Dingdong (Cayman) Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
March 6, 2025

There are 3 speakers on the call.

Operator

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

Operator

Please go ahead, sir.

Speaker 1

Thank you. Hello, everyone, and welcome to Xindong's fourth quarter twenty twenty four earnings call. With me today are Mr. Chang Lin Liang, our Founder and CEO and Mr. Sun Wang, our CFO.

Speaker 1

You You can refer to our fourth quarter twenty twenty four financial results on our IR website at ir100.me. You can also access the replay of this call on our website when it becomes available a few hours, updates, 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's prepared remarks are in RMB terms.

Speaker 1

And we will discuss non GAAP measures today, which are necessarily explained and reconciled to the most comparable measures reported in our earnings release and filings with the SEC. I will now turn the call to our first speaker today, the Founder and CEO of Dindong, Mr. Liang.

Speaker 2

Hello, everyone. Thank you for joining the Dandong earnings call for Q4 twenty twenty four. We achieved non GAAP profitability for the ninth consecutive quarter and GAAP profitability for the fourth consecutive quarter. Additionally, we have recorded positive year over year revenue growth for four straight quarters. This stable profitability has established a solid foundation for the company's future development.

Speaker 2

First, I'll present our Q4 twenty twenty four performance followed by an analysis of our operating data and conclude with a brief outlook on future development and performance. In Q4 twenty twenty four, Dingdong reported a GMV of RMB6.55 billion, an 18.4% year over year increase. The company's revenue grew to RMB5.91 billion, an 18.3% year over year increase. Under non GAAP standards, Jingdong achieved a net profit of RMB120 million, more than six times the RMB16 million reported in Q4 twenty twenty three. This resulted in a net profit margin of 2%, an increase of 1.7 percentage points year over year.

Speaker 2

Under GAAP standards, the net profit was RMB9 million, a turnaround from a loss of RMB4.39 million in Q4 twenty twenty three, leading to a net profit margin of 1.6%.

Speaker 1

For the full

Speaker 2

year of 2024, Dingo reported a GMV of RMB25.56 billion, a year over year increase of 16.3%. Revenue reached RMB23.07 billion, a 15.5% increase compared to the previous year. Under the non GAAP standard, Jingdong reported a net profit of RMB420 million, marking an increase of more than eight times compared to RMB45 million in the same period last year, representing a net profit margin of 1.8%, up by 1.6 percentage points year over year. According to GAAP standards, Ding Dong reported a net profit of RMB300 million, a significant turnaround from a loss of RMB91 million in the same period last year, resulting in a net profit margin of 1.3%. The rapid performance growth is mainly fueled by rapidly increasing user penetration, improved user conversion rates and higher user ARPU in existing regions.

Speaker 2

Regarding user scale, in Q4, the average number of monthly transacting users reached approximately 7,740,000, a year over year increase of 16.1%. The average monthly transaction conversion rate was 63.6%, up 4.7 percentage points year over year. Additionally, ARPU saw a rise of 3.7% year over year. As user scale continued to grow rapidly, user engagement also rose. In Q4, users placed an average of 4.2 monthly orders, a 3% increase year over year.

Speaker 2

Among members, the average monthly order frequency rose to seven orders, a year over year increase of 4.5%. This continued strong performance built on Q3's results, showcasing high user retention and frequent repurchases. These outcomes were attributed to our comprehensive efforts across various dimensions, including product capability development, operational enhancement, improved user experience and data driven strategies. Regarding regional performance, Jiangsu, Zhejiang and Shanghai continued to show relatively rapid growth, serving as the primary drivers of our overall expansion. This quarter, GMV for the Shanghai region increased by 1616.8% year over year, while in Jiangsu and Zhejiang, it grew more than 20% year over year.

Speaker 2

Notably, 13 cities within the Jiangsu, Zhejiang and Shanghai regions achieved a year over year GMV growth of over 30%. This quarter's growth rate in these regions was the highest recorded for the year, excluding the peak season in Q3. We accelerated the development of our frontline fulfillment station network in these key regions. By the end of Q4, the company had opened a total of 130 new frontline fulfillment stations throughout the year, with 50 of those opening in Q4 alone. This achievement surpassed our annual target of 110 new frontline stations that we mentioned during the Q3 quarterly conference.

Speaker 2

We continued to enhance the density and efficiency of our frontline fulfillment station network in these core areas. Our goal was to further strengthen our order fulfillment capabilities, reduce distribution costs, improve operational efficiency and establish a solid foundation for 2025. I would like to update you on Dingdong's performance during the Lunar New Year. From New Year's Eve to the sixth day of the first lunar month, the national GMV increased by more than 15% year over year. It grew 10% in the core market of Shanghai, while regions such as Ningbo, Nanjing and Changzhou saw growth of over 30%.

Speaker 2

During this period, some high quality products experienced significant increases, including salmon in the seafood sector, premixed alcoholic beverages and traditional Lunar New Year's dishes, which saw growth of 50% and even more than 120% year over year in some cases. These standout products are a key driving force behind Daynong's continued growth. We've been reflecting on our business model and the competitive landscape. Among the four key attributes of more, faster, better and cheaper, our company, which focusing on fresh groceries sees the greatest opportunity in better. This involves four key areas, better users, better products, better services and better mind share.

Speaker 2

Here are our ideas for developing high quality products. One, we create great products by aligning with or discovering users' real needs and ultimately delivering value to our customers. Two, we ensure that our food products maintain high and consistent quality. While perfection may not be achievable in a single product development cycle, we focus on responding to user feedback and iterating our products, continuously working to improve our offerings. Three, we aim to create differentiated products or those available at structurally lower prices.

Speaker 2

Four, we believe in storytelling for our products. Our offerings feature visually appealing packaging, attractive designs and engaging stories that resonate with customers. Five, our goal is to be captivating, soulful and to provide distinct value propositions. To attract valuable users, we must first create compelling products and services, positioning ourselves as interesting entities that naturally captivate an audience. Over the past year, we have developed a variety of products, including our popular craft and Dandong's customized pumpkin raw milk.

Speaker 2

Looking ahead, we're committed to expanding our mission of creating high quality products that are also reasonably priced. Better products, better service to the clients are our mission and original aspiration. Lastly, let's turn to our outlook for Q1 of twenty twenty five. We expect to achieve year over year scale growth and maintain non GAAP profitability in the first quarter of twenty twenty five. However, in 2025, the competition we face will be more intense and we're also in the process of transitioning from pursuing short term scale and profitability to focusing on quality and long term competitiveness, which may impact us.

Speaker 2

Nonetheless, we're confident in the long term development of the company's business. This concludes my prepared remarks. Thank you all for listening. I would like to turn the call over to our CFO, Wang Sung, to go over our financials. Thank you, Mr.

Speaker 2

Liang, and hello, everyone. Before I review our financial performance for the fourth quarter, please note that all of our figures are in RMB. In 2024, Dingdong achieved significant growth and profitability. The annual GMV reached RMB25.56 billion, while revenue amounted to RMB23.07 billion, reflecting year over year increases of 16.315.5% respectively. Notably, GMV in 22 cities experienced substantial double digit growth.

Speaker 2

Additionally, our profits for the year reached an all time high. Non GAAP net profit margin was 1.8%, an increase of 1.6 percentage points year over year with a net profit of RMB420 million, an impressive 8.3 fold increase compared to the previous year. Under GAAP standards, we achieved profitability for the first time recording a net profit margin of 1.3%, which is 1.8 percentage points higher than the previous year with a net profit of RMB 300,000,000. Furthermore, our strong growth is evident in our cash flow. The full year net operating cash inflow reached a historic high of RMB930 million, a significant increase of RMB1.16 billion year over year.

Speaker 2

For the first time in our history, the full year free cash flow turned positive amounting to RMB830 million. In Q4, Tingtong reported revenue of RMB5.91 billion and an 18.3% year over year increase. This marks the fourth consecutive quarter of positive year over year growth. Non GAAP net profit margin was 2%, indicating profitability for the ninth consecutive quarter, while GAAP net profit margin stood at 1.6% maintaining four straight quarters of profitability. Its operating net cash inflow was RMB190 million, resulting in positive net cash inflow for six consecutive quarters.

Speaker 2

Through high quality growth and sustained profitability, we have validated our first grocery e commerce business model, which is supported by a network of frontline fulfillment stations. This has demonstrated our efficiency and quick response capabilities. As the consumer industry transitions to a buyer centric era, China's retail sector is experiencing significant structural changes. Highly efficient businesses are increasingly replacing inefficient ones, presenting both opportunities and challenges. Our past successes have built a strong infrastructure and provided us with valuable experience.

Speaker 2

With this foundation, we find ourselves at a new starting point. Jingdong will continue to tackle challenging tasks with a pragmatic approach, aiming to satisfy consumers with excellent products and services, while establishing our own differentiated path through stable quality and supply capabilities. Let's break down the results for Q4. Revenue reached RMB5.91 billion, an increase of 18.3% compared to the previous year. Meanwhile, GMV totaled RMB6.55 billion, an 18.4% year over year rise.

Speaker 2

We remain committed to producing high quality products that attract consumers and improved order conversion rates and repeat purchases. Additionally, Q4 MAU experienced a year over year increase of 4.7%. The conversion rates of MAUs to monthly transacting users also hit a record high in recent years, averaging 63.6%, an increase of 4.7 percentage points year over year. Furthermore, the number of users placing orders more than eight times a month, essentially those who shop about twice a week grew by 19.6% year over year. Gross profit margin was 30.2%, a decrease of 0.4 percentage points year over year.

Speaker 2

We plan to enhance our investment in the supply chain to improve overall industry efficiency by shortening the supply chain. The proportion of direct sourcing of fresh groceries has consistently increased each year, stabilizing at around 85% in 2024. Leveraging our ability to build intelligent forecasting and operational scheduling systems, we can better match user needs and improve the efficiency and defect management of our products. In 2024, the average turnover days for short term products with a sealable life of less than twenty eight days was two point three days, demonstrating our efficiency increase of 6.4% year over year. While the loss rate remained stable, the out of stock rate for our top products decreased by 1.3 percentage points from the previous year.

Speaker 2

In Q4, the fulfillment cost rate was 21.7%, an improvement of 1.8 percentage points year over year. The fulfillment cost optimization in 2024 was primarily driven by a significant increase in the average number of orders per frontline station and improved operational efficiency. Throughout the year, we opened 130 new frontline fulfillment stations with an average daily order volume of nearly 1,000 orders per station, which represented a 22.2% year over year increase. Additionally, we have continued to deliver excellent service to our users by leveraging our algorithms and supply chain capabilities. In Q4, we reduced the fulfillment time for instant orders by two minutes compared to the previous year, bringing it down to thirty four minutes.

Speaker 2

The marketing expense rate was 2.3%, an increase of 0.2 percentage points compared to the previous year. Looking ahead, we plan to boost our investment in promoting good products on its mind share, leveraging high quality products to drive traffic and will continue to enhance the efficiency of our advertising conversions. The combined management and R and D expense accounted for 0.5 percentage points of revenue, reflecting the larger scale effect. We will continue to invest in food R and D, agricultural technology and technical data algorithms. This ongoing investment will enhance our product development capabilities and full chain digital capabilities, ultimately improving supply chain efficiency.

Speaker 2

Non GAAP net profit margin was 2%, resulting in a net profit of RMB120 million. Additionally, GAAP net profit margin was 1.6%, which amounted to a net profit of RMB90 million. As of the end of Q4, the total balance of cash and cash equivalents, short term restricted funds and short term investments stood at RMB 4,450,000,000.00. We're continually optimizing the efficiency of our capital utilization and financing structure. After deducting the balance of short term loans, our actual balance of self owned funds was RMB 2,850,000,000.00, reflecting an increase of RMB $840,000,000 from the end of twenty twenty three.

Speaker 2

Furthermore, to strengthen long term partnerships and maintain our services to upstream suppliers, we have shortened the account payable period for the entire year of 2024 by eight point six days year over year, bringing it down to thirty five days. This concludes my prepared remarks. Operator, we can now start the question and answer session.

Operator

We will now begin the question and answer session. The first question today comes from Thomas Chong with Jefferies. Please go ahead.

Speaker 1

So I'll try to ask myself, thanks management for taking my question. And first, congratulations for the excellent results this quarter. And I would like to ask about the importance of producing quality products for the company and also the strategy implemented for developing high quality items. So could you provide examples of how you have collaborated with suppliers to create these quality products? Thanks.

Speaker 2

Thank you for your question. In Q4, we continue to achieve strong results compared to the previous quarter and the ongoing profitability has given us greater confidence to try and make changes. In a vast and ever evolving market with diverse consumer demand, we recognize that our own strengths are not enough to succeed. Therefore, we are eager to collaborate with like minded partners to create greater value for consumers. We aim to move beyond the traditional supplier retailer relationship and foster deeper, more cooperative partnerships where we can support one another effectively.

Speaker 2

In terms of our business model, we plan to open up key categories for collaboration with our partners. This approach will allow us to leverage the strength of both parties leading to mutually beneficial and successful outcomes. On the technical side, we're committed to investing in and sharing our IT capabilities with our partners. This will enhance our cooperative efficiency and facilitate the digital transformation of our business operations. Regarding financial support, we're dedicated to increasing our investment, innovating supply chain, financing models and providing our partners with stronger financial backing.

Speaker 2

For example, a professional breeding cooperative in Jingjiang has been partnering with Dingdong since 2019 to supply fresh chicken. This collaboration has flourished through ongoing communication, feedback, strategic alignment and professional cooperation between Invenio's product center and its suppliers. Their efforts have span from product research and development to aligning sales strategies, ensuring quality feed sourcing and introducing advanced production processes. This approach has led to share success for both parties. In 2024, sales of the Dingdong customized Qijun Fresh Free Range Chicken reached RMB40 million, a 30% year over year increase.

Speaker 2

We invest in and trust our

Operator

The next question comes from Wu Hongwei with CICC. Please go ahead.

Speaker 2

Thanks to management for taking my question. Congratulations to the company for good quarterly results. I have a follow-up question. Does the company have examples of developing strong products using its own supply chain given that it has its own factory for food research, development, production and processing? Thanks.

Speaker 1

Thank you

Speaker 2

for your question. Dingdong's core strategy has always centered around product development capabilities, which serve as the driving force behind our development. We're dedicated to continuously creating a unique and high quality product system for our consumers. To achieve this goal, we have established a comprehensive independent production and R and D system. A crucial support for this is the supply chain development of our self operated factories, which has led to an operating mechanism focused on continuous optimization and upgrading.

Speaker 2

Over the past year, our GUI factory has been transitioning from a supply chain company to a product brand company. For example, our private label carefully develops and recreates regional specialties, childless labors and products that evoke traditional memories to give them emotional value. Moreover, our entire product development process begins with understanding consumer needs and concludes with the final consumption of the product. This process includes research and development, product design, formula replication, pilot production at our factory and mass production. Our ability to maintain a closed loop in the entire process and continuously iterate products enhances the dynamics of this brand's innovation.

Speaker 2

Our products manufactured in our own factories are not only sold through our own channels, but can also be exported. This allows us to compete more effectively in a wider and more direct market environment. Currently, our products are available in over 30 countries and regions worldwide. In China, we distribute them through KA channels such as Bienhua JD7 Fresh and Huazhu. We're committed to showcasing our high quality products on a larger stage so that more consumers can experience our dedication and efforts.

Speaker 2

Our goal is for everyone to achieve their aspirations for a better life.

Operator

This concludes our question and answer session. I would like to turn the call back over to management for closing remarks.

Speaker 1

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

Operator

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

Remove Ads
Powered by Quartr
Earnings Conference Call
Dingdong (Cayman) Q4 2024
00:00 / 00:00
Remove Ads