Q1 2024 Dingdong (Cayman) Ltd Earnings Call
Good morning, and good evening, ladies and gentlemen, thank.
Speaker Change: You for standing by and welcome to the Ding-dong Limited first quarter 'twenty 'twenty four 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 first speaker today, Nikki Zhang Director of Investor Relations. Please go ahead.
Thank you.
Hello, everyone and welcome to <unk> first quarter 2024 earnings call.
With me today are Mr. Jon <unk>, our founder and CEO and Mr song Wang our CFO.
I think I referred to our first quarter 2020 full financial results.
That's all I had I'll go along Jud I mean.
You can also access a replay of this call I'll have a website, where you can get it.
It's available a few hours after its conclusion.
For today's call management to walk us through their prepared remarks, which will be followed by a question and answer session.
Before we continue I would like to refer you to all safe Harbor statements in our earnings press release, which also applies to this call.
As we will be making forward looking statements. Please note that all numbers stated the following management's prepared remarks are in RMB terms.
And we will discuss non-GAAP measures today, which are more salary expense and the way you kind of salad to the most comparable measures reported in our earnings release and filings with the S. E C.
I would now turn the call to our fastest speaker today, the founder and CEO of Athene don't mean, Australia.
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Hi, Paul.
Speaker Change: Ginger and.
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Good morning, and good evening, ladies and gentlemen, welcome to <unk> first quarter 2024 earnings conference call in the first quarter of 'twenty 'twenty four we achieved non-GAAP profitability for the sixth consecutive quarter, notably we recorded a substantial increase in our net profit margin and revenue rose in March.
2024. This success can be largely attributed to dangle, some world, leading fresh grocery supply chain capabilities.
Speaker Change: Yeah.
These capabilities will not only contribute your dangles continue expansion and profitability between the domestic market, but also position the company to make a substantial impact on the overseas market generating greater and lasting value.
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My remarks today will be divided into three session first I'll review, our Q1 performance then I'll introduce kingdoms capabilities and advantages in the fresh grocery supply chain and finally I'll provide a brief overlook on our future development and prelaunch.
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So hoping you can get your quick shields, which I D.
Let's begin with a quick rundown of our performance in Q1 'twenty 'twenty four.
Company managed to achieve a G. M D. A 5.53 billion renminbi and our non-GAAP net profit of 41.482 million renminbi those.
Those increased year over year. So it's worthwhile to note that the performance of Q1 2023 was heavily impacted by the pandemic, which only ended in January and February of last year.
Taking that into account it wouldn't be meaningful to make a direct comparison of those months, so well only compare the performance of March 2023 with March 'twenty 'twenty four in March 'twenty 'twenty four at G. M. D reached 197 billion renminbi and increase of six 5% year over year not getting.
Speaker Change: Net profit was 41.45 million renminbi, representing a year over year increase of 76, 8% the.
The non-GAAP net profit margin reached 2.3% if we look at the figures coming out of Shanghai Judge Young and jumped to region. We can see that in Shanghai. The auto volume per station increased by 10, 5% year over year enjoy young it increased by 11, 6%.
And in Jiangsu by 14.5 per cent in Guangzhou, Shenzhen and Beijing area. The company has been experiencing a rapid reduction in losses.
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Agenda.
Speaker Change: There's a lot we shall she has always been an iPad. So yeah, I'm Gonna Aloni, who also.
Oh, well, leading fresh grocery supply chain capabilities have proven to be instrumental in driving Danielle it's robust growth and profitability I will now provide a thorough introduction to our strengths in this area.
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Shelly did you Wanna say, California, let me cause yourself, Oh, yeah, yeah yeah.
Speaker Change: Oh, yeah yeah.
If you go to war to California, Lilly last phone call couldn't pull the shopping twice this year, we more than doubled.
And then Don we have been studying the fresh grocery industry and its unique features since day. One we've identified two intrinsic factors that set it apart from traditional retail firstly, the first principle of traditional retail is achieving scale by offering low prices, which then allows for further reductions in purchase price.
However, fresh groceries being primarily agricultural products are limited by supply and demand dynamics as well as seasonality and so do not benefit significantly from economies of scale secondly in traditional retail increasing scale can help reduce operating costs. However, our frontline for someone grandma's.
<unk> requires the delivery fee that will not decrease.
Substantially as how increases.
We have realized that the first principle of traditional retailing that has been successful since the Walmart ear at era, if not complimentary to the fresh grocery industry.
Our industry. The first principle for success is to continuously enhance end to end efficiency to achieve growth at scale secret profitability and bolster competitiveness. It is crucial that we focus on consistently improving our supply chain capabilities with these capabilities will be able to serve a larger customer base and meet.
Our evolving needs.
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Speaker Change: Julien, Tennessee, California alone E. G. She said that you saw some of them yet.
Over the past seven years, we have strived to improve the quality efficiency and stability of our procurement processes to drive. This we have focused on direct sourcing in order base forming from production areas. We've also invested in food R&D as long as production and processing capabilities to give our products are more competitive edge.
Our self developed P. GAAP standards W. M. S. T M S intelligent forecasting and operation systems, and warehousing automation systems have enabled us to improve the efficiency and flexibility of our off our agricultural product for Humana and central warehouse reduction in processing.
As a result of these efforts we have successfully established well, beating fresh grocery supply chain capabilities evidenced in the following three areas.
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Speaker Change: Oh, God, you're hurting that Tulsa, Sheepish, Algeria joined Us just yesterday.
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First we ensure a high caliber of product quality through our supply chain capabilities. He knows primary goal is to make high quality food as susceptible to everyone as tap water. We've taken this mission to heart and have invested in our own production and processing facilities as well as regional processing centers to ensure.
Our supply chain is efficiently organised.
Speaker Change: Guarantee that the food we provide is not the highest quality we've implemented a seven plus one quality control system. Our investigations have shown that's 29 types of ingredients are prone to quality issues like chemical rest of Jews and excessive heavy metals. We've addressed these very concerned by fine tuning our channels.
Speaker Change: Logical processes and implementing more of them after the.
Speaker Change: Article in Sabre cultivation practices.
We're involved in every aspect of the food supply chain from production to delivery, we can guarantee that our fresh products are consistently off the highest quality. We're proud to say that upholding such proactive measures has paid off given that we've substantially reduced customer complaint and boosted user loyalty.
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Speaker Change: Second to our supply chain capabilities, we've improved end to end efficiency and increase gross profit margin. Our current turnover period for fresh groceries is around five days with an end to end loss of one 5% by utilizing intelligent forecasting and scheduling systems, we've been able to maintain a steady bal.
<unk> between out of stock rates and loss rates, while ensuring a quality bis ratio. This was we sold it in a higher gross profit margin. Additionally, all credit periods are very short with a seven plus seven payment model utilized for fresh groceries.
We're actively focused on enhancing our supply chain capabilities to foster a stronger ecosystem together with our upstream partners.
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Speaker Change: Third our innovative supply chain capabilities broadened the scope of our development potential our high quality products are now available not only on our app, but also through various other channels. Some of our competitors has also begun purchasing our products. Moreover, our cutting edge digital supply chain system can support traditional retail.
Trade agriculture, and a multi chew all food industries. It is evident that the development of our supply chain capabilities has and will continue to contribute to our growth potential creating substantial opportunities for scaling our operations and driving profit growth.
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Speaker Change: You've got a courtyard or you mean.
Looking ahead to the remaining months of 'twenty 'twenty four and based on the growth we have already upset we forecast a tangible sustained improvement in our performance, we think that the strategic advantages of our supply chain capabilities will not will only become more apparent and will play a crucial role in boosting our profits and.
Scale with this in mind, we've raised our expectations for both net profit and scale and are anticipating considerable year over year growth for Q2, and this year, we're looking to achieve both non-GAAP and GAAP profits in Q2 and for the entire year of 'twenty 'twenty four.
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Thank you all for listening now I would like to invite our CFO wants them to go over the company's financials.
Sure I'll start off.
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Thank you Mr long and Hello, everyone before I review, our financial performance. Please note that all figures are in renminbi.
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Speaker Change: Okay.
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In the first quarter of 2020 for Kingdom achieved a revenue of 5.02 billion renminbi, marking a year over year increase of 0.5%. The company's non-GAAP net profit margin rose to 0.8% with a year over year increase of 0.7 percentage points, while it's non-GAAP.
Net profit surged six eight times year over year due to also accomplish GAAP profitability in the same period posting a net profit margin at 0.2% up by 1.3 percentage point year over year, but the net profit growth of 64.666 million renminbi.
Is that the company's operating cash flow net inflow was 95 million, let me be marking its third consecutive quarter of net operating cash inflow.
After deducting short term borrowings at the end of Q1 kingdoms actual cellphone fund balance reached 2.09 billion renminbi, a net increase for the third consecutive quarter.
These results show that the company has entered a new stage of growth after consolidating its competitive advantages.
With simultaneous growth in revenue and profit and a continuous net inflow of operating cash flow.
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Speaker Change: So as you say you don't know what you're gonna Kinsley become hot Metallica.
<unk> got a hold of Finjan shelf it yourself guys alright.
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We have been focusing on improving our product development capabilities quality control and end to end supply chain capabilities for the cold chain of fresh groceries. Our aim is to provide consumers with fresh groceries off the highest quality. We've also been fine tuning our product structure, notably in categories like food dairy drinks.
Convenience goods and bakery products in March the total sales of these categories increased by approximately 8% year over year. We're also actively working on improving our private label product development capabilities in doing so we'll continue to provide users with better quality product with cost benefits our ultimate objective.
This is to engage a wider consumer base and expand our user reach.
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Speaker Change: Daniel Hi, bathrooms and stuff like that.
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Speaker Change: So that's it.
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And Q1 O G. N V reached 5.53 billion renminbi, marking a year over year increase of 1.4% after accounting for the impact of store closures and Sichuan chunky, Guangzhou and Shenzhen, we saw a four 4% year over year.
Increase in existing stores.
Our revenue also grew to 5.02 billion renminbi, a yearly increase of 0.5%. This growth may be mainly attributed to the rise in the number of orders by 3.5% year over year.
Emerging from the pandemic aftermath, our Shanghai market rebounded and achieved a year over year growth of 2.7% in Q1 G. M D I'm almost 10% year over year growth in March.
Furthermore, gross in Jiangsu Angela Qian continued to lead with G. M b achieving year over year growth of 16, 6% and 14.8% respectively. This year, we plan to expand our coverage and increase the density of our frontline fulfillment stations in Shanghai, Zhejiang and Jiangsu region as of the end of.
Q1, we've added 15, new frontline stations in Jiangsu and Zhejiang The average daily order volume of these new stations has quickly ramped up to more than 650 <unk>.
Speaker Change: Additionally, we significantly reduced regional losses in the Guangzhou, Shenzhen and Beijing areas.
Don has been consistently achieving balanced development across multiple regions.
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Gross profit margin was 30.6% 0.1 percentage point lower than last year going deeper into each aspect of our supply chain, including procurement production processing warehousing fulfillment and distribution increases our gross profit margin were committed to maintaining price competitiveness.
While providing consumers with high value products.
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Our fulfillment expense rate improved by one 1% year over year to 22.8%. Thanks to an increased order volume, which boosted operational efficiency. The average daily order volume at the frontline for humans station rose by 16% year over year. In addition, we optimize the layout of the regional processing centers in the second half.
Something like a second half of last year, a development, which will undoubtedly continue to improve operational efficiency. This year.
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Our marketing expense rate increased by 0.4 percentage points year over year and reached 2.2% because of our strong financial performance and sufficient cash reserve, we have decided to increase our marketing investment on the user side, we aim to expand our user base in key areas and drive growth at scale.
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Our administrative expense and R&D expense rate remained at similar levels as the previous year as always we remain committed to research and development in the fields of food agricultural technology and technical data algorithms.
Speaker Change: Pardon me I need to do.
Well, Mr Nagao, Cogent Shopify Evansville, Indiana.
Hey, Jim.
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non-GAAP net profit margin was 0.8% with a profit of 41.48 million renminbi. This marks our sixth consecutive quarter of non-GAAP profit. We also had a GAAP net profit margin of 0.2% this quarter.
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Jim: Each of the mall, Tianjin Jewish agenda and job well done.
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In the first quarter, our company achieved a net operating cash inflow of 95 million renminbi, despite incurring costs and expenses by staying open during the Chinese new year holiday. This is the third consecutive quarter during which we maintained a net operating cash inflow as of the end of Q1, we had 4.51 billion.
It would be in cash and cash equivalents short term restricted cash and short term investment we've been working diligently to optimize our capital usage and financing structure and how actual cellphone fund balance after deducting the balance of our short term borrowings is 2.09 billion renminbi our financial performance.
It's improving with simultaneous growth in revenue and profits we have sufficient financial resource with all of this in mind, we're confident that we'll achieve this year's growth and profit targets.
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Speaker Change: Hello, Dan.
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Finally, I would like to share an update on our recent performance during the labor day holiday our G. M D increased by 17% year over year, when we exclude the impact of Sichuan and you'll see the G. M. B increase by 20% by region G. N V in Shanghai towards young and jumped two regions.
Piece by 24% year over year, and you can't be in Beijing also increased by 5%. These results are remarkable considering that during the holiday jumped to Georgetown and Shanghai saw a year over year increase in outbound tourists.
In addition, as of yesterday during the eight days of this year's May 5th shopping festival and mother's day, our G. M V increased by 20% year over year, and our order volume increased by 21% year over year, when we exclude the Sichuan influencing can be increased by 24% year over year and.
Our order volume increased by 26% year over year, among which the D. M V off convenience goods increased by approximately 35% year over year and the G. M V. Oh aquatic products increased by nearly 30% year over year.
On Mothers' day G. M V increased by 26% year over year and auto volume increased by 24% and again when excluding Sichuan interim T. G. M V increase increased by 30% and auto volume increased by 29%.
Among them the flowers that we mainly push on and festivals have increased by about 45% of G. M. D and fruit have increased by about 40% of G. M D.
Speaker Change: Why don't you kind of fire and all such as all of that up Shanghai, because you know what you want and yellow.
This concludes I'll speak today, operator, we can now start the Q&A session.
We will now begin the question and answer session.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
When asking a question. Please state it in Chinese first and then repeat it in English for the convenience of everyone on the call.
The first question today comes from Thomas Chong with Jefferies. Please go ahead.
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Celebrated its seventh anniversary congratulations to the teams on all the success with our bottom lines over the past eight years achieving growth in both scale and a profit.
So now I'm curious to know actually it's not going to pass that maybe is what's happening to some of the biggest lessons and accomplishment for you and your team.
Okay.
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Thank you for acknowledging Ding-dong seventh anniversary and we look back on the past seven years, we humbly admit that we have not achieved and he said they've been kind of accomplishment. However, we would like to share with you. Some principles that we have always adhere to.
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It's important to stick to doing what's right, even though even when it's challenging for instance, it's easy to grow our business by offering low prices, but it's tough to build and strengthen your supply chain. It's also easy to attract new users through marketing campaigns, but it's difficult to keep them engaged and loyal simply copying industry practices.
It's easy, but it's hard to analyze and then adapt to changes in the market over the past seven years, we've learned that the right things are always harder to do and subsequently we've made it a point to always do what's right even when it's hard.
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Over the past seven years, we have given swift responses to various challenges, including the three years comprising the pandemic during the pandemic, we fulfill our responsibilities and maintain a reliable supply while also which eating our own growth. Despite headwinds we have adapted to changes in the capital market.
Shifting from a focus on expansion to Paris, hiking efficiency, while still keeping scale top up the mine.
As a result, we have attained at substantial profits after for six consecutive quarters and have ample cash flow was awful with also successfully navigated challenging situations like Chinese new year or severe weather conditions, such as typhoons heavy rains and snow storms, our ability to deliver a rack.
Responses has ultimately strengthen our supply chain capabilities and is a testament to our adaptability.
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Well, we use a little more.
Speaker Change: We'll go off and do something going here.
A lot of shouting we thought I don't care about how the country PRP that'd be Hassan he although there's also named Paw Jagoda artist charity. So we shall we go to other jobs.
As mentioned earlier, our primary goal is to make quality food as accessible as top way to achieve this we focus on creating value for our consumers instead of engaging a zero sum games or price wars without peers, we continuously strive to improve the end to end efficiency of our supply chain and develop.
Better more cost effective food products, where the public our commitment to creating value for our customers remain steadfast.
Okay.
It was as high as usual well muscles that up at all so yes, I thought it was probably not well mogelonsky booth roll My mind sure that she is almost always a footnote on that.
It's important to have a long term perspective.
Company the business all fresh groceries are challenging and time consuming and we're only at the beginning of our journey. So no matter what obstacles to come our way we're committed to seeing distrainee through.
Oh sure sure.
Thank you.
Yeah.
The next question comes from Robyn with Daiwa. Please go ahead.
Uh huh.
Do you want one I want to share with you the trend in D C.
So my target.
Samsung chose here I'll try again.
Q1, so I'll try to give thoughts on a cellphone.
Oh, you know from a T. The Oklahoma and so Oh, Okay and then.
I thought I recall that things don't have physical grocery outlets last year can you provide an update on the progress since Q1 additional hey, do you have any insights to share. Thank you.
Hi, this is yet.
Our idea is so among countries boxes that appear to have seen the Formosa well my financial what is their true, Florida Lauderdale go Colonialize says that you couldn't Carlos shouldn't job. So you will have module alone are negotiable well oriented she won't total coda to call me or how does it yesterday, well my casualness of yard idea well.
Oh theoretical kind of suggestion y'all idea because here you got some barrels are paying me said that then goes to show that somebody here. So how do I put out a probable. So you already have you found me unquote allo, and there's always shrinking so seattle, they're pushing buttons work indoor shelf three meal, a somewhat as usual problem yeah, Yeah sure Cornell Let me lead up she said Gee all cornea linear Chow.
Oh, good Lewis shop, either shrinking or cause or that you thought you were cutting out of 10 of them yet.
Speaker Change: We have launched a new service model with east physical fresh grocery outlets to cater to the evolving times and also to meet the shopping needs of the elderly in China. We've observed that China is becoming an aging society and the elderly tend to prefer offline shopping and the value of cost effectiveness more.
Therefore, it we've opened fresh grocery outlets to provide them with healthy and delicious fresh groceries right in their neighborhoods. Currently we have four stores each covering an area of about 350 square meters did any cells per story are up more than 40000, renminbi and the south of ours.
Still increasing these orders I mean, these stores serve to expand our consumer groups meet the needs of a broader range of consumers and reflect our supply chain capabilities with a robust supply chain, we can expand our reach to serve more customers and fuel growth.
Sure.
Speaker Change: Thank you.
Yeah.
The next question comes from judging Chen with C. I C. C. Please go ahead.
Uh huh.
They do to do that and.
We'll come out as soon as he took also listen to you. Some of these sound like they do more and that's really didn't change all that sounds he wants to add.
Mr Now and congratulation for the outperforming result, this quarter could you. Please tell us why the company's cash balance decreased compared to the last quarter. Thank you.
Hi, Susan.
Oh about doing these yogurts that who wants what we thought.
Thank you for your question our CFO once one is better suited to answer your question and I'll defer to him.
She'll handle all chime in on what Michelle I'll, just I'll, just say that each of them all women of Shenzhen Shenzhen Guangzhou sense with your thought that you talked about you always says I E. N. J why don't you do much as all of you buy you out.
Thank you Mr. Along we want to update you on our financial status.
The end of Q1, we had a balance of cash and cash equivalents short term restricted cash and short term investments amounted to 4.51 billion renminbi is approximately 800 million renminbi lower than our balance at the end of the previous quarter.
So it's actually turned out a slew of oven a chance I'll say, Oh Gee it wasn't all tender for woman tissue. So don't tell you all took off without doubt chuckled, a gerbil Daiichi adult formula J&J Shenzhen It yesterday actually it sounds like you do that Giuliano digital on the Tulsa office, all you'd be hard to engineer, but I'm not sure I'm going to attempt that failed.
I couldn't quite shocked when they used to do all along is the shallow fish on that change in general.
Yeah, Ive, yet, although the woman that way more how are you doing it though that ends up well may June launch and talking about your job Fisher unique thoughts I'll share this year.
First and foremost the decrease in our balance sheet is not due to our operational activities. Instead, we took proactive measures to adjust our balance sheet structure.
Costs and expenses incurred in the first quarter to stay open during the Chinese new year, we still achieved a positive operating cash flow and a net inflow of around 100 million renminbi. Its worth noting that this is our third consecutive quarter with a net inflow. Moreover, we're thrilled to real Ah report that our scale and profits are.
Growing and we've now become a continuously probably making and self generating enterprise.
Sorry, I'm switching totaled I shouldn't go shop once it would only go harlem's logistical she was on for Jamie in the Charlotte you don't see it.
So James how her label friends actually jackpot Yoshi theory half what's already in full couch you along for her go into that general diaper side. Thank you too Bryan so quite a change at all yeah body on Bayou that so he got cut off that gives you a lot hope well messages.
So Jamie I said, yeah, Joey that all sounds you don't watch and dialogue, yeah watching them on that.
During the quarter, we took the initiative to optimize our financing structure improved capital efficiency and use own funds to repay some of our short term borrowings we worked with banks to repay the notes payable and reverse factoring arrangements, which is supply chain finance lungs are we're starting in a decrease of 800.
80 million member being on that short term borrowings. After deducting. These short term borrowings our actual cellphone fund balance increased by approximately 80 million there may be from the end of the previous quarter to a total of 2.09 billion renminbi.
Pass it on.
Oh, Yeah, Oh, Yeah franchise hotel going Oh, My God Guineans downtown she is clearly challenging each other and it just goes off whatever they want.
Speaker Change: The whole banking system.
The audio I shouldn't annualize on the hydride tissue, what's under your watch Archie did you don't find.
Those are canceled finally sounds good old chaparral, Daniel Kim 20, odd Tanya and you took the job had a lot of Cheetah Angelo Tim that Codell, Brian Shea joke Jeez info down about 30, I shall go off without hope well known to us at all so just so cheap jumped out at them all and Jello you Dangelo E S.
We've been actively working towards building a strong a very strong relationship with all suppliers by providing them with more support and empowering them.
The original suppliers quite a period is relatively short and be industry. We further optimized our credit periods since the start of 'twenty 'twenty four.
This has yielded positive results as seen in Q1, where our accounts payable turnover days accelerated by two six days compared to the previous quarter and by seven nine days compared to Q1 in 'twenty 'twenty. Three. Additionally, after deducting short term borrowings and accounts payable our own funds have increased by 190.
Mmm and be compare to the end of the previous quarter.
Turning to Asia.
We set it up I would say that from the J&J San Angelo just allows the shallow your event. That's when you'll know that that was all opened up anymore. Leland thousands up that's only one of them. That's how would you go so ginger genco fungi always hold out at the gym like this and junior in Shanghai, China end up way more than Uh Huh, Joseph O'dea true cause also sure that intelligence as well.
In summary, with a series of financial resource integrations, our operating cash recorded a net inflow of approximately 100 million renminbi. This combined with our scale and profit growth is a clear indication that our financial and capital structures are becoming more stable as we continue to become financially healthier.
We'll have access to more funds to support our growth throughout the year and the necessary capital expenditure. So built news stations in Shanghai, just young and young Soo regions.
Tricia.
Thank you.
Yeah.
As a reminder, if you would like to ask a question. Please press Star then one to be joined into the queue.
Yeah.
[noise], who ask a question. Please press Star then one.
Yeah.
As there are no further questions I'd like to return the call to the management for closing remarks.
Thank you again for joining our call today.
If you have any further questions. Please feel free to competitors a request.
Website.
We look forward to speaking with everyone on the next earnings call have a good day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.