Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to the Dingdong Limited Second Quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. Please note, this event is being recorded. I will now turn the conference over to the first speaker today Senior Director of Investor Relations please go ahead sir.

Thank you. Hello everyone and welcome to Dingdong’s second quarter 2022 earnings call. With us today are Mr. Changlin Liang, our Founder and CEO and Ms. Le Yu, our CSO. You can refer to our second quarter 2022 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. Before today’s call, management will provide their prepared remarks first and then we will hosting our question-and-answer session. Before we continue I will like to refer to Safe Harbor statements in our earnings press release which also apply to the call as we will be making forward-looking statement. Please note that all the numbers saved in the following management for prepared remarks are in RMB terms and we will discuss non-GAAP measures today. We are more thoroughly extend and reconciled to our most comparable measures retail reported in our earnings release and the filings with SEC. I will now turn the culture over first speaker today Founder and the CEO of Dingdong, Ms. Liang.

Hello, everyone. Welcome to the Q2 earnings call of Dingdong Fresh in 2022. On the call today I’ll mainly cover three areas. First, I’ll briefly report our Q2 operating performance. Second, I’ll discuss our product development capabilities. And lastly, I’ll share the company’s better development plans. Firstly, let me report the company’s operating performance in Q2, 2022. Our Q2 revenues were 6.63 billion representing 42.8% year-over-year growth. We also achieved a non-GAAP net profit of over 20 million for the first time marking an important milestone for our development. Yangtze River Delta region or YRD in particular, achieved profitability with an operating margin of 3.7% in the first half of 2022. We started our business in Shanghai back in 2017 and gradually expanded to the whole YRD region and then to other cities across China. We have seen that the entire YRD has become a solid market for the company following Shanghai. We’re also confident that our product development capabilities, methodology and management talents accumulated in the YRD region will help us grow and serve more users in other cities. We have prioritized product development capabilities to increase users and orders ever since the adoption of the quality growth strategy in August 2021. And we have made great progress. Specifically in Q2 of all products sold, we had a total of 217 SKUs that were uniquely Dingdong and our private label accounted for 17.5% of the total GMV with the majority being developed and processed in-house in our 3S factory. We have become not only a large scale fresh grocery e-commerce leader, but also a food manufacturer with R&D and innovation capabilities. As we all know, Shanghai was hit by another pandemic wave from March to May 2022. During that period, we overcame various supply chain management difficulties to ensure…

Thank you, Mr. Lyon. And hello, everyone. Before I walk you through our detailed financial results please note that all numbers stating the following remarks are in RMB terms or comparisons on a percentage changes our year-over-year basis unless otherwise noted. In Q2, 2022 we maintain quality growth with revenues increasing 42.8% year-over-year to 6.63 billion. Our product development capabilities and operational efficiency have significantly and steadily include things that we began implementing the strategy of efficiency first, with due consideration to scare at the end of August 2021. Margins has narrowed consistently to 37.2%, 31.9%, 18.9% and 7.8% over the past four quarters, respectively. This quarter we also reached a positive non-GAAP net margin of 0.3% for the first time UP 37.5 percentage points from Q2, 2021. Now, let’s look at the Q2 results in detail. The company’s revenue reached 6.63 billion representing year-over-year growth of 42.8%. The GMV to revenue conversion rate was 93.2% at 6.9 percentage points from the same period last year. The growth margin in Q2 was 31.6%, up 17 percentage points year-over-year and the 2.9 percentage points quarter-over-quarter. This is because we kept the developing and diversifying the source of our supply. For example, our newly developed food production and processing initiative include our product R&D capabilities, expanded our processing scale, and boosted our product sales, thus increasing our production positive contributions to gross margin. Data analytics also empowered our order to production and reduce the production efficiencies and wastage. In addition, a high percentage of direct sourcing has penetrated not only the fresh produce, but also the non-fresh produce categories. The final step of our supply chain is doorstep delivery, providing convenient, reliable and reputable value added service to the consumers. In summary the long multilink and a deep supply chain has not…

We will now begin the question and answer session. Our first question will come from Joyce Ju of Bank of America. Please go ahead.

I will translate my questions myself. Recently we noted there is a close competitor of the company was reportedly having some difficulties in terms of cash flows. And also a shrinkage in operations. We wonder like could management share some colors in terms of your viewing in the market competitive landscape? How this company’s business or like situations will actually affect Dingdong in terms of like competitive landscape in terms of capabilities in terms of relationship with the customer and also their suppliers? Many thanks.

Okay, thank you for your question. Indeed, the news has triggered heated discussions recently. First of all, we rarely comment on our peers. It’s more important to focus on what we do than to point fingers. Also, some people think that the whole industry is doomed when they see one company in trouble. We strongly disagree with such a simple linear way of thinking. Even in the same industry the differences between companies can be drastic. Dingdong is very unique in our industry. We have always been focused on one thing, always paid more attention to the needs of our users, and then push ourselves to progress. We don’t cut corners. We don’t compromise. We are committed to developing product development capabilities, which has gained us love and trust from our users. Any company loved by users is a promising company. We also hope that a society can be more tolerant towards entrepreneurs and we wish entrepreneurs who encountered difficulties will persevere in a moment of darkness and usher in a brighter future. Alright. That’s all for my answer. Thank you.

The next question comes from Ashley Xu of Credit Suisse. Please go ahead.

Thanks management for taking my question. Just want to check during the lockdown period other than our revenue growth and other improvement or development especially in terms of our operation or supply chain that is worth sharing. Thank you.

Okay, thank you for this particularly good question. In addition to our revenue growth, Dingdong has grown in three areas after the lockdown. First, we have established a more flexible and adaptive supply chain and build a responsive organization. During the lockdown we faced various problems including supply disruption, logistic blockages, regional warehouses and frontline centers being locked down and personnel management difficulties. However, we adopted and created new supply models for example, using direct delivery by merchants and neighborhood -- not only ensure supply during the lockdown, but also calms prices and sharpen our supplying system to hold the basic duty of securing supply in case of unexpected incidents. Second, we have improved the cohesiveness of the team. During the lockdown the workload was heavy, life was tough, and there was the risk of being quarantined at any time. We were under unprecedented pressure. And we all took it upon ourselves to maintain supplies for local residents creating plenty of heroic stories. But everyone here at Dingdong could also feel the sense of accomplishment from setting our users. After the lockdown we as a team became more united. Third, Dingdong have been with our customers throughout the lockdown keeping supplies and prices stable. And as a result, we are loved by more customers than ever before. Whether it’s routine consumption or lockdown purchases Dingdong is always a destination that you can trust without a doubt. Finally, I would like to highlight that we have been complying with the government’s pandemic control requirements, and fulfilling our basic duties as a daily supply company for the general public. We also wish that the pandemic. We hope that the pandemic will end soon and that everyone can enjoy a healthy and stable life. Thank you. That’s all for my answer.

The next question comes from Thomas Chong of Jefferies. Please go ahead.

Thanks management for taking my questions. We have seen we have a very good job in achieving profitability in Q2. How should we think about the situation in Q3 and Q4 and when should we expect full year profitability? And also before we reach our full year profitability how should we think about our cash flow? Would there be any issues apparent?

All right, our CFO Ms. Le will take your question.

Okay. Thank you, Thomas, for your question. First of all, Q2 was a very difficult period for the company. And the operational headwinds were tremendous under the influence of macro factors. However, the good thing is that the company staff were united to battle the challenges and we finally achieved quarterly positive profits in Q2. We also observed very positive progress post lockdown and compare it to pre-lockdown periods, both in terms of product development capabilities and user satisfaction, which are the aspects that we care about most, and also about core performance indicators such as the AOB and penetration rate, we also achieved a very positive progress as well. Therefore, we believe that our non-GAAP net loss will be down at least three percentage points in Q3 compared to the pre-lockdown Q1 and Q4 will be further optimized on the basis of Q3. Second, in January this year when we will all still completely in the dark about the subsequent lockdown, the management had already set the goal of achieving a single month break even by the end of the year. A goal that we have never changed and we are still convinced that we will achieve this goal. Finally, although there is no change in the timing of us achieving full profitability, the Q2 results objectively optimize our loss ratio and cash outflow for the year. So for Q3 and Q4 this year, our loss and cash outflow will be significantly optimized compared to the same period last year. Next year, we forecast that the company will still be cash flow positive. And as of the end of Q2, our cash balance was 6.06 billion RMB. Banks have been working more closely with the company with short term bank borrowings increasing to 890 million RMB. In Q2, many banks have given us higher credit limits on loans after renewal at the end of the term. In short, we don’t have many capital spending needs at the moment and the balance on the books is still quite sufficient. So we think that the company is not at any cash flow risk. Thank you. That’s all from answer.

Next question comes from Robin Leung of Daiwa. Please go ahead.

Thanks management for taking my question and congratulations on the strong set of results. Some investors have concern on the warehouse models given what happened to -- also some competitors in the local retail industry explicitly said warehouse is not going to work. Could management share your thoughts on that? Thanks.

Well, thank you for your question. First of all, I would like to draw your attention to the fact that excluding the three months during the pandemic, when the lockdown hit hard, Dingdong has been able to continue improving as loss ratio for 10 consecutive months. And we are very confident that we will achieve full and sustained profitability by the end of this year. Therefore, we have a strong belief in the frontline fulfillment grid model. There are many analysis of this model on the market and they are up for you to judge. But we often forget that the most important criteria to assess the pros and cons of a model are whether it really meets the needs of the users and whether it is in lined with the changing trend of user consumption behavior. Only the users’ choice can determine the success or failure of a business model. The frontline fulfillment grid model enjoys the highest efficiency, the fastest delivery and can better control the quality of fresh food. This model meets the needs of consumers for a better life and caters to the younger generation of new consumption habits. With that we firmly believe that this is a business model with the bright future, and we in turn push ourselves to strive for progress. When people think that the gross margin of fresh groceries is low, we improve it by making the supply chain deeper and stronger. When people criticize the losses and the high loss rate in fresh groceries, we improve it by enhancing our order density and improving our prediction and product recommendation technologies. As a result, our recommendation is excellent today and our loss rate is far lower than the traditional fresh produce peers. When people think that the quality control of non-standardized or non-standard products is difficult, we standardize the process and we increase human resources and technology investment. As a result our quality control nowadays is industry leading in the entire fresh grocery industry. Our way of thinking is identifying the user’s needs and then pushing ourselves to improve accordingly. Some people see problems and immediately they try to be smart and announce to the world that they know everything. Others, on the other hand, keep their heads down in solving problems. In fact, entrepreneurship is the process of problem solving. Why do we need entrepreneurs if there is this a perfect industry with a huge highly lucrative market with no problems or difficulties? Thank you.

This concludes our question and answer session. I’d like to hand the conference back to our management for 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 IR website. We look forward to speaking with everyone in our next earning call. Have a good day.

The conference is now concluded. Thank you for attending today’s presentation and you may now disconnect.