Dingdong (Cayman) Ltd ADR

Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to the Ding Dong Limited First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please note that the event is being recorded. I will now turn the conference over to the first speaker today, Nikki Jang, Director of Investor Relations. Please go ahead, sir.

Thank you. Hello, everyone. Welcome to Ding Dong's first quarter 2025 earnings call. With me today are Mr. Changlin Liang, our founder and the CEO, and Mr. Song Wang, our CFO. You can refer to our first quarter 2025 financial results on our IR website at ir.m100.me. You can also access a replay of this call on our IR website when it becomes available a few hours update conclusion. For today's call, management will go through their prepared remarks, which will be followed by a question and answer session. 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. As we will be making forward looking statements, please note that all numbers stated in the following management prepared remarks are in R&B terms. And we will discuss non-GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported in our earnings release and the findings with the SEC. I will now turn the call to our first speaker today, the founder and the CEO of Dingdong, Mr. Liang.

Thank you, investors, analysts, and friends of Dingdong Maicai. Welcome to the Q1 financial reporting session of Dingdong Maicai in 2025. As of Q1 2025, Dingdong Maicai has achieved profit under the standard of long gap for 10 consecutive seasons. It has also achieved profit under the standard of gap for five consecutive seasons. Its revenue has also achieved the same growth for five consecutive seasons. Stable growth and profit potential have led the company to move forward Hello, everyone.

Thank you for joining the Ding Dong earnings call for Q1 2025. As of the first quarter of 2025, we have achieved non-GAAP profitability for 10 consecutive quarters and GAAP profitability for five quarters. Additionally, we've seen positive year-on-year revenue growth for five straight quarters. This consistent growth in both scale and profitability has undoubtedly laid a strong foundation for our future development. In today's call, I'll outline our operating performance in Q1, offer a thorough analysis of our product status and discuss recent strategic insights.

In the Q1 of 2025, Dingdong Grocery achieved a GDP of 59.6 billion yuan, a growth of 7.9%, a revenue of 54.8 billion yuan, and a growth of 9.1%. Under the Long Gap standard, the net profit is 0.3 billion yuan, and the net profit rate is 0.6%. Under the Gap standard, the net profit is 8 million yuan, and the net profit rate is 0.1%. Based on the year-round profit in 2024, we will continue to maintain a profitable and growing trend.

In the first quarter of 2025, Ding Dong reported a GMV of 5.96 billion RMB, a 7.9% increase compared to the previous year. Revenue for the same period reached 5.48 billion RMB, a rise of 9.1% year-on-year. Non-GAAP net profit stood at 30 million RMB with a non-GAAP net profit margin of 0.6%. GAAP net profit was 8 million RMB with a GAAP net profit margin of 0.1%.

Building on the profits from 2024, we successfully achieved both profitability and growth in scale in the first quarter.

The first quarter of 2025 marked the commencement of Dingdong's implementation of the 4G strategy, which emphasizes good users, good products, good services, and good mindshare. Significant adjustments have been made to the company's objectives, organizational structure, and evaluation methods, and we continue to experience transitional challenges. Nevertheless, even amidst these difficulties, we have achieved year-on-year performance growth.

The growth of the industry mainly comes from the improvement of the active users in the existing area, as well as the further improvement and optimization of our business power. In terms of business growth, the number of orders in this quarter has increased by 12.1%. The number of active users in Japan has exceeded 2 million people. foreign foreign 2.4% proved that our continuous optimization in product development, operation capability, and app display recommendation, products are more attractive to users. Users are more comfortable from browsing to purchasing. In terms of user contact, the monthly order frequency reached 4.1 times and increased by 2.4%. We have created a high-quality shopping experience for users, helping users to form high-quality service habits. The growth of these data shows that the 4G strategy of good users, good products, good service, and good quality has reached a good start. People often say that the good start is half of success. We believe that we are doing the right thing, and will start the trend of development to achieve better performance.

The growth in performance was primarily fueled by higher user engagement in existing markets and our continued improvement in product development capabilities and optimization efforts. This quarter, the order volume rose by 12.1% year on year, with the average daily active user count surpassing 2 million, a 4.5% increase year on year. This reflects strong market demand, enhanced appeal of Digno's products, and our upgraded product development capabilities. Regarding user conversion, the average daily transaction users exceeded 830,000, an 11.1% year-on-year increase, owing to our effective strategies in user acquisition and traffic conversion. This conversion rate for ordering users improves by 2.4 percentage points year-on-year, thanks to the continued enhancement in product development, operational efficiency, app-based recommendations, as well as the appeal of our offerings. This has created a more seamless transition from browsing to purchasing. users' stickiness continue to increase with average monthly order frequency rising to 4.1 times, an increase of 2.4% year-on-year, driven by our superior shopping experience that includes both products and services, which helps users cultivate a habit of frequent repurchases. The growth in these metrics mark a promising start of our 4G strategy, which emphasizes good users, good products, good services, and good mindshare. People often say that a good start is half the battle, We firmly believe that we're undertaking the difficult yet right course of action, which will undoubtedly activate a positive development flywheel and deliver better performance.

On the other hand, in terms of the region, the Jiangzhe-Hu region is still the core source of our growth. In this quarter, the GDP of the Shanghai region increased by 5.0%, and the GDP of the Zhejiang and Jiangsu regions increased by 17.8% and 13.9% respectively. In the Jiangzhe-Hu region, all cities achieved the same growth, including Wenzhou, Huzhou, Nantong, Jinhua, and other cities achieved an annual growth of more than 50%. In addition, it is worth mentioning that Huizhou and Foshan in the Guangzhou area have also achieved more than 40% growth. This year, we will continue to accelerate the development of the front-end warehouse network layout in the Jiangzhou-Hu area. Following QEMO, the company has opened 14 new front-end warehouses, focusing on the precise layout and density optimization of the front-end warehouse network in the core area. We have created a more efficient business system and a more fair cost structure, promoting the overall operating efficiency to continue to improve.

Regionally, the Jiangsu, Zhejiang, and Shanghai regions remain our primary growth drivers. In this quarter, Shanghai's GMV rose by 5% year on year, while Zhejiang and Jiangsu saw increases of 17.8% and 13.9% respectively. All cities within these regions reported positive year on year growth. Notable mentions include Wenzhou, Huzhou, Nantou, and Jinhua, each surpassing 50% growth. Additionally, Huizhou and Foshan in the Guangzhou Shenzhen area experienced over 40% year-on-year growth. This year, we are further accelerating the deployment of our frontline fulfillment stations in Jiangsu, Zhejiang, and Shanghai. By the end of Q1, we had established 14 new frontline stations. By strategically optimizing the layout and density of our frontline fulfillment network in key areas, we aim to create a more efficient fulfillment system and enhance our cost structure, thereby continually improving overall operational efficiency.

In the fourth quarter of last year, the company and the business united to promote the quality of the products and develop the difference between good products and bad products. After determining the four-level strategy of good users, good products, good service, and good intentions, we established the technical goals and growth relationship that match the strategic tasks. In the first quarter, we established the technical reward system with the technical reward system developed by the difference between good products and bad products through the adjustment of the price of the product department. We established the responsibility system for the whole life cycle of the product. In the last quarter of 2024, the entire company aligned around a share understanding, which is we work together to improve product quality and develop differentiated products.

After determining the 4G strategy of good users, good products, good services, and good mindshare, We established performance goals and organizational structures that support these strategic objectives. As a result, in the first quarter, more and more differentiated and good products appeared on our app and gained user popularity, driven by methods such as restructuring the product business unit, establishing an incentive scheme that rewards the development of differentiated and good products, creating a product lifecycle accountability system, having core executives visit product sources, and requiring product developers to respond to consumers' negative reviews personally.

With our meat products as an example, the hard work of the six meat factories in Dingdong has driven our product innovation. After building up a trusted Japanese brand, we have re-designed and focused on healthy and delicious lotus seeds and high-end black pig brands. In addition, we have also started to launch new products with high-end products, focusing on healthy trends, selecting high-quality raw materials, and developing healthy and delicious Japanese snacks. For example, lotus seeds, Australian goose, beef steak, With its high quality Australian raw materials and unique market knowledge, it has won the Golden Radish Award of our Good Products Festival. Since its launch in early March, it has quickly gained the love of consumers. The single product sales volume is about 3.4 million yuan. At the same time, the good products of X-E-Hua have attracted good users. The order of goods including He Huatian, Australian Gu Si, and He Niu Niu Pai Cui LV has reached 139 yuan. For instance, our meat products showcase the strength of our six self-operated meat factories, which drive our product innovation.

After establishing the trusted Daily Fresh brand, we introduced the He Huatian brand, emphasizing health and taste, along with the premium black pig pork label, Black Diamond Family, Furthermore, we began expanding our focus on the deep-processing sector within the leisure goods segment, emphasizing health trends, selecting premium raw materials, and crafting healthy, tasty daily preparations and snacks. For example, our Huahuaqian Australian grain-fed Wagyu beef cribs recently won the Golden Carrot Award during our Good Product Competition, thanks to its top-quality Australian Wagyu beef and distinctive cheese flavor. Since its early March launch, it has rapidly gained popularity among consumers, achieving sales of around 3.4 million RMB. Orders that include this item recorded an average order value of 139 RMB, outperforming the company average by nearly 100%, demonstrating how good products attract good users. Our product development team prioritizes quality and meticulously examines every stage to ensure that each product meets StainDome's high standards.

Moreover, our product developers have won over users with their dedication and professionalism.

For instance, our users fondly refer to our product creators as Guava Sister and Sorry Fish Brother on social media because they developed the acclaimed tree-ripe rich cream guava and spring fresh wontons and sorry fish and shepherds purse, both of which won awards in our product competition.

It is widely acknowledged that in the present consumer environment encounters substantial challenges.

the instant retail sector has become markedly saturated with competitors, resulting in heightened competition. There's a common concern about Ding Dong maintaining profitability amidst fierce rivalry, and there are apprehensions regarding the sustainability of Ding Dong as a viable entity. Faced with these competition, what advantages and opportunities do we possess

First of all, we are very lucky. In the past competition, we did not follow the mainstream, but stick to the nature of the business. We are in a mode where we are deep in the supply chain and strengthen the core area. In all stages of competition, we are steady, deep digging and wide measuring. Today, not only do we have a strong technical base, the supply chain base, but also our cash reserves are relatively sufficient and continue to be profitable. All of this continues to build the foundation of e-sports for our success in the new stage of competition.

Firstly, we're fortunate that in previous rounds of competition, we do not simply follow trends, rather we stay true to the fundamental of business, meticulously developing a comprehensive model, enhancing our supply chain, and focusing on key regions. Throughout each stage of competition, we make consistent advancements, delving deeply into our strategies and ensuring adequate resources. Today, we not only possess a robust technological accumulation, and a solid foundation within our supply chain, but also our cash reserves are healthy, enabling us to sustain profitability. All of these factors have established a strong foundation for us to keep succeeding in this new phase of competition.

In summary, in today's fierce competition, we have the following core advantages. First, solid power of the supply chain. The idea of e-commerce is to provide healthy and high-quality ingredients and products to consumers. From the beginning of the e-commerce, we understand that we can't just do simple transportation work or just a retail channel. Instead, we need to upgrade the quality and improve efficiency in every part of the supply chain. We are deeply involved in the production of raw materials, source procurement, logistics warehouse, sorting and packaging, food research and processing, distribution and operation, and delivery to the customer's hands. We call this strategy 1-inch-thin, 1-kilometer-thin. If we only look at the scope of operation and revenue, we may not have an advantage, but we have a strong leading advantage in the supply chain. In conclusion, in the context of today's intense competition, we have identified the following core advantages.

Robust supply chain capabilities. The company was founded to provide consumers with healthy and high-quality food ingredients. from the inception of our operations. We recognize that our role could not be limited to merely serving as an intermediary or sales channel. Rather, we had to delve deeply into each aspect of the supply chain to enhance quality and improve efficiency. We engaged comprehensively in every stage of the process, including cultivating and producing food ingredients, sourcing, logistics, and warehousing, grading and packaging, food research and development, distribution operations, and delivery to consumers. We refer to the strategic approach as narrow and deep, as narrow as an inch, yet as deep as a mile. Our operational product categories and revenue scale may not highlight a competitive advantage, but we have a substantial lead in enhancing and strengthening the supply chain. Importantly, throughout the transformation and upgrading of our supply chain, we have established a robust IT system that enables us to continuously optimize costs, enhance efficiency, and replicate our supply chain capabilities across various regions and sectors.

Recently, we have established a strategic partnership with the DFI Group in Hong Kong. DFI is a leading global trading and retail company. In the past, they had a lot of cooperation with many Chinese companies, but eventually chose to cooperate with Dingdong Maicai. They valued Dingdong's fresh supply chain capabilities and IT system capabilities, which reflected Dingdong Maicai's supply chain capabilities from one side.

Recently, we have formed a strategic partnership with the DFI Group based in Hong Kong. DFI is a recognized leading global trading and retail company. While they have previously explored cooperation with numerous Chinese companies, they ultimately chose to partner with Dingdong. Their decision is driven by Dingdong's robust fresh grocery supply chain capabilities and advanced IT system capabilities. This, in turn, is a testament to our supply chain effectiveness.

Due to our robust supply chain capabilities, we have evolved beyond a conventional retail company, thus positioning ourselves to withstand the intense competition within the instant retail market

As time progresses, the advantages of our supply chain will become increasingly apparent, generating profit margins that substantially surpass those of instant retail enterprises.

Second, clean and diversified positioning. Our Tonghang is basically positioned as an online supermarket. Dingdong is focused on ingredients and food. Tonghang's strategy is basically one kilometer wide and one inch shallow. Dingdong's strategy is completely different. We are one inch narrow and one inch deep. Tonghang still relies on price tags to grab traffic from competitors. Dingdong relies on good quality and good quality to attract users. Distinct positioning.

Our competitors are mostly positioned as online supermarkets, while Ding Dong focuses on quality ingredients and products. They mostly follow a strategy that is wide as a mile, yet as shallow as an inch, in contrast with our approach of being narrow as an inch, yet deep as a mile. Competitors rely on price wars for customer traffic, whereas we prioritize quality and service to attract users. Operational data shows that we outperform competitors in key metrics of user trust and quality, such as ALV, repurchase rate, gross profit margin, and satisfaction. While some see us as a basic retail service, we are a full-chain fresh grocery supply chain company driven by digital technology.

As mentioned, we have established strategic cooperation with DFI in Hong Kong. At the same time, in the international market, we are establishing deep cooperation with Hong Kong's Hong Kong TV Mall, Singapore's Fair Plus, and China's Linru Group. On the one hand, we provide advanced IT capabilities for these excellent Linru companies, and we also bring China's beautiful food and video to the overseas market.

but a robust ecosystem. As mentioned, we have established a strategic partnership with DSI in Hong Kong. Concurrently, in the international markets, we are fostering in-depth cooperation with HKTV Mall in Hong Kong, Fair Price in Singapore, and retail groups in Central Asia and the Middle East. On one hand, we provide advanced IT capabilities to these excellent retail partners to enhance their fresh grocery supply chain efficiencies. Simultaneously, we also introduce China's high-quality ingredients and culinary offers to overseas markets.

In the domestic market, we have formed strategic partnerships with numerous agricultural and food research and development institutions and agricultural and food companies.

We use our retail and supply chain capabilities to empower these organizations to foster and foster collective growth.

In China, we have also reinvigorated Gu Yu Food Group. In the development and production of pre-made dishes, meat products, grain products, and bean products, we are in the top position in China. Gu Yu's food has been sold to many channels other than Dingdong Grocery, and has been growing rapidly in terms of revenue and profit. For example, everyone knows that Li Jingji is a world-renowned food seasoning company. Li Jingji used to sell his products to retail companies. Internally, we have incubated Gu Yu Food Group, a leader in China for the R&D and production of pre-prepared meals, meats, grains, and soy products.

GUI's products are distributed through various channels beyond Dingdong, showing consistent rapid revenue growth and profit margins. Lee Kum Kee, a world-renowned food seasoning company, has traditionally sold its products to retailers. Now, we are the sole provider of pre-prepared meals to Lee Kum Kee, facilitating broader overseas distribution of our products. This collaboration highlights our product capabilities and future development potential.

Organizational ability and implementation.

Since its inception, Dingdao has faced fierce competition from both startups and large companies. Eight years later, most rivals have vanished, while giants with similar businesses continue to incur losses. Dingdao not only survived, but also achieved profit for 10 consecutive quarters, demonstrating our competitiveness and vitality.

Eight years have passed. The colleagues who started the business together today are basically still on the front line with us. At different stages, we have different challenges, and we have different strategic adjustments. With the adjustment of the company's strategy, we also have the adjustment of the organizational structure. The management team can quickly adjust according to the company's requirements. This year, in order to further enhance the public opinion ability and establish a difference, we have proposed a good user, good product, good service, and good new 4G strategy. With the adjustment of the strategy, we have adjusted the organizational structure in a large area. The core executives of the company have taken on the task of developing the business and building the corresponding public opinion ability. All core executives have a large framework and have no complaints, and they are responsible for new responsibilities. It's been eight years since we started our business and the colleagues who join us on the journey are still actively working alongside us today.

Over time, we face various challenges that have to require us to make some strategic changes. As part of evolving our strategy, we have also restructured our organization to help our management team adapt quickly to the changing needs of the business. This year, to strengthen our supply chain and create competitive advantages, we have introduced the 4G strategy focusing on good users, good products, good services, and good mindshare. This shift has led to a significant overhaul of our structure, where our core executives have taken on new roles in product development and improving our supply chain capabilities. Everyone on the team is focusing on the big picture, embracing the new responsibilities with enthusiasm. After five months of hard work, we've begun to see some great results. Ding Dong is rolling out more unique and high-quality products, our users are happier than before, and our supply chain efficiency is steadily improving. As we continue moving forward, these benefits are becoming even more obvious. This really highlights our strong organizational ability to adapt and bounce back in the face of adversity.

Because of the different positioning of e-commerce and our unique advantages, we believe that we will be undefeated in all kinds of competitions. And as time goes by, our advantages are becoming more and more obvious. Especially with the gradual adjustment of this strategy, we will quickly exit the shock zone brought by the change. Soon there will be a large increase in sales, more innovation in business, and further improvement in profitability.

Due to Dingdong's distinct positioning and unique advantages, we're confident that we can remain competitive in various competitive landscapes. Over time, our advantages will become increasingly evident. Particularly as this strategic adjustment is progressively implemented, we anticipate a swift recovery from the short-term challenges induced by the transition, leading to a substantial enhancement in sales volume, increased innovation within our business practices, and further optimization of our profit margins.

In the end, I would like to remind everyone of the perspective of Q2 in 2025. We expect that Q2 in 2025 will continue to maintain the same scale of growth and continue to achieve the profit of the non-GAAP context. We are still in the period of change, but this period will pass quickly. By the end of this year, the profit and loss advantage will be very obvious. We expect that at that time, the scale of performance and profit and loss will grow significantly. My speech ends here. Thank you. Next, let's ask CFO Wang Song to introduce the financial situation of the company.

Finally, I'll provide an update on the outlook for Q2 2025. We anticipate maintaining year-on-year growth in scale and achieving non-gap profitability for the second quarter of 2025. We're still in the transitional phase of transformation, but this period will pass quickly. By the end of the year, Dingdong's advantages will be distinctly evident. We expect significant growth in both performance scale and profit margin by then. This wraps up my speech. Thank you. Now, I would like to invite our CFO, Wang Song, to discuss the company's financial performance.

Thank you, Mr. Liang.

And hello, everyone. Before I review our financial performance for the first quarter, please note that all of our figures are in RMB.

In the Q1 of 2025, Dingdong Maicai achieved a revenue of 54.8 billion yuan, a growth of 9.1% in the same ratio, and maintained a growth of the same ratio for five consecutive seasons. Non-GAAP interest rate is 0.3 billion yuan GAAP interest rate is 8 million yuan Operating cash flow is 0.85 billion yuan The company continues to maintain positive profits and positive operating cash flow After QEMO, our actual free fund interest is 28.9 billion yuan Continue to maintain competitive growth This year, we will firmly carry out a value proposition of 1 km long and 1 km deep Continue to grow and satisfy consumers with good products and good services

In the first quarter of 2025, Dingdong reported a revenue of 5.48 billion RMB, reflecting a 9.1% year-over-year increase and marking five consecutive quarters of positive growth. Non-GAAP net profit was 30 million RMB, and GAAP net profit was 8 million RMB. and operating net cash inflow reached 85 million RMB. The company continued to demonstrate positive profitability alongside positive operating net cash inflow. By the end of Q1, after accounting for short-term loans, our actual funds amounted to 2.89 billion RMB, indicating a continued net increase. This year, we're committed to executing our narrow yet deep value proposition, intensifying our efforts to satisfy consumers' through quality products and services while establishing a unique path focused on quality, stability, and consistent supply capabilities.

接下来我们来看一下QE的具体财务情况。 QE的营收为54.8亿元,同比增长9.1%, GNV为59.6亿元,同比增长7.9%, 日均GNV同比增速9.1%, 我们会坚定地用好商品吸引更多消费者,提升用户联系, Q1, the transfer rate of lower-end users has reached a new high this year, with an average of 64%, with an increase of 4.8%. The number of lower-end users per month has increased by 10.3%, and the number of members per month has increased by 12.6%. At the same time, in cities such as Wenzhou, Huzhou, Nantong, Jinhua, etc., we continue to maintain a high growth trend, with an increase of more than 50%. Next, we'll analyze the first quarter's financial performance.

Revenue reached 5.48 billion RMB, a 9.1% year-on-year growth. GMV stood at 5.96 billion RMB, a 7.9% increase from the previous year. While the average daily GMV rose by 9.1%, We leverage our products to attract more consumers and boost user engagement. The conversion rate of transacting users in Q1 reached a record high in recent years, averaging 64%, an increase of 4.8 percentage points year-on-year. The number of monthly transacting users rose by 10.3% year-on-year, and monthly transacting members grew by 12.6% year-on-year. Additionally, cities such as Wenzhou, Huzhou, Nantong, and Jinhua demonstrated a strong growth momentum, achieving over 50% year-on-year growth.

Furthermore, our 2B business has shown solid growth, boasting a revenue increase of 64.6% year-on-year and a rise in revenue share of 1.4 percentage points year-on-year. At the same time, we will continue to return the value of growth and optimization to consumers on the products. In the future, we will continue to invest in good products, and use the spirit of the craftsman to deeply study and study our core competitiveness. In addition, thanks to our ability to predict and operate, we can more accurately match the needs of users, improve the performance efficiency of the products, and reduce the ability to balance. The overall growth time is an average of 11.7 days, Gross profit margin was 29.9%, down 0.7 percentage points from last year.

This decline in gross profit largely stems from our increased investment in high-quality products. The introduction of more quality items and our commitment to removing less favorite products Additionally, consumers benefited from our dedicated efforts in optimizing the supply chain. Moving forward, we'll persist in nurturing quality products, focus on in-depth research with the Crossman dedication, and strengthen our core competitive edge. Moreover, by utilizing our intelligent forecasting and operational scheduling capabilities, we aim to better meet user needs and improve the efficiency of our inventory turnover and defect management. The average turnover days improved to 11.7 days, a 2.8% increase in efficiency year-on-year. While the loss rate remained stable, the out-of-stock rate for leading products decreased by 1.8 percentage points compared to last year.

QE's turnover rate is 22.9%, which is a 0.1% increase in total. The turnover rate increase is mainly due to the company's investment in overseas trade, which is about 0.4%. The efficiency of the domestic pre-sale business is still constantly improving. Q1's warehouse and Japanese goods volume have increased by 2.6% in the same period. Not to mention that in the past 24 years, the old warehouse and Japanese goods volume have increased by 5.3% in the same period. At the same time, we continue to provide users with spring and autumn service in the 12th year. By using the algorithm and supply chain operation ability, we can bring good service to users. Q1, Jetsudan Liyue Market has the same volume of 5 minutes, reaching 34 minutes.

The fulfillment cost rate rose to 22.9%, up 0.1 percentage points from the previous year. This increase primarily stems from the company's overseas investment, representing about 0.4% of revenue. Meanwhile, the domestic frontline fulfillment stations further enhanced their efficiency with a 2.6% year-on-year rise in average daily order volume per station for Q1. If we exclude the efforts, the effect of newly added stations since 2024, the average daily order volume at established stations saw a year-on-year increase of 5.3%. During the Lunar New Year in 2025, we also provided users with our non-closing services, leveraging algorithms and operational capabilities to deliver quality services. In Q1, the fulfillment time for ASAP orders was reduced by five minutes year-on-year, bringing it down to 34 minutes.

The sales and marketing expense rate was 2%, a decrease of 0.2 percentage points year-on-year.

Moving forward, we aim to boost our investment in customer mindshare by utilizing high-quality products to drive traffic and improve delivery conversion efficiency.

The management and development costs of QE are 5.7% and 0.2% lower than before, mainly due to the scale effect. We will continue to invest in video development, agricultural technology and technical data algorithm, not only to improve the ability of product development and digitalization of whole chain, but also to improve the efficiency of supply chain.

Management and R&D expenses represented 5.7% of revenue, a 0.2 percentage point decrease year-over-year, primarily due to economies of scale. We're committed to continuing our investment in food R&D, agricultural technology, and data algorithms, which will enhance our product development and full-chain digital capabilities, thereby boosting supply chain efficiency.

In Q1 of 2025, we achieved 0.6% of our net profit, which is 0.3 billion yuan.

Non-GAAP net profit margin was 0.6%, resulting in net profit of 30 million RMB. We also achieved a GAAP net profit margin of 0.1%.

QEMO, cash and cash-related transactions. As of the end of Q1, our cash and cash equivalents along with our short-term restricted funds and investments totaled 4.29 billion RMB.

We remain focused on optimizing capital use and our financing structure. After accounting for short-term loans, our net balance of funds stands at 2.89 billion RMB. This concludes my prepared remarks. Operator, we can now start the Q&A session.

We will now begin the question and answer session. To ask a question, you may press star then 1. on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. When asking a question, please state it in Chinese first and then repeat it in English for the convenience of everyone on the call. At this time, we will pause momentarily to assemble our roster. The first question comes from Thomas Chong with Jefferies. Please go ahead.

网上好,谢谢管理层介绍我的提问。 恭喜公司这个季度继续取得优秀的成绩。 在两种的讲话中多次强调冰冻买菜的CG的战略, 可以展开跟我们分享一下这个战略好吗? Thanks management for taking my questions and congratulations on a solid set of results. In the speech, Mr. Liang emphasized Ding Dong's 4G strategy multiple times. Can you elaborate about the 4G strategy? What changes has Ding Dong made to execute the strategy? Over the long term, what advantages will the 4G strategy provide to us? Thank you.

Thank you for your question. We all know that the sales performance of Dingdong Maicai in 2024 is not bad. But our team has been thinking about the strategy meeting at the end of 2024. The management has seriously analyzed the trend of consumers. The company is facing competition. We know the advantage of Dingdong Maicai. If we want to build a real competition wall and get long-term development opportunities, we must compete with the current peers. On the other hand, we must further develop our advantages in supply and demand.

Thank you for your question. As you are aware, we deliver a strong performance in 2024. Nevertheless, our team remains cautious. At our strategic meeting at the end of 2024, we closely examined consumer trends, competition, and Dingdong's unique strengths. We understand that to create genuine competitive barriers and secure long-term growth opportunities, we must differentiate our approach compared to our current competitors. Simultaneously, we need to maximize our supply chain advantages.

Let's take a look at the current competitive situation. At the end of the line, people often say that it's all about the four words of good province. In today's era of sufficient supply and supply, more is no longer an advantage. And three minutes of fast delivery has become the standard of the industry. It's no longer a competitive advantage. Our colleagues are basically still trying their best to reach the point of interest of the province. This is different from everyone else. We are no longer over-pursuing the province. We have a good strategy. To be specific, it's a good user, good product, good service, good quality. We are categorized as

Let's examine the current competitive landscape. We tell customers typically want more, faster, better, and cheaper. However, in today's market, where supply is ample, more no longer holds an advantage. An industry standard of 30-minute delivery has erased the competitive edge of speed. Many competitors are still fixating on cheaper. Ding Dong takes a different approach. We don't excessively pursue cheaper anymore. Instead, we have introduced what we believe is a better strategy. This encompasses good users, good products, good services, and good mindshare, which we refer to internally as the 4G strategy.

. . . . . The need for balanced development is the need for the health of the elderly. It can even be said that it is the most fundamental basis for a nation's strong development. And a share of money and a share of goods, excessive pursuit of low prices has damaged the quality of the products and also destroyed the health development of the whole industry. On the other hand, from Dingdong's own real advantage, we have been deep in the industry for a long time. Only companies like us can really do good quality.

This strategy aligns with our original intention when we started the business. Right from the beginning, our goal has been to provide children with healthy and safe food. Although circumstances have changed over time, our commitment to this principle remains steadfast. Furthermore, good quality is central to the food industry. The saying, you are what you eat, underscores the importance of healthy eating for children's growth, balanced development for adults, and overall health and longevity for the elderly. It can even be said that quality food is essential for a nation's strong development. However, you get what you pay for reminds us that an excessive focus on low prices can compromise product quality and hinder healthy industry growth. However, when we consider our strengths, our deep engagement and long-term investment in the supply chain stand out. Only companies like ours with deep roots and dedication in this area can deliver on the promise of good quality.

It's very simple. As long as you do one thing right, you can attract consumers at a low price. You can increase the sales scale. It's easy, but it's hard. It's 10,000 small things. It's a long-term process of a system. For this reason, we have co-founded the company many times. We have unified our knowledge. We have adjusted the assessment goals. For a period of time, we have not set the indicators of GNV and utilization rate. We only look at the comparison of good products and good users. We look at the recovery rate of users and care about user evaluation. We have also adjusted the production relationship, and we have constructed the original product development center on the organizational structure. In this way, the entire company has established 10 independent business departments, and the core executives of the company lead each business department. In this way, the product development team can truly leave behind its own experience. to really develop a difference-making good product. Such organizational structure adjustment also allows the whole company to really care and understand the product, understand the process of product development, and make a difference-making good product. In addition, such organizational structure adjustment also allows every branch of the company to really improve the efficiency of good product service and create value throughout the process of good product development.

Achieving cheaper is straightforward. If you maintain low prices, you can draw in consumers and boost sales. However, striving for better is far more challenging. It involves doing 10,000 small things right and demands a systematic long-term approach. To facilitate this, we have repeatedly held internal brainstorming sessions to develop a unified understanding. We have adjusted our performance metrics, and for a period of time, we're focusing solely on the ratio of quality products and satisfied users, monitoring user repurchase rates, and paying attention to negative reviews. Instead of GMV and profit margin metrics, we also reshape our fundamental challenges to internal structure. We dismantle the original product development center and integrate product development, product operation, and quality control teams into independent business units, each led by a core executive. This setup empowers the product development team to abandon conventional thinking and focus on creating distinctive quality products. Additionally, this organizational adjustment fosters a genuine commitment across the company to fully understand and enhance products, leveraging the supply chain in product development and create unique quality offerings. Furthermore, this restructuring enables each functional department to effectively support quality products, continuously boost efficiency, and create value throughout the product development process.

There will be a period of change that will force all of us to step out of the comfort zone. It will also affect the rapid growth of scale and revenue in a short time. But if we really want to do well, we must step out of this comfort zone. We must also endure this period of change. Although it is only five months, we have seen that our good products stand higher and higher, and our good users stand higher and higher, and our users' wealth is also growing. Users' good reviews will increase more and more, whether it is on the app or on social media.

Such a transition will entail a challenging period that compels us all to leave our comfort zones, impacting our rapid scaling and profit margins in the near term. However, to truly succeed, we must embrace a disruption and persevere through the tough times. Even though just five months have passed, we have noted an uptick in the proportion of quality products, an increase in the number of good users, a rise in the user repurchase rate, and more positive feedback on the Ding Dong app and social media.

Thank you.

Unlike typical retail transformation that are often initiated externally, our approach is an inside-out transformation. While this method may not be widely noticed externally and results may take time, it promises ongoing fundamental improvements. Over time, substantial and transformative changes will occur, significantly enhancing our scale, optimizing profit margins, and fostering genuine core competitiveness that withstand competition. Thank you.

Thank you.

The next question comes from Yang Bai with CICC. Please go ahead.

Mr. Liang also talked about the internally incubated guyu food group in his speech. Can you give an overview of the current business situation? Thank you.

好的,谢谢你的提问。 我请公司CFO王松来回答这个问题。 Thank you for your question.

Our CFO is better equipped to address this matter.

好的,谢谢梁总。 我可以从谷宇的战略定位、规模增长、商品力打造和外销进展四个方面来向您介绍。 第一,谷宇是公司于2020年初开始孵化的战略性事业部。 It marks our transformation from a food supply chain to a food supply chain. Through the construction of factories, we realize the vertical integration of supply chains, covering from the development of goods, raw materials, raw materials, joint farming and planting, production and processing, to the middle and end of sales, strengthening our control over the quality, cost and efficiency of goods. At present, we have formed the three major business departments of meat, jade, and bone, and built over 540,000 square meters of 12 self-sufficiency factories in six cities, equipped with automated production flow lines, strictly controlling food safety, and improving the flavor and quality of products. In the future, we plan to turn bone fish into the standard of Dingdong and even the industry, and become a consumer, providing more beautiful products for consumers.

Thank you, Mr. Liang. I can introduce Gu Yu through four key aspects, strategic positioning, scale growth, product development, and export progress. First, Gu Yu is the strategic business unit that the company began to incubate in early 2020. marking our transformation into a food supply chain company with a comprehensive industry layout. We achieved vertical integration of the supply chain through self-built factories, encompassing a closed loop from product research and development, joint farming and planting of raw materials and ingredients, production and processing to terminal sales, thereby strengthening our control over product quality, cost, and timeliness. Currently, we have established three major business units, meat, pre-prepared meals, and grains, and have built 12 self-operated factories spanning more than 54,000 square meters across six cities, equipped with automated production lines that strictly control food safety while enhancing the flavor and quality of products. In the future, we plan to position Gu Yu as a benchmark for Dingdong and even the industry, providing consumers with even more exceptional products.

In the past five years, Gu Yu's production and processing capacity has grown dramatically. The year-over-year growth rate of the production capacity is 40% in 2020. In 2020, the stock price of JNV on Dingdong is about 5 billion yuan. The annual growth rate is close to 200%. The sales volume on Dingdong is about 20%. At the same time, we officially started to export from 2023. In just two years, the export revenue of 2020 is about 300 million yuan. The same growth rate is about 150%. The Q1 revenue of 2025 is more than 100 million yuan. The same growth rate is close to 120%. We expect the export revenue of this year to reach 600 million yuan.

Second, over the past five years, Guyu's production and processing capacity has grown rapidly, with an average annual growth rate of over 40%. In 2024, the GMV of Guyu products on Dingdong was approximately 5 billion RMB, with a CAGR of nearly 200%, accounting for about 20% of sales on Dingdong. We officially began exporting in 2023. In just two years, export revenues in 2024 reached about 300 million RMB, a year-on-year growth rate of about 150%. The revenue in Q1 of 2025 surpassed 100 million RMB, a year-on-year growth rate of nearly 120%. We anticipate that export revenues this year will reach 600 million RMB and expect that by 2027, exports will account for more than 50% of GUI's revenues.

Thank you. We prioritize quality as our core value and meticulously refine our product development capabilities.

Currently, we have established a product mix with distinctive features in meat, grains, and pre-prepared meals.

Japanese-divided production capacity can reach 500,000 boxes. It is the highest company with comprehensive production capacity in the country. As previously introduced, the product covers the original meat and meat products of pork, beef, and lamb. Among them, our Heizan Shijia brand focuses on high-end black pork. Coordinated with high-quality food, we established a black pig breeding base. Introduce native breeding, choose high-quality breeds, and use the technology of pre-cultivation and post-cultivation 300 days. In 2024, Heizan Shijia will receive about 200 million yuan, and the annual gain will reach 30%.

We currently operate six meat factories with a daily cutting capacity of 500,000 boxes, making us the highest comprehensive production capacity in the country. As mentioned earlier, the products range from pork, beef, raw cut beef, raw cut mutton, to various meat products. Among them, our Black Diamond family brands focuses on high-end black pork. We have established a black pig farming base in partnership with Kaohsiung Food, engaging ourselves in source breeding, selecting high quality varieties, and employing coarse grains for 300 days low raising period. In 2024, the GMV of Black Diamond family reached about 200 million RMB with an annual growth rate of 30%. Meanwhile, the offline store of Black Diamond Family will also ramp up expansion. By 2025, we plan to increase the existing five Black Diamond Family stores to between 15 and 20.

We currently have three antiques factories that cover the production of rice and bean products. We also have bean products from Liangxian Jiangren. For example, Liangxian Jiangren's local specialty, traditional handmade, In the field of health and other products, we have developed and introduced non-dominant technology, and jointly developed with five-star restaurant chefs, universities, and multinational enterprises to preserve the essence of traditional technology to make product innovation more active. Two of these factories have been certified by the FSSA 222 system and registered by the U.S. FDA. Not only has the trademarked production system reached the international top security control level, but it has also paved the way for the global high-end market. We have three grain factories producing rice, flour, and bean products.

We have incubated brands such as Liang Xin Jiang Ren and You Dou Zhi. For instance, Liang Xin Jiang Ren has introduced intangible cultural heritage craft and collaborated with five-star catering chefs. universities, and multinational companies, all while remaining the essence of traditional craftsmanship to make product innovation more dynamic. As a result, this label has skillfully created products that highlight regional traits, incorporate traditional craft, and promote children's health among other features. Two of the factories have obtained FSSC 22,000 certification and US FDA registration, which indicates that the production system has reached the highest level of international safety control and pays the way for entering the global high-end market. In 2024, the GMB of Liangxin Jiangren was about 600 million RMB with an annual growth rate of 22% and an average monthly repurchase rate of 40%.

We currently have three factories covering meat products, seafood products, and salad, fruit slices and other products. The core of the Caixiangqin brand is the deep-rooted trend of consumers. Based on single market data, advanced production technology, and more than 3,000 flavor codes, the development of healthy jade dishes with hellish flavor characteristics, many products are deeply loved by consumers. For example, the whole chicken shrimp has been sold for 300 million yuan for three consecutive years. Caixiangqin mouthwash machine sold for 30 million yuan per year.

For pre-prepared meals, we currently operate three factories that cover categories such as meat products, aquatic products, and salad and fruit cuts. With the Cai Changqing brand as our foundation, we develop health-prepared healthy pre-prepared meals with regional flavors based on our insight into consumer trends and front-end market data, advanced production capability and technology, and over 3,000 flavor codes. Consumers greatly love many products, such as boxing crayfish, which has had an annual sales exceeding 100 million RMB for three consecutive years, and chai changqing, mouth-watering chicken, with an annual sales surpassing 30 million RMB. In 2024, the GMV of Caichangjin was approximately 1.1 billion RMB, with a year-on-year growth rate of 27% and an average monthly repurchase rate of 40%.

国际的商品也有足够能力,除了服务丁东买菜自身, 也可以在更广阔,更直接的市场上去比拼。 目前,我们的商品不仅在莲华,金东七仙,华柱等国内连锁渠道销售, 同时,在国际市场, We sell our products to more than 30 countries and regions through Li Jingji, Hong Kong FDFI, Hong Kong FDFI, Hong Kong FDFI, Hong Kong FDFI, Hong Kong FDFI, Hong Kong FDFI, Hong Kong FDFI, Hong Kong FDFI, Hong Kong FDFI, Hong Kong FDFI, Hong Kong FDFI,

Besides serving Ding Dong, Gui's products are competitive directly in a broader market due to their high quality. Currently, our products are sold not only in domestic chain channels such as Lianhua Supermarkets, Jingdong 7 Fresh, and Huazhou Hotels, but also in international markets where we have distributed our products to over 30 countries and regions through partners like Lee Kum Kee, Hong Kong DFI, and T&T Supermarkets from Canada. Furthermore, we are establishing in-depth cooperative relationships with HKTV Mall in Hong Kong, Fair Price in Singapore, and retail groups in Central Asia and the Middle East. In the future, we will leverage all data, production, and R&D capabilities to develop products that cater to various channels.

The development of Wuyi is the manifestation of Dingdong's all-industry chain capabilities. It is also the manifestation of the true potential of our 1km strategy. The evolution of Gu Yu serves as a testament to Dingdong's full industry chain capabilities and the genuine potential of our narrow and deep strategy.

It not only enhances Dingdong's product competitiveness, but also effectively establishes a robust, modern, and internationally oriented, rapidly developing expanding and high-quality food enterprise. Thank you.

As there are no further questions, I'd like to return the call to our management for closing remarks.

Thank you again for joining our call today. If you have any further questions, please feel free to contact us or request through our Iowa website. We look forward to speaking with everyone on your next earnings call. Have a good day and have a good night.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.