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JD.com Announces Third Quarter 2019 Results

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BEIJING, Nov. 15, 2019 (GLOBE NEWSWIRE) -- JD.com, Inc. (NASDAQ:JD), China's leading technology driven e-commerce company and retail infrastructure service provider, today announced its unaudited financial results for the quarter ended September 30, 2019.

Third Quarter 2019 Highlights

  • Net revenues for the third quarter of 2019 were RMB134.8 billion (US$118.9 billion), an increase of 28.7% from the third quarter of 2018. Net service revenues for the third quarter of 2019 were RMB16.0 billion (US$2.2 billion), an increase of 47.0% from the third quarter of 2018.

  • Income from operations for the third quarter of 2019 was RMB4,973.2 million (US$695.8 million), compared to loss from operations of RMB650.7 million for the same period last year. Non-GAAP2 income from operations for the third quarter of 2019 was RMB2,974.9 million (US$416.2 million) with a record non-GAAP operating margin of 2.2%, as compared to RMB638.3 million in the third quarter of 2018 with a non-GAAP operating margin of 0.6%.

  • Net income attributable to ordinary shareholders for the third quarter of 2019 was RMB612.3 million (US$85.7 million), compared to RMB3,000.6 million for the same period last year. Non-GAAP net income attributable to ordinary shareholders increased by 160.6% to RMB3,085.9 million (US$431.7 million) in the third quarter of 2019 from RMB1,184.3 million in the third quarter of 2018.

  • Diluted EPS and Non-GAAP Diluted EPS. Diluted net income per ADS for the third quarter of 2019 was RMB0.41 (US$0.06), compared to RMB2.03 for the third quarter of 2018. Non-GAAP diluted net income per ADS for the third quarter of 2019 was RMB2.08 (US$0.29), compared to RMB0.80 for the same quarter last year.

  • Operating cash flow for the twelve months ended September 30, 2019 increased to RMB30.8 billion (US$4.3 billion) from RMB18.2 billion for the twelve months ended September 30, 2018. Free cash flow, which excludes the impact from JD Baitiao receivables included in the operating cash flow, for the twelve months ended September 30, 2019 increased to RMB15.6 billion (US$2.2 billion), compared to outflow of RMB5.5 billion for the twelve months ended September 30, 2018.

  • Annual active customer accounts3 increased to 334.4 million in the twelve months ended September 30, 2019 from 321.3 million in the twelve months ended June 30, 2019. Mobile monthly active users4 in September 2019 increased by 36% as compared to September 2018. In the third quarter, over 70% of new customers were from lower-tier cities.

"JD's commitment to providing consumers with the best possible online shopping experience drove another strong quarter of growth," said Richard Liu, Chairman and Chief Executive Officer of JD.com. "In particular, more and more consumers in China's fast-growing lower-tier cities are turning to JD for our superior value and service. We will continue to invest in technology and innovation to meet the growing needs of Chinese consumers and businesses for fast and reliable e-commerce and supply chain solutions."

"JD saw excellent results for the third quarter marked by accelerating revenue growth and record operating profit margin," said Sidney Huang, Chief Financial Officer of JD.com. "Customer growth also remained solid, reflecting our commitment to becoming China's top source for quality products at everyday low prices, supported by world class operating efficiency. Looking forward, we will increasingly benefit from the economies of scale inherent in JD's unique business model through our leading supply chain, technology and service capabilities."

Business Highlights

JD Retail

  • In September, JD.com officially launched its social e-commerce platform Jingxi as part of its strategy to penetrate into lower-tier cities. Jingxi is available to consumers across multiple channels including the standalone Jingxi app, Jingxi mini program and a WeChat first-level entry point. Combining social media and retail, Jingxi provides quality goods and services at attractive prices. Jingxi also has partnered with domestic manufacturers in over one hundred industrial clusters, serving as a bridge between manufacturers and consumers. During the Singles Day promotion season, approximately 75% of Jingxi's new users came from lower-tier cities, and approximately 55% of total Jingxi users were female.

  • In the third quarter, JD.com continued to apply its data-based customer insights to help brands tailor their products to satisfy consumers' customized demands on JD's platforms. To date, JD has established partnerships with over 140 appliance brands under its Consumer to Manufacturer (C2M) initiative covering over 800 SKUs, with premium names including GREE, Midea, Philips, Siemens and Hisense, among others.

  • In the third quarter, JD Retail segment had net revenues of RMB128.7 billion, an increase of 27.3% from the third quarter of 2018. The operating profit margin for the segment was 3.3% during the quarter.

JD Logistics

  • During the quarter, JD Logistics further improved its efficiency in lower-tier cities as it continued to expand its 24-hour delivery service in these areas. By optimizing its expanding warehouse network with AI-driven technologies, JD Logistics is able to deliver approximately 90% of its direct sales orders within 24 hours in China. In the third quarter, JD Logistics remained top-ranked in customer satisfaction rate in the national survey of express service satisfaction conducted by State Post Bureau. JD Logistics continued to expand its third-party businesses rapidly in the third quarter with external revenues accounted for nearly 40% of its total revenues.

  • As of September 30, 2019, JD Logistics operated over 650 warehouses. The warehouses covered an aggregate gross floor area of approximately 16 million square meters, including warehouse space managed under the JD Logistics Open Warehouse Platform.

JD Health

  • JD Health, a majority owned subsidiary of the Company, successfully completed its series A preferred share financing in November 2019, with a post-money valuation of approximately US$7 billion. Over the past few years, JD Health has built a comprehensive "Internet + healthcare" ecosystem, providing pharmaceutical and healthcare products, internet healthcare, health management and intelligent healthcare solutions to the customers. "JD Pharmacy" is China's largest online pharmacy by revenue. JD Health, which benefits from JD.com's trusted e-commerce brand image and collaboration with leading industry players, continues to expand its customer base and service offerings, aiming to become the most trusted "chief health manager" for customers.

JD Property

  • In February 2019, JD Property Management Group ("JD Property") established its first logistics properties fund ("Core Fund") with GIC and entered into an agreement to dispose of certain logistics facilities to Core Fund for a total gross asset value of RMB10.9 billion. By the end of September 2019, the disposition of the majority of these logistics facilities had been completed. Currently, JD Property manages properties with a total gross floor area ("GFA") of over 10 million square meters, including properties that are completed, under construction and held for future development, making JD Property a top 3 logistics property company by GFA in China.

Environment, Social and Governance

  • JD.com enhanced its Environmental, Social and Governance (ESG) program with the launch of the China E-Commerce & Logistics Packaging Standard Alliance together with FMCG brands including Procter & Gamble, Johnson & Johnson, Mengniu, Unilever, Heinz, as well as packaging giant Amcor and the China Packaging Testing Center. The Alliance aims to optimize the usage of packaging materials in China by establishing nationwide e-commerce packaging standards. JD Logistics also expanded its box recycling initiative across China with customer incentives provided in the form of rebates.

Equity Investees Update

  • By the end of October 2019, JD.com joint venture Dada-JD Daojia, China's leading on-demand logistics and omnichannel e-commerce platform, had formed partnerships with over 300 well-known chain retailers and more than 50 first-tier international and domestic FMCG brands. In the third quarter, Dada-JD Daojia provided its omnichannel customer relationship management (CRM) services to an expanding number of retail partners, helping them develop their own digital membership programs. To date, 135 merchants and over 18,000 stores have joined Dada-JD Daojia's omnichannel CRM program.

Operational Metrics Update

  • As of September 30, 2019, JD.com had over 250,000 merchants on its online marketplace, and over 200,000 employees excluding part-time and interns.

Third Quarter 2019 Financial Results

Net Revenues.  For the third quarter of 2019, JD.com reported net revenues of RMB134.8 billion (US$18.9 billion), representing a 28.7% increase from the same period in 2018. Net product revenues increased by 26.6%, while net service revenues increased by 47.0% in the third quarter of 2019, as compared to the third quarter of 2018.

Cost of Revenues.  Cost of revenues increased by 29.4% to RMB114.7 billion (US$16.1 billion) in the third quarter of 2019 from RMB88.7 billion in the third quarter of 2018. This increase was primarily due to the growth of the company's online direct sales business and the logistics services provided to third parties.

Fulfillment Expenses.  Fulfillment expenses, which primarily include procurement, warehousing, delivery, customer service and payment processing expenses, increased by 12.8% to RMB8.8 billion (US$1.2 billion) in the third quarter of 2019 from RMB7.8 billion in the third quarter of 2018. Fulfillment expenses as a percentage of net revenues decreased to 6.5% in the third quarter of 2019, compared to 7.4% in the same period last year, mainly due to economies of scale from enhanced logistics capacity utilization and staff productivity.

Marketing Expenses.  Marketing expenses increased by 7.6% to RMB4.4 billion (US$0.6 billion) in the third quarter of 2019 from RMB4.1 billion in the third quarter of 2018.

Technology and Content Expenses.  Technology and content expenses increased to RMB3.6 billion (US$0.5 billion) in the third quarter of 2019 from RMB3.4 billion in the third quarter of 2018.

General and Administrative ExpensesGeneral and administrative expenses decreased to RMB1.3 billion (US$0.2 billion) in the third quarter of 2019 from RMB1.4 billion in the third quarter of 2018.

Gain on Disposals of Long-Lived Assets.  Gain on disposals of long-lived assets for the third quarter of 2019 was RMB3.0 billion (US$0.4 billion), which was the gain on disposals of logistics facilities to Core Fund.

Income/(Loss) from Operations and Non-GAAP Income from Operations.  Income from operations for the third quarter of 2019 was RMB5.0 billion (US$0.7 billion), compared to loss from operations of RMB0.7 billion for the same period last year. Non-GAAP income from operations for the third quarter of 2019 was RMB3.0 billion (US$0.4 billion) with a non-GAAP operating margin of 2.2%, as compared to RMB0.6 billion in the third quarter of 2018 with a non-GAAP operating margin of 0.6%.

Non-GAAP EBITDA for the third quarter of 2019 was RMB4.2 billion (US$0.6 billion) with a non-GAAP EBITDA margin of 3.1%, as compared to RMB1.7 billion with a non-GAAP EBITDA margin of 1.6% for the third quarter of 2018.

Net Income Attributable to Ordinary Shareholders and Non-GAAP Net Income Attributable to Ordinary ShareholdersNet income attributable to ordinary shareholders for the third quarter of 2019 was RMB612.3 million (US$85.7 million), compared to RMB3.0 billion for the same period last year. Non-GAAP net income attributable to ordinary shareholders for the third quarter of 2019 was RMB3.1 billion (US$0.4 billion), compared to RMB1.2 billion for the same period last year.

Diluted EPS and Non-GAAP Diluted EPS.  Diluted net income per ADS for the third quarter of 2019 was RMB0.41 (US$0.06), compared to RMB2.03 for the third quarter of 2018. Non-GAAP diluted net income per ADS for the third quarter of 2019 was RMB2.08 (US$0.29), as compared to RMB0.80 for the third quarter of 2018.

Cash Flow and Working Capital

As of September 30, 2019, the company's cash and cash equivalents, restricted cash and short-term investments totaled RMB59.2 billion (US$8.3 billion), compared to RMB39.5 billion as of December 31, 2018. For the third quarter of 2019, free cash flow of the company was as follows:

    For the three months ended
    September 30,
2018
  September 30,
2019
September 30,
2019
    RMB   RMB US$
    (In thousands)
     
Net cash provided by operating activities   2,212,661     1,262,118   176,577  
Less: Impact from JD Baitiao receivables included in the operating cash flow   (1,775,639 )   (1,312,084 ) (183,567 )
Add/(less): Capital expenditures          
Capital expenditures, net of disposals, related to development projects available for sale*   (2,041,996 )   771,208   107,896  
Other capital expenditures**   (6,581,905 )   (658,634 ) (92,146 )
Free cash flow   (8,186,879 )   62,608   8,760  
                 

* Including logistics facilities and other real estate properties developed by the company's property management group, which may be disposed under various equity structures. In the third quarter of 2019, approximately RMB2.9 billion proceeds from the sale of logistics assets were included in this line.
** Including capital expenditures related to the company's headquarters in Beijing and all other capital expenditures.

Net cash used in investing activities was RMB5.7 billion (US$0.8 billion) for the third quarter of 2019, consisting primarily of increase in investments in equity investees and short-term loans to JD Digits. In addition, cash paid for capital expenditures in the third quarter of 2019 was RMB2.8 billion, offset by the net cash consideration of RMB2.9 billion received in relation to the disposals of development projects to Core Fund.

Net cash provided by financing activities was RMB2.5 billion (US$0.3 billion) for the third quarter of 2019, consisting primarily of cash received as part of JD Health's Series A financing.

For the twelve months ended September 30, 2019, free cash flow of the company was as follows:

    For the twelve months ended
    September 30,
2018
  September 30,
2019
September 30,
2019
    RMB   RMB US$
    (In thousands)
     
Net cash provided by operating activities   18,239,926     30,805,649   4,309,869  
Less: Impact from JD Baitiao receivables included in the operating cash flow   (4,449,269 )   (9,716,127 ) (1,359,336 )
Less: Capital expenditures          
Capital expenditures, net of disposals, related to development projects available for sale   (7,637,675 )  
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