Q4 2021 Dingdong (Cayman) Ltd Earnings Call
Hey, Thank you you'll be on hold until their call begin.
Speaker 1: Thank you. You'll be on hold until their call begins.
Okay.
Okay.
Good morning, and good evening, ladies and gentlemen.
Thank you for standing by and welcome to the Dangle Fourthquarter.
Speaker 1: Thank you for standing by and welcome to the Dingdong fourth quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. We'll be hosting a question and answer session after management prepare remote.
2021 earnings conference call.
At this time all participants are in a listen only mode.
We'll be hosting a question and answer session after management's prepared remarks.
During today's call management will give their prepared remarks.
In Chinese or English directly.
When management speaks Chinese or third party interpreter will provide simultaneous translation in English on the English line.
Speaker 1: When management speaks Chinese, a third party interpreter will provide simultaneous translation in English on the English line. I'll now turn
I'll now turn the conference over to the first speaker today.
Speaker 1: Karen Ji, Investor Relations Vice President of the company.
Karen G Investor relation Vice President of the company. Please.
Please go ahead ma'am.
Sure.
Thank you operator, Hello, everyone and welcome to <unk> fourth quarter 2021 earnings call with US today are Mr. Tony <unk>, our founder and CEO and Mr. <unk> our CSO.
Speaker 1: Thank you operator. Hello everyone and welcome to Dingdong Sports Quarter 2021 earnings call. With us today are Mr. Chang Ling-Liang, our founder and CEO , and Ms. Le Yu, our CSO.
You can refer to our fourth quarter <unk> 2021 financial results and presentation materials on our IR website at IR Dot 100 <unk>.
Speaker 1: You can refer to our fourth quarter 2021 financial results and presentation materials on our IR website at ir.100.me.
Okay.
Speaker 1: You can also access a replay of this call on our IR website when it becomes available a few hours after its conclusion.
Can also access a replay of this call on our IR website when it becomes available a few hours after its conclusion.
Okay.
Speaker 1: Before we start, please note that this call may contain forward-looking statements made pursuant to the Safe Harbor provision for the Private Securities Litigation Reform Act of 1995.
Before we start please note that this call may contain forward looking statements made pursuant to the safe Harbor provision for the private Securities Litigation Reform Act of 1995.
Speaker 1: These forward-looking statements are based on management's current expectations and observations that involve known and unknown uncertainties and other factors not under the company's control, which may cause actual results, performance, or achievements of the company to be maturely different from the results, performance, or expectations implied by these forward-looking statements.
These forward looking statements are based on management's current expectations and observations that involve known and unknown risks uncertainties and other factors not ended the companys control.
Which may cause actual results performance or achievements of the company to be materially different from the results performance or expectations implied by these forward looking statements.
All forward looking statements are expressly qualified in their entirety by the cautionary statement.
Speaker 1: All forward-looking statements are expressly qualified in their entirety by the questionary statement. For more details of the...
Some of the details of the call.
C C.
The company undertakes no duty to.
Speaker 1: The company undertakes no duty to review any forward-looking statements for selected events or circumstances after the date of this conference call.
Any forward looking statements for selected events or circumstances. After the date of this conference call.
Please also note that all the numbers are stated in the following management's prepared remarks are in RMB terms adopting the landmark.
Speaker 1: Please also know that all the numbers stated in the following management prepare remarks are in R&B terms, adopting the non-management approach at the interface composition expense level.
Got it.
<unk> based compensation expense.
Speaker 1: During this call, we will be discussing certain non-GAAP financial measures, as defined by SEC Regulation G, such as non-GAAP net loss margin and non-GAAP operating expenses. A reconsideration of these non-GAAP financial measures to the most typical GAAP measures. ...news press release...
During this call we will be discussing certain non-GAAP financial measures as defined by SEC regulation G. Such as non-GAAP net loss margin and a non-GAAP operating expenses a.
A reconciliation of these non-GAAP financial measures to the most.
Total GAAP measures.
<unk> press release.
President Ariel which is posted on the Companys website.
Now I will turn the call over to our first speaker today, founder and CEO of Ding-dong Natalia.
Speaker 1: Now, I will turn the call over to our first speaker today, founder and CEO of Dingdong, Mr. Liang. Okay.
Ill.
Hi, everyone.
Prince.
Today is actually the Lenten festival of China Happy Lenten Festival, everyone. Thank you so much for joining our Q4 earnings conference call over the past few months our stock price performance has been a much challenged we are grateful that many investors analysts and media that know us and trust us continue to support us, but we are.
Speaker 1: Today is actually the Lanterns Festival of China. Happy Lanterns Festival, everyone. Thank you so much for joining our Q4 Earnings Conference call. Over the past few months, our stock price performance has been much challenged. We are grateful that many investors, analysts, and media that know us and trust us continue to support us, but we also understand that there might be questions and doubts, is Ding Dong a worthy investment? Will Ding Dong be profitable? In fact, Q4.
Also understand that there might be questions in Dallas is doing no a worthy investment welding don't be profitable.
In fact.
Q4 was our best quarter since inception.
Speaker 1: making year-over-year revenue growth of over 70% and significant efficiency optimization. In December , the overall non-GAAP net loss margin narrowed to less than 13% and Shanghai was fully profitable. At the end of Q4, we had RMB 5.2 billion in cash reserves. We are on the fast track of quality development and we have sufficient cash to last us before full profitability in the near future.
Making year over year revenue growth of over 70% and significant efficiency optimization in December the overall non-GAAP net loss margin narrowed to less than 13% and Shanghai was fully profitable at the end of Q4, we had a RMB five 2 billion in cash reserves, we are on the fast.
Tried to us quality development, and we have sufficient cash to last us before its full profitability in the near future.
Today, I would like to explain the current state of operations.
Speaker 1: Today, I would like to explain the current state of operations, the future, and our philosophy in the following five aspects. The Q4 2021 results ding-dongs path to profitability, profit capability, I mean, product capabilities as the primary driver, infrastructure development, and our plans for 2022. I hope that this call can clear up any doubts in your mind. First, let me briefly talk about the Q4 results.
The future and our philosophy in the following five aspects. The Q4 2021 results kingdoms path to profitability profit of capability I mean product capabilities as the primary driver infrastructure development and our plans for 2022 I hope that this call can clear up any doubt in your mind first let me briefly talk about the key.
For results.
Speaker 1: We achieved total revenue of 5.48 billion RMB, up 72% year-over-year. In addition, our efficiency has been significantly optimized for seven consecutive months, with a net loss margin of less than 13% in December 2021, and the number was 37.2% back in Q2 at the time of the IPO.
We achieved total revenue of 5.48 billion RMB, 72% year over year. In addition, our efficiency has been significantly optimized for seven consecutive months with a net loss margin of less than 13% in December 2021, and a number was 37.2% back in Q2 at a time of the IPO.
Speaker 1: Shanghai became fully profitable in December . It is the first city we entered and has continued innovating and iterating, constructing precedents and experiences for our nationwide operation.
Yeah, Hi became fully profitable in December it is the first city, we enter and has continue innovating and iterating constructing precedent and experiences for our nationwide M operation.
Speaker 1: we have found a path to profitability in the city and expect the whole Yangtze River Delta to be next.
We have found a path to profitability in the city and expect a whole Yowzah River Delta to be next.
And the whole company will follow Susan private labels and in House R&D and processing are also taking off in Q4 private label sales accounted for 10.2% up G. M V and our self developed and self processed products accounted for $6, 5% off the total G. M. B, our pre preparing meals sales also contributed to 14.9.
Speaker 1: Private labels and in-house R&D and processing are also taking off. In Q4, private label sales accounted for 10.2% of the GMV and our self-developed and self-processed products accounted for 6.5% of the total GMV. Our pre-prepared meals sales also contributed to 14.9% of the total GMV as consumers began to embrace this new category.
Sent up the total G M V as consumers began to embrace this new category.
Speaker 1: The past period has been marked by sporadic outbreaks of the COVID pandemic in certain Chinese cities. In addition, many of the fresh produce sourcing regions have been stricken by harsh weather conditions including low temperatures, rain and snow storms. All has happened around the Chinese New Year. However, we stepped up during these difficult times and became one of the most fundamental forces in stabilizing the grocery price and supply essential for people's livelihood. The municipal governments of Shenzhen, Tianjin, Hangzhou, Ningbo and Tangshan have expressed their appreciation and gratitude to us for our commitment and execution. Mainstream media such as People's Daily, Xinhua News, CCTV and Jiefang Daily have all reported our work and achievements.
The past period has been marked by sporadic outbreaks of the Covid pandemic in Sutton Chinese cities. In addition, many of the fresh produce sourcing regions have been stricken by harsh weather conditions, including low temperatures rain and snow storms. All has happened around the Chinese new year. However, we stepped up during these difficult times and it became one of the most fundamental forces in stable.
Elisa the grocery prices and supply Accenture for People's livelihoods, the municipal government of Shenzhen, Tianjin, Hangzhou, Ningbo, and Tangshan have expressed their appreciation and gratitude to us for our commitment and execution mainstream media such as People's Daily Sukarno's CCTV and Giovanni Daily have all reported I'll work and achievements before the Chinese new year.
Speaker 1: Before the Chinese New Year, Mr. Gong Cheng, the mayor of Shanghai, visited our front-line fulfillment stations and praised us for our full-chain digital management and quality control of food.
Mr. Goh junk the mayor of Shanghai visited all frontline fulfillment stations and praised us for our full chain digital management and quality control or food. He also encouraged us to fulfill people's longing for a quality life. The second aspect I would like to address is canting don't be profitable as I mentioned earlier, we achieved profitability in Shanghai.
Speaker 1: in Shanghai in December with an AOV of over 66 RMB and a gross margin of over 28% per order. As a percentage of GMV, the regional processing center costs were 6% for the processing and transportation to frontline fulfillment stations. The frontline stations costs were 15%, GNA and marketing expenses were 7%. As a result, Shanghai became slightly profitable. Going forward, our AOV will increase as our product capabilities continue to grow. In addition, as both our user repurchase rate and order density increase, diluting the fixed costs of the frontline stations and regional centers, fulfillment efficiency will significantly enhance. Therefore, Shanghai is expected to achieve a net margin of 3% to 5%. Shanghai is our first city and testing ground for innovation and iteration. Of course, other Chinese cities do not share all of Shanghai's consumption habits. So the trend of consumption upgrade for the young consumers is universal.
In December it was in a L V of over 66, RMB and a gross margin of over 28% per order as a percentage of G. M V. The regional processing center cost one were 6% for the processing and transportation to frontline procurements stations. The frontline stations costs were a 15% G&A and marketing expenses were 7%.
As a result, Shanghai became slightly profitable going forward, our a O V will increase as our product.
Product capabilities continue to grow in addition, as both our user repurchase rate and order density increase diluting the fixed cost of the frontline stations and regional centers fulfillment efficiency will significantly enhance therefore, Shanghai is expected to achieve a net margin of 3% to 5% Shanghai is our first city and testing ground for innovation and iteration of <unk>.
Speaker 1: Shanghai is our first city and testing ground for innovation and iteration. Of course, other Chinese cities do not share all of Shanghai's consumption habits, so the trend of consumption upgrade for the young consumers is universal. So is the longing for convenience and variety. In addition, we are popular in second and third tier cities with a supply shortage of quality goods, low labor costs and housing prices, and robust spending power. Therefore, the Yangtze River Delta will follow Shanghai's footsteps and become profitable soon, followed by a full profitability nationwide.
Course, other Chinese cities do not sure all of Shanghai's consumption habits. So the trend of consumption upgrade for the young consumers. It universal so as the longing for convenience and variety. In addition, we are popular in second and third tier cities with a supply shortage of quality got low labor costs and housing prices and robustness that spending power. Therefore, the Yenisei River Delta will follow Shanghai Spa.
Footsteps and become profitable soon followed by a full profitability nationwide.
One of the critical concerns for our profitability as the home delivery model, beating too high fulfillment costs, which is a misconception in fact in Shanghai for example, different level of human cost accounted for roughly 15% up the G. N V, which is below the fulfillment causes of most business models in the fresh grocery market.
Speaker 1: One of the critical concerns for our profitability is the home delivery model leading to high fulfillment costs, which is a misconception. In fact, in Shanghai, for example, the frontline fulfillment costs accounted for roughly
Speaker 1: 15% of the GMV, which is below the fulfillment cost of most business models in the fresh grocery market, including online e-commerce and offline players, according to public data. Therefore, our frontline fulfillment grant model is highly cost effective. Others are worried about the lack of exposure of the frontline fulfillment stations and hence no traffic. But the essence of shopping is quality goods.
Online e-commerce and offline players according to public data therefore, our frontline fulfillment grit motto is highly cost effective others are worried about the lack of exposure of the frontline fulfillment station and hence no traffic, but the essence of shopping is quality goods quality wins over consumers and the users repurchase rate and word of mouth or of one <unk>.
Speaker 1: Quality wins over consumers, and the user's repurchase rate and word of mouth are what matters. So we are never worried about lacking traffic. We would only be concerned if we could not develop better or differentiated products. The Frontline Fulfillment Grid model eliminates the dependence on offline traffic and the need to renovate or create trendy vibes offline. It is straight to the essence of shopping by delivering quality goods straight to a door.
So were never worried about lacking traffic, we would only be concerned if we could not develop better or differentiated products. The frontline fulfillment grit model eliminates the dependence on offline traffic and the need to renovate or create trendy bites offline. It is straight to the essence of shopping by delivering quality goods are straight to your doorstep.
There are also concerns at that hour model might require continuous cash burn because it caused us significant losses early on indeed, there was an upfront investment in ramp up period from building regional processing centers from life of human stations in supply chain and we in particular invested aggressively in infrastructure.
Speaker 1: There are also concerns that our model might require continuous cash burn because it caused us significant losses early on. Indeed, there was an upfront investment and ramp-up period from building regional processing centers from line fulfillment stations and supply chains. And we, in particular, invested aggressively in infrastructure, but these are fixed costs that can be gradually diluted as the business matures and our scale expands. As time has proven, the solid infrastructure brings greater returns and sets the foundation for long-term stable.
These are fixed costs that can be gradually diluted as the business matures and our scale expand as time has proven the solid infrastructure brings greater returns and set the foundation for long term stable development.
In addition to being profitable the frontline fulfillment motto has several other strengths first frontline fulfillment station model keeps perishables fresh and maintains their quality the centralized purchasing and processing in the regional centers control the quality strictly while our frontline fulfillment stations focus on storage capabilities and take a freshness.
Speaker 1: In addition to being profitable, the Frontline Fulfillment Model has several other strengths.
Speaker 1: First, Frontline Fulfillment Station model keeps perishables fresh and maintains their quality. The centralized purchasing and processing in the regional centers control the quality strictly, while our Frontline Fulfillment Stations focus on storage capabilities and take freshness to new heights.
Two new heights, so even if you place an order at 10 P. M. We still guarantee of timely home delivery of fresh fish and shrimp, which is something that offline grocery players and traditional e-commerce failed to do.
Speaker 1: So even if you place an order at 10 p.m., we still guarantee a timely home delivery of fresh fish and shrimp, which is something that offline grocery players and traditional e-commerce fail to do.
Second we cut out the middle links improve supply chain efficiency and reduced loss and waste our loss rate is up only about 2%, whereas traditional grocery players normally have an over 10% loss rate at the retail end.
Speaker 1: Second, we cut out the middle links, improved supply chain efficiency, and reduced loss and waste. Our loss rate is only about 2 percent, whereas traditional grocery players normally have an over 10 percent loss rate at the retail end.
Third, we improve social efficiency and save energy our writers in Shanghai deliver over 85 orders daily saving 85 families from grocery trips, which significantly reduces social costs. In addition to frontline Appleton My model offers more excellent social value in maintaining the supply of People's livelihood, especially in harsh weathers facing the pandemic or during the new year holiday.
Speaker 1: Third, we improve social efficiency and safe energy. Our riders in Shanghai deliver over 85 orders daily, saving 85 families from grocery trips, which significantly reduces social cost. In addition, the frontline fulfillment model offers more excellent social value in maintaining the supply of people's livelihood, especially in harsh weathers, facing the pandemic or during the New Year holidays.
Today's.
Speaker 1: Fourth, more importantly, instant and fast delivery enabled by this model aligns with the young consumer's trend of digitalization, immediate satisfaction, home delivery, and impulsive shopping. The older generations tend to be less sensitive to the changing world, yet you cannot escape the trend of the times, of the world, the future of the well-belonging.
Or more importantly incident and fast delivery enabled by this model aligns with the young consumers trend of digitalization, a media satisfaction home delivery and impulsive shopping the older generations tend to be less sensitive to the changing world and yet you cannot escape the trend of the times of the world the future of the world belongs to the young.
Speaker 1: People wonder if I'm convinced that the Frontline Fulfillment Model is the optimal solution or model for fresh grocery e-commerce, because I'm always optimistic about the model. We would never think so. First of all, fresh grocery is a massive market with diverse user needs and allows various business models to coexist. Second, consumers are constantly changing. As a consumer-centric company, we must keep innovating and iterating, so there would never be an optimal solution or any ultimate model.
People Wonder if I'm convinced that the frontline fulfill my motto is the Optimus illusion AR or models for fresh grocery e-commerce , because I'm always optimistic about the model. We would never think so first of all fresh grocery is a massive market with diverse user needs and allows various business models to a coexist second consumers.
<unk> constantly changing as a consumer centric company, we must keep innovating and iterating. So there would never be an optimal.
Solution or any ultimate model.
Speaker 1: The third aspect I would like to address is product capabilities, the primary driver.
The third aspect I would like to address is product capabilities. The primarily the primary driver we have two firm beliefs consumption upgrade and product capabilities being our primary growth driver many internet retailers adopt a low pricing strategy and the idea of consumption downgrade has been widespread however, we maintain a store.
Speaker 1: Many internet retailers adopt a low-pricing strategy, and the idea of consumption downgrade has been widespread. However, we maintain strong confidence in the consumption upgrade trend for the younger generation who pursue quality life, especially when it comes to food. Therefore, we are committed to meeting that need. In addition, in the internet industry, traffic operation was the core competitiveness in the first half of the game. As a result, several monopolistic traffic platforms were created with marketing activities such as Double 11 that marked the peak of traffic operation. But in the second half of the game, product capabilities that take us back to the nature of shopping are the primary driver of growth. Therefore, we have prioritized product capabilities since August .
<unk> confidence in the consumption upgrade trend for the younger generation, who pursue quality life, especially when it comes to food. Therefore, we are committed to meeting that need. In addition in the Internet industry traffic operation was was the core competitiveness in the first half of the game as a result of several of them on the political traffic platforms that were created with marketing activities such as.
Double 11 at March the peak of traffic operation, but we are but in the second half of the game of product capabilities that take us back to the nature of shopping are the primary driver of growth.
Speaker 1: Therefore, we have prioritized product capabilities since August 2021 to generate extra profit and attract users with quality products and through word of mouth. In addition, we will grow our business through an increasing repurchase rate.
Therefore, we have time, alright, prioritize product capabilities in August 2020, once to generate extra profit and attract users with quality products and through word of mouth. In addition, we will grow our business through an increasingly repurchase rate.
We improved product capabilities from four aspects.
One adjusting our product structure products are categorized as into ordinary superb and excellent and we have an increasing proportion of superb and excellent one thing that makes.
Speaker 1: one, adjusting product structure. Products are categorized as into ordinary, superb, and excellent. And we have an increasing proportion of superb and excellent ones in America.
Speaker 1: to creating various consumption scenarios. For example, we launched a mom's choice page for quality child products. My entrepreneurial venture was an online mother and child community that had served Chinese families for 13 years. We saw a particular pain point at that time. Many families had health and safety concerns over children's food. Therefore, when we started Ding Dong, we had one thing in mind. We wanted to make sure that children eat healthily and safely so that mothers can rest assured.
<unk>, creating various consumption scenarios for example, we launched amongst choice page for equality child products.
My Entrepreneurialism venture was an online mother and child Committee that had serve Chinese families for 13 years, we saw a particular pain point at that time, many families had health and safety concerns over chip children's food and therefore, when we started thing don't we had one thing in mind, we wanted to make sure that children eat healthily and safely so that.
<unk> can rest assured in addition to a dedicated page like mom's choice in 2022, we plan to develop more unique products and create a more consumer scenarios based on the needs of different people.
Speaker 1: In addition to dedicated page like Mom's Choice in 2022, we plan to develop more unique products and create more consumer scenarios based on the needs of different people.
Three expanding private label products and improving in house, R&D and processing capabilities. Many retailers are basically developing private labels to reduce cost gain higher profits or attract users with lower prices. However, our primary goal with private labels is to create a differentiated product.
Speaker 1: 3. Expanding private label products and improving in-house R&D and processing capabilities.
Speaker 1: Many retailers are basically developing private labels to reduce costs, gain higher profits, or attract users with lower prices. However, our primary goal with private labels is to create differentiated products, and we offer the best quality in the categories where we can differentiate ourselves.
And we offer the best quality in the categories, where we can differentiate ourselves if we can achieve either of these we consider developing lower priced products. For example, our bakery products are available in barley clean labeled and reduce sugar our tofu.
Speaker 1: If we can't achieve either of these, we consider developing lower-priced products. For example, our bakery products are available in barley, clean, labeled, and reduced sugar. Our tofu...
Speaker 1: Our tofu is available in stone grinding and iron pot textures. Our fresh water porridge is raised on a nutritious feed developed by a Ph.D. supervisor from Shanghai Ocean University. The tomatoes with a weekly repurchase rate of over 40% are our exclusive offering. We also offer daily freshly made noodles and special noodles containing 60% of Alaska cod and a four-color veggie source. Our pre-prepared meals are available in traditional marinated and low-heat slow-cook.
Our tofu is available in stone griding and our impart textures, our freshwater a push is race on our new nutritious feed developed by a ph D stabilizer from Shanghai Ocean University, the Tomatoes, with a bi weekly repurchase rate of over 40% are our exclusive offering we also offer daily fresh freshly made new.
<unk> and special noodles containing 60% of our Alaska card and a four color veggie source, our pea prepared meals are available in traditional marinated in low heat Slowcoach. We also offer a P made suits with chicken race on the cordyceps and mushroom culture graph. The list goes on and on so again, we either differentiate ourselves.
Speaker 1: We also offer pre-made soups with chicken raised on cordyceps and mushroom culture grass. The list goes on and on. So again, we either differentiate ourselves or be the best in class. For investing more in infrastructure, which is also the fourth aspect I want to talk about, we have always been building robust infrastructure in five direct.
Or a beat of best in class for investing more in infrastructure, which is also the fourth aspect I want to talk about we have always been a building robust infrastructure in five directions.
One we have about 1400 frontline fulfillment stations with a total area of approximately 800000 square meters. We leased about 60, a regional processing centers with over 400000 square meters of space, we have been insisting on conducting in house processing and sorting of fresh groceries for two reasons.
Speaker 1: One, we have about 1,400 frontline fulfillment stations with a total area of approximately 500,000 square meters. We lease about 60 regional processing centers with over 400,000 square meters of space. We have been insisting on conducting in-house processing and sorting of fresh groceries for two reasons. It allows us to improve efficiency with automation and big data, and we can perform a full inspection on all fresh groceries. Many of our regional centers are semi-automated. With our partners, we will continue investing in the R&D of automated equipment and data systems of our frontline stations and regional processing centers.
It allow us to it allows us to improve our efficiency with automation and big data and we can perform a full inspection on all fresh groceries. Many of our original centers or semi automated with our partners. We will continue investing in the R&D of automated equipment and data systems of all frontline stations and regional processing centers to we have 10 food R&D in process.
And facilities of which the song Chung of pastry factory received the I F. S certification in 2021 one of the very few factories in China to receive just said is instead a vacation in December our self developed in processed products sells already accounted for seven 2% of the total G. M. B a Furthermore, last year, we began all upon.
The ship with three local governments, including question in junk food and in 'twenty 'twenty. Two we will start the construction of three larger scale modern.
Fresh grocery complex is as we continue in hunting in house, R&D and processing capabilities, we will develop more differentiated and quality of food products for consumers.
We are we currently own three motto agricultural campuses and have partnered with 118 contract farming bases, we have lunch day, Don good agricultural practice centers or D gap by applying international standards to China and are vigorously promoting it among our partner igloo agribusiness season through deep.
Speaker 1: We currently own three model agricultural companies and have partnered with 118 contract farming bases. We have launched Ding Dong Good Agricultural Practice Standards, or DGAP, by applying international standards to China and are vigorously promoting it among our partner agribusinesses.
Speaker 1: Through DGAP and contract farming, we eliminated excessive pesticide and drug residues in 28 vegetables we sourced and maintain a high standard for our grocery quality.
GAAP and contract farming, we eliminated excessive pesticides and drug residues in 28, vegetables, we sourced and maintain our high standard for our grocery our quality.
Or we have invested heavily in quality control a fresh groceries, where the first two proposed the seven plus one quality control standard of digital management system that strengthens quality control and manages the quality of goods in seven processes product production environment farming harvesting transportation original processing center.
Speaker 1: Four, we have invested heavily in quality control of fresh groceries. We are the first to propose the 7 plus 1 quality control standard, a digital management system that strengthens quality control and manages the quality of goods in seven processes. Product, production environment, farming, harvesting, transportation, regional processing center from land fulfillment station and home delivery.
Turf online fulfillment station and home deliveries.
In addition, we hire over 500 quality control personnel and invested over 27 million RMB in fast inspection and third party testing in 2021 .
Speaker 1: In addition, we hire over 500 quality control personnel and invested over 27 million RMB in fast inspection and third-party testing in 2021. Such industry-leading efforts and investment earned us a pass rate of around 99.4% when government agencies sampled and inspected over 4,000 batches of our products from Q2 to Q4 of 2021.
Such industry, leading efforts and investment earned US a pass rate of around 99.4% when government agency sampled and inspected over 4000 batches of our products from Q2 to Q4 of 2021 .
Five.
We increased investment in R&D of cutting edge technologies at our last conference call, we actually at our last earnings call. We introduce our land based antibiotics free shrimp projects. In addition, we also started developing cooking robots and planting and picking robots are last year, we began exploring an exciting technology of non destructive.
Speaker 1: We increased investment in R&D of cutting edge technologies. At our last conference call, we actually, our last earnings call, we introduced our land-based antibiotics-free shrimp projects. In addition, we also started developing cooking robots and planting and picking robots. Last year, we began exploring an exciting technology, a non-destructive durian ripeness testing robot. We all know that shopping for durian and like is like opening a mystery box. The ripeness is always uncertain.
Kiss, a jewelry and ripeness testing robots, we all know that shopping for Dorian and like Ah is like opening a mystery box. The ripeness is always uncertain and 30%.
Speaker 1: I'm 30%
30% to 40% of the cost of jewelry and sells is wasted on unripe Julien our robot is dedicated to unraveling, the mystery and improving the user experience reducing loss and increasing efficiency.
Speaker 1: 30% to 40% of the cost of durian cells is wasted on unripe durian. Our robot is dedicated to unraveling the mystery and improving the user experience, reducing loss and increasing efficiency.
Speaker 1: five-hour plans for 2022. We will improve product capabilities with an adjusted category mix, more consumption scenarios, private labels, and in-house R&D and processing capabilities. We'll offer consumers differentiated and quality goods that win them over.
Our plans are for 2022 we will improve product capabilities with an adjusted category mix more consumption scenarios private labels and in house, R&D and processing capabilities will offer consumers differentiate it and quality goods that wyndham over.
Second we will drive to use a repurchase rate up to grow our business scale at the same time, we will strive to achieve a full profitability in the Yowzah River Delta region by the end of Q2, 2022 and approach profitability for the whole company in Q4 2022 .
Speaker 1: Second, we will drive the user repurchase rate up to grow our business scale. At the same time, we will strive to achieve full profitability in the Yangtze River Delta region by the end of Q2 2022 and approach profitability for the whole company in Q4 2022. Third, we will increase investment in infant
Start to we will increase investment in infrastructure.
Speaker 1: In summary, 2021 has had its ups and downs, and 2022 is destined to be extraordinary. We do not comment much on stock prices, but we agree with Benjamin Graham. The market was a voting machine in the short term, but a weighing machine in the long run. In this sense, Teng Dong is committed to building substance.
In summary, 2021 has had its ups and downs and twenties. Hundreds you is destined to be extraordinary we do not comment much on stock prices, but we agree with Benjamin grant them. The market was a voting machine in the short term, but a weighing machine in the long run in this sense Ding-dong is committed to building substance specifically it has the potential to develop product capabilities win over customers with quality.
Products develop a supply chain and physical R&D and processing capabilities and invest long term in infrastructure on a country focusing on traffic operation price wars retail platforms or short term profitability is trivial having a couple of champion products or a marketing successes is of much less substance than striving for a better life well.
The consumers are and customers in the long run substantial allergy is what matters is our core competitive competitiveness and it will create long term value. So let's be patient and because time withheld. Thank you with that I'll hand over the call to Ms. Yu, our CFO to go over the financials.
Speaker 1: and customers in the long run. Substantiality is what matters. It is our core competitiveness and will create long-term value. So let's be patient because time will tell. Thank you. With that, I'll hand over the call to Ms. Yu, our CSO, to go over the
Thank you Mr Lim and Hello, everyone before I walk you through our detailed financial results. Please note that all numbers stated in the following remarks.
Speaker 2: Thank you, Mr. Liang, and hello, everyone. Before I walk you through our detailed financial results, please note that all numbers stated in the following remarks are in RMB terms. All reporting adopts a non-GAAP measurement, and all comparisons and percentage changes are on a year-over-year basis.
In terms of reporting adopt announced the non-GAAP measurement and all comparisons and percentage changes are year over year basis.
As noted.
We achieved a quality goes in 2021 with total revenue of 77.5 cents year over year to 20 point of one 2 billion. Our net loss has been significantly optimized in both Q3 and Q4, especially in Q4 since the company started to ink.
Speaker 2: We achieved a quality growth in 2021, with total revenue up 77.5% year-over-year to $20.12 billion. Our net loss has been significantly optimized in both Q3 and Q4, especially in Q4, since the company started to implement a strategy of efficiency first with due consideration to scale since the end of August 2021.
Cleveland to Jared J O efficiency first it was due consideration to scare since the end of August 2021.
As a result, our net loss has been continuously and the substantial optimized.
Speaker 2: As a result, our net loss has been continuously and substantially optimized for the fit since
For the page think June 2021 .
The net loss ratio was reduced to 12 point to 9% in December for all 13, 9.1% in June a reduction of 26 point to two percentage points.
Speaker 2: The net loss ratio was reduced to 12.9% in December from 39.1% in June , a reduction of 26.2 percentage points.
Speaker 2: At the current pace, we will achieve profitability shortly.
At the current pace, we will achieve profitability shuttling.
Now, let's let let's look at the Q4 result in Q4 2021 our revenue reached a 5.48 billion representing year over year goes Oh seven to eight 2%.
Speaker 2: Now let's look at the Q4 results. In Q4 2021, our revenue reached $5.48 billion, representing year-over-year growth of 72%.
Speaker 2: The conversion rate of GMV to revenue was 91.3 percent, up 6.3 percent.
The conversion rate of Gen V. Two revenue was 91, 3% up six points.
Speaker 2: year-over-year. Driven by the decline in the GMP, the decrease in coupons resulted from our significantly improved product capabilities, which became massive user traction, and gradually replaced the coupons as a new growth driver. As a result, both GMV and Ramu showed a healthier and stronger growth model.
Year over year, driven by the decline in that.
The decrease in crew policy, resulting from our significantly improved the product capabilities, which became massive user traction and the gradually replace the coupons as a new growth driver.
As a result, both G N V and the revenue showed a healthier and the.
Uh huh.
Speaker 2: The gross profit margin for the fourth quarter was 27.7 percent, an improvement of 12.6 percentage points year-over-year. The most vital driver was a continuous improvement of product capabilities. Specifically, first of all, the company's in-house production and processing capabilities generated extra gross profit.
The gross profit profit margin for the fourth quarter was 27 point to 7% and improvement of 12 points to six percentage points year over year. The most vital driver was a continuous improvement of product capabilities.
Specifically first of all the companies in house production and processing capabilities generated actual gross profit.
Speaker 2: Secondly, the company's long-term investment in blockchain began
Secondly, the company's long term investment.
Chen began to bear fruit.
Thirdly, we increased the proportion of high gross margin categories. For example, the contribution of pre prepare the meal to total Gen V reached a 14.9% in Q4.
Speaker 2: Thirdly, we increase the proportion of high gross margin categories. For example, the contribution of pre-prepared meals to total GMV reached 14.9% in Q4.
In Q4, the fulfillment expenses were so take 2.4% down five points or six percentage points year over year.
Speaker 2: In Q4, the fulfillment expenses were 32.4%, down 5.6 percentage points year-over-year.
We have changed our strategy to efficiency first of with Duke evolution to scale Brunskill first of with due consideration to efficiency since the end of August 2021.
Speaker 2: We have changed our strategy to efficiency first with due consideration to scale from scale first with due consideration to efficiency since end of August 2021. As a result, we have developed an efficient transformation strategy. For example,
As a result.
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For example, the fourth.
Speaker 2: optimized by substantial improvement in the efficiency of front-line staff.
Firstly optimize the by a substantial improvement in the efficiency of frontline stuff.
Typically our rises delivered an average of 74.80 there is daily in Q4.
Speaker 2: Specifically, our riders delivered an average of 74.8 orders daily in Q4.
At 16.2% from 64.
Speaker 2: up 16.2% from 64%.
Speaker 2: In addition, in Shanghai alone, our riders delivered an average of 89.5 orders daily. Compared to Shanghai, there is room for optimization in the efficiency nationwide. This is why we expect to be able to deliver an average of 89.5 orders daily.
Fortunately.
<unk> in Shanghai alone our ride those delivered an average of 89.5 orders daily.
Powder to Shanghai.
There's room for optimization.
Efficiency nationwide.
That is why we expect.
So it depends is to be further improved as the delivery efficiency in the areas outside of Shanghai continues to enhance.
Speaker 2: to be further improved as the delivery efficiency in the areas outside Shanghai continues to enhance.
The sales and marketing expenses in the first culture, where.
Speaker 2: The sales and marketing expenses in the fourth quarter were 6.4%, down 1.7 percentage points year-over-year, mainly driven by the decline in the customer acquisition costs both online and offline.
6.4% down one point to seven percentage points year over year.
Driven by the decline in the customer acquisition costs, both online and offline in.
Speaker 2: In Q4, we focused on acquiring variable users and reducing ineffective...
In Q4, we focused on acquiring variable users and are reducing effective.
Speaker 2: As a result, the quality of users was enhanced significantly and the customer acquisition costs were reduced considerably.
As a result, the quality of users was enhanced significantly and the customer acquisition costs were reduced considerably.
It makes sense is we'll optimize the year over year for all three point the 2% to two.
Speaker 2: The expenses will optimize the year-over-year from 3.2% to 2.5%.
Speaker 2: Thanks to the scale effect, meanwhile, we continued to increase investment in China's agricultural technology, food R&D, and other infrastructure.
Thanks to the scare effect. Meanwhile, we continued to increase investment.
Prior to this.
<unk> technology food R&D and other infrastructure.
Speaker 2: As a result, the R&D expenses increased year-over-year from 4% to 4.7%. However, we are convinced that long-term investment in infrastructure such as food R&D, agriculture technology, and technological data will build strong core competencies for Dingdong and create long-term value for our investors.
As a result, the R&D expense is increased the year over year from 4% to 4.7%. However, we are convinced.
The investment in infrastructure, such as the food IMD Angren culture technology, and the technological data will build a strong core competency competencies for lingo and create long term value for our investors.
The only the Q3 earnings call, we estimated as the Q4 net loss rate to reduce by at least a 5.3 percentage points sequentially. Today. We are pleased to share that our net loss in Q4 was 18.9% optimized by 13th.
Speaker 2: During the Q3 earnings call, we estimated the Q4 net loss rate to reduce by at least 5.3 percentage points sequentially. Today, we are pleased to share that our net loss in Q4 was 18.9 percent, optimized by 13 percent.
Speaker 2: from 31.9% in Q3, significantly exceeding the Q3 estimate.
So tier one point of 9% in Q3 significantly exceeding the Q3 estimate.
Oh, the Q3 earnings we also provided a guidance on the unit economics for Q4.
Speaker 2: On the Q3 earnings, we also provided guidance on the unit economics for Q4.
As the first say tasting dough entered Shanghai was expected to achieve breakeven in Q4 and gradually drive the UE optimization of the entire youngster River Delta region.
Speaker 2: As the first city Dingdong entered, Shanghai was expected to achieve break-even in Q4 and gradually drive the ue optimization of the entire Yangtze River Delta region.
Speaker 2: Today, we are also pleased to share that in Shanghai, we achieved a positive U.E. profit in Q4 and a positive operating profit in December . In the Yangtze River Delta region, we made a positive U.E. profit in Q4 with a revenue growth of 46.2% year-over-year.
We are also pleased to share that in Shanghai, we achieved a positive UE profit in Q4 and a positive operating profit in December in the Yangtze River Delta region. We made a positive view your profit in Q4 with a revenue growth of 46.2% year over year.
You'll hear optimize the faster than the Q3 expectation, which is a solid testament to the profitability of those business model.
Speaker 2: UEE optimizes faster than the Q3 expectation, which is a solid testament to the profitability of Dingdong's business model.
Net cash outflow for appraisal activity. It was 1.8 billion in Q4 was an exempted a net cash outflow being 1.5 billion, excluding the effect of the supply chain financing provided during the period we.
Speaker 2: Net cash outflow for operating activity was $1.8 billion in Q4, with adjusted net cash outflow being $1.5 billion, excluding the effect of supply chain financing provided during the period.
Speaker 2: We had $5.2 billion in cash, cash equivalents.
We had a five point to 2 billion in cash cash equivalents risks.
Speaker 2: cash and short-term investments by the end of the year. Cash outflow in Q4 was higher than other quarters in 2021.
Short term investments by the end of the year.
[noise] outflow in Q4 was higher than other quarter in 2021 .
With infrastructure investments and improve the supply chain ecosystem.
Speaker 2: with infrastructure investment and improve the supply chain ecosystem.
However, we are confident that cash outflow will be significantly improved in 2022.
Speaker 2: However, we are confident that cash outflow will be significantly improved in 2022.
Speaker 2: In December , our net loss was $220 million. Divided by cash balance, our downside risk was completely manageable. And it is only static, historic calculation. Dynamically speaking, the loss narrowing is more predictable as we have a proven track record of reducing losses quickly and continuously over the past seven months.
Simba, our net loss was 220 million divided by our cash balance our downside risk was completely manageable and it is only static historic calculation dynamically speaking the loss the loss narrowing its more predictable as we have a proven check.
Record of reducing losses quickly and continuously over the past seven mounted.
Therefore in the current financial position.
Speaker 2: Therefore, in the current financial position, the company is confident of maintaining a healthy rate of
The company is confident of maintaining our house.
Before profitability is achieved.
Overall, we achieved a solid revenue growth in Q4 and greatly optimized the operation efficiency with a net loss narrowed substantially.
Speaker 2: Overall, we achieved solid revenue growth in Q4 and greatly optimized the operation efficiency with net loss narrowed substantially.
And we will be committed to build a robust product capabilities make it.
Speaker 2: We will be committed to build a robust product capabilities, making precautions that drive the thing don't you.
Oh, well cost is and that's drive the kingdom to.
Speaker 2: meet the growing needs of the people for a better life.
Meeting the growing needs of the people for a better life.
Speaker 2: the guidance for Q1 2022. Q1 is typically a slow season for urban grocery markets because of the Chinese New Year, which may lead to a decline in revenue on a sequential basis.
The guidance for Q1 2022 kilowatt is typically a slow season for urban grocery market because of the Chinese new year, which may lead to a decline in revenue or a sequential basis.
Speaker 2: In addition, the overtime labor cost incurred during the Chinese New Year may impact the fulfillment cost.
In addition to the overtime labor costs incurred during the Chinese new year may impact the fulfillment costs.
Despite this factors, we still expect a small dip in the natural and a substantial improvement of operating cash outflow in Q1 from Q4 2021.
Speaker 2: Despite these factors, we still expect a small dip in the net loss and a substantial improvement of operating cash outflow in Q1 from Q4 2021. This concludes our prepared remarks. As the moderator, we are now ready to take questions.
This concludes our prepare remarks.
Operator, we are now ready to pick question.
Okay.
Thank you.
We will now begin the question and answer session.
Speaker 1: If you want to ask a question, please press star and one on your telephone keypad. If you use a speakerphone, please pick up your handset before pressing.
If you want to ask a question. Please press star and one on your telephone keypad. If you use a speakerphone. Please pick up your handset before pressing the key.
Please press star into two Richard your question when asking a question. Please state your question in Chinese and a third party interpreter will provide simultaneous translation into English.
Speaker 1: Please press star and two to redraw your question. When asking the question, please state your question in Chinese and a third party interpreter will provide simultaneous translation in English.
Our management answer questions in Chinese.
Speaker 1: The third-party translator will provide consecutive translations.
The third party translator will provide consecutive translation.
All translations are for convenience purposes only.
Speaker 1: All translations are for convenience purposes only. In the case of any discrepancies,
In the case of any discrepancies Manny.
Management statement in the original language.
We will prevail.
And our first question today will come from Eddy Wang of Morgan Stanley . Please go ahead with your question.
Speaker 1: And our first question today will come from Eddie Wang of Morgan Stanley . Please go ahead with your question.
Hi, Mr Lau, Mr. Yu, Karen how are you.
Speaker 1: Hi, Mr. Leung, Mr. Yu, Karen, how are you? Thank you so much for taking my question. I have, my question is,
Thank you so much for taking my question I have my question is.
Well actually we see that.
Speaker 1: Since Q3, Dengdong has shifted its strategy to efficiency first with due consideration to scale. And looking from Q4's performance, there was definitely a fast and significant efficiency improvement. How did you actually achieve this, and is there any room for improvement in the future?
You know since Q3 doing Don has shifted his strategy to efficiency first with due consideration to scale.
And looking from a you know Q4's performance there it was definitely a fastest significant efficiency improvement how did you actually achieve this and is there any room for improvement in the future.
Thank you.
Speaker 3: Thank you for your question. As you can see, in 2021, Q4, we have indeed improved our efficiency and even surpassed our goal. These efficiency improvements come from the joint efforts of the team. We have made progress in three directions, seven points. First, in the direction of Maoli, there are four points. The first is the adjustment of product structure. We have developed more and higher quality products. We advocate the price-performance ratio.
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Speaker 3: Second, the quality of the goods is higher and the price is also higher, and it also gets a better profit margin. Second, the price of free brands and self-produced processed goods has increased. On the one hand, it brings more differentiated and high-quality goods. On the other hand, it is also true that the price of the goods is higher.
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Speaker 3: And as the first driving force, it has increased the margin of error. Fourth, the overall user structure has also been adjusted. Users brought by commodity power are higher cost-effective than users brought by pure marketing, which also gives us a greater margin of error.
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Thank you for your question and as you can see we did achieve significant efficiency gains in Q4, 2021 and even exceeded our stated goals. This efficiency gains came from our concerted team effort and we made progress in three main areas. Firstly in terms of gross profit we have developed more quality products with a good quality to price ratio.
Speaker 1: Thank you for your question. As you can see, we did achieve significant efficiency gains in Q4 2021 and even exceeded our stated goals. These efficiency gains came from a concerted team effort, and we made progress in three main areas. Firstly, in terms of gross profit, we have developed more quality products with a good quality-to-price ratio. These products are naturally priced higher and give better growth margins.
These products are naturally priced higher and get better gross margin.
Speaker 1: Secondly, the increase in the proportion of private label and self-produce and process products bring us more differentiated and quality goods. In addition, they allow us to get the gross profit brought by the research and development processing and brand.
Secondly, the increase in the proportion of private label and self produced and processed products bring us more differentiated and quality goods. In addition, they allow us to get the gross profit brought by the research and development and processing and brand premiums.
Speaker 1: Third, changes in customer acquisition and marketing, we spend less on subsidies and increased growth margin with product capabilities as the primary driver. Fourth, the overall user structure is somewhat adjusted. Users who come for our products generated actually higher AOV than those obtained by subsidies only, who also give us a greater...
Changes in our customer acquisition and marketing, we spend less on subsidies and increase gross margin with product capabilities as the primary driver for.
For the overall use of structure is somewhat adjusted users who come for our products generated actually hire a O V than those obtained by subsidies only <unk>, who also gave us a greater gross margin.
Okay.
Speaker 3: On the other hand, the cost of aluminum is decreasing. As time goes by, the city services are becoming more and more mature. In the early days, the infrastructure was...
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Speaker 3: Second, with the improvement of management capacity, the efficiency of warehouse staff and equipment staff has greatly improved. In addition, at the level of the whole company, we have reduced operating costs on the one hand, and on the other hand, it also meets the development trend of low-carbon environmental protection throughout the society. Okay, this is my answer.
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The second aspect is the decline in fulfillment costs first of all the cities we cover it gradually matured and investment in early infrastructure was diluted with the improvement of management capabilities warehouse and logistics personnel efficiency has increased substantially in addition at the holding company level, we advocate energy saving and consumption reduction.
Speaker 1: The second aspect is the decline in fulfillment costs. First of all, the city's recovery gradually matures and investment in early infrastructure was diluted. With the improvement of management capabilities, warehouse and logistic personnel deficiency has increased substantially. In addition, at the whole company level, we advocate energy saving and consumption reduction, which reduces the operation cost and is in line with the development trend of low carbon and environmental protection of the whole society.
Which reduces the operation cost and is in line with the development trying to up low carbon and environmental protection of the whole society.
So I'll start off with on your did you ever in regarding to temporary shortage agenda.
Speaker 3: I just answered your first question about the ways to improve efficiency. Your second question is about whether there are any ways to improve efficiency later on.
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Speaker 3: I want to talk about two aspects. The first aspect is that the sales volume can continue to increase, which increases the number of users who buy the screen. This will bring a scale of growth.
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Speaker 3: The cost of infrastructure will be further embezzled, and the efficiency of women's uniforms will be further increased. Secondly, our free brands and self-developed processing products
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Speaker 3: But it will improve and earn more good products. On the other hand, it will earn the interest of R&D, processing and brands. Okay, this is my answer.
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So that was about the first part of your question about the reason why we achieved such an impressive results for the past quarter coming up I'm going to respond to the second part of your question, which is a winter on how we have room for improvement in the future in terms of efficiency optimization definitely we still have a lot of potential to improve our efficiency from two main areas. The first one is product capabilities, which will be <unk>.
Speaker 1: So that was about the first part of your question about the reason why we achieved such an impressive result for the past quarter. Coming up, I'm going to respond to the second part of your question, which is whether or not we have room for improvement in the future in terms of efficiency optimization. Definitely, we still have a lot of potential to improve our efficiency from two main areas. The first one is product capabilities, which will be enhanced and to enhance our users' average monthly purchase frequency, bringing about four in scale, and growth in scale. After the expansion of scale, the cost of infrastructure will be diluted in order for it to be further improved. On top of that, the proportion of private labels and self-developed and processed goods is further increased, allowing us to get the gross profit brought by research and development, processing, and brand premium. That's all for my answer, thank you.
Enhance and to enhance our users average monthly purchase frequency, bringing about for in scale and a growth in scale. After the expansion of scale the cost of infrastructure, where we dial Linda frontier will be diluted in the order book will be further improved on top of that the proportion of private labels in self developed and processed goods is better increased a lot.
With us to get the gross profit brought by research and development processing and Brent premium that's all for my answer Thank you.
Our next question comes from Joyce from Bank of America. Please go ahead.
Speaker 1: Our next question comes from Joyce from Bank of America. Please go ahead.
Hi, Mr. Yao Mr. Yu, Karen how are you. Thank you so much for taking my question. My question is that management, just mentioned that the G. N V of prepared foods is close to 15%. Indeed preparing meals is a category that is very much in line with the current consumption trends of young people and has received a lot of attention from the capital market.
Speaker 1: Hi, Mr. Leung, Mr. Yu, Karen, how are you? Thank you so much for taking my question. My question is that management just mentioned that the GMV of prepared food is close to 15%. Indeed, pre-prepared meals is a category that is very much in line with the current consumption trend of young people and has received a lot of attention from the capital market. Can you tell us what are the advantages of Dingdong's pre-prepared meals business and what are your future prospects? What is your current strategies and your future prospects in general?
Can you tell us what are the advantages of dig dose pre prepare meals business and what are your future prospect what is your current strategies and your future prospects in general Thank you.
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Speaker 2: This is the core competitiveness of Dingdong. At present, the main sales channels of pre-ordered goods on the market are often on Douyin or other e-commerce. In these platforms, the flow and transportation costs are very high, and it is not easy to make money.
Speaker 2: In addition, the consumption level of the vegetable market is not high, and it is not suitable for pre-cultivated vegetables. We have our own sales channels, and we are starting in B2C mode. At present, the scale is already very objective, for example, the GMV of pre-cultivated vegetables like Q4 Dingdong is more than 900 million RMB. If the annualization is 30%
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Speaker 2: of the two companies listed in the A-shares last year, our scale is already more than two to four times their size.
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Speaker 1: The CSO, Ms. Yu, is going to take this question. Hello. Thank you for your question. We believe that the biggest threshold of pre-prepared meals is mainly the sales channel, which is our main core competitiveness.
I'm the CFO Ms. <unk> is going to take this question Hello. Thank you for your question. We believe that the biggest threshold of prepay parent Muse is mainly to sales channel, which is our main core competitiveness. Our main the main sales channels, where pre prepared meals in the market often right now kipp talk and other e-commerce platforms, where traffic cost.
Speaker 1: The main sales channels for pre-prepared meals in the market are often right now TikTok and other e-commerce platforms, where traffic costs and transportation costs are high and making money is not easy. Meanwhile, street markets target price-sensitive consumers, making it unsuitable for pre-prepared meals.
And transportation costs are high and making money is not easy. Meanwhile street market target price sensitive consumers, making it unsuitable for pre prepare meals on the other hand, our dingo has its own sales channels, because we started off with a D to C model and the scale has been very impressive for example, the G. M V off doing dose pre prepare meals in Q4.
Speaker 1: On the other hand, Ding Dong has its own sales channels because we started off with a D to Z model and the scale has been very impressive. For example, the GMV of Ding Dong's pre-prepared meals in Q4 was more than 900 million RMB, an annualized number of over 3 billion RMB, which is more than two to four times the scale of the two pre-prepared meals company that was listed in A-Share last year.
More than I hundred million RMB in annualized number of over 3 billion RMB, which is more than two to four times. The scale. After two pre prepare meals company that was listed in a share last year.
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Speaker 2: Yuzhicai is very different from Shenxian. Yuzhicai has a lot of SKUs. So if the sales are not high at the production end, the production scale of a single SKU at the production end will be very small. Then the production end will lack the effect of scaling. So when we came to Shangyou ourselves, we found that although the entire Yuzhicai track in the capital market is very hot, but the production capacity of the entire production end is still excessive. Our free channel brings very stable sales. In addition to our own free production processing, we can also use the OEM method to use Shangyou's production capacity well to achieve a large-scale production.
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Speaker 1: The second point is pre-prepared meals are different from fresh grocery. There are many SKUs. If the cells volume is not high, the production scale of individual SKUs will be very small and the production end will lack the scale effect. We found over capacity in production when we examine the upstream of pre-prepared meals, even though the pre-prepared meals are very popular as a category. With our channels generating stable cells, we can use the upstream capacity with OEM and our own production and processing to achieve scale production.
The second point is preparing meals are different from fresh grocery there are many S get used if the sales volume is not high or production scale of individual skus will be very small and the production and will lack the scale effect, we found over capacity in production when we examine the upstream off pre prepare meals, even though the P. P per meals are very popular.
As a category with all channels generating stable cells, we can use the upstream capacity with OEM and our own production and processing to achieve scale production.
Speaker 2: Third, the accumulation of big data and close users have always been Dingdong's strengths. So we can quickly catch some subtle changes in users' consumption trends. According to users' real-time feedback...
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Speaker 2: to provide a quick response, a quick development, a quick replacement, and a quick feedback to the production end. This is an advantage that only the companies at the production end do not have. So, in summary, our advantage is that our free sales channels bring a lot of benefits to our customers.
Speaker 2: This stable scale also brings high efficiency at the production end. Some big data accumulated in free channels can be quickly returned to the production end for development and production replacement, thus forming a positive wheel effect.
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The third aspect I would like to mention is that the accumulation of big data and proximity to users has always been shingles strengths. We can quickly catch subtle changes in user consumption trends based on real time user feedback and data. We can quickly react dybala to iterate and give feedback to the protection side, which is an advantage that companies with only the production capability.
Speaker 1: The third aspect I would like to mention is that the accumulation of big data and proximity to users has always been Dingle's strength. We can quickly catch subtle changes in user consumption trends. Based on real-time user feedback and data, we can quickly react, develop, iterate, and give feedback to the production side, which is an advantage that companies with only the production capability do not have. To sum up, our advantage is that our own sales channel brings stable scale, which brings efficiency at a production end. The data accumulated in our self-developed channels can be quickly fed back to the production for R&D and iteration, forming a positive flywheel effect.
Do not have to sum up our advantage is that our own sales channel brings a stable scale, which brings efficiency out of production and the data accumulated in our self developed channels can be quickly tied back to the production for R&D and iteration, forming a positive flywheel effect.
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Speaker 2: We think that in the future, the JMV ratio of Yuzhicai in Dingdong is expected to be higher. Young people have a higher demand for food. It may be compared with the time young people want to spend in the kitchen and the cooking skills of most young people. Yuzhicai conforms to this trend. Objectively, it also brings more high-value consumers and a higher profit margin to Dingdong. This is my answer. Thank you.
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In terms of the prospect for the future are preparing meals are expected to account for a much larger share larger share of dangles G. M V. Because young consumers have high standards for food, but less time in the kitchen and are less skillful at cooking pre prepared dishes allow this trend and bring more vulnerable consumers and high gross margins. That's all for my answer.
Speaker 1: In terms of the prospect for the future, pre-prepared meals are expected to account for a much larger share of Dainton's GMV because young consumers have high standards for food, but less time in the kitchen and are less skillful at cooking. Pre-prepared dishes allow this trend and bring more valuable consumers and higher gross margins. That's all for my answer.
Thank you.
Our next question today will come from Ashley shoe.
Speaker 1: Our next question today will come from Ashley Hsu with Credit Suisse. Please go ahead.
With credit Suisse. Please go ahead.
Thank you. Thank you for taking my question. My question is about the regulatory environment there.
Speaker 1: Thank you. Thank you for taking my question. My question is about the regulatory environment. There have been a series of regulatory policies for Internet companies starting in the second half of 2021. The regulatory policies for ADRs are also changing with a lot of uncertainties and even the risk of delisting. Can you assess the impact on the company and state your coping strategies? Thank you.
There have been a series of regulatory policies for our Internet companies starting out in the second half of 291 Deregulatory policies for a D. Ours also changing with a lot of uncertainties and even the risk of delisting.
Can you assess the impact on the company and state your are coping strategies. Thank you.
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Speaker 3: I have a question for you. I want to answer this question in four aspects.
Speaker 3: First of all, we are not the same as our peers. Dingdong Grocery is a deep shopping chain. It has a lot of investment in its own development and production. There is also a lot of investment in the robot technology of related agricultural household consumption. Dingdong Grocery is a real-life physical economy company that uses the Internet as a technical means. This is the direction that China is currently encouraging. Second, Dingdong Grocery has been deep and upstream in promoting Dingdong No. 2 Agricultural Standard at the agricultural end. Through advanced technology and public chain finance, the rich agriculture will increase the quality of agricultural products and agricultural income through order planting.
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Speaker 3: In 2020, we launched the Green Water Green Hills Project, which aims to help agricultural products in remote areas improve their quality and scale, and sell them to major cities. This is the direction that the country's rural policy encourages.
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Speaker 1: Thank you for your question. I would like to address this question from four perspectives. The first one is, unlike any of our peers, we are deep in the supply chain and have invested aggressively in R&D and production and robotics of agriculture and household.
Thank you for your question I would like to address this question from for our perspectives. The first one is unlike any of our peers. We are deep in the supply chain and have invested aggressively in R&D and production and robotics of agriculture and household consumption. Therefore, we are a solid real economy company using internet technology to develop which is the direction.
Speaker 1: Therefore, we are a solid real economy company using internet technology to develop, which is the direction that the Chinese government encourages.
That the Chinese government encourages second Ding Dong has been deeply involved in upstream promoting the D. GAAP standards at the agricultural and empowering agriculture through advanced technology, and supply chain finance and improving the quality of foreign products and agricultural income through contract farming.
Speaker 1: Second, Ding Dong has been deeply involved in upstream, promoting the DGAP standards at the agricultural end, empowering agriculture through advanced technology and supply chain finance, and improving the quality of farm products and agricultural income through contract farming.
Speaker 1: Last year, we launched the Green Mountain Clearwater Initiative to help improve the quality and scale of farming products in remote areas in China to sell them to metropolitan areas. This is all in line with the National Rural Revitalization Policy promoted by the Chinese
Last year, we launched the Green mountain clear water initiatives to help improve the quality and scale of farming product in remote areas in China to sell them to a metropolitan areas. This is all in line with the National Rural revitalization policy promoted by the Chinese government.
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Speaker 3: and make more contributions to a better life. Fourth, regarding China's control of the U.S. capital market, on the one hand, we will firmly abide by and support China's government policies. On the other hand, we also believe in the wisdom and tolerance between countries, and believe that China will continue to improve its open policy. A better world will be different.
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Speaker 1: Third, we mentioned earlier that Dingdong is one of the key forces in keeping with people's livelihood in the pandemic and severe weather conditions in 2021. Many local governments have sent letters of appreciation to us, and Xinhua News Agency, People's Daily, CCTV have all praised our commitment multiple times. Before the Chinese New Year, Mr. Gong Zheng, mayor of Shanghai, visited Dingdong and showed support in Dingdong in making contributions to keep the people's livelihood and support people's pursuit of a happier life.
Third we mentioned earlier that thing Don is one of the key focuses are in our key forces in keeping with the People's livelihood in the pandemic and severe weather conditions in 'twenty 'twenty. One many local governments have sent letters of appreciation to us and Xinhua News agency People's Daily CCTV have all trace our commitment multiple times.
Before the Chinese new year, Mr. Gong junk mayor of Shanghai visited Kingdom and show support in Dingle in making contributions to keep the People's livelihoods and support People's pursuit of a happier life.
Speaker 1: Regarding the ADR regulations, we are fully compliant with the Chinese government's policies. We also believe in the wisdom and tolerance among great economic powers. We expect China to adhere to its reform and opening up policy. A better world should reflect harmony within diversity. That's all for my answer.
Regarding the ADR regulations, we are fully compliant with the Chinese government's policies. We also believe in the wisdom and tolerance among great economic powers, we expect China to adhere to its reform and opening up policy, a better well should reflect harmony within diversity. That's all for my answer. Thank you.
Our next question will come from Thomas Chong from Jefferies. Please go ahead.
Speaker 1: Our next question will come from Thomas Chung from Jeffries. Please go ahead.
Speaker 1: Good evening. Thank you. Thank you so much for taking my question. Now, we noticed that the company has $1.5 billion operating cash outflow in Q4 2021, which is higher than previous quarters. Can you please be more specific on why this is the case? Can you disclose the company's current bank borrowings?
Good evening. Thank you. Thank you so much for taking my question now we noticed that the company has a 1.5 billion operating cash outflow in Q4, tiny tiny one which is higher than previous quarters can.
Can you please be more specific on why this is the case can you disclose the company's current bank borrowings and also.
Speaker 1: Is there a risk that these bank borrowings cannot be extended?
Is there a risk that are these bank borrowings cannot be extended.
So that's my question. Thank you.
Okay.
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Speaker 2: In 2021, Q4's cash flow was more than RMB7 billion higher than the current NAMGAP loss. At the same time, we can see that compared to Q3, our whole balance sheet has also decreased by RMB7 billion. Mainly because we think that in today's high-quality development, we need to maintain a good supply chain ecology.
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Speaker 2: At the same time, we can also see that the outflow of Q1 to Q3 in 2021 is lower than
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Speaker 2: The difference between the outflow of operating cash and the adjusted EBITDA is only more than 100 million RMB. As the loss continues to decline, the outflow of operating cash in 2022 will be greatly optimized in 2021 compared to the outflow of operating cash in 2022.
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Thank you for your question the operating cash outflow in Q4, 2021 it was higher than the non-GAAP net loss in the same period by over 700 million RMB, while our accounts payable decreased by over 700 million RMB at the end of Q4 compared to the end of Q3, it's mainly because it is more important.
Speaker 1: Thank you for your question. The operating cash outflow in Q4 2021 was higher than the non-GapNet loss in the same period by over 700 million RMB, while our accounts payable decreased by over 700 million RMB at the end of Q4 compared to the end of Q3. It's mainly because it is more important to maintain the supply chain ecosystem when pursuing quality growth.
To maintain the supply chain ecosystem when pursuing quality growth at the same time, the operating cash outflow from Q1 to Q3 of 2021 was lower than the adjusted EBITDA in the same period. However, after Q4 at a if we look at the whole year performance the difference between operating cash outflow and adjusting.
Speaker 1: At the same time, the operating cash outflow from Q1 to Q3 of 2021 was lower than the adjusted EBITDA in the same period. However, after Q4, if we look at the whole year performance, the difference between operating cash outflow and adjusted EBITDA was just about 100 million RMB. So as we further narrow our net loss, the operating cash outflow in 2022 will be optimized substantially compared to Q4.
Adjusted EBITDA was just about a 100 million RMB. So as we further narrow our net loss the operating.
Cash outflow in 2022 will be optimized substantially compared to Q4.
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Speaker 2: As of last year's Q4, the company's bank loan amount is less than 700 million RMB. At present, our communication with the bank is very smooth. There is no risk of not being able to pay in time. I would like to say that in addition to the above-mentioned loans, Dingdong is involved in agriculture, livelihoods and the real economy.
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Speaker 2: The government has provided additional assistance to our loan scale. As of today, February 15, Dingdong has received a reimbursement. But the amount not yet paid is nearly 500 million RMB. In addition, the reimbursement is being reviewed and is still in the report process.
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Speaker 2: QE, we will also sign a strategic cooperation agreement with the bank that has a deep cooperation and strengthen cooperation.
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Speaker 2: We also strive to create greater value for both sides in this deep cooperation.
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Speaker 1: As of Q4 2021, the company's bank borrowing balance was less than 700 million RMB. Based on our smooth communication with the banks, there is no risk of not extending our loan.
As of Q4, 'twenty, one the company's bank borrowing balance was less than 700 million RMB based on our smooth communications with the banks and there is no risk of not extending our lungs. In addition, because of the nature of our business, which involves agriculture People's livelihoods and the real economy, we are a preferred partner for major banks.
Speaker 1: In addition, because of the nature of our business, which involves agriculture, people's livelihood and real economy, we are a preferred partner for major banks.
Speaker 1: What's more, the general easing policy in lending since the beginning of 2022 has provided an additional boost to our loan size.
What's more the general easing policy in lending since the beginning of 'twenty 'twenty. Two has provided an additional boost to our loan sizes as of February the 15th 2022, which is today, we have nearly 500 million RMB granted as our loan credit and not yet withdrawn. In addition, the new credit line that is in the filing path.
Speaker 1: As of February the 15th, 2022, which is today, we have nearly 500 million RMB granted as our loan credit and not yet withdrawn.
Speaker 1: In addition, the new credit line that is in the filing process to get approved is over 400 million RMB. In Q1, we will sign strategic cooperation agreements with banks with deep partnerships to create more value for both parties.
It has to get approved is over 400 million RMB in Q1, we will sign a strategic cooperation agreements with banks with a deep partnerships to create more value for both parties.
So for my answer thank you.
Our next question today comes from Loon from Daiwa. Please go ahead.
Speaker 1: Our next question today comes from Lune from Dawa. Please go ahead.
Thank you.
Speaker 1: Thank you. Thank you for taking my question. Just now the management mentioned that Dingdong has had 10 in-house production and processing factories by the end of 2021 with in-house production and processing
For taking my question just now the management mentioned that being Don has had 10 in house production and processing factories by the end of 2021 with in house production and processing.
Contribution of six 5%.
Why did you start in house production and processing in the first place and will there be any conflicts between itself develop products and your suppliers. Thank you.
Speaker 3: Thank you for your question. Why do we do our own production and processing? As we said before, we do this for better product power. We believe that product power is the most important thing. As for the relationship with suppliers, I would like to answer four questions seriously. First, food is the most important thing in the world. There is a huge market for food. The demand for food varies from customer to customer. Therefore, food is not a competitive market where the weak and the strong compete with each other. It is a diversified ecosystem. Ding Dong Bai has the best relationship with all suppliers.
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Speaker 3: The second point is that Dingdong Buying and Selling has always emphasized the good generation of suppliers. For a long time, retail channels have often become the last straw for suppliers. In Q4 2021, Dingdong Buying and Selling took the initiative to shorten the supply chain of suppliers, while actively innovating with Shanghai Bank, Shanghai Longshang Bank, Zhaozhang Bank, etc., to develop public chain finance to support suppliers, so that suppliers can develop better.
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Speaker 1: Thank you for your question. About the reason why we started doing in-house production and processing facilities is because we believe in the potential of product capabilities, which is our primary growth driver. And then to our relationship with our suppliers, I would like to address that from four aspects. The first one is food is very essential, forming a massive market with different users and changing needs. The competition will not end up with a winner-takes-all kind of landscape, but an ecosystem with differences in diversity. The best relationship between Ding Dong and its supplier is harmony within diversity.
Thank you for your question about the reason why we started doing in house production and processing facilities is because we believe in the potential of product capabilities, which is our primary growth driver and then to our relationship with our suppliers I would like to address that from four aspects. The first one is food is very accentual, forming a massive market with <unk>.
Different users and changing even the competition will not end up with a winner takes all kind of landscape, but an ecosystem with differences in diversity the best relationship between downtown and its supplier is comedy with Endeavour City. In addition, they know has always been treating suppliers very well for a long time backlogs in the retail channel have often been.
Speaker 1: In addition, Dingdong has always been treating suppliers very well. For a long time, backlogs in the retail channel have often been the last straw of suppliers. In Q4, Dingdong has taken the initiative to shorten the supplier accounting period while proactively innovating and developing supply chain finance with the Bank of Shanghai, Shanghai Agricultural and Commercial Bank, and China Merchants Bank to support suppliers to grow better.
The last row of suppliers in Q4, it ginkgo has taken the initiative to shortened to supplier accounting periods, while proactively innovating and developing supply chain finance with the bank of Shanghai, Shanghai Agricultural and commercial bank and China merchants bank to support suppliers to grow better.
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Speaker 3: Thirdly, in terms of free brands and self-development, Dingdong Buying and Selling is not simply a substitute for a supplier, but a product that develops and differentiates from the supplier, a product with better quality. Fourthly, in the era of consumer upgrades in China, the government has also emphasized the use of consumer goods. This is an opportunity for all of our companies, not just a simple joint game, but an all-out effort to fight for the people's desire to grow and a better life. This is my answer. Thank you.
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Third in terms of private labels in in House, R&D and protection Stingo never aims to replace our suppliers on our country. It is committed to developing products that are differentiated from the suppliers' products and all the better quality Ah China is an era of consumption upgrades and the government emphasizes the use of consumption to drive a larger domestic cycle.
Speaker 1: Third, in terms of private labels and in-house R&D and production, Dingdong never aims to replace our suppliers. On the contrary, it is committed to developing products that are differentiated from the supplier's products and of a better quality.
Speaker 1: China is in the era of consumption upgrade, and the government emphasizes the use of consumption to drive a larger domestic cycle, so this is the opportunity, is a great opportunity for all companies rather than a zero-sum game.
So this is the opportunity is a great opportunity for all companies rather than a zero sum game various players can grow together with the growing needs of the people for a better life. That's all for my answer Thank you.
Speaker 1: Various players can grow together for the growing needs of the people for a better life.
Our next question today will come from Luke Junk me.
Speaker 1: Our next question today will come from Liu Zhangming of TF Securities. Please go ahead.
T F Securities. Please go ahead.
Thank you and thank you for taking my question.
Now I think there has been in the media a lot lately can you comment on some of the media reports.
Speaker 1: Now, Ding Dong has been in the media a lot lately. Can you comment on some of the media reports?
First of all yeah.
Speaker 1: You mentioned that in 2021, Ding Dong passed the government quality inspection with flying colors and the pass rate is leading in the industry. Can you comment on the excessive...
You mentioned that in 2021 thing don't pass the government quality inspection with flying colors and the pass rate is leading in the industry can you comment on the excessive.
Speaker 1: drug residues in your brain as reported some time ago. The second aspect is that can you also comment on the news that Ding Dong has laid off 10,000 people? The third and the last part of my question is that during an interview, Hema expressed a pessimistic view about the Frontline Fulfillment Grant model. Can you respond to that?
Drug residues in your brain as reported some time ago.
The second aspect is that can you also comment on the news that Ding Dong has laid off 10000 people the third and the last part of my question is that during an interview Homer expressed a pessimistic view about the frontline fulfillment great model and you respond to that.
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Speaker 3: I think the media is also concerned about this issue, so we have a good opportunity to talk about it. The first question is about poverty and the issue of overspending on medicines. In the consumer market, there is a problem of overspending on pesticides and meat in agricultural products, especially water products. This kind of buying and selling uses quality as a lifeline, and a large amount of human resources are invested in poverty alleviation. In the government's respective inspections, our cooperation rate is also leading among companies of the same scale. Poverty alleviation has always been a major disaster in the pharmaceutical industry. After the overspending incident in the pharmaceutical industry, we immediately...
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Speaker 3: We plan to invest in aquaculture and aquaculture technology companies in Zhejiang and Huzhou in 2022. We will use green mountains, green water and advanced technology to fundamentally solve the quality and safety of aquaculture products and completely safely release aquaculture resources.
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Speaker 1: Thank you for your questions. Now your first question is about quality control and the pesticide and drug residues incident with the brains. Now agricultural products, especially aquatic products, have always encountered the issue of excessive drug residues or heavy metal from time to time. Dingdong has always regarded quality as the lifeline and invested a lot of human and financial resources and quality control. As a result, we have always passed various government inspections with flying colors, a passing rate way higher than our peers of the same scale.
Thank you for your questions now your first question is about quality control and the pesticide indirect messages incidents with our brains now agricultural products, especially aquatic products have always encounter the issue of excessive drug residues or heavy metal from time to time Dingo has always regarded quality at the lifeline and invested a lot of human and financial.
Sources and quality control as a result, we have always pass various government inspections with flying colors are passing rate way higher than our peers at the same scale.
Speaker 1: Breams are more prone to have excessive drug residues than other products. As soon as the incident happened, we immediately took the particular supplier's product off the shelf, and we learned from the painful experience, and we were determined to solve the problem once and for all. That's why in 2022, we plan to invest in an agricultural technology company in Huzhou, Zhejiang province, to fundamentally improve aquatic product quality and safety, and farm safe and secure marine products with clean natural resources and advanced technology.
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Speaker 3: The second question about the financial support is indeed a rumor. Because of the influence of public opinion, the labor inspection department in Shanghai also went to Dingdong to investigate. The conclusion is that the flow of staff in Dingdong has not changed much compared to previous years. The Shanghai Internet Information Office also helped the official media to issue PLs. We also summarized this matter and revealed that we are not very good at communicating with the media and the public. In the future, we will continue to improve our ability in this area.
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Speaker 1: Your second question is about layoffs. This is indeed a rumor. The Shanghai Labor Inspection Department also conducted a field investigation at Dingdong and concluded that there were no major fluctuations in our staff turnover compared to previous years. The Cyberspace Administration of Shanghai also assisted us in making an official announcement to clear the air. However, we did learn our lesson through this incident, and we will improve our public relations management and communication with the media and the general public.
Your second question is about layoffs. This is indeed Aruba, the Shanghai Labor inspection Department also conducted a field investigation of Ding-dong and concluded that there were no major fluctuations in our staff turnover compared to previous years. The Cyberspace administration of Shanghai also assisted us in making an official one.
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Speaker 3: Thirdly, we don't pay much attention to the opinions of our peers. We focus on users and promote our products first. We are not worried about traffic.
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Speaker 3: I am worried about whether we can develop good products, whether we can gain the trust of our users. In order to meet the needs of the people who are growing day by day, we need to have a big picture and look further. Life is short, but we need to do valuable things. This is my answer to the three questions from the media. Thank you.
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Now about your last question to be Frank we don't pay much attention to what our peers say, we are not worried about traffic price wars or competition, but only about developing good products and gaining users' trust as the Chinese expression goes how many within diversity weird different with our peers, but we can definitely coexist in.
Speaker 1: Now, about your last question, to be frank, we don't pay much attention to what our peers say. We are not worried about traffic, price wars, or...
Speaker 1: but only about developing good products and gaining users' trust. As the Chinese expression goes, harmony within diversity. We are different with our peers, but we can definitely coexist. In meeting the growing needs of the people for a better life, we must have a big picture and look further. Life is short. Do something worthwhile. That's all for my answer. Thank you.
Meeting the growing needs of the people for a better life, we must have a big picture and look footer Livish shorts do something worthwhile. That's all for my answer thank you.
Ladies and gentlemen that concludes our question and answer session.
Speaker 1: Ladies and gentlemen, that concludes our question and answer session.
Speaker 1: I'd like to hand the conference back to our management for closing remarks.
I like to hand, the conference back to our management for closing remarks.
Thank you again for joining our call today. It would have any further questions. Please feel free to contact us or request through our IR website. We look forward to speaking with everyone. In our next earnings call have a good day.
Speaker 2: Thank you again for joining our call today. If you have any further questions, please feel free to contact us or request through our IR website. We look forward to speaking with everyone in our next earnings call. Have a good day.
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