JD.com, Inc. (NASDAQ:JD) Q2 2019 Earnings Conference Call - Final Transcript

Aug 13, 2019 • 07:30 am ET


JD.com, Inc. (NASDAQ:JD) Q2 2019 Earnings Conference Call - Final Transcript


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Richard Liu

in growing benefits, profits for our shareholders. As we are gaining more profitability in various of our business, I believe our revenues will continue to grow and our profits in the long run will continue to grow. Since our IPO, we have express that our growth will be mainly driven by our economies of scale and our advantages in the cost and our efficiency, and the day has come to fulfill our promises. And in the future, we'll continue to enhance our user experiences and also gain more potential customers from third to six-tier cities. We'll continue to invest in our technologies and improve our management to reduce costs and improve profitability.

And I will continue to build up our organization's efficiencies and optimize on our operation to bring more cash flow. And this has never changed, and it will continue into the future. Thank you very much.

Sidney Xuande Huang

Okay. Thank you, Richard. And so let me continue to give you a quick quarterly update. We're very pleased to report a solid second quarter with strong results across all key metrics.

Our net revenues exceeded the upper end of our guidance and we achieved record high operating profit in a heavily promotional season. We are also encouraged by a healthy growth of 11 million net additional customers to a total of 321 million in the past 12 months. These strong results illustrate the solid fundamentals of our online retail business model, as well as the significant progress we have made to improve our R&D capabilities, operational processes and organizational design over the past few quarters.

During the second quarter of 2019, our net revenue growth accelerated to 22.9% despite market concerns about macroeconomic conditions and competitive dynamics. All major categories of electronics and home appliances saw double-digit growth during the quarter and the general merchandise categories grew by 34% led by FMCG products. Net service revenues grew by 42% year-over-year and contributed 11.2% of our overall revenues driven by strong momentum from third-party logistics and advertising revenues.

Logistics and other service revenues grew 98% thanks to the team's focus on product innovation and a superior service quality. Gross margin in the second quarter was 14.7%, up from 13.5% in the same quarter last year. The margin expansion was contributed by both JD Retail and our third-party logistics business. JD Retail gross margin improved by 76 basis points, driven by economies of scale from our 1P business better economics of advertising and certain one-time benefits of the VAT tax reform, which took effect on April 1, 2019. This marks the 21st consecutive quarter of JD Retail's gross margin expansion on a year-over-year basis in spite of intense competition from existing and new industry participants. It validates the resilience of our business model and the long-term margin trajectory that we have communicated since our IPO.

On the other hand, JD Logistics also delivered a stellar quarter as its capacity utilization and staff productivity reached the normalized level during a seasonally busy quarter. The