Dingdong (Cayman) achieves record Q3 2025 revenue of RMB 6.66 billion, sustaining profitability amid competitive landscape with strong growth in user engagement.

OPERATOR - (00:01:46)

Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to the Dingdong (Cayman) third quarter 2025 earnings conference call. At this time, all participants are in a listen only mode. Please note that this event is being recorded. I will now turn the conference over to the first speaker today, Nikki Zhang, Director of Investor Relations. Please go ahead, ma'am.

Nikki Zhang - Director of Investor Relations - (00:02:18)

Thank you. Hello everyone and welcome to Dingdong (Cayman)'s third quarter 2025 earnings call. With me today are Mr. Chang Ling Liang, our founder and CEO, and Mr. Song Wang, our CFO. You can refer to our third quarter 2025 financial results on our website at IR SECtion. 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 our numbers stated in the following management prepared remarks are in RMB terms and we will discuss non GAAP measures today which are most thoroughly explained and reconciled to the most comparable measures reported in our earnings release and filings with SEC. I will now turn the call to our first speaker today, the founder and CEO of Dingdong, Mr. Liang.

UNKNOWN - (00:03:59)

Yeah.

Chang Ling Liang - Founder and CEO - (00:04:41)

Hello everyone. Thank you for participating in Dingdong (Cayman)'s Q3 2025 earnings call. As of Q3 2025, Dingdong (Cayman) 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 demonstrate Dingdong (Cayman)'s 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 insight and outlook for the business. In Q3 2025, Dingdong (Cayman) 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 (Cayman)'s highest ever quarterly GMV in 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.

UNKNOWN - (00:07:10)

Janice. This year the company has made notable progress with its Good product system. A series of good products has effectively enhanced user retention and repurchase rate while also significantly supporting overall GMV growth. For instance, in September, SKUs classified as good products comprise 37.2%, generating 44.7% of total GMV, a rapid jump from January when the Four Good 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 (Cayman). 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 4.6 times 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. Jamie Tongue. From a regional perspective, the GMV in Jiangsu, Zhejiang, and Shanghai continues its steady upward trend this quarter increasing by 1.4% year over year. Shanghai as the strategic core markets maintain stable operations, leveraging its high penetration rate to support the region's overall growth. Meanwhile, Jiangsu and Zhejiang, which are still in the face 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 Zhuzhou, nine cities delivered growth of over 10%, with Wenzhou 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 strategy to guide a 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. JB Kaj. Unlike best sellers, 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. Since the One Small in 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, Suzhou and Hangzhou. Building on this, we plan to focus our expansion on smaller and medium sized cities in the Jiangsu, Zhejiang and Shanghai regions such as Xincheng 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. The. Changing. 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, Nantong, 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. From Tampa.

Wang Song - (00:19:16)

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're confident in our ability to grow overseas. We have formed partnerships with top tier partners like Fairprice in Singapore, DFI in Hong Kong, Lee Kom Key and Hong Kong TV Mall. We're also pleased to see A large number of fresh groceries and packaged foods developed by Ding Dong have been widely, 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 offline 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 strengths in supply chain product development and IT systems, bolstered by sustained profitability and solid cash reserves, Dingdong (Cayman) 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. Thank you, Mr. Liang. Hello everyone. Before I present our financial performance, please note that all figures are in RMB. In Q3 2025, Dingdong (Cayman) reported revenue of RMB 6.66 billion mark 1.9% year over year growth and maintaining positive growth for seven 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 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 incident orders was 36%, 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 my share penetration and efficient conversion, we'll continuously enhance the overall return on marketing investment. Combined GNA and R and D expenses represented 4.9% of revenue, similar to the same period last year. We'll maintain our focus on R and D investment in food research, agriculture 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 restrictive 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 and A session. Thank you.

OPERATOR - (00:30:56)

We will now begin the question and answer session. To ask a question, you may press Star then one on a telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press Star then two. Please state your question in Chinese first and then repeated in English for the convenience of everyone on the call. At this time, we will pause momentarily to assemble our roster and our first question today will come from Erica Chu of Jeffries. Please go ahead. Erica, you may be muted on your end. Your line is live here. Erica, is your line muted? We can move on to our next question. We can move on to our next question. Our next question will come from Yang Bai of cicc. Please go ahead with your question.

Yang Bai - (00:32:59)

Thank you management for taking my question. The instant retail market remains highly competitive and fresh groceries are at the heart of this battlefield. Industry giants like Alibaba, Meituan and Jingdong are all making significant investments. How does Ding Dong view the current competitive landscape? What challenges does it bring and are there new opportunities behind it? Thank you.

Chang Ling Liang - Founder and CEO - (00:33:48)

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 (Cayman), our path is to build differentiation proactively guided by two major strategic paths. First, on the user side, we firmly execute our Four Good 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 one inch wide, one mile deep. We focus deeply on our core areas, going all the way to the source. From direct sourcing at farms to in house RD and production, and from warehouse 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 Ding Dong. 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 noises fade, time will ultimately stand on our side. Thank you.

OPERATOR - (00:38:27)

Our next question today will come from Erica Chu of Jefferies. Please go ahead.

UNKNOWN - (00:38:39)

Great.

Erica Chu - Equity Analyst - (00:39:25)

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.

UNKNOWN - (00:40:24)

Senior.

Chang Ling Liang - Founder and CEO - (00:40:44)

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 viewed 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 (Cayman) perspective to a full chain perspective. This requires us to think and act as comprehensive product managers, designing every product's full lifecycle 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 non standardized, 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 lowers bollage rates 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.

UNKNOWN - (00:43:05)

Mo Jagong.

Chang Ling Liang - Founder and CEO - (00:43:32)

Our systematic approach to developing top-selling products involves assessing a category like fruits across six key 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. This summer campaign results validated our strategy. For example, Guangxi Red Heart Pamelo generated nearly 15 million RMB 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 Guiwei Lychee achieved 9 million RMB in GMV, experiencing significant increases in revenue and repurchase rates. 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 merging brand appeal with the benefits of scale thank you.

OPERATOR - (00:46:40)

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

UNKNOWN - (00:46:51)

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

OPERATOR - (00:47:12)

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