Baozun Announces Third Quarter 2018 Unaudited Financial Results

SHANGHAI, China, Nov. 21, 2018 (GLOBE NEWSWIRE) — Baozun Inc. (Nasdaq: BZUN) (“Baozun” or the “Company”), the leading brand e-commerce service partner that helps brands execute their e-commerce strategies in China, today announced its unaudited financial results for the third quarter ended September 30, 2018.

Third Quarter 2018 Financial Highlights

• Total net revenues were RMB1,110.8 million (US$¹161.7 million), an increase of 24.8% year-over-year. Services revenue was RMB606.2 million (US$88.3 million), an increase of 45.1% year-over-year.
• Income from operations was RMB39.3 million (US$5.7 million), an increase of 41.4% year-over-year. Operating margin was 3.5%, compared with 3.1% in the same quarter of last year.
• Non-GAAP income from operations² was RMB61.2 million (US$8.9 million), an increase of 48.6% year-over-year. Non-GAAP operating margin was 5.5%, compared with 4.6% in the same quarter of last year.
• Net income attributable to ordinary shareholders of Baozun Inc. was RMB29.8 million (US$4.3 million), an increase of 35.8% year-over-year.
• Non-GAAP net income attributable to ordinary shareholders of Baozun Inc.³ was RMB51.4 million (US$7.5 million), an increase of 46.7% year-over-year.
• Basic and diluted net income attributable to ordinary shareholders of Baozun Inc. per American Depository Share (“ADS⁴”) were RMB0.52 (US$0.08) and RMB0.50 (US$0.07), respectively, compared with RMB0.40 and RMB0.37, respectively, for the same period of 2017.
• Basic and diluted non-GAAP net income attributable to ordinary shareholders of Baozun Inc. per ADS⁵ were RMB0.90 (US$0.13) and RMB0.86 (US$0.13), respectively, compared with RMB0.64 and RMB0.59, respectively, for the same period of 2017.

Third Quarter 2018 Operational Highlights

• Total Gross Merchandise Volume (“GMV”)⁶ was RMB6,361.0 million, an increase of 55.0% year-over-year.
• Distribution GMV⁷ was RMB581.2 million, an increase of 6.4% year-over-year.
• Non-distribution GMV⁸ was RMB5,779.8 million, an increase of 62.4% year-over-year.
• Number of brand partners increased to 172 as of September 30, 2018, from 146 as of September 30, 2017.
• Number of GMV brand partners increased to 166 as of September 30, 2018, from 141 as of September 30, 2017.

“We are pleased to report another quarter of solid growth across the board, driven primarily by growth from our existing online stores and improving operational efficiency as we invest further in developing new and innovative products and tools,” commented Mr. Vincent Qiu, Chairman and Chief Executive Officer of Baozun. “I am proud of the experience and capabilities we have accumulated from participating in the Singles Day shopping festival over the past decade. This year total order value settled through payment gateways on all of our e-commerce channels reached a new record high of RMB6.55 billion on Singles Day 2018, an increase of approximately 31% compared to last year. Investing in R&D plays a critical role in our strategy which we strongly believe will lay a solid foundation for our long-term sustainable growth. We will continue to refine, update, commercialize, and expand the omni-channel matrix of solutions we are able to offer brand partners to drive future growth and strengthen our leading position in China’s brand e-commerce market.”    

Mr. Beck Chen, Chief Financial Officer of Baozun commented, “We had another strong quarter, with total GMV increasing 55.0% year-over-year and non-distribution GMV growing even faster at 62.4% year-over-year. We invested RMB20.1 million in technological innovation and productization during the quarter, which will strengthen our position as the leading brand e-commerce business partner and technology solutions services provider. Our daily sales momentum during the fourth quarter of 2018 continues to remain strong and outpace the growth on Singles Day this year. As such, we expect our GMV for the fourth quarter of 2018 to grow 40-45% on a year-over-year basis while our services revenue during the fourth quarter of 2018 will grow faster than the GMV growth.”

Third Quarter 2018 Financial Results

Total net revenues were RMB1,110.8 million (US$161.7 million), an increase of 24.8% from RMB890.2 million in the same quarter of last year.

Product sales revenue was RMB504.5 million (US$73.5 million), an increase of 6.8% from RMB472.5 million in the same quarter of last year. The increase was primarily attributable to the increase in product sales revenue resulting from the increased popularity of brand partners’ products and Baozun’s increasingly effective marketing and promotional campaigns, which was partially offset by the transition of a leading electronics brand partner’s business from the distribution model to the consignment model in September 2017.

Services revenue was RMB606.2 million (US$88.3 million), an increase of 45.1% from RMB417.7 million in the same quarter of last year. The increase was primarily attributable to the rapid growth in sales from existing brand partners and the addition of new brand partners under the Company’s consignment model and service fee model.

Total operating expenses were RMB1,071.5 million (US$156.0 million), compared with RMB862.4 million in the same quarter of last year.

• Cost of products was RMB401.2 million (US$58.4 million), compared with RMB407.5 million in the same quarter of last year. The decrease was primarily due to the transition of a leading electronics brand partner’s business from the distribution model to the consignment model in September 2017 and improved margins from product sales.
• Fulfillment expenses were RMB262.0 million (US$38.2 million), compared with RMB173.3 million in the same quarter of last year. The increase was primarily due to an increase in GMV from the Company’s consignment model business and increased warehouse rental expenses.
• Sales and marketing expenses were RMB301.1 million (US$43.8 million), compared with RMB222.0 million in the same quarter of last year. The increase was primarily due to the addition of online store operational staff and an increase in promotional and marketing expenses associated with Company-operated online stores.
• Technology and content expenses were RMB69.5 million (US$10.1 million), compared with RMB35.6 million in the same quarter of last year. The increase was primarily due to increased investments in innovation and productization, and recruitment of additional technology-focused staff.
• General and administrative expenses were RMB41.0 million (US$6.0 million), compared with RMB29.6 million in the same quarter of last year. The increase was primarily due to an increase in administrative, corporate strategy, and business planning staff.

Income from operations was RMB39.3 million (US$5.7 million), compared with RMB27.8 million in the same quarter of last year. Operating margin was 3.5%, compared with 3.1% in the same quarter of last year.

Non-GAAP income from operations was RMB61.2 million (US$8.9 million), compared with RMB41.2 million in the same quarter of last year. Non-GAAP operating margin was 5.5%, compared with 4.6% in the same quarter of last year.

Net income attributable to ordinary shareholders of Baozun Inc. was RMB29.8 million (US$4.3 million), an increase of 35.8% from the same quarter of last year. Basic and diluted net income attributable to ordinary shareholders of Baozun Inc. per ADS were RMB0.52 (US$0.08) and RMB0.50 (US$0.07), respectively, compared with RMB0.40 and RMB0.37, respectively, in the same period of 2017.

Non-GAAP net income attributable to ordinary shareholders of Baozun Inc. was RMB51.4 million (US$7.5 million), an increase of 46.7% from the same quarter of last year. Basic and diluted non-GAAP net income attributable to ordinary shareholders of Baozun Inc. per ADS were RMB0.90 (US$0.13) and RMB0.86 (US$0.13), respectively, compared with RMB0.64 and RMB0.59, respectively, in the same period of 2017.

As of September 30, 2018, the Company had RMB445.2 million (US$64.8 million) in cash, cash equivalents and short-term investment, a decrease from RMB557.4 million as of December 31, 2017 primarily due to inventory procurement in preparation for Singles Day 2018.

Business Outlook

The Company expects total net revenues to be between RMB2,200 million and RMB2,250 million for the fourth quarter of 2018. 

Conference Call

The Company will host a conference call to discuss the earnings at 7:00 a.m. Eastern Time on Wednesday, November 21, 2018 (8:00 p.m. Beijing time on the same day).

Dial-in numbers for the live conference call are as follows:

A telephone replay of the call will be available after the conclusion of the conference call through 11:59 p.m. Hong Kong Time, November 28, 2018.

Dial-in numbers for the replay are as follows:

A live and archived webcast of the conference call will be available on the Investor Relations section of Baozun’s website at http://ir.baozun.com/.

Use of Non-GAAP Financial Measures

In evaluating the Company’s business, the Company considers and uses non-GAAP income/(loss) from operations, non-GAAP operating margin, non-GAAP net income/(loss), non-GAAP net margin, non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc. and non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc. per ADS, as supplemental measures to review and assess the Company’s operating performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. Non-GAAP income/(loss) from operations is income/(loss) from operations excluding the impact of share-based compensation expenses and amortization of intangible assets resulting from business acquisition. Non-GAAP operating margin is non-GAAP income from operations as a percentage of total net revenues. Non-GAAP net income/(loss) is net income/(loss) excluding the impact of share-based compensation expenses and amortization of intangible assets resulting from business acquisition. Non-GAAP net margin is non-GAAP net income as a percentage of total net revenues.  Non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc. is net income (loss) attributable to ordinary shareholders of Baozun Inc. excluding the impact of share-based compensation expenses and amortization of intangible assets resulting from business acquisition. Non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc. per ADS is non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc. divided by weighted average number of shares used in calculating net income per ordinary share multiplied by three.

The Company presents the non-GAAP financial measures because they are used by the Company’s management to evaluate the Company’s operating performance and formulate business plans. Non-GAAP income/(loss) from operations and non-GAAP net income/(loss) enable the Company’s management to assess the Company’s operating results without considering the impact of share-based compensation expenses and amortization of intangible assets resulting from business acquisition. The Company also believes that the use of the non-GAAP measures facilitate investors’ assessment of the Company’s operating performance.

The non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. The non-GAAP financial measures have limitations as analytical tools. One of the key limitations of using non-GAAP income/(loss) from operations, non-GAAP net income/(loss), non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc., and non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc. per ADS is that they do not reflect all items of income and expense that affect the Company’s operations. Share-based compensation expenses and amortization of intangible assets resulting from business acquisition have been and may continue to be incurred in the Company’s business and is not reflected in the presentation of non-GAAP income/(loss) from operations and non-GAAP net income/(loss). Further, the non-GAAP measures may differ from the non-GAAP measures used by other companies, including peer companies, and therefore their comparability may be limited. In light of the foregoing limitations, the non-GAAP financial measures that we use should not be considered in isolation from or as an alternative to the GAAP financial measures from which they are derived.

The Company compensates for these limitations by reconciling the non-GAAP financial measures to the nearest U.S. GAAP performance measures, which should be considered when evaluating the Company’s performance.  For reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying tables titled, “Reconciliations of GAAP and Non-GAAP Results.”

Safe Harbor Statements

This news release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in 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,” “target,” “going forward,” “outlook” and similar statements. For example, our statement about our expectations for Company performance in the fourth quarter of 2018 is a forward-looking statement and is inherently uncertain. Our forward-looking statements are based upon management’s current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the Company’s control, which may cause the Company’s actual results, performance or achievements to differ materially from those in the forward-looking statements. For example, the level of consumer economic activity in China could impact our sales results in unpredicted ways.  Further information regarding these and other risks, uncertainties or factors is included in the Company’s filings with the U.S. Securities and Exchange Commission. The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under law.

About Baozun Inc.

Baozun is the leading brand e-commerce service partner that helps brands execute their e-commerce strategies in China by selling their goods directly to customers online or by providing services to assist with their e-commerce operations. The Company’s integrated end-to-end brand e-commerce capabilities encompass all aspects of the e-commerce value chain, covering IT solutions, store operations, digital marketing, customer services, warehousing and fulfillment.

For more information, please visit http://ir.baozun.com 

For investor and media inquiries, please contact:

Baozun Inc.
Ms. Ellen Chiu
ir@baozun.com 

Christensen
In China
Mr. Christian Arnell
Phone: +86-10-5900-1548
E-mail: carnell@christensenir.com 

In U.S.
Ms. Linda Bergkamp
Phone: +1-480-614-3004
Email: lbergkamp@christensenir.com

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¹ This announcement contains translations of certain Renminbi (RMB) amounts into U.S. dollars (US$) at a specified rate solely for the convenience of the reader. Unless otherwise noted, the translation of RMB into US$ has been made at RMB6.8680 to US$1.00, the noon buying rate in effect on September 28, 2018 as set forth in the H.10 Statistical Release of the Federal Reserve Board.

² Non-GAAP income from operations is a non-GAAP financial measure, which is defined as income from operations excluding share-based compensation expenses and amortization of intangible assets resulting from business acquisition.

³ Non-GAAP net income attributable to ordinary shareholders of Baozun Inc. is a non-GAAP financial measure, which is defined as net income attributable to ordinary shareholders of Baozun Inc. excluding share-based compensation expenses and amortization of intangible assets resulting from business acquisition.

⁴ Each ADS represents three Class A ordinary shares.

⁵ Basic and diluted non-GAAP net income attributable to ordinary shareholders of Baozun Inc. per ADS are non-GAAP financial measures, which are defined as non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc. divided by weighted average number of shares used in calculating basic and diluted net income per ordinary share multiplied by three, respectively.

⁶ GMV includes value added tax and excludes (i) shipping charges, (ii) surcharges and other taxes, (iii) value of the goods that are returned and (iv) deposits for purchases that have not been settled.

⁷ Distribution GMV refers to the GMV under the distribution business model.

⁸ Non-distribution GMV refers to the GMV under the service fee business model and the consignment business model.

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¹   Certain reclassifications in accounts receivable, inventories, prepayments and other current assets and accrued expenses and other current liabilities as of December 31, 2017 were retrospectively adjusted as a result of the adoption of a new revenue accounting standard effective on January 1, 2018.

(1) Share-based compensation expenses are allocated in operating expenses items as follows:

(2) Including amortization of intangible assets resulting from business acquisition, which amounted to RMB0.4 million for both the three months period ended September 30, 2017 and 2018.

(3) Including income tax benefits of RMB0.1 million related to the reversal of deferred tax liabilities, which was recognized on business acquisition for both the three months period ended September 30, 2017 and 2018.