Dangdang Announces Unaudited First Quarter 2015 Results

BEIJING, May 28, 2015 /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 first quarter ended March 31, 2015.

First Quarter 2015 Highlights

• Total net revenues for the first quarter of 2015 were RMB2,217.3 million ($357.7 million), a 27.7% increase from the corresponding period in 2014. Gross Merchandise Value ("GMV") from the marketplace in the first quarter of 2015 was RMB1,771.5 million ($285.8 million), a 49.4% increase from the corresponding period in 2014. The combination of product revenue from principal business and GMV from the marketplace reached RMB3,920.2 million ($632.4 million) and grew 37.3% year-over-year.
• Dangdang had approximately 10.2 million active customers including approximately 4.1 million new customers, in the first quarter of 2015, representing increases of 18% and 46%, respectively, from the corresponding period in 2014. Total orders for the first quarter of 2015 were approximately 21.3 million, a 29% increase from the corresponding period in 2014.
• Mobile orders accounted for 41% of total orders for the first quarter of 2015, compared to 14% for the corresponding period in 2014.
• Net loss for the first quarter of 2015 was RMB60.2 million ($9.7 million), or negative 2.7% of total net revenues, compared to net income of RMB2.0 million in the first quarter of 2014, or 0.1% of total net revenues.

"Dangdang successfully delivered on our guidance for the quarter, achieving strong top line growth.  We further entrenched Dangdang as the market leader in China's books and media market.  Although we posted a loss for the quarter, it was primarily the result of marketing and technology initiatives and expenditures related to e-books, mobile and content that we believe set the stage for the future healthy development of our business," said Ms. Peggy Yu Yu, Executive Chairwoman of Dangdang.

"Our investments in mobile Dangdang resulted in mobile orders reaching a record 41% of total orders, driven by significant growth in new and active users and higher conversion rates.  We are making good progress in the digital reading market, offering more content and achieving rapid growth in e-book downloads and monthly active users.  We are confident our current expenditures will yield positive returns to Dangdang and our shareholders in the future," Ms. Peggy Yu Yu concluded.

First Quarter 2015 Results

Dangdang's total net revenues in the first quarter of 2015 were RMB2,217.3 million ($357.7 million), a 27.7% increase from the corresponding period in 2014.

Media product revenue for the first quarter of 2015 was RMB1,260.9 million ($203.4 million), representing a 9.5% increase from the corresponding period in 2014. General merchandise revenue for the first quarter of 2015 was RMB887.8 million ($143.2 million), representing a 71.8% increase from the corresponding period in 2014. Other revenue including revenue from third-party merchants for the first quarter of 2015 was RMB68.7 million ($11.1 million), representing a 1.9% increase from the corresponding period in 2014.

Dangdang had approximately 10.2 million active customers including approximately 4.1 million new customers in the first quarter of 2015, representing increases of 18% and 46%, respectively, from the corresponding period in 2014. Total orders for the first quarter of 2015 were approximately 21.3 million, a 29% increase from the corresponding period in 2014.

Gross margin in the first quarter of 2015 was 15.2%, compared to 18.2% in the first quarter of 2014 and 17.1% in the fourth quarter of 2014. The year-over-year and quarter-over-quarter decreases in gross margin were due to a larger contribution of general merchandise sales as a percentage of total net revenues and a decline in logistics revenue from third-party merchants.

Fulfillment expenses which include warehousing, shipping and customer service expenses, were RMB202.3 million ($32.6 million), representing 9.1% of total net revenues, compared to 9.8% in the corresponding period in 2014 and 8.8% in the fourth quarter of 2014. The year-over-year decrease in fulfillment expenses as a percentage of total net revenues was primarily due to larger order size. The quarter-over-quarter increase as a percentage of total net revenues was the result of a seasonal decline in revenue in the first quarter, which is traditionally an off-peak season for e-commerce in China, and an increase in headcount.

Marketing expenses were RMB95.4 million ($15.4 million), representing 4.3% of total net revenues, compared to 3.9% in the corresponding period in 2014 and 4.8% in the fourth quarter of 2014. The year-over-year increase in marketing expenses as a percentage of total net revenues reflected the Company's investments to promote mobile Dangdang as well as advertising and marketing programs to build awareness of Dangdang's new destination categories and e-books. The quarter-over-quarter decrease as a percentage of total net revenues was the result of lower expenditures for marketing programs relative to the fourth quarter, which is typically the peak season for e-commerce in China.

Technology and content expenses were RMB61.5 million ($9.9 million), representing 2.8% of total net revenues, compared to 2.5% in thecorresponding period in 2014 and 2.6% in the fourth quarter of 2014. The year-over-year and quarter-over-quarter increases in technology and content expenses as a percentage of total net revenues were primarily due to an increase in headcount and expenditures to support the Company's mobile, e-book and other growth initiatives.   

General and administrative expenses were RMB50.3 million ($8.1 million), representing 2.3% of total net revenues, compared to 2.2% in the corresponding period in 2014 and 1.9% in the fourth quarter of 2014. The year-over-year and quarter-over-quarter increases in general and administrative expenses as a percentage of total net revenues were primarily due to expansion in headcount to support the Company's mobile, e-book and other growth initiatives.

Government grants and value-added tax refunds were RMB1.0 million ($0.2 million) representing 0.0% of total net revenues, compared to 0.7% in the corresponding period in 2014 and 1.7% in the fourth quarter of 2014. The year-over-year and quarter-over-quarter decreases as a percentage of total net revenues were primarily due to a limited amount of government grants and tax refunds.

Share-based compensation expenses, which were allocated to related expense line items, were RMB2.2 million ($0.4 million) in the first quarter of 2015, compared to RMB3.2 million in the corresponding period in 2014,representing a 30.8% decrease.

Dangdang recorded an operating loss of RMB70.6 million ($11.4 million) in the first quarter of 2015, compared to operating income of RMB10.1 million in the corresponding period in 2014.

Operating loss excluding share-based compensation expenses (non-GAAP) was RMB68.4 million ($11.0 million), compared to operating income excluding share-based compensation (non-GAAP) of RMB13.3 million in the corresponding period in 2014.

Net loss was RMB60.2 million ($9.7 million), compared to net income of RMB2.0 million in the corresponding period in 2014.

Net loss excluding share-based compensation expenses (non-GAAP) was RMB58.0 million ($9.3 million), compared to net income excluding share-based compensation (non-GAAP) of RMB5.2 million in the corresponding period in 2014.

Net margin was negative 2.7%, compared to 0.1% in the corresponding period in 2014. Non-GAAP net margin was negative 2.6%, compared to a non-GAAP net margin of 0.3% in the corresponding period in 2014.

Diluted loss per ADS was RMB0.74 ($0.12), compared to diluted earnings per ADS of RMB0.02 in the corresponding period in 2014. 

As of March 31, 2015, Dangdang had cash and cash equivalents, restricted cash, short-term time deposits, held-to-maturity and available for sale investments of RMB1,655.9 million ($267.1 million), compared to RMB1,399.0 million as of December 31, 2014. As of March 31, 2015, Dangdang had no bank loans.

Capital expenditures for the first quarter of 2015 were RMB27.8 million ($4.5 million).

Outlook for Second Quarter 2015

Dangdang expects total net revenues in the second quarter of 2015 to be approximately RMB2.3 billion, representing year-over-year growth of approximately 30%. The Company also expects GMV from its marketplace to grow at a rate of 32% year-over-year to approximately RMB1.9 billion in the second quarter of 2015. 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 on May 28, 2015 at 8:00 AM U.S. Eastern Time (or 8:00 PM on May 28, 2015 Beijing/Hong Kong time).

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

US: +1-845-675-0437
China, Domestic: +400-620-8038
Hong Kong: +852-3018-6771
International: +65-6723-9381

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 through June 5, 2015:

International: +61-2-8199-0299
Conference ID: 47987541

A live and archived webcast of this conference call will be available at http://ir.dangdang.com through May 28, 2016.

About Dangdang

E-Commerce China Dangdang Inc. is a leading business-to-consumer e-commerce company in China. On its website dangdang.com and through mobile Dangdang, the Company offers books and media products as well as selected general merchandise products including fashion and apparel, baby, children and maternity and home and lifestyle products, among others. It also operates the dangdang.com marketplace program, which allows third-party merchants to sell their products alongside products sourced by the Company. Dangdang is transforming itself into an integrated online shopping experience with prominent destination categories. Dangdang's nationwide fulfilment and delivery capabilities, high-quality customer service support and scalable technology infrastructure enable it to provide a compelling online shopping experience to customers. For more information, please visit http://ir.dangdang.com .

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 second quarter 2015 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"), the Company uses the following measures as non-GAAP financial measures: non-GAAP operating (loss) income, non-GAAP operating margin, non-GAAP net (loss) income, non-GAAP net margin and adjusted EBITDA (collectively referred to as the "Non-GAAP Financial Measures" hereafter). The Company defines non-GAAP operating (loss) income, non-GAAP operating margin, non-GAAP net (loss) income and non-GAAP net margin as operating (loss) income, operating margin, net (loss) income and net margin excluding the impact of share-based compensation expenses respectively. The Company defines adjusted EBITDA as (loss) income before interest, taxes, depreciation, amortization, other non-operating income and share-based compensation expenses. The Company reviews the Non-GAAP Financial Measures together with operating (loss) income, operating margin, net (loss) income and net margin to obtain a better understanding of its operating performance. The Company believes 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 operating (loss) income, operating margin, net (loss) income and net margin 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 operating (loss) income, operating margin, net (loss) income and net margin 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 tables captioned "Non-GAAP operating income (loss), operating margin and net income (loss)" and "Adjusted EBITDA" at the end of this release.

Investor Contacts:

Tony Hung
Senior Investor Relations Director
E-Commerce China Dangdang Inc. 
Phone: +86-10-5799-2301
E-mail: [email protected]

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

- Financial Tables Follow -

SOURCE E-Commerce China Dangdang Inc.

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