PDD Holdings Inc.

Ladies and gentlemen, thank you for standing by and welcome to PDD Holdings Inc second quarter 2024 earnings conference. At this time, all participants are in a listen only mode. That 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 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. 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, I would like to refer you to our safe harbor statement in earnings press release, which applies to this call, as we will make certain forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to GAAP measures. Joining us today on the call are 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 second quarter and June 30, 2024. During the Q&A session, Lei and Jiajun will answer questions in Chinese that we will help translate. Please kindly note that the English translation is for reference only, and 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, Mr. Chen Lei. Lei, please go ahead.

Thank you. Hello, everyone. Thank you all for joining our earnest call for the second quarter of 2024. In the first half of 2024, we will remain committed to our high-quality development strategy and consistently invested in our platform ecosystem. We received positive feedback for these efforts. Consumer experience and our services have continued to improve. A number of new merchants and products have grown significantly. This further meets the diverse needs of our consumers. This quarter, we benefited from the improving macro environment and achieved robust financial results. Our total revenues reached RMB 97 billion, which represents a year-on-year increase of 86%. However, we are seeing many new challenges ahead, from changing consumer demand, intensifying competition, and uncertainties in global environment. As a result, we will enter a new phase of high-quality development that calls for increased investments, and our profitability will affect it as a result. Since the beginning of this year, we are seeing that consumer preferences have become more diverse. On one hand, consumers are increasingly choosing experience-based consumption over material purchases. On the other hand, there's a growing emphasis on rational consumption. Consumers are making more thoughtful decisions to balance quality and value. In response, we have collaborated with high-quality brands and manufacturers to create customized products that cater to these diverse demands. This approach has not only propelled many new brands to success, but also revived the popularity of many established brands. And this is just one example of how digital technology and manufacturing can come together to create new opportunities. At this moment, the competition among e-commerce platforms is quickly escalating. And therefore, it's even more important that we go back to the basics of supply chain improvement and invest firmly in supply chain efficiencies. This will be the key focus for our high-quality development going forward. For example, in the second quarter, our teams continue to bring our agricultural crop initiative to major production regions, helping local growers to bring seasonal foods directly to people's hearts. And in this process, promoting local agricultural brands. In addition, to further improve agricultural supply chain, nurture research talents, and promote technology inclusion, we continue to support the Smart Agriculture Competition and the Pinduoduo Academy Growing Competition. The Agricultural Research Fund we established in cooperation with China Agricultural University has also started to bear fruit. On the manufacturing side, we are pleased to find that many small and medium-sized businesses have been using the digital capabilities from our platform to support product iteration and innovation. Through this process, they have not only emerged stronger from the competition, but also led the local industries towards high-quality development. These results have strengthened our commitment to further investing in high-quality development. We have communicated on a number of occasions that the profit goals in the past few quarters should not be used as a long-term guidance, and it is a result of mismatch between the business investment and the financial reporting cycles. As we enter a new investment phase, I would like to make it clear to our investors that our profits will gradually trend down starting in Q3, and there will be fluctuations or rebounds in the short term. In the long run, the decline in profitability is inevitable. Suddenly, our preference has reached a considerable scale, and we will remain committed to high-quality development and focus on creating a healthy and sustainable platform ecosystem. And to this end, we adopt the veterinary policies to vigorously support high-quality merchants and tackle low-quality ones. On the supply side, we will invest substantial resources to support high-quality merchants who are willing to innovate and improve quality. and we will offer a significant transaction fee reduction to these merchants, with an initial target of $10 billion in the first year. By doing so, our goals provide clear initial incentives for the merchants to join high-quality development. On the other hand, we will further deepen our trust and safety capabilities to improve our merchant ecosystem and strengthen our supply chain. We are actually identifying and removing a lot of bad actors from our platforms, and we will continue to strengthen these efforts. At the moment, we have already started a new round of investments in operations and R&D to streamline the merchant onboarding and product listing process. Leveraging technology will gradually improve the quality of the products sold on our platforms and create a fair and transparent business environment for our merchants. In this process, we believe that sacrificing short-term profits is necessary. A clear downward trend in profits is expected, but we are prepared to invest firmly and patiently in the platform's long-term health. This is a decision that has received unanimous support from all our management team. And now, moving on to the global business. In the past few quarters, we have noticed the rapid shifts in external environments, which brought significantly greater uncertainty. Our operations have also become increasingly affected by non-business factors. And meanwhile, the competition we face is growing stronger. Competition is here to stay and is expected to intensify in our industry. Our global business is facing significant uncertainties from intense competition and evolving external environments. These factors combined will inevitably cause fluctuations to our business, as shown in this quarter's results. High revenue growth is not sustainable and a downward trend in profitability is inevitable. And finally, as the environment evolves and our company continues growth, the island management team and I often discuss how we can better fulfill our corporate social responsibilities. We believe there is still many things that can be done, for example, Through enhancing our governance structure and adjusting resources, we can better adapt to the changing times. We can also do more to give back to society, to support agriculture and other industry sectors, and offer greater support to the people who need it most. We fully recognize that simply measuring our company's performance by short-term capital returns no longer aligns with where we are today. As a global company in this era, we are committed to driving innovation, adapting to change, and taking on greater social responsibilities in the region across the globe. Now, I will hand it over to our co-CEO, Sal Gazzan, to talk more about our operations in the second quarter.