OREANDA-NEWS. Baozun Inc. (NASDAQ:BZUN) ("Baozun" or the "Company"), the leading brand e-commerce solutions provider in China, today announced its unaudited financial results for the first quarter ended March 31, 2016.

First Quarter 2016 Financial Highlights

  • Total net revenues were RMB668.2 million (US$[1]103.6 million), an increase of 40.0% year-over-year.
  • Net income was RMB4.1 million (US$0.6 million), a significant increase of 107.9% year-over-year.
  • Non-GAAP net income[2] was RMB14.1 million (US$2.2 million), an increase of 85.1% year-over-year.
  • Basic and diluted non-GAAP net income attributable to ordinary shareholders per American Depository Share[3] (“ADS[4]”) were RMB0.29 (US$0.04) and RMB0.27 (US$0.04), respectively, compared with basic and diluted non-GAAP net loss attributable to ordinary shareholders per ADS of RMB1.89 and RMB1.89, respectively, for the same period of 2015.

First Quarter 2016 Operational Highlights

  • Total Gross Merchandise Volume (“GMV”)[5] was RMB1,853.0 million, an increase of 60.1% year-over-year. Maikefeng, the Company’s online retail platform, contributed RMB51.0 million to total GMV, an increase of 125.3% year-over-year.
  • Distribution GMV[6] was RMB541.1 million, an increase of 30.8% year-over-year.
  • Non-distribution GMV[7] was RMB1,311.9 million, an increase of 76.5% year-over-year.
  • Number of brand partners increased to 116 as of March 31, 2016, from 94 as of March 31, 2015.
  • Number of GMV brand partners increased to 98 as of March 31, 2016, from 84 as of March 31, 2015.

“Our business continued to gain momentum with another strong quarter of solid growth,” commented Mr. Vincent Qiu, Chairman and Chief Executive Officer of Baozun. “We held the First Global Brand E-commerce Summit earlier this month in Shanghai. The industry was incredibly upbeat and optimistic about the wealth of opportunities that China’s rising consumerism and brand e-commerce are creating. Having just completed our first year as a publicly listed company, we are pleased to  welcome Steve Hsien-Chieng Hsia and Benjamin Changqing Ye as independent directors to our board. I am confident their wealth of leadership experience and business expertise will add significant value to Baozun. We remain focused on enhancing our capabilities and working closely with our brand partners to develop the industry’s best practices and strengthen our leadership in China’s brand e-commerce market.”

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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 RMB 6.4480 to US$1.00, the noon buying rate in effect on March 31, 2016 as set forth in the H.10 Statistical Release of the Federal Reserve Board.

[2] Non-GAAP net income is a non-GAAP financial measure, which is defined as net income excluding share-based compensation expenses.

[3] Basic and diluted non-GAAP net income per American Depository Share are non-GAAP financial measures, which are defined as non-GAAP net income (loss) attributable to ordinary shareholders divided by weighted average number of ADSs used in calculating basic and diluted net income (loss) per ADS, respectively.

[4] Each ADS represents three Class A ordinary shares.

[5] 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.

[6] Distribution GMV refers to the GMV under the distribution business model.

[7] Non-distribution GMV refers to the GMV under the service fee business model and the consignment business model.

Mr. Beck Chen, Chief Financial Officer of Baozun added, “We are pleased to see stronger than expected growth this quarter with GMV increasing by 60%, significant margin improvement and net income more than doubling this quarter compared to the same period last year. As we mentioned last quarter, we expect total GMV for fiscal year 2016 to increase by over 50% from 2015. We continue to focus on improving our business model mix by expanding our non-distribution GMV business, which grew by 76% during the quarter, faster than total GMV growth. As the leading brand e-commerce solutions provider in China, Baozun is benefiting from increased demand by consumers for quality brands and authentic products. We believe these results demonstrate the increasing importance that brand e-commerce is playing in a brand’s strategy in China and our capability to help them benefit from the enormous growth opportunities. We will continue to optimize our business model mix and further increase our profitability.”

First Quarter 2016 Financial Results

Total net revenues were RMB668.2 million (US$103.6 million), an increase of 40.0% from RMB477.2 million in the same quarter of last year. Maikefeng contributed RMB6.5 million (US$1.0 million) to total net revenues, a decrease of 66.4% from RMB19.3 million in the same quarter of last year.

Product sales revenue was RMB465.7 million (US$72.2 million), an increase of 31.7% from RMB353.7 million in the same quarter of last year. The increase was primarily due to the increased popularity of brand partners’ products and increasingly effective promotional and marketing activities. Maikefeng contributed RMB3.8 million (US$0.6 million) to product sales revenues, a decrease of 80.3% from RMB19.3 million in the same quarter of last year. The decrease was a result of Maikefeng’s transition from a direct sales model to a marketplace-focused model.

Services revenue was RMB202.5 million (US$31.4 million), an increase of 63.9% from RMB123.5 million in the same quarter of last year. The increase was primarily attributable to growth in sales of apparel products sold by existing brand partners as they expand their online presence, and the addition of new brand partners in the apparel category. Maikefeng contributed RMB2.7 million (US$0.4 million) to services revenue, compared with nil during the same quarter of last year.

Total operating expenses were RMB664.2 million (US$103.0 million), compared with RMB474.4 million in the same quarter of last year.

  • Cost of products was RMB410.8 million (US$63.7 million), compared with RMB322.9 million in the same quarter of last year. The increase was primarily due to an increase in the volume of product sales. Maikefeng accounted for RMB4.6 million (US$0.7 million) in cost of products, compared with RMB16.4 million in the same quarter of last year.
  • Fulfillment expenses were RMB93.0 million (US$14.4 million), compared with RMB52.1 million in the same quarter of last year. The increase was primarily due to increases in GMV contribution from the consignment business, and an increase in rental expenses for the Company’s warehouses. Maikefeng accounted for RMB1.2 million (US$0.2 million) in fulfillment expenses, compared with RMB2.9 million in the same quarter of last year.
  • Sales and marketing expenses were RMB119.4 million (US$18.5 million), compared with RMB73.9 million in the same quarter of last year. The increase was primarily due to an increase in promotional and marketing expenses associated with the Company’s online stores. Maikefeng accounted for RMB8.8 million (US$1.4 million) in sales and marketing expenses, compared with RMB5.4 million in the same quarter of last year.
  • Technology and content expenses were RMB21.2 million (US$3.3 million), compared with RMB12.6 million in the same quarter of last year. The increase was primarily due to increases in technology-focused staff and project-based variable technological expenses from brand stores. Maikefeng accounted for RMB1.5 million (US$0.2 million) in technology and content expenses, compared with RMB1.1 million in the same quarter of last year.
  • General and administrative expenses were RMB20.3 million (US$3.2 million), compared with RMB12.4 million in the same quarter of last year. The increase was primarily due to increases in share-based compensation expenses and professional service fees  associated with being a publicly listed company. Maikefeng accounted for RMB0.5 million (US$0.1 million) in general and administrative expenses, compared with nil during the same quarter of last year.

Excluding Maikefeng’s direct impact on revenues and expenses, non-GAAP income from operations was RMB24.1 million (US$3.7 million), compared with RMB14.8 million in the same quarter of last year, and non-GAAP operating margin was 3.6%, compared with 3.2% in the same quarter of last year.  

Net income was RMB4.1 million (US$0.6 million), a significant increase of 107.9% year-over-year. Basic and diluted earnings attributable to ordinary shareholders per ADS were RMB0.09, compared with basic and diluted net loss attributable to ordinary shareholders per ADS of RMB2.49, for the same period of 2015.

Non-GAAP net income was RMB14.1 million (US$2.2 million), an increase of 85.1% year-over-year. Non-GAAP net margin[8] was 2.1%, compared with 1.6% in the same quarter of last year. Basic and diluted non-GAAP net income attributable to ordinary shareholders per ADS were RMB0.29 and RMB0.27, respectively, compared with basic and diluted non-GAAP net loss attributable to ordinary shareholders per ADS of RMB1.89 and RMB1.89, respectively, for the same period of 2015.

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[8] Non-GAAP net margin is a non-GAAP financial measure, which is defined as non-GAAP net income as a percentage of total net revenues.

As of March 31, 2016, the Company had RMB683.4 million (US$106.0 million) of cash, cash equivalents and short-term investments, a decrease from RMB837.3 million as of December 31, 2015 due to the Company’s share repurchase program, investment in logistics and office space and procurement of products for end-of-season sales campaigns.

Share Repurchase

As of March 31, 2016, the Company had repurchased approximately US$10 million in aggregate of its own ADSs, completing the share repurchase program announced in November 2015.

Business Outlook

For the second quarter of 2016, the Company expects total net revenues to be between RMB680 million and RMB690 million, representing year-over-year growth of approximately 31% to 33%.

About Baozun Inc.

Baozun is the leading brand e-commerce solutions provider in China that helps brand partners execute their e-commerce strategies. The Company's integrated capabilities encompass all aspects of the e-commerce value chain, covering IT solutions, store operations, digital marketing, customer services, warehousing and fulfillment. The Company helps brand partners 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.

 Baozun Inc.
 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except for share and per share data)
             
    As of
    December
 31, 2015		   March 31,
2016		   March 31,
2016
    RMB   RMB   US$
ASSETS            
Current assets            
Cash and cash equivalents   787,257    673,419   104,438
Restricted cash    48,144    40,900   6,343
Short-term investment    50,000    10,000   1,551
Accounts receivable, net    364,782   368,013   57,074
Inventories    334,347   396,426   61,480
Advances to suppliers    34,668   55,009   8,531
Deferred tax assets    13,815   13,940   2,162
Prepayments and other current assets    112,122   102,914   15,961
Amounts due from related parties    37,565   47,976   7,440
Total current assets   1,782,700    1,708,597   264,980
             
Non-current assets            
Investments in cost method investees    13,307   20,057   3,111
Property and equipment, net    59,208   75,361   11,688
Intangible assets, net    20,128   20,796   3,225
Other non-current assets    13,830   14,907   2,312
Total non-current assets   106,473   131,121   20,336
             
Total assets   1,889,173   1,839,718   285,316
 Baozun Inc.
 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except for share and per share data)
             
      As of
    December 31, 2015   March 31,
 2016		   March 31, 2016
    RMB   RMB   US$
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
Current liabilities            
Accounts payable     457,493       486,722       75,484  
Note payable     31,088       -       -  
Income tax payable     7,793       10,683       1,657  
Accrued expenses and other current liabilities     150,859       138,548       21,487  
Amounts due to related parties     7,469       7,469       1,158  
Total current liabilities     654,702       643,422       99,786  
Total liabilities     654,702       643,422       99,786  
             
Shareholders’ equity:            
Ordinary shares (US$0.0001 par value; 500,000,000 shares authorized, 148,527,064 shares issued and outstanding as of March 31, 2016)     93       91       14  
Additional paid-in capital     1,535,665       1,494,919       231,842  
Accumulated deficit     (320,499 )     (316,379 )     (49,066 )
Accumulated other comprehensive income     19,212       17,665       2,740  
Total shareholders' equity     1,234,471       1,196,296       185,530  
                         
Total liabilities and shareholders’ equity                        
      1,889,173       1,839,718       285,316  
 Baozun Inc.
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 (In thousands, except for share and per share data and per ADS data)
             
         
    Three months ended March 31
      2015       2016  
    RMB   RMB   US$
             
Net revenues            
Product sales     353,653       465,669       72,219  
Services     123,546       202,519       31,408  
Total net revenues     477,199       668,188       103,627  
             
Operating expenses (1)            
Cost of products     (322,929 )     (410,805 )     (63,710 )
Fulfillment     (52,149 )     (92,969 )     (14,418 )
Sales and marketing     (73,888 )     (119,443 )     (18,524 )
Technology and content     (12,607 )     (21,160 )     (3,282 )
General and administrative     (12,402 )     (20,328 )     (3,153 )
Other operating (expense) income, net     (474 )     520       81  
Total operating expenses     (474,449 )     (664,185 )     (103,006 )
Income from operations     2,750       4,003       621  
Other income            
Interest income     575       2,803       435  
Exchange (loss) gain     (505 )     79       12  
Income before income tax and share of loss in equity method investment     2,820       6,885       1,068  
Income tax benefit (expense)     986       (2,765 )     (429 )
Income before share of loss in equity method investment     3,806       4,120       639  
Share of loss in equity method investment     (1,824 )     -       -  
Net income     1,982       4,120       639  
Change in redemption value of convertible redeemable preferred shares     (25,332 )     -       -  
Net (loss) income attributable to ordinary shareholders     (23,350 )     4,120       639  
             
Net (loss) income per share:            
Basic     (0.83 )     0.03       0.00  
Diluted     (0.83 )     0.03       0.00  
Net (loss) income per ADS:            
Basic     (2.49 )     0.09       0.01  
Diluted     (2.49 )     0.09       0.01  
Weighted average shares used in calculating net (loss) income per ordinary share            
Basic     28,058,820       148,876,209       148,876,209  
Diluted     28,058,820       159,274,427       159,274,427  
             
Net income     1,982       4,120       639  
Other comprehensive loss, net of tax:            
Foreign currency translation adjustment     (50 )     (1,547 )     (240 )
Comprehensive income     1,932       2,573       399  

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

      Three months ended March
31
    2015   2016
    RMB   RMB   US$
             
Fulfillment   345   462   72
Sales and marketing   2,808   4,340   673
Technology and content   968   1,848   287
General and administrative   1,541   3,377   524
    5,662   10,027   1,556
 Baozun Inc.
 Reconciliations of GAAP and Non-GAAP Results
 (in thousands, except for share and per ADS data)
           
    Three months ended March 31  
      2015     2016  
               
               
               
Income from operations     2,750     4,003   621  
Add: Share-based compensation expenses     5,662     10,027   1,556  
Non-GAAP income from operations     8,412     14,030   2,177  
               
Net income     1,982     4,120   639  
Add: Share-based compensation expenses     5,662     10,027   1,556  
Non-GAAP net income     7,644     14,147   2,195  
               
Net (loss) income attributable to ordinary shareholders     (23,350 )   4,120   639  
Add: Share-based compensation expenses     5,662     10,027   1,556  
Non-GAAP net (loss) income attributable to ordinary shareholders       (17,688 )   14,147   2,195  
                 
               
Non-GAAP net (loss) income attributable to ordinary shareholders per ADS:              
Basic     (1.89 )   0.29   0.04  
Diluted     (1.89 )   0.27   0.04  
Weighted average shares used in calculating net (loss) income per ordinary share              
Basic     28,058,820     148,876,209   148,876,209  
Diluted     28,058,820     159,274,427   159,274,427