Dingdong (Cayman) Ltd. Q2 FY2022 earnings call

Operating Performance

• Q2 revenues were 6.63 billion RMB, up 42.8% Y-o-Y. Achieved non-GAAP net profit over 20 million for the first time. Yangtze River Delta region had an operating margin of 3.7% in H1 2022.

Product Development Capabilities

• Prioritized product development since Aug 2021. In Q2, 217 SKUs were uniquely Dingdong, private label accounted for 17.5% of GMV. Focused on mother-child community, identified pain points of healthy food for children. Improved product development in 5 aspects: no compromise on quality, developing signature products, strengthening user trend research, expanding consumption scenarios, and enhancing infrastructure.

Pandemic Response

• Overcame supply chain difficulties during Shanghai's pandemic in Mar-May 2022. Riders were appreciated by users, including a heartwarming story of a rider being cheered and a child's drawing of a rider.

Future Plans

• Stay focused on fresh grocery and food business. Improve user experience by reconfiguring logistics/warehousing, optimizing service processes, and training frontline personnel. Aim to be fully profitable by end of 2022.

In Q2 2022, Dingdong's revenues were 6.63 billion RMB, representing a 42.8% year-over-year growth. The Yangtze River Delta region achieved profitability with an operating margin of 3.7% in the first half of 2022. Private label accounted for 17.5% of the total GMV, with the majority developed and processed in-house in the 3S factory.

Forward-Looking Statements

• Expect Q3 to have a slight loss but net loss margin to narrow continuously while sustaining revenue growth. Aim to achieve single month non-GAAP profit in Dec 2022. Confident of being fully profitable by end of 2022. As of Q2 end, cash balance was 6.06 billion RMB, with sufficient cash flow and no apparent issues.

Risks

• Pandemic led to uncertainties and operational difficulties, but management emphasized enhancing organizational capabilities and supply chain adaptability to handle these challenges.

Q: Recently a close competitor had cash flow difficulties and operational shrinkage. How does this affect Dingdong in terms of competitive landscape, customer relationships, and suppliers?

A: Rarely comment on peers. Focus on own development. Dingdong is unique, focused on user needs, and committed to product development, which has gained user love and trust.

Q: During lockdown, what other operations or supply chain developments were worth sharing?

A: After lockdown, established more flexible supply chain, improved team cohesiveness, and gained more customer love by keeping supplies and prices stable during lockdown.

Q: How to think about Q3/Q4 and full year profitability? Any cash flow issues?

A: Q3 expected quality revenue growth with narrowed net loss margin. Aim for single month non-GAAP profit in Dec. Cash balance as of Q2 end was 6.06 billion RMB, with sufficient cash and no cash flow risk.

Q: Concerns about warehouse models after competitors' issues. Thoughts?

A: Dingdong has 10 consecutive months of improving loss ratio excluding pandemic months. Believes frontline fulfillment grid model is effective as it meets user needs, ensures fast delivery, and controls fresh food quality.