[March 10th, 2021]
DaDa reported 4Q20 results and held earnings call yesterday.
Review of my projection
- DaDa Now
- There’s link error in my growth driver cell of TTM Orders Delivered (M)
- Monetization for Ordered Delivered was better than expectation. Trajectory can be revised upward.
- The traction of TTM Active Consumers looks fine. I was too optimistic about the adoption.
- The consumer spending (TTM GMV / Active Consumer) was much better then I expected. I expect the momentum to continue for a while because this is a trailing metric.
- Monetization rate slightly trends higher. I believe it’s on a healthy traction driven by retailer commission, brand marketing spend and delivery fee.
- Haibo operating system is quite interesting to me because it helps retailers to digitize and manage inventory, orders, procurement, financials, and CRM. Haibo might have the potential to be a standalone enterprise SaaS product (look at those attractive comps!) but I have no idea about management’s plan. No analyst asked more about Haibo in last three earnings calls. Maybe it’s just a hook or cost item for merchant acquisition/retention?
- Corporate level
- “Gross margin” (I define the gross profit = net revenue – operations and support expense) was worse than I expected because it seems the business’ financial didn’t show economies of scale in 4Q20. While gross margin declined in 4Q, gross profit dollar still grew 34% QoQ thanks to larger scale .
- Other expense ratios were in line or better then expectation.
Upgrade of last-mile delivery businesses & impact on revenue recognition going forward
Last-mile rider cost will be directly paid through third-party companies instead of through us, like the current practice. And we will continue to collect our service fee from JD Logistics and will only recognize this service fee as our revenue going forward. We will no longer recognize rider-related revenues and rider-related costs in our income statement for the last-mile delivery businesses, while our related-party accounts receivables balance will also decrease significantly going forward. – 4Q20 Earnings Call
The direct impact is shrinkage of revenue size of last-mile delivery businesses as it goes from gross-basis to net-basis. There’s no impact on gross profit but the overall gross margin will get higher. In additional, there will be cash flow from release of working capital in the next few quarters.
I’m not sure how much revenue will be impacted. While fundamental does not change due to accounting treatment, market might need “few minutes” to digest especially the stock has low trading liquidity. Participants might misunderstand the guidance of 2Q21 when they first see the earnings release in after market. (an opportunity?)
For 1Q21, Dada expects total revenue to be between RMB1,610 million and RMB1,660 million. I was too optimistic about the behavior change.