Dada Nexus Limited

Good morning, ladies and gentlemen, and thank you for standing by for DADA's second quarter 2024 earnings conference call. At this time, all participants are in 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 will now 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 our second quarter 2024 earnings conference call. On the call today from DADA, we have Mr. Henry G. Mao, CFO. Mr. Mao will talk about our operations, company highlights, and the financials. He will be available to answer your questions during the Q&A session. Before we begin, I'd like to remind you that this conference call contains forelooking statements. Please refer to our latest specific hardware statement in the earnings precedence list on our IRY site, which applies to this call. Also, during this call, we will discuss certain non-tax financial measures. Please also refer to our earnings precedence list, which contains the reconciliation of non-tax measures to the comparable gas measures. Finally, please note that, unlike otherwise stated, all figures mentioned during this conference call are in R&D. It is now my pleasure to introduce our CFO, Mr. Mao. Henry, please go ahead.

Thank you, Caroline, and thank you all for joining us. In the second quarter of 2024, we delivered high-quality results. For JDNOW, Both monthly transacting users and orders through the JD app recorded over 100% year-on-year growth in the quarter. Meanwhile, the penetration of JD Now among JD users continues to increase sequentially. For DataNow, our local on-demand delivery platform, revenue growth in the first half of the year exceeded 50% year-on-year. Driven by the overall improvement in operational efficiency, our non-GAAP net loss margin narrowed sequentially in the second quarter. Specifically, Data Group's total net revenues in the second quarter were RMB $2.3 billion, The year-on-year change was mainly due to the continued review and adjustments of the JDNow business, starting from the beginning of this year. Net revenues from JDNow were RMB $912 million in the quarter. Net revenues from DataNow increased by 47% year-on-year to RMB $1.4 billion. In the first half of the year, Net revenues of data now increased by 51% year-on-year to RMB 2.6 billion, mainly driven by the continuous expansion of new customers and the increased penetration of existing partners in our PA business. Non-GAAP net loss in the second quarter was RMB 142 million, sequentially improving by RMB 53 million. This was mainly due to our strategic refocusing on core businesses, which is gradually bearing fruit. Down gap net loss ratio in the second quarter was 6.1%, sequentially narrowing by 1.8 percentage points. Now let's go through the operating highlights for two platforms, JDNOW and DataNOW. Starting with the JDNOW. After our brand update in May 2024, we officially announced the first brand ambassador of JD Now in July in an effort to further enhance our brand image. As witnessed by Olympic champion hurdler Liu Xiang, JD Now showcased its industry-leading delivery speed and deepened its brand image of quality merchandise and instant delivery. During the 2024 Paris Olympic Games, we conducted a series of brand promotion and marketing campaigns, echoing users' game-watching and shopping enthusiasm, cheering on the Olympic athletes by providing users with on-demand shopping experience with delivery as fast as nine minutes. For instance, we launched a bill-waving for celebration campaign offering 2024 randomly selected orders free of charge every time Team China claimed a gold medal, and a late-night feed channel providing the nighttime audience with rich selections of snacks and beverages. We are pleased to see how well these efforts have resonated with our customers. In the second quarter, we remained focused on driving growth on the JD app, increasing user mindshare, as well as continuously enriching supply to better serve users' diverse needs for on-demand retail. On the GMAT side, We expanded the geographic coverage of the JD Now section on the JD app nationwide and accelerated penetration among JD Plus members to reach more JD users. We launched a new JD Now section in the central area of the JD app home page in May 2024. Enabling products and merchants on JD Now to gain incremental exposure Earlier in August, following our operations in the first batch of 39 CDs for more than two months, we further expanded the service coverage of the JDNOW section nationwide, delivering more users with the convenient JDNOW on-demand retail services right to their doorsteps. Meanwhile, we introduced exclusive benefits such as price discounts for JDplus members. to engage them to experience the convenient on-demand retail service of JD Now and gain their mind share. In June 2024, the number of average JD Plus members who placed orders on JD Now increased by 40% as compared with March 24. On the supply side, We took initiatives on five fronts to comprehensively enhance our supply capability. In terms of store coverage, we continue to expand our product offering in existing categories, such as convenience stores and consumer electronics. In the convenience stores category during this quarter, JD now depend its cooperation with Meijia, the largest convenience store operator in China in terms of store count, with over 5,000 stores on board. And in July, we launched over 1,000 stores of internationally-renowned convenience store brands, such as Roses. In addition, in the consumer electronics category, to support the launch of the JDNOW section, we made further progress in essential accessories to better meet users' immediate needs. For instance, we initiated new partnerships with leading brands, such as Python, a renowned digital accessories brand in China, and deepened cooperation with existing partners, such as Ugreen, a leading smartphone and tablet accessory brand in China. During the quarter, the number of transacting stores in consumer electronics category increased by more than 10,000 sequentially. In our efforts to boost price competitiveness, we continue to enhance capabilities and reinforce users' perceptions of JTNL's value for money offerings. In May, we launched the Top Rents for RMB 1 Yuan section on the landing page of the JDNOW tab, offering consumers more than 10 million items of value-for-money products priced as low as RMB 1 Yuan. In May, the 7-day repeat purchase rate of users who purchased products from this section was 6 percentage points higher than that of the entire JDNOW tab. In terms of inventory, in June, we launched the Treasures of the Store tab in the supermarket category, featuring curated and reliable flagship SKUs in product categories such as fresh produce offered by leading supermarkets. Going forward, we will continue to explore more opportunities with supermarkets for the Treasures of the Store tab and highlight differentiated product offerings. On the content side, we continue to enrich product information and improve product attractiveness. In May, we added the product setting points, promotional discounts, and other decision-useful information to search results and the main product images, which increased the click-through rate of search results by over one percentage point and the conversion rate by over 2 percentage points. On the extra service side, we continue to improve the fulfillment experience. In the second quarter, the average fulfillment time of JD Now's on-demand orders delivered by DataNow shortened by 15% year-on-year. In May, we launched the on-time delivery guarantee service for our customers on the JD app. which automatically compensates users with a no-threshold coupon when order is fulfilled more than 10 minutes later than the estimated delivery time, showcasing our competence in the continuous improvement of delivery speed. In addition, in May, we joined hands with Highline Homes and other menswear brands to take the lead in launching free try-on service and apparel on-demand retail industry. Enabling consumers to enjoy free shipping provided by brands of returned orders if they find the size or style unsatisfactory after fitting. Following the launch of the service, the conversion rate of the related brands increased by more than 10%. While we continue to implement the above-mentioned comprehensive measures, the penetration of JDNOW on JD users continue to increase with accelerated mindshare growth. Our store density and supply quality continue to improve, resulting in accelerated order volume growth. With the launch of the JDNOW section at the center of the JDF homepage, In the second quarter, our average daily unique visitors through the JD app increased by over 70% year-on-year, while user conversion rate was up over 20% year-on-year, driving the average daily paying users to increase by over 100% year-on-year, excluding the impact of business adjustments. In terms of user stickiness, During this quarter, the 30-day repeat purchase rate of users through the core JD app channel increased by over 10 percentage points year-on-year, excluding the impact of business adjustments. Specifically, the 30-day repeat purchase rate of users of the newly launched JD Now section exceeded 50% in May and June. In April through June, the number of high-frequency users through the JD app channel increased by over 100% year-on-year, excluding the impact of business adjustments, and accelerated from month to month, contributing to the improvement in overall repeat purchase rate. In addition, we continued to improve user satisfaction in the second quarter, demonstrated by a decrease in cost per order or CPO by over 10% year-on-year. On the supply side, we continue to expand our offering. By end of June, the number of operating stores increased by nearly 70% year-on-year. The daily average number of transacting stores during the quarter increased by over 80% year-on-year. At the end of June, the proportion of highly-priced competitive products increased nearly 7 percentage points from a year earlier, bringing the total number of attractively-priced store-specific SKUs to 100 million. Driven by the growth of user base and a stronger user mindshare, as well as the continuous enhancement of supply, The number of online orders through the JD app channel increased by over 100% year-on-year in the second quarter, more than 30 percentage points faster than that in Q1. The peak day online order volume of JD Now reached a new high during the quarter. Excluding the impact of our business adjustment, JD Now's average daily paid order volume increased by over 50% year-on-year in this quarter. Next, I'd like to give you an update on DataNow, a leading local on-demand delivery platform open to merchants and individual sellers across various industries and product categories. In the second quarter, DataNow maintained rapid growth driven by the continued increase in the penetration of restaurants and beverage KAs. Net revenues from that add-on increased by 47% year-on-year to RMB 1.4 billion in the second quarter. The earnings released distributed earlier. We added disclosure of the number of orders delivered and the gross billings of our on-demand delivery business. The number of orders delivered includes orders directly placed through DataNow by merchants and individual senders, and orders fulfilled by DataNow for merchants on JDNOW. Those billings refer to the gross amount of service charged for above-mentioned orders of the on-demand delivery services, net of value-added tax. We believe that this measure is more representative of our business scale and more comparable to our peers. The number of orders delivered by DataNow in the second quarter rose 21% year-on-year to $679 million. And the gross billions of DataNow grew by 23% year-on-year to RMB $3 billion. In the first half of the year, net revenues from DataNow increased by 51% year-on-year to RMB 2.6 billion, mainly thanks to the continuous expansion of new K customers, as well as increased penetration of existing customers. The number of orders delivered by DataNow in the first half was up 15% year-over-year to $1.2 billion, and the gross billings of DataNow were up 15% year-on-year to RMB $5.5 billion. Our KA, or chain merchants, business saw an overall revenue growth of nearly 50% year-on-year in the second quarter, of which net revenues of restaurant and beverage KAs grew by nearly 80%, as to a significant growth in the number of new stores, which more than doubled year-over-year. In terms of beverage KAs, we deepened our cooperation with brands such as Luckin Coffee and Chachi, For restaurant KAs, we continue to increase penetration of top customers, such as YamChina, while then doubling the number of fulfilled orders and revenues of the subcategory. This concludes our operational updates for the two platforms. Overall, during the quarter, we remain committed to our high-quality growth strategy. The continuous enhancement of user experience and the supply of the JD now resulted in increased consumer engagement and a rapid order of growth on the JD app. Meanwhile, data now saw further gains in the market share and a strong revenue growth momentum, thanks to increased penetration of restaurants and beverage KAs. Going forward, we will continue to focus on high-quality development It has user experience across the board to strengthen our efforts to increase the mind share of our on-demand retail business. And the further left is synergies between the on-demand retail and the on-demand delivery platforms. With that, I will now go over the financials for the quarter. Before we go over numbers, just a few housekeeping items. We believe year-over-year comparisons are the most useful way to evaluate our performance, and as a result, our percentage change that I'm going to give will be on a year-over-year basis, and all figures are in RMB, otherwise noted. In addition, please note that we changed the presentation of the disaggregation of our net revenues this quarter to better reflect our business lines. with prior period financials retrospectively recast to confirm to current period presentation. Net revenues from JDNow include three line items, namely commission fee revenues, online advertising and marketing services revenues, and fulfillment services and others. And net revenues from DataNow also include three line items, namely intra-city delivery services revenue, last mile delivery services revenue, and other revenues. The total net revenues in the second quarter was $2.3 billion. Net revenues from JDNOW was $912 million, mainly due to a decrease in online advertising and marketing services revenue and a decrease in fulfillment services and other revenues. as a result of the full rollout of our delivery fee waiver program for orders exceeding RMB 29 since February 2024. NAREP use from DataNow increased by 47% to $1.4 billion, mainly driven by an increase in order volume of intra-city delivery services provided to various chain merchants. For the first half of 2024, NAM revenues from data now increased by 51% to $2.6 billion. Specifically, revenues from intra-city delivery services and revenues from last mile delivery services increased by 51% and 64% in the first half of 2024, respectively. Moving over to cost and expense side, Operations and support costs in the second quarter were $1.7 billion. This increase was primarily due to an increase in rider costs as a result of the increased order volume of intra-city delivery services provided to various chain merchants, partially offset by a decrease in online advertising and marketing services costs. Selling and marketing expenses decreased to $782 million, primarily due to a decrease in promotion activities initiated by us on the JDNOW platform. General and administrative expenses decreased to $48 million as a result of a decrease in amortization of intangible assets arising from the acquisition of JDNOW in 2016. Research and development expenses decreased to $85 million, meaning attributable to a decrease in research and development personnel costs. Long-gap net loss was $142 million, and long-gap net loss margins were 60.1%, sequentially narrowing by 1.8 percentage points. As of June 30, 2024, we had $3.6 billion in cash, cash equivalents with free cash and short-term investment. And pursuant to our $40 million US dollars share repurchase program announced in March 2024, we had repurchased approximately $9.8 million US dollars of ADSs as of June 30, 2024. This concludes my prepared remarks. Operator, we are now ready to begin the Q&A session. Thank you.