Dingdong(DDL) - 2024 Q1 - Quarterly Report

Introduction Company Overview Dingdong (Cayman) Limited is a leading fresh grocery e-commerce company in China, offering fresh produce and private label products - Dingdong (Cayman) Limited is a leading fresh grocery e-commerce company in China, offering fresh produce, prepared food, and other food products[15] - The company operates through an extensive self-operated frontline fulfillment grid, focusing on convenience and shopping experience[15] - Dingdong has successfully launched a series of private label products, many produced in its own plants, leveraging strong food innovation capabilities and insights into consumer needs[15] Report Context This Form 6-K report announces Dingdong (Cayman) Limited's unaudited Q4 2023 financial results - The document is a Form 6-K report filed by Dingdong (Cayman) Limited for the month of February 2024[1] - Exhibit 99.1 of this report contains the announcement of Dingdong (Cayman) Limited's unaudited financial results for the fourth quarter ended December 31, 2023[2][4] Fourth Quarter 2023 Financial Performance Highlights Dingdong achieved its fifth consecutive quarter of non-GAAP profitability in Q4 2023, with strong private label growth and positive operating cash flow Key Financial Highlights | Metric | Q4 2023 (RMB) | Q4 2023 (US$) | YoY Change (Percentage Points) | | :-------------------------------------- | :------------ | :------------ | :----------------------------- | | Non-GAAP Net Income | 16.3 million | 2.3 million | N/A | | GMV (Jiangsu and Zhejiang) Growth | N/A | N/A | +3.6% | | Private Label Products (% of Total GMV) | >20% | N/A | +3.1 | | Non-Fresh Private Label (% of Non-Fresh GMV) | 34.3% | N/A | +7.7 | | Net Cash from Operating Activities | 119.8 million | 16.9 million | N/A | - The company achieved its fifth consecutive quarter of non-GAAP profitability[5] Management Commentary Management highlighted Q4 2023 non-GAAP profitability, the first full year of non-GAAP profit, and confidence in 2024 GMV growth and efficiency - CEO Changlin Liang reported non-GAAP net income of RMB16.3 million (0.3% net profit margin) for Q4 2023, marking the fifth consecutive quarter and first full year of non-GAAP profitability[6] - The CEO expressed confidence in regaining GMV growth momentum and maintaining non-GAAP profitability in 2024, including Q1 2024 despite Chinese New Year holiday expenses[6] - CFO Song Wang highlighted the improvement from a 30.4% non-GAAP annual loss margin in 2021 to a 0.2% non-GAAP annual profit margin in 2023, and noted a net increase in cash and cash equivalents for the second consecutive quarter[6] - The CFO stated that the primary focus for 2024 will be maintaining high-quality services, delivering cost-effective products, and improving operational efficiency and profitability through comprehensive supply chain and system capabilities[6] Detailed Financial Results Total Revenues Total revenues for Q4 2023 decreased to RMB4,993.5 million due to city withdrawals and a high prior-year base, though service revenues increased Revenue Breakdown | Revenue Type | Q4 2023 (RMB) | Q4 2023 (US$) | Q4 2022 (RMB) | YoY Change (RMB) | | :-------------- | :------------ | :------------ | :------------ | :--------------- | | Total Revenues | 4,993.5 million | 703.3 million | 6,200.6 million | (1,207.1 million) | | Product Revenues | 4,922.4 million | 693.3 million | 6,138.0 million | (1,215.6 million) | | Service Revenues | 71.0 million | 10.0 million | 62.7 million | +8.3 million | - The decrease in total revenues was primarily due to withdrawal from a number of cities and stations and the high base effect from increased order volumes during the same quarter of 2022 due to COVID-19 infections[7] - Service revenues increased, primarily driven by an increase in customers subscribing to Dingdong's membership program[8] Operating Costs and Expenses Total operating costs and expenses decreased by 18.3% YoY in Q4 2023, driven by improved fulfillment efficiency and reduced G&A and R&D expenses Operating Costs and Expenses Breakdown | Expense Type | Q4 2023 (RMB) | Q4 2023 (US$) | Q4 2022 (RMB) | YoY Change (RMB) | YoY Change (%) | | :-------------------------------- | :------------ | :------------ | :------------ | :--------------- | :------------- | | Total Operating Costs & Expenses | 5,029.8 million | 708.4 million | 6,154.5 million | (1,124.7 million) | -18.3% | | Cost of Goods Sold | 3,467.8 million | 488.4 million | 4,162.0 million | (694.2 million) | -16.7% | | Fulfillment Expenses | 1,179.1 million | 166.1 million | 1,493.6 million | (314.5 million) | -21.1% | | Sales and Marketing Expenses | 97.8 million | 13.8 million | 91.1 million | +6.7 million | +7.3% | | General and Administrative Expenses | 93.9 million | 13.2 million | 148.8 million | (54.9 million) | -36.9% | | Product Development Expenses | 191.2 million | 26.9 million | 259.0 million | (67.8 million) | -26.2% | Operating Expense Ratios | Metric | Q4 2023 (%) | Q4 2022 (%) | Change (pp) | | :-------------------------------------- | :---------- | :---------- | :---------- | | Cost of Goods Sold as % of Revenues | 69.4% | 67.1% | +2.3 | | Gross Margin | 30.6% | N/A | +0.2 (vs Q3 2023) | | Fulfillment Expenses as % of Total Revenues | 23.6% | 24.1% | -0.5 | | Sales and Marketing Expenses as % of Total Revenues | 2.0% | N/A | +0.1 (vs Q3 2023) | - Fulfillment expenses decreased mainly due to improved efficiency of regional processing centers and frontline employees[9] - General and administrative expenses decreased primarily due to lower professional service fees and share-based compensation expenses[9] - Product development expenses decreased due to improved R&D human resources efficiency, though the company plans continued investment in technology infrastructure[10] Profitability (GAAP & Non-GAAP) Dingdong reported a GAAP net loss in Q4 2023 but achieved its fifth consecutive non-GAAP net income of RMB16.3 million, albeit lower YoY GAAP and Non-GAAP Profitability | Metric | Q4 2023 (RMB) | Q4 2023 (US$) | Q4 2022 (RMB) | YoY Change (RMB) | | :---------------------- | :------------ | :------------ | :------------ | :--------------- | | Loss from Operations | (21.9 million) | (3.1 million) | 52.5 million | (74.4 million) | | Net Loss | (4.4 million) | (0.6 million) | 49.9 million | (54.3 million) | | Non-GAAP Net Income | 16.3 million | 2.3 million | 115.8 million | (99.5 million) | Non-GAAP Profitability Margins | Metric | Q4 2023 (%) | Q4 2022 (%) | Change (pp) | | :-------------------------- | :---------- | :---------- | :---------- | | Non-GAAP Net Income Margin | 0.3% | 1.9% | -1.6 | - Non-GAAP net income for Q4 2023 was RMB16.3 million, marking the fifth consecutive quarter of non-GAAP profitability[5][11] Per Share Data Basic and diluted net loss per share was RMB0.02 in Q4 2023, with non-GAAP net income per share at RMB0.04, both lower YoY Per Share Financials | Metric | Q4 2023 (RMB) | Q4 2023 (US$) | Q4 2022 (RMB) | | :-------------------------------------- | :------------ | :------------ | :------------ | | Basic and Diluted Net Loss Per Share | (0.02) | (0.00) | 0.15 | | Non-GAAP Net Income Per Share (Basic and Diluted) | 0.04 | 0.01 | 0.35 | Cash and Cash Equivalents Cash and cash equivalents and short-term investments totaled RMB5,309.2 million as of December 31, 2023, a decrease from the prior year Cash and Short-term Investments | Metric | As of Dec 31, 2023 (RMB) | As of Dec 31, 2023 (US$) | As of Dec 31, 2022 (RMB) | | :------------------------------------------ | :----------------------- | :----------------------- | :----------------------- | | Cash and Cash Equivalents & Short-term Investments | 5,309.2 million | 747.8 million | 6,493.0 million | Consolidated Financial Statements Unaudited Condensed Consolidated Balance Sheets As of December 31, 2023, total assets and liabilities decreased, while total shareholders' equity increased to RMB382.5 million Condensed Consolidated Balance Sheet | Balance Sheet Item | Dec 31, 2023 (RMB '000) | Dec 31, 2023 (US$ '000) | Dec 31, 2022 (RMB '000) | | :------------------------------ | :---------------------- | :---------------------- | :---------------------- | | ASSETS | | | | | Cash and cash equivalents | 1,209,225 | 170,316 | 1,856,187 | | Short-term investments | 4,099,977 | 577,470 | 4,636,774 | | Total current assets | 6,150,651 | 866,301 | 7,496,247 | | Total non-current assets | 1,547,905 | 218,018 | 1,885,660 | | TOTAL ASSETS | 7,698,556 | 1,084,319 | 9,381,907 | | LIABILITIES | | | | | Short-term borrowings | 3,300,214 | 464,825 | 4,237,978 | | Total current liabilities | 6,505,687 | 916,307 | 8,211,240 | | Total non-current liabilities | 694,245 | 97,782 | 753,000 | | TOTAL LIABILITIES | 7,199,932 | 1,014,089 | 8,964,240 | | SHAREHOLDERS' EQUITY | | | | | Total Shareholders' Equity | 382,534 | 53,879 | 310,177 | Unaudited Condensed Consolidated Statements of Comprehensive Loss Q4 2023 saw total revenues of RMB4,993.5 million and a net loss of RMB4.4 million, resulting in a basic and diluted net loss per share of RMB0.02 Condensed Consolidated Statements of Comprehensive Loss | Income Statement Item | Q4 2023 (RMB '000) | Q4 2023 (US$ '000) | Q4 2022 (RMB '000) | | :------------------------------------ | :----------------- | :----------------- | :----------------- | | Total revenues | 4,993,454 | 703,313 | 6,200,644 | | Total operating costs and expenses | (5,029,788) | (708,431) | (6,154,519) | | Income / (Loss) from operations | (21,882) | (3,082) | 52,542 | | Net income / (loss) | (4,388) | (618) | 49,877 | | Net income / (loss) attributable to ordinary shareholders | (6,618) | (932) | 47,812 | Per Share Data (Comprehensive Loss) | Per Share Data | Q4 2023 (RMB) | Q4 2023 (US$) | Q4 2022 (RMB) | | :------------------------------------ | :------------ | :------------ | :------------ | | Net income / (loss) per share (Basic and diluted) | (0.02) | (0.00) | 0.15 | - Foreign currency translation adjustments resulted in an other comprehensive loss of RMB26.3 million in Q4 2023[32] Unaudited Condensed Consolidated Statements of Cash Flows Q4 2023 generated RMB119.8 million in operating cash, with investing activities generating cash and financing activities using cash, leading to a net decrease Condensed Consolidated Statements of Cash Flows | Cash Flow Item | Q4 2023 (RMB '000) | Q4 2023 (US$ '000) | Q4 2022 (RMB '000) | | :---------------------------------------------- | :----------------- | :----------------- | :----------------- | | Net cash generated from operating activities | 119,835 | 16,879 | 682,118 | | Net cash (used in) / generated from investing activities | 186,761 | 26,305 | (230,500) | | Net cash used in financing activities | (393,781) | (55,463) | (10,843) | | Net increase / (decrease) in cash and cash equivalents and restricted cash | (88,003) | (12,394) | 441,435 | | Cash and cash equivalents and restricted cash at the end of the period | 1,209,705 | 170,384 | 1,858,950 | Unaudited Reconciliation of GAAP and Non-GAAP Results Q4 2023 GAAP net loss of RMB4.4 million reconciled to a non-GAAP net income of RMB16.3 million after adjusting for share-based compensation GAAP to Non-GAAP Net Income Reconciliation | Metric | Q4 2023 (RMB '000) | Q4 2023 (US$ '000) | Q4 2022 (RMB '000) | | :-------------------------------------- | :----------------- | :----------------- | :----------------- | | Net income / (loss) (GAAP) | (4,388) | (618) | 49,877 | | Add: Share-based compensation expenses | 20,639 | 2,907 | 65,907 | | Non-GAAP Net Income | 16,251 | 2,289 | 115,784 | | Non-GAAP Net Income Margin | 0.3% | 0.3% | 1.9% | | Non-GAAP Net Income Per Share (Basic and Diluted) | 0.04 | 0.01 | 0.35 | Share-based Compensation Allocation | Share-based Compensation Allocation | Q4 2023 (RMB '000) | Q4 2023 (US$ '000) | Q4 2022 (RMB '000) | | :---------------------------------- | :----------------- | :----------------- | :----------------- | | Fulfillment expenses | 3,551 | 500 | 11,893 | | Sales and marketing expenses | (341) | (48) | 3,284 | | Product development expenses | 12,361 | 1,741 | 32,258 | | General and administrative expenses | 5,068 | 714 | 18,472 | | Total | 20,639 | 2,907 | 65,907 | Additional Information Use of Non-GAAP Financial Measures Dingdong uses non-GAAP measures, excluding share-based compensation, to assess operating results and identify underlying business trends, providing GAAP reconciliations - The Company uses non-GAAP measures (e.g., non-GAAP net income, margin, EPS) to evaluate operating results and for financial/operational decision-making[16] - Non-GAAP measures exclude share-based compensation expenses, which are non-cash charges, to help identify underlying business trends[16] - Non-GAAP financial measures are not defined under U.S. GAAP, have limitations as analytical tools, and should not be considered in isolation or as a substitute for GAAP measures. The company provides reconciliations to U.S. GAAP[17][18] Exchange Rate Information RMB to US$ translations use an exchange rate of RMB7.0999 to US$1.00, based on the Federal Reserve Board's H.10 statistical release - Translations from RMB to US$ in the announcement are for convenience, using an exchange rate of RMB7.0999 to US$1.00[19] - The exchange rate is based on the H.10 statistical release of the Federal Reserve Board on December 29, 2023[19] Safe Harbor Statement This announcement contains forward-looking statements subject to inherent risks and uncertainties, with no duty to update except as legally required - The announcement contains forward-looking statements under the 'safe harbor' provisions of the U.S. Private Securities Litigation Reform Act of 1995[20] - These statements involve inherent risks and uncertainties, and actual results could differ materially due to various factors, including business strategies, market outlook, competition, and regulatory conditions[20] - The company undertakes no duty to update such information, except as required under applicable law[20] Conference Call Details Dingdong's management hosted an earnings conference call on February 29, 2024, with Mandarin and English presentations and replay options - A conference call was held on Thursday, February 29, 2024, at 7:00 A.M. Eastern Time to discuss the financial results[12] - The presentation and Q&A session were presented in both Mandarin and English[12] - A replay was accessible through March 7, 2024, and a live and archived webcast is available on the company's investor relations website[14] Investor Relations Investor inquiries for Dingdong Fresh can be directed via email to ir@100.me - Investor inquiries can be directed to ir@100.me[21]