PDD Holdings Inc.

Ladies and gentlemen, thank you for standing by and welcome to PDD Holdings, Inc. Third Quarter 2023 Earnings Conference Call. At this time, all participants were 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. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining us today.

PDD Holdings earnings release was distributed earlier and is available on our website at investor.pddholdings.com, as well as through global newswire services. Before we begin, I would like to refer you to our safe harbor statement in earnings price 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 Mr. Chen Lei, our chairman and co-CEO, Mr. Zhao Jiazhen, our executive director and co-CEO, as well as Ms. 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. June will then walk us through our financial results for the third quarter ended September 30, 2023. During the Q&A session, Lei and Jiazhen will answer questions in Chinese and will help translate. Please note that the English translation is for reference only. In case of any discrepancy, management statements in the original language should prevail. Now it's my pleasure to introduce our chairman and co-CEO, Chen Lei. Lei, please go ahead.

Hello, everyone. Thank you for joining our earnings call for the third quarter of 2023. I will start by giving a brief overview of our third quarter results. In Q3, we achieved a total revenue of 68.8 billion RMB representing a 94% year-on-year increase. This is a result of the improving consumer sentiment in our efforts to carrying out the high-quality development strategy. As one of the largest e-commerce platforms in China, we clearly felt a continuous recovery of the economy as well as the potential and the resilience of a consumption market. With the introduction of a series of policies to support consumption, we are also seeing robust demand for consumption upgrades. Consumer behavior is telling us that consumption upgrade is not just about quality, but equally about price. It's the balance of quality and price that consumers care most about. Recognizing this trend, we are more confident about our value proposition of more savings and better services. And in Q3, we continue to invest platform resources to make it easier for our users to enjoy an ever greater selection of quality products at affordable prices and with great service satisfaction. In Q3, we continued exploring new ways to offer our users special promotions through a series of campaigns such as Door-to-Door Harvest Festival, National Brand Festival, Door-to-Door Reading Month, and National Day Sales. Consumers get to enjoy attractive prizes that are typically only available a few times a year during shopping festivals. We have always been confident in the vitality of China's consumer market. While we are laser-focused on the shopping experience, our efforts go beyond the surface. Investing in technology innovation is the key to achieving high-quality development. In Q3, we continue to invest decisively in areas such as agri-tech, supply chain technology, and our core R&D capabilities. Our investment in R&D reached 2.8 billion RMB, setting a new high. Technology innovation is the core driving force behind our pursuit of high-quality development, and we will continue to step up investment in this area. At the same time, we are proactively taking on more social responsibilities. In August, the area was hit by severe weather. We immediately went into action and donated 30 billion RMB to a China Charity Federation to support affected region. At the same time, we launched dedicated relief campaigns and charity live streaming events to support affected companies. For example, to help book merchants in the region resume normal operations, we set up a dedicated channel on our platform and provided relief measures such as traffic support and zero condition policy. In Q3, we went back to places in several provinces and hosted a series of Reading For You book donation events. We also donated food and helped build libraries for schools in Gansu and Hebei provinces. We are hopeful that through these efforts, we can do what we can to broaden the horizons of young people and help them achieve a brighter future. I'm pleased to report that we were awarded the CLAWS China Charity Award in September. This is in recognition of our efforts in rural revitalization, disaster relief, and knowledge sharing. Although our business outside of China is still at an early stage, it has made a meaningful progress since its launch a year ago. Drawing on supply chain capabilities we have accumulated over the years, we are able to assist many manufacturers in expanding their presence and to directly engage consumers. Through TIMU, our cross-border services now help manufacturers reach consumers in over 40 countries. While we have broadened our reach, The business is still in its early stage and will face uncertainties. We are excited and intrigued by the opportunities and challenges that come with international development. We look forward to working with more manufacturers and all our partners to create a next-generation supply chain and shopping experience, fit for the evolving trends of our times. Our mission is to serve all and benefit all and to empower consumers all around the world to live their best lives. This year is a year of recovery and also a year of heightened competition. As always, we will maintain our strategic direction and focus on the execution of our high-quality development strategy. we will keep reminding ourselves of the day-one mentality and explore new and better ways to serve our users. Through rapid product iterations and feedback cycles, we will gain valuable insights that enable sustainable, high-quality goals. Through our efforts, we hope we can better the lives of our users and bring about positive trends to the world as a whole. Towards this goal, we will move ahead steadily and tirelessly. And now, I will hand it over to Co-CEO Jiazhen. He will talk more about our high-quality development strategy.

Thank you, Lei. Hello, everyone. This is Zhao Jiazhen. Thank you all for joining this earnings call. In the previous three seasons, with the continuous emergence of consumer policy comprehensive measures, the market activity continues to strengthen, and consumer development potential is flourishing. In this context, in the third season, we started from the general meeting and the list of names, and launched the summer festival, the多多封鎖館, the国货节, the多多读书业, etc. activities, and increased investment to continue to provide consumers with more affordable and better services.

In the first three quarters, market vitality has continued to improve. As the effect of consumption support policies gradually works its way into the economy, we are seeing stronger demand for consumption upgrades. Against this backdrop, in Q3, we launched a series of promotions such as the Summer Carnival, Dodo Harvest Festival, National Brand Festival, and Dodo Reading Month. Guided by our principle of serve all and benefit all, we stepped up our investment to offer more savings and better services.

And during this year's Singles Day, we continue to simplify our approach

For the first time, we offered direct price reduction on top of our $10 billion program. We now also cover many imported goods under the $10 billion program, bringing our users a wider selection of quality products at reasonable prices. As a result of our efforts, we saw good momentum during single-stay, and over 620 million consumers benefited from the $10 billion program. 上次一大出是我们积极实施高质量发展策略的一个安全面。

The single-state promotion is one aspect of our high-quality development strategy. With the goal of creating incremental value for the consumers and the society, we focused relentlessly on execution to deliver high-quality assumptions

high-quality supply, and to improve platform governance and merchant ecosystem.

下面呢,我将为大家介绍三季度网络团队在推动公司高质量发展的方面推行的几错以及取得的成果。 Now let me walk you through the key initiatives my team and I have worked on during Q3.

First, we focused on high-quality consumption. Since Q3, we continue to work on improving our core capabilities in offering more savings and better services. By adopting appropriate platform policies and incentives, we are constantly making affordable, quality products more accessible to the public.

In September, Take the Dodo Harvest Festival as an example. In September, as the largest agricultural platform in China,

Pinduoduo invested $1 billion in platform resources and partnered with over 300,000 agriculture merchants in more than 1,000 production regions across the country to launch the Duoduo Harvest Festival. At the same time, we expanded the $10 billion program to cover the full selection of participating agriculture product categories.

By selecting high-end agricultural products and using real gold and silver subsidies, we have helped farmers expand the national market, realized a wind farm and a wind farm,

We continue to invest to support quality agricultural products, and in this process, we help farmers participate in the national market and grow their income. Our farmer merchants are encouraged by the results they receive on our platform and are ever more committed to a career in agriculture. 除了針對農產品的豐收節,

我们上个季度还联合了100家国货老字号品牌, 开启为期一个多月的国货节大述。 期间呢,我们与央视合作, 邀请58家优质国货品牌到白衣补贴直播间团见, 例如有上海制造、361、孔凤村、头线和客, 对广大的网友介绍优质好物和品牌背后的故事。 In addition to the Dodo Harvest Festival, which was dedicated to agricultural products,

In Q3, we also collaborated with over 100 Chinese national brands to launch the National Brews Festival. In partnership with CCTV, more than 50 top Chinese brands such as Shanghai Soap, 3631, Co-Phoenix, and R-Cook were invited to live streaming sessions hosted on our 10 billion program to showcase their products and tell their brand stories to a nationwide audience. 平台用户分为用订单,

The consumer demand was boosted by our various support measures, such as featured live stream events, 10 billion programs, and large group buying.

We are pleased to see that some national brands achieved rapid growth in partnership with us. Some even experienced a 40 times growth in the past two years. and the business is still growing quickly.

The high-quality supply is the foundation for high-quality consumption. In Q3, we continue to invest in our supply chain capabilities

which in turn enable more local manufacturing and agriculture producers to emerge as leaders of certain product categories and expand international and even global markets.

On the third quarter, we launched a farm operation, which went back and forth into rural areas such as Jiangsu Dazha County, Northwest Fruit and others, to help local farmers build more resilient and competitive digital farms. Over the past few years, with the help of Pinduoduo, these areas have been able to produce In the third quarter, our team returned to key agricultural production areas, such as Jiangsu for aircraft and Northwest for food. Under our Agricultural Cloud Initiative,

we brought digital solutions to local producers to improve the resilience and competitiveness of the local supply chain. In recent years, with the help of Pinduoduo, we are happy to see that a new generation of growers and farmers is emerging in these regions. Among them are a post-90s finance master degree holder who sent notes to investment banking and devoted himself to the aircraft trade, and a post-58 village director who helped farmers sell 4 million kilograms of sweet potatoes over three years. They are playing a vital role in driving rural revitalization.

innovation is a crucial element of the agricultural value chain. In Q3, we continue to promote digital inclusion and technology adoption in agriculture. To this end, we hosted the Pinduoduo Academy Growing Competition for the second year,

which serves as a platform to bring wider recognition for innovative tech-driven agricultural practices across the nation. This year's event attracted 96 research teams. At the same time, our platform also provided strong traffic support and coupons for agri-tech-enabled products championed by participating teams. This is to promote standardization, brand building, and digitization in agriculture. Our support covered a wide range of products, including oranges, citruses, lamb, and kiwi fruits from top production regions.

In the third quarter, we continue the rapid business model iteration for our global initiative.

we made it easier than ever for manufacturers to reach consumers in over 40 countries and regions worldwide. We now serve more than 10,000 manufacturers from over 100 industrial belts across Guangdong, Zhejiang, Shandong, and Anhui provinces.

In our pursuit of high-quality development, a high-quality ecosystem is the foundation

that nurtures a mutually beneficial environment that supports the growth of the platform and its participants.

In the third quarter, we will continue to innovate the online shopping protection service for underage people. In terms of underage people's account identification, search and browsing, and shopping download restrictions, and positive content guidance, we have upgraded the protection of legal rights for this group. At the same time, we will deepen the professional activities of publishing and other copyrighted products, actively carry out platform responsibility,

In the past quarter, we improved the protection mechanism for minors that now covers account verification, search and browsing, order restrictions, and content management. In addition, we also deepened our commitment to copyright protection through a series of dedicated campaigns. We are proactively looking for areas where we can take on more social responsibilities as we strive for a greener and healthier platform ecosystem.

Last month, Pinduoduo celebrated its 80th anniversary. Looking back at the past journey, we sincerely thank the consumers, farmers, farmers, investors, and the broad support of the society. Looking forward to the future, we still have the spirit of fighting hard and working hard. We will work hard to promote a high-quality development strategy. In terms of demand, we will insist on the consumer to further improve the quality of the general meeting and service. In terms of supply, Last month, Pinduoduo celebrated its 8th anniversary.

Looking back on the journey, we sincerely thank the consumers, farmers, merchants, investors, and other stakeholders for all the support we received. Looking ahead, we'll move forward with a relentless focus on execution of a high-quality development strategy. On the demand side, we'll continue to be consumer-oriented to provide more savings and better services. On the supply side, we'll remain firmly rooted in the real economy, driving industrial modernization through innovation. On platform ecosystem, we'll allocate more resources to upgrade platform governance, support quality SME merchants, and foster a healthy and mutually beneficial environment. Now let me hand it over to Jun. She'll provide you with an update on our financial performance.

Thank you, Justin. Hello, everyone. Let me walk you through our financial performance for the third quarter ended September 30, 2023. In terms of income statements, in the third quarter, Our total revenues increased 94% year-over-year to RMB 68.8 billion. This was mainly driven by the continued recovery in consumer sentiment and encouraging results from executing our high-cost development strategy. Revenues from online marketing services and others were RMB 39.7 billion this quarter, up 39% from the same quarter of 2022. Revenues from transaction services were RMB 29.1 billion, up 315% from the same quarter last year. Moving on to costs and expenses. Our total cost of revenues increased 262% from RMB 7.4 billion in Q3 2022 to RMB 26.8 billion this quarter, mainly due to increase in fulfillment fees payment processing fees, maintenance costs, and call center expenses. On a gap basis, total operating expenses increased 44% to RMB 25.4 billion, from RMB 17.7 billion in the same quarter of 2022. On a non-gap basis, total operating expenses increased to RMB $23.9 billion this quarter from RMB $15.8 billion in Q3 2022. In the past quarter, guided by our high-quality development strategy, we invested decisively and responsibly in key strategic initiatives. Our total non-GAAP operating expenses as a percentage of our total revenue this quarter was 35%, compared to 44% in the same quarter last year. Looking to specific expense items, unknown gap sales and marketing expenses this quarter will be 21.3 billion, up 58% versus the same quarter last year. Unknown gap basis, our sales and marketing expenses as a percentage of our revenue this quarter was 31% versus 38% for the same quarter last year. Throughout the past quarter, we continued to give back to consumers and rolled out a series of promotional campaigns. We have seen due to consumer feedback to our efforts. Unknown Gap General and administrative expenses were RMB 403.3 million versus RMB 226.3 million in the same quarter of 2022. Our research and development expenses were RMB 2.2 billion this quarter on a non-GAAP basis and RMB 2.8 billion on a GAAP basis, hitting a new high. Technology is at the heart of our value creation and will be a long-term focus for us. We're committed to stepping up our investment in areas such as agricultural technology, supply chain, and our core R&D capabilities. Operating profit for the quarter was RMB 16.7 billion on a gap basis, compared with RMB 10.4 billion in the same quarter last year. Loan gap operating profit was RMB 18.1 billion versus RMB 12.3 billion in the same quarter last year. Loan gap operating profit margin was 26% this quarter compared with 35% for the same quarter last year. Net income attributable to ordinary shareholders was RMB 15.5 billion for the quarter, compared to RMB 10.6 billion in the same quarter last year. Base earnings per ADS was RMB 11.38, and dilute earnings per ADS was RMB 10.60, versus base earnings per ADS of RMB 8.38 and dilute earnings per ADS of RMB 7.34 in the same quarter of 2022. Long-gap SNAPs income achievable to ordinary shareholders was RMB 17 billion versus RMB 12.4 billion in the same quarter last year. Long-gap dilute earnings per ADS was RMB 11.61 versus RMB 8.62 in the same quarter of 2022. We delivered solid financial results in the post-quarter. Looking ahead, we will continue to invest patiently to execute our high-quality development strategy. That completes the income statement. Now let me move on to cash flow. Our net cash generated from operating activities was RMB 32.5 billion, compared with RMB 11.7 billion in the same quarter last year. As of September 30, 2023, we had RMB 202.8 billion in cash, cash equivalents, and short-term investments. Thank you. This concludes my prepared remarks.

Thank you, Jun.

Next, we'll move on to the Q&A session. Today's Q&A session, Lei, Jiajun, and Jun will take questions from analysts on the line. You could take a maximum of two questions from each analyst. Lei and Jiajun will answer questions in Chinese and will help translate for convenience purposes. Operator, we're open for questions.

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

Good evening. Thank you for accepting my question. I have two questions. The first question is about the strategy. In the past, the company has made good progress in this period. I would like to know where the strategic focus of the management team will be placed next. Can you please introduce some strategic actions that will be implemented in the future? The second question is about agriculture. We understand that the company has been emphasizing that agriculture is a very important product category. Could you please explain the reason behind it and the thinking of the management team? We have recently learned that the agricultural category has achieved very good growth in the past quarter. In the past few years, the agricultural category has developed very well and has achieved a good result. Could you please introduce some of the major mistakes in this field in the past period? Let me translate myself. Thanks for taking my question. I have two here. First one is regarding the company strategy. How does management think about your strategic priorities? The business showed very strong momentum in the past quarter. So from a forward-looking perspective, just wondering what are the key strategies on the top of the mind of management strategies And then my second question is regarding the agriculture. We understand that agriculture has always been a core merchandise category for Pinduoduo. So just wondering, can management elaborate on why this category is key to our platform? And we recently learned that after so many years of efforts in the In this sector, this product category has continued to perform well and booked meaningful growth in the past quarter. Can management give us some color on what are some of the key initiatives you have implemented in agriculture so as to achieve that growth? Thank you.

Hi, this is Zhao Jiazhen. Let me take this question on strategies. As we mentioned last quarter, starting this year, we are entering a stage of high-quality development. And for us, this is not an empty catchphrase. We are implementing it in every aspect of our business. And first on the supply side, on the one hand, we are strengthening our capabilities in agriculture. And going forward, we'll continue to invest

in agri-tech and in supporting infrastructure. This is to improve the overall quality of the agricultural products that are sold on our platform.

On the other hand, we have also initiated the construction of a 100-year ecosystem, helping to support the good quality of products, and at the same time serving the good business partners and ecological partners. From this point of view, we will further encourage the high-quality development of the ecosystem. At the same time, we will continue to promote the 1st Project of the Platform since I took office.

At the same time, we launched the 10 billion ecosystem earlier this year to support the high-quality merchants and other ecosystem partners doing business with us. This is to provide the right kind of incentives to facilitate the high-quality development of the whole ecosystem. And at the same time, we are working very hard on improving our platform governance efforts, which is one of our top priorities since I took office. We are making steady progress in areas such as minor protection and also product safety.

From a sales point of view, on the one hand, we have made the original high-end products more affordable and affordable. In the past 30 years, And from the consumer side, first I want to say that our $10 billion program is making some of the

higher ticket items more accessible to our consumers. And during the most recent single stay, the number of users who benefited from the $10 billion program went over 620 million. And a positive user mindshare is our most valuable asset. And it takes years of efforts to build up one order at a time, but could be easily destroyed very quickly. So we will not relax in this area.

And from the consumer side, secondly,

we have been improving our capabilities to provide better services to our users since the beginning of this year. And so far, we've received positive feedback. Over the long run, through better service satisfaction, we hope to strengthen users' trust in our platform and deepen the better services mindshare. And by doing so, consumers will be more likely to try new product categories on the platform.

so we can also better serve their diverse needs.

We are prepared to work long and hard for the high-quality development of our business and our platform. We are very pleased to see that the strategy is starting to deliver results even sooner than we had hoped for. And also coming back to your question on our strategic priority, the board and management team adopted the high-quality development strategy when I took office earlier this year, and this will continue to be our focus during my tenure.

Thank you.

Hello, I'm Chen Lei. Let me answer your second question about agricultural strategy.

Hi, this is Chen Lei. I will answer this question on your agricultural strategy.

As you mentioned, agricultural products are of strategic significance for Pinduoduo. We are a farmer. We have a lot of users who started to use Pinduoduo from agricultural products. As you mentioned, agriculture is of strategic importance to us. We started out in agriculture, and that's how many users first came to know us.

we are able to retain those users by serving them well through our agricultural offerings. Today, the online penetration of agricultural products is still relatively low. So, there remains huge potential in this product category.

Last quarter, we launched a special event called多多分收馆. We connected more than 1,000 agricultural products to consumers across the country. Through the investment of resources from major brands, to enhance the quality and consumption experience of agricultural products, and to connect the right logistics resources for the farmers. In this way, we have sent many special agricultural products to the table of consumers across the country. We have also satisfied consumers' needs for high-quality, fresh and healthy agricultural products. These are some of the measures that we have been trying to implement in the field of agricultural products circulation.

Last quarter, we launched the Doduo Harvest Festival and brought agricultural products directly from more than 1,000 productive regions to consumers across the country. We allocated more platform resources to improve the quality of agricultural products and shopping experiences on our platform. We also brought many regional specialties to the national market for the first time by connecting farmers with suitable logistic resources. In doing so, we were able to better address consumers' demands for high-quality, fresh, and healthy agricultural products. That's what we have been doing to improve the quality and efficiency of the supply chain for agricultural products.

At the same time, we also realized that circulation is just a part of the modernization of agriculture. We also need to accelerate the actual landing of agricultural technology innovation. Only in this way can we say that

At the same time, we understand that improving supply chain is just one aspect of agricultural modernization. We also need to accelerate the adoption of agri-tech innovation to improve productivity and product quality.

The second Pinduoduo Bay Technology Institute will continue to promote the innovation and popularization of advanced agricultural technology, and the recruitment of talents in the field of agriculture. In the process of the transformation of scientific results, we also made our contribution to improve the productivity of farmers, reduce consumption and waste. In addition, we also know the importance of basic research. Therefore, in May this year,

我们向中国农业大学捐赠了1亿元人民币,设立专项研究基金,那么旨在解决农业领域的关键需求。 This year, we hosted the third Smart Agriculture Competition and the second Pinduoduo Academy Growing Competition to promote agri-tech innovation and adoption. We also supported talents specializing in agricultural areas and helped farmers increase productivity and reduce losses. Meanwhile, we recognize the importance of fundamental research. In May, we donated 100 million RMB to establish a dedicated research fund at China Agricultural University to address critical needs in agricultural research.

In August this year, we also invited international agricultural and food safety experts, Yi Wang, to become our independent director. With his participation,

In August, we were pleased to welcome Yvonne to our board as an independent director. Yvonne is an expert in agriculture and food safety. With her on board, we will be more targeted in our investment in agricultural research. Our goal is to utilize cutting-edge research to solve practical problems in China.

Our goal is to utilize cutting-edge research to solve practical problems in China. Our goal is to utilize cutting-edge research to solve practical problems in China. Our goal is to utilize cutting-edge research to solve practical problems in China. Our goal is to utilize cutting-edge research to solve practical problems in China. Our goal is to utilize cutting-edge research to solve practical problems in China.

Going forward, agriculture will remain a cornerstone of our high-quality development strategy. We will continue to leverage our advantages in technology and platform resources to streamline the supply chain of agricultural products, promote agri-tech innovation and adoption, and bring more quality products directly from farm to table thereby creating tangible benefits to our farmer merchants. Thank you all.

Thank you, Natalie. Hopefully, we can move on to the next analyst on the line.

The next question comes from Ronald Kyung of Goldman Sachs. Please go ahead.

Thank you, Manager. My first question is about competition. Since this year, I have seen your competitors are doing a lot of work on high-performance products. At the same time, it also makes it easier for factories to open up on their platforms. After these promotions, they have also seen some good trends in users and merchants. I would like to ask how the management level evaluates the pattern of industry competition. I would also like to ask the management level to share what measures the management level has taken to respond to the competition in this competitive environment. My second question is about globalized business. Since the company launched globalized business, the market has been very concerned. We also noticed that in the past year, the development of this new business is very, very fast. Could you please share some of the latest developments in the field of globalized business? What are your thoughts on some of the future strategies behind this business? And what are your views on globalized business in the middle and short term? Thank you, management, for taking my question. So my first question is that since the beginning of this year, many of your competitors have been putting more emphasis on value for money merchandise and made it easier for manufacturers to set up storefronts on those platforms. And some of your peers have observed some strong user and merchant momentum. How do you evaluate the competitive landscape and what are some of the key initiatives to defend your competitive position in this environment? And my second question is that we've seen your global business gather good, strong momentum since launch a little over a year ago. So may you share with us the latest development, your strategy for this business going forward, and what's your vision for the business in the near to medium term? Thank you.

你好,我是赵家珍。谢谢你的问题。 我先来分享一下我们对于海鲜的一些看法。 This is Xiaojiazhen. Thank you for your question. Let me share my thoughts on competition.

As Lei just mentioned, this year is a year of recovery, but it's also a year of heightened competition. As the micro-supportive policies are gradually rolled out, we are not surprised that our industry peers have been increasing investments to boost consumption.

Our industry needs to face directly

the constantly evolving consumer needs. And consumers nowadays have different platforms to choose from, so competition is in fact inevitable. There's no permanent solution to dealing with competition. Instead, we are always thinking about how to improve our core competencies and work with ecosystem partners to create greater value for our consumers.

At Shajid, we continue to surround ourselves with a variety of good services

In the third quarter, we continue to be innovative in promoting more savings and better services, and to offer more quality and affordable products to our consumers, and at the same time, with great shopping experience.

While we are continuing to deepen the more savings mindset, which is our strong suit traditionally, we hope we can also deepen

consumers' trust in our platform by providing better services. This will hopefully invite more users to explore new product categories on the platform so we can better serve our users' demand for a consumption upgrade.

At GoDiBa, we continue to expand the physical economy to solve the physical economy digitalization problem in all parts of the country. to help them connect the products to consumers all over the country and even all over the world, so that more manufacturers can enjoy a digital future, and also enrich consumers' shopping choices from the source.

And on the supply side, we continue to be rooted in real economy and to promote digital inclusion in agriculture and manufacturing sectors across the nation. By helping the producers sell their products directly to consumers, both in China and now globally, we enable more producers to enjoy the benefits of digital economy, and at the same time, broaden the merchandise selection on our platform.

We have always been very clear about our strategy. That is, we don't look at what the market is doing. We look at what consumers need. However, the demand and trend of our platform consumers is very obvious. Around this trend, we have developed a high-end strategy,

Our approach to competition has always been clear, which is we don't focus on what our competitors do, but on what our consumers need. We have been seeing a clear trend of consumption upgrade among our users. And against this backdrop, we formulated the high-quality development strategy to better adapt to this trend. The idea is very simple, but simple does not mean easy.

There are two types of competition in the market, and there are also two types of competition. Sometimes some competition is easy to devalue, and it will be combined with some market behavior. We also feel that doing well itself will also cause attacks. For example, at the beginning of September, a work organization issued a report on our work. This report has no basis, and this work company is also a bit of a mess. The intention of this organization to publish the report is obvious, which is to create panic in the market.

There is both healthy and malicious competition. Sometimes competition can easily evolve into unhealthy market practices, and those who do well will always attract attacks. For example, we noted that a short salary report on our company was issued in early September. The allegations in the report are totally baseless, and the short salary has spotty track record. And on this page, the report was published with the intent to create panic and to drive down stock prices and enabling the firm to, the short seller, to profit from short decisions. As we investigated further, we found out that there were actually more follow-up actions taken by the instigator behind the report. Their motives and the unusual actions are quite apparent. We are encouraged to see that most investors understood the underlying motives and saw through the groundless acquisitions.

Looking forward, we will continue to focus on our consumers

and our high-quality development strategy. With a clear and focused mind, we will relentlessly focus on execution, and in the end, we believe consumers will vote with their wallets. This is our view on competition.

Thank you.

This is Jane. Thanks, Rona. Let me take your question on global business. Well, for our global business, the idea is to leverage the supply chain expertise accumulated over the years to create a new form of channel and shorten experience, which directly connects the factories with consumers and is based on a flexible supply chain. Currently, consumers from over 40 countries with diverse cultural backgrounds are able to purchase directly from high-quality factories through our services. However, this is still in a very early stage. Many of our initiatives are in the beta testing phase. Our team is actually learning about the different markets and consumer needs around the world. It will be an iterative process that will be challenging, but at the same time interesting. We look forward to working with Lamad and partners on this journey to make the lives of consumers around the world more enjoyable.

Thanks. And operator, I think we have time for one more analyst.

The next question comes from Ellie Jang of Macquarie. Please go ahead.

Good evening, thank you for accepting my question. My first question is about the increase in revenue. We see that this quarter's revenue is very good, rising by 94%. Can you share with us whether the current increase in revenue is mainly due to a few factors? Or did the company do anything better last quarter? Can you share with us how we should look at this trend to extend to the fourth quarter and next year? Let me translate myself. Two questions. First is on the revenue. It seems the company achieved very robust revenue growth of 94% year over year. What did you think contributed to this growth? What do you think you have done right in the past quarter? And how do you think about the growth sustainability into the fourth and next year? And then the next is about the margin. We've noticed that your margin decreased on a year-over-year and quarter-over-quarter basis. What are some of the key investment areas that you are putting your resources into? Is this related to the competition? How is your global business impacting your profitability? and how should we think about the trend for the margin in the next few quarters? Thank you.

Hi, this is Zhao Jiazhen. I'll start by addressing the question about growth.

As Lei mentioned earlier, our financial performance this quarter is the combined result of improving consumer sentiment and the execution of our high-quality development strategy. In the past quarter, driven by consumption recovery, the Chinese economy grew at a rate that went over market expectations, which demonstrates the resilience of the Chinese economy. What we are seeing on our platform also confirms the potential of the consumer market. We have confidence in the Chinese consumption markets, there remains much to be done to better serve the consumer demands.

From the company's point of view, although there are no major changes to the 3G system, we continue to invest in the concept of day-to-day low price as usual, and we are gradually making choices for consumers in terms of price and freedom, and we will do our best. While the platform serves the customer's technical needs, we have also achieved good results in cooperation with the brand. Although the industry players did not have any major promotions planned during Q3, we still practiced everyday low-price philosophy

and worked hard to provide consumers with a wider selection of quality products at affordable prices. And this is to deepen our more savings value proposition. And while we serve the basic needs of our consumers, our cooperation with branded merchants also generated good results. During the National Goods Festival, we invested in coupons and also invested platform resources to help more national brands to quickly gain popularity. In partnership with our platform, some brands were able to achieve multiple growths in the past year or two.

We have also fully mobilized the customers' enthusiasm through various CD policies and platform resources, and have done a lot of good service with the platform. We are also very happy to see that users are more and more recognized by the platform, and the turnover is also higher. This also provides more sales opportunities for the participants.

And we put in place the appropriate policies and offered platform resources to incentivize our merchants to work with us together on providing more savings and better services. We are very pleased to see growing trust in our platform and higher user activities, which in turn provide more sales opportunities for the merchants. and merchants in turn are naturally more willing to increase the investment on our platform. We have been saying that revenue is a natural outcome of the value we create for our ecosystem partners. We will maintain our strategic direction and focus on the execution of the high-quality development strategy. Instead of paying too much attention to short-term revenue trends, we will direct our attention to work on improving our core capabilities for serving the consumers and our merchants. Thank you.

This is Jane. Thanks, Ali, for your question. I will answer your question about profitability. First and foremost, we are still in a development phase. Profitability in the short run is not our priority. Instead, our team is less focused on executing our high-quality development strategy, which we hope will increase the value of the platform in the long run. In the past quarter, Guided by the high-quality development strategy, we step up our investment in key areas such as promotion activities and service upgrades to deepen our more savings and better services for our share. We also further build on our supply chain capabilities and ecosystem improvements. We are seeing encouraging results from our execution and we will continue to invest firmly when we see good ROI potential. In terms of future trends, we operate in a fast-paced market environment where investment opportunities change on a daily basis. Because of this, our business execution will not match the financial reporting schedule. And going forward, our profitability may continue to fluctuate on a quarterly basis. Thank you.

And thank you all once again for joining us today. It's about time. And if you have any further questions, please reach out to our IR team.

Thank you and see you next quarter.

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating and you may now disconnect.