Q1 2021 Dada Nexus Ltd Earnings Call
[music].
Good morning, ladies and gentlemen, and thank you for standing by for daughters first quarter 'twenty 'twenty, 1 earnings conference call.
At this time, all participants 7 of this and only mode.
After the managements prepared remarks, there will be a question and answer session.
As a reminder, today's conference call is being recorded.
I'd now like to turn the call over to the host for today's call Ms. Caroline Dong head of Investor Relations Cicada. Please proceed Carolyn.
Thank you operator, Hello, everyone and thank you for joining us today, Oh of course, the quarter from Pizza and who want earnings release was distributed all of today and is available all of the IR website at IR of dog I'm that out of out of saying as well as on global Newswire services.
On the call today from that out we have missed the first why chairman and the Chief Executive Officer make the backend Chief Financial Officer Animus that we on the cofounder and the Chief Technology Officer.
Mr Flywheel talk about out of operations in the company highlights followed by Mr. Chen who will discuss the financials on guidance. They will all be available to answer your questions. During the Q&A session that follows.
Before the game I'd like to remind you that this conference call contents for looking statements at the defining the section 21 E of the debt Securities Change Act of 94, and the the U S. Private Securities Litigation Reform Act of 1995.
These forward looking statements are based on the current management's current expectations and the current market on the operating conditions of late.
The events that involve known or unknown risks uncertainties and all of the other factors all of which are difficult to predict antimatter of voyage of beyond the companies on shelf.
These risks may cause the company's actual results or coker of minutes did before materially.
Well the information regarding these and other risks uncertainties or factors as the.
Included in the in the Companys filings with the U S. The SEC. The company does not undertake any obligation to update any forward looking statements out of the readout of the information future against the loss of what exactly as required under applicable law.
Finally, please note that unless otherwise stated all figures mentioned during this conference call are in RMB. It is now my pleasure to introduce our chairman and chief of exactly our officers meeting first.
So it's quite.
So let's please go ahead.
Thank you Caroline and thank you all very much for joining US today, we're pleased to deliver a strong quarter as the kickoff plenty plenty of 1 or the total net revenue for the first quarter of rich the $1.7 billion, which is C. On the high end of our guidance.
Hi.
The year over year growth rate of 50.
The 2% despite the high base from Q1 of the 20.
The 2 year compound average growth rate, whereas some of the 80% where in particular those from Q1 of 2019.
Revenue generated from the D J reached so.
$778 million with the 2 year CAGR of 97%.
I'm going to talk you through our deep on the strategy.
Cooperation with JD group, some highlights of the April 15th anniversary of promotions and such.
The risks on the progress of our 2 platforms.
Ill hand, the call over to Pat to talk about our financial results.
On March 20 seconds.
Now the <unk>.
<unk> Dot com will increase the stake diggers.
71%.
Vesting of a total of 800 million U S. Dollar the newly issued ordinary shares the increase investments Mark the deepened cooperation between city of Dot Com and other under the omni channel strategy.
Leveraging the Jv's devoted the strategy supports other few of demand for local on demand of the retail and the delivery on steady covering various scenarios and categories and expand our omni channel cooperation with JD.
Together with J D will continue to provide consumers with superior shopping service empower retailers and brand partners and the true when we incorporation for all.
So it's a lot of interest in statistics go we have started to seamlessly collaborate with JD retail to explore more synergy opportunities.
We are working together to meet the consumer's needs of on.
On demand service on SEDAR com across all categories.
For the supermarkets consumer electronics due to the health apparel etcetera.
So that's it really we're optimizing access points and the exposures of fine tuning product offerings and the innovative marketing activities to improve the consumer experience and operational efficiencies of the on demand service on David.
So over the past 6 years, our J D. D. J platform has obviously grown very fast and our anniversary promotion has become 1 of the most important of the promotional events across categories in the on demand of the retail industry.
Of this year sales on our platform during the events were 1.7 times greater than last year and total sales generated by brands that we partnered with growth by 2 times year over year.
So during the promotional event in lower tier cities. So we have entered for over a year.
Or is it more of the 100% the year over year of growth rate.
The significant growth momentum demonstrates our potential existing lower tier cities and the competitive advantages in the effectively meeting consumers' needs.
Now I'll provide some of the updates on our 2 platforms starting with steady Vijay.
The first we have been constantly expanding our geographic coverage, especially in lower tier cities on the.
Further diversifies the category of coverage provides our consumers with more product offerings in more of categories on demand.
At the end of first quarter or JV. The J platform has covered over the 300 to the southern countries.
Which has more than doubled compared to the associated the last year.
1 of our flagship of supermarket category remains on the SaaS growth.
The path, we have made significant progress across many other categories.
So on consumer electronics do we have now.
Nearly 9000 stores, let's say the on our platform during the first quarter, we successfully facilitate the itself from the smartphone brands such as Romania, the wound plus.
During the anniversary promotion sales of.
The mobile phones from brands, such as Apple vivo Xiaomi of local all increased by more of the 7 times year over year.
We also deepens.
The collaboration with Lenovo.
Local brands to bring all of the <unk>, 1 thousands of offline stores.
Line to provide consumers with access to Lenovo on PC and other.
The products on demand.
For the cosmetics.
We continue to improve our product line.
To enrich for the offerings and improved consumer experience for example, we have the newly.
Partnered with leading cosmetics.
The <unk> such as Sephora are low color and the colourist.
And we're also progressing really pruning the offline stores onto our platform.
For apparel.
We attracted a number of new brands and the distributors to the platform such as the Skechers product and the few leading Chinese force growth.
We will continuously focus on expanding brand partnerships, especially in the men's clothing in the sportswear settlements to strengthen our presence in the growth category.
For the mom and baby.
We deepened our cooperation with <unk>, the leading player in the category and have crossed almost of 400 of their stores across the country onto our platform.
For home appliance, where now cooperating with 5 star of clients.
Current deal to provide the 1 hour delivery for consumers, who buy of smaller home appliance on our platform.
Instead of <unk>.
We are continuously strengthening our relationships and depending our cooperation with our virus.
Retailer and the brand partners.
We newly established partnership with about 30, leading supermarket on our platform as of today, we have partnered with 75 of the top of 100 of supermarket chains in China.
On the fresh product category, we collaborated with Mis fresh to officially launch their front end of the warehouses on both JD Vijay on the JD Com. This partnership allows us to offer more consumers on the.
Demand delivery of fresh products and further demonstrate our advantage.
And the open platform.
Our cross ores and the digitized picking service for retailers.
The second also saw increased adoption.
So that is taking its a great solution for retailers, who will struggle to meet the fluctuated demands and the bring down on labor cost the <unk>.
Picking all the volume in Q1 increased by 200 service assets from the <unk>.
Fourth quarter of last year.
And the time it took the.
The.
The riders.
The.
The 2 such goods declined by 10, 3%.
Now in the process of expanding to the packaging and the replenishing service to provide a comprehensive set of solutions for improving retailers operational efficiencies.
So moving on line.
To talk about the online marketing service for our brand partners the <unk>.
During the first quarter online marketing revenue from brand partners remained strong increasing by over 100% year over year, we continue to deepen our strategic partnerships with a great number of international brands, especially for omni channel.
Targeted marketing service that helps them effectively engage with consumers.
Simple, we jointly launch of new promotional campaign on cost Omni channel Super brand day, with JD Com and the dairy brands was China.
So the event effectively integrates online also online DTC and offline marketing to allow brands to precisely target consumers and digitize the entire marketing process.
So on May 20 is towards China's sales on <unk> platform increased by $3.7 times year over year and TDD J became the biggest auto channel Force China.
And third I would like to talk about our innovative technology to empower our retailer in the brand partners.
All of our high both system the omni channel online retail operating system continues to be a welcomed and popular amount retailers because the.
It's an open neutral a flexible system.
All of the end of April the system has been adopted a more than.
$300.303000, the 300 retailer channel.
The stores the significant increase from the 200.
So 2200 stores as of the end of February.
So in addition to current market shares.
With minimal additional development, we successfully expand the hydro systems the.
Deployment scenarios to convenience stores and the consumer electronics categories.
So this demonstrated the feasibility of implementing the system as a standardized solution across multiple verticals.
The great thing about the whole system is debt is evolving with our merchants demands the help merchants to enhance our personnel and the cost efficiencies by constantly.
Iterating and upgrading the system to address the pinpoints across their omni channel <unk> operations, which also leads to a higher consumer so to the satisfaction.
For example, during the first quarter, we added a new automatic replacements.
Feature which digitize the.
The replacement process and <unk>.
The U is although stock. The this feature alone has helped.
On the average cost spend our managing products shortage by 80%.
We also upgraded the dashboards of the system. So that the stores can breakdown the online subsidies delivery fees and commissions into each of SKU. So this enable merchants to have other insights on the SKU profitability operational performance across channel.
And identify issues in a timely fashion.
I would like to provide a specific case study of the deployments of our <unk> system at a leading supermarket chain in Shanxi province, which has been acknowledged by.
The <unk> the wishes of China Channel store and the franchise Association for the impressive digital transformation.
So this merchant has helped to boost sales through also channel, but we're struggling with losses caused by a lack of detailed operational data.
Subsidy the efficiencies.
By adopting of hydro system, the we're able to automate financial risks.
Consultation process for omni channel business and the high growth visualized dashboards enable them to annualize.
Operational data across dimensions, including sales channel, our stores' product categories and Skus.
So after adopting the hypothesis from the merchants, obviously on the OXXO sales increased by over 50% from previously in addition, the profit margin of the also of business improved by 3.5 times.
Moving forward, we will promote the value added service to more of our existing retail partners.
The moving on to that are now in the first quarter, our interest to the delivery service to Tim merchants continue to grow significantly with revenue increasing by more than 130% year over year.
As the more 10 merchants choose our service in the store penetration reported each merchants continues to rise we expect the business to maintain its fast growth in Q2.
Revenue from catering channel increased by over 400% year over year, as we keep expanding our customer base and the increasing store penetration in existing partners were pleased to see that our high quality of delivery services are increasingly recognized by our restaurants.
In the pharmaceutical category, we were able to increase the revenue from the pharmaceutical chair merchants by more than 600% year over year as we continue to enhance our service offerings.
From a musical chairs.
Secondly, we upgraded our personal fourth.
To provide better support for long distance late night others.
In the supermarket category based on our strategic partnership with <unk>, we have already fully integrated our dedicated.
Delivery service to the omni channel others of.
Around 1000 of 300, <unk> our stores starting from April.
In addition to chair merchant business, our delivery service providers of small and medium sized merchants also experienced very fast growth in Q1, the number of small and medium sized merchant the complete the others on that on our platform more than doubled year over year.
I would like to talk about the last mile delivery.
As of the end of Q1, we provide the support to logistic companies in over 2700 cities in the countries. We continue to deepen our cooperation with JD logistics. During April we successfully changed to a more asset light model S. We told.
In the last earning call.
So with that I will now pass the call to action to rollover of our financials for the quarter. Thank you.
Thanks for the before we go over the numbers just a few housekeeping items in the bands we believe the year over year comparisons are the most useful ways to judge our performance all percentage changes I'm going to get will be on a year over year basis, and all figures are in renminbi and net.
Otherwise noted.
The total net revenues increased by 52% to $1.7 billion net revenues from debt and now increased by 51% to 894 million, mainly driven by the increasing order volumes for our services 2 largest companies and the interest it delivery of services to chain mentioned.
The total net revenue from <unk> increased by 50.
The 53% to 778 million, mainly due to increasing <unk> from the same quarter last year, which was driven by the increase in average order value and that the number of active consumers the year.
Year over year increase in online marketing services revenue was over 130%.
Moving over to the expenses side of <unk> and the support expenses increased the tier 1.4 billion, mainly due to an increasing rate of costs as the result of increasing orders of the volume of our services to logistic companies and the interest at the delivery services.
The <unk> chain merchants on the platform and the retailers on the JD <unk> platform.
Selling and the marketing expenses rose to 719.1 million, mainly due to the growing incentives to JD DJ consumers and increase at an increasing into the pricing and marketing expenses, which was primarily attributable to the increase in retro fees paid to the staff at retail stores in the sort of the packet promotion of service.
The providers for the assets to attract new consumers to the J D D J platform.
G&A expenses increased slightly to 103 million, mainly due to increases in professional service fees that the company incurred as the Lithia company.
R&D expenses rose to 194 million, mainly because of the increasing research and development personnel cost debt. The company continues to strengthen its technology capabilities.
The increase of share based compensation expenses also contributed to the increase in personnel costs.
In Q1 of our non-GAAP net loss attributable to ordinary shareholders was $6.18 million versus 4 and $10 million in Q1 last year, and then GAAP diluted net loss per share was <unk> <unk>.
75.
Paired with $1.11 in the first quarter of 2020.
As of March 31st on <unk>, when we had $5.5 billion in cash and the cash equivalents risks distributed cash in the short term investments.
Our board of directors has authorized a share repurchase program for debt to repurchase 8 assets.
With an aggregate value of up to $115.150 million. During the next 12 months founded on by our existing cash balance.
The share buyback reflects our confidence in the potential and the growth momentum of our businesses.
Before providing the outlook I would like to recap the upgrade of our last mile delivery businesses to improve our working capital efficiencies, adding in April the cost of riders for our last mile delivery and it is has been directly paid through through the party companies instead of through us and now.
We only charge JD logistics of platform services fee, which we recognized net revenue the change in greater cost of the settlement as well as the revenue and the cost of the recognition we've ever had.
No impact on the services and support that we provide the new approach will significantly improve our working capital efficiencies and the revenue quality.
And to help our investors either in the spend our revenue growth in the next 4 quarters from <unk> <unk> to <unk> 'twenty 'twenty..2 we will also provide the pro forma information that in line at on our last mile delivery revenue to net basis for Apple to Apple comparison purposes in our upcoming quarterly.
Earnings release.
So for the second quarter of 2020 on when we expect total net revenue to be between $1.4 billion and the 1 point of 45 billion, representing a pro forma growth rate of 72% to 78% adjusting Q2, and the Q2.2000, when the R&R less amounts of revenue to net basis.
In addition, we are excited with J D. Djs our strong growth momentum. So some of that the year over year of growth rate of the <unk> revenue will be over 80% in Q2, and we are further accelerating in the second half of this year.
As Q2 might still be a very early stage of our deepened the collaboration with JD, we expect on much more incremental impact of where progressive kick in starting from Q3.
And both JD and of that are highly confident that we will provide <unk> 500 million annual active customers with superior has some of the services and enrich the coverage in online.
On demand and reach our delivery and the penetration of on demand services. Among <unk> users will provide substantial progress of potential potential for growth.
We'll work together to enable our partners and accelerate the digital transformation of our real economy enterprises.
So this concludes our prepared remarks.
And operator, we are now ready to begin the Q&A session. Thank you.
Thank you we will now begin the question and answer session. If you wish to ask a question. Please press star 1 on your telephone and wait for your name to be announced if you Nathan.
Your question. Please press the pound key.
Our first question comes from Ronald Keung from Goldman Sachs. Please go ahead.
Thank you thanks, a lot of back CNN Caroline.
2 questions for this for this results out of first just wanted to ask about LGD DJ growth in the second quarter and you talked about the acceleration that we expect in the second half. So can you just give us maybe the drivers of that from say pick of ties, which we call <unk>.
And user and user of purchase frequency.
Particularly as we lapped that high <unk> last year during COVID-19, but we're still delivering accelerating growth just want to know what are we seeing order growth acceleration on the drivers behind.
And then my second question is we did see some impact of commodity group purchase on our business, but on most of the all our merchants which of the <unk>.
Offline supermarket sales.
To sum from public news that the sales have been seeing some impact in the March just wanted to see how do we see.
Ill merchants, which are the offline supermarkets is ultra OFC of becoming an even larger pie of supermarket sales judging from our very healthy growth of GDP, Jay So how much how much of the OTA wholesale portion reach and how do we how should we interpret the evolving shopping patterns of plenty of consumers between the different channels.
Yes.
Thank you Ron on so let me address the first question on our past the second constitute flip to answer so in terms of the growth drivers of J D. D. J in Q2 and also the second half of this year, we expect on a year over year basis the <unk>.
The.
We are slightly still will slightly increase in Q1 actually the <unk>, reaching 170 on the.
<unk>.
But I would like to just the attributes of this factor to the Chinese.
Chinese new year of factor, so even like the supermarket of categories sales, reaching historical high at <unk>.
As of today.
Compared to Q1, we think Q2 and the also the second half of this year were not that much high and it will be by steel on a year over year basis.
Of our increased and figure on this of course, the growth of the number of consumers and the.
Right now actually.
For example.
The 500 million active consumers of J D.
And there, it's very very small and advantage of.
That's on pace is.
<unk> was experiencing.
Also on demand.
Retails.
And we have.
Target and also on not so much target not to grow this percentage too.
Much much larger than before so we believe for the second half of this year the growth of the number of <unk>.
Active consumers on J D D. J we are.
The a major contributor to the to.
The growth of the EDA platform.
Okay I'll address the second 1 regarding the community grew buying impacts and the.
So first of all of ore.
We believe the market potential is huge and as you can see in Q1, we continue to grow fast and in some of the province.
The Hunan of Hubei balance sheet challenges of those are the province.
The within the group buying has been most absolutely.
Doing business, so our JV in those provinces.
The continued to see a year over year doubling growth so we grow more than 100% in those balance so.
I think the market potential is huge and we are in.
Doing well despite all of the community group buy and those.
I am sure you have also.
Notice that the regulation in this sector has been more and more tight.
We believe this will be beneficial for everyone.
In the markets for the long term healthy growth.
Sustainable healthy growth.
So and as you mentioned some of the supermarket certainly has the.
The factors.
The.
Our community grew by and as a result, so almost all of the supermarkets are even more willing to do.
Deepened partnership with us.
That's why we are now seeing more and more supermarkets are adopting high water some or.
We are seeing more of the more supermarkets are starting their partnership with us. So I think of this is the.
Also helping us to deepen the partnership.
At the same time many of the supermarkets have tried.
Community grew by on their own.
But then they realize that for supermarkets the best weighted.
To improve their sales force performance and the compete with community group buy is not to do community group buy on their own instead, they should be focusing on the store based on demand retail. So that's another reason why.
Almost all of the supermarkets are now strengthening their partnership with us. So I think overall we are.
How much confidence for our growth and also we are confident.
To help our partners too.
Grow their business and to compete with.
The community group buy and certainly the percentage.
As the on demand retail.
The contribution to the supermarket is certainly growing.
And the.
I think of the number we will just keep growing for the.
The foreseeable future.
At the same time, we are helping our supermarkets to improve their like.
The profitability et cetera of by providing.
Advanced technologies and operations support.
The good round silicon back Thats very useful.
Sure. Thank you.
Our next question comes from Eddie Leung from Bank of America. Please go ahead.
Hi, good morning, guys.
As you guys mentioned it a part of your.
Cooperation with JD.
The I have 2 follow up questions. The first.
1 is a power of the car and.
Use.
On the current status of your user acquisition channels roughly speaking how important the argues that.
The JD channel for you guys.
Since you're on.
And the other channels like mini program.
And then secondly of the size.
The natural selection, which is more of faulty GAAP consumers on.
So hurt from JD in there.
Core debt.
Could be thinking more of our logistics and <unk>.
And the cooperation with the FERC the lease including you guys.
The.
The user acquisition channel.
On the potential cooperation on the.
Fulfillment and logistics side. Thank you.
Sure So think of Eddie.
Sure.
Provide some perspective.
If that will have anything debt so first of all.
Staying about the user acquisition and the penetration so as.
As of today the <unk>.
User penetration.
In J D dot com for the for the on demand the retail is very low very low.
Like the.
Low single digits or even lower so.
At the same time, both JD on Earth.
Fully aligned and we have the same go to increase to grow this penetration.
And the.
We plan to grow this penetration of all the way to like the 50% or even more.
So that's the strategically we are fully aligned and historically JD, where it's not a like a very significant.
<unk> duvernay dominant user of.
Tradition channel 4 of J D D J.
Since.
This year, we believe that the J D will become a more on the more important.
User acquisition channel for HDD, Jay and I think that this will absolutely be mutual beneficial because we're providing JD with the.
The lots and lots of quality offline stores and the inventory, so which will.
Help the help JD to growth the user of frequencies and to grow the user base at the same time.
So we will increase the penetration in <unk> user base, and JD will leverage our capabilities to grow the frequencies and to continue to expand the user base. The things, we will definitely be a mutual beneficial.
And beyond the user of partnership we believe that more on the more strategic partner share will definitely be seen in the.
Like the next few quarters or the in the foreseeable future. The some of the sales I'll just give you some examples.
No.
The logistics as you mentioned.
So for some of the.
RP or have the products as J D dot com the.
The other fulfillment cost is very high at the you can imagine deliver all the way from warehouse the warehouse to deepwater on to customers and those heavy and bulky.
Our products require a cold chain are already located in the stores near the customers in the.
Like the.
3.3 miles or even 1 of it is so leveraging our on demand.
Delivery capabilities and the inventory already located in off line stores, certainly the logistic cost and the entire efficiencies will be.
Like are greatly improved.
I think this again will be mutual beneficial for JD for Earth for retailers and for our brand as well. Another example of that as we mentioned in the remarks.
In may of <unk>, we have already had a very successful.
3 way partnership.
With both with JD and.
Unilever China.
<unk> brands car of the World.
Hello share so.
So was there a screening of our sodas.
<unk> dot com as well as <unk>.
On PDD Jay So the 3 of 3 offers partnered together to launch a joint.
Marketing program. So this again health too.
Improve the sales performance as well as to improve the efficiencies.
Things like that so we are very much confidence on that.
The a lot of.
Strategic.
Our synergies.
Can be seen from the JD a partnership and we are very much looking forward to that.
Yes.
The more points from my side is.
Yes, we just touch on about like the marketing innovative marketing activities. So traditionally.
We are just license separately true teams and J D is operating with some online team of of the brand side in the DJ is cooperating with the offline our auto team of the brand side and there is some inefficiency of beating us so in the future of we are actually collaborate.
Together into 2 halves.
<unk> marketing campaign to work with the brands and we believe as debt.
The potential for the.
The marketing revenues for both sides.
The is huge and also.
We mentioned the in the prepared remarks that we are optimizing.
Access points and exposures and the.
On tuning the product offerings cost previously we are little like loosen in the relationship with the right now with the tightening of the partnership of both sides.
There is some like huge huge opportunities ahead of us.
So you got maybe you will see assume yes. So this is my position.
Great. Thank.
Thank you.
Our next question comes from Thomas Chong of Jefferies.
Go ahead.
Hi, good morning.
Menthol, taking my questions and congratulation on a strong Q2 guidance.
Given our cooperation.
J D. All of EMEA couple of how we should think about.
The net economics.
All of J D D J.
The monetization potential of ATB J of course, the viewpoint line like commission marketing the differently and how we should.
Think about the.
The timing of J P D J.
Into profitability into the future and my last question is about the housekeeping questions.
So.
A couple of the contribution from the loans supermarket in terms of the oldest in the Tms during the quarter. Thank you.
Okay. So thank you for the cash income so the non supermarket actually the non.
Simple market categories.
Contributing on a kind of 5% of the total of Jeremy.
<unk> in Q1, so some marketing accounting for lack of 17, 5% and.
<unk> for the economics, so basically for the money.
Monetary side and there is no.
The big difference between the businesses.
And the <unk> App on the day generally is very similar of everything.
The.
Actually right now we are also in.
<unk> and <unk>.
Launching some products and offerings to optimize.
Subsidy level.
Of our merchants and also of the platform.
Ourselves together, so we expect to see the effect coming out in the second half.
And in terms of the total active strategy.
Like the on the calibration of JD right now we prioritize the growth.
Cost of the growth momentum and the potential is huge for testing <unk> 500 million active users on J D.
So when the growth.
Yes.
Big enough and we are further.
Optimize like the.
Subsea level too.
The health and it has to achieve.
Breakeven or profitable.
On.
As soon as possible. So generally we think the growth potential is.
The bigger than our <unk>.
Our.
Previous expectation and with this.
The <unk>, we have more opportunities to.
Optimize our.
Unit.
Our third the margin level.
On.
And even earlier than prior expectation.
Thank you.
Our next question comes from Ashley Xu.
Please please go ahead.
Okay.
Thank you Philip and thank for taking my questions.
Just a quick follow up on.
Of our second quarter guidance.
Just wanted to tag on what.
What does the guidance reflect in terms of both geographic and category expansion of for the quarter and also in terms of our cooperation with JD. Currently are there any more concrete plans.
For for all of our cooperation starting second quarter.
Lastly in terms of.
Use of Capex.
Thank you.
Okay. So.
For the first question, yes. So.
We are.
We are penetrating into the.
The lower tier cities and also on like the suburban areas of growth.
Big cities, all the direct top director of operating cities. So this is all accounted in the.
In the into the guidance.
Giving out and the in terms of the detailed cash.
The operating plan actually.
Starting from.
April and May most.
Most of the parties on a including J D. In the DJ are sitting together and we already have.
Walk team to 2 panel with charter and.
And there are some very concrete plan the.
Including the Covid.
On some.
The trends are.
The traffic or access points.
And the week.
Actually I think.
No you are expecting to see is very slow in Q3 and the.
Even like the previous plan increasingly call. The like we can kind of plan, maybe we are half of brand new name and upgraded on as.
Well so.
Right now it's still under the the last.
Units like the.
The development so.
So assets coming out.
And we think we will have your guidance note issuance of hospital.
Yeah, and just to add a little bit so.
Sure.
So 4 or so.
As you mentioned the geographic in the category, we will certainly continue to expand our geographic coverage to more cities.
Also to expand to more categories and we're happy to see that we have got some early wins from the consumer electronics and now as we are expanding.
You see in the press.
Some of those here.
The other categories, we are seeing a very good momentum as well.
Able to sign up the.
Yes.
Offline retailers on board and.
We are confident to see more.
Growth from lack of.
The more categories.
In terms of on the punishment with JD.
The first of or our happy to see that at the very top level, we're able to arrive at a very concrete.
Agreements with the top leadership at J D.
So omni channel strategy is absolutely consider at a very top priority for JD top leadership and this is.
Like are fully aligned with all of the.
JD executives and the.
The all the general managers across JV business units. So I think this is very important and the as a result, so JD app is now being optimized.
To be more location base to be able to support the.
The on demand the retail business and also.
As you may see in the.
Near future and in the foreseeable future, we will be able to get more access points from JD as well. So users we will have more chances to experience.
The on demand the retail so some of that agreement is.
We have already arrived at debt agreement with the JD leadership, So I think the.
We are very much confident about the outlook.
Yes.
Okay.
Very helpful. Thank you.
Our next question comes from Wei Zhang from Morgan Stanley. Please go ahead.
Thank you very much for taking my question I have 2 questions. The first is.
We sit on the guidance for second quarter, the JCB trade route.
It's quite strong so the GMB growth will also be very strong so within that growth on do we have line any color on how much of the gms growth will come from the merchants that we developed onto our J the DJ possible of empower ourselves.
What is the contribution from the woods from tens of platform.
Yeah.
And my second question the top.
For those others from the woods in terms of system can we assume that these orders are positive in the rock margins. So basically we charged on commissions from the merchant.
The probably repay some debt.
Crockett County of clinical J D. I'll comment then.
Just the positive director of Martin do we need to pay and the like subsidy for those order from <unk> in terms of the system.
This is on my questions. Thank you.
Okay.
Can you kind of patchy peso.
So first of all of it.
For all of the merging.
Right now actually.
The operating guidance of our sales guidance of <unk>, developing those new emerging and invest them onto the platform and on to <unk> dot com through the natural fracturing systems simultaneously.
So <unk> guidance the like the that the guys to operate.
To invest the dose.
So on machines.
And also in terms of the contribution of the the.
The JV switching channel right now in Q1 or in Q2 of that <unk> is still contributing.
On a lower percentage of our entities, but we expect that.
In the following quarters, the contribution of <unk> will be slightly bigger than the bigger.
In the <unk>.
Future and at this moment.
For example on AG for the supermarket of categories and products invested on dot com through with the intent.
We still will get the make the customer subsidies to.
In 2.
To attract or retain the consumers.
But just as I said.
In the previous catching so.
As long as we have got some.
More access points and the benefits of the <unk>.
And within Tinder is growing significantly.
For example in the second half of this year, we already have a plan to.
The cut down the subsidies.
The 2.
Given to the consumers to make it like to improve actually the unique.
The economic on the direct margin on <unk>.
<unk> dot com so.
This is all in our.
Planning.
That's correct. Thank you very much.
Our next question comes from Alicia.
Great.
Please go ahead.
Hi, good morning on management, Thanks for taking my questions.
I'll have a couple of questions number 1.
Later to the second quarter guidance, if we take out the.
GDP growth.
<unk> expectation it seems like.
The growth rate for that I know, the actually imply a pretty decent growth.
Maybe roughly over 60% to 70%. So maybe can you elaborate on later on the order demand outlook for the from chain much of my sister.
For the coming from SME and also overall competitive landscape.
For the on demand delivery and then second if you can also elaborate in the debate.
On the differentiation or competitive advantage.
Of the high power system back make it.
Very differentiated and also attracted to the east.
Retailers debt shopping thank you.
Okay.
At the historic Jeremy. Thank you for the question I'll address the first question, Okay. So and in terms of the Q2 guidance for the data on our side.
On costs.
Actually starting from Q2.
The only the chamber of change and it is the.
The accounting wise the only the channel merchant initiatives, we argued I can recognize that on.
Gross basis the last mile.
The net sales and also on like the more in the medium sized our individual centers and it is we won't be reconnected revenues will be recognized on net basis, so which means actually.
The churn merchant's business is growing very fast so in the first quarter the Chimera <unk>.
Sales is growing by over a 130% and we still.
<unk> debt.
The Q2.
We have maintained triple digit growth rates and we are even more confidence that even in the second half of this year.
The business is still very strong and we believe that maybe in the second half of this year, we for the trade matching the news is actually with the from the Q2.
Turnkey.
19, and after 2 or more than 2 years, we expect the discipline assets will grow to beat the <unk>.
Largest platform in China to provide.
2 of those.
Our chain merchant businesses, just in the second half of the.
Supporting every kind of interest.
Interest.
Delivery of platforms in China.
And the regarding the high both system so.
The first of all of that.
We have the best technology and the functionality.
With the system the first.
Since 2015.
The very first platform to work with the retailers essentially supermarket.
To do there on demand and retail business and the since then we have been providing lots of anything from the fulfillment.
Operation of Puna.
Growth to.
To help our retailers. So that's why the hydro system are able to grow together with J D D J and the retailers the practice so thats why has growth.
It has been having more and more advanced in the sophisticated and because of the we are able to work with almost all of the leading players in the market. That's why we are able to.
See like all of the use cases and able to improve the systems. I think this is a very solid and the unique foundation that makes high book.
First.
Solution in the market as you can see like.
Our adoption is overwhelmingly Tommy.
Dominance so that's why.
So I think that's so wisely.
Like the wisely.
Appreciated by our customers. That's the number 1 on the technology and functionality is foundation and second because TBD Jay we are a pure neutral platform and we never compete with our retailers in over a year, we have been establishing very solid tough.
The retailers that's why the.
That's why the hydro system.
Because the habits of the leads to excess of lot of sensitivity sensitive information.
And for some of the partners.
We are.
Given their like the margin information or like the very sensitive information and.
The retailers charter the place.
With those information and we were able to.
The work with the retailers to improve their efficiencies and improve their profitability leveraging those information.
So I think those kind of trust is also very much unique and we believe that this also how close to <unk>.
Positioned <unk> as the.
The most competitive.
The system in the market.
Thank you.
Okay.
Our next question comes from Robin Leung.
Please go ahead.
Hi, Thanks management for taking my questions at the phone.
All of questions on the.
User acquisition in J D. So besides <unk>, we noticed that there is also a user traffic acquisition channel tranche on coal so can management share of the differences in the use cases of these channels and the channel fees debt J D D J.
Is paying to JD and for the synergies in the second half.
More traffic from JD should we expect the.
On the traffic is coming from the existing channel looks like the JD supermarket.
Or is it from the new channels in this and also my second question is on the high bar system any monetization plan and debt.
And as we are now starting to do more on the convenience stores. How is the difference in the unit economics comforting to our supermarket and if we can know the percentage of supermarket that is already using our hyper system.
The figure that would be great too.
Okay.
Second of all by now give you a brief.
The answer on the <unk> have anything to add the first of all of our we're getting barrels.
The other many kinds of access points that we can get from Disney Dot com.
And thanks for noticing the change Angola, and us and we have assets like that and we are now.
Right.
Going through a.
Like a comprehensive.
R&D, the research and development process with J D.
Polish team we are current.
2 reviewing the performance of all of the access point and the designing the.
On the.
On the the way that.
The customer can experience on demand in retail most effectively in the with the best customer experience on digital com. So all of the things you have seen now like the change on the or the <unk> tender from the search result page. So those are.
Or the.
Trial cases before the partnership and.
And we believe that.
In the foreseeable future, we will be seeing a more of the best.
The.
The more advanced practice with better.
Performance in the.
A lot of conversions and the.
Etc. So based on our previous data points already collected from the previous chart cases.
So I think.
The getting more access points as well as better performing.
The process.
And in terms of the.
Of the.
The type of monetization. So first of all we continue our monetization.
For the hypothesis with with.
All kinds of retailers across the board, we continue to collect the.
The commission fee from the GMB are handled by of Hydro system. So I think thats something we have already been doing and going forward as we are providing more.
The added service to retailers and to the brand.
I would imagine the vision that in the future we will be able to.
Have more monetization opportunities around headwaters non necessarily from like the licensing model while the.
As we are providing more value I think more like.
The value added services can bring in additional revenue as well.
Great. Thank you.
Okay.
Our final question comes from Hans Chung at Keybanc Capital markets. Please go ahead.
Hi, Good morning management team. Thank you for taking my question. So.
Couple of questions from me first.
Can you.
By the caller about.
The south of the label on it.
That's the right margin for TV sales in Q1.
And then how well.
Involved in same quarter in the second half.
And then second question is about.
The cash net behavior.
Just like on.
Whats your base.
Beijing on the consumer behavior.
<unk>.
The pandemic and then.
And then as we started to.
The.
On the cover too.
Pandemic.
The debt scenario and then.
How how the kind of consumer behavior evolve.
On maintenance and then.
If possible can you give.
Caller on the.
The customer line.
Over the past the year.
The PRASM or acquired in 2020.
How about the retention in the cohort on in terms of shopping frequency and so on.
So that would be helpful. Thank you.
So for the.
The first question so.
The gross margin of.
The DJ and exiting Q1 at minus.
Minus 2.8%.
And we would leave that for the next 3 quarters.
During the year.
2 of the declining so the Q1 is the.
In terms of net interest margin out of Q1 of the worst.
And the subsidy level and is also the highest in Q1.
6.2% for the consumer incentives and also in the following the <unk> III callers we exactly.
The level will go down.
Yes, and in terms of the customers' behavior.
So we are seeing that customers are.
Even in mainland China like the.
What we call the post pandemic.
We're seeing customers.
Are more used to say.
Sales online.
And especially for on demand.
I think we are.
We're actually seeing the.
Behavior shifts.
Probably like permanent permanent slate and the.
So.
I think our business will.
Absolutely benefit from this trend.
And at the same time, we are seeing a trend that the customer has been educated.
From like the rest of restaurant food delivery and then the grocery delivery and now 2 more of the more of categories. So customers are now.
Used to like buy everything on demand.
This is fully aligned with our mission that everything will become available.
In 1 hour or so.
We are happy to see the trends.
Yeah, and actually in China, the pandemic is already settling down 1 year ago.
Compare that to the 50% growth rate in Q1.
For the U T. J, we are expecting more than 80% in Q2 and also even faster much faster in the second half so.
Which also on demonstration.
Our.
The platforms popularity among consumers.
Yes.
Thank you. Thank you.
Yes.
Thank you.
Sorry, the question Joe.
The management for any final comments.
Thank you operator, you can close the enough of that as management team, we'd like to thank you.
After the call.
If you require any for the information feel free to reach out cash directly. Thank you for joining US day net outflows of the call.
Okay. Thank you.
Thank you all for joining you may now disconnect.
Okay.
[music].
[music].
[music].
Good morning, ladies and gentlemen, and thank you for standing by for the daughters first quarter 'twenty 'twenty 1 earnings conference call.
At this time, all participants 7 of listen only mode of.
The the managements prepared remarks, there will be a question and answer session.
As a reminder, today's conference call is being recorded.
I'd now like to turn the call over to the host for today's call Ms. Caroline Dong <unk> head of Investor Relations Siddhartha. Please proceed Carolyn.
Thank you operator, Hello, everyone and thank you for joining US today, our first quarter from page 21 earnings from the list was distributed all of today and is available on the IR website at IR of Dot I'm that out of sand as well as on global Newswire services.
On the calls a day from that out we have missed the first part chairman I'm, the Chief Executive Officer make the bag Chen Chief Financial Officer and of Mr. Jin Yan co founder and the Chief Technology Officer.
Mr. Clive will talk about our operations and the company highlights followed by Mr. Chen who will discuss the financials on guidance there.
We'll all be available to answer your questions. During the 2 in the session that follows.
Before we begin I'd like to remind you that this conference call contains forward looking statements as of defining the section tons from 1 E of the debt Securities change Act of lighting, the sport and the the U S. Private Securities Litigation Reform Act of 90.95.
These forward looking statements are based on the current management's current expectations and the current market on the operating conditions and relate to events that involve known or unknown risks uncertainties and on the other factors all of which are difficult to predict any matter of voyage of beyond the company until.
These risks may cause the company's actual results or core for a minute before materially.
Well the information regarding these and other risks uncertainties or factors is included in the in the Companys 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 except as required under applicable.
All of it all.
Finally, please note that unless otherwise stated all figures mentioned during this conference call are in RMB.
It's now my pleasure to introduce our chairman and the chief exactly our officers.
So the supply.
So let's please go ahead.
Thank you the Carolina and thank you all very much for joining us today.
We're pleased to deliver a strong quarter, it's the kickoff 'twenty 'twenty, 1 or a total of net revenue for the first quarter average of $1.7 billion, which is beyond the high end of our guidance.
Yeah.
The year over year growth rate of 62%. Despite the high base from Q1 of the SMC.
The 2 year compounded average growth rate, whereas some of the 80% 1 takeaway of those from Q1 of 2019.
The revenue is generated from the entity J reached.
778 million with the 2 year CAGR of 97%.
I'm going to talk you through our deep on the strategy.
Cooperation with JD group, some highlights of the April 15th and the.
The <unk> promotion.
Some risks on the progress of our 2 platforms.
Then I will hand, the call over to Matt to.
To talk about our financial results.
On March 27.
We announced the JD com will increase its stake.
71%.
Vesting a total of.
800 million U S dollar the newly issued ordinary shares the increase investment Mark the diesel.
The cooperation between city of Dot Com and other under the Omni channel strategy.
Leverage in the JV is devoted to the strategy supports who other few of demand for local on demand the retail and the delivery on steady covering various scenarios and categories.
Our omni channel cooperation with JD.
Together with J D will continue to provide consumers with superior shopping service empower retailers and brand partners and the cheap when we incorporation for all.
So it's a lot of interest in statistics go we have started to seamlessly collaborate with JD retail to explore more synergy opportunities. So we're working together to meet the consumer's needs of on demand service on steady dot com across all categories.
Clothing supermarkets consumer electronics due till the health apparel etcetera.
So that's the really we're optimizing access points and exposures of fine tuning product offerings and the innovative marketing activities to improve consumer experience and operational efficiencies of the on demand service on JD.
So over the past 6 years, our J D. D. J platform has obviously grown there.
And our anniversary promotion has become 1 of the most important of the promotional events across the categories in the on demand of the retail industry.
This year sales on our platform during the events were 1.7 times greater than last year and total sales generated by brands that we partnered with growth by 2 times year over year.
So during the promotional event in lower tier cities, we have entered for over a year.
The more of the 100% of year over year growth rate.
The significant growth momentum demonstrated our potential in the existing lower tier cities of the competitive advantages in the effectively meeting consumers' needs.
Now I will provide some of the updates on our 2 platforms starting with steady Vijay.
The first we have been constantly expanding our geographic coverage, especially in lower tier cities.
The further diversifies the category of coverage provides our consumers with more product offerings in more of talent on demand.
On the end of first quarter, our agility J platform has covered over the 337 countries.
That's more than doubled compared to the associated the last year.
1 of our flagship supermarket category remains on the SaaS growth.
First we have made significant progress across many other categories.
So on consumer electronics, so we haven't now.
Nearly 9000 stores, let's say the on our platform in the first quarter, we successfully facilitate itself from the smartphone brands such as Romania, The wind plus day.
During the anniversary promotion sales of mobile phones from brands, such as Apple vivo Xiaomi of local or increased by more of the 7 times year over year.
We also deepen the strategic collaboration with the low loss.
Local brands to bring all of the <unk>, 1 thousands of offline stores online to provide consumers with access to a number of PC and other.
The products on demand.
For the cosmetics.
We continue to improve our product line.
To enrich the offerings and improved consumer experience for example, we have newly of.
Partnered with leading cosmetics.
Such as so far out of low color and colorist.
And we're also of progressively pruning the offline stores onto our platform.
For apparel.
We attracted a number of new brands and the distributors to the platform such as the Skechers product and a few leading Chinese force growth.
We will continuously focus on expanding brand partnerships, especially in the men's clothing in the sportswear settlements to strengthen our presence in the growth category.
For the mom and baby.
We deepened our cooperation with Keith 1 of leading player in the category and have brought almost of 400 of their stores across the country onto our platform.
For home appliance, we are now cooperating with 5 star appliance.
<unk> debt to provide the 1 hour delivery for consumers, who buy a smaller home appliance on our platform.
Instead of <unk>.
We are continuously strengthening our relationships and depending our cooperation with our virus.
Retailer and the brand partners.
We newly established partnership was about 30, leading supermarket on.
Our platform as of today, we have partnered with 75 of the top of 100 of supermarket channel in China.
On the fresh product category, we collaborated with Mis fresh to officially launch their frontline on the warehouses on both JD Vijay on the digital comp. This partnership allows us to offer more of consumers on demand delivery of fresh products and further demonstrate our advantage.
And the open platform.
Our crowdsource and the digitized picking of service for retailers.
<unk> also saw increased adoption.
So <unk> is a great solution for retailers, who will struggle to meet the fluctuated demand and bring down on labor cost the <unk>.
Taking all the volume in Q1 increased by 230% from the fourth.
Fourth quarter of last year.
And the time it took the.
The.
The riders.
2 such goods declined by some of this 3%.
Now in the process of expanding to the packaging and the replenishing the service to provide a comprehensive set of solutions for improving retailers operational efficiencies.
So moving on I would like to talk about the online marketing service for our brand partners the deal.
During the first quarter online marketing revenue from brand partners remain strong.
Increasing by over 130% year on year, we continue to deepen our strategic partnerships with a greater number of international brands, especially for omni channel and targeted marketing service that helps them effectively engage with consumers.
For example, we jointly launched a new promotional campaign on cost Omni channel Super brand day, with JD Com and the dairy brands woes, China on May.
The countries. So the event effectively integrates online also all line DTC and offline marketing to allow brands to precisely target the consumers and digitize the entire marketing process.
So on May 20 is the word China's sales on <unk> platform increased by $3.7 times year over year and TDD J became the biggest auto channel for China.
And third I would like to talk about our innovative technology to empower our retailer and the brand partners.
Of our hybrid system, the omni channel online retail operating system continues to be a welcomed and popular amount retailers because of it.
It's an open neutral a flexible system as of the end of April of the system has been adopted a more then.
$300.303000, the 300 retailer channel.
The stores the significant increase from the 200.
So 2200 stores as of the end of February.
So in addition to the supermarket shelves.
With minimal additional development, we successfully expand the hydro systems the.
Deployments narrows to convenience stores and the consumer electronics categories.
So this demonstrated the feasibility of implementing the system as a standardized solution across multiple verticals.
The great thing about the hypothesis on with US is evolving with our merchant demands, we help merchants to enhance our personnel and the cost efficiencies by constantly.
Iterating and upgrading the system to address the 10.
Points across their omni channel <unk> operations, which also leads to a higher consumer sets the satisfaction.
For example, during the first quarter, we added a new automatic replacements.
Feature which stood at height.
The replacement process.
Are you is although stock. The this feature alone has helped per down the average cost and are managing product shortage by 80%.
We also upgraded the dashboards of the system. So that the stores can breakdown the online subsidies delivery fees and commissions into each SKU. So this enable merchants to have other insights on that.
<unk> talked the ability operational performance across channels and identify issues in the timely fashion.
I would like to provide a specific case study the.
Deployment of our <unk> system at a leading supermarket channel in Jiangsu Province, which has being acknowledged by.
CSA the wishes of China chain store of the franchise Association for the impressive digital transformation.
So this merchant has helped to boost sales through also channels, but we're struggling with losses caused by a lack of detailed operational data.
Subsidy the efficiencies.
By adopting of hydro system, the we're able to automate financial risks.
Consultation process for omni channel business and the high growth visualized dashboards enable them to annualize.
Operational data across dimensions, including the sales channel the stores product categories and Skus.
So after adopting the hydro system, the merchants' omni channel <unk> sales increased by over 50% from previously in addition, the profit margin of the also of business improved by 3.5 times.
Moving forward, we will promote the value added service to more of our existing retail partners.
The moving on to the.
Now the in the first quarter, our interest to the delivery service to Tim merchants continue to grow significantly with revenue increasing by more than 130% year over year.
As the more 10 merchants choose our service in the store penetration for each merchants continues to rise we expect the business to Manhattan as fast growth in Q2.
Revenue from catering sales increased by over 400% year over year, as we keep expanding our customer base and the increasing store penetration in existing partners were pleased to see that our high quality of delivery services are increasingly recognized by our restaurants.
In the pharmaceutical category, we were able to increase the revenue from the pharmaceutical share merchants by more than 600% year over year as we continue to enhance our service offerings.
For.
Pharmaceutical sales.
Separately, we upgraded our personal fourth.
To provide better support for long distance late night others.
In the supermarket category based on our strategic partnership with CR Vanguard, we have already fully integrated our dedicated deliver.
Delivery service to the omni channel others of.
Around 1300, <unk> of our stores starting from April.
In addition to churn merchant business, our delivery service providers of small and medium sized merchants also experienced very fast growth in Q1, the number of small and medium sized merchants the complete the others on that on our platform more than doubled year over year.
I would like to talk about the last mile delivery.
As of the end of Q1, we provide the support to logistically of companies in over 2700 cities in the countries. We continue to deepen our cooperation with JD logistics. During April we successfully changed to a more asset light model as we told the.
In the last earning call.
So with that I will now pass the call to that tend to go over our financials for the quarter. Thank you.
Thanks for the before we go over the numbers just a few housekeeping items in the bands we believe the year over year comparisons on most useful way to judge our performance all percentage changes I'm going to debt will be on a year over year basis, and all figures are in renminbi unless.
Otherwise noted.
The total net revenues increased by 52% to $1.7 billion net revenues from debt and now increased by 51% to 894 million, mainly driven by the increasing order volumes for our services 2 largest companies and interest at delivery of services to chain mentioned.
The total net revenue from <unk> increased by.
The 53% to 778 million, mainly due to the increasing <unk> from the same quarter last year, which was driven by the increase in average order value and that the number of active consumers.
Year over year increase in online marketing services revenue was over 130%.
Moving over to the expense side operating now in the deposit expenses increase the tier 1.4 billion, mainly due to an increasing rider cost as the result of increasing orders on the volume of our services to logistic companies and the interest city of delivery services.
The 2 vigorous chain merchants on the platform and the retailers on the <unk> platform.
Selling and the marketing expenses rose to 719.1 million, mainly due to the <unk>.
Growing incentives to JD DJ consumers and an increased at an increasing into the pricing and marketing expenses, which was primarily attributable to the increase in retro fees paid to the staff at retailer stores and instead of the packet promotion of service providers for the efforts to attract new consumers to the JD DJ platform.
G&A expenses increased slightly to 103 million, mainly due to increases in professional services fees that the company incurred as the Lithia company R&D.
R&D expenses rose to 134 million, mainly because of the increase in research and development personnel cost as the company continues to strengthen its technology capabilities.
The increase of share based compensation expenses also contributed to the increase in personnel costs.
In Q1 of our non-GAAP net loss attributable to ordinary shareholders was $6.18 million versus 4 and $10 million in Q1 last year, and then GAAP diluted net loss per share was <unk> <unk>.
75.
Paired with $1.11 in the first quarter of 2020.
As of March 31st until 'twenty, 1 we had $5.5 billion in cash and the cash equivalents risks the strategic cash in the short term investments. In addition of our board of directors has authorized the share repurchase program for debt to repurchase 8 assets.
With an aggregate value of up to $115.150 million. During the next 12 months only the by our existing cash balance the share buyback reflects our confidence in the potential and the growth momentum of our businesses.
Before providing the outlook I would like to recap the upgrade of our last mile delivery businesses to improve our working capital efficiencies, adding in April the cost of riders for our last mile delivery and it has been directly paid through through the pocket companies instead of through us and now.
We only charge JD logistics of platform services fee, which we recognized net revenue the change in rider cost of the settlement as well as the revenue and the cost of the recognition we will have no impact on the services and support that we provide the new approach will significantly improve both our working capital efficiencies and the revenue.
The quality.
And to help our investors better understand our revenue growth in the next 4 quarters from <unk> <unk> went from <unk> 2022, we will also provide the pro forma information that in line and on our last mile delivery revenue to net basis for Apple to Apple comparison purposes in our upcoming of quarterly <unk>.
The increase.
So for the second quarter of 2020 of where and we expect total net revenue to be between 1.4 billion and the 1 point of 45 billion, representing a pro forma growth rate of 72% of 78% adjusted Q2, and the Q2.2000 win and there are no less amount of revenue to net basis.
In addition, we are excited with JD Djs our strong growth momentum. So some of that the year over year growth rate of the <unk> revenue will be over 80% in Q2 and the will further accelerating in the second half of this year.
As of Q2 might still be the very early stage of our deepened the collaboration with JD, we expected on much more incremental impact of where progressive picking packing from Q3.
Both JD and of that.
Our highly of confidence that we will provide <unk> 500 million annual active customers with 2 period has the mix.
Services and enrich the coverage in online on.
The demand and reach our delivery and the penetration of on demand service among <unk> users.
<unk> substantial progress of potential potential for growth, we will work together to enable our partners and accelerate the digital transformation of our real economy enterprises.
So this concludes our prepared remarks.
And operator, we are now ready to begin the Q&A session. Thank you.
Thank you.
We'll now begin the question and answer session. If you wish to ask a question. Please press star 1 on your telephone and wait for your name to be announced if you Nathan.
The question please press the pound key.
Our first question comes from Ronald Keung from Goldman Sachs. Please go ahead.
Thank you thanks, Phil add back CNN Caroline too.
Questions for this for this results out first just wanted to ask about LGD DJ growth in the second quarter and you talked about the acceleration that we expect in the second half. So can you just give us maybe the drivers of that from say pick of ties, which we call <unk>.
And user and user of purchase frequency.
Particularly as we lapsed that high <unk> last year during cold day, but we're still delivering accelerating growth just want to know whether we're seeing order growth acceleration on the drivers behind.
And then my second question is we did see some impact of kinetic repurchase on our business, but on most of the merchants which of the offline supermarket sales.
According to some from publics news that the sales have been seeing some impact in the March just wanted to see how do we see.
The merchants, which are the offline supermarkets is ultra OLED of becoming an even larger pie of supermarket sales judging from a very healthy growth of GDP, Jay So how much how much you total sales port portion reach and how do we how should we interpret the evolving shopping shopping patterns of plenty of consumers between the different channels. Thank you.
Thank you Ron So let me address the first question on our past the same constitute filipe to answer.
In terms of the growth drivers of J D. D. J in Q2 and also the second half of this year, we expect on a year over year basis, the air will be.
Our slightly still will slightly increase in Q1 actually the <unk>, reaching 170 on the.
But I would like to just the attributes of this factor to the Chinese.
Chinese new year factory, so even like the supermarket category sales, reaching historical high at the base.
As of today.
Compared to Q1, we think Q2 and the also the second half of this year were not much high and it will be by SKU on year over year basis.
Of our increased and the second is of course, the growth of the number of consumers and the.
Right now actually.
And like the 500 million active consumers of J D.
It's very very it's more of an advantage of.
That's on pace is.
Exploring what's the experiencing.
Also on demand.
<unk> before.
Before and we have.
Target and also on not so much target not to grow this percentage too.
Much much larger than before so we believe for the second half of this year the growth of the number of active.
The active consumers on J D D. J we are.
The major.
Tribute her to the.
To the growth of the EDA platform.
Okay.
The second 1 regarding the community grew volume impacts and the.
The.
So the first of ore.
<unk>.
We believe the market potential is huge and as you can see in Q1, we continue to grow fast in the.
In some of the province.
Like Hunan of Hubei balance sheet challenges of those are the province.
On the group buying has been most absolutely.
Doing business, so our JV in those provinces.
Continue to see a year over year doubling growth.
We grow more than 100% in those balance so.
The market potential is huge and we have been doing well, but the slides are the community group buy.
And.
I am sure you have also.
Notice that the regulation in the sector has been more and more tight.
We believe this will be beneficial for everyone.
In the markets for the long term healthy growth.
Sustainable healthy growth.
So and as you mentioned some of the supermarket certainly has the.
The factors.
The.
The community grew by and as a result, so almost all of the supermarkets are even more willing to.
Deepened partnership with us.
That's why we are now seeing more and more supermarkets are adopting hypothesis or.
We are seeing more of the more supermarkets are starting their partnership with us. So I think of this is.
Also helping us to deepen the partnership.
At the same time many of the supermarkets have tried.
<unk> grew by on their own.
But then they realize that for supermarkets the best weighted.
To improve their sales force performance and the compete with community group buy is not to do community group buy on the all instead of that should be focusing on the store based on demand retail. So thats. Another reason why.
Almost all of the supermarkets are now strengthening their partnership with us. So I think overall, we are very much confident for our growth and also we are confident.
To help our partners too.
So their business and to compete with.
The community they grew by and certainly the percentage.
As the on demand retail.
The contribution to the supermarket is certainly growing.
And.
I think of the number we will just keep growing for the.
The foreseeable future.
At the same time, we are helping our supermarkets to improve there like of.
The ability et cetera.
Providing the.
Advanced technologies and operations support.
If you can give around silicon back that's very useful.
Thank you.
Our next question comes from Eddie Leung from Bank of America. Please go ahead.
Hi, good morning, guys.
As you guys mentioned debt.
Of your cooperation with JD.
Half of our 2 follow up questions.
First 1 is the power the car.
<unk> and <unk>.
Use.
The that the current status of your user acquisition channels roughly speaking how important is the.
The JD channel for you guys.
You're on.
And the other channels like a mini program.
And then secondly of the size.
Natural selection, which is more for the Yao of consumers. We also heard from JD in there.
Core debt.
Could be thinking more of our logistics and <unk>.
And the cooperation with the FERC the lease including your cash.
Besides the user acquisition channel.
On the potential cooperation on the.
Fulfillment and logistics side. Thank you.
Sure So think of Eddie.
Sure.
Provide some perspective.
That will have anything of that so first of all.
Thing about the user acquisition and the penetration so.
As of today the <unk>.
User penetration.
In JD com for the for the on demand of the retail is very low very low.
Like the.
Low single digits or even lower so at the.
The same time, both JD on Earth.
Fully aligned and we have the same go to increase to grow this penetration.
We.
We plan to grow this penetration of all the way to like the 50% or even more.
So that's the strategically we are fully aligned and historically JV, where it's not like the.
There is significant value.
On the dominance of ACA.
Physician channel 4 of J D D J.
Since.
This year, we believe that the J D will become a more on the more important.
The acquisition channel for HDD, Jay and I think this is absolutely the mutual beneficial because we're providing JD with the.
The lots and lots of quality offline stores and the inventory the which will.
Help the help JD to growth the user frequencies and to grow the user base at the same time.
So we will increase the penetration in <unk> user base, and JD will leverage our capabilities to grow the frequencies and the continued to expand the.
The base I think we will definitely be a mutual beneficial.
And beyond the user of partnership we believe that more on the more specific kind of share growth.
The scene in the non.
The next few quarters or the in the foreseeable future the some of the.
<unk> I'll just give you some examples so.
The logistics as you mentioned.
So for some of the.
Our key or have the products as J D Dot com.
The order fulfillment cost is very high at the you can imagine deliver all the way from warehouse the warehouse to depose the end to customers and those heavy and bulky.
Our products require of coast Chen.
<unk> already located in the stores near of the customers in the us.
Like the.
3.3 miles or even 1 of it is so.
Leveraging our on demand delivery capabilities and the inventory already located in the offline stores certainly the <unk>.
Logistics costs and the entire efficiencies will be less.
<unk> greatly improved.
I think this again will be mutual beneficial for JD for Earth for retailers and for our brands as well. Another example of debt.
As we mentioned in the remarks.
In may of <unk>.
We have already had a very successful.
3 way partnership.
With both with JD and <unk>.
Unilever China.
Their brands for the World.
<unk>.
Hello share so.
So was there a screening of our sodas.
To the dot com as well as <unk>.
On PDD Jay So 3 of 3 offers partnered together to launch a joint.
Marketing program. So this again health too.
Improve the sales performance as well as to improve the efficiency. So things like that so we are very much confident that.
The a lot of.
The strategic.
The synergies.
It can be seen from the JD a partnership and we are very much looking forward to that.
Yes.
Yes.
The more points from my side as.
We just touch on about like the marketing innovative marketing activities. So traditionally.
We are just license separately to teens on JD is cooperating with some online team off of the.
The brand side in the DJ it's cooperating with the offline on <unk>.
Actual team of the brand side and there is some inefficiency of beating us so in the future of we are actually.
Collaborate together and to to have a unified marketing campaigns to work with the brands and we believe that.
On the potential for the.
The marketing revenues for both sides.
The is huge and also.
We mentioned the in the prepared remarks that we are optimizing.
The access points and exposures and.
On tuning the product offerings cost previously we are little like loosen in the relationship right now with the tightening of the partnership of both sides.
There is some like huge huge.
<unk> ahead of us.
So you know maybe you will see assume yes. So this is my addition.
Great. Thank.
Thank you.
Our next question comes from Thomas Chong of Jefferies.
Go ahead.
Hi, good morning.
Metal, taking my question and congratulation on a strong Q2 guidance.
Given our corporation.
J D.
First of all of how we should think about.
The net economics.
Of J D D J.
Of the monetization of potential or the ATB J of course.
On the different line like commission marketing the differently.
How we should.
Think about the.
The timing of J D D J.
Into profitability into the future and my last question is about the housekeeping questions.
So.
A couple of the contribution from the loans supermarket in terms of the oldest in the Tms.
During the quarter. Thank you.
Okay. So thank you for the question come on so the non supermarket actually the non.
So the market categories.
Contributing the 25% of the total Jeremy.
In Q1, so some markets accounting for lack of 17, 5% and.
As for the economic so basically for the money.
Monetary side and there is no.
The big difference between the businesses.
The <unk> App on the day generally is very similar of everything.
The actually right now we are also.
And <unk>.
The launching some products and offerings to optimize.
The subsidy level.
Of our merchants and also of the platform.
Ourselves together, so we expect to see the effect coming out in the second half.
And in terms of the total like the step strategy.
Like the.
On the calibration of JD right now we prioritize the growth.
Cost of the growth momentum and the potential is huge book just imagine of 500 million active users on J D.
So when the growth.
Yes.
Big enough and we are further.
Optimize like the subsea.
Subsea level too.
On.
And it has to achieve.
Breakeven or profitable.
On.
As soon as possible. So generally we think the growth potential is.
The bigger than our <unk>.
Our.
Previous expectation.
With this.
The <unk>, we have more opportunities to.
Optimize our.
Our third the margin level.
On.
And even earlier than prior expectation.
Thank you.
Our next question comes from Ashley Xu.
Please please go ahead.
Yes.
Thank you Philip and thank for taking my questions.
Just a quick follow up.
Of our second quarter guidance.
Just wanted to tag on what.
What does the guidance flat in terms of both geographic and category expansion for the quarter and also in terms of our cooperation with JD currently are there any more concrete plans.
For for all of our cooperation starting second quarter.
Lastly in terms of.
User traffics.
Thank you.
Okay. So.
For the first question, yes. So.
No.
We are penetrating into the.
The lower tier cities and the also like the suburban areas of growth.
Expertise all day.
As per our top director of operating cities. So this is all accounted in the.
In the into the guidance.
Giving out and the in terms of the detail.
The operating plan actually.
Starting from.
April and May.
Both of the parties, including J D. In the DJ are sitting together and we already have.
Walk team to the 2 panel with charter and the.
There are some very concrete plan.
The including like the.
Some of some.
Channel.
The traffic or access points.
And the week.
Actually I think.
And I think you'll see us very soon in Q3 and.
The even like the previous.
Chris the recall of the likelihood of tens of plan, maybe we are half of brand new name and upgraded on.
As well so.
Right now it's still under the law.
Many of Tonight.
Development so.
So assets coming out.
And we think we will have your guidance no it as soon as possible.
Yeah, and just to add a little bit so.
So for us.
As you mentioned the geographic in the category, we will certainly continue to expand our geographic coverage to more cities.
Also.
To the extent more categories and we're happy to see that we have got some early wins from the consumer electronics and now as we are expanding into like the beauty and personal care and the other categories. We are seeing a very good momentum there as well.
Able to sign up the.
Yes.
The offline retailers on board.
We are confident to see more.
The.
Growth from lots of more categories and then in terms of the partnership with JD.
I think first of all of or our happy to see that at the very top level, we're able to arrive at a very concrete.
Agreements with the top leadership at J D.
So omni channel strategy is absolutely consider at a very top priority for JD top leadership and this is like.
<unk> are fully aligned with all of the.
JD executives and the.
The.
All of the general managers across JV business units. So I think this is very important and as a result, so JD app is now being optimized.
To be more location base to be able to support the.
The on demand the retail business and also.
As you may see in the.
The near future.
The foreseeable future, we will be able to get more access points from JD as well. So users will have a more intensive to experience.
The on demand the retail so so that agreement of this.
We have already arrived at that agreement with the JD leadership, So I think the.
We are very much confident about outlook.
Okay.
Very helpful. Thank you.
Our next question comes from Blake Zhang from Morgan Stanley. Please go ahead.
Thank you very much for taking my question I have 2 questions. The first is.
We see that the guidance for second quarter, the JCB trade.
Revenue was quite strong so the GMB growth would also be very strong so within that growth do we have line any color on how much of the GM where growth will come from the merchants that we developed onto our true the DJ possible empower ourselves and what is the contribution from the woods in terms of platform.
Jim.
And my second question is that for those others from the woods in terms of system can we assume that these orders are positive in the rack margins. So basically we charged some commissions from the merchants and probably will pay some.
Crockett County, preclinical J D power comment then.
Just the positive direct markets do we need to pay and the like subsidy for those orders from <unk> in terms of the system.
The number of questions. Thank you.
Okay. Thanks.
Thank you for the question.
So first of all.
All of the merging.
Right now actually.
The operating.
Operating guidance, our sales guidance of CTG is developing the new emerging and invest them onto the platform and onto the <unk> dot com through the Nexus It actually uses 10 simultaneously.
So 80 day skies as the like the that the guys to operate our tier 2 invest the dose.
So on machines.
And.
And the auto in terms of the contribution of the.
Of the JV would incent the right now in Q1 or in Q2 of the <unk> is still contributing.
A lower percentage of our entities, but we expect of that.
In the following quarters, the contribution of <unk> will be slightly bigger than the bigger.
The.
In the future and at this moment.
Yes.
For example of that for the supermarket of categories and products in the down at <unk> Dot com through with intent.
We feel we'll get the mic.
The customer subsidies to.
And George.
To attract our true returned the consumers.
But just as I said.
In the previous catching so.
As long as we have got some.
No.
More access points and the benefit of the business.
The next is unwilling to growing significantly.
Paul in the second half of this year, we already have a plan to.
Cut down the subsea.
Cds.
To get.
Moving to the consumers to make he'd like to improve actually the unique.
The economic or the direct the margin on the JD com so.
This is all in our.
Planning.
That's correct. Thank you very much.
Our next question comes from Alicia.
Great.
Please go ahead.
Hi, Good morning management, Thanks for taking my questions.
A couple of questions number 1.
Later to the second quarter guidance, if we take out the.
GDP growth.
Expectation is same site.
The growth rate for that on out actually imply a pretty decent growth.
Maybe rafi over 60% to 70%. So maybe can you elaborate on later on the order demand outlook for the channel much of our system.
The orders coming from SME and also overall competitive landscape.
For the on demand delivery and then second if you can also lap and the debate what is the.
The differentiation or competitive advantage.
Of the hypothesis the bat.
All very differentiated and also our cash.
Debt to the.
Retailers. Thank you. Thank you.
Okay.
At this point Jeremy.
And the question.
The first question, Okay, So and in terms of the Q2 guidance for the data on our side.
Carsten.
Sure.
Actually starting from Q2.
Only the chain merchant businesses.
Counting wise the only the channel merchant initiatives, we argue I can recognize that on <unk>.
The spaces the last mile.
Yes.
Net sales and also like the us more in the medium sized our individual standard and it is will be recognized the revenues will be recognized on net basis, so which means actually.
The churn merchant's business is growing very fast so in the first quarter of Chimera <unk>.
It is growing by over a 130% and we still.
Is that.
The Q2. The finished we will maintain our triple digit growth rates and we are even more confidence that even in the second half of this year.
It is still very strong and we believe that maybe in the second half of this year.
For the <unk> <unk> actually with the from the Q2 'twenty.
19, and after 2 or more than 2 years, we expected it to the nurses where growth should be at <unk>.
Largest platform in China to provide.
2 of those.
Our chain merchant communities just the.
In the second half of the.
The party every kind of interest.
Interest.
Delivery platforms in China.
And the regarding the hybrid system so.
The total of or do.
So we have the best technology and the functionality.
With the system the first since.
Since 2015, we are the.
The very first.
The platform to work with the retailers essentially supermarket.
To do their on demand of retail business and the since then we have been providing lots of anything from other fulfillment.
Operation of Puna.
<unk> 2.
To help our retailers. So that's why the hydro system are able to grow together with J D J and the retailers the practice so thats why it.
It has been having more and more advanced in the sophisticated and the <unk>.
We are able to work with almost all of the leading players in the market. That's why we are able to.
C line all of the use cases.
Both to improve the systems I think this is a very solid and the unique foundation that makes high book is very good.
Best.
Solution in the market as you can see like.
Our adoption is overwhelmingly dominance so thats why.
So I think thats the wisely.
Like the.
Wisely.
Appreciated by our customers that's the number 1 on the technology and functionality is foundation the <unk>.
The current CBD Jay.
Pure mutual platform and we never compete with our retailers in over a year, we have been establishing very solid task.
With the retailers that's why.
That's why the hydro system.
Most of the leads to excess of lot of sensitivity sensitive information.
And for some of the partners.
We are.
Given their like the margin information or less of that.
Very sensitive information and the.
Retailers charter deeply.
With those information and we are able to.
The work with the retailers to improve the efficiencies and improve their profitability leveraging those information.
So I think those kind of tough is also very much unique and we believe that this also how close to.
<unk> positioned <unk> as the most competitive.
The system in the market.
Thank you.
Okay.
Our next question comes from Robin Leung.
Please go ahead.
Hi, Thanks management for taking my questions at the follow up questions on the.
User acquisition in J D. So besides <unk>.
<unk>, we noticed that Dennis also of user traffic acquisition channel tranche on coal so can management share the differences in the use cases of these channels and the channels fees debt J D. D. J is paying to JD and for the synergies.
In the second half.
We expect more traffic from JD should we expect the.
The traffic is coming from the existing channel looks like the JD supermarket.
Or is it from the new channels.
In this and also my second question is on the high bar system any monetization plan in this end and as we are.
Now are starting to do more on the convenience stores. How is the difference in the unit economics of comforting to our supermarket and if we can know the percentage of supermarket that is already using our hyper system.
Figured that would be great too.
Okay.
The second Rob and ill give you a brief.
The answer on the <unk> have anything to add the first of all of our we're getting barrels.
There are many kinds of assets points that we can get from <unk> com.
The incentives from a notice of any like the change in Goa and we.
We have assets.
That's S pause like that and we are now.
<unk>.
Going through a.
Comprehensive.
R&D, the research and development process with J D.
The list team we are.
2 reviewing the performance of all of the access point and the designing the.
The.
On the the way that.
The customer account experience on demand the retail most effectively in the with the best customer experience on deliver com. So all of the things you have seen now like the change on the or the Odeon tender from the search result page. So those are.
Or the.
Trial cases before the scholarship and.
And we believe that.
In the foreseeable future, we will be seeing a more advanced in the.
Okay.
More of advanced practices with better.
Performance in the.
The conversions and the.
Etc. So based on our previous data points already collected from the previous channel cases.
So I think.
We will be getting more at that point.
Well as better performing.
Practice.
And in terms of the.
Of the.
The type of monetization so first of all we need.
Continue our monetization.
For the hypothesis with with <unk>.
All kinds of retailers across the board, we continue to collect the seat a.
The commission fee from the GMB handled by of Hydro system.
That's something we have already been doing and going forward as we are providing more.
The value added service to the retailers and to the brand.
The vision envision that in the future, we will be able to.
Have more monetization opportunities around the headwaters of not necessarily from like the licensing model.
As we are providing more value I think more.
But the value added.
Services can bring in additional revenue as well.
Great. Thank you.
Okay.
Our final question comes from Hans Chung at Keybanc Capital markets. Please go ahead.
Hi, Good morning management team. Thank you for taking my question. So couple.
Couple of questions from me first.
Can you.
By the collar on file.
The south of the label.
The right margin for GDP day in Q1.
And then how.
While dollars.
Involved in same quarter in the second half.
And then second question is about.
The cash might be heavier.
Just on whats.
Whats the or the.
Beijing on the consumer behavior.
<unk>.
All of the pandemic and then.
And then as we started to.
The.
Recovered to the pre.
Pandemic.
The debt scenario and then.
How how the consumer behavior evolve.
Recently and then.
If possible can you.
The color about the.
The path from here.
For the past the year.
For the customer required.
On the.
How about the changing in the cohort on in terms of shopping frequency and so on the that would be helpful. Thank you.
So for the.
The first question so.
The gross margin.
The decrease in interest in Q1 net minus.
Minus 2.8%.
And we should leave that for the next 3 quarters.
During the year.
The.
The declining so the Q1 is the.
In terms of the tariff of margin out of Q1 of the worst.
And the subsidy level is also the highest in Q1.
The 6.2% for the consumer incentives and also in the following 3 quarters of exactly.
The C level will go down.
Yes, and in terms of the customers' behavior.
So we are seeing that customers are.
Even in mainland China like the.
What we call the post pandemic.
We're seeing customers.
Are more used to say.
Sales online.
And especially for on the beds.
I think we're on.
We're actually seeing the cut.
Behavior shifts.
Probably less per months permanent slate and the.
So.
I think our business will.
Absolutely benefit from this trend.
And at the same time, we are seeing a trend that the customer has to be educated.
From like.
The rest of the rest of our food delivery, and then sort of grocery delivery and now 2 more on the more categories. So customers are now.
Used to buy everything on the demands.
Since this is fully aligned with our vision that everything will become available.
England hour so.
We are happy to see the trends.
Yes actually in China, the pandemic is already settling down on 1 year ago.
Compare that to the 50% growth rate in Q1.
For the ADT, Jay we are expecting more than 80% in Q2 and also even faster much faster in the second half so.
Which also are demonstrating.
Our.
The platforms popularity among consumers.
Yes.
Thank you thank.
Thank you.
Yes, yes.
Yes.
Thank you we have no further questions I'll hand back to management for any final comments.
Thank you operator and closed the muscle of Dod as management team, we'd like to thank you.
The call.
If you require any for the information feel free to reach out share directly. Thank you for the next day.
Outflows of the call.
Okay. Thank you.
Thank you all for joining you may now disconnect.