PDD Holdings Inc.

Q1 2022 Earnings Conference Call


spk06: Ladies and gentlemen, thank you for standing by and welcome to Penn Dodo first quarter 2022 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 one 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 today, Mr. Chen Pin. Sir, please go ahead.
spk12: 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 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 the earnings press release, which applies to this call. as we will make certain forward-looking statements.
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spk12: Also, this call includes discussions 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 our strategic focus going forward. Jun will then take us through our financial results for the first quarter ended March 31, 2022. 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.
spk11: Thank you, Chen. Hello, everyone. Thank you for joining our earnest call for the first quarter of 2022. Let me start by giving a brief overview of our first quarter results. Our total revenue for this quarter, excluding revenue from merchandise sales, was RMB 23.7 billion. This represents a year-on-year increase of 39%. Our annual active buyers reached 881.9 million for 12 months ending on March 31st, with 751.3 million average quarterly MAUs. Given our current scale, our user growth will inevitably slow down. That's why we have shifted our priority from winning new users to how to better serve our existing user base. We also strive to adapt to the constantly evolving patterns of consumer behavior. There is still plenty of room for us to improve, and we will continue to work hard to refine and strengthen our core capabilities. In all of this, agriculture continues to be the front and center of our strategy. we remain focused on making long-term investments in agriculture and promoting digital inclusion. A key plank of our strategy has been to develop a tech-driven agriculture infrastructure that's responsive, sustainable, and that can meet the needs of different stakeholders. We constantly think about how we can use our platform to create more value for our consumers and benefit society. And here, I would like to take this opportunity to express my thanks to our consumers, producers, merchants, and other partners for their continued support. We are grateful to them for standing with us as Pinduoduo matures as a company and takes on more social responsibility. We are committed to serving all of them better. We are also grateful that Pinduoduo is in a position to serve millions of farmers and connect them to a digital economy. We help farmers and more by promoting agricultural produce to more consumers across the country. This creates huge value for our consumers who can now enjoy high-quality fresh produce at low cost through our agriculture network. During the Chinese New Year period in the first quarter, we partnered with our merchants and logistics service providers to offer uninterrupted delivery services. Demand for high-quality agricultural produce surged during the period. we attracted orders from consumers who could not fulfill their needs previously due to lengthy delivery time, high cost, and wastage. Order volumes for different types of agricultural produce increased significantly during the Chinese New Year period. They include cherries, oranges, seafood, and so on. their relatively short shelf lives meant that supply has previously been confined to a local region. Aided by our agricultural infrastructure, it now takes just a few hours for the fresh produce to arrive at warehouses. This has greatly shortened the time consumers have to wait to receive their fresh produce. As work continues on agricultural infrastructure, We're also pushing ahead on a technology front. And now, I'm happy to share with you some of the tangible results from a second smart agriculture competition. A long-distance tomato growing challenge concluded in April. Over the last six months, we worked closely with China Agricultural University, Zhejiang University, the UNFAO, and Wageningen University to encourage young scientists and technologists to develop practical and cost-effective agri-tech solutions that farmers can use to improve their livelihood. The participating teams have done very well in applying technology to solve real-world problems. First, they developed precision greenhouse management solutions that substantially improve crop production. The teams were able to deliver double the yields of traditional growers by addressing variables such as community and likeness. The nutritional value of the tomatoes also registers in the top range of the industry. These solutions are commercially viable and can be applied by growers without special training. Second, the R&D processes of participating teams gave birth to other practical technologies. For instance, one group of researchers developed a disease prediction model that gave farmers one week window to intervene and prevent loss. Another group came up with low cost and environmentally friendly equipment. that enhance plant growth. The teams also make use of visual recognition technology to help growers make better decisions on irrigation and harvesting. Their achievements demonstrate the benefits of technology when brought into agriculture. We are delighted that the competition is serving as a bridge between academia and industry and a channel for the implementation of effective technology. We will be supporting the teams as they roll out their solutions across China.
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spk11: We are also very encouraged that the petition has helped inspire young people from different disciplines and backgrounds to improve their work in agriculture. The majority of the participants in the Smart Agriculture Competition were born in the 1990s. Many have said they benefited greatly from interacting with world-class talent from different fields. They gained new perspectives and new knowledge to help advance their own work. Indeed, some participants in the competition come from rural backgrounds. They bring with them a firm belief that agri-tech will help secure our food supply and relieve the workload of farmers. We will share their deeply healthy information to make agriculture better through technology. The future of agriculture will depend on attracting more of this type of youth and channeling their passion and ideas into this sector. And on our part, Pinduoduo stands ready to help facilitate their dream. We believe that the digitalization of agriculture will unlock opportunities and efficiencies that will benefit society at large and the environment. We are committed to investing and working with like-minded partners on this important mission. We will play long game and aim for long-term success. This will mean being patient and evaluating initiatives according to the impact of agri-food ecosystem and future generations. To conclude, We started last year to transition from a phrase of hyper goals to one of the more measured developments. Our transition from sales and marketing towards research and development continues a space into 2022. We now have a technology team numbering over 5,600. which represents about 60% of our total workforce. They not only innovate and improve our technological capabilities, but also help attract new talent. We will step up our efforts to further build up our in-house research and development capabilities. We continue to believe that this is the right approach at this stage of our development. We will do more and do better to achieve our long-term corporate mission to put people first, to be open, and to benefit all. Thank you. And now, let me pass the time to Jean.
spk05: Thank you, Lei. Hello, everyone. Let me first walk you through our operating results for the first quarter ended March 31st, 2022. Our annual active buyers for the 12 months ending March 31st, 2022 was 881.9 million. This is an increase of 58.1 million or 7% from the same quarter of 2021. Average MEU in Q1 was 751.3 million. This is a 26.7 million increase, or 4%, from the same quarter of 2021. At this current scale, it is inevitable for us to see slower user growth. We will continue to focus on how to serve our users better to deepen the trust users place in us and to improve user much share. Next, I will go through our financial performance and quarter ended March 31st, 2022. In terms of P&L, our total revenue in the quarter was RMB 23.8 billion. up 7% from RMB 22.2 billion in the same quarter of 2021. This was mainly driven by an increase in revenues from online marketing services and revenue from transaction services, offset by the decrease in revenue from 1P trials. Excluding revenue from our 1P trials, Our total revenue was RMB 23.7 billion in Q1 2022, up 39% from RMB 17 billion in the same quarter of 2021. Revenues from online marketing services and others were RMB 18.2 billion this quarter, up 29% compared with the same period of 2021. This was primarily due to an increase in merchant activities, a reflection of the value that our platform craves for them. Our transaction services revenues this quarter were RMB 5.6 billion, up 91% versus the same period of 2021. The increase in our transaction services revenue was due to First, the increase in total transaction processing fee as a result of higher transaction volume. And second, more diversified services that we provide to merchants, such as fulfillment services. Moving on to costs and expenses. Our total cost of revenue decreased from RMB 10.7 billion in Q1 2021 and RMB to RMB 7.2 billion this quarter. The decrease came mainly from the reduction of merchandise sales, partially offset by increased fulfillment expenses. Total operating expenses this quarter were RMB 14.5 billion versus RMB 15.6 billion in the same quarter of 2021. On a known gap basis, our total operating expenses as a percentage of revenue, including 1p, has been declined from 86% to 55% for Q1 of 2021 and 2022, respectively. Looking into specific expense items, our known gap sales and marketing expenses this quarter are RMB 10.7 billion, down 16% versus the same quarter of 2021. As we continue to shift away from our previous focus on sales and marketing, We remained disciplined on our sales and marketing spending this quarter. As a result, on a non-GAAP basis, our sales and marketing expenses as a percentage of our revenues this quarter was 45%, compared with 57% for the same quarter in 2021. Our non-GAAP general and administrative expenses were RMB 208.8 million versus RMB 160.7 million in the same quarter of 2021. Our non-GAAP research and development expenses were RMB 2 billion an increase of 70% from RMB 1.7 billion in the same quarter of 2021. The increase was primarily due to an increase in headcount and the recruitment of more experienced R&D personnel. To better meet the evolving consumer demand and to foster sustainable growth of our platform, We are committed to further growing our R&D capabilities and stubbing up our R&D spending. Operating profit for the quarter was RMB 2.2 billion on a GAAP basis, compared with operating loss of RMB 4.1 billion in the same quarter of 2021. Non-GAAP operating profit was RMB 3.7 billion versus the operating loss of RMB 3.2 billion in the same quarter of 2021. Net income attributable to ordinary shareholders was RMB 2.6 billion, compared with the net loss of RMB 2.9 billion in the same quarter of 2021. Basic earnings per ADS was RMB 2.06 and diluted earnings per ADS was RMB 1.84 versus basic and diluted net loss per ADS of RMB 2.33 in the same quarter of 2021. Non-GAAP net income attributable to ordinary shareholders was RMB 4.2 billion, compared with the net loss of RMB 1.9 billion in the same quarter last year. Non-GAAP diluted earnings per ADS was RMB 2.95 versus a non-GAAP diluted net loss per ADS of RMB 1.52 in the same quarter of 2021. More disciplined spending and slowing growth are the main reasons behind the profits in the past few quarters. The profits give us more confidence and resources to devote to key areas, such as R&D and agriculture initiatives. That said, we expect profits to fluctuate as we spend to meet changing consumer needs, notably Our profit this quarter narrowed significantly versus the last quarter. Our net cash flow used in operating activities was RMB 9.1 billion, compared with our flow of RMB 3.7 billion the same quarter of 2021. Primarily due to changes in working capital, as a result of seasonality offset by an increase in online marketing services revenues. As of March 31, 2022, the company had RMB 95.2 billion in cash, cash equivalents, and short-term investments. This concludes my prepaid remarks.
spk12: Thank you, Jing. Next, we will move on to the Q&A session. For today's Q&A session, Lei and Jun will take questions from analysts on the line. We may take a maximum of two questions per analyst. Lei will answer questions in Chinese, and I will help translate Lei's remarks for ease of reference. Operator, we may now take questions on the line.
spk06: Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key. Participants are requested to restrict two questions at each time. Your first question comes from Thomas Chung of Jefferies. Please ask your question.
spk09: Good evening. Thank you for introducing my question. My question is about the financial performance of QE. Thanks management for taking my questions. My question is about our growth driver in Q1. And given the outbreak of pandemic in recent months, can management share some of the thoughts about what we are seeing in terms of the recent monthly trend? On the other hand, can management also comment about the trend in terms of the tick rate? Thanks.
spk11: Hello, Thomas. Let me answer your first question, which is about the company's growth rate.
spk12: Hi, Thomas. So let me address your first question around growth rate.
spk11: In the past, we have been adjusting the growth rate strategy. We are starting to focus more on the investment in research and agriculture. We hope to pursue a long-term high-quality development. This kind of development and development adjustment will take some effort and time. Maybe our short-term growth will be affected.
spk12: Over the past period of time, we have been going through adjustment and development strategies to focus more on technology and agriculture in order to pursue long-term, high-quality growth. Well, it takes time for the final results to bear fruit. And in the process, our growth rate might be affected.
spk11: In addition, as we reach our current scale investors should not expect us to continuously deliver high growth. The core of our focus now is to better serve our current 8.8 billion users. We aim to encourage consumers to strengthen their trust in the platform and increase the user's confidence. We hope that through R&D, investment in agriculture,
spk12: Well, our development is inseparable from the support of our consumers. So as the user base reaches its current scale, our focus now is on how to serve our 880 million users and improve their trust and mind share to remain to be user-centric. So we will continue to pay more attention to technology and agri-investments and to promote our differentiation in agriculture to help create more values for our consumers. 那么在这过程中,我们保持不变地会专注这种长期的内生价值,
spk11: But from an external point of view, it is likely that the development of our company will sometimes be very aggressive and conservative. I suggest that you do not pay too much attention to the fluctuation between seasons, but pay more attention to whether what we are doing now has value and can bring high-quality growth to the company.
spk12: Well, as we have been communicating, we always remain committed to investing to create long-term value.
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spk12: If you look from the outside, at times we might appear to be overly aggressive or overly conservative sometimes. So we recommend you not to pay too much attention to the fluctuations between quarters. Instead, we hope investors would focus on whether what we are doing is generating value and whether it can bring about high-quality development. I hope what I have shared may address your question.
spk05: Hello, Thomas. This is Jane. Thank you for your question. I would like to further talk about the takeaway you just mentioned. Well, our focus has always been to better serve our users, as just mentioned by Lei. With this being said, tick rate or monetization rate is not a metric to focus. Instead, I think it is a natural result. So we recommend you not look at quarter to quarter changes And in the long run, our monetization rate depends on how much value we create. And for future outlook for monetization, as I said, it really depends on our value creation. One thing we would like to point out is we started Pingduoduo with a strong agriculture focus from the beginning. And we stick to our zero commission policy for agriculture projects. And we definitely will continue to support agriculture merchants, for example, offering more traffic exposure. Also, we have communicated before we will step up investment in agriculture for better consumer experience Well, as the proportion of agricultural product increases, our monetization rates might be affected. Thank you.
spk12: Call operator. We will now take questions from the next analyst in the queue.
spk06: Your next question comes from Eddie Wayne with Morgan Stanley. Please ask your question.
spk08: Thank you for accepting my question. I have two questions here. The first question may be about competition. Although President Chen Lei said that we are more concerned about the development of our own advantages, but I remember when you mentioned the earnings call last time, you also mentioned that there will be more and more attention for external competition. In the e-commerce industry, we observe that the demand for this year is relatively weak. We will focus more on the profit, rather than on the income. But this is something that some traditional e-commerce platforms are doing. At the same time, we see that some live e-commerce companies are relatively aggressive in expanding and acquiring customers. I don't know what the impact of this kind of industry is from our point of view, and whether we will make some corresponding strategic adjustments. The second question is related to this. Mr. Chen mentioned that our advantage is that we are in different places, especially in agriculture. We saw that the cost of development of the previous 100 billion agricultural salt has definitely increased. Actually, I would like to ask, if we look at the current stage until the end of May, how much has the expense of 100 billion agricultural salt reached? Thank you for taking my question. I have two questions. First is about competition. Can you please share with us your view on China's e-commerce industry competitive landscape? We witnessed that on one hand, we do see other e-commerce platform adopting a structured cost control and less aggressive in expansion. But on the other hand, we do see some live streaming e-commerce platform seems to be very aggressive in the user acquisition and expansion. So just want to hear your view on the competitive landscape in the e-commerce sector and the impact on BDD. And the follow-up question is about the 10 billion agriculture new initiatives. So what's the proportion of the 10 billion have been used so far? And what's the next kind of areas we want to investment in the next maybe one or two years? Thank you.
spk11: Hello, Eddie. First of all, there is a question about the current situation. I think that the current situation of the whole e-commerce industry is that there is no great need for it now and three months ago. In fact, the core is that the Chinese e-commerce industry is a very large and potential market. Eddie, so for your question around competition landscape, I think the current landscape versus two, three months ago
spk12: it has not changed much. So essentially, China's e-commerce industry is a huge market, and it is full of potential. As industry infrastructure continues to develop, and as consumer needs continue to evolve, more and more companies will join e-commerce. 那我们认为呢,
spk11: We believe that in the long run, the emergence of new platforms as well as new formats will have a positive impact on consumers and on the industry itself.
spk12: For us, if you look under the perspective of the recent pandemic, and if you look at areas where other peers have done well, we think that for ourselves, there is still a lot of room to further improve from our current level of service offerings. This is what our team needs to learn from. And our team needs to work harder and also remain down to earth to serve consumers well and to create value for the society as a whole. This is the duty and responsibility for us as a company.
spk11: What is the difference between us? We started from agricultural products. On the path of our company, agriculture has always been our core. We are also very confident in the broad prospects of the field of agriculture. We have introduced it to you. It is now also in the development and investment, especially in agricultural technology.
spk12: As for our differentiation, well, we started out Pinduoduo with agricultural products. As we develop, agriculture has always been our core. We also firmly believe in the future potential of the agriculture sector. Just as I introduced, we are now stepping up investment in core technology, especially in agriculture technology. We believe in the long run, these investments can create more value for consumers.
spk11: So here, let me also address your second question.
spk12: We announced the $10 billion agriculture initiative last year. When we announced it, we also mentioned that we hope this initiative can facilitate the advancement of agri-tech, promote digital inclusion, and also to make a sense of fulfillment for agri-workers and agri-scientists.
spk11: Over the past year, our team and myself have been devoting a lot of time and effort to diligently evaluate and study our various proposals and projects.
spk12: in order to deploy resources to where they are needed the most. In my previous remarks, I also have given you some examples of how technology empowers agriculture, including our smart agriculture competition. In addition, we are also cooperating with top economic universities and research institutions to jointly work on some research projects.
spk11: But I should admit that through technology, it is still a matter of very careful deliberation and extra patience. We need to compare different solutions horizontally, and combine our continuous experience in the field of agriculture and the technical background of our team.
spk12: Admittedly, to empower agriculture through technology requires a lot of thinking, deep understanding, and actual patience. So we need to compare various options side by side and evaluate each option carefully. And we have to leverage our past experiences in agriculture as well as our team's technical background to make the best options and choices.
spk11: In this field, we have some long-term strategies. But in general, investment is still in an early stage. But I think in such a big field, whether it's investment cycle or strength, it will not be affected by such a fluctuation in the medium and short term.
spk12: In this area, our strategy is long-term, and our investments in agriculture are still in an early stage. For such a sector of such big scale and impact, our investment horizon as well as investment scale would not change when there are short- to medium-term fluctuations. Hope what I shared can give you more color around how we think about and what we are doing in terms of agriculture.
spk08: Thank you.
spk12: Hi, Brito. We may now move on to the next analyst.
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spk06: Your next question comes from Kenneth Fong with Credit Suisse. Please ask your question.
spk10: Hi, good evening. Thank you for accepting my question. I have two questions. The first is from the point of view of user growth, I see that MAU and AAC are still growing at a faster rate than high-speed. Can you share with us some of the driving factors behind this? Yiming Bai, now we have a relatively large number of customers. The growth will definitely slow down in the future. Can you share with us how we should think about the growth trend in the future and the ceiling of users? The second is the marketing cost aspect. In terms of our revenue growth, the speed is still under rapid growth. Our sales cost is also controlled very well, and the starting price has dropped. Thank you management for taking my question. I have two questions, please. On user, we noticed that despite a high base, AAC and MAU both see accelerating sequential growth. Can you share with us the drivers behind? Understand that we shouldn't expect fast growth given our larger user base. How should we think about user upside and end of ceiling? And my second question is on the sales and marketing expense. Despite the fast revenue growth, our control over sales and marketing has been very effective. with amount continue to come down on a year-on-year basis. Can you share with us the reason behind? For example, is there a change in our ROI threshold for user acquisition, and any room for further improvement? Last year, Pinduoduo said that we are shifting from sales and marketing to R&D focus. Can you also update us on the progress, and should we expect this to be largely finished? Thank you.
spk11: Hi, Kenneth. Let me answer some questions about the number of users. At the same time last year, the number of consumers and active users was 8.2 and 7.2 billion. It should be a relatively high number. This year, it has grown to 8.8 and 7.5 billion. There is some growth. Well, Kenneth, so let me address a question on a user number.
spk12: So let's look at the numbers first. By the first quarter last year, our annual active buyers and MAU was approximately 820 million and 720 million, respectively. This was already a relatively high base. And by the first quarter this year, our AAC and MAU further increased. to about $880 million and $750 million. We achieved some growth, but I think the long-term trend should be very clear. Though there might be quality fluctuations, I think it is inevitable that our user growth would be slower. Well, over the course from the past few quarters, we also have shared this view with you.
spk11: So in this situation, the opportunity we see, or the task we have to complete, is to let the consumers who are already using Pinduoduo have a better user experience. Then they will have more trust in Pinduoduo. At the same time, they will have a deeper knowledge of shopping on Pinduoduo.
spk12: So now the priority that we see and the duty we have to perform right now is to further improve the existing 880 million consumers' user experience and as well as to improve their trust and solidify their mind share in us.
spk11: In other words, the development strategy we were working on before, the core of it is to use research and development to discover how the eyes of user behavior and the evolution of the infrastructure of the entire society, through research and development, can seize the opportunity of new service consumers.
spk12: As for the strategic shift we are going through, basically amid the changes in infrastructure upgrade and the evolving user needs, what we are doing in terms of investing in technology is to find opportunities and improve ourselves to serve our users better.
spk11: And I'm glad to see that through our efforts, we have indeed created value for consumers.
spk12: especially in the area of agricultural produce.
spk11: We also hope to be able to continuously understand the users' new needs and preferences, and to improve our own capabilities. Another point is that in the process, it is very likely that we will still need to make some firm investments in the scale of good opportunities. Therefore, this reaction on the future of finance, especially on the cost of development, is still possible.
spk12: So another point is that the recent pandemic does show some of the areas that we need to improve. And in terms of understanding users' needs and keeping up with the changes in their behaviors and their demand, we need to do better. So we will continue to explore the evolving needs and preferences of our users and to continue enhance our capabilities. In addition, as we explore, when we see good opportunities, we will continue to invest. So if we look at the financials, it is possible that our efforts would show up and be reflected in the future financial results as well, especially around technology.
spk11: And hope what I have just shared may provide you with more color and give you some insight on our user number and its growth going forward.
spk05: Thank you, Kenneth. I will take your second question about S&ME expenses. Well, as you just said, we are going through a shift. We are more focused towards R&D from marketing, and such a shift has been in our financial results, as you may see. For example, sales and marketing expenses fell 14% year-over-year in Q1, which represents 47% of total revenue, and down from 59% of Q1 last year. And at the same time, R&D expenses increased by 20% YOY. Well, for every investment, we carefully evaluate the ROI and we allocate resources to generate long-term and high-quality development. As always, we will continue our investment discipline. And in addition, in terms of serving user needs, We're not doing well enough, and there's still plenty of room for us to further improve. So we need to further explore how to better serve our users. In fact, recent pandemic also shows certain areas for us to improve. So as we see good opportunities, we will continue our investments. to create more value for our consumers. As a result, the future expenses trend is likely to change. And to us, we firmly believe that R&D investment can generate high-quality development. So we will continue to step up the investment, which will be shown in our financial results. And we are still in the investment phase instead of the stable stage. For financial numbers, we suggest you look at the long-term trends and the value we create from this investment. Hope Diabath can clarify your questions. Thank you.
spk12: Thank you. Hi, operator. I think we still have time to take questions from the next list, and that will be the last one.
spk06: Your last question comes from Natalie Wu with Haitong International. Please ask your question.
spk07: I have two questions. The first one is about the pandemic. I would like to ask Mr. Lei, can you share more about the impact of the pandemic on the industry and the company's business? How big is the impact on our performance in the first quarter? And what are your expectations for the second quarter in the context of the pandemic? This is the first one. The second one is about profit. Let me quickly translate myself. So two questions from my side. First question is related with the COVID. Just regarding the recent COVID breakout, can management share more details about how the pandemic has impacted industry and your operations at Pinduoduo? And how much impact has it had on your first quarter results? And also, what is your outlook towards the second quarter results considering current pandemic status? And my second question is regarding the profitability. You have delivered meaningful profits on both GAAP and non-GAAP basis for four consecutive quarters. Just wondering at current stage, are you now prioritizing profitability over growth? Should investors expect quarterly earnings to be the norm? Thank you.
spk11: Hello, Nancy. Let me answer the question about the impact of the pandemic on our company. I think the biggest impact of the pandemic on us is that through the pandemic, it is obvious that we still feel that the company is still lacking in operations. There are still some shortcomings. In fact,
spk12: Well, Natalie, so let me take your question on how the pandemic has affected us and our operations. Well, I think one area that the pandemic has shown us is that For our business, we need to build it to be more resilient, and there are certain areas that we need to further improve, especially in terms of how we can effectively meet users' needs.
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spk03: And under the current situation and the pandemic,
spk12: On the current situation, I think our peers have shown certain aspects that we may also learn from.
spk11: Pinduoduo is actually a company that is more focused on the daily needs of users. During the pandemic, we are actively using our own characteristics to do things for consumer service. And Pinduoduo is an e-commerce company
spk12: that focuses on the essential needs of users. During the pandemic, we are also actively leveraging our differentiation to create a value for consumers and to fulfill our social responsibilities. Here, let me give you some examples. First, in Shanghai, we launched 48-hour supply packages for Shanghai residents. Through aggregating their ordering and the fulfillment staff, we strive to meet the basic needs from as many households as possible.
spk11: In addition, on the guidance of our relevant governmental departments, we have made efforts to provide supplies for medical personnel and people in need.
spk12: These are some areas which we have been working on by leveraging our differentiation and our value proposition.
spk11: But on the other hand, I think we also saw that in the process, there are a lot of young team members in our company dealing with a lot of urgent actual problems. and grow rapidly. Because they are fighting on the front lines, including organizing supplies, overcoming the basic problems in the process of protection and operation. They have taken on more responsibilities and challenges. This makes me more confident about the potential of our team. This should be said that during the epidemic,
spk12: Another important point that I want to make during this pandemic time is that we also see many young talents writing up to challenges, and they are growing up rapidly. in the face of these real world challenges. They are proactively securing good supply. They provide technical support to assist fulfillment. And they are also solving some of the operational difficulties. They are taking on more and more responsibilities and challenges. So, from this, I'm confident in the potential of our team. So, based on what I just said, what I see really has given me more conviction in how our team would perform and in the young talent from our team.
spk11: as a foundation to impact the importance of every person's life in this industry, that is, the importance of this kind of fluid supply chain. What I mean is that our long-term and continuous investment in agriculture is very important, and we need to have a very patient long-term and continuous investment. I hope these above are
spk12: And to add on one more point, during such special times, we also see that agriculture and the agriculture supply chain is so essential. And the importance of having a very resilient agriculture supply chain So our long-term investment in agriculture is particularly important. I hope what I've just shared around this point can give you some more color around our take on agriculture.
spk05: Well, thanks for your second question about profitability. First, I would like to point out it is not our current priority. And over the past few quarters, our profits were mainly due to our operating leverage, especially from sales and marketing. And as mentioned last quarter, we have also controlled our spending in the face of slower growth. And under current intensified competition, We also see we still have meaningful room to improve in terms of certifying users. The recent pandemic also shows that. So we need to step up our investments. And it may cause our quarterly profit to fluctuate in the future. As you may see, this quarter's profit has decreased sequentially versus last quarter. Meanwhile, the profitability over past few quarters also gives us greater confidence to continue our long-term investments. We hope that everyone will focus more on the value we generate. Thank you.
spk12: Okay. Thank you everyone for joining us on the conference call today. If you have further questions, Please feel free to reach out to our RR team. Thank you. Have a great day.
spk06: Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.

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