Vipshop(VIPS) - 2022 Q2 - Quarterly Report

Second Quarter 2022 Highlights Vipshop's Q2 2022 net revenue decreased year-over-year, but effective cost control led to increased GAAP and non-GAAP net profits despite reduced revenue and active users | Metric | Q2 2022 | Prior Year Period | YoY Change | | :--- | :--- | :--- | :--- | | Total Net Revenue (RMB) | RMB 24.5 billion | RMB 29.6 billion | -17.2% | | GMV (RMB) | RMB 40.6 billion | RMB 48.1 billion | -15.6% | | Gross Profit (RMB) | RMB 5.0 billion | RMB 6.0 billion | -16.7% | | Net Income Attributable to Shareholders (RMB) | RMB 1.3 billion | RMB 1.1 billion | +17.4% | | Non-GAAP Net Income Attributable to Shareholders (RMB) | RMB 1.6 billion | RMB 1.5 billion | +8.4% | | Active Users | 41.7 million | 51.1 million | -18.4% | | Total Orders | 186.3 million | 221.5 million | -15.9% | Management Commentary Management attributes better-than-expected Q2 performance to macro environment improvements, optimizing brand portfolio, and efficient cost control, while repurchasing USD 177.1 million in ADS - Chairman and CEO Eric Shen stated that the company's business demonstrated strong execution and flexibility, updating its brand portfolio with new trendy and high-end brands, while high-value customers continued to grow and showed strong spending power[4] - CFO David Cui noted that the company achieved year-over-year growth in profit and overall profit margin through strict cost savings and rational spending, committing to its share repurchase program with USD 177.1 million in ADS repurchased this quarter[4] Second Quarter 2022 Financial Results Analysis Despite a year-over-year revenue decline in Q2 2022, Vipshop improved operating and net profit margins through enhanced gross margin and significant reductions in operating expenses, particularly marketing Revenue Analysis Q2 2022 total net revenue decreased to RMB 24.5 billion due to macro challenges and weak consumer demand for non-essential goods amid recurring COVID-19 outbreaks in China | Financial Metric | Q2 2022 | Q2 2021 | | :--- | :--- | :--- | | Total Net Revenue | RMB 24.5 billion | RMB 29.6 billion | Gross Profit Analysis Q2 2022 gross profit was RMB 5.0 billion, with the gross margin increasing to 20.5% from 20.1% in the prior year period | Financial Metric | Q2 2022 | Q2 2021 | | :--- | :--- | :--- | | Gross Profit | RMB 5.0 billion | RMB 6.0 billion | | Gross Margin | 20.5% | 20.1% | Operating Expenses Analysis Total operating expenses decreased by 18.7% year-over-year in Q2 2022, driven by a 60.5% reduction in marketing expenses, while fulfillment costs also declined | Expense Item | Q2 2022 (RMB) | YoY Change | % of Total Revenue | | :--- | :--- | :--- | :--- | | Total Operating Expenses | RMB 3.9 billion | -18.7% | 16.1% | | Fulfillment Expenses | RMB 1.8 billion | -13.7% | 7.2% | | Marketing Expenses | RMB 556 million | -60.5% | 2.3% | | Technology and Content Expenses | RMB 412 million | +11.3% | 1.7% | | General and Administrative Expenses | RMB 1.2 billion | +18.6% | 4.9% | Operating Income Analysis Q2 2022 operating income was RMB 1.3 billion, with the operating margin increasing to 5.2%, and non-GAAP operating income also saw an improved margin | Metric | Q2 2022 | Q2 2021 | | :--- | :--- | :--- | | Operating Income | RMB 1.3 billion | RMB 1.5 billion | | Operating Margin | 5.2% | 5.0% | | Non-GAAP Operating Income | RMB 1.6 billion | RMB 1.7 billion | | Non-GAAP Operating Margin | 6.3% | 5.9% | Net Income Analysis Q2 2022 GAAP net income attributable to shareholders increased by 17.4% to RMB 1.3 billion, with both GAAP and non-GAAP net profit margins showing improvement | Metric | Q2 2022 | Q2 2021 | | :--- | :--- | :--- | | Net Income Attributable to Shareholders | RMB 1.3 billion | RMB 1.1 billion | | Net Profit Margin | 5.2% | 3.7% | | Diluted ADS Earnings Per Share | RMB 1.97 | RMB 1.56 | | Non-GAAP Net Income Attributable to Shareholders | RMB 1.6 billion | RMB 1.5 billion | | Non-GAAP Net Profit Margin | 6.5% | 5.0% | | Non-GAAP Diluted ADS Earnings Per Share | RMB 2.45 | RMB 2.10 | Balance Sheet and Cash Flow As of June 30, 2022, the company maintained a strong financial position with RMB 21.4 billion in cash and short-term investments, generating robust net cash flow from operations and free cash flow - As of June 30, 2022, the company held RMB 17.3 billion (USD 2.6 billion) in cash and cash equivalents and restricted cash, along with RMB 4.1 billion (USD 615.4 million) in short-term investments[14] | Cash Flow Item (RMB) | Q2 2022 | Q2 2021 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | RMB 4.466 billion | RMB 1.996 billion | | Free Cash Flow | RMB 3.261 billion | RMB 1.338 billion | Share Repurchase Program The company announced a USD 1 billion, 24-month share repurchase program on March 31, 2022, having repurchased USD 177.1 million in ADS by June 30, 2022 - The company's board of directors authorized a USD 1 billion share repurchase program with a 24-month validity period[15] - As of June 30, 2022, the company had repurchased USD 177.1 million in ADS under this program[15] Business Outlook For Q3 2022, the company anticipates total net revenue between RMB 21.2 billion and RMB 22.4 billion, representing a year-over-year decline of approximately 10% to 15% - Total net revenue for Q3 2022 is expected to be between RMB 21.2 billion and RMB 22.4 billion[18] - The projected year-over-year revenue decrease is approximately 10% to 15%[18] Financial Statements This section presents unaudited condensed consolidated statements of income, balance sheets, and GAAP to non-GAAP reconciliations, illustrating improved net profit despite revenue decline and healthy liquidity Unaudited Condensed Consolidated Statements of Income and Comprehensive Income In Q2 2022, total net revenue was RMB 24.54 billion, with gross profit at RMB 5.02 billion, resulting in a net income attributable to Vipshop shareholders of RMB 1.28 billion, a 17.4% year-over-year increase | Item (RMB thousands) | Q2 2022 | Q2 2021 | | :--- | :--- | :--- | | Total Net Revenues | 24,535,254 | 29,607,702 | | Gross Profit | 5,024,345 | 5,956,827 | | Income from Operations | 1,268,285 | 1,470,508 | | Net Income Attributable to Vipshop Shareholders | 1,282,890 | 1,092,482 | Unaudited Condensed Consolidated Balance Sheets As of June 30, 2022, total assets were RMB 59.97 billion and total liabilities were RMB 25.81 billion, with healthy current assets and liabilities indicating strong short-term solvency and liquidity | Item (RMB thousands) | As of June 30, 2022 | As of Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | 59,969,088 | 62,287,541 | | Total Liabilities | 25,805,228 | 28,459,225 | | Total Current Assets | 30,112,927 | 32,841,945 | | Total Current Liabilities | 23,303,882 | 25,771,017 | Reconciliations of GAAP and Non-GAAP Results This table details adjustments from GAAP to non-GAAP metrics for Q2 2022, primarily including RMB 283 million in share-based compensation and RMB 50 million in investment impairment losses, leading to adjusted non-GAAP operating and net profits | Reconciliation Item (RMB thousands) | Q2 2022 | | :--- | :--- | | Income from Operations (GAAP) | 1,268,285 | | Add: Share-based compensation expenses | 282,799 | | Non-GAAP Income from Operations | 1,551,084 | | | | | Net Income Attributable to Vipshop Shareholders (GAAP) | 1,282,890 | | Add: Share-based compensation expenses | 282,799 | | Add: Impairment loss of investments | 50,000 | | Other adjustments | (23,280) | | Non-GAAP Net Income Attributable to Vipshop Shareholders | 1,592,409 |