PDD Holdings Inc.

Ladies and gentlemen, thank you for standing by, and welcome to PennDOTO's fourth quarter and full year 2021 earnings conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session, at which time, if you wish to ask a question, you will need to press star 1 on your telephone. I must advise you that this conference is being recorded today. I would now like to hand the conference over to your host for today's conference, Mr. Chen Please go ahead, sir.

Thank you, operator. Hello, everyone, and thank you for joining us today. My name is Chen, and I will help host the earnings call. Pinduoduo's earnings release was distributed earlier and is available on our website at investor.pinduoduo.com, as well as through Global Newswire Services. Before we begin, I would like to refer you to our safe harbor statement in earnings press release, which applies to this call. as we will make certain forward-looking statements. Also, this call contains discussion of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of the non-GAAP measures to GAAP measures. Joining us today on the call are Chen Lei, our Chairman and Chief Executive Officer, Liu Jun, our VP of Finance. Lei will make some general remarks on our performance for the past quarter and fiscal year 2021, and our strategic focus, Jun will then take us through our key operating and financial results for the fourth quarter and fiscal year ended December 31, 2021. During the Q&A session, Lei will answer questions in Chinese and I will help translate. Please kindly note that all translations provided are for reference purpose only. In case of any discrepancy between the original remarks and the translated version, statements in the original language should prevail. Now, it is my pleasure to introduce our Chairman and Chief Executive Officer, Chen Lei. Lei, please go ahead.

Thank you, Chen, and thank you, everyone. Thank you for joining us on our earning call for the fourth quarter and the fiscal year of 2021. Let me first recap our results in Q4 and full year 2021. Our total revenue in the fourth quarter excluding revenue from merchandise sales of RMB 27.1 billion. This represents a year-on-year increase of 28%. Our active buyers reached 868.7 million for the 12 months ending on December 31st, with 733.4 million average quarterly MAUs. Our GMV in 2021 was RMB 2,441 billion, representing 46% year-on-year growth. Total revenue for 2021, including revenue from merchandise sales, was RMB 86.7 billion, representing 61% growth year-on-year. 2021 was a year of transition for Pinto Door. Over the course of the year, during which I took over the role of chairman, we shifted our priority of sales and marketing toward research and development. I'm glad to see that this shift is well on track. It will lay a solid foundation for us over the long run. We are grateful for our users' continued trust and support. To keep up with the evolving and increasingly multi-dimensional preferences, we constantly ask ourselves how we can serve them better. As a team with engineering background, our focus has always been to use technology to benefit all. We were fortunate to be early in identifying opportunities to contribute to and create value in agriculture. Agriculture is a sector that touches everyone's daily life, yet has low levels of digitalization. Since Pinduoduo's establishment in 2015, we have been facilitating agricultural modernization and digital inclusion. And efficient, resilient, sustainable and vibrant agricultural sector benefits all the stakeholders in the value chain, and we remain focused on our goal. In 2021, we deepen our agricultural digital inclusion efforts in various ways, and they include, one, helping farmers to expand their assets to the market, two, advancing the use of smart agriculture, And three, encouraging and enabling more young and tech savvy talent into the agricultural sector. And now, let me elaborate. In the downstream, we continue to bring farmers into the digital economy by expanding their market assets. We are working hard to build a platform that effectively matches consumer demand with agricultural productions across the country. This enables farmers to ship their fresh and perishable agri-food products directly to consumers, bypassing layers of distribution to deliver in a shorter timeframe. The result is higher income for farmers, lower price for consumers, and the fresher produce consumers who receive Our platform has opened up a market of nearly 870 million users to farmers and agri-producers in China directly. We have also provided them with various tools to promote their unique agricultural produce. One commitment that we have is our zero commission policy on agricultural products. We waive sales commissions and proactively gain more exposure for agricultural products. We plan to continue this zero-commission policy on agricultural products. We aim to create a virtual cycle like what we have done for SMEs in the past, in which farmers earn more while consumers get fresher and more affordable produce. To amplify its effectiveness, we launched numerous promotional events. In 2021, we worked with various regions to create a series of agri-focused shopping festivals that introduced consumers across China to different regional specialties. We also collaborated with key partners, such as CCTV, to launch live streaming events to promote China's agricultural heritage. This event not only enhanced user awareness and appreciation of local specialties, it enabled farmers to directly talk to consumers, understand consumers' preference better, which helped them in brand building and production upgrades for quality agricultural produce. For instance, we initiated an orange festival to promote high-quality orange specialties from seven major orange-produced areas across the country, bringing regional orange varieties to consumers nationwide. Benefiting from rising order volumes on our platform, local orange farmers and agri-merchants in Hunan province witnessed a large increase in sales. This increase in sales not only improved farmers' living standards, but also gave them confidence to invest into the future. Many of them reinvested their profits into developing better products, including in shorting machines and packaging design. Moving upstream. We are advancing adoption of agricultural technology to help growers improve their productivity. A few practical and affordable technologies came out of the inaugural Smart Agriculture Competition last year, including automated crop monitoring, program dynamic adjustment for changing climate conditions, and irrigation. We have several teams commercialize these technology solutions. Today, these solutions have been applied in major strawberry growing regions across China, such as Liaoning, Anhui, and Yunnan provinces. They have helped traditional growers more than double their management capacity. Such progress is inspiring and valuable to the entire industry. We regularly organize knowledge sharing sessions to encourage adoption of technology in this sector. Earlier this month, we jointly hosted a sharing session with FAO China on harnessing smart agriculture to boost food production and security. Representatives from FAO, China Agricultural University, Chinese Academy of Agricultural Sciences, Pinduoduo, and the finalists of the Smart Agriculture Competition presented their insights at a webinar. We are honored to work closely with world-class partners in the agri-food sector, such as China Agricultural University, Zhejiang University, UNFAO, Singapore ASTAR, and Wageningen University. And we look forward to cooperating with more like-minded organizations and individuals in the future. Another important problem of Tinto Do's agricultural strategy focuses on encouraging and enabling more young and tech savvy talent into the agricultural sector. we are glad to see more and more young agricultural entrepreneurs choosing to start their businesses with Pinduoduo. As of end October 2021, over 126,000 young farming professionals born after 1995 have joined the Pinduoduo platform. Up from 85,700 in 2020, and 29,700 in 2019. Most of these young entrepreneurs are well-educated. They are digital natives who grew up with mobile technology. Therefore, they are used to buying things online and using innovations like live streaming. At the same time, many of them are motivated by the desire to contribute to their rural communities To upskill them, we have offered dedicated training programs on necessary know-how to operate their e-commerce businesses. We will devote more resources to support them as we believe they will play a key role in facilitating agricultural modernization and rural vitalization. Looking back on our efforts in agriculture, we are happy with the positive impact that we have generated. But we have only scratched the surface in the field of technology advancement and digital inclusion in agriculture. Therefore, we are stepping up our investment in this sector as a long-term commitment. The focus of our long-term mission may not always translate into near-term results that we will be patient as we do our part to contribute to agricultural modernization. As mentioned last year, I'm personally overseeing our 10 billion agriculture initiative, which aims to facilitate advancement of agri-tech, promote digital inclusion, and provide agri-tech talent with greater motivation and sense of achievement. Profits from this quarter will continue to be allocated to this initiative. Lastly, as a platform that serves over 868 million consumers, we are also shouldering more social responsibility. In July, we rapidly respond to help with flood relief efforts in Henan, making donations and launching a portal to support emergency relief distribution. In October, we did an exam to carry out emergency disaster relief and post-disaster construction work in Shaanxi. In December, we contributed towards relief efforts in Xi'an and worked with the local government to maintain necessary provisions as we fought a COVID-19 outbreak. To support the rural communities, we launched Duo Duo Reading Month. Today, we have donated carefully selected storybooks to rural communities around the country and organized reading programs. We hope that these efforts will broaden the horizons of the youth and contribute to a better future for their communities. As we step into another year, we remain laser-focused on our goals and will continue to do our best to serve all our stakeholders. And I would like to thank you all in advance for your continued support. And now, let me pass the time to Jim. Jim has been with us since 2017 and has been recently promoted to VP of Finance It's part of our plan to grow more young generation leaders. And June, please.

Thank you, Lei. Hello, everyone. Nice meeting you here. Let me first walk you through our operating results for the fourth quarter and the fiscal year ending December 31, 2021. Our annual active buyers for the 12 funds ending December 31, 2021, was 800. and 68.7 million. This is an increase of 80.3 million from end 2020, or 1.4 million from the 12 months ending September 30, 2021. In Q4, we observed a quarter-over-quarter decline of the MAU. Average MAU in Q4 was 733.4 million, This is a 13.5 million increase from the same quarter in 2020, or an 8.1 million decline from Q3 2021. At our current scale, we are approaching the limits in terms of user number and do not see it as a meaningful driver of future growth. To us, it is more important to focus on meeting our existing users' involvement needs and to serve them in the best way that we can. Our GMV for the last 12 months in December 31st, 2021 was RMB 2,441 billion, an increase of 46% compared to 2020. Average annual spending per active buyer for the last 12 months ending December 31st, 2021 which is the result of GMV divided by the number of active buyers over the same period increased 33% year-over-year to RMB 2,810. We're encouraged by their growing trust and are committed to serve them better. Last year, our platform generated a total of 61 billion orders an increase of 59% from a year ago. There has been a significant increase in agricultural orders on our platform, in line with our step-up focus and resources on the sector. As average order value for agricultural products is lower, this resulted in a decrease in AOV over the same period. Our AOMV came down 8% to RMB 40 in 2021 as compared to RMB 44 in 2020, while average number of orders per active buyer was 70 in 2021, an increase of 45% from 2020. We are glad to see that our investment in agriculture is addressing our users' real needs. We plan to deepen our efforts in agriculture. Next, I will go through our financial performance in the quarter ended December 31st, 2021. In terms of P&L, our total revenue in the quarter was RMB 27.2 billion, up 3% from RMB 26.5 billion in the same quarter of 2020. This was mainly driven by an increase in revenues from online marketing services and revenue from transaction services, offset by a decrease in revenue from 1P trials. Excluding revenue from our 1P trials, our total revenue was RMB 27.1 billion in Q4 2021, up 28% from RMB 21.2 billion in the same quarter of 2020. Revenue from online marketing services and others were RMB 22.4 billion this quarter, up 90% compared to the same period of 2020. This was preliminary due to increased merchant activities, adjustments of our platform's capability to help them reach their target customers effectively and efficiently. Our transaction services revenue this quarter was RMB 4.7 billion, up 108% compared with the same period of 2020. The increase in our transaction services revenues was due to, first, the increase in total transaction processing fees as a result of higher Gen V. Second, more diversified services that we provide to merchants, such as fulfillment services, Moving on to cost and expenses. Our total cost of revenue decreased from RMB 11.5 billion in Q4 2020 to RMB 6.5 billion this quarter. The decrease came mainly from the reduction of 1P12 and decreased several quotes due to a 1F rebate, offset by increased fulfillment fees. Total operating expenses this quarter were RMB 13.8 billion, compared with RMB 17.1 billion in the same quarter of 2020. On a known gap basis, our total operating expenses as a percentage of revenue, excluding 1P, has been declined from 94% to 76% to 45% for Q4 of 2019, 2020 and 2021 respectively. As we observed lower user and top line growth, we proactively controlled our expenses. This resulted in lower operating expenses in the quarter. As we face more competition from existing and new players, we expect relevant expense items to increase in the future. looking into specific expense items. Our non-GAAP sales and marketing expenses this quarter are in the 10.8 billion, down 25% the same quarter of 2020. As we continue to shift away from our previous focus on sales and marketing, on top of this, as I mentioned, we further control our expenses in the face of slower user and revenue growth. As a result, on a non-GAAP basis, our sales and marketing expenses as a percentage of our revenues in this quarter was 40%, compared with 84% and 54% for the same quarter in 2019 and in 2020. Our non-GAAP general and administrative expenses were RMB 195.8 million, compared with RMB 153.1 million in the same quarter of 2020. Our non-GAAP research and development expenses were RMB 1.3 billion, a decline of 16% from RMB 1.6 billion in the same quarter of 2020. the decrease in non-GAAP R&D expenses was due to a one-off rebate from one of our service providers. If we take out impact of this rebate, R&D expenses will have risen. We do not expect a rebate to recur. As a result, operating profit per quarter was R&D 6.9 billion on a GAAP basis. Compelled with operating loss of RMB 2 billion in the same quarter of 2020. Non-GAAP operating profit was RMB 8.4 billion. Compelled with operating loss of RMB 1.1 billion in the same quarter of 2020. Net income attributable to ordinary shareholders was RMB 6.6 billion. Compelled with net loss of RMB 1.4 billion in the same quarter of 2020. Basic earnings per EDS was RMB 5.26 and the dilute earnings per EDS was RMB 4.66. Compelled with basic and dilute net loss per EDS of RMB 1.13 in the same quarter of 2020. Non-GAAP net income attributable to ordinary shareholders was RMB 8.4 billion, compared with the net loss of RMB 184.5 million in the same quarter last year. Non-GAAP diluted earnings per ADS was RMB 5.88, compared with Non-GAAP diluted net loss per ADS of RMB 0.15 in the same quarter of 2020. To conclude, profitability in the past quarter was mainly attributed to, first, controlled spending in the face of slow growth, and second, reduction of costs and expenses due to YNAB rebates. We expect profits to fluctuate as we continue to invest in the agriculture space, including agricultural technology. As I mentioned in previous quarters, we are also facing more competition. Therefore, we do not expect the profitability in Q4 to serve as a benchmark for the following quarters. Similar to previous quarters, profits from this quarter will be allocated to the 10 billion agriculture initiative. That completes the profit and the loss statements for the fourth quarter 2021. Our net cash flow provided by operating activities was RMB 16.4 billion, compared with RMB 14.9 billion in the same quarter of 2020. As of December 31st, 2021, the company had RMB 92.9 billion in cash, cash equivalents on short-term investments. With that, I conclude my prepared remarks.

Thank you, Jing. Next, we will move on to the Q&A session. For today's Q&A session, Lei and Jing will take questions from analysts on the line. We could take a maximum two questions per analyst. Lei will answer questions in Chinese, and I will help translate Lei's remark for easier reference. Operator will now take questions on the line.

As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question is from Thomas Chong with Jefferies. Your line is open.

Thanks, management, for taking my questions. My first question is more about the macro uncertainties that we are facing. How should we think about the impact to the consumers as well as to Pinduoduo. And my second question is about our 10 billion RMB agriculture initiatives. Can management comment about the progress so far, the P&L impact, this year's KPI, as well as our thoughts if there will be a step up in investment going forward? Thank you.

Thank you, Thomas, for your question. Let me answer it. First of all, your question is about the red light economy. In fact, what we actually see more is what areas can be improved through technology within our capacity range. Thank you, Thomas, for your question.

And let me take your questions. You asked about market economy. Well, for us, we always look internally and see what areas we can improve through technology. And for us, a big area is agriculture. So there are many aspects and areas in agriculture that we can improve. In production, we can increase yield, reduce the environmental impact, and also help farmers get higher and stable income. In terms of consumption, through our efforts, we can provide consumers with fresher and more affordable agricultural produce and reduce waste at the same time. In addition, another area of interest for us is in distribution. We can use technology to improve the distribution efficiency of agricultural produce and also strengthen the rural logistics system. In the agriculture sector alone, which is so fundamental and crucial, we see so many opportunities. This reflects that we remain confident about the potential of industry and future development. 但是这个农业的投入是需要一个时间和过程的。 But investments in agriculture take time and the process is gradual. So we have to be very patient in the process. 那這個百億牛的專項呢,是我們在去年Q2業績會的時候公佈的。 And with that, this naturally brings us to your next question, our 10 billion agri initiative. We announced the 10 billion agri initiative in Q2 last year. 他們呢,這個...

We also mentioned that the hundred-billion farmland is not for commercial value or profit purposes. In fact, it is mainly aimed at the agricultural and rural needs. In terms of investment, we hope that the hundred-billion farmland can be used to promote the improvement of agricultural technology, the spread of technology,

And for this initiative, profitability or commercial value is not the aim. We hope that this initiative can address the critical needs in the agriculture sector and rural areas. As for where we would put our investment in, I hope this initiative can facilitate the advancement of agri-tech, promote digital inclusion, and also give more motivation and a sense of achievement to agri-talents and workers. 其实我们希望把应用项目能够最大化的推动农业科技的

We really hope the 10 billion agri-initiative can maximize its potential and impact

in the advancement of agri-tech and digital inclusion. Therefore, we are diligently evaluating different proposals and projects, and also take into account of our, and make those evaluations based upon our past experiences in agriculture, as well as our technical background. 这里其实我可以举几个例子给大家分享一下我们现在 Here I can also share some examples of our focus areas.

Some examples, some of which I have mentioned, include that how to improve distribution efficiency through technology,

how to reduce the transportation time, as well as reduce the environmental impact with logistic technology, and also how to use technology in production to improve the efficiency as well as quality. 如何用技术赋能农业行业链条上的多个环节?

This is a long-term project that requires patience. We are currently in the early stages of this process. We also hope that everyone can be more patient. With our investment, we will also share with you more about the progress of Baiyi Agricultural Park. I hope this information can answer your question.

To use technology to enable different links along the agriculture value chain is really a long-term project that requires long-term dedication and patience. We are still in the early days of this and hope everybody can have more patience. As we invest, we also look forward to share with you our progress on the 10 billion agri-initiative. and hope what I have said have addressed your questions.

Thank you.

Operator, we may take questions from the next audience on the line.

Our next question comes from Yang Bei with CICC. Your line is open.

Thank you, Ms. Guan. My first question is about industry competition. Thank you, management, for taking my question. My first question is regarding to the future competitive landscape. I noticed that Pinduoduo always focuses more on the value to consumers instead of pressure from competitors. So from your perspective, what is needed or what kind of improvement should be emphasized for the company to make the cut. And my second question is regarding to your branding strategy. For the past six years, Pinduoduo was very distinguished from other competitors, especially for your value for money merchandise. However, when it comes to branding, it seems that the past advantage is kind of becoming the bottleneck. So I'd like to know your future strategy, how to efficiently help a brand business in Pinduoduo's platform. Thank you.

Thank you, Bai Yao. Thank you for your question. Let me answer it here. First of all, about competition, I think that Binduoduo has been in a very intense competition industry since its first day of creation. China's e-commerce is a very big industry, and it has always been a highly competitive industry.

Thank you, Baiyang, for your questions. I will share my views on those fronts. As for competition, since the day Pinduoduo was established, we are in this highly competitive space. And China e-commerce space is a huge industry, and it has always been highly competitive.

Now we can see that more major platforms have entered the e-commerce industry. We now see more large platforms entering e-commerce and they provide different options to consumers.

As technology continues to upgrade, consumers' needs will also continue to evolve, and we expect more engagement formats will emerge and more platform companies will join e-commerce. As you have mentioned in the question, internally we would focus on users and whether we are serving their needs well. So we target to offer users a unique, more savings, more fun shopping experience. This is our company's benefit. Indeed, we do not focus too much on competition. 但是在过去一段时间里面,我认为呢,

But with that said,

I think over the past period of time, in terms of understanding and catching up with directly changing user needs and addressing their needs effectively and efficiently, there is still plenty of room for us to improve. Admittedly, many of our competitors have done a better job in some of these aspects, and we need to learn from them.

We need to find our own reasons, improve our services, and increase the satisfaction of users. This is what we want to do. I also mentioned a few weeks ago that it is impossible for Pinduoduo to be perfect.

especially under intensified competition, we still need to look into ourselves on how to do better, improve our services, and raise our user satisfaction. I also mentioned a few quarters ago that Pingo Duo cannot always be perfect or be the best. And we will inevitably slow down as we go through transitions in leadership and when we make adjustments. But these are all part of a company's development.

In addition, we have chosen to invest in agriculture, and this is different from a pure Internet technology.

In this sector, we need to be more patient with our investment due to its nature.

We will continue to invest in agriculture.

We see that compared with categories that have been digitized earlier or categories that now have higher online penetration rate, the online penetration rate for agriculture is still very low. And on the existing fulfillment experience, many consumer needs have not been met. This is why we are investing in agriculture without hesitation as well as in core agricultural technology. with a goal to promote agri-tech and digital inclusion.

For our companies,

me to long-term development outlook, my team and I are confident. At the same time, in order for our confidence to translate into actual results, we need dedication and hard work from everybody in our team.

As for your next question on brand, our platform now has nearly 870 million users.

and their needs is continuing to diversify. We hope to satisfy our users' needs and also give them a better shopping experience on our platform. And in this process, brand is definitely one part that we need to work on.

However, store opening does not happen overnight. Instead, it takes time.

Essentially, I believe that the ultimate goal for brands and for us are the same, and that is to serve consumers well. So we will continue to be very patient and down-to-earth to do our part within our capability and what we should do. In this process of cooperation, we see a trend that brands who seize opportunities first would generate higher returns. And this would, in turn, attract more brands to learn more about us and seek collaboration.

As for whether more brands will lead to higher ARP or AOV order prices, this is not what we are looking at. We still have to look at the satisfaction of our users. We believe that this kind of universal, human-centered, more open concept will have a continuous positive impact on brands, users, and our platform.

As for whether more brands would help increase the ARP or AOV, that is not our core focus. Instead, we focus on user satisfaction. We will stick to our principles of benefit all, people first, and more open. And I believe this would have a positive impact on brand users as well as our platform. Operator, we may now take questions from the next panelist.

Our next question comes from Joyce Zhu with Bank of America. Your line is open.

Good evening, Lei, Jing, and Chen. Congrats on the solid quarter and thanks for taking my questions. My first question is, first, we have seen continued leverage and decline in sales marketing expenses this quarter. Is there any specific reason this quarter which leads to the company to further control the sales marketing spending or it's simply an improvement on your sales marketing ROI? And my second question is PDD has delivered another quarter of strong profit. Could you share with us how management team are looking at the balance between profitability and growth? Are we seeing a pivot in strategic priority? Also, how should we expect the future probability trend, and how much was the one-time rebate that contributed to this quarter's higher probability? This quarter's proportion has been declining. I would like to ask if the decline we see in this quarter is because we have a special situation or we see a special trend that allows us to control the market investment of this quarter, or do we see an improvement in the ROI on this market investment? The second question is about this quarter. We see that our profits have shown a very strong trend. This year is already the third quarter. I would like to ask how the management is looking at the balance between growth and profit rate in the future. From our strategic point of view, do we have a adjustment now? That is, from the previous growth priority to the current profit, we will now look at it more seriously. 然後我們投資人應該怎麼樣去考慮未來的這個利潤率的趨勢。 還有剛剛我們有提到這個季度有一個一次性的反用, 讓我們這個季度的利潤有所提升。 想問一下大概是多大的貢獻。 非常感謝。 Thank you for your question, Joyce. Well, for sales and marketing expenses,

you may see that we are actually changing our investment direction based on our past quotas results. And during Q1 and to Q3 last year, our S and M expenses showed consecutive quota on quota decreases in terms of absolute dollar amount. And in Q4, Our selling and marketing expenses decreased by 23% YOY, which represented 42% of revenues. Well, that is the lowest level in our history. We think it is a drastic shift. As Leigh just mentioned, we need to focus and invest more in technological development such as every tech. And meanwhile, with slowing growth rate, we are more cautious, so we have proactively controlled expenses. This is also where seeing higher probability margin in the past quarter. And recent fluctuation in user activities and slowing revenue growth is a reflection that we are not doing well enough in terms of satisfying users' needs. So our team is working hard to explore how to make user needs better and quicker. And we think this will require continued investment and definitely expense will very likely increase in the future. For a second question, which is about profitability, well, I would like to point out that we're not changing our strategy to focus on profitability. This quarter's higher profit was due to a 1F rebate, as mentioned before, and controlled spending in the face of slower growth. To further elaborate, first, we are as we encounter slow growth and are concurrently making adjustments, we are taking a cautious approach and proactively controlling our expenses. On top of this, a portion of this quarter's profit was due to a cost and expense reduction related to a one-off rebate from our source provider. And this one-off rebate has resulted in a lower cost and expenses and higher profitability in the quarter. But if we strip out the wind-up rebate, costs and expenses will be higher than the reporting number, and profitability in the quarter will also be lower. And second, as competition intensifies and user demand becomes more diversified, we do expect continuing investment in agriculture and cool technology. which will result in high expense items, hence impacting profitability. And in your question, you also emphasize the rebates. Well, I think the one of the rebates, yes, it's one of nature. It's based on a case by case negotiation with our service providers. We do not expect it will recur in the future. And for the amount, due to confidentiality obligation with the service provider, we could not comment on the specific amount. But what we can say is that it contributed a meaningful portion of this quarter's profit.

We have time to take questions from one more analyst.

Our last question comes from Kim Fong with Credit Suisse. Your line is open.

Hi, thank you for accepting my question. From the income section, we see that the online marketing service revenue is 19% compared to the previous quarter. In fact, I want to know what is the reason behind it. Is it because of the change in the rate of return of GMV? Thank you, management, for taking my question. I have a question on the online market service revenue, which in Q4 records a slower growth rate of only 19% compared with the previous quarters. What's the reason behind it? Is this mainly due to a slower GMV growth or due to the change in take rate policies? And have we carried out more version support measures in the recent quarter that also depressed our take rate? And as an investor, how should we think about the growth outlook for first quarter and then the next two quarter? Thank you. 我先说一下就是有关这个就是

Uh,

Kenneth, let me take your question and offer some insight on our revenue growth and then Jing will supplement with some insights on take rates. First of all, for us to reach our current scale, investors should not expect continuous and ultra-high growth. 未来的增长我觉得还是需要有这个

strategic and structural evolution. Therefore, since last year, we have been adjusting our development strategy, paying more attention to agricultural and core technologies, and pursuing a long-term, high-quality development. I think this will inevitably have an impact on Zhenzhu.

As for our future growth, I believe we need a strategic upgrade, and we also went through adjustments last year to focus more on agriculture and core technology in order to pursue a long-term, high-quality development. 比如說我們會關注如何利用核心技術

For example, we are looking to

how to apply our core technology to improve the efficiency and reduce waste in agriculture so that consumers can get affordable and high-quality produce, and farmers at the same time can increase yield, enjoy improvement in income, and benefit from digital inclusion. We believe our focus in agriculture and investment in core technology creates a long-term value.

In the past year, many different platforms and e-commerce models have emerged in the market. As I just mentioned, we need to learn more and solve more problems. On the other hand, it also reminds us that the internal structure of the organization needs to quickly accommodate more young management and core teams.

We are fortunate to have nearly 870 million customers who choose to believe in us. To serve our users well, address their constantly changing needs, and improve their satisfaction level is our long-term focus. In the past year, we have seen many different platforms entering e-commerce, as well as new e-commerce formats. As I have said, we need to learn from them and also improve our services. It also serves as a good reminder for us to iterate and promote more young talent to our management team and to keep up with the market development. 但这些业务的发展和调整和带来效果是需要时间的。

For these adjustments to

show results, it takes time. And in the process, our growth rate may be affected. As we develop, you may see that our business cycle and financial reporting cycle do not necessarily correspond smoothly to each other. So we do not recommend investors to use one quarter of a result to predict the next.

Jun may help supplement with some insights on tick rate.

Okay, thank you, Kenneth. As you mentioned about SMEs, so before I answer your question about the tick rate, I would like to talk more about SME. As we started Pinduoduo, with our corporate principles of benefit all, people first, and more open. In addition, agriculture is our core, and many agriculture merchants are SME merchants themselves. So we have always been looking for ways to support SME merchants and the products. And for tick rate, well, it's not a metric that we focus on. In the past few quarters, as you already know, we continue to implement the zero pollution policy on agricultural products. We actively extend support to agriculture merchants and S&E merchants and offer more exposure and traffic to agricultural products. All of this would affect our take rates. that were what we have done and are still doing. And in the long run, our revenue and monetization depends on how much value we create. As we, as our user experience and user man share improves, our platform could provide more value to merchants and merchants will find investments on our platform more attractive as a result. But I think if the percentage of our agriculture products increases, the monetization rate is unlikely to grow at the same pace as our scale. But to us, serving our users well is our number one priority. As mentioned before, agriculture is Pinduoduo's core and strategic direction, and we will stick to it.

Thank you. Very clear.

Thank you. I would now like to turn the call back over to Chen Pin for closing remarks.

All right. Thank you, everybody, for joining us on the conference call today. If you have any further questions, please feel free to reach out to our team. Thank you. Have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.