Q2 2024 Dingdong Cayman Limited Earnings Call
Speaker Change: Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to the Dingdong Limited second quarter 2024 earnings conference call.
Operator: Please note, this event is being recorded. I would now like to turn the conference over to the first speaker today, Nicky Zheng, Director of Investor Relations. Please go ahead, sir. Thank you.
Speaker Change: At this time all participants are in a listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to the first speaker today, Nicky Zheng, Director of Investor Relations. Please go ahead, sir.
Nicky Zheng: Thank you. Hello everyone, and welcome to Dingdong's second quarter 2024 earnings call. With me today are Mr. Changlin Liang, our founder and CEO, and Mr. Song Wang, our CFO. You can also access a replay of this call on our website when it becomes available a few hours after its conclusion. For today's call, management will go through their prepared remarks, which will be followed by a question and answer session, which also applies to this call.
Speaker Change: Thank you. Hello, everyone, and welcome to Dingdong's second quarter 2024 earnings call. With me today are Mr. Changlin Liang, our founder and CEO , and Mr. Song Wang, our CFO .
Speaker Change: You can refer to our second quarter 2024 financial results on our IR website at ir.100.me. You can also access a replay of this call on our IR website when it becomes available a few hours after its conclusion.
Speaker Change: For today's call, management will go through their prepared remarks, which will be followed by a question and answer session.
Speaker Change: Before we continue, I would like to refer you to our safe harbor statement in our earnings press release, which also applies to this call.
Speaker Change: As we will be making forward-looking statements, please note that all numbers stated in the following management prepared remarks are in RMB terms.
Speaker Change: And we will discuss non-GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported in UNICEF's release and filings with the SEC.
Nicky Zheng: And we will discuss non-GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported in our earliest release and filings with the SEC. I will now turn the call over to our first speaker today, the founder and CEO of Dingdong, Mr. Liang.
Speaker Change: I will now turn the call to our first speaker today, the founder and CEO of Dingdong, Mr. Liang.
Mr. Liang: Thank you to all the investors, analysts, and friends of Dingdong Maicai. Welcome everyone to the Dingdong Maicai 2024 Q2 financial report analysis meeting.
Speaker Change: By Q2 2024, Dingdong Maicai has achieved profitability for seven consecutive quarters under the Long gap standard.
Speaker Change: And after achieving profitability under the GAP standard in Q1 this year, it has done so again.
Speaker Change: Especially since the QE this year, we have returned to the growth track. While maintaining profit growth, our revenue has also achieved year-on-year positive growth for two consecutive quarters. This is mainly because Financial Buy Bonds has a globally leading power supply capability, which will help us achieve sustained growth in scale profits.
Speaker Change: Hi everyone, thank you for joining Dingdong's Q2 2024 earnings call.
Speaker Change: As of Q2 2024, Dingdong has achieved profitability for 7 consecutive quarters based on non-GAAP standards.
Speaker Change: Additionally, after Q1 of this year, the company has again achieved GAP profitability.
Speaker Change: Notably, we haven't resumed growth since Q1 of this year. Both profits and revenue have shown positive year-over-year growth for two consecutive quarters.
Speaker Change: These achievements are mainly attributed to Dingdong's world-leading fresh grocery supply chain capabilities, which facilitate our continued growth in scale and profit.
Liang Changlin: Today, my speech will be divided into three parts. The first part will be a review of Q2 2024's performance. Then I will briefly introduce Dingdong Cayman's strengths. Finally, I will briefly look at the subsequent development and performance.
Speaker Change: Today, my speech will be divided into three parts. First, I will review the performance of Q2 2024. Next, I will briefly introduce the competitive points of Dingdong Maicai. Finally, I will give a brief outlook on future development and performance.
Speaker Change: In my speech, I'll review our Q2 performance, discuss Dingdong's growth drivers, and provide an outlook for future development and performance.
Liang Changlin: Let me briefly introduce the performance of QR QR In 2024, Dingdong Cayman realized CNV.
Speaker Change: Unknown Executive, Song Wang, Liang Changlin
Speaker Change: Let me briefly introduce QR's performance. In 2024, QR's electric grocery shopping achieved a GNV of 6.22 billion yuan, a year-on-year increase of 16.8%. Under the Long Game standard, the net profit was 103 million yuan, nearly 13 times the growth year-on-year, with a net profit margin of 1.8%, an increase of 1.6 percentage points year-on-year. Particularly noteworthy is the recent growth. In June , our GNV grew by 21.6% year-on-year on a comparable basis, with all regions achieving year-on-year growth in scale.
Speaker Change: Let's take a brief look at our Q2 performance.
Ding Dong: Dingdong achieved a GMV of 6.22 billion RMB, a 16.8% increase year-over-year. Based on non-GAAP standards, net profit was 103 million RMB, nearly 13 times more than the prior year.
Ding Dong: And Net Profit Margin was 1.8%, up by 1.6 percentage points year-over-year. Meanwhile, in June , we saw remarkable growth, with the same source, GMV, increasing by 21.6% year-over-year, and all regions experienced positive year-over-year growth in scale.
Ding Dong: Year-on-year growth of 17%, based on a year-on-year increase of 4.3% in DAU, benefited from continuous improvements in supply chain efficiency and service capabilities, the order conversion rate increased by 4.3 percentage points compared to the same period last year.
Liang Changlin: The order conversion rate increased by 4.3% compared to the same time last year.
Liang Changlin: The hard-earned growth can be attributed to the consistent increase in transacting users in ARPU. In Q2, we recorded 7.3 million transacting users monthly, up 11.7% year-over-year. Additionally, the average daily number of transacting users approached 900,000, up 17% year-over-year. With a 4.3% year-over-year increase in DAU, the company also benefited from ongoing enhancement in service capabilities and supply chain operation improvement. Consequently, the conversion rate of DAU to daily transacting users increased by 4.3 percentage points compared to the same period last year.
Ding Dong: Thank you for watching.
Ding Dong: The hard-earned growth can be attributed to the consistent increase in transacting users in R-Probe.
Ding Dong: In Q2, we recorded 7.3 million transacting users monthly, up 11.7% year-over-year. Additionally, the average daily number of transacting users approached 900,000, up 17% year-over-year.
Ding Dong: With a 4.3% year-over-year increase in DAU, the company also benefited from ongoing enhancement in service capabilities and supply chain operation improvement.
Ding Dong: Consequently, the conversion rate of DAU to daily transacting users increased by 4.3 percentage points compared to the same period last year.
Liang Changlin: At the same time, the user's consumption connection and wallet size in Dingdong Cayman have been further improved. Q2 users' monthly upgrade has been increased by 6% in the same period last year. Among them, the member's monthly upgrade value has increased by 7.8%, reaching more than 500 yuan.
Ding Dong: At the same time, users' spending on frozen groceries and their wallet share have further increased. The average monthly UP of QR users has risen by 6% compared to last year. Among them, the average monthly UP value of members has increased by 7.8% year-on-year, reaching over 500 yuan.
Ding Dong: User loyalty and wallet share on Dingdong increased during the same period. Our users monthly ARPU increased 6% year-over-year. Specifically, members monthly ARPU rose 7.8% year-over-year, surpassing 500 RMB.
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Speaker Change: From an operational perspective, we have further enhanced our advantages in dining table scenarios this year.
Speaker Change: The variety of products meets the purchasing needs of different groups, enabling a one-stop experience.
Speaker Change: Purchase all the ingredients needed for a meal. Additionally, we want to investigate leisure scenarios to expand the richness of product supply, mainly including fruits, dairy products, alcoholic beverages, leisure goods, and baked goods. We have already made phased progress in QR. Taking leisure goods as an example, the average purchase frequency per person and monthly purchase frequency have both increased rapidly, driving the average monthly UP of this category to increase by 24% year-on-year.
Liang Changlin: Looking at it from a business standpoint, over the course of this year, we've further enhanced the assortment of products in our advantageous dining table category. This has enabled us to better cater to the purchasing needs of diverse consumer groups, providing them with a one-stop shop solution to acquire all the necessary ingredients for a complete meal. We've also expanded the SKUs available for the leisure scene to include fruit, dairy, alcohol, beverages, leisure products, and baked goods, and the strategy achieved initial success in Q2. For example, in the leisure product category, both the number of average purchases per user and frequency of monthly purchases have increased rapidly, leading to a 24% year-over-year increase in monthly ARPU in this category.
Speaker Change: Looking at it from a business standpoint, over the course of this year we've further enhanced the assortment of products in our advantageous dining table category. This has enabled us to better cater to the purchasing needs of diverse consumer groups, providing them with a one-stop-shop solution to acquire all the necessary ingredients for a complete meal.
Speaker Change: We've also expanded the FKUs available for the leisure scene to include fruit, dairy, alcohol, beverages, leisure products, and baked goods, and the strategy achieved initial success in Q2.
Speaker Change: For example, in the leisure product category, both the number of average purchases per user and frequency of monthly purchases have increased rapidly, leading to a 24% year-over-year increase in monthly ARPU in this category.
Liang Changlin: At the same time, this year, we have begun to build new submarines in the Jiangsu-Zhejiang region and continue to increase the penetration network in the Jiangsu-Zhejiang region. This year, about 80 new submarines are expected to be opened in Jiangsu-Zhejiang, and nearly 40 have been completed in the first half of the year. These new openings are climbing rapidly. The number of single-cabin soldiers is currently rising.
Speaker Change: At the same time,
Speaker Change: This year, we have started building new plier warehouses in the Jiangsu, Zhejiang, and Shanghai regions, continuously increasing our warehouse network penetration in these areas. We expect to open around 80 new plier warehouses in Jiangsu, Zhejiang, and Shanghai this year. In the first half of the year, we have already completed nearly 40. These newly opened warehouses are ramping up quickly, with the average daily orders per warehouse currently reaching 800.
Liang Changlin: This year, we've resumed expanding our station network in Jiangsu, Zhejiang, and Shanghai, continuously increasing our station network penetration in these regions. We aim to open approximately 80 new frontline stations in these regions this year, with nearly 40 already completed in the first half of this year. These new frontline stations are quickly ramping up, and each station now manages an average of 800 orders daily. Earlier, I introduced to you the situation at Dingdong Cayman K2. Next, I would like to introduce a few positive points for the future.
Speaker Change: This year, we've resumed expanding our station network in Jiangsu, Zhejiang, and Shanghai, continuously increasing our station network penetration in these regions.
Speaker Change: We aim to open approximately 80 new front-line stations in these regions this year, with nearly 40 already completed in the first half of this year. These new front-line stations are quickly ramping up, and each station now manages an average of 800 orders daily.
Speaker Change: Earlier, I introduced the situation of the electric grocery shopping vehicle for the second phase. Next, I would like to introduce a few key points for the future.
Speaker Change: As I've just outlined our Q3 performance, I would now like to introduce several future growth drivers.
Liang Changlin: First of all, the Jiangsu-Zhejiang region will continue to grow. In the first half of this year, the GDP of Dingdong in Shanghai grew by 9.5% The GDP of Zhejiang grew by 22.7% The GDP of Jiangsu grew by 22.6% The scale of growth comes from the growth of the penetration rate and the growth of the per capita unit The population of the Jiangsu-Zhejiang region is large, the population density is large, and the efficiency is strong There is still a lot of room for development in the Jiangsu-Zhejiang region We are very confident that in the long term, Dingdong Cayman will continue to grow rapidly in the Jiangsu-Zhejiang region
Speaker Change: The
Speaker Change: The Jiangsu, Zhejiang, and Shanghai regions will continue to grow. In the first half of this year, Dingdong's GNV in Shanghai increased by 9.5% year-on-year, by 22.7% in Zhejiang, and by 22.6% in Jiangsu. The scale of growth comes from increased penetration rates and higher per capita order volumes. The Jiangsu, Zhejiang, and Shanghai regions have large populations, high residential density, and strong purchasing power. Dingdong Maicai has significant development potential in these areas. We are very confident that Dingdong Maicai will continue to grow in the Jiangsu, Zhejiang, and Shanghai regions for a long time to come.
Liang Changlin: Volume from our Jiangsu, Zhejiang, and Shanghai business is expected to keep growing. In the first half of this year, Shanghai achieved a GMV year-over-year growth of 9.5%, Zhejiang 22.7%, and Jiangsu 22.6%. The increase in scale was driven by the rise in the penetration rate and the number of orders per user. Due to the large populations, high residential density, and strong purchasing power in these regions, Dingdong still has significant potential for growth. We're very confident that we'll maintain speedy growth in these regions for a long time to come.
Speaker Change: Maintain rapid growth
Speaker Change: Volume from our Jiangsu, Zhejiang, and Shanghai business are expected to keep growing. In the first half of this year, Shanghai achieved a GMV year-over-year growth of 9.5%.
Speaker Change: Zhejiang 22.7% and Jiangsu 22.6%.
Speaker Change: The increase in scale was driven by the rise in the penetration rate and the number of orders per user.
Speaker Change: Due to the large populations, high residential density and strong purchasing power in these regions, Dingdong still has significant potential for growth. We're very confident that we'll maintain speedy growth in these regions for a long time to come.
Speaker Change: Secondly, the growth in the Jiangsu, Zhejiang, and Shanghai regions has also enhanced our power supply capacity and user operation capabilities. This capability will benefit our South China and North China regions, which will also maintain continuous growth in scale while gradually achieving profitability. Additionally, in Q2, we saw significant growth in some third- and fourth-tier cities, such as Yangzhou, Hudu, and Dengcheng, all of which achieved over 50% year-on-year growth.
Speaker Change: China has a large number of third- and fourth-tier cities, which will lay the foundation for our future power supply and operational methodologies in more regions.
Speaker Change: The expansion in the Jiangsu, Zhejiang and Shanghai regions has helped improve our supply chain and user operation capabilities. This will benefit our operations in South China and North China, which we are expected to continue growing in scale and gradually become profitable.
Speaker Change: Additionally, we have seen sizable growth in some Tier 3 and Tier 4 cities, such as in Yangzhou and Huzhou, with an impressive year-over-year growth rate of over 50% in the second quarter.
Speaker Change: Given the high number of Tier 3 and Tier 4 cities in China, this progress will establish a robust foundation for our supply chain and operational strategies in additional regions in the future.
Speaker Change: Third, the spillover of purchasing chain capabilities gives our food research, production, and processing a significant growth potential, and can also create greater value. Currently, Dingdong's meat cutting and processing, grain and bean products, and fish dish research, production, and processing are all at a top level in the Chinese consumer market. Our products can be accessed through Dingdong's APP.
Speaker Change: Providing users with more and more products through various retail channels to sell to consumers, while also using hospitality and dining channels such as Huazhu, Jinjiang Inn, and Yaduo.
Speaker Change: Serving more consumers, based on the product service brands we have accumulated among our 400 million end customers, and our channel and logistics advantages, we believe we can cover more B-end customers in the future, realizing our mission and original intention of making quality ingredients as common as tap water for everyone.
Liang Changlin: An overflow in our supply chain capacity facilitates rapid growth in food R&D, production, and processing, creating more value for us. Our R&D, manufacturing, and processing of meat, grain, bean products, and prepared meals are of top quality in the Chinese consumer market, and we distribute these products to users through the Dingdong app and various retail channels. He's fulfilling our mission of making top quality ingredients readily accessible to everyone.
Speaker Change: An overflow in our supply chain capacity facilitates rapid growth in food R&D, production and processing, creating more value for us.
Speaker Change: Our R&D, manufacturing, and processing of meat, grain, bean products, and prepared meals are of top quality in the Chinese consumer market, and we distribute these products to users through the Dingdong app and various retail channels.
Speaker Change: Moreover, our products are increasingly being sold to consumers through hotel and catering channels such as Huazhu, Jinjiang Inn, and Atour. By leveraging our reputation and channel logistics advantages, we aim to expand our reach to more business customers in the future.
Speaker Change: Keep fulfilling our mission of making top-quality ingredients readily accessible to everyone.
Speaker Change: He's it
Speaker Change: We can create value in overseas markets.
Speaker Change: In the past seven years, through the capabilities of our supply chain, we have provided ingredients from China's peripheral regions to consumers in affluent areas such as Jiangsu, Zhejiang, and Shanghai. On one hand, this has met people's needs for a better life, and on the other hand, it has brought wealth to the people in the peripheral regions and enhanced the overall productivity of society.
Speaker Change: There is a significant imbalance between supply and demand globally. We can achieve the free flow of ingredients and food through our power supply capabilities. This is the original intention of our entrepreneurship. Through our power supply capabilities and construction efforts, we will create greater social value and also generate commercial value.
Liang Changlin: One of the ways we create value is by expanding into international markets. For the past seven years, we've utilized our supply chain expertise to deliver food from remote areas of China to affluent regions including Jiangsu, Zhejiang, and Shanghai. This has not only satisfied the needs of people in these areas for a better quality of life but has also generated prosperity for those in remote regions and enhanced overall productivity within society. From a global perspective, there exists a significant disparity between food supply and demand.
Speaker Change: One of the ways we create value is by expanding into international markets.
Speaker Change: Over the past seven years, we've utilized our supply chain expertise to deliver food from remote areas of China to affluent regions including Jiangsu, Zhejiang, and Shanghai.
Speaker Change: This has not only satisfied the needs of people in these areas for a better quality of life, but has also generated prosperity for those in remote regions and enhanced overall productivity within society.
Speaker Change: Considering the global perspective, there exists a significant disparity between food supply and demand.
Liang Changlin: Leveraging our supply chain capabilities, we can work towards facilitating a more efficient movement of food. This is our original entrepreneurial goal. By leveraging our supply chain capabilities and working hard, we aim to generate significant social and commercial value.
Speaker Change: Leveraging our supply chain capabilities, we can work towards facilitating a more efficient movement of goods, of food. This is our original entrepreneurial goal. By leveraging our supply chain capabilities and working hard, we aim to generate significant social and commercial value.
Liang Changlin: Last but not least, I would like to update everyone on our outlook for the rest of 2024 and Q3.
Speaker Change: Finally, I will update everyone on our performance outlook for the entire year of 2024 and Q3.
Speaker Change: Referring to QR's performance growth and our better recent performance, we have internally further raised our expectations for profit and scale. Both this year and in the third quarter, net profit and scale will see a significant year-on-year increase, and we will continue to achieve profitability on both a non-GAAP and GAAP basis.
Speaker Change: We are confident in the scale and profit growth for this year, and we have even greater confidence in the future.
Speaker Change: Finally, I'd like to give you an update on our performance outlook for the entire year of 2024 and for the third quarter.
Speaker Change: Considering our improved performance in the second quarter and also over the past few quarters, we have raised our internal forecast for profitability and scale. We anticipate a significant year-over-year increase in net profit and scale for both the year as a whole and the third quarter.
Speaker Change: That concludes my speech, thank you everyone. Next, let's have our CFO , Wang Song, introduce the company's financial situation.
Liang Changlin: This concludes my speech. Thank you all for listening. Now, I would like to invite our CFO, Wang Zong, to go over the company's financials.
Speaker Change: This concludes my speech. Thank you all for listening. Now I would like to invite our CFO , Wang Zong, to go over the company's financials.
Wang Zong: Thank you, Mr. Liang. Hello everyone. Before introducing our financial situation, I would like to clarify that all our figures are in RMB.
Song Wang: Thank you, Mr. Liang, and hello everyone. Before I review our financial performance for the second quarter, please note that all our figures are in renminbi.
Wang Zong: Thank you Mr. Liang and hello everyone. Before I review our financial performance for the second quarter, please note that all our figures are in renminbi.
Song Wang: In 2024 Q2, Dingdong Cayman achieved a revenue of 5.6 billion yuan and a growth rate of 15.7%. Under the NAGAP standard, the net profit was 1.8% and the growth rate was 1.6%. The net profit was 1.03 billion yuan, and the growth rate was nearly 13 times. We maintained the net profit under the NAGAP standard for 7 consecutive quarters. At the same time, under the GAP standard, we achieved a net profit of 1.2% again after Q1. The net profit was 67.13 billion yuan, and the growth rate was 1.04 billion yuan.
Speaker Change: In Q2 2024, Dingdong Maicai achieved a revenue of 5.6 billion yuan, a year-on-year increase of 15.7%. The overall profit margin of Nandaihe was 1.8%, a year-on-year increase of 1.6 percentage points.
Speaker Change: The profit amount is nearly 103 million yuan, representing a growth of nearly 13 times year-on-year. We have maintained profitability under the Nagate standard for 7 consecutive quarters.
Speaker Change: At the same time, under this standard, we achieved profitability under this standard once again after QE. The net profit margin was 1.2%, an increase of 2 percentage points year-on-year. The net profit amount was 67.13 million yuan, an increase of 104 million yuan year-on-year.
Song Wang: In the second quarter of 2024, Dingdong generated revenue of 5.6 billion RMB, up 15.7% compared to the previous year. The non-GAAP net profit margin was 1.8%, a 1.6 percentage point increase from the previous year, with a net profit of 103 million RMB, nearly a 13-fold increase from the previous year. This is the seventh consecutive quarter of non-GAAP profitability. The company was profitable under the GAAP standards for a second consecutive quarter with a net profit margin of 1.2%, up by 2 percentage points year-over-year, and a net profit of 67.13 million RMB, an increase of 104 million RMB year-over-year.
Speaker Change: In the second quarter of 2024, Dingdong generated revenue of 5.6 billion RMB, up 15.7% compared to the previous year.
Speaker Change: The company was profitable under the GAAP standards for a second consecutive quarter with net profit margin of 1.2 percent.
Speaker Change: Up by 2 percentage points year over year, a net profit of 67.13 million RMB, an increase of 104 million RMB year over year.
Song Wang: In terms of funds, QI, the operating cash flow, is 2.5 billion yuan, and the cash flow has been maintained for four consecutive quarters. As of the end of June, the free cash flow for the past 12 months was 5.1 billion yuan, which is the highest point in recent years and increased by 8.1 billion yuan in the same period last year. After QI, Q to short-term payment, our actual free funds are 23.2 billion yuan, which increased by 3.2 billion yuan at the end of last year and increased by 2.4 billion yuan at the end of March.
Speaker Change: In terms of funds, QI had an operating cash inflow of 250 million yuan, maintaining a net inflow for four consecutive quarters. As of the end of June , the free cash flow for the past 12 months was 510 million yuan.
Speaker Change: At the highest point in recent years, an increase of 810 million yuan compared to the same period last year. After adding the short-term loan balance, our actual own funds balance is 2.32 billion yuan, an increase of 320 million yuan compared to last year, and an increase of 240 million yuan compared to March.
Song Wang: Operating cash flow showed a net inflow of 0.25 billion renminbi, marking the fourth consecutive quarter of net inflow. As of the end of June, free cash flow for the past 12 months amounted to 0.51 billion renminbi, the highest level in recent years and reflecting a 0.81 billion renminbi increase from the same period last year. By the end of Q2, our actual self-owned funds balance after deducting the short-term loans stood at 2.32 billion renminbi, a 0.32 billion renminbi increase from the end of last year and a 0.24 billion renminbi increase from the end of March.
Speaker Change: Operating cash flow showed a net inflow of 0.25 billion RMB marking the fourth consecutive quarter of net inflow.
Speaker Change: As of the end of June , free cash flow for the past 12 months amounted to 0.51 billion RMB, the highest level in recent years and reflecting a 0.81 billion RMB increase from the same period last year.
Speaker Change: By the end of Q2, our actual self-owned funds balance, after deducting the short-term loans,
Speaker Change: Students at 2.32 billion renminbi, a 0.32 billion renminbi increase from the end of last year and a 0.24 billion renminbi increase from the end of March.
Song Wang: As we have always emphasized, Dingdong Cayman has not only increased its profitability but also increased its income. In addition, in the case of the opening of a new business, the capital ability is also constantly improving. The above financial performance shows that we can be fully self-sufficient and maintain healthy growth.
Speaker Change: As we have consistently emphasized, while Dingdong Maicai's profitability continues to improve, it has not only achieved impressive revenue growth but also enhanced its financial capacity despite the addition of new warehouses. These financial results indicate that we are fully capable of self-sufficiency and maintaining healthy growth.
Speaker Change: As we've always emphasized, Dingdong has not only achieved gratifying revenue growth, but has also continued to increase its profitability. In addition, our financial capacity has been continuously improving, while the number of our frontline stations has also been growing.
Speaker Change: The above financial performance demonstrates that we are fully self-sufficient and maintaining healthy growth.
Song Wang: Next, let's take a look at QI's financial situation. QI's GNV is 6.2 billion yuan, which has increased by 16.8%. This is due to the continuous expansion of the coverage and penetration of Jiangsu, Shanghai, Jiangsu and Zhejiang regions, which achieved 16.5%, 28.5%, and 30.4% growth respectively. At the same time, the Beijing region has also returned to positive growth, which increased by 8.5%. With the arrival of summer, all areas, including Guangzhou and Shenzhen, have achieved the same growth rate, which is 21.6%.
Speaker Change: Next, let's take a look at QI's specific financial situation.
Speaker Change: The adorable GMV is 6.22 billion yuan, a year-on-year increase of 16.8%.
Speaker Change: Among them, benefiting from our continuous expansion and penetration in the Jiangsu, Zhejiang, and Shanghai regions, Shanghai, Jiangsu, and Zhejiang achieved year-on-year growth of 16.5%, 28.5%, and 30.4% respectively.
Speaker Change: At the same time, the Beijing region also returned to positive growth, with a year-on-year increase of 8.5%. With the arrival of summer in June , all regions, including Guangzhou and Shenzhen, achieved year-on-year positive growth in scale, with the overall market's electricity growth rate at 21.6%.
Song Wang: We expect that during the summer vacation, the addition of high-temperature weather will maintain the growth rate of June. In addition, the loss in the Guangzhou and Beijing regions has been gradually reduced. The strategy of the company's regional layout is working.
Speaker Change: We expect to maintain the growth momentum from June during the summer vacation period, compounded by the impact of high temperatures. Additionally, the quarterly losses in the Guangzhou-Shenzhen and Beijing regions are continuously narrowing, indicating that the company's regional layout strategy is yielding results.
Speaker Change: Let's review the specific financials.
Speaker Change: GMV was 6.2 billion RMB, up 16.8% year-over-year. Notably, Shanghai, Jiangsu, and Zhejiang saw impressive year-over-year growth rate of 16.5%, 28.5%, and 30.4% respectively.
Song Wang: This growth can be attributed to our expanded coverage and penetration in these regions. Furthermore, losses in Guangzhou, Shenzhen, and Beijing are gradually narrowing each quarter, indicating the success of the company's regional strategy.
Speaker Change: This growth was attributed to our expanded coverage and penetration in these regions.
Speaker Change: In June , all regions, including Guangzhou and Shenzhen, achieved year-over-year positive growth, with the same store growth rate achieving 21.6% nationwide.
Speaker Change: Furthermore, losses in Guangzhou, Shenzhen, and Beijing are gradually narrowing each quarter, indicating the success of the company's regional strategy.
Song Wang: The QI ratio is 30%, which is 1% lower than last year. The higher the QI ratio, the higher the return on investment. At the same time, we will also give more value to the consumers and keep our price competitiveness.
Speaker Change: QI's gross profit margin is 30%, a decrease of 1% compared to last year. By delving into the source procurement, production processing, warehousing, and tourism distribution in the supply chain, we have achieved a higher gross profit margin. However, we will also return more value to consumers to maintain our price competitiveness.
Speaker Change: Gross profit margin was 30% down 1 percentage point year-over-year. The decrease was due to price concessions to provide more value to consumers and maintain our competitiveness.
Song Wang: New York's QI rate is 22.4%, which is 1.2% better than last year. The increase in order volume has improved operation efficiency.
Speaker Change: QI's fulfillment cost rate is 22.4%, which has improved by 1.2 percentage points compared to last year.
Speaker Change: The increase in order volume has led to an improvement in operational efficiency.
Speaker Change: Surpassed 1000 orders, a year-on-year increase of 29.4%
Speaker Change: Among them, Shanghai exceeded 1,500 cases.
Speaker Change: At the same time, we continuously enhance our service capabilities by leveraging algorithms and supply chain operation capabilities. The average QR instant order fulfillment time is 36 minutes, which is 2 minutes faster than last year. The 60-minute fulfillment rate is 97%, an improvement of 18 percentage points.
Speaker Change: Fulfillment cost rate was 22.4%, 1.2 percentage points lower year over year. The increase in order volume has led to improved operational efficiency.
Speaker Change: Our frontline fulfillment stations processed over 1,000 orders daily on average, up 29.4% compared to a year ago, with Shanghai processing over 1,500 orders daily.
Song Wang: We are continually enhancing our service capabilities using algorithms and supply chain operation capabilities. Consequently, the average ASAP order fulfillment time in Q2 was 36 minutes, two minutes faster than the previous year. And the 60-minute delivery availability was 97%, an 18-percentage point year-over-year increase.
Speaker Change: We're continually enhancing our service capabilities using algorithms and supply chain operation capabilities.
Song Wang: QI's marketing cost rate is 2.3%, which is 0.4% higher than last year. With excellent financial performance and sufficient cash reserves, we will further increase the marketing investment of users' cars, improve traffic operation efficiency, and continue to increase user penetration in the advantageous areas to promote scale growth.
Speaker Change: Increased by 0.4 percentage points compared to last year
Speaker Change: Under the premise of excellent financial performance and ample cash reserves, we will further increase marketing investment in user vehicles, enhance the efficiency of traffic operations, continuously increase user penetration in advantageous areas, and promote scale growth.
Speaker Change: So the marketing cost rate was 2.3%, a 0.4 percentage point increase year-over-year. With strong financial performance and ample cash reserves, we plan to increase our marketing investments to enhance user acquisition, optimize traffic operations, expand our user base in key areas, and drive overall business growth.
Speaker Change: The total of management expenses and R&D expenses in Q2 as a percentage of revenue decreased by 0.4 percentage points compared to the same period last year, mainly due to the effect of scale. We will continue to invest in R&D in areas such as video development, agricultural technology, and technical data algorithms as always.
Speaker Change: Total GNA and R&D expenses were 0.4 percentage points lower than in the same period last year, primarily due to economies of scale. We intend to maintain our investment in R&D for food, agricultural technology, and technical data algorithm.
Speaker Change: In Q2 2024, we achieved a net profit margin of 1.8% in Southern California and other regions, with a net profit amounting to 103 million yuan. At the same time, we also achieved a net profit margin of 1.2% in Northern California and other regions this quarter.
Speaker Change: Non-Gap Net Profit Margin was 1.8%, resulting in a net profit of 103 million RMB. Gap Net Profit Margin was 1.2%.
Song Wang: As of the end of Q2, cash and cash additives, short-term cash withdrawals, and short-term investments amounted to 41.6 billion yuan. We continue to optimize the efficiency and financing structure of funds.
Speaker Change: As of the end of Q2, the balance of cash and cash equivalents, short-term receivables, and short-term investments was 4.16 billion yuan. We continue to optimize the efficiency of fund usage and financing structure. After accounting for the short-term loan balance in Q2, our actual free funds balance was 2.32 billion yuan. We achieved the guidance provided in the previous quarter with outstanding financial performance in Q2.
Song Wang: After Q2, our actual free funds amounted to 23.2 billion yuan. We Q2 completed the guidance given last quarter with excellent financial performance. Combined with the company's recent financial performance and sufficient funds, we are very confident in meeting the performance forecast given in the third quarter and the whole year.
Speaker Change: Based on the company's recent operational and financial performance and ample funds, we are very confident in meeting the performance expectations for the third quarter and the entire year.
Speaker Change: At the end of Q2, our balance of cash and cash equivalent, short-term restrictive funds, and short-term investment amounted to 4.16 billion renminbi.
Speaker Change: We're continuously improving the efficiency of capital use and our financing structure. After deducting the balance of short-term loans, the actual balance of our own funds was 2.32 billion RMB. In the second quarter, we achieved outstanding financial performance in line with our guidance.
Song Wang: Considering our recent operating financial performance and balance sheet strength, we're confident that we will meet our performance expectations for the third quarter and the whole year.
Speaker Change: Considering our recent operating financial performance and balance sheet strength, we're confident that we will meet our performance expectations for the third quarter and the whole year.
Speaker Change: Our speech ends here today, and now we can move on to the Q&A session.
Operator: This concludes our speech today. Operator, we can now start the question and answer session.
Song Wang: This concludes.
Speaker Change: This concludes our speech today. Operator, we can now start the question and answer session.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question, you may press star then 1 on your touchtone phone.
Operator: If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered 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. At this time, we will pause momentarily to assemble our roster.
Speaker Change: 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 2.
Speaker Change: When asking a question, please state it in Chinese first and then repeat it in English for the convenience of everyone on the call.
Speaker Change: At this time, we will pause momentarily to assemble our rockster.
Speaker Change: Unknown Executive, Song Wang, Liang Changlin
Speaker Change: The first question comes from Thomas Chong with Jeffries. Please go ahead.
Thomas Chong: Thank you to the management for accepting my question. My question is that I recently saw some reports that Hema has restarted the construction of the potential cabin recruitment, and JD.com is also planning the potential cabin.
Speaker Change: Including Meituan, more cities are setting up front-end operations. How should we evaluate these developments, and how should we view future competition?
Speaker Change: Thanks, Nancy, for taking my question. So, according to recent reports, HRMA has restarted recruitment and construction of front-line hospitalizations.
Speaker Change: and also JD is also deploying from line for few stations and also Meituan is extending the station to more cities. So what are your thoughts on those developments and also how do you foresee the future competition? Thanks.
Liang Changlin: Thank you for your question. In the past, due to changes in the macroeconomic environment and the competition pattern, people were worried and asked whether Dingdong Cayman would survive or not. However, the continuous profits and the growth of the scale can fully show that we have survived firmly. Even in such a relatively low-profit consumer environment, we are also growing and increasing our profits, so that we can live better and better. In the past, people thought that there was no way to make money and even thought that there was no way out in the food industry.
Speaker Change: Thank you for your question. Earlier, due to adjustments in the macro environment and changes in the competitive landscape, there were doubts and concerns about the survival of Dingdong Maicai. However, continuous profitability and growth in scale have fully demonstrated that we have firmly survived. Even in the current relatively sluggish consumption environment, we are still growing and increasing profitability, living better and better. Previously, everyone thought we couldn't make it in the long run.
Liang Changlin: I believe that the results we have achieved can be a reason for more peers to participate in the front line. In a broad sense, it also promotes the growth of the front line and the whole industry of fresh e-commerce.
Speaker Change: Fresh e-commerce has no future. Believe in the achievements we have made, which can become the reason for more peers to participate in the front-end commerce track. To some extent, it has also promoted the growth of the entire industry of front-end commerce and fresh e-commerce.
Liang Changlin: Thank you for your question. In the past, doubts and concerns have arisen about our chances of survival due to changes in the macro environment and competitive landscape. However, our consistent profitability and growing scale demonstrate that we have not only survived, but thrived, even in a slow consumption environment. Previously, there were concerns about challenges in the frontline fulfillment station grid model or even in the fresh grocery e-commerce industry. But I believe our success in this area has encouraged peers to participate in and contribute to the growth of the frontline fulfillment grid model and the fresh grocery e-commerce industry.
Speaker Change: Thank you for your question. In the past, doubts and concerns arose about our chances of survival due to changes in the macroenvironment and competitive landscape.
Speaker Change: However, our consistent profitability and growing scale demonstrate that we have not only survived but thrived, even in a slow consumption environment.
Speaker Change: Previously, there were concerns about challenges in the Frontline Fulfillment Station grid model or even in the fresh grocery e-commerce industry, but I believe our success in this area has encouraged peers to participate and contribute to the growth of the Frontline Fulfillment Station grid model and the fresh grocery e-commerce industry.
Speaker Change: Here, I just want to simply share our differences. This does not represent right or wrong, good or bad, but only our understanding of our own business models.
Liang Changlin: Now, I want to briefly share our differentiation compared to our peers. There's no right or wrong, good or bad, but only our understanding of our business model.
Speaker Change: Now here I want to briefly share our differentiation compared to our peers. There's no right or wrong, good or bad, but only our understanding of our business model.
Liang Changlin: First, there is a different understanding of the low-level principles of the fresh industry. In the same industry, there are more low-level principles that follow the traditional retail industry. The low-level principles that have been proven since the Wama era, which is to get scale through low prices, reduce purchasing costs and operating costs through scale, have failed in the new industry. We believe that the low-level principles of the fresh industry are to be efficient from end to end through supply and demand, to be profitable through supply and demand, and to serve consumers well through supply and demand. And to achieve scale growth.
Speaker Change: First, there is a different understanding of the low-wage principle in the fresh produce industry. Many peers adhere more to the traditional retail industry's low-wage principle, which was validated during the Walmart era. This principle involves achieving scale through low prices, thereby reducing procurement costs and operating expenses. However, this principle has failed in the fresh produce industry. We believe that the low-wage principle in the fresh produce industry is to achieve efficiency through supply chain capabilities, to seek profit through supply chain capabilities, and to serve consumers well through supply chain capabilities in order to achieve scale growth.
Speaker Change: principles within the fresh grocery
Speaker Change: Instead, the first principle of success is to continuously enhance end-to-end efficiency.
Speaker Change: To achieve growth at scale, seek profitability, and bolster competitiveness, it is crucial that we focus on consistently improving our supply chain capabilities. With these capabilities, we'll be able to serve a larger customer base and meet their evolving needs.
Liang Changlin: Second, in the past, everyone has been exploring and seeking change, but the point of change is different. Some peers are constantly trying to find the best solution in the mode of operation, while we have been adjusting development strategies based on environmental change. We believe that power is a basic ability. Modes and forms are not important. Powerful power can be unalterable.
Liang Changlin: Second, in the past, as our industry developed, everybody was exploring and pursuing various changes to business models. Some constantly modified their operational methods in search of the best solution. We, on the other hand, focused on adapting our development strategy to accommodate changes in our environment. We always believe that strong supply chain capabilities are essential,
Speaker Change: Second, in the past, as our industry developed, everybody was exploring and pursuing various changes to business models.
Speaker Change: Some constantly modify their operational methods in search of the best solution. We, on the other hand, focused on adapting our development strategy to accommodate changes in our environment.
Speaker Change: We always believe that strong supply chain capabilities are essential and that beyond this, the specific model and structure are not as crucial. Robust supply chain capabilities allow us to quickly and effectively adapt to evolving market conditions.
Speaker Change: As our supply chain expands, we'll be able to reach more people in different regions in a more adaptable manner.
Liang Changlin: For many years, our industry has...
Operator: The next question comes from Robin Leung with Gaiwa. Please go ahead.
Speaker Change: Thank you to the management for accepting my question. I noticed that in the previous few earnings calls, the main focus has been on the development of public chain capabilities.
Speaker Change: Unknown Executive, Song Wang, Liang Changlin
Speaker Change: Polish in your plans
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Liang Changlin: Thank you for your question. We mentioned four key points earlier. These four key points are the roots of our natural growth. We believe that in the future, these four key points will be able to develop to the same or larger scale as today's business. We have divided Dingdong Cayman's initial development into two stages. The first stage is the start of business in 2017 to today.
Speaker Change: Earlier, we mentioned four growth points. These growth points are all naturally growing based on our fresh supply capabilities. We believe that in the future, these four growth points will be able to develop to the same scale as today's business, or even larger.
Speaker Change: We also divide the initial development of JD Fresh into two stages. The first stage is from its founding in 2017 to today, a span of 7 years.
Speaker Change: It was during the stage from 0 to 1 that we achieved profitability, reaching an annual revenue scale of over 20 billion RMB. The second stage starts from this year and spans the next 7 years, which is the stage from 1 to 10. We expect to achieve an annual revenue scale of approximately 100 billion RMB.
Liang Changlin: In our previous discussion, we highlighted four key drivers for growth. These factors are linked to the organic expansion of our fresh grocery supply chain.
Liang Changlin: We're confident that in the future, these four growth drivers will be able to expand to the same scale as our current business lines or even greater. Additionally, we have divided Dingdong's initial development into two stages. The first stage covers the seven-year period from our business establishment in 2017 to the present, representing the transition from zero to one. During this time, we have achieved profitability and have reached an annual revenue scale of more than 20 billion renminbi. Looking ahead, the second stage will encompass the next seven years, representing the transition from one to ten, and we aim to achieve an annual revenue scale of 100 billion renminbi.
Speaker Change: We're confident that, in the future, these
Speaker Change: Additionally, we have divided Dingdong's initial development into two stages.
Speaker Change: The first stage covers the seven-year period from our business establishment in 2017 to the present, representing the transition from zero to one. During this time, we have achieved profitability and have reached an annual revenue scale of more than 20 billion RMB.
Speaker Change: Looking ahead, the second stage will encompass the next seven years, representing the transition from one to ten, and we aim to achieve an annual revenue scale of $100 billion.
Speaker Change: Xièxiè.
Operator: The next question comes from Bai Yang with CICC. Please go ahead.
Speaker Change: The next question comes from Bai Yang with CICC. Please go ahead.
Bai Yang: Thank you, Mr. Guan. Mr. Guan just mentioned that there will be 80 new pre-orders this year. Will the investment in pre-orders put pressure on the company's cash flow?
Bai Yang: I will translate by myself. The measurement just mentioned that they are anticipating opening 18 new front line stations this year. Will that increase pressure on the company's cash flow? Thank you.
Liang Changlin: Thank you for your question. I will leave the question to CFO Wang to answer.
Liang Changlin: Thank you for your question. I'll let our CFO Wang Zong answer it.
Speaker Change: Thank you for your question. I will pass this question to our CFO , Wang Song, to answer.
Wang Song: The company is restarting its warehouse expansion plan this year, and it is expected to open around 80 new warehouses the year before last, mainly concentrated in the Jiangsu, Zhejiang, and Hubei regions. By opening warehouses in Jiangsu and Zhejiang, the company aims to increase coverage and penetration in the Jiangsu-Zhejiang area, supporting long-term growth.
Speaker Change: Thank you, Mr. Liang. I will address this question from three perspectives.
Speaker Change: This year, we have initiated the opening of approximately 80 new stations with a focus on the Jiangsu, Zhejiang and Shanghai regions.
Speaker Change: We expect the company's operating cash flow and free cash flow to continue to have cash inflows.
Speaker Change: After deducting the short-term loan balance, the cash on hand at the end of the quarter is 2.32 billion yuan, marking an increase for four consecutive quarters. We estimate that the total investment in Capex will be around 40 million, so we have sufficient own funds to complete the warehouse opening without putting any pressure on our daily operating funds.
Speaker Change: As our scale increases and profitability improves, we expect a consistent increase in operating cash flow and free cash flow.
Speaker Change: At the end of Q2, the company had 2.32 billion renminbi in cash on hand after repaying short-term loans, marking growth for four consecutive quarters.
Speaker Change: We estimate that the total capex investment for these 80 new stations will be around 40 million renminbi. Therefore, we have enough self-owned funds to complete their opening without impacting our daily operating funds at all.
Song Wang: Third, thanks to our complete infrastructure in Jiangsu and Zhejiang Province, mature supply chain capability, and operation capability, our newly-opened pre-fabricated warehouses are faster than we used to in terms of scale and operation speed. Let's do a calculation. Newly-opened warehouses in Jiangsu and Zhejiang Province can achieve an operating level of profit-loss balance with a daily volume of 500 units. The operating period is about 3 to 6 months. Our newly-opened warehouses in the first half of the year reached an average of 800 units.
Song Wang: Most of them have achieved an operating level of profit-loss balance. So, based on the rapid growth, newly-opened warehouses will not cause any pressure on the company's operating cash. At the same time, these newly-opened warehouses will effectively promote the scale and penetration of the Jiangsu and Zhejiang Provinces.
Song Wang: But thanks to our well-established infrastructure, mature supply chain capabilities, and operational expertise in Jiangsu, Zhejiang, and Shanghai, our newly opened frontline fulfillment stations have significantly improved in terms of scale and unit economics. We estimate that the new frontline fulfillment stations in Jiangsu, Zhejiang, and Shanghai can achieve operational break-even with only 500 orders daily per station. The ramp-up period is about three to six months. Our new frontline fulfillment stations processed an average of 800 orders daily in the first half of this year, and most of them are now breaking even at the operational level.
Song Wang: As a result of this rapid progress, the new frontline fulfillment stations will not strain the company's operating cash. Additionally, these new stations will significantly contribute to our expansion and reach in the Jiangsu, Zhejiang, and Shanghai regions.
Speaker Change: In summary, we have sufficient financial reserves to support our warehouse opening, and the ramp-up speed of the new warehouse is very fast, so it will not put any pressure on our cash flow. Additionally, the new warehouse will help us maintain continuous growth. Thank you!
Speaker Change: In summary, we have sufficient capital reserves to support our Frontline Fulfillment Stations opening. The new stations are ramping up very quickly, so there will be no pressure on the cash flow, and they will help us maintain sustained growth. Thank you.