Dada Nexus' Q3 2021: Expansion ContinuesSome improvement in financials was accompanied by new product initiatives.
Amid the recurrent waves of COVID-19 restrictions in China, on-demand retailing, which combines online experience and offline channels, is acting as a stabilizer in the consumer goods industry. Once tried, more people are choosing to stick to O2O-based consumption. According to an iResearch report (link in Chinese), the total GMV of China's local on-demand retail market is estimated to be set to expand at a 62% CAGR between 2020 and 2024. In this transition era, some companies are seizing the emerging opportunities to create massive market value.
Dada Nexus (DADA:NASDAQ), a firm operating on-demand delivery and retail platforms in China, is one of them. According to its latest unaudited quarterly financial results, in Q3 2021, Dada continued rapid business expansion, while growing its customer base. This article analyzes the company's recent financials and provides a look into its key moves and initiatives.
Net revenue growth accelerates, with narrowing losses
In the three months preceding and continuing into September 2021, Dada's net revenue growth inched up from the previous quarter's +81.3%, recording an 86% year-on-year increase. (The company's revenue recognition model was changed in April 2021.)
JDDJ, Dada's local on-demand platform that connects retailers and brand owners directly with consumers, has been performing exceptionally so far in 2021. GMV of the platform grew by 74.6% year-on-year, while its user base experienced a steady increase, reaching over 50 million and almost doubling from Q1 2020.
In this quarter, Dada's non-GAAP net loss was CNY 450.10 million; yet the company has achieved the earlier set goal of narrowing down this figure – it declined by almost one-fifth from CNY 549.20 million in this year's second quarter. Meanwhile, the operating profit margin improved by more than 16% year-on-year (aligning Dada Now's last-mile delivery revenue to a comparable basis).
Dada Now and JDDJ: old and new developments
Dada Now, an open on-demand delivery platform serving merchants and individuals, has achieved a 90% growth in net revenue year-on-year, mainly driven by a shored-up order volume of intracity delivery services to chain merchants. As disclosed during the company's earnings call on November 23, Dada Now's merchants increased by 110%, and revenues from supermarket key accounts rose by over 90% year on year. The platform also managed to deliver a 90% growth in the number of active SME merchants.
While expanding its user base, the platform has also been making efforts to provide its merchants with tools to improve business efficiency and boost their online sales. For example, new geo-fencing functions were added to the on-demand delivery system, allowing merchants to determine the delivery area effectively with no additional costs. Besides, in November, the company launched logistics SaaS Dada Smart Delivery, a system assisting merchants and third-party delivery service providers with "managing orders, dispatching and routing for omnichannel on-demand orders," according to Dada's executives.
Empowered by strengthened cooperation with JD.com, a unified brand called Shop Now, or Xiaoshigou, was released. This is another attempt to allow users to access on-demand services via various channels within the JD ecosystem – it is considered by Dada as a way to increase its penetration rate among the e-commerce platform's vast user base.
During China's now-traditional 'Double 11' shopping festival, JDDJ achieved a 100% year-on-year boost in GMV on November 1-11, 2021. As a result, net revenues from this platform added up to CNY 1.10 billion, up by 84% from the last year. According to Beck Chen, the company's CFO, the uplift was caused by raised GMV and average order size, which hit CNY 194 this time. In this year, the platform has developed partnerships with multiple big names in various sectors. Specifically, in the supermarket segment, JDDJ has already partnered with 82 out of China's 100 largest supermarket chains; in the smartphone sector, cooperation was established with Samsung and Honor, while JDDJ's total sales figure on the launch day of the iPhone 13 was seven times higher than that on the iPhone 12's launch day.
The company's efforts also empower the industry, specifically in the online marketing space: in this quarter, a program named Super New Product Day was launched to assist retailers with product promotion.
Risks to watch
Dada's cross-functional cooperation with JD.com is highly beneficial to the idea of developing a leading national brand for on-demand services. Yet, it is not the only tech giant-backed O2O platform aiming to fulfill the growing demand in the industry. The competition is poised to further intensify, with e-commerce and local services companies leveraging their 2C prowess.
As of September 30, 2021, Dada's cash & equivalents figure was at CNY 1.55 billion. Adding up the firm's restricted cash and short-term investments, the total volume was around CNY 3 billion. This drop in the cash position was, among other factors, due to the USD 150 million repurchase program announced in June; the plan was almost completed as of October 31, 2021: USD 130.6 million in ADSs had been repurchased by that date.
At a glance
Dada Nexus has improved its operating and marketing efficiency, as the narrowed ratios of O&S and S&M costs over the net revenue suggest. Its revenue, meanwhile, keeps growing. Despite that China's overly competitive on-demand delivery and retail space might keep the company's margins below zero for another few quarters, the company's prospects look rather promising: after all, Dada is a growth-stage firm in a market that some projects will swell at high double digits in the following years.
For the full article with the charts, please visit the original link.
Dadanexus
Dada Nexus Beats Q2 2021 Earnings Estimates, Growth AcceleratesCreating extra value for JD.com's 530 million active users will be the company's next strategic endeavor.
With the tumultuous unfolding around China's major New York-listed tech companies, plenty of mid-cap stocks have been affected as well, losing their market value in 2021. In some cases, however, investors' fear has little to nothing to do with the firms' real fundamentals.
Dada Nexus (DADA:NASDAQ) may be one such company. The Chinese operator of on-demand delivery and retail platforms recently posted its Q2 2021 financials. This time, the key results slightly exceeded both the analyst consensus and the firm's own projections, showing a pro forma revenue growth of 81.3% (the revenue recognition model was changed in April) and CNY 549 million in net loss – the Street's average expectation was CNY 615 million.
Dada was founded in 2014 as an "open local on-demand delivery platform" and took its present form after a merger with JD.com's (JD:NASDAQ) spinoff JDDJ in 2016; since the completion of that deal, it has been developing around a duo of products, boosting the core services' scope and building adjacent businesses and partnerships. In June 2020, the firm went public on Nasdaq, raising funds vital to stay competitive in the ongoing battle for Chinese consumers.
A growth-stage company, Dada is scrambling for a larger market share while moving towards profitability. Throughout the June quarter, its expansion continued.
This article looks at the key indicators' dynamics to analyze Dada Now and JDDJ's performance within those three months. We first crunch the newly reported data, then calculate key ratios to track the progress in financials and unit economics. To top it off, we provide a glance at Dada's tech initiatives beyond the two platforms.
"JD's over 530 million users" and COVID-19
In the twelve months through June 2021, the number of JDDJ's active users reached 51.3 million, increasing by 58.8% year-on-year. Dada relates this growth, among other things, to its cooperation with JD.com. During the earnings call, the company's executives stated that it "continued to win customers' trust" and is going to proceed with the "in-depth cooperation with JD to better serve the omnichannel and on-demand needs of JD's over 530 million active users." In addition, a new tool is being constructed at the intersection of the two digital ecosystems: 'Fujin', the former's entry point within the latter's app, has been tested in a handful of cities, including Shenzhen and Shanghai.
The duet's convergence is happening amid a post-COVID boom in the Chinese on-demand retail market. The number of users in the space has lately skyrocketed and is projected (link in Chinese) to grow at a 31% CAGR from 2019 to 2023. Consumers have changed their shopping habits forever.
It's also crucial that despite the magnitude of new possible outbreaks in China, this trend will remain strong, as the fix-cost-burdened offline stores are embracing online traffic. And Dada is among the country's top platforms that drive brick-and-mortar players' online sales, accelerating their adoption of digital tools.
From the ESG perspective, COVID-19 has pushed Dada Group to shoulder more social responsibility. Its executives stated that the company had worked "closely with local governments to provide the daily supplies and the on-demand delivery for the customers," and, as a result, "received recognition from the government."
More merchants, new partners and categories
Users are just a part – although the most critical one – of the story. The supply-side matters as much. As per the company, this quarter, JDDJ made significant progress in category expansion.
In retrospect, Dada started its business with groceries and has now covered a number of areas, such as pharma and apparel. By now, it has been taking the lead in the supermarket category and seeking partnerships with big chains. By the end of Q2 2021, hands had been shaken between Dada and "80 chains out of China's top 100."
The most recent attempt in the consumer electronics arena was emphasized a couple of times in the investor conference. As on-demand retailing has gradually been recognized by smartphone manufacturers, Dada has partnered with hundreds of distributors and established cooperation with Apple and vivo, among other major brands. Besides, the company stepped further into the PC category, cooperating with Microsoft, Asus, Dell and Alienware, among others. In response to an analyst's question, the executives disclosed that the potential of some new categories, including home appliances and cosmetics, will be further explored.
User acquisition at full pelt
In Q2, Dada's total expenses have added to around CNY 2.21 billion. The sales and marketing cost grew from CNY 386 million in Q2 2020 to CNY 824 million in Q2 2021. According to the unaudited financial results, this boost was mainly driven by the rising "incentives given to JDDJ consumers" and "referral fees paid to retailer store staff and third parties" to attract new users to the platform. Considerable investment was also directed to R&D, showing the intention to build comprehensive tech products on top of the company's commercial network. (One is Haibo.)
The operations and support expenses reached CNY 1.14 billion, compared with CNY 1.10 billion in the same quarter of 2020. The rise in rider cost stemming from the increasing intra-city delivery order volume mainly contributed to the accretion of this category; but this was partially offset by the decrease of rider-related costs incurred by the last-mile delivery business model upgrade – "effective since April 2021, the cost of riders for last-mile delivery services has been directly paid through third-party companies instead of through the company."
Even though the company experienced massive revenue growth in Q2, the spending on market expansion has kept the net profit margin at low levels. On a sequential basis, though, Dada improved its net profit margin, thanks to the efficiency gain in operations and consumer incentives.
Unit economics steadily improving
Positive dynamics in absolute figures, be it revenue or user pool growth, are never enough to claim success for a pre-profit platform economy enterprise. Dada's key business ratios, nonetheless, show some progress, too.
The trailing-twelve-months (TTM) revenue of JDDJ jumped from CNY 1.10 billion in Q4 2019 to CNY 2.97 billion in Q2 2021. In the meantime, the number of the platform's new users has been growing steadily, from 24.4 million to 51.3 million, up by 110.2%. The average revenue per user (ARPU) thereby rose from CNY 45.20 to CNY 57.90.
Using Meituan's Q2 2019 number (53.6%) as a proxy for quarter-on-quarter user retention rate (as opposed to customer churn) and the only assumption in this analysis, we found that JDDJ's user base may not only grow on the TTM basis, but the speed might have been accelerating continuously over the past eight quarters, which was perhaps caused by the platform's significant word-of-mouth marketing potential and effective referral system.
New tech, no red flags
Reporting a financially solid three-month period, Dada announced a few other updates this time. For one thing, it included an extra 1,000 stores into SaaS Haibo's network. The company is also developing an open autonomous delivery operation system, enabling on-demand retail applications for various hardware providers. The system has been tested and reportedly adopted by JD's SEVEN FRESH and Yonghui Superstores.
Both projects are narratives to keep tabs on. Those are highly likely to become key differentiators in the upcoming maturity phase of the on-demand delivery and retail market.
Over the past quarters, Dada Nexus has been growing at high double digits; good fundamentals and a balanced tactical arsenal are set to protect its market position.
For the full article with the charts, please visit the original link.
Dada Posts Strong Q2 2021 Results The Chinese local on-demand delivery and retail platform has announced its unaudited financial results for the second quarter, maintaining the strong growth momentum.
– In the second quarter of 2021, Dada Nexus' (DADA:NASDAQ) total net revenues increased to CNY 1.47 billion, which is above the Street's consensus expectation of CNY 1.41 billion and the company's high-end guidance of CNY 1.45 billion. Aligning the revenue recognition method of Dada Now last-mile delivery services to net basis, pro forma revenue growth would have been 81.3% year-over-year.
Dada also reported a quarterly non-GAAP net loss of CNY 549 million, against the Street's expectation of CNY 615 million.
Dada has continued to win Chinese consumers' trust by providing "timely, efficient and high-quality services." The number of trailing-twelve-month active consumers on JDDJ increased by around 60% year-on-year to 51.3 million as of June 30. The company will continue to execute its in-depth cooperation with JD, to better serve the omni-channel and on-demand needs of JD's over 530 million active users. GMV of JDDJ for the twelve months ended June 30, was CNY 32.3 billion, an increase of 77% year-over-year.
"Dada Group has long served the real economy and is growing together with brick-and-mortar retailers as well as our brand partners. We welcome the stepping up of regulations and firmly believe it will be good for the long-term sustainable development of the industry. There is enormous potential in the on-demand retail industry for us to explore," said Mr. Philip Kuai, Chairman and Chief Executive Officer of Dada Group. "Through the deepening cooperation with JD, we continue to build strong partnerships with our retail and brand partners, working together to create value to consumers. Our partners will continue to benefit from our technology platform and high levels of innovation. Together, with Dada's commitment to bring people everything on demand, we will continue to focus on long-term value creation to the benefit of enterprises and consumers around China."
JDDJ has maintained a top position in the supermarket category and partnered with 80 of the top 100 supermarket chains, including 9 of the top 10. Meanwhile, it established direct partnerships with smartphone brands, including Apple and vivo, and has newly partnered with Microsoft, ASUS, Dell and Alienware, gradually moving their offline stores online. As a SaaS product that enables retailers to drive O2O sales while streamlining operations, Dada's Haibo System has been adopted by more than 4,300 retail chain stores as of the end of August, covering over 40% of the top 100 supermarket chains.
As a platform that connects consumers and merchants with crowdsource-based delivery services, Dada Now provides a large number of flexible employment opportunities to society, and at the same time, it is committed to protecting the rights and interests of gig economy workers. During the second quarter, Dada Now's on-demand delivery service to chain merchants continued to see explosive growth, with year-over-year revenue growth accelerating to over 140%. In July, it officially launched the Dada Autonomous Delivery Open Platform, which is open to autonomous vehicle companies, such as JD Logistics and aims to accelerate the commercial use of autonomous delivery.
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