PDD Holdings Inc.

Q1 2024 Earnings Conference Call


spk04: Ladies and gentlemen, thank you for standing by and welcome to PDD Holdings Inc. First Quarter 2024 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.
spk06: 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, I would like to refer you to our safe harbor statement in earnings price release. which also 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-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 Jiajun 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 first quarter ended March 31st, 2024. And during the Q&A session, Lei and Jiajun will answer questions in Chinese and will help translate. Please note that the English translation is for reference only and in case of any discrepancy, statements in their original language should prevail. Now, it's my pleasure to introduce our chairman and co-chief executive officer, Chen Lei. Lei, please go ahead.
spk09: Hello, everyone. Thank you all for joining our early call for the first quarter of 2024. 2023 was the first year on our journey towards high-quality development. We are encouraged by the positive feedback from our users and merchants and are more confident in our strategic direction. 2024 is a critical year to deepen our execution. In the first quarter, we benefited from an improving macro environment and achieved steady growth. Our total revenue reached IMD 86.8 billion, which represents a 131 year-on-year increase. Looking ahead, we will continue to work on the fundamentals of our business through our investment in supporting high-quality consumption, broadening high-quality supply, and promoting a high-quality ecosystem. Our proactive transition to high-quality development will inevitably bring challenges and difficulties. But still, we decided to embark on this journey and are determined executing well because we are seeing a few irreversible long-term market shifts. First of all, we clearly see a trend of consumption upgrades. And in response to this, we are innovating our service offering to cover more consumption scenarios. And at the same time, actually engaging with our merchants to broaden our product selection. For example, this year, we are deepening our cooperation with top brands from around the world to bring a new product to our platform. In addition to meeting consumers' demand for more savings and better services, we hope to deepen connections with our consumers and strengthen our platform's market share in new product categories and among new customer groups. High-quality consumption will not be possible without strong supply chain capabilities, and over the years, we have built our valuable experience across the entire e-commerce supply chain. Through technology innovation and investment in research and development, our supply chain know-how is transformed into easy-to-use tools and services to empower our merchants with cost-saving digital solutions. This measure has proven to be effective in terms of attracting more merchants to our platform, broadening our product selection, and reducing product costs, all of which are essential to support high-quality consumption. And lastly, an ecosystem that encourages compliant business conduct is the foundation to long-term growth of our platform. As commerce integrates with digital technology at a record pace, consumers and regulators are holding e-commerce platforms accountable for higher standards. And we are taking the initiative to build an industry-leading compliance program and to leverage our technology capabilities to empower SME businesses with our compliance know-how. This is to foster a healthy commandment that attracts quality merchants that are willing to play by the rules and drives our bad actors, thereby creating a positive feedback loop. When it comes to consumer well-being and economic interest, we always stand behind the former. We are focused on building long-lasting trust with our consumers and not on short-term gains. We also adopt a similar long-term orientation to other aspects of our business. As a company that is still in the growth mode, we will continue to focus on long-term value creation and invest firmly into opportunities with great potential. We are not guided by short-term goals, and this is also reflected in how we manage our global business. Our global business is still in an exploration stage and there's plenty of room for improvement. We are prepared to respond positively to challenges and we view these as important opportunities to improve ourselves. We are in this for the long term and will not be distracted by short-term results. Instead, we will focus our efforts on building our key capabilities. Firstly, supply chain capabilities. We will continue to roll out tailored fulfillment solutions in different markets to improve supply chain efficiency and reduce cost. We welcome quality merchants from around the world to join us in providing a rich variety of quality products for consumers worldwide. Secondly, legal and compliance capabilities. With the goal of building an industry-leading compliance program, we will make firm investments to create a safe and trustworthy shopping environment for our users, uphold our compliance standards we will conduct forward-looking research into laws and regulations in the market we operate and transform our know-how into tools that can be easily assessed by our merchants. And thirdly, service capabilities. In response to the diverse needs and quality standards of global users, we will keep up our investment technology and operations to improve overall user experience. as we bring more value to consumers and merchants along the road. We are hopeful that our platform will be increasingly recognized and welcomed by local communities we serve. We do not expect this to be easy, as we are prepared for investments over the long run. Finally, I would like to say that we are operating in a constantly evolving industry. which competition and opportunities are both emerging at rapid pace. Competition has been intensifying in the past quarter, which will inevitably increase our expenses and affect some organic growth. On the other hand, new technologies and new markets also offer us tremendous opportunity for growth. At this moment, I want to revisit our first shareholder letter when the company went public. We are not a conventional company, and we hope to show you the true colors of our company, no matter how bumpy or rough the numbers may seem to be. Our business does not follow a linear path, and our earnings will almost certainly fluctuate. we suggest our shareholders not to measure our overall performance with results from a few quarters. Our financial performance may be on these market expectation accounts, but as long as we keep focusing on long-term value creation, and ultimately, this short-term fluctuation will converge to our growing intrinsic value. And now, I will hand it over to our co-CEO, Justin
spk08: Thank you, Lei. Hello, everyone. This is Zhao Jiazhen. Thank you all for joining our earnings call for the first quarter of 2024. 我们积极响应促消费政策, 针对平台用户在新春佳节等节庆时令的购物需求, 推出了一系列促商惠民的让利活动, 刺激消费潜能释放。 在政策和活动的双重驱动下, 一季度的整体增长稳健, 我们对国内消费市场的未来充满信心。 This year is a year for consumption promotion. The consumer market in the first quarter has made a good start. Online consumption remains strong.
spk02: and online retail penetration continues to rise, we proactively responded to the consumption promotion policies and launched a series of promotional activities to meet users' shopping needs during the Spring Festival and other seasonal events. This further relieves consumption potential and benefits merchants. Driven by both macro environment and our effective promotional events, we achieved solid growth in the first quarter We are confident in the consumer market in China.
spk08: As Lei mentioned,
spk02: This year, we will step up our investment to deepen the execution of high-quality development strategy. High-quality development is our long-term strategy. Going forward, we will continue to direct our efforts into three key areas, which are consumption, supply, compliance, and the platform ecosystem. We are offering more savings to consumers. We are also focused on delivering high-quality supply and services to more consumers.
spk08: Guided by this strategy,
spk02: On the consumer side, in the first quarter, we remain committed to putting consumers first. Focusing on more savings and better services, we continue to give back the most tangible rewards to our users. For example, we step up our investment in a $10 billion program and partner with millions of quality merchants during the Spring Festival shopping season and the May Day Shopping Festival to fulfill consumers' demand for more savings.
spk08: In terms of good service, the start of consumer goods exchange is one of the major drivers of domestic consumer work this year. We actively join the third-party service platform to provide consumer goods exchange service to users, covering mobile phones, digital, air conditioners, refrigerators, washing machines, TVs, and other types. Currently, the number of service personnel is more than 10 million. Our consumer goods exchange also supports white-collar non-stick products. Consumers can get additional white-collar non-stick products. By further reducing the threshold of consumer upgrade, the customer's shopping experience is also better.
spk02: As for better services, the consumer goods trade-in program is one of the initiatives driving this year's nationwide consumption promotion efforts. We have been actively working with third-party service platforms to provide users with convenient trade-in services, covering mobile phones, electronics, air conditioners, refrigerators, washing machines, TVs, and other categories. Today, we have served more than 10 million customers Our trade-in services also extend to popular products under the 10 Billion Program, which offers consumers attractive discounts. As we make it even easier for consumers to upgrade their consumption, their shopping experience is further enhanced.
spk08: In addition, we wanted to make sure that consumers in remote areas could also enjoy the free shipping shopping experience. So, in the first quarter, we upgraded our shopping and shipping services and pioneered free shipping to villages in remote provinces.
spk02: Our efforts brought last-mile delivery posts even closer to the consumers, with most now within 2 km radius. Such innovation led to a rapid year-on-year growth of order volume from these regions. We are happy to see that our service improvements are further driving our growth.
spk08: At the supply end, we continue to increase investment in the brand and participate in joint growth. In the first quarter, we focused on the national goods brand theme,
spk02: on the supply side, we continue our investment to support and grow together with the brands and merchants. In the first quarter, we focused on the theme of trending national brands and allocated platform resources, such as traffic support to high-quality merchants. This not only ensures the high-quality supply, but also help boost our merchant businesses.
spk08: For example, during the spring festival shopping season, a dairy product brand launched a limited edition offering for the Year of the Dragon.
spk02: inspired by New Year traditions, and chose our platform for the product launch. With the support of our platform's resources, the product quickly gained popularity and became a topseller in the dairy category.
spk08: the second year of the Science and Technology Festival, to explore the new productivity of agricultural development.
spk02: Agriculture is our foundation. We are committed to invest in this important sector over the long run. In the first quarter, we continue to support agricultural technology innovation by launching the fourth Smart Agriculture Competition and the second Duoduo Academy Growing Competition. This helps to explore new productive forces in agriculture.
spk08: At the same time, our agricultural operations We continue to go deep into Anhui, Yunnan, Guangxi, Shandong and other places to provide e-sports training and one-on-one direct training for local merchants. In addition, we joined forces with more than 1,000 high-quality agricultural areas in each province to celebrate the New Year's Day. While accelerating the promotion of special agricultural products, we also promoted farmers to collect and pay. During the 55 shopping festival, we started a 100-billion subsidy e-sports delivery live broadcast. The focus is to recommend Yunnan local agricultural products such as orchids and fresh flowers.
spk02: At the same time, our agriculture cloud initiative has been steadily advancing in production regions such as Anhui, Yunnan, Guangxi, and Shandong to bring e-commerce training and one-on-one consultation to local farmer merchants. In addition, during our spring festival shopping season, we collaborated with more than 1,000 quality agriculture production regions across the nation, which not only brought more specialty agricultural products to our platform, but also boosts farmers' income. During the May Day Shopping Festival, we launched dedicated live streaming sessions under the $10 billion program for agricultural products. With a particular focus on Yunnan agricultural specialties, such as blueberries and flowers, we supported the scaling of regional production and the branding of local agricultural products.
spk08: 在向高质量转型发展的过程中,我们非常的重视高质量生态的建设。 只有健康有序合规的生态才能运营出可持续发展的平台。 在一季度,平台继续推进百亿生态专项,做了一系列的专项治理行动。 例如我们的治理小组利用技术手段,进一步提升了不但宣传展示信息的高效的自动管控。 A high-quality ecosystem is critical to our transformation to high-quality developments.
spk02: Only a healthy ecosystem with well-designed platform policies can support the long-term sustainable growth of an e-commerce platform. In the first quarter, we continue to invest in the 10 billion ecosystem initiative and carry out a series of compliance projects. For example, our trust and safety team utilize the technological means to further enhance the efficient automated review of product information on our platform.
spk08: As the largest e-commerce platform for consumers, we use our own resources to actively carry out social responsibility. Over the past year, we have continued to support the key public service activities of going home across the country, caring for the elderly, and helping the elderly to go home safely. Before the world of reading, we started the 7th多座读书院, using the $1 billion reading fund to collect official subsidies, and for the first time, we have implemented the original supply of 30,000 kinds of reading products, so that more people can enjoy the benefits of supporting the general meeting.
spk02: As an e-commerce platform serving a vast and diverse consumer base, we also actively utilize our own unique resources to take on more social responsibilities. Since the beginning of this year, we have continued to support the Key to Home nationwide campaign, caring for the elderly and help lost seniors return home safely. Around the World Reading Day, we launched the seventh Dodo Reading Month and provided direct discount to tens of thousands book products, enabling more people to enjoy the benefits of knowledge sharing.
spk08: 拼多多的高质量发展是一项长期庞大复杂的系统工程。 我们将汇聚各方力量,扎实推进,狠抓落实,为我们的消费者和商家创造更多价值。 Our high-quality development strategy is a long-term, massive, and complex project.
spk02: We will bring together the efforts and resources from all ecosystem participants to deepen our execution and create more value for our consumers and merchants. Now, let me hand it over to Jun. She will provide you with an update on our financial performance in the first quarter.
spk01: Thank you, Jasmine. Hello, everyone. Let me walk you through our financial performance for the first quarter ended March 31st, 2024. In terms of income statements, in the first quarter, our total revenues increased 131% year-over-year to RMB 86.8 billion. 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 42.5 billion this quarter, up 56% from the same quarter of 2023. Revenues from transaction services were RMB 44.4 billion, up 327% from the same quarter last year. Moving on to costs and expenses, Our total cost of revenues increased 194% from RMB 11.1 billion in Q1 2023 to RMB 32.7 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 this quarter increased 44% to RMB 28.1 billion, from RMB 19.6 billion in the same quarter of 2023. On a non-GAAP basis, total operating expenses increased to RMB 25.6 billion this quarter, from RMB 18.1 billion in Q1 2023. In the past quarter, We invested decisively in key strategic initiatives, such as giving back to the consumers, investing in our service offerings, promoting brand awareness and R&D. Our total known gap operating expenses as a percentage of total revenue this quarter was 29%, compared to 48% in the same quarter last year. looking into specific expense items. Our non-GAAP sales and marketing expenses this quarter were RMB 22.7 billion, up 44% versus the same quarter last year. Throughout the past quarter, we continued to give back to consumers over a series of seasonal promotional campaigns and increased advertising to promote our brands. Our non-GAAP basis Our sales and marketing expenses as a percentage of our revenues this quarter was 26% versus 42% for the same quarter last year. Our known gap general and administrative expenses were RMB 572 million versus RMB 338 million in the same quarter of 2023. Our research and development expenses were RMB 2.3 billion this quarter on a known gap basis, and RMB 2.9 billion on a gap basis, up 16% year-over-year. Technology is at the core of our high-quality development strategy. We will continue our investment in RMD to provide our users with a more satisfying shopping experience, improve supply chain efficiency, and to build a robust compliance program. On a GAAP basis, operating profit for the quarter was RMB 26 billion versus RMB 6.9 billion in the same quarter last year. On GAAP operating profit was RMB 28.6 billion versus RMB 8.5 billion in the same quarter last year. Non-GAAP operating profit margin was 33% this quarter, compared with 22% for the same quarter last year. Net income attributable to ordinary shareholders was RMB 28 billion for the quarter, compared to the RMB 8.1 billion in the same quarter last year. Basic earnings per ADS was RMB 20.33, and diluted earnings per ADS was RMB 18.96 versus basic earnings per ADS of RMB 6.13 and diluted earnings per ADS of RMB 5.55 in the same quarter of 2023. Non-GAAP net income attributable to ordinary shareholders was RMB 30.6 billion versus RMB 10.1 billion in the same quarter last year. Non-GAAP, the loaded earnings per ADS was RMB 20.72 versus RMB 6.92 in the same quarter of 2023. As Leigh mentioned, our business does not follow a linear path. This quarter's financial data does not represent the future. Flutterations are inevitable. We suggest investors not to forecast our growth solely based on results from the few quarters. That completes the income statement. Now let me move on to cash flow. Our net cash generated from operating activities was RMB 21.1 billion, compared with RMB 1.3 billion in the same quarter last year. As of March 31st, 2024, We have RMB 242.1 billion in cash, cash equivalents, and short-term investments. Thank you. This concludes my prepared remarks.
spk06: Thank you, Jun. Now, let's move on to the Q&A session. In 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 from each analyst. Lei and Jiajun will answer questions in Chinese and will help translate for convenience purposes. Operator, we are open for questions.
spk04: Thank you. 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 to two questions at each time. Your first question comes from Alicia Yap from Citigroup. Please ask your question.
spk03: Hi, thank you. Please share with us how the company evaluates the current competitive trend of the industry, and in such a competitive environment, what aspects of the company, especially the strategic center of Pinduoduo's business, will be placed. The second question is, we have also noticed that in the past few business meetings, the management has placed compliance and platform ecology into very important positions. thanks management for taking my questions congrats on the strong results uh two questions first is uh regarding the domestic competition so over the past year we have seen e-commerce platform actively adjusting their strategies in terms of the pricing and service. Can management share your view on how you evaluate the competitive landscape in such an environment? What would be the strategic focus for Pinduoduo business going forward? Second question is related to compliance. I think we noticed on the reasons earnings call Management spent quite a bit of time talking about compliance-related matters. Obviously, markets is also paying close attention to the work that you are doing in this area. Can management explain a little bit more about the efforts you have made so far and what goals you wanted to achieve? Thank you.
spk09: Hello, Lixia. I'm Chen Lei. Let me answer your question.
spk06: Hi Alicia, this is Chen Lei. Let me take your question. And regarding your first question on strategy and competition, as for competition, we find that consumers are getting used to making purchases from different platforms. And before they decide which platform to choose from, to shop from, consumers compare the overall shopping experience across different platforms in a few areas. For example, on product selection, on pricing, and also on services. And given this trend during the first quarter, we are seeing that our industry peers have significantly stepped up their efforts.
spk09: We welcome a good competition. In the face of competition, our starting point is to make the consumers go first. And
spk06: We welcome healthy competition. And in response to competition, we always put our consumers first. Our survival depends on the value we create for our users. And with our continued investments over the years, we are very pleased to see that our value proposition of more savings and better services is being increasingly recognized and accepted by our consumers. But at the same time, we also realize that consumer demand is constantly changing. and we must do our best to keep up with it.
spk09: And currently, consumer demands are becoming more rational and also more diversified.
spk06: And this means, in addition to offering more savings, we are also expected to meet consumers' needs for higher quality products and also more varied consumption scenarios. And therefore, On top of deepening our more savings and better services capabilities, we are also working on boosting the supply of high-quality products on our platform. And by improving the overall shopping experience, we hope we can further deepen our users' trust in us.
spk09: The second question is about compliance and platform. With the further development of the company's business, we have seen that the consumers and the management department to meet the higher requirements of the business. In order to create a safe and secure shopping environment for our users, we have invested a large amount of resources in the core strengthening field in the past period of time. The broad framework of the global market is constantly evolving, and new laws and regulations are constantly being issued. Therefore, we have introduced high-quality development strategies into the construction of regulatory capabilities.
spk06: And regarding your second question on compliance, as our business grows, consumers and regulatory bodies are holding us accountable for ever higher compliance requirements and also on the merchants doing business with us. And in order to create a trustworthy shopping environment for users, compliance is an area where we're committed to improve and where we have invested significant resources over the past few years. Major regulatory frameworks around the world are evolving, and new laws and regulations are being introduced. And therefore, we see compliance capability as an important aspect of our high-quality development strategy, and also compliance capability as one of our core capabilities of our platform.
spk09: We mentioned the last slide. um um
spk06: During last quarter's earnings call, we also communicated that with a learning mindset, we are actively engaging with regulatory bodies in various countries. And during this process, we are proactively strengthening our compliance capabilities. We are also investing heavily in researching and understanding the regulations of each market. And we have dedicated teams to apply these research findings to all aspects of our business.
spk09: And our initiatives in the compliance area not only cover
spk06: those regulations related to our platform's own operations. For example, data-related regulations. But it also includes those related to merchant operations as well. For example, product compliance and consumer protection. And at the same time, we're also providing the necessary incentives for our small and medium-sized merchants to conduct their businesses in a more compliant and high-quality manner. which benefits the sustainable development of our platform ecosystem.
spk09: The growth of high-quality products will bring more product attacks to our platform, and joint operations and good platform ecology can ensure long-term sustainable development of the platform. Both of these will help us to further satisfy the user's multidimensional, multidimensional, high-quality needs, and thus form a positive ecosystem.
spk06: And the growing high-quality merchant base will bring more quality product offers to our platform. And while compliant operations and a healthy ecosystem are fundamental to long-term development of our platform, both of which will support us in better satisfying consumers' diverse needs for high-quality consumption and thereby forming a virtuous cycle. And this is my view on compliance matters. Thank you.
spk03: Thank you.
spk06: Operator, we can move on to the next analyst on the line.
spk04: Thank you. Your next question comes from Yang Bai with CICC. Please ask your question.
spk05: Thank you, Ms. Wang. The first one is about growth. We see that the company's income growth this quarter I have two questions. The first one is about the growth. The company delivered decent top-line growth for this quarter. Please can the management share your thoughts on the growth potential of the business? Is there still room to grow? How should we think about its growth rate going forward? And my second question is about the global business. Could the management talk a bit more about your latest thinking around the strategy of your global business? How would this business look like in five years? Thank you.
spk01: Hi, this is Jane. Thanks for your questions. I will take your first question about the growth. Well, rather than being affected by short-term financial results, we have always focused on long-term investments and creating long-lasting value. And in the long run, we still see many areas to improving the consumption markets The consumption market actually offers plenty of opportunities for platforms and merchants. And in addition to the potential of the overall consumer market, we also see that the online retail industry is growing quickly. E-commerce infrastructure continues to improve, and new e-commerce models continue to emerge. We are absolutely innovating and exploring new models to create greater value for our consumers. In the long term, we believe there's still large potential in online retail penetration. We will keep improving our services to consumers. From the immersion side, we are also improving the scope and value of our services We continue to allocate resources to support high-quality merchants who are willing to do business properly. By doing so, we hope to grow together with the merchants and further broaden the selection of quality products on our platform. A positive feedback loop is achieved when these factors work together. In such a rising industry, We need to keep our heads down and focus on execution. Faced with more competition, our constant focus is to deliver more value for our consumers and merchants. We believe that the value we create for consumers and merchants will ultimately be reflected in our financial results. Thank you.
spk09: Hi, Baiyang. I'm Chen Lei. Let me answer a question about global strategy.
spk06: Hi, Baiyang. Let me take your question on global business strategy.
spk09: First of all, our global business is a very new business. At this stage, we are also constantly searching and learning to work hard to promote high-quality business development as soon as possible. We are a heavy-duty company. After determining the target, we will do our best to implement it.
spk06: First of all, our global business is still quite new, and we are working very hard to grow the business in a high-quality way, while at the same time still learning more about the new business model. And we are a company that focuses heavily on execution, and after setting a strategic direction, we'll do our best to execute.
spk09: After communicating with several institutions in the past,
spk06: And as we communicated in the past few quarters, looking ahead, we will continue to focus on enhancing our supply chain capabilities, our service capabilities, and compliance capabilities. And in terms of supply chain, our goal is to further extend and deepen our supply chain to connect with high-quality merchants and high-quality supplies around the world and to further broaden the product offerings on our platform. And at the same time, we'll improve efficiency of the supply chain to make it easier for merchants to sell their products and also to lower their cost of doing business. And therefore, all consumers and merchants worldwide will be able to benefit from this.
spk09: In terms of service capability, we will try different business methods. From our comprehensive business efficiency, we will serve more consumer scenarios.
spk06: In terms of service capabilities, we are exploring different fulfillment solutions to improve efficiency and also to serve more diverse consumption scenarios. In addition, we are also leveraging our technology capabilities to improve our customer service and the overall shopping experience.
spk09: As for compliance, we have talked about it earlier on this call that this is the key to the high quality and sustainable development of our platform. And it is also the foundation
spk06: for creating a safe shopping environment for our users. And we will continue to invest firmly in this area.
spk09: And finally, the purpose of us doing all these investments
spk06: is always to bring more quality products at affordable prices to consumers worldwide and to offer them a safe, enjoyable, and unique shopping experience. Operators, let's move on to the next analyst on the line.
spk04: Thank you. Your next question comes from Kenneth Song from UBS. Please ask your question.
spk07: Good evening. Thank you for accepting my question. I have two questions. The first one is about profit. The company has achieved a good profit level in this quarter under the background of competitive growth. We also see a good business sense in terms of sales costs. Does this mean that the company's future sales investment will slowly slow down? We can talk about the company's plans for future investment. My second question is about agriculture. The company has been emphasizing Thank you, management, for taking my question. I have two questions. The first is on profitability. The company can still achieve profitability growth in the first quarter despite intensified competition. We are also seeing good operating leverage in terms of sales and marketing expenses. Does it mean the company is slowing down the investment in marketing? More broadly, can management talk about your plan in resources allocation? And my second question is on agriculture strategy. Regarding agriculture, could management share how you think about the growth potential of agricultural product category and also how do you evaluate your key competitive advantage in this area? Thank you.
spk01: Hi, Kenny. Thanks for your question. This is Jane. Let me first answer your question about profitability. Well, regarding profitability, we mentioned in our pre-prep remarks that the company's business does not follow a linear path. It will beat market expectations in some quarters and miss expectations in others. We suggest investors not to forecast our future growth completely based on results from a few quarters. We always focus on the long-term growth of the company's intrinsic value, and we not smooth out short-term financial data. In business execution, we will compare the return of investment in different markets and make prudent plans for a resources allocation. will not increase or decrease in expense items solely based on a pre-set market budget. The company's investment in each quarter depends on the specific investment opportunities we see in the market. Currently, we are still in a growth phase. If we see good value creation opportunities in the future, we will invest firmly. These investments might bring fluctuations to short-term profitability, but will help us grow intrinsic value in the long run. This is our view on profitability. Thank you.
spk08: Hi, this is Zhao Jiazhen. Let me take your question on agriculture. We are based on the agricultural products. We started our business with retailing of agriculture products. We have been investing in agriculture for many years.
spk02: and we initiated the new model of good purchase for agricultural products. We have also innovated many agricultural solutions, such as the direct delivery of agricultural products from the place of origin and our dodo grocery, building up a platform that connects local supply to local demand.
spk08: Agriculture is a challenging industry.
spk02: with low product standardization and decentralized supply. Storing and transporting agricultural products can be quite difficult. Currently, the online penetration rate of agricultural products remains relatively low, and there's still plenty of room for improvement in digitalizing farmers' operations. Therefore, we have taken it upon ourselves to invest in this industry and dive deep into transforming the agricultural supply chain. Throughout this journey, we have accumulated a lot of valuable experience and enhanced our team's capabilities.
spk08: 农产品现在是一个非常重要的高频的品类。 拼多多始终是一个以农产品为特色的全品类电商品牌。 我们仍然会坚定地在农业方面做投入。 上个月开幕的第四届多多农业科技大赛, 我们聚焦了AI种植 Agricultural products are now a very important high-frequency category, and Pinduoduo has always been a full-category e-commerce platform featuring agricultural products.
spk02: we're still making firm investment in agriculture. In the fourth Smart Agriculture Competition launched last month, we focus on AI planting and encourage participants to explore optimization and commercialization of agricultural production. Our Agriculture Cloud Initiative also continue to bring digital solutions to farmers in various agricultural production regions. We will continue to invest in diverse aspects of agricultural production and supply chain in the future.
spk08: 通过对农业的持续投入, 我们希望在促进农业现代化, 助力供应链体制增效的同时, 能够帮助农民征收,创造当地的就业, 为乡村全面的振兴做出我们的贡献,谢谢。 Through continuous investment in agriculture, we hope to promote modernization of the agricultural industry
spk02: and enhance the quality and efficiency of the supply chain. At the same time, we help farmers increase their value and income, create local jobs, thereby supporting the overall revitalization of rural communities. Thank you.
spk06: Thank you, Jiazhen. And also, thank you, Kenny. Thank you all once again for joining us today. And it's about time. And if you have any further questions, please reach out to our investor relations team. And thank you and have a great day.
spk04: Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect. Thank you. you you Thank you. Thank you. Thank you. Bye. Thank you. you you you Ladies and gentlemen, thank you for standing by and welcome to PDD Holdings Inc. First Quarter 2024.

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