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Baozun Announces Second Quarter 2020 Unaudited Financial Results

SHANGHAI, China, Aug. 21, 2020 (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 second quarter ended June 30, 2020.

Second Quarter 2020 Financial Highlights

  • Total net revenues were RMB2,152.1 million (US$1304.6 million), an increase of 26.3% year-over-year. Services revenue was RMB1,224.3 million (US$173.3 million), an increase of 43.2% year-over-year.

  • Income from operations was RMB160.6 million (US$22.7 million), an increase of 87.2% year-over-year. Operating margin was 7.5%, compared with 5.0% in the same quarter of last year.

  • Non-GAAP income from operations2 was RMB187.1 million (US$26.5 million), an increase of 81.4% year-over-year. Non-GAAP operating margin was 8.7%, compared with 6.1% in the same quarter of last year.

  • Net income attributable to ordinary shareholders of Baozun Inc. was RMB119.8 million (US$17.0 million), an increase of 78.6% year-over-year.

  • Non-GAAP net income attributable to ordinary shareholders of Baozun Inc.3 was RMB146.0 million (US$20.7 million), an increase of 73.4% year-over-year.

  • Basic and diluted net income attributable to ordinary shareholders of Baozun Inc. per American Depository Share (“ADS4”) were RMB2.04 (US$0.29) and RMB2.00 (US$0.28), respectively, compared with RMB1.16 and RMB1.13, respectively, for the same period of 2019.

  • Basic and diluted non-GAAP net income attributable to ordinary shareholders of Baozun Inc. per ADS5 were RMB2.48 (US$0.35) and RMB2.43 (US$0.34), respectively, compared with RMB1.45 and RMB1.41, respectively, for the same period of 2019.

Second Quarter 2020 Operational Highlights

  • Total Gross Merchandise Volume (“GMV”)6 was RMB12,757.8 million, an increase of 31.2% year-over-year.

  • Distribution GMV7 was RMB1,037.6 million, an increase of 9.1% year-over-year.

  • Non-distribution GMV8 was RMB11,720.2 million, an increase of 33.6% year-over-year.

  • Number of brand partners increased to 250 as of June 30, 2020, from 212 as of June 30, 2019.

  • Number of GMV brand partners increased to 241 as of June 30, 2020, from 202 as of June 30, 2019.

Mr. Vincent Qiu, Chairman and Chief Executive Officer of Baozun, commented, “Strong recovery in e-commerce, our unique value proposition to brand partners and the tenacity of our team underpinned a solid set of results in the second quarter of 2020, with strong top line growth and remarkably improved profitability. COVID-19, while an impediment to growth for many companies, created an opportunity for us to empower our brand partners as they bolstered their online go-to-market strategies and integrated omni-channel initiatives. Over the past three years, we have centralized and continuously strengthened our technology footprint around cloud infrastructure and AI technology in our integrated digital operating platform to drive efficiency and enhance intelligence for our brand partners. We believe digitalization and innovation will continue to be key components of our strategy that will strengthen our competitive moat and drive our long-term sustainable growth.”

Mr. Robin Lu, Chief Financial Officer of Baozun, commented, “In the past few quarters, while we have continued to push through various cost control initiatives, we have stepped up our efforts to optimize category mix, accelerate new brands engagement, and enhance operating leverage and synergies through digitization and innovation. All these initiatives have contributed to a remarkable margin expansion, with non-GAAP operating profit growing by over 81% year-over-year, a solid milestone in delivering on our high-quality growth strategy. Looking into the third quarter, despite the pandemic, we will continue to forge ahead with our optimization of category mix and high-quality growth strategy. While we are experiencing stronger seasonality and continued macro uncertainties, we anticipate that GMV for the third quarter of 2020 will grow by at least 15% year-over-year. We are very confident we will deliver strong year-over-year growth in our non-GAAP operating profits in the third quarter of 2020.”

Second Quarter 2020 Financial Results

Total net revenues were RMB2,152.1 million (US$304.6 million), an increase of 26.3% from RMB1,704.2 million in the same quarter of last year.

Product sales revenue was RMB927.8 million (US$131.3 million), an increase of 9.3% from RMB849.1 million in the same quarter of last year. The increase was primarily attributable to the acquisition of new brand partners and the increased popularity of brand partners’ products, partially offset by slower growth in personal-care products in appliances category.

Services revenue was RMB1,224.3 million (US$173.3 million), an increase of 43.2% from RMB855.1 million in the same quarter of last year. The increase was primarily attributable to the rapid growth of the Company’s consignment model and service fee model. 

Total operating expenses were RMB1,991.4 million (US$281.9 million), compared with RMB1,618.4 million in the same quarter of last year.

  • Cost of products was RMB775.8 million (US$109.8 million), compared with RMB679.2 million in the same quarter of last year. The increase was primarily due to higher costs associated with an increase in product sales revenue.

  • Fulfillment expenses were RMB575.3 million (US$81.4 million), compared with RMB391.9 million in the same quarter of last year. The increase was primarily due to a rise in GMV contribution from the Company’s distribution and consignment model, and an increase in warehouse rental expenses associated with expanded warehouse capacity to address additional growth opportunities, both of which were partially offset by efficiency improvements.

  • Sales and marketing expenses were RMB522.0 million (US$73.9 million), compared with RMB413.2 million in the same quarter of last year. The increase was in line with GMV growth and an increase in digital marketing services, which was partially offset by efficiency improvements.

  • Technology and content expenses were flat at RMB102.3 million (US$14.5 million) compared the same quarter of last year, which was mainly attributable to the Company’s cost control initiatives and efficiency improvements.

  • General and administrative expenses were RMB53.9 million (US$7.6 million), compared with RMB51.7 million in the same quarter of last year. The increase was primarily due to a rise in administrative, corporate strategy, and business planning staff, which were partially offset by cost control initiatives.

Income from operations was RMB160.6 million (US$22.7 million), an increase of 87.2% compared with RMB85.8 million in the same quarter of last year. Operating margin was 7.5%, compared with 5.0% in the same quarter of last year.

Non-GAAP income from operations was RMB187.1 million (US$26.5 million), an increase of 81.4% compared with RMB103.1 million in the same quarter of last year. Non-GAAP operating margin was 8.7%, compared with 6.1% in the same quarter of last year.

Net income attributable to ordinary shareholders of Baozun Inc. was RMB119.8 million (US$17.0 million), an increase of 78.6% from the same quarter of last year. Basic and diluted net income attributable to ordinary shareholders of Baozun Inc. per ADS were RMB2.04 (US$0.29) and RMB2.00 (US$0.28), respectively, compared with RMB1.16 and RMB1.13, respectively, in the same period of 2019.

Non-GAAP net income attributable to ordinary shareholders of Baozun Inc. was RMB146.0 million (US$20.7 million), an increase of 73.4% from the same quarter of last year. Basic and diluted non-GAAP net income attributable to ordinary shareholders of Baozun Inc. per ADS were RMB2.48 (US$0.35) and RMB2.43 (US$0.34), respectively, compared with RMB1.45 and RMB1.41, respectively, in the same period of 2019.

As of June 30, 2020, the Company had RMB2,330.8 million (US$329.9 million) in cash, cash equivalents and short-term investments, an increase from RMB1,988.5 million as of December 31, 2019.

Business Outlook

Based on current market and operational conditions and assuming that the macroeconomic environment does not deteriorate further, the Company expects total net revenues to be between RMB1,750 million and RMB1,800 million for the third quarter of 2020, which represents a year-over-year growth rate of 16% to 20%. The above forecast reflects the Company’s current and preliminary view, which is subject to substantial macro uncertainty related to the global COVID-19 pandemic.

Conference Call

The Company will host a conference call to discuss the earnings at 7:00 a.m. Eastern Time on Friday, August 21, 2020 (7:00 p.m. Beijing time on the same day).

Due to the outbreak of COVID-19, operator assisted conference calls are not available at the moment. All participants wishing to attend the call must preregister online before they can receive the dial-in numbers. Preregistration may require a few minutes to complete. The Company would like to apologize for any inconvenience caused by not having an operator as a result of COVID-19.

Participants can register for the conference call by navigating to http://apac.directeventreg.com/registration/event/3999806. Once preregistration has been complete, participants will receive dial-in numbers, the passcode, and a unique access PIN.

To join the conference, simply dial the number in the calendar invite you receive after preregistering, enter the passcode followed by your PIN, and you will join the conference instantly.

A telephone replay of the call will be available after the conclusion of the conference call through 09:59 p.m. Beijing Time, August 29, 2020.

Dial-in numbers for the replay are as follows: 
International Dial-in +61-2-8199-0299
U.S. Toll Free +1-855-452-5696
Passcode: 3999806#

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

The Company also uses certain non-GAAP financial measures in evaluating its business. For example, the Company 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 its financial and 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 (loss) 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 financial and 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 financial and 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 facilitates investors’ assessment of the Company’s financial and 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, potentially limiting the comparability of their financial results to the Company’s. In light of the foregoing limitations, the 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 for the period should not be considered in isolation from or as an alternative to income/(loss) from operations, operating margin, net income/(loss), net margin, net income (loss) attributable to ordinary shareholders of Baozun Inc. and net income (loss) attributable to ordinary shareholders of Baozun Inc. per ADS, or other financial measures prepared in accordance with U.S. GAAP.

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, quotations from management in this announcement and the Company’s statement about its expectations for Company performance in the third quarter of 2020 is a forward-looking statement and is inherently uncertain. Such 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, such as the Company’s expected growth of the online retail industry in China, the Company’s expectations regarding demand for and market acceptance of its products and services, the impact of the COVID-19 pandemic on business and economic conditions in China and globally, the Company’s expectations regarding its relationships with its brand partners and e-commerce channels, and the level of consumer economic activity in China, 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. 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 applicable 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. Wendy Sun
Email: ir@baozun.com

Christensen
In China
Mr. Andrew McLeod
Phone: +852-2232-3941
E-mail: baozun@christensenir.com

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


Baozun Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
             
    As of
    December 31,
2019
  June 30,
2020
  June 30,
2020
    RMB   RMB   US$
ASSETS            
Current assets            
Cash and cash equivalents   1,144,451    1,606,390    227,370
Restricted cash   382,359    159,910    22,634
Short-term investments   844,040    724,370    102,528
Accounts receivable, net   1,800,896    1,548,649    219,197
Inventories, net   896,818    912,175    129,110
Advances to suppliers   214,771   193,558   27,396
Prepayments and other current assets   387,713    377,958   53,496
Amounts due from related parties   19,323    30,532    4,322
Total current assets   5,690,371    5,553,542    786,053


Non-current assets            
Long-term time deposits   209,495    212,030    30,011
Investments in equity investees   37,373    56,114    7,942
Property and equipment, net   415,648    417,219    59,054
Intangible assets, net   151,041    141,741    20,062
Land use right, net   42,567    42,054    5,952
Operating lease right-of-use assets   440,593    367,470    52,012
Goodwill   13,574    13,574    1,921
Other non-current assets   41,461    39,124    5,538
Deferred tax assets   54,477    55,489    7,854
Total non-current assets   1,406,229    1,344,815    190,346
             
Total assets   7,096,600   6,898,357   976,399
             



Baozun Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)
             
    As of
    December 31,
2019
  June 30,
2020
  June 30,
2020
    RMB   RMB   US$
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
Current liabilities            
Short-term loan   428,490    183,480    25,970
Accounts payable   877,093    413,151    58,478
Notes payable   210,693    468,985    66,381
Income tax payables   81,966    36,804    5,209
Accrued expenses and other current liabilities   581,122   744,674    105,401
Amounts due to related parties   6,796    5,801    821
Current operating lease liabilities   137,855    118,689    16,799
Total current liabilities   2,324,015   1,971,584   279,059
             
Non-current liabilities            
Long-term loan   1,859,896    1,895,148    268,241
Deferred tax liability   2,929    2,734    387
Long-term operating lease liabilities   309,989    257,931    36,508
Total non-current liabilities   2,172,814      2,155,813    305,136
             
Total liabilities   4,496,829   4,127,397   584,195
             
Redeemable non-controlling interests   9,254    9,185    1,300
             
Baozun Inc. shareholders’ equity:            
Class A ordinary shares (US$0.0001 par value; 470,000,000 shares authorized, 174,918,929 and 175,977,846 shares issued and outstanding as of December 31, 2019 and June 30, 2020, respectively)   107    107    15
Class B ordinary shares (US$0.0001 par value; 30,000,000 shares authorized, 13,300,738 shares issued and outstanding as of December 31, 2019 and June 30, 2020, respectively)   8    8    1
Additional paid-in capital   2,014,227    2,063,997    292,140
Retained earnings   526,009    648,019    91,721
Accumulated other comprehensive income   28,380    27,071    3,832
             
Total Baozun Inc. shareholders' equity   2,568,731   2,739,202   387,709
             
Non-controlling interests   21,786   22,573   3,195
             
Total equity   2,590,517   2,761,775   390,904
           
Total liabilities, redeemable non-controlling interests and equity   7,096,600   6,898,357   976,399
             




 

Baozun Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except for share and per share data and per ADS data)
             
    For the three months ended June 30,
    2019     2020  
    RMB   RMB   US$
             
Net revenues            
Product sales   849,153      927,799      131,321  
Services   855,057      1,224,267      173,284  
Total net revenues   1,704,210      2,152,066      304,605  
             
Operating expenses (1)            
Cost of products   (679,232 )    (775,783 )    (109,805 )
Fulfillment   (391,943 )    (575,323 )    (81,432 )
Sales and marketing (2)   (413,153 )    (521,969 )    (73,880 )
Technology and content   (102,297 )    (102,258 )    (14,474 )
General and administrative   (51,657 )    (53,892 )    (7,628 )
Other operating income, net   19,868      37,802      5,351  
Total operating expenses   (1,618,414 )    (1,991,423 )    (281,868 )
Income from operations   85,796      160,643      22,737  
Other income (expenses)            
Interest income    13,049      9,090      1,287  
Interest expense    (16,415 )    (18,112 )    (2,564 )
Exchange gain (loss)    (3,922 )    274      39  
Income before income tax and share of income (loss) in equity method investment   78,508     151,895     21,499  
Income tax expense (3)    (12,317 )    (29,107 )    (4,120 )
Share of income (loss) in equity method investment, net of tax of nil    483      (1,719 )    (243 )
Net income    66,674      121,069      17,136  
             
Net (income) loss attributable to non-controlling interests   388     (653 )   (93 )
Net income attributable to redeemable non-controlling interests   -     (645 )   (91 )
Net income attributable to ordinary shareholders of Baozun Inc.   67,062     119,771     16,952  
             
Net income per share attributable to ordinary shareholders of Baozun Inc.:            
Basic    0.39      0.68      0.10  
Diluted    0.38      0.67      0.09  
Net income per ADS attributable to ordinary shareholders of Baozun Inc.:            
Basic    1.16      2.04      0.29  
Diluted    1.13      2.00      0.28  
Weighted average shares used in calculating net income per ordinary share            
Basic   173,775,288     176,473,910     176,473,910  
Diluted   178,830,949     179,857,079     179,857,079  
             
Net income   66,674     121,069     17,136  
Other comprehensive income, net of tax of nil:            
Foreign currency translation adjustment   2,790     1,899     269  
Comprehensive income   69,464     122,968     17,405  
                   

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), which requires all entities to disclose their current estimate of all expected credit losses. We adopted this ASU on January 1, 2020 using the modified retrospective transition method and no material adjustment to the opening balance of retained earnings of 2020 was necessary. The adoption of this new ASU has no material impact on our consolidated financial position and results of operations.

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

    For the three months ended June 30,
    2019   2020
    RMB   RMB   US$
             
Fulfillment   2,154   2,681   379
Sales and marketing   5,050   9,074   1,285
Technology and content   2,748   4,412   624
General and administrative   7,008   9,893   1,400
    16,960   26,060   3,688
             

(2) Including amortization of intangible assets resulting from business acquisition, which amounted to RMB0.4 million for both the three months period ended June 30, 2019 and 2020.

(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 June 30, 2019 and 2020.

Baozun Inc.
Reconciliations of GAAP and Non-GAAP Results
(in thousands, except for share and per ADS data)
 
    For the three months ended June 30,
  2019     2020  
    RMB   RMB   US$
             
             
Income from operations   85,796     160,643     22,737  
Add: Share-based compensation expenses   16,960     26,060     3,688  
  Amortization of intangible assets resulting from business acquisition   391     391     55  
Non-GAAP income from operations   103,147     187,094     26,480  
             
Net Income   66,674     121,069     17,136  
Add: Share-based compensation expenses   16,960     26,060     3,688  
  Amortization of intangible assets resulting from business acquisition   391     391     55  
Less: Tax effect of amortization of intangible assets resulting from business acquisition   (98 )   (98 )   (14 )
Non-GAAP net income   83,927     147,422     20,865  
             
Net income attributable to ordinary shareholders of Baozun Inc.   67,062     119,771     16,952  
Add: Share-based compensation expenses   16,960     26,060     3,688  
  Amortization of intangible assets resulting from business acquisition   199     199     28  
Less: Tax effect of amortization of intangible assets resulting from business acquisition   (50 )   (50 )   (7 )
Non-GAAP net income attributable to ordinary shareholders of Baozun Inc.   84,171     145,980     20,661  
             
             
Non-GAAP net income attributable to ordinary shareholders of Baozun Inc. per ADS:            
Basic   1.45     2.48     0.35  
Diluted   1.41     2.43     0.34  
Weighted average shares used in calculating net income per ordinary share            
Basic   173,775,288     176,473,910     176,473,910  
Diluted   178,830,949     179,857,079     179,857,079  

___________________________

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 RMB7.0651 to US$1.00, the noon buying rate in effect on June 30, 2020 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 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.


Source: Baozun Inc.