PDD Holdings Inc.

Ladies and gentlemen, thank you for standing by and welcome to PDD Holdings, Inc. Second 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 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 Teng. So please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining us today. My name is Cheng, and I will help host the earnings call. PD Holdings earnings release was distributed earlier and is available on our website at investor.pdholdings.com. as well through group newswire services. Before we begin, I would like to refer you to our Safe Harbor Statement in Earnings Press Release, which applies to this call, as we will make certain forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our Earnings Release, which contains a reconciliation of 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 walk us through our financial results for the second quarter ended June 30, 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.

Hello, everyone. Thank you for joining our earnings call for the second quarter of 2023. I will start by giving a brief overview of our second quarter results. We achieved a total of RMB $52.3 billion in revenue this quarter, representing a 66% year-on-year increase. This reflects the growing trust that consumers place in our products and services. During the past quarter, we observed a continued improvement in consumer sentiment, resulting in increasing consumer demand across multiple product categories. We also actively launched various promotional initiatives that boosted consumer demand. For instance, we supported a June 18 shopping festival with attractive promotions and discount coupons to encourage spending. The response from consumers was positive. Recognizing this trend, we remain devoted to connecting products directly with consumers so that they can enjoy a wide range of quality products at attractive value with great service satisfaction. Since the start of 2023, our main focus has been high-quality development. The results from this quarter offer concrete evidence that our strategy is starting to bear fruit. This gives us more confidence that we are on the right path and that our investments are laying the foundation for continued quality growth. A cornerstone for achieving high-quality growth is our commitment to research and development, which is the lifeblood of innovation. Over the past 12 months, our IND expenditure exceeded IND 10 billion, with Q2's IND spending hitting a new high, reflecting our dedication to investing in the future. We will continue to increase our investments in IND as innovation represents the future engine of growth for the company. As a company with its roots in agriculture, We have been firsthand witnesses to how technology can transform and drive farming practices. Through technological advancement, we have optimized the matching of demand and supply, helping farmers to sell their products and consumers to get fresher produce. A key driving force behind our emphasis on agriculture is our belief in social impact of innovation. This has motivated us to support talent cultivation, promote the adoption of practical and cost-effective technology, and transform scientific research into tangible, commercially viable solutions. For the past three years, our annual Smart Agriculture Competition has been a platform to advance precision farming. We partnered with leading agronomic institutes, including China Agriculture University, Zhejiang University, FAO China, and the Shanghai Academy of Agricultural Sciences. The latest iteration involves the use of compact spaces, like shipping containers, for vertical farming. Aspiring teams challenge themselves to come up with cost-effective ways to growing and marketing high-quality greens. With our help, many teams have turned their innovations into real-time applications. For example, a pioneering team from our inaugural competition deployed 40 cutting-edge systems, empowering farmers to boost their yields by 30%. They achieved this while at the same time reducing overhead costs related to labor, fertilizer, and prime protection. A team from this year's event is in the process of utilizing an algorithm that moderates neutral combinations with the aim to make it easy for more people to use. Our diverse projects aim to bridge the gap between research and real-world application. We have supported the creation of many agri-tech demonstration hubs. These centers of excellence serve as fertile grounds to combine academic learning with hands-on experience. By giving budding sciences the platform to validate their research under real-world conditions, we envision speeding up the digital transformation of agriculture to the collective benefit of society. We also strive to help push the boundary of agri-tech through our support for fundamental research. In May, to further accelerate the pace of innovation, we made a donation of 100 million RMB to China Agriculture University. As a part of our 10 billion agriculture initiative, this contribution established a dedicated research fund aimed at addressing critical needs in agriculture. Additionally, we have partnered with FAO China to start a three-year research program that focuses on four key themes, namely agricultural modernization, precision farming, sustainability, and health nutrition. Here, I'm happy to announce the appointment of Professor Yvonne Richards as an independent director to PDD's board. Professor Luchens, with her long standing tenure since 2001 as a professor at One Handicap University, and currently a department head of toxicology, is a well respected expert in food tech research. Her three decades expertise in food safety will no doubt be a huge support to our agri-tech initiative. With her on board, our board of directors now have seven members, and the majority being independent directors. The appointment not only enriched our board of expertise, but also adds to its diversity. In addition, to strengthen our global footprint and operations, we will set up a legal and a compliance committee to build and oversee regional, legal, and complex matters, given their complexity and different requirements of each region. I will chair this committee, which will replace the general council role and function. As we stated in our IPO letter, PED is still a young organization that will continue to adapt as he strives to be a mature global institution. During this journey, our goals remain the same. We will continue to champion innovation, nurture emerging talents, and constantly seek to bring on the best people to guide us towards our goal of seeking quality development. And now, I will head over to our co-CEO, Jiazhen, who will go into more details about our quality development.

谢谢陈磊,大家好,我是赵家珍。 Thank you, Lei.

Hello, everybody, this is Zhao Jiazhen. In Q2, with various pro-consumption policies, we observed a clear trend of consumption sentiment improvement. To support consumption in this year's June 18 promotion, we increased our efforts. We received positive responses and saw further increase in consumer demand on the Pinduoduo platform. 在消费大环境转转的背景下,我们积极把握机遇,全面拥抱高质量发展。 我们的高质量发展的战略主要包括以下的部分。 Riding on the encouraging industry trend, we proactively seize the opportunities to fully embrace high-quality development. Our strategy includes the following aspects.

from price, service, consumer rights protection, etc., to better meet consumers' needs for a better life. The second part is high-quality supply. We are deep into the manufacturing and agricultural industry, helping traditional industries transform, allowing high-quality products to reach the entire country and the global market. The third part is high-quality ecology. We actively take on social responsibility, optimize platform governance, and help high-quality participants through 100 billion ecological projects to achieve high-quality transformation of platform ecology.

First, high-quality consumption. To meet consumers' continued growing demand for quality, we strive to better serve consumers with more savings, better services, and upgraded consumer protection. Second, high-quality supply. We go deep in the industrial and agricultural production areas, leverage our tech capabilities to support digital transformation, and bring more quality products to the national and global markets. Third, high-quality ecosystem. we shoulder social responsibilities and further refine our platform governance capability. By supporting quality merchants with our 10 billion ecosystem initiative, we promote our virtual cycle, which accelerates the upgrade of our platform ecosystem.

We are aware that the high-quality development of the platform requires patience and patience. In the past quarter, we have continued to encourage consumers, support high-quality participants, and promote platform ecosystem construction. We have also seen some preliminary results.

我们的业务也取得了不错的增长。 We are fully aware that high-quality development requires patient investment. Over the past quarter, we have seen some encouraging early results from our efforts in giving back to consumers, supporting quality merchants, and enhancing our platform ecosystem. Our business also delivered decent growth. 下面我来为大家介绍一下我和团队在高质量发展的多个方面正在切实执行的具体的举措。 Now let me walk you through some specific measures that my team and I are actively implementing under our high-quality development strategy.

首先是高质量消费。 我们正在强化提供多时会加好服务的能力, 并将它转化为消费者能感受到的好体验, 加强消费者对平台的信任, 进一步激发平台消费潜能的释放。 First, for high-quality consumption,

we are working hard to deepen more savings and better services so that we can give good experience. This improves consumer trust in our platform, which in turn stimulates spending.

In the past two seasons, we have continued to bring out positive and negative profits, and increased the amount of subsidies. We will supplement what consumers like, and sincerely return to platform users. As I mentioned before, in this year's Z118 event, we have actively distributed benefits to consumers, including digital home appliances,

In Q2, we continue to promote a wide range of merchandise of consumers' preference. As mentioned, during this year's June 18 promotion, we increased our efforts to give back to consumers. The promotions cover a full range of product categories, including electronics, cosmetics, fresh produce, as well as apparel. This stimulated full category consumption demand.

At the same time, we are also improving the ability of good service to promote the trust of consumers to the platform. For example, during the 618 event, we upgraded the logistics and sales service system, providing consumers with all-round service such as buying expensive must-pay, fake clothes to pay for food, and sending goods to the door, ensuring that users can buy at ease and return at ease. We have also been cooperating with well-known insurance companies and many well-known brands to guarantee quality insurance for products. For goods mismanagement or quality issues,

In addition to solidifying more savings, we continue to provide better services, which increase consumers' trust in our platform. For example, during June 18, we upgraded logistics and after-sales services, such as price protection, 10x compensation for counterfeits, and to-door delivery. These measures make sure consumers can buy with confidence and return with ease. We also cooperate with established insurance companies and brands offer quality guarantee insurance, which covers situations such as inaccurate product descriptions or product quality issues. After the June 18 promotion, we remained focused on addressing fundamental consumer needs and continued with our early days June 18 approach. We provided quality products and services at good prices, unleashing demand potential to explore new product categories. As our platform continues to gain trust and recognition, We are delighted to see that a growing number of brands across multiple categories have started to cooperate with Pinduoduo as the primary channel to reach consumers. Another crucial aspect of high quality development is the co-development and integration of the digital economy and the traditional industries so that more quality products can reach the national and global markets. This is what we call high quality supply. It will continue to be a focal point in our pursuit of high-quality development. As we bring more agri-produce to market, innovation is the key to enhancing quality and creating added value. So, it is crucial to meet consumers' growing demands for high-quality, safe, and healthy agricultural produce through innovation and the adoption of agri-tech.

In the second quarter, we held the Guaming Duoduo Sustainable Agriculture Challenge, which is the final round of the third Guaming Duoduo Agricultural Technology Competition. We also launched the second Guaming Duoduo Agricultural Technology Challenge, which is the final round of the third Guaming Duoduo Agricultural Technology Challenge, which is the final round of the third Guaming Duoduo Agricultural Technology Challenge, which is the final round of the third Guaming Duoduo Agricultural Technology Challenge, which is the final round of the third Guaming Duoduo Agricultural Technology Challenge,

In Q2, we launched the third Smart Agriculture Competition and the second Pinduoduo Cup Growing Competition. Through these initiatives, we actively engaged in agri-tech innovation and support technology adoption in agriculture. Our vision is to further improve the quality and efficiency of agricultural production through technology. At the same time, we are stepping up support for products enabled by Agritech on our platform to accelerate how research findings translate into products.

At the same time, we are actively using new technologies and new modes to promote digital transformation and upgrade of the special industry belt of each region. Our supply chain insight and technical advantages can help to accurately meet the needs of consumers and increase the overall efficiency of the production environment. For example, in the last quarter, we launched a special industry belt live broadcast and entered the industry belt of each manufacturing industry. For the more, we are driving the digital transformation of manufacturing with new tools and new models.

Leveraging our consumer insights and tech capabilities will help manufacturers better understand evolving consumer demand and improve production efficiency. Last quarter, our team went into industrial balance and launched a series of live streaming events to showcase a broad selection of local products to consumers. This helps consumers learn about the products tangibly and enhances their trust in online shopping.

We are also deepening collaborations with merchants in areas such as product design and marketing so they can better meet diverse consumer needs. This is welcomed by many merchants.

For example, we recently partnered with a well-known liquor brand. Together, we experimented with online plus offline approach, which has offline pop-up shops. This format led to their record-breaking sales on our platform, and at the same time, enabled the brand to reach young consumers effectively and obtain valuable consumer insights. A high-quality ecosystem is the foundation that nurtures the sustainable and mutually beneficial growth of the platform and all its participants. Last quarter, we launched the 10 Billion Ecosystem Initiative to support quality merchants and products. This initiative provides incentives for SME merchants and quality merchants to upgrade their service offerings, thereby creating a robust environment to drive up efficiency and service quality of the entire ecosystem. We also made significant efforts in platform governance in areas such as food and drug safety, model protection, and live streaming compliance. 通过百亿生态和平台治理双管旗下,我们希望能够进一步巩固扩大平台生态向好发展的这个趋势和成果。 We hope to accelerate the positive momentum in the platform ecosystem with both the Ten Billion Ecosystem Initiative and our platform governance efforts.

For example, in order to promote the sustainable development of the positive momentum in the platform ecosystem, to strengthen the protection of intellectual property rights, in the second quarter, we joined the domestic mainstream publishers and publishing brands to launch the fifth quarter of the多多读书月活动, and continue to invest in the one-million-dollar reading fund for official subsidies. For example, we collaborated with major publishing houses and book brands to launch the fifth Dodo Reading Month. We continue to invest hundreds of millions of RMB in coupons.

in an effort to promote a sustainable online authentic book market and to strengthen IP protection. Our effort covered 6 million copies of best-selling books, connecting quality content directly with consumers. As of today, over 2,700 publishing houses, book companies, and distributors have joined the Pinduoduo platform.

In the process of high-quality development, we also actively carry out social responsibility to create more value for society, At the beginning of this month, there was extreme weather in the Jingjing area. We donated 30 million yuan to the Central Chinese Food and Drug Association at the first time to support the relief of disaster relief in Jingjing and other places. At the same time, we cooperated with the new media of the People's Daily, and jointly initiated a special campaign to help businesses in the affected areas to reduce the loss of production and storage, and accelerate the recovery of production. In addition, in order to help the disaster relief in Zhuozhou to reduce the loss, Pinduoduo launched a special sales activity.

We are always looking for opportunities to shoulder more social responsibilities and create value for the society. Earlier this month, the Jingjingji region was hit by a severe rainfall. We sprung to action and donated RMB 30 million to support the flood relief efforts. At the same time, in partnership with People's Daily, we launched a dedicated relief campaign to help businesses in the affected regions reduce losses from production disruption and inventory damage and help them get back to normal operations quickly. Furthermore, to help book merchants in Georgia, we set up a dedicated book selling channel and provided relief measures such as traffic support and zero commission policy to help these merchants reduce losses and resume normal operations.

We fully understand the long-term strategy to further improve the value of the platform and avoid high-quality development. Accelerating the transformation of high-quality development and the overall ecological quality construction is not only a good thing from a long-term perspective, but it will also receive positive feedback from consumers and businesses in the short term. We will insist on doing the right thing, continue to increase investment, further support high-quality merchants and small and medium-sized manufacturing factories, promote agricultural technology generalization, and add power to high-quality development.

We are well aware that our value creation is inseparable from our long-term strategy of high-quality development. Our focus on high-quality development and ecosystem not only lays a solid foundation for the future, but also earns immediate positive feedback from consumers and merchants. Looking forward, we will continue to support quality merchants and SMEs and to promote digital inclusion agriculture. We will keep doing the right things and keep up our investment in the key areas to speed up our progress towards high-quality development.

Now I'll hand it over to Jane.

She will provide you with updates on our financial performance.

Thank you, Justin. Hello, everyone. Let me walk you through our financial performance for the second quarter ended June 30, 2023. In terms of income statements, In the second quarter, our total revenues increased 66% year-over-year to RMB $62.3 billion. Our top line growth was mainly driven by consumption recovery and the early feedback from executing our high-quality development strategy. Revenues from online marketing services and others were RMB $37.9 billion this quarter, up 50% from the same quarter of 2022. Revenues from transaction services this quarter were RMB 14.3 billion, up 131% from the same quarter of 2022. Moving on to costs and expenses. Our total cost of revenues increased 135% from RMB 8 billion in Q2 2022 to RMB 18.7 billion this quarter, mainly due to increase in fulfillment fees and payment processing fees. On a gap basis, total operating expenses this quarter increased 41% to RMB 20.9 billion, from RMB 14.8 billion in the same quarter of 2022. On a non-gap basis, our total operating expenses increased to RMB 19 billion this quarter, from RMB 12.9 billion in Q2 2022. In the past quarter, which serves the opportunities of favorable consumption trends by investing firmly and responsibly to support our long-term, high-quality development. Our total loan gap operating expenses as a percentage of total revenues this quarter was 36%, compared to 41% in the same quarter last year. Looking into specific expense items Our non-GAAP sales and marketing expenses this quarter will earn $16.6 billion, of 53% compared to the same quarter last year. On a non-GAAP basis, our sales and marketing expenses are the percentage of our revenues this quarter with 32%, compared with 34% for the same quarter in 2022. In Q2, we stepped up our efforts during the June 18th Shopping Festival and throughout the entire quarter to provide more savings to consumers. We also improved our service quality to deliver better services and support consumption. Our non-GAAP general administrative expenses were RMB 370.2 million versus RMB 164.7 million in the same quarter of 2022. Our research and development expenses were RMB 2.1 billion this quarter on a non-GAAP basis and RMB 2.7 billion on a GAAP basis, setting a new high. RMD is fundamental to the high-quality development of our platform ecosystem. We will continue to grow our RMD capabilities so that we can understand consumers' moving demands and serve them as better. Operating profit for the quarter was RMB 12.7 billion on a GAAP basis, compared with RMB 8.7 billion in the same quarter last year. Non-GAAP operating profit was RMB 14.6 billion versus RMB 10.5 billion in the same quarter last year. Non-GAAP operating profit margin was 28% this quarter, compared with 34% for the same quarter last year. Net income attributable to ordinary shareholders was RMB 13.1 billion for the quarter, compared to RMB 8.9 billion in the same quarter last year. Basic earnings per ADS was RMB 9.64, and the daily earnings per ADS was RMB 9, versus basic earnings per ADS of RMB 7.06. and dilute earnings per ADS of RMB 6.22 in the same quarter of 2022. Loan gap net income attributable to ordinary shareholders was RMB 15.3 billion, compared with RMB 10.8 billion in the same quarter last year. Loan gap dilute earnings per ADS was RMB 10.47 versus RMB 7.54 in the same quarter of 2022. To sum up, over the past quarter, we delivered fully financial results and high-quality development began to show impact. Looking ahead, we will continue to invest with determination and patience to execute our high-quality development strategy. We also react positively to competition by deepening our more serious and better services capabilities. That completes the income statement. Now, let me move on to cash flow. Our net cash flow generated from operating activities was RMB 23.4 billion, compared with RMB 19.4 billion in the same quarter last year. As of June 30, 2023, we have RMB 179.5 billion in cash, cash equivalents, and short-term investments. Thank you. This concludes my prepared remarks.

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

Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. Participants are requested to restrict the two questions at each time. Your first question will come from Joyce Ju of Bank of America. Please go ahead.

Hello, this is Jiazhen Jun. Good evening. Thank you for accepting my question. I have two questions related to strategy. The first one is, as we mentioned, since last week, the company has clarified the future strategy to pursue high-quality development. The opening part of the month also shared with us a lot of progress. I would like to ask the management team to share more about this strategy in the direction of execution in the future. We will also see what aspects can be done to further invest and change to promote this high-quality development. There will be some indicators inside us, or specific targets. At the same time, we want to see if it will have a short-term or long-term impact on our company's growth and finance. The second question, we understand that agriculture is one of the important development strategies of our company, and it is also an important consumer product of our platform. I would like to ask, what is the difference between the two core strategies of agricultural strategy and high-quality development? My first question is, we note Pinduoduo has started a new long-term strategy of focusing on high-quality growth since last quarter. could management elaborate a bit more on the implementation of this strategy? What business measurement and movement having been taken and how this strategy is going to affect company's financial outlook in the near and longer term? My second question is that we understand agriculture has been Pingo Door's key strategy for a very long time. And it is also a core merchandise category for the platform. How this strategy and how agriculture fit under the company's new strategy of high-quality development. What impact will it have on the company's operations and financials? Will the company adjust your investment budget and pace in the corresponding areas? Thank you a lot.

Hi, this is Jiazhen. I'll answer your question on our high-quality development strategy.

So over the past few years, we gradually transitioned from fast growth to solid development.

from marketing-driven to R&D-driven. And starting from the first half of this year, we fully embraced the high-quality development strategy. And this hails in a new development phase for us, which prioritizes quality.

As a growth-oriented company, I think we still have a lot to improve in terms of service consumers and the construction of two good platforms. Therefore, training internal workers to achieve high-quality development

We are in the development stage, and there are still many areas to improve in terms of serving consumers well and building a thriving ecosystem. So strengthening our capability and embracing high-quality development is a necessary path to take to further deepen our value. As I have mentioned earlier, implementing this strategy mainly involves three key areas.

第一部分是高架段消费。 我们坚持站位消费者会继续强化这个平台的多时会加好服务的能力, 给消费者带来全方位的好体验, 希望能满足他们日益多元的需求。 First is high quality consumption.

We are always consumer-centric. We work hard to strengthen our capability to give more savings and better services. So we can deliver a 360-degree good experience to consumers and meet their diversified demand.

We hope to connect more high-quality products nationwide and globally.

Second is high-quality supply. We leverage our tech expertise and we go deep in the supply chains. We promote digital inclusion in manufacturing and also agricultural sectors. And we hope to directly connect more quality products to the nationwide and also the global market.

The third part is high-quality ecology. Third is high-quality ecosystem.

With our 10 billion ecosystem initiative, we actively support quality merchants, SME businesses, and pharma merchants. And we also enhance our overall platform governance.

And for the foreseeable future, Leigh and I will lead our team together to invest in these areas persistently and also patiently.

We strive to enhance consumer experience, optimize efficiency of the agriculture and manufacturing supply chains, and also reinforce the positive trend of our platform ecosystem and execute our high-quality development strategy in every single detail of our operations. Thank you.

George, hello. I'm Chen Lei. Let me answer the second question about agricultural strategy.

Pinduoduo is based on agriculture. Our development is closely related to the development of agricultural products. Since then, we have been actively using our own technical background to promote agricultural technology meetings.

This is Lei. I'll take your question on agriculture strategy. Pinduoduo started out in agriculture, and our development is deeply connected with this agricultural supply chain. We are proactively leveraging our tech background to promote digital inclusion in agriculture.

We are proactively leveraging our tech background to promote digital inclusion in agriculture.

Online penetration of agricultural produce remains relatively low. There is a lot of room to streamline the agricultural supply chain, and we can create our unique value by using our tech capabilities to facilitate the development of agriculture. Going forward, agriculture will continue to be a major focus for us.

Recently, we continued our efforts

In bringing together industry and academia, we hosted several agri-tech competitions, such as the Smart Agriculture Competition, Pinduoduo Cup Growing Competition, and the Global Agriculture Innovator Competition. We are happy to see our contribution to the commercialization of research findings.

正如我刚介绍的,我们这次也迎来了一位新的独立董事,Evan Richards教授。

As I mentioned, it is our pleasure to welcome Professor Ivona Richens to join our board as independent director. She has been a tenured professor at Wageningen University since 2001,

and she currently serves as the head of Toxicology Department. The Netherlands is an agricultural powerhouse, and Wageningen University is a globally renowned institution in agronomic research.

Demanda has been in the food safety field for decades. Its arrival will help us gain professional experience in the field of food technology and global research trends. 我们非常期待在Ivana的指导下 为推动农业现代化的转型 做出更大的贡献 谢谢 Ivana has decades of experience in food safety.

She will bring to our board deep expertise in food technology and cutting-edge agri-tech research trends. With Ivana on board, we look forward to deepening our contribution in the modernization of agriculture. Thank you.

Operator, we can move to the next analyst on the line.

Thank you. Our next question today will come from Yang Bai of CICC. Please go ahead.

I have two questions on financials. You book a total revenue growth of 66% and the Online marketing service growth of 50%. What do you think contribute to this? What are the highlights in the past quarter? And do you think this momentum will continue into the second half of the year? My second question is, we noticed your profit margin decreased slightly year on year. What are some of the key areas you are putting results into? And how should we understand the fluctuation of your profit margins as industry computation further intensifies. Thank you.

Hello, I'm Zhaozhen Zhao. Let me answer the question about growth.

Hi, this is Zhaozhen. And I'll take the question on growth rate first.

Generally speaking, I think the growth of this quarter is mainly due to two factors. On the one hand, it's good for the macroeconomic situation. On the other hand, it's good feedback from the early stage of our high-quality strategic development.

So in short, growth this quarter can be attributed to two factors. First is the positive industry trend, and second is the early positive feedback toward our high-quality development strategy. 我们觉得这与触消费的各项政策措施推出以及实施是密不可分的。 Our business is closely tied to the overall consumption market, and we noticed continued improvement in the market trend and also consumers increasing willingness to shop. We think this is inseparable from the introduction and also implementation of various pro-consumption support measures.

In the second phase, we took advantage of the opportunity to work hard to improve the ability of multi-stakeholder and four-stakeholder. We covered the low-price high-quality products with more product choices to firmly implement our high-quality development strategy. For example, in the 618 event, we increased the amount of subsidies and invested more than 10 billion yuan in the front-line consumers to help stimulate the demand for full-scale consumption. In addition to the 618 event, we also implemented the idea of 618 every day.

In Q2, we seized opportunities to enhance our capability to give more savings and better services. We expanded our value for money product choices, and also we executed our high-quality development strategy with determination. For example, during the June 18 event, we increased promotions and also invested billions in coupons to give back to consumers. And this helped stimulate demand for all merchandise categories. And beyond this promotional event, we also followed through with our concept of AirDays June 18 and also provided consumers with savings non-stop. 通过我们的努力提升了这个平台用户的消费热情,

And our efforts improved the consumption sediment, and this in turn generated more sales opportunities for the merchants. Also, our support for quality merchants encouraged them to invest

and collaborate with us in serving consumers well together. So as a result, we recorded a decent revenue growth.

We believe that revenue is a natural result created by the value of the platform. High-quality development is our long-term strategy. We will not deliberately pursue a single-week rate. Because we believe that as we provide better services, better cost-effectiveness, and better customer needs,

We believe that revenue is a natural result of our value creation, and high-quality development is our long-term strategy. We do not prioritize growth over a single quarter. We think that if we can better serve the diverse consumer needs, with enhanced services and better savings, and if we can build a robust ecosystem, I think our platform will naturally achieve sustainable and high-quality development. Thank you.

This is Jing. Thanks. Let me take your second question. Well, first, we are still in the development phase. Profitability itself is not our priority. as Justin just mentioned, is a natural result of the value we create. So with that said, in Q2, we saw decent financial results, showing the early results from our high-quality development strategy. And in this process of executing our high-quality development strategy, we are stepping up investment in many key investment areas, for example, giving back to consumers supporting SME merchants, investing agricultural and manufacturing supply chains, and the 10 billion ecosystem initiative, to name a few. These efforts are reflecting our financial results. Also, as competition further intensifies, we will react positively by enhancing our more savings and better service core capabilities, and giving back to our consumers and merchants On our road to high-quality development, when we see opportunities to create long-term value, will we continue to exercise financial prudence and invest with determination? Thank you.

Hi, Alberta. I think we have time for one more analyst.

Thank you. Our next question will come from of Macquarie. Please go ahead.

Thank you very much for accepting my question. My first question is about competition. Since this year, we have seen that many of our friends have been focusing on the low price strategy and have also launched a lot of related promotions. At the same time, we have also seen that many of our friends have published some data about buyers and active merchants. I would like to ask how the management level evaluates the current competition's impact on our business. and whether competition will affect our subsequent strategy. The second question is about TIM. Let me quickly translate myself. My first question is on the competition. So we're seeing a lot of the competitors putting more emphasis towards the promotions and low pricing categories. Also, we're seeing pretty strong active buyers and merchants data from the peers. How do management evaluate the impact on our operations? Are we feeling more pressure and that would potentially impact our strategy going forward? And the second question is on Teemu. We have seen Teemu, you know, following Teemu very closely in the recent periods, We understand that this is still very early stage and might have limited financial contribution, but I wonder if management could share with us the latest progress of Timu and talk about the overall strategy, any financial metrics the management could share. Thank you.

Hello, this is Jiazhen. Thank you for your question. I would like to share with you our views on H&D.

Hello, this is Jiazhen. Thanks for the questions. I'll share some thoughts on competition first.

We are concerned about the recent changes in the industry. With the warm-up of the consumer market, consumers have also shown stronger shopping needs. We are not surprised that our opponents will add subsidies. The industry competition is also becoming more intense. But in our opinion, the positive competition started from the consumer needs is actually beneficial to the overall development of the industry. We think this is a good thing for consumers and this platform.

We notice changes in the industry, and as consumption recovers and consumers show a standard demand, it's not surprising for us to see peers stepping up on subsidies. Competition is indeed becoming more intense, and we believe that healthy competition, which is driven by a consumer-centric goal, can benefit industry, which includes not only the consumers but also the platforms as well.

The face-to-face industry has been developing rapidly. For us, the core of the rapid change of the industry is not the strategy of the leading players, but the demand of consumers to improve their own capabilities and be brave in the face-to-face competition. Therefore, we will transform the pressure of competition into the motivation to strengthen the core capabilities, and put our efforts into implementing high-quality development.

The e-commerce industry is always rapidly evolving, and for us, the key to adapting to the rapid changes is not to focus on what competitors are doing. Instead, it is to stay laser-focused on consumer demand and sharpen our own skills, and also to face competition directly and also bravely. We channel competitive pressure into more motivation to strengthen our core competencies and focus on implementing our high quality development strategy. 我们希望确保消费者在拼多多上买到丰富的低价好制的产品。 And serving consumers well is at the core of our value creation. We are deepening our capabilities of providing more savings services. More savings remains very important to us. And last quarter, for example, we invested billions in the June 18th promotions. to cover all product categories and make sure consumers have access to quality products at affordable prices.

At the same time, a good consumer experience requires a comprehensive effort. It may not only be the single dimension of price. We have continued to heavily develop the direction, quickly understand and improve the consumer's new needs and new preferences. In order to make consumers feel at ease, we have also comprehensively upgraded logistics and logistics services And positive consumer experience requires a comprehensive effort.

It is not just about price. And we continue to focus on R&D to understand and also adapt to consumers' evolving needs. To help consumers shop with peace of mind, We also work very hard to provide better services, which includes, for example, upgrading logistics and also after-sales support.

And

high quality supply is a fundamental to offering a value for money product. And we are promoting digital transformation in agriculture and also manufacturing. Our team is active in the fields and also in the factories to help farmers and also SME manufacturers standardize and also improve design, production, as well as logistics. With our 10 billion ecosystem initiative, we also provide support to quality merchants and products, and this incentivizes them to improve product and service quality. I think this in turn promotes the healthy and high-quality development of our platform ecosystem.

I received positive feedback from this effort.

And this gives us confidence to continue on this path of high quality development. Our strategy is very clear, but executing well is not that easy. It actually requires a long-term commitment. And we all need to do the right things and also do things right. We will continue to stick to our , improve ourselves in the face of competition, and create a greater value. Thank you.

Thanks for the question. Let me address your second question, Timu. Well, for our global initiative, Timu is currently in a learning stage. Our key focus right now is how we can apply our expertise to create our unique value. We do not focus on monetization or other financial metrics at the current stage. We hope to leverage our tech backgrounds and supply chain know-how to bring quality products at good prices to consumers in various markets globally. And this presents us with both challenges and learning opportunities. Currently, our team is less focused on understanding and adapting to different cultural preferences. social environments and consumer demands in different markets with the aim of creating more unique value. As we continue to understand and explore the consumer demands from the different markets, we will carefully evaluate the ROI of every investment opportunity and make responsible capital allocation decisions. Thank you.

Thank you everybody for joining us on the conference call today. It's about time. Thank you. Have a great day.

The conference has now concluded. We do thank you for attending the presentation today. You may now disconnect.