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 Jun 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 today's conference call contain forward-looking statements. Please refer to our latest Safe Harbor statement in the earnings press release 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 press release which contains a reconciliation of non-GAAP measures to the comparable GAAP measures. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. It is now my pleasure to introduce our CFO, Mr. Mao. Henry, please go ahead..

JD NOW and Dada NOW. Starting with the JD NOW. After our brand update in May 2024, we officially announced the first brand advantage 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 deepen 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, sharing on the Olympic athletes by providing users with on-demand shopping experience with delivery as fast as 9 minutes.

For instance, we launched a bill waiving for celebration campaign, offering 2024 randomly selected orders free of charge every time in China claimed a gold medal and a late night feed channel providing the night-time audience with rich selections of snacks and beverage. We are pleased to see how well these efforts have resonated with our customers.

In the second quarter, we remain focused on driving growth on the JD App, increasing user market share as well as continuously enriching supply to better serve users diverse needs for on-demand retail.

On the demand 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 cities for more than 2 months, we further expanded the service coverage of the JD NOW section nationwide, delivering more users with the convenient JD NOW on-demand retail services right to their doorsteps.

Meanwhile, we introduced exclusive benefits such as price discounts for JD PLUS members to engage them to experience the convenient on-demand retail service of JD NOW and gain their mindshare. In June 2024, the number of daily -- average JD PLUS members who placed the orders on JD NOW increased by 40% as compared with March '24.

On the supply side, we took initiatives on forefront 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 convenience stores category, during this quarter, JD NOW deepened its cooperation with Meiyijia, 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 brand such as Lawson.

In addition, in the consumer electronics category, to support the launch of the JD NOW section, we made further progress in essential accessories to better meet users' immediate needs.

For instance, we initiated new partnerships with leading brand such as Python [ph], 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 JD NOW's value-for-money offerings.

In May, we launched the top brand for RMB1 inception [ph] on the landing page of the JD NOW tab, offering consumers more than 10 million items of value-for-money products priced as low as RMB1.

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 our JD NOW app.

In terms of inventory, in June, we launched the treasures of the store tap [ph] 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 like tap [ph] 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 selling points, promotional discounts and other divisions useful information to search results and the main product images which increased the click-through rate of search results by over 1 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 Dada NOW 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 compensate the users with no threshold coupon when order is fulfilled more than 10 minutes later than the estimated delivery time, showcasing our confidence in the continuous improvement of delivery speed.

In addition, in May, we joined hands with Highland Home [ph] and other menswear brand to take the lead in long-chain 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 brand increased by more than 10%. While we continue to implement the above-mentioned comprehensive measures, the penetration of JD NOW among JD users continue to increase with accelerated mindshare growth.

Our store density and supply quality continued to improve, resulting in accelerated order volume growth.

With the launch of the JD NOW section at the center of the JD App 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 our business adjustments.

And 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 in June.

In April through June, the number of high-frequency users with 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 continue 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 use of 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 Dada NOW, a leading long-haul demand delivery platform open to merchants and individual centers across various industries and product categories. In the second quarter, Dada NOW maintained rapid growth driven by the continued increase in the penetration of restaurants and average KAs.

Net revenues from Dada NOW increased by 47% year-on-year to RMB1.4 billion in the second quarter. The earnings release 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 include orders directly placed through Dada NOW by merchants and individual centers and orders fulfilled by Dada NOW for merchants on JD NOW. Gross billings refer to the gross amount of service charges for above-mention 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 Dada NOW in the second quarter rose 21% year-on-year to 679 million and gross billings of Dada NOW grew by 23% year-on-year to RMB3 billion.

In the first half of the year, net revenues from Dada NOW increased by 51% year-on-year to RMB2.6 billion, mainly due to the continued expansion of new KA customers as well as increased penetration of existing customers.

The number of orders delivered by Dada NOW in the first half was up 15% year-over-year to 1.2 billion and the gross billings of Dada NOW were up 15% year-on-year to RMB5.5 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 CHAGEE. For restaurant KAs, we continue to increase penetration of top customers, such as Yum China, more than doubling the number of fulfilled orders and revenues of the subcategory. This concludes our operational updates for the 2 platforms.

Overall, during the quarter, we remain committed to our high-quality growth strategy. The continuous enhancement of user experience and supply of the JD NOW resulted increased consumer engagement and a record order of growth from the JD App.

Meanwhile, Dada NOW saw further gains in the market share and strong revenue growth momentum, as to interest penetration of restaurants and beverage KAs. Going forward, we will continue to focus on high-quality development.

It has user experience across the board, strengthened our efforts to increase the mindshare of our on-demand retail business and the third and last 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 the 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 conform to current period presentation.

Net revenues from JD NOW includes 3 line items, namely commission fee revenues, online advertising and marketing services revenues and fulfillment services and others. And net revenues from Dada NOW also include 3 line items, namely intra-city delivery services revenue, last-mile delivery services revenues and other revenues.

The total net revenues in the second quarter was CNY 2.3 billion.

Net revenues from JD NOW was CNY 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 RMB29 since February 2024.

Net revenues from Dada NOW increased by 47% to CNY 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, net revenues from Dada NOW increased by 51% to CNY 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 CNY 1.7 billion.

This increase was primarily due to an increase in rider cost 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 JD NOW platform. General and administrative expenses decreased to CNY 48 million as a result of a decreased amortization of intangible assets arising from the acquisition of JD NOW in 2016.

Research and development expenses decreased to CNY 85 million, mainly attributable to a decrease in research and development personnel costs. Non-GAAP net loss was CNY 142 million and non-GAAP net loss margin was 60.1% [ph], sequentially narrowing by 1.8 percentage points.

As of June 30, 2024, we had CNY 3.6 billion in cash, cash equivalents, with free cash and short-term investments. And pursuant to our USD 40 million share repurchase program announced in March 2024, we had repurchased approximately USD 9.8 million 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..

[Operator Instructions] Our first question is from the line of Thomas Chong with Jefferies..

My first question is about consumer sentiment. Can management update about the trend in recent months? And my second question is about competitive landscape.

How we should think about it over the next couple of quarters? And can management comment about the business trend for JD NOW and Dada NOW in the second half?.

Thank you, Thomas, for your question. As we shared on our previous calls for JD NOW, we focus on the overall consumption of willingness and trend.

On the willingness front, in the second quarter, online sales of physical goods grew by 6.4% year-on-year on last year's high base and the year-on-year growth rate in July slightly increased to 8.1%, reflecting the continuous and stable recovery of the overall consumer confidence and willingness to spend.

In terms of consumption trends, we continue to observe growing consumer demand or convenience across various categories. As an on-demand retail platform, we are actively expanding high-quality supply across a wide range of categories to provide consumers with an increasingly rich selection.

On the other hand, we continuously optimize the fulfillment experience and reinforce the mindset of quality and speed. Therefore, we firmly believe that the penetration rate of on-demand retail and overall social retail will continue to increase.

And as you may know, since the beginning of this year, when we started to fully embrace the JD.com ecosystem and drive the upgrade of user experience as JD NOW has maintained rapid growth in GMV and the user base within the JD App channel.

We believe that our competitive edges lie in the richness of offerings on the supply side and a big integration with JD.com on the demand side, driving us to increase our market share with the on-demand retail industry as we ride on the industry growth.

On the supply side, we've continuously expanded cooperation with a wide range of local merchants across all categories such as chain supermarkets, convenience stores, brand authorized stores, et cetera.

With extensive partnership with merchants ensures a rich supply of high-quality products on our platform which is the foundation of gaining the trust of continuously attracting and retaining customers.

And on the demand side, our quarterly paying users currently account for only a mid-single-digit percentage of JD's overall user base, leaving ample room for further penetration among JD.com users.

Given that JD.com users inherently have clear shopping purpose and are more demanded in terms of product quality and delivery speed which fits the profile of on-demand retail user as well.

We believe that converting JD.com users into on-demand retail users as more efficient as we remain confident in the long-term continuous improvement of our penetration rate among JD.com users.

And for -- I don't know, I think you can see in terms of order volume and revenue growth in the first half of 2024 but now significantly outperformed the on-demand delivery industry and the major third-party on-demand delivery platforms, meaning that we are continuously gaining market share.

Dada NOW has significantly advantaged in terms of network coverage and delivery costs, giving us confidence in maintaining above-industry growth rate in the long run.

In terms of the network coverage has already covered more than 2,600 cities and counties with an annual active rider count approaching 1.3 million and the cumulative number of the registered riders and tens of millions. So this ensures sufficient delivery capacity in both high-tier and low-tier cities.

And in terms of the delivery cost, as to the cloud-sourced delivery model, the average delivery cost per order for Dada NOW is lower than that of other major third-party on-demand delivery platforms on a like-for-like basis.

And JD NOW has always been committed to providing users with on-demand retail shopping experience of quality merchandise and instant delivery in order to meet the development of the on-demand retail industry.

So as I mentioned earlier, at the beginning of the year, so we have a comprehensive review and adjustment of the business, we have established a strategy of focusing on user experience, fully embracing with JD.com ecosystem and further deepening our strategic partnership with JD.com.

To this end, for the first half year, we have been optimizing the user experience and enriching supply through a series of measures such as the delivery fee waiver program and the brand upgrade with the aim of accelerating the penetration among JD.com's vast user base and further enhancing the user mindshare and brand influence of JD NOW.

In this quarter, we see a strong trend of improvements in core operational metrics, as introduced on our average monthly transacting users and orders through the JD App grew by over 100% on a year-over-year basis, accelerating by over 30 percentage points from Q1 '24.

So in the long term, we believe that there is significant room for the on-demand retail industry to increase its penetration rate which is still in early stage of development with huge upside and we are firmly committed to investing in our business.

And for Dada NOW, over the past 2 years, we have made continued significant progress in increasing market share and improve profitability; in particular, our year-on-year revenue growth for the first half of over 50 percentage significantly outpaced the industry growth. So -- and for Dada NOW, we are currently in the process of brand upgrade.

So Dada NOW will be renamed as Dada NOW, capitalized NOW, to strengthen our brand image as a high-speed, high-quality delivery service provider..

Our next question is from the line of Alicia Yap with Citigroup..

Two questions here. One is for your JD NOW order demand, can management share with us how the user consumption pattern in terms of the category? So whether you have seen cutback on the non-FMCG category versus the FMCG category. Just wondering, are there any pressure for the take rate across the different categories, given the macro situation.

The second question -- follow-up. So thank you for giving a lot more disclosure starting this quarter. So besides the revenue, just wondering if management can also remind us the gross profit trend for each of the segments for the Dada NOW. For example, the key customer, the SME in terms of the last-mile customer.

So wondering if you can provide some of the segments and if you see any of the segments that actually have a bigger macro headwind..

Thank you, Alicia, for your questions. So I just want to add that starting from the beginning of this year, our company has proactively undergone business streamlining and adjustments, concentrating on the core businesses and the channels while terminating some inefficient operations in the channels.

So consequently, JD NOW has faced challenges in terms of overall GMV and revenue growth in the short term, nonetheless, we anticipate that these adjustments will pave the way for sustainable high-growth, high-quality growth in the long run. Well, we are encouraged to see the rapid growth of users and all the volume on the JD App channel.

So to your question, with years of experience to the supermarket category, we have firmly established our brand in the minds of consumers. Compared to other categories, the supermarket category is more mature and stable.

Within this category, we've noticed a growing appeal of retail models like club warehouse stores and convenience stores among consumers. So in response, we are actively thinking collaborations with this models to fulfil consumer need.

For example, in the convenience store category, we continue to deepen and extend our cooperation with top brands in the second quarter bringing for more than 5,000 Meiyijia stores and more than 10,000 Lawson stores in July. The improvement in supply also led to incremental orders for JD NOW.

And in recent years, non-supermarket categories have seen a consistently higher growth rate than supermarkets largely due to the rising on-demand retail penetration rate in these sectors and evolving consumer mindshare. This trend has continued into this year.

For instance, our emerging categories such as flowers and beverages registered rapid growth during the second quarter, thanks to our supply expansion efforts and a series of festival famed marketing campaigns which resonated well with consumers.

So we are confident that as consumers increasingly value convenience across all categories and merchants prioritize on demand retail channels, every category holds significant growth potential in the future for that for JD NOW.

And to your question regarding the UE [ph] for Dada NOW, in terms of business development trend of Dada NOW, KA business is still the focus of this year. So for the KA business, we will meet the needs of our customers with high-caliber fulfillment services to increase our market share.

And for both the KA and SME business, we will closely monitor the development of the industry and our industry peers and its top line growth and profitability improvement. The demand -- in on-demand delivery service remains fast growing across restaurants and beverage, supermarkets and other categories. Dada NOW's performance has been resilient.

I hope that answers your question..

Our next question comes from the line of Jiulu Li with CICC..

I think I have two questions here. The first one is about financial guidance. As we see, Dada NOW has a relatively higher growth JD NOW revenue growth may face some pressure here.

From a financial perspective, can we share more color about our like growth target or financial guidance cost or by business? And the second one is about the cooperation with JD? Do we have some new developments in our cooperation and understand that in the long term, we still aim to penetrate like 50% of JD users? In addition, what are your short-term, mid-term and even long-term goals ideas and how to quantify this? And also survey about the management change, we noticed management change this month, are there any change to the company's strategy? And can we share more about it?.

Thank you, Jiulu, for your question.

So regarding the outlook of the business plan, I think, as I mentioned repeatedly earlier, like starting from this year, we have think through the business review and adjustment which has posed a challenge on JD NOW's GMV and emission revenue growth in the short term but where we have seen some fruitful results with focus of embracing more with JD.com ecosystem and the user base and the order volume growth on JD App has partially offset the impact of our business streamlining.

So especially for this -- for the second quarter, excluding the impact of business adjustment, our GMV was largely flat on a year-over-year basis. And also, the GMV from JD App channel experiencing a year-over-year growth of over 20%, so the channel focus shift also temporarily affected our advertising monetization rate.

Advertising revenue for JD NOW was primarily generated from the independent JDDJ App previously. However, since the beginning of the year, we have been strategically converting to the JD App channel. So as a result of the traffic and GMV of independent JDDJ App has shown a continuous decline attracting advertising monetization.

On the other hand, although the traffic and the GMV in the JD App channel have significantly increased.

We are still focusing on calculating user mindshare and penetration, so at the same time, there is room for improvement in the sophistication of location-based technology, advertising, products and marketing solutions within the JD App channel which require further refinement and merchant education.

However, in the long run, we are fully confident in advertising monetization potential of on-demand retail within the JD App channel and believe that a healthier business structure following our business adjustments will pave the way for the long-term sustainable growth.

And for Dada NOW, thanks to the strong momentum of our restaurants and beverage case, our order volume and revenue achieved rapid growth continuously gaining market share in the on-demand delivery industry.

Dada NOW has significant advantages in terms of network coverage and the delivery cost gives us confidence in maintaining above industry growth rate in the long run. So overall, I think currently, management are prioritizing user and order volume growth with a focus on penetrating more JD users and enhancing their mindshare of on-demand retail.

In the long run, the improvement in users repeat purchase and the growth of order volume along the GMV will contribute to commission revenue and better monetization of advertising business. And on the bottom line front is our confidence in the industry's potential and our competitive advantages.

We remain optimistic about achieving breakeven and profitability in the long term. And speaking of the cooperation with JD.com, this quarter, we continue to fully embrace with JD ecosystem, accelerating our user penetration and mindshare growth.

In May, a new JD NOW section was launched on the home page of JD App, initially covering 39 cities and it focuses on high-frequency essential categories such as coffee and milk tea, convenience stores, fresh produce markets and emergency digital products offering consumers on-demand shopping options across all categories with delivery as fast as 9 minutes.

In June, the average daily paying users of the JD NOW section had approached 10% of the overall users of JD NOW through the JD.com app and the 30-day repurchase rate of users in the JD NOW section exceeded 60% which is also higher than that of users through the JD.com app.

So we think it is a sign of initial results that JD NOW section has achieved in terms of user penetration and cultivating consumer habits. And as of yesterday, we further expanded the geographical coverage of JD NOW section to nationwide, providing more JD.com users with their on-demand retail service.

Next to the increase in exposure brought about by the newly launched JD NOW section as well as the continuous optimization of CTR and conversion rates at various entry points.

So in this quarter, the penetration rate of JD NOW's quarterly paying users among the JD user base reached middle single digits with both year-on-year and quarter-over-quarter growth. So we are also confident in the further improvement of user penetration in the future.

And Dada NOW also support the JD Logistics is mostly handling the order peak during the June 18 shopping festival, providing flexible delivery capacity for smart pickup and the last-mile delivery services. And to your question regarding the company strategy. As you can see, the announcement regarding the management change, so Mr.

Kevin Guo has become the Chair of the Board of Directors of the company, providing high-level strategic planning and the consultation to the company. The strategy of both JD NOW and Dada NOW has never changed.

JD NOW has always been committed to providing users with on-demand retail shopping experience of quality merchandise and instant delivery in order to lead the development of the on-demand retail industry. And also, Dada NOW, we are continuing to focus on providing customers with stable and efficient on-demand delivery services.

And also, as I mentioned, restaurant and beverage KA business is a top priority of this year..

Jiulu, this is the operator. Do you have any more questions? Ladies and gentlemen, we have lost the line for Jiulu. And as there are no further questions at this time, I will now hand back to Caroline for closing remarks.

Caroline?.

Thank you, operator. In closing, on behalf of Dada's 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..

Thank you. That concludes our conference for today. Thank you for participating. You may now disconnect your lines..