Vipshop : Q3 2020 Financial Results

Vipshop Reports Unaudited Third Quarter 2020 Financial Results

Conference Call to Be Held at 7:30 A.M. U.S. Eastern Time on November 13, 2020

Guangzhou, China, November 13, 2020 - 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, 2020.

Third Quarter 2020 Highlights

• Total net revenue for the third quarter of 2020 increased by 18.2% year over year to RMB23.2 billion (US$3.4 billion) from RMB19.6 billion in the prior year period.
• GMV1 for the third quarter of 2020 increased by 21% year over year to RMB38.3 billion from RMB31.7 billion in the prior year period.
• Gross profit for the third quarter of 2020 increased by 15.3% year over year to RMB4.9 billion (US$718.9 million) from RMB4.2 billion in the prior year period.
• Net income attributable to Vipshop's shareholders for the third quarter of 2020 increased by 42.1% year over year to RMB1.2 billion (US$183.3 million) from RMB875.5 million in the prior year period.
• Non-GAAPnet income attributable to Vipshop's shareholders2 for the third quarter of 2020 increased by 15.2% year over year to RMB1.4 billion (US$204.1 million) from RMB1.2 billion in the prior year period.
• The number of active customers3 for the third quarter of 2020 increased by 36% year over year to 43.4 million from 32.0 million in the prior year period.
• Total orders4 for the third quarter of 2020 increased by 35% year over year to 172.8 million from 127.6 million in the prior year period.

1 "Gross merchandise value (GMV)" is defined as the total Renminbi value of all products and services sold through the

Company's online sales business, online marketplace platform, offline stores, and Shan Shan Outlets during the relevant period, including through the Company's websites and mobile apps, third-party websites and mobile apps, Vipshop offline stores and Vipmaxx offline stores, as well as Shan Shan Outlets that were fulfilled by either the Company or its third-party merchants, regardless of whether or not the goods were delivered or returned. GMV includes shipping charges paid by buyers to sellers. For prudent considerations, the Company does not consider products or services to be sold if the relevant orders were placed and canceled pre-shipment and only included orders that left the Company's or other third-party vendors' warehouses.

1. Non-GAAPnet income attributable to Vipshop's shareholders is a non-GAAP financial measure, which is defined as net income attributable to Vipshop's shareholders excluding (i) share-based compensation expenses, (ii) amortization of intangible assets resulting from business acquisitions, (iii) tax effect of amortization of intangible assets resulting from business acquisitions, (iv) investment gain and revaluation of investments excluding dividends, (v) tax effect of investment gain and revaluation of investments excluding dividends, and (vi) share of loss in investment of limited partnerships that are accounted for as equity method investees.
2. "Active customers" is defined as registered members who have purchased from the Company's online sales business or the Company's online marketplace platforms at least once during the relevant period.

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Mr. Eric Shen, Chairman and Chief Executive Officer of Vipshop, stated, "We finished the third quarter of 2020 with robust financial and operational results. During the quarter, our number of active customers increased by 36% year over year to 43.4 million from 32.0 million in the prior year period. Importantly, both our existing and new customers have shown improved next-month retention as compared to the same period last year. We are glad that customers recognize the value of our differentiated offerings, particularly in our core apparel-related categories. We are confident the positive trends in customer acquisition and retention will continue to drive our growth and profitability going forward. Looking ahead, we remain focused on providing value to our customers, offering superior customer experience and carefully procured assortments at a deep discount, further enabling us to gain share in China's discount retail market."

Mr. Donghao Yang, Chief Financial Officer of Vipshop, further commented, "In the third quarter of 2020, we delivered strong topline growth coupled with solid profitability, driven by the strong performance in new customer acquisition and existing customer retention. Our total GMV for the quarter increased by 21% year over year to 38.3 billion from 31.7 billion in the prior year period, and GMV for our core apparel-related categories grew even faster at 29% year over year. Going forward, we will continue to focus on improving our merchandising capability and offering a differentiated shopping experience as compared to marketplace platforms, delivering solid shareholder return over time."

Third Quarter 2020 Financial Results

REVENUE

Total net revenue for the third quarter of 2020 increased by 18.2% year over year to RMB23.2 billion (US$3.4 billion) from RMB19.6 billion in the prior year period, primarily driven by the growth in the number of total active customers.

GROSS PROFIT

Gross profit for the third quarter of 2020 increased by 15.3% year over year to RMB4.9 billion (US$718.9 million) from RMB4.2 billion in the prior year period. Gross margin for the third quarter of 2020 was 21.1%, as compared with 21.6% in the prior year period.

OPERATING EXPENSES

Total operating expenses for the third quarter of 2020 were RMB3.9 billion (US$576.3 million), as compared with RMB3.4 billion in the prior year period. As a percentage of total net revenue, total operating expenses for the third quarter of 2020 decreased to 16.9% from 17.3% in the prior year period.

• Fulfillment expenses for the third quarter of 2020 were RMB1.6 billion (US$238.5 million), as compared with RMB1.6 billion in the prior year period. As a percentage of total net revenue,

4 "Total orders" is defined as the total number of orders placed during the relevant period, including the orders for products and services sold through the Company's online sales business and the Company's online marketplace platforms (excluding, for the avoidance of doubt, orders from the Company's offline stores and outlets), net of orders returned.

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fulfillment expenses for the third quarter of 2020 decreased to 7.0% from 8.1% in the prior year period, primarily attributable to the change in fulfillment logistic arrangement.

• Marketing expenses for the third quarter of 2020 were RMB1.1 billion (US$167.8 million), as compared with RMB721.3 million in the prior year period. As a percentage of total net revenue, marketing expenses for the third quarter of 2020 were 4.9%, as compared with 3.7% in the prior year period, primarily attributable to increased investment into customer acquisition.
• Technology and content expenses for the third quarter of 2020 decreased to RMB305.1 million (US$44.9 million) from RMB400.7 million in the prior year period. As a percentage of total net revenue, technology and content expenses for the third quarter of 2020 decreased to 1.3% from 2.0% in the prior year period.
• General and administrative expenses for the third quarter of 2020 were RMB848.6 million (US$125.0 million), as compared with RMB681.6 million in the prior year period. As a percentage of total net revenue, general and administrative expenses for the third quarter of 2020 were 3.7%, as compared with 3.5% in the prior year period.

INCOME FROM OPERATIONS

Income from operations for the third quarter of 2020 increased by 6.7% year over year to RMB1.2 billion (US$183.8 million) from RMB1.2 billion in the prior year period. Operating margin for the third quarter of 2020 was 5.4%, as compared with 6.0% in the prior year period.

Non-GAAP income from operations 5 for the third quarter of 2020, which excluded share-based compensation expenses and amortization of intangible assets resulting from business acquisitions, increased by 8.0% year over year to RMB1.5 billion (US$218.9 million) from RMB1.4 billion in the prior year period. Non-GAAP operating income margin6 for the third quarter of 2020 was 6.4%, as compared with 7.0% in the prior year period.

NET INCOME

Net income attributable to Vipshop's shareholders for the third quarter of 2020 increased by 42.1% year over year to RMB1.2 billion (US$183.3 million) from RMB875.5 million in the prior year period. Net margin attributable to Vipshop's shareholders for the third quarter of 2020 increased to 5.4% from 4.5% in the prior year period. Net income attributable to Vipshop's shareholders per diluted ADS7 for the third quarter of 2020 increased to RMB1.80 (US$0.27) from RMB1.30 in the prior year period.

Non-GAAP net income attributable to Vipshop's shareholders for the third quarter of 2020, which excluded (i) share-based compensation expenses, (ii) amortization of intangible assets resulting from business acquisitions, (iii) tax effect of amortization of intangible assets resulting from business acquisitions, (iv) investment gain and revaluation of investments excluding dividends, (v) tax effect of

1. Non-GAAPincome 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 acquisitions.
2. Non-GAAPoperating income margin is a non-GAAP financial measure, which is defined as non-GAAP income from operations as a percentage of total net revenues.
3. "ADS" means American depositary share, each of which represents 0.2 Class A ordinary share.

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investment gain and revaluation of investments excluding dividends, and (vi) share of loss in investment of limited partnerships that are accounted for as equity method investees, increased by 15.2% year over year to RMB1.4 billion (US$204.1 million) from RMB1.2 billion in the prior year period. Non-GAAP net margin attributable to Vipshop's shareholders8 for the third quarter of 2020 was 6.0%, as compared with 6.1% in the prior year period. Non-GAAP net income attributable to Vipshop's shareholders per diluted ADS9 for the third quarter of 2020 increased to RMB2.01 (US$0.30) from RMB1.78 in the prior year period.

For the quarter ended September 30, 2020, the Company's weighted average number of ADSs used in computing diluted income per ADS was 690,834,625.

BALANCE SHEET AND CASH FLOW

As of September 30, 2020, the Company had cash and cash equivalents and restricted cash of RMB9.6 billion (US$1.4 billion) and short term investments of RMB4.9 billion (US$728.7 million).

For the quarter ended September 30, 2020, net cash from operating activities was RMB1.2 billion (US$177.1 million), and free cash flow10, a non-GAAP measurement of liquidity, was as follows:

For the three months ended

Net cash from operating activities

Add: Net impact from Internet financing activities11

Less: Capital expenditures Free cash (outflow) / inflow

For the trailing twelve months ended

Net cash from operating activities

Add: Net impact from Internet financing activities11

Sep 30, 2019	Sep 30, 2020	Sep 30, 2020
RMB'000	RMB'000	US$'000
2,067,480	1,202,504	177,110
(1,837,974)	(178,412)	(26,277)
(1,094,668)	(627,434)	(92,411)
(865,162)	396,658	58,422

Sep 30, 2019	Sep 30, 2020	Sep 30, 2020
RMB'000	RMB'000	US$'000
12,053,995	10,684,651	1,573,679
(3,239,772)	(2,367,857)	(348,748)

1. Non-GAAPnet margin attributable to Vipshop's shareholders is a non-GAAP financial measure, which is defined as non- GAAP net income attributable to Vipshop's shareholders, as a percentage of total net revenues.
2. Non-GAAPnet income attributable to Vipshop's shareholders per diluted ADS is a non-GAAP financial measure, which is defined as non-GAAP net income attributable to Vipshop's shareholders,divided by the weighted average number of diluted ADS outstanding for computing diluted earnings per ADS.
3. Free cash flow is a non-GAAP financial measure, which is defined as net cash from (used in) operating activities adding back the impact from Internet financing activities and less capital expenditures, which include purchase and deposits of property and equipment and land use rights, and purchase of other assets.
4. Net impact from Internet financing activities represents net cash flow relating to the Company's financial products, which are primarily consumer financing and supplier financing that the Company provides to its customers and suppliers.

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