Dada Nexus, Inc. (NASDAQ:DADA) Q3 2022 Earnings Conference Call November 17, 2022 8:30 PM ET Company Participants Caroline Dong - Head, IR Jeff Huijian - President & Director Beck Chen - CFO Conference Call Participants Ronald Keung - Goldman Sachs Thomas Chong - Jefferies Alicia Yap - Citi Ashley Xu - Crédit Suisse Andre Chang - JPMorgan Chase & Co. Operator Good morning, ladies and gentlemen, and thank you for standing by for Dada's Third Quarter 2022 Earnings Conference Call. [Operator Instructions]. I w ...

Dada Nexus Limited (NASDAQ:DADA) Q2 2022 Earnings Conference Call August 22, 2022 9:30 PM ET Company Participants Caroline Dong - Head of Investor Relations Philip Kuai - Chairman & Chief Executive Officer Beck Chen - Chief Financial Officer Jeff Huijian - President Conference Call Participants Ronald Keung - Goldman Sachs Thomas Chong - Jefferies Eddie Leung - Bank of America Merrill Lynch Alicia Yap - Citigroup Andre Chang - JPMorgan Wei Xiong - UBS Operator Good morning, ladies and gentlemen and thank yo ...

Financial Data and Key Metrics Changes - Dada Group reported a total net revenue of RMB 2 billion for Q1 2022, reflecting a pro forma revenue growth of 74% year-over-year [22] - Non-GAAP net loss attributable to ordinary shareholders was RMB 481 million, with a non-GAAP net loss margin of 24%, showing an improvement of about 30 percentage points year-over-year [25] - Cash, cash equivalents, restricted cash, and short-term investments totaled RMB 4.6 billion as of March 31, 2022 [25] Business Line Data and Key Metrics Changes - Net revenue from Dada Now was RMB 623 million, driven by increased order volume for intercity delivery services [22] - JDDJ's net revenues increased by 80% to RMB 1.4 billion, attributed to a rise in GMV, active consumers, and average order size [23] - The GMV of JDDJ's supermarket category accelerated year-over-year, with partnerships established with 86 out of the top 100 supermarket chains in China [11] Market Data and Key Metrics Changes - The number of annual active users on JDDJ increased by 47% year-over-year to 67.9 million [10] - The average daily GMV during the April 15th Intra-City Shopping Festival exceeded that of last year's Double 11 shopping festival [9] - The contribution of JD channels to Dada's GMV in Q1 was over 50% [40] Company Strategy and Development Direction - Dada Group is focused on compliant operations while driving sustainable business growth, particularly in the context of the platform economy [5] - The company is enhancing its cooperation with JD.com, improving product performance and brand marketing initiatives [38] - Dada is committed to expanding its geographic coverage and improving user experience through app design and operations [8] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by COVID-19 but expressed confidence in the recovery of business operations [30] - The company anticipates that the competitive landscape will become more rational post-COVID, benefiting strong players in the market [38] - For Q2 2022, Dada expects total revenue between RMB 2.25 billion and RMB 2.35 billion, representing a pro forma growth rate of 59% to 66% [26] Other Important Information - Dada has implemented various support measures for riders and merchants during the pandemic, including subsidies and delivery capabilities [6] - The company has launched new marketing campaigns to promote products based on consumption trends, contributing to sales growth [14] Q&A Session Summary Question: Impact of COVID on business and growth expectations for JDDJ - Management noted that while COVID outbreaks have affected operations, they have been approved as a key company for daily supplies, and business is recovering quickly [29][30] Question: Long-term outlook post-COVID and competitive landscape changes - Management expects a more rational competitive environment post-COVID, with smaller competitors facing challenges, while basket sizes continue to grow [38] Question: Contribution of JD channels to GMV - JD channels contributed over 50% to Dada's GMV in Q1, with expectations for continued growth [40] Question: Unit economics for JDDJ and revenue trends - Management indicated that JDDJ is on track to achieve positive direct margins in Q2, with expectations for continued revenue growth [43][44] Question: Advertising yield and monetization rate outlook - Advertising revenue grew by 180% year-over-year, with expectations for continued growth in monetization rates [65][66]

Dada Nexus Limited (NASDAQ:DADA) Q4 2021 Earnings Conference Call March 8, 2022 8:00 PM ET Company Participants Caroline Dong - Head, Investor Relations Philip Kuai - Chairman & Chief Executive Officer Beck Chen - Chief Financial Officer Jun Yang - Co-Founder & Chief Technology Officer Conference Call Participants Ronald Keung - Goldman Sachs Eddie Leung - Bank of America Thomas Chong - Jefferies Alicia Yap - Citigroup Ashley Xu - Credit Suisse Andre Chang - JPMorgan Wei Fang - Morgan Stanley Wei Xiong - UB ...

Dada Nexus Limited (NASDAQ:DADA) Q3 2021 Earnings Conference Call November 23, 2021 8:00 PM ET Company Participants Caroline Dong - Head, Investor Relations Philip Kuai - Chairman and CEO Beck Chen - Chief Financial Officer Jun Yang - Co-Founder and CTO Conference Call Participants Ronald Keung - Goldman Sachs Eddie Leung - Bank of America Thomas Chong - Jefferies Alicia Yap - Citigroup Ashley Xu - Credit Suisse Wei Xiong - UBS Robin Leung - Daiwa Operator Good morning, ladies and gentlemen. Thank you for s ...

Financial Data and Key Metrics Changes - Total net revenue increased to RMB 1.5 billion, with a pro forma revenue growth of 81% year-over-year [22][23] - Non-GAAP net loss attributable to ordinary shareholders was RMB 549 million, compared to RMB 319 million in Q2 last year [25] - Cash and cash equivalents, restricted cash, and short-term investments totaled RMB 4.7 billion as of June 30, 2021 [25] Business Line Data and Key Metrics Changes - Net revenues from Dada Now were RMB 594 million, with a pro forma growth rate of 81% year-over-year [23] - Total net revenues from JDDJ increased by 81% to RMB 881 million, driven by an increase in GMV and active consumers [23] - Online marketing revenue from brand partners increased by over 110% year-over-year [13] Market Data and Key Metrics Changes - The number of active consumers increased by around 50% year-over-year to 51.3 million [9] - The GMV from the JD one-hour shopping service grew by 90% quarter-over-quarter [30] - Offline retail still accounts for 76.3% of consumer goods sold in the first half of the year [10] Company Strategy and Development Direction - The company aims to support the healthy development of China's real economy and promote domestic circulation [6][7] - Focus on digital transformation and enhancing the O2O (online-to-offline) experience for retailers [11] - Plans to deepen cooperation with JD Group to enhance on-demand delivery services and expand into new categories [30][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term competitiveness of the company amid evolving regulatory environments [7][8] - The company anticipates continued growth in the Dada Now business, expecting triple-digit growth in the second half of the year [61] - Management noted that the COVID-19 pandemic has led to increased online ordering habits among consumers, which is expected to benefit the company in the long term [42][43] Other Important Information - The company has launched a data autonomous delivery open platform to enhance operational efficiency [20] - The Haibo system has been adopted by over 4,300 retail chain stores, demonstrating significant growth [15] - The company is preparing for the implementation of work-related injury insurance for riders, with an estimated incremental cost of RMB 0.04 per order [63] Q&A Session Summary Question: Updates on cooperation with JD and expansion plans - Management highlighted strengthened partnership with JD, with significant growth in GMV from JD's one-hour shopping service and plans for further expansion [30][31] Question: JDDJ growth expectations and seasonality - Management expects JDDJ growth to accelerate in the second half, with Q4 anticipated to outperform Q3 due to seasonal factors [32] Question: Rider cost trends and implications - Management noted that rider costs have increased due to higher order volumes, but the cost per order remains stable [36][37] Question: Impact of COVID-19 on business - Management reported that COVID-19 has led to increased online ordering, benefiting the company, and does not expect significant negative impacts from recent floods [42][44] Question: Community group platform demand and competitive landscape - Management indicated that tighter regulations on community group buying platforms may lead to increased demand for supermarket retail partners [48][49] Question: Autonomous delivery cost savings and pricing structure - Management expects autonomous delivery to significantly reduce costs in the long term, with ongoing trials showing positive customer experiences [52][54]

Dada Nexus Ltd (NASDAQ:DADA) Q1 2021 Earnings Conference Call June 7, 2021 9:00 PM ET Corporate Participants Caroline Dong - Head, Investor Relations Philip Kuai - Chairman and Chief Executive Officer Beck Chen - Chief Financial Officer Conference Call Participants Ronald Keung - Goldman Sachs Group Eddie Leung - Bank of America Thomas Chong - Jefferies Ashley Xu - Credit Suisse Qianlei Fan - Morgan Stanley Alicia Yap - Citigroup Robin Leung - Daiwa Hans Chung - KeyBanc Capital Markets Operator Good morning ...

PART I [Item 3. Key Information](index=6&type=section&id=Item%203.%20Key%20Information) The company faces significant risks related to its business, corporate structure, China operations, and ADSs [Risks Relating to Our Business](index=6&type=section&id=Risks%20Relating%20to%20Our%20Business) Business risks include dependency on the on-demand retail industry, a history of net losses, and reliance on major partners - The company's business and growth are **highly dependent on the on-demand retail and delivery industries** in China, which are new and rapidly evolving[19](index=19&type=chunk) - The company has significant strategic and financial reliance on JD Group and Walmart Group, who held approximately **46.0% and 10.1%** of the company's equity, respectively, as of February 28, 2021[25](index=25&type=chunk) History of Net Losses and Negative Operating Cash Flow (2018-2020) | Year | Net Loss (RMB million) | Net Cash Used in Operating Activities (RMB million) | | :--- | :--- | :--- | | 2018 | 1,878.4 | 1,819.4 | | 2019 | 1,669.8 | 1,297.8 | | 2020 | 1,705.2 | 1,108.2 | Revenue Concentration from Major Customers (2018-2020) | Customer | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | | JD Group | 49.1% | 50.5% | 38.6% | | Walmart Group | 4.6% | 13.0% | 13.8% | - A **material weakness in internal control** over financial reporting was identified for the year ended 2020, relating to a lack of detailed accounting policies and procedures[143](index=143&type=chunk)[144](index=144&type=chunk) [Risks Related to Our Corporate Structure](index=27&type=section&id=Risks%20Related%20to%20Our%20Corporate%20Structure) The company's VIE structure, used to comply with PRC law, poses significant legal and regulatory uncertainties - The company uses a **VIE structure** to operate its value-added telecommunication services in China, relying on contractual arrangements rather than direct ownership[149](index=149&type=chunk)[150](index=150&type=chunk) - There are substantial uncertainties regarding PRC laws; if the government finds the VIE agreements non-compliant, the company could face **severe penalties**[153](index=153&type=chunk) - The Foreign Investment Law does not explicitly classify VIE structures, creating **uncertainty about future regulations** that could deem them foreign investments in restricted industries[166](index=166&type=chunk) [Risks Related to Doing Business in China](index=31&type=section&id=Risks%20Related%20to%20Doing%20Business%20in%20China) Operations are exposed to China's economic, political, and legal systems, including potential delisting under the HFCAA - Substantially all assets and operations are in China, making the business **highly susceptible to changes in China's economic and political conditions**[175](index=175&type=chunk) - If classified as a PRC resident enterprise, the company could be subject to a **25% tax on its worldwide income**, and non-PRC shareholders could face PRC withholding taxes[187](index=187&type=chunk)[189](index=189&type=chunk) - The company's ADSs may be **delisted under the Holding Foreign Companies Accountable Act (HFCAA)** if the PCAOB cannot inspect its China-based auditor for three consecutive years[228](index=228&type=chunk)[229](index=229&type=chunk) - PRC regulations on foreign exchange may **limit the ability of PRC subsidiaries to transfer funds** to the parent company[212](index=212&type=chunk)[226](index=226&type=chunk) [Risks Related to Our ADSs](index=42&type=section&id=Risks%20Related%20to%20Our%20ADSs) Investment risks include ADS price volatility, limited voting rights, and potential adverse US tax consequences - The trading price of the ADSs has been **volatile**, ranging from US$14.75 to US$57.95 per ADS since the IPO[241](index=241&type=chunk) - The company **does not expect to pay dividends** in the foreseeable future, so investors must rely on ADS price appreciation for returns[250](index=250&type=chunk) - Holders of ADSs have **limited voting rights** and cannot directly attend or vote at shareholder meetings unless they withdraw the underlying ordinary shares[254](index=254&type=chunk)[255](index=255&type=chunk) - As a foreign private issuer, the company is **exempt from certain SEC reporting requirements** applicable to U.S. domestic companies[278](index=278&type=chunk) - There is a risk the company could be classified as a **Passive Foreign Investment Company (PFIC)**, which would result in adverse U.S. federal income tax consequences for U.S. investors[280](index=280&type=chunk)[281](index=281&type=chunk) [Item 4. Information on the Company](index=49&type=section&id=Item%204.%20Information%20on%20the%20Company) The company's history, dual-platform business model, VIE structure, and strategic partnerships are detailed [A. History and Development of the Company](index=49&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Key milestones include the company's founding, acquisition of JDDJ, and a significant new investment from JD.com - The company was founded in July 2014 with the launch of the Dada Now app[287](index=287&type=chunk) - In April 2016, the company **acquired the JDDJ business from JD Group**, which became a strategic investor[288](index=288&type=chunk) - Walmart Group became a strategic investor in October 2016, following a business cooperation agreement established in June 2016[289](index=289&type=chunk) - In March 2021, JD.com agreed to invest an additional **US$800 million**, expected to increase its ownership stake to approximately 51%[291](index=291&type=chunk) [B. Business Overview](index=50&type=section&id=B.%20Business%20Overview) The company operates two complementary platforms, Dada Now and JDDJ, supported by key strategic partnerships - The company operates two main platforms: **Dada Now** for on-demand delivery and **JDDJ** for on-demand retail[293](index=293&type=chunk) Dada Now Key Metrics (2020) | Metric | Value | | :--- | :--- | | Orders Delivered | 1,057.1 million | | Intra-city Coverage | ~1,400 cities/counties | | Last-mile Coverage | >2,700 cities/counties | JDDJ Key Metrics (2020) | Metric | Value | | :--- | :--- | | GMV | RMB 25,262 million | | Active Consumers | 41.3 million | | Coverage | ~1,400 cities/counties | - The company has deep strategic partnerships with **JD Group and Walmart Group**, who are both major investors and significant sources of revenue[338](index=338&type=chunk)[339](index=339&type=chunk) - The business is subject to extensive PRC regulations, including those related to foreign investment, e-commerce, data privacy, and intellectual property[367](index=367&type=chunk) [C. Organizational Structure](index=79&type=section&id=C.%20Organizational%20Structure) The company uses a VIE structure controlled via contractual arrangements to operate in restricted sectors in China - The company utilizes a **VIE structure** to operate businesses in China that are subject to foreign ownership restrictions[464](index=464&type=chunk)[467](index=467&type=chunk) - Control over the VIE (Shanghai Qusheng) is established through **contractual arrangements** with its wholly-owned subsidiary, Dada Glory[467](index=467&type=chunk) - Key contractual agreements include Powers of Attorney, Share Pledge Agreements, an Exclusive Business Cooperation Agreement, and Exclusive Option Agreements[469](index=469&type=chunk)[470](index=470&type=chunk)[472](index=472&type=chunk)[474](index=474&type=chunk) [D. Property, Plant and Equipment](index=82&type=section&id=D.%20Property%2C%20Plant%20and%20Equipment) The company operates from leased office spaces across China and utilizes third-party data centers - As of December 31, 2020, the company leased approximately **43,100 square meters** of office and other space across China[477](index=477&type=chunk) - Servers are hosted in **third-party data centers** located in Beijing[479](index=479&type=chunk) [Item 5. Operating and Financial Review and Prospects](index=83&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) The company shows strong revenue growth driven by order volume but remains unprofitable with negative operating cash flow [A. Operating Results](index=83&type=section&id=A.%20Operating%20Results) Net revenues grew significantly in 2020, though net loss widened slightly due to increased operating costs Consolidated Results of Operations (2018-2020) | Metric (RMB in millions) | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | | **Net Revenues** | 1,922.0 | 3,100.0 | 5,740.0 | | Operations and support | (2,044.1) | (2,845.9) | (4,721.3) | | Selling and marketing | (1,223.3) | (1,414.5) | (1,848.7) | | Loss from operations | (1,976.5) | (1,749.7) | (1,764.1) | | **Net Loss** | (1,878.4) | (1,669.8) | (1,705.2) | - Net revenues in 2020 increased by **85.2% year-over-year**, primarily due to substantial growth in delivery and marketplace services[523](index=523&type=chunk) - JDDJ platform's GMV grew **107.0% in 2020**, driven by a 69.5% increase in active consumers and a 49.1% increase in average order size[483](index=483&type=chunk)[524](index=524&type=chunk) - Operations and support costs, the largest expense category, increased by **65.9% in 2020 to RMB 4.72 billion**, mainly due to higher rider costs[525](index=525&type=chunk) [B. Liquidity and Capital Resources](index=100&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) Liquidity is primarily sourced from financing activities as operations continue to generate negative cash flow Summary of Cash Flows (2018-2020) | Cash Flow (RMB in millions) | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | (1,819.4) | (1,297.8) | (1,108.2) | | Net cash used in investing activities | (415.4) | (267.5) | (229.8) | | Net cash provided by financing activities | 3,048.1 | 0 | 5,891.6 | - As of December 31, 2020, the company had **RMB 5.46 billion (US$837.0 million)** in cash and cash equivalents[581](index=581&type=chunk) - Liquidity is primarily sourced from financing activities; in 2020, the company raised a net total of **RMB 5.89 billion** from its IPO, follow-on offering, and borrowings[599](index=599&type=chunk) - The company's ability to use cash generated in China is **restricted by PRC laws**, which limit dividend payments from PRC subsidiaries[588](index=588&type=chunk)[602](index=602&type=chunk) [Item 6. Directors, Senior Management and Employees](index=105&type=section&id=Item%206.%20Directors%2C%20Senior%20Management%20and%20Employees) The company's leadership, board composition, compensation plans, and employee base are described [A. Directors and Senior Management](index=105&type=section&id=A.%20Directors%20and%20Senior%20Management) The leadership team includes the company's founders and representatives from strategic partners JD.com and Walmart - The leadership team includes founder **Philip Jiaqi Kuai (Chairman & CEO)**, co-founder **Jun Yang (Director & CTO)**, and **Beck Zhaoming Chen (CFO)**[609](index=609&type=chunk)[612](index=612&type=chunk)[613](index=613&type=chunk)[621](index=621&type=chunk) - The board of directors includes executives from strategic partners **JD.com and Walmart**, reflecting their significant ownership and strategic importance[609](index=609&type=chunk)[614](index=614&type=chunk)[616](index=616&type=chunk) [B. Compensation](index=107&type=section&id=B.%20Compensation) Compensation includes cash salaries and equity incentives under two share plans designed to attract and retain talent - Total cash compensation paid to executive officers in 2020 was **RMB 6.7 million (US$1.0 million)**[622](index=622&type=chunk) - The company has a **2015 Equity Incentive Plan and a 2020 Share Incentive Plan** for granting equity awards like options and RSUs[628](index=628&type=chunk)[632](index=632&type=chunk) - As of February 28, 2021, there were options to purchase **41,391,852 ordinary shares** and **19,374,513 outstanding RSUs** under the 2015 Plan[628](index=628&type=chunk) - As of February 28, 2021, there were options to purchase **1,738,000 ordinary shares** and **2,684,800 outstanding RSUs** under the 2020 Plan[632](index=632&type=chunk) [C. Board Practices](index=110&type=section&id=C.%20Board%20Practices) The board has nine members and three committees, operating under Cayman Islands law with specific fiduciary duties - The board of directors consists of **nine members** and has three committees: Audit, Compensation, and Nominating and Corporate Governance[640](index=640&type=chunk)[641](index=641&type=chunk) - The Audit Committee is composed of independent directors, with Ms. Bonnie Yi Zhang serving as chairperson and qualifying as an **audit committee financial expert**[641](index=641&type=chunk) - Directors are elected by shareholder resolution and **do not have a fixed term of office**[648](index=648&type=chunk) [D. Employees](index=112&type=section&id=D.%20Employees) The company employs over 2,400 staff, while its delivery riders are classified as independent contractors Employee Count by Function (as of Dec 31, 2020) | Function | Number of Employees | | :--- | :--- | | Business operations and sales & marketing | 1,466 | | Research and development | 681 | | Customer care | 115 | | General and administrative | 178 | | **Total** | **2,440** | - The company's riders are **not considered employees**; they are primarily part-time crowdsourced individuals or from outsourced delivery agencies[652](index=652&type=chunk) [E. Share Ownership](index=113&type=section&id=E.%20Share%20Ownership) Major shareholders include JD Group and Walmart, with JD.com's ownership expected to exceed 50% Principal Shareholders (as of Feb 28, 2021) | Shareholder | Beneficial Ownership % | | :--- | :--- | | JD Group Entities | 46.0% | | Walmart Entities | 10.1% | | Sequoia Capital China | 7.3% | | Pleasant Lake Limited | 7.2% | | Investment funds affiliated with DST | 5.4% | - CEO Philip Jiaqi Kuai and CTO Jun Yang beneficially owned **7.8% and 1.6%** of ordinary shares, respectively, as of February 28, 2021[658](index=658&type=chunk) - A March 2021 share purchase agreement is expected to increase **JD.com's ownership to approximately 51%** upon closing[669](index=669&type=chunk) [Item 7. Major Shareholders and Related Party Transactions](index=116&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) The company has significant revenue-generating and operational transactions with major shareholders JD Group and Walmart - The company has significant related party transactions with its major shareholders, **JD Group and Walmart Group**[672](index=672&type=chunk)[673](index=673&type=chunk) Revenues from Major Related Parties (2018-2020) | Related Party (RMB in millions) | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | | JD Group | 943.1 | 1,564.4 | 2,214.3 | | Walmart Group | 89.4 | 403.3 | 794.7 | - The company incurred operational support service fees from JD Group amounting to **RMB 79.0 million in 2020**[672](index=672&type=chunk) - Shareholders have been granted **registration rights**, including demand, piggyback, and Form F-3 registration rights[676](index=676&type=chunk)[677](index=677&type=chunk)[678](index=678&type=chunk)[679](index=679&type=chunk) [Item 8. Financial Information](index=117&type=section&id=Item%208.%20Financial%20Information) The company reports no material legal proceedings and does not plan to pay dividends, retaining earnings for growth - The company is **not currently a party to any material legal** or administrative proceedings[681](index=681&type=chunk) - The company has **no present plan to pay cash dividends** and intends to retain earnings for business expansion[683](index=683&type=chunk) - The ability to pay dividends is dependent on receiving distributions from PRC subsidiaries, which is **subject to PRC regulations** and profitability[683](index=683&type=chunk) [Item 9. The Offer and Listing](index=118&type=section&id=Item%209.%20The%20Offer%20and%20Listing) The company's ADSs, each representing four ordinary shares, are listed on the Nasdaq under the ticker DADA - The company's ADSs are listed on the **Nasdaq Global Select Market under the symbol "DADA"** since June 5, 2020[685](index=685&type=chunk) - **Each ADS represents four ordinary shares**[685](index=685&type=chunk) [Item 10. Additional Information](index=119&type=section&id=Item%2010.%20Additional%20Information) This section details the company's articles of association, corporate law differences, and key tax considerations [B. Memorandum and Articles of Association](index=119&type=section&id=B.%20Memorandum%20and%20Articles%20of%20Association) Governing documents under Cayman law define shareholder rights and include anti-takeover provisions - The company's corporate affairs are governed by its memorandum and articles of association and the **Companies Act of the Cayman Islands**[688](index=688&type=chunk) - An ordinary resolution requires a simple majority vote, while a special resolution requires a **two-thirds majority vote**[690](index=690&type=chunk) - The articles include **anti-takeover provisions**, such as authorizing the board to issue preference shares without further shareholder approval[704](index=704&type=chunk) - Cayman Islands law provides for mergers and consolidations but offers **more limited shareholder appraisal rights** compared to Delaware law[709](index=709&type=chunk)[712](index=712&type=chunk)[713](index=713&type=chunk) [E. Taxation](index=127&type=section&id=E.%20Taxation) Key tax risks include potential PRC resident enterprise status and US PFIC classification for investors - The company is **not subject to profits, income, or capital gains tax** in the Cayman Islands[737](index=737&type=chunk) - A significant PRC tax risk is the potential classification as a **"resident enterprise,"** which would subject the company to a 25% tax on its worldwide income[739](index=739&type=chunk)[742](index=742&type=chunk) - For U.S. investors, there is a risk that the company could be classified as a **Passive Foreign Investment Company (PFIC)**, resulting in unfavorable tax treatment[751](index=751&type=chunk)[761](index=761&type=chunk) [Item 11. Quantitative and Qualitative Disclosures about Market Risk](index=133&type=section&id=Item%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks are foreign exchange rate fluctuations and, to a lesser extent, interest rates - The company's main market risk is **foreign exchange risk**, as its business is denominated in RMB while its ADSs are traded in U.S. dollars[771](index=771&type=chunk) - **Interest rate risk** exposure is primarily related to short-term bank borrowings and is not considered material[775](index=775&type=chunk) [Item 12. Description of Securities Other than Equity Securities](index=134&type=section&id=Item%2012.%20Description%20of%20Securities%20Other%20than%20Equity%20Securities) This section details the fees charged to ADS holders by the depositary bank, as no other securities are issued - ADS holders are subject to various fees charged by the depositary, including a fee of up to **$5.00 per 100 ADSs** for issuance or surrender[777](index=777&type=chunk)[778](index=778&type=chunk) - Additional charges may include fees for cash distributions, ADR transfers, and reimbursement for taxes or other governmental charges[778](index=778&type=chunk)[780](index=780&type=chunk) PART II [Item 13. Defaults, Dividend Arrearages and Delinquencies](index=137&type=section&id=Item%2013.%20Defaults%2C%20Dividend%20Arrearages%20and%20Delinquencies) The company reports no defaults, dividend arrearages, or delinquencies - None reported[787](index=787&type=chunk) [Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds](index=137&type=section&id=Item%2014.%20Material%20Modifications%20to%20the%20Rights%20of%20Security%20Holders%20and%20Use%20of%20Proceeds) The use of proceeds from the 2020 IPO and follow-on offering is detailed, with no changes to security holder rights - There have been **no material modifications** to the rights of security holders[787](index=787&type=chunk) - The company raised net proceeds of **US$333.4 million** from its June 2020 IPO, of which US$83.9 million had been used as of December 31, 2020[787](index=787&type=chunk)[789](index=789&type=chunk) - The company raised net proceeds of **US$431.3 million** from its December 2020 follow-on offering, with none of these proceeds used as of year-end 2020[790](index=790&type=chunk)[792](index=792&type=chunk) [Item 15. Controls and Procedures](index=138&type=section&id=Item%2015.%20Controls%20and%20Procedures) Disclosure controls were deemed ineffective due to a material weakness in internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were **not effective** as of December 31, 2020[795](index=795&type=chunk) - A **material weakness in internal control** over financial reporting remained as of December 31, 2020, related to a lack of detailed accounting policies[797](index=797&type=chunk)[800](index=800&type=chunk) - The company has taken remedial actions and aims to **fully remediate the material weakness** by the end of 2021[798](index=798&type=chunk)[800](index=800&type=chunk) - The annual report does not include a management assessment or auditor attestation on internal control over financial reporting, as permitted for newly public companies[796](index=796&type=chunk) [Item 16. Corporate Governance and Other Matters](index=139&type=section&id=Item%2016.%20Corporate%20Governance%20and%20Other%20Matters) This section covers the audit committee financial expert, code of ethics, accountant fees, and auditor change - The board has identified **Bonnie Yi Zhang** as the audit committee financial expert[803](index=803&type=chunk) - The company adopted a **code of business conduct and ethics** applicable to all directors, officers, and employees in May 2020[804](index=804&type=chunk) Principal Accountant Fees (USD) | Fee Type | 2019 | 2020 | | :--- | :--- | :--- | | Audit fees | 830,000 | 1,800,000 | | All other fees | 123,000 | 21,000 | - In February 2019, the company changed its certifying accountant from PwC to **Deloitte Touche Tohmatsu Certified Public Accountants LLP**[808](index=808&type=chunk) PART III [Item 17 & 18. Financial Statements](index=141&type=section&id=Item%2017%20%26%2018.%20Financial%20Statements) This section presents the company's audited consolidated financial statements for 2018-2020 with an unqualified opinion - The report includes audited consolidated financial statements for the years ended December 31, 2018, 2019, and 2020[813](index=813&type=chunk) - The independent auditor, Deloitte Touche Tohmatsu Certified Public Accountants LLP, issued an **unqualified opinion** on the financial statements[821](index=821&type=chunk) Consolidated Balance Sheet Highlights (as of Dec 31, 2020) | Metric (RMB in millions) | Amount | | :--- | :--- | | Total Assets | 9,547.0 | | Total Liabilities | 2,519.1 | | Total Shareholders' Equity | 7,028.0 | | Cash and cash equivalents | 5,461.3 | [Item 19. Exhibits](index=141&type=section&id=Item%2019.%20Exhibits) This section lists all filed exhibits, including governing documents, material contracts, and VIE agreements - Lists key corporate documents, including the Eighth Amended and Restated **Memorandum and Articles of Association**[811](index=811&type=chunk) - Includes material contracts such as the **2015 and 2020 Share Incentive Plans**, and business cooperation agreements with JD.com and Walmart[811](index=811&type=chunk)[815](index=815&type=chunk) - Contains the contractual arrangements that form the basis of the company's **VIE structure**, including Share Pledge and Exclusive Option agreements[811](index=811&type=chunk)[815](index=815&type=chunk)