Dada Nexus Limited

Good morning, ladies and gentlemen, and thank you for standing by for DADA's fourth quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, there will be a question and answer session. As a reminder, today's conference is being recorded. I'd now like to turn the meeting over to your host for today's call, Ms. Caroline Dong, Head of Investor Relations for DADA. Please proceed, Caroline.

Thank you, operator. Hello, everyone, and thank you for joining us today. Our fourth quarter 2021 earnings list was distributed earlier today and is available on our IR website at ir.imdata.cn, as well as on Global News Service Services. On the call today from data, we have Mr. Philip Kwai, Chairman and the Chief Executive Officer. Mr. Bak Chen, Chief Financial Officer, and Mr. Jun Yang, Co-Founder and the Chief Technology Officer. Mr. Quai will talk about our operations and company highlights, followed by Mr. Chen, who will discuss the financials and guidance. They will all be available to answer your questions during the Q&A session that follows. Before we begin, I'd like to remind you that this conference call contains following statements as defined in Section 21E of the Securities Exchange Act of 1934 and the U.S. Private Security Litigation Reform Act of 1995. These following statements are based upon the management's current expectations and the current market and operating conditions. and relate to events that involve known or unknown risks, uncertainties, and other factors, all of which are difficult to predict and a manner of which are beyond the company's control. These risks may cause the company's actual results or performance to deform materially. All the information regarding these and other risks, uncertainties, or factors is included in the company's filings with the USFCC. The company does not undertake any obligation to update any follow-up statement as a result of new information, future events, or otherwise, except as required under applicable law. Please note that, unless otherwise stated, all figures mentioned during the conference call are in RMB, and it is not my pleasure to introduce our chairman and the chief executive officer, Mr. Kwai. So let's go ahead.

Thank you, Caroline. And thank you all for joining us today. We are pleased to announce another excellent quarter and a strong finish to the year. Despite macro weakness in the fourth quarter, data group delivered the revenue growth on a comparable net basis of 80.3% year-over-year. The strong revenue growth is achieved while operating efficiency is greatly improved. I'd like to highlight our recent progress and provide updates on our two platforms. And then back, we'll go through our financial results in greater detail. The Chinese central government has recently stated that leveraging the advantages in massive data and rich application scenarios China shall promote the deep integration of digital technology and the real economy, empower traditional industries to transform and upgrade, create new industries, new formats, and new models to continue to strengthen, optimize, and scale up its digital economy. In this regard, data is working hard and is striving to be a digital economy enabler. We continue to leverage our strong digital technology capabilities to empower the real economy, promote the integrated development of the digital economy and the real economy, and push forward the application of digital technology in the new development roadmap of China. The central government also proposed to establish a comprehensive cross-departmental supervision system and improve the coordinated supervision of markets, quality, and safety to anticipate issues as well as provide controls and supervision during and after the event. Data actively supports the government's policies and develops our business in full compliance with regulations. So before jumping into our business updates, I'm pleased to announce that JD.com's investment in data obtains Regulatory approvals in late February this year and the worst completed on February 28 We're looking forward to further different strategic cooperation with the dot-com The mutually beneficial cooperation with the dot-com has always been a strategic priority for us and Since we officially launched ShopNow or Xiaoshigou, the unified brand for all on-demand retail services within the JD ecosystem in October 2021, we have been leveraging the collaborative synergies to support the development of the real economy and jointly lead the development of the on-demand industry. During the fourth quarter, the GMV of ShopNow Xiaoshigou and had a strong growth momentum and increased several times year over year. As of the end of 2021, more than 70% of the active stores on JD.DJ were available on ShopNow. So going forward, we will further deepen the omnichannel cooperation with JD.com, improve JD users' mindshare for on-demand retail, and jointly expand the product categories of on-demand retail on JD. Now, let's talk deeper about JDDJ, the leading local on-demand retail platform in China. Despite a challenging macro environment, JDDJ still managed to grow its revenue by 80% year-over-year in the fourth quarter, significantly outpacing the overall consumption growth. The government has been encouraging the platform economy to provide support for high-quality economic development and high-quality life guiding the platform economy to be more open, innovative, and empowering. JDDJ has consistently positioned as an open platform and commits to empower the retail industry through technology and service innovation. During the fourth quarter, JDDJ continued to digitize the retail industry with respect to enabling retailers and brands and technology empowerment. Firstly, empowering more retailers and in region product supplies. With the continuous optimization on the supply side, we strive to provide industry-best one-stop shopping experience for consumers in the on-demand retail space. In 2021, the number of active users on GDDJ increased 51% year-over-year to 62.3 million. Looking to different verticals, in the supermarket category, we have now established partnership with 85 out of the top 100 supermarket chains in China. According to our research, the market share of JDDJ in the supermarket O2O sector increased to 27% in 2021. The gap between JDDJ and the second and the third players remained wide at 11 and 18 percentage points respectfully. With continuous expansion of merchant partners and product offerings, deepening cooperation with JD.com and improving delivery fulfillment capability, JDTJ continues to win more users and become a primary on-demand retail channel for more users. For our supermarket partners, We are committed to helping them create incremental sales through innovative tools and campaigns. Recall that in the last earning call, I introduced the 3-in-1 coupon that helps improve sales efficiencies for retailers, brands, and platforms. In early December, JDDJ further expanded the coverage of 3-in-1 coupons and partnered with around 20 regional leading players. including CP Lotus and Eon, to launch the first shopping carnival campaign covering more than 10,000 stores in over 100 cities. The GMV of participating stores increased by more than 200% over regular weekends in November. Meanwhile, the conversion rates increased by over 10 percentage points. In addition to cementing the leadership in the supermarket category. JDDJ continued to grow its influence in the 3C, the consumer electronics category. The GMV of the 3C category increased by more than three times year over year. In the smartphone subcategory, by the end of December, we had onboarded more than 12,000 stores on JDDJ. In the fourth quarter, we strengthened our partnership with JD Bytel, or JD Buy Now and Pay Later service, to further enhance the experience for consumers purchasing smartphones on our platform. In the PC and accessory category, we established new partnerships with more well-known brands, including Jimmy, Logitech, and Razer. In the home appliance subsector, total GMV continued to grow by more than 100% on a sequential basis in the fourth quarter. In addition, we launched a strategic partnership with Dyson, and we are gradually onboarding more than 800 Dyson stores onto GDDJ across China. Secondly, GDDJ continues to drive marketing efficiencies for brands. In the first quarter, our online marketing service revenue increased by more than 140% year-over-year. For full year 2021, online marketing revenue growth was over 130%. SJDDJ onboards more brand partners and captures a larger share of their marketing spending. In addition to deepening cooperation with more FMCG brands, GDDJ started to collaborate with the cosmetics business of major international brands, such as L'Oreal, P&G, and Johnson & Johnson. Our innovative marketing campaigns have always been welcomed by brand partners. In January 2022, GDDJ launched the Super Alliance campaign to help brand partners achieve explosive growth in the influence, customer traffic, and sales. This campaign integrates current affairs and engages with consumers across multiple social media channels. Just ahead of the 2022 Winter Olympic Games, GDDJ rolled out the first Super Alliance campaign together with P&G, Coca-Cola, Snickers, and Ely. The GMV during the campaign increased by approximately 200% year-over-year. Moving on to our technology empowerment. As of the end of January 2022, our omnichannel operating system, Haibo, covered around 6,000 retail chain stores. Haibo's value in boosting retailers' sales while improving cost efficiency not only help us continue to acquire new merchants, but also enable us to maintain a very high retention rate. In 2021, the renewal rate of the merchants using Haibo system was more than 98%. In terms of feature iteration and optimization, we upgraded the fulfillment module on Haibo in the first quarter to improve order picking efficiency and optimize labor costs. The upgraded module enables stores to pick items in different zones based on SKU distribution, sales heat map, and the labor capacity, and then aggregate orders efficiently. With the launch of the upgraded module, the picking time at stores can be reduced by an average of 40%. At present, more than 80% of the merchants using Hibor system have adopted this module. Regarding our digitized in-store picking service, data picking, the number of stores covered by data picking continue to expand, as is increasingly recognized by merchants. As of the end of 2021, data picking covered around 500 stores of supermarket chains, with number of orders for few in the fourth quarter growing more than eight times year-over-year. Let's now move on to DataNow, the leading local on-demand delivery platform in China. In early 2022, the State Council issued the development plan for a modern comprehensive transportation system during the 14th Five-Year Plan to clarify the major tasks for the transportation industry. One important task set out in the plan is to expand the supplier of high-quality transport services, including supporting the development of new modules like on-demand delivery. With a leading local delivery network that provides service nationwide, DataNow is always committed to meeting people's needs for a better life with higher quality, higher efficiency, and a lower cost service. In addition to supporting domestic consumption with solid logistics infrastructure, DataNow also continues to take measures to safeguard riders' interests. In January, we attended the administrative guidance meetings held by the Ministry of Human Resources and Social Security and three other ministries. During the meeting, Our efforts and achievements in protecting the rights and interests of workers engaging in the new form of employment and improving rider experience were fully recognized by the government. In terms of the business progresses, our revenue from on-demand delivery services to key accounts or KA chain merchants increased 100% year-over-year in the first quarter. In full year 2021, our KA revenue growth was over 120%. This was the third consecutive year that our KA revenue grew at 100% and above. The strong growth momentum is a result of our enhancing service offerings and expanding customer bases. While maintaining rapid revenue growth, we continue to improve our service quality and operational efficiencies for the KA merchants. In the fourth quarter, we achieved higher delivery fulfillment rates while reducing fulfillment costs by strengthening standardized management, deepening cooperation with merchants, and optimizing operational strategies. Moving on to SMEs. Orders fulfilled for SME merchants in the first quarter increased 100% year over year. The fast growth of SME orders also led to the increase of overall order density of DataNow delivery network, contributing to delivery efficiency improvement. For last mile service, with improving service capabilities, delivery orders experienced steady growth and our pickup orders maintain rapid growth. In addition to offering pickup services to individual consumers and small businesses, we have also made significant progress in on-site pickup services for large customers, comprehensively catering to the needs of JD Logistics. Lastly, on data autonomous delivery, Since the open platform was officially launched in July 2021, we continue to empower our upstream and downstream partners in the augmented delivery value chain through strong technology and operational support. At present, the platform has delivered over 30,000 orders for supermarket partners. Meanwhile, our delivery fulfillment rate remains stable at over 95% even during heavy promotional periods and bad weather. While we made this encouraging progress, ESG efforts are integrated across our businesses. Recently, in recognition of our socially responsible practice such as anti-pandemic assistance and poverty relief, we were named as a Charity Star of Shanghai in the 10th edition of the awards, being the only internet and online new economy enterprise awarded. In January this year, JDDJ was among the first batch of applications to pass the agent-friendly and barrier-free assessment launched by the Ministry of Industry and Information Technology. Another group We'll continue to stick to our ESG strategy and drive sustainable value creation. With that, I will now pass the call over to to go over our financials for the quarter and the full year.