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spk07: Good morning, ladies and gentlemen, and thank you for standing by for DADA's first quarter 2023 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 call is being recorded. I'll now turn the meeting over for your host for today's call, Ms. Caroline Dong, Head of Investor Relations for DADA. Please proceed, Caroline. Thank you, Caroline.
spk13: Thank you, operator. Hello, everyone, and thank you for joining our first quarter 2023 earnings conference call. On the call today from Dada, we have Mr. Jeff Huijianhe, president, and Mr. Back Chen, CFO. Mr. He will talk about our operations and company highlights. Then Mr. Chen will discuss the financials and guidance. Please kindly note that during the Q&A session, Jeff will answer questions in Chinese and a consecutive translation will be provided. In case of added discrepancy between the original remarks and the translated version, statements in the original remarks should prevail. Before we begin, I'd like to remind you that this conference call contains following statements. Please refer to our latest safe harbor statement in the earnings price list on our IR website, which applies to this call. Also, during this call, we will discuss certain non-GAAP financial measures. Please also refer to our earnings price list, which contains a reconciliation of non-GAAP measures to the comparable GAAP measures. Finally, please note that, unless otherwise stated, all figures mentioned during our conference call are in R&B. It is now my pleasure to introduce our president, Mr. He. Jeff, please go ahead.
spk03: Thank you, Caroline. And thank you all for joining us today. During this, the first quarter of 2023, Dada Group continued to deliver strong revenue growth while significantly improving our operating efficiency. Our total net revenues increased by over 27, and our adjusted net loss margin narrowed by over 16 percentage points year-over-year. Our database presentation was an update on our dependent a collaboration with JD.com, following which I will share the operational highlights from our two platforms. That will then take you through the detailed financial results. We continue to deepen our collaboration with JD.com in several areas. During the first quarter, CME of Shocknow, a sales school, the unified brand for all on-demand retail services within the JD ecosystem increased by 60 year-over-year. In particular, GME for nearby or Fuzhintab maintained the latest year-over-year growth. This was determined by continued increase in nearby DAU, as well as a higher conversion rate during the page with designs that made the shopping experience more efficient. Regarding search results, we also recently launched price-based stock ratings. The tool then highlights the most competitively-priced products. Through this feature, we have boosted traffic conversion and enhanced shop miles appear among JD users. as a shopping channel with competitive price and the fastest viewer. Let's move on to the operational highlights for our two platforms, starting with JDTJ, the leading on-demand retail platform in China. In the first quarter, JDTJ maintained the level of GME growth that significantly outpaced the last dollar-per-million Our high-quality growth is affected by our close cooperation with and technology commitment to our retailers and brand partners. Let's start with JDTJ's expanded and strengthened efforts to empower retailers. In the supermarket category, in terms of our cooperation with top supermarket chains, We recently signed a new partnership, such as Zhengzhou Chinese, and now we established a partnership with over 19 of the top 100 supermarket chains in China. In addition, we continue to extend the cooperation with leading convenience store chains. With stores from top brands such as Mijia, and food. Recently launched on our platform, we will be able to meet consumers' needs across more diversified shopping scenarios. Knowledge in supermarkets, merchandise chains, and our consumer insights. We continue to launch various campaigns to drive sales. Together with our supermarket partners, we launched the Weekend One Cent Shopping campaign. The campaign is designed to boost our user awareness of JDTJ's attractive price product, offering through targeted promotion of specific SKUs. The U.N. has significantly improved its chain sales and user engagement levels. For example, at the end of March, JD.D.J. collaborated with 19 supermarkets chains to launch the one-cent fresh meat campaign in Beijing. In the U.N., GMO fresh meat products in Beijing increased by more than 60 year-on-year, more than 30 percentage points higher than the overall GME growth rating in Beijing. In addition, the seven-day repeated purchase rate of participating consumers was seven percentage points higher than that of the city-wide user base. We also made further progress in the consumer electronics and home appliance category. In the computer and access to knowledge subcategory, we recently partnered with smart learning device brands, such as Xiao Tiancai and Youthbook. In the first quarter, GME from computer and accelerator leads, the chance increased by nearly 200 year-on-year. In the home appliance subject category, we sign up leading home appliance brands such as Haier and Midi to onboard and promote their offline stores on JDTJ, offering Customers differentiated product selection and the convenient one-stop delivery and installation services. In the first quarter, GME from home appraisal returns grew by nearly 200 year-on-year. In the apparel category, we have successfully expanded into the infant and children's apparel segment, and recently partnered with leading brands such as Yunshi and Balabala. In the first quarter, GMO apparel category increased nearly six-fold year-on-year. In the home and furniture category, we achieved breakthroughs in segments, including 19 hardware accessories and software. For example, we recently established a partnership with Opel, Vore, and Sears. In the first quarter, GME for home and furniture machines increased nearly fourfold year-on-year. Let's move on to JDDJ's efforts to empower brands. We continue to penetrate the various FMCG segments, helping brands increase their sales through auto oil channels. Food and Just Fuel released and signed partnerships with confectionery brands such as Shock Day, daily brands such as Adobe Echo, and personal care brands such as Adolf. Next, I will touch on our efforts to empower both retailers and the brands through technology innovation and digital transformation. Firstly, on Haibo, our omnichannel auto operating system for retailers. Our high-boss system just crossed 10,000 milestones in the number of stores deployed. In the first quarter, we successfully expanded high-boss services to commodities retailers with further penetrating categories such as supermarkets, convenience stores, and mom-and-baby stores. We also continued to upgrade HIBOS features to help machines improve auto-operating efficiency. For example, we introduced the automatic product launch function to HIBOS operation model to help our partners onboard new products more efficiently. Machines that tested this new model was able to list new products more than AT faster. Moving next to data picking. Digitized in-store picking services for the sellers. We continue to strengthen our cooperation with leading supermarkets such as Walmart and Sunflash to meet their labor needs in a flexible and cost-efficient manner. I will now turn to Dada Now, China's leading local on-demand delivery platform. For business progress, let's start with our CA, or Chairman Chen's, business. Despite the impact of COVID outbreaks in January, we still managed to optimize our services' quality and the surge of fulfillment rate increased by three percentage points year on year in the first quarter. In the supermarket cake category, we continued to work closely with partners such as Walmart and Sam's Club. We also set up new partnerships with supermarket chains such as Arby's. In the restaurant and beverage cake category, Our revenue increased by more than 40 year-on-year, among which revenues from beverage chains more than double year-on-year. We continue to provide dedicated support to beverage cases, such as Mac and Coffee and Hattie, and sign up our other beverage brands, such as Miesje Binsen, and . SME and C2C business. Thanks to the product offerings for SMEs and the C2C order sources, the number of orders fulfilled increased by more than 40 year-on-year in the first quarter. Our UAE continued to improve significantly, driven by our refined pricing strategy and improved our dispatching efficiency. Moving on to our last-mile services, we continued to leverage our flexible crowdsourcing network to provide steady support to JD Logistics supplementing its own delivery fleet. In the Chinese New Year shopping festival, we saw a significant year-on-year increase in our average daily orders for 4G logistics. Lastly, an update on Dada Now's autonomous delivery services. we continued to maintain our leading position in autonomous delivery for supermarkets. At the end of March 2023, Dadao's autonomous delivery open platform had prepared more than 100,000 on-demand delivery orders for supermarkets. Dadao's operations Operational updates for the two platforms. We continue to make steady progress in terms of both top-line revenue growth and bottom-line improvement during the first quarter. We have built up significant momentum to start the year based on our enriched product offerings. penetration in key categories, and improved user experience. We will leverage our strong partnerships with retailers and brands, our flexible LIDAR network, and our dependent alliance with JD.com to capitalize on new opportunities in the quarters to come. I will now pass the call to back to go through our financial results for this question. Thank you.
spk06: Thanks, Jeff. Before we go over the numbers, just a few housekeeping items in advance. We believe year-over-year comparisons are the most useful ways to judge our performance. Therefore, all percentage changes I'm going to give will be on year-over-year basis. All figures are in RMB, unless otherwise noted. Total net revenues in the first quarter increased by 27% to $2.6 billion. Net revenue from Dada Now increased by 20% to $749 million, mainly driven by the increases in all the volume of intra-city delivery service to chain merchants. Net revenues from JDDJ increased by 30% to $1.8 billion, mainly due to the increase in GNV. The increase in online marketing services revenue as a result of the increasing promotional activities also contributed to the revenue growth of JDDJ. Moving over to the expenses side, operations and the support costs were $1.4 billion, increase was primarily due to an increase in rider cost as a result of increasing all the volume for interest city delivery services provided to various chain merchants selling and the marketing expenses were 1.3 billion the increase was primarily due to the growing absolute dollar amount of incentives to jddj consumers and The amortization of the business cooperation agreement arising from share subscription transaction with JD.com in February 2022. P&A expenses decreased to $79 million as a result of our expense control measures and decreased the share-based compensation expenses. R&D expenses decreased to 129 million mainly due to lowered R&D personal costs as we enhanced operation efficiency. Our non-GAAP net loss attributable to ordinary shareholders of data was 182 million. Our non-GAAP net loss margin was 7.1%, improving by 17 percentage points year-over-year. As of March 31, 2023, the company had $3.7 billion in cash, cash equivalents, restricted cash, and short-term investments. In terms of the outlook for the second quarter of 2023, we expect total revenue to be between $2.8 billion and $3 billion. representing a year-over-year growth rate of 23% to 32%. In addition, we expect non-GAAP net margin in the second quarter of 2023 to continue to significantly improve and reach break-even. This concludes our prepared remarks. Operator, we are now ready to begin the Q&A session. Thank you.
spk07: Thank you. If you would like to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you'd like to cancel your request, please press star 2. If you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Ronald Kang from Goldman Sachs. Please go ahead.
spk01: Thank you. Thank you, Jeff Beck and Caroline. Mainly two questions. One is on our JDDJ GMB growth. How do we think about that into the next few quarters? We are broadly in last year's kind of COVID situation reopening a week in macro, but we also have a kind of lower base versus the initial very hyper growth pace until the first quarter of 2022. So how do we think about the GMB growth rate in the next few quarters And then the second is that you just talked about reaching confidence, reaching break-even. So what was the direct margin in the first quarter? And longer term, how should we think about either direct margin or the GMB profit potential, GMB profit margin potential? Should I translate or is this English is fine?
spk06: I think it's fine, Ronald. So thank you for the question. Let me just take that. Yeah, let me just answer the two questions. So first, in regard to the GME growth, you're right. So basically, you know, everything right now in China is back to normal. So basically, everything is in order right now. But still, you know, we are witnessing that the market consumption demand is still taking time to recover. So we still keep the same – expectation for the whole year the GME grows. It's like the second half of this year growth rate could be faster than the first half of this year because it still needs to take time to grow for the consumers demand. And also for the second quarter, for the second question, so our our direct margin of JDG businesses in Q1 is growing by 140 bps on a year-over-year basis. And for this year, we think we can grow the direct margin level for the whole year base by 180 bps on a year-over-year basis. So, which makes us like to make it like 2.5 to 2.6% on annual basis.
spk05: Got it. Thank you.
spk04: Thank you. Your next question comes from Thomas Chong from Jefferies.
spk07: Please go ahead.
spk08: Hello everyone, thank you for accepting my question. I have two questions. The first one is about our collaboration with Douyin. Can you share with us the latest progress and our expectations for this year? The second question is about JDDJ. Can you share with us the GNV mix by product categories and Thanks, management, for taking my question. My first question is about the cooperation with Daoyin. Can management share the latest updates as well as our expectation for this year? And my second question is also relating to the JDDJ side. Can management comment about the GMV mixed by product categories and the AOV outlook? And how should we think about the GMV growth for the full year if any comes? Thank you.
spk03: Thank you. You can answer. I'll answer.
spk06: Thomas, I will answer the second question and I will leave the first question to Jeff. Regarding the numbers, basically for our GM mix, because of the seasonality, our supermarket category is growing on a Q-on-Q level compared to Q4. And also our 3C category is decreasing on a Q&Q level. And we believe for the whole year base and also for the next few quarters, our 3C appliance and like all those big 3C categories, the category growth still will be growing faster and the mix will be more contributed by 3C categories on a year-over-year basis. Q1 is just a sustainability fact. And also for our overall AOV, the marketplace average order value for Q1 is further growing to 240 RMB per order. And Our supermarket category's AOV is also growing on a year-over-year basis. And for the whole year base, we still maintain the same expectation as our last earnings call. So we expect that the AOV is to continue to grow during this year. So Jeff.
spk03: OK. The service of Douyin delivery is still being tested in three or four cities in the early stage. What we see is that our share is stable and improved. Of course, the strategy and plan related to Douyin delivery is not disclosed in detail. But based on the fast network coverage and service level, including our cost advantage, Regarding our cooperation with Douyin, as of the end of Q1, its food delivery business was still under trial in nearly three cities, and the data now's market share has steadily increased.
spk10: With regard to Douyin's strategy and the expansion plan for the food delivery business, we are not in the right position to unilaterally communicate with the market due to confidentiality. However, we are confident to say that Adana will be able to obtain a considerable market share among Douyin's food delivery orders, given our strength in network coverage, service quality, and cost effectiveness.
spk05: Thank you. Thank you.
spk03: Thanks, Tomas.
spk07: Thank you. Your next question comes from Alicia Yap from Citigroup. Please go ahead.
spk12: Thank you. Good morning. I have two questions. The first question is about the guidance for the second quarter. If we use the bottom line, the bottom line, it's actually... uh uh uh uh the rate of income will increase. So, I would like to ask the management, what are the reasons in the past two months that led to this decline in our guidance? The second question is that the market consumption is higher than we expected. I have two questions. The first question is related to the second quarter revenue guidance. The low end of the guidance at 23% actually suggests 2Q top line growth will be decelerating from the first quarter level because I remember management comment earlier that You expect revenue growth to be accelerating each quarter from the first quarter onwards. Is there any reasons that prompted you to provide the low end of the guidance range? And then second question is on the sales and marketing spend. It seems to be slightly higher than what we expected. Is there any reasons on that? Is it related to the subsidy that you have for JD, DJ user or the competition is intensified? Thank you.
spk06: Okay, so let me answer the question, Alicia. So thank you for the question. So first, it's your right. Basically, as we go into March and April, the first reason is because we are monitoring the overall consumption, just like I mentioned in the previous question. So in the previous answer, so basically, we are monitoring the overall marketplace growth, not only just us, but just the offline, the channel and also the pure online marketplace and I believe you also got more information from other e-commerce platform is that basically the market consumer demand is still taking time to be back so that's why we could be more we just want to be more prudent on that and also compared to other companies we just released the earnings in early May. So basically, you know, there is a big mid-year promotion event in June. So basically, it still takes time for us. The project is still not kicking off for the June mid-year campaign. So we will watch for the mid-year campaign, whether or not it will be still consistent with our So for the second question, so basically for Q1, we still spend some money, but basically we have overall target for the net loss optimization on a year-over-year basis. So we may spend some money in sales and marketing expenses, during Q1, but still, we have well-controlled other expenses, including all those back-end expenses. So we reached the targets, just like we mentioned, and for the second quarter of this year, we will still keep our rhythm and continue to decrease our rider cost and subsidies are given on the marketplace and to reach our goal, which is break-even during the second quarter. And we are confident that we can realize the break-even target during the second quarter.
spk05: Thank you, Beck.
spk07: Thank you. Your next question comes from Wei Xiong from UBS. Please go ahead.
spk11: Good morning. Thank you for accepting my question. I have two questions. First of all, I would like to follow up on our judgment on the red line and the recovery of consumption. And I would also like to ask, because we have seen that the number of customers is still good. I would like to ask about the O2O consumption, for example, as you go out for dinner or travel, etc. Will the demand for O2O or commercial products be affected in the short term? Or is this not the main factor that affects our speed assessment? Secondly, I'd like to ask about the direct margin EQ and the improvement over the year. Can you share with us the contribution of the direct margin EQ and the starting cost to the improvement of the direct margin EQ? Based on the continuous improvement of the direct margin EQ, how should we think about the rate of sales marketing in the next few quarters? If we can realize the profit and loss of the company soon, and in the future, Thank you, management, for taking my questions. I have two questions. The first is, given that we've seen good recovery in the offline traffic, just wondering, would that have any impact on the consumer demand for the O2O retail or to the supermarket category products? or that wouldn't be a major consideration when we judge the JDDJ growth rates for the next few quarters. And second is when we talk about the improvement in the direct margin, just wondering what will be the contribution from the subsidy ratio as well as the rider cost, and also considering the continued improvement in the subsidy ratio, how should we think about the sales marketing expense ratio for the next few quarters, especially as we are turning profitable in the near term? Thank you.
spk06: Okay, so thanks for the question, Shunwei. So I will answer the second question, and I believe Jeff will answer the first question. So for the second question, so for the direct margin, actually, for Q1, we have our manufacturing rate growing by 20 bps on year-over-year basis, and for the consumer incentives, we save like 80 bps And for the operation and the rider cost, we save 40 bps on year-over-year basis. And for the whole year, we believe, first of all, we are expecting some growth for the monetary rate on a year-over-year basis. In the same time, we will save like 90 to 100 bps for the consumer incentives on a year-over-year basis. And also, we may have like 30, sorry, 60 BIP savings for the operation and the supporting cost, which includes, mainly includes the rider cost. And in the same time, for the sales and the marketing expenses, we expect the sales and the marketing expenses, the dollar amount of this expense could be growing like very single digits on a yearly basis, on a non-GAAP basis. And so the expenses as percentage of revenues will be decreasing to lower than 40% of revenue, as percentage of revenue. The comparison Comparison number for 2022 is 47% as percentage of revenue. So this is our current expectation for sales and marketing expenses. We don't think this is a major issue for us to like to have this expense item to be well controlled.
spk03: Okay. Thank you for your question. Let me answer the first question. Regarding the situation we observed in Hong Kong, let me first talk about the situation we observed in Hong Kong. From the perspective of the entire Hong Kong economy, China's Hong Kong economy and the overall consumption are still recovering, including the data of the Bureau of Statistics we saw in March, which showed a fast recovery of the rate compared to last year. So let me share with you our observations on the micro front.
spk10: So the macro economy and overall consumption are in the gradual process of recovering. And according to data from the National Bureau of Statistics, the growth of total retail sales in March accelerated notably from the first two months of the year, among which consumption for services, including catering, entertainment, and travel, grew faster than the consumption for physical merchandise. This was mainly driven by the release of pent-up demand during the pandemic.
spk03: So we think that the growth and recovery of consumer confidence and efficiency still needs some time.
spk10: And among the consumption of physical merchandise, there is some imbalance or unevenness in terms of categories. With discretionary items, including apparel and cosmetics, outpacing non-discretionary categories such as food and beverage. The consumption data from the May Day holiday last week also indicated a similar trend. Therefore, it might take some time before we see an all-around recovery in total consumption power.
spk03: 关于OTO,特别是到家的这块来看, 我们认为消费者向更快时效的消费模式的迁移, 这个是确定的。 Looking at O2O demand in specific, longer term, we believe the consumer migration towards shopping channels with faster fulfillment
spk10: is a secular and certain trend. Therefore, we firmly believe that O2O penetration among retail sales can reach a double-digit percentage in the future, supported by the growing adoption on the consumer side and the further digitalization of local merchants on the supply side. 刚才您提到的这个超市线下零流的恢复 You just mentioned the recovery of offline food traffic to supermarkets. This inevitably has some impact to the O2O sales of the supermarket category.
spk03: For us, compared with fresh grocery e-commerce marketplaces, because we have
spk10: richer product selection and border merchandise categories. So the impact on us is more muted.
spk03: Thank you for your question.
spk06: Yes, and I just want to mention that it's a dynamic transition in this dynamic situation. Instead of a static or muted, situation. So simultaneously, just like I mentioned before, we are doing some work to continue to decrease the subsidies on a year-over-year basis, which is like we expect to save 90 to 100 bps for consumer incentives on a year-over-year basis, which means that most of those Subsidies will be saved through the consumer like the the supermarket category because we usually just lost money in this category so which means that we are still very proactively to execute on track to reach break-even for the For JDDJ and also for the whole company level so which is just not a very Apple to Apple basis comparison
spk05: Understood. Thank you very much, management. Thank you.
spk07: Your next question comes from Zhu Luli from CICC. Please go ahead.
spk09: In the first quarter of 2023, we found that the revenue growth of data now has slowed down, excluding K and SME business mentioned before. What is the growth rate of last mile delivery service and what is the the expected growth rate of each business line in the whole year.
spk06: Okay, so for last month, and this is in Q1, it's still growing very rigorously, so very, very quick, because still we, for the Chinese New Year campaign and also during the first during January and February the last mile orders is abundant and also we we will you know because we are mainly provided crowdsourcing So when especially during January, the riders are usually getting affected by COVID for the JDL riders. So we will get sufficient orders from the network. And in Q2, because last year we have relatively high base, in Q2 last year, a lot of places like Xinjiang, like the old northeastern region, and also like the East China region, especially Shanghai, those regions are in lockdown. So usually last year, it's a high base for our last mile of benefits. So for this year, in QQ, we expect like flat growth on a year-over-year basis. So for the overall, like the data now, in its growth, we still expect that the growth rate will be higher than last year with not any like large contribution from Douyin. It could be another like potential other resources.
spk09: I understand. Thank you very much.
spk03: I'll add some color on the cost and margin front.
spk10: Since February this year, the overall labor supply and flexible employment segment has been favorable, and our rider supply has been sufficient. In Q1, the average daily active riders grew by about 40% year-over-year.
spk03: Due to the rapid growth of the overall order volume and the increase in the number of riders, The fast order volume growth coupled with sufficient rider supply drove our unit delivery cost to decrease on a like-for-like basis.
spk10: And we expect the delivery cost to continue to go down year over year, which will serve as an important contributing factor to the margin improvement of the whole group. Thank you.
spk05: Thank you.
spk07: Once again, if you'd like to ask a question, please press star 1 on your telephone and wait for your name to be announced. Your next question comes from Wei Xiang from Mizuho. Please go ahead.
spk02: Hey, good morning, Jeff, Caroline. Thank you for accepting my question. I want to ask, recently we saw at the entrance of the 10 billion campaign in Jindong, it seems that we haven't seen the inventory of Jindong Daojia. I want to ask again, Thank you. I'll translate it for myself. So our recent check shows that in JD's 10 billion campaign entry point, we don't see any JDDJ inventory, right? Can management comment on that, right? Whether JD's traffic allocation to that 10 billion specific campaign is as expensive to JDDJ, right? Or are we working on a backend and to eventually join the program? Thank you.
spk03: Okay, Nick. I'd like to answer this question. Thank you for your question. Indeed, in the past two months, the product and operating team of Jindong have been working together to promote the 100-day subsidy system to support the customers of JDBJ. We use RBS to achieve the ability of pricing, and to prepare the business for the 100-day subsidy for small and medium-sized products.
spk10: Thank you for your question. In the recent two months, we have been cooperating with JD's R&D and operational teams to upgrade the RMB 10 billion subsidy program, including rolling out location-based price comparisons of ShopNow products. So we have to pave the way for ShopNow products to launch in the 10 billion RMB subsidy channel in the future.
spk03: Based on the advantages of local businesses, JTBJ's products will be launched in a few days, and will be able to get an external exposure from JTBJ. The product range will be based on 3C and some high-end fast-selling products.
spk10: Leveraging our retailer partners' strength in the supply chain, ShopNow is expected to participate in the $10 billion subsidy program soon to gain additional traffic exposure on the JD app. And in terms of categories, we will focus on the consumer electronics and the large ticket size FMCG products.
spk03: Since the main sources of traffic for the shop now is from the search results and the nearby tab, the impact of the RMB 10 billion subsidy campaign
spk10: That is limited.
spk05: Thank you very much. Thank you.
spk04: Thank you. There are no further questions at this time.
spk07: I'm going to hand back to Ms. Dong for any closing remarks.
spk13: Thank you, Operator. In closing, on behalf of the Data Management Team, we'd like to thank you for your participation in today's call. If you require any further information, please feel free to reach out to us directly. Thank you for joining us today. This concludes the call.
spk07: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
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