Dingdong (Cayman) Ltd - ADR Aktie

Good morning and good evening, ladies and gentlemen. Thank you for standing by. Welcome to the Dingdong Limited 2026 Annual General Meeting Conference Call. [Operator Instructions] Please note that this event is being recorded. I will now turn the conference over to the first speaker today, Nicky Zheng, Director of Investor Relations. Please go ahead, sir.

Thank you. Hello, everyone. Welcome to Dingdong's 2026 Annual General Meeting Conference Call. With me today are Mr. Changlin Liang, our Founder and Chairman of the Board; and Mr. Song Wang, our CEO. For today's call, management will go through their prepared remarks and announce the results of the vote on the proposal submitted for shareholders' approval. You can access a replay of this call on our IR website when it becomes available a few hours after its conclusion. Before we continue, I would like to refer you to our safe harbor statement in our previous earnings press release, which also applies to this call. I will now turn the call to our first speaker, the Founder and the Chairman of the Board of Dingdong, Mr. Liang.

[Interpreted] Thank you. I Changlin Liang take the Chair of the meeting in accordance with Article 68 of the company's Articles of Association. I would like to express our special thanks to all of you for joining our Annual General Meeting. Notice of this meeting was dispatched by the company to its shareholders on March 10, 2026. If there is no objection from the floor, it is proposed to dispense with the formality of reading the notice. Copies of the notice and the form of proxy for the meeting are available for inspection throughout this meeting or any adjournment thereof.

Only registered holders of ordinary shares of the company at the close of business on March 9, 2026, Shanghai Time, which is the record date for this meeting, are entitled to attend and vote at the meeting. According to the Articles of Association of the company, one or more shareholders hold shares which carry in aggregate or representing by proxy, not less than 50% of all votes attaching to all shares in issue and entitled to vote at such general meeting and present at the meeting shall be quorum for all purpose.

The shareholders who are present at the meeting in person or by proxy or virtually hold shares which carry in aggregate more than 85% votes, which is more than 50% of all votes attaching to all shares in issue and entitled to attend and vote at this meeting. On such basis and in accordance with Article 65 of the company's Articles of Association, I declare a quorum present at the meeting -- at the Annual General Meeting. Because due notice of this meeting has been given and a quorum is present, I declare this meeting to be duly convened.

As set out in the notice, following 3 proposals will be considered and voted on this meeting. Proposal #1, the company's entry into share purchase agreement with Meituan wholly owned subsidiary, Two Hearts Investment Limited and the completion of the related transaction are approved. The company will set all issued and outstanding shares of BVI Incorporated, wholly owned subsidiary, Dingdong Fresh Holdings Limited, which holds substantially all of its China operations.

Proposal #2, subject to the transaction's closing, receipt of cash proceeds and compliance with the Cayman Islands Companies Act, the Board is authorized to use no less than 90% of the post-closing adjusted cash balance for share repurchases and/or shareholder dividends at its discretion. Proposal #3, the general authorization saying that the company and its directors, officers or registered office provider are authorized to execute relevant documents and take all necessary actions, including Cayman Islands filings/registrations to implement the foregoing resolutions.

The Board of Directors of the company has recommended that the shareholders vote for resolution in proposal #1, #2 and #3. I hereby demand that the voting on both proposals be conducted by poll. The polls are now open. If you desire a ballot, please raise your hand to so indicate and it will be provided. If you have previously appointed a proxy or proxies to vote on your behalf, you do not need to vote today unless you wish to change your vote. We now seem to have all the ballots. And since all those desiring to vote by ballot have done so, I hereby declare the polls closed. Based on the voting results from the holders of the company's American deposited shares, that is ADS Holders and the holders of the company's ordinary shares, I hereby declare that all the proposals have been duly passed as ordinary resolution of the company.

The Board has carefully deliberated on all these decisions. On this occasion, I would like to share our thinking with you. Over the years, Dingdong has built formidable supply chain capabilities. We source over 85% of fresh produce directly from origins, operate 12 self-owned processing plants and 2 company-owned farms. In the past year, our black pork accounted for more than 37% of total pork consumption. Sales of organic vegetables, low GI products and healthy snacks all grew by over 30% year-on-year and hot pot quick prep dishes saw a 28% year-over-year increase this past winter. These are real strengths forged over more than 8 years, refined step-by-step across every link in the chain.

As peer in the industry, Meituan's Xiaoxiang supermarket has achieved remarkable growth in recent years. By curating a vast array of high-quality products and continuously elevating user experience, it has rapidly become an industry leader, an achievement that aligns perfectly with our 4G strategy. Following the merger, Dingdong's 3 core competitive advantages: unmatched product development capabilities, service excellence that exceeds expectations and ultimate operational efficiency powered by our supply chain system will not fade. Instead, they will deliver even greater value on a larger platform. Together, we can serve a broader market to ensure that good food is as accessible as tap water, benefiting everyone. This has been our mission since day 1, and it resonates deeply with Meituan's mission, help everyone eat better and live better.

Now let me address a key concern shared by all shareholders, the use of cash proceeds from this transaction. As stated in earlier resolutions, we hereby make a firm commitment. Upon the successful completion of the deal, no less than 90% of the cash proceeds from the business sale will be used for repurchases and/or dividend payments to shareholders. This is not a temporary decision, but a long-standing principle we uphold. We always act in the best interest of shareholders. We're committed to being a responsible and trustworthy company for all of you. We'll honor this promise in full, turn the proceeds into tangible returns for every shareholder and live up to a trust.

In closing, on behalf of the entire Dingdong Board of Directors and the entire Dingdong team, I would like to thank you for your interest and participation in today's meeting. We deeply appreciate your trust and support for Dingdong all along. If you require any further information, please do not hesitate to contact us. With no further business, I hereby declare the conclusion of this shareholders' meeting. Thank you.

Thank you for attending today's presentation. The conference has now concluded. You may now disconnect.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good morning, and good evening, ladies and gentlemen. Thank you for standing by, and welcome to the Dingdong Limited Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded.

I will now turn the conference over to the first speaker today, Nicky Zheng, Director of Investor Relations. Please go ahead, sir.

Thank you. Hello, everyone, and welcome to Dingdong Third Quarter 2025 Earnings Call. With me today are Mr. Changlin Liang, our Founder and CEO; and Mr. Song Wang, our CFO.

You can refer to our third quarter 2025 financial results on our IR website at ir.100.me. You can also access a replay of this call on our IR website when it becomes available a few hours after its conclusion. For today's call, management will go through their prepared remarks, which will be followed by a question-and-answer session.

Before we continue, I would like to refer you to our safe harbor statement in our earnings press release, which also applies to this call, as we will be making forward-looking statements. Please note that all numbers stated in the following management's prepared remarks are in RMB terms. And we will discuss non-GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported in our earnings release and filings with the SEC.

I will now turn the call to our first speaker today, the Founder and CEO of Dingdong, Mr. Liang.

[Interpreted] Hello, everyone. Thank you for participating in Dingdong's Q3 2025 Earnings Call. As of Q3 2025, Dingdong has maintained profitability under non-GAAP standards for 12 consecutive quarters and under GAAP standards for 7 consecutive quarters. Despite a higher baseline compared to the same period last year, revenue has achieved year-over-year growth, which marks the seventh straight quarter. This sustained expansion and steady achievement of profit targets fully demonstrating our strategic resilience and execution excellence amid the current complex market and competitive landscape, providing strong momentum for advancing our long-term strategy.

Next, I'll review the key highlights of Q3 operations and share our insights and outlook for the business. In Q3 2025, Dingdong reported a GMV of RMB 7.27 billion and a revenue of RMB 6.66 billion, both increasing slightly year-on-year. This marked Dingdong's highest ever quarterly GMV and revenue. Non-GAAP net profit was RMB 0.1 billion with a profit margin of 1.5%, while GAAP net profit was RMB 0.08 billion with a margin of 1.2%. Building on the strong growth seen in Q3 2024, we continue to sustain our growth momentum and stay profitable.

This year, the company has made notable progress with its good products system. A series of good products has effectively enhanced user retention and repurchase rates, while also significantly supporting overall GMV growth. For instance, in September, SKUs classified as good products comprised 37.2% generating 44.7% of total GMV, a rapid jump from January. When the 4G strategy was launched and -- the share of good products SKUs was 14.1% and their GMV contribution was 16.4%. The growing number of these good products has attracted more users to place orders on Dingdong. In Q3, the monthly order conversion rate increased by 1.6 percentage points year-over-year and the number of monthly ordering users grew by 4.1%. Additionally, good products have further strengthened user mindshare. The average monthly order frequency reached a record 4.6x in Q3, up 4.9% year-over-year with member placing an average of 7.7 orders per month, a 1.3% year-on-year increase.

From a regional perspective, the GMV in Jiangsu, Zhejiang and Shanghai continued its steady upward trend this quarter, increasing by 1.4% year-over-year. Shanghai as the strategic core markets maintained stable operations, leveraging its high penetration rate to support the region's overall growth. Meanwhile, Jiangsu and Zhejiang, which are still in the phase of rapid market penetration, sustained strong growth with GMV rising 3.6% year-over-year. Of the 19 cities in the region, excluding the recently expanded cities of [ Xuancheng ] and Chuzhou, 9 cities delivered growth of over 10% with [ Xuancheng ] performing exceptionally well with growth exceeding 60%, reflecting significant consumption potential. These results clearly indicate that the market demand in Jiangsu and Zhejiang is still largely untapped. The existing mature cities, operational capacity and the expansion potential in new cities together present substantial opportunities for future growth.

In Q3, building on our ongoing implementation of the 4G strategy of good users, good products, good services, good mindset, we introduced a new development framework called "One Big, One Small, One World" to guide the company's next stage of growth. One Big emphasizes our high-volume top-selling product strategy. Building on the initial successes of our good product strategy and approach, we are now dedicated to developing a top-selling product system. We believe that a deep understanding of products arises not only from economies of scale, but also from the structural opportunities discovered through refined operations, which is precisely the long-term significance of our top-selling product strategy.

Unlike bestsellers, small but beautiful products prioritize user value and unique experiences over scale. Conversely, high-volume top-selling products prioritize market fundamentals such as sourcing raw materials, category resilience and scalability. At Dingdong, we set clear standards for creating blockbuster products. They must possess core competitiveness, ideally with universal appeal for potential for wide consumer appeal. By systematically analyzing production resources, efficiently managing supply chains and brand building, these products are well positioned for operational success and growth. Additionally, blockbuster products should align with existing channels, meet genuine consumer needs and have low loss rates, coupled with high market scalability. During the 100-day summer campaign from June 21 to September 30, over 100 top-selling products were developed, laying a strong foundation for our high-volume top-selling product strategy.

The One Small -- a "One small, one Big, One small, One World" refers to establishing frontline fulfillment stations in smaller cities and expanding into those markets. Our warehousing network is already dense in key areas like Shanghai, Chuzhou and Hangzhou. Building on this, we plan to focus on -- our expansion on smaller and medium-sized cities in the Jiangsu, Zhejiang and Shanghai regions, such as [ Xuancheng and Chuzhou ], which we launched this quarter. These cities tend to experience a decline in traditional retail, yet their consumers demonstrate strong purchasing power, especially in discretionary spending in food categories. As living standards rise and consumption habits evolve, local residents increasingly value product quality and health, creating a significant opportunity for high-quality fresh groceries.

In exploring markets in small- and medium-sized cities, we have developed a systematic approach to market expansion, continuously refining it through real-world operations. Compared with mature cities, we have made specific adjustments to our city entry strategies, user acquisition methods, product configurations and performance metrics. Our core focus is on dining and coffee table leisure scenarios in small cities, aiming to offer consumers high-quality, reliable and affordable products. This strategic direction has proven to be a key breakthrough for us in today's highly competitive market environment. By the third quarter, we had opened 40 new frontline fulfillment stations this year, including 17 in the third quarter, successfully expanding into small city markets such as Chongming Island In Shanghai, Rugao in Nantong, in Xuancheng and Chuzhou. By exploring and developing small city markets in Jiangsu, Zhejiang and Shanghai, we have found a clear strategic path to breakthrough and sustainable growth in an increasingly competitive environment.

Finally, the One World in One Big, One Small, One World strategy refers to the expansion into international markets. By leveraging our robust domestically developed fresh grocery supply chain, we are confident in our ability to grow overseas. We have formed partnerships with top-tier partners like FairPrice in Singapore, DFI in Hong Kong, Lee Kum Kee in Hong Kong City Mall. We're also pleased to see the large -- a number of fresh groceries and packaged foods developed by Dingdong have been widely embraced by overseas consumers.

Now let me share with you our outlook for Q4 2025. Industry-wide competition in the instant retail sector is intensifying with both platforms and off-line merchants increasing their investments to gain market share. This has led to a rise in overall market competition. Nevertheless, building on the "One Big, One Small, One World" framework introduced in Q3 and leveraging our strength in supply chain, product development and IT systems bolstered by sustained profitability and solid cash reserves, Dingdong is confident in forging a unique quality focused, efficient and resilient growth path through intense competition and in maintaining last year's scale and non-GAAP profitability in Q4.

That concludes my remarks. Thank you. Now I invite our CFO, Wang Song, to discuss the company's financial status.

[Interpreted] Thank you, Mr. Liang. Hello, everyone. Before I present our financial performance, please note that all figures are in RMB.

In Q3, 2025, Dingdong reported revenue of RMB 6.66 billion, marking a 1.9% year-over-year growth and maintaining positive growth for 7 straight quarters. Non-GAAP net profit reached RMB 0.1 billion with a 1.5% net profit margin, while GAAP net profit was RMB 0.08 billion with a 1.2% margin. We had net operating cash inflow of RMB 0.14 billion in Q3, the ninth consecutive quarter of positive cash flow. By the end of Q3, after deducting short-term borrowings, our actual cash owned increased to RMB 3.03 billion.

Next, let's review the specific financial results for Q3. Revenue for Q3 reached RMB 6.66 billion, marking a 1.9% year-over-year increase. GMV was RMB 7.27 billion, up 0.1% compared to the previous year. The scale growth maintain -- mainly stemmed from a general rise in order volume, which increased by 2.2% year-over-year in Q3. This quarter, our B2B business continued to grow steadily with revenue expanding by 67.4% year-over-year, and its revenue share rose by 1.9 percentage points year-over-year.

Gross profit margin was 28.9%, down 0.9 percentage points year-over-year. The decline in gross profit narrowed on a quarter-over-quarter basis. During the quarter, the company maintained its focus on its good product strategy by refining its product lineup, emphasizing flagship items and increasing the supply of high-quality goods. It continued to enhance its supply chain system by prioritizing high-quality products that meet market demand while systematically phasing out slow-moving goods with low user preference. This high-quality in, low-quality out approach enabled the company to focus core categories, thereby enhancing overall product competitiveness. At the same time, in a highly competitive instant retail environment, the company actively managed gross profit margins, rewarding consumers, improving market access for high-quality products and steadily expanding its user base and market reputation.

The fulfillment cost ratio was 21.5%, up by 0.1 percentage points compared to last year. Although the overall fulfillment cost ratio stayed stable year-over-year, we continue to prioritize service improvement. This quarter, our on-time delivery rate reached 97%, up by 1.5 percentage points from the previous year. The product negative review rate was 0.04% and rider negative reviews were at 0.02%, each decreasing by 0.01 percentage points annually. The average fulfillment time for instant orders was 36.3 minutes, down by 1.4 minutes year-over-year. These results highlight our ongoing efforts to optimize services, enhance user experience, build user trust and generate long-term value.

The sales and marketing expense ratio was 1.9%, a decrease of 0.3 percentage points year-over-year. Going forward, we'll strengthen our top-selling product strategy, making it a core growth driver and traffic generator. By focusing resources on mindshare penetration and efficient conversion, we will continuously enhance the overall return on marketing investment.

Combined G&A and R&D expenses represented 4.9% of revenue, similar to the same period last year. We'll maintain our focus on R&D investment in food research, agricultural technology and data algorithms. Additionally, we'll continuously enhance our product development capabilities and strengthen digital integration throughout the entire supply chain.

We recorded a non-GAAP net profit margin of 1.5% with a net profit of RMB 0.1 billion. Meanwhile, our GAAP net profit margin was 1.2%, amounting to RMB 0.08 billion this quarter. As of the end of Q3, the total of cash, cash equivalents, short-term restricted funds, short-term investment and long-term wealth management products stood at RMB 3.94 billion. We maintain efforts to improve capital efficiency and optimize our financing structure. After deducting short-term borrowings, our net equity funds hit a record high of RMB 3.03 billion, up RMB 0.08 billion from the previous quarter.

That concludes our presentation for today. Operator, we can now proceed to the Q&A session.

[Operator Instructions] And our first question today will come from [ Erica Chua ] of Jefferies.

Erica you maybe muted on your end. Your line is live here. Erica is you line muted?

We can move on to our next question. our next question will come from Yang Bai of CICC.

The instant retail market remains highly competitive and fresh groceries are at the heart of this battlefield. Industry giants like Alibaba, Meituan and Dingdong are all making significant investments. How does Dingdong view the current competitive landscape? What challenges does it bring? And are there new opportunities behind it?

Thank you for the question. Indeed, competition in instant retail has never been quiet. Fresh groceries are not only the most competitive part of the market, but also the most valuable. We constantly ask ourselves how can we not just survive in competition but grow meaningfully through it.

We observed that the mainstream approach in today's market still revolves around price competition, using subsidies and discounts to drive short-term traffic and scale. This may work in the near term, but it's not sustainable long term. At Dingdong, our path is to build differentiation proactively guided by 2 major strategic paths. First, on the user side, we firmly execute our 4G strategy. Our philosophy is simple, yet powerful. Good products attract good users. We're not chasing mass traffic, but focusing on building a high-quality user base through differentiated products and experiences. In the short term, this may not create explosive growth, but in the long run, it leads to healthier compounding growth. When the market eventually returns to the fundamentals of value and efficiency, this foundation will become our strongest moat. Second, on the supply chain side, we follow the principle of 1 inch wide, mile deep. We focus deeply on our core areas going all the way to the source from direct sourcing at farms, to in-house R&D and production and from warehousing and logistics to digital and AI infrastructure, whether it's developing best-selling products, investing in food innovation or strengthening traceability, IT and AI systems, all these efforts aim to build a supply chain capability that is uniquely Dingdong's. This strength doesn't show overnight, but it becomes the most resilient and hardest to replicate assets in the long run.

In summary, we're committed to a long-term path. Beyond short-term battles over price and scale, we focus on long-term battles of efficiency and capability. As the market becomes more rational, those who truly possess supply, product and organizational strength will outlast the cycle and win the future. We believe that our patience, discipline and long-term investment today will become our core competitiveness tomorrow. After the noise is fade, time will ultimately stand on our side. Thank you.

Our next question today will come from [ Erica Chua ] of Jefferies.

Let me translate my question. First of all, congratulations on the company's continued excellent performance this year -- this quarter, especially considering the extremely fierce competition in the instant retail market. Could you elaborate on the aforementioned top selling product strategy, especially -- specifically in conjunction with the top sellers from this year's third quarter summer sales campaign?

Thank you for your question. The strong performance of our top-selling products this summer has reinforced our long-term commitment on product-driven growth. Previously, we build products mainly through a channel lens, but now we're shifting from a channel distributor mindset to a product manager mindset, moving from a Dingdong perspective to a full chain perspective. This requires us to think and act as comprehensive product managers, designing every product's full life cycle from its origin to the hands of the consumer. We're no longer just selling products but create products that truly resonate with users. Fresh groceries are naturally nonstandardized, highly perishable and seasonal. To address this, we harness digital and IT technologies to expand our management scope and efficiency, eliminate intermediaries, reduce procurement costs and lower spoilage rate through standardized quality control, thereby improving the overall profitability of our supply chain.

Unlike the small but beautiful products that are limited in scale, our top seller approach focuses more on stability, controllability and economies of scale. This consistency is key to earning user trust. A top-selling product that reliably offers a high-quality experience and maintains a stable supply will deepen brand recognition in the minds of our users, resulting in increased repurchase rates and stronger brand loyalty.

Our systematic approach to developing top-selling products involves assessing a category like foods across 6 key dimensions: market size; supply chain capabilities; product competitiveness; operational efficiency; channel fit and profitability. We carefully select the most promising targets and then scale them across the country or even into international markets by leveraging centralized procurement, standardized quality control, tiered processing and large-scale fulfillment, we're able to significantly reduce costs and losses, therefore, enhancing product value. Furthermore, this process has helped us build a comprehensive set of replicable system capabilities covering origin selection, planting, harvesting, processing, warehousing, transportation and end user sales, establishing a standardized supply chain framework. This enables us to better control the upstream supply chain, ensuring Dingdong's products are uniquely differentiated and virtually irreplaceable.

The summer campaign results validated our strategy. For example, Guangxi Red Heart Pomelo generated nearly RMB 15 million in GMV, marking a 22-fold increase year-over-year with notable growth in user repurchase rates and a low-quality complaint rate of just 0.84%. Similarly, the new product, Guangwei Litchi achieved RMB 9 million in GMV, experiencing significant increases in revenue and repurchase rate. These figures show that distinctive high-quality individual products that resonate with consumers can strengthen brand identity and serve as key drivers of sales growth. Therefore, we believe that the top-selling product strategy is more than just a sales tactic. It's long-term approach to developing capabilities. This strategy enables us to create a sustainable competitive advantage centered on products, emerging brand appeal with the benefits of scale. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Thank you again for joining our call today. If you have any further questions, please feel free to contact us or request through our IR website. We look forward to speaking with everyone in our next earnings call. Have a good day, and have a good night.

The conference has now concluded. We thank you for attending today's presentation, and you may now disconnect your lines.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good day, and welcome to the Dingdong Limited Second Quarter 2025 Earnings Conference Call.

[Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Nicky Zheng, Director of Investor Relations. Please go ahead.

Thank you. Hello, everyone. Welcome to Dingdong Second Quarter 2025 Earnings Call.

With me today are Mr. Changlin Liang, our Founder and CEO; and Mr. Song Wang, our CFO.

You can refer to our second quarter 2025 financial results on our IR website at ir.100.me. You can also access a replay of this call on our IR website when it becomes available a few hours after its conclusion.

For today's call, management will go through their prepared remarks, which will be followed by a question-and-answer session.

Before we continue, I would like to refer you to our safe harbor statements in our earnings press release, which also applies to this call. As we will be making forward-looking statements, please note that all numbers stated in the following management's prepared remarks are in RMB terms, and we will discuss non-GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported in our earnings press release and filings with the SEC.

I will now turn the call to our first speaker today, the Founder and CEO of Dingdong. Mr. Liang.

[Interpreted] Hello, everyone. Thank you for joining Dingdong's Q2 2025 Earnings Call despite your busy schedules.

As of Q2 2025, Dingdong has achieved 11 straight quarters of non-GAAP profitability and 6 straight quarters of GAAP profitability, along with 6 consecutive quarters of positive year-over-year revenue growth. This consistent growth in scale and profitability not only shows that we have overcome the challenge of survival but also proves the resilience and execution capabilities of the Dingdong team, laying a strong foundation for the next phase of high-quality growth.

Next, I will review Q2's operational highlights, share the progress of our 4G strategy of good users, good products, good services and good mindset, introduce new growth drivers and update you on our AI-related business development.

In Q2 2025, Dingdong reported a GMV of RMB 6.5 billion, up 4.5% year-over-year. The revenue of RMB 5.98 billion, a 6.7% increase from the previous year. Non-GAAP net profit reached RMB 130 million, growing 23.9% compared to RMB 100 million in the same period last year, with a net profit margin of 2.1%, up 0.3 percentage points year-over-year. GAAP net profit was RMB 110 million, an increase of 59.7% from RMB 70 million with a net profit margin of 1.8%, up 0.6 percentage points year-on-year. Building on our robust growth in 2024, we have maintained our scale expansion and profitability this year.

By the end of Q2, Dingdong's 4G strategy center on good users, good products, good services and good mind share have been in place for 6 months. While the company is still transforming, it has achieved steady year-over-year growth. Additionally, through adjustments in production relations and productivity improvement, the 4G strategy has already begun to show results. The company remains focused on developing good products, aiming to create more offerings that are well received, commercially successful and distinctive. Our principle is where others fall short, we deliver. Where others deliver, we excel. Where others excel, we redefine. Operational metrics aligned with the 4G strategy continue to improve steadily.

In Q2, good product SKUs made up an average of 38% of all SKUs, a 16.9 percentage points rise from Q1 when we first introduced a new strategy. These good products represented 43.1% of our GMV, a 20.9 percentage point increase from Q1. The increase in good products is attracting more good users. The conversion rate of monthly transacting users in Q2 grew by 3.3 percentage points year-over-year with a number of monthly transacting users increasing by 5.8%.

Good products also boost user engagement with an average monthly order frequency of 4.4x in Q2, a 3.2% rise year-over-year. Besides general market users, our good product offerings through more good users who value product quality and we're willing to pay for it. In Q2, the number of good users who placed orders increased by 19.3% quarter-over-quarter from Q1, accounting for 28.9% of total users replace orders. These users also placed about 8.1 orders per month.

Geographically, the company's 4G strategy center on Shanghai has quickly expanded to Jiangsu and Zhejiang, fueling additional growth in these areas. Despite already high market penetration, Shanghai still achieved a 3.5% year-on-year increase. In Jiangsu and Zhejiang continued market penetration resulted in 11% yearly growth, with 10 cities surpassing 20% growth.

Going on the 4G strategy, let's take a look at Dingdong's current business framework and its new growth drivers. First, we strengthened our presence in the supply chain by sourcing over 85% of our fresh growth -- our fresh produce directly from the origin, including Dingdong Agriculture, Guyu Factory, 10 product development division, Dingdong Xiaoman origin procurement and direct sourcing from Australia. This ensure ample product availability. In other words, always have stock on hand.

Second, on the demand side, we expanded omnichannel sales. Besides our popular Dingdong app, we also serve domestic and international KA channels and B2B clients such as merchants, hotels, travel agencies, restaurants, canteens and factories. Omnichannel sales boosted sales efficiency and fully showcase the value of our supply chain, leading to sales success.

Lastly, we continuously expanded our operational regions, starting from East China to nationwide coverage and then gradually entering Southeast Asia and the Middle East, Central Asia. Looking ahead, we plan to expand into Europe, America and Africa. These simultaneous efforts across supply chains, channels and regions forming interconnected systems, point, line, payment, solid, which broke growth barriers and enhance our core system capabilities and competitiveness.

Our overseas approach is not simply a copy of our domestic frontline fulfillment station model. Instead, in centers -- it centers on our supply chain strength and product offerings. These our domestic supply chain expertise. We focus on fresh produce as our key entry points and reduce market risk by partnering with local retail giants. This strategy reflects the concept of exporting supply chain capabilities and jointly developing local channels. For instance, in Hong Kong, we formed strategic alliances with groups like BComKey, Dairy Farm and HKTVmall generating over RMB 10 million in total sales so far with more products to be launched through these collaborations.

Next, I want to update you on Dingdong's AI efforts and progress. Dingdong has long been dedicated to enhancing digital capabilities and relies on algorithms to foster business growth. As AI technology has been more deeply integrated into its operations as well has shifted from nearly improving supply chain efficiency to becoming a crucial driver of business model innovation and user experience enhancements. Dingdong was an early AI adopter. And among the first in the industry to extensively embed AI into its business. It now implements a comprehensive full chain AI strategy across all core business segments.

Our comprehensive full chain AI strategy centers on these 3 key areas. First, internal efficiency enhancement. We leverage the understanding, generation and reasoning skills of large language models, LLM to help our team boost productivity in various areas, including operations, cost management, food research and development and office administration.

Second, supply chain intelligence, we use multi-model technology for smart management and optimization throughout the supply chain, enhancing the accuracy and consistency of mapping between physical and digital environment and ensuring truth seeking and traceability across the entire supply chain. Additionally, a large language model or LLM agent automate decisions on purchasing, allocation and promotions, further improving inventory accuracy and system stability. For instance, we developed an automated system, protecting fruit sugar content, overhauling the technique process to automate everything from image recognition to data analysis to system integration, replacing manual data entry. The results are notable.

Data entry time dropped from 20 seconds to under 3 seconds. Accuracy rose significantly to 98.3%, greatly reducing quality disputes caused by human errors, and all test data is automatically synchronized to the system, supporting data analysis and traceability, standardizing data and boosting management efficiency. The system represents a successful application of intelligent supply chain management in its quality control process.

Third, enhanced consumer experience, we have integrated multiple AI features into the user app. For instance, our AI chatbot, Smart Diet Butler supports multi-model interactions and has upgraded its recommendation logic from solely based on user behavior to the combination of behavior plus knowledge, merging behavioral data with specialized knowledge on nutrition. Users can query products, and the Smart Butler not only suggests recipes but also offers personalized with nutritional advice using medical examination data. Voice integration enables parents to easily customize healthy meals even when busy with their children.

The system also features ingredient/dish dual recognition, which analyzes nutritional balance and displays key nutrients like calories, protein and sugar clearly, helping users quickly grasp the nutritional value of ingredients. Compared to the previous simple select products and place order process, Dingdong now utilizes AI to offer personalized dietary recommendations and dietary purchasing options. This improves user decision-making and turns vague health eating needs into concrete purchasing behavior, greatly boosting user engagement and loyalty.

Finally, I want to share our outlook for Q3 2025. Last year's Q3 saw rapid growth for Dingdong this year despite the rollout of our 4G strategy, which led to the drop of some mass market products and users and amid rising competition, we still aim for a stable scale year-over-year and maintain non-GAAP profitability.

This wraps up my remarks. Thank you. Now I invite our CFO, Mr. Wang Song to discuss our financials.

[Interpreted] Thank you, Mr. Liang, and hello, everyone. Before I review our financial performance for the second quarter, please note that all of our figures are in RMB.

In Q2 2025, Dingdong generated revenue of RMB 5.98 billion, a 6.7% year-over-year increase, marking 6 consecutive quarters of positive growth. Non-GAAP net profit reached RMB 130 million with a net margin of 2.1%, up 0.3 percentage points year-on-year. GAAP net profit was RMB 110 million with a net margin of 1.8%, an increase of 0.6 percentage points. In terms of funds, Q2 recorded a net cash inflow of RMB 100 million from operating activities, the eighth straight quarter of positive cash flow. By the end of Q2, after deducting short-term borrowings, our actual cash earned increased to RMB 2.95 billion, Dingdong has been focused on the instant retail and fresh grocery e-commerce sectors. For over 8 years, our ongoing profitability and rising cash flow reinforce our commitment to the value proposition narrow and deep. Despite external changes, we will remain fully dedicated to the fresh grocery vertical, investing continuously in good products and supply chains following our unique path.

Let's now review the specific financial results for Q2. Revenue was RMB 5.98 billion, up 6.7% year-on-year, while GMV reached RMB 6.5 billion, up 4.5% year-on-year, thanks to the steady advancement of our 4G strategy, good products and good users contributed to overall market growth. where the user mind share continuing to improve. The average monthly order frequency hit 4.4x, reflecting not only a year-on-year increase, but also matching the peak level of last year's Q3. Additionally, our 2B business saw consistent growth with revenue climbing 69.4% year-on-year and its revenue share rising by 1.6 percentage points year-on-year.

Gross profit margin stood at 28.8%, down 1.2 percentage points from the previous year. The decline was mainly driven by our increased investment in good products, the steady availability of such products and the proactive replacement of unpopular items. For example, in Shanghai alone, we replaced about 3,600 SKUs in the first half of the year, about 1,300 more than the same period last year. Additionally, we took a proactive approach in managing gross profit. We continue to pass the cost benefit to consumers through in-depth product supply chain optimization and cultivation. Our goal is for more families to have access to our good products.

Moving forward, we'll continue to incubate good products, conduct thorough research with a craftsmanship dedication and strengthen our core competitiveness.

The fulfillment cost rate dropped to 21.7%, down by 0.7 percentage points year-on-year. This decline was mainly driven by economies of scale and ongoing efficiency gains. Meanwhile, we remain committed to excellent service, achieving a record on-time delivery rate of 97.3% so far this year, which is 1.6 percentage points higher than last year in Q2. The fulfillment time of ASAP orders also has improved, averaging 35.8 minutes to 0.6 minutes faster than last year.

The marketing expense ratio was 1.7%, a 0.6 percentage point improvement year-on-year. Moving forward, we plan to start to boost investment in promoting good products, leveraging them to generate traffic and continuously enhance our conversion rates.

Combined administrative and R&D expenses represented 5.5% of revenue remaining stable compared to the same period last year. We will continue to invest in food R&D, agricultural technology and technical data algorithms to continually enhance our product development and full chain digital capabilities, thereby improving supply chain efficiency.

Non-GAAP net profit margin reached 2.1%, up 0.3 percentage points year-on-year, resulting in a net profit of RMB 130 million. GAAP net profit margin was 1.8% for the same quarter, a year-on-year increase of 0.6 percentage points.

At the end of Q2, the total of cash, cash equivalents, short-term restricted cash, short-term investments and long-term deposit was RMB 4.01 billion. We're actively improving the efficiency of capital use and financing structure after subtracting short-term borrowings, our net equity stood at RMB 2.95 billion.

This concludes my prepared remarks. Operator, we can now start the question-and-answer session.

[Operator Instructions] And the first question will come from Thomas Chong with Jefferies.

[Foreign Language] Mr. Liang. Congratulations to the company for maintaining excellent result this quarter. You mentioned that the 4G strategy has been in place for 6 months. Could you summarize the progress and outcome of the 4G strategy during this period?

[Interpreted] Thank you for your question. The 4G strategy has been in place for more than 6 months. During this period, we've refined our production relations and enhance productivity, enhance emphasizing good users, good products, good services and good mind share.

First, we comprehensively restructured our production relationships by dismantling traditional product development centers. We integrated personnel from product development, operations and quality control to form 10 independent product development divisions, each led by a key executive. This shift enabled the company to prioritize high-quality products and increase our organizational efficiency. Simultaneously, we overhaul resource distribution and performance evaluation method. During this period, we removed GMV and profit margin as performance metrics instead emphasizing quality indicators such as the proportion of good products, good users, purchase repeat rate and negative reviews.

Secondly, we enhanced productivity by reorienting our apps positioning to love of quality. This shift directed homepage traffic toward good products emphasizing categories, such as organic collection, Taste of China, [ MomSelect ], along with products featuring, clean ingredients and low GI. For instance, in Q2, our sales of organic products grew by about 40% year-over-year.

As previously mentioned, we're fully integrating AI and expanding our system capabilities to include more partners. Additionally, this year, we have recruited around 500 management trainees. We look forward to this new talent helping us to advance the implementation of our 4G strategy.

Following these organizational changes, I would like to update you on the current progress of the 4G strategy. Let's first talk about our good users. We have served users who prioritize product quality and are willing to pay for it. In June, nearly 30% of users will consider good users accounting for about 68.5% of our total GMV. Furthermore, around 80% of new users were classified as good users. While we once rely on low prices for user acquisition, we now attract customers with good products. The repurchase rate is vital. Now good users show an exceptionally high repurchase rate with at least 8 orders monthly per user compared to the average of 4.4%.

We have also replaced over 4,000 items with good products. In June, good products made up 40% of our SKUs and contributed to around 47% of our GMV. This shows a rapid growth in GMV increasing by roughly 30 percentage points since the start of the year. Even in categories often seen as mass market where differentiations can be challenging, we continue to source from the origins with innovation. This has led to a quick rise in the share of good products within these categories. For instance in June, good products accounted for 55% of GMV in meat, poultry and eggs. Organic vegetables represented 12% of our vegetable sales, a 38% increase of its GMV year-over-year. In pork -- black pork accounts for 35%, while in nationwide market, it makes up only 3% of total pork consumption.

Overall, after 6 months of implementing our 4G strategy, we gained more good products and users. This indicates that our understanding of the market and user is accurate, and we have developed a winning strategy. We'll persist with the narrow and deep approach to deliver healthy, high-quality ingredients and foods, ensuring every family can enjoy healthier and favorite meals.

The next question will come from Yang Bai with CICC.

[Foreign Language] Thank you management. How does management perceive the current competition, including instant retail and the frontline fulfillment station market? And what's its impact on us?

[Interpreted] Thank you for your question. Competition is a highly relevant topic for everyone. Since our IPO in 2021, we have been attentive to competition in areas such as community group buying, platform delivery and frontline fulfillment stations. We have addressed these issues individually in previous quarters. we focus less on competition and more on creating value, reflecting on this journey, we have stayed consistent and accurate in our understanding and positioning.

First, recent competition within instant retail has gone a widespread attention. The battle for users and traffic is fierce with many adopting quick short-term price wars. However, this focus often neglects aspects like supply chains and product development. As we outlined with our strategic approach of narrow and deep, we defer significantly from typical instant retail companies. First, our goal is to develop the supply chain and create an ecosystem, whereas theirs is to compete for more users and traffic.

Second, strategically speaking, we emphasize commodity and ecological approaches, unlike their focus on traffic, platform dominance and market monopolization. Third, in our relationships with channels, we seek win-win cooperation and steady growth, whereas they engage in zero-sum market composition. Fourth, our interactions with suppliers are collaborative and mutually beneficial while theirs follow a traditional client provider model. Fifth, our business models grow in proportion to our upstream and downstream partners. In contrast, theirs are characterized by a power-law distribution with a few entities controlling most resources and influence and becoming oligopolies. Sixth, we value long-term relationships and patients, unlike their focus on short-term KPIs.

These significant differences set us apart from other retail -- instant retail brands, when you browse social media platforms like Xiaohongshu, RedNote, you see increasing discussions about Dingdong's innovative and high-quality products. This helps us stand out in the current market, which is dominated by price competition and homogeneity.

From the consumers' point of view, since the pandemic, more individuals have raised their standards for food quality, consumers are increasingly recognizing that you are what you eat. On one hand, food nutritional content directly impacts your body, influencing your physic, health, energy and immunity over time. For instance, consistently consuming high sugar diet can result in obesity, metabolic issues, while eating more healthy fruits and vegetables can lower the risk of chronic diseases.

On the other hand, dietary choices also mirror your identity, values and lifestyle. For instance, vegetarians might prioritize environmental protection and animal welfare, whereas those who prefer local ingredients may support sustainability. In essence, eating not only molds your body, but also defines who you are and what you stand for. Most products on our app are developed to align closely with these consumer needs.

That said, we did not introduce Dingdong's 4G strategy, narrow and deep approach and its love of quality positioning as a way to compete. Instead, these have become objectively Dingdong's unique competitive edge, ensuring its strong position in the market. While our transformation will undoubtedly require time, we believe the results will become increasingly evident. Time is our ally. We aim to create long-term value for our investors. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Nicky Zheng for any closing remarks. Please go ahead.

Thank you again for joining our call today. If we have any further questions, please feel free to contact us or request through our IR website. We look forward to speaking with everyone in our next earnings call. Have a good day and have a good night.

The conference is now concluded. Thank you for participating in today's call. You may now disconnect.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]