Dingdong (Cayman) - Q2 2024

Transcript

Operator (participant)

Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to the Dingdong Limited Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to the first speaker today, Nicky Zheng, Director of Investor Relations. Please go ahead, sir.

Nicky Zheng (Head of Investor Relations)

Thank you. Hello, everyone, and welcome to Dingdong's second quarter 2024 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 2024 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 make...

We will be making forward-looking statements. Please note that all numbers stated in the following management 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.

Changlin Liang (Founder and CEO)

Thank you, investors, analysts, and Dingdong Maicai users. Welcome to the Dingdong Maicai 2024 Q2 earnings call. As of 2024 Q2, Dingdong Maicai has achieved profitability for seven consecutive quarters under non-GAAP standards, and since Q1 of this year, we have once again achieved profitability under GAAP. Especially since Q1 this year, we have returned to a growth trajectory. While maintaining profit growth, revenue has also grown year-over-year for two consecutive quarters. This is primarily because Dingdong Maicai has world-leading fresh grocery supply chain capabilities, which will help us achieve sustained growth in scale and profits.

Speaker 7

Hi, everyone. Thank you for joining Dingdong's Q2 2024 earnings call. As of Q2 2024, Dingdong has achieved profitability for seven consecutive quarters based on non-GAAP standards. Additionally, after Q1 of this year, the company has again achieved GAAP profitability. Notably, we have resumed growth since Q1 of this year. Both profits and revenue have shown positive year-over-year growth for two consecutive quarters. These achievements are mainly attributed to Dingdong's world-leading fresh grocery supply chain capabilities, which facilitate our continued growth in scale and profit.

Changlin Liang (Founder and CEO)

Today, my speech is divided into three parts. First, a review of Q2 2024 results. Next, I will briefly introduce Dingdong Maicai's growth points. Finally, I will provide an outlook for future development and performance.

Speaker 7

In my speech, I'll review our Q2 performance, discuss Dingdong's growth drivers, and provide an outlook for future development and performance.

Let me first briefly introduce Q2's performance. In Q2 2024, Dingdong Maicai achieved a GMV of RMB 62.2 billion, a 16.8% year-over-year increase. Under non-GAAP standards, net profit was RMB 103 million, nearly 13 times more than the prior year, and net profit margin was 1.8%, up by 1.6 percentage points year-over-year. Meanwhile, in June, we saw remarkable growth, with the same-store GMV increasing by 21.6% year-over-year, and all regions experienced positive year-over-year growth in scale. The hard-earned growth can be attributed to the consistent increase in transacting users and ARPU. In Q2, we recorded 7.3 million transacting users monthly, up 11.7% year-over-year. Additionally, the average daily number of transacting users approached 900,000, up 17% year-over-year.

With a 4.3% year-over-year increase in DAU, the company also benefited from ongoing enhancement in service capabilities and supply chain operation improvement. Consequently, the conversion rate of DAU to daily transacting users increased by 4.3 percentage points compared to the same period last year.

Changlin Liang (Founder and CEO)

...同时，用户在叮咚买菜的消费粘性和钱包份额进一步提升。Q2用户月均ARPU较去年提升，同期提升6%，其中会员月均ARPU值同比提升了7.8%，达到CNY 500+。

Speaker 7

User loyalty and wallet share on Dingdong increased during the same period. Our users monthly ARPU increased 6% year-over-year. Specifically, members monthly ARPU rose 7.8% year-over-year, surpassing 500 RMB.

Changlin Liang (Founder and CEO)

从经营层面来看，在今年以来，我们的优势的餐桌场景下，进一步提升商品的丰富度，满足不同人群的购买需求，能一站式购齐一顿饭所需的全部食材。另外，我们向茶几休闲场景扩展商品供给的丰富度，主要包括水果、乳品、酒饮、休闲百货、烘焙，在Q2已经取得了阶段性的进展。以休闲百货为例，人均购买次数和月购买频次均快速增长，带动该品类月均ARPU同比提升24%。

Speaker 7

Looking at it from a business standpoint, over the course of this year, we've further enhanced the assortment of products in our advantageous dining table category. This has enabled us to better cater to the purchasing needs of diverse consumer groups, providing them with a one-stop-shop solution to acquire all the necessary ingredients for a complete meal. We've also expanded the SKUs available for the leisure scene to include fruit, dairy, alcohol, beverages, leisure products, and baked goods, and the strategy achieved initial success in Q2. For example, in the leisure product category, both the number of average purchases per user and frequency of monthly purchases have increased rapidly, leading to a 24% year-over-year increase in monthly ARPU in this category.

Changlin Liang (Founder and CEO)

同时，今年我们开始在江浙沪地区开始新建前置仓，持续加大在江浙沪区域的仓网渗透。今年预计在江浙沪新开80个左右前置仓，上半年已经完成了近40个。这些新开仓爬坡迅速，单仓日均单量目前已爬坡到了800单。

Speaker 7

This year, we've resumed expanding our station network in Jiangsu, Zhejiang, and Shanghai, continuously increasing our station network penetration in these regions. We aim to open approximately 80 new frontline stations in these regions this year, with nearly 40 already completed in the first half of this year. These new frontline stations are quickly ramping up, and each station now manages an average of 800 orders daily.

Changlin Liang (Founder and CEO)

前面向大家介绍了叮咚买菜Q2的情况，接下来我想再介绍未来的几个增长点。

Speaker 7

As I've just outlined, our Q2 performance, I would now like to introduce several future growth drivers.

Changlin Liang (Founder and CEO)

第一，江浙沪地区将继续增长。今年上半年，叮咚在上海的GMV同比增长9.5%，浙江同比增长22.7%，江苏同比增长22.6%。规模的增长来自于渗透率的增长以及人均单量的增长。江浙沪地区人口众多，居住密度大，消费力强，叮咚买菜在江浙沪区域的发展空间还很大。我们非常有信心，在未来的很长时间里，叮咚买菜在江浙沪区域都会保持快速的增长。

Speaker 7

Volume from our Jiangsu, Zhejiang, and Shanghai business are expected to keep growing. In the first half of this year, Shanghai achieved a GMV year-over-year growth of 9.5%, Zhejiang 22.7%, and Jiangsu 22.6%. The increase in scale was driven by the rise in the penetration rate and the number of orders per user. Due to the large populations, high residential density, and strong purchasing power in these regions, Dingdong still has significant potential for growth. We're very confident that we'll maintain speedy growth in these regions for a long time to come.

Changlin Liang (Founder and CEO)

第二，江浙沪地区的增长也提升了我们供应链能力和用户运营能力，这个能力会赋能我们华南、华北区域，这两个区域也会在逐渐实现盈利的情况下，保持规模的持续增长。另外，在Q2，我们在一些三、四线城市的增长都很好，例如扬州、湖州等城市都达到50%以上的年同比增长。中国有大量的三、四线城市，这会为我们未来在更多区域的发展奠定供应链基础和运营方法论。

Speaker 7

Expansion in the Jiangsu, Zhejiang, and Shanghai regions has helped improve our supply chain and user operation capabilities. This will benefit our operations in South China and North China, which we are expected to continue growing in scale and gradually become profitable. Additionally, we have seen sizable growth in some Tier 3 and Tier 4 cities, such as in Yangzhou and Huzhou, with an impressive year-over-year growth rate of over 50% in the second quarter. Given the high number of Tier 3 and Tier 4 cities in China, this progress will establish a robust foundation for our supply chain and operational strategies in additional regions in the future.

Changlin Liang (Founder and CEO)

第三，供应链能力的溢出，使我们的食品研发、生产加工有很大的增长空间，也能创造更大价值。目前，叮咚的肉类切割加工、谷物豆制品和预制菜的研发生产加工，在中国的消费市场里都处于一流水平。我们的商品除了能够通过叮咚的APP供给用户，也越来越多地通过各种零售渠道销售给消费者，同时也会通过华住、锦江之星、亚朵等酒旅餐饮渠道服务更多的消费者。基于我们在C端客户当中积累的商品服务品牌，以及我们的渠道优势，我们相信未来能覆盖更多B端客户，实现我们让美好的食材像自来水一样普惠万众的使命和初心。

Speaker 7

... An overflow in our supply chain capacity facilitates rapid growth in food R&D, production, and processing, creating more value for us. Our R&D, manufacturing, and processing of meat, grain, bean products, and prepared meals are of top quality in the Chinese consumer market, and we distribute these products to users through the Dingdong app and various retail channels. Moreover, our products are increasingly being sold to consumers through hotels and catering channels such as Huazhu, Jinjiang Inn, and Atour. By leveraging our reputation and channel logistics advantages, we aim to expand our reach to more business customers in the future, keep fulfilling our mission of making top quality ingredients readily accessible to everyone. One of the ways we create value is by expanding into international markets.

Over the past seven years, we've utilized our supply chain expertise to deliver food from remote areas of China to affluent regions, including Jiangsu, Zhejiang, and Shanghai. This has not only satisfied the needs of people in these areas for a better quality of life, but has also generated prosperity for those in remote regions and enhanced overall productivity within society. Considering the global perspective, there exists a significant disparity between food supply and demand. Leveraging our supply chain capabilities, we can work towards facilitating a more efficient movement of goods, of food. This is our original entrepreneurial goal. By leveraging our supply chain capabilities and working hard, we aim to generate significant social and commercial value. Finally, I'd like to give you an update on our performance outlook for the entire year of 2024 and for the third quarter.

Considering our improved performance in the second quarter, and also over the past few quarters, we have raised our internal forecast for profitability and scale. We anticipate a significant year-over-year increase in net profit and scale for both the year as a whole and the third quarter, and we're confident that we will continue achieving both non-GAAP and GAAP profitability. We have full confidence in the growth of scale and profits this year, and we are even more confident about the future. This concludes my speech. Thank you all for listening. Now, I would like to invite our CFO, Song Wang, to go over the company's financials.

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

In the second quarter of 2024, Dingdong generated revenue of CNY 5.6 billion, up 15.7% compared to the previous year. Non-GAAP net profit margin was 1.8%, a 1.6 percentage points increase from the previous year, with a net profit of CNY 103 million, nearly a thirteen-fold increase from the previous year. This is the seventh consecutive quarter of non-GAAP profitability. The company was profitable under the GAAP standards for a second consecutive quarter, with net profit margin of 1.2%, up by 2 percentage points year-over-year, and net profit of CNY 67.13 million, an increase of CNY 104 million year-over-year. ... Operating cash flow showed a net inflow of CNY 0.25 billion, marking the fourth consecutive quarter of net inflow.

As of the end of June, free cash flow for the past 12 months amounted to RMB 0.51 billion, the highest level in recent years, and reflecting a RMB 0.81 billion increase from the same period last year. By the end of Q2, our actual self-owned funds balance, after deducting the short-term loans, stood at RMB 2.32 billion, a RMB 0.32 billion increase from the end of last year, and a RMB 0.24 billion increase from the end of March. As we've always emphasized, Dingdong has not only achieved gratifying revenue growth, but has also continued to increase its profitability. In addition, our financial capacity has been continuously improving, while the number of our frontline stations has also been growing.

The above financial performance demonstrates that we're fully self-sufficient and maintaining healthy growth. Let's review the specific financials. GMV was 6.2 billion RMB, up 16.8% year-over-year. Notably, Shanghai, Jiangsu, and Zhejiang saw impressive year-over-year growth rate of 16.5%, 28.5%, and 30.4% respectively. This growth was attributed to our expanded coverage and penetration in these regions. Additionally, the Beijing region returned to positive growth with an 8.5% year-over-year increase. In June, all regions, including Guangzhou and Shenzhen, achieved year-over-year positive growth, with same-store growth rate at achieving 21.6% nationwide. Looking ahead, we anticipate that the growth momentum in June will be sustained during the summer vacation, especially due to the impact of high temperatures.

Furthermore, losses in Guangzhou, Shenzhen, and Beijing are gradually narrowing each quarter, indicating the success of the company's regional strategy. Gross profit margin was 30%, down 1 percentage point year-over-year. The decrease was due to price concessions to provide more value to consumers and maintain our competitiveness. It was partially offset by an increase in gross profit margin resulting from improvement in our entire supply chain, which includes direct sourcing, production and processing, warehousing, fulfillment, and distribution. Fulfillment cost rate was 22.4%, 1.2 percentage points lower year-over-year. The increase in order volume has led to improved operational efficiency. Our frontline fulfillment stations processed over 1,000 orders daily on average, up 29.4% compared to a year ago, with Shanghai processing over 1,500 orders daily. We're continually enhancing our service capabilities using algorithms and supply chain operation capabilities.

Consequently, the average ASAP order fulfillment time in Q2 was 36 minutes, 2 minutes faster than the previous year, and the 60-minute delivery availability was 97%, an 18 percentage points year-over-year increase. Sales and marketing cost rate was 2.3%, a 0.4 percentage point increase year-over-year. With strong financial performance and ample cash reserves, we plan to increase our marketing investments to enhance user acquisition, optimize traffic operations, expand our user base in key areas, and drive overall business growth.

Song Wang (Director and CFO)

...Q2的管理费用和研发费用总和占收入比例较去年同期降低0.4个百分点，主要来自于规模的效应。我们将一如既往地在食品研发、农业科技和技术数据算法等方面持续进行研发投入。

Total G&A and R&D expenses were 0.4 percentage points lower than in the same period last year, primarily due to economies of scale. We intend to maintain our investment in R&D for food, agricultural technology, and technical data algorithm.

2024年Q2，我们实现了non-GAAP 1.8%的净利润率，净利润额达1.03亿元。同时我们在本季度同样实现了GAAP 1.2%的净利润率。

Speaker 7

Non-GAAP net profit margin was 1.8%, resulting in a net profit of RMB 103 million. GAAP net profit margin was 1.2%.

Song Wang (Director and CFO)

截至 Q2 末，现金及现金等价物，短期受限资金和短期投资的余额为 CNY 41.6 亿元。我们持续优化资金的使用效率和融资结构，在 Q2 短期借款余额后，我们的实际自由资金余额为 CNY 2.232 亿元。我们 Q2 用出色的财务表现完成了上个季度给出的指引。结合公司近期的经营财务表现和充足的资金，我们非常有信心完成三季度和全年给出的业绩预期。

Speaker 7

At the end of Q2, our balance of cash and cash equivalent, short-term restricted funds, and short-term investment amounted to 4.16 billion RMB. We are continuously improving the efficiency of capital use and our financing structure. After deducting the balance of short-term loans, the actual balance of our own funds was 2.32 billion RMB. In the second quarter, we achieved outstanding financial performance in line with our guidance. Considering our recent operating financial performance and balance sheet strength, we're confident that we will meet our performance expectations for the third quarter and the whole year.

Song Wang (Director and CFO)

好，我们今天的发言到此结束。Operator，下面可以进入提问环节了。

Speaker 7

This concludes our speech today. Operator, we can now start the question and answer session.

Operator (participant)

We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. 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. When asking a question, please state it in Chinese first and then repeat it in English for the convenience of everyone on the call. At this time, we will pause momentarily to assemble our roster. The first question comes from Thomas Chong with Jefferies. Please go ahead.

Thomas Chong (Analyst)

Thanks once again for taking my question. So, according to recent reports, Hema has restarted recruitment and construction of frontline fulfillment stations, and also JD is also deploying frontline fulfillment stations and also Meituan is extending the station to more cities. So, what are your thoughts on those developments?

Also how do you foresee the future competition? Thanks.

Changlin Liang (Founder and CEO)

好，谢谢你的问题啊。那早些时候呢，因为宏观环境的调整和竞争格局的变化，大家对于京东买菜有生死存亡的质疑和担心。不过呢，连续的盈利以及规模的增长，能够充分说明我们已经坚定地生存下来了。即使在现在这样一个相对低迷的消费环境 下，我们也在增长，并加大盈利，能活得越来越好。之前大家觉得前置仓模式跑不通，甚至认为生鲜电商没有出路。相信我们所取得的成绩，能够成为更多的同行参与到前置仓赛道的理由，从某种程度来说，也推动了前置仓和生鲜电商的整个行业的增长。

Speaker 7

Thank you for your question. In the past, doubts and concerns arose about our chances of survival due to changes in the macro environment and competitive landscape. However, our consistent profitability and growing scale demonstrate that we have not only survived, but thrived, even in a slow consumption environment. Previously, there were concerns about challenges in the frontline fulfillment station grid model, or even in the fresh grocery e-commerce industry. But I believe our success in this area has encouraged peers to participate it, and contributed to the growth of the frontline fulfillment grid model and the fresh grocery e-commerce industry.

Changlin Liang (Founder and CEO)

在这里呢，我想简单分享一下我们的不同点，这不代表对错或者好坏，只代表我们对于自己商业模式的理解。

Speaker 7

Now, here I want to briefly share our differentiation compared to our peers. There's no right or wrong, good or bad, but only our understanding of our business model.

Changlin Liang (Founder and CEO)

第一，对生鲜行业的低成本原则的理解不同，同行更多遵守了传统零售业的低成本原则，从沃尔玛时代就被验证的低成本原则，就是通过低价获得规模，通过规模降低采购成本和运营费用。而这一点呢，在生鲜行业失效了。我们认为生鲜行业的低成本原则是通过供应链能力，向端到端要效率，向供应链能力要利润，并通过供应链能力服务好消费者，也获得规模的增长。

Speaker 7

...First, there are different interpretations of the fundamental, principles within the fresh grocery industry. Many in the industry adhere to the traditional retail approach, which is achieving scale by offering low prices and then leveraging that scale to drive down procurement costs and operating expenses. However, we've realized that the first principle of traditional retailing, which has been successful since the Walmart era, is not applicable to the fresh grocery industry. Instead, the first principle of success is to continuously enhance end-to-end efficiency. To achieve growth at scale, seek profitability, and bolster competitiveness, it is crucial that we focus on consistently improving our supply chain capabilities. With these capabilities, we'll be able to serve a larger consumer, customer base and meet their evolving needs.

Second, in the past, as our industry developed, everybody was exploring and pursuing various changes to business models. Some constantly modified their operational methods in search of the best solution. We, on the other hand, focused on adapting our development strategy to accommodate changes in our environment. We always believe that strong supply chain capabilities are essential, and that beyond this, the specific model and structure are not as crucial. Robust supply chain capabilities allow us to quickly and effectively adapt to evolving market conditions. Our growth strategy is unique. Unlike our competitors who focus on retail or e-commerce, Dingdong is primarily a fresh grocery supply chain business. As our supply chain expands, we'll be able to reach more people in different regions in a more adaptable manner. We'll also be able to cater to a wider range of consumers in flexible way.

We're not constrained by traditions or forms, but focus on the core elements, observe the world, work diligently, and therefore have greater opportunities and room for development. For many years, our industry competitors have experienced ups and downs, but we have been steadily moving forward. We're not overtly concerned about competition and rarely evaluate our peers. Our focus is on our initial purpose, mission, and self-development. Thank you.

Operator (participant)

The next question comes from Robin Leung with Daiwa. Please go ahead.

Robin Leung (Analyst)

Hi, thanks, management, for taking my question. During previous earnings call, management focused on supply chain capability building and ways for the company to generate profits. However, today, the focus seems to have shifted to future growth. Would you share what is the future revenue growth rate look like for Dingdong in the future? Thank you.

Thanks, management, for taking my question. During previous earnings call, management focused on supply chain capability building and ways for the company to generate profits. However, today, the focus seems to have shifted to future growth. Would you share what the future revenue growth rate looks like for Dingdong in the future? Thank you.

Speaker 7

In our previous discussion, we highlighted four key drivers for growth. These factors are linked to the organic expansion of our fresh grocery supply chain capabilities. We're confident that in the future, these four growth drivers will be able to expand to the same scale as our current business lines or even greater. Additionally, we have divided Dingdong's initial development into two stages. The first stage covers the seven-year period from our business establishment in 2017 to the present, representing the transition from zero to one.

During this time, we have achieved profitability and have reached an annual revenue scale of more than CNY 20 billion. Looking ahead, the second stage will encompass the next seven years, representing the transition from one to ten, and we aim to achieve an annual revenue scale of CNY 100 billion.

Robin Leung (Analyst)

... Thank you.

Speaker 7

Thank you.

Nicky Zheng (Head of Investor Relations)

The next question comes from Yang Bai with CICC. Please go ahead.

Yang Bai (Analyst)

谢谢，管理层。刚才管理层提到，今年预计会新开80个新的前置仓，那么请问，开仓的投入会对公司的现金流造成压力吗？ I will translate by myself. The management just mentioned that, they anticipating opening 80 new fronts, new frontline stations this year. Will that increase pressure on the tech company's cash flow? Thank you.

Changlin Liang (Founder and CEO)

好，谢谢你的问题。这个问题呢，我交给CFO王松来回答。

Nicky Zheng (Head of Investor Relations)

Thank you for your question. I'll let our CFO, Song Wang, answer it.

Song Wang (Director and CFO)

好的，谢谢梁总。好，我从三个方面来回答这个问题。第一，我先向大家简单介绍一下我们的开仓规划。公司今年整体开仓计划，预计全年会开80个左右的新仓，主要集中在江浙沪地区，尤其是通过在江苏和浙江开仓，加大江浙区域的覆盖和渗透，支持公司的长期增长。今年上半年，我们已经开出了将近一半的前置仓，刚刚梁总也已经介绍过。目前这些开仓单量爬坡迅速，单仓日均单量目前已经爬坡到了800单。

Speaker 7

Thank you, Mr. Liang. I will address this question from three perspectives. First, let me provide a brief overview of our plan for the new frontline fulfillment stations. This year, we have initiated the opening of approximately 80 new stations, with a focus on the Jiangsu, Zhejiang, and Shanghai regions. Our primary goal is to bolster our presence in these areas to support the company's long-term growth. As of the first half of this year, we have already achieved nearly half of our target, and the average daily orders of these newly opened stations are rapidly increasing to 800.

Song Wang (Director and CFO)

我们的资金储备非常充足，Q2是我们每年年终奖的发放季。在发放年终奖后，我们仍然实现了经营性现金流净流入2.5亿元，是近年来峰值。过去12个月的自由现金流为5.1亿元，也是近年来最高点。随着公司规模的增长和盈利能力提升，我们预计公司的经营性现金流和自由现金流都会持续净流入。公司扣掉短期借款余额后的在手现金，Q2末为23.2亿元，连续4个季度增加。而我们预估CapEx整体投入会在4000万左右，所以我们有充足的自由资金来完成开仓，并且完全不会对我们的日常运营资金造成挤压。

Speaker 7

Second, our capital reserves are very strong. Each year in Q2, we distribute our year-end bonuses of the previous year. Even after distributing the bonuses, we achieved a net inflow of CNY 0.25 billion in operating cash flow, the highest in recent years. Our free cash flow in the past twelve months was CNY 0.51 billion, also the highest in recent years. As our scale increases and profitability improves, we expect a consistent increase in operating cash flow and free cash flow. At the end of Q2, the company had CNY 2.32 billion in cash on hand after repaying short-term loans, marking growth for four consecutive quarters. We estimate that the total CapEx investment for these 80 new stations will be around CNY 40 million.

Therefore, we have enough self-owned funds to complete their opening without impacting our daily operating funds at all.

Song Wang (Director and CFO)

第三，受益于我们在江浙沪完整的设施，成熟的供应链能力和运营能力，我们新开出的前置仓，无论规模还是优异的爬坡速度，都比我们以前要快。我们测算，江浙沪地区的新开仓，基本达到单仓日均单量 500 单，就能实现运营层面的盈亏平衡，爬坡期在 3-6 个月左右。我们上半年的新开仓，目前平均已经爬坡到了 800 单，其中大部分都已经实现了运营层面的盈亏平衡。所以基于快速的爬坡，新开仓也不会对公司的运营现金造成任何压力。同时，这些新开仓将有效促进江浙沪区域的规模和渗透提升。

Speaker 7

Third, thanks to our well-established infrastructure, mature supply chain capabilities, and operational expertise in Jiangsu, Zhejiang, and Shanghai, our newly opened frontline fulfillment stations have significantly improved in terms of scale and unit economics ramp-up. We estimate that the new frontline fulfillment stations in Jiangsu, Zhejiang, and Shanghai can achieve operational break-even with only 500 orders daily per station. The ramp-up period is about 3-6 months. Our new frontline fulfillment stations processed an average of 800 orders daily in the first half of this year, and most of them are now breaking even at the operational level. As a result of this rapid progress, the new frontline fulfillment stations will not strain the company's operating cash. Additionally, these new stations will significantly contribute to our expansion and reach in the Jiangsu, Zhejiang, and Shanghai regions.

Song Wang (Director and CFO)

总体来说，我们有充足的现金储备来支持我们开仓，并且新仓的爬坡速度很快，所以完全不会对我们的现金流造成压力，并且新开仓将助力我们保持持续的增长。谢谢。

Speaker 7

In summary, we have sufficient capital reserves to support our frontline fulfillment stations opening. The new stations are ramping up very quickly, so there will be no pressure on the cash flow, and they will help us maintain sustained growth. Thank you. Once again, if you would like to ask a question, please press star then one to join the queue. As there are no further questions, I'd like to turn the call back over to our management for closing remarks.

Nicky Zheng (Head of Investor Relations)

Thank you. Thank you again for joining our call today. If you have further questions, please feel free to contact us or request 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 (participant)

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