China’s 58.com back in the black

28 Aug 2016

58.com, China’s horizontal classified and local-merchant site, has regained profitability for the first time since the fourth quarter of 2014.

Unaudited results for Q2 show total revenue was $297.8 million U.S., an 86.7 percent year-over-year increase, in line with the company’s guidance of $296 million to $303 million U.S. The company, 58.com Inc., reports results in U.S. dollars because it is traded on the NYSE as WUBA.

“With Ganji and Anjuke now fully consolidated following years of intense competition, we regained profitability for the first time since the fourth quarter of 2014,” Michael Yao Jinbo, chairman and CEO, said in the company’s news release. “Ganji’s integration continues to make solid progress as we find new and meaningful ways to create synergies between the two businesses.”

58.com acquired Anjuke, a Shanghai-based real estate site, in March 2015, and Ganji.com, a direct but much smaller competitor, the following month.

“Despite the slowdown in China’s economy, we continue to see overall growth in user and merchant numbers as well as revenues. We believe there is still significant room for growth as businesses shift from offline to online, whether it be consumers searching for information or merchants using the internet to market their services and attract potential customers. Our ability to innovate new products and efficiently connect consumers and merchants is as strong as ever. We are particularly excited about the potential our platforms have to create greater value for our users and shareholders.”

Gross margin was 91.8 percent, compared with 93.7 percent in the same quarter of 2015.  Income from operations was $35.5 million, compared with loss from operations of $35.8 million during Q2 of 2015. Non-GAAP income from operations was $55.3 million vs. $30.3 million the previous year.

Net income was $13.9 million compared with a net loss of $26.9 million in Q2 in 2015. Non-GAAP net income was $21.7 million compared with a net loss of $20.8 million. 

Basic and diluted earnings per ADS attributable to ordinary shareholders were 10 cents U.S.  Non-GAAP basic and diluted earnings per ADS attributable to ordinary shareholders were 15 cents. Each ADS represents two Class A ordinary shares.

Q2 expenses included a $31.8 million pickup of the net loss attributable to ordinary shareholders in 58Home, the company’s local services platform, calculated based on the company’s 87.9 common-stock holding in 58Home. However, operating expenses no longer include expenses from the 58 Home business, which was deconsolidated in November. There was also a $12.9 million non-cash loss on a note conversion at its automotive site, Guazi. Those loses were partially offset by a non-cash gain of $12.1 million on the disposal of online short-term and vacation rental platform Mayi to Tujia.com International: 58.com’s stake in Mayi was swapped for equity in the merged Tujia-Mayi entity.

Based on the current operations, total revenue for Q3 is projected at RMB 2.04 billion and 2.08 billion, or $304 million to $311 million based on July’s average exchange rate. This represents a year-over-year increase of 52 percent to 56 percent in RMB.

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Don Gasper