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spk05: 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 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. Cheng Ting. Sir, please go ahead.
spk02: 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 .pddholdings.com as well as through a group of new cloud 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 31st, 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.
spk13: 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% -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 quarter results also show that our long-term strategic focus on high-quality development is starting to paint off. We are glad to see that the focus on quality development not only sets us on a solid footing 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 liver-leaf 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 efforts. Last year, we launched TEMU to offer quality products at affordable prices to consumers around the world. By working closely with sellers and manufacturers, TEMU offers a wide selection of merchandise, inducing supply chain inefficiencies, helping with 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 ecosystem, 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 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 wider market access. We are prom-promising 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. Finally, I want to introduce my longtime colleague, Mr. Zhao Jiazhe, who was recently appointed as co-CEO and executive director by our board. Jiazhe concentrates more on supply chain management and China operations, while my focus is more on globalization efforts. Jiazhe is a founding member of our company. He led the team to launch and expand our dodo grocery business and also led our supply chain efforts. Jiazhe 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 Jiazhe.
spk15: Thank you, Mr. Zhao. Hello, everyone. I am Zhao Jiazhe. I am very happy to attend this year's business meeting.
spk02: Thank you, ladies. Hello, everyone. This is Zhao Jiazhe. I am glad to join this earnings call.
spk15: In the first quarter, different places have been making mistakes to promote consumer growth. We have also seen a significant trend in the supply chain. The online market is continuing to improve. The consumer desire of the Pinduoduo platform is also continuing to grow. The consumer firepower is accelerating. This good attitude has laid the foundation for the consistent growth of consumer growth throughout the year. We are very optimistic about the future of the consumer market.
spk02: 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 vitality 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.
spk15: In the previous quarter, we have moved the platform's resources to further help the consumer to actively and positively transform. We have provided good products to our users as usual. In the first quarter, the annual holiday, Spring Festival, and the opening of a series of large-scale events, we have added subsidies and extra gift vouchers to make the gift vouchers cover as many users as possible.
spk02: 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.
spk15: In the recent Shanghai 55 shopping festival, we have invested more than 4 billion yuan in consumer subsidies. It is the largest amount of subsidies. During this period, we have worked with the Central Broadcasting Television and the Oriental TV, and landed on the live stream of Daihuo. Through a comprehensive display of various products, we have improved the customer's confidence in online shopping. At the same time, our online shopping is also actively opening up and innovating. We have tried to create a new consumer scene, improve the buying platform, and improve the customer's customer service. We have promoted the integration and development of online and offline.
spk02: 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 total growth rate team actively explores innovation by creating new consumption scenarios and deepening the spillover effect of the pickup point of surrounding areas' consumption. We hope this can further promote the development and integration of online and offline consumption.
spk15: In addition to the strength of the Double Five, we have further improved our service capabilities. We have launched the digital home appliance consumer season in April and have proposed the 618 consumer concept every day. We have fully guaranteed the value of our services, and have fully optimized our services from multiple angles to ensure the customer experience. During the many reading events launched in the next quarter of April, we have invested in the 1-yen reading fund, which helps to increase the amount of reading. The evaluation report from the third platform shows that the comprehensive price, the guarantee of the product, the service, the logistics, the practicality, and the five items that will be used, the comprehensive purchase experience of the Pinduoduo platform are the top priority in the many online platforms. In
spk02: 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 ensured 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.
spk15: Under the big background of the physical consumer, high quality meets the diversification needs of consumers. The combination of expansion and expansion of consumers is both an opportunity and a challenge for us. We hope to use the expansion of subsidies, expanding the category, and upgrading services to fully protect the rights and interests of consumers. We will further optimize the ecosystem of the platform. Through the high quality transformation of the platform's ecosystem, we will further boost the consumer's energy.
spk02: Against the backdrop of consumption recovery, 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 vitality through our focus on quality development of the platform ecosystem.
spk15: As consumption rebounds,
spk02: it also brings about more intense industry competition. As competition further intensifies, some competitive behaviors have gone beyond the scope of normal business activities.
spk15: For
spk02: example, since late March, dozens of flagship stores on Pingoduo 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.
spk15: We believe that competition can encourage us to learn more efficiently, to innovate more quickly, and to quickly bring in more services. We will continue to stick to the direction of consumers, and face all kinds of competition in a positive and positive way. Even if we face malicious attacks, we will still be able to read the comments.
spk02: 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. We will take attacks from competitors into our motivation to move forward. We will stick to our own duties and prove ourselves constantly, innovate with a clear direction, and guide our competitors to the right path. We will provide 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 also provide preferential after-sale 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.
spk15: At the same time, we will further increase the impact of the positive attack on the customer service and the investment in the supply chain. We will establish a 100 billion ecosystem, and support the promotion of quality products and businesses, and promote the quality of small and medium-sized enterprises to achieve high quality growth, and improve the overall service efficiency and quality of platform customers. In terms of the supply chain, we have increased the supply chain and production lines for many years. The connection between products and consumers has reduced traffic, and reduced the cost of the supply and demand of the two-stage production. We will continue to increase investment, improve the ability of the supply chain, strengthen the construction of the physical supply chain, and promote the transformation and upgrade of traditional industries, and further build the advantage and disadvantage.
spk02: At the same time, we will further step up our support for quality supply and our investment in the supply chain. 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 standards. For supply chain, over the years, we have rooted ourselves deeply in major production areas and industrial belt. 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 build-up of physical supply chain infrastructure, contribute to the transformation and upgrade of traditional sectors, and further deepen our competitive advantages.
spk15: This year,
spk02: Pinduoduo has continuously optimized platform governance and actively takes on social responsibilities. We strive to bring warmth and responsibility. 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.
spk15: We have also been able to promote the development of agricultural products, and promote the agricultural fish movement throughout the country. So far, the special team has entered the main agricultural areas of many agricultural cities, providing special training for farmers and farmers' families. They are helping to connect the storage and storage systems suitable for farming, reduce the loss of transport, and improve the competitiveness of products. In order to help the construction of agricultural products, we have found special products from all the agricultural areas, and we have been focusing on exposure, and we have been leading them to increase the visibility of the 100 billion subsidies. Through similar agricultural projects, we hope to bring more agricultural areas to the top of the local market, and to drive the digitalization of the entire production capacity.
spk02: 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 cold chain logistics, to reduce transportation spoilage 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.
spk15: Thank you. We
spk02: continue to defend our cooperation with top economic institutions to support the role of agri-tech in agricultural transformation and promote agri-tech adoption. We have hosted various events focusing on agricultural development, such as the Tinduoduo 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 Tinduoduo and China Agriculture 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 agriculture supply chain. We were the sole recipient of this award globally in 2022. We will continue to work hard to support digital transformation and technology adoption in agriculture, and uphold the principle of tech for good. 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, including the agricultural sector, 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. Now, let me hand it over to June. She will provide you with an update on our financial performance.
spk03: Thank you, Jiazhen. Hello, everyone. Let me walk you through our financial performance for the first quarter ending March 31, 2023. In terms of income statements, our total revenues in the quarter were RMB 37.6 billion. Up 58 percent, RMB 23.8 billion in the same quarter of 2022. This increase meaning came from encouraging trends in consumer sentiment and positive responses from consumers and merchants towards our focus on high-quality development. Revenues from online marketing services and others were RMB 27.2 billion this quarter. Up 50 percent compared with the same period of 2022. Revenues from transaction services this quarter were RMB 10.4 billion. Up 86 percent versus the same period of 2022. Moving on to cost and expenses. Our total cost of revenues increased 55 percent from RMB 7.2 billion in Q1 2022 to RMB 11.1 billion this quarter. Meaning 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 non-gap basis, our total operating expenses increased to RMB 18.1 billion this quarter. From RMB 13 billion in Q1 2022. Broke 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-gap operating expenses as a percentage of total revenues this quarter is 48 percent. Compared to 54 percent in the same quarter last year. Looking into specific expense items. Our non-gap sales and marketing expenses this quarter were RMB 15.8 billion of 47 percent versus the same quarter of 2022. On non-gap basis, our sales and marketing expenses as a percentage of our revenue this quarter was 42 percent. Compared with 45 percent for the same quarter in 2022. In Q1, we actively leverage the platform resources to facilitate consumption recovery. Our non-gap general and administrative expenses were RMB 338.3 million versus RMB 208.8 million in the same quarter of 2022. Our non-gap research and development expenses were RMB 2 billion this quarter. RNZ is a top priority and a long-term focus for us. We are committed to further strengthening our RNZ capabilities and we continue to increase investment in this area. Operating profit for the quarter was RMB 6.9 billion on a gap basis. Compared with operating profit of RMB 2.2 billion in the same quarter of 2022. Non-gap 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 basic earnings per ADS of RMB 2.06 and dilute earnings per ADS of RMB 1.84 in the same quarter of 2022. Non-gap net income attributable to ordinary shareholders was RMB 10.1 billion. Compared with RMB 4.2 billion in the same quarter last year. Non-gap dilute earnings per ADS was RMB 6.92 versus RMB 2.95 in the same quarter of 2022. We continue to increase investment and focus on creating sustainable and vibrant ecosystems to support our long-term, high-quality development. That completes the income statements. 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 working factor. As of March 31, 2023, the company had RMB 157 billion in cash, cash recolons and short-term investments. Thank you. This concludes my prepared remarks.
spk02: Thank you, Jean. Next, we will move on to the Q&A session. Today's Q&A session, Leixia Zheng and Jean will take questions from analysts online. We will take a maximum of two questions from analysts. Leixia and Jean will answer questions in Chinese and we will help translate their remarks for easier reference. Operator, we may now take questions on the line.
spk05: Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star and 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star and 2. Participants are requested to restrict to two questions at each time. Your first question today comes from Joyce Ju with Bank of America. Please go ahead.
spk12: Good evening. Thank you for giving me this opportunity to ask. I have two questions. First, we have seen that the recent company structure has become a mode of contact with the CEO. Will this change the company's future strategy? What is the main driving force for growth in the future? We also noticed that in the company's CEO structure, Mr. Chen Lei will put more energy on global business. Does this mean that global strategy is now of importance? My second question is that the company's business revenue in this quarter has increased by 50% compared to last quarter. How should we understand the speed of revenue in this quarter? Can the management share with us the business volume of this quarter? Thank you very much. I will translate myself. My first question is, noting PDD recently implemented the co-CEO structure, how does the change affect your group's strategies? What are your key growth drivers going forward? Per your announcement, post the co-CEO structure change, Lei will focus 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% -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.
spk13: Joyce, thank you for your question. I am Chen Lei. I will answer the first question you asked about the company's strategy.
spk14: Hi Joyce, thank you very much for your question. This is Lei. I can take your first question on strategies.
spk13: How do you see the
spk14: companies' strategies in the next four months? I'm judging 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.
spk11: Under our
spk13: long-term strategy, we are continuing to improve our supply chain, and increase our advantage. We will also further increase our support for the -the-range consumers, by establishing a -billion-centre standard, and promote and improve the overall service quality of the platform. In addition, we will continue to optimize the overall platform's quality.
spk14: Under our long-term strategy, we are continuously strengthening our supply chain capabilities, and also expanding the supply of high-quality merchandise. We will further increase our support for quality sellers, by launching our -eco-system initiative, and further push forward our platform's overall quality. And in addition, we will also continue to improve our supply chain capabilities, and we will continue to optimize our platform's ecosystem.
spk11: As a technology-oriented company,
spk13: the value
spk00: we create is
spk13: inseparable from our research and development. So we are also continuing to strengthen our research and development capabilities, and
spk11: continue to expand our research and development path.
spk13: Currently, the research and development of the company has already reached half of the employees.
spk11: China is
spk13: an razing market. We can still have high potential to develop in China. Vide 호 podem轉 Xue, We can see the rapid change in the market. The competition is getting stronger. We can say that the competition is a challenge. That is why the board appointed Zhao Jiazhen as the CEO. We will develop and implement the strategy together. We will strengthen the team power
spk06: of China. Now, let me introduce the
spk14: situation. The China market is huge. 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. Competition is intense. We demonstrate both challenges and opportunities. This is why our board has appointed Zhao Jiazhen as the CEO. We will design and execute the strategy together with me. We will strengthen our China operations team. Next, let me hand over to Zhao Jiazhen.
spk15: Thank you, Mr. Lei. I am very honored to be appointed as the CEO. I am very excited about my new position. I feel a lot of responsibility and pressure. As the industry is recovering, we are entering a new phase. In the past few years, we have successfully shifted from marketing to research and development. We have laid the foundation for our development. Now, we are at the other end of the stage. We need to make every effort to advance the new stage of high-volume development.
spk02: We are consolidating the efficiency of our solutions
spk15: through elite development.
spk02: In this new stage, 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.
spk15: We believe that the investment in platform ecosystem and supply chain is of a lasting value. We will lead the team to firmly implement these strategies and accelerate the development of high-quality chip.
spk02: We believe that investing in our platform ecosystem, supply chain and also R&D can create long-term value. We will lead our team together to execute these strategies with determination, accelerating our footsteps and entering this new stage of high-quality development. Let me also take your question on revenue growth. In the past quarter, many places introduced policies to support consumption. We see continued improvement in consumer sentiment and these trends show a good beginning for 2023. We have also benefit from this and our platform consumption mortality is further boosted.
spk15: In order to help consumers recover, we have been working hard to shift the resources of this platform from consumer demand. In order to continue to bring more people to the table, we have also held large-scale sales activities, and have issued additional vouchers and discounts to help consumers, hoping to increase their consumer confidence.
spk02: We are also working hard 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.
spk15: We have also been working hard to bring good service to consumers. We have fully upgraded the protection and service of consumers. For example, most of our products have been shipped from 72 hours and have been upgraded to 48 hours.
spk02: We have also been working hard to give better services to our consumers. We have upgraded consumer protection and services throughout the entire shopping spares. For example, for most of the product categories, the shipping processing time has been cut down from 72 hours to 48 hours.
spk15: We have built a platform ecosystem with a good service and a good service, which has brought good customers and consumers feedback. At the same time, the growth of eGIS has also reflected the results of the ecosystem construction. Looking back, we still need to step back and further train our internal workers to create more consumer value. For example, we have launched a special project for the 100 billion-element ecosystem. We hope to further improve the platform's support for the best supply. Thank you.
spk02: 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-eco system initiative to further support quality supply. Thank you. Hi, operator. I think we are ready to take the next question on the line.
spk05: The next question comes from Natalie Wu with PeiKong International. Please go ahead.
spk04: What are the strategy for the company? How does the management think about how to maintain our middle ground? Especially with the price, does this mean that the price will continue to increase in order to maintain the price? The second question is that we see that the company's profit this season has also been good, but it has fallen compared to the previous season. What is the reason behind this? Is it because of the low price or is it because of the company's growth? Let me translate myself in English. Thank you for taking my question. So I have two questions here. The 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 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 certainly we noticed that your profit 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? Thank you.
spk15: Hello, I am Zhao Yazhen. Thank you for your question. Let me share with you our views on the industry competition.
spk02: This is Jia Zheng here. Thank you for your questions. I will share my views on competition.
spk15: Compared to the actions of the competitors, we will pay more attention to our own growth in competition. For us, competition is a test of our ability to test and to stimulate our quick response. As I mentioned in my speech, we stick to the direction of the consumers and will actively compete for all types of competition.
spk02: We are also increasing our growth in competition. We view competition as a testing ground. 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.
spk15: We are also accelerating the construction of a healthy ecosystem with a good service. The core of the multi-facility is from the improvement of retail efficiency. We will further enhance our technical capabilities and improve the ability to accurately match the tools. We will also root for more industries and industries, like the quality of the product, the direct consumers. For example, in the agricultural project, we rely on the ability of the industry to bring more users the high-quality of the price justice. We also hope to further enhance the efficiency and transform it into a sustainable price advantage. At the same time, we will continue to add subsidies and send consumer cards to directly return to consumers.
spk02: We will also 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. For example, in initiatives such as our agriculture cloud initiative, we are leveraging our supply chain expertise to offer more users quality and affordable agricultural products. We hope to further improve our efficiency and turn it into a sustainable price advantage for consumers. At the same time, we will also continue to increase discounts and issue more coupons to give back to consumers directly.
spk15: Service is another aspect of our major development. We are currently optimizing the full-process service experience that covers the collection of money and the collection of goods. For example, we will take care of the elderly and the poor consumers in the remote areas and provide them with clean and affordable resources. We have also upgraded the customer strategy of receiving goods and providing services to
spk02: consumers. And better services is another important area. We are optimizing our service quality throughout the entire shopping experience. 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. We
spk15: will also establish a special project for the 100 billion ecosystem. We will provide free access to quality products and services for the rich and wealthy. We will promote small and medium-sized enterprises and rich and wealthy people to achieve quality growth. We will also improve the overall service efficiency and quality of the platform. We will also continue to stick to self-improvement in the future and create more value for consumers. Thank you.
spk02: We are launching a dedicated 10 billion ecosystem initiative. And this aims to channel more resources towards high-quality sellers to support SMBs and also quality businesses and enhance the platform's 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.
spk03: This is Jane. Thanks, Natalie, for your questions. I will address your question on profitability. Well, as just Lay pointed out, we have very clear long-term strategies and we see many areas to further improve. We are 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 part two quarters on a -to-quarter basis. We think it is normal for profitability to fluctuate between quarters. Thank you.
spk02: All right, we may take questions from the next audience on the line.
spk05: The next question comes from Kenneth Fong with Credit Suisse. Please go ahead.
spk15: Thank you, Manjushan, for taking my questions. I have two questions. First, for your global business, may management share what is the level of financial impact from TAMU? How many users do you serve now? Could you maybe be able to give us an update matrix such as
spk02: order volume? And I have a second question. Now we see more sellers opening up stores across multiple platforms.
spk15: 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
spk02: your agricultural products? Thank you.
spk03: Thanks, Kenneth. I will take your first question about the financial impact of TAMU. This business is currently in its early stage and compared to our overall scale, its revenue contribution is small. For TAMU, 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 our driven approach when evaluating each investment opportunity. Thank you.
spk15: Hello, I am Zhao Yuzhen. I will answer the question about supply chain and agriculture. In many platforms, we have seen a further expansion and optimization of the distribution opportunities. For example, the online distribution rate of agricultural products is still very low. We have seen that there are huge user needs that have not been met. There are also many high-quality agricultural products that have not entered the high-efficiency transportation system.
spk02: Hello, I am Zhao Yuzhen. Let me take your question about 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 own mass demand and we also see a lot of quality agricultural products are not efficiently distributed.
spk15: We see a lot of agricultural products have increased the distribution range and reduced the loss of quality and nutrition in the process. In addition, our multi-faceted business is also continuing to explore and innovate. At the same time as providing convenient services, we have further enriched the choice of the consumer's food basket.
spk02: We are also working 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, our total grocery business continues to explore innovation. We help consumers get convenience as well as broader selection of fresh produce.
spk15: 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 recently donated one billion yuan to the Chinese Agricultural University to help with the research of the advanced technology. Our sales can also help with the agricultural results and quickly move to the market to bring more quality products
spk02: to consumers. We also continue to drive every type of innovation as well as adoption. And we are deepening our cooperation with top agronomic 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 to 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.
spk15: In the long term, we will continue to transfer the resources and influence of the platform to the supply chain, bringing more and more excellent products to consumers. Thank you.
spk02: Okay, it's about time. Thank you everybody for joining us on the conference call today. Thank you and have a great day.
spk05: Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.
spk08: Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.
spk05: Thank 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 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. Cheng Ting. Sir, please go ahead.
spk02: 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 .pddholdings.com as well as through our group newsflash 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 Cheng 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 note that all translations provided are for reference purposes 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, Cheng Lei. Lei, please go ahead.
spk13: Hello, everyone. Thank you for joining our earnings 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% -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 quarter 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 footing 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 personal 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 RMB to foster sustainable progress. Our engineers make up about half of our total employees. RMB 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 RMB. And now let me talk about our globalization efforts. Last year, we launched TEMU to offer quality products at affordable prices to consumers around the world. By working closely with sellers and manufacturers, TEMU offers a wide selection of merchandise, reduces supply chain inefficiencies, and passes 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 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 wider market access. We are promulgating 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 agriculture 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 co-CEO and executive director by our board. Jiazhen concentrates more on supply chain management and China operations, while my focus is more on globalization efforts. Jiazhen 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.
spk15: Thank you, Chen Lei. Hello, everyone. I am Zhao Jiazhen. I am very happy to attend this year's conference.
spk02: Thank you, Lei. Hello, everyone. This is Zhao Jiazhen. I am glad to join this earnings call. In
spk15: the first quarter, many places have been pushing out their mistakes to promote consumer growth. We have also seen a significant trend in the supply chain. The online market is continuing to improve. The demand for consumer services of many platforms is also continuing to increase. The consumption firepower is accelerating. This good attitude has laid the foundation for the steady growth of consumer consumption throughout the year. We are very optimistic about the future of the consumer market. In
spk02: 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 vitality 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.
spk15: In Q1, we have mobilized platform resources to further promote the activity and transformation of consumer potential. We have provided many good products to users as usual. In the first quarter of the year, we have added subsidies and additional gift vouchers to the large-scale events such as Spring Festival, Spring Festival of Spring, and the opening of the year. These are the benefits of providing as many platform users
spk02: as possible. In the last quarter, we have added a lot of 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 step up discounts and issued extra coupons to benefit as many users as possible.
spk15: In the recent Shanghai 55 shopping festival, we have invested more than 400 million yuan in consumer subsidies. This is the biggest amount of subsidies. During this period, we have worked with the Central Broadcasting Television and the Central Television, and we have landed on the live stream of the goods. We have shown various products through a comprehensive view, and we have improved the customer's confidence in online shopping. At the same time, our shop has actively opened up and innovated, and we have tried to create a new consumer scene, and we have improved the customer's interest in food, and we have promoted the integration and development of online and offline. Recently,
spk02: 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 stream itself, showcasing a wide range of products to viewers in an interactive and direct manner, enhancing consumer trust in online shopping. Furthermore, our Dodo grocery 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.
spk15: In addition to the strength of the Dodo grocery team, we have further enhanced our ability to provide good service. We have launched the digital home appliance consumer system in April, and we have proposed the 618 consumer concept every day. We are working hard to ensure good value, and we are working hard to fully optimize our services and ensure the customer experience. During the many reading events launched in the following April, we have invested in the 1 yuan-level reading fund, and we have helped to increase the reading capacity. The evaluation report from the third platform shows that in the five items of the Dodo grocery team, including the comprehensive price, product security, social service, logistics performance and the advantage of the five items, the comprehensive construction experience of the Dodo grocery team is a top priority among the many online platforms.
spk02: 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, logistics efficiency and promotion level, the Pinduoduo platform's overall shopping experience for books ranks as one of the best among many e-commerce peers.
spk15: Under the big background of the consumer, high quality meets the diversified needs of consumers, and the ability to expand the consumer is a challenge for us. We hope to further increase subsidies, expand the category, upgrade services, and fully protect the rights and interests of consumers. We hope to further optimize the ecosystem of the platform, and further boost consumer activity
spk02: through high-quality transformation of the ecosystem. Against the backdrop of consumption recovery, to satisfy the diversified needs of consumers, and form a driving force for expanding consumption, it's 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 vitality through our focus on quality development of the platform ecosystem. As consumption rebounds, it also brings about more intense industry competition. As competition further intensifies, some competitive behaviors have gone beyond the scope of normal business activities.
spk15: For example, from March to June, at the beginning of this year, dozens of Pinguduo-based flagship stores were bombed with malicious orders. The attackers were organized and planned to disrupt the normal business of these stores, causing great losses. We immediately fought against the first three stores, and upgraded the strategy of defense, and quickly restored the normal management order.
spk02: For example, since late March, dozens of flagship stores on Pinguduo were bombarded with malicious orders. The attackers disrupted these stores' normal operations 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 operations very soon. We believe that competition can motivate us to learn more efficiently and innovate more quickly, 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.
spk15: We will transform the offensive of our competitors into the motivation to move forward, to stick to our duties, to constantly improve ourselves, to have high-performance innovation in defense, and to lead the platform to a higher level of development. For example, we will upgrade most of our products from 72 hours to 48 hours. We will also provide more active customer service strategies to the elderly and the consumers. For example, we will provide a cash-in service to the consumers.
spk02: We will turn attacks from competitors into our motivation to move forward. We will stick to our duties, to constantly improve ourselves, to 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-sale services for elderly consumers and consumers in remote areas. In addition, we will take a more proactive approach in customer service, such as offering consumers the option to receive refund without returning the item.
spk15: In terms of supply chains, we have increased the supply chain capacity of large-scale industries and industries over the past few years. We have reduced the flow of our products and consumers, and reduced the cost of the supply chain to two-stage production. We will continue to invest in improving supply chain capacity, strengthening the construction of the physical supply chain, and promoting the transformation and upgrade of traditional industries, and further building and advantageous build-ups.
spk02: For the last few years, we have been working on the supply chain, and our investment in the supply chain. 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-seller efficiency and standards. For supply chain, over the years, we have rooted ourselves deeply in major production areas and industrial belt. 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 investments, optimize our supply chain capabilities, strengthen the build-up of physical supply chain infrastructure, contribute to the transformation and upgrade of traditional sectors, and further deepen our competitive advantages.
spk15: This year, Pinduoduo
spk02: has continuously optimized platform governance and actively takes on social responsibilities. We strive to bring warmth and responsibility. 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.
spk15: We
spk02: 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 farmers. We also promote logistic infrastructure suitable for agricultural produce, such as warehousing and cold chain logistics, to reduce transportation spoilage 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.
spk15: We also encourage young people to take part in the World Agricultural Science Competition, and other international agricultural development competitions. We encourage more young people to take part in the competition, and promote the transformation of the agricultural research. Recently, as part of the 100 billion farm, we have also donated 100 million yuan to the Chinese Agricultural University, and established the Pinduoduo Chinese Agricultural University Research Foundation, to further support the research and innovation of agricultural technology. We have won the 2022 Annual Innovation Award, to encourage our innovation in the agricultural supply chain. We are also the only winners of the 2022 award in the world. We will continue to work hard to further support the development of agricultural technology, and continue to develop the technology partnership. We
spk02: continue to defend our cooperation with top economic entities, to support the role of agri-tech in agricultural transformation, and promote agri-tech adoption. We have hosted various events focusing on agricultural development, such as the Pinduoduo Calf 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 recipients of this award globally in 2022. We will continue to work hard to support digital transformation, and technology adoption agriculture, and uphold the principle of tech for good. 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, 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 our agricultural industry, and develop 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.
spk15: Now,
spk02: let me hand it over to Jin. She will provide you with an update on our financial performance.
spk03: Thank you, Jiazhen. Hello, everyone. Let me walk you through our financial performance for the first quarter, ending 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 meaning came from encouraging trends in consumer sentiment, and positive responses from consumers and merchants towards our vocational high quality development. Revenues from online marketing services and others, RMB 27.2 billion this quarter, up 50% compared with the same period of 2022. Revenues from transaction services this quarter, RMB 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, meaning 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-gap 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 continued to invest in our long-term focus areas to support our high quality development. Our total non-gap 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-gap sales and marketing expenses this quarter were RMB 15.8 billion, up 47% versus the same quarter of 2022. On a non-gap basis, our sales and marketing expenses as a percentage of our revenues 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-gap general and administrative expenses were RMB 338.3 million, versus RMB 208.8 million in the same quarter of 2022. Our non-gap research and development expenses were RMB 2 billion this quarter, RMG is a top priority and a long-term focus for us. We are committed to further strengthening our RMG capabilities, and we continue to increase investment in this area. Operating profit for the quarter was RMB 6.9 billion on a gap basis, compared with operating profit of RMB 2.2 billion in the same quarter of 2022. Non-gap 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 basic earnings per ADS of RMB 2.06, and dilute earnings per ADS of RMB 1.84 in the same quarter of 2022. Non-gap net income attributable to ordinary shareholders was RMB 10.1 billion, compared with RMB 4.2 billion in the same quarter last year. Non-gap dilute 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 vibrant ecosystems to support our long-term, high-quality development. That completes the income statements. 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 working factor. As of March 31, 2023, the company had RMB 157 billion in cash, cash requirements and short-term investments. Thank you. This concludes my prepared remarks.
spk02: Thank you, Jean. Next, we will move on to the Q&A session. This Q&A session, ladies, Jiazhen and Jin will take questions from panelists online. You can take a maximum of two questions per minute. Ladies and Jiazhen will answer questions in Chinese, and you will help translate their remarks for easier reference. Operator, you may now take questions on the line.
spk05: Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star and 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star and 2. Participants are requested to restrict to two questions at each time. Your first question today comes from Joyce Ju with Bank of America. Please go ahead.
spk12: Good evening. Thank you for giving me this opportunity to ask questions. I have two questions. First, we see that the recent company structure adjustment has become a mode of connecting with CEOs. Will this change the company's future strategy? What is the main growth drive for the future? We also noticed that in the connection with CEO structure, Mr. Chen Lei will put more energy on global business. Does this mean that global strategy is now of an important level? My second question is that the company's business revenue this quarter has increased by 50% in comparison to last quarter. How should we understand the speed of revenue this quarter? Can the management share with us the business highlights of this quarter? Thank you very much. I will translate myself. My first question is noting PDD recently implemented the co-CEO structure. How does the change affect your group's strategies? What are your key growth drivers going forward? Per your announcement, post the co-CEO structure change, Lei will focus 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% this quarter, accelerating from the last quarter. How should we think about this reaccelerated momentum? What PDD has done this quarter contributing to this? Thank you very much.
spk13: Joyce, thank you for your question. I am Chen Lei. I will answer the first
spk06: question you asked about the company
spk13: strategy.
spk14: Hi, Joyce. Thank you very much for your question. This is Lei. I can take your first question on strategies.
spk13: Zhao Jiazong and
spk06: I
spk13: have been working together for many years. We have deep trust in each other. Under the high quality development of the company, we have developed clear long-term strategies and will continue to lead the team. We have a very strong team of people who are very experienced and know how to implement these strategies. Based on this, we can combine different backgrounds and ideas to achieve more effective decisions.
spk14: Zhao Jiazong 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. 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 consumers. We are also seeing positive feedback from consumers and sellers on this ship, which is also reflected in this quarter's results. Under our long-term strategies, we are continuously strengthening our supply chain capabilities and also expanding the supply of high quality merchandise. We will further increase our support for quality sellers by launching our 10 billion ecosystem initiatives and further push forward our platform's overall potential. In addition, we will continue to optimize our platform ecosystem. 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 and increasing our R&D investment. Currently, our R&D team makes up about half of our total employees.
spk13: We believe that in the foreseeable future, the Chinese market will become our main market. Of course, we also see that the market has changed very rapidly and the competition has also been significantly strengthened. We should say that the small and the large are both in place. This is why the board appointed Zhao Jiazhen as the joint CEO to work together with me on the development and implementation of our strategy. We will also further strengthen our Chinese business team.
spk06: Now, Zhao Jiazhen will introduce the
spk11: situation.
spk14: The situation 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 the strategies together with me and further strengthen our China operations team. Next, let me hand over to Jiazhen.
spk15: We are very excited about our new appointment and feel a lot of responsibility and pressure. As the entire industry is recovering, we are entering a new phase. In the past few years, we have successfully turned from marketing to research and development to build a foundation for our development. Now, we are at the other end of the stage. We need to make every effort to advance the new phase of high-volume development.
spk02: Thank you, Lei. First, I am honored that our board put their trust in me. I am very excited for my new role. At the same time, I feel responsibilities and challenges. As the industry recovers, we are also entering a new stage. In the past few years, we have successfully shifted from marketing-driven to &D-driven. These lay solid foundations for our development. Now, we reach the gate of another stage, which is the stage of dedicating ourselves to promoting holistic high-quality development.
spk15: At this new stage, we are further optimizing the ecosystem of the platform, upgrading the service of consumers, greatly supporting the ability of high-quality supply and commercialization. We will also continue to optimize platform management and further build a platform with social value.
spk02: We are also increasing support for quality supply and also deepening our supply chain expertise. We constantly optimize platform governance to further build a socially responsible platform. We believe that investing in our platform ecosystem, supply chain, and also R&D can create long-term value. We will lead our team together to execute these strategies with determination, accelerating our footsteps in entering this new stage of high-quality development. And let me also take your question on revenue growth. In the past quarter, many places introduced policies to support consumption. We see continued improvement in consumer sentiment, and these trends show a good beginning for 2020-3. We have also benefited from this, and our platform consumers are also very happy.
spk15: In order to help consumers recover, we insist on starting from consumer demand, and fully mobilize the resources of this platform. In order to continue to bring more customers to the meeting, we have also held several large-scale event, and issued additional vouchers and discounts to strengthen consumers, hoping to increase their consumer confidence.
spk02: 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.
spk15: We have fully upgraded the protection and service of consumers. For example, most of our products have been shipped from 72 hours, and have been upgraded to 48 hours.
spk02: The shipping process in time has been cut down from 72 hours to 48 hours.
spk15: For example, we have launched the 100 billion ecosystem project, and hope to further improve the platform's support for the best supply. Thank you.
spk02: 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 are ready to take the next question on the line.
spk05: The next question comes from Natalie Wu with PeiKong International. Please go ahead.
spk04: What are the company's strategy for this? How do you think about how to maintain our middle-earnings? Especially with the price, does this mean that the price will increase in order to maintain the price? The second question is that we see that the company's profit this season has also been slightly better, but it has dropped compared to the previous season. So, what is the reason behind this? Is it because of the low season or the low price? Is it because the company is working hard to increase its profit? Let me translate myself in English. Thank you for taking my question. So, I have two questions here. The 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 your response and how do you plan to maintain your competitive advantage specifically for pricing? Do you think there will be an ambulance spiral of increasing discounts to ensure the lowest price? And certainly, we noticed that your profit-saving 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 golf? Thank you.
spk02: This is Jia Zheng here. Thank you for your questions. I will share my views on competition.
spk15: As Mr. Hua mentioned, we insist on following the direction. So, in a positive way, we focus on all types of competition.
spk02: 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.
spk15: We are also accelerating the construction of a healthy ecosystem with a good service. The core of the multi-facility is the increase in the efficiency of retail. We will further strengthen our technical capabilities and improve the ability to accurately match the tools. We will also root for more manufacturers and industrial generations to connect with consumers. For example, in the agricultural operation project, we rely on the ability of the public sector to bring more users to the market for fair prices. We also hope to further enhance the efficiency, transforming the efficiency into a sustainable price advantage. At the same time, we will continue to add subsidies, send consumer cards, and directly return to consumers.
spk02: We are accelerating to build up a healthy ecosystem of more savings and better services. Our more savings essentially comes from retail efficiency improvement. 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. For example, in initiatives such as our agriculture cloud initiative, we are leveraging our supply chain expertise to offer more users quality and affordable agricultural products. We hope to further improve efficiency and turn it into a sustainable price advantage for consumers. At the same time, we will also continue to increase discounts and issue more coupons to give back to consumers directly.
spk15: Good service is another aspect of our major development. We are currently optimizing the full-term service experience that covers the full-time and full-time service experience. For example, we will take care of the elderly and the vulnerable consumers, and provide them with customer support. We have also upgraded the customer service strategy for customers, providing customer service services.
spk02: And better services is another important area. 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.
spk15: We will also continue to stick to self-improvement in the future, and create more value for consumers. Thank you.
spk03: This is Jane. Thanks, Natalie, for your questions. I will address your question on profitability. Well, as just Lay pointed out, we have very clear long-term strategies, and we see many examples of this. We are 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 makes 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 part two quarters on a -to-quarter basis. We think it is normal for profitability to fluctuate between quarters. Thank you.
spk02: We may take questions from the next audience on the line.
spk05: The next question comes from Kenneth Fong with Credit Suisse. Please go ahead.
spk15: We see more and more companies operating on multiple platforms. We also see different platforms' products and services are more and more similar. Can the management team talk to us about the features of the services, especially in the agricultural products, and the services? I will translate it for you. 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?
spk02: And
spk15: I have a second question.
spk02: Now we see more sellers opening up stores across multiple platforms. So,
spk15: it seems the merchant-style selection on different platforms are becoming more and more similar. Can management share with us what is the differentiation on the supply side, especially for
spk02: your agricultural products? Thank you.
spk03: Thanks, Kenneth. I will take your first question about the financial impact of Temu. This business is currently in its early stage and compared to our overall scale, its revenue contribution is small. For Temu, 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 our right-driven approach when evaluating each investment opportunity. Thank you.
spk15: Hello, I am Zhao Yizhen. I will answer the question about supply chain and agriculture. In many areas, we have seen a further expansion and optimization of the supply chain. For example, the online processing rate of agricultural products is still very low. We have seen that there is a huge demand for users and that they are not satisfied. There are also many high-quality agricultural products that have not entered the high-quality travel system.
spk02: Hi, this is Zhao Yizhen. Let me take your question about 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 unmatched demand and we also see a lot of quality agricultural products are not efficiently distributed.
spk15: We see a lot of agricultural products are not efficiently distributed. We see a lot of unmatched demand and we see a lot of quality agricultural products are not efficiently distributed. In addition, our food business continues to explore and innovate. At the same time of providing convenient services, we further enrich the choices of the consumers' food.
spk02: We are also working 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, our total grocery business continues to explore innovation. We help consumers get convenience as well as broader selection of fresh produce.
spk15: 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 recently donated one billion yuan to the Chinese Agricultural University to help with the research of the technology. Our sales can also help with the agricultural results and quickly move to the market to bring more quality products
spk02: to consumers. We also continue to drive every type of 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 to 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.
spk15: In the long term, we will continue to transfer the resources and influence of the platform to the supply chain, bringing more and more high-quality products to consumers. Thank you.
spk02: Okay, it's about time. Thank you everybody for joining us on the conference call today. Thank you and have a great day.
spk05: Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all
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