Q3 2021 Dingdong (Cayman) Ltd Earnings Call
Okay.
Good morning, and good evening, ladies and gentlemen.
Thank you for standing by and welcome to the <unk> Limited third quarter 2021 earnings Conference call.
At this time all participants are in a listen only mode.
We will be hosting a question and answer session. After management's prepared remarks.
Please note this event is being recorded.
I will now turn the conference over to the first speaker today, Karen G Investor Relations Vice President of the company.
Go ahead, Matt.
Okay.
Thank you.
Hello, everyone and welcome to the del sur culturally 2021 earnings call with US today are Mr. Tony Yang, our founder and CEO and Michelle <unk> our CFO.
You can refer to our CEO cadre tons, they turned to <unk> financial results on our IR website.
I've got 100 dark meat.
You can also access a replay of this call when it becomes available a few hours after its conclusion on our IR website.
Before we start please note that this call may contain forward looking statements made pursuant to the safe Harbor provisions for the private Securities Litigation Reform Act of 1995.
These forward looking statements are based on management's current expectations and observations that involve known and unknown.
And the certainties and other factors not ended the company's control, which may cause actual results performance well actually.
Many of the company to be materially different from the results.
For me all expectations implied by these forward looking statements.
All forward looking statements are expressly qualified in their entirety by the cautionary statements risk factors and details of the company's filings with the S. E T.
The company undertakes no duty to revise or update any forward looking statements for selected events or circumstances. After the date of this conference call.
I will now turn the call to our first speaker today, someday and as CEO of being done Mr. Now huh.
Why not downtown.
I mean, our union Tucson, you're taller way okay.
It holds it thank you.
Hi, just wanted to let you know a lot of China.
Got it all turned on and that's why we're so changing the pony system.
You saw that also to eat.
Hello, everyone and welcome to Ding don't stick quarter 2021 earnings conference call first on behalf of the entire thing don't team I would like to extend our sincerest gratitude and appreciation to all the investors and analysts for their support we here at Ding-dong are rapidly maturing company with advanced supply chain capabilities and one of them.
China's fastest growing companies in the domestic neighborhood retail industry.
Oh gosh.
Besides your door.
Paul just a cultural thing.
So what you said so pretty so neither thought when you why Didnt you your question well keep them though.
What would you do you know if it was on Humira ex U.
Yeah.
Yes.
Yeah, I think Amelia Chilean Basel.
Basel well the people, who don't realize Thomas let's see Hugo to Dubai.
We're delighted to report that we not only achieved strong growth in the third quarter, but also rapidly optimize efficiency and make significant improvements to our non-GAAP net loss margin. In addition, according to data from Quest mobile Oh Dingell lab has grown into one of the top 10 e-commerce platforms in China. This call.
More importantly, we ranked number one among chinas e-commerce platforms with fresh proteins, and we have tremendous confidence in our prospects.
Sure.
It's also the phone so I mean do you monetize that show.
Sure Sheila.
So here it goes I know you're not alone so greenwood.
Total than dogs, she was on <unk>.
You know, Matt that Ginger theory told me, it's under a lot, but I am thinking about it and she didn't she chooses.
Yeah, you saw the annual show so just water and show what does that chose under your dreams, a downswing yesterday I didn't ask Shimon funding cost.
Oh, sorry.
<unk> been able to chase into June.
Let me share all third quarter highlights in terms of all in terms of four primary aspects of our business.
One highlight is our continued rapid growth in scale overall G. M V increased by 107, 7% year over year to 7.0 to 10 billion RMB in the third quarter. The number of average monthly transacting users exceeded our milestone of 10 million for the first time. In addition, the number of average.
Are you transacting members grew by 26, 5% sequentially with each member of placing an average of 7.4 orders per month.
Well, we really didn't know that Jimmy jump down to the challenging quiet until you go how long ago not so those are the I forgot she hasn't gotten call you understood.
Let me do denials, so I apologize if you guys should you choose to put on me.
Do you know if it was.
Well first of all you know that tends to slow down between I told you so really about Basel Tony wants to see.
Yes, John do it yet.
Arriving at total G M V, but assembles the formula for our coops volume length times with time right.
Eight times with wafers to our geographic coverage and it has good potential was seen in all mass expansion capabilities or we can do a mass expansion capabilities have already been thoroughly tested and verified.
As of the end of the third quarter, we've seen 185% year over year growth in city coverage proving that geographical expansion is a relatively simple task for us.
Gotcha.
As of late May.
I didn't know what lies ahead of you a drink to everybody's yet.
Yes.
Well, what you guys saw amazing to me.
So I didn't know that Jeremy.
It sounded like Antonio so that to us is how over the gimbal pulled yet.
Go to the sundial.
She has a huge I shouldn't doritos cheetos.
So the three Joe showed you know so you need to do well and not just through the city, but Tom did you.
He didn't.
Nobody is.
Telling me it didn't.
Uh huh.
And also the son and daughter suddenly.
So I've called this wrong you are free to answer you with us in Dunn County.
The height of the Cuba first duty average monthly G. M D contribution on Ding-dong by each cities urban population for example, Shanghai as population is approximately $24 million and its current monthly G. M. V. Contribution is 30 RMB per capita showing that we still have significant growth potential in our existing.
Markets expanding the height of the cube requires us to increase the penetration rate of all existing cities and enhance the purchase frequency of all current users.
In our pursuit of efficiency quality and profitability. These are necessary efforts that bill difficult, we'll strive for relentlessly.
Even in relatively mature markets like our young forgive me for Delta region, where we have been operating for over four years, we continue to see tremendous growth potential in terms of height at G. M. B for the region increased by 64, 8% year over here in the third quarter.
She said she was under lease.
So that's greenwald, especially the causal dinning homelessness.
Puzzled Houston, Dallas, Seattle, one does not how's it. She was also noteworthy yeah I hope you all are doing.
Sure.
So D G by guess judging even though Matt.
So when he was young Jim was totally.
Jim who people well they don't play Puneet, well Gee when somebody leaves no go ahead.
She didn't even show these calls enough of that Jim Ross again, Philadelphia.
Another highlight for the third quarter is that while continuing to grow in scale.
So significantly enhance efficiency when major shift to macro policy change to launch at the high market growth, we quickly and proactively responded to keep pace in late August we changed our strategy from a scale first with due consideration of efficiency to efficiency first with do consume.
Iteration of scale will continue to work hard to improve our product development capabilities strengthen our supply chain and optimize our operational efficiency to achieve high quality development and self sufficient capacity.
You know when you sell you puzzled by inkjet Tal.
But he is on the talent, Chile Sunday at almost a yellow page what is sharleen She said no.
Josh could you and he's home Julian.
But I'm just trying to check out you'll want all Saturday you didn't show you didn't you saw that audio sounds about India pseudo Vishal, Jim will pretty well.
What we do well free dog generic Joe's puts a niche Joe you'll good thoughtful disorder.
We achieved a rapid efficiency improvement in the third quarter. Thanks to our ability to act swiftly, which is one of our core strengths. Moreover, an accumulation of long term investment in our supply chain began to bear fruit.
Non-GAAP net loss margin improved by 530 basis points from 37, 2% in the previous quarter to 31, 9% in the third quarter. We're confident that we'll narrow the non-GAAP net loss margin to a greater extent in the next quarter with the thorough execution of our efficiency first with Duke.
Raising of scale strategy.
Chris when you say you'll walk.
Well, Mr. Mears I'll, let Tonya total wallboard do nonetheless tonnage that you're hoping by you that lawyers, who are sitting around that city total total we all kind of know how.
Yeah. So look all of our time so yeah. So the total is that Johnson <unk> Johnson, <unk>, Johnson, which enable cutting off road are good enough to do that so what are you what my shortly that she said.
Improvements in our non-GAAP net loss margin was primarily due to the returns for the long term upfront investment in the supply chain. These include investments in contract farming direct sourcing private label brand agricultural technology and food processing.
While we are aware that it takes a long time for us to see returns on these investments, we're confident that will significantly improve our efficiency and benefits from these investments in the future.
It's on the known sushi that she didn't know when there's something to me.
Do you know why it's hard to tell you something.
How do you think youll meet the sodium load amusing isn't down there. She was almost usual so James job. He does I do note all of my tie well minimum.
So I would point out nobody lives.
But my team is on those hot.
How about going holiday. It was how you want the soggy you shoot the Smoky mountains, sometimes Jonathan toggle Fabio.
The idea that you want.
Sorry, we continue to enhance our product development capabilities, which are a core competitive strength and primary growth drivers to satisfy to satisfy people's ever growing demand for a happy life.
With me customers would buy groceries on Ding-dong our goal for the next for the near future as for more customers to buy Dingoes grocery. This goal requires us to diligently develop differentiated products with better quality as we continue to iterate and optimize our private label brand.
Our in house production and processing line.
No no no it's not being biased.
I mean, it's all here in July.
P J, it's European badly Alessandri Junior San Diego didn't don't so we are absorbing.
My opinion no Jeremy W. You thought at all.
You do need to be.
Sure no problem.
Arthur will go back and do you how should I tell my job as CEO as usual Condor.
Good coffee and did not see some big changes at that time didn't answer but did you ever WD juggled, a genius sounds a little with your boss. She was off I mean, just as easily.
Since their launch in July last year, our private label brands have leverage our product development capabilities to develop rapidly G. M. D about leading private label brands in aggregate accounted for 27% of G. M D for their corresponding categories during the quarter, representing an increase.
Of 22.6% points compared to the same period last year.
As we have and will continue to evolve according to user needs and develop more high quality private label products and increasingly diverse product categories for us.
As long term perspective, we expect the G. M V contributions from our private label brands to reach as high as 30% increasing from the 5.8% up this year's Q3.
So that's probably about it.
So you go something somebody total Bureau, a bundle so there'll be no.
Yeah, I don't want to know where the challenges.
How do we use all of it.
$2, she bought out and nobody did you Uh huh.
Sure.
There are some items so we're body those good to.
What do you do.
We steadfastly adhere to our principle of applying rigorous attention to detail to every product, while creating our private label brand putting this principle into practice, we selected 18 different flavors for our private label Hotpot bread Ding-dong by Mike Glenn.
After developing and testing over 720 recipes and conducting over 240 rounds of testing each flavor features a unique local tastes and together these flavors represent a culinary hotpot map off the entire nation.
So it's a little bit by the Kung Fu or Magellan, followed through the feed on kind of on the paddle.
When you're talking about a soggy G. G. You were sort of going through the Covid here you go harder sometimes you don't you need to go higher.
Oh no no no.
Okay.
Some big corridor, where you saw either without a G G almost all of them.
Bob <unk>, who you said P. J shall we assume your departure.
While proactively developing the private label brands, we'll keep an open mind toward non private label products. We firmly believe that to be an excellent company, we must establish an ecosystem to be the development of the entire industry as we events will work closely with more partners to develop.
More distinctive and better quality product for the gratification of our customers doing so puts us in a position to capitalize on the transition from an era of simply serving peoples basic needs to a period of prosperity and a nationwide consumption upgrade.
So is that more do normalize how're you only always sit out to you sometimes job in Utah didn't know that.
John I need to know Schlomo sounds you do see all of a sudden time job would've Geordie one be argued with $10 five.
Or would you have bought.
Sure Jonathan.
It's really challenging training going in.
There's something that nobody's done that she can jump.
Ginger.
Totally alcohol syndrome, where you find younger boy two.
Oh, two trenches Chinchillas you don't shut down do you suppose you don't for the phone yeah.
Boon to our I D.
Fortunately in China, how did you come to younger debacle of slipping shipyard, yet gigot timing, the phone where you're hooking to generic.
Yeah.
Well I've actually Gucci is sitting Belgian Dr. Chalmers.
It goes without saying he told that you'll need to do.
Yes.
As of the end of the quarter, we had 10 in house production and processing plants.
To rapidly scale into our production and processing capabilities G. M V contribution from products developed in process in house in the third quarter increased by 85.8% quarter over quarter on the production and processing side were driven by the core principle of ingenuity two perfect.
Our supply chain and enhance automation in our production lines, thereby reducing cost and increasing efficiency.
Over we diligently monitor our factory environment products processes and personnel through the lens of four core aspect excellent production practices strike of process control and we're monitoring system and two way traceability system, we have established stringent rules for food safety.
In the flavor and quality of our products, which are nonnegotiable priority for us in the third quarter Dingo screen processing plans obtain I am best International food standards that a vacation, reflecting our strategy to invest in high quality product.
He is well known.
So leave it sounds interesting.
Hi, Good morning, Huddle. So now couldn't go to somebody said jewelry is a generic who was that.
Yeah.
Mm three ounces done before so I I gotcha.
Yes. So go onboard you Oh, Gee, calling series G D G I Joe Johnson.
Theory shouldn't you can do remotely by the G series that young to G. D. P J.
Oh sure.
You saw you on just hired a hotshot well what do you do as shown under him. So he also tried to do to address it.
I'm going to choose what you don't.
Boy, we can see new to further our commitment to rural revitalization participating in public welfare activities and taking on additional social responsibilities.
Example, in this year's Q3, we began to build the first environmentally friendly one space antibiotic free shrimp breeding base collaborating with the two young men discipline governance of Sichuan Province, and Shanghai Ocean University. Upon completion this space will be the most upside.
And largest antibiotic eastern based in China with the potential to quickly tried to development of the fish and shrimp agriculture that region, we understand that the prerequisite of brutal revitalization is industrial revitalization, which requires technological advancement.
Oh God you D G.
Also the Ginger Oh, sorry, just shopping at home.
But are you sure you saw you sold some but John do you somehow Tor.
Didn't you guys, Judy I am pretty sure that you want to reach you. So do you feel you're on new Python as Jan said, she though John thought out a chunk of Johan do you go solar.
The breeding base was established in the suburbs of the South east of Western City in China, while enhancing our product development capabilities, we simultaneously reduce shrimp transportation costs product waste and carbon emissions. In addition, the base adopt cutting edge of bonds.
What is their collation technology, and zero drug zero discharge breathing system significantly, reducing environmental and biological pollution.
So if you don't you're going to as usual she was an astoundingly fall show me the closeness to know about I thought you did change the Dorian O'neill Dunbar, two deep holes, you're going to see it.
I'll talk about when you said you didn't know about.
You'll eupol adult so that should also be true there. So what was the Hollywood E. Julia Xu.
While further developing our supply chain technology, and I don't think all product development capabilities and serving our consumers will continue to invest on our philosophy of greater power greater responsibility and actively devote ourselves to public welfare in July cut unprofitable.
China suffered from heavy rain storms and floods, we donated 5 million RMB to provide daily necessities flood prevention supplies and emergency rescue so the victims.
Do you know monetize so these are just a susana just doing a b b.
So just changing Jim yesterday as you do for me I always Sudan engine going agenda powerful don't didn't want you to either pay those as an injury G. G seems all youll not bugging with hospital for javelin puzzle, it's administered yet gotten really young long times of her life with a Y O Y, but it's usually about a new highway Bill should go long.
So the total chunky.
She knew Thomas CEO.
She's got a foothold into the thousands of law.
It's also worth mentioning that we are the first fresh grocery app available for the visually impaired and we continue to impact us a vantage groups 'twenty 'twenty. One that is the fourth consecutive year that we have run our charity donation program for the visually impaired our employees our company.
Actually impair individuals' as one on one guys, helping don't get outdoors explore the world and experience Sunshine nature, and societal concern and care our research and development team has scheduled a regular visits with visually impaired users to collect their feedback and developed our technology to serve there.
Daily lives better.
Well, what do you what do you want your options how do you how does sound good.
Julia Music's Lindahl does she was somewhat as usual.
In summary, as a new type of supply chain company will deepen the integration of Internet technology with agriculture, food processing and neighborhood retail operations to offer high quality and differentiated products to meet the user's ever growing demand for a happy life.
Because I do know Matt Dahan.
Uh-huh shortly who didn't kill will bring more.
Surely the Sundar cause when you thought was that we were seeing things that she was feasible with thoughtful to John to your question I mean, you need us.
She gave me all you'd be.
You put a little but we'll find out what he thought of alluding to.
We don't yet so what are you either.
Do not match as we moved into I'll call them somewhat pseudo Shirley Chisholm.
Yes, she does a good job.
What do I mean, we shall shift.
In the third quarter, we proactively adjusted our strategic focus to efficiency first with due consideration of scale as such we rapidly improved efficiency and significantly narrowed our non-GAAP net loss margin, we're confident that we'll put or would choose the non-GAAP net loss margin substantially.
In the fourth quarter, we're more optimistic now that we were doing the IPO process about our expected profitability timeline. Many great companies growth trajectory is often not linear but more closely resembles the curse of the smile.
Lilly, we may experience slowdowns in the growth pace in the coming one to two quarters. Nevertheless, we are confident that we'll achieve new and more solid growth through improvements in efficiency and quality that will complete that perfect smile curve.
Oh don't worry do you hold most of that general food, usually buy so I'll wait till it shall be shall go on to the final choose out of band why does it go away without us so that when my Celgene generally match I shouldn't go Yeah. You saw me he was looking to be down but most of that.
So that's the way we show each caller, Josh that you'll be holding on our country's gotcha.
China has transitioned from the newer of simply beating basic human needs to a period of prosperity, leading to tremendous changes in people's consumption habits. This is a momentous Arab through deeper engagement in our supply chain and enhancement of our product development capabilities.
We will live up to the opportunities presented by the times create value for consumers and generate long term returns for our investors.
Well the digital shift.
So I'm Gonna June Conference, Arizona.
How would you go off just yet.
Okay. Thank.
Thank you everyone with that I'll hand, the call over to Mr. Hu, our CFO to go over the financials.
Thank you Mr <unk> and Hello, everyone before I walk you through our detailed financial results place no doubt on labor day to end up falling remarks.
M B tonnes, and all comparisons and 10 day changes on a year over year basis, unless otherwise noted.
In the third culture of 2021 total revenue increased by 111% year over year to $6 19 billion and our G. N V to Raphael conversion rate in close to by 140 basis points year over year to 88, 2%. This result was planned.
Really driven by a decrease in coupons as a percentage of G M D and as well as our substantially optimized marketing efficiency enabled by the just mapping system, we launched in the previous culture.
Do you know the culture, while gradual growth in tier one cities maintained a rapid pace, we experienced even stronger momentum in settlement said on our fourth tier cities.
Fortunately for example, one of our newest market, which we entered in late May.
With newly added frontline fulfillment stations in this culture accounting for up to 68.4% of the service great I bet. They may all devastation still grew at an amazing speed episodes yesterday, pointing to 4% from the previous culture to 1200 and a tasty.
Because of our supply of fresh groceries and daily necessities from both online and offline channels in lower tier cities, it's relatively inadequate to compare the two that in tier one cities, we believe that consumers in lower tier cities already and are willing to switch from the traditional offline retail Ma.
Those directly to the on demand home delivery model.
In addition, our productive development capabilities will further promote rapid improvements.
Kevin.
The front runner of the on demand home delivery model, we see huge growth potential in these lower tier cities.
Our gross margin for the third quarter increased by 360 basis points from the previous culture to 18, 2% as Mr. Mora mentioned earlier, the primary driver for such improvement, whereas the efficiency gains and the continued enhancement of our play do you put a duck.
Ted development capabilities empowered by our long term investment in our supply chain. We are confident that our product development efforts to ensure our gross margin and more importantly serve as a basis for attracting more consumers and how do they tend to have ground and loyalty.
In the film culture, Mount that fulfillment expenses as a percentage of total revenue increased slightly from the previous culture to such a 7% primarily due to the higher revenue contribution from your market. The resurgence of Covid in some regions utility cost increases during the summer and high Tech.
Each of subsidies to deliberate riders.
And your market tend to have lower OTA entity, almost there for higher fulfillment expense ratios than mature markets.
Meanwhile, we have made a significant improvement in average daily order up a frontline fulfillment station in new markets, which is call. It indicates you of all the density.
Oh, the desk, taking newmont has increased fulfillment expenses as a percentage of total about human nature decreased substantially.
For example from unit Economics perspective, just weak fulfillment expenses as a percentage of total revenue decreased by 810 basis point for all the previous culture in South Boston market as such we are confident that the fulfillment expenses as a percentage of total that you will continue to dip.
Most of the over or the density glasses.
What does it change inkjet ticket play for all skill first with deal consideration of efficiency to efficiency first with due consideration of scan our marketing expenses as percentage of total revenue with 6.1% in the third quarter, representing a decrease of 190 basis point.
For all of the previous culture. The improvement was primarily driven by a decrease in user acquisition cost in both online and offline channels.
That the number of new users still increased by 14.7% sequentially.
Going forward, we will focus more on the quality of new users I never say never.
First chip users, while steadily acquiring new users.
We must typically manage their user acquisition cost in each channel and attract more users with high consumption potential.
I would now that's not.
Non-GAAP G&A expenses as a percentage of total revenue decreased from 2.9% a year ago to 2.3% instead of culture, thanks to our growing economic scare.
We believe that technology and the data are crucial for our printed the on demand home delivery model.
We increased our investments in product development accordingly.
To be more specific we invested more in our supply chain systems and personnel with agriculture Tech knowledge expertise this quarter.
As such our non-GAAP productive development expenses as percentage of total revenue increase the true full 0.1% in this sort of culture around two 9% in the same period last year, we believe our investments in tech lenders and data will generate great value throughout the full cycle of ours.
Supply chain sharply.
Oh, all the last earnings call, we announced our guidance to reduce all went down that's that the loss margin by 400 basis points in the third of culture, We managed to beat our guidance by reduced when do you think that that lost margin by for 510 basis.
Points for us so two 7.2% in the previous culture too so tier 1.9% this culture.
We are confident in our ability to sustain this momentum and the frozen out of our non-GAAP net loss margin in the common culture.
And that's cash net cash outflow from operating activities was 1.3 billion in the set of culture considering supply to find that this is not a cash outflow from operating activities Timothy ensure that chose the other real point 8 billion I'll.
Our capex in a set of culture was the other point 1 billion.
Our cash cash equivalents restricted cash and short term investments totaled $6 8 billion as of September 30th 2021.
To sum up we not only achieved a satisfactory top line growth, but also narrowed our non-GAAP net loss margin in Desoto culture.
From the user's perspective, the number of Avalere mouth leg chest active users and <unk> increased.
Increased by 24.2% from the previous culture.
And they use us repeat purchase rate on the purchase frequency in crude in.
In terms of our supply chain the percentages of direct sourcing in fresh grocery suppliers increased to 17, 9.1% in the third of culture and the law.
Long run we will continue our commitment to providing consumers with bad too and the safer product.
For the first culture, and then also bring higher battle users, improving our non-GAAP net loss margin and growing our G. M D.
Oh Dear basis, we will continue to improve our gross margin while further benefiting from our upfront investment in the supply chain and Crazy journey contribution.
Our private label brands and in house production and optimize optimizing our production mix in terms of a non stop that the lost margin, we expect to achieve greatest sequential improvement in the first culture than in the sort of culture in Shanghai the home.
Of our first operation, we expect our unit economics to reach breakeven in the upcoming culture.
Driving unit economics ease of youngsters Altai region to steadily turned positive in the future.
This concludes our prepared remarks for today operator, we are now that they to take questions.
Since you are asking a question maybe for storm and the warm or your Touchtone phone.
To remove yourself from the queue. Please press Star then two.
Today's first question social.
Morgan Stanley. Please go ahead.
We also encourage them at all.
Uh huh.
Oh.
Nothing to chance prepared remarks, she thought additional auctions.
Sure.
Shelter Yoshi, Jim what are you more oh.
And kind of thought she used to trauma quite honestly.
Their phone.
Uh huh.
Uh huh.
Sure.
I wish you all.
Sure.
She took almost always have to go live went up so much and I'll talk about that.
I know you can't won't be cheap quake.
Quaid Beach.
Beach, Florida.
Joe.
So you've got quite a fine.
Thank you for taking my question. My question is about the spill.
Time Laurie.
Uh huh.
That's right.
Right now we are.
I'll focus on operating efficiency.
And so we are kind of protocol.
In terms of like you said.
The new market.
So I just want if you can get more color about the.
Timeline.
This is a little bit different.
We previously communicated during the IPO.
And most of all stage. Thank you.
She did in either Q, what should I do it well.
<unk> chosen.
T J.
So just two more lives as of January 31, and got to watch it.
I forgot you call it.
So as you put all of it.
You do not are you going to.
Shoot me he didn't put all the tools.
Our goal not so theres a ton about Susan I may go to another angle. So I didn't know about it.
So there you have a drink Jed Regan with your children.
I wanted to ask on I'll call yellow Vishal, you cut out on me.
So that decision so it goes on cars.
She of course, all our control she got a flu shot.
Conscious of two with Jonathan This is he didn't know about it.
Got it out so you could have been done.
Thank you for your question. The short answer is yes, we're now expecting a faster pace in delivering profitability than we previously expected.
I think our total G. M V resembles the formula for it keeps the volume length times width times Heights, the length times with represent our geographic coverage and its growth potential with Feeney now in mass expansion capabilities original mass expansion capabilities have already been thoroughly tested and verified and our track record the height.
Of the cube refers to each city's average monthly G. M. B contribution on Ding-dong by the urban population, while geographic expansion or as we call. It length times width is a relatively simple task for us growing the height is comparatively challenging as in test our product development capabilities service capabilities and.
Oh boy efficiency, starting from Q3, we have postponed our expansion into new regions and focus more on improving quality and surface efficiency. We believe that this will add the most value to our business in the long run and it also guarantees the high quality and sustainable growth of the adult.
Oh sure I'm kind of Tucson.
So I can't even say Judah saw hi, Joe doubtful to be true.
Yeah, sorry, that's high Vol, B junior colleges and all but I know what she saw Michele as you realize Oh My God. That's something we are going in the junior booths in Chile. So then going on why does it seem to you put on our soldiers will fall one thought that choose to do that so no need to go buy a piece of it may go to another to go so I didn't know that how did you drink, Arizona, which is huge.
Yeah.
In Q3, our revenue in Shanghai, where we have been operating the longest grew by over 50% year over year together with the substantial decrease in operating losses at the regional level as we further enhance our product development capabilities and supply chain, we believe that all our penetration rate in existing market.
User.
Purchase frequency and HSA. These average monthly G. M V contribution on our platform by urban populations will improve despite the slowdown in new region expansion speed.
Oh, sorry.
How dare you knew Jean and assembled those people know she didn't go so well we said yes.
Hi, Joe.
Oh, you mean, Tanzania D G E.
So you don't see that yeah, well no I'm always G E.
Do you sample forget the lagoon and sometimes even better.
If you want as a whole where do you go.
Yeah.
Do you even got a fund or could you move agenda shown that you'll want to show you watch them all well below one.
Yeah.
As you all know what.
Yeah.
Yes.
As such our path to profitability consists of three steps in Shanghai, We expect our unit economics to reach breakeven in the coming quarter driving unit economics in the young adult to region to steadily turned positive in the future second we aim to reach breakeven for operating cash flow third well.
Then target the delivery of positive net income to our shareholders. During the IPO process, we expected to recognize positive net income in Q4 of 'twenty 'twenty. Four we are now even more optimistic about our timeline to achieve profitability based on the current status of efficiency improve.
Smith.
Our next question today comes from George you a.
Please go ahead.
Downzone when you feel like somehow Oh go exactly what she'd thrown off and now you're working against.
So that they will do good she vented seem quite a weather event.
To G go for woman it seem Joe Hi, I'm working on defining as long as I'm Gonna Windup email them with Canyon dollar who should turn around you know agile high shouldn't go Athena kind majority that was all I'm doing a whole go to war <expletive> I founded who does.
Our home, which in Hawaii construction in Culberson County.
Do you want me take lodging don't blame so Oh, yeah sure Jacob go women can't do com or shoot it sounds like with home that'd be four times, a keen eye on Washington.
Amit Hi, somehow holders what had just happened you got changes how are you going to restrict the Mackay I'm thinking like she'd be entity, but kingdom goods bulk hotel she's a woman who took the time to a thumbs down who I can get a wage of guns kindred at home a whole gig a woman kind I think Congress does a good job.
That woman cant that'd be.
Lifting the transient focused on that I would translate myself are good evening management. Thanks for taking my questions. My question is regarding the competitive landscape and how it affects our strategic direction and we have seen a lot of competitors in this fast growing segment, including from.
So unlike a woman greed model and also the type of models. It has like Jude J D D J and make one could management elaborate a little bit in terms of the recent update of the competitive landscape and how we're looking at the competitors and what strategy, we will choose to try to be a standout.
Our competitors thanks a lot.
How does.
Nobody knows.
Told you once you are.
So gene up Korea, CJ zoom can we do things.
I was hoping so.
Do you agree with John.
Sure.
She's just so a man who do you normally you'd hardly then she said Oh, Yeah, Hi, Richard.
Yes.
John.
I'll try not to eat well.
Well what are your free condo.
Sorry about that.
Hello.
Hello.
The team members all uncles those don't rebound, but people don't buy three U P I thought.
John most of the time it was harder than we thought.
Thank you for your question in terms of user experience, we all belong to the on demand delivery model focusing on fresh groceries and daily necessities, the fresh produce and daily necessity market is enormous and any business model. There are that'll generate user DAU generating user value can blossom.
The trend of neighborhood retail and digitalization is a consensus among the prominent participants in the on demand industry, including J D Matewan Alibaba enough with <unk>.
Letting that be excellent prospects and strong vitality mm mm vitality of the on demand business model, we're happy to see a healthy competitive landscape in this large market while monopoly ages accompany strong competitive ensure that accompanies always striving for excellence just like a day one.
Market entrants regarding the differences between the platforms of home model and us I would like to elaborate on board aspect.
So as you know people that cannot.
Most of the country, you don't see any sign.
So liana, so he's hanging out with us.
And then go shoes, where they put on us.
Do you want to own.
Got it.
Let me check some in pizza hut.
I'll.
Got it.
Oh Gosh, what are you guys show the photos you would call out for you.
It'll go golf when will you have thought about.
Sorry, the supply side of the platform to home model is based on the offline merchants such a platform can quickly expand into many cities and offer us as more diversified product selection utilizing societies existing infrastructure. However, the self operated model has several other outstanding features.
Such as the solid supply chain capabilities higher quality products better service experiences and more efficient delivery services. As a result, the self operated model is more widely accepted by users and has a higher repeat purchase rate in the <unk>.
Cities, where both models exist cellphone branded business models, usually enjoy a higher order density in a larger scale.
Yeah.
She said Oh, my God, all Qunar, yes sure.
I'm more familiar with.
Sure Josh.
So that that gene pool, the other jobs that you're talking about.
Paul This is Ed.
As she said she isn't going to show it.
Yeah those are that apologizes.
Second the plus one model the platform model is a traffic driven mentality and it charges fees from offline Burton through traffic allocation in our opinion times are involving a company's actual value lies in value creation, including developing products for users ensuring the safety and.
Quality of fresh food use in the home thing supply chain efficiency and empowering upstream business partners.
So it's a wash it off what are the cheaper the cenci peanuts.
Some of those high job change Tom do you believe point of Valley.
So yes, I mean, bill do you want to know what do you. We didn't see that holds a lot of talk about yeah, we shouldn't just find out shortly.
Yet.
So we think that digitalization is a prerequisite for online services. For example, the platform to home model has a more significant inventory management challenge because supermarkets and street markets Alright suppliers that also operate offline. In addition, the standardization level of fresh produce.
Offline retail market is low which is also which haulage for online south in general offline merchants face enormous digitalization challenges that restrict their development efficiency and user experience.
Oh no no.
Sure.
Most of the.
If we could get all that I've had them or that they don't know what he is attending the audience pedal result.
Do people tend on could be done.
Most of that which will not be there, but we're treating sedonia daughter, Melissa please reach out to you.
Thank you Pete I'm talking about her golf.
The golf truck.
Fourth the self operated model has a higher efficiency in the last mile delivery and bingo, we deliver from a single point to multiple planes, which increases delivery efficiency and lowest delivery cost per order. In contrast, the platform model usually delivers well.
Notable points to multiple points and the starting point, but a delivery rider is uncertain, which constrained the development of delivery efficiency, leading to higher delivery cost per order.
Our soldiers.
No John housekeeping.
Most of this hard you jumped out. So this is all from me.
So most of the Italian with jingle, how corny go here shortly.
Who'd been quiet.
To sum up we believe that those two business models will coexist in the long run, but will likely have different market shares because of the differences in their models. We think that self operated model will grow faster in the future. Thanks to the more robust product development capability better user experience and higher supply chain efficiency.
Our next question today, social honestly shoe with credit Suisse. Please go ahead.
And she says I was hoping someone chemo that sounds just shoot them opinion all claims on the you know what I'm she's actually do the range out when I'm talking about just the balance on the market at that time without going in to see what you don't know such as long and complete bone employee well see.
Okay.
Gimbal doing you'd want a person hung COO women do we like the this mall you'd begin to ease them attack I don't want to do things Oh. Thanks management for taking my question I have a follow up on our profitability to the gross profit margin can we have a more detailed breakdown or more color on the underlying driver of.
The improvement and at the same time COVID-19, my share more color on the outlook. Thank you.
Holiday season.
No most of those guys.
She didn't leave Gerard.
Some of them in the month of June so it should be.
Generally, yes, it's hard to know.
Hi, John childhood with somewhat it shouldn't be the Hawaii, where your minds.
Let's see where someone is usual, Colorado tower, you'll have a zombie goodbye.
I'll be talking about it if I hear your.
Yes.
Thank you for your question three factors, mainly drive the improvement in gross margin.
<unk> is part of developing capability product development capability is our core competency and also the primary growth driver for all development, while we capitalize on the growth potential of China's consumption upgrade will do all apart to meet people's ever growing needs for a happy life by developing more differentiated products.
More private label products with better gross margins.
She says.
Go ahead and put out a total so going in shortly.
So.
I don't know John you somehow do normalize I did just that in total.
Total Tyson javelin lung total so here Thanos undo some relief come through yet.
Eddie.
The second is the supply chain will continue to invest in our supply chain to enhance its efficiency to empower our upstream partners and fitter with juice, the intermediate process and losses.
In addition, we remain committed to our investment in agriculture technology, and production and processing capabilities, which will simultaneously helped boost our product development capability and increase our gross margin.
So that's the site shutdown something needed to resolve them towards how you walk gung Ho to something like you, who she volume of fleet being out of your agenda.
So the way I want to talk about.
Yes, you got them all.
Building on our efforts to enhance our product development capability will attract more users increase repeat purchase rates with all the differentiated and superior products. In this way will avoid being dragged into rely on common promotion tactics used on the internet such as price wars.
Or special offers which in turn will raise our gross margin.
Oh, Yeah, so does somebody either going it alone.
Do you know why I tried to answer you go to their goals.
Already Jumbo you do what you said.
In conclusion, as our product development and supply chain capabilities improve we are on track to achieve high quality and highly efficient development with gradually improving gross margin.
Okay.
Yes.
Whose U R. Wilson, who is awesome almost chong of Jefferies. Please go ahead.
Why is that.
So what if the U N oh, well they wouldn't usage out of pocket legal so on this one.
He told me he probably know at the time that Ohio chasing.
Thanks management for taking my questions were actually in a private label was likely mode ramping up very quickly I just wanted to get a sense about our strategies off of private labels as well.
Thank you.
Yeah. So.
No.
So you shouldn't get a choice so if that's helping them ourselves.
Chung Chung.
How do you want to somebody going out its Avi I would.
She also talked with Asahi.
We don't have yet.
Thank you for your question first of all we see opportunities in consumption upgrades. So we'll be focusing on developing differentiated and superior product for our private label brands instead of simply replicating the top sellers on the market.
She is a demand out of China Boy Green Yoda sorry.
Well Michelle parties that she chooses to Bosch how'd, you totally well Magellan.
You're Gonna Hall at the corner of some bad yeah, she wants out of hydrogen.
Second Ingo will not compete with meeting upstream suppliers directly we mainly focus on areas that require technological breakthroughs and long term investment will work hard to maintain about supply chain ecology and hope to promote the industry's progress.
Do you know how do you do this thing out.
The views that you could judge the gimbal that don't do that.
Jonathan Johnson.
A little more challenging to open by the shoes will hopefully more.
So if somebody had told me Oh geez, we like what you see here.
Yeah.
Single has always believed in the seat spirit, a tiny and well plan to seat will grow into a tolerant treat in the long run and therefore will not just for us the development speed and scale of how private label brands. Instead, we are steadfast in the hearing to our principle of applying rigorous attention.
To detail to every product to lay a solid foundation for future prosperity.
Thank you and the next question today comes from.
Robin We're boardwalk. Please go ahead.
Hi, Susan.
What can you tell on attrition with if you want to Oh come see anyone to Metallica T.
Got it so I'm going to come home and Sunshine, Utah, a woman's eyes Shanghai.
Teach them. So you said Youre Chee Ching Kwan mutual a woman's scent that'd be 20 Tommy venue.
And gone downhill nausea, Ohio tracks, you touch on the shoulder Thomasville woman.
And with that on your just your thoughts around how would you argue that you should think of a woman who got the attendees how.
And she wanted to talk to you.
Centralize the cocoa Thompson.
Sure.
In truth Tamayo thoughts you can either she can quickly be each and she tends to have come to a quite a what did you find yourself. Thanks management for taking my questions and could management share more on the unit economics improvement in Shanghai for example, the number of daily order.
Warehouse and also the number for the mature cities and for the new added warehouse like do we see it faster than before at breakeven timeline because of the Ah <unk>.
Wining, our user acquisition cost trend in the industry. Thank you.
How does she Daniel LNG.
And you would see all months, absolutely I forgot.
Thank you for you if I could.
I would like to us hours. He has Oh you look to answer this question.
I think that's still says that women, particularly keen on that that sounds like a change well, that's just happy with what's out of Shanghai into China.
Thank God, how true that you'll see in the ultimate that'd be kill or do you think that you'll acquire another shot I know one that you'll find a lot of young.
Sounds good, but if indeed, the massage holsteins outlets that you counsel shall cool I've tried downshift element, though you'll wireless look up by sending you shop, the mobile mesh at that parity there shall go and sit down and try and get that high touch on wage and salary always thinking we'll win more of that now, but that's a whole another you'll either youll find you'll congestion.
Nope, usually sounds Shanghai, Oh, we have found that trigger union agent, who need that English ourself.
In Q3, the union and all mature markets, including Shanghai, and the young who go to region improved sequentially. For example, our U V was enhanced by two to three percentage points in Shanghai and in Jiangsu Province, and Georgetown provinces are you. He was enhanced by over four percentage points starting in.
Late August we have changed our strategy to efficiency first with due consideration of scale. Since then you. He has improved even more than what I. Just mentioned in September did you eat in Shanghai was close to the breakeven level.
[noise], playing a bunch of women and shunting vehicle going digital marketing vehicle could I get a T shirt.
I mean don't actually don't.
But the gene pool, you'll quite well my fish ourselves changing and kill some element of quasi Shanghai, she's saying, you'll eat adoption of children that Jim good chunk out get down to bullshit, you'll either just sounds Andy but no mobile magical elfish Honeywell seeing changing on that is how the English should think out now that would be ideal ideal shouldnt you would've gone way look what ticket.
As our product development capabilities and supply chain further drive the increase in our gross margin and average order value order density them. What it is that it helps to improve fulfillment efficiency. We believe our unit economics in Shanghai will reach breakeven in Q4. This will in turn drive you.
Economics in younger Delta region to steadily turned positive in the future, we're very confident and even more optimistic and all the timeline to achieve profitability now that during the IPO process. Thank you.
Ladies and gentlemen. This concludes our question answer session I was with her conference back over to Joe Zhou for any closing remarks.
Thank you again for joining our call today. If you have any further questions. Please feel free to contact us on a path through our IR website, we look forward to speaking with everyone. In our next earnings call have a good day.
Right.
Thank you bye bye.
Ladies and gentlemen. This concludes today's conference call. Thank you all for DRAM and Flash virtualization all of this.
Commercial lines.