JMU Ltd. :JMU-US: Earnings Analysis: Q1, 2017 By the Numbers : June 26, 2017

JMU Ltd. reports financial results for the quarter ended March 31, 2017.

We analyze the earnings along side the following peers of JMU Ltd. – Forrester Research, Inc., Navigant Consulting, Inc., ICF International, Inc. and TransUnion (FORR-US, NCI-US, ICFI-US and TRU-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 19.24 million, Net Earnings of USD -4.97 million.
  • Gross margins widened from -0.35% to 0.54% compared to the same period last year, operating (EBITDA) margins now -28.43% from -6.07%.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-03-31 2016-12-31 2016-09-30 2016-06-30 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 19.24 20.2 19.43 14.87 43.1
Revenue Growth (%YOY) -55.36 236.48 157.18 57.9 N/A
Earnings (mil) -4.97 -8.2 -7.26 -5 -4.18
Earnings Growth (%YOY) -18.77 44.71 1.09 35.2 N/A
Net Margin (%) -25.81 -40.61 -37.36 -33.63 -9.7
EPS -0.06 -0.17 -0.09 -0.06 -0.05
Return on Equity (%) -8.03 -12.48 -10.34 -6.84 -5.14
Return on Assets (%) -7.24 -11.12 -9.11 -6.11 -4.28

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Market Share Versus Profits

Revenues History
Earnings History

JMU-US‘s change in revenue this period compared to the same period last year of -55.36% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that JMU-US is holding onto its market share. Also, for comparison purposes, revenues changed by -4.73% and earnings by 39.46% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings declined year-on-year largely because of the increases in operating costs. Its operating margins (EBITDA margins) went from -6.07% to -28.43%. This decline in earnings would have been worse except for the fact that the company showed improvement in gross margins, from -0.35% to 0.54%. For comparison, gross margins were 3.31% and EBITDA margins -33.26% in the immediate last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

JMU-US‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently -15.10, compared to last year’s level of -26.71 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from -10.95% to -28.43% and (2) one-time items that contributed to a decrease in pretax margins from -10.92% to -28.34%

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

JMU Ltd. is a holding company, which engages in online group buying and storefront services. It provides e-commerce platform networking services, focusing on local entertainment and lifestyle services such as restaurants, movie theaters, and beauty salons. The company was founded by Mao Dong Xu on July 13, 2011 and is headquartered in Beijing, China.

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