Q4 2023 Dada Nexus Ltd Earnings Call
Participants
Caroline Dong; Investor Relations; Dada Nexus Ltd
Bing Fu; Interim President; Dada Nexus Ltd
Jun Mao; Chief Financial Officer; Dada Nexus Ltd
Li Jiang; Analyst; Bank of America
Thomas Chong; Analyst; Jefferies
Xiong Wei; Analyst; UBS HK
Presentation
Operator
Good morning, ladies and gentlemen. Thank you for standing by for Dada's fourth quarter and fiscal year 2023 earnings conference call. (Operator Instructions)
As a reminder, today's conference call is being recorded. I would now like to turn the meeting over to your host for today's call, Ms. Caroline Dong, Head of Investor Relations for Dada. Please proceed.
Caroline Dong
Thank you, operator. Hello, everyone, and thank you for joining our fourth quarter and fiscal year 2023 earnings conference call. On the call today from Dada, we have Mr. Bing Fu, Interim President; and Mr. Henry Jun Mao, CFO. Mr. Fu will talk about our operations and company highlights, then Mr. Mao will discuss the financials. They will both be available to answer your questions during the Q&A session.
Please kindly note that Mr. Fu will give his remarks and answer questions in Chinese and the consecutive translation will be provided. In case of any discrepancy between the original remarks and the translated version, statements in the original remarks should prevail.
Before we begin, I'd like to remind you that this conference call contains 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 net 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 Interim President, Mr. Fu. Mr. Fu, please go ahead.
Bing Fu
(interpreted) Thank you, Caroline, and thank you all for joining us. Before we get into the highlights from the quarter, I would like to address the recent independent review results released by the company on March 5, 2024.
Back in January, we disclosed that during a routine internal audit, the Company identified a potential overstatement in revenues and costs related to online advertising and marketing services for the first three quarters of 2023. The company took this matter seriously, and the audit committee of the Board immediately initiated an independent review with the assistance of a third-party independent professional advisors, consisting of a leading international law firm and forensic accounting experts from an international consulting firm that is not the company's auditor.
Upon the substantial completion of the review, we announced the findings and remedial measures on March 5, including collection of certain information and the relevant past financial statements that are necessary and appropriate.
As you may have noticed the corrected line items of financial statements for the first three quarters of 2023 are presented in our earnings release, and it's important to note that neither net profit or loss nor cash balance was impacted by the correction in the corresponding periods.
As part of our dedication to reinforcing corporate governance, we will enhance the company's internal policies, systems and controls, and record-keeping and implement rigorous internal audits with enhanced monitoring and oversight mechanisms going forward to strengthen transparency, accountability, and integrity at all levels of the company.
How you got here. I mean, if digital doing well, meaning do you see less of that, about 800 sold regionally, where motivation from zonal upon the Tenda that Nissan encounter singly Randy can be by chance is up and yet now let's go through our financial and business performance during the fourth quarter of 2023.
Caroline Dong
So faced with challenges that our group made steady progress in improving both top line and operating efficiency. Our total net revenues increased by 3% and adjusted net margin improved by one percentage point year over year.
Bing Fu
So just the normal job without our portfolio looking either Europe or the interest here, finish our budgets all while meeting no details of Looking Glass in Autodesk will implement sufficient hole in your who you're familiar with yet EBIT to shelter that creating shared value pool conduit and our evolution. And Luca, if the digital shelf should at least in other PAO complete and our toggle back and rebuy because we are the sole yet the adjudication hosted team dominate the antitrust filing competition towards Gigabit Ethernet, silicon concrete, all sheltered. Our team now change our GMV from these into total 11 billion, let say fulfill local home equity to go full bore hole to Don Shassian. Shell should our R&D or the G&A from the Tenda as an essential piece here in New York with the seltzer that into that situation.
Caroline Dong
Before I get into the operational highlights from our two platforms, a brief update on our cooperation with JD.com. With respect to JDDJ, we continued to reach more daily users and optimize their user experience. In the fourth quarter, the number of monthly average structured our transacting users increased by 50% year on year. The breakdown by entry point stand alone, should our TAP saw its DAU more than double year on year, driven by increased click-through rate on the daily homepage. Meanwhile, order conversion rate within this should have increased by more than one percentage point year on year. As a result, GMV generated by online traffic on the shelf. Should that have more than tripled year on year, essentially that exposure not a major entry point on JD for glad to see that GMV generated by users who actively filter out non chartered out products among search results increased by 30% year on year in the fourth quarter, demonstrating growing on-demand mindshare.
Bing Fu
Martin JD. uses of our portfolio in loan-to-deposit total, you bought Jefferson for digital out-of-home sushi weigh in on the tissue paper official given you about up $1 from the general view about Veeva, meanwhile at our cooperation with JD.com further strengthened in the fourth quarter that I'll continue to provide dedicated support to JD's on-demand delivery needs is orders fulfilled nearly doubling year on year to make use of the NovaSure priorities with you. Do you think Chiquita if the deals the non-data situation by asking the OEMs will change that a little closer to the phone and can do it on such a gap. It's just adding U.S. NAND in targeting high eating some killer Pogo ChEVAS?
Yeah, think children here. Let me assure you we are adding RD&E compete and on top of it in the back.
Caroline Dong
Now let's go through the details fourth quarter operational highlights for JDDJ, the leading local on-demand retail platform in China. In the fourth quarter, we continued to deepen cooperation with large chains and empower more SMEs as of the end of 2023, JDDJ had onboarded over 500,000 retail stores more than doubling from the end of 2022.
Bing Fu
So the influence from hockey may well maybe you should do a GAAP items and how easy is it to the total shares, Archer SeaMicro door waiting time portal, a high-yielding gender neutral currency in the supermarket category, we cooperated closely with over 90% of the top 100 supermarket chains as well as regional champions to provide our users with industry-leading high-quality supplies ability until a formal JV or just low, reaching EBITDA major open until we also got a total EBITDA to GMV 20 and October to date.
Caroline Dong
At the same time, we deepened the cooperation with major convenience store chains such as daily convenience store, the offline store format empowered by JD.com, major the largest convenience store operator in China.
In terms of store count and Lawson, the fifth largest step by the same metrics. Total GMV generated by convenience stores in the fourth quarter increased about more than four times year on year shelf life stage of ATMs accumulate.
Bing Fu
So Devonian if digital overall hygiene and Tempe, GM based on recent pullback in rebates. And also my phone here is the you to show my hand in late GMV, out-of-home be by then do you see some of that type of Vinda function that will mature in 2020 and PNC late entry Dollar General into moving on to consumer electronics and smartphone category?
Caroline Dong
The GMV of Google and Samsung mobile phones more than doubled year on year in Q4.
In the computer and accessories category, initial products maintained rapid GMV growth of more than 50% year on year.
Bing Fu
And we also made significant progress in essential tech accessories such as charges, Javier, Caterpillar, and due to making changes at Santa Barbara and documenting pay station swap position and Lincoln in the PHP total food on Viking Lake Tahoe, Nevada, Finlandia. The change here is due to the audience here. And based on these and on top of revenue should start to see some way competes and up in F&G by turning to the home appliance and home furnishing categories.
Caroline Dong
During the quarter, we established new partnerships with major appliance brands such as Panasonic and Aruba. Now that one of China's top kitchen appliance brands, while we work more closely with leading SmartBox manufacturers such as cadence, Paddy should collectively, we newly onboarded over 10,000 home appliance and home furnishing stores onto our platform. As a result, in the fourth quarter, GMV of home appliance merchants increased by more than 50% year on year.
Bing Fu
While GMV of home furnishing merchants nearly doubled year on year, you're chasing me silly to me and the Toyota GM rate on the agenda.
Caroline Dong
Top 100 in the liquor category, namely in the fourth quarter increased by more than three times year on year, driven by regional store expansion that we're shipping late bleach issued for that kind of way. We should only how you file something the inventory if it is to push it to Liberty and they can be turned up towards M&A in the apparel category, GMA surged more than threefold, driven by our continued expansion in the sports and outdoor segments and differentiation of product offerings usual format.
Bing Fu
And you just show what they need to charge for those that don't yet get to adding U.S. NAND from an accounting change. And that change with all at-will easyhome hypo E4 guide toward EDR, Sam and Yamini yet on the agenda, talk about this issue and you Antonio, you should have all goes with some gas rules change agenda, some values. When you add all year as indeed you should see a TCL a change ERP hypo seasonal.
Andrew Hammond, TCV in children per eyeball sheet, yet I from the Moapa on to Sanjay to your 20th in Cabletica zero 30 32 commencing Zila in done from 2018 combo agenda should be issued.
Caroline Dong
I think Dan suggested incongruity people, some gap, Uncle Noni 18 Antisoma technological empowerment is an important important focus in our partnerships with retailers, hypo omnichannel or dual operating system. It been deployed in more than 13,000 stores as of year end 2023, an increase of over 40% from the end of 2022 and 2023 by both customer retention rate remained at around 90% despite a significantly enlarged customer base. This underscores the recognition among merchants of high both ability to enhance their operational efficiency. We continue to add more features to enable and improve its existing functionality. I've mentioned address pain points and improve operations. For example, in the fourth quarter PayPal added a new feature to intelligently identify fraudulent orders and provides real-time monitoring and alerts, thus enhancing merchants, risk control capabilities and operational security.
Bing Fu
Erg Mobile Data using data to tell you that that's a whole other pipe under the agenda. It's too early. I think Andy had quite on the future pay loyalty pay you some near flat total. I'll tell my colleagues can look at the situation at DeepOcean hole and other dementias, how putting our 10-year average on the for your tissue holidays and our whole goal of not sure. Just how cool. But after that fully Tomball payphone team had actually issued that will you'll see move onto let's move on to that are now the leading local on-demand delivery platform in China.
Caroline Dong
As of the end of 2023, our interest in home delivery and Last Mile businesses covered over 2,500 and over 26 hundred cities and counties, respectively, penetrating into more low-tier cities. In 2023, we had more than 1.2 million annual Active Riders of the data on our platform, an increase of more than 20% year on year, further expanding flexible employment opportunities for a wide range of Flowcast.
Bing Fu
You will a path towards yesterday. You should therefore some value if the deal to pay year which issued culture Delta into Pantaya can be summed up.
Talk about NovaSure entry in Mali on the tissue division, clearly top of M&A deal flow, let Harley on the insurance company and Joe, who should pay Copel NZD5 by two issues that are adding a 10-year initial data from the pool.
Caroline Dong
Isabella summed up the other part of the year for Julia looking at either input for our KA. or chain mentioned business in the fourth quarter, K. business delivers high quality growth with orders fulfilled increasing by more than 20% year on year. Average gross profit per order continuously improving year on year and fulfillment rate at above 95%. Quality and cost effectiveness of our fulfillment services, the main well recognized by merchants, notably all of the top 50 revenue contributors among our pay clients in 2020 to continue to rely on our services in 2023, using cable me if Digital One, parallel on the agenda.
Bing Fu
Talk about dilution from this year or dollar reaching above other big data layer on top of Azure. What I mean to me around Harvey, I can tell you personally live fairly unpleasant agenda in Q1 led to competitive growth pumping cave Aamir.
Homeaway has seen some seen close to all my people that Taleo quesadilla and the beverage category order facilities increased by more than 60% year on year in the fourth quarter. In October, we received the Best Strategic Partner Award like Luckin Coffee, the largest coffee chain in China, I still come. In addition, we also received recognition from charity, a popular new style P chain in China, having fulfilled a rapidly growing volume of orders with high quality service since the establishment of our strategic partnership in early 2023. In the restaurant K., candidly, orders fulfilled for newly partnered events such as tasty and Chinese style burger chain also wrap it up quickly.
If the shutdown southbound out of the NPA, he'll fill you in Ghana, neither your VoIP phone, you should have seen counting the paid-for issuances under traditional. Finally, I'll say some yen from checkout into China and when we send out top-up at large.
Moving on to our SME and C2C business number of SME and C2C orders fulfilled in the fourth quarter increased by more than 20% year on year from the high base in the prior year period, driven by pricing optimization, expansion into new verticals and increase the penetration into lower tier cities, Joshua working out a year, which induction costs on the lateral.
Wondering you went into Yeti.
Yes, we are not done yet, but it will audit us and yet prominently featured young gen content up fully here will tell you that since each of our clientele from Warwick, we don't conduct and other gadgets.
Yes, I think the primary cash element is the key to her tenure, and that's how that hit us yet either.
This concludes the overview of Argentina's performance to wrap up. It was a robust close to the year and heading into 2024, we will continue to place healthy growth at the heart of our overall strategy for creating shareholder value.
I will now pass the call over to Henry to go through our financials for the fourth quarter and fiscal year 2023. Thank you.
Jun Mao
Thank you, Mr. Fu. I'm thrilled to be on my first earnings call as CFO of our Group to discuss our financial performance with our valued analysts and then investors just a few housekeeping items before we go over the numbers, we believe year-over-year comparisons are the most useful way to evaluate our performance. Therefore, all percentage changes I'm going to give will be on year over year basis and all figures are in RMB unless otherwise noted.
In addition, figures for full year 2023 have reflected the traction of the financial statements, details of which are laid out in Annex. Our earnings release total net revenues in the fourth quarter increased by 3% 2.75 billion. Net revenues from JDDJ reached one point 55 million, mainly due to the decrease and online advertising and marketing services revenue. Net revenues from data now increased by 36% to EUR1.2 billion, mainly driven by the increases in order volume of intra-city delivery services chain merchants.
Moving over to cost and expense side, operations and support costs were 1.9 billion. The increase was primarily due to an increase in rider costs as a result of increase in order volume for intra-city delivery services provided to a various chain merchants.
Selling and marketing expenses decreased to 1 billion, primarily due to a decrease in promotional activities conducted on JDDJ platform and a decrease and advertising and marketing expenses.
General and administrative expenses decreased to 89 million as a result of decreased amortization of intangibles related with the acquisition of JDDJ. in 2016 and it reduced share-based compensation expenses.
Research and development expenses decreased to EUR91 million, mainly due to lower R&D personnel costs. Impairment loss of goodwill was EUR958 million for the fourth quarter of 2023. Non-gaap net loss was EUR159 million improvement compared with a loss of EUR179 million in the fourth quarter of 2022. Non-gaap net loss margin was 5.8%, improving by one percentage point year over year. As of December 31st, 2023, we had 4 billion in cash, cash equivalents, restricted cash and short-term investments.
I will now quickly run through a few key full year 2023 financial results. Further details can be found in our earnings release.
Total net revenues in 2023 increased by 12% to 10.5 billion with revenue from JDDJ growing by 5% to 6.5 billion and in revenue from data now growing by 27%, 4 billion operations and support costs were 6.5 billion compared with EUR5.7 billion in 2022. Selling and marketing expenses were 4.5 billion compared with 4.7 billion last year. General and administrative expenses were 253 million compared with EUR409 million in 2022. Research and development development expenses were 416 million compared with EUR631 million in 2022. Our non-GAAP net loss was EUR342 million compared with 1.3 billion in credit two, non-GAAP net loss margin was 3.3%, improving by 11 percentage points year over year. In addition, we have announced that the Board of Directors have authorized a share repurchase program of up to UFB. 40 million of American Depository Shares funded by our existing cash balance for a two year period through March 2026. Our decision to repurchase shares is part of our broader strategy to create long-term value for our shareholders. We have taken limited to prioritizing shareholder interest and enhancing shareholder returns.
This concludes our prepared remarks. Operator, we are now ready to begin the Q&A session.
Question and Answer Session
Operator
(Operator Instructions) Li Jiang, Bank of America.
Li Jiang
How high our galleys and that's our hypothesis is all about US auto and you know the Goldrush ReSound in Valle San Jose one I will mention here. Holding SaaS does VCRs in yen. Our term good are good. Our GM business, the Macau will then comment on key homegrown data at ASH and adding new diagnoses. And since our Taiwanese Centrex RZRs, and you said that earlier, that sounds half, you'll see here on that note emerging.
No doubt that you would have to go pull a higher, easier to go to your platform into our CCF back this year.
Our segment rental taking aircraft rents are two questions here. First, can you share more color with us are in terms of the macro and the consumption downgrade, the impact to our business?
Secondly, wondering your overall 2024 outlook, including the subsidy plan for our JDDJ. business.
Jun Mao
Thank you. Assuming no NPL what you have with H. at Eagle and thank you for your question. I will answer your first one for us and, you know, say the Jinji shortly HMLP for China Whitening Gel basis, how much residual for Jim in the shelf in Germany who are choppy teaching your Nike mutation often in meetings, each issue which Shah pretty easily from one city center close to help agents who have put our policies here, John Shelby, we felt was a patient counted out our Corporate Center in 2023 as they occur as the economy and society normalized consumption market gradually recovered.
Bing Fu
Nonetheless, there was still room for consumers, spending power and confidence to improve and into 2024 with the economy poised to further rebound and improve as well as the introduction of a series of macro stimulus and Pro consumption policies the recovery and expansion of consumption will be further strengthened as any of the change that Tom gave a helpful for TDRs, which are the shipper pay Neil one-time universal for Delphi as Gen two flow units.
And those are industrial shallow bay that we fully do finding us. And yet you've REF and the survey showed you that have time Leo foods outweigh the CTO and the dilution and shoe choppy.
There were no question 18-year teaming, say for self-pay short average, again, to come back down to GAAP and that the delinquent last year service consumption such as catering, tourism and entertainment improved, thanks to the return of offline consumption scenarios as well as the unleashing of pent-up demand, which took off some steam from the recovery of physical goods consumption. But when sentiment data for the first two months of the year indicates continued strength in solid consumption, such as catering and tourism and stable recovery in physical goods consumption.
Looking ahead, we expect a more balanced wallet share of services versus physical goods that you usually show volume items or others altogether, Tachi, low-power holiday doll, Shell, BP and noodles was 19.4 doors and Tommy, the Ocean from accounting usually show especially June version holiday. You'll watch the future.
The on-demand retail sector is still in the early days of developments in the edge of on-demand retail in both convenience and product selection. We remain confident as its penetration among retail sales and further channel and the lower and thank you, Les, and I will take your second question.
Jun Mao
So regarding the overall strategy, I think a 24 on with respect to JDDJ, I think it definitely will continue to enrich its supply to meet the rising consumer demand for the online demand shopping on enhancing our user experience and mindshare. And meanwhile, I think we will focus on the health of our JDDJ business and improve the operating efficiency.
In terms of the on promotion activities and consumer incentives, I think we will continue continuously invest in a targeted manner to drive the growth while ensuring ensuring the health of the business by evaluating the ROI on across different channels, user demographics and categories to optimize our subsidy and efficiency and also on par with respect to that. And now I think we all know that it now has is on adventurous nationwide eroding network. So on I don't know, we're continuously focused on its key business with sustained efforts to enhance services and technologies on going forward. I think that I know we'll work more closely with existing customers while proactively on acquiring new clients to ride on the boom of on-demand delivery to fitness growth, along with the efficiency gains. And I hope that answers your question.
Operator
Thomas Chong, Jefferies.
Thomas Chong
Please go ahead and finally transition what a T1, which they will now go into something Delta people into shooting and that are now giving rise to the K that the Dow closure with regard to shift from E&O D&O, and you should know if we if there's obvious element very early R&D and JDDJ that you wouldn't want to sit on the defined. Thanks management for taking my question. Two questions. First for that. And now how do you see the key order and the revenue momentum this year? And my second question is about JDDJ could you please provide any color about JDDJ outlook in 2020 for ticket of note?
Bing Fu
Were here with us at Eagle? When do you think you are take the first question I can you can go to the city to the K the year, which she bolted onto and Allianz can be then Dan Togo. I'm not sure total year Sugiyama from detail by the dividend up throughout the year. We'll know closer to the high end keenly than downtown flat Tijuana and her team had us well positioned to enhance Aloha the future young audience, again guarantee fee.
Sure.
In the fourth quarter of 2023, our K. business delivered high-quality growth with the number of orders fulfilled increasing by more than 20% year on year as well as rapid revenue growth year on year. Healthy momentum primarily resulted from robust growth of our average chain SaaS as well as our deepened cooperation with them and we're pleased to see that these trends remain ongoing, and we expect that to it will continue into 2024.
Yes.
Yes.
As to the Usama, the handwritten data throughout the data platform for HM, whether you want to go when things go south Louisiana me since I am Angela Ho Ping pay in July, the full feature them that meet each commercially that you should know me or changing. She's seen collating, Sanjay, that's on schedule in 2020 further for not only potential partnership. Can you cope with the question? How do you classify it up by saying that the Samsung you should pay for Chitung sheeting, though from our offices?
Well, you highlighted Central and we think these trends are likely to gain. Thanks to that in-house nationwide fiber network, stable and efficient fulfillment ability to Peter to talk brands need for customized services as well as to have a competitive edge in cost efficiency. But confident in attracting more of merchant has and all verticals and deepening partnerships with our existing customers. In the long run, we expect to further gain market share in the third-party on-demand delivery industry and maintain above industry growth.
Jun Mao
Okay. I will take the second question. As I mentioned earlier, I think regarding JDDJ, so in 2024, we will be laser focused on the high-quality growth of the business and having to the market opportunities of on-demand retail on together with JD.com and to further improve the shopping experience for the customers and to unleash more synergies with JD.com. And in the long run, we are very confident in delivering sustainable, healthy growth given our commitment to the implementation of our on-demand retail strategy, along with our efforts to enrich the product offerings and to enhance that user experience in kids.
Thomas Chong
Thank you.
Operator
Xiong Wei, UBS.
Xiong Wei
Thanks, management, for taking my question was on drilling to a Netflix when it comes to the salvage setting in Nigeria with January, Joan Dea, just momentary situation, you will go more of a Pizza Hut efficiencies occasions either sold or shut down, we're looking with refineries.
Could management share your strategic focus on JDDJ development?
Are we more focusing on user growth and frequency improvement or are they continue to do more cost efficiency improvement and improving unit economics in 2004?
Could you give us more color around balancing the top line growth and profitability improvement? Thanks.
Bing Fu
Thank you for your question. And I think, yes, we have discussed this a lot. I think on one hand, we've always been focused on high-quality user growth and high quality, our improvements in repeat purchase rate and shopping frequency and with users at the heart of our strategy, we will continuously optimize our merchandise offerings on interface design and the business operations. And also we will continue to unleash more synergies with JD.com to efficiently serve consumers diversified argument shopping needs. I think in doing so, we aim to improve the overall on user experience and to enhance user mindshare on. And I think for this year, JDDJ will focus on the health of its business, grow and adapt a more ROI-driven approach to achieve on high-quality growth and operating efficiency improvements. Our overall goal is to achieve high-quality, healthy and sustainable business growth, along with a steady improvement in profitability I mean, in the long run, we are very confident in delivering the sustainable high-quality growth.
Yes.
Operator
There are no further questions at this time. I'll now hand back to Ms. Caroline Dong for closing remarks.
Caroline Dong
Thank you, operator. In closing, on behalf of 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, and thanks for joining us today.
This concludes the call.
Operator
That does conclude our conference for today. Thank you for participating. You may now disconnect.
