Q4 2020 Dada Nexus Ltd Earnings Call

[music].

Good morning, ladies and gentlemen, and thank you for assigned by for <unk> fourth quarter. Two types of 'twenty earnings Conference call. At this time all participants are in listen only mode. After of the managements prepared remarks, there will be a question and answer session.

As a reminder, today's conference call is being recorded all of them.

Now churn of the V D over a true hosts for today's call Ms. Caroline Dong head of Investor Relations for Dada piece per seat Caroline.

Thank you operator, Hello, everyone and thank you for joining us today.

The fourth quarter can teach on your earnings release was disability of Labor day and is available on our IR website.

And that does the end as well as on global Newswire services.

On the call today from debt out we have Mr. Philip <unk>, Chairman and Chief Executive Officer, Mr. Jean Young from phone very on the Chief Technology Officer and missed it back Chen Chief Financial Officer.

I missed the Quad will talk about our operations and the company highlights followed by Mr. Chen who will discuss the financials and the guidance.

They will all be available to answer your questions during the Q&A session that follows.

Before beginning I liked Ya man do you that this conference call contains forward looking statements as of defining the section 21 E of the security of the ex.

The change act of of the.

19 of 34, and the U S Private Securities Litigation Reform Act of 19 five.

These forward statements are based on I'll call management's current expectations and current market and operating conditions.

And relate to events of the involve known or unknown risks uncertainties and other factors all of which are difficult to predict and a matter of which of you on the company's can chill.

These risks may cause the company's actual results of our performance to differ materially.

For the information regarding these and all of the better risks uncertainties or factors is included in the company's filings with the you asked the SEC. The company does not undertake any obligation to update any forward looking statements as a result of new information future events or otherwise.

As required under applicable law. It is now my pleasure to introduce our chairman and Chief Executive Officer amidst the pie Phillip. Please go ahead.

Okay Carolina.

For all for joining the risks with it.

We're very pleased to deliver another strong quarter in Austin is political year.

Our total net revenue of 225.

$5 7 billion.

And as far as the percentage year over year growth rate.

While the industry, leading position has been further strengthened with market share expansion and the award on gas with a set of the following players.

According to our research J D. D. J continues to be China's largest local on demand the retail platform transition.

With market share increasing to the 5% from some of the 1% of 2019.

In the meantime, I don't know remained the largest open on the node delivery platform in China with market share increasing to the 5% from 19% in <unk>.

The <unk> 19.

I will provide updates on the performance of our two platforms.

We will go into greater details about our financial and operating results.

So the first let's talk about TDD, Jay kind of.

The local on demand of the retail platform.

So the data is fast growth in fourth quarter of what's driven for.

For men sectors.

First.

We have been constantly extending our geographic coverage, especially in lower tier cities on the further diversifies the category of coverage to provide more product offerings to the more credit risk on the web.

Leveraging on the leading in the expandable to the question on the vintages of.

Our retail partners and our continuously growing retail partner base the intra another.

200 cities in the context during the quarter.

And on Sunday, we cover the <unk>.

For 200 cities from countries for any more on the more people everything on demand.

We believe there is still tremendous potential in lower tier cities for example, CMV in lower tier cities increased by 150% year over year during this quarter.

We also expense and enriched our category of coverage with our mission to bring peace whoever is the on demand.

This quarter, we achieved breakthroughs in cosmetics, while making great progress on the consumer electronics and smartphones.

In the cosmetics in the personal care category, we have established in the partnership with Watson Manning.

In the free and other duty on the personal care channel breadth.

And then.

For the 402, two stores have now being lifted onto the D. J.

As for consumer electronics out of smartphones PDD to established in the partnerships with the Singtel JD home appliance stores and the vivo.

Altogether over six feet.

The over 6000 stores.

Being listed on the J D D J of platform.

Sort of it.

We're continuously enhancing the cooperation with our retailer in the brand's hunters.

In terms of retail of others in this quarter, we established partnerships with over 20, leading supermarket channel.

Functional supermarket, the Hubei province, and the lease Department store in honestly the province.

The loan intelligent province, and <unk>.

For supermarket in Shandong Province.

Our amount of the top 100 of the supermarket shows on the original dominant players in China.

As of today, we have established partnerships with 71 of the top of 100 supermarket chains in China.

As we enable and empower retailers the create value for them at the.

Ponder rather than competing directly with them the overwhelming number of leading retailers on the hour J D. D day platform compared with our competitors clearly demonstrate our competitive edge.

Partnering with national wide, leading supermarket channel J D. D. J has launched brand new promotional compares called Super merchant day. During this quarter, the new IP events will help retailers improve cells expand the customer base and enhance brand influence.

This initiative has achieved success in the trial cases for them.

For during the first Super merchant days launched for Jamba warehouse supermarket in the first weekend of December.

The sales improved by more than 12 times over their vertical or we can sales.

In light of the exceptional results, we are rolling out this compared to more of a leading supermarket chains.

As the if I recall, we launched the debt are picking cross sourcing service for.

For the retailers in the third quarter to improve the efficiency of the picking in the fulfillment process.

During Q4 net are picking has provided omni channel other picking service to more of a supermarket stores, increasing their PK efficiencies by 24% and of lowering picking costs by the deferred percent.

Some typical of stores.

We also expanded the number of pharmaceutical chairs from the first quarter and have now established partnerships with more than 80 out of couple of hundred pharmaceutical channel in China.

In terms of brand pillars. During this quarter, our online marketing service revenue from brands continue to gain momentum increasing by around 300% year over year the <unk>.

Continue to innovate marketing activities to create the more values for brand partners during double the trough promotional season, many of leading brands such as Ely millennial on.

The fully man increase the ourselves multiple times versus the same period of last year.

For me the surgeon demand of the cosmetics, we launched the join the promotion program was in the liver and the P&G during the double 11 Festival.

Elsewhere more than 10 times that of the law firm period of last year.

During the quarter till the DJ also extend to the strategic cooperation with certain brands owners. For example, we establish of live streaming collaboration agreement with <unk> in the liver and deepen progression with Pepsi to launch John marketing campaigns during the Chinese new year promote.

Sure.

And third we continue to develop innovative technology to empower our retailers and the brand partners as of end of February debt, a high bar Omni channel online retail operating system and now being adopted by over.

Two.

The <unk> hundred large and the medium sized supermarket chain stores in China during.

During the quarter, we added an upgrade of the modules in our hybrid system. For example, the new heat maps module provides the distribution of others across the communities within a particular delivery rate is for.

This will allow supermarket stores to launch targeted offline promotions and attract new customers more efficiently.

We provided and the omni channel fulfillment of solutions that integrate the warehousing picky on delivery in a systematic it is highest in.

On the standardized fashion with a significantly improved operating efficiencies and reduce cost on.

On average our hydro system increase the number of products promoted on line by six times.

On the promoted Skus as a percentage of total all of our Skus offer in the store are twice as our peers.

Labor efficiencies for product management, and the promotion management increased by 10 times top pilots respectfully and accuracy rate of accounts.

The reconciliation the worst boosted to 90, 999%.

And fourth we deepen our collaboration with <unk> Dot Com Ujjain tens of the the key omni channel collaboration program with <unk>.

Out of more traffic entry points for Otis tender. So now in addition to search result page on JD App. This program can be accessed through the homepage and the JD supermarket channel after the dot com.

The roofing sales of program.

So expand the more categories beyond the growth rate such as consumer electronics the sparkle.

Currencies of personal care.

Cosmetics, providing JD platform users with more product offerings.

For our one hour delivery service.

And finally, J D and GT D J Johnson.

The joint marketing efforts during our shopping festivals, such as double 11, and doubled half as well as omni channel retail promotions.

So, let's now move on to that allow the largest open on demand delivery platform in China.

The first <unk> merchant business.

We continue to collaborate with industry leading of supermarket from.

So the coast and the catering sales in the fourth quarter.

The revenue from share merchants in the fourth quarter increased by 130% year over year.

Once the accessories highlighted is Sam's club three years ago that are now entered into a collaboration agreement with Sam's club to provide intra city delivery service, allowing Sams club member to enjoy a premier and the convenient shopping experience to the.

Day, our dedicated delivery of service covered 100 sales cloud.

Warehouse and for all of this omnichannel, others, including those from TD D J.

From the Sam's club App and the mini program.

The average daily delivery orders volume per warehouse has now served more than 10 times since initiating the partnership.

And turning to the last mile delivery.

We further extended our geographic coverage to more lower tier cities at the end of 2020 recovered to thousands of the 700 of cities in the countries.

So overall, we are pleased with our progress during the quarter.

About the journey ahead, as we execute our growth strategy, we look forward to generating sustainable long term value for our shareholders as we navigate a new era in chinas retail industry.

With that I will now pass the call over to Dr. Chen to go over our financials for the quarter Okay.

And for Fedex, but before we go over the numbers just a few housekeeping items in the bands we believe the year over year comparison side of the most useful way to judge our performance or percentage of changes I'm going to the Cape beyond that will be on year over year basis, and the all figures.

Unless otherwise noted.

I'll start with Q4 numbers first.

Total net revenues increased by 70% to 2 billion net revenues from and I know you increased by 54% to $1 3 billion, mainly driven by increases in all the volume for our surface to logistic companies and interest city delivery services to Chang merchants.

The total net revenue from <unk> increased by 107% to $729 million, mainly due to the increase in <unk> for on the same quarter last year, which was driven by increases in average order value and at the number of active consumers.

Year over year increases increases in online marketing services revenue was around 300%.

Moving over to the expense side for you.

<unk> expenses increased to $1 6 billion, mainly due to the increase in bright the costs as a result of increasing the volume for our services to logistic companies and interest at delivery of services provided to the risk of churn merchants on the LNR platform and the retailers on the J D D J platform.

Selling and marketing expenses rose to 700 of $3 million, mainly due to the first draw any incentive to J D. D. J consumers in line with <unk> growth, while the rate of incentives as a percentage of <unk> declined.

The second an increase in advertising and marketing expenses, which was primarily attributable to the increasing wrapper of fees paid to the staff at the retail stores in the third party of promoting service providers for the efforts to attract new consumers to the JD platform.

And the third an increase in personnel costs in connection with the company's growing niches and increases share based compensation expenses.

G&A expenses rose to $113 million, mainly due to the first the increase of share based compensation expenses in the segment increased gain per foot.

Professional fee for service fees that the company incurred as of late to the company.

On the expenses rose to 110 million, mainly because of the increase in research and the development personnel cost as the company continues to strengthen technology capabilities. The.

The increase the share based compensation expenses also contributed to the increase in personnel costs.

And then the GAAP loss from operations narrowed by 12% to $434 million non-GAAP operating margin was minus 22%, which was an improvement from minus 42% in the same quarter of last year.

In Q4, our non-GAAP net loss narrowed the by 12% to 420 million on.

GAAP net margin was minus 21%, which is which was an improvement from minus 40% in the same quarter of last year.

Non-GAAP net loss attributable to ordinary shareholders with for $419 million versus $695 million in Q4 last year non-GAAP net diluted net loss per share was <unk> 46, compared with 191 in the fourth quarter of 2019.

I will now quickly run through a few of full year 2020 financial result, the further details can be found in the earnings release. The total net revenues for the full year was $5 7 billion, an increase of 85% from $3 1 billion in 2019.

Operations in the supporting standard for the full year were $4 7 billion compared with $2 8 billion in 2019.

<unk> expenses for the full year was $1 8 billion compared with the $1 4 billion in 2019 G&A expenses for the full year were 419 9 million compared with 281 million of in 2019.

R&D expenses for the full year were for that for.

429 million compared with $334 million in 2019, non-GAAP loss from operations for full year was one 2 billion compared with $1 5 billion in 2019, and the non-GAAP operating margin was minus 21% in punting on.

Plenty of compared with.

The 48% in 2019 in.

In 2020 of our non-GAAP net loss was $1 2 billion compared with $1 4 billion in 2019, and non-GAAP net loss attributable to ordinary shareholders was $1 5 billion in 2020 versus $2 2 billion in 2019.

Non-GAAP net diluted net loss per share was 231 in 2020 compared with $6 11 during 2019.

Okay.

As of December 31st the 20th century, we had 663 billion in cash cash equivalents restricted cash and the short term investments in early December we completed the follow on offerings with total proceeds of $415 million. This has strengthened our balance sheet and that will allow us to.

Grow our user base and furthering best in our technology and the R&D consolidate our leadership positioning in the strengthen the value of proposition, we offer to merchants and the consumers.

So in terms of the outlook for the first quarter of 2020, when we expect the total net revenue to be between $1 61 billion and the one point of 66 billion as of.

For the total net revenues of J D. D. J given that Q1, the traditionally lower season for consumption and the <unk> revenue growth of over 150% during pandemic outbreak in Q1 last year, resulting of high base. We expect the J D. D. J revenue in Q1, this year to grow or 50.

3% five zero, 50% on the year over year basis and the hedging.

The into Q2, we expect the J D. D. J revenue grows to re accelerate a lot on a year over year of basis.

Lastly, I would like to talk about the upgrade of our last mile delivery businesses and the impact on revenue recognition going forward.

So in the past few years, we have cooperated the seamlessly with JD logistics and our last mile delivery businesses has grown significantly.

As a result related party accounts receivable from JD logistics also saw substantial increases from over $200 million at the end of 2019 to over 500 million by the end of 'twenty panting.

In order to improve our company's for working capital efficiency. The also by the understanding of the support from JD logistics starting from Q2. This year the last mile rider cost that will be directly paid through so the project companies instead of through us like the current practice and the.

We will continue to collect our service fee from JD logistics and the we are only recognized this service fee as our revenue going forward, we will no longer recognize rider related the revenues and the Ryder is the cost in our income statement for the last mile delivery businesses, while our read of hepatic accounts receivable and we're also.

So decrease significantly going forward.

So let me provide an example of a better illustration. So end of the current practice JD logistics and they pay us the island.

For the provision of last mile delivery service of which we were the $10 to the riders for this work force at work and the we keep $1 of service fee at the gross profit.

As for the of country accounting treatment, we recognize revenue as our revenue and the accounts receivable and a recognized $10 as the rider costs.

Following the change of the business model JD logistics will pay of service fee of $1, which we will recognize as revenue in the.

And the accounts receivable, we will no longer recognize the other $10 as the right the cost.

And as the Raptor.

As the revenues in the auto the accounts receivables because it will be paid through buy for the Apache companies.

This is a little bit like gross basis changed to net basis and the has no impact on all of our gross profit and our continuing services to JD logistics.

Now we anticipate that the various change will take effect of things Q2, this year and the going forward, we expect to see a significant improvement in our working capital positioning and overall quality of our total net revenues.

And also to help our investors better understand our range of growth in the next four quarters from <unk> 2020 of win two <unk> plenty of Panted. Two we will also provide the pro forma information for Apple to Apple comparison purpose in our upcoming quarterly earnings release.

So this concludes our prepared remarks.

Operator, we are now ready to begin the Q&A session. Thank you.

Ladies and gentlemen, we will now begin the question and answer session.

Do you wish to ask the question. Please press star one on your telephone and wait for him to be announced.

Thanks for the cash on your request please press the pound or hash key once again is for one to ask the question.

Your first question comes from the line of Ronald Keung from Goldman Sachs. Please ask your question.

Thank you thank you for that.

And Caroline for for taking my questions and I guess two questions for this quarter the.

The first question would be about allo adhere strategy lower tier city strategy is how have we observed the the performance had been and if we have looked into kind of different.

Business models out there, including I think we talked about the company repurchase.

Kind of models evolving since the second half of last year.

We see we're serving a very different kind of user demographic cohort of any anything.

We could address the or share on how our lower tier city of performance alongside the 150% GNP that we talked about how do we see as compared with other other.

MS models and our strategy is ahead in the adding at users and the order intensity.

My second question, but I mean right now.

The question.

Thank you Ron so talk about the lower tiers.

The city the strategy.

So first of all of our as you can see from the result of our growth in the lower tier cities has been very strong.

One of the key reasons behind the if that we're able to work with the most competitive.

Retailers in each region.

For the past supply chain capabilities.

<unk>.

As you know in China the <unk>.

<unk> is rather fragmented and in each region there.

The retailer leaders, which has the most competitive of supply chain and the weir.

Able to work each one of them at the same time, we never compete with them. So we were able to always is the.

Truthful.

On <unk> with them I think thats, the key reason and as of the basket size and the demographics et cetera, we're seeing the comparable basket size and the lower tier cities and the purchase power from the.

Consumers in lower tier cities are strong.

What we have observed in the first Geocities Ting.

Perhaps one of the reason of this that the living cost is relatively low in lower tier cities, especially the real estate on the rental cost for they are able to spend more in the willing to spend more.

In terms of the group purchase of as you met.

<unk> as.

As we have observed in the competing with group purchase players for the last few quarters and that we are now even more confident about our strengths.

So in some of the.

The area of Science group purchase players on most actors, including like of Hunan of Hubei et cetera.

We managed to grow three digits continued to grow through the days so.

Our business was not affect us anyway.

And.

At the same time.

We are able to provide at the.

The store level at least 10 times more.

Skews the product assortment to the customers and our basket size.

Is at least 10 times.

Bigger than the group purchase players so we're very confidence.

The future competition as well.

And as.

As we continue to grow the user base, we're happy to see that our user base has been growing per.

The strong in both tier one and tier two cities and there are few things in terms of the.

User acquisition of our growth I would like to mention.

So first of all four.

Very unique to us because we are working with.

Almost all of the leading.

Supermarket on grocery chains in China, and the most of the leading brands.

In China. So we're now so on daily basis, there are tens of thousands of store associates in offline.

Brand the promoters, helping <unk> to promote the GDP the app.

At the same time, we also provides digit highest membership program.

For the retailers and brands. So there also for promoting their membership program to their existing customer base and those members share power based on GDP drop versus the highly win win.

Collaboration at the <unk>.

Same time.

No.

So happy to.

The work, even more closely with JD and <unk>.

Received lots of traffic support from JD as well. So we are very confident about our user growth.

Going forward.

Thank you for that that's very useful and my second question is on your hybrid system.

Many many store the using it what does it accounts for let's say out of it.

Daily orders from Janney D J.

And how are we penetrating our EBITDA plus with the market's amongst the top 100.

Any any targets, there and potential for monetization or even kind of the thing that overseas by your partner.

So hi, both system is very strategic and the we consider this as a one of the major way for us to empower our retailer partners have all system that you can consider it as the operating system for any retailer to do.

Omni channel business and essentially helps the retailer to debt is highest and manage their inventory there others. Their procurement there are financial of etcetera. So.

Extremely important and helpful system.

On the other two half of the retailers to adopt hybrid system first of all of the hydro system itself needs to be very very strong with the.

Very high.

Stability and the.

The.

The capabilities of the system has to be really really competitive at the same time you also require very deep cost between the two parties the speakers.

Okay.

Imagine you're a retailer in the U N now using a.

Such a core system to manage essentially you're on.

The channel business.

On the chart needs to be very very deep.

We are very proud of that over the last few years, we will have the most developed a very deep trough.

And partnerships with the retailers.

In terms of the monetization.

We have just started of some very moderate.

Consolidation with the retailers.

At the same time the high blood system I think it will continue in the foreseeable future you will continue to serve as the backbone and the foundation for the retailers to do the business on mature.

On the business and as a strong.

Value offering from us at the same time, we are.

Also our pioneering some.

SaaS by the system.

And offerings to help the brand owners as well.

So on.

We.

It may give you a more cases more examples in the future, but we are happy to see some of the.

Early.

Early cases as well so.

At the same time, we will empowering both of the brand owners the.

The retailers and brand owners.

So at the same time the hydro system.

Together with the fibrosis on what we are having our CRM.

<unk> technologies, which has being quickly adopted by the more and more.

Stores, so as of today I think there are over 40000.

The <unk>.

For switch has adopters of our.

CRM programs, which also.

<unk> health for the retailers. So we will continue to invest heavily in technology and to empower all our retailer and brand partners.

Thank you that's very useful thank you for that.

Sure.

Your next question comes from the line of Eddie Leung. Please ask your question.

Good morning.

Just wondering if you could share with us your.

For category the cash.

Cash and under J D. Pega is not 2021 for example are we looking at more of a key categories to penetrate and true.

And the related to that could you could you.

Help us understand the person.

And the age of orders Archie Hadley on whatever metric you think appropriate from a non supermarket.

Fourth quarter. Thank you.

Sure of it.

So in.

In terms of the category expansion, we're very happy that the year or so ago, we started off with supermarket because it's the most complicated category with the.

The most like the largest number of skus and the.

The inventories and all of those things most difficult to deal with so we laid a very solid foundations.

While we are doing in the supermarket categories and now we believe that that is the time for us to extend from credit from supermarkets of other colleagues.

Categories. So we see this.

The strategy for.

From this angle for basically if youre looking to all of the products available for retail.

We categorize the product into three groups.

Number one is the product of you.

You typically can only debt from supermarkets and the second is the products that you typically can only cash.

The non supermarket.

If examples and the third.

The products that are available in both supermarket and other stores.

So in categories and group of number one the things you can only get in supermarkets for example, like on milk.

Of our cooking oil or rice or toilet papers or like the shampoos etcetera. So those are the things typically it can only get in supermarkets.

And the things you can only get from non stop markets, including like the.

Smartphones laptops of pharmaceutical products.

And the like the home appliance.

Flowers.

And the like.

The.

Okay.

Things like that right. So those are the things that the only gas from non sort of markets.

And they are also part.

You can guess in both supermarket and non sort of markets for example, like AR.

The skincare and cosmetics.

<unk>.

Like the alcohol beverage bakery.

Snacks et cetera, apparently.

Apparently et cetera, so those are the things.

Those are the NGO.

Into the category expansion.

So we will continue to strengthen our leading position in supermarket categories. No doubt we will continue to.

Strength in the market share.

And two is.

Matter of fact, we have now already.

B.

One of the fastest growing for most of the SMC G brands that are <unk>.

<unk> in supermarkets.

And we will continue to strengthen our leading position as.

At the same time, we will expand from supermarket categories too.

On to the category of debt.

Our available in both supermarkets and others for example, like AR.

Bakery or alcohol or like the fresh produce et cetera. So those are the things you can get from.

From the specialty stores and supermarkets will expand to specialty stores at the same time.

As we have already successfully.

On.

The leading position in like the smartphone on our delivery business, we will continue to strengthen that and like the pharmaceutical delivery et cetera for those other things from non supermarkets. We will continue the strength of that so to summarize the category expansion.

Belief is.

We are we have got very solid foundation from the supermarkets.

From the last few years and.

We will.

The expense to more of categories in the foreseeable.

Orders in the years the same time the collaboration with J D. I think will also strengthen.

The buyer within terms of our other programs.

It will be also helpful for our category expansion.

And also on the non non supermarket of categories is coming for <unk>.

Plenty of 5% of the Jimmy the mainly coming from the electronics force of fresh market fruits for the.

Pharmacy stores and beauty store et cetera.

So that's the.

That's the answer.

Thank you Pekka and thank you.

Okay.

Your next question comes from the line of Thomas Chong from Jefferies. Please ask your question.

Hi, Good morning, Thanks management for taking my questions also of a question relating to J D D J.

Can management comment about the trend in the unit economics.

Cost of commissions and other pricing as we go for 2021 as well as on how we should think about.

The trend of for.

Some of the incentives and how we should expect the timing to.

To breakeven on.

Some of that May I also ask about what's the latest poll quest that we work with JD on the margin and project.

Sure.

Sure. So let's take the lead in terms of the question first and ill have.

Traction through those for the in the.

Economists.

And some of the financial projections.

So the loading in terms of program.

It.

The has been.

Launched for us.

A couple of quarter of few quarters since early last year and.

We're happy to see that in Q4 of <unk> tens of.

The the <unk> tens of the has been growing very strong in fact this quarter over quarter by a multiple of highest growth and both JD and ourselves are very.

Key in this program and we are very actively pushing this forward.

You might have observed in Q4 on JD dot com from page and JD supermarket from pace there.

A few more entry points and.

Also search on TV Dot com on the search result page you will see many significant entry points as well.

So.

Through this alluding to in the program we are now offering the.

The JD users with one hour delivery service for many categories.

From grocery now to consumer electronics currency cosmetics, and so on and the we envision that we will expand to more of the more categories in the.

Upcoming quarters, as well and the other.

Same time in Q4, we have launched multiple other successful marketing initiatives with J D <unk> center and so on.

On more.

The retailers now participate in those kind of marketing initiatives.

And the.

So both retailers brands and JD really appreciated this program.

So it's still the.

The rather early stage, but we have.

Fully believe that the CMA.

<unk> growth through moving tons that will keep the very strong.

Total.

I'll also want to just to give a quick.

The summary of the rationale behind the <unk> tens of so.

Might be able to understand the logic more clearly.

So the <unk> is a highly win win partnerships between J D. J D D J.

Through a few dimensions. So number one is about the fulfillment.

As you can imagine for JD dot com there are many product categories are.

Actually very difficult for JD to do the other procurement, including like the heavy products for our key products or the frozen.

For us or the fresh produce et cetera. So all of the categories I just mentioned.

Either had very high for Cumulus cost or has the very highest shrinkage et cetera. So.

It does not make too much economic sense for JD dot com to do the other fulfillment on the wrong at the seven time those products and the inventory of already available in the stores near the customers in our retail partner stores. So it makes a lot of sense for for Earth.

For our retailer partners to do the other procurements. So that's number one other procurement.

<unk> two is about the inventory.

So in many categories take consumer electronics as an example like hub.

Like the Apple or vivo Opel so those are the smartphones or of consumer electronics players each one of them day.

We will.

Highly promoting their own.

The stores, the offline brand stores and allocate more inventory to the offline stores.

At the same time, we also see that the other categories. The.

Our brands.

The more marketing campaigns.

And much of us to the offline stores as well so by working with <unk>, we're now being able to accessing the offline inventory. So it's again the highly win win for our brands and for <unk> Dot com and for of J D. D. J is a highly <unk>.

For for everyone, we're helping the brands to sell their offline inventory.

On the <unk> is able to access to more valuable inventory and we certainly access.

<unk>.

To generate a lot of value out of it and the third is about the.

Marketing and promotion so JD certainly has the very strong like the double 11 or June 18th.

Promotion festivals.

There are very.

So there are certainly strong was that at the same time.

The offline retailers each one of them have their own any of promotional events and other promotional events again, it's highly complementary.

Tween the offline retailers in the J D Dot com. So we also serve as a very valuable bridge the two.

<unk> for the parties the last.

The quick summary of the Odin, hence the logic of the rationale.

As you can see is a highly wing wing program and the we are generating a lot of value from it.

And as for the outlook for the outlook for the.

Eric the margin.

In 2021, the first of all for the money.

Monetization side, we expect debt.

Should be growing by.

30 bps on a year over year basis, which is generally coming.

From.

On the different.

Revenue items revenue streams, including commissions.

The online marketing fees and the.

But the other fees.

In terms for the cost of.

Cost of side, we expect that.

We are prioritizing the growth of.

J D D day, a platform so the consumer incentives could be growing.

As of year over year basis, while the operating cost mainly like the rate of cost can be on the.

Well control.

In 2020.

Thank you.

Your next question comes from the line up.

<unk> from Citigroup. Please ask your question.

Okay.

Yes.

Excuse me actually share.

Your line is open you can ask your question.

Hi, Thank you management for taking my question.

My question is more on the <unk> channel and you have been seeing post carry and putting in line I just want the attack given the steep for policy implied Chinese new year, how we have seen the channel of our audio volume as well as Apple and how is that trending post.

And the patch.

Is there any change in our full year expectation and Jamie Thank.

Thank you.

Thank you yes.

Give us a overview and I think that can give you more colors.

So the.

The the <unk> has been again, a very unique last day in why we.

<unk> for the COVID-19, and the C&I, we went through the so called the stay low core stay home.

The Chinese new year so.

On.

We're happy to see that the purchase power from the customers has been very strong during the C&I periods and the.

The basket size and the other volume has been.

Very strong.

On.

The effects mentioned earlier so we.

Even.

Even based on the very high base last year, we anticipate that.

Of this Q1, we will continue to grow more than like 50% year over year from last Q1.

So we are very confident going forward as well and at the same time as we have worked with the retailers and the brands for the last few years, we have developed a very close partnership and more on the more we're now being able to.

We're closely and.

The two really flexible.

In terms of all of the partnerships the deal with those unique.

The situations like we have just seen this year right. So.

Through a partnership even certainly we are of different parties for the jointly we are now being a very we're able to being very flexible and adaptive. So I think we are.

Very confident about the outlook.

Yes, and also just like I said in the prepared comments.

We are.

Looking forward to debt.

Moving to the Q2.

The growth rate of J D. D. J, we are reaccelerate much higher than the 50% to 60%.

In Q2 and for the second half of all for the whole year outlook.

At this time, we should still be.

It'll be conservative.

I think maybe go into the mid of the year could be.

The landscape could be more clear more clear for us too.

On the for Pat.

Okay.

Okay.

The debt.

Net last question was from MS. Angie <unk> from credit Suisse.

Your next question.

Comes from the line of Alicia Yapp from Citigroup. Please ask your question.

Hi, Good morning management. Thanks for taking my questions I have a very quick one just a follow up on the overall monetization potential for JBT.

The management deal what is the potential in the longer line on to improve.

<unk> take rate from the retail partners.

The company is.

Providing more and more value added staffing to ban of cotton.

And then how high of the online marketing revenue at the percentage of GMB input you believed you could reasonably reach in the longer term. Thank you.

Right. So I'll give you an overview on the backs can give you a.

More of color.

So the monetization of J D D J, mainly come from free.

Yes.

The first of the commission from the retailers and the second is the market marketing promotion dollars from the brands and the third is the delivery cost paid by the consumers.

So in terms of the commission from the retailers.

So as we are expanding to more of the more of categories. We're happy to see that in most of the categories other than the supermarkets the.

Gross margin for that category tends to be higher than the supermarket category. So.

Given that we are.

I think theres rhythm reasonable to see a.

The room for increasing the commission from.

The retailers going forwards from of Iris categories.

And in terms of the brand's marketing dollars.

As we are providing a lot of very unique value of two the brands. We are happy to see that in last quarter. The.

The revenue from the brands.

Grew by 300%.

And.

As you can imagine brand.

So for most of the FMC G brands.

Most of their sales still comes from offline and they always allocate a significant portion of their marketing dollars to offline channels.

For the.

Traditionally the offline channels have felt it's the.

Difficult to digitize or to measure also optimize their hours of spending the now we are providing them with a very transparent digitized way to spend the marketing dollars and to measure and improve the performance. So that's why of brands are very happy working with ours and allocating more marketing dollars.

Through our channel.

At the same time, we are now.

It's one of the fastest growing channel for the brands as well. So we are very confident.

Continue to monetize from the brands.

And for the delivery cost I think we are.

We are moderates.

Increasing the depth of delivery costs.

We actually Amar.

The very few platforms.

The charge.

The customers in the last few years, while other people may not.

On the charge the customers, although we are seeing today that including like the thermo.

From all others there now.

So of them are now charging the customers.

Think we are we'll continue to do that but I think we will be moderate.

And also generally right now we haven't seen any of that.

For the growth of the monetization rate so right now for.

I think in the coming two or three years, we just the steel at Phillips said, we just moderately grow our overall manufacturing right not just the from like when revenue stream across different revenue streams too.

To improve our.

On.

The profit improve on the monetization rate.

Okay. Thank you.

Okay.

Your next question comes from the line of definitely Blue from heightened International Please ask your question.

Sure.

Hi, Good morning management, I am Jackie on behalf of Natalie.

Thank you for taking my question.

I actually have two questions. The first one is about our ex.

In the lower.

I, especially want to ask about our strategy in the expansion because of.

We know a lot of the supermarket retailer in lower tier cities are quite small in size, meaning they don't have that many chains the way.

What is our strategy ensure thankful.

Partner with and also because they are not a lot of them on not operating.

In the area while condition. So they may not free in that many of what Gary.

Your line.

And does that mean on our strategy.

The with them.

The level of our commission take rate. So this is the.

First question.

The second question is yes.

We share more color about the tens of program, especially on what are the from the offline Brian that we are now operating words, because now I think management has mentioned.

On some Brian talk of the operating with with the intent to hub.

Celebrate their sales and their offline inventory. Thank you.

Sure. So the first one regarding the lower tier city of strategy.

So first of all of ore we.

We entered each lower tier cities.

Working with our existing partners of the national players like a warm oratorio on play of Vanguard each one of them has hunters.

And for even the thousands of.

Offline stores.

The last half of lower tier cities so for.

For every city, we enter is always the hot start if not a cold start that's number one the number two.

There are a lot of very strong local players.

And we.

So we did the analysis that at least there one hundreds of very strong local channel players.

My only operating one city or in one province, but theyre very.

The strong and the dominance in that particular city or even countries for at least there of 100 of them and.

We are very happy to sign.

The sign up with with those the local of winners one by one and the we are confident to work with almost all of them that's net.

That's the number two the number of three.

Sure.

Very competitive 10 stores from other categories as well for example, you can see apple stores or vivo Opel stores almost everywhere in China.

Lower tier cities today and like.

And the beauty of the personal care stores like the Watson you can also see lots of lots of them in lower tier cities, but I think today, the lower tier cities.

Very good.

The competitive in terms of the.

Retailer landscape and the players there.

Is very powerful.

And we're happy to.

See our partnership with them.

In terms of the <unk> tender.

We have now are quickly.

On this putting tens of the partnership with most of our retailer partners at the same time the.

The breadth of the FMC brands that other brands have been quickly adopting this.

The partnership with us as well, so I think going forward with the tender will be overwhelmingly popular program to most of our brands and the rich.

The retailer partners.

Thank you.

Yes.

Your next question comes from the line of Robin you. Please ask your question.

Hi, Good morning, Thanks management for taking my question and congratulations on a solid quarter.

I have a follow up question on the user acquisition cost of can management comment that if we see potential pressure on the user acquisition cost in 2009 of one <unk>.

We see.

From bigger players are very strong and growing of users in mini programs and the committee for purchase and even those smaller fund and warehouse players active in.

In capital raising activities recently, so is it likely that they're going to spend more in 2021, so for J D D J.

Are we going to see more spending.

The new users are coming from our offline promotion in lower tier cities.

Sure. So I'll give you an overview on the back half of anything to add so for user acquisition I will split into like a true.

Things to look at US for one thing is how you can acquire the new customers and the access to new customers at the same time. The second thing is the.

The incentives and other to convert and to return the.

Customers for the first thing.

So as I mentioned earlier in the call.

So we have a very unique position and the resource.

So we have on daily basis, we have tens of thousands of active offline store associates on the brand promoters how can lead us to promote the agility of the App.

At the same time, we are able to get a tremendous traffic support from <unk> Dot com I think of those are the sales are very unique and on available to other players that the keepers, a very unique the ventas in terms of.

User acquisition for the new customers the.

The same time as you can.

Can see from our financial numbers the incentives as a percentage of origin in the given to the customers continue to go down as we are able to offer a brother of product Assortments and the.

The very solid.

User experience I think.

<unk> customers are coming to buy good products at the reasonable price and expecting a good service and we will continue to.

The as competitive as possible in terms of providing all of this I think the incentives.

We will continue to go down and the despite the Etsy managed mentioned there are other players.

Aggressively competing for customers.

That's all we have okay.

I would now like to enter the conference back to MS. Caroline Dong for closing remarks. Please continue.

Thank you operator, thank you for joining us today this comparable for the call.

Okay, ladies and gentlemen.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may all disconnect.

Sure.

Okay.

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Good morning, ladies and gentlemen, and thank you for standby for our guidance fourth quarter 2020 earnings conference call. At this time all participants are in a listen only mode. After the management's prepared remarks, there will be a question and answer session.

As a reminder, today's conference call is being recorded all of them.

I'll now turn the meeting over to your host for today's call net.

Caroline Dong head of Investor Relations for Dod.

Please proceed Caroline.

Thank you operator, Hello, everyone and thank you for joining us today, our fourth quarter I can touch on your earnings release was disability Labor day and is available on our IR website at IR and data does CN as well as on global Newswire services.

On the call today from <unk>, we have Mr. Philip <unk>, Chairman and Chief Executive Officer, Mr. Jin Yan co founder and Chief Technology Officer, and Mr. Beck, Chen Chief Financial Officer Mr.

Mr. <unk> will talk about our operations and company highlights followed by Mr. Chen who will discuss the financials and guidance.

They will all be available to answer your questions during the Q&A session that follows.

Before we begin I'd like to land you that this conference call contains forward looking statements as of defining the second Gen Y E of the fifth.

Securities Exchange Act the Alpha the <unk>.

And I think that for and the U S. Private Securities Litigation Reform Act of 95.

The following statements are based on how management current expectations and current market and operating conditions.

And relate to events that involve known or unknown risks uncertainties and other factors all of which are difficult to predict and a matter of lake at the year on the company's current gel.

These risks may cause the company's actual results of our performance to differ materially.

For the information regarding these and other risks uncertainties or factors is included in the company's filings with the U asked the SEC. The company does not undertake any obligation to update any forward looking statements as a result of new information future events or otherwise.

As required under applicable law.

It is now my pleasure to introduce our chairman and Chief Executive Officer, Nick The Thai.

Phillip Please go ahead.

Thank you Caroline and thank you all for joining us today.

We're very pleased to deliver another extra ordinary quarter and outstanding fiscal year.

Our total net revenue of 2020 reached $5 7 billion with 85% year on year growth rate.

Our industry, leading position has been further strengthened with market share expansion and on a widening gap with the southern in the following players.

According to <unk> research J D. DJ continues to be China's largest local on demand of the retail platform in consistency with market share increasing to 45% from 21% in 2019.

In the meantime that allow remained the largest open on demand delivery platform in China with market share increasing sales of the 5% from 19% in 2019.

I will provide updates on the performance of our two platforms.

We will go into greater details about our financial and operating results.

So the first let's talk about TD D J, China, leading local on demand the retail platform.

<unk> fast growth in fourth quarter of what's driven by for men sectors for.

First.

We have been constantly expanding our geographic coverage, especially in lower tier cities and the further diversified the category of coverage to provide more product offerings in more categories on the debt.

Leveraging on the leading an expandable supply chain the vintages of our retail partners and our continuously growing retail partner base the enter another.

200 cities in the context during the quarter at the.

And on 2020, we cover the <unk>.

<unk> hundred citizen countries for anymore on the more people everything on demand.

I believe there is still tremendous potential in lower tier cities for example, CMV in lower tier cities increased by 150% year over year during this quarter.

We also expense and enriched our category of coverage with our mission to bring people everything on the web during this quarter, we achieved breakthroughs in cosmetics, while making great progress on consumer electronics and smartphones.

In the cosmetics in the personal care category, we have established in the partnership with Watson's Manning.

The industry and other duty on the personal care channel and brands.

And then sort of the 400 due to the stores have now being listed on the D. J.

As for consumer electronics, the smartphones TDD J established interest partnerships with this income JD home appliance stores and the vivo.

Altogether over.

The six T. The over 6000 stores, having listed on the JD <unk> platform.

700.

We are continuously enhancing the cooperation with our retailer and the Brent hunters.

In terms of retail of others in this quarter.

Tablets partnerships with over 20, leading supermarket channel such as functional supermarket in Hubei Province, and the lead Department store in Anhui Province on Cologne in total on filings and pay for supermarket in Shandong Province.

Our amount of the top 100, the supermarket shelves and the original dominant players in China.

As of today, we have established partnerships with 71 of the top of 100 supermarket chains in China.

As we enable and empower retailers the create value for them.

Partner, rather than competing directly with them the overwhelming number of leading retailers on the hour GTD platform compared with our competitors clearly demonstrate our competitive edge.

Partnering with nationwide, leading supermarket chess J D. D. J has launched brand new promotional compares Super merchant day. During this quarter, the new IP events will help retailers improve sales expanded customer base and enhance brand influence the.

Of this initiative has achieved success in trial cases for that.

For during the first Super merchant days launch for Jamba warehouse supermarket in the first weekend of December.

The sales improved by more than 12 times over the air Vogler weekend sales.

In light of the exceptional results, we are rolling out this compared to more of leading supermarket chains.

As the if I recall, we launched the debt are thinking cross sourcing service for.

For the retailers in the third quarter to improve the efficiency of the picking in the fulfillment process.

During Q4 net are picking has provided omni channel other picking service to more supermarket stores, increasing their PK efficiencies by 24% and of lowering picking cost by the day, 4% and some typical stores.

We also expanded the number of pharmaceutical chairs in the fourth quarter and have now established partnerships with more than 80 out of top of 100 pharmaceutical channel in China.

In terms of brand partners during this quarter, our online marketing service revenue from brands continue to gain momentum increasing by around 300 per half year over year for <unk>.

Continuously innovate marketing activities to create the more values for brand partners during double of 12 promotional cedars many of leading brands such as Ely mono on.

The fully months increase the ourselves multiple times versus the same period of last year.

The meet the surge of demand in cosmetics, we launched the join the promotion program was in the liver and the P&G during the double 11 Festival.

Elsewhere more than 10 times that after.

Same period of last year.

During the quarter Jay the DJ also extend the strategic cooperation with certain brand owners for example.

Establish of live streaming collaboration agreement with <unk> in the liver and deepen progression with Pepsi to launch John marketing campaigns during the China Chinese new year promotion.

And third we continue to develop innovative technology to empower our retailers and the brand partners as of the.

The end of February debt out high bar Omni channel retail operating system is now being adopted by over.

The <unk> hundred large and medium sized supermarket chain of stores in China. During the quarter. We added an upgrade of the modules in our hybrid system. For example, the new heat maps module provides the distribution of orders across communities within a particular delivery.

The rate is.

This will allow supermarket stores to launch targeted offline promotions and attract new customers more efficiently.

We provided in the omni channel fulfillment of solution that integrates the warehousing picky on delivery in a systematic this is highest in.

The standardized fashion with a significantly improved operating efficiencies and reduce cost.

On average our hydro system increase the number of products promoted on line by six times.

In the promoted Skus as a percentage of total all of our Skus offer in the store are twice as our peers.

Labor efficiencies for product management, and the promotion management increased by 10 times and top pilots respectfully and the accuracy rate of accounts.

The reconciliation the worse boosted to 90, 999%.

And fourth.

We deepened our collaboration with steady dot com user in terms of the.

Key omni channel collaboration program, we added more traffic entry points for <unk> tender. So now in addition to search result page on JD App. This program can be accessed through the homepage and the JD supermarket channel of steady Dot com.

Moving to the program, whereas the also expand the more categories beyond the growth rate such as consumer electronics that's Marco.

Currencies of Paris.

<unk> care.

Cost of IDEXX, providing JD platform users with more product offerings.

For our one hour delivery service.

And finally, J D and GT the J strengthen the.

The joint marketing efforts during our shopping festivals, such as double 11, and double staff as well as the Omnichannel retailer promotions.

So let's now move on to that are now the largest open on demand delivery platform in China.

The first for a chair merchant business.

We continue to collaborate with industry leading of supermarket from <unk>.

Total cost and the catering sales in the fourth quarter.

The revenue from share merchant in the fourth quarter increased by 130% year over year.

Once the accessory to highlight is sales.

The club three years ago that are now entering into a collaboration agreement with Sam's club to provide intra city delivery service, allowing sales club member to enjoy a premium and a convenient shopping experience to the.

Our dedicated delivery of service covered 100 sales force.

Warehouse and for all of his omnichannel, others, including those from TDD Jay.

From the sales towards the App and the mini program.

The average daily delivery orders volume per warehouse has now served more than 10 times since initiating the partnership.

And turning to the last mile delivery.

We further extended our geographic coverage to more lower tier cities at the end of 2020, we covered 2000, the 700 series on the contest.

So overall, we are pleased with our progress during the quarter.

About the journey ahead, as we execute our growth strategy, we look forward to generating sustainable long term value for our shareholders as we navigate a new era in chinas retail industry.

With that I will now pass the call over to Dr. Chen to go over our financials for the quarter Okay.

Central credit, but before we go over the numbers just a few housekeeping items in the bands we believe the year over year comparison side of the most useful way to judge our performance of.

Percentage of changes on going to get well beyond that whether it be on year over year basis, and all figures are in renminbi unless otherwise noted.

I'll start with Q4 numbers first.

Total net revenues increased by 70% to $2 billion net revenues from and I know increased by 54% to $1 3 billion, mainly driven by increases in order volume for our surface to logistic companies and interest city delivery of services to chain merchants.

The total net revenue from <unk> increased by 107% to $729 million, mainly due to the increase in <unk> for on the same quarter last year, which was driven by increases in average order value and the number of active consumers the year.

Year over year increases increases in online marketing services revenue was around 300%.

Moving over to the expense side of <unk>.

<unk> expenses increased to $1 6 billion, mainly due to the increase in Brian the costs as a result of increasing the volume for our services to logistic companies and the interest at the delivery services provided to the Ria channel merchants on the LNR platform and the retailers on the J D D J platform.

Selling and marketing expenses rose to 700 of 3 million men on Youtube first draw any incentive to JD DJ consumers in line with <unk> growth, while the rate of incentives as a percentage of Jeremy declined.

Second an increase in advertising and marketing expenses, which was primarily attributable to the increase in wrapper of fees paid to the staff at the retail stores in the third party of promoting service providers for the efforts to attract new consumers to the JD <unk> platform and the.

The third an increase in personnel costs in connection with the company's growing niches and increases share based compensation expenses.

G&A expenses rose to 113 million, mainly due to the first the increase of share based compensation expenses in the second increases gain per for professional.

Professional fee for service fees that the company incurred as the visit the company.

On the expenses rose to $110 million, mainly because of the increase in research and development personnel cost as the company continues to strengthen its technology capabilities. The increase the share based compensation expenses also contributed to the increase in personnel costs.

The non-GAAP loss from operations narrowed by 12% to $434 million non-GAAP operating margin was minus 22%, which was an improvement from minus 42% in the same quarter of last year.

In Q4, our non-GAAP net loss narrowed the by 12% to $420 million non-GAAP net margin was minus 21%, which is which was an improvement from minus 40% in the same quarter of last year.

Non-GAAP net loss attributable to ordinary shareholders was for $419 million versus $695 million in Q4 last year non-GAAP net diluted net loss per share was 46 compared with 191 in the fourth quarter of 2019.

I will now quickly run through a few of full year 2020 financial result for further details can be found in the earnings release. The total net revenues for the full year was $5 7 billion, an increase of 85% from $3 1 billion in 2019.

Operations in the supporting standard for the full year were $4 7 billion compared with $2 8 billion in 2019.

And then expenses for the full year was $1 8 billion compared with the $1 4 billion in 2019 G&A expenses for the full year were 419 9 million compared with 281 million of in 2019.

R&D expenses for the full year work for that for.

<unk> hundred $29 million compared with $334 million in 2019, non-GAAP loss from operations for full year was one point cube.

<unk> billion compared with $1 5 billion in 2019, and the non-GAAP operating margin was mine there is plenty of 1% in <unk>.

Plenty of compared with minus 40.

48% in 2019 in.

In 2020 of our non-GAAP net loss was the $1 2 billion compared with $1 4 billion in 2019, non-GAAP net loss attributable to ordinary shareholders was $1 5 billion in 2020 versus $2 2 billion in 2019.

Non-GAAP net diluted net loss per share was $2 31 in 2020 compared with $6 11 during 2019.

Okay.

As of December 31st of 2020, we had six of $6 3 billion in cash cash equivalents restricted cash and the short term investments in early December we completed a follow on offerings with total proceeds of $415 million. This has strengthened our balance sheet and that will allow us to.

Grow our user base and furthering S in our technology and the R&D consolidate our leadership position and strengthen the value proposition, we offer to merchants and the consumers.

So in terms of the outlook for the first quarter of 2021, we expect the total net revenue to be between $1.

61 billion in the 166 billion as of for the total net revenues of ADT, Jay given that Q1, the traditionally lower season for consumption and the <unk> revenue growth of over 150% during pandemic outbreak in Q1 last year, resulting in a high base.

<unk> revenue in Q1, this year to grow over 50% five zero, 50% on a year over year basis. The hedging heading into Q2, we expect the J D. D. J revenue growth to re accelerate a lot on a year over year basis.

Lastly, I would like to talk about the upgrade of our last mile delivery businesses and its impact on revenue recognition going forward.

So in the past few years, we have cooperated the seamlessly with JD logistics and our last mile delivery of <unk> has grown significantly.

As a result related party accounts receivable from JD logistics also saw substantial increases from over $200 million by the end of 2019 to over 500 million by the end of 'twenty panting.

In order to improve our company's working capital efficiency. The also by the understanding of the support from JD logistics.

Starting from Q2 this year the last mile right across the we are the directly paid through through the pocket companies instead of through US like the current practice and we will continue to collect our service the from JD logistics and the we are only recognized the service fee as our revenue going forward, we will no longer.

The recognize rider related the revenues and the Ryder is the cost in our income statement for the last mile delivery businesses, while our read of hepatic accounts receivable and will also decrease significantly going forward.

So let me provide an example of a better illustration. So end of the current practice JD logistics and they pay us the other $1.

For the provision of last mile delivery service of which we will of $10 to the riders for this work force at work and the we keep $1 of service fee as the gross profit.

As for the of country accounting treatment, we recognized $11 as our revenue and accounts receivable and the recognized $10 as the rider costs.

Following the change of the business model a day logistics will pay of service fee of $1, which we will recognize as revenue in the.

And the accounts receivable, we will no longer recognize the other $10 at the right the cost.

And at the rack.

As the revenues in the auto the accounts receivables the cost it will be paid through by the patchy companies.

This is a little bit like gross basis changed to net basis in the has no impact on all of our gross profit and our continuing services to JD logistics.

We anticipate that the vignettes change we are take a factor of things Q2, this year and the going forward, we expect to see a significant improvement in our working capital positioning and overall quality of our total net revenues.

And also to help our investors better understand our range of growth in the next four quarters from Q2 2020 of win to <unk> 'twenty 'twenty. Two we will also provide the pro forma information for Apple to Apple comparison purpose in our upcoming quarterly earnings release.

So this concludes our prepared remarks.

Operator, we are now ready to begin the Q&A session. Thank you.

Ladies and gentlemen, we will now begin the question and answer session.

Do you wish to ask the question. Please press star one on your telephone and wait for him to be announced.

Richard the cash I'll request, please press the pound or hash key once again is part of what you asked the question.

Your first question comes from the line of Ronald Keung from Goldman Sachs. Please ask your question.

Thank you. Thank you.

And Caroline for for taking my questions and I guess two questions for this quarter the.

The first question would be about alloy adhere strategy lower tier city strategy, just how have we observed the the performance had been and if we have looked into kind of different.

Business models out there, including I think we've talked about the company repurchase.

Kind of models evolving since the second half of last year.

We see we are serving a very different kind of user demographic in cohort of any anything that we could address or share on how lower tier city performance alongside the 150% GNP that we talked about how do we see debt compared with other the other.

The business models and our strategy is ahead in adding at users and the order intensity.

My second question, but I mean, great question.

Thank you rollout so talk about the lower tiers.

The city the strategy.

So first of all of our as you can see from the result of our growth in the lower tier cities has been very strong.

I think.

One of the key reasons behind the is that we're able to work with the most competitive.

Tailors in each region with the best supply chain capabilities.

Sure.

As you know in China, the supply chain is rather fragmented and in each region there.

The retailer leaders, which has the most competitive supply chain and the we are.

Able to work each one of them at the same time, we never compete with them. So we're able to always is the.

Truthful.

Partner with them I think that's the key.

Key reason and as all of the basket size and the demographics et cetera, we are seeing the comparable basket size and the lower tier cities and the purchase power from the.

The consumers in lower tier cities as strong as what we have observed in first tier cities the thing.

Perhaps one of the reasons is that the living cost is relatively low in lower tier cities, especially the real estate and the rental costs. So they are able to spend more in the willing to spend more.

In terms of the.

Group purchase of dimensions.

As we have observed in the competing with group purchase players for the last few quarters and that we are now even more confident about our strengths.

So in some of the.

The area of SaaS group purchase players on most actors, including like of Hunan of Hubei et cetera, we managed to grow three digits continued to grow through the debt. So.

Our business will not affect us in any way.

And.

At the same time.

We are able to provide at the.

The store level at least 10 times more.

Skews the product assortment to the customers and our basket size is.

Is at least 10 times.

<unk> then the group.

Group purchase players so we're very confident about the future.

Competition as well.

And.

As we continue to grow the user base, we are happy to see that our user base has been growing pretty strong in both tier one and tier two cities.

There are few things in terms of the.

User acquisition or growth I would like to mention.

So first of all it's very unique to tour of speakers.

We're working with.

Almost all of the leading supermarket on grocery chains in China, and the most of the leading brands.

In China. So we're now on daily basis, there are tens of thousands of store associates and offline.

The brand promoters, helping <unk> to promote the GDT. The app at the same time, we also provide digit highest member of share program.

To the retailers and brands. So there also for promoting their membership program to their existing customer base and those members share power based on <unk> App. This is a highly win win.

The collaboration and the <unk>.

<unk> time.

We're also happy to.

Work, even more closely with J D.

Received lots of traffic support from television as well. So we are very confident about our user growth.

Going forward.

Thank you for that that's very useful on my second question is on the hybrid system.

Many many stores that are using it what does it account for let's say out of.

Daily orders from Janney D J.

And how are we penetrating.

EBITDA plus with the market's amongst the top 100.

Any any target stay on potential for monetization or even kind of the thing that overseas by your partner.

Right. So hydro system is very strategic and we consider this as a one of the major way for us to empower our retailer partners for <unk>.

No system that you can consider it as the operating system for any retailer to the army.

The channel business and essentially helps the retailer to debt is highest and manage their inventory there others their procurement their financials et cetera. So.

Extremely important and helpful system.

On the other two half of the retailers to adopt hybrid system first of all for the hydro system itself needs to be very very strong with.

Very high.

Stability and.

The capabilities of the system has to be really really competitive.

Same time. It also requires very deep cost between the two parties the speakers.

The image.

And you are a retailer in the you are now using a.

Such a core system to manage essentially your omni channel business.

The truck needs to be very very deep. So we're very proud that over the last few years, we have demo of civil after a very deep trough and.

And partnerships with the retailers.

In terms of the monetization. So we have just started of some very moderate.

Sedation with the retailers.

At the same time the high bar system I think it will continue in the foreseeable future you will continue to serve as the backbone and the foundation for the retailers to do the business on the <unk>.

On the business and as a strong.

The.

Value offering from us.

Same time, we are.

Also our pioneering some.

SaaS by the system.

And offerings to help the brand owners as well.

So on.

We.

It may give you a more cases more examples in the future, but we are happy to see some of the.

Early.

Early cases as well so.

At the same time, we will empowering both of the brand owners the.

The retailers and brand owners.

So at the same time the hybrid system.

Together with the hypothesis on what we are having our CRM.

<unk> technologies, which has been quickly adopted by our more on the more.

The stores so as of today I think they are over 40000.

The <unk>.

<unk>, which has adopted our <unk>.

CRM programs, which also.

Matter of call. It help the retailers. So we will continue to invest heavily in technology and.

The to empower our retailer and brand partners.

Thank you that's very useful thank you for that.

Sure.

Your next question comes from the line of Eddie Leung. Please ask your question.

Good morning.

Sure.

Wondering if you could share with us your.

And.

For category for the key.

Patients on.

The J D P J E T.

2021 for example are we looking at the more key categories auto Paddy training too.

And the related to that could you.

Could you help us understand the.

Percentage of orders of GMB on what other metrics that you think appropriate.

From a non supermarket.

Fourth quarter. Thank you.

Sure.

So in.

In terms of the category expansion, we are very happy that the year. So ago, we started off with supermarket because it's the most complicated category with the.

The most like the largest number of skus and the.

Of the inventories in all of those things most difficult to deal with so we laid a very solid foundations.

While we are doing the supermarket categories and now we believe that the time for us to expand from credit from supermarkets for other colleagues.

Categories. So we see this.

The strategy for.

From this angle. So basically if you are looking to all of the products available for retail.

We categorize the product into three groups.

So number one is the product.

Typically you can only debt from supermarkets and the second is the products that you typically can only guidance.

The non supermarket outlook.

Examples and the third.

The products that are available in both supermarket and other stores.

So in category and group number one the things you can only get in supermarkets free the ampco like milk.

Of our cooking oil or rice for poly papers or like the shampoos etcetera. So those are the things typically it can only gas in supermarkets.

The thing you can only get from north of of markets, including Leica.

Smartphones laptops of pharmaceutical products.

And the like the home appliance.

The flowers.

And the like.

<unk>.

Okay.

Thanks, a lot of that right. So those are the things that the only gas from announced of the market.

And they are also part of.

You can guess in both of them market and non sort of markets for example, like.

The skincare and cosmetics.

<unk>.

Like the alcohol beverage bakery.

Snacks et cetera.

The currency et cetera, so those are the things.

Those are the NGO.

The into the category expansion.

So we will continue to strengthen our leading position in supermarket categories. No doubt we will continue to.

Strengthening the market share.

And two in a matter of fact, we have now already.

The.

One of the fastest growing for most of the SMC G brands that are.

Available in supermarkets.

We will continue to strengthen our leading position as the <unk>.

Same time, we will expand from supermarket categories too.

To the category of debt.

Our available in both supermarkets and others for example, like.

Bakery or alcohol or like the fresh produce.

The etcetera. So those are the things you can get from.

From the specialty stores and supermarkets will extend to specialty stores.

At the same time.

As we have already successfully.

The leading position in the smartphone on our delivery business, we will continue to strengthen the apps and lack of pharmaceutical delivery et cetera for those other things from the answer for markets. We will continue the strength of that so to summarize the.

The category expansion, we believe is the.

We are we have got very solid foundation from the supermarkets.

From the last few years and.

We will.

The expense.

More of categories in the foreseeable quarters and years. The same time the collaboration with JD I think will also strengthen.

On buyer within terms of our other programs.

It will be also helpful for our category expansion.

And also on the non <unk>.

Non supermarket of categories is counting for the.

The 25% of the Jimmy the mainly coming from our electronics force of fresh market fruits for us.

Pharmacy stores and beauty store etcetera.

So that's the net.

The answer.

Thank you Brett and thank.

Thank you.

Okay.

Your next question comes from the line of Thomas Chong from Jefferies. Please ask your question.

Hi, good morning, the fast management for the.

My questions are also of a question relating to J D D J.

Management comments about the trend in the unit economics of course commissions and advertising.

We go for 2021.

As well as on how we should think about the.

The trend of.

On Soma incentive and how we should expect the timing.

Breakeven.

On top of that on May also ask about.

What's the latest progress that we work with JD on the margin and project. Thank you.

Sure. So let's take the sales of the question first and I'll have.

Section two goes for the.

In the economy.

And some of the financial protections.

So the loading in terms of program.

The has been.

The launch for us.

A couple of quarter of few quarters since early last year and we are.

We're happy to see that in Q4 of <unk> tender.

The the <unk> tender has been growing very strong in for.

Fact is quarter over quarter by a multiple of the highest growth and both JD and ourselves are very.

The key in this program and we are very actively pushing this forward.

You might have observed in Q4 on JD dot com from page and JD supermarket from pace there.

A few more entry points and.

So search on <unk> Dot com on the search result page you will see many significant enter points as well.

So.

Through the saluting tender program, we are now offering.

The JD users with one hour delivery service for our Medicare degrees.

From a gross range now to consumer electronics currency cosmetics, and so on and we envision that we will expand to more of the more categories in the.

Upcoming quarters, as well and at the.

The same time in Q4, we have launched multiple other successful marketing initiatives with JD, So would the intent and some more.

The retailers now participate in those kind of marketing initiatives.

And so both the retailers brands and J D really appreciated this program.

So it's still early.

The rather early stage, but we.

Totally believe that the.

<unk> growth through moving teams that will keep the very strong.

Rental.

And I'll also want to just to give a quick.

The summary of the rationale behind the <unk> tender so.

Might be able to understand the logic will clearly.

So the <unk> 10, there is a highly win win partnership between JD and <unk>.

Jay.

Through a few dimensions. So number one is about the fulfillment.

As you can imagine for JD dot com there are many product categories are.

Actually very difficult for a JV to do the other procurements, including like the heavy products for our key products or the frozen.

<unk> or the fresh produce et cetera, so all of the categories I just mentioned.

Either had very high for fuel cost or has the very highest shrinkage et cetera. So.

Does not make too much economic sense for JD dot com to the.

The other fulfillment on their own at the same time those products and the inventory of already available in the stores near the customers.

Our retail partner stores. So it makes a lot of sense for for Earth for our retailer partners to do the other procurement. So thats number one other procurement of.

Number two is about the inventory.

So in many categories TEG consumer electronics as an example, like Kirk.

Like the Apple or vivo pole. So those are the smartphones are of consumer electronics players each one of the day.

I will.

The highly promoting their own.

When the stores the offline brand stores and allocates more inventory to the offline stores.

At the same time, we also see that the other categories. The.

Power brands.

Allocated more of marketing campaigns.

And but for us to their offline stores as well so by working with <unk>. We are now being able to accessing the offline inventory. So it's again the highly win win for our brands and for <unk> Dot com and for of J D. D. J is the highly <unk>.

Looking for for everyone, we're helping the brand to sell their offline inventory.

On the <unk> is able to access to more valuable inventory and we certainly access.

Sure.

To generate a lot of value out of it.

And the third is about the.

The marketing and promotion.

So J D. Certainly has the very strong like the double 11 or June 18th.

On.

The promotion festivals.

There are very.

So the especially strong with that at the same time.

The offline retailers each one of them I have their own annual promotional events and other promotional events.

Again, it's highly complementary.

Tween, the offline retailers and the JD dot com. So we also serve as a very valuable bridge.

All of the parties.

The quick summary of the Odin tens of the logic of the rationale.

As you can see it's a highly wing wing program and the we are generating a lot of value from it.

And as for the outlook for the outlook for the.

Direct the margin.

In 2021, the first of all for the.

The monetization side of the we expand debt.

Should be of growing by the.

The next 30 bps on the year over year basis, which is generally coming.

From.

The different.

Revenue revenue streams, including commissions.

The online marketing fees and the.

At the other fees.

The in terms for the cost of cost.

The other side that we expect that.

As we are prioritizing the growth of.

J D D J of platform, so the consumer incentives could be growing.

As of year over year basis, while the operating costs, mainly like the REIT of course can be on the.

Well control.

In 2020.

Thank you.

Your next question comes from the lineup of Ash.

As the shoe from Citigroup. Please ask your question.

Okay.

Yes.

Excuse me Sir your line.

<unk> is open you can ask your question.

Hi, Thank you management for taking my question.

My question is more on the <unk> channel, we have been seeing post Gary and putting in line I just wanted to check given the policy in client interest.

The new year, how we have seen the channels on our auto volume as well as Apple and how is that trending post.

The Chinese new year and the patch.

Is there any change in our full year expectation in Jamie Thank.

Thank you.

Thank you yes.

Give us a overview and I think that can give you more colors.

So the the <unk> has been again, a very unique last day and why we.

<unk> for the COVID-19, and the C&I, we went through the so called the stay low core stay home.

The Chinese new year so.

<unk>.

We're happy to see that the purchase power from the customers has been very strong during the C&I periods.

And the.

The basket size of the other volume has been.

Very strong.

The.

The effects mentioned earlier so we.

Even.

Even based on the very high base last year, we anticipate that this Q1, we will continue to grow.

More than like 50% year over year from last Q1.

So we are very confident going forward as well and at the same time as we have worked with the retailers and the brands for the last few years, we have developed a very close partnership.

And more on the more we're now being able to.

We're closely and.

The two really flexible.

In terms of all of the partnerships the deal with those unique.

The situations like we have just seen this year right. So.

Even through a partnership even certainly we are different parties for the jointly we are now being very we're able to being very flexible and adaptive.

We are.

Very confident about the outlook.

Yes, and also just like I said in the prepared comments.

We are looking forward to debt.

Moving to the Q2.

The growth rate of GTT, Jay we are reaccelerate much higher than the 50% to 60%.

In Q2 and for the second half of all for the whole year outlook.

At this time, we should still be.

The conservative cost.

I think maybe go into the mid of the year could be.

The landscape could be more clear more clear for us too.

The forecast.

Yeah.

Okay.

The debt.

On that last question was from MS. Ashish <unk> from credit Suisse.

Your next question comes.

From the line of Alicia Yapp from Citigroup. Please ask your question.

Hi, Good morning management, Thanks for taking my question head on.

Very quick one just a follow up on the overall monetization potential for JBT.

In management's view.

What is the potential in the longer run on too.

The improved commission take rate from the retail partners.

The company is.

Providing more and more value added service to Gan on silicon.

And then how high of the online marketing revenue at the percentage of GNP input you believed you could reasonably reach in the longer term. Thank you.

Alright, so give you an overview on the backs can give you.

More color.

So the monetization of J D D J, mainly come from free.

Yes.

The first is the commission from the retailers and the second is the market marketing promotion dollars from the brands and the third is the delivery cost paid by the consumers.

So in terms of the commission from the retailers.

So as we are expanding to more of the more of categories. We're happy to see that in most of the categories other than supermarkets the.

Gross margin for that categories, the tends to be higher than the supermarket category. So.

Given that we are.

I think as rhythm reasonable to see a.

The room for increasing the commission from.

The retailers going forward from of Iris categories.

And in terms of the brand's marketing dollars.

As we are providing a lot of very unique value to the brands. We are happy to see that in last quarter. The.

The revenue from the brands.

Grew by 300%.

And.

As you can imagine brand.

So for most of the FMC G brands.

Most of the ourselves still comes from offline and they always allocates a very significant portion of their marketing dollars to offline channels.

The.

Traditionally the offline channels.

It's difficult to digitize or to measure of the optimize their hours of spending. The now we are providing them with a very transparent digitized way to spend the marketing dollars and to measure and improve the performance. So that's why if brands are very happy working with <unk> and allocating more of marketing.

Through our channel.

At the same time, we are now.

It's one of the fastest growing channel for the brands as well. So we are very confident to continue to monetize from the brands.

And for the delivery cost I think we are.

We are moderates.

In increasing the depth of delivery costs.

We actually Amar.

The very few platforms.

The charge.

The customers in the last few years, while other people may not.

<unk> charged the customers, although we are seeing today that including like the flow.

Some of our others there now.

Some of them are now charging the customers.

Think we are we will continue to do that but I think we will be moderate.

And also generally right now we haven't seen any cash.

For the growth of the monetization rate so right now for.

I think in the coming two or three years, we just the steel exit of said, we just moderately grow our overall manufacturing right not just the from like when revenue stream across different revenue streams too.

To improve our.

On.

The profit improve of monetization rate.

Okay. Thank you.

Okay.

Your next question comes from the line of definitely Blue from heightened International Please ask your question.

Hi, Good morning management.

I am Jeff on behalf of Natalie.

Thank you for taking my question on.

I actually have two questions. The first one is about our expense.

In lower.

Tier cities.

I, especially want to ask about our strategy in the expansion because as we know a lot of the supermarket retailer in lower tier cities are quite small in size, meaning they don't have that money on.

James Stewart.

What is our strategy ensures the ankle.

Partner with and also because they are not a lot of them are not operating.

In the area while condition so.

They may not free in that many of what Gary.

All lines.

And does that mean on our strategy.

The with them.

Level of our commission take rate.

The first question.

The second question is cash.

We share more color about the tens of program, especially on what are the brand the offline Brian that we are now operating with the desk.

No I think management has mentioned.

From Brian talk of the operating with with the intent to hub.

Elevate their sales in there.

Line inventory thank you.

Sure so the.

The first one regarding the lower tier cities strategy.

So first of all.

We entered each lower tier cities.

Working with our <unk>.

Existing partners of the National players like Walmart volume play of Vanguard, each one of them has hunters.

And for even thousands of.

Offline stores.

The last half of lower tier cities so for.

For every city, we enter is always the hot start its not a cold start that's number one the number two.

There are a lot of.

There is strong local players.

And we.

So we did the analysis that at least there one hundreds of very strong local channel players.

My only operating one cities or in one province of their varied.

The strong and dominant in that particular city or even countries. So at least there of 100 of them.

Yes.

We are very happy to sign.

Sign up with with those the local of winners one by one and the way our confidence to work with.

Almost all of them.

Net debt.

Number two the number of three.

There.

The very competitive 10 stores from other categories as well for example, you can see apple stores or vivo Opel stores almost everywhere.

China's.

Lower tier cities today and like.

Beauty in the beauty of the personal care stores like the Wilsons you can also see lots of lots of them in lower tier cities. So I think today, the lower tier cities.

It's very.

The competitive in terms of the.

Retailer landscape and the players there.

Is very powerful.

And we're happy to.

Our partnership with them.

In terms of the <unk> tender.

No.

We have now I will quickly expand this.

In terms of the partnership with most of our retailer partners at the same time the.

The breadth of the FMC brands that other brands have been.

Being quickly adopting this.

The partnership with us as well so I think going forward, we think there will be a.

Overwhelmingly popular program.

Of our brands and the.

The retailer partners.

Thank you.

Your next question comes from the line of Rob can you. Please ask your question.

Hi, Good morning, Thanks management for taking my question and congratulations on a solid quarter.

I have a follow up question on the user acquisition cost could management comment that if we see potential pressure on the user acquisition cost in 2021 for you guys. We see.

From bigger players are very strong and growing of users in many programs in the community for purchase and even those smaller front end warehouse players active in capital raising activities recently, so it's likely that.

They are going to spend more in 2021, so for J D D J.

Are we going to see more spending more new users are coming from our offline promotion in lower tier cities.

Sure. So ill give you an overview on the <unk> have anything to add.

For user acquisition.

Split into like the.

Two things.

Things to look at the one thing is how you can acquire the new customers and the access to new customers at the same time the second thing is.

The incentives and other to convert and to return the.

Customers for the first thing.

So as I mentioned earlier in the call. So we have a very unique position in the resource.

So we have on daily basis, we have tens of thousands of active offline store associates of the brand promoters how pillar is to promote the agility the app.

At the same time, we are able to get a tremendous traffic support from <unk> Dot com and I think those are the things that are very unique and on the available to other players that gives us a very unique the vantage in terms of.

User acquisition for the new customers.

At the same time as you can see from our financial numbers the.

The incentives as a percentage of our JV given to the customers continue to go down as we are able to offer a brother of product Assortments and the.

A very solid.

User experience and I think eventually customers are coming to buy good products at the reasonable price and.

Expecting a good service.

We will continue to be.

The as competitive as possible in terms of providing all of this the thing the incentive.

We will continue to go down and despite the as you managed mentioned there are other players.

Aggressively competing for customers.

That's all we have okay.

I would now like to take on price back to Ms. Caroline Dong for closing remarks. Please continue.

Thank you operator, thank you for joining us today is comparable to the call.

Okay, ladies and gentlemen.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may all disconnect.