Dangdang Announces Second Quarter 2013 Results

BEIJING, Aug. 15, 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 second quarter ended June 30, 2013.

Second Quarter 2013 Highlights

• Gross Margin in the second quarter of 2013 was 17.1%, compared to 13.1% in the second quarter of 2012 and 17.2% in the first quarter of 2013.
• Net Loss for the second quarter of 2013 was RMB63.9 million ($10.4 million), representing negative 4.3% of total revenues, as compared with a net loss of RMB122.2 million in the second quarter of 2012 representing negative 10.1% of total revenues and a net loss of RMB72.7 million representing negative 5.5% of revenues in the first quarter of 2013.
• Gross Merchants Value ("GMV") of the marketplace in the second quarter of 2013 was RMB788.4 million ($128.5 million), a 178% increase from the corresponding period in 2012. The combined general merchandise sales from both the marketplace and self-procurement business increased 86% year-over-year.
• Dangdang had approximately 7.6 million active customers including approximately 2.4 million new customers in the second quarter of 2013, representing a 28% and 35% increase from the corresponding period in 2012. Total orders for the second quarter of 2013 were approximately 15.0 million, a 25% increase from the corresponding period in 2012.

Ms. Peggy Yu Yu, Dangdang's Executive Chairwoman commented, "We delivered another quarter of strong performance, marked by solid growth in sales, healthy margin expansion and further growth in our customer base, all of which contributed to our best bottom line performance since the third quarter of 2011. Making a significant investment in marketing and branding while successfully improving our bottom line performance is an important achievement for us." 

"Books and media sales grew 22% this quarter, allowing us to maintain our dominant market share in the online media sector. Dangdang's marketplace program once again demonstrated outstanding growth momentum, as marketplace GMV grew 178% year-over-year in the second quarter. Sales from general merchandise, which include both self-procurement and marketplace, exceeded sales from books and media for the third consecutive quarter. We are on track in transforming our company 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.  We are encouraged by our financial performance thus far and are committed to further improvement throughout the year."

"In addition to strong sales growth, we saw a significant improvement in gross margin, which rose 400 basis points to 17.1% on a year-over-year basis.  With operating leverage, particularly more efficient fulfillment and inventory management, our net loss narrowed to RMB63.9 million, or a negative 4.3% of total net revenues, which is the best performance since the third quarter of 2011," said Mr. Jun Zou, Dangdang's Chief Financial Officer. "In addition, our efforts in working capital management contributed to positive operating cash flow of RMB46.8 million compared with negative RMB19.3 million in the same period last year."

Second Quarter 2013 Results

Dangdang's total net revenues in the second quarter of 2013 were RMB1,493.5 million ($243.3 million), a 24% increase from the corresponding period in 2012. 

Media product revenue for the second quarter of 2013 was RMB945.2 million ($154.0 million), representing a 22% increase from the corresponding period in 2012. General merchandise revenue for the second quarter of 2013 was RMB484.5 million ($78.9 million), a 20% increase from the corresponding period in 2012. Other revenue including revenue from third-party merchants for the second quarter of 2013 was RMB63.8 million ($10.4 million), representing a 91% increase from the corresponding period in 2012. 

Dangdang had approximately 7.6 million active customers including approximately 2.4 million new customers in the second quarter of 2013, representing a 28% and 35% increase from the corresponding period in 2012. Total orders for the second quarter of 2013 were approximately 15.0 million, a 25% increase from the corresponding period in 2012. 

Cost of revenues was RMB1,237.8 million ($201.7 million), representing 82.9% of total revenues, as compared to 86.9% 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 second quarter of 2013 was 17.1%, as compared to 13.1% in the corresponding period in 2012 and 17.2% in the first quarter of 2013. 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.

Fulfillment expenses which include warehousing and shipping expenses, were RMB178.5 million ($29.1 million), representing 12.0% of total revenues, compared to 15.0% in the corresponding period in 2012 and 13.8% in the first quarter of 2013. The year-over-year and quarter-over-quarter decreases were primarily due to consistent operating leverage, improved warehousing management systems and lower unit shipping costs.    

Marketing expenses were RMB76.8 million ($12.5 million), representing 5.1% of total revenues, compared to 3.0% in the corresponding period in 2012. The increase was primarily due to a marketing and branding campaign focused on apparel and fashion, advertisements on premier television channels and other offline media and other targeted marketing campaigns. 

Technology and content expenses were RMB47.0 million ($7.7 million), representing 3.1% of total revenues, compared to 3.2% in the corresponding period in 2012 and 3.7% in the first quarter of 2013. The year-over-year and quarter-over-quarter decreases were primarily due to operating leverage, especially on IT headcount.  

General and administrative expenses were RMB35.0 million ($5.7 million), representing 2.3% of total revenues, compared to 2.6% in the corresponding period in 2012. The decrease in general and administrative expenses was primarily due to operating leverage and improved management efficiency.

Share-based compensation expenses, which were allocated to related expense line items, were RMB2.6 million ($0.4 million) in the second quarter of 2013, compared to RMB2.8 million in the corresponding period in 2012, representing a 7.0% decrease.

Dangdang recorded an operating loss of RMB78.9 million ($12.9 million) in the second quarter of 2013, as compared with an operating loss of RMB126.2 million in the corresponding period in 2012, primarily due to the increase in gross margin and consistent operating leverage. 

Operating loss excluding share-based compensation expenses (non-GAAP) was RMB76.3 million ($12.4 million), as compared with an operating loss excluding share-based compensation expenses (non-GAAP) of RMB123.4 million in the corresponding period in 2012.

Net loss was RMB63.9 million ($10.4 million), as compared with losses of RMB122.2 million and RMB 72.7 million in the second quarter of 2012 and first quarter of 2013, respectively, primarily due to the Company's efforts to increase gross profit and operating leverage. 

Net margin was negative 4.3%, as compared with a negative net margin of 10.1% in the corresponding period in 2012.

Net loss excluding share-based compensation expenses (non-GAAP) was RMB61.3 million ($10.0 million), as compared with a net loss excluding share-based compensation expenses (non-GAAP) of RMB119.4 million in the corresponding period in 2012.

As of June 30, 2013, Dangdang had cash and cash equivalents, short-term time deposits and held-to-maturity investments of RMB1,291.2 million ($210.4 million), as compared to RMB1,634.6 million, including RMB709.4 million of restricted cash as of December 31, 2012. As of June 30, 2013, Dangdang had no restricted cash and no short-term bank loans.

Capital expenditures for the second quarter of 2013 were RMB35.4 million ($5.8 million), including RMB32.8 million spending on the construction of Tianjin warehouse.

Adjusted EBITDA loss (non-GAAP) in the second quarter of 2013 was RMB63.8 million ($10.4 million), as compared with an adjusted EBITDA loss of RMB113.5 million in the corresponding period in 2012.

Outlook for Third Quarter 2013

Dangdang expects total net revenue in the third quarter of 2013 to be around RMB 1,584 million, representing year-over-year growth of around 23%. The Company also expects GMV from its marketplace to grow at a rate of 165% year-over-year in the third 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 7:30 A.M. Eastern Time (or 7:30 P.M. Beijing/Hong Kong time) on August 15, 2013.

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

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 numbers through August 22, 2013:

A live and archived webcast of this conference call will be available at http://ir.dangdang.com through August 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 910,000 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 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: [email protected]  

Elaine Ketchmere, CFA 
Compass Investor Relations
+1 310-528-3031 
Email: [email protected]       

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SOURCE E-commerce China Dangdang Inc.