Vipshop Holdings Ltd – ADR (NYSE:VIPS) which some investors believe is a fraud, including Whitney Tilson of Kase Capital, was up over 32% in today’s trading after reporting earnings. Below are some highlights from the Vipshop Holdings Ltd – ADR (NYSE:VIPS) conference call.
Donghao Yang – Vipshop Holdings Ltd – ADR (NYSE:VIPS) Holdings Limited – CFO
Thanks, Eric, and hello, everyone. We’re pleased with our result for the fourth quarter and full-year 2013, which demonstrate continually improving scale effect associated with our growing business. Over the course of 2013, the total number of our customers and orders increased by 129.8% and 124.1% year over year respectively.
As we built Vipshop into a much larger business than it was a year ago, we established a more powerful and virtuous cycle of business, which will help propel and accelerate our revenue growth going forward.
Moving on, I would like to update you regarding our progress in some key growth areas and initiatives.
Heading into 2014, Vipshop Holdings Ltd – ADR (NYSE:VIPS) is committed to further scaling our platform by growing our brand, broadening our product offering and enlarging our warehousing and logistics capabilities. Enhancing our warehousing and logistics capabilities remains one of our top priorities for 2014.
In recent years, we invested heavily in the build out of warehouse capabilities, which are well equipped to effectively manage the overwhelming sales volume associated with the flash sales model, in order to gain an advantage in driving incremental sales, improving customer experience, as well as strengthening our competitive position.
With our warehouse capacity reaching approximately 290,000 square meters at the end of 2013, we are very confident in our ability to better accommodate surging customer orders and demand. We’re also on track to expand our total capacity to over 700,000 square meters by 2016.
Vipshop Holdings Ltd – ADR (NYSE:VIPS) continue to progress well on mobile monetization. Mobile revenues further increased in the fourth quarter, representing a strong quarter-over-quarter growth of 122%. We see the growing prevalence of mobile Internet as representing one of the most transformational and disruptive technology shifts in China’s e-commerce sector and leaving many opportunities in its wake.
Vipshop Holdings Ltd – ADR (NYSE:VIPS) will capitalize on these opportunities through continuing to invest in strengthening our mobile and IT capabilities. We believe these initiatives will optimally position us to capitalize on the opportunities in China’s dynamic evolving e-commerce market.
Now, moving onto our quarterly financial highlights. Before I get started, I’d like to clarify that all the financial numbers we’re presenting today are in US dollar amounts and all the percentage changes refer to year-over-year changes, unless otherwise noted.
Vipshop Holdings Ltd – ADR (NYSE:VIPS) Total revenues for the fourth quarter of 2013 increased by 117.3% to $651 million. This tremendous growth was primarily driven by a 119.5% increase in the number of total active customers to 5.7 million, and a 102.4% increase in the number of total orders to 17.7 million.
Vipshop Holdings Ltd – ADR (NYSE:VIPS) Gross margin for this quarter further expanded to 24.5% from 22.9% in the prior-year period and gross profit increased by 131.9% to $159.4 million.
This improvement was driven by the increased scale of our business, leading to greater bargaining power with our suppliers. Moreover, as we discussed earlier, we continued to see improvement in operating margins as a result of improved economies of scale and increased operational leverage.
Vipshop Holdings Ltd – ADR (NYSE:VIPS) More specifically, fulfillment expenses increased by 95.7% to $73.2 million for the fourth quarter of 2013. As a percentage of total net revenues, fulfillment expenses decreased to 11.2% from 12.5% in the prior-year period.
The cost reduction was primarily due to the successful implementation of our distributed warehouse strategy, as well as our ongoing shift to high-quality regional and local couriers, both lowering our fulfillment cost and shortening delivery times to our end customers.
Vipshop Holdings Ltd – ADR (NYSE:VIPS) Marketing expenses increased by 131.3% to $28.9 million. As a percentage of total net revenues, marketing expenses remained stable at 4.4% compared with 4.2% in the prior-year period.
Technology and content expenses increased by 123.6% to $14.2 million. As a percentage of total net revenues, technology and content expenses remained stable at 2.2% compared with 2.1% in the prior-year period.
Vipshop Holdings Ltd – ADR (NYSE:VIPS) General and administrative expenses increased by 121.4% to $17.5 million. As a percentage of total net revenues, general and administrative expenses were 2.7% compared with 2.6% in the prior-year period.
Driven by the growing scale of our Company’s operations, improved gross margin and cost control, income from operations increased by 445% to $29.6 million for the fourth quarter of 2013 from $5.4 million in the prior-year period. Operating income margin increased to 4.5% from 1.8% in the prior-year period.
Vipshop Holdings Ltd – ADR (NYSE:VIPS) Non-GAAP income from operations, which excludes share-based compensation expenses, increased by 357% to $33 million from $7.2 million in the prior-year period. Non-GAAP operating income margin increased to 5.1% from 2.4% in the prior-year period.
Our net income for the fourth quarter of 2013 increased by 300% to $25.4 million from $6.3 million in the prior-year period. Net income margin increased to 3.9% from 2.1% in the prior-year period. Net income per diluted ADS increased to $0.43 from $0.12 in the prior-year period.
Vipshop Holdings Ltd – ADR (NYSE:VIPS) Non-GAAP net income increased by 253.9% to $28.8 million from $8.1 million in the prior-year period. Non-GAAP net income margin increased to 4.4% from 2.7% in the prior-year period. Non-GAAP net income per diluted ADS increased to $0.49 in the fourth quarter of 2013 from the $0.16 in the prior-year period.
As of December 31, 2013, our Company had cash and cash equivalents of $334.7 million and held-to-maturity securities of $385.8 million.
