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spk23: Ladies and gentlemen, thank you for standing by and welcome to PDD Holdings, Inc. First Quarter 2023 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 then 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 today, Mr. Chen Peng. Sir, please go ahead.
spk06: Thank you, operator. Hello, everyone, and thank you for joining us today. My name is Chen, and I will help host the earnings call. PDD Holdings' earnings release was distributed earlier and is available on our website at investor.pddholdings.com, as well as through group newsletter 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 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 Co-Chief Executive Officer, Zhao Jiazhen, our Executive Director and Co-Chief Executive Officer, Liu Jun, our VP of Finance. Lei and Jiazhen will make some general remarks on our performance for the past quarter and our strategic focus. Jun will then take us through our financial results for the first quarter ended March 31, 2023. During the Q&A session, Lei and Jiazhen will answer questions in Chinese, and we 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's my pleasure to introduce our chairman and co-chief executive officer, Chen Lei. Lei, please go ahead.
spk03: Hello, everyone. Thank you for joining our early call for the first quarter of 2023. I will start by giving a brief overview of our first quarter results. We achieved a total of RMB 37.6 billion in revenue this quarter, representing a 58% year-on-year increase. During the past quarter, we saw consumer sentiment continue to improve. We have seen a surge in demand across various categories, reflecting consumer's eagerness to explore the wide range of products we offer. The quarterly results also show that our long-term strategic focus on high-quality development is starting to pay off. We are glad to see that the focus on quality development not only sets us on a solid routine for the future, but also delivers immediate gains for consumers and sellers. We are encouraged by the strong backing from our stakeholders. We work hard to create a lively marketplace where consumers can find what they are looking for and where high-quality sellers can thrive and succeed. Technology is very important to our mission to build a healthy and vibrant platform ecosystem. It is also a vital catalyst to drive efficiency and opportunities in the manufacturing and the retailer sectors. That is why we are putting more time and resources into R&D to foster sustainable progress. Our engineers make up about half of our total employees. R&D helps us meet the unique needs of consumers, provide merchants with deeper understanding in shocking trends, and allow manufacturers to respond swiftly to evolving demand. By making supply and demand work better together, we can help unlock the potential in different industries. We will continue to step up our investment in R&D. And now, let me talk about our globalization effort. Last year, we launched Tmoo to offer quality products at affordable prices to consumers around the world. By working closely with sellers and manufacturers, Tmoo offers a wide selection of merchandise, reduces supply chain inefficiencies, passing on savings to consumers. As we move forward, we will keep seeking ways to meet diverse consumer needs, and we are still in the early stage of exploration. We will always start from the fundamental needs of consumers, adapt quickly, and strive to create our own unique value. As we continue to grow, we are finding more ways to generate a positive impact to the society. A vibrant and sustainable e-commerce ecosystem can only be achieved by encouraging broader engagement in the digital economy. For instance, the advent of mobile internet has created a space for female entrepreneurs in e-commerce, enabling them to balance work and family. By providing the opportunities, we have enabled females to utilize their unique skills in managing successful e-commerce enterprises. In fact, Many of our platform's female entrepreneurs started their first business with us. They have created new jobs and injected new vitalities into their communities. We are committed to providing more opportunities for individuals to become entrepreneurs through training and a wider market access. We are prominently among the younger generation. We believe that nurturing a passion for reading can open doors to knowledge. To this end, we hold regular reading events and donate books, and we invite reputable authors to talk with students in rural areas. We hope this will help young students broaden their horizons. We are also working to promote agricultural digital inclusion. We are helping young people who are passionate about agriculture to bring new technology from lab to the field. We are working with top universities and institutes to encourage innovation. We also hold competitions for young people to realize their skills and ideas, which help create innovative and sustainable farming practices. As a young company still in the development stage, we believe that through the increasing business opportunities facilitated by us, we can help uplift communities and make contributions to the society. We will do more as we grow. And finally, I want to introduce my longtime colleague, Mr. Song Jiazhen, who was recently appointed as the co-CEO and executive director by our board. Jiasheng concentrates more on supply chain management and China operations, while my focus is more on globalization efforts. Jiasheng is a founding member of our company. He led a team to launch and expand our DoDo grocery business and also led our supply chain efforts. Jiazhen and I have been working closely together for over a decade. We have established deep trust in each other. His new leadership role shows that our team is full of vitality and our next generation of leaders are ready to take on more challenges. And now, I will hand over to Jiazhen.
spk08: Thank you, Chen Lei. Hello, everyone. I am Jiazhen. 很高興參加本次的業績會。 Thank you, Les.
spk06: Hello, everyone. This is Zhao Jiazhen. I'm glad to join this earnings call. In Q1, many places introduced measures to promote consumption. We see clear recovery trends. Online retail continues to pick up. Users on Pinduoduo show a higher willingness to shop. Consumption fatality is becoming increasingly evident. These favorable trends lay a solid foundation for the steady growth of consumption for the whole year. we are very optimistic about the prospects of the consumption market.
spk08: In the past quarter, we have mobilized the platform's resources to further facilitate the activation and transformation of consumer potential. We have provided good products for users as usual. In the first quarter's New Year's Eve, Spring Festival, and New Year's Eve, we have added subsidies and issued extra discount cards to cover as many platform users as possible.
spk06: Over the past quarter, we actively mobilized platform resources to stimulate and realize the consumption potential. As always, we provide users quality merchandise with more savings. In the various large-scale promotional campaigns in Q1, such as the Chinese New Year promotion and the New Year sale, we stepped up discounts and issued extra coupons to benefit as many users as possible. 在近期舉辦的上海五五購物節,
spk08: We invested more than $4 billion in consumer subsidies, which is the largest amount of subsidies. During this period, we cooperated with the Central Broadcasting Television and the Central Television, and recorded a live broadcast of the goods. Through the full-scale presentation of various products, we promote consumers' trust in online shopping. At the same time, our多德买菜 also actively expanded and innovated, and often created new consumer scenarios, improving the effect of buying and selling side dishes on surrounding consumption.
spk06: recently in this year's Double Five Shopping Festival in Shanghai, we invested over 4 billion RMB in coupons and discounts, marking a new high. During this event, we partnered with China Central Television and Oriental TV on live streaming sales, showcasing a wide range of products to viewers in an interactive and direct manner, enhancing consumer trust in online shopping. Furthermore, our Dodo Growth Rate team actively explores innovation by creating new consumption scenarios and deepening the spillover effect of the pickup points of surrounding areas' consumption. We hope this can further promote the development and integration of online and offline consumption.
spk08: and proposed the consumption concept of 618 every day. In order to guarantee a good price, we optimize the service from multiple dimensions to guarantee the consumer experience. In the activities of many reading pages launched in late April, we invested in a reading fund of one yuan level to assist in the amplification of high-quality reading. The evaluation report from the third-party platform shows that in the five indicators of comprehensive price, positive security, social service, logistics, and discount rate, the comprehensive purchasing experience of the platform
spk06: In addition to our strong suit of more savings, we have further improved our ability to provide better services to optimize the consumer experience. We launched the electronics shopping season in advance in April and introduced the concept of Every Day is June 18. We not only ensure good prices, but also upgrade services on many fronts to improve consumer experience. In the Dodo Reading Month, which kicked off in late April, we invested hundreds of millions RMB to promote high-quality and universal access to reading. A third-party evaluation report shows that in five dimensions, including price, authenticity, after-sales support, logistic efficiency, and promotion level, the Pinduoduo platform's overall shopping experience for books ranks as one of the best among many e-commerce peers.
spk08: Against the backdrop of consumption recovery,
spk06: to satisfy the diversified needs of consumers and form a driving force for expanding consumption is both an opportunity and a challenge for us. We aim to further improve the platform ecosystem through a series of impactful measures, including increasing discounts, upgrading services, and fully protecting consumer rights. We hope to further boost consumption lethality through our focus on quality development of the platform ecosystem.
spk08: 消费回转的同时,也带来了更加激烈的行业竞争。 随着竞争的激烈并且进一步异化, 一些竞争行为已经超出了正常的商业范畴。 As consumption rebound, it also brings about more intense industry competition. As competition further intensifies,
spk06: some competitive behaviors have gone beyond the scope of normal business activities. For example, since late March, dozens of flagship stores on Pingo Doors were bombarded with malicious orders. The attackers disrupted the stores' normal operation in a clearly organized and purposeful way, causing significant losses. We immediately provided protection to the affected stores and upgraded our defense strategies. The stores were back in normal business operation very soon.
spk08: We believe that competition can motivate us to learn more efficiently and innovate more quickly.
spk06: so that we can speed up the iteration of our services. We will continue to be consumer-oriented and react positively and actively to all types of competition. Even when we face malicious attacks, we will maintain positive thinking.
spk08: We will turn attacks from competitors into our motivation to move forward. We will stick to our本分, improve ourselves constantly.
spk06: innovate with a clear direction, and guide the platform towards higher quality development. For example, we have upgraded the shipping processing time for most merchandise categories from 72 hours after placing the order to no later than 48 hours. We will provide preferential after-sales services for elderly consumers and consumers in remote areas. In addition, we take a more proactive approach in customer service. such as offering consumers the option to receive refunds without returning the item.
spk08: At the same time, we will further step up our support for quality supply and our investment in the supply chain.
spk06: we are launching the 10 Billion Ecosystem Initiative to offer resources and support to quality sellers and products so that we can promote the quality growth of SMEs and quality sellers and improve the overall seller service efficiency and standard. For supply chain, over the years, we have rooted ourselves deeply in major production areas and industrial belts. We connect products directly with end consumers reduce distribution layers, and lower the procurement and sales costs between supply and demand. We will continue to increase investment, optimize our supply chain capabilities, strengthen the buildup of physical supply chain infrastructure, contribute to the transformation and upgrade of traditional sectors, and further deepen our competitive advantages. 今年以來,拼多多對內持續優化品牌治理,
spk08: This year, Pinduoduo has continuously optimized platform governance and actively takes on social responsibilities. We strive to bring warmth and responsibility. For example,
spk06: We have recently launched several dedicated initiatives, such as the Initiative to Protect the Miners and the Initiative on Authentic Books, to name a few, so that we can build a positive ecosystem for sustainable development.
spk08: provide professional online training for farmers and merchants, helping them connect with the logistics and cold chain logistics system suitable for farmers and merchants, reduce import losses, and increase product competitiveness. For the creation of a strong agricultural product brand, we have found special products in various industries, continue to focus on exposure, and guide them to invest in 100 billion subsidies to improve their quality of life. Through similar agricultural operations, we hope to make more industries run out of the local sheep,
spk06: We also promote digitization in agriculture, and we launched the Agriculture Cloud Initiative. To date, our dedicated team has gone deep into the various production regions in many provinces. We provide specialized e-commerce training for farmer sellers and help connect them with logistics infrastructure suitable for agricultural produce such as warehousing and co-chain logistics, to reduce transportation forage and improve product competitiveness. To support brand-building agriculture, we search for high-quality specialty products, provide strong traffic support, and help them gain recognition by including them in our $10 billion program. Through initiatives similar to the Agriculture Cloud Initiative, we hope to enable more local production regions to emerge as leaders of certain products and drive the digital transformation of the entire industry value chain.
spk08: to encourage more young people to enter the agricultural industry. At the same time, by selling anti-pollution research, we will further promote the transformation of research results. In recent years, as part of the 100 billion agricultural expertise, we have donated 100 million yuan to China Agricultural University, set up the Pinduoduo China Agricultural University Research Fund, and further support the basic research and innovation of agricultural technology. We have won the 2022 Annual Innovation Award from the United Nations Agricultural Organization. We continue to deepen our cooperation with top economic institutes to support the role of agri-tech in agricultural transformation and promote agri-tech adoption.
spk06: we have hosted various events focusing on agricultural development, such as the Pinduoduo Cup Growing Competition, the Smart Agriculture Competition, and the Global Agricultural Innovator Competition. These competitions promote innovation and inspire more young people to join agriculture. It also leverages sales to support research and helps bring more research findings to the market. As a part of our 10 billion agriculture initiative, we recently donated 100 million RMB to set up the Pinduoduo and China Agricultural University Research Fund to further support fundamental research and innovation in agri-tech. We are proud to receive the FAO 2022 Innovation Award from the United Nations Food Agriculture Organization, which recognizes our innovation in the agricultural supply chain. We were the sole recipient of this award globally in 2022. We will continue to work hard, support digital transformation and technology adoption agriculture, and uphold the principle of tech for good.
spk08: We will stick to the principle of quality first, continue to carry out our business, and actively take on greater social responsibility. At the same time, we will use time as a basis to continue to increase our investment in the supply chain, We will stick to our quality first principle, continue to live up to our role, and proactively take up bigger social responsibilities. Additionally, we will remain rooted in the real economy
spk06: increase investment in the supply chain, and search for strong driving forces towards our high-quality development. We will speed up the process of building up a healthy ecosystem featuring more savings and better services. I look forward to working together with the team to promote high-quality development and promote a healthy win-win outcome for our platform ecosystem. 有她为大家介绍一下我们的财务表现。 Now, let me hand it over to Jin. She will provide you with an update on our financial performance.
spk18: Thank you, Jiajun. Hello, everyone. Let me walk you through our financial performance for the first quarter ended March 31, 2023. In terms of income statements, Our total revenues in the quarter were RMB 37.6 billion, up 58%, RMB 23.8 billion in the same quarter of 2022. This increase mainly came from encouraging trends in consumer sentiment and positive responses from consumers and merchants towards our focus on high-quality developments. Revenues from online marketing services and others will be 27.2 billion this quarter, up 50% compared with the same period of 2022. Revenues from transaction services this quarter will be 10.4 billion, up 86% versus the same period of 2022. Moving on to cost and expenses. Our total cost of revenues increased 55% from RMB 7.2 billion in Q1 2022 to RMB 11.1 billion this quarter, mainly due to increased fulfillment fees and payment processing fees. Total operating expenses this quarter were RMB 19.6 billion on a gap basis, versus RMB 14.5 billion in the same quarter of 2022. On a non-GAAP basis, our total operating expenses increased to RMB 18.1 billion this quarter, from RMB 13 billion in Q1 2022. We rolled out several large-scale promotional campaigns to help boost user sentiment, and we continue to invest in our long-term focus areas to support our high-quality development. Our total non-GAAP operating expenses as a percentage of total revenues this quarter is 48%, compared to 54% in the same quarter last year. Looking into specific expense items, our non-GAAP sales and marketing expenses this quarter were only 15.8 billion, up 47%, versus the same quarter of 2022. On non-GAAP basis, our sales and marketing expenses as a percentage of our revenue this quarter was 42%, compared with 45% for the same quarter in 2022. In Q1, we actively leveraged the platform resources to facilitate consumption recovery. Our non-GAAP general and administrative expenses were RMB $338.3 million versus RMB $208.8 million in the same quarter of 2022. Our known gap research and development expenses were RMB $2 billion this quarter. R&D is a top priority and a long-term focus for us. We're committed to further strengthening our R&D capabilities, and we continue to increase investment in this area. Operating profit for the quarter was RMB 6.9 billion on a GAAP basis, compared with operating profit of RMB 2.2 billion in the same quarter of 2022. Non-GAAP operating profit was RMB 8.5 billion versus operating profit of RMB 3.7 billion in the same quarter of 2022. Net income attributable to ordinary shareholders was RMB 8.1 billion, compared with RMB 2.6 billion in the same quarter of 2022. Basic earnings per ADS was RMB 6.13, and dilute earnings per ADS was RMB 5.55, versus base earnings per ADS of RMB 2.06, and dilute earnings per ADS of RMB 1.8. in the same quarter of 2022. Non-GAAP net income attributable to ordinary shareholders was RMB 10.1 billion, compared with RMB 4.2 billion in the same quarter last year. Non-GAAP diluted earnings per ADS was RMB 6.92 versus RMB 2.95 in the same quarter of 2022. We continue to increase investments and focus on creating sustainable and a vibrant ecosystem to support our long-term, high-quality development. That completes the income statement. Now let me move on to cash flow. Our net cash flow generated from operating activities was RMB 1.3 billion, compared with the cash outflow of RMB 9.1 billion in the same quarter of 2022. mainly due to the increase in net income and the changes in work impact. As of March 31, 2023, the company had RMB 157 billion in cash, cash equivalents, and short-term investments. Thank you. This concludes my prepared remarks.
spk06: Thank you, Jing. Next, we will move on to the Q&A session. Today's Q&A session Lei, Jiajun, and Jin will take questions from analysts on the line. We will take a maximum of two questions from analysts. Lei and Jiajun will answer questions in Chinese and we will help translate their remarks for easier reference. Operators, you may now take questions on the line.
spk23: Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star and the one on your telephone. and wait for your name to be announced. If you wish to cancel your request, please press star, send to. Participants are requested to restrict to two questions at each time. Your first question today comes from Joyce Zhu with Bank of America. Please go ahead.
spk20: Good evening. Thank you for giving me this opportunity to ask a question. I have two questions. First, we see that the recent company structure adjustment has become the mode of joint CEO. Will this change the company's future strategy? What is the main growth driving force in the future? We also noticed that in the joint CEO structure, President Chen Lei put more energy on globalized business. Does this mean that the globalization strategy is now significantly improved? 我的第二个问题是公司这个季度的业务收入在广告上面同比增加了50% 和上个季度相比要加快了一些 我们应该怎么理解这一季度的收入的加速 管理层是否能和我们分享一下这个季度的业务亮点 非常感谢 I will translate myself My first question is noting PDD recently implemented the co-CEO structure How does the change affect your group strategies? What are your key growth drivers going forward? Per your announcement post the co-CEO structure change, Laywell focused more on the globalization side. Does that mean your globalization strategy now has a higher priority? My second question is related to top-line growth. Your online marketing services revenue increased by 50% year-over-year this quarter. accelerating from the last quarter. How should we think about this re-accelerated momentum? What PDD has done this quarter contributing to this? Thank you very much.
spk03: Joyce, thank you for your question. I'm very tired. I'm going to answer your first question, which is about the company strategy.
spk04: Hi, Joyce. Thank you very much for your question. And this is Leigh. I can take your first question on strategies.
spk05: Judge and I have been working together for many years, and we have established deep trust. With our goal of high quality development in mind, we have constructed very clear long-term strategies, and we will continue to lead our team in terms of execution. And on top of that, we will leverage our different backgrounds and ideas and be efficient in decision-making. Over the past period of time, we are steadily shifting our strategic focus from the speed of growth towards the quality of growth. And we have seen positive feedback from both consumers and sellers on this shift, which is also reflected in this quarter's results.
spk03: Under our long-term strategy, we are continuously improving supply chain capacity, increasing quality supply chain, Under our long-term strategies, we are continuously strengthening our supply chain capabilities
spk05: and also expanding the supply of high-quality merchandise. We will further increase our support for quality sellers by launching our 10 billion ecosystem initiative and further push forward our platform's overall quality. And in addition, we will continue to optimize our platform ecosystem.
spk03: As a technology-oriented company, the value we create As a tech-driven company, the value we create is inseparable from our R&D capabilities. So we are also strengthening our R&D capabilities
spk05: and increasing our R&D investment. Currently, our R&D team makes up about half of our total employees.
spk03: China is a huge market. We still have a great potential for development in China. We believe that in the foreseeable future, the Chinese market will become our main market. Of course, we also see that the market is changing very quickly. The China market is huge.
spk05: and we see big potential for us to further grow. We believe that in the foreseeable future, China market is our biggest market. At the same time, we also note that it is changing very fast and competition is intense, which demonstrates both challenges and opportunities. This is why our board has appointed Jiazhen as Co-Chief Executive Officer to design and execute strategies together with me and further strengthen our China operations team. Next, let me hand over to Jiazhen.
spk08: Thank you, Chen Lei. First of all, I am very honored to gain the trust of the board of directors. I am very excited about the new appointment. At the same time, I also feel a lot of responsibility and pressure. While the entire industry is recovering, we are also entering a new stage. Thank you, Lei. And first, I'm honored that our board put their trust in me. I'm very excited for my new role
spk06: At the same time, I feel a responsibility and challenge. As the industry recovers, we are also entering a new stage. And in the past few years, we successfully shifted from marketing-driven to R&D-driven, and this lays a solid foundation for our development. Now we reach the gate of another stage, which is the stage of dedicating ourselves to promoting holistic high-quality development.
spk08: In this new stage,
spk06: we are further improving our platform ecosystem, upgrading consumer services, increasing support for quality supply, and also deepening our supply chain expertise. We constantly optimize platform governance to further build a socially responsible platform. 我们相信作为平台生态供应链研发的投入 And we believe that investing in our platform ecosystem, supply chain, and also R&D can create long-term value. And we will lead our team together to execute these strategies with determination. accelerating our footsteps in entering this new stage of high-quality development.
spk08: 我再来回答一下关于增长的问题。 And let me also take your question on revenue growth. In the past quarter, many places introduced policies to support consumption.
spk06: We see a continued improvement in consumer sentiment, and these trends show a good beginning for 2023. We have also benefit from this and our platform consumption vitality is further boosted.
spk08: In order to help the consumer recover, we insist on starting from the consumer's needs and fully mobilize the resources of this platform. In order to continue to bring more customers, we have also continuously organized many large-scale sales activities, issued additional vouchers and discounts to benefit consumers, at least to increase their consumer confidence,
spk06: To support consumption recovery, we continue to start from consumer demand and actively mobilize our platform resources. To give consumers more savings, we organized several large-scale sales events in a row and gave out extra coupons to boost consumer sentiment.
spk08: 我们全面升级了消费者的保护和服务。 举个例子,我们平台绝大多数的商品已经从72小时发货, 升级为了48小时内发货。 We also strive to give better services to our consumers. So we have upgraded consumer protection and also services throughout the entire shopping experience. For example, for most of the product categories,
spk06: The shipping process and time has been cut down from 72 hours to within 48 hours.
spk08: We have built such a versatile and easy-to-use platform ecosystem, which has brought us good consumer and business feedback. At the same time, the growth of EGZ has also initially reflected the results of this ecosystem construction. If we look back, we still need to work hard to further train our internal workers and create more consumer values.
spk06: Our virtual platform ecosystem of more savings and better services has earned us a decent consumer and seller feedback. Also, our Q1 growth is an early testament to our progress in building up the platform ecosystem. Looking ahead, we still need to remain down to earth and further strengthen our core capabilities so that we can create more value for consumers. For example, we are launching the 10 billion ecosystem initiative to further support quality supply. Thank you. Hi, operator. I think we're ready to take the next question on the line.
spk23: The next question comes from Natalie Wu with Ketong International. Please go ahead.
spk22: Hi, thank you for accepting my question. I have two main questions. The first one is related to the 618. We see that many e-commerce companies have launched a large-scale plan and policy this year. It seems to be very strong. I don't know what the company's strategy is for this. So, how does the management think about how to maintain our competitive advantage in the future? Especially in terms of price, does this mean that countries will continue to increase subsidies in order to maintain the lowest price? The second question is that we see that the company's profit this quarter is slightly better, although it is slightly better than the previous quarter. What is the main reason behind this? Let me translate myself in English. Thanks for taking my question. So I have two questions here. First one is, with the June 18th approaching, we see that many of your peers have rolled out this year's promotion, which seems to be very aggressive. Just wondering what's your response and how do you plan to maintain your competitive advantage, specifically for pricing? Do you think there will be an endless spiral of increasing discounts to ensure the lowest price? And secondly, we noticed that your profit-raising margin, this quarter, is another sequential decrease. Just wondering what are the major reasons behind Is it because of the seasonality or competition? Does it mean that you are now actively spending extra for growth?
spk08: Thank you. This is Jia Zheng here, and thank you for your questions. I will share my views on competition. Compared to focusing on the actions of competitors, we will pay more attention to our own growth in the competition. For us, competition is a test of our ability, and it can encourage our rapid recovery. As I mentioned in my speech earlier, we insist on the direction of the competitors, and we will respond to all types of competition in a positive way.
spk06: So instead of paying too much attention to what competitors are doing, we actually focus more on how we grow in competition. We view competition as a testing ground, and it motivates us to iterate quickly. Just as I have mentioned in my remarks, we are always consumer-oriented and we actively and positively embrace all types of competition.
spk08: We are
spk06: accelerating to build up a healthy ecosystem of more savings and better services. Our more savings essentially comes from retail efficiency improvement, and we will continue to strengthen our R&D to help better match supply and demand. We will also root ourselves deeply in more production regions to connect quality products to consumers directly. So for example, in initiatives such as our agricultural initiative, agricultural cloud initiative, we are leveraging our supply chain expertise to offer more users quality and also affordable agricultural produce. And we hope to further improve our efficiency and turn it into a sustainable price advantage for consumers. At the same time, we also continue to increase discounts and issue more coupons to give back to consumers directly.
spk08: And better services is another important area.
spk06: We are optimizing our service quality throughout the entire shopping experience. So, for example, we offer extra care to the elderly people and also consumers living in remote areas and we give them preferential customer services. We have also upgraded our post-sales services, such as offering consumers the option to receive a refund without having to return the item.
spk08: And we are launching a dedicated 10 billion ecosystem initiative, and this aims to channel more resources towards high-quality sellers to support SMEs
spk06: and also quality businesses and enhance the platform overall service efficiency and quality. And we will continue to focus on self-improvement in competition and strive to create more value for consumers. Thank you.
spk18: This is Jane. Thanks, Natalie, for your questions. I will address your question on profitability. Well, as just Leigh pointed out, We have very clear long-term strategies and we see many areas to further improve. We're executing these strategies with determination. We will continue to nurture the development of a healthy, more savings, and better services platform ecosystem. We firmly believe our patient investment can generate value for consumers, sellers, and the platform ecosystem. Feedback from consumers and sellers also make us more determined in seeking quality development. So we plan to further step up our long-term investment. For example, we are launching our 10 billion ecosystem initiative to support quality sellers and improve our overall platform ecosystem. As we deepen our efforts, our profitability level decreased in the past two quarters on a quarter-to-quarter basis. We think it is normal for probability to have a lot of change between quarters. Thank you.
spk06: Operator, we may take questions from the next analyst on the line.
spk23: The next question comes from Kenneth Fong with Credit Suisse. Please go ahead.
spk07: Thank you, Director. I have two questions. First, can you tell us how big the financial impact of global business TAM is? How many users does the business have now? Can you share with us how big the TAM is in terms of management? The second question is about the economy. We see more and more businesses operating on multiple platforms. We also see that the supply and demand of different platforms is becoming more and more similar. Thank you, management, for taking my questions. I have two questions. First, for your global business, may management share what is the level of financial impact from Temu? How many users do you serve now? Could you be able to give us an update matrix such as order volume? And I have a second question. Now we see more sellers are opening up stores across multiple platforms. So it seems the merchant style selection on different platforms are becoming more and more similar. Can management share with us what's your differentiation on the supply side, especially for your agricultural products? Thank you.
spk18: Thanks, Kenneth. I will take your first questions about the financial impact of Tmoo. Well, this business is currently in its early stage, and compared to our overall scale, its revenue contribution is small. For TIMU, as we mentioned before, our focus is always how to better understand consumer needs and how to satisfy these needs. Financial metrics will be a natural result of our value creation. We will follow our financial discipline and ROI-driven approach when evaluating each investment opportunity. Thank you.
spk06: Hi, this is Jiazhen, and let me take your question of supply chain and agriculture. In many categories, we see a lot of room to expand and optimize supply. For example, the digitization rate of agricultural products is still low. We see a lot of unmet demand, and we also see a lot of quality agricultural produce are not efficiently distributed.
spk08: We try to use the energy of this platform to improve the efficiency of the supply chain. We hope to help more high-quality agricultural products enter the flow. Through the training of e-cigarettes, and the participation of the agricultural product industry to connect the logistics infrastructure, 我们帮助了更多的农产品,扩大了流通范围,并且在路途中减少了品质和营养物质的损耗。 另外,我们的多种买菜业务其实也在持续地探索创新,在提供便捷的服务的同时,进一步丰富了消费者的菜篮子的选择。 And we are committed to leveraging our resources to increase supply chain efficiency.
spk06: and also to help more quality produce connect to the nationwide market. We provide e-commerce training and connect farmers with every focused logistics resources, which helps more produce expand their distribution radius and also helps preserve quality as well as nutrition during transportation. On top of that, of our total grocery business continues to explore innovation. And we help consumers get convenience as well as a broader selection of fresh produce.
spk08: We are also making great progress in the innovation and transformation of agricultural technology. We are continuously strengthening and cooperating with the top agricultural universities. We have recently donated 100 million yuan to the Chinese Agricultural University. We also continue to drive agri-tech innovation as well as adoption. And we are deepening our cooperation with top economic institutes. For example, we recently donated
spk06: 100 million RMB to support cutting-edge research at China Agricultural University. In addition to that, our platform itself can allow more research findings quickly reach the market, which can help bring more quality products to consumers. And we also proactively support every seller with our platform resources, including traffic, to help quality produce reach more end consumers. So in this way, the quality sellers and the platform can grow together healthily. and constantly improve product and service quality.
spk08: Agriculture is our long-term strategy, so we will continue to mobilize platform resources and also our influence.
spk06: go deep into the supply chain and bring more quality of produce to consumers. Thank you. Okay, it's about time. And thank you everybody for joining us on the conference call today. Thank you and have a great day.
spk23: Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. We may all disconnect. Thank you. you Thank you. you you Thank you. Thank you. Ladies and gentlemen, thank you for standing by and welcome to PDD Holdings, Inc. First Quarter 2023 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 then 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 today, Mr. Cheng Peng. Sir, please go ahead.
spk06: Thank you, operator. Hello, everyone, and thank you for joining us today. My name is Cheng, and I will help host the earnings call. PDD Holdings' earnings release was distributed earlier and is available on our website at investor.pddholdings.com, as well as through our group's newsletter 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 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 Co-Chief Executive Officer, Zhao Dajun, our Executive Director and Co-Chief Executive Officer, Liu Jun, our VP of Finance. Lei and Jiazhen will make some general remarks on our performance for the past quarter and our strategic focus. Jun will then take us through our financial results for the first quarter ended March 31, 2023. During the Q&A session, Lei and Jiazhen will answer questions in Chinese, and we 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's my pleasure to introduce our chairman and co-chief executive officer, Chen Lei. Lei, please go ahead.
spk03: Hello, everyone. Thank you for joining our early call for the first quarter of 2023. I will start by giving a brief overview of our first quarter results. We achieved a total of RMB 37.6 billion in revenue this quarter, representing a 58% year-on-year increase. During the past quarter, we saw consumer sentiment continue to improve. We have seen a surge in demand across various categories, reflecting consumer's eagerness to explore the wide range of products we offer. According to results also show that our long-term strategic focus on high-quality development is starting to paying off. We are glad to see that the focus on quality development not only sets us on a solid routine for the future, but also delivers immediate gains for consumers and sellers. We are encouraged by the strong backing from our stakeholders. We work hard to create a lively marketplace where consumers can find what they are looking for and where high-quality sellers can thrive and succeed. Technology is very important to our mission to build a healthy and vibrant platform ecosystem. It is also a vital catalyst to drive efficiency and opportunities in the manufacturing and the retailer sectors. That is why we are putting more time and resources into R&D to foster sustainable progress. Our engineers make up about half of our total employees. R&D helps us meet the unique needs of consumers, provide merchants with deeper understanding in shocking trends, and allow manufacturers to respond swiftly to evolving demand. By making supply and demand work better together, we can help unlock the potential in different industries. We will continue to step up our investment in R&D. And now, let me talk about our globalization effort. Last year, we launched Tmoo to offer quality products at affordable prices to consumers around the world. By working closely with sellers and manufacturers, Tmoo offers a wide selection of merchandise, reduces supply chain inefficiencies, passing on savings to consumers. As we move forward, we will keep seeking ways to meet diverse consumer needs, and we are still in the early stage of exploration. We will always start from the fundamental needs of consumers, adapt quickly, and strive to create our own unique value. As we continue to grow, we are finding more ways to generate a positive impact to the society. A vibrant and sustainable e-commerce ecosystem can only be achieved by encouraging broader engagement in a digital economy. For instance, the advent of mobile internet has created a space for female entrepreneurs in e-commerce, enabling them to balance work and family. By providing the opportunities, we have enabled females to utilize their unique skills in managing successful e-commerce enterprises. In fact, Many of our platform's female entrepreneurs started their first business with us. They have created new jobs and injected new vitalities into their communities. We are committed to providing more opportunities for individuals to become entrepreneurs through training and a wider market access. We are proud in reading among the younger generation. We believe that Nurturing a passion for reading can open doors to knowledge. To this end, we hold regular reading events and donate books, and we invite reputable authors to talk with students in rural areas. We hope this will help young students broaden their horizons. We are also working to promote agricultural digital inclusion. We are helping young people who are passionate about agriculture to bring new technology from lab to the field. We are working with top universities and institutes to encourage innovation. We also hold competitions for young people to realize their skills and ideas, which help create innovative and sustainable farming practices. As a young company still in the development stage, we believe that through the increasing business opportunities facilitated by us, we can help uplift communities and make contributions to the society. We will do more as we grow. And finally, I want to introduce my longtime colleague, Mr. Zhao Jiazhen, who was recently appointed as the co-CEO and executive director by our board. Jiazong concentrates more on supply chain management and China operations, while my focus is more on globalization efforts. Jiazong is a founding member of our company. He led a team to launch and expand our DoDo grocery business and also led our supply chain efforts. Jiazhen and I have been working closely together for over a decade. We have established deep trust in each other. His new leadership role shows that our team is full of vitality and our next generation of leaders are ready to take on more challenges. And now, I will hand over to Jiazhen.
spk08: Thank you, Chen Lei. Hello, everyone. I am Jiazhen. 很高興參加本次的業績會。 Thank you, Les.
spk06: Hello, everyone. This is Zhao Jiazhen. I'm glad to join this earnings call. In Q1, many places introduced measures to promote consumption. We see clear recovery trends. Online retail continues to pick up. Users on Pinduoduo show a higher willingness to shop. Consumption mortality is becoming increasingly evident. These favorable trends lay a solid foundation for the steady growth of consumption for the whole year. we are very optimistic about the prospects of the consumption market. Over the past quarter, we actively mobilized platform resources to stimulate and realize the consumption potential. As always, we provide users quality merchandise with more savings. In the various large-scale promotional campaigns in Q1, such as the Chinese New Year promotion and the New Year sale, we stepped up discounts and issued extra coupons to benefit as many users as possible. 在近期舉辦的上海五五公務節,
spk08: We invested more than 400 million yuan in consumer subsidies, which is the largest amount of subsidies. During this period, we cooperated with the Central Broadcasting Television and the Central Television, and launched a live delivery of goods. Through a comprehensive display of various products, we promote consumers' trust in online shopping. At the same time, our多的买菜 also actively opened up and innovated, and often created new consumer scenarios to improve the effect of buying vegetables on the surrounding consumption.
spk06: recently in this year's Double Five Shopping Festival in Shanghai, we invested over 4 billion RMB in coupons and discounts, marking a new high. During this event, we partnered with China Central Television and Oriental TV on live streaming sales, showcasing a wide range of products to viewers in an interactive and direct manner, enhancing consumer trust in online shopping. Furthermore, our DodoGrowthrate team actively explores innovation by creating new consumption scenarios and deepening the spillover effect of the pick-up points of surrounding areas' consumption. We hope this can further promote the development and integration of online and offline consumption.
spk08: We proposed a 618 consumption concept every day. In order to guarantee a good price, we fully optimize services from multiple dimensions to guarantee the consumer experience. In the activities of many reading pages launched in late April, we invested in a reading fund of one yuan level to assist in the accumulation of high-quality readings. The evaluation report from the third-party platform shows that in the five indicators of comprehensive price, positive security, social services, logistics, and discount rates, the comprehensive purchasing experience of the platform
spk06: In addition to our strong suit of more savings, we have further improved our ability to provide better services to optimize the consumer experience. We launched the electronics shopping season in advance in April and introduced the concept of Every Day is June 18. We not only ensure good prices, but also upgrade services on many fronts to improve consumer experience. In the Dodo Reading Month, which kicked off in late April, we invested hundreds of millions RMB to promote high-quality and universal access to reading. A third-party evaluation report shows that in five dimensions, including price, authenticity, after-sales support, logistic efficiency, and promotion level, the Pingo Dodo platform's overall shopping experience for books ranks as one of the best among many e-commerce peers.
spk08: Against the backdrop of consumption recovery,
spk06: to satisfy the diversified needs of consumers and form a driving force for expanding consumption is both an opportunity and a challenge for us. We aim to further improve the platform ecosystem through a series of impactful measures, including increasing discounts, upgrading services, and fully protecting consumer rights. We hope to further boost consumption lethality through our focus on quality development of the platform ecosystem.
spk08: 消费回暖的同时也带来了更加激烈的行业竞争, 随着竞争的激烈并且进一步异化, 一些竞争行为已经超出了正常的商业范畴。 As consumption rebound, it also brings about more intense industry competition. As competition further intensifies,
spk06: some competitive behaviors have gone beyond the scope of normal business activities. For example, since late March, dozens of flagship stores on Pingo Doors were bombarded with malicious orders. The attackers disrupted the store's normal operation in a clearly organized and purposeful way, causing significant losses. We immediately provided protection to the affected stores and upgraded our defense strategies. The stores were back in normal business operation very soon.
spk08: 我们认为竞争能够激励我们更高效的学习,更快速的创新,从而也能促进服务的快速迭代。 我们将继续坚持消费者导向,以正面和积极的方式应对所有类型的竞争。 即使是面对恶意的攻击,我们也会善意地解读。 We believe that competition can motivate us to learn more efficiently and innovate more quickly.
spk06: so that we can speed up the iteration of our services. We will continue to be consumer-oriented and react positively and actively to all types of competition. Even when we face malicious attacks, we will maintain positive thinking.
spk08: We will turn attacks from competitors into our motivation to move forward. We will stick to our本分, improve ourselves constantly.
spk06: innovate with a clear direction and guide the platform towards higher quality development. For example, we have upgraded the shipping processing time for most merchandise categories from 72 hours after placing the order to no later than 48 hours. We will provide preferential after-sales services for elderly consumers and consumers in remote areas. In addition, we take a more proactive approach in customer service. such as offering consumers the option to receive refunds without returning the item.
spk08: At the same time, we will further step up our support for quality supply and our investment in the supply chain.
spk06: we are launching the 10 Billion Ecosystem Initiative to offer resources and support to quality sellers and products so that we can promote the quality growth of SMEs and quality sellers and improve the overall seller service efficiency and standard. For supply chain, over the years, we have rooted ourselves deeply in major production areas and industrial belts. We connect products directly with end consumers reduce distribution layers, and lower the procurement and sales cost between supply and demand. We will continue to increase investment, optimize our supply chain capabilities, strengthen the buildup of physical supply chain infrastructure, contribute to the transformation and upgrade of traditional sectors, and further deepen our competitive advantages. 今年以來,拼多多對內持續優化品牌治理,
spk08: This year, Pinduoduo has continuously optimized platform governance and actively takes on social responsibilities. We strive to bring warmth and responsibility.
spk06: For example, we have recently launched several dedicated initiatives, such as the initiative to protect the miners and the initiative on authentic books, to name a few, so that we can build a positive ecosystem for sustainable development.
spk08: provide professional training for farmers and merchants, help them connect with logistics and cold chain logistics systems that are suitable for farmers and merchants, reduce transportation losses, and improve product competitiveness. For the construction of agricultural product brands, we have found special products from various industries, continue to focus on exposure, and guide them to invest in 100 billion subsidies to improve their profitability. Through similar agricultural operation projects, we hope to make more industries run out of the local sheep,
spk06: We also promote digitization in agriculture, and we launched the Agriculture Cloud Initiative. To date, our dedicated team has gone deep into the various production regions in many provinces. We provide specialized e-commerce training for farmer sellers and help connect them with logistics infrastructure suitable for agricultural produce such as warehousing and co-chain logistics to reduce transportation and improve product competitiveness. To support brand-building agriculture, we search for high-quality specialty products, provide strong traffic support, and help them gain recognition by including them in our 10 billion program. Through initiatives similar to the Agriculture Cloud Initiative, we hope to enable more local production regions to emerge as leaders of certain products and drive the digital transformation of the entire industry value chain.
spk08: We continue to strengthen our cooperation with top agricultural universities, improve the support capabilities of advanced technology in agricultural transformation and design, and assist in the transformation of technology. We continue to take part in the Pinduoduo Cup Small Technology Competition, the Duoduo Agricultural Technology Competition, and other agricultural development competitions around the world. To promote innovation in the competition, to encourage more young people to enter the agricultural sector. At the same time, by selling anti-pollution research, we will further promote the transformation of research results. In recent years, as part of the 100 billion agricultural research, we have also donated 100 million yuan to the Chinese Agricultural University, set up the Pinduoduo Chinese Agricultural University Research Fund, and further support the basic research and innovation of agricultural technology. We have won the 2022 Annual Innovation Award from the United Nations Agricultural Organization. We continue to deepen our cooperation with top economic institutes to support the role of agri-tech in agricultural transformation and promote agri-tech adoption. We have hosted various events
spk06: focusing on agricultural development, such as the Pinduoduo Cup Growing Competition, the Smart Agriculture Competition, and the Global Agricultural Innovator Competition. These competitions promote innovation and inspire more young people to join agriculture. It also leverages sales to support research and helps bring more research funding to the market. As a part of our 10 billion agricultural initiative, We recently donated 100 million RMB to set up the Pinduoduo and China Agricultural University Research Fund to further support fundamental research and innovation in agri-tech. We are proud to receive the FAO 2022 Innovation Award from the United Nations Food Agriculture Organization, which recognizes our innovation in the agricultural supply chain. We were the sole recipient of this award globally in 2022. We will continue to work hard, support digital transformation and technology adoption in agriculture, and uphold the principle of tech for good.
spk08: We will stick to the principle of quality first, continue to carry out our business, and actively take on greater social responsibility. At the same time, we will use food as our basis, continue to increase our supply chain investment, We will stick to our quality first principle, continue to live up to our role, and proactively take up bigger social responsibilities. Additionally, we will remain rooted in the real economy
spk06: increase investment in the supply chain, and search for strong driving forces towards our high-quality development. We will speed up the process of building up a healthy ecosystem featuring more savings and better services. I look forward to working together with the team to promote high-quality development and promote a healthy win-win outcome for our platform ecosystem. 有她为大家介绍一下我们的财务表现。 Now, let me hand it over to Jing. She will provide you with an update on our financial performance.
spk18: Thank you, Jiajun. Hello, everyone. Let me walk you through our financial performance for the first quarter ended March 31, 2023. In terms of income statements, Our total revenues in the quarter were RMB 37.6 billion, up 58%, RMB 23.8 billion in the same quarter of 2022. This increase mainly came from encouraging trends in consumer sentiment and positive responses from consumers and merchants towards our focus on high-quality developments. Revenues from online marketing services and others will be 27.2 billion this quarter, up 50% compared with the same period of 2022. Revenues from transaction services this quarter will be 10.4 billion, up 86% versus the same period of 2022. Moving on to cost and expenses. Our total cost of revenues increased 55% from RMB 7.2 billion in Q1 2022 to RMB 11.1 billion this quarter, mainly due to increased fulfillment fees and payment processing fees. Total operating expenses this quarter were RMB 19.6 billion on a gap basis, versus RMB 14.5 billion in the same quarter of 2022. On a non-GAAP basis, our total operating expenses increased to RMB 18.1 billion this quarter, from RMB 13 billion in Q1 2022. We rolled out several large-scale promotional campaigns to help boost user sentiment, and we continue to invest in our long-term focus areas to support our high-quality development. Our total non-GAAP operating expenses as a percentage of total revenues this quarter is 48%, compared to 54% in the same quarter last year. Looking into specific expense items, our non-GAAP sales and marketing expenses this quarter will only be 15.8 billion, up 47%, versus the same quarter of 2022. On non-GAAP basis, our sales and marketing expenses as a percentage of our revenue this quarter was 42%, compared with 45% for the same quarter in 2022. In Q1, we actively leveraged the platform resources to facilitate consumption recovery. Our non-GAAP general and administrative expenses were RMB $338.3 million versus RMB $208.8 million in the same quarter of 2022. Our known gap research and development expenses were RMB $2 billion this quarter. R&D is a top priority and a long-term focus for us. We're committed to further strengthening our R&D capabilities, and we continue to increase investment in this area. Operating profit for the quarter was RMB 6.9 billion on a GAAP basis, compared with operating profit of RMB 2.2 billion in the same quarter of 2022. Non-GAAP operating profit was RMB 8.5 billion versus operating profit of RMB 3.7 billion in the same quarter of 2022. Net income attributable to ordinary shareholders was RMB 8.1 billion, compared with RMB 2.6 billion in the same quarter of 2022. Basic earnings per ADS was RMB 6.13, and dilute earnings per ADS was RMB 5.55, versus base earnings per ADS of RMB 2.06, and dilute earnings per ADS of RMB 1.6. in the same quarter of 2022. Non-GAAP net income attributable to ordinary shareholders was RMB 10.1 billion, compared with RMB 4.2 billion in the same quarter last year. Non-GAAP diluted earnings per ADS was RMB 6.92 versus RMB 2.95 in the same quarter of 2022. We continue to increase investments and focus on creating sustainable and a vibrant ecosystem to support our long-term, high-quality development. That completes the income statement. Now let me move on to cash flow. Our net cash flow generated from operating activities was RMB 1.3 billion, compared with the cash outflow of RMB 9.1 billion in the same quarter of 2022. mainly due to the increase in net income and the changes in work impact. As of March 31st, 2023, the company had RMB 157 billion in cash, cash equivalents, and short-term investments. Thank you. This concludes my prepared remarks.
spk06: Thank you, Jean. Next, we will move on to the Q&A session. Today's Q&A session Lei, Jiajun, and Jin will take questions from analysts on the line. We will take a maximum of two questions from analysts. Lei and Jiajun will answer questions in Chinese and we will help translate their remarks for easier reference. Operators, you may now take questions on the line.
spk23: Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star and the one on your telephone. and wait for your name to be announced. If you wish to cancel your request, please press star, send to. Participants are requested to restrict to two questions at each time. Your first question today comes from Joyce Zhu with Bank of America. Please go ahead.
spk20: Good evening. Thank you for giving me this opportunity to ask a question. I have two questions. First, we see that the recent company structure adjustment has become a mode of connecting with the CEO. Will this change the company's future strategy? What is the main growth driving force in the future? We also noticed that in the connection CEO structure, President Chen Lei put more energy on globalized business. Does this mean that the globalization strategy is now an important level of improvement? 我的第二个问题是公司这个季度的业务收入 在广告上面同比增加了50% 和上个季度相比要加快了一些 我们应该怎么理解这一季度的收入的加速 管理层是否能和我们分享一下这个季度的业务亮点 非常感谢 I will translate myself My first question is noting PDD recently implemented the co-CEO structure How does the change affect your group strategies? What are your key growth drivers going forward? Per your announcement, post the co-CEO structure change, Laywell focused more on the globalization side. Does that mean your globalization strategy now has a higher priority? My second question is related to top-line growth. Your online marketing services revenue increased by 50% year-over-year this quarter. accelerating from the last quarter. How should we think about this re-accelerated momentum? What PDD has done this quarter contributing to this? Thank you very much.
spk03: Joyce, thank you for your question. I'm Chen Lei. Let me answer the first question you asked about the company strategy.
spk04: Hi, Joyce. Thank you very much for your question. And this is Lei. I can take your first question on strategies.
spk05: Judge and I have been working together for many years, and we have established deep trust. With our goal of high quality development in mind, we have constructed very clear long-term strategies, and we will continue to lead our team in terms of execution. And on top of that, we will leverage our different backgrounds and ideas and be efficient in decision-making.
spk03: In the past, we have been gradually adjusting the strategic focus. From the speed of attention to growth to the quality of development. This adjustment has received positive feedback from consumers and business owners. This also reflects the revenue of our quarter.
spk05: Over the past period of time, we are steadily shifting our strategic focus from the speed of growth towards the quality of growth. And we have seen positive feedback from both consumers and sellers on this shift, which is also reflected in this quarter's results. 那么在我们长期的战略下,我们正在持续地提升供应链的能力,增加优质的供给,
spk03: Under our long-term strategies, we are continuously strengthening our supply chain capabilities
spk05: and also expanding the supply of high-quality merchandise. We will further increase our support for quality sellers by launching our 10 billion ecosystem initiative and further push forward our platform's overall quality. And in addition, we will continue to optimize our platform ecosystem.
spk03: As a technology-oriented company, the value we create As a tech-driven company, the value we create is inseparable from our R&D capabilities. So we are also strengthening our R&D capabilities
spk05: and increasing our R&D investment. Currently, our R&D team makes up about half of our total employees.
spk03: China is a huge market. We still have a great potential for development in China. We believe that in the near future, the Chinese market will become our main market. Of course, we also see that the market is changing very quickly. The China market is huge.
spk05: and we see big potential for us to further grow. We believe that in the foreseeable future, China market is our biggest market. At the same time, we also note that it is changing very fast and competition is intense, which demonstrates both challenges and opportunities. This is why our board has appointed Jiajun as Co-Chief Executive Officer to design and execute strategies together with me and further strengthen our China operations team. Next, let me hand over to Jiazhen.
spk08: Thank you, Chen Lei. First of all, I am very honored to gain the trust of the board. I am very excited about the new appointment. At the same time, I also feel a lot of responsibility and pressure. While the entire industry is recovering, we are also entering a new stage. Thank you, Lei. And first, I'm honored that our board put their trust in me. I'm very excited for my new role
spk06: At the same time, I feel a responsibility and challenge. As the industry recovers, we are also entering a new stage. And in the past few years, we successfully shifted from marketing-driven to R&D-driven, and this lays a solid foundation for our development. Now we reach the gate of another stage, which is the stage of dedicating ourselves to promoting holistic high-quality development.
spk08: In this new stage,
spk06: we are further improving our platform ecosystem, upgrading consumer services, increasing support for quality supply, and also deepening our supply chain expertise. We constantly optimize platform governance to further build a socially responsible platform.
spk08: We believe that the investment in the platform ecosystem and supply chain
spk06: And we believe that investing in our platform ecosystem, supply chain, and also R&D can create long-term value. And we will lead our team together to execute these strategies with determination. accelerating our footsteps in entering this new stage of high-quality development.
spk08: 我再来回答一下关于增长的问题。 And let me also take your question on revenue growth. 在过去的一个季度以来,随着各地促进消费的政策的落地,我们也看到了消费信心在持续的恢复。 In the past quarter, many places introduced policies to support consumption.
spk06: We see a continued improvement in consumer sentiment, and these trends show a good beginning for 2043. We have also benefit from this, and our platform consumption mortality is further boosted.
spk08: In order to help the consumer recover, we insist on starting from the consumer's needs, and fully mobilize the platform's resources. In order to continue to bring more customers to the meeting, we have also continuously organized many large-scale sales activities, and issued additional vouchers and discounts to benefit consumers, at least to increase their consumer confidence,
spk06: To support consumption recovery, we continue to start from consumer demand and actively mobilize our platform resources. To give consumers more savings, we organized several large-scale sales events in a row and gave out extra coupons to boost consumer sentiment.
spk08: 我们全面升级了消费者的保护和服务。 举个例子,我们平台绝大多数的商品已经从72小时发货,升级为了48小时内发货。 We also strive to give better services to our consumers. So we have upgraded consumer protection and also services throughout the entire shopping spirit. For example, for most of the product categories,
spk06: the shipping process and time has been cut down from 72 hours to within 48 hours.
spk08: We have built such a versatile and easy-to-use platform ecosystem, which has brought us good consumer and business feedback. At the same time, the growth of EGZ has also initially reflected the results of this ecosystem construction. If we look back, we still need to work hard to further train our internal workers and create more consumer values. Our virtual platform ecosystem of more savings and better services has earned us a decent consumer and seller feedback.
spk06: Also, our Q1 growth is an early testament to our progress in building up the platform ecosystem. Looking ahead, we still need to remain down to earth and further strengthen our core capabilities so that we can create more value for consumers. For example, we are launching the 10 billion ecosystem initiative to further support quality supply. Thank you. Hi, operator. I think we're ready to take the next question on the line.
spk23: The next question comes from Natalie Wu with Ketone International. Please go ahead.
spk22: Good evening. Thank you for accepting my question. I have two main questions. The first one is related to the COVID-19. We see that many e-commerce companies have launched a large-scale plan and strategy this year. It seems to be very strong. I don't know what the company's strategy is for this. So how does the management think about how to maintain our competitive advantage in the future? Especially for the price, does this mean that the price will increase in order to maintain the lowest price? So the second question is, we see that the company's profit this quarter, although it is better than last quarter, is decreasing. So what is the main reason behind this? Let me translate myself in English. Thanks for taking my question. So I have two questions here. First one is, with the June 18th approaching, we see that many of your peers have rolled out DTS promotion, which seems to be very aggressive. Just wondering what's your response and how do you plan to maintain your competitive advantage specifically for pricing? Do you think there will be an endless spiral of increasing discounts to ensure the lowest price? And secondly, we noticed that the profit-raising margin, this quarter, is another sequential decrease. Just wondering what are the major reasons behind Is it because of the seasonality or competition? Does it mean that you are now actively spending extra for growth?
spk08: Thank you. This is Jia Zheng here, and thank you for your questions. I want to share my views on competition. So instead of paying too much attention to what
spk06: are doing. We actually focus more on how we grow in competition. We view competition as a testing ground, and it motivates us to iterate quickly. As I have mentioned in my remarks, we are always consumer-oriented, and we actively and positively embrace all types of competition.
spk08: multi-tasking plus good service and healthy ecology. The core of multi-tasking is the improvement of retail efficiency. We will further enhance the technical capability and improve the capability of accurate matching tools. We will also root for more industries and industrial areas, and direct consumers of high-quality products. For example, in the project of agricultural operation, we rely on the ability of the industry to bring fair price to more users. We are accelerating to build up a healthy ecosystem of more savings and better services. Our more savings essentially comes from retail efficiency improvement.
spk06: And we will continue to strengthen our R&D to help better match supply and demand. We will also root ourselves deeply in more production regions to connect quality product to consumers directly. So, for example, in initiatives such as our agriculture initiative, agriculture cloud initiative, We are leveraging our supply chain expertise to offer more users quality and also affordable agricultural produce. And we hope to further improve efficiency and turn it into a sustainable price advantage for consumers. At the same time, we also continue to increase discounts and issue more coupons to give back to consumers directly.
spk08: And better services is another important area.
spk06: we are optimizing our service quality throughout the entire shopping experience. So, for example, we offer extra care to the elderly people and also consumers living in remote areas, and we give them preferential customer services. We have also upgraded our post-sales services. such as offering consumers the option to receive a refund without having to return the item. And we are launching a dedicated 10 billion ecosystem initiative and this aims to channel more resources towards high quality sellers to support SMEs and also quality businesses and enhance the platform overall service efficiency and quality. and we will continue to focus on self-improvement in competition and strive to create more value for consumers. Thank you.
spk18: This is Jane. Thanks, Natalie, for your questions. I will address your question on profitability. Well, as just Le pointed out, we have very clear long-term strategies, and we see many areas to further improve. We're executing these strategies with determination. We will continue to nurture the development of a healthy, more savings, and better services platform ecosystem. We firmly believe our patient investment can generate value for consumers, sellers, and the platform ecosystem. Feedback from consumers and sellers also make us more determined in seeking quality development. So we plan to further step up our long-term investment. For example, we are launching our 10 billion ecosystem initiative to support quality sellers and improve our overall platform ecosystem. As we deepen our efforts, our profitability level decreased in the past two quarters on a quarter to quarter basis We think it is normal for probability to have a lot of change between quarters. Thank you.
spk06: Operator, we may take questions from the next analyst on the line.
spk23: The next question comes from Kenneth Fong with Credit Suisse. Please go ahead.
spk07: Hey, thank you for accepting my question. I have two questions. The first is, can you introduce us to our global business, TAMU? How big is the financial impact on this sector? How many users are there in this business? And the management team can also share with us, for example, how big is the number of orders now? My second question is from the financial side. We are now seeing more and more businesses operating on multiple platforms. We also see that the supply and demand of different platforms is getting more and more similar. Can the management team talk to us about the supply side, especially in terms of agricultural products? What are the characteristics of the company in terms of supply? Thank you, management, for taking my questions. I have two questions. First, for your global business, may management share what is the level of financial impact from Temu? How many users do you serve now? Could you maybe be able to give us an update matrix such as order volume? And I have a second question. Now we see more sellers are opening up stores across multiple platforms. So it seems the merchant style selection on different platforms are becoming more and more similar. Can management share with us what your differentiation are on the supply side, especially for your agricultural products? Thank you.
spk18: Thanks, Kenneth. I will take your first questions about the financial impact of Timu. Well, this business is currently in its early stage. and compared to our overall scale, its revenue contribution is small. For TIMU, as we mentioned before, our focus is always how to better understand consumer needs and how to satisfy these needs. Financial metrics will be a natural result of our value creation. We will follow our financial discipline and ROI-driven approach when evaluating each investment opportunity. Thank you.
spk06: Hi, this is Jiazhen, and let me take your question on supply chain and agriculture. In many categories, we see a lot of room to expand and optimize supply. For example, the digitization rate for agricultural products is still low. We see a lot of mass demand. And we also see a lot of quality agricultural produce are not efficiently distributed.
spk08: And we are committed to leveraging our resources to increase supply chain efficiency and also to help
spk06: more quality produce connect to the nationwide market. We provide e-commerce training and connect farmers with every focused logistics resources, which helps more produce expand their distribution radius and also helps preserve quality as well as nutrition during transportation. On top of that, our total grocery business continues to explore innovation. And we help consumers get convenience as well as a broader selection of fresh produce.
spk08: We are also working hard to promote the innovation and transformation of agricultural technology. We are constantly strengthening our cooperation with the top agricultural universities. We have donated 100 million yuan to the Chinese Agricultural University in recent years. We hope to contribute to the research of advanced technology
spk06: We also continue to drive agri-tech innovation as well as adoption, and we are deepening our cooperation with top economic institutes. For example, we recently donated 100 million RMB to support cutting-edge research at China Agricultural University. In addition to that, our platform sales can allow more research findings quickly reach the market, which can help bring more quality products to consumers. And we also proactively support every seller with our platform resources, including traffic, to help quality produce reach more end consumers. So in this way, the quality sellers and the platform can grow together healthily. and constantly improve our product and service quality.
spk08: Agriculture is our long-term strategy, so we will continue to mobilize platform resources and also our influence.
spk06: go deep into the supply chain and bring more quality of produce to consumers. Thank you. Okay, it's about time. And thank you, everybody, for joining us on the conference call today. Thank you, and have a great day.
spk23: Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. We may all disconnect.
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