GUANGZHOU, China, Nov. 21, 2016 /PRNewswire/ -- Vipshop Holdings Limited (NYSE: VIPS), a leading online discount retailer for brands in China ("Vipshop" or the "Company"), today announced its unaudited financial results for the third quarter ended September 30, 2016.

Third Quarter 2016 Highlights

• Total net revenue increased by 38.4% to RMB12.00 billion (US$1.80 billion), primarily attributable to a 43% year-over-year increase in the number of active customers^[1] to 20.8 million and a 34% year-over-year increase in total orders^[2] to 60.1 million.
• Gross profit increased by 36.0% to RMB2.93 billion (US$439.7 million) from RMB2.16 billion in the prior year period.
• Income from operations increased by 21.3% to RMB528.8 million (US$79.3 million) from RMB436.1 million in the prior year period. Operating margin was 4.4% as compared with 5.0% in the prior year period.
• Non-GAAP income from operations^[3] increased by 24.8% to RMB732.0 million (US$109.8 million) from RMB586.8 million in the prior year period. Non-GAAP operating margin^[4] was 6.1% as compared with 6.8% in the prior year period.
• Net income attributable to Vipshop's shareholders increased by 8.3% to RMB342.9 million (US$51.4 million) from RMB316.7 million in the prior year period.
• Non-GAAP net income attributable to Vipshop's shareholder^[5] increased by 31.5% to RMB595.5 million (US$89.3 million) from RMB452.7 million in the prior year period.

"We are pleased to have delivered solid financial results and healthy customer growth despite a seasonally soft quarter for retail," said Mr. Eric Shen, chairman and chief executive officer of Vipshop, "As a leading online discount retailer for brands in China, we are committed to advancing the end-to-end shopping experience on our platform by providing our customers with diverse products and more personalized merchandising. The superior user experience across our platform led to improved user stickiness, as demonstrated by the strong 49% year-over-year increase in repeat customers^[6] to 16.7 million. Despite macro weakness, our robust customer growth and retention is a testament to the resilience of our business model. We are confident that our strong foundation will continue to drive our overall secular business growth and enable us to maintain our market leadership regardless of macro environment changes."

Mr. Donghao Yang, chief financial officer of Vipshop, further commented, "In the third quarter of 2016, we continued to deliver strong growth in revenues, active customers and total orders. Importantly, we were able to achieve solid top-line growth and market share gain while maintaining stable margins. In addition, we continue to expand our Internet finance business which is increasingly beneficial to our core retail business and will further strengthen our overall ecosystem. By balancing revenue and profitability, we aim to continue to expand our user base and gain additional market share from China's highly fragmented discount retail market."

Third Quarter 2016 Financial Results

REVENUE

Total net revenue for the third quarter of 2016 increased by 38.4% to RMB12.00 billion (US$1.80 billion) from RMB8.67 billion in the prior year period, primarily driven by the growth in the numbers of total active customers, repeat customers, and total orders.

The number of active customers for the third quarter of 2016 increased by 43% to 20.8 million from 14.6 million in the prior year period. The number of total orders for the third quarter of 2016 increased by 34% to 60.1 million from 44.8 million in the prior year period.

GROSS PROFIT 

Gross profit for the third quarter of 2016 increased by 36.0% to RMB2.93 billion (US$439.7 million) from RMB2.16 billion in the prior year period. Gross margin was 24.4% as compared with 24.9% in the prior year period.

OPERATING INCOME AND EXPENSES

Total operating expenses for the third quarter of 2016 were RMB2.54 billion (US$381.3 million), as compared with RMB1.80 billion in the prior year period. As a percentage of total net revenue, total operating expenses were 21.2% as compared with 20.7% in the prior year period.

• Fulfillment expenses for the third quarter of 2016 were RMB1.03 billion (US$153.8 million), as compared with RMB778.1 million in the prior year period, primarily reflecting the increase in sales volume and number of orders fulfilled. As a percentage of total net revenue, fulfillment expenses decreased to 8.5% from 9.0% in the prior year period, primarily reflecting the scale effect associated with the growth in total net revenue and improved fulfillment efficiency.
• Marketing expenses for the third quarter of 2016 were RMB641.5 million (US$96.2 million), as compared with RMB469.6 million in the prior year period, reflecting the Company's strategy to drive long-term growth through sustainable investments to strengthen its brand awareness, attract new users and expand market share. As a percentage of total net revenue, marketing expenses decreased to 5.3% from 5.4% in the prior year period.
• Technology and content expenses for the third quarter of 2016 were RMB374.5 million (US$56.2 million), as compared with RMB253.1 million in the prior year period, reflecting the Company's continued efforts to invest in human capital, advanced technologies such as data analytics as well as new business opportunities including the Internet finance unit. As a percentage of total net revenue, technology and content expenses were 3.1% as compared with 2.9% in the prior year period.
• General and administrative expenses for the third quarter of 2016 were RMB500.6 million (US$75.1 million), as compared with RMB296.6 million in the prior year period, primarily due to the build-out of the Internet finance team. As a percentage of total net revenue, general and administrative expenses were 4.2% as compared with 3.4% in the prior year period.

Income from operations for the third quarter of 2016 increased by 21.3% to RMB528.8 million (US$79.3 million) from RMB436.1 million in the prior year period. Operating margin was 4.4% as compared with 5.0% in the prior year period.

Non-GAAP income from operations, which excludes share-based compensation expenses and amortization of intangible assets resulting from a business acquisition, increased by 24.8% to RMB732.0 million (US$109.8 million) from RMB586.8 million in the prior year period. Non-GAAP operating income margin was 6.1% as compared with 6.8% in the prior year period.

NET INCOME

Net income attributable to Vipshop's shareholders increased by 8.3% to RMB342.9 million (US$51.4 million) from RMB316.7 million in the prior year period. Net margin attributable to Vipshop's shareholders was 2.9% as compared with 3.7% in the prior year period. The decline is primarily attributable to a RMB65.9 million impairment loss of investments. Net income attributable to Vipshop's shareholders per diluted ADS^[7] increased to RMB0.58(US$0.09) from RMB0.53 in the prior year period.

Non-GAAP net income attributable to Vipshop's shareholders, which excludes share-based compensation expenses, impairment loss of investments, and amortization of intangible assets resulting from a business acquisition and equity method investments, increased by 31.5% to RMB595.5 million (US$89.3 million) from RMB452.7 million in the prior year period. Non-GAAP net margin attributable to Vipshop's shareholders was 5.0% as compared with 5.2% in the prior year period. Non-GAAP net income attributable to Vipshop's shareholders per diluted ADS increased to RMB1.00(US$0.15) from RMB0.76 in the prior year period.

For the quarter ended September 30, 2016, the Company's weighted average number of ADSs used in computing diluted income per ADS was 593,638,381.

BALANCE SHEET AND CASH FLOW

As of September 30, 2016, the Company had cash and cash equivalents, and restricted cash of RMB4.94 billion (US$740.6 million) and held-to-maturity securities of RMB71.3 million (US$10.7 million).

For the quarter ended September 30, 2016, operating cash was RMB0.65 billion, and free cash flow^[8], a non-GAAP measurement of liquidity, was as follows:

Business Outlook

For the fourth quarter of 2016, the Company expects its total net revenue to be between RMB18.0 billion and RMB18.5 billion, representing a year-over-year growth rate of approximately 30% to 33%. These forecasts reflect the Company's current and preliminary view on the market and operational conditions, which is subject to change.

Exchange Rate

This announcement contains currency conversions of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from Renminbi to U.S. dollars are made at a rate of RMB6.6685 to US$1.00, the effective noon buying rate for September 30, 2016 as set forth in the H.10 statistical release of the Federal Reserve Board.

Conference Call Information

The Company will hold a conference call on Tuesday, November 22, 2016 at 8:00 am Eastern Time or 9:00 pm Beijing Time to discuss its financial results and operating performance for the third quarter of 2016.

The replay will be accessible through November 30, 2016 by dialing the following numbers:

A live and archived webcast of the conference call will also be available at the Company's investor relations website at http://ir.vip.com.

About Vipshop Holdings Limited

Vipshop Holdings Limited is a leading online discount retailer for brands in China. Vipshop offers high quality and popular branded products to consumers throughout China at a significant discount to retail prices. Since it was founded in August 2008, the Company has rapidly built a sizeable and growing base of customers and brand partners. For more information, please visit www.vip.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" and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as Vipshop's strategic and operational plans, contain forward-looking statements. Vipshop 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 Vipshop'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: Vipshop's goals and strategies; Vipshop's future business development, results of operations and financial condition; the expected growth of the online discount retail market in China; Vipshop's ability to attract customers and brand partners and further enhance its brand recognition; Vipshop's expectations regarding demand for and market acceptance of flash sales products and services; competition in the discount retail industry; fluctuations in general economic and business conditions in China and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in Vipshop'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 Vipshop does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

Use of Non-GAAP Financial Measures

The unaudited condensed consolidated financial information is prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"), except that the consolidated statement of shareholders' equity, consolidated statements of cash flows, and the detailed notes required by Accounting Standards Codification 270 Interim Reporting ("ASC270"), have not been presented. Vipshop uses non-GAAP net income attributable to Vipshop's shareholders, non-GAAP net income per diluted ADS, non-GAAP income from operations, non-GAAP net income margin, and non-GAAP operating income margin, free cash flow, each of which is a non-GAAP financial measure. Non-GAAP net income attributable to Vipshop's shareholders is net income attributable to Vipshop's shareholders excluding share-based compensation expenses, impairment loss of investments, and amortization of intangible assets resulting from a business acquisition and equity method investments. Non-GAAP net income per diluted ADS is non-GAAP net income divided by weighted average number of diluted ADS. Non-GAAP income from operations is income from operations excluding share-based compensation expenses and amortization of intangible assets resulting from a business acquisition. Non-GAAP operating income margin is non-GAAP income from operations as a percentage of total net revenue. Non-GAAP net income margin is non-GAAP net income as a percentage of total net revenue. Free cash flow is the operating cash flow adding back the impact from Internet financing activities and less capital expenditures, which include purchase of property and equipment, purchase and deposits of land use rights, and purchase of other assets. The Company believes that separate analysis and exclusion of the non-cash impact of share-based compensation, impairment loss of investments and amortization of intangible assets adds clarity to the constituent parts of its performance. The Company reviews these non-GAAP financial measures together with GAAP financial measures to obtain a better understanding of its operating performance. It uses these non-GAAP financial measures for planning, forecasting and measuring results against the forecast. The Company believes that non-GAAP financial measures are useful supplemental information for investors and analysts to assess its operating performance without the effect of non-cash share-based compensation expenses, impairment loss of investments, and amortization of intangible assets. Free cash flow enables the Company to assess liquidity and cash flow, taking into account the impact from Internet financing activities and the financial resources needed for the expansion of fulfillment infrastructure and technology platform. Share-based compensation expenses and amortization of intangible assets have been and will continue to be significant recurring expenses in its business. However, the use of non-GAAP financial measures has material limitations as an analytical tool. One of the limitations of using non-GAAP financial measures is that they do not include all items that impact the Company's net income for the period. In addition, because non-GAAP financial measures are not measured in the same manner by all companies, they may not be comparable to other similar titled measures used by other companies. One of the key limitations of free cash flow is that it does not represent the residual cash flow available for discretionary expenditures. In light of the foregoing limitations, you should not consider non-GAAP financial measure in isolation from or as an alternative to the financial measure prepared in accordance with U.S. GAAP.

The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, or as a substitute for, the financial information prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Vipshop Holdings Limited Reconciliations of GAAP and Non-GAAP Results" at the end of this release.

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SOURCE Vipshop Holdings Limited

Millicent Tu, Vipshop Holdings Limited, +86-20-2233-0732, IR@vipshop.com; Jeremy Peruski, ICR, Inc., +1-646-405-4866, IR@vipshop.com