PDD Holdings Inc.

Thank you for standing by and welcome to PDD Holdings Inc. 4th Quarter and Fiscal Year 2023 Earnings Conference Call. At this time, all participants are in 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. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today. Sir, 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 the Globe Newswire services. Before we begin, we would like to refer you to our safe harbor statement in the earnings press release, which applies to this call as well. 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-Chief Executive Officer, Mr. Zhao Jiazhen, our Executive Director and Co-Chief Executive Officer, as well as Ms. Liu Jing, 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 fourth quarter and the physical year ended December 31st, 2023. During the Q&A session, Lei and Jiazhen will answer questions in Chinese and will help translate. Please kindly note that English translation is for reference only. In case of any discrepancy, 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 fourth quarter and the fiscal year of 2023. 2023 was an important year for PDG Holdings. We began a journey dedicated to high-quality development. Aligned with our strategy, we wrote out a series of initiatives to empower businesses and enhance consumer value. This effort has resonated well with our users and merchants, earning their positive feedback and support. Given by a rebounding consumer market, our total revenue in the fourth quarter was RMB 88.9 billion, which represents a 123% year-on-year increase. Gas net income for this quarter was RMB 23.3 billion, Over the past year, our revenue was RMB 247.6 billion, which represents a 90% year-on-year increase. In 2023, amid a positive consumer sentiment, our platform saw a healthy resurgence in demand. In the fourth quarter, we focused on improving consumer well-being by making higher-quality products more accessible. This was achieved through a series of events, such as the Double 11 and Double 12 Shopping Festival. Our goal was always being clear. Unlock unrealized consumer potential and empower individuals to achieve higher quality of life. As a result of this effort, we have seen sustained growth in consumer engagement in our platform throughout the first quarter. In 2024, we will continue to ramp up our support for high-quality supply and enhance our ability to deliver a good value and excellent service. We will refine our supply chain insights and technology capabilities to help manufacturers reduce costs, increase efficiency, and develop more products that resonate deeply with consumers. Our support for a new generation of farmers and merchants skilled in both agriculture and e-commerce is unwavering. This is part of our ongoing effort to boost local employment and increase farmers' income. Through our 10 billion ecosystem initiative, we grow alongside our high-quality merchants, brands, and small to medium-sized businesses to build a more sustainable ecosystem. R&D is at the core of our growth as a technology company, and last year, we continued to invest in technology innovation with R&D expense reaching RMB 11 billion. This is the second consecutive year that our R&D expense has surpassed RMB 10 billion. In the fourth quarter, R&D expenses grew by 19%, reaching RMB 2.9 billion. This year, we continue to channel investments into new drivers of high-quality development. We are dedicated to advancing the role of cutting-edge technology in agriculture and manufacturing. In the fourth quarter, we reinforced our agricultural strategy through supporting projects such as the Agricultural Cloud Initiative and the Pinduoduo Academy Growing Competition. We hope to encourage the development of more resilient digital agriculture regions to further revitalize rural communities. Take the Pinduoduo Academy Growing Competition as an example. It provides a platform for college students to showcase their agricultural innovation. Pinduoduo has been an active supporter for this event for the past year running. And we also pay close attention to the development of agricultural products driven by technology. For instance, Pinduoduo offers support for specialty agricultural products through initiatives such as zero commission and 10 billion program. For agricultural produces such as orange, tangerine, grapefruit, et cetera. We formed a strategic partnership with certain producers to broaden their market reach and provided continuous platform support. We also actively fulfilled our social responsibilities. In December last year, an earthquake struck Gansu Province. We promptly donated RMB 20 million. The donation will aid in purchase of relief supplies and post-disaster reconstruction. We feel ourselves accountable for making positive contributions to our community. As for our global operation, since launching in September 2022, we have expanded into 50 countries and regions. As a newcomer, we are excited to learn from our diverse global consumers and markets as we explore technology innovation. With our supply chain expertise, we are dedicated to helping each consumer live a more fulfilling life, and we remain committed to this mission. 2023 marks the eighth year since the founding of PDD Holdings. Since our inception, we have always stayed closely to our focus on e-commerce. We have always put consumers first and embraced innovation with an open mind. Throughout this journey, our team has experienced remarkable growth and development, and we have seen ambitious young leaders emerge ready to take on greater responsibilities. Our company strives on creativity and energy of the younger generation, giving us the confidence to create unique value for our growing consumer base. And now, I will hand it over to our co-CEO, Zhao Jiazhen, to further talk about our high-quality development strategy.

Thank you, Lei. Hello, everyone. This is Zhao Jiazhen. Thank you all for joining the fourth quarter and full year 2023 earnings call. 2023 is a year of recovery.

Guided by the key principles of recovery, benefit-all, and innovation, we proactively responded to the consumption recovery policies. By bringing together the supply of quality products and the demand of consumption upgrade, we played our part in releasing consumption potential. We achieved decent growth in 2023, which we believe is the combined result of our effective promotional activities and the overall recovery of consumption. 印度作为最广大的消费者服务,

在與用戶的接觸中,我們發現,國內消費者近年消費升級的需求愈發了強烈。 但同時,消費者們也開始關注如何用更經濟、更便捷的方式獲得更高的生活品質。 消費升級不是高消費,不是投資需求,而是幫助用戶節省開支的同時,為他們提供更好的產品與服務。 雲露多 is built to serve the needs of a vast and diverse consumer base.

In recent years, through interactions with our users, we are observing a growing demand of consumption upgrades. But at the same time, we also noticed that our consumers are looking for ways to upgrade in a more rational manner. Consumption upgrade is not about high consumption or overspending. It is more about offering our users better products and services at more accessible prices to bring more savings. 鉴于此,我们在平台实测的过程中注重丰富优质产品的供给, seeing this trend, we paid special attention to broadening selection of quality products sold on our platform, and focused our promotional efforts on premium consumer goods, such as trendy national brands, imported goods, and high-quality produce. 例如通过百亿补贴等方式,平台持续加快引进海外品牌,

and strongly supports high-quality domestic goods development. During 2021, while we save more money for users, we also help customers sell more goods. During the event, Yangsha Channel provides more than 100,000 small and medium-sized customers with an increase in volume. More than 40 categories such as agricultural goods, domestic goods, and global goods have increased twice as much. The number of domestic goods and domestic goods that are not included in the income and rent has increased more than twice as much. The top 100 brands in global goods business,

有21个品牌实现了同比300%以上的增长。 单日销售额过百万的单品达到了59个。 For example, through our 10 billion program, we are making it increasingly easy to enjoy imported products. And we are also investing firmly to support national brands. During the singles day last year, we helped our merchants sell more and our users save more. Our flash sale channel acted as a growth engine for over 100,000 SME merchants, and by the end of the event, more than 40 product categories saw their sales double. These included agricultural products, national branded products, and quality imported goods. The number of merchants selling agricultural products and national branded goods that benefited from our $10 billion program more than doubled. In our total growth worldwide channel dedicated to imported products, 21 out of the top 100 brands achieved a year-on-year growth of over 300%. 59 items recorded daily sales of over 1 million RMB during single stay. These numbers also show that the growth of a platform is the result of the value we create for our consumers and merchants. 2024 will be a year of consumption promotion. As always, guided by the principle of consumer first, we will continue to improve the variety of products and services offered on our platform, deepen our value for money mindshare, upgrade our shopping experience, and enhance user activity. And as a result, we'll be able to offer more visibility and sales opportunities for quality merchants, thereby strengthening the positive feedback loop on our platform.

2023 is a new year for us to embrace high-quality development. 2024 will be an important year for Pinduoduo to deepen its high-quality development strategy. We will invest more, use high-quality consumption, high-quality supply, high-quality ecology, and three types of work as our hands.

2023 proved to be a pivotal year for us as we embark on the journey towards high-quality development, and 2024 will be another critical year to implement this strategy to every part of our operations. We will step up our investments in the three key areas of high-quality consumption, supply, and platform ecosystem to further optimize our capabilities in offering more savings and better services.

In terms of high-quality consumption, we will continue to put ourselves in consumers' shoes and adjust our product offerings, following closely the changes in consumer demand.

With tailored promotional events featuring holidays, seasons, and special product categories, we'll make it easier for consumers to fulfill their demand for high-quality products at attractive prices. In addition to more savings, we will also continue to upgrade our services. We will roll out a series of initiatives that benefit consumers, strengthen consumer protection, and further improve the shopping experience for remote areas and underprivileged groups. 在高质量供给方面,去年四季度以来,通过多场国货团间的主题带货直播、国货展等大数活动,

我们提供流量与补贴的支持,帮助制造业品牌扩大影响力,取得了不错的效果。 国货从起步到崛起甚至引领行业,背后需要品牌与平台的共同努力。 今年我们将继续为新老国货拓宽新菜道,与中国品牌一起,共同为消费者提供更好的产品和高质量的消费体验。 In terms of high quality supply, since Q4, we have been allocating platform resources such as traffic support and coupons.

to help manufacturing brands expand their influence. Through a series of promotional activities, such as dedicated live streaming sessions and the National Goods Festival, our merchants make great progress on our platform. The rise of national brands to industry-leading positions requires the joint effort from both the brands and our platform. This year, in partnership with new and established national brands, we will continue to explore new market opportunities and bring to our consumers better products and a high-quality shopping experience.

农业是拼多多的基本盘,作为国内最大的农产品赛行平台, 次季度我们积极支持科技小院大赛的举办, 并对科技小院重点研发的科技农产品给予流量与补贴扶持, 提升农业科技成果转化率,加快发展农业的新制生产力。 Agriculture is the foundation of Pinduoduo.

As the largest agricultural platform in China, in Q4, we continued our support for the Pinduoduo Academy growing competition. We also provided ongoing traffic support and other platform resources for agri-tech-enabled products backed by participating teams. By doing so, our goal is to promote the real-world application of research findings and to accelerate the improvement in farming productivity. 去年我们发起的农云行动

into rural areas such as Shaanxi, Sichuan, Shanxi, Yunnan, Hubei, Fujian, Shandong, Jiangsu, and so on. We will provide training in electric and commercial operation, as well as one-to-one fixed operation guidance, and help rural and industrial revitalization to increase employment. This year, we will increase the investment in agricultural operations, agricultural competitions, and other agricultural key projects, and continue to promote the development of more resilient, competitive, digitalized rural areas, and help rural revitalization and the recruitment of farmers.

Last year, our Agricultural Cloud Initiative went to production regions in Shanxi, Sichuan, Shanxi, Yunnan, Hubei, Fujian, Shandong, and Jiangsu, bringing e-commerce training and one-on-one consultation to local agricultural merchants. This year, we'll increase our investments in agriculture through projects such as the Agricultural Cloud Initiative and the Smart Agriculture Competition to continue to bring digitization solutions to local producers to improve the resilience and competitiveness of the local supply chain, thereby supporting rural revitalization and increasing farmers' income. Building a high-quality platform ecosystem will remain our top priority this year. Through the 10 billion ecosystem initiative and platform governance policies, we will continue to foster an environment that encourages high-quality supply and services, advancing a green, healthy, and modern platform ecosystem.

Now let me hand it over to Jun. She will provide you with an update on our financial performance.

Thank you, Jason. Hello, everyone. Now, let me walk you through our financial performance in the fourth quarter and fiscal year ended December 31, 2023. In terms of income statement in Q4, our total revenues increased 123% year-over-year to RMB $88.9 billion and 90% year-over-year to RMB $247.6 billion for full year 2023. This was mainly driven by an increase in revenues from online marketing services and transaction services. Revenues from online marketing services and others were RMB 48.7 billion this quarter, up 57% compared to the same period of 2022. Our transaction services revenue this quarter were RMB 40.2 billion, of 357% versus the same period of 2022. Moving on to costs and expenses, our total cost of revenues increased 293% from RMB 8.9 billion in Q4 2022 to RMB 35.1 billion this quarter. For the full year, our total cost of revenues increased 192%, to RMB 91.7 billion, mainly due to increased fulfillment fees, payment processing fees, maintenance costs, and call center expenses. On a gap basis, total operating expenses this quarter increased 44% to RMB 31.4 billion, from RMB 21.8 billion in the same quarter of 2022. On a known gap basis, Our total operating expenses increased to RMB 29.3 billion this quarter, from RMB 19.3 billion in Q4 2022. During the past quarter, we continue to focus on key areas critical to the high-quality development of our platform, such as investing in our more saving smart share, our brands, and our R&D capabilities. Our total non-GAAP operating expenses as a percentage of total revenues was 33% in Q4, compared to 48% same quarter 2022. Before year 2023, total non-GAAP operating expenses were RMB 90.3 billion, up from RMB 61 billion in 2022. Looking into specific expense items Our non-GAAP sales and marketing expenses this quarter were RMB 26.2 billion, up 53% versus the same quarter of 2022. During Q4, we stepped up our investment in a series of year-end promotion events to give back to consumers and increased advertising to promote our brands. On a non-GAAP basis, Our sales and marketing expenses as a percentage of our revenue this quarter was 30%, versus 43% for the same quarter in 2022. For full-year, non-GAAP sales and marketing expenses increased from RMB $52.2 billion to RMB $79.8 billion in 2023. Our non-GAAP G&A expenses were RMB $600 billion 74.5 million in Q4 versus RMB 360.8 million in the second quarter of 2022. Our annual non-GAAP GNA expenses were RMB 1.8 billion in 2023 versus RMB 1 billion last year. Our research and development expenses were RMB 2.4 billion in the fourth quarter on a known GAAP basis and RMB 2.9 billion on a GAAP basis. Before year 2023, our annual GAAP R&D expenses surpassed RMB 10 billion for the second consecutive year. Technology is at the core of everything we do. We will continue to build on our R&D capabilities to promote tech adoption in agriculture and the manufacturing sectors. to improve supply chain efficiency and in turn offer our consumers a growing selection of quality products at attractive prices. On a GAAP basis, operating profit for the quarter was RMB 22.4 billion versus RMB 9.1 billion in the same quarter, 2022. Non-GAAP operating profit was RMB 24.6 billion versus RMB 11.6 billion in the same quarter 2022. Non-GAAP operating profit margin was 28% this quarter, compared with 29% for the same quarter 2022. For full year, non-GAAP operating profit increased from RMB 38.1 billion to RMB 65.8 billion in 2023. Nottingham attributable to ordinary shareholders was RMB 23.3 billion for the quarter and RMB 60 billion for the full year. In the fourth quarter, base earnings per ADS was RMB 17 and dilute earnings per ADS was RMB 15.83 versus base earnings per ADS of RMB 7.42 and dilute earnings per ADS of RMB 6.52 in the same quarter of 2022. Non-GAAP NUTS income attributable to ordinary shareholders was RMB 25.5 billion for the quarter and RMB 67.9 billion for the full year. In the fourth quarter, non-GAAP diluted earnings per ADS was RMB 17.32 versus RMB 8.34 in the same quarter of 2022. As Lynn mentioned, 2023 is the first year on our path towards high-quality development, and we are encouraged by the early results. Looking ahead, while we are excited about the new journey, there are challenges and uncertainties along the way, and we need to be prepared to invest decisively for the long-term value of our platforms. Our financial results may continue to fluctuate, and past performance may not serve as a benchmark for future quarters That completes the income statement. Now, let me move on to cash flow. Our net cash flow generated from operating activities was RMB 36.9 billion Q4 and RMB 94.2 billion for the full year of 2023, compared with RMB 26.6 billion in the same quarter of 2022 and RMB 48.5 billion in 2022. As of December 31, 2023, the company had RMB 217.2 billion in cash equivalents and short-term investments. Thank you. This concludes my prepared remarks.

Thank you, Jun. Next, we will move on to the Q&A session. Today's Q&A session, Lei, Jiazhen, and Jun will take questions from analysts. We could take a maximum of two questions from each analyst. Lei and Jiazhen will answer in Chinese. and will help translate for convenience purposes. Operator, we are 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 1 on your telephone and wait for your name to be announced. Participants are requested to restrict to two questions at each time. Your first question comes from Joyce Ju with Bank of America.

Good evening, Lei, Jiajun, Jun, and Kairi. Thanks for taking my questions. I have two questions today. Firstly, as management mentioned in the opening remark, 2023 was a very important year for PDD from the strategic perspective. Looking back at the fourth quarter and the full year 2023, could the management share how you would evaluate your executions of the past year's strategies and how does the actual results are compared against the team's original expectations? For 2024, will there be any major changes in your strategic focus? And my second question was actually about the fourth quarter promotions. We all know the fourth quarter is the peak season for the e-commerce platforms. How would management assess PDD's performance in the fourth quarter shopping festivals? Are there any interesting trends of consumers, merchants, or platforms can be shared with us? Also, could you also help us a little bit in terms of understanding the relationship between the promotional seasonality and your very strong fourth quarter results? Thanks a lot. Then I would like to ask how the management team will evaluate the performance in this year's fourth quarter's large-scale activities. Have you observed any new trends that you can share with us? In addition, I would also like to ask the management team to talk about the specificity of this fourth quarter, as well as the relationship between the wholesale activities and the performance of our current quarter's financial performance. Thank you. Hello, Joyce. I am Chen Lei.

Let me answer the first strategic question.

Hi, Joyce. This is Chen Lei. Let me take your question on strategy.

We just talked about the beginning of the high-quality development of Pinduoduo Group in 2022. After a year of investment and execution, As mentioned in our remarks, 2023 marks the beginning of our high quality development strategy. After a year of dedicated execution, we have seen positive outcomes on the consumption side.

supply side, and within our platform ecosystem. This further reaffirms our lasting commitment in high-quality development.

At present, we have entered many countries and regions. We are facing different consumer habits, cultures, and markets in various countries and countries. But we always believe that the unchanging As we expanded into multiple countries and regions, we encountered diverse consumer habits, cultures, and rapidly evolving market landscapes.

We firmly believe that the consumer's demand for more savings and better services is universal. Therefore, in Q4, we continue our investment in alignment with our high-quality development strategy.

First of all, let me talk about the consumer side. In the consumer side, we always put the understanding and satisfaction of the consumer's needs in the first place. The fourth quarter caused the e-commerce to forget First, from the consumer side,

Our top priority has always been to understand and meet consumer needs. During the peak season in Q4, we introduced tailored promotional activities across different markets, featuring innovative, direct, and engaging campaigns. These initiatives allow consumers to improve their quality of life with ease and great savings, making it easier for our consumers to achieve high-quality consumption. The response to these promotions has been positive.

On the supply side,

We continue to allocate platform resources towards high-quality products and restable merchants to offer consumers more quality products. In addition, we also help merchants drive volume, improve turnover efficiency, reduce operating costs, minimize product waste, and consequently lower product prices, forming a virtuous cycle.

A healthy ecosystem is the premise of long-term sustainable development of a platform. This is also the area that we are determined to strengthen. We will continue to invest in platform governance through technical means to actively identify risks and increase the response speed of platforms, and to protect underage people, copyright protection, product compliance, The healthy ecosystem is the fundamental for the sustainable growth of the platform, and we are determined to put more effort in this area.

We continue to make forward-looking investment in platform governance, employing technology to identify risk early and respond quickly. We carry out product screening and merchant review on issues such as safeguarding miners, IP protection, and product compliance, and achieve favorable outcome. Moving ahead, we will continue to take on social responsibilities, fostering a favorable environment for both consumers and merchants.

After the past year of implementation, we can see the positive changes that high-quality development strategies have brought to us. Our strategic focus will not change. We will continue to deepen and implement high-quality development strategies to further optimize the ability of platforms to create our unique value for consumers and society. Thank you.

After a year of execution, we're delighted to see the positive changes brought about by our high-quality development strategy. Going forward, we'll stick to our strategic focus, deepen and strengthen our strategy, further refine platform capabilities, and deliver our unique value to consumers and society. Thank you.

Hello, I'm Zhaozhen Zai. Let me answer a question about Datu.

Hi, this is Zhao Jiazhen. Let me take your question on shopping festivals.

During the last year's Double 11 and Double 12, we have been discussing the value of multi-stakeholdership, providing consumers with simple and direct benefits. For example, during the Double 11, we presented the first single-stakeholder game on the basis of 100 billion subsidies. In addition to the strength of the subsidies and the coverage of the brand, we meet the needs of consumers to upgrade their consumption.

As always, during last year's single stay and Double 12, we provided consumers with straightforward price discounts to strengthen our more savings mindshare. For example, during the Double 11 last year, for the first time, we introduced direct price reduction on top of our $10 billion program. So we also expanded the brands and products covered by our promotions. This is to meet the growing demand for upgrades.

我们的持续投入呢,在消费者中也取得了很好的反响。 双11期间,拼多多百亿补贴的用户突破了6.2亿,百亿补贴的订单量也同比翻倍。 同时呢,我们也很高兴地看到,平台的价值得到了商家们的广泛的认可。 参与平台促销活动的品牌,商家及商品数量均创新高,实现了平台和商家的共同成长。 We received positive feedback from our continued efforts.

and during single-stay, over 620 million consumers benefited from the $10 billion program, with order volume more than doubled. At the same time, we are happy to see that the value of our platform has been increasingly recognized by our merchants. The number of merchants, brands, and products participating in our promotional activities reached a new height. Our merchants are growing together with our platform.

We are very happy to see that while the platform is growing,

And while we are very pleased to see the results from our shopping festivals, our team actually chose to pay more attention to the ongoing improvement in our platform's capabilities and how we can better meet consumers' demand for quality products at attractive prices all year round.

Since the founding of Pinduoduo eight years ago, we have always kept our focus on our core e-commerce business.

By patiently giving back to the consumers we serve, we have gradually earned a positive user mindshare. I think the result we have today is not only brought by the promotions in the past quarter, but also the return on investment we made in the past. From the consumer side, we continue to see the growing trust from our users. And in addition to serving more new users, we are also expanding the wallet share of our existing users. We believe it's the result of our growing capabilities in offering more savings and better services. This very encouraging trend strengthens our confidence in the overall direction of the high-quality development strategy. And from the supply side, we leverage our technology and scale to provide differentiated services for our SME merchants. And through these services, we help SME merchants expand their market reach and at the same time, broaden the product selection available on our platform. And by doing so, we create a virtual cycle. And looking ahead, we'll continue to invest firmly and patiently to create long-term value for consumers and merchants, and also to build a solid foundation for the next phase of our journey. Thank you. Operator, we are ready for the next question.

Your next question comes from Kenneth Fong with UBS. Hi, 晚上好,谢谢管理层接受我的提问。 我有两个问题,第一个是关于整体消费行业的。 管理层可以跟我们分享一下对未来一年国内拼多多的业务的整体的消费市场的看法, 然后公司在低基度会有看到一些新的趋势,可以跟我们分享吗?

我们看到我们资产负债表跟现金流也非常健康, 好遇到我们现在其他的互联网公司也在规模做回购跟派系等等动作, 我们会有类似的打算吗? 我继续翻译一下。 Thanks management for taking my question. My first question is regarding Pinduoduo domestic business. Can management share your view on the overall consumption market in the upcoming year? What are the new trends that you are seeing in the first quarter? My second question is on the shareholder return and margin. In fourth quarter, the company achieved a decent profitability against a backdrop of intensified competition and rapid growth of your global business. Can management share your view of how we should think about the margin in 2024 and going forward? And meanwhile, on shareholder return, We saw that you have a very strong balance sheet and then cash flow. Given peers have announced large increase in share buyback and dividends. Do we have similar plans? Thank you.

你好,我是赵家珍。 先由我来回答一下关于消费市场的问题。 Hi, this is Zhao Jiazhen. Let me take your question on the consumption market. 在过去的一年中,我们切实地感受到中国的消费市场

有深度,也有广度,也有韧性。 我们对未来的消费市场是充满了信心的。 In the past year, we actually clearly felt the depth with and also the resilience of the China's consumer market. And we are very confident in its future.

the trend can be further strengthened and strengthened.

And also from the activities we see on our platform, we clearly feel the improving consumer sentiment, and we look forward to seeing that trend continue into this year with the support of more macro policies.

We see the long-term progress of many consumer trends. First, consumers are full of expectations and aspirations for a good life. This is the bottom line of consumer development. We see many long-term driving forces behind the positive consumption trend. First of all, consumers have desires for a better life.

which lays the solid foundation for consumption growth. And secondly, we see new retail formats and business models emerge with the technology innovations, which also drives online penetration of retail sales. This supports the industry's long-term prospects as well. And thirdly, we see tremendous potential in a large number of quality national brands and agricultural products. And this also offers further opportunities for our platforms.

In this favorable consumption environment, we will continue our investment to enhance our service capabilities, collaborate with more merchants to serve our consumers well, and also improve the platform ecosystem.

And by doing so, we hope we can create greater value for society. Thank you.

Hi, Kenneth. This is Jing. Let me take your question about the profitability and shareholder return. Well, regarding profitability, we always emphasize that we are still in the development stage. Profitability in the short run is not our priority. Considering our current stage of development, Our strategic focus remains on the high quality development of the platform. So we're focused on building the platform's long term value, which is consistent with the interest of our investors. Over the past years, guided by our strategy of high quality development, we have made firm investments in a few key areas For example, we have continued to give back to consumers to deepen our market share. We also remain committed to R&D, which R&D exceeding 10 billion RMB for the second consecutive year. This investment have yielded favorable initial returns. Moving forward, we will continue to make decisive and patient investments where we see a long-term RI potential. And our business execution cycle is affected by various factors and may not align with our financial reporting cycle. Profitability on a quarterly basis will inevitably fluctuate based on the different investment opportunities we identify. So the financial results in Q4 may not serve as a benchmark for future quarters. And regarding the share repurchase and dividends, you're basically asking about our overall capital allocation, which is also affected by the stage of our development. Each company is at a different stage of development. And for us, we are still in the investment phase. So our current focus is still to invest in our long-term value. Thank you.

Okay, operator, let's move on to the next question.

Your next question comes from Thomas Chong with Jefferies.

the company's view on platform law and regulations, and how the company can balance the law and regulations with business development. My second question is also about competition. In the past year, the company's main competition opponents' strategies have been adjusted, re-starting to emphasize the price, low-cost economy, and low-cost strategy every day. How does the management view the re-positioning of competition opponents? Thanks, management, for taking my questions. My first question is that we saw your global business has gained good momentum in the past year. Could you please share any of your view on the future plan for global business? Moreover, the market also pays attention to the company's position on compliance How would the company balance legal and compliance with your business development? My second question is about domestic competition. In the past year, many of your major competitors have pivoted in their strategies, putting more emphasis on price competitiveness. How does the management view the repositioning of your competitors? Are you concerned that it might impact the market share of Pinduoduo? How do you adjust your own strategy in such a green competition? Thank you.

Thomas, hello. I'm Chen Lei. Let me answer the question about globalized business. Our intention for globalizing our business is to use our own supply chain and technology to bring excellent products to consumers all over the world, and help consumers around the world realize their dreams. This business is still in its early stages, and there may be many changes and challenges in the future.

Hi Thomas, this is Chen Lei. Let me take your question on global business. Our vision for global business is to utilize our supply chain and technological capabilities to bring outstanding merchants and high-quality products all over the world to global consumers, helping consumers from all backgrounds to achieve their dreams. Currently, the business is still at a relatively early stage, facing many uncertainties and challenges ahead.

To address these uncertainties, we must constantly improve ourselves with a genuine desire to learn from consumers and the market.

We actively seek more innovations in technology and operation models to embrace market competition and overcome challenges.

I just mentioned that no matter how the market environment or competition pattern changes, consumers' demand for e-commerce platforms is more affordable and better served. This is not the case. As I mentioned earlier,

Despite shifts in the market environment and competitive landscape, consumers' demand for more savings and better services is universal. Therefore, we will be dedicated to integrating our high-quality development strategy into our global operations and be prepared for long-term investments. We have confidence in the unique value of our platform. and welcome like-minded partners to join us in creating more value for consumers globally.

As you mentioned earlier, we have always seen legal and regulatory work as the basis for business development. Therefore, legal and regulatory work has always been an important part of our strategic planning. The management team pays great attention to this work and put a lot of effort into it. Last year, we established a legal and regulatory committee at the group level. As the chairman of the committee, I will further strengthen our legal and regulatory capabilities in various areas.

You also mentioned compliance. Legal and compliance has always been fundamental to our business. It's a big part of our strategic planning, and the management team has put in extensive efforts in this area. Last year, we established the Legal and Compliance Committee, chaired by myself, to reinforce our legal and compliance capabilities across regions.

After a period of construction, we have continued to improve the internal compliance mechanism and procedures. We are taking an innovative approach to understand the latest legal and legal movements in the industry. We also communicate and cooperate with relevant regulatory agencies from various countries.

Through our continued efforts, we enhance our internal compliance mechanisms and processes. With a humble attitude, we strive to stay abreast of the latest industry laws and regulations, and maintain communication and cooperation with regulatory bodies in the countries where we operate.

We aim to align with high industry standards in the field of legal and compliance.

We will continue to conduct research and invest in this area to lay a solid foundation for our long-term healthy development. Thank you.

Hi, this is Zhao Jiazhen.

Let me take a question on competition.

As we mentioned before, in 2023, all over the country, we are implementing a policy of recovery and expansion of consumption. As we mentioned earlier on this call, in 2023, we saw sustained recovery in consumer sentiment, and at the same time, consumers

start to care more and more about achieving upgrade at attractive prices. And in this background, we think it is normal to see e-commerce platforms increase promotional efforts and also focus more on price competitiveness. And competition is inevitable in our industry. In the face of competition, we always focus on understanding and meeting the needs of consumers and keep working on our own capabilities.

In the past year, the platform's high-tech development strategy has been effective. We are full of confidence in the overall strategy direction. Next, we will be even more self-confident and quick to implement the high-tech development into the platform's operation methods.

Over the past year, we have built good momentum on our high-quality development strategy, and we are confident in the overall strategic direction. And moving ahead, we'll be focusing on implementing our strategy in every aspect of our platform operations. And first, we'll continue to deepen our consumer mindshare, and we do so by offering more savings to our users. We'll very closely follow consumer needs and launch very simple and direct promotional activities targeting the most desirable product categories and price ranges. This is the foundation that we need to keep investing.

当然了,这个良好的消费体验不只是价格这一个维度。 在好服务方面,我们也会在整个的购物流程上 对售前、物流履约、售后、消费者保护等方面 会做全方位的持续的升级,让消费者能够买得放心。 And of course, a good consumer experience is not only about price. In terms of services,

We also continue to refine our entire shopping experience from pre-sale consultation, fulfillment, after-sale services, to consumer protection. Our goal is to offer a safe and enjoyable shopping experience for our users. And at the same time, as a tech company, we'll increase our investment in R&D. And we are guided by the principle of tech for good, and we'll continue to strengthen our capabilities to empower a wide range of SMEs, promote the digitization of the various industries, and also introduce more popular products to the market.

As another important component of the platform ecosystem, high-quality supply is the basis for us to serve our users well. We hope that R&D will further drive the positive development of our ecosystem. We believe that returning to the basics, We believe that by focusing on these areas that are critical to long-term value creation, we can remain calm in a fiercely competitive environment and continue to improve ourselves and create greater value for the consumers and the society. Thank you.

Okay, operator, it's about time. And I want to thank you all again for joining us today. And if you have any further questions, please reach out to our team. And thank you. I'll see you next quarter.

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