Q2 2021 Dada Nexus Ltd Earnings Call

[music].

Good morning, ladies and gentlemen, and thank you for standing by for that is second quarter 2021 earnings Conference call.

This time, all participants are in a listen only mode. After the management's prepared remarks, there will be a question and answer session. As a reminder, todays conference call is being recorded I will now turn the meeting over to your host for today's call Ms. Caroline Dong head of Investor Relations for Dodder. Please proceed.

Your line.

Thank you operator, Hello, everyone and thank you for joining us today, our second quarter 2021.

At what stage.

And it is available on our IR website at IR Dot dot.

And as long as envelope newswire services.

On the call today from data, we have missed the food pie Chairman and Chief Executive Officer, Mr. Chen Chief Financial Officer.

And Mr. Jean Young co founder and Chief Technology Officer.

And Mr. <unk> will talk about our operations and company highlights followed by Mr. Chen who will discuss our financials and guidance. They will all be available to answer your questions. During the Q&A session that follows.

Before we begin I'd like to remind you that this conference call contains forward looking statements as defined Angus actually kind of Y E of the Securities Exchange Act of 93, four and a U S. Private Securities Litigation Reform Act of 995.

This bill looking statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks uncertainties and other factors all of which are difficult to predict in a matter of wage are beyond the company's control. This risks may cause the company's actual results or performance to differ.

Charlie.

Information regarding these and other risks uncertainties or factors is included in the company's filing with the SEC.

The company does not undertake any obligation to update any forward looking statement as a result of new information future events or otherwise except as required under applicable law. In addition, please note that unless otherwise stated all figures mentioned during this conference call are in RMB.

It is now my pleasure to introduce our chairman and Chief Executive Officer, Mr. Hi, Phillip. Please go ahead.

Yeah.

Thank you Caroline.

Thank you all for joining US today, we're pleased to announce another set of solid results for the southern quarter of 'twenty one.

I'd like to start by providing updates on our operations and the highlights.

I'll now turn the call over to <unk> to.

Dive deeper into our financial and operating results.

As a leading local on demand delivery in a retail company. We have long served the real economy and growing together with the brick and mortar retailers and brand partners.

Leveraging our unique because advantages of retail plus delivery capabilities. We are fully committed to supporting the healthy development of China's real economy, and promoting domestics escalation.

We believe this is the key element of the countries fewer circulation strategy.

So definitely we enable our retailer and brand partners in achieving their digital transformation.

Production for the new <unk> era.

One year after on demand at retail and the delivery model, we empower our retailer and brand partner with over five core pillar of open platform procurement marketing user engagement and digital empowerment.

This is Lee we have seen an evolving regulatory environment in China, while our government fully support the development of innovative internet companies that can enhance China's international competitiveness.

So are these also and to create ourselves legal environment to ensure the company's Manhattan compliant operation.

For example, the government recently strengthened and team monopoly effort to prevent this utterly extension of a couple of those.

Our business model is in line with policy directors, we welcome the strengthening of regulation and believe an orderly in their environment will lead to the long term sustainable development of the industry.

Now I'll move on to update all of our J D D J platform as the leading local on demand the retail platform.

For the June 18th shopping festival, we have achieved extraordinary results, our total <unk> more than doubled and JV of consumer electronics cosmetics and home appliance all grew more than double year over year.

It's vital for China to booth domestic market and new expansion models by enlarge in domestic of the Mezz and promoting high quality economic development.

We will leverage our strengths to support national economic policies to help foster win win win situations and common core priorities.

As such I would like to discuss <unk> progress on forefront.

Serving users.

Enabling retailers boosting brand promotion and technology comments.

So overall by trading value of the four participants along the value shift we aim to drive long term sustainable value creation.

First.

In terms of serving evolving consumer needs, we continue to win customers Trust.

Providing highly efficient.

And high quality services.

Number of active consumers increased significantly by around 60% year over year to $54.0 million.

We will continue over in depth cooperation with JD to better serve the omnichannel and on demand needs of Jd's over 500 million.

Million active users.

In July a word J D D J when our E Commerce platform projects were selected as a demonstration project for.

New form of resolve by the states Ministry of industry and information technology hosting boom.

Which demonstrated that governments recognition in our in the latest model and our ability to satisfy the growing needs of consumers for better and more convenient life.

Further in terms of empowering retailers, we provide integrated digital solutions.

Income passing open.

Marketplace fulfillment membership management and technology platform to help resellers improved self and enhance operating efficiencies.

We continue to see enormous growth potential for local on demand and retail services.

So according to the National Bureau of statistics offline retail still accounts for 76, 3% of consumer goods. So in the first half of the year to realize quality growth and to stay competitive we believe accelerating digital transformation will continue to be the strategic focus.

Our physical retailers.

With our vision of bringing people everything on demand or TDD J platform expand the category and the merchant coverage.

We maintain the leading position in the supermarket cutting rates by deepening our strategic cooperation with existing partners and establishing a partnership with new supermarket chairs.

So now on board as Eddie although the top 100 supermarkets.

Nine of the top 10.

In the smartphone category, we are glad to see that the value of on demand and retail is increasingly recognized by smartphone manufacturers to ensure sufficient and high quality supply of smartphones, we have already hundreds with hundreds of authorized distributors.

This quarter, we went further and establish direct partnerships with smartphone brands, including Apple and Google.

I think in the PC category, we have newly partners with Microsoft a food Dell.

Alienware.

How can this brand strengthened also presence by gradually onboarding their offline stores put J D D J.

We also continuously rollout value added services to.

To retailers.

Our startup kicking service helps retailers to improve other 15 efficiencies.

While reducing their store personnel cost and the staff shortages.

Currently picking is deployed by Walmart CR Vanguard, you always supermarket, Hello, fresh and other merchant stores.

During the second quarter that are taking again significant pace.

The number of stores and number of units picks and income four pillars, all increased by around 60% quarter over quarter.

During August 8th promotional come hit the average speaking time for Walmart stores, which are utilized over that Theyre, taking service was reduced down to just three minutes.

And third online marketing service for brand partners.

During the second quarter.

<unk> marketing revenue from branded partners remained very strong increasing by more than 110% on a high base in Q2 last year.

This further demonstrate our unquestionable leading position in the Alibaba in the retail sector for brand partners.

On top of deepening our cooperation with existing brands.

We have also signed several new domestic S. M C G brands.

Including WH group.

And Blue Moon.

And emerging global brands such as <unk>.

We're promoting the China national type or the quartile and writing <unk>.

Emerging and consumption trends.

That's great technology harvests.

Enterprise become more digitized networks and intelligence.

New momentum to economic development.

Under the backdrop of the states promotion of digital economy developments in industrial digitalization, we abide by the National policy directors upgrading digital China, our <unk> system can be a good example high boy is a SaaS.

That enables retailers to drive <unk> cel, while streamlining operations.

That's all at the end of others hybrid has been adopted by more than four.

<unk> thousand 300 retail chain stores up significantly from 3300 stores as of the end of April.

Our hydro system now covers over 40% of the Taco hinders supermarket channels.

In the second quarter, we will launch a new intelligence pricing module.

To replace menu pricing adjustments. This module helps merchants improves theyre also promotional efficiency and the profitability.

As a result source that have utilized the new module has seen a 60% increase in profit and a 5%.

Points improvement in gross margin.

Let's move onto that Enel.

As a platform that connects consumers and the merchants with crowdsource phase delivery services to provide a large number of festival in.

Employment opportunities.

And at same time, we are committed to protecting the rights and interests of every gig workers.

As encouraged by the authority.

All right and Terry we listen to and understand the riders pinpoint and needs in time.

Via multiple channels.

Currently we continuously optimize our platform to help providers deliver more efficiently and safely.

At the same time, we regularly hold training sessions to improve ryder's delivery experience and service capability.

In addition, we have upgraded our radio stations in the new stations will not only set up the rest areas, but also provides convenience amenities, including drinking water medicine.

Direct.

Prevention materials and.

Everybody is charging services.

Our business progresses.

During the second quarter, our on demand delivery service to churn merchants.

Looking at the key accounts and continue to see explosive growth the revenue year over year growth accelerated to over 140%.

And the supermarket category revenue increased by 70% year over year, we have a recently announced partnership with CP group, we provide comprehensive on demand delivery services for the Omnichannel, so others of CPE logos.

In the restaurant category year over year revenue growth with over 200%.

We have seen significant growth from our existing partner merchants such as Mcdonald. This was driven by an increase in the number of stores and the increasing order up the other volume Christoph.

In the meantime.

We have expanded into the key beverage categories and have signed a number of new tea brands.

In the second quarter.

Small and medium sized merchants.

Are very important to the countries.

Economy.

Now allow small businesses.

This is owners to get access to on demand delivery service at reasonable cost.

Number of merchants that place orders continued to double year over year in the second quarter.

For our last mile delivery business, we successfully transitioned to a more asset light model. This quarter based on our crossword through either network. We provides comprehensive and cost effective last mile delivery in the picking solutions, especially during the peak season going for.

Forward, we will continue to deepen our cooperation with JD logistics.

Last but not least.

I would like to talk about our exciting technology developments in the logistics industry.

Technology innovation is an important driver to promote a positive change in quality efficiency and growth engine of China's economy.

Clothing, the spirit of National guidance, excluding digital China benefiting the public we have always been the pioneer of developing cutting edge technology.

Recently on demand the consumption is becoming the new norm of how people shop. We believe the use of unmanned is vehicle for on demand delivery.

Is paramount.

Proving both our personal efficiency.

Tumor shopping experience in July we officially launch the data autonomous.

Delivery open platform.

Which is open to autonomous vehicle companies, leveraging our own demand others opera.

Personal knowhow and other discussion capabilities, our open platform accelerates the application of <unk> delivery in the on demand and retail industry.

Currently our Mendes deliveries powered by our open platform is orange, how wrong in flushes districts in Beijing and Shanghai.

Okay.

So in the short term autonomous delivery will be utilized to supplement menu delivery and health.

To ease the capacity constraints.

Especially during peak all other seasons of or periods of extreme weather conditions.

Over the longer term it will significantly reduce the cost of delivery as the scale becomes larger.

I would like to end with a brief recap of how we are shouldering social responsibilities.

<unk> has made in social responsibility and essential asset of the company and its leadership.

While creating value for our business partners and our users. We also adhered to our original intention to few or corporate social responsibility initiatives.

Recently, we made more effort to improve peoples likelihood.

For example, we insured living.

Living needs during pandemic containment in Guangdong and <unk> provided a disaster relief in response.

Flopped promoted internet inclusion among the elderly.

And launch of theory of a program and to support the social work.

With that I will now pass the call over to Beth to go over our financials for the quarter. Thank you.

Thank you for that and before we go over the numbers just a few housekeeping items in the bands we believe year over year comparisons the most useful way to judge our performance and therefore percentage changes I'm going to give will be on year over year basis, and all figures, arguing renminbi.

Invest otherwise noted.

Total net revenue increased to 215 billion aligning the revenue recognition method of data in our last mile delivery services to a comparable net basis pro forma revenue growth would have been 81% year over year net revenues from brand now were 590 <unk>.

$4 million, the pro forma revenue growth rates with <unk>.

81% year over year, mainly driven by the increasing order volume market interest city delivery services to train merchants.

In total net revenues from J D. J also increased by 81% to $881 million, mainly due to the increase in <unk> from the same quarter last year, which was driven by increases in the number of active consumers and the average order size increase in online marketing services.

Is that right out of the increasing promotional activities launched by brand owners also constituted a new increment of the net revenue generated from ADT Jay.

Operating income as a path.

We're $2.0 billion. The rise was primarily due to an increasing <unk> cost as a result of increasing order volume for interested delivery services provided at U.

P chain merchants on our platform and the retailers on the J D. J platform, partially offset by the decrease of rider related costs incurred by the various upgrade of our last mile delivery services.

And the marketing expenses were $824 million, mainly due to <unk>.

Growing absolute dollar amount of incentives to J D D J consumers and an increasing in advertising and marketing expenses, which was primarily attributable to the increase in retro fees paid to this assets retailer stores and the third party promotional service providers for their efforts to attract new consumers through.

J D D J a platform.

G&A expenses decreased to 100 million, mainly due to the decreased share based compensation expenses and share based compensation expenses recognized immediately in the second half second quarter of 2020, resulting from.

Options granted to employees with a natural performance condition.

R&D expenses were 132 million, mainly because of the increase in research and development personnel cost as the company continues to strengthen its technology capabilities.

Non-GAAP net loss attributable to ordinary shareholders was $549 million versus $319 million in Q2 last year non-GAAP diluted net loss per share was negative <unk> 58 compared with negative.

Compared with negative <unk>.

Taking a quarter of last year.

As of June <unk>, 2021 we had $11.0 billion in cash and cash equivalents restricted cash and short term investments.

Another $150 million share repurchase program announced in June we had repurchased approximately $73 million of our eight years as of August 31.2021.

For the third quarter of 2020, when we expect total revenue to be between one point to 63.

And $69.0 billion, representing a pro forma growth rates of 80% to 86%.

Adjusting and that are now last mile revenue to a comparable net basis in Q3 of both years.

In addition, with.

In addition, our net revenues from <unk> increased by eight 1% in Q2. This year and we also expect a revenue growth of JD DJ to accelerate in the second half.

With continuous improvement in our accretion.

Operating efficiency, we expect that the pro forma non-GAAP net loss margin after adjusting revenues of last mile delivery services to a comparable net basis to further narrow in the third and fourth quarter of 2021 on both year over year and sequential basis.

This concludes our prepared remarks.

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

Yes.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or hash key.

Please standby, while we compile the Q&A roster. Once again is star one to ask a question.

First question comes from the line of broad Kim from Goldman Sachs. Please ask your question.

Thank you. Thank you Philipp backend Caroline to two questions Firstly I'd like to hear our latest deepening cooperation with J D.

Based on the channel continues to be a key focus. So just wondering is there any updates about the changes or the natural selection.

Any further dedicated projects that youre working on from kind of dedicated channels or how are we planning to expand categories in order to promote this higher on demand shopping not only for our own J D. J App users also into the JD users.

My second question would be.

Thank you talked about the accelerating growth with GDP J in the second half just wanted to hear.

Within our revenue guidance, what is the kind of embedded J D D J.

Hello growth that we're expecting in the third quarter, we expect any seasonality between third and fourth quarter to drive you know expectation of faster.

J B DJ growth in the second half of this year. Thank you.

Thank you Ron.

So I'll take the first question and I will have to address the second one.

So the.

Our partnership with JD group has been like.

It's really really important and a win win for both parties and we have together.

Dedicated to provide.

Good services to the customer needs and to improve the consumer experience to in Q2, we are very happy to see that our partnership has significantly strengthened.

In Q2.

<unk> <unk> from the J.

J D. One hour shopping the timberland sale should go which is in <unk>.

Power's buyers.

<unk> had a quarter over quarter growth.

90%.

And you perhaps have already noticed that.

We will open up a JD app.

Many cities, including Shanghai and Shenzhen in many cities.

You have seen on the very top on <unk> homepage there is a.

Yes.

New entry points caused 14 or nearby our local.

This is in test and we plan to rollout this new service to more cities and have a bigger scale of expansion. This will essentially bring our customers.

Sure.

More on demand.

<unk> experience and the shopping experience.

At the same time.

We are looking closely with JD to improve the penetration.

Into the JV is 530 million annual active consumers for more and more of them to experience. The on demand the retail services and we will continue to do that.

<unk>.

We will continue to work very closely with JD to improve the shopping experience and.

Streamlining the products and services and to improve the penetration.

So our partnership with J D.

Really happens with the JD retail, but also with JD logistics.

So in addition to the existing other.

Picking and others delivery partnership we have recently launched a new partnership with JD logistics.

The data autonomous.

Delivery open platform and we will jointly to promote the.

Upgrade in the transformation of the.

Intelligent delivery.

<unk> and to jointly improve the infrastructure of intra city.

Delivery and on demand delivery. So we are.

Again, very happy and excited with what's happening with Gd group and that we jointly will.

Push this forward and it's a highly win win partnership.

Okay. So for.

For the second question about the J D J basically at.

At the <unk> growth basically.

I want to add more color.

On the <unk>.

The expansion of categories. So.

By cooperating with J D.

We are expecting to explore into or just extend our cooperation into more categories, including home appliances. So not only just like a supermarket and fast FMC G products and smartphones products before previously we will explore into more <unk>.

<unk> home appliance and cost.

Cosmetics by Corporation, which the JT group.

So.

There is some seasonality for the second half and we expect Q4s.

Revenue growth.

After ADT Jay would be even.

More than and.

More than Q3s numbers cost usually for Q4, there will be an hour a big campaign and also for all of those businesses like apparel and smartphones there will be new product launch we.

We expect.

Q4 will be even better than Q3.

<unk>.

And also we are captains that.

The online marketing revenues growth rate and because in Q2 as we have discussed that the online marketing revenue is increasing by.

Over 100%.

Then.

On the higher base of Q2 last year, if everybody's remembering Q2 last year the brands are actually.

Spend a lot of marketing dollars are different e-commerce platforms, not only for the <unk>.

So with ADM.

Right well.

Q2, this year with few witnessed.

Triple digit growth rates of <unk>.

The marketing dollars and that we also expect that for the second half of this year for each quarter of this year online marketing revenues will continue to grow.

Triple digits.

Per year.

So.

That's the part we believe that our overall.

Monetization rate.

He also growing not only.

On a year over year basis also on a sequential basis for Q3 and Q4, yes.

Yes. So this is.

Mrs.

Like the guidance for the DDA growth for the Q3 and Q4.

Fair enough.

Wonderful Thank you Philip.

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

Good morning, guys.

Two questions.

The first one is about the.

The light colas.

We saw that on your press release, you mentioned that the operations and.

Almost.

When up and partly because of an increase in rider cost. So just wondering if you could give us more color on Nokia <unk> cost.

For example.

The trend in terms of the wider call. This hopper.

And is that anything that going forward, we need to buffer for extra cost because of the call for our protection of our benefits and then the effect on the sales and marketing just wondering if you could give us a call.

Some color.

About the customer incentive portion versus advertising and staff costs. Thank you.

Okay. So thank you for the question Andy So for the first price, we're seeing about the rider costs, so basically that.

So look we were talking about like the absolute dollar amount of the Ryder Cup that increase.

So the cost <unk>.

Generally like the train machines, Ben It is what's growing by 100, almost 150% year over year. So.

We are.

We will pay like.

More than a salute dollar amounts of the rider cost Judy.

To the riders so basically the other per.

But the cost per order value is generally stable.

This year and also.

<unk>.

For the sales for the sales and marketing.

Mark teams customer incentives so onward Q.

Q a sequential basis our.

Consumer incentives.

You like maintaining like the same level, a little bit decrease compared to Q1. This year and that we also expect that on sequential basis.

The consumer incentives given to the.

Customers will be increasing in Q3 and Q4 this year.

And also in terms of the.

Operating cost as a percentage of the Jimmy of JD DJ We also expect.

The decrease on a sequential level.

Not only in Q2, but also in Q3.

In the second half.

Yes, I'll, just add a little bit.

Just wanted to talk a little bit on top of that just mentioned so if you look long term in terms of sales marketing and customer incentives I think one of the.

Very positive.

We are now looking at is our partnership with J D.

No.

What's happened in the last few years, we need to acquire like brand new customers.

J D D J.

Now as we are working closely with JD. So we are.

Working together with JD to penetrate into Jc's massive user.

User base. So we envision that this partnership in the long term will help to drive down the.

Sales and marketing.

And the customer experience customer incentives.

Because those customers has already in JD customers. So.

As you might imagine that the acquisition cost or the conversion costs for those customers might be.

Lower than the brand new customers.

And also for the rider costs.

Same thing if you look at the mid to long term.

We are confident that with the increase of our order density.

As you can see that.

The growth of our data now on demand.

Every business has been very fast we are now seeing more and more 10 merchants at the same time.

Other members of <unk> has been growing very fast as well to the other density will also help too.

To reduce the.

Rather cost the higher density.

More numbers of others that weather's can carry and can deliver.

In like a certain period of time, so this will improve the efficiency and therefore reduce our costs. So.

To summarize I think the if you will commit to long term survival cost.

Can be well managed and the sales and marketing.

He says can be lowered.

Okay got it thank you.

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

Okay.

Thank you my question two questions.

Thanks, Bob.

Hum.

Yes.

That's great.

Wow.

Yes.

Okay.

Alibaba our peanuts.

Okay.

Could you repeat the first question.

Yes my question.

Oh Wow.

Uh huh.

Thank you.

Yes.

The COVID-19 impact on JD Jane is that right.

Yeah Colby.

Yeah.

Yes.

Okay.

Okay.

Yes.

Sure.

Yes.

A quick update.

The Covid and the reason.

The floods anything hurt us so.

The last few months, we have seen that occasionally.

In some cities or areas in China, we are seeing Covid cases and.

We work very closely with local governments to provide the.

The daily supply sand.

The on demand.

Delivery for the customers.

So we are.

Dosing every city, we receive a recognition from the government for the two.

So basically.

Giving us very positive feedback.

Yep.

Down to health.

The health of the city and helped our society.

<unk>.

Certainly we are seeing that our customers are.

Getting more and more used to ordering from online instead of going to offline stores. All the time, So I think this.

In the long term will benefit <unk>.

<unk>.

This equates to <unk> to acquire and educate more customers.

So.

This is something has already happened in the last two years and we expect this to come.

To happen going forward and at the same time. This also helps to educate the merchants.

So therefore, we are now seeing almost.

All of the top supermarkets have been working already working with US and also we are seeing.

The more and more leading merchant from other industrials right now turning to working with US I think this also helps to educate the merchants everyone knows that.

Others, who deal with the COVID-19 or to deal with the customer needs.

Yes.

They have to transform quickly and digitally so I think this also will benefit us.

And also for Q3 financials.

We don't think flat.

Situations going on will have any material negative impact on us.

And then your second question regarding the high ball.

Our competitiveness.

So so.

So first of all we are very proud that the <unk> system has been.

The value of hydro one has been referenced by more and more.

Leading retailers and at the same time because of our neutral position of J D. D. J, because we're not a retailer ourself, so that significantly help floaters as well in terms of penetrating into more and more.

Merchant so Amy.

Last quarter, we have now seen over 434300 <unk>.

Stores are.

Using high both system and this number keeps going up.

And at the same time <unk> system has already been proven.

Proven unable to Kris.

The efficiency of retailers ultra business and also to increase their revenue from <unk> business. So I think the hydro system.

Yes.

Our pressure on <unk>.

The most adopted and the most leading.

This term in the market.

That's very clear thank you.

Sure. Thank you.

Your next.

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

Hi, Good morning management, Thanks for taking my questions.

My first question please.

Related to the community group buy platform, so with the slowdown of many of these platform volume have you seen any addition.

The addition of demand flowing back to your supermarket retail partners any qualitative comments on how the demand trends.

<unk> has changed over the last two months versus what you've seen already at the share that you could share and then second is how much in terms of the longer term the cost saving that you foresee the autonomous delivery could bring along and how will the pricing.

What the margin structure that brings along with Steve autonomously.

Thank you.

Thank you Alicia So give you my view and I will see that.

Has anything to add.

First of all.

<unk> grew by it.

I'll give you some data points.

So in Q2.

<unk>.

The GMB growth of <unk> in a number of provinces that are most accurately.

<unk>.

Developed by <unk>.

Community grew by including like cooler Hubei biopsy, Tallahassee, Florida assemble so in all of those problems.

The <unk>.

<unk> opportunity Jay achieved a.

Over 100% year over year growth. So we are doing very well in all of those provinces and.

At the same time as you probably have noticed that the <unk>.

Regulators have now I'll place tighter.

Either a regulation in terms of.

Mike.

Fair.

Competition.

Sure.

And also the anti monopoly et cetera, So there's certainly a place a lot of pressure on the.

Community group buying players in.

So we are very confident that in the long term, we will have more competitiveness.

And.

Also because we always believe that the.

Our supply chain capability is a key to winning in this market and to fulfill customer needs and we are able to work with all the local leading players to have the strongest supply chain capabilities and have the broadest.

Geographic coverage that we can.

Few customer needs national wide with the product SKU assortments.

Those are on comparable.

The.

Community group buying players at the same time, because we are one hour delivery, so much more efficient and much better customer experience than.

Our next day delivery. So this also.

Housewares to differentiate ourself.

<unk>.

And another thing to mention is that.

For example, like megawatt.

Two bowls.

I'm going to take nearby as well as.

Our platform business, which is quiet.

The controversial rehearse for the retailers.

Definitely we will consider required as a competitor in terms of a neutral players or a partner.

No.

We have the position of the platform business.

Only because we are neutral.

And we only help the retailers have never competed with them. So I think this is also helping us to.

<unk> left ourselves so in short we are quite confident about our.

Hum.

The competitiveness against the community group.

Buying players.

Yeah, Yeah, and also for more color.

The.

<unk>.

Maybe maybe in the beginning of the year some of the repairs.

Fierce competition in their local tier three or tier four cities with the CGP niches.

Right now I think most of those reserves.

And much more much better.

<unk> and to grow their businesses.

We have witnessed is therefore.

For those retailers their offline initiatives.

Overall it is gross margin is improving.

Apparently so which makes them to be.

Better position to further invest in.

Online basis in the second half of this year end.

And going forward.

Yes, and also for the autonomous.

Delivery.

Give my view and our.

Our country will have anything to add.

We're quite excited.

And now our open platform for autonomous.

Deliveries.

In the last few months, we have been working on this for quite a while working very closely with JD logistics, along with a few other partners.

And we have already successfully launched the service with.

Like Walmart Sam's club southern fresh.

<unk>.

So.

In both in both Beijing and.

And Shanghai, so in some districts according to the local government.

The guidance so.

Terms of the.

Process or a customer experience. So I think those are having dramatically improved over the last few months.

All of those.

Autonomous delivery are happening in the rural environment and serving the rural customers every day every single day now and so we are confident that the customer experience is very good.

At the same time, we're seeing that the cost be improving along the time as well.

Yes.

It also.

I think in the short term.

Turnover delivery will be utilized to supplement our menu delivery and relief capacity constrained, especially during peak season or during the extreme weather conditions and in the longer term.

I think leveraging the scale applications.

The autonomous delivery, we expect it will significantly reduce the cost of delivery in the long term.

Yes.

Some color on that so right out.

Trial around is still quite limited and.

The whole ecosystem is in its very early stage so.

If you look at the cost per order I think still backing high because of the <unk>.

We have cost as long as.

The limited trial, but we are seeing already a trained and also the projections to the hardware cost is going to go down quite significantly over the next few years.

So we are expecting.

Probably two to three years I think.

There is a chance that the cost will be.

Lower than human cost.

And then the training put them to work out to work out is the human cost.

The next few years.

Back to you probably can't even higher given the.

Population looks like so.

So that's why we are in that team really early stage, two making sure we can accelerate the commercial use of the autonomous drive advanced delivery.

Great. Thank you for the color.

Your next question comes from the line of Wei Fang from Morgan Stanley. Please ask your question.

Thank you and good morning, Citigroup background Caroline.

Two questions.

First is on the monetization side I saw that the total monetization rate seems to be stable quarter on quarter.

But seems like the structure has been changed I noticed that the delivery fee as a percentage of Jeremy has dropped by something like 0.5 percentage points.

Is there any particular reason behind that that we are lowering the charges.

From the customers or is just due to the mix of order types.

And the second question is on the cost side is still above the rider cost I'm trying to reconcile.

Overall sub.

Hum.

From a cost items.

I noticed that it seems like the comp.

Right.

Increase is.

Higher than what I can calculate it from greater cost.

Chris.

That announced Ryder Kaufman of course, so I just wonder whether in the second quarter are there any one time or one off items and the rider cost side that transform special.

Subsidy providers during the pandemic or something like that I mean like one time.

Sure.

My questions. Thank you very much.

Thank you Wei so yes for the first question on power demand and transition rates so basically.

Overall, when you take the rate is increasing by 20 bps.

On a sequential basis.

I also said that for the second.

The third quarter and fourth quarter, we expect.

Monetization to be stably.

Zero growing almost equivalent basis as well.

In which on a marketing.

Passing rate is increasing significantly two like two 9% in.

In Q2, this year versus two 5% Q2 last year and as you mention is that it really service fees Our commission fees.

Vantage and that percentage of Jeremy is dropping a little bit.

Great.

Mainly because of the mix of mix change about.

Product categories in Q2.

The smartphone cases, increasing relatively faster than the average and because their commission rate is lower than the average in the area.

He is higher much higher than the average platform.

So which means less orders compared to the.

The other categories and also we are just to receive less percentage less bitter fees as a percentage of the Jeremy of the smartphones.

And it is and we also believe.

Is that in Q3.

The commissions and fees as a percentage of <unk> will be.

Locate growing.

On a sequential basis compared to Q2.

Because in Q3, usually there is this is a little bit slack season for the smartphone business is so the growth rate of smartphone businesses will be lower than Q2. So the overall commission rate and the delivery of services fee.

<unk> will be a growing as a percentage of <unk>, while we still maintain a relatively higher.

Gross rate of armour, marketing's, which makes.

Ah stably growing manufacturing rate in Q3, and Q4 and in terms of the second question about the rider costs, Yes, there is.

Sure.

Sure.

When time issue, but it's basically it's not onetime issue because as we mentioned that things are extracted from.

Active from April this year, we successfully chip transaction model.

Model.

The last mile delivery services from gross basis to net basis, but actually talking from like mid off.

So accounting wise for the first half of April.

For the last Malibu niches, we still counting.

On a gross basis, which makes us have more have more cost in.

In the accretion and.

And.

And the deposit cost fixed cost line, because we didnt need you paid some rider ratio constitute the last mile writers in the first half of April but.

For the rest of the quarter and also for Q3, there is no such issue.

Alright, Thank you very much back from a very detailed answer thank you.

Thank you.

Okay.

Your next question comes from the line of Ashley Xu from Credit Suisse. Please ask your question.

Thank you management for taking my questions. My first question is on.

<unk> outlook for our Datacom business.

In the past we have seen this business growing quite well so looking forward.

Hover expansion plan and all of this Scott and my second question is about the potential impact from social security requirement on the riders and your recent updates or Tien tsin.

You.

Thank you Ashley let me just take the two questions.

For the first question about the growth rate of I don't know.

Yeah. So so in.

In the first half of this year.

Daniel now key accounts Chamberlain, Spanish it's growth, it's growing very quickly.

140% for the first half and we also expect that today in the second half it will be continue to grow at triple digits just like.

We mentioned in the earlier.

So and also for the next year, we also expect.

The business is growing at.

Relatively higher speed than we expected right now.

Almost close to <unk>.

Right.

Number one player in the chain merchant services.

Services businesses.

We expect that in the fourth quarter or lighting.

The fourth quarter or early in next year, our business model being the chamber jeans sector in China.

Should be.

Almost with the number one.

Leader and the in terms of the potential impact from the.

So right across from the law so yeah.

Okay.

So the guiding opinions protecting labor and.

Social rights and the interest of workers engage in new forms of employment and whats it going to be released by eight central departments of the government in July.

And.

We fully understand the government's policy to better.

Tact flexibly employed social workers and are pushing forward with the implementation of the guideline.

So.

While we create a large number of flexible employment opportunities through our crowd sourcing network we are.

Also committed to safeguarding the rights and interest of the riders.

And specifically in terms of the work related injury insurance.

We have been.

I think we have discussed in the last earnings call that we had been actively participating discussion panels hosted by the government Ginnie poo and strictly stick to the principal protection.

Protection and under the guidance of the relevant authorities.

Yeah.

We are also right now preparing for the for the path to run our pilot phase of work related injury insurance in select provinces like Shanghai, Guangdong and Beijing.

The incremental cost of purchasing the work related injury insurance for riders is estimated to be <unk> RMB per order. It is likely we mentioned that in June and then we think this could be were offset by our increasing order density.

And based on the opinion and although entities and local governments are formulating specific measures for different industry for example for food delivery the state.

Iteration for market regulation ethane.

Subsequently took the lead in the formulation of the guidelines to specify the responsibility of <unk>.

Food delivery platforms and to protect the rights of our food delivery riders so based on our communication with the.

The guideline released by SA.

Not applicable applicable to us because we do not operate our food delivery platform and our riders to now work for self owned food delivery platforms.

This is just.

Right now the impact for us and we expect that only <unk> order on the work related injury insurance.

Well be well digested in hour.

Cost improvement.

Next year.

Thank you.

Your next question comes from the line of Robyn <unk> from Daiwa. Please ask your question.

Hi, Thanks management for taking my question.

Could management comment on the mix of the server market and Nordstrom market contributions and ASP.

Management.

And with the deepening cooperation with JD.

That will have more contribution from home appliances, and cosmetics should we expecting Nordstrom market mix to increase meaningfully and also what is the op. This quarter, so with non supermarket mix, even higher with <unk>.

Even more and given the subsidies are mostly spent on the supermarket category. So when Nordstrom a market category increase should we expect that to benefit the margin.

More in the second half thank you.

Okay. So thank you for the question Robyn So basically for Q2 for the mix change for the met mix contribution a supermarket is contributing about 70% to the total Jamie while the smartphone <unk> phase III, including smartphone.

In the home appliances is like around 20%.

Of that total Jamie and.

With the further cooperation with JD, just like we mentioned in the earnings call in June that we expect the.

Non stop market categories will gradually continue to increase.

The total market share in our Jimmy amount and in terms of the.

Average order value. So in Q2 this year our average.

The platform is about 180 RMB, while for the <unk> of the supermarket, Greg categories is still as high as 140 RMB.

And we think in the.

Second half of this year, we should be still able to maintain.

The higher <unk> for the market for our platform average and also for supermarket average.

And.

And youre right, so not only because of the mix contribution but also we are.

Slide gradually.

<unk> decreased.

The subsidy level or the consumer incentives given to the shoppers so our average.

Cost.

Percentage and as Jamie after ADT, Jay will be also sliding down in the second half that's why for Q2 this year, our <unk> margin.

Is minus two 3% versus two 8% in Q in Q1, this year, which is improving by 50 bps on a sequential basis. While in Q3, we are seeing further.

The improvement I think almost 100.

Two.

Minus one 3%.

Thank you very helpful.

I would like to had a conference back to MS. Caroline Dong for closing remarks. Please continue.

Thank you operator in closing on behalf of that as management team, we'd like to thank you for your participation on today's call. If you require any further information feel free to reach out to us directly. Thank you for joining US today. This concludes the call.

This concludes today's conference call. Thank you for participating you may now disconnect.

[music].

[music].

[music].

Good morning, ladies and gentlemen, and thank you for attending by far that our second quarter 2021 earnings Conference call.

At this time all participants are in a listen only mode. After the management's prepared remarks, there will be a question and answer session. As a reminder, today's conference call is being recorded I will now turn the meeting over to your host for today's call Ms. Caroline Dong head of Investor Relations for data. Please proceed.

Caroline.

Thank you operator, Hello, everyone and thank you for joining us today, our second quarter 'twenty 'twenty. One earnings release was distributed earlier today and is available on our IR website at IR Dot I'm data adopt in as well as envelope newswire services on.

On the call today from data we have missed the first part chairman and Chief Executive Officer, Mr. Chen Chief Financial Officer.

And Mr Jin Yan co founder and Chief Technology Officer.

And Mr. <unk> will talk about our operations and company highlights followed by Mr. Chen who will discuss our financials and guidance. They will all be available to answer your questions. During the Q&A session that follows.

Before we begin I'd like to remind you that this conference call contains forward looking statements as defined and that's actually kind of Y E. M. That'd be great as Jean jacket off 90, 34, and a U S. Private Securities Litigation Reform Act of 995.

These forward looking statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks uncertainties and other factors all of which are difficult to predict in a matter of wage are beyond the company's control. These risks may cause the company's actual results or performance to differ.

Materially.

Information regarding these and other risks uncertainties or factors is included in the company's filing with the U S. FTC.

The company does not undertake any obligation to update any for looking statements as a result of new information future events or otherwise, except as required under applicable law.

And please note that unless otherwise stated all figures mentioned during this conference call are in RMB.

It is now my pleasure to introduce our chairman and Chief Executive Officer, Mr. Hi, Phillip. Please go ahead.

Yeah.

Thank you Caroline.

Thank you all for joining us today.

Pleased to announce another set of solid results for the second quarter of Sunday is really what I would like to start by providing updates on our operations and the highlights and I will.

Ill turn the call over to Pat to dive deeper into our financial and operating results.

As a leading local on demand delivery in a retail company. We have long served the real economy and being growing together with the brick and mortar retailers and brand partners there.

Leveraging our unique advantages of retail plus delivery capabilities, we are fully committed to supporting the healthy development of China's real economy, and promoting domestics escalation.

We believe this is a key element of the countries fewer circulation strategy.

So definitely we enable our retailer and brand partners.

Colors in achieving their digital transformation.

In addition to the new <unk> era.

One year after on demand at retail and the delivery model, we empower our retailer and brand partner with our five core pillar of open platform procurement myopathy user engagements and digital empowerment.

This is Lee we have seen an evolving regulatory environment in China, while our assortments fully support the development of innovative internet companies that enhance Chinas international competitiveness.

Thirdly also aim to create ourselves legal environment to ensure the company's Manhattan combined operation.

For example, the government recently strengthened and team monopoly effort to prevent this utterly extension of capital.

Our business model is in line with policy directors, we welcome the strengthening of regulation and believe an orderly and necessary environment will lead to the long term sustainable development of the industry.

Now I'll move on to the update all of our J D. D. J platform, the leading local on demand the retail level.

For the June 18th shopping festival, we have achieved extraordinary results, our total <unk> more than doubled and JV of consumer electronics cosmetics and home appliance all grew more than double year over year.

Despite the look forward, China to book domestic market and new expansion models by and large in domestic at the mill and promoting high quality economic development.

We will leverage our strengths to support national economic policies to help foster win win win situations and common prosperity.

As such I would like to discuss <unk> progress on forefront.

Serving users.

Enabling retailers closely.

In brand promotion and technology comments.

So overall by trading value of the four participants along the value chain, we aim to drive long term sustainable value creation.

First.

In terms of serving evolving consumer needs, we continue to win customers Trust.

Providing timely efficient.

And high quality services.

The number of active consumers increased significantly by around 60% year over year to $54.0 million.

We will continue our in depth cooperation with JD to better serve the omnichannel and on demand needs of JD is over 530 million active users.

In July our <unk> with our E Commerce platform projects were selected as a demonstration project for.

A new form of retail by the states Ministry of industry and information technology, causing boom.

<unk> demonstrated that governments recognition in our in the latest model and our ability to satisfy the growing needs of consumers for better and more convenient life.

Further.

In terms of empowering retailers, we provide integrated digital solutions income passing open marketplace fulfillment membership management and technology platform to help resellers improved.

Improved self and enhance operating efficiencies.

We continue to see enormous growth potential for local on demand and retail services.

So according to the National Bureau of statistics offline retail still accounts for 76, 3% of consumer goods. So in the first half of the year to realize quality growth and stay competitive we believe accelerating digital transformation will continue to be the strategic <unk>.

After the call retailers.

With our vision of bringing people everything on demand or <unk> platform expand the categories the merchant coverage.

We maintain the leading position in the supermarket category by deepening our strategic cooperation with existing partners and establishing a partnership with new supermarket shares.

Now on board as Eddie although off the top of a 100 supermarkets.

Nine.

The top 10.

In the smartphone category, we are glad to see that the value of on demand and retail is increasingly recognized by smartphone manufacturers.

Ensure sufficient and high quality supply of smartphones, we have already partnered with hundreds of authorized distributors.

Second quarter, we went further and establish direct partnerships with smartphone brands, including Apple and vivo.

I think in the PC category, we have newly partnered with Microsoft or food.

Alienware, where how can this brand strengthen <unk> presence by gradually onboarding their offline stores.

D J.

We also continuously rollout value added services.

Retailers for example, our startup kicking service helps retailers to improve other 15 efficiencies, while reducing their store personnel cost and the staff shortages.

Currently thinking is deployed by Walmart CR vendors, you're hoarding supermarket, Hello, fresh and other merchant stores.

During the second quarter startup, taking again significantly.

The number of stores and number of units picks and income four pillars, all increased by around 60% quarter over quarter.

During August 8th promotional come hit that average speaking time for Walmart stores, which are utilized over that Theyre, taking service was reduced down to just three minutes.

And third online marketing service for brand partners.

During the second quarter.

<unk> marketing revenue from branded partners remained very strong increasing by more than 110% or a high base in Q2 last year.

This further demonstrated our unquestionable leading position in the Alibaba in the retail sector for brand partners.

On top of deepening our cooperation with existing brands.

We have also signed several new domestic SMC G brands.

Including double edge group CNS.

And Blue Moon.

Emergent global brands such as <unk>.

We're promoting with China national type or the portal.

Right.

Consumption trends.

Lastly, technology empowerment as enterprises become more digitized networks and intelligence, they will add new momentum to economic development.

The backdrop of the states promotion.

Digital economy developments in industrial digitalization, we abide by the National policy directors updating digital China.

Our <unk> system can be a good example.

<unk> is a SaaS.

That enables retailers to drive ultra low self while streamlining operations.

As at the end of August hybrid has been adopted by more than.

4300 retail chain stores up significantly from 3300 stores as of the end of April.

Our hydro system now covers over 40% of the top 100 supermarket channels.

In the second quarter, we will launch a new intelligence pricing model to replace menu pricing adjustments. This module helps merchants improve their overall promotional efficiency and the profitability.

As a result of stores that have utilized the new module has seen a 60% increase in profit and a 5%.

Improvement in gross margin.

Let's move onto that Enel.

As a platform that connects consumers and the merchants with crowdsource base delivery services to provide a large number of flexible in.

Employment opportunities.

And at same time, we are committed to protecting the rise in the interest of every gig workers.

As encouraged by the authorities.

All right on carrier, we listen to and understand the riders pinpoint and needs in time.

Via multiple channels accordingly, we continuously optimize our platform to help providers deliver more efficiently and safely.

At the same time, we regularly.

Turning assertion to improve rather delivery experience and service capability.

In addition, we have upgraded our radio stations in the new stations will not only set up the rest areas, but also provides convenience amenities, including drinking water medicine.

Correct.

<unk> materials and.

Rather it is harder and services.

Our business progresses.

During the second quarter, our on demand delivery service to churn merchants.

While the key accounts and continue to see explosive growth the revenue year over year growth accelerated to over 140%.

And the supermarket category revenue increased by 70% year over year, we have our recently announced partnership with CP group will provide comprehensive on demand delivery services for the Omnichannel, so others of CPE losses.

In the restaurant category year over year revenue growth with over 200%.

We have seen significant growth from our existing partner merchants such as Mcdonald. This was driven by an increase in the number of stores and the increasing order.

The other volume Crystal.

In the meantime.

We have expanded into the key beverage categories and have signed a number of new tea brands.

In the second quarter.

Small and medium sized merchants.

Are very important to the countries.

The economy.

I'll now allows small business owners to get access to on demand delivery service at reasonable cost.

The number of merchants that others continue to double year over year in the second quarter.

For our last mile delivery business, we successfully transitioned to a more asset light model this quarter.

Our crossword through either network, we provides comprehensive and cost effective last mile delivery in the picking solutions, especially during the peak season.

Going forward, we will continue to deepen our cooperation with JD logistics.

Lastly, our knowledge.

I'd like to talk about our exciting technology developments in the logistics industry.

Technology innovation is an important driver to promote a positive change in quality efficiency and growth engine of China's economy.

Upholding the third of National guidance, excluding a digital China benefiting the public we have always been the pioneer of developing cutting edge technology.

It's only on demand consumption is becoming the new norm of how people shop, we believe the use of unmanned vehicle for on demand delivery.

Paramount <unk>.

Both our operational efficiency and consumer shopping service in.

In July we officially launch the data autonomous delay.

Delivery open platform.

Which is open to autonomous vehicles companies leveraging our on demand others operational knowhow and other discussion capabilities.

Our open platform accelerate the application of our mandates delivery in the on demand and retail industry.

Currently our mandate delivering powered by our <unk> platform is orange, how wrong in selected districts in Beijing and Shanghai.

So in the short term autonomous delivery will be utilized to supplement menu delivery and health.

Two.

Is the capacity constraints.

Especially during peak all other seasons of or periods of extreme weather conditions.

Over the longer term it will significantly reduce the cost of delivery as a scale becomes larger.

I would like to end with a brief recap of how we are shouldering social responsibilities.

<unk> has made in social responsibility and essential asset of the company and its leadership.

While creating value for business partners and our users. We also adhere to our original intention to few or corporate social responsibility initiatives.

Recently, we made more effort to improve people with electrical.

For example, we insured limit.

<unk> needs during pandemic containment in Guangdong and chancel provided a disaster relief in response.

Fluff promoted internet inclusion among the elderly.

And launch a series of a program.

Our support of social work.

With that I will now pass the call over to Beth to go over our financials for the quarter. Thank you.

Thank you.

So we go over the numbers just a few housekeeping items seeing demands we believe year over year comparisons are the most useful way to judge our performance and therefore percentage changes I'm going to give will be on year over year basis, and all figures are in renminbi unless otherwise noted.

Total net revenue increased to one 5 billion aligning the revenue recognition method of that in our last mile delivery services to a comparable net basis pro forma revenue growth would have been 81% year over year net revenue from I don't know were 590.

$4 million the pro forma revenue growth rates was 81% year over year, mainly driven by the increasing order volume of interest <unk> delivery services to training merchants.

In total net revenues from <unk> also increased by 81% to $881 million, mainly due to the increase in <unk> from the same quarter last year, which was driven by increases in the number of active consumers and the average order size increase in online marketing services.

Is that right out of the increasing promotional activities launched by brand owners also constituted an increment of the net revenue generated from ADT Jay.

Operating income as a part.

ASP of $2.0 billion. The rise was primarily due to an increasing <unk> cost as a result of increasing order volume for interested delivery services provided to you.

Key chain merchants on our platform and the retailers on the J D. J platform, partially offset by the decrease of variety of related costs incurred by the various upgrade of our last mile delivery services.

And the marketing expenses were $824 million, mainly due to <unk>.

Growing absolute dollar amount of incentives to J D D J consumers and increasing advertising and marketing expenses, which was primarily attributable to the increase in retro fees paid to this GAAP tax retailer stores and the third party promotional service providers for their efforts to attract new consumers.

The <unk> platform.

G&A expenses decreased to 100 million, mainly due to the decreased share based compensation expenses and share based compensation expenses were recognized immediately in the second half second quarter of 2020, resulting from options granted to employees with an IPO performance condition.

<unk>.

R&D expenses were 132 million, mainly because of the increase in research and development personnel cost as the company continues to constraints and as technology capabilities.

GAAP net loss attributable to ordinary shareholders was $549 million versus $319 million in Q2 last year non-GAAP diluted net loss per share was negative <unk> 58 compared with negative.

Compared with negative <unk>.

In the second quarter of last year.

As of June 30, 'twenty. Thank you well, we had $11.0 billion in cash and cash equivalents restricted cash and short term investments.

Another $150 million share repurchase program announced in June we had repurchased approximately $73 million of our eight years as of August 31.2021.

For the third quarter of 2020, when we expect the total revenue to be between 163 billion.

And 168 billion, representing a pro forma growth rate of 80% to 86%.

And there are now Latin MAU revenue to a comparable net basis in Q3 of both years.

In addition, with.

And in addition, our net revenues from <unk> increased by eight 1% in Q2 this year and we also expect a.

<unk> growth of JD DJ to accelerate in the second half.

With continuous improvement in our preaching.

Operating efficiency, we expect that the pro forma non-GAAP net loss margin after adjusting revenues of last mile delivery services to a comparable net basis to further narrow in the third and fourth quarter of 2021 on both year over year and sequential basis.

This concludes our prepared remarks.

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

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or hash key.

Please standby, while we compile the Q&A roster. Once again is star one to ask a question.

First question comes from the line of broad Kim from Goldman Sachs. Please ask your question.

Thank you. Thank you Philipp backend Caroline through two questions. Firstly I'd like to hear our latest deepening cooperation with JD as based Omnichannel continues to be a key focus and just wondering is there any updates further changes or the natural selection.

Any further dedicated project that you're working on from kind of dedicated channels or how are we planning to expand categories in order to promote this higher on demand shopping.

Not only for our own J D D. J App users also into the JD users.

My second question would be.

Thank you you talked about the accelerating growth with GDP J in the second half just wanted to hear.

Within our revenue guidance, what is that kind of embedded JBT Jay.

Standalone growth that we're expecting in the third quarter, we expect any seasonality between third and fourth quarter to drive.

Patients faster.

Maybe DJ growth in the second half of this year. Thank you.

Thank you Ron.

So I'll take the first question and I will have to address the second one.

So the.

Our partnership with JD group has been.

Really really important and a win win for both parties and we have put together dedicated to provide.

<unk> services to the customer needs and to improve the consumer experience to in Q2, we are very happy to see that our partnership has significantly strengthened.

In Q2.

The <unk> from the J.

J D. One hour shopping the Tyndall South should go which is in <unk>.

Howard buyers.

<unk> had a quarter over quarter growth.

90%.

And you perhaps have already noticed that.

We will open up a JD app.

Any cities, including Shanghai and Shenzhen in many cities.

You have seen on the very top on <unk> homepage there is a.

Sure.

New entry clients caused 14 or nearby our local.

This is in test and we plan to rollout this new service to more cities and have a bigger scale expansion. This will essentially bring our customers.

More on demand.

Every experience and the shopping experience.

At the same time.

We are looking closely with JD to improve the penetration.

Into the JV is 530 million annual active consumers for more and more of them to experience the <unk>.

On demand and retail services, and we will continue to do that.

<unk>.

We will continue to work very closely with JD to improve the shopping experience and.

Streamlining the products and services and to improve the penetration.

So our partnership with J D.

What.

It happens with the JD retail, but also with JD logistics.

So in addition to the existing other.

Picking and other delivery partnership we have recently launched a new partnership with JD logistics.

The data autonomous.

Delivery open platform.

And we will jointly too.

Promote the.

Upgrade in the transformation of the <unk>.

Intelligent delivery.

<unk> and <unk>.

To jointly improve the infrastructure of <unk>.

<unk>.

Delivery and on demand delivery. So we are.

Again, very happy and excited with what's happening with JD group and that we jointly will.

Push this forward and it's a highly win win partnership.

Okay. So.

For the second question about the J D J ethically.

<unk> growth basically.

Sure.

I want to add more color.

On the.

The expansion of categories, so by cooperation with J D.

We are expecting to explore into all and just extend our cooperation into more categories, including home appliances.

Not only just like a supermarket and fast FMC products and smartphones product before previously we will explore into more business, including home appliance and.

Cosmetics by Corporation, which the JT group.

So.

There is some seasonality for the second half and we expect Q4s.

Revenue growth in.

After ADT Jay would be even.

More than <unk>.

More than Q3's number as cost usually for Q4, there will be an hour a big campaign and also for all of those businesses like apparel and smartphones, there will be new product launch weeks.

We expect.

Q4 will be even better than Q3 and.

And also we are captains that.

The online marketing revenues growth rate.

Because in Q2 as we have discussed that the online marketing.

Revenue sales increasing by.

Over a 100%.

Then.

On the higher base of Q2 last year, if everybody's remembering Q2 last year the brands are actually.

Spend a lot of marketing partners on different e-commerce platforms, not only for the <unk>.

Also with ADM.

Well.

Q2, this year with few witnessed.

Triple digit growth rates.

The marketing dollars and that we also expect that for the second half of this year for each quarter of this year online marketing revenues will continue to grow.

With triple digit.

Year over year.

So.

That's the part we believe that our overall.

The monetization rate.

We're also growing our only.

On a year over year basis, but also on a sequential basis.

<unk> for Q3 and Q4.

Yes. So this is.

Mrs.

The guidance for the DDA growth for the Q3 and Q4.

Fair enough.

Thank you Philip.

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

Good morning, guys.

Two questions.

The first one is about the.

The lighter colors.

We saw that on your press release, you mentioned that the operations and.

Almost.

When up and partly because of an increase in rider cost. So just wondering if you could give us more color on Nokia rider cost for example.

The trend in terms of the wider college hopper.

And is that anything that going forward, we need to buffer for extra cost because of.

The call for our protection of our benefits and then the effect on the sales and marketing just wondering if you could give us a color some color about the customer incentive portion versus advertising staff costs.

Thank you.

Okay. So.

For the Christianity. So further price, we're seeing about the rider costs, so basically that.

So look we were talking about like the absolute dollar amount of the rider costs that increase.

So the cost <unk>.

Generally like the train machines, Ben It is what's growing by 100, almost 150% year over year. So.

We are.

We will pay like.

More in salute dollar amounts of the rider cost Judy.

To the riders so basically the other per.

But the cost per order.

Is generally stable.

This year and also.

And.

For the sales for the <unk>, Mark teens customer incentives so on a Q on Q a sequential basis our.

Consumer incentives.

You like maintaining like the same level, a little bit decrease compared to Q1. This year and that we also expect that on sequential basis.

The.

Consumer incentives given to the.

Customers will be increasing in Q3 and Q4 this year.

And also in terms of the.

Operating cost as a percentage of the.

Jeremy of JD DJ we also expect Q.

The decrease on a sequential level.

Not only in Q2, but also in Q3.

In the second half.

Yes, I'll, just add a little bit.

Just wanted to talk a little bit on top of that just mentioned so if you look long term in terms of sales marketing and customer incentives I think one of the.

Very positive thing we are now looking at is our partnership with J D.

No.

What's happened in the last few years, we need to acquire like brand new customers.

J D D J.

Now as we are working closely with JD. So we are.

Working together with JD into penetrates into JV is massive.

The base. So we envision that this partnership in the long term will help to drive down the.

Sales and marketing.

And the customer experience customer incentives.

Dollars.

Of those customers has already in J D.

Tumors so.

As you might imagine that the acquisition cost or the conversion costs for those customers might be.

Lower than the brand new customers.

And also for the rider costs.

Same thing if you look at the mid to long term.

We are confident that with the increase of our other density.

As you can see that.

The growth of our data now on demand.

Every business has been very fast so we're now seeing more and more 10 merchants at the same time.

Other members of <unk> has been growing very fast as well to the other density will also help too.

To reduce the.

Right our cost the higher density.

More members of others.

<unk> currently and can deliver.

In like a certain period of time, so this will improve the efficiency and therefore reduce our costs. So.

Yes.

To summarize I think the if you look mid to long term the rider costs.

Can be well managed.

The sales and marketing.

<unk> can be lowered.

Okay got it thank you.

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

Okay.

Thanks for taking my question two questions.

Thank you Bob.

Hum.

Yes.

And my question.

Yes.

Why.

Yes.

Alibaba our peanuts.

Thank god for that.

Okay.

Could you repeat the first question.

Yes my question.

Oh Wow.

Scott.

Thank you.

Yes.

The COVID-19 impact on JD Jane is that right.

Yes, Covid and flat.

Okay.

Okay.

Okay. Okay.

So yes.

Yes.

<unk>.

The COVID-19.

<unk>.

The floods anything so.

In the last few months, we have seen that occasionally in some.

Some cities or areas in China, we are seeing Covid cases and.

We work very closely with local governments to provide the.

Sure.

The daily supply sand.

The.

The on demand.

Delivery for the customers.

So we are on.

Almost every city, we received a recognition from the government for that too.

So basically.

So very positive feedback.

Yep.

Down to health.

We helped the city and helped our society.

Certainly we are seeing that our customers are.

Getting more and more used to ordering from online.

Instead of going to offline stores all the time, so I think this.

In the long term will benefit.

Yeah.

This equates to <unk> to acquire and educate more customers.

So.

This is something.

Already happened in the last two years and we expect.

This too.

Continue to happen going forward and at the same time. This also helps to educate the merchants.

Therefore, we are now seeing almost.

Like all of the top supermarkets have been already working with US and also we are seeing.

The more and more leading merchant from other industrials right now turning to working with US I think this also helps to educate the merchants everyone knows that in.

In order to deal with the COVID-19 or to deal with the customer needs a shift.

They have to transform quickly and digitally so I think this also will benefit us.

And also for Q3 financials.

We don't think the floor.

<unk>.

Situations going on and we are have any material negative impact on us.

Yes, and on your second question regarding the high pool.

Our competitiveness.

So.

So first of all we are very proud that the <unk> system has been.

The value of hydro one has been referenced by more and more.

Leading retailers and at the same time because of our neutral position of J D. D. J, because we're not a retailer ourself, so that significantly help floaters as well in terms of penetrating into more and more.

Merchant so Amy.

Further we have now seen over 434300 <unk>.

<unk> stores using a hypothesis and this number physically up and at the same time.

<unk> has already been proven unable to.

Kris.

The efficiency of retailers ultra business and also to increase their revenue from outflow business. So I think the hydro system.

Yes.

Our question really.

The most adopted as the most leading.

This term in the market.

That's very clear thank you.

Sure. Thank you.

Your next question comes from the line of Alicia Yapp from Citigroup. Please ask your question.

Hi, Good morning management, Thanks for taking my questions.

My first question please.

Related to the community group buy platform, so with the slowdown of many of these platform volume have you seen any.

Addition that demand flowing back to your supermarket retail partners any qualitative comments on how the demand trends that trend has changed over the last two months.

<unk> seen earlier this year that you could share and then second is how much.

In terms of the longer term the cost saving that you foresee the autonomous delivery could bring along and how will the pricing.

<unk> structural that brings along with autonomous unit.

Speaker scale. Thank you.

Thank you Alicia So give you my view.

The back half of anything to add.

First of all.

<unk> grew by I will give you some data points.

So in Q2.

The GMB growth of DVD J E. A number of provinces that are most accurately.

Developed by <unk>.

Community grew by including like cooler Hubei quality tenancy.

So all of those problems.

The JV.

<unk> achieved a <unk>.

Over 100% year over year growth. So we are doing very well in all of those provinces and.

At the same time as you probably have noticed that the <unk>.

Regulators have now I'll place tied.

Either a regulation in terms of.

Mike.

Fair.

Competition.

Sure.

And also the anti monopoly et cetera, So there's certainly a place a lot of pressure.

Community group buying players in.

So we are very confident that in the in the long term, we will have more competitiveness.

And.

Also.

We always believe that the.

Our supply chain capability is a key to winning in this market.

For few customer needs and we are able to work with all the local leading players.

The strongest supply chain capabilities and have the <unk>.

Broadest.

Geographic coverage now we can.

So a few customer needs national wide with the broadest SKU assortments.

All of those are on comparable.

Either.

Community group buying players at the same time, because we are one hour delivery, so much more efficient and much better customer experience then.

Next day delivery. So this also.

Help us to differentiate ourselves.

And.

And another thing to mention is that.

For example, like May file.

Yes to both.

Our community grew by as well as.

Our platform business.

Its quiet.

Controversial because for the retailers.

Definitely we will consider required as a competitor in terms of a neutral players or a partner.

No.

We have the position of the platform business only because we are neutral.

And we only help the retailers have never competed with them. So I think this is also helping us to do.

Differentiated ourselves so in short we are quite confident about our.

Okay.

The competitiveness against the comedian hit group buying.

Buying players.

Yes, yes, and also for more color.

The.

Sure.

Maybe maybe in the beginning of the year some of the repairs.

Fierce competition in their local tier three or tier four cities wafer CGP initiatives and right now I think most of those reserves.

And are you doing much more much better.

<unk> and to grow their businesses and what we have witnessed is therefore.

For those retailers their offline venues as Judy.

Overall it is gross margin is improving.

Apparently so which makes them to be.

Better position to further invest in.

Online basis.

In the second half of this year end.

And going forward.

Yes, and also for the autonomous.

Delivery.

<unk> My view in the.

Our country will have anything to add.

I'm excited to announce our open platform for autonomous.

Deliveries.

In the last few months, we have been working on this for quite a while working very closely with JD logistics, along with a few other partners and.

We have already successfully launched the service with.

Like Walmart Sam's club selling fresh.

Good.

In both in both Beijing and <unk>.

In Shanghai so.

Some districts according to the local government.

The guidance so.

In terms of the.

Process or a customer experience. So I think those are having dramatically improved over the last few months.

All of those.

Autonomous delivery are happening in the rural environment and serving the rural customers every day every single day now and so we are confident that the customer experience.

Very good.

At the same time, we're seeing that the cost being improving along the time as well.

Sure.

And also.

I think in the short term turnover delivery will be utilized to supplement our menu delivery and relief capacity constraints, especially during peak season.

During the extreme weather conditions and in the longer term.

Leveraging the scale application.

The autonomous delivery, we expect it will significantly reduce the cost of delivery in the long term.

Please add some color on that so right out of the trial around is still quite limited and.

The whole ecosystem.

It's very early stage so.

If you look at the cost per order I think steel vacuum high because of.

The hardware cost as long as.

The limited trial, but we are seeing already a chain and also the projections to hardware coffee is going to go down.

<unk> significantly over the next few years.

So we are expecting in probably two to three years I think.

As a chance to the cost will be.

Lower than human cost.

And another trend pattern for walk out to work out is the human cost.

The next few years.

Back to you probably can't even higher given the.

Population looks like so so.

So that's why we are investing really early stage two making sure we can accelerate the commercial use of.

The autonomous drive.

Agree.

Great. Thank you for the color.

Your next question comes from the line of Wang from Morgan Stanley. Please ask your question.

Thank you good morning, Citigroup backend Caroline.

Two questions.

First is on the monetization side I saw that the total monetization rates seem to be stable quarter on quarter.

But seems like the structure has been terms I noticed that the delivery fee as a percentage of Jeremy has dropped by something like 0.5 percentage points.

Is there any particular reason behind that that we are lowering the charges.

From the customers or is just due to the mix of order types.

And the second question is on the cost side is still above the rider cost im trying to reconcile.

Overall.

Ports and fulfillment cost items.

I noticed that it seems like.

Our rider cost increase is.

It's higher than what I can calculate it from Djs rider cost.

Chris.

So I just wonder whether in the second quarter are there any one time or one off items and the rider cost side.

Special sauce.

Obsidian providers during the pandemic or something.

At one time.

The impact of FX.

That's my questions. Thank you very much.

Thank you our way so.

So yes for the first question on power demand transition rates so basically.

Overall, when you take the rate is increasing by 20 bps.

On a sequential basis.

I also said that for the second for the third quarter and for fourth quarter, we expect.

Monetization to be stably.

Zero growing almost equivalent basis as well.

In which online marketing.

Manufacturing rate is increasing significantly two like two 9% in.

In Q2, this year versus two 5% Q2 last year and as you mentioned is that it really service fees Our commission fees.

Vantage and that percentage of Jeremy is dropping a little bit.

Mainly because of the mix of mix change about.

Product categories in Q2.

Smartphone cases, increasing relatively faster than the average and because their commission rate is lower than the average in the area.

He is higher much higher than the average of platform.

So which means less orders compared to the.

The other categories and also we are just to receive less attended last subsidiary of fees as a percentage of the <unk> smartphones.

And it is and we also.

Is that in Q3.

The commissions and fees as a percentage of <unk> will be.

A little bit <unk>.

On a sequential basis compared to Q2.

Of course in Q3, usually there is this is a little bit slack season for the smartphone business is so the growth rate of smartphone businesses will be lower than Q2. So the overall commission rate and the delivery of services fee.

Will it be.

<unk> as a percentage of <unk>, while we still maintain a relatively higher.

Gross rate of online marketing's, which makes.

Stably growing manufacturing rate in Q3, and Q4 and in terms of the second question about the rider costs, Yes, there is.

Sure.

Sure.

One time issue, but it's basically it's not onetime issue because as we mentioned that seeing effective from.

Active from April this year, we successfully transitioned our business model of.

The last mile delivery services from gross basis to net basis.

As a king from like mid <unk>.

So accounting wise for the first half of April.

For the last mile of any issues, we still counting.

Gross basis, which makes us have more have more rider cost in.

The accretion.

And in the deposit cost fixed cost line, because we need you paid some rider ratio constitute our last mile writers in the first half of April but for.

For the rest of the quarter and also for Q3, there is no such issue.

Alright, Thank you very much back from a very detailed answer thank you.

Okay.

Okay.

Your next question comes from the line of Ashley Xu from Credit Suisse. Please ask your question.

Thank you management for taking my questions.

First question is on.

Growth outlook for our business.

Because in the past we have seen this business growing quite well so looking forward.

Whatever expansion plan and although down this path.

And my second question is about the potential impact from social security requirement on the riders any recent updates or change on that.

Thank you.

Thank you Ashley let me just take a few questions.

So for the first question on power the growth rate of I don't know.

Yeah. So so.

In the first half of this year.

Now key accounts chamber itching, Spanish it's growth, it's growing very quickly.

140% for the first half and we also expect that today in the second half and yes. It will be continue to grow at triple digits just like.

We mentioned in the earlier.

So and also for the next year, we also expect.

The business is growing at.

Relatively higher speed and we expect right now we are almost close to it.

Seo.

Our number one player in the chain matching.

Services businesses.

We expect that in the fourth quarter or lighting.

In the fourth quarter or early in next year, our business volume in the chamber jeans sector in China should be.

Almost with the number one.

Leader and the in terms of the potential impact from the.

So right across from the law so yes.

So our guidance opinions protecting labor and <unk>.

Social rights and the interest of walkers engaging new forms of employment.

I joined <unk> to buy eight central it departments of the government in July.

And we fully.

We understand the government's policy to better.

Tact flexibly employed social workers and are pushing forward with the implementation of the guideline.

So.

While we create a large number of flexible employment opportunities through our crowd sourcing and network we are.

Also committed to safeguarding the rights and interests of the underwriters.

Specifically in terms of the work related injury insurance.

We have been.

I think we have discussed in the last earnings call that we had been actively participating discussion panels hosted by the government to ensure pool and strictly stick to the principle of <unk>.

Production.

Under the guidance of the relevant authorities.

We are also right now preparing for the for the path to run our pilot phase of work related injury insurance in select provinces like Shanghai, Guangdong and Beijing.

And the incremental cost of purchasing the work related injury insurance for riders is estimated to be <unk> RMB per order. It is likely we mentioned that in June and then we think this could be well offset by our increasing order density.

And then based on the opinion.

Alrighty and local governments are formulating specific measures for different industry for example for food delivery date.

Illustration for market regulation ethane.

Subsequently took the lead in the formulation of the guidelines to specify the responsibility of <unk>.

Food delivery platforms and to protect the rights of our food delivery riders. So based on our communication with S. A R.

The guidelines reduced by assay is not ethical applicable to us because we do not operate our food delivery platform and our riders to network for self on the food delivery platforms.

This is just.

No.

Right now the impact for us and we expect that only <unk> order on the what created the injury insurance.

B, we are digested in hour.

Cost improvement.

Next year.

Thank you.

Your next question comes from the line of Robyn <unk> from Daiwa. Please ask your question.

Hi, Thanks management for taking my question.

Management comment on the mix of the server market and Nordstrom, a market contributions and merger.

Benjamin.

With the deepened cooperation with JD.

Ed.

That will have more clarification from home appliances, and cosmetics should we expecting non supermarket mix to increase meaningfully and also what is the op. This quarter, so with the non supermarket mix, even higher would that.

Even more and given the subsidies are mostly spent on the supermarket category. So when Nordstrom a market category increase should we expect that to benefit the margin more in the second half. Thank you.

Okay. So thank you for the question Robyn So basically for Q2 for the mixture for the met mix contribution Super markets contributing about 70% to the total Jamie while the smartphone <unk> phase III, including smartphones.

In the home appliances is like around 20%.

Of the total Jamie and.

With the further cooperation with JD, just like we mentioned in the earnings call in June that we expect the non.

<unk> market categories will gradually continue to increase.

The total market share in our Jimmy amount and in terms of the.

Average order value. So in Q2 this year our average.

The platform is about 180 RMB, while for the <unk> of the supermarket growth categories is due is highest 140 RMB.

And we think in the.

Second half of this year, we should be still able to maintain at the higher LTV for the market for our platform average and also for supermarket average.

And.

Youre right, so not only because of the mix contribution but also we are.

Gradually.

Decreased.

The subsidy level or the consumer incentives given to the ASP.

So our average.

Cost.

Vantage and as Jamie after ADT, Jay will be also slightly down in the second half that's why for Q2. This year. Our <unk> margin is minus two 3% versus two 8% in Q in Q1, this year, which is improving by 50.

On a sequential basis, while in Q3, we are seeing further.

<unk>.

Almost 102.

Minus one 3%.

Thank you very helpful.

Okay.

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

Thank you operator in closing on behalf of that as management team, we'd like to thank you for your participation on today's call. If you require any further information feel free to reach out to ask directly. Thank you for joining US today. This concludes the call.

Yes.

This concludes today's conference call. Thank you for participating you may now disconnect.