Q2 2021 Missfresh Ltd Earnings Call

[music].

Hello, Ladies and gentlemen, thank you for standing by for <unk> Limited.

2021 earnings conference call.

At this time all participants are in a listen only mode. After management's remarks.

There will be a question and answer session.

Today's conference call is being recorded I would now turn the call over to your host lingering Hu senior director of.

Financing of the company. Please go ahead leaning.

Thank you Hello, everyone and do all comes from MS. <unk> second quarter two.

'twenty one earnings conference call.

So and operating results were issued via Newswire services earlier today and are available online you can also the other earnings press released a video team to our section of our website at IR doesn't Miss fresh Delphi and <unk>.

It depends on today's call will be Mr.

Mr. Jones, she found there cannot under C. O me searching wall and then there's Catherine Chen our co chief financial officers.

Management will begin with prepared remarks, and the call will conclude with a Q&A session. As a reminder, this conference is being recorded.

Okay.

A replay of this conference call will be available on the IR section of all upset there.

Before we continue piece enough that this discussion will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of Lunching down to five.

Forward looking statements involve inherent risks and uncertainties.

As such they come as a result may be materially different from the views expressed today well that information regarding this and other risks and uncertainties is included in the relevant public filings of the company itself.

Well you have to pay Okay Exchange Commission it.

Company does not assume any obligation to update any forward looking for the net except as required under applicable law.

Please also note that Ms Frost or these press release and this conference call include that disclosure.

I'll, let Ted GAAP financial measures as well as non-GAAP financial measures.

MS Fresh earnings press release issued earlier today contains a reconciliation of the out all the non-GAAP Mega hubs. So if it gets matrix.

We also posted a slide presentation on our website providing.

Details on our results what was what do we look for those results.

Our remarks, but not refer to specific slides you are into that discussion.

I now turn the call over 12, founder Chairman and CEO, Mr. Joe Ritchie. Please go ahead.

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Pete.

Hello, everyone and thank you for joining our inaugural earnings conference call today.

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And that all goes to tried to young Sheldon soil Zillow, who don't move towards Silicon chip.

On June 22021, Ms Fresh with successfully listed on the NASDAQ Global market, an extraordinary milestone marking to stop top our new journey as a public company on behalf of all our all of our employees.

<unk> and myself I would like to extend our sincere gratitude and appreciation to our new and existing shareholders for their support.

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Today represents another important milestone for MS stretch as we reported our very first quarterly results following our IPO in the second.

<unk> 2021 hour Jammie grew to RMB, two 3 billion and total revenue reached RMB, one 9 billion, an increase of more than 40% on a year over year basis, as an innovator and leader in China's neighborhood retail industry, we remain relentlessly in pursuit of our growth strategy targeting.

Taking out the final landscape of all of the industry.

Our unique business model consists of three pillars, our pioneering on demand distributed in many warehouse D. M. W retail business, our intelligent fresh markets and our retail cloud business does pillars works in concert to drive digital transformation.

Across the huge neighborhood retail market in China meeting the evolving needs of consumers as we pursue our mission to help every family enjoy quality grocery at their fingertips.

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Our on demand BMW retail business park is to grow into the prevailing grocery shopping channel for mainstream arb.

Consumers and first or second tier cities, our pioneering D. M. W solution, featuring full spectrum product selections better price performance ratio and convenient on demand delivery services enables us to efficiently provide consumers with quality fresh produce and fast moving consumer goods M.

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As of June 30th 2021.

We have 625 self operated M w's across 16 cities offering over 4000, Sku's with an average delivery time for other of 37 minutes.

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In terms of customer strategy, we stick to our business philosophy to pursue high quality sustainable growth, we have amplified our marketing efforts with a dual pronged approach, including online social network based consumer acquisition and offline community based promotional event, resulting.

Putting in a 35% up year over year increase in the number of new transacting users into Q2 thousand 21. We also actively promote our paid membership program, which features exclusive member only product selections service offerings and exclusive benefits our membership.

Sure program efforts drove year to year growth of about 240% in our revenue contributed by paid members.

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As we strive to Scranton, our supply chain capabilities, we remain diligent in our efforts to refine our full spectrum quality product selection.

On the fresh groceries front, we focus on quality improvement from places of origin, and two and coaching coverage and the shelf life management for seven major fresh food groups, including meat fish at diary, vegetables, fruits and flowers, maintaining the high quality of our fresh produce offerings and creating.

A superior neighborhood shopping experience with respect to FMC G with further enhanced our strategic collaborations with leading consumer brands and top trendsetting brands employing joint marketing pangs to cultivate customers on demand shopping habits in the second quarter, our average value per order.

<unk> grew to RMB $96, one at a leading position in the industry.

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Adapt to an increased spending on on demand in the retail channel and with the continuous improvement of our core capabilities. We believe our on demand retail business well maintained its strong growth momentum and realize long term profitability.

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Moving to our intelligent.

And fresh market business. This business segment targets, the French form the major neighborhood retail channel by mainstream consumers in third tier where sports tier cities leveraging retail chain operation model, along with digital upgrade initiative, we aim to transform offline fresh market into a neighborhood shopping while delivering a better.

Shopping experiences to consumers, while helping marketplace merchants increase revenue and profit.

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I'd like to highlight that our intelligent fresh market business inherently encourages neighborhood development and community development, our socially responsible models garnered.

Widespread recognition and secure the community and local government support during its development as of June 32021, we have entered into contracts to operate at 48.58 intelligent fresh market in 15 cities 34 of which have commenced operations.

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We have great confidence in the future prospects of our intelligence.

Fresh market business, we're poised to accelerate the expansion of the business segment with our hundreds of cities thousands of fresh Mart initiatives, making the intelligent fresh markets business one of our significant growth drivers.

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By way of technology empowerment through industrial Internet our.

Our retail cloud business will help to massive neighborhood retailers across China, and lower tier cities to start their online operations, and digitalization, which will create a better shopping experience for customers and enable retailers to boost revenue growth and profitability.

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At our retail cloud strategy conference on June 2021, when joined forces with Tencent Smart retail division to launch our retail cloud business, which enables traditional retailers and specialty.

Small and medium sized supermarkets to improve their digital operation capabilities. Thus far we have established a retail cloud collaborations with several regional supermarket chain operators supported by our extensive industry know how accumulated in our one P. M W operations and in house.

House developed retail AI network rang, our retail cloud business provides a SaaS platform, which allows small and medium sized supermarkets to swiftly build digital operating capabilities, while optimizing all aspects of operations to increase efficiency, including omni channel marketing private traffic.

<unk> merchandising supply chain and last mile fulfillment capabilities.

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To summarize the neighborhood retail industry in China, we can compare multiple business models to accommodate diverse consumer needs for fresh produce and FMC is dropping and different tier cities has tremendous potential.

Growth is accelerating rapidly due to the wave of industry wide digital transformation, our unique business matrix consisting of on demand retail intelligent fresh market and retail cloud along with our core capabilities build our supply chain enhancement technology and value chain empowerment presents an excellent value.

Proposition in a neighborhood retail market. We believe this winning combination will support Ms fresh to achieve even stronger higher quality and more sustainable growth in the long run ultimately underpinning our vision to become the leader to drive the Digitization of China's neighborhood retail industry.

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<unk> yeah.

Thank you everyone with that I will now turn the call my childhood co CFO and MS. Catherine Chen to discuss our financial performance for the second quarter of 2021.

Thank you Mr XI I'll really good results there.

Demonstrates our go back then it strengthened the effective execution of our strategy solidifying our leadership position in the industry. This call. Their success will allow us two weeks were more strategic partnership and our recent listing on the NASDAQ has further reinforced our brand name recognition and the influences in the market.

So we're encouraged by our second quarter results and are optimistic about our future growth opportunities now I'd like to walk you through our detailed financial results total net revenue reached RMB.

One 9 billion in the second quarter of 2021 compared to one three.

We're in the same period of 2020, the year over year growth accelerated significantly to 47% net revenue grew by 23, 8% on quarter over quarter basis.

Sales of products through online platform increased by 41, 2% to RMB.

Billion.

$1854.1 million in the second quarter of 2021.

<unk> $1313.4 million in the same period of 2020, primarily driven by an increase in the numbers of others.

Other revenues reached RMB.

B $40.4 million in the second quarter of 2021, representing an increase of 23, 6% from RMB $32.7 million in the same period of 2020, primarily attributable to an increase in the sales of products through all our convenience goes smart vending machine business.

Cost of revenue increased by 65, 5% to RMB $1752.6 million in the second quarter of 2021 from RMB $1059.1 million in the same period of 2020 was profit was RMB.

$441.9 million in the second quarter of 2021, representing a decrease of 56% from RMB $286 nine minutes in the same period of 2020.

Gross margin was seven 5% in the second quarter of 2021 compared.

Gross margin up 12, 3% in the first quarter of 2021 and 'twenty one.

3% in the second quarter of 2020, the decrease was primarily attributable to increasing discounts coupons and incentives offered to customers.

Operating expenses were RMB one.

<unk> thousand $635.5 million in the second quarter of 2021 compared to RMB $623.7 million in the same period of 2020 fulfillment expenses were RMB $541 million in the second quarter of 2021 compared to RMB 342.

$2.2 million in the same quarter of 2020, primarily due to an increase in the number of orders fulfilled and an increase in the number of product delivery.

Warehouse operations quality control and customer service staff for further enhancement of our fulfillment capabilities.

<unk> expense as a percentage of net revenue was 28, 6% on non-GAAP basis in the second quarter of 2021 compared to 28, 8% in the first quarter of 2046, 4% in the second quarter of 2020.

Sales and marketing.

Expenses were RMB $304.7 million in the second quarter of 2021 compared to RMB $179.2 million. The same period of 2020. The increase was primarily due to an increase in advertising and marketing and promotion expenses as reporting method and targeted advertisement.

In residential neighborhoods to acquire new customers in the retail existing customers to retain existing customers as well as the increase in share based compensation recognized upon the completion of our initial public offering in June 2021.

General and administrative expenses.

Spencer, what RMB 396 million in the second quarter of 2021 compared to RMB $58.7 million in the same period of 2020. The increase was mainly attributable to the increase in share based compensation recognized upon completion of our initial public offering in June 2021.

As well as an increase in the number of Magnum stopped for new business initiatives.

Allergen content expenses were RMB 393, 8 million in the second quarter of 2021, and RMB $83.6 million in the same period of 2020. The increase was mainly due to an increase in share based comp.

Physicians recognized upon completion of our IPO as a result of the foregoing losses from operations were RMB.

$1493.7 million in the second quarter 2021, compared to a loss of RMB $336 eight minutes in the same period of 2020.

Net loss was RMB $1433.2 million in the second quarter of 2021 compared to RMB 339, 8 million in the same quarter of 2020 non-GAAP adjusted net loss was RMB $888.9 million in the second quarter of 2021.

Compared to adjusted net loss of RMB $325.4 million in the same period of 2020 basic and diluted net loss per ads were both RMB 30, 387 in the second quarter of 2020.

Our 2021 compared to basic and diluted net loss.

Loss of RMB 14.4 night parade, yet in the second quarter of 2020.

Non-GAAP basic and diluted net loss per ads were both RMB 18.84 in the second quarter of 2021 compared to basic and diluted net loss of RMB 10.08.

Yes in the second hold up just under 20.

June 30th 2021, the company had cash and cash equivalents.

Adjusted cash and short term investments of RMB 3000, 427.3 minutes compared with RMB 1000.41.5 minutes.

As of December 31, 2020 increase was primarily attributable to net proceeds received from the company's IPO in June 2021 in the second quarter of 2021, the net cash used in operating activities was RMB 698 minutes now turning to our business.

Logan projection.

For the third quarter of 2021 the company currently expects the net revenue to be in the range of RMB 2000, 20 million to RMB 2090 minute, representing a year over year growth of our accelerated growth of approximately 40.

All of a sudden 245% and expects gross margin to improve by 250 basis point to 350 basis points.

Our quarter basis.

This outlook is based on our current market condition and reflects our preliminary estimates of.

40, print and operating conditions and consumer demand.

That's the way I've got to change was already innovative business model and core technology capabilities. We will continue to fulfill our mission to help every family enjoy quality groceries at their fingertips. This concludes our prepared remarks, well now open.

Mark how to questions operator. Please go ahead.

Thank you, ladies and gentlemen, we would now begin the question and answer session.

Two questions on the phone please.

Please press star one.

Yeah.

If you'd like to see a request is Brexit.

Okay.

Open Nikola benefits of all participants on today's call. If you wish to ask questions to management in Chinese police immediately repeat your questions in English to be mindful off the back of our earnings call. Please ask no more than two questions. At a time should you have follow up questions. Please press star one again to go back into the queue.

Next question comes from Dubai.

Andre Chang of Jpmorgan. Please go ahead.

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Hi, Susan.

Thank God.

Exactly.

Now let me repeat my question so.

Thanks.

Thanks, Paul management, taking my question and congrats on a successful IPO and the decent growth.

I have two questions one is about the recent.

Our Titan.

China.

Second half please.

Or do we see some of our computing business model do you see more pressure in it.

Leaving a small tennessee or improve.

Our retail called those out there right now.

Fresh market.

And my second.

Yourself.

Although it can be done.

Your chance for acceleration or multiple already.

Okay.

Fourth quarter or next year.

Thank you.

Hum.

Hey, guys hang in there too.

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Okay.

But.

So oh translate the neighborhood retail market in China is a massive market in terms of scale, we're seeing accelerating digitization of the market, especially a stronger growth in the online sales of fresh produce and food.

Our distributed in many warehouse only among retail business.

So we're continuing to focus on quality growth and build upon our growth strategy by targeting at the value customers in the first and second tier cities well focus on quality users and constantly improve our core capabilities and supply chain to drive increasing spending by our customers and better operation.

This will overseas.

And Meanwhile, our multiple business mm mm business strategy help us to better positioned for the future gross off the market.

Our intelligent fresh market business, it's a social friendly business that has been supporting the local merchants to better like our support.

<unk> business, helping them to increase their income and providing jobs and also empowering them with digitalization capabilities and this has been fully recognized by the local government and local society and.

And at the same time, our retail club business is empowering our local retailers and helping them.

Dan Fisher better grow and with the help from the Detroit Dacian tools. So our unique business matrix of our own team on retail in the first and second tier cities intelligent fresh market in the meat in a mid small sized cities and the retail cloud business that empowers supermarkets, well, we support them with.

To achieve even stronger and higher quality and more sustainable growth in the long run.

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Tricia.

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Yes.

We have entered into a new phase of growth on the supply side, we continue to enhance our core capabilities and supply chain to offer quality products.

All categories on one hand, we emphasize the freshness of our fresh produce offerings and pay attention to quality improvement from places of origin end to end cop 10 coverage and shelf life management. So that we can consistently provides best shopping experiences to our consumers for example.

That's our today's production service, a fresh meat and milk had been well received by our customers our flashlight seafood category differentiate whether it's safety freshness and convenience and include now sit 70 as COVID-19.

And we have emphasized the fresh which.

All of our sales out of fresh fish and fresh seafood has been highly welcomed by the consumers, but also offer 60 S. K use for fresh flowers and our flowers sales increased by three times since launch in March this year on the other hand, our seagate products.

Like we have strengthened collaborations with leading consumer brands and top trendsetting brands by holding co marketing some pains to cultivate the consumption happens up to consumers and from the Covid pandemic, we have seen a trend that's the top brands has been shifting their sales from offline to more of the.

Online on demand channels, and we have seen there is a increasing collaboration potentials between US was the F. N C. G a major brands.

From the efforts from both the demand side as well as the supply side. We are seeing the revenue growth is accelerating and we expect our gross.

Gross to grow by around AR to be further accelerated in the three key 2021 was revenue growth estimated to be around 40% to 45% year over year basis, and we also see us accelerating our planning in the AR in the coming quarters.

Yeah.

Next question please operator.

Thank you next question comes from the line of shuttle way of Citigroup. Please ask your question.

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That's fun food could be in June.

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Sure.

Can you just kind of a human child, China without email.

I'm not sure what that particular issue.

You bet.

Thank you for taking my question My question about the.

The market development in the third quarter as we know about China.

And resurgence of Covid cases in third quarter.

Should we and a lot of C. D implemented most of the strict lockdowns. It seems the first half last year. So my question is about what did you see the challenges or opportunities does this change the market dynamics, especially in the areas of.

The interaction with users and it's just mix in terms of catalog.

<unk> Skus.

Our strategy to find to buy to fine tune or.

Accretion in order to maximize growth and also do you see any pressure on your infrastructure and logistics all the procurement. Thank you.

Yeah.

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Anyway, you call me or do you think she says D women.

It simply takes a lot of them. So you can tell you without tune census household.

Yeah, Josh on the project.

Tiger you should Oh.

So treating so Susan here's our clientele much Houston simple couldn't either T V.

You will remember that advertising deal with a torch out sort of a project.

Okay. So overall.

Overall.

Oh, that's like the overall in China.

So the Kuwait, our situation has been well controlled.

However in this year there are several cases, but it has been like a swiftly and discover then.

And controlled so so it's half like some of that positive tailwind providing to our business given that users are oh.

Be reminded I'll be more well awareness out us being like Ah Ah Ah Ah adopt.

Adopting lifestyle protection our measures.

Against like whole wheat, so people choose to not too so out that upturn and now to go to like Oh, some of the offline shopping areas to prevent like a potential like a risk so that helps them to help the users to have more adoption of online shopping trends.

Friends and they are more used to doing their grocery and fresh produce shopping from my own team on the retail platforms and this has been like are helping us to transform users as well as nurturing their habits and improving their oh. There are they are shopping like all frequencies and on the supply.

King side, we have been like Oh, well prepared Oh, AR being reacting to the to the increasing demand through our like a commodity sources as well as our service capabilities and we call it to a 222 <unk> Europe.

Our responsibilities and never a pull back and we're able to being able to fast response to some of the emergence like increased demand and this kind of attitude and secure our supply has been well received by our users as well as local governments.

And we.

We have been a week, we have received several like.

Several letters and thank you letters from the government.

And that's helping to stand while were a strong efforts during the emergence situations and we see with this kind of macro environment.

And there is an accelerating trend of online and digitalization.

Which helps us to better improve our business at the same time, our intelligent fresh market business and our retail cloud business, which is how we help to empowering the digitalization of neighborhood retail market. It's also.

Accelerating expansion speed and we are we could see a great potential in the new business as well.

She is I'll put them kind of on high amount yet how many.

Thank you Brad.

Next question.

Comes from the mild Vincent you need him.

<unk> please.

Please go ahead.

Yeah.

Well, let's see here.

Bob.

Okay.

Hey, good luck caught up now with agenda Sidney.

Yes.

I P O.

Keep it where it is.

Margin growth will backfill legit.

So Tom that you said you do not want you to see it.

And then finally and that should give us Europe.

And from your own income and just under <unk>.

But even once you do as you are trying to take away when the gross margin.

Jake.

Our.

<unk>.

It seems like the onion, we're sorry semiannual my shoes that are kind of like it was kind of like Jonathan.

The ECA.

T cell therapy that doesn't matter.

Now who have mastered the art you do kinds of it if not we'll mentioned which were quite that particular type of an interest you. She owns it put.

Put enough not E.

Digital woman.

Marty the fruits of that kind of a major chunky.

That column and swimming.

<unk> you.

Let me guess units.

But once you should want introduce a woman's egg.

Portland, Qingdao Jewish on Wingstop length, and I'm gonna things out without thinking.

Sure.

Coleman, you'll know you'd always see a visual point, though when she came during a half or so.

T G I.

Essentially you're not saying it won't geography.

Thanks, Jeff.

Since you're not chasing things pool come into <unk>.

Just without Wednesday, when income Guang, if you take a woman Jacob.

And that at the inwards income.

Keith off of Covid.

Yeah.

Thanks again.

Yes.

Okay.

Okay.

Okay.

We're not a great job.

They can take out well with them.

<unk> yeah.

Sure.

Okay.

Campbell Walmart.

Okay.

Can you hear me now.

Okay. Okay.

Cool.

Yeah.

Okay.

[noise] Gotcha, and you did say that.

Uh huh.

But after you go into Europe.

Total woman to them already like she says Oh funding.

Tell me what you said as you go through this.

Yeah, that's good for us he medicals senior Lewington.

She told food either see it actually was helpful.

Well, maybe some people will take the multi retail video.

Finally, the T cell now towards how do you like kind of how you found me, obviously cancer triage element of <unk> culture.

As you know the team I tell them that TD, the paywall woman turns out something turns out we.

What we're trying to outright full basically moshe so does that argue to Walmart.

And as you saw it in <unk>, which is you don't hesitate on.

Challenging.

<unk>, where youll farm, there's something vehicle <unk>.

So you see a material impact.

Hello.

Its own self SMTP something attempting to quit.

You'll walk you some normality its angle in Manhattan.

Because I think the TCT governments with IPD that Johan the sampling of the timber.

Quite almost the same formula.

I would say the.

Basically I'm Melissa.

<unk> <unk> <unk> and <unk>.

We've had some catch up.

So the tendency also likely going forward it turns out entirely also credentials.

It does.

Quickly with handheld.

The team.

The third pillar.

Okay. So that's it.

<unk> gross margin on a.

Year over year basis. This was mainly contributed by our marketing our Purion Archie.

Our marketing strategy for our new year round up.

Please.

Please.

Gross margin will be further reach for.

But it increased by 250 to 350 basis points and hold our corner basis Q2 thousand 21, so in mid to long time, well stick to our strategy of focusing on high value customers and actively promote our paid membership.

Of course, which features.

Membership only product selection.

As well as benefit on the other side, we will continue to optimize the product mix and increase the proportion of Seagate products private brand products as well as a mid to high end consumption upgrade category.

<unk> will also further increase the proportion of direct procurement to optimize commodity cost so as to further improve the gross margin. So in summary, it well before the the Walmart and will be for the increase.

The increase was driven by the above factors and the revenue growth is mainly driven.

We're at probably increasing transacting users. So oh, we will further optimize our marketing strategy and enhance the customer acquisition through online social network based customer acquisition and offline community based promotions to further boost the new customer growth and repeat purchases by existing customers.

The other one too.

Newton's who put their phone they're not.

Sure.

Okay woman the chance to talk to you soon so the year without a woman.

It's.

Joe could switch it turns out who don't seem to be more.

On a tour down there things that you go through.

Nah consequent tissue that yard Samsung Z Yoshida toward that 10 years to also the Samuel townships, where it allows a woman the charge that Europe would sushi machine.

Our whole cookbook.

Oh, who themselves.

Oh, great. Thank you I'll take I'll take the Seo tends to them in Denmark with a me too he Goldman.

The Saudi cookie yet.

A consequence, you had the 20 that kind of homework with omni channel, telling you towards angled shrunk or tarboosh, yeah, since and since all material science, who will go through you're creating the townships of shooting it not at all but I kind of Hollywood you do yes, and just on that one times, which is.

Welcome to the Central Louisiana.

It's a palm sitting in front of me on Monday June center, essentially unchanged with teaching them for them. That's a great touch on U box with a woman things into a year with record of yours.

That said listen so towards that is how much of the Cleveland <unk> yeah.

It seems I think that's.

The higher the trading floor.

For the expansion of our BMW business misfortune continue to focus on sustainable economic model oriented growth. So we will continue to expand our game W business in first tier second tier cities. So we believe that in the current Cds that we covered there to steel.

With the potential to to further build up our a D. M. W networks and to increase the density of our game that is and also our way of our strategy is to keep acquiring like our high value customers in existing cities and expand our business and we have already went out a amount.

Our great top 15 top tier cities in China. They are 35 cities that can build up the network and so staying for long term growth. So yeah. So we were targeting office our cities in a longtime I put that mid to long term perspective. So we think there are still room.

The penetration rates to rise and the first tier and second tier cities as the customers are have higher requirement of consumption for product quality for fulfillment efficiency etcetera, and we believe tableau motto has more advantages to fulfill this demand compared with other models on the other hand for the.

But it appears that he is that we have our intelligent fresh market. That's penetrating into this market that has helped to provide a quality product and services to the to the population in the lower tier cities. So we believe that with these two pillars.

The the BMW and intelligent fresh market business as well.

Our retail cloud business, we can take full use of our capabilities to achieve even stronger and higher quality and more sustainable growth in the long run.

Okay now with your son Nguyen.

Once you Mil Milton, though what does that guidance the Windsor.

And as you said why don't you take that.

Well as I know you're a woman.

Really kicking off with industrial but not <unk>.

So it sounds like a woman.

What do you do something that you do so.

Shop on <unk> million dollars.

This is some kind of know who we.

What I'm, saying we shouldn't.

He or she is actually in the DC.

England.

And when he said it will be quite about what you've got to you've got you've got that's only one can you just share shneidman at retail.

So guys, sorry, Arthur but that's another issue that's on my phone so I guess some investors.

Who cannot understand Mandarin.

It's not kind of understand what.

Yeah.

Two questions.

Third question I guess that so being very quick.

Brief.

They can.

My first question was about gross margin strategy.

The long term goal. My second question was about the progress into new cities and the challenges that sort of a question I just.

I just is about the user growth initiative funding in place and to get.

The view on user growth trend for second half 4043. Thank you.

Oh I see.

Oh about you go through them, but they're not quite true.

That's a good Yahoo should girls nah, she's a ton goldman's core trip, we're trying to tell.

And Youll Hydro Michelle she is also adult she shot so true though is on soybeans, which is as you said.

You contend with Giacinta no woman, Tim They won't go through the 10 dogs you shouldn't take handle.

I think at your door.

What you see is about essentially what do you think the types of work.

Good for me I'll make it a tender grocers how have within Europe that Europe.

Gotcha settlement that says you're preaching to all food quickly I know most of the conversation or something.

That's right.

I'll I'll take or pay on the time can cause which is a build out a global phase, particularly usually at Aqua, even cool who found quit no.

Hope you're doing well.

So long so.

If you go to your computers without all the facts and the others.

Well I would tell Charles city, almost kind of.

Is it kind of volatile and challenging but you've got passion tango.

So what are the things that you put on that when you're out in the Europe with charter that she's a great did something that's in the order which is a positive.

So you can fit on challenging as you go to Chicago.

Antigua Dominion, Hi, Shlomo shooter that towards that syndrome.

Got it.

Yeah, I think that's it.

I would think the cuts that you get sent on autonomy.

So the company will stick to them online social network based customer acquisition as well as offline community based promotions back to a double engine, that's driving the customer growth off the company.

And it's also have been providing proven.

With a hour in the second quarter of 2021, our newly added transacting users on year over year basis has been growing at a pace of 35% and also we are also emphasizing from <unk>, increasing the power of customer value. So our user value has also.

Moving quickly through our paid membership program for them that we can see that in the second quarter. The revenue contributed by our paid members has been increased by over 200 and around the 240% on year over year basis, and this too has been providing evidence of our users.

<unk> been active user growth strategy, and we expect the trend of our user growth will remain strong and also our efforts has been proven to be effective in the world.

Without a doubt.

Our growth strategy as well as per user value core strategies to further improve to further drive for that.

Retail gross up the company.

Great.

Excellent that next question. Please operator.

Thank you. The next question comes from the Wild Charlie Chen of China Renaissance. Please go ahead.

Okay.

Good morning.

So you go with us.

Okay.

Sure.

Correct.

Got it.

Yes.

Sounds like you guys have.

Sure.

Okay got it.

How did you charge on a hard out there.

Okay.

I hope you everyone.

Sure.

Our initiatives.

Just to pick up.

When a machine.

Okay.

Sure.

China, Okay, what's it Omnichannel journey.

That's the way.

Hey.

Uh huh.

How are you.

Uh huh.

P J.

No.

Covid, even forget found with I don't know it yeah. Thank you Sir.

Thanks for taking my questions I've got two questions here. The first one is.

Average order value, Okay C D L actually increased about 3% year on year what.

What is the.

Strategies or other initiatives that management is taking to further increase the a O.

Are you in the future. So that's the first question and the second question.

Some.

It's about the new initiatives.

The company has taken recently, including the smart vending machine and also the cooperation with J DS platform.

This too.

New channels fitting.

<unk> omnichannel strategy to maximize coverage of Europe.

We later as well as minimize possible kind about any kind of medication business. Thank you.

Uh huh.

If you go when his acquire you could hang out with you though.

Sure sure.

A woman.

Consumer in more soon.

Kansas City, and so as you go business as well, which could then Josh.

It sounds like that you eat phase II phase I am told me all legal claim against the Bill.

The chances are you're going to you think of when you would you I guess, either it's a good turnaround they don't call the golden tail that R&D the.

And I could've downtown Chicago.

Jim She goes hung.

Hum.

And with the highly on those Eagle Eagle juice, which is the Chinese government could angelic.

Fish on Youtube.

Yeah, it's a good business that you've got cognizant.

Or do they put on guidance you see.

How does your guidance for the outbound yet if unused.

Oh sure sure.

Many of you on the.

Karl Johnsen, who is the.

Oh, Gee and fill it because.

Because according to your meal and how the immune oncology outside of Europe.

Man, Oh Man Oh, yes.

As usual the condominium cause hunting vehicle, which is a womans own.

Sure just to say, yes to New York with the two local match retail deal.

What would you say do you take those two documents here that you did that she also holds its own.

Okay.

So we're kind of in the current issue.

That goes away type boxes are cheaper.

In the Wuxi.

Letting them.

Gtt's zoom or quasi sampling of 10 days or something like that you can go to the.

If you go to a shop, which is a woman that if I'm wrong.

He says that under control. So you kind of any particular synthesizer eagle jeans.

So it's.

Question as.

A L. B average cash flow, although it's very very important 40, MW model and is a determining factor for all the overall like our unit economic model and are in for me Slash, we have always been performing very well in a not a L D part and which is well.

Various industry average and it's also a guarantee that we what we are able to achieve a better unit economic model. So in terms of the supply.

Our sites that you need to have the correct.

Product mix to provide a facing to the high value customers and on the other hand.

And you also need to become the major channel and a major consumption scenario for your for your customers. So for them. It's fresh we have been working a lot.

In these two areas first we emphasized on the freshness of our fresh produce offering and to pay attention to the quality.

Ah by improvement from our places to Oregon end to end cold chain coverage as well as improving the F. M. C. G like mix, so by providing the correct and the mix of our products to our users we are able to achieve a steady growth and at the same time. We are also like accelerating and that's continuing.

Into two two to improve our fulfillment experiences to make sure we are becoming the major kernel and a major a channel that accounts for the our customers' wallet share.

Yeah.

But the other one is just a quantity of geological team.

And from Yahoo.

The majority of instances.

So of course, you know locals would that cause you to either Suzanne.

Because of the local how do you go to end up doing is calling for them coming out of that you can go to a whole bunch of Utah.

Nicholasville, Joshua young form yet if unused.

The political maybe ocean.

Yeah on the.

Since yes, since I don't think that you're going to go Oh jeez with the article.

Tim Duncan has anybody up.

There you go.

Send to the flipbook that caught you did you guys should young woman sequel, I deal with it turns on us at all.

It sounds like a cultural thing.

Right for me to say.

Yes.

So what you'll hear application.

Who can go on that and I'll use you can cope with you towards the north digit arcimboldi annual jingle.

Electrical media into Europe with T Rowe.

The Condor selling team and all of that so you got you.

Uh huh.

John the English so she says she oversaw wholesale.

The judge harshly to hockey a woman's everybody else, which alone according to GAAP.

Oh My God you're.

In doing so I'll try to squeeze that Saddam Paci said, though it's unfortunately, that's again positive things on hold until it turns out for me when I think of Europe.

All right.

Yeah, but I mean.

Okay. So oh, it's one off.

It's an important business partner and also are we have seen a great growth in the past.

So one part of the collaboration is Hum on the fresh produce in our food and our categories that we were neutralizing hours us a strength in the supply chain side the way it works.

Our himself on the.

That platform and this part has a realized very good like a gross and net sales violence and on the other hand on this fresh a P. P. That we have are just kind of high frequency and a female oriented customer base, which also we have been able to collaborate.

Cable took them out of their supply chain to provide our next day delivery services and products. So which also achieved very good growth. So on one hand that is using our genomes cafes and in combination with our supply chain and on the other hand, it's using our chocolate in combination with kingdom supply chain Bolthouse.

Switching to our collaboration potentials and achieved a great growth in the sales growth.

They are going into the <unk> to go on that.

Yeah.

Yes.

And Thats, how you would change anything that you can do sometimes it again, which is great.

Very simply simple to be about.

Our team has accomplished for them with you.

Yes.

Cool.

Now to answer the Delta was it took a year without that kind of like to Cushing you. Once you go to the other two the charter school or either you go would you choose to or your guidance are you using that to go.

Moving to the tungsten languages and looking through all of them do see or you could tell me how many you realize children.

Sure.

You should.

No. It sounds you know without it.

Are you that you need to realize I think of a partnership.

Got you your palm and she's going to Europe.

So it's easier to go to go to go through the Covid again, Joel Cahill Omega will shoot that <unk> got.

Or what is your view, okay cool so that as we got their jobs, which is a highlight to you that you would have thought on this in Europe.

I O T could.

That's a good P T communities with Honeywell she handed off to the Ocado you got into.

Net income.

Atlanta that tissue, which is with its you know realize elements and very intelligent in the.

Counsel has a real machine that they took with Qatar.

Is it steady.

I do.

Got you.

Yeah sure.

She says.

Sudan.

No.

Or do you see the agenda.

Could you tell me, what you're needing to be attack I guess you could go through the changes in the tenure, it's useful to use agenda.

Most of that suite in the intent to turn them either you got you got you got you.

Okay.

You were talking I don't use with Omega is labor.

So can I assume that that kind of a year rule.

$10, you heard with Florida.

Looking at the school or a woman she won't kind of do we like it had a titusville high sizzle to realizing synergies with the DC Internet to generics and getting me why won't you won't get into of course, you know me.

Sudan, Egypt.

They can.

Yep.

So in terms of come in and it's called Smart vending machine business that we haven't disclosed.

It's close not much in the past as it is a it.

It is a more I'll say exploration business as in the past that are in the.

Embedded in the midst fresh yeah eight that.

Because we always have the endeavor to facing the final landscape after the industry and making more like esports restaurants are.

I mean, it's called Smart vending machine is one part of that and we believe that the smart vending machines would be the next generation of coming and starts so we have been.

Ah Ah Ah Ah developed that business for for a period of time and to actively utilized on the technology side, including Iot Internet of things like data technologies and to ensure that we have on our fleet, we have a remote controlled alvardo smart vending machine.

And Oh, including like also that AI and Iot technologies that can be further formed our core technology capabilities and to be a funny utilized in our intelligent crush market and our retail cloud business. So so in summary, so this business it's more.

Exploration business with very good growth and also with good profitability and we are also emphasizing on this kind of exploration that help us to accumulate it technology core capabilities that can be but are becoming our core competencies and empower our future other business.

Hum.

And they go to Europe, which uses them.

Jewish how we're doing and tell them that center city and so again.

Danielle that's tied to how you sell in country in Europe. She's on the deemed children you Bill Young Tigers M&A, you always see in time more since launching.

You should treat on G&A you go the only.

So so the smart are those coming in school smart vending machine business is more like a 30 MW business at the at five or six years ago, and our intelligent and fresh marketing business are around two two years ago and our.

So the whole business around one year ago, it's all Oh represent already endeavor to continue to do small business model.

Innovation as well as technology innovation, that's driving the future of gross carve up the company.

[noise].

Retail.

Our next question please operator.

That's all my next questions will come from the line of Thomas Chong of Jefferies. Please ask your question.

So somehow they said why don't you tell them not just on what it human Oh no longer Lindsay.

Oh that was it you saw.

Well my existing Tucson, but you've got a cohort analysis of what you saw.

Oh sure.

With that he got a purchase frequency I E. S. P. A unfortunately.

You got a trend you'll oh.

Eat all woman.

Uh huh.

So yes, you're right.

Oh someone he saw that don't work for Ya man and woman.

They know that they'll do that.

Hum.

Oh, who does seem way soldiers frequency I E. S. P. A a couple of quick ones as long you saw that with other true banner.

Beautiful.

One woman response, yeah with that juncture.

Technology, the empowerment of women come bow tie off I'm getting anything else without the.

Jude, Ohio doses she prada.

Oh, sorry, Georgia, you can find them in the overall supermarkets so for each one.

The bond is a dual play beach volleyball.

Got it swung towards your style type of ours either for men.

This is Brian Nagel.

That's for me and my kind of woman does it bother you got a competitive edge back up a great.

Thanks management for taking my questions I have two questions.

First question is about other.

Okay miniature ministry about purchase frequency E S P.

Because in our exit.

And users and then given that all of our paid members.

Revenue supporting where we rapidly okay management also share some of the behavioral differences.

Members versus those non paying subscribers and my second question is about our socks off season. This oh.

He is a huge market with enormous oh, okay.

So and where it is.

Seeing that there.

Competition is also quite intense.

Yes.

The bar embracing the opportunities are 10 minutes I'm going to share about our key competitive edge on discipline.

In terms of our data insights.

And and and other areas and in public Columbia pick up at the R&D spending how should be our ambition our R&D costs are going.

Yes.

Two.

Thank you Thomas for your question for the first question on the L. B and the other frequency. So the company has been like the continuously to improve our E. O V. So we're providing a more like abundant product mix and the correct.

Paul makes two hour facing our value customers and we have been strengthening of our supply chain capabilities by providing like a fresh.

Our fresh meat fresh fish as well as more like a flash products as well as providing a wide range of FMC game products that serving the the user's needs.

Paul I'm consumption upgrade and this helps us to contribute to our L. B as people are adding more items to their shopping basket at each time when they are there. So and also on the frequency side. We also rolled out to somewhere else that for example, our paid membership program that we happen to continue to calculate.

It's worth that and also the revenue contributed by our our paid members has been increasing significantly and also there are other frequencies and this also help us to drive the other frequency growth and at the same time, whereas the more like a stronger supply chain on the fresh produce died that arises in the.

Calculate example, like a live fish like shrimp and that's helped us to contribute to the increase of the users like although frequency as well as they are more inclined to shop on our platform with a combination of our fresh produce as well as F. M C G and to satisfy their needs.

And for the second question, our time to our partner and CFO, how sample a long journey to answer that.

Hey, Tom.

I heard your question about the <unk>.

Retail cloud business.

Richard Cloud business is very much focused on the product optimization in implementation.

So you assemble clients at its moments and so that we can pay for wave two future expansion.

And at the same time, we're actively engaging with business partners for in depth cooperation and our retail cloud business.

As you have seen from the news we have already.

Had a strategy press conference.

And smart retail to collaborate on this business initiative.

And in addition to this I think.

As you have been very much a.

Interest in the uniqueness of our business I think it might be a three dimensions. The first why is that we are very friendly to the Ceos of our customers.

<unk>, which we offer them private traffic private domain traffic as the major solution to bring their customer from offline to online without robbing their customer to a centralized traffic platform. So in this way we sit together with them.

Power, then rather than centralize, reflecting the bigger customers.

Customers.

In the second half back so I think we're a very friendly to the CTO. Our product is very much a standardized and it is compatible with the existing system and so they can they don't have to replace the ERP.

We can be compatible with the ERP, because we focus on the application level.

On the operations rather than on the bottom level of the Eros.

And also it's very easy to deploy this setup, but because we have already standardized a lot of the operation into product, adding to automate automation driven by AI. So that it can be easily deployed in a <unk> friendly.

All employees board of seals off our customers by offering value to the three key decision maker and the like.

Users within our customers.

The retail cloud offering them.

A solution that is powerful and a friendly in the meantime, I think thats our.

Your machine nicknamed entity extensive utilization of AI and shaping the future of the smart decision, making for future supermarkets offline and online together the whole solution.

Yes.

Thank you.

Thank you for the questions in view of time constraints.

Okay.

We are going to turn to the next question from Robin I believe I thought there was a nine yeah, well turning to Robyn from Darwin.

Certainly.

Robin Your line is now open you May go ahead.

Eric why don't you tell.

Depending on what the tier one where you've got quite a one P M.

All announcing Italian shop plenty of times a year.

And SAP on their and higher on the <unk>.

And Coco atone, but anyway Tushar do you have a bunch of home so that's.

That's one comment the whole room.

That show, how we finish out the one topic you can touch.

Tango military demand.

Okay.

And Thomas.

A quarter.

How should a woman.

She thought that tends to tell them they want not that seem to be high.

Sure.

On the user acquisition cost in the second half.

After 2021 and next year.

Our specialty.

Yeah.

I am seeing some investment from they're coming to you.

Purchase players.

Decreasing in some small players have exited the market. So is there any positive impact, especially in the lower tier cities and we are meeting the competing with other often in warehouse model. Thank you.

Okay.

Okay, we expect our user and our revenue to further grow in.

Coming quarters, which is mainly driven by the increase of our transacting users in a L E.

Steve that's the cost of customer acquisition.

Second half of the year well be continuously to tweet.

It's just because of our implementation Oh pharma online social network based customer acquisition in combination with our offline I community based promotional events marketing strategies. So as you mentioned that in some of the lower tier cities that you see some of the smaller platforms like I daresay involving transfer for us.

We will continue to and we believe that with the current situation that expansion in competition with you.

The market will be more rational and the whole industry will be more focus on high quality and sustainable growth. So in a long time, we believe that there are $7 two trillion online neighborhood retail market.

Like all that well.

Several anchor trillion dollar like car platform, so providing different kind of like the value proposition covering the needs of various users from different tier cities. So the company always concentrated on our.

On the business with scalability and a stronger barriers.

Debating the final landscape, we have been like a planning for a long time in implementing our strategy with multiple business contribution, including BMW and the internet intelligent fresh market as large retail competency that's taken the full use of our core capabilities to achieve a stronger and higher.

So steady and sustainable growth in the long run. So we'll continue to focus on the quality growth as well as build up our growth strategy by targeting add the value customers in the first and second tier cities and also we will focus on the quality user and constantly improve our core capabilities and supply chain to drive the increase in spending.

All of our customers and in the lower tier cities, well more like covering the customer through our intelligent a fresh market as well as retail cloud business to cover a wider range of our customers in a wider spectrum of cities.

Thank you very helpful.

Okay.

Thank you very much with that let me hand, the call back to the Venezuelan for closing remarks.

Thank you once again for joining us today. If you have further questions. Please feel free to contact Mr. Fred <unk>.

I'll contact information provided to all of us that Oh, they keep looking them after they check I know today.

This concludes.

Today's conference call you May now disconnect. Your line. Thank you.

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Hello, Ladies and gentlemen, thank you for standing by for <unk> Limited.

2020.

One earnings conference call at this time, all participants are in a listen only mode. After management's remarks, there'll be a question and answer session.

Today's conference call is being recorded I would now turn the call over to your host, bringing Hu senior director of.

Financing of the company. Please go ahead leaning.

Thank you Hello, everyone and they've all come from MS. <unk> second quarter 2021 earnings Conference call All financial and operating results were issued via Newswire services earlier today and are available online you can also be in the earnings press released but the team that I asked section of our website at.

I R, Doug Metz fresh Dawson and.

Participants on today's call will be Mr. John machine, our founder Chairman and CEO, Mr. Jean Wall, and then MS. Catherine Chen our co chief financial officers.

Management will begin with prepared remarks, and the call will conclude with a Q&A.

Session. As a reminder, this conference is being recorded a webcast replay of this conference call will be available on the IR section of all upset.

Before we continue please note that.

This discussion will contain forward looking statements made under the safe Harbor.

Probably just on the U S Private Securities Litigation Reform Act of 1995.

Forward looking statements involve risks and uncertainties as.

As such the comments the result may be materially different from the views expressed today, but they keep a motion regarding this and other risks.

Risks and uncertainties is included in the rollout by the public filings of the company at felt well that you have to pair tastes and exchange Commission. The company does not assume any obligation to update any forward looking guidance for the mess, except as required under applicable law. Please also note that.

That means for us or these press release and this conference call include the disclosure or the and I'll, let Ted GAAP financial measures as well as non-GAAP financial measures.

Misread earnings press release issued earlier today contains a reconciliation of non-GAAP to migrate to the guest.

Marriage.

<unk> also posted a slide presentation on our website, providing details on our results what are the what we refer those results in your prepared remarks, but not refer to specific slides you are into that discussion.

I now turn the call over to our founder Chairman.

I don't see a mid September she please go ahead.

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Great.

Hello, everyone and thank you for joining our inaugural earnings conference call today.

Our union annuity our food Hall.

Maybe really Jensen, who then stock, which I'm sure catchy little machine that Cheetah Schindler Jensen.

So what I can tell you of course, the Chinese gunkel shall soil she local demand, but also to continue.

Got you.

On June 25, 2021, Ms. Fresh was successfully listed on the NASDAQ global market, an extraordinary milestone marking.

Marking to stop top our new journey as a public company on behalf of all our all of our employees and myself I would like to extend our sincere gratitude and appreciation to our new and existing shareholders for their support.

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Our union.

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<unk> October buttons.

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Judging by the Ascension to the folks in the city.

Today represents another important milestone for Mr.

MS Fresh as we reported our very first quarterly results following our IPO in the second quarter of 2021 hour or <unk> grew to RMB, two 3 billion and total revenue reached RMB, one 9 billion, an increase of more than 40% on year over year basis, as an innovator and leader in.

China's neighborhood retail industry, we remain relentlessly in the pursuit of our growth strategy targeting at the final landscape of all of the industry.

Our unique business model consists of three pillars, our pioneering on demand distributed in many warehouse D. M. W retail business, our intelligent fresh markets an hour.

Retail cloud business. This pillars works in concert to drive digital transformation across the huge neighborhood retail market in China meeting the evolving needs of consumers as we pursue our mission to help every family enjoy quality grocery at their fingertips.

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Women. This issue to ensure you two routing where you're doing more yards here.

Two new yogurt to lose all of it at all.

Commvault go through show trauma tends at home I'm sure you're going to triangulate, Tunisia, Tim BNP gather some to answer your question.

So you can anticipate some of those other food.

Our on demand BMW.

Retail business pockets to grow into the prevailing grocery shopping channel for mainstream urban consumers and first or second tier cities, our pioneering DFW solution featuring full spectrum product selections better price performance ratio and convenient on demand delivery services enables.

To efficiently provide consumers with quality fresh produce and fast moving consumer goods FMC Gs at competitive prices every day.

Digital audio our Union Central Hall.

Women's our sugarcane.

<unk> was our chance to talk to you going forward retail question, just switching quick question or something.

Finjan says, it's even though persona.

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As of June 32021, we have 625 self operated bmw's across 16 cities offering over 4000, Sku's with an average delivery time for other of 37 minutes.

We all know who union will misses on.

Thank you Andrew Goldfields anthology Linea, <unk>, Joe Jackson, and Joshua <unk> improve our motion.

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The Formula did you pick one tranche are chomping transform transform Chinese food.

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Our digital content.

Coincidentally solo computer indulges you present diverse.

In terms of customer strategy, we stick to.

Our business philosophy to pursue high quality sustainable growth, we have amplified our marketing efforts with a dual pronged approach including.

Online social network based consumer acquisition and offline community based promotional event, resulting in a 35% of year over year increase in the number of new transacting users into Q2 thousand 21. We also actively promote our paid membership program, which features exclusive member.

Remember only product selections service offerings and exclusive benefits our membership program efforts drove year to year growth of about 240% in our revenue contributed by paid members.

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<unk> grew up in Hoboken back while lumpy marathoner goodwill.

<unk> certainly in Europe.

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As we strive to strengthen our supply chain capable.

Capabilities, we remain diligent in our efforts to refine our full spectrum quality product selection on this.

Fresh groceries front, we focus on quality improvement from places of origin and to and coaching coverage and shelf life management for seven major fresh food groups, including meat fish at.

Diary, vegetables, fruits and flowers, maintaining the high quality of our fresh produce offerings and creating a superior neighborhood shopping experience with respect to FMC G. With further enhanced our strategic collaborations with leading consumer brands and top trendsetting brands employing joint marketing campaign.

Thanks to cultivate customized on demand shopping habits in the second quarter, our average value per order grew to RMB $96, one at a leading position in the industry.

Well Michelle.

Sure.

Both Europe.

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G City and so you know we don't go.

Susan.

And counting.

It was more customer adapt to an increased spending on on demand in the retail channel and with the continuous improvement of our core capabilities. We believe our on demand retail business will maintain its strong growth momentum and.

Realized long term profitability.

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Audience with <unk> syndrome.

So as soon as our personal auto insurance you saw your attention.

Where you want what you're going to go.

While the Soviet yet being truly some who don't shortened.

Moving to our intelligent flash market business. This business segment targets to transform the major neighborhood retail channel by mainstream consumers in third tier where sports tier cities leveraging retail chain operation model along with digital.

Upgrade initiative, we aim to transform offline fresh market into a neighborhood shopping while delivering a better shopping experiences to consumers, while helping marketplace merchants increase revenue and profit.

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Of course reported.

And of course, the dollar terms.

So with the conferences.

Generally the RDR Union, New youth, Social Hall will merge into sugar transferred to Europe, which provides a parallel shear zone.

In case of Union.

I'd like to highlight that our intelligent fresh market business inherently encourages.

Against neighborhood.

<unk> nine and community development, our socially responsible models garnered widespread recognition and secure the community and local government support during its development as of June 32021, we have entered into contracts to operate 48.58.

<unk> intelligent fresh market in 15 cities 34 of which have commenced operations.

Okay.

Life, either changing towards licensing.

<unk>.

It's absolutely deal with water to Toshiba.

So when it comes to $10.2 million.

We have great confidence in the future prospects of our intelligent fresh market business, we're poised to accelerate the expansion of the business segment with our 100 subsidies thousands of fresh Mars initiatives, making the intelligent flash markets business one of our significant.

<unk> growth drivers.

100 <unk>.

<unk> launches were hopeful.

Both automotive and sensors are ones that are sort of trading so Susan <unk>, causing the Washington.

Will you call that you're going to go how that go with Europe being bundled into Osaka.

<unk> central.

By way of technology empowerment through industrial Internet, our retail cloud business will help to massive neighborhood retailers across China, and lower tier cities to start their online operations, and digitalization, which will create a better shopping experience for customers and enable.

With retailers to boost revenue growth and profitability.

We will monitor our Union City Hall <unk> salary.

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<unk>, our way through the turnaround and hotel keys.

Through the widening in the mirror.

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<unk> heard towards high acuity, so latasha cannula hurdle.

<unk> is half of the year, we don't deliver 17, yet etonian through the end of 200, and so longer read 100 insurer in times in terms of SaaS of had a impact bound to tons are somehow clients routinely Cuba.

Since our union being Europe patented quality due to herself bancorp translate our income through the OTA sampling unions without Canadian <unk>.

<unk> pesos.

At our retail cloud strategy comprehensive June 2021 winter line questions.

With Tencent Smart retail division to lock, our retail cloud business, which enables traditional retailers, especially small and medium sized supermarkets to improve their digital operation capability. Thus far we have established a retail cloud collaboration with several regional supermarket chain operators.

Supported by our extensive industry know how accumulated in our one P. M. W operations and in house developed retail AI network Rang, our retail cloud business provides a SaaS platform, which allows small and medium sized supermarkets to swiftly build digital operating capabilities.

While optimizing all aspects of operations to increase efficiency, including omni channel marketing private traffic merchandising supply chain and last mile fulfillment capabilities.

So I'm here in June gaucher, treating so having agreeable to that.

Who used to a shooting so should the high.

Our teams in the Gulf of Zebra.

Total selling most of the country.

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<unk> consulting tells you can do to the Christmas season.

As long term as search and social.

Okay.

To summarize the neighborhood retail industry in China, which encompass multiple business models to accommodate diverse.

<unk> consumer needs for fresh produce and FMC is dropping in different tier cities has tremendous potential as growth is accelerating rapidly due to the wave of industry wide digital transformation, our unique business matrix consisting of on demand retail intelligent fresh market and retail cloud.

Along with our core capabilities built out supply chain enhancement technology in the value chain empowerment presents an excellent value proposition and a neighborhood retail market. We believe this winning combination will support me as fresh to achieve even stronger higher quality and more sustainable growth in the long run.

Ultimately underpinning our vision to become the leader to drive the deconsolidation of China's neighborhood retail industry.

See you at either familiar woman or close to about 10 feet.

Yes.

Well. Thank you everyone with that I will now turn the call over to our co CFO Ms. Catherine <unk>.

Ken to discuss our financial performance for the second quarter of 2021.

Thank you Mr. Qi, our GAAP results demonstrates our robustness strengthen the effective execution of our strategy solidifying our leadership position in the industry. This quarter success will allow us to explore more strategic.

The partnership and our recent listing on the NASDAQ has further reinforced our brand name recognition and Influencers in the market. We are encouraged by our second quarter results and are optimistic about our future growth opportunities now I'd like to walk you through our detailed financial results.

Total.

Net revenue reached RMB.

One 9 billion in the second quarter of 2021 compared to $1.3 billion in the same period of 2020, the year over year growth accelerated significantly to 47% net revenue grew by 23, 8% alcohol.

Quarter over quarter basis.

Our products through online platform increased by 41, 2% to RMB.

$1854.1 million in the second quarter of 2021.

RMB $1313.4 million.

In the same period of 2020, primarily driven by an increase in the numbers of others.

Other revenues reached RMB $40.4 million in the second quarter of 2021, representing an increase of 23, 6% from RMB $32.7 million in the same period of 2020.

'twenty, primarily attributable to an increase in sales of products through our convenience <unk> smart vending machine business.

Cost of revenue increased by 65, 5% to RMB $1752.6 million in the second quarter of 2000.

'twenty one from RMB $1059.1 million in the same period of 2020 was profit was RMB $141.9 million in the second quarter of 2021, representing a decrease of 56% from RMB 286.9 minutes.

In the same period of 2020.

Gross margin was seven 5% in the second quarter of 2021 compared to gross margin of 12, 3% in the first quarter of 2021 and 'twenty one.

3% in the second quarter of 2020, the decrease was primarily on.

Attributable to increasing discounts coupons and incentives offered to customers.

Operating expenses were RMB $1635.5 million in the second quarter of 2021 compared to RMB $623.7 million in the same period of 2020 fulfillment.

Expenses were RMB $541 million in the second quarter of 2021 compared to RMB $342.2 million in the same quarter of 2020, primarily due to an increase in the number of orders fulfilled and an increase in the number of product delivery.

Warehouse operations quality control and customer service staff for further enhancement of our fulfillment capabilities.

Fulfillment expense as a percentage of net revenue was up was 28, 6%.

Non-GAAP basis in the second quarter of 2021 compared to 28.

Eight 8% in the first quarter 2021, and 25, 4% in the second quarter of 2020.

Sales and marketing Basw RMB $304.7 million in the second quarter of 2021 compared to RMB $179.2 million in the spirit of 2020.

The increase was primarily due to an increase in advertising and marketing and promotion expenses as reporting method and targeted advertisement in residential neighborhoods to acquire new customers and retail existing customers to retain existing customers as well as the increase in share based compensation recognized upon.

On the completion.

Of our initial public offering in June 2021.

General and administrative expenses were RMB 396 million in the second quarter of 2021 compared to RMB $58.7 million in the same period of 2020, the increase was mainly attributed.

Attributable to the increase in share based compensation recognized upon completion of our initial public offering in June 2021, as well as an increase in the number of Magnum staff for new business initiatives.

Technology and content expenses were RMB 393, 8 million in the second quarter of 2021.

<unk> and RMB $83.6 million in the same period of 2020. The increase was mainly due to an increase in share based compensation recognized upon completion of our IPO as a result of the foregoing losses from operations were RMB.

$1493.7 million.

Second quarter 2021, compared to a loss of RMB $336 eight minutes in the same period of 2020 net loss was RMB $1433.2 million in the second quarter of 2021 compared to RMB 339, 8 million in the same quarter.

2020.

Non-GAAP adjusted net loss was RMB $888.9 million in the second quarter of 2021 compared to adjusted net loss of RMB $325.4 million in the same period of 2020 basic and diluted net loss per ads were both.

And then RMB 30, 387 in the second quarter of 2010.

2021, compared to basic and diluted net loss of RMB 14, four night, yes in the second quarter of 2020.

Non-GAAP basic and diluted net loss per ads were both RMB 18.

Eight four in the second quarter of 2021 compared to basic and diluted net loss of RMB 10.08, yes in the second quarter 2020 as of June 32021, the company had cash and cash equivalents restricted cash and short term investments.

Of RMB 3000, 427.3 minutes compared with RMB $1041.5 million as of December 31, 2020 increase was primarily attributable to net proceeds received from the company's IPO in June 2021 in the second quarter of two.

2021, the net cash used in operating activities was RMB 698 minutes now turning our business outlook and projection.

For the third quarter of 2021 the company currently expects the net revenue to be in the range of RMB 2000.20 million.

<unk> to RMB 2090 minutes, representing a year over year growth of accelerated growth of approximately 40% to 45% and expects gross margin to improve by 250 basis point to 350 basis points quarter over.

Quarter basis.

This outlook is based on our current market condition and reflects our preliminary estimates of market and operating conditions and consumer demand all of which are subject to change without our innovative business model and core technology capabilities, we will continue to fulfill.

Our mission to help every family enjoy quality groceries at their fingertips. This concludes our prepared remarks, well now open the call to questions. Operator. Please go ahead.

Thank you ladies and gentlemen, we will now begin the question and answer session to ask a question. Please press star one.

For our name to beyond that if you will.

You can see a request please press the pound.

Okay.

Okay.

For the benefit of all participants on today's call. If you wish to ask questions to management in Chinese Please see immediately repeat your questions in English.

Michael off the back of our earnings call.

Please ask no more than two questions at that time should you have follow up questions. Please press star one again to go back into the queue.

Next question comes from Andre Chang of Jpmorgan. Please go ahead.

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Question and income growth on a successful IPO and the decent growth.

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Paul.

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Retail call again.

Mark.

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So Michelle is here.

Harsh enough will launch in the U K.

Could you.

There are though and even though wouldn't you should oh, so I will translate the neighborhood retail market in China is a massive market in terms of scale, we're seeing accelerating digitalization of the market.

Especially a stronger growth in online sales up fresh produce and food.

Our distributed in many warehouse on demand retail business will continue to focus on quality growth and build upon our growth strategy by targeting at the value customers in the first and second tier cities with a focus on quality.

Users and constantly improve our core capabilities and supply chain to drive increasing spending by our customers and better operational efficiencies.

And Meanwhile, our multiple business mm mm business strategy help us to better position for the future growth of the market.

Our Intel.

Elegant fresh market business, it's a social friendly business that has been supporting the local merchants to better like a support their business, helping them to increase their income and providing jobs and also empower them with digitalization capabilities and this has been fully recognized by the local government.

And local society.

And at the same time, our retail club business is empowering our local like retailers and helping them to better grow and with the help from the Detroit Dacian tools. So our unique business matrix of our Rocky Mountain retail in the first and second tier.

Intelligent fresh market in the meat in a mid small sized cities and our retail cloud business that empowers supermarkets, well, it's supporting this rush to achieve even stronger and higher quality and more sustainable growth in the long run.

The other one to see growing enrollment.

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Sure.

We have entered into a new phase of growth on the supply side, we continue to enhance our core capabilities and supply chain to offer quality products from all categories on one hand, we emphasize the freshness of our fresh produce offerings and pay attention to quality improvement from places of origin end.

10 coverage and shelf life management. So that we can consistently provides best shopping experiences to our consumers. For example, our today's productions here with a fresh meat and milk has been well received by our customers our flashlight seafood category differentiate with its safety.

And two any freshness and convenience and include now sit 70 as Covid.

We have emphasized the fresh which like our sales out of fresh fish and fresh seafood has been highly welcomed by the consumers, but also offer 60 S. K use for fresh flowers.

Safe 10 hour flower sales increased by three times since launch in March this year.

The other hand, our seagate products, we have strengthened collaborations with leading consumer brands and top trendsetting brands by holding co marketing some pains to cultivate the consumption habits.

And from the Covid pandemic, we have seen a trend that's the top brands has been shifting their sales from offline to more of the online on demand channels and we have seen there is a increasing collaborations potentials between US was the F. M C. G a major brands.

And.

Sequentially from the efforts from both the demand side as well as the supply side. We are seeing the revenue growth is accelerating and we expect our growth to grow by around two before that accelerated in the three key 2021 with revenue growth estimated to be around 40% to 45% year over year basis.

And we also see a further accelerating our planning in the AR in the coming quarters.

Yes.

Okay.

Next question please operator.

Thank you next question comes from the line of Shuffle of Citigroup. Please ask your question.

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Thank you Josh I'll be keeping my retail right now.

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Should we do you can you just kind of as you mature China without email.

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Yes.

Thank you for taking my question.

You know about.

Or market development, you can third quarter as we noted that China had a resurgence of Covid cases in third quarter and a lot of C. D implemented amongst the strict lockdown income stream says first half last year. So my question is about what did you see the challenges or opportunities.

Does this change the market dynamics.

Really in the areas of.

The action was users and that's just mix in terms of category an excuse.

Our strategy to find to buy to find through Europe.

Accretion in order to maximize the girl on the Ocean.

Do you see any pressure on your infrastructure and logistics all the program. Thank you.

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George also Gil Y'all Amir so they'll often do a woman shows up between Carnegie bulk on the journey.

They're telling me you called out quicker.

Oh by member what do you consider the streets with Vegas is that going to flow.

Now would you don't hear that kind of with Joshua woman's ago.

And how hard she said the project now be like only or would you. Then she says Oh do you want to go to simply pass how God, even childrens you argue with that joint venture hotels.

With jazz food genre project, even if you guys had good I got you.

If at all.

So treating.

So Susan Here's how hard you all know Jesus who couldn't either T V.

Then you will move to the evolution here with the Toyota project.

Okay. So.

Overall.

I mean kind of like the overall like in China, the the Kuwait a situation.

Situations has been well controlled.

However in.

This year there are several liked those cases, but it has been like a swiftly in discover then controlled so so it has some of the positive tailwind providing to our business given that users are a kind of constantly.

Be reminded I'll be more well awareness out stuff the being like Ah Ah Ah Ah adopting like a protection.

Our measures are against like Covid, so people choose to not to go out that often and not to go to like Oh, some of the offline shopping areas.

To prevent like a potential like a risk so that helps them to help the users to have more adoption of online shopping trends and they are more used to do their grocery and fresh produce shopping from my own team on the retail platforms and this has been like that helping us too.

Transform users as well as nurturing their habits and improving there are other oh theyre shopping like all frequencies and on the supply chain side, we had been like them are well prepared for it.

<unk> been reacting to the to the increasing demand through our like.

Commodity sources as well as our service capabilities and we call. It to a 222 guaranteeing your responsibilities and never pulled back and we're able to being able to fast response to some of the emergence like increased demand.

And this kind of attitude and secure our supply has been well received by our users as well as local governments.

And we have our being a REIT we have received several like Oh.

Several letters and thank you letters from the government and that's.

The marking to stack, where our our strong efforts during the emergent situations and we see with this kind of macro environment and there is an accelerating trend of online and digitalization.

Which helps us to better improve our business at the same time our.

How palette and fresh market business and our retail cloud business, which is how quick help to empowering the digitalization of neighborhood retail market is also accelerating its expansion speed and we are we could see a great potential in the new business as well.

Yeah.

She is a put on kind of an email.

Thanks again.

Yeah.

Next questions comes from the mild Vincent.

Pam and cool. Please go ahead.

Yeah.

Thank you.

All of them.

Okay potential.

Hey, good luck caught up now with agenda Sidney.

Yes.

Sure.

So Martin who is going to grow somewhere thereabouts.

Sometimes that you say you do not want that once you see it.

I mean that you shouldn't you shouldn't they.

Yes.

Yes.

And on the Permian.

Aviva once you do it if you're buying them giggled when the gross margin.

Morning, David.

Okay got Union, we're sorry somebody will buy shoes.

Kind of like Jonathan.

You bet.

T cell therapy that doesn't.

Now let me ask you two questions as Bob mentioned, we completed a pretty good job on it.

She only take a put enough not digital woman.

A multitude of things that I kind of a 120 tons that Coleman.

But when things are not equal.

You've got some new casino Dr are the ones you should want.

Four months ago, Portland, the Kinder Jewish on Wednesday, when Sam I'm going to thank you guys are thinking.

In the future.

Local and then you'll know you've obviously had Europe once the once you can get.

Sure Peter.

Definitely potentially youre not doing yoga franchise.

No.

We do see some things.

At this time.

Once you do you see as your appointment.

Just without Wednesday guanines.

So I'm going to take a woman that's embedded.

What's inbound traffic.

Keep up with Covid.

Yeah.

Okay.

Good.

Okay.

Okay.

Great.

Based on what we're going to need.

Yeah.

I wish you well.

Yeah.

Okay.

Campbell Walmart.

Oh I see.

Okay.

Uh huh.

Let's take the first can you hear me now.

Okay, Okay cool.

Okay.

[noise], Oh gosh, that's a good tee well huh.

No.

Oh boy.

So, but after you go into Q.

Total woman Archie do the ammonia that consciousness, Oh pardon me.

You said, you're going to get checked out, let's say to us that you may consider doing things on the cheap.

On food Cheetah detached unions I would put it well maybe you do that some people will say memorial day Julio.

So.

That's one two how do you like kind of how you found me I'll be quick Jensen huge element in <unk> culture to Europe with it you don't see in Florida.

It's easy to take one woman something we're.

What we're trying to outright.

And.

And this has always been competing with.

I just didn't know.

Okay.

A challenging comp.

Yeah, where youll pharma, there's something to you go you go quite shocking you do them at three O P. In bad times in the Tempe payroll, a golden triangle down shellfish, ANZ P&I something that no.

The challenge with the kind of thing.

What are some of the multi deciding on behalf of John.

Okay got you good TCT governments with IPD that youre talking about them, but that's almost the size of the formula.

So basically I'm Melissa.

Chico Chico's subject they go to Europe.

This woman and go through the materials.

With that she shouldn't gotcha.

Sooner than dogs are also likely to go with it turns out that they also could enjoy that hit us in the sense.

There's a woman a quickly behind all the debt you can see in there you go.

The two of them.

Okay. So the decrease in the gross margin on a year over year.

This is mainly contributed by our marketing our Purion I'll check.

Our marketing strategy for our new Roundup gross space, we expect that the gross margin will be further reads for increased by 250 to 350 basis points and hold our corner basis Ricky.

<unk> 2020.

Basis, so in mid to long term well stick to our strategy of focusing on high value customers and actively promote our paid membership program, which features will save our members only product selection.

And offerings as well as benefits on the other side well continue to optimize the product mix I mean.

One is the proportion of FMC products private brand products as well as a mid to high end consumption upgrade category products will also further increase the proportion of direct procurement to optimize commodity costs. So as to further improve the gross margin. So in summary at.

But the the Walmart and will be for the AR increase that was driven by the above factors and the revenue growth is mainly driven by increasing transacting users. So a.

We will further optimize our marketing strategy and enhance the customer acquisition through online social network based customer.

Beef and offline community based promotions to further boost the new customer growth and repeat purchases by existing customers.

Yeah, you want to call your attention to the polygon found yet.

Sure.

Okay women they tend to talk to you soon so the year wish our women's shoes.

They shouldn't pizza dough Jensen, Oh could sushi it turns out who don't seem to be more changes on a tour down there that you could put it the consequent tissue that yard Samsung Z Yoshida toward that opinion to also that Samuel townships real older woman the judge the Yahoo Suzhou Chongqing.

Uh huh.

Who themselves Oh, great thing Gotcha Gotcha.

Understood them and do you want me to keep government and the Union does Sheldon quota yet now.

<unk> do you have the 20 that kind of homework with all of them the chance to talk to you towards and our trunk or.

Tarboosh Janssen since Orange.

World Class, who will go through.

Creating a torturous Eugenia, that's all but I kind of hold through the year.

At all times, which is a high often go to simple convenient.

Palm sitting in front of me on the day to send a sensible trade show them, what we're teaching them for them. That's a great touch on Europe Barclay woman.

He was the Toyota water usage.

That said listen to what that is how would you go.

Yeah.

It is integral to their opinion.

For the expansion of our BMW business East West continues to focus on sustainable economic model oriented growth so well.

So I'm going to expand our game W business in first and second tier cities. So we believe that in the current cities that we cover there's a still a great potential to to to further build up our a D. M. W network and to increase the density of our BMW and also our way of our strategy.

Kentucky acquiring like our high value customers are in the existing cities and expand our business and we have already wrench out are among the top 15 top tier cities in China. They are 35 cities that can build up like the new network and sustain for long term growth. So.

So we were targeting.

East office.

Our cities are in a long time I put that mid to long term perspective. So we think there are still room, but the penetration rates to rise in the first tier and second tier cities as the customers are have higher requirement of consumption for product quality for fulfillment efficiency.

And we believe M. W. Motto has more advantages to fulfill this demand compared with other models on the other hand for the lower tier cities that we have our intelligent fresh market. That's penetrating in this market that has helped to provide a quality product and services to the to the population.

Actually the lower tier cities. So we believe that with these two pillars.

The the BMW and intelligent fresh market business as well as our retail cloud business. We can take full use of our core capabilities to achieve even stronger and higher quality and more sustainable growth in the long run.

Shane.

Thank you Mel Watt is on Wednesday.

No no no what you thought the Windsor.

Once you said why don't you take that.

You shouldn't able manage its.

It's actually kicking off with industrial.

I don't you shouldn't say a woman.

Or is there something that you do so going to your shop on AG minion, no significant element to them.

Oh, Oh well.

I'm, saying, we shouldn't have done that.

Would he or she has that changed.

England sampled.

Quite a lot what you got.

That's all one can you just.

Five minute design wins.

Uh huh.

So sorry outdoor.

The issue with that.

No.

I guess some investors.

Who cannot understand Mandarin.

It's not kind of understand what I just asked but that's a.

Two questions.

And the third question I guess that so being very quick.

Brief.

They can you face is my first question was about the gross margin.

Imagery and the long term goal. My second question was about the progress into a new cities.

The challenges Yeah third question I, just asked is about the user growth initiatives putting in place.

But the view on user growth trend for second half 4043. Thank you.

Okay.

Oh I see.

Uh huh.

I'll go about you go through them, but they're not quite true.

On government that'd be good.

Who should a girl with no excuse the pun goldmans has quadrupled.

A couch and Youll harder since I'm sure Jill Shea shot so true.

His own sharleen, she knows what she says here that you contend with that team.

No woman to them, they're going to go through the same docs you shouldn't pay tango Ah at your door.

He is a beneficial way do you think the pace of when you get a good chunk.

But for me I'll make it a two grocers how have within Europe.

Doctor settlement.

Sure sure.

So you're going to fulfill most of the conversation or something.

That's right.

I'll take the kids to you on the timing for which is a pure dollars local faithful, particularly G really at Aqua, Ian Cook or Val quit no. It's in the Aussie dollar.

That industry.

So new so.

That's a good point because with all of that because obviously, that's a real agricultural eventually they'll move kind of quip also unchanged, even though you've got passion tango.

On the phone so with anything else that Europe will show you put on that figure out what are they doing.

Gotcha.

Great.

She says Baltic Okay.

He knows he can.

It should hold up.

Antigua Dominion High school nuclear Yoshida tied towards a syndrome.

Got it.

How long it will take a cut that you get sent on autonomy.

So the company will stick to them online social network based customer acquisition as well as offline community base.

Turning back to a double engine, that's driving the customer growth off the company and its also has been providing proven by hour in the second quarter of 2021, our newly added transacting users on year over year basis has been growing at a pace of 35% and also.

Also emphasizing from a increasing the customer value. So our user value has also been increased through our paid membership program for them that we can see that in the second quarter. The revenue contributed by our paid members has been increased by over.

Also wondering around the 240% on year over year basis, and this too has been providing evidence of our user growth you pack them user growth strategy and we expect the trend of our user growth will remain strong and also our efforts has been a proven to be effective and will kind of continue with that.

Toyota growth strategy as well as per user value go strategy to further improve to further glad for the vitro girl stop of the company.

Yeah.

Excellent that next question. Please operator.

Thank you. The next question comes from Charlie Chen of.

The Renaissance. Please go ahead.

Good morning.

Yes.

Uh huh.

They own them.

Oh gosh.

Oh, I'm kind of Europe.

Yeah.

Uh huh.

Okay Gotcha.

Got it.

How does your choice.

I gotcha.

Yeah.

Our initiatives.

That's helpful.

Bob Gwin diminishing, Ohio.

Okay.

Sure.

China, Okay close at all.

I mean I've had to deal with.

And that's a shame.

But I think again, what you got.

Okay.

Uh huh.

Yeah.

Yeah.

Cut what do you foresee I found it I don't know what to do.

Yeah. Thank you so.

Thanks for taking my questions I've got two questions here. The first one is that right.

The average order value. Okay C. D E O V actually increased about 3% year on year what is the.

The strategies or other initiatives.

So management is taking to further increase the future. So that's the first question and the second question is.

It's related to the new initiatives in.

The company has taken recently, including the smart vending machine and also the cooperation with JD as a platform.

So how does this to you.

New channels fitting.

Omni channel strategy to maximize coverage of your consumers as well as minimize possible kind of others.

Our Europe business. Thank you.

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Do you go when his acquire you could on jobs, which are the chips.

Tissue at a woman to this OEM more see the chance to talk to you sitting so I think the business is how would you do it could then Josh.

And then you eat phase one phase I'm, telling you all that you've acquaintance appeal.

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The maybe we shouldn't that could that guys are used to treat yard and Jim as it goes along with it.

It's all of the hydro energy local Eagle juice, which answer Timna triangle when they go they could angelic.

Refresh on Youtube.

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Holiday you got to sit down and tell me. It is on me as a schedule to medium mail G on the Eagle <unk>.

<unk>, you'll recall a genius.

So as.

To your email.

Cause immune oncology outside of Europe.

Months management culture, as we go through future or the green yeah of.

Of course, I'm in vehicle, which is a woman that teenagers today, yeah, I sentences to New York water to local match you though.

So do you think was truly a mix issue that you did that shoot yourself Algonquin.

Hum.

So if we kind of in the current issue that Galway hypoxia Sergipe.

And in Chile.

Natasha.

GTT zoom or quasi some <unk>, some pause or something of shingles shingles.

Go to a shop or do the woman.

And she said.

Got it under control so you kind of retail.

Oh, there you go Indians.

So it's a very good question as.

A L V average price, although it's very very important for BMW mono and is a determining factor for all the overall.

Youre not economic model and in if I Miss Flash, we have always been performing very well in a not a L D part and which is well above industry average and it's also our guarantees that we were able to achieve a better our unit economic model. So in terms of the supply.

Site.

Like that you need to have the correct up product mix to provide a facing to the high value customers and on the other hand, you also need to become the major channel and the major consumption scenario for your for your customers. So for them. It's fresh we have been working.

Like a lot in.

In these two areas as far as we emphasized on the freshness of our fresh produce offering and to pay attention to the quality improvement from our places to our region and to and cocaine coverage as well as improving the S. M. C. G like mix, so by providing the correct mix.

Working on products to our users we are able to achieve a steady growth and at the same time. We are also like accelerating and that's continued to two two to improve our fulfillment experiences to make sure. We are becoming the major channel and a major a channel that are accountable to our customers.

Wallet share.

Yeah.

The other one is just a great.

So I'm going to call me at home.

Oh go towards if I'm introducing susie.

So of course, you know locals would have what you need us Virginia.

The local Ocado, you go tender and doing it for them.

Customer you go to a whole bunch of Utah.

Oh, because let's be honest with you on the phone yet if unused.

Can go or maybe Osha and dot all the gel in the.

Sentience Supervisors regulatory that you go Oh jeez with the article minions Theodore Kim Duncan has anybody Oh man you Hugo.

Are they into the could look like what you did you guys should young woman quite a year with us and don't use about three times bigger cultural leeway for them and she says you call you'll hear a pension.

We'll go can go in there and I'll use you can cope with you towards the north digit arcimboldi Regal.

Yohji convenient.

So you're going to go and do something no one or two that you go to the dark dark either Johnny English and so she says she oversaw wholesale take.

The judge harshly to hockey or maybe what else I can turn the corner.

Welcome to the Columbia and doing so I'll try to not sit on pacifico thoughts like what you know you guys have been positive phase I was hoping you could send out.

With me is something we like to Europe.

Yes, I mean.

Okay. So it's one of our important business partner and also are we have seen a great growth in the past. So one part of the collaboration is Oh no fresh.

Is that enough food and Oh categories that we work neutralizing hours us a strength in the supply chain side, we were able to sell on the build out that platform and this part has a realize very good like our growth in the sales fallen and on the other hand, our Ms. Fresh a P. P that we have.

Could you just kind of high frequency and a female a female oriented customer base, which are also we have been able to collaborate with kingdom on their supply chain to provide our next day delivery services and products. So which also achieved very good growth. So on one hand that is.

Oh genomes traffic and in combination with our supply chain and on the other hand, if using our chocolate in combination with kingdom supply chain. Both had very good Oh collaboration potentials and achieved a great growth in our sales growth.

They are going into the <unk> to go on that.

Using.

Yeah.

Yes, there you go.

I'm curious how you would change anything that you can you know it seems like every year, which is equally morphine boosted probably about.

The only thing housing combo taught us anything.

Now onto the telco would take a year without that kind of like to Cushing or would you go.

Neither do the charter school.

You go would you choose issue or your guidance do you assume that you're good to go.

At the end of the tungsten languages in Laguna Lucy or you go to them and show how you realize the potential of poultry the eastern corn and wheat.

No.

Children with allergy shots that you need to realize I think the fact that she should do excuse me got cheap elements you can see Europe okay.

Teachers are too good to go to go through the chicken again, Jordan, who will shoot Puchu goggle would you be okay with that.

As with other jobs, which is a highlight to you that's useful.

Do this I would have thought on this in Europe.

I O T Hood, particularly too much of a T T phone me and accusing tenuous you shouldn't do on kind of the Ocado you got into in the woodlands.

So the planning now.

He's with us whether it's you know realize elements and good intelligence.

Our council has a real machine that's simply a catch all.

Yeah.

Good idea.

I know those vehicles.

Yeah, Julian it's either excuses.

Consider also kind of Philadelphia and Bob what do you see the tender.

Could you tell me what you're neither you attack that yes, you could go through the transaction the tenants useful they use it again.

Suzanne.

Is it in terms of you're going to drill them either you got you got you got you got you got.

You bet, Yeah, Jason Kenney go year widget on 20, I don't want you said to me the big Labor soon.

I kind of Oh, yeah.

A $10 per quarter.

Nothing of the tool.

So a woman she she won't kind of be realized.

The Peninsula high says well do.

Realizing he thinks he is with the DC the internet to generics.

Why you're being so close you know me sit down with you would you look I'm going to membership.

So in terms of come in and it's called Smart banking machine business that we haven't disclosed not much in the past as.

Yes.

It is a more exploration business as in the past that are embedded in the midst fresh yeah. Eight that was always happening endeavor to facing the final landscape of the industry and making more of like a explored retrans, so <unk> smart vending.

It is one part of that and we believe that the smart vending machines would be the next generation of convenience store. So we have been like Ah Ah Ah Ah came out of that business for for a period of time and to actively utilized on the technology side, including Micah I O T.

Machine out of things like data technologies and to ensure that we have oh, we have a remote control alvardo smart vending machine and oh, including like Oh, So that AI and Iot technologies that can be further formed our core technology capabilities and to be.

Interpreting it utilized in our intelligent fresh market and our retail cloud business. So so in summary, so this business, it's more about exploration business with very good growth and also with good profitability and we are also emphasizing on this kind of exploration that help us.

So accumulated technology core capabilities that can be further becoming our core competencies and empower our future other business.

Hum.

And they go to the year, which isn't true.

Jewish out.

Yeah, and tell them that sounds it sounds you're sitting so in Europe.

So.

That's a good try telling you show and country mix you don't deem children, you're so young that goes in there you're always in a time motion function, where it's useful to treat him telling me you go the only.

So so the smart are those coming in school smart vending machine business, it's more like Oh.

The BMW business at the at five or six years ago, and our intelligent frac market business are around two two years ago, and our retail composite around one year ago. It's all oh represent our endeavor to continue to do more business model.

Innovation as well as technology.

Innovation, that's driving the future of gross carve up the company.

Yes.

Yeah.

Okay.

Our next question please operator.

That's all my next questions will come from the line of Thomas Chong of Jefferies.

Please ask your question.

So I was like Oh, Oh, They said why don't you try them Oh, what it human Oh, no longer Lindsay I think he's got a song Oh that was it.

You saw a woman assisting Tucson, but you've got a cohort analysis, because he's got those suitable because they know they're going through.

Yeah.

Perfect.

But E S P a.

But you got a trend you'll go up from there to eat all woman.

Okay.

So yes, you're right.

Awesome when you saw that sure Cooper for Europe.

And Oh.

They know that.

Sure.

It should be crumbling.

Those who have seen me dossiers.

E S. P. A a couple of Cleveland he thought that you would all be true banner during COVID-19.

Wonder woman stance that you have with that.

Oh sure Oh technology, the empowerment of women combo, Jai I'm getting anything else.

Uh huh.

Oh those are cheap father pay on that.

You can find them in.

So supermarkets.

The bond is it usually beach volleyball, I was hoping you sound like one of your children doses of.

Well this is Brian Nagel.

That's for me and my kind of woman does it bother you got a competitive.

Hi, Ashwin.

Great.

Oh, Thanks management for taking my questions I have two.

Two questions. The first question is about other cohort analysis, Okay miniature ministry about the purchase frequency of E. S. P. A.

We caution.

And users and then.

But it is given that all of our paid members. Our revenue is growing very rapidly. Okay management also share some of the behavioral differences Oh.

Or the paid members versus those non paying subscribers and my second question is about our socks off season. This oh.

He is a huge market.

Oh enormous potential.

Is that the competition is also quite intense.

Yes.

British and opportunities or 10 minutes I'm going to share about our key competitive edge on discipline in terms of our data insights and.

And and other areas and in public Colombia, if we got to the R&D spending Uh huh.

Ambition of our R&D costs going forward. Thank you.

Thank you Thomas for your question for the first question like on the Oh and the other frequency.

So the company has been like a continuously to improve our E. O V. So we're providing a more life abundant product mix and the correct call. It makes to our facing our value customers and we have been strengthening of our supply chain capabilities by providing like a fresh.

Fresh meat fresh.

<unk> as well as more like a flash products as well as providing a wide range of M. C. D products that serving the the users' needs for consumption upgrade and this helps us to contribute to our L. E. As people are adding more items to their shopping basket at each time when they are there.

And also on the frequency side, we also rolled out to somewhere else that for example, our paid membership program that we happen to continue to calculate that and also the revenue contributed by our our paid members has been increasing significantly and also their older frequencies and this also help us.

So the older frequency growth and at the same time, whereas the more like a stronger supply chain on the fresh produce died that arises in the US for example, like a live fish like shrimp and that's helped us to contribute to the increase of the users like although frequency as well as.

Took are more inclined to shop on our platform with a combination of our fresh produce as well as F. M C G and to satisfy their needs.

And for the second question, our time to our our partner in Seattle, how sample a long journey to.

Yeah, So hey, tomer.

Ah I heard your question about the <unk>.

The retail cloud business.

All of which are cloud business is very much focused on the product optimization and implementation for several clients and its moments and so that we can pay for wave two future expansion.

And at the same time, we're actively engaging with business partners for in depth cooperation and a retail cloud business.

As you have seen from the news we have already had a strategy of cross conference with Tencent Smart retail to collaborate on this business initiative.

In addition to this I think.

Ah as you have been very much a.

Interest in the uniqueness of our business I think it might be a three dimensions. The first why is that we're very friendly to the Ceos of our customers we offer them private traffic private domain traffic goes to major solution to bring their customer.

Inc from offline to online without robbing their customer to a centralized traffic platform. So in this way we sit together with them.

Power, then rather than central actually collecting the bureau customers.

In the second half back so I think we're a very friendly to the CTO our product is very.

Customer finalized and it is compatible with their existing system and so they can they don't have to replace the ERP.

We can be compatible with the ERP, because we focus on the application level on the operation rather than on the bottom level off the profit.

And also it's.

Stacy to deploy these sets of it because we have already standardized a lot of the operation into product, adding to automate automation driven by AI. So that it can be easily deployed in it.

It's friendly to employees board of seals off our customers by offering value to the three key divisions.

Very eager and the like.

Users are within our customers are the retail cloud offering them.

A solution that is powerful and friendly in the meantime, I think thats our view.

The nickname entity extensive utilization of AI and shaping the future of the smart.

You can make decision, making for future supermarkets offline and online together as a whole solution.

Yes.

Thank you.

Thank you for the questions in view of time constraints I'll now turn the call we're going to turn to the next question from Robin I believe that's a nine yeah.

Mark will turn to Robin from Delmarva.

Certainly Mr. Robin Lu Your line is now open you May go ahead.

Eric why don't you tell.

Depending on what the tier one where you got quite a one P. A.

Sure plenty of time for us.

Women shop online higher on an odd and Qualcomm.

Yeah.

Josh I'll give you a bunch of home.

One comment the whole room.

If you can show highlights that show that one chart, though you can touch Chicago military demand.

Okay.

In terms of the quarter.

A month ago.

Tom you talked about.

Tend to tell them they want to us I think somebody down the hall.

Could management share a bit on the user acquisition cost in the second half.

After 2801 and next year.

Especially we have to see where.

We're seeing some investment from they're coming to you.

Purchase players.

Decreasing.

Players have exited the market. So is there any positive impact, especially in the lower tier cities and we are meeting the competing with other finance warehouse model. Thank you.

Okay, we expect our user and our revenue for two further rollout in the coming quarters, which.

At some point even for them by the increase of our transacting users an L b we'd be.

Steve that's the cost of customer acquisition in the second half of the year well be.

<unk> D to decrease.

Oh wait just because of our implementation of our online social network based customer acquisition.

It's mainly nation with our offline like community based promotional event marketing strategies. So as you mentioned that in some of the lower tier cities that you'd see some of the smaller platforms. Like I guess are you modeling trends there, but for us like I will continue to and we believe that with the current situation that expansion.

In position.

In a market will be more rational and the whole industry will be more focus on high quality and sustainable growth. So in a long time, we believe that there are $7 two trillion online neighborhood retail market that that well provide.

I have several like a trillion dollar like car platform so providing.

A complete different kind of like the value proposition covering the needs of various users from different tier cities. So the company always concentrated on our on the business with scalability and a stronger barriers. So facing the final landscape. We have been like a planning for a long time and is implementing a restructuring.

Riding with multiple business contribution, including BMW any internet intelligent frac market as well as retail club business. That's taken the full use of our core capabilities to achieve a stronger and higher quality and sustainable growth in the long run. So we will continue to focus on the quality growth and yours.

Scrap our gross strategy by targeting at the value customers in the first and second tier cities and also we will focus on DAU quality user and cause constantly improve our core capabilities and supply chain to drive the increase in spending by our customers and in the lower tier cities well more like covering the customer through our intelligent.

Our fresh market as large retail cloud business to cover a wider range of our customers in a wider spectrum of cities.

Thank you very much.

Cool.

Yeah.

Thank you very much with that let me hand, the call back to the management for closing remarks.

Okay.

Thank you once again for joining us today, if you have further questions. Please feel free to contact much faster.

I'll contact information provided on the website they keep looking them after they check.

Today.

This concludes today's conference call you May now disconnect. Your line. Thank you.