Dingdong records first annual non-GAAP profit

The Shanghai-based online grocer’s revenue fell nearly 20% in the fourth quarter as it focused on its most profitable markets

By Teri Yu 

Shanghai-based online grocer Dingdong (Cayman) Limited (DDL.US) last Thursday reported it achieved its first-ever annual non-GAAP profit of 45.4 million yuan ($6.3 million) in 2023 by focusing on its most profitable markets, in sharp contrast with former rival Missfresh (MFLTY.US), which collapsed in mid-2022 due to strategic missteps.

But the profit milestone came with a major asterisk, as the company also recorded accelerating shrinkage in its revenue as it continued to exit unprofitable smaller markets that were once a major part of its growth story. 

“We achieved full year non-GAAP profitability for the first time in 2023, a critical milestone for both Dingdong and the industry,” said founder and CEO Liang Changlin on the company’s earnings call. “This reflects how we have successfully navigated a highly challenging macroeconomic and competitive environment in which many raised concern about the company’s sustainability,” he added. 

Dingdong’s fourth-quarter revenue totalled nearly 5 billion yuan, down 19.5% from a year earlier when pandemic restrictions drove high order volumes as many consumers were confined to their homes. The quarter’s revenue was also impacted negatively as it withdrew services from several less profitable cities starting in the second quarter in 2023. 

Dingdong’s full year revenue was 19.97 billion yuan, also down about 17% from 24.2 billion yuan in 2022. Average order value increased from 58.6 yuan to 72.1 yuan and average monthly order frequency increased to four orders per month in 2023. 

Investors seemed most focused on the continuing revenue declines rather than the profit milestone, with Dingdong’s shares dropping 10% in Thursday trade after the announcement. At their latest close of $1.16, Dongdong shares have lost more than 90% of their value since their IPO more than two years ago.

Non-GAAP annual net margin was 0.2%, moving into positive territory after the company reported net negative margins of 2.4% in 2022 and 30.4% in 2021. 

On a quarterly basis, the company also achieved a non-GAAP net profit of 16.3 million yuan in last year’s fourth quarter, representing a fifth consecutive quarter of profitability on a non-GAAP basis, which excludes certain costs such as employee-based stock compensation. It continued to lose money on a net basis, recording a 4.4 million yuan loss during the quarter, though that marked a big improvement from a loss of 49.9 million yuan a year earlier. 

“We expect to be profitable on a non-GAAP basis during the first quarter of 2024,” said Liang. “Maintaining profitability in the current environment highlights the viability of our business model and provides us with additional resources to fuel our future development.”

The company expressed confidence in regaining growth momentum this year and maintaining its non-GAAP profitability. It said it would continue to focus on positioning itself as a provider of high-quality services with the highest cost efficiencies, under its newer strategy of targeting higher-end markets. 

In late January Dingdong also announced a $20 million share repurchase plan to support its stock. 

Dingdong was founded in Shanghai in 2017 and listed in New York in 2021. The company operates extensive distribution and delivery networks in most major cities, providing fresh produce, prepared foods and other food products to consumers. It also runs a higher-margin private-label business across a variety of food categories produced at its own facilities. 

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