JD.com Announces Second Quarter 2018 Results 

BEIJING, Aug. 16, 2018 (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 June 30, 2018.

Second Quarter 2018 Highlights

• Net revenues¹ for the second quarter of 2018 were RMB122.3 billion (US$²18.5 billion), an increase of 31.2% from the second quarter of 2017. Net service revenues for the second quarter of 2018 were RMB11.8 billion (US$1.8 billion), an increase of 51.0% from the second quarter of 2017.
  
  
• Operating margin of JD Mall before unallocated items³ for the second quarter of 2018 was 1.1%, as compared to 0.8% for the same period last year.
  
  
• Net loss from continuing operations attributable to ordinary shareholders for the second quarter of 2018 was RMB2,212.5 million (US$334.4 million), compared to RMB287.0 million for the same period last year. Non-GAAP net income from continuing operations attributable to ordinary shareholders⁴ for the second quarter of 2018 was RMB478.1 million (US$72.3 million), compared to RMB976.5 million for the same period last year.
  
  
• Diluted EPS and Non-GAAP Diluted EPS. Diluted net loss per ADS from continuing operations for the second quarter of 2018 was RMB1.54 (US$0.23), compared to RMB0.20 for the second quarter of 2017. Non-GAAP diluted net income per ADS from continuing operations for the second quarter of 2018 was RMB0.33 (US$0.05), compared to RMB0.67 for the same quarter last year.
  
  
• Annual active customer accounts increased by 21.5% to 313.8 million in the twelve months ended June 30, 2018 from 258.3 million in the twelve months ended June 30, 2017.

“As China’s most trusted e-commerce platform, JD continues to win over quality-focused customers with a premium shopping experience and an unrivaled level of service, no matter where they choose to shop,” said Richard Liu, Chairman and CEO of JD.com. “We are also seeing more corporate clients, both Chinese and international, leveraging JD’s superior technology and retail infrastructure to help take their businesses to the next level. We will continue to prioritize technology innovation to empower our partners with enhanced capabilities and improved efficiency, helping us to realize our ‘Retail as a Service’ strategy, and driving our next phase of growth.”

“We are pleased to see continued healthy performance in the second quarter, with solid revenue growth and improved margins in our core JD Mall business,” said Sidney Huang, Chief Financial Officer of JD.com. “Our new business initiatives continue to gain impressive traction across the industry. We will maintain a balanced, long-term approach to investing in the technologies that will define the future of retail.”

Recent Business Developments

• In June, Google invested $550 million in JD as part of a new strategic partnership. The companies will work together to explore joint development of retail solutions, enabling personalized and frictionless shopping experiences in several regions around the world. Furthermore, JD will join Google Shopping to offer a curated selection of high-quality products to consumers across multiple regions. In the future, the two companies will also explore cooperation opportunities in areas such as artificial intelligence (“AI”), augmented reality (“AR”), virtual reality and unmanned technology, among others.
  
  
• In April, JD.com launched a strategic partnership with iQiyi, an innovative market-leading online entertainment service in China, to offer bundled memberships allowing users who purchase one-year memberships for either iQiyi or JD to enjoy the premium service and benefits of both platforms. JD will continue to introduce new diversified value-added services and benefits for JD Plus members, further enhancing its premium online shopping experience and expanding the company’s paid-subscriber base.
  
  
• In the second quarter, JD.com continued to strengthen its position as the go-to trusted platform in China for premium brands. For example, Japanese lifestyle brand, MUJI, launched its flagship store on JD, giving JD users access to its full range of high-quality products and a superior shopping experience by leveraging JD’s integrated logistics services. In addition, the 130-year-old Swiss watch brand, Carl F. Bucherer, made its world e-commerce debut with the launch of its official online direct sales flagship store on JD, reflecting the trust top international brands have in JD as the most reliable online channel to tap into the Chinese market.
  
  
• In July, international luxury brand, Balenciaga, launched an e-flagship store on JD’s luxury platform TOPLIFE, complete with 24/7 customer service and JD’s exclusive white glove delivery service, JD Luxury Express. By providing a premium experience on TOPLIFE that complements what luxury brands offer in their own brick-and-mortar stores, JD is enabling Balenciaga and other leading brands to strengthen their omnichannel strategies in China.
  
  
• In August, as part of its boundaryless retail strategy, JD launched a cooperation with China-based home furnishing retailer Qumei. Leveraging JD’s extensive product selection, Qumei expanded its offering from furniture to a wide range of home products. JD’s ability to use big data to build accurate customer profiles has enabled Qumei to more effectively match its product selection with consumer demand. With the help of cutting-edge JD technologies such as AI-based facial recognition and AR features, the cooperation is enabling Qumei to deliver a fully-interactive shopping experience in its traditional offline stores.
  
  
• In April, JD.com launched its open AI platform, NeuHub, offering a set of AI services ranging from natural language processing, speech recognition, computer vision, and machine learning. One of the platform’s successful applications is the new sentiment analysis API on NeuHub. This API, developed fully in-house by JD, leverages a large volume of historical data on JD’s platform to allow JIMI, JD’s automated customer service assistant, to more precisely identify customers’ emotions and express the appropriate sentiment when replying through online chat. The new functionality has significantly increased user satisfaction on JD’s online chat service.
  
  
• In the second quarter, to reduce product-to-customer distance and provide customers with innovative delivery options, JD Logistics launched its “Flash Delivery” initiative. JD Logistics is now able to offer delivery times ranging from several minutes to about one hour for selected merchandise in certain areas through optimally allocating merchandise across its distribution network, including front-line metropolitan distribution centers, delivery stations and partners’ offline stores, based on its analysis of customer demands.
  
  
• In July, JD.com deployed a team of drone engineers as well as drones and ancillary vehicles to support the Beijing municipal government’s storm relief efforts. This was JD’s first disaster relief effort following its establishment of China’s first nationwide drone rescue team in May 2018. JD drones were previously called upon to transport emergency medicines and daily necessities to a remote cliff village in Sichuan province.
  
  
• As of July 31, 2018, JD.com’s joint venture, Dada-JD Daojia, had partnered with over 200 Walmart stores and 500 Yonghui stores, among numerous other supermarkets and grocery stores, to provide a premium online fresh grocery shopping experience with one-hour home delivery service. Dada-JD Daojia is China’s leading on-demand logistics and omnichannel e-commerce platform.
  
  
• During the second quarter, JD expanded its leadership position in fulfillment capabilities among China’s e-commerce companies. As of June 30, 2018, JD.com operated 521 warehouses covering an aggregate gross floor area of 11.6 million square meters in China.
  
  
• JD.com had over 170,000 merchants on its online marketplace, and a total of 173,904 full-time employees as of June 30, 2018.

Second Quarter 2018 Financial Results

Net Revenues.  For the second quarter of 2018, JD.com reported net revenues of RMB122.3 billion (US$18.5 billion), representing a 31.2% increase from the same period in 2017. Net product revenues increased by 29.4%, while net service revenues increased by 51.0% in the second quarter of 2018, from the second quarter of 2017.

Cost of Revenues.  Cost of revenues increased by 31.3% to RMB105.8 billion (US$16.0 billion) in the second quarter of 2018 from RMB80.6 billion in the second quarter of 2017. This increase was primarily due to the growth of the company’s direct sales business, costs related to the logistics services provided to merchants and other partners, as well as traffic acquisition costs directly related to the online marketing services provided to merchants and suppliers.

Fulfillment Expenses.  Fulfillment expenses, which primarily include procurement, warehousing, delivery, customer service and payment processing expenses, increased by 28.7% to RMB8.2 billion (US$1.2 billion) in the second quarter of 2018 from RMB6.4 billion in the second quarter of 2017. Fulfillment expenses as a percentage of net revenues was 6.7%, compared to 6.8% in the same period last year.

Marketing Expenses.  Marketing expenses increased by 29.1% to RMB5.3 billion (US$0.8 billion) in the second quarter of 2018 from RMB4.1 billion in the second quarter of 2017.

Technology and Content Expenses.  Technology and content expenses increased by 79.8% to RMB2.8 billion (US$0.4 billion) in the second quarter of 2018 from RMB1.5 billion in the second quarter of 2017, as a result of the company’s continual investment in top R&D talent and technology infrastructure.

General and Administrative Expenses.  General and administrative expenses increased by 23.1% to RMB1.3 billion (US$0.2 billion) in the second quarter of 2018 from RMB1.0 billion in the second quarter of 2017.

Loss from operations and Non-GAAP income from operations⁵.  Operating loss from continuing operations for the second quarter of 2018 was RMB1,033.9 million (US$156.2 million), compared to RMB403.0 million for the same period last year. Non-GAAP operating income from continuing operations for the second quarter of 2018 was RMB113.2 million (US$17.1 million), as compared to RMB581.9 million in the second quarter of 2017. Operating margin of JD Mall before unallocated items for the second quarter of 2018 was 1.1%, as compared to 0.8% for the same period last year.

Non-GAAP EBITDA⁶ from continuing operations for the second quarter of 2018 was RMB922.4 million (US$139.4 million), as compared to RMB1,109.4 million for the second quarter of 2017.

Others, net.  Others, net from continuing operations for the second quarter of 2018 was a loss of RMB1,185.8 million (US$179.2 million), compared with an income of RMB114.4 million for the second quarter of 2017. The loss was primarily due to the loss from fair value change of long-term investments of RMB2.7 billion (US$0.4 billion) in accordance with the new financial instruments accounting standard adopted on January 1, 2018, partially offset by the realized gain from disposal of Ele.me of RMB1.3 billion (US$0.2 billion).

Net loss attributable to ordinary shareholders and Non-GAAP Net income attributable to ordinary shareholders.  Net loss from continuing operations attributable to ordinary shareholders for the second quarter of 2018 was RMB2,212.5 million (US$334.4 million), compared to RMB287.0 million for the same period last year. Non-GAAP net income from continuing operations attributable to ordinary shareholders for the second quarter of 2018 was RMB478.1 million (US$72.3 million), compared to RMB976.5 million for the same period last year.

Diluted EPS and Non-GAAP Diluted EPS.  Diluted net loss per ADS from continuing operations for the second quarter of 2018 was RMB1.54 (US$0.23), compared to RMB0.20 for the second quarter of 2017. Non-GAAP diluted net income per ADS from continuing operations for the second quarter of 2018 was RMB0.33 (US$0.05), as compared to RMB0.67 for the second quarter of 2017.

Cash Flow and Working Capital

As of June 30, 2018, the company’s cash and cash equivalents, restricted cash and short-term investments totaled RMB52.8 billion (US$8.0 billion), compared to RMB38.4 billion as of December 31, 2017. For the second quarter of 2018, free cash flow from continuing operations of the company was as follows:

Net cash used in investing activities from continuing operations was RMB20.3 billion (US$3.1 billion) for the second quarter of 2018, consisting primarily of cash paid for capital expenditures of RMB4.7 billion, increases in investments in equity investees and investment securities of RMB11.2 billion, and increases in loans to JD Finance of RMB4.0 billion.

Net cash provided by financing activities from continuing operations was RMB4.8 billion (US$0.7 billion) for the second quarter of 2018, consisting primarily of proceeds from issuance of ordinary shares of RMB3.5 billion and proceeds from long-term borrowings of RMB2.9 billion, partially offset by repayment of nonrecourse securitization debt of RMB1.8 billion.

For working capital turnover days, see table under “Supplemental Financial Information and Business Metrics.”

Half-Year Supplemental Information

The table below sets forth the half-year segment operating results:

* New businesses of the company include logistics services provided to third parties, technology initiatives, and overseas business.
** The inter-segment eliminations mainly consisted of services provided by JD Mall to the overseas business, and services provided by JD Logistics to the vendors of JD Mall, which were recorded as a deduction of cost of revenues at the consolidated level.

The table below sets forth the half-year revenue information:

Recent Development

In the second quarter of 2018, JD Finance entered into a definitive agreement with certain investors, including China International Capital Corporation, Bank of China, China Securities Co. and CITIC Capital, for its Series B financing round, valuing JD Finance at over RMB130 billion on a post-money basis. The transaction is subject to customary closing conditions and is expected to close in the third quarter of 2018. As of June 30, 2017, JD Finance has been deconsolidated from JD.com as a result of the reorganization of JD Finance. Pursuant to the agreements relating to the reorganization of JD Finance, in exchange for certain licenses and services provided by JD.com to JD Finance, JD.com will receive 40% of the future pre-tax profit of JD Finance when JD Finance has a positive pre-tax income on a cumulative basis, and JD.com may be able to convert its profit-sharing right into 40% of JD Finance’s equity interest, subject to applicable regulatory approvals. Upon completion of JD Finance’s series B financing, the foregoing percentage of profit sharing and maximum equity interest issuance to JD.com will be diluted proportionally to approximately 36%.

Third Quarter 2018 Guidance

Net revenues for the third quarter of 2018 are expected to be between RMB104.5 billion and RMB109.0 billion, representing a growth rate between 25% and 30% compared with the third quarter of 2017. This forecast reflects JD.com’s current and preliminary expectation, which is subject to change.

Conference Call

JD.com’s management will hold a conference call at 8:00 am, Eastern Time on August 16, 2018, (8:00 pm, Beijing/Hong Kong Time on August 16, 2018) to discuss the second quarter 2018 financial results.

Listeners may access the call by dialing the following numbers:

A telephone replay will be available from 11:00 am, Eastern Time on August 16, 2018 through 09:59 am, Eastern Time on August 24, 2018. The dial-in details are as follows:

Additionally, a live and archived webcast of the conference call will also be available on the company’s investor relations website at http://ir.jd.com.

About JD.com

JD.com is a leading technology driven e-commerce company and retail infrastructure service provider in China. Its cutting-edge retail infrastructure enables consumers to buy whatever they want, whenever and wherever they want it. The company has opened its technology and infrastructure to partners, brands and other sectors, as part of its Retail as a Service offering to help drive productivity and innovation across a range of industries. JD.com is the largest retailer in China, a member of the NASDAQ100 and a Fortune Global 500 company.

Non-GAAP Measures

In evaluating the business, the company considers and uses non-GAAP measures, such as non-GAAP income/(loss) from operations, non-GAAP operating margin, non-GAAP net income/(loss) attributable to ordinary shareholders, non-GAAP net margin, free cash flow, non-GAAP EBITDA, non-GAAP EBITDA margin, non-GAAP net income/(loss) per weighted average number of shares and non-GAAP net income/(loss) per ADS, as supplemental measures to review and assess 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 accounting principles generally accepted in the United States of America (“U.S. GAAP”). The company defines non-GAAP income/(loss) from operations as income/(loss) from operations excluding share-based compensation, amortization of intangible assets resulting from assets and business acquisitions, revenue from business cooperation arrangements with equity investees and impairment of goodwill and intangible assets. The company defines non-GAAP net income/(loss) attributable to ordinary shareholders as net income/(loss) attributable to ordinary shareholders excluding share-based compensation, amortization of intangible assets resulting from assets and business acquisitions, revenue from business cooperation arrangements with equity investees, gain on disposals/revaluation of investments, preferred shares redemption value accretion, income from non-compete agreement, reconciling items on the share of equity method investments, fair value change of long-term investments, impairment of goodwill, intangible assets and investments. The company defines free cash flow as operating cash flow adding back the impact from JD Finance related credit products included in the operating cash flow and less capital expenditures, which include purchase of property, equipment and software, cash paid for construction in progress, purchase of intangible assets and land use rights. The company defines non-GAAP EBITDA as non-GAAP income/(loss) from operations plus depreciation and amortization excluding amortization of intangible assets resulting from assets and business acquisitions.

The company presents these non-GAAP financial measures because they are used by management to evaluate operating performance and formulate business plans. Non-GAAP income/(loss) from operations, non-GAAP net income/(loss) attributable to ordinary shareholders and non-GAAP EBITDA reflect the company’s ongoing business operations in a manner that allows more meaningful period-to-period comparisons. Free cash flow enables management to assess liquidity and cash flow while taking into account the impact from JD Finance related credit products included in the operating cash flow and the demands that the expansion of fulfillment infrastructure and technology platform has placed on financial resources. The company also believes that the use of the non-GAAP financial measures facilitates investors to understand and evaluate the company’s current operating performance and future prospects in the same manner as management does, if they so choose. The company also believes that the non-GAAP financial measures provide useful information to both management and investors by excluding certain expenses, gain/loss and other items that are not expected to result in future cash payments or that are non-recurring in nature or may not be indicative of the company's core operating results and business outlook.

The non-GAAP financial measures have limitations as analytical tools. The company’s non-GAAP financial measures do not reflect all items of income and expense that affect the company’s operations or not represent the residual cash flow available for discretionary expenditures. Further, these non-GAAP measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore their comparability may be limited. The company compensates for these limitations by reconciling the non-GAAP financial measures to the nearest U.S. GAAP performance measure, all of which should be considered when evaluating performance. The company encourages you to review the company’s financial information in its entirety and not rely on a single financial measure.

CONTACTS:

Investor Relations
Ruiyu Li
Senior Director of Investor Relations
+86 (10) 8912-6805
IR@JD.com

Media
+86 (10) 8911-6155
Press@JD.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 business outlook and quotations from management in this announcement, as well as JD.com's strategic and operational plans, contain forward-looking statements. JD.com may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), 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 JD.com'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: JD.com'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 e-commerce market; changes in its revenues and certain cost or expense items; the expected growth of the Chinese e-commerce market; Chinese governmental policies relating to JD.com's industry and general economic conditions in China. Further information regarding these and other risks is included in JD.com's filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and JD.com undertakes no obligation to update any forward-looking statement, except as required under applicable law.

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¹ The financial information and non-GAAP financial information disclosed in this press release is presented on a continuing operations basis, unless otherwise specifically stated.

² The U.S. dollar (US$) amounts disclosed in this press release, except for those transaction amounts that were actually settled in U.S. dollars, are presented solely for the convenience of the readers. The conversion of Renminbi (RMB) into US$ in this press release is based on the exchange rate set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System as of June 29, 2018, which was RMB6.6171 to US$1.00. The percentages stated in this press release are calculated based on the RMB amounts.

³ Unallocated items are consistent with non-GAAP adjustments and include revenue from business cooperation arrangements with equity investees, share-based compensation, amortization of intangible assets resulting from assets and business acquisitions, and impairment of goodwill and intangible assets, which are not allocated to segments.

⁴ Non-GAAP net income/(loss) attributable to ordinary shareholders is defined to exclude share-based compensation, amortization of intangible assets resulting from acquisitions, fair value changes of long-term investments, gain on disposals/revaluation of investments, and certain other non-cash gain or loss items from net income/(loss) attributable to ordinary shareholders. See “Reconciliation of GAAP and Non-GAAP Results” at the end of this press release.

⁵ Non-GAAP income/(loss) from operations is defined to exclude share-based compensation, amortization of intangible assets resulting from acquisitions, and certain other non-cash gain or loss items from income/(loss) from operations. Non-GAAP operating margin is calculated by dividing non-GAAP income/(loss) from operations by net revenues. See “Reconciliation of GAAP and Non-GAAP Results” at the end of this press release.

⁶ Non-GAAP EBITDA is defined as non-GAAP income/(loss) from operations plus depreciation and amortization excluding amortization of intangible assets resulting from assets and business acquisitions, and non-GAAP EBITDA margin is calculated by dividing non-GAAP EBITDA by net revenues. See “Reconciliation of GAAP and Non-GAAP Results” at the end of this press release.

⁷ Marketplace and advertising revenues were RMB10,719 million, RMB17,075 million, and RMB25,391 million, and logistics and other service revenues were RMB2,387 million, RMB3,272 million, and RMB5,116 million, for the years ended December 31, 2015, 2016 and 2017, respectively.