Dada Nexus Ltd

NASDAQ:DADA

Earnings Call Analysis

Dada Group Achieves Strong Revenue Growth and Enhanced User Engagement

In Q3 2024, Dada Group reported total net revenues of RMB 2.4 billion, with Dada NOW revenue climbing 39% year-over-year to RMB 1.5 billion. The enhanced JD NOW platform saw a remarkable 100% growth in monthly transacting users. Non-GAAP net loss decreased to RMB 59 million, narrowing the loss margin to 2.4%. The number of operating stores increased by 70% year-on-year, amplifying service offerings. As a fundamental strategy, the company focuses on improving user experience leading to doubled daily orders and optimized fulfillment times, creating a robust environment for future growth.

Strong Growth Trajectory

In the third quarter of 2024, Dada Group showcased impressive growth, particularly in its flagship products, JD NOW and Dada NOW. The company reported a substantial year-over-year increase in monthly transacting users and order volume through the JD App, with a notable surge of over 100%. This growth reflects a robust penetration rate among JD users, signaling a strong user engagement and loyalty that are critical for long-term success.

Financial Performance Highlights

Dada Group achieved total net revenues of RMB 2.4 billion for the quarter, highlighting a diverse revenue base. Specifically, JD NOW contributed RMB 930 million, while Dada NOW saw its revenues grow by 39% year-on-year to RMB 1.5 billion. The company has consistently enhanced operational efficiency, with a non-GAAP net loss of RMB 59 million for the quarter, which represents a significant reduction in loss ratio by 3.7 percentage points compared to the previous quarter. This demonstrates improved cost management and operational performance.

Operational Improvements and User Engagement

The third quarter saw Dada renew its focus on enhancing user stickiness and mindshare within the on-demand retail space. The average monthly transaction users of JD NOW more than doubled year-on-year, reflecting the success of their strategies to boost user experience and service quality. Moreover, the cost per order fell by over 10% year-on-year, indicative of a steady improvement in operational efficiency. This commitment has driven up customer satisfaction and repeat purchase rates substantially.

Accelerating Delivery Services

Dada NOW has continued its upward trajectory with a 39% year-on-year revenue growth, propelled by strengthened partnerships with chain merchants and an overall enhancement in delivery service quality. Noteworthy is the substantial growth in key accounts, particularly in the restaurant and beverage sectors, which saw revenues soar by over 100% year-on-year.

Strategic Focus for Sustainable Growth

Going forward, Dada Group intends to maintain its emphasis on high-quality growth strategies. This includes enhancing the user experience and leveraging synergies between its on-demand retail and delivery platforms. Such an integrated approach is aimed at building longer-term sustainable growth, which investors should keep an eye on as it positions the company favorably within a competitive market.

Forward Guidance

While specific revenue projections were not detailed in the call, the leadership emphasized their commitment to accelerating growth through effective user engagement strategies and operational improvements. As the company continues to evolve and strengthen its market position, investors might expect ongoing positive momentum in both revenue growth and margin enhancements in the upcoming quarters.

Earnings Call Transcript 2024-Q3

[Operator]

Good morning, ladies and gentlemen, and thank you for standing by for Dada's Third Quarter 2024 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. [ Iris Lu ] from Investor Relations for Dada. Please proceed, Iris.

[Unknown Executive]

Thank you, operator. Hello, everyone, and welcome for joining our third 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 would 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 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. Mr. Mao, please go ahead.

[Henry Jun Mao, executive]

Thank you, Iris. And thank you all for joining us. In the third quarter of 2024, our high-quality growth accelerated further. For JD NOW, year-on-year growth in monthly transacting users and orders through the JD App continued strong momentum, increasing by over 100% this quarter. JD NOW continued to engage with more high-quality JD users and its penetration rate among JD users continued to increase sequentially quarter-over-quarter.

For Dada NOW, net revenues registered 46% year-on-year growth for the first 9 months of the year. We continue to optimize our overall operating efficiency with non-GAAP loss margin once again narrowed on a sequential basis in the third quarter.

Dada Group's total net revenues in the third quarter were RMB 2.4 billion. Net revenues from JD NOW were RMB 930 million. Net revenues from Dada NOW increased by 39% year-on-year to RMB 1.5 billion as we consistently strengthened partnerships with our chain merchants and further enhance delivery service quality.

Non-GAAP net loss in the third quarter was RMB 59 million. Non-GAAP net loss ratio was 2.4%, narrowing by 3.7 percentage points compared to the previous quarter, primarily due to the sequentially improved cost efficiency as well as optimized consumer subsidy efficiency.

Now let's turn to the operating highlights for our 2 platforms, JD NOW and Dada NOW. Starting from the -- with the JD NOW first. In the third quarter, we remain focused on driving the growth of JD NOW on the JD App, strengthening user mindshare has consistently enriched our offerings to better meet users' diverse needs in on-demand retail.

We continue to provide quality products and instant delivery to more and more JD users and fueled by customer experience optimization, users repurchase rates also registered remarkable growth sequentially. It is worth noting that during the Double 11 shopping festival, JD NOW's peak day online order volume reached a new high.

On the demand side, following the launch of the new JD NOW section and the JD NOW tab on the JD App homepage in this May, we gradually expanded the service coverage of JD NOW to more cities nationwide, providing more users with a convenient JD NOW on-demand return services with quality products and instant delivery right to their doorsteps.

With the enhancement of location-based service capabilities, we have recently launched JD NOW brand flagship stores joined hands with more than 100 renowned brands from categories, including food and beverages, personal care, consumer electronics and more. This initiative connects brands and retailers directly with the most relevant customers, delivering authentic products to consumer store staff in as fast as 9 minutes.

Leveraging JD's superior technology-driven supply chain capabilities. JD NOW brand flagship stores emphasize brand value proposition and foster local user engagement to attract user traffic for online and offline retailers, boosting marketing effectiveness for brand owners.

During this quarter, the number of cross-category visits by users in the JD NOW section on the JD App continued to increase sequentially as our category expansion brought diversified choices to consumers, further accelerating the year-on-year growth rate of orders placed through the JD App channel.

In the meanwhile, we introduced exclusive benefits such as price discounts and coupons for JD PLUS members to attract them to experience JD NOW's convenient on-demand retail services and capture their mindshare. The daily average transacting PLUS members for JD NOW continued its growth momentum in the third quarter, increasing notably by more than 50% quarter-over-quarter.

On the supply side, we continue to work on 5 fronts to comprehensively enhance our supply capabilities. In terms of store coverage, we continue to enrich our product offerings in existing categories such as supermarkets, convenience stores and the consumer electronics. As of the end of September of this year, the number of operating stores increased by over 70% year-over-year to more than 600,000 stores.

In the Supermarket category, JD NOW deepened collaboration with major supermarket chains with average daily delivery order volumes continuing to grow during the quarter. In the convenience store category, we launched over 1,000 stores of internationally renowned brand, Lawson, in July. We also deepened collaboration with other leading domestic convenience store brands in terms of store count.

The product offerings for convenience stores [ benefit ] well with our on-demand retail consumers. In the third quarter, the average daily delivery order volume in the convenience store category increased by more than 50% year-on-year.

In the consumer electronics category, we deepened our cooperation with existing brands and merchants. During the launch of new mobile phone models, we leveraged over 10,000 store coverage and provided the users with instant delivery service for new phones in as fast as 9 minutes.

On the date of the release of Apple iPhone 16 series, sales increased by double digits compared with the same period last year when the iPhone 15 series were released. Xiaomi, Huawei and other mobile phone brands also experienced remarkable year-on-year growth in the quarter.

Additionally, we also made progress in our essential accessories category to better address users' immediate needs. Year-to-date, we have added thousands of stores of brands such as Python and UGREEN.

We further enhanced price competitiveness. As of the end of September, the proportion of highly priced competitive products increased by 3 percentage points as compared with June this year. We continue to optimize the top brands for RMB 1 [ section ] on the landing page of the JD NOW tab, offering consumers various value-for-money products priced as low as RMB 1.

In terms of inventory, we continue to expand our offerings in the supermarket brand promotion section, carefully selecting the flagship SKUs of the top supermarkets with differentiated price advantages and providing users with attractive and diverse section of products.

On the accounting side, we further enriched product information and enhanced product attractiveness. In the third quarter, to further facilitate the purchase decision-making process, we enriched product information for merchants listing the JD NOW tab, including product description as well as applicable discounts and coupons. As a result, our click-through rate increased by 2 percentage points and our conversion rate increased by 5 percentage points sequentially, a clear sign that enriching product information improve customer experience and enhance its product appeal.

Furthermore, we believe that providing most cost-effective services are key to winning more users and meeting the demand-driven nature of on-demand retail. As reported earlier, we lowered the delivery fee waiver threshold to RMB 29 at the end of this February. This initiative effectively enhanced user experience and strengthened user mindshare, contributing to the continued growth momentum in JD NOW's order volume through the JD App over the past few quarters.

Additionally, we endeavor to provide users with shorter and more accurate estimated delivery time on the payment page through optimized algorithms and further accelerated the fulfillment process. The average fulfillment time for JD NOW orders this quarter was shortened by more than 20% year-over-year.

As a result of the above-mentioned measures, the penetration of JD NOW among JD users continued to increase quarter-over-quarter. User mindshare was further enhanced and the supply density and quality continues to improve, resulting in sequentially accelerated order volume growth in the third quarter.

In terms of user scale, as the user mindshare of on-demand retail through the JD App continued to increase, both our click-through rate and transaction conversion rates through the JD App increased in the third quarter, resulting in our overall user conversion rates more than doubling on a sequential basis.

JD NOW continued its strong growth momentum in average monthly transaction users on the JD App growing by more than 100% year-over-year, with high-frequency users growing even faster. The number of high-frequency users through the JD App more than doubled in this quarter.

In terms of user stickiness, our 30-day repeat purchase rate of users of the JD NOW section on the JD App experienced a significant increase from the previous quarter with a repeat rate of new and existing customers both growing. Additionally, we continue to improve user satisfaction in the quarter, demonstrated by a decrease in cost per order by over 10% year-on-year, also continually optimized sequentially.

On the supply side, we remain committed to expand product categories and store coverage. We believe that our quality for supply enrichment strategy will lay a solid foundation for our mindshare gains in the long term. The daily average JD NOW orders through the JD App continued to grow by over 100% year-on-year, accelerating further from the previous quarter. This was mainly [ thanks ] to the growing user base, strengthened user mindshare and continuous improvement in our service quality.

Next, I would like to turn to Dada NOW, our local on-demand delivery platform. In the third quarter, Dada NOW continued to grow rapidly. Net revenues from Dada NOW increased by 39% year-on-year to RMB 1.5 billion, driven by our strengthened partnerships with chain merchants and further enhanced delivery service quality.

In the third quarter, driven by significant growth in the number of stores, our key accounts or chain merchant business saw overall revenue growth north of 30% year-on-year with net revenues of restaurants and beverage KA growing more than 100% year-on-year and over 40% quarter-over-quarter.

When we reported earnings for the second quarter this year, we disclosed the number of orders delivered and gross billings of our on-demand delivery business for the first time. In the third quarter, the number of orders delivered by Dada NOW increased by 36% year-on-year to 648 million and the gross billings of Dada NOW grew by 33% year-on-year to RMB 3.1 billion. Meanwhile, we continue to leverage technology to refine operations, optimize delivery routes and dynamically adjust subsidy to further strengthen our price competitiveness and expand market share.

This concludes our operational updates for the 2 platforms. In the third quarter, we continued to strengthen user stickiness by enhancing user mindshare, attracting more high-quality JV users to the JD NOW service, both monthly transacting users and orders through the JD App maintained notably growth year-on-year, more than doubling in the quarter. Dada NOW also continued its rapid growth momentum driven by the share gains in merchant business, especially restaurant KA and order volume growth.

Going forward, we will continue to focus and execute on our high-quality growth strategy, improved user experience across the board, enhance our efforts to increase the mindshare of our on-demand retail business and further leverage the synergies between our on-demand retail and on-demand delivery platforms to drive longer-term sustainable growth.

With that, I will now go over our financials for this quarter. Before we go over the numbers, just a few housekeeping items. We believe year-on-year comparisons are the most useful way to evaluate our performance. And as a result, all percentage change that I'm going to give will be on a year-over-year basis and all figures are in RMB, unless otherwise noted.

Total net revenues in the third quarter was CNY 2.4 billion. Net revenues for JD NOW was CNY 930 million, mainly due to a decrease in online advertising and marketing services revenues and a decrease in fulfillment services and other revenues as a result of the full rollout of delivery fee waiver program for orders existing RMB 29 since February 2024.

Net revenues from Dada NOW increased by 39% to CNY 1.5 billion, mainly driven by an increase in order volume of intra-city delivery services provided to various chain merchants. For the first 9 months of 2024, our net revenues from Dada NOW increased by 46% to CNY 4.1 billion. Specifically, revenues from intra-city delivery services and the revenues from last-mile delivery services increased by 45% and 76% in the first 9 months of 2024, respectively.

Moving over to cost and expense side. Operations and support costs in the third quarter was CNY 1.7 billion. The increase was primarily due to an increase in rider cost as a result of increase in order volume of our intra-city delivery services provided to various chain merchants, offset by a decrease in online advertising and marketing service costs.

Selling and marketing expenses decreased to CNY 717 million, primarily due to a decrease in promotional activities initiated by us on the JD NOW section. General and administrative expenses were CNY 108 million. The increase was primarily due to an increase in provision for credit loss and litigation-related expenses.

Research and development expenses were CNY 90 million this quarter. Non-GAAP net loss was CNY 59 million and a non-GAAP net loss margin was 2.7 -- sorry, was 2.4% sequentially narrowing by 3.7 percentage points.

This concludes my prepared remarks. Operator, we are now ready to begin the Q&A session. Thank you.

[Operator]

[Operator Instructions] Your first question today comes from Thomas Chong from Jefferies.

[Thomas Chong, analyst]

[Foreign Language] My question is about the macro and industry landscape. How do we see the recent government support policies and consumer sentiment trend? What are your thoughts about the competitive landscape for the on-demand retail business?

[Henry Jun Mao, executive]

Thank you, Thomas, for your question. Well, we definitely believe that boosting consumer confidence is an important growth driver for China's economy. Also, we remain optimistic about the growth prospects of on-demand retail, being one of the fastest-growing subsectors with China consumption category.

Well, in terms of consumer preference, we continue to observe that growing consumer demand for convenience across various categories. We believe that there is significant room for JD NOW's on-demand retail to increase its penetration among JD users. Therefore, we are firmly committed to investing in our business. Our integration with the JD ecosystem still has huge upside and user mindshare is gaining momentum. As you can see for the past quarters, to better serve the evolving needs of our users as a platform providing both on-demand retail and delivery services, we are actively enriching high-quality supply across a wide range of categories to product consumers with more choices.

As I mentioned earlier, at the end of the September on the number of operating stores increased by over 70% year-on-year to more than 600,000 stores. And also back in this summer during the Paris Olympic Games period jointly with brand owners and local retailers, we further enriched our product offerings echoing user game watching and shopping enthusiasm. For instance, we launched a late-night feed channel, providing the nighttime audience with rich selections of snacks and beverages.

And I think Dada's unique competitive advantages also lies in the synergies between the JD NOW and the Dada NOW, two platforms. In the first 9 months this year in terms of revenue growth, Dada NOW significantly outperformed the on-demand delivery industry. This primarily is attributable to our share gains in restaurants and beverage KA chain merchant business, contributing as another strong growth engine to our business. So we believe that the 2 platforms will together fuel the growth in order volume and density, building up economics of scale and improve overall delivery efficiency.

So this can be, in turn, shown in the constant enhanced fulfillment service quality of JD NOW and Dada NOW this quarter. The average fulfillment time for JD NOW orders this quarter was shortened by more than 20% on a year-over-year basis, reinforcing our user mindset of quality products at instant delivery. So I would like to summarize that we believe that our competitive edge lies in the continually enriching product offerings on the supply side, the deep integration with JD.com on the demand side and synergistic gains between JD NOW and Dada NOW.

So these factors altogether help us to increase our user mindshare, our market share within the on-demand retail and delivery industry as we ride on the industry growth. I hope that answers question.

[Operator]

[Operator Instructions] Your next question comes from Alicia Yap from Citigroup.

[Alicis a Yap, analyst]

I have a couple of questions. First is that can management elaborate a little bit the user profile that you acquire or through the JD channels, given you have already deepened your collaborations recently. So just wondering if you can highlight a little bit what type of user profile that is successfully gather from the JD channel? And then especially, if you see any meaningful uptake in the recent Singles' Day promotion period from the JD channel. And then overall, if you can also just comment a little bit on whether you have seen some improvement in consumption spending, especially on JD NOW business where if the macros actually drive a little bit of the confidence level in the consumer consumption. So let me translate very quickly. [Foreign Language]

[Henry Jun Mao, executive]

Thank you, Alicia, for your questions. As we all know, since the beginning of this year, we have continued to execute our strategy of focusing on user experience, fully embracing the JD.com App ecosystem. As we all remember, starting from this May, following our brand upgrade from JDDJ previously to JD NOW, we have further increased touch points with the JD App primarily by launching the JD NOW section on JD App's homepage and adding a parallel tab for JD NOW.

So we believe the strategy paves the way for our sustainable growth in the future, given that the users from JD.com are highly relevant to the on-demand retail consumption scenarios. So they typically have stronger purchasing power, higher demand for quality and timeliness. Therefore, we have seen endeavoring to -- we have been endeavoring to provide quality services to engage more JD users and beyond.

In the third quarter of this year, we see a strong trend of improvement in core operational metrics, first set to the enriched product information and optimize operations we have effectively converted more user traffic with JD.com. The click-through rate of various major JD NOW entry points within the JD App has increased significantly quarter-over-quarter.

And as I mentioned earlier in my prepared remarks, our average monthly transaction users and orders to the JD App grew by over 100% year-on-year, continuing the strength -- the very strong growth momentum. It is also worth noting that the total number of new transacting users of JD NOW has also been growing at an increasing scale quarter-over-quarter, contributing to the continued sequentially increased penetration rate on the broader JD user base.

And JD NOW's users' repeat purchase rate within the JD App has also been fueled by the enriched product offerings and high-quality services. So the repeat purchase rate of JD NOW consumers through the core JD channel sequentially increased by over 10 percentage points in the third quarter. And our continued efforts in serving the high-quality JD Plus members have also yield measurable results this quarter. The daily average transaction JD Plus members for JD NOW continued its continued growth momentum growing by high double digits quarter-over-quarter.

Also, further investment in Dada by JD.com this quarter strongly reflected the unique role that Dada fulfills in on-demand retail and delivery industry within JD.com's broader ecosystem. So well, I think we are very optimistic in the company's long-term growth and development.

And one more thing, I think as you may have probably already noticed, we have recently launched the JD NOW brand flagship stores, joined hands with more than 100 renowned brands by offering authentic products deliverable in as fast as 9 minutes, emphasizing brand value, engaging consumers through membership, promotional activities and more JD NOW brand flagship stores directly connect the consumption brand with the most relevant nearby on-demand retail consumers. And meanwhile, provides retailers with more exposures.

As we further integrate into JD.com, we believe that the brand flagship stores will harness the technology-driven supply chain advantages of JD.com in the longer term, and this enables us to provide our users with the right selection of products and also enables us to holistically allocate resources. I hope that answers your questions.

[Operator]

As there are no further questions at this time. I'll now hand back to Ms. [ Lu ] for any closing remarks.

[Unknown Executive]

Thank you, operator. In closing, on behalf of Dada's management team, we would 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.