Q3 2022 Dingdong (Cayman) Ltd Earnings Call
[music].
Good morning, and good evening, ladies and gentlemen, thank you for standing by.
And welcome to the Ding-dong Ltd third quarter 2022 earnings Conference call.
At this time all participants are in a listen only mode. Please.
Please note that this event is being recorded.
I will now turn the conference over to the FERC Speaker today, making Zhang director of Investor Relations. Please go ahead Sir.
Yes.
Thank you.
Hello, everyone and welcome to themed uncertain COVID-19 areas without intending to earnings call.
Faster today are Mr. Chan Leanne down, our founder and CEO and Mr. Liu All SaaS.
Hello.
I kind of referred to I said quarter in 2022 financial results.
Our website.
Well Hunter I E.
You can also access a replay of this call I'll have appetite when it becomes available a few hours to updates conversation.
On today's call management will provide prepared remarks, and then well be hosting a question and answer session.
Before we continue I would like to refer you to our safe Harbor statement.
<unk> press release.
Which also applies to this call.
We will be making forward looking statements. Please note that all numbers stated in this.
Following management's remarks, I E D terms, and we will discuss non-GAAP measures today, which are more Sally explained and reconciled to the most comparable measures reported in our earnings release and filings with the SEC.
I will now turn the call that you offer to the speaker today, the founder and CEO of being dumped me sell down Ms. <unk>. Please go ahead.
Oh, Yeah go ahead.
Thank you Sir.
That's.
Find out.
Is that are you already in Tucson high ball from your wife.
Well, yeah, that'd be John's idea you know, but you know Matt is that are you already in Tucson.
Yeah.
It's something you need to catch up on me.
And yet you put up on them.
Thank you and welcome to Jim Jones, Q3 earnings call in 2022 today I would like to discuss our Q3 operational performance some thoughts on product development capabilities and our next steps.
Absolutely yes.
Yeah.
She was on that.
Yeah, you can so you wouldn't see that.
Now that you have.
Yeah, Chris I would just sit there and bought football well need to see.
First let's dive in our Q3 performance as we expected revenue in Q3 was not was 5.94 billion RMB with a non-GAAP net loss margin of four 8%.
I've seen that ensures that all of my guidance at all.
It seems like it would play out well she was a childhood disease.
Jim Gouin model for that in.
John you know each.
The other piece of neat you Didnt home sooner and hold you back.
You didn't you see I have not seen Yang.
I missed it but I don't see it yet.
In total what junkies that union.
So as you know each other unique yeah, yeah, you're on top of what my I P. O E C.
Is that you didn't call you guys, yeah, what we'll shoot you that's why it wasn't it Judy.
$10 you go limbo.
How about students when they need to try it.
We quickly adapted to the changing business environment in the third quarter last year and began our strategy efficiency first with due consideration to scale. Consequently, our non-GAAP net loss margin narrowed substantially to four 8% from 31, 9% from a year ago.
With such momentum, we're confident approaching non-GAAP breakeven in the fourth quarter, this year, which would soon which would be sooner than expected during our IPO.
Dan Ding-dong will have evolved from a start up that needed external financing to a self sustaining company with strong survival capabilities.
Okay, Yeah, it's true.
The way you can do without you, saying something that he talked about on boarding but she got Jody J you need it.
Yeah cool again.
She doesn't it.
The key drivers of our achievements are our commitments to product development service upgrades and supply chain efficiency, all of which contribute to our profitability and competitive moat.
And that's been done by somebody needs to have.
Just know that you tend to have off of your ways. All the time that's.
He's not a serial lets you do this all about.
Cheers.
Yeah, well it means that somebody is just it sounds like.
Oh.
Next I would like to share our thoughts on product development on previous call I introduced our strategies and practices for enhancing product development capabilities today I'll focus on the rationale behind it.
Our CEO .
Yeah.
Oh, yeah yeah.
Wildfires in Australia, where you all are.
Yeah, that's a lot of Dropbox, you can even see some D C C.
So you got to sit there and talk about and you can see all these young team.
So we will let you do your modeling.
So that puts you in golf.
Yes, you do you like.
That's usually you want to walk through the pay options it couldn't get them hooked it I'm sure.
When do you need to see how.
Well, we'd be all it's the wife adult.
First we have conviction in our pursuit of a better life for the longest time traffic was the only thing that marriage in China's e-commerce industry, low pricing with an obvious and straightforward way to acquire users.
As a result consumption downgrade became a trend. However, ding-dong was founded to address the mother's concerns over their children's food safety.
Since day, one we have been dedicated to producing safer healthier and better quality food products, we have unwavering faith in pursuing a better life and will strive towards that goal.
Oh, Yeah, well, we always told me somebody told US Yazoo Toyota Honda and she has at least for the legal question.
That's the way I can talk all you.
So could you either how they always tell visa.
Gotcha.
That's doing well, but they tell me the coupons that yeah, well see how this all what you can do the visual with gay woman. She went on would you hadn't tackled yet so what does all of a sudden boom.
Second we aim to create value for the consumer and society. Most start ups are trapped in a competitive zero sum dilemma, which is limiting dingo has escaped from such a mindset and emphasize value creation, instead, which is unlimited and liberating.
As al can seamless constantly evolve with and matching placebo for a better life, we have infinite market opportunities to capture in the months to fulfill.
Oh no no.
Okay, sometimes they'll buy it all sitting just a hole to it Cai yeah. So I mean, Paul on the P&L.
But it.
Well he told me so he will probably get them to you on some of them you need not much at all yet.
That's down about three P off we cant yeah, you know, Matt that's what's happened off of that agenda.
<unk> found women should all couldn't get in Congress and in a city.
I see no problem the other T J yeah Tobey.
Where are you solely talking about jobs.
As you know Don has educated the clean label off no additives unless necessary ingredients on the packaging upset in food products in a market outlined various chemicals flavorings colorings Empress averages, sometimes forgotten density all over the clean label, we advocate for it and <unk>.
<unk> enables more consumers to ask us healthy and safe through product. It also forces the entire industry to strive towards creating value for society.
The minutes yet.
Hi, Hello easier Tobey.
How does the corridor for you Paul in terms of the final kind of L. B.
Yeah.
Oh gosh.
T G I.
The well known weight Tebo tool goes down the zombies without him, but he would've been say magnitude. So you can read you some ounces.
Yeah.
Today, an increasing number of people around us are obese and even suffer from diabetes due to excessive carbohydrates and sugar intake. This is why Jim Don has put tremendous effort and resources into developing delicious low carb low Gi suite products.
Overtime, we expect to generate more products in this category to align it with our current health and nutrition concept.
Do you know how these all country can go kind of jobs, where you where you.
She handed to you Bob.
It seems as if you know somebody here.
Yes.
Yeah.
We really pay attention to the competition, but rather focus on value, we embrace infinite value creation and unrestricted by the competitive landscape. This is the principle that drives our product development and also our proposition in place.
Designs and don't put there's always tells me. She wouldn't you say that you won't be all of a sudden what did you give what didn't don't do that.
So it was a $3 people, you'll judge let's see yes.
Well just be sure how long satellite excuse me this year yeah.
If you are what you eat.
You guys gave you know her she was all of them basically that'd be the jockey as I said, yes. It was all of them into the store.
Hudson It means.
Sorry, we do not just sell food products, we provide solutions that help you improve your life Kingdom is in the food industry a business that provides satisfaction and creates value for people eating is not only a basic physical niche, but also brings a psychological a pleasure.
Moreover, you are what you eat eating is changing in shaping us our families and the entire society a nation.
Oh Hello young.
Right.
You find that you where you can buy box and they had the system up and also on my line. So how.
Scott do you want.
Has it been sought adult with 70 yards for me.
So you want to talk about it but my guess, yes, you can do.
Without them.
So yeah, yeah yeah.
Got you and Cushing, who know what didn't cover.
So my mom would be Sydney, I'm going to tell you.
Archie I would send you my mom and dad finish as usual to go how did you get what.
Oftentimes the consumer comes to us for more than just a meal. If you ask the mother, how she wants to see her child. She does not specify all she wants is something that a child likes that helps them grow as tall or healthier smarter and even become a better person. That's why we curated mumps choice.
With traceability scientific nutrition and minimum.
Additives. This curation meets mothers needs and he says their concerns over food safety.
That's what it is that something you can do without.
We shall be doing somewhat she won't be all of Sydney.
Yeah. This is Joe maybe you would assume that you did she won't be all of a sudden what did you have you thought.
Go for it when we develop products, we aim to provide not only quality food for quality of life, but also solutions that is with expertise and deep consumer insights.
Oh, Yeah, yeah that's.
Those are all examples right.
Well, it's a union endorsed.
It's not a piece of it because it's worked out well.
Well for the job.
She didn't know that.
non-GAAP.
You don't just suddenly you've got lingo one trend. So it tells you that.
Lastly, I would like to discuss the next steps our loss ratio narrowed remarkably over the past year, giving me full confidence in near and non-GAAP breakeven in Q4, when it happens kingdom will become a fully self sustaining company.
You don't young choose you guys sounding he's on body care about who can do it on behalf of city, Yeah coupons YOD Council, yes, yes, she's a woman that's what it sounded in your Corrine, Yeah 42 young children.
The only me all the time being we could I'm.
Good Boy you know, you'll always seemed like what you see is it was like July cause young fella agree more that city has been the Moody's double dancing Chow.
So you know so you got Covid would send out and who gets which they need to.
Yeah.
[noise] Ding-dong, we'll keep investing in our product development to generate more product quality products building, a stronger supply chain and upgrading savages.
These capabilities will form our competitive moats, Moreover, quality products naturally king traction because consumers can trust and rely on them, bringing continuous growth in scale, while the supply chain and service capabilities are instrumental to profitability, albeit bus will allow ding-dong great potential for growth.
Yeah.
Oh yeah.
Some go off and do without resolving tons out of jobs, then we'll put out in front of them.
We're going to talk about Yahoo, Josh.
But you didn't gain with Johnson.
Or how would you kind of jobs, which you're getting at yeah. That's absolutely see a dog that you just don't.
No.
Are you talking about countries.
Our company striving to achieve a better life and create value for the consumer has unbeatable value in the long term such value will translate into premium pricing. So thank you all for your continuous support let's generate long term value together.
Oh, well, there probably aren't always as usual.
So I mean again.
How would you want to hear.
Thank you everyone with that I'll hand, the call over to Mr. <unk>, our CFO to go over the financials.
Thank you Mick and Hello, everyone.
Walk us through our detailed financial results pismo that or not but the following remarks.
Uh huh.
Well in Q3, 2022 was 594 billion down slightly by 4% year over year. However in the first three quarters of this year, we achieved a 23 point a 1% revenue growth while narrowing the networks margin I saw two one points to seven percentage points.
Our higher revenue in Q3 last year was driven by extensive subsidies and concessions granted to our users. In contrast in Q3 of this year, we were committed to enhancing product quality and order fulfillment efficiency, while reducing operational costs on this strategy.
Efficiency first it was still consideration too scared.
As a result, we achieved a significant growth in gross profit growing by 58.2% year over year, a testimony to our product development capabilities and operational efficiency, we expect to roughly breakeven non-GAAP basis in Q4 this year with <unk>.
Turning to our year over year growth trajectory.
Let's take a detailed look at the Q3 performance.
The jelly to grab your conversion rate was 91, 3% at 3.1 percentage point a year ago.
Gross margin for the third quarter was 30%.
At 11.8 percentage points from a year ago.
Movement in gross margin have been significant over the past year, but we still anticipate more room for growth in both the short and long term.
Our fulfillment across my to be higher than those of the traditional supermarket model because we are more deeply engaged in the supply chain. However, such a commitment also generates higher gross margin.
Example.
Our supply chain, we standardize and digitalize the management of fresh grocery and fits exactly by introducing different storage temperatures in our region of freestanding centers.
In contrast, most of our peers from traditional supermarket or using online model also such processes to suppliers.
As a result, our.
Expense ratio of the original processing centers in Q3 was seven 3%.
In addition, we conducted a higher proportion of direct sourcing and order based on final and it kept a racing standards and the quality control of our product.
Our extensive and far reaching participation in our supply chain has yet to be fully reflected in our current gross margin, we expect to translate into higher profitability as we make it.
The fulfillment expense ratio for Q3 was 26.8% downturn.
10.5 percentage points year over year.
Primary only two English, who average order value and optimization of frontline worker efficiency.
We also recorded a 25% improvement year over year in L. V. This culture, driven by better product development capabilities, and I think those ground at Domino's and consumer mindshare.
Our frontline fulfillment stations deliver efficiency increased by 15.8% and a whole staff efficiency and shoot up by 29.6% year over year.
The marketing expense ratio for the third of culture was two 1% down 4.8 percentage points throughout a year ago.
Addition, the customer acquisition cost per new transacting users jumped up significantly by so take 2.6% year over year, driven by better product development capabilities and brand image.
The Ginnie saturation declined two 2% from two 5% a year ago.
R&D expense ratio grew slightly to four 3% from four 2% a year ago going forward. We will continue our investment in food I V and with culture technology and technical data angry then why minimizing Westport expenses at headquarters to cut costs.
We believe infrastructure investment in about three areas, we have strengthened our competitive advantage and create long term value for investors.
In Q3, GAAP net loss margin was five 8% narrowed by 26.7 percentage points from a year ago.
Now get that gross margin was 4.8% narrowed or by 27.1 percentage points compared to Q3 last year.
And three percentage points compared to Q1 this year before the Covid lockdown.
Excluding a one time expense of 52.7 million our.
The adjusted non-GAAP gross margin was 3.9%.
In Q3, we reduced our operating cash outflow from 407 million to 244 million by introducing the pricing supply chain finance.
At the end of Q3, we had 5.9 billion in cash cash equivalents restricted cash and short term investments.
In summary, things are we emerge from the lockdown in Q2 and our production.
Welcome and capabilities gained attraction, we observed a solid upward trend in our online penetration L V gross margin and operational efficiency.
At the same time, we also had a higher product quality to meet consumers' growing demand for a better life.
As a result, they don't remember all our lawyer uses well highly sticky, whereas the net myles with tissue right.
84.2% and net them off GMP contribution of over 400, Oh average the longer. These members stayed with us the more of a monthly gym be increased.
We believe zynga is that become an integral part of more users' lives.
Going into Q4, we expect to return to our year over year growth trajectory attitude and be close to knock at breakeven.
When we achieve that we will have lowered our non-GAAP gross margin by over 10 percentage points from 31, 9%. When we began the efficiency for our strategy in Q3 last year.
It's actually a notable optimization in less than one half years would have demonstrated in the vitality and the profitability of our business model. This concludes our prepared remarks for today operator, we are now ready to take questions.
Yeah.
Thank you we will now begin the question and answer session.
I ask a question you May press Star then one on your Touchtone phone.
If you're using a speaker phone please pickup your handset before pressing the keys to withdraw your question. Please press Star then two one.
One asking the question. Please state your question in Chinese first then repeat a question in English for the convenience of everyone on the call.
Today's first question comes from actually issue with Credit Suisse. Please go ahead.
Oh got it home control at Q1 O one time now.
And she's like Oh.
Do you think that one thing but.
A whole lot there sure farooq actual about jumping to Chicago.
Now how would you teed up.
My phone conscious about not.
So it wasn't part of any chance. Thank you management for taking my question just.
Just wanted to check given the overall macro environment have you sensed any change in consumer.
Consumer behavior and what's the key changes we have seen thank you.
Uh Huh, she didn't you know where to go.
Well, maybe $2 Sofa, you too and she says you know what.
It's probably the series C, where I know that sometimes you know she is a woman to the Hyatt.
Julia who chooses you asked that.
It's a little hard to do so.
Thank you for your question are we all know that consumers are constantly changing and so are all consumption habits. This is the fascinating part of our industry.
<unk> is the only constant and so are our efforts to serve to users.
Hi.
Who shall be you can recall will come on let's see there's all but you don't have to choose a goodbye.
Do you know the engineer you don't know yet.
Do you know about that.
Have all of your clients you made Yahoo email.
Sure Josh.
Using June 30, probably not what you saw here in Georgia ballpark.
Children's Museum hockey well whenever you enter into this little Kabbalah, which ends up.
So do you mean, what was it two five year old longboard system, though.
Why do you hold out.
You can go well into the future.
And as usual well chico's.
Yes. It seems you have another shop in town.
Yeah drew has bothered even thought well they see how.
How about you.
Yeah, Yeah yeah.
So by doing that.
Shelby as usual.
Here are some consumption trends obsess on recent user behaviors for one young consumers are paying more attention to health and wellness. That's why I didn't don't develop a prune enzyme drink with over 20 kinds of fruit and vegetable enzymes and four kinds of probiotics. It is perfect for the Gi tract and became a big hit.
As soon as it was lunch with basically all five star reviews.
Following this trend we subsequently developed more products such as line compound Jews without adding white sugar and like me fermented mango juice, which are all very popular later week, you're right at the junior planet Peach to meet the needs of youngsters pursuing health and wellness. Another trend is meal for one.
It's nothing perfunctory instead, it's a dish with balanced nutrition, that's why we have been developing certain preparing meals emphasizing nutritional balance at a smaller portion which truly caters to dish trench.
The threat is home to go to your Dearborn, Oh, My Gosh, you allow yes, you answered it well.
Well, yeah, well way out she coffee I'll say easier to choose a thumping their Shelby said she was something I don't go fully that does the cotton jargon, but what can you just talk about your philosophy that'd be good.
And she said.
In addition from their search results and Paas, you think behaviors, we notice young consumers expect to diversify their meals with changes in the prices. We also notice that categories, such as bakeries and coffee are trending up lastly, the ratio of processed foods, including prepare meals and <unk>.
<unk> foods has been increasing in all product category mix.
Oh no.
Yeah why are you almost couldn't go find who we should all be sure. She all but you don't you do it.
So hearing you on shooting up she was the Oh My God. She said that she wants it up here.
Yeah, what you were trying to do but we.
I thought that you want to look quite strong suits a whole lot more.
So if I got it.
Clearly the jogger because that's what will get you will forget this gives a hall for quiet Jogger study, nobody who know who.
We'll go to Joe you'll have forgotten, she said something need to all come together she got thrown at me.
You just can't go to who didn't didn't only.
Well, it's important to identify changes our core focus remains to address the constant demand and consumer consumption first it's a common hope fall to enjoy better quality taste and nutrition and food second it's desirable to have varied innovative categories. In addition.
Delivery is expected people want instant gratification.
Quantification finally consumers expect reasonable pricing to sum up people expect quality diversity speech and affordability.
To meet the ever changing needs of users, we need to have better product development supply chain and service capabilities. All of these are the core competitiveness that didn't Don has always been focused on.
Oh yeah.
Thank you.
Yeah.
Thank you and our next question today comes from Thomas Chong of Jefferies. Please go ahead.
Yeah.
Okay.
Well, let's see what they do.
What was that.
Let me totally right.
Hi.
Those should argue English.
Our basement instrumental it became my questions.
Talking about Oh my goodness.
Last quarter just want to.
Management about.
The strategy and we are and how is the operation.
Hugh.
Okay.
Hi, Susan.
Oh My God.
Hum.
Simple easy and my mom and as usual walk through my mom and she won't simply put him on the hydro the yount might read out.
So while I'm not I shouldn't go much freedom for all of them. They are trying to see how big a job function.
Yeah.
Thank you for your question modest needs. They have always been important to us offering nutritious and tasty meal solutions to children of various age groups based on our understanding of modest neat really aligns with our founding motivation, which is to provide healthy food products to children and east families concerns over safety.
With him for my agenda shrunk you enjoy.
Even though you thought those watching what she'd only Shanghai soup Amaya admitted. She then youre done didn't do you find that you know towards the former you're Gonna you Couldnt do mildly Didnt you go you talk on that.
I'm going to tell me well then let somebody go low.
The sushi Dungey didn't Don Doyle Weird, Paul marching didn't seem to the Jews about selling your well yeah. So my mom it as well.
Oh, that's eating peanut, let's see at Wuxi.
I'll start by utilities Hudson City outside something something don't change it.
We saw more than 88 million average monthly G. M V off mom's choice products nationwide half of it actually came from Shanghai, where we kicked off this program and also mom's choice.
On the operational level Mom's choice G. M V. On average is higher than the G. M. B, a gross profit margin across the country in terms of the and.
National average regarding our product offering we have best selling skus that exceeded millions in cells, each such as salmon for our kids and twisty rose with mens pork, our exclusive orange Bun and banana bun customized to appeal to children are also very popular among the mothers.
At the same time, we enhance the readability of our ingredient list to highlight high protein low fat low sugar and other key nutritional facts that are important to mothers.
Oh, yeah, well nobody has that.
Lisa you wish into the future.
Hi, Isaac.
Oh sure Yeah. The argument makes it a lot.
I don't survive.
Joe Johnson Blah Blah blah blah.
Yeah.
Going forward, we'll develop scientific and nutritious food solutions for children based on our understanding of different families needs. Our goal is to cultivate children's loved for food. So that's they grow up healthy and strong and their mothers to have peace of mind. Thank you.
Yeah.
Thank you and ladies and gentlemen, our next question today comes from Robert Robin Leung with Boa. Please go ahead.
Yeah.
Hi, Thanks management for taking my question could management provide some updates on the competitive landscape.
Especially competition with a purchase or on demand players cause I wanted to touch on what you want.
The woman Sunshine, you're saturating the detail.
Good.
Good triangle.
On demand.
Okay.
Sure.
Yeah.
Oh.
Yeah, I think so.
So you know those who don't know women's people took it sounded like the oil market.
When people, you'll you'll do it.
Hi.
Yeah.
Thank you Robin for your question Tyndall does not focus on competition, rather we prioritize value creation, we're not limited by the competitive landscape, we embraced the infinite opportunities in the space.
She told US about how you are yet to go see journalists students that you won't see you got the one.
This is how soon do you all do you agree with Josh.
Yeah.
What do you wish you all the excuses here you'll work through most of the Jones Act without you can buy that couldn't get you Didnt tell you don't see almost one talk about what you see.
So young.
People go to answer that because she said towards the higher do you think you could get.
Sure.
Yeah.
From an industry perspective, our fresh groceries and food products. Our E 10 trillion dollar market in China and the business model that is vulnerable to users can stay business models that align with ease of consumption trends and create more benefits for users will have a brighter future and survive economic cycles.
The online penetration rate of the fresh grocery category remains slow it is coming up fast and strong at the same time industry competition has become more benign and rational.
How do you go to the South East local man than me.
Yeah, that's what Moody's Sir I have.
Why is that when people say, we shouldn't do.
Who runs off.
Do you use it.
Our long term strategies are to enhance our product development supply chain and service capabilities, we're not doing it for competition purposes, but consequently, these efforts allow us to gain competitive advantages.
So when somebody here you see what both of us sitting duck going to Dawn and friends General home isn't going to go into a gentle to.
So yeah, let me do it.
Bob.
It's usually the tower you have that can be put on city. It was sometimes jaguarundi, Florida for sure.
Got it.
We'll see everybody who runs out we launched hungry young adult all.
So you said that you'd like.
You can see from Hawaii could yourself either the shoes you also it seems that the tower you are here you would probably like to know how this all gets yes, you got it you said that you would see our team on their toes on Covid.
Yeah, Lindsay a woman that I shouldn't call them already couldn't comment.
Well, we like because of how that sort of tells you allow me.
First regarding the regarding building product development capabilities since the suppliers are fresh grocery we use the most foods are scattered and technical technologically backward. We're determined to go deep into the source of the supply chain improving our in house product R&D actively.
<unk> differentiated products that are aligned with consumption trends and expanding our product and process capabilities.
Heavy lifting will pay off over time with a strong first mover advantage and long term value. We are in the era of surplus and our supplies have been extremely enriched that's why customized differentiated asking us that meet the needs of consumers and provide a better product experience, which can greatly.
Improve our user stickiness.
Those long supply chain involvement can also bring higher gross profit margins stronger profitability and self sustainability.
Oh food yeah, Yeah. So we are going to you shouldn't you shouldn't be Jimmy Choo woman Sushi dinner, you'll watch it sits on the board you continue to see the Guarani crews employed posted downstream to our COO.
So would you told me what slots at the time to attend this all new Zohar couldn't go to as COO. So he and she has signed on to something.
Do you agree that something she won't couldn't bother to get those agendas other symbols.
Why do you obviously had a good one but it seems you want to add something.
We bought it well, but what we're trying to go to your phone to the G. P. J I'll walk can be as little people as a good jumping into a C. D. E. Shaw you told me what I thought would be a Christian do you show that you can judge it.
In terms of developing services at the Chinese, saying goes our craftsmen must shop and its tool to do its job, we iteratively optimize the layout of the frontline fulfillment stations and manage inventory stocking with granularity and transparency so that each frontline fulfillment stage.
<unk> can accommodate more skus and items. This brings abundant are in our product diversity and enhances the upper limit update a G. M D.
The same time, the frontline fulfillment stations are distributed across the country, which takes work to manage we adopt the jewel of standardization in our management leveraging corporate values and all granular so Pete we'll keep strengthening training and make data transparent to each action in the S. O P. So the S O P can be.
Effectively implemented.
Yeah.
So some people that I saw a woman supercharge that.
How long do you told you where he co gen couldn't come to June Disney.
Oh, so called the jobs real up without getting to know them trying to use it.
Yes.
To sum up although we do not focus on competition, our long term strategies built competitiveness and create high value, allowing us to gain an advantage in the future. Thank you.
Thank you and our next question comes from Aaron Turner Adulthood investments. Please go ahead.
I can't say, but anytime genco with excellent well the once you ship single attentions homeless without you know going to mean that I don't know Tristan My question myself central for answering that question I want to know in your opinion.
Is the phone like fulfillment station business model could really make profit and if yes, what will bring donuts closet. Thank you.
Oh, we don't you led off with out of the region.
Yeah.
Yeah.
Uh huh.
She now Marcelo will find I should say genius. The Q4 did that Shan Shan Shan Nen KEPCO inside the breakeven.
Well then ill, let you go shyam warship on them go you Lena Zhang Alcan Paas Chipotle food trends on its action than what you've been doing or again, no woman 10 milligram total gleaned in elite venture, you'll cool Shindo the thing to sushi metric against my assumption Alcoholysis English in terms you don't how you quite a chunky.
Our women's team doesn't assure you a sneak.
Gotcha Gotcha, Johann IV, absolutely No New York, John Juices shopping quite as to the value of the donlin coal that you're seeing that those shares.
They're shifting.
Alright, I'll CFO Mr. Do you Love would take this question. Thank you for your question are we expect to roughly achieve non-GAAP breakeven in Q4, we believe that the weather our business model is profitable or not it depends on where it creates value for our users. We have built our supply chain capabilities to customize research and Puds.
<unk> differentiated products based on user demand, we operate in high consumption frequency categories that are difficult to manage and we deliver these products quickly to users doorstep all of which are valuable.
Oh, there you go Cheyenne Walsh your foot and ankle you need the high they can journey, the Hungary ship shield, even our culture and Michelle since home depot, you won't call. The show don't Judge how should I think that you should go down to a friend's sounds like you sound off without you.
How do you judge the mortgage people shot on goal number that comes in at that time I'm going to end up shrinking hone a woman in consulting on the Mali side or should it be glad she didn't yet jumped up quite so the Xinjiang.
Secondly, whether a business model that can be profitable depends on the profit margins of the industry. The price markup a fresh groceries from the origin to the user is significant but the dispersion and inefficiency of the supply side b to low gross margins, but the industry after gradually breaking through the bottleneck off the supply.
<unk>, we managed to raise the gross profit margin of being done very rapidly.
[laughter] dishonor eaglesham or shouldn't we shouldn't go try and candidate can still go such that when we lend against only makes you shop, the Medina, let's say going down towards the Choctaw, Shandong they'll Shanghai and they shall change at all.
Third we're a business model that can make money depends on their engagement in the supply chain the width and depth of our expansion in the supply chain are done in the industry.
The mosaiq going in that she didn't know she's mpls xiaomi on what make sense, we'll just have to be venous shunt Aldo I think the actual solution that doesn't mean that you don't own council did casualty pneumonia, the jumping off of the more mission.
You guys don't seem to have things changed in the Belgium classes.
And I must say Gee go finish and send US your teams they know what because she chooses to shop.
He loves the ocean checked out home to meet some of that.
Going into the joint Vietnam, you'll routine shouldn't actually shows he thinks he thought that I felt like I should say you don't do it by Shanghai being something that we don't put a diamond quotient.
Uh huh.
Yeah.
Firstly, let's look at the upstream in the fresh food category, we have a high proportion of direct sourcing from the starting point of the supply chain and we are gradually increasing the share of order based production directly signed with a large and medium sized farmers, we choose to carry out the standardization and informative.
Our fresh food and the regional processing centers, while establishing our in house production and processing capabilities in the non fresh food category regarding the downstream are the user only needs to place an order on a mobile phone before we deliver the goods to their doorsteps in about half an hour, which is extremely convenient.
Please denote potentially off was actually supposed to do.
And of course, yeah, shannon's going in sort of hand, there'll be call hunger and do the show somebody he sounds old or not so it won't be answered I think national Jewish them yet.
So I don't she really thinks you shoot it sounds like you're trying to time the op margin Shyam motion that you think should be a general number to torching end of Q3. So you always see in Denver, where more turmoil woman, that's how you're holding a woman.
GP marketing of Tony Schindler shouldn't you got back from getting shot fulfillment that you go for your own doing the Kony Youll bylaw should go up back in Dania shot in the Marquis digestion Phase should you go Toby you don't kind of actually I'll go back and getting shot a number it looks like prices are just sort of getting closer to putting that element you got hung in Nashville.
The artists their show of science and the Jewish.
Shlomi.
They don't actually say elite issue, we don't see that.
Uh huh.
Thank you didn't go not only creates value for its users, but also operates in an industry with great profit margin potential. In addition, it has been more deeply involved in the supply chain that its peers do all of the above will naturally translate into stronger financial performance since we adopted the efficiency.
Strategy in Q3 last year, our gross margin has gone up over 11 percentage points from a year ago fulfillment expenses down 10 percentage points and the loss ratio novels by over 26 percentage points, such a rapid reduction of losses is not only unique in the industry, but also rare and other industries. There is no doubt.
That didn't don't can achieve profitability. Thank you.
Thank you and that was there are no further questions at this time I'd like to hand, the conference back to our management for closing remarks.
Thank you again for joining our call today. If you have further questions. Please feel free to contact her sure Eric Crouch to all of our web site.
We look forward to speaking with everyone next earnings call have a good day.
Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.