PDD Holdings Inc.

Executive Director and Co-Chief Executive Officer. Our VP of Finance, Ms. Liu Jun, is unfortunately on medical leave. Delivering the prepared remarks on Jun's behalf today will be Ms. Xin Yi Lin from our Investor Relations team, who has spoken on our earlier earnings calls. Lei and Jiajun will make some general remarks and on our performance for the past quarter and our strategic focus. And Xin Yi will then walk us through our financial results for the third quarter ended September 30th, 2025. And during the Q&A session, Lei and Jiajun will answer questions in Chinese and 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.

Hello everyone, and thank you for joining our Q3 2025 earnings conference call. This year marks the 10th anniversary of the company's founding. Just before this earnings release, we celebrated our 10th birthday. When we started in 2015, we pioneered the team purchase model, which offered the value proposition of more savings and more funds at scale. and created a new e-commerce defined by three characters, namely Benefit All, People First, and More Open. Since then, we have gradually grown from a startup into a key player in the e-commerce industry, and along our journey, created greater value for our users, our merchants, as well as the industry and the society. This quarter, we reported RMB 108 billion in revenue, with growth remaining under pressure. As always, we prioritize long-term value over short-term results. Looking back over the past decade, we have upheld our core value of Benzene, adhered firmly to our own duties and principles, and maintained focus on our core business of e-commerce. Through our journey, we strive to create value for our users and to address the needs of the widest range of consumers. We have also made every effort in giving back to the industry ecosystem, driving the industry to become more beneficial, more people-first, and more open. Since day one, our mission has been to serve the broadest range of consumers by offering affordable prices and quality services. Ten years ago, we introduced the team purchase model to address the challenges faced by the farmers and growers as well as the industrial belt merchants. This e-commerce model has helped a large base of farmers and everyday workers increase their income while offering urban and rural consumers across through quality foods and daily necessities at affordable prices. Today, 10 years later, our focus remains on the day-to-day of people from all walks of life. We continue to provide consumers with quality goods at affordable prices and help merchants, many of which SMEs, expand their market reach. And ultimately, we help producers and consumers live a better life. As a new e-commerce platform born in the mobile internet era, we moved beyond the traditional online shopping model that places products at the center. And instead, we put people first. We built our model around a consumer focus. We tried to understand the human touch behind every click. And we honored the consumer trust behind every order. We strive to bring more savings and more fun to every purchasing experience. And with this goal in mind, we will continuously driven product innovation, technology iteration, service upgrades, and improvements in product selection and the efficiency of supply chain. In doing so, we aim to satisfy the diverse and rapidly growing needs of everyday consumers. Throughout our journey, we have faced fierce and persistent industry competition. And yet, we have remained steadfast in our focus on the company's intrinsic value in the long run. And we promote the high-quality growth of the platform ecosystem, and we advocate for a more open industry environment. Since last year, We have further elevated our ecosystem development and rolled out substantial merchant support initiatives, such as the $10 billion fee reduction program and $100 billion support program. Through these initiatives, we made investments in our merchants and the wider market, creating room for innovation and growth for both established brands and SMEs. We hope to play our part in facilitating supply chain upgrade in addressing the long standing challenge faced by our merchants who had quality but lack brand recognition. As we look ahead, the e-commerce industry is witnessing even more intense competition. And we will continue to uphold the principles that had guided us for the past 10 years, staying true to our mission of creating value for our consumers, and focused on investing in the high-quality development of our platform and the wider industry. Today, the scale of our business is far greater than it was 10 years ago, and with greater scale comes greater social responsibility. And therefore, As we think about our growth in this new era, we must do so in a way that prioritizes the interest of the wider public and the long-term outlook of the entire ecosystem. Going forward, more strategic initiatives similar to the $100 billion support program will be rolled out to support both supply side and demand side. We are also strengthening our efforts in giving back to the industry and a broader society. Three years ago, we launched our global business, which has now grown to serve many markets. Today, with the rapid involvement of trade barriers and other global events, we are seeing significant shifts in the platform's regulatory environment, including in trade policies, tax rules, data security, and the product compliance regulation across different countries and regions. This means we will inevitably face greater challenges and more uncertainties. As a young global company, we are working hard to learn to keep up and to adapt to these trends. However, there remains significant uncertainties exposing a company to risks that are unpredictable and difficult to quantify, which may impact our financial performance both in the short term and over the long term. And in the midst of fierce industry competition, a complex global environment in our continuous ecosystem investments. Our quarterly profitability will fluctuate and is inherently unpredictable. Therefore, simple linear projection might not be a good way to projecting future performance. As we have emphasized in the past, short-term stock price fluctuation has never been our focus. And rather, our focus remains on building long lasting intrinsic value by doing the right thing and creating value for consumers. It is with our firm commitment to high quality development, we embark on the next decade towards our vision of Costco plus Disney. And with that, we'll turn the call over to Zhao Jiazhen for further remarks.

Good day, everyone.

This is Zhao Jiazhen.

Thank you again for joining our Q3 2025 earnings release. The third quarter this year marks the company's 10th anniversary.

As Lei mentioned, over the past 10 years, we have remained committed to creating value for our users and growing alongside our merchants. we have strived to drive the industry to become more open and have delivered incremental value to the society. At this 10-year juncture, we will continue to step up our efforts to give back to the supply side and the demand side as part of our efforts to drive industry upgrades and deliver more savings and more funds to the general public.

In this quarter, our profit and loss index continues to be suppressed, and the net profit and loss index is growing at a low level. At present, the competition of the e-commerce industry around the new industry continues to intensify. We will continue to invest in real gold and silver, and refurbish the platform ecosystem. This is a major business move that has been led by 100 billion yuan. It will last for a long time. In this quarter, our revenue growth continues to be under pressure, and operating profit grew in low single digits.

Currently, we see intensified competition within the e-commerce sector, that is centered around new business models. We will continue to invest back into our platform ecosystem and our investments into the merchant support initiatives similar to the $10 billion fee reduction program and the $100 billion support program will continue in the long run. These investments will affect the sustained performance of revenue and net profit and accordingly, our financial results of this quarter should now be considered as guidance for future performance. we cannot rule out the possibility that financial performance in the next few quarters will continue to fluctuate.

In the past 10 years, we have grown from a first-rate company to a public platform, benefiting from the rapid development of China's economy, and we have never forgotten to bear the social responsibility of platform companies, and have been actively giving back to agriculture and industry. Since this year, our e-commerce industry has launched hundreds of billions of shares in non-agricultural actions, and through many good products, new products, e-commerce trends, etc., continued to promote the high-quality development of platform ecology,

Over the past decade, we grew from a startup into a public platform. We benefited from China's rapid economic development, and at the same time, we have not lost sight of the social responsibilities that are inherent to a platform company and proactively gave back to the agriculture and other industries. And this year, we rolled out the first 100 billion support program in the e-commerce industry to support merchants and farmers. Through initiatives such as dodo premium produce, new quality supply, and logistics support to remote regions, we continue to drive the high-quality development of the platform ecosystem.

As a start-up in the field of agricultural products, the first step of users and participants in the trade in China is agricultural products. All the way, we have long-term investment in various fields of agriculture, including the supply chain, industrial logistics, new farmers, agricultural research, etc. We have greatly improved the size and efficiency of agricultural products and standardized them. We have increased the production and reception of large-scale farmers. We have also become China's largest agricultural product marketing platform.

As a new e-commerce platform with roots in agriculture, the first products bought and sold on Kinodo was agricultural produce. Along the way, we have made long-term investments across different parts of the agricultural industry, from supply chain and warehousing logistics to supporting new generations of farmers and agricultural research and development. These efforts have significantly increased the scale and efficiency of agricultural product distribution, greatly promoted product standardization and helped farmers increase output and income. And in this process, we have become the largest platform for agricultural products in China.

Over the past year, we have relied on the strategy of 1000 billion, launched a number of good specialty special operations, and continued to increase our investment in the agricultural sector. According to the 2025 agricultural product promotion half-year report published by the platform, our investment in agriculture has been very effective. In the first half of this year, the share of agricultural products increased by 47%, and the number of farmers and merchants also maintained a high rate of growth, especially the number of farmers and merchants after the pandemic increased by more than 30%. The space for agricultural products to be promoted is still full.

In the third quarter, our DODO premium projects team visited dozens of agriculture specialty regions, including Hubei Jingzhou, Henan Shangqiu, Shandong Laiyang, Yunnan Pu'er, this year on the back of 100 billion support program we launched the dodo premium products initiative to step our investments into agriculture based on the 2025 agricultural product half year report that we just issued our investments in agriculture have yielded significant results and in the first half of this year our culture sales grew by 47 percent year over year and we saw a similarly rapid increase in the number of agricultural merchants with a particularly notable increase of over 30% year-over-year in the generation of merchants born in the 2000s. This demonstrates that the online distribution of agricultural products continues to hold immense promise.

In the last few months, many of our high-end agricultural projects have moved to Hubei, Jingzhou, Henan, Shandong, Laiyang, Yunnan, Pu'er, Sichuan, Anyue, and other dozens of agricultural areas. We have launched custom-made projects for local businesses to promote the development of large-scale, In the third quarter, our DODO premium produce team visited dozens of agricultural specialty regions, including Hubei, Jingzhou,

Henan Shangqiu, Shandong Laiyang, Yunnan Pu'er, and Sichuan Anyue to develop tailored solutions for the merchants and help them make the transition from a model that prioritizes scale to one that prioritizes quality. And during the harvest season, starting in September, we allocated $1 billion subsidy and $2 billion traffic support. And in collaboration with the 300,000 agricultural merchants on the platform, we rolled out a dodo harvest season program to facilitate the timely distribution of produce from rural areas to urban markets, helping farmers increase income.

In the early stage of Pinduoduo, we used the Pinduoduo mode to successfully solve the supply problem of industrial bags and drive the rapid scale-up of local industries. Many industrial bags have been delivered to 3 companies, from 100 to 200 companies, and have grown to thousands of companies. The products also exist in the same way. So far, industrial bags have entered the key points of transformation.

In the early days of our company, our team purchase model brought about a solution to the legacy challenges within the industrial belt and enabled the industries to quickly scale across regions. The number of e-commerce merchants in many of these regions grew from just a hundred or two to several thousands. However, this growth has also led to commoditized competition. And today, these industrial belts have reached a critical juncture that calls for transformation.

In the past record, our 100 billion support strategy has continuously increased the supply of new products. The professional team has deepened into Pinghu Yulong, Huizhou Linxi, Foshan Tongzhuang, Shaogong Xiangbao, Taoxiang Hanfu, and other dozens of industrial areas. By using the digitalization capability of the platform, by simplifying the support, we continue to promote the performance of the company, promote the innovation of the product, raw materials, and supply chain in various areas, and actively crack down on the industrial problems of the same-state competition.

This quarter, we continue to invest in a new quality supply initiative through our 100 billion support program. Our teams visited dozens of industrial belts such as down jackets in Pinghu, snacks in Huizhou, children's wear in Foshan, bags and luggages in Shaodong, and Hanfu in Caoxian. Leveraging our digital capabilities and fee reduction and merchant support programs, we continue to enhance quality and efficiency for our merchants. We aim to address the challenges of commoditized competition faced by many industries by incremental innovation across each part of the supply chain, from raw materials to finished products.

At the end of September, we released the first anniversary of our new product. According to the report, the number of industrial units on the platform increased rapidly. After 1995, the number increased by 31 percent. After 2000, the number increased by 44 percent. The number of SQs per day increased by more than 5 percent. The retail stores in the industry have also grown significantly. All major industries are moving towards high-quality development.

At the end of September, we released a one-year development report on new quality supply. The report shows rapid growth in the number of industrial belt merchants. The number of merchants between the age of 25 and 30 grew by 31% year-over-year, and those born in the 2000s grew by 44%. The number of high-quality SKUs increased by over 50% year-over-year, and we've also seen a significant rise in the branded stores on these industrial belts.

And these figures demonstrate that the key industrial belts are steadily moving towards high-quality development. And on supply side, investments have allowed us to bring more savings and more funds to a broad base of ordinary consumers.

We see urban white collar workers holding fresh flowers from Yunnan, while young people in small towns buy trendy designer toys. We see mountain villages enjoying high-quality seafood, while herdsmen in western regions wear UV protective jackets. And taking the western regions as an example, the exemption of transshipment fees has led to a significant surge in order volume for pet supplies, outdoor and sun protection gears, designer toys, and fresh produce and plants, among other product categories. This greatly stimulated economic activities between the regions.

Over the past 10 years, we will continue to stick to the consumer orientation, continue to evolve the organization, and solve the actual problems of the user, the third party, and the industry one by one with the spirit of Dingdingzi. Continue to build a platform ecosystem that works together, take on greater social responsibility, and continue to create value for the general public.

Starting afresh from this 10-year mark, we will continue to put consumers first and drive organizational evolution. And one by one, we will tackle the practical problems faced by our users, merchants, and the industries through persistent, focused efforts, and continue to build a thriving platform that benefits all, taking on greater social responsibility and creating value for the public.

Next, I would like to introduce the financial performance of our system.

Now, I'll hand it over to Xinyi to provide you with an update on our Q3 financial performance.

Thank you, Jiajun. Hello, everyone. This is Xinyi from the investor relations team. Jun is on medical leave and I will deliver the prepared remarks on behalf of her. Let me walk you through our financial performance for the third quarter ended September 30th, 2025. In terms of income statements, in the third quarter, Our total revenues increased 9% year over year to RMB 108.3 billion. This was driven by an increase in revenues from online marketing services and transaction services. Revenues from online marketing services and others were RMB 53.3 billion this quarter, up 8% from the same quarter of 2024. Online marketing services growth moderated further as competition intensified and as we invest in the merchant ecosystem. Revenues from transaction services were RMB 54.9 billion, up 10% from the same quarter last year. Moving on to costs and expenses. Our total cost of revenues increased 18% from RMB 39.7 billion in Q3 2024 to RMB 46.8 billion this quarter mainly due to increase in fulfillment fees, bandwidth and server costs, and payment processing fees. On a GAAP basis, total operating expenses this quarter increased 3% to RMB 36.4 billion from RMB 35.4 billion in the same quarter of 2024. On a non-GAAP basis, total operating expenses increased to RMB 34.4 billion this quarter from RMB 32.9 billion in Q3 2024. Our total non-GAAP operating expenses as a percentage of total revenues this quarter was 32%, roughly in line with the same quarter last year. Looking into specific expense items, our non-GAAP sales and marketing expenses this quarter were RMB $29.8 billion, flat compared to the same quarter last year. On a non-GAAP basis, our sales and marketing expenses as a percentage of our revenues this quarter was 28%, compared to 30% in the same quarter last year. Our non-GAAP general and administrative expenses were RMB $896 million versus RMB $647 million in the same quarter of 2024. Our research and development expenses were RMB $3.7 billion this quarter on a non-GAAP basis and RMB $4.3 billion on a GAAP basis, up 41% year over year. Our investment in R&D reached a new high this quarter, reflecting our focus on improving the core technology capabilities of our platform. We are committed to investing in R&D over the long run to capture opportunities in supply chain innovation and consumer experience. On a gap basis, operating profit for the quarter was RMB 25 billion versus RMB 24.3 billion in the same quarter last year. Non-GAAP operating profit was RMB 27.1 billion versus RMB 28.8 billion in the same quarter last year. Non-GAAP operating profit margin was 25% this quarter, down from 27% for the same quarter last year. As we invest in the platform ecosystem, our profitability may continue to fluctuate. Net income attributable to ordinary shareholders was RMB 29.3 billion for the quarter, compared to RMB 25 billion in the same quarter last year. Basic earnings per ADS was RMB 20.96 and diluted earnings per ADS was RMB 19.7 versus basic earnings per ADS of RMB 18.02 and diluted earnings per ADS of RMB 16.91 in the same quarter of 2024. Non-GAAP net income attributable to ordinary shareholders was RMB 31.4 billion versus RMB 27.5 billion in the same quarter last year. Non-GAAP diluted earnings per ADS was RMB 21.08 versus RMB 18.59 in the same quarter of 2024. Now, as Lei and Jiazhen mentioned, we are facing an increasingly competitive industry landscape, which calls for more investments in the platform ecosystem. And therefore, as we roll out greater merchant support initiatives and ecosystem investments, financial results may continue to fluctuate from quarter to quarter. That completes our income statements. Now let me move on to cash flow. Our net cash generated from operating activities was RMB 45.7 billion compared with RMB 27.5 billion in the same quarter last year. As of September 30, 2025, we had RMB 423.8 billion in cash, cash equivalents, and short-term investments. Thank you. This concludes my prepared remarks.

Thank you, Xinyi. And next, we will move on to the Q&A session. In today's Q&A session, Lei and Jiajun 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 convenient 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 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, Please press the pound or hash key. Participants are requested to restrict the number of questions to two at each time. Your first question comes from Joyce Xu with Bank of America. Please go ahead.

Lei, Jiazhen, Xinyi, Carrie, good evening. Thank you for accepting my question. My first question is, in the third quarter, we saw the online retail market gradually warm up. The industry has reached the best level in the past few seasons. I would like to ask the company to share its observation and interpretation of the trend in the industry in the past period. At the same time, we also noticed that the advertising revenue of this season has slowed down. The overall conversion rate has also fluctuated. I would like to ask the management to talk about the main reason. Do you think this situation will continue in the next few seasons? I will translate myself. My first question is, in the third quarter, we see a recovery in overall online retail sector as the industry's year-over-year growth reached its best level in the past two quarters. Could management share the company's perspective on the recent industry trend? In the meantime, we noticed a slowdown in Duoduo's online marketing service revenue this quarter, which we estimate also indicated some pressure on the take rate. Could management elaborate on the main factors dragging the growth And do you anticipate this trend will continue in the next couple of quarters? Secondly, in the past few quarters, we've seen several platform companies roll out major business innovations and ramp up investment in the new models, which has really shifted the competitive dynamics. How does management view the competitive outlook in China's e-commerce sector from here and why? Thank you very much.

Hi, this is Zhao Zhaozhen. Let me take this question. In the face of the rapid change in competition and industry, we are mainly thinking about what kind of unique value the platform can create for consumers, third parties, and other platform participants, and not too much focus on the trend of the short-term industry and the movement of smart phones.

In the past few quarters, the industry has entered a new investment cycle. The e-commerce sector is evolving rapidly and within an industry landscape that has a large number of strong players, competition is unavoidable. And faced with this competitive and fast-changing environment, our primary focus should be that what unique value our platform can create for the consumers, merchants and other participants. We do not pay too much attention to the short-term industry trends or every move made by the competition.

In our view, the development of the online platform must combine its own advantages and strive for high-quality development. Through the improvement of the actual ability, we can control the market and consumers, and create more value. Of course, we are also very happy to see the warm-up of the online retail.

And as we see it from here onward, we must leverage our inherent strength to pursue high quality growth and enhance our core capabilities in order to better serve our merchants and consumers and along the way creating more value. And of course, we are also encouraged to see the overall recovery in online retail.

At the beginning of this year, we realized the value of high-end development. At this stage, we decided to upgrade the platform's production and construction to a new stage, and launched a multi-billion support meeting plan. The platform took the initiative to promote the business and the industry, to share the innovation and development of the brand, and to create plenty of space.

At the beginning of this year, we further recognized the long-term value of high-quality growth, and our management team made a commitment to elevate our platform ecosystem investments to a new stage and launched the $100 billion support program to support our merchants. This involves the platform proactively dedicating substantial resources to invest in merchants and the broader industry. And in doing so, we are targeted to provide ample room for innovation and growth for both established brands and SMEs.

At the same time, BINTA also established the Three-Family Protection Committee, established a long-term communication mechanism with the three companies, made special upgrades to the three-family sales service system, and implemented multiple improvements and governance measures on the issues of long-term and long-term sales. optimize the financial environment, and build a platform ecosystem for multiple users.

In the meantime, we also formed the Merchant Protection Committee to create a long-term communication mechanism with our merchants. We have also undertaken targeted upgrades to the merchant after-sales service system and implemented multiple improvements to address issues like abnormal order disputes. These efforts are all focused on optimizing the business environment for merchants and nurturing a platform ecosystem where all participants can thrive together.

Looking ahead, the management has agreed to continue to increase the investment in the platform's ecosystem and consider corporate development from a more social, public and long-term health perspective. This is what our platform should do. We will focus on the long-term internal value of the platform and the long-term health development of the platform. Therefore, in the next period of time, strategic projects that are based on the supply and demand of hundreds of billions will be improved. The strength of the platform to protect the industry and return to society will also increase.

In looking ahead at this juncture, management unanimously agreed that it is our responsibility to further increase investment in our platform ecosystem and to think about the company's development from the broader perspective of public interest and the long-term health of the entire ecosystem. We will remain focused on the platform's intrinsic value and healthy development in the long run And therefore, in a period ahead, we plan to roll out more strategic initiatives that benefit both merchants and consumers. Programs such as the 100 billion support program and further enhance our efforts to invest in the industry and give back to the society.

Back to the performance rate, as we said a few weeks ago, with the growth of the platform and the increase in competition, high growth is inevitable. The rate will slow down. With the continuous investment of a series of third parties and industries, our financial performance will also rise in the near future. However, our company has always been long-term and long-term committed to creating our unique value for consumers, and thus achieving long-term internal value growth of the platform.

Back to the topic of growth rates. We mentioned several quarters ago that as the platform increases in scale and also as competition intensifies, our growth rate is set to slow down. As we continue to invest in programs to support merchants and industry, our financial performance may experience ups and downs in the coming period. However, we will always maintain a long-term perspective and focusing on creating a unique value for consumers and merchants and building our intrinsic value. 还有第二个关于竞争的问题,那我也来回答一下。 And in terms of your second question about competition.

那相信您也可以看到我们所在的市场竞争是在持续地加剧的。 As you have observed, the competition in our industry has intensified.

And over the past few months, we've seen many industry peers deploying significant capital and resources to aggressively develop new business models, leading to increasingly fierce competition around emerging business models in the e-commerce sector.

In this context, we will continue to invest in Zhenjin Baiying's anti-corruption platform ecosystem. Just like what Daqian is currently doing, similar to the mid-term meeting of Baiyi Jiamian, In the future, we will also launch more similar measures. The platform is willing to sacrifice its own profits to create a wider space for the platform ecosystem. This is our long-term investment.

In this environment, we will continue to invest substantial capital to strengthen our platform ecosystem. Major merchant support initiatives such as the 10 billion fee reduction program and 100 billion support program will be sustained over the long run and with more similar programs to be launched. The platform is willing to let go some of the profits to create room for the development of the entire ecosystem. We view these as our long-term investments.

For example, as I mentioned before, we have been relying on the strategy of 100 billion yuan to launch many good-for-nothing special actions to help the large-scale and efficient scale and efficiency of highly improved agricultural products by high-quality farmers. There are many similar examples.

And for instance, as mentioned earlier, this year we launched the DoDo premium product campaign under our 100 billion support program, which has significantly helped quality agricultural merchants increase their scale and improve the efficiency of product distributions. There are numerous initiatives like this.

These long-term investments will inevitably affect the performance of revenue and revenue. Next, we will face changes in the external environment and fierce industry competition. our long-term investment strength will increase. Therefore, we do not think that the profits of this quarter can be used as a guide for the next performance. We do not rule out that the performance of the next few quarters will have repeated fluctuations. Thank you.

These long-term investments will naturally impact our revenue and profits performance. And moving forward, amid the changing external conditions and intensifying competition, our long-term investments are set to increase. And therefore, we do not think this quarter's profitability should serve as guidance for future performance, and there is still the possibility of continuous fluctuation in the results over the coming quarters. Thank you.

Thank you very much.

Thank you, Joyce. Operator, we're ready for the next analyst on the line.

Your next question comes from Alicia Yap of Citigroup.

Hello. 管理层,晚上好。 谢谢接受我的提问。 我有两个问题。 第一个问题是关于全球。 So 全球化的业务中, 我们看到公司和一些同行在不少国家其实是受到 a lot of supervision, and the review of the public opinion. Some of them are even more intense. Then how does the management team view such a situation? Then what kind of response do we have next? The second question is, in the past few seasons, the company has mentioned the investment of commercial ecology. What is the current effect? 我们应该怎么样去衡量它对财务的影响? 未来公司的计划是怎么样? 我自己翻译一下。 Thanks management for taking my questions. Two questions. The first one is in the global business operation, we have observed that the company and also other peers are facing regulatory and also public scrutiny in many countries. some of which are quite intense. How does management view this situation, and what are our plans' response? And then second question is, the company has mentioned investment in the merchant ecosystem over the past few quarters. Could you share the current status of this initiative, and how should we assess the financial impacts of this initiative, and what are the company's future plans? Thank you.

Hello, Alicia. My name is Chen Lei. Let me answer your first question. Our company's globalized business has been developing for more than three years. Currently, we have received positive feedback from consumers from all over the world who are serving the local market. In the face of such support and trust, we are very encouraged. But at the same time, we also feel that the responsibility on the shoulders is very heavy.

Hi Alicia, this is Lei. Let me answer your first question. After more than three years of development, the company's global business now serves local consumers in many markets and has received positive feedback from users worldwide. And we are greatly encouraged by such support and trust. But at the same time, we sense profound responsibility.

Our globalized business, from the beginning, our goal is to achieve long-term health development in all markets around the world. We hope that consumers from all countries can create real value. So, from the very beginning, the goal of our global business has been to achieve long-term sustainable development in each market and deliver tangible value to consumers.

And therefore, we continuously reflect on how to integrate with the local cultural practices and legal compliance systems in each of the markets so that we become an organic part of the local economies.

The business development of the platform and the monitoring system of the various markets have provided us with higher requirements. We also believe that providing consumers with a safe The growth of our business alongside regulatory trends across different markets

Now set a higher standard for us. We have always believed that providing consumers with a safe and trustworthy shopping environment is a fundamental duty of an e-commerce platform. And accordingly, management has made trust and safety and also product compliance a key component of the company's high quality development strategy and has made substantial investments in this area.

From a technical point of view, we are constantly optimizing the standardization and process of commercial accommodation and commercial price. This company has invested a lot of resources in our collaboration and artificial screening methods. We do active inspection and management of the commercial price, sales, and after-sales, as well as the discovery and corresponding ability of perfecting safety risks. At the same time, we are also actively cooperating with foreign countries. We are listening to their opinions and asking ourselves on a high standard.

And on a technical front, we are continuously refining the policies and processes for merchant onboarding and product listing. The company has dedicated significant resources combining automated and manual screening to proactively monitor product listing, sales, and after-sales services. And by doing so, we hope to enhance our ability to detect and respond to safety risk. And at the same time, we actively collaborate with external stakeholders and incorporate their feedback to hold ourselves to higher standards.

In terms of team building, we continue to focus on professional team building, and to follow up on the current market trend, and to make adjustments in the business side.

And in terms of our teams, we continue to invest in building a professional compliance team that keeps up with regulatory trends in our operating markets and promptly implements adjustments in our business operations.

Even so, we also see that in various countries and regions, their policies on trade policy, tax, data, and product compliance are making major changes. This is inevitable, and it has brought us greater challenges and increased uncertainty.

Despite these efforts, a regulatory environment in areas such as trade policies, tax, data security, and product compliance are undergoing significant changes across various countries and regions. And this presents us with greater challenges and heightened uncertainty.

As a young globalized company, we are working hard to learn and adapt to these changes. But I think we need to admit that there is uncertainty in this process. This may cause the company to face unpredictable and difficult to calculate risks, which will affect the financial performance in the short and long term.

As a young and global organization, we are striving to learn and to adapt to these changes. However, I have to admit that this process introduces significant uncertainties which bring unpredictable and difficult-to-quantify risks and could impact the company's financial performance in both the short and long term. And in facing such uncertainties to us, we remain very focused on strengthening our internal capabilities and enhancing platform compliance and fostering a healthier and more sustainable platform ecosystem. Thank you.

Hi, this is Zhao Zhaozhen.

Let me answer your second question.

In the past 10 years, we have gone through an extraordinary journey of growth. We have developed from a first-rate company to a public platform with social impact. Along the way, we have benefited from the rapid development of the Internet economy and the social responsibility of leading platform-based enterprises. Over the past 10 years, we have been constantly exploring how to use digital power to serve a broader community and return to society in a positive way, especially in the field of agricultural revitalization and industrial upgrade.

And over the past 10 years, we have undergone an extraordinary growth journey, evolving from a startup to a public platform with certain social influence. And throughout this journey, we have benefited from the rapid development of the digital economy, and while at the same time, took on social responsibilities that are expected of a platform company like ours. And over these 10 years, we have explored different ways to leverage digital capabilities to serve the broader communities and give back to the society, and particularly around rural revitalization and industry upgrades.

In this process, we first launched a strategic project to print agricultural products, and created new motivation for agricultural modernization. This year, we have taken a step further. in the e-commerce industry. We are constantly optimizing the platform ecosystem through the important steps such as building good assets, formulating supply chains, and e-commerce. We are promoting more high-quality products that are more efficient and able to connect to a broader consumer market to encourage the high-quality development of this industry.

And as part of this journey, we launched strategic initiatives such as the 10 billion agricultural research program to inject new energy into agricultural modernization. And this year, we took another critical step to launch the first 100 billion support program in the e-commerce sector. Through key measures such as total premium produce, new quality supply, and logistic support for remote regions, we are continuously improving the platform ecosystem and brought more high-quality merchants and products to the broader consumer markets, driving the high-quality development of different industries.

As an e-commerce platform, we have been emphasizing the need for collaborative cooperation between the platform and the environmental partners to create value for consumers. Business is an important partner for us to serve consumers well. Therefore, healthy and sustainable e-commerce platforms are an important basis for the high-end development of the platform.

And regarding your question around merchant support investments, we have always emphasized that as an e-commerce platform, we must collaborate closely with all the ecosystem participants to create value for consumers. And merchants are vital partners in our efforts to serve the consumers well. And therefore, a healthy and sustainable merchant ecosystem is a fundamental pillar of the platform's high-quality development.

We hope that these policies can promote the high-quality development of high-quality products. For example, we launched a cost reduction policy to reduce the cost of business. This will help customers to improve their products and services further with more motivation and ability. Currently, on our platform, we see that investment in ecological construction has generated some positive feedback.

We hope these initiatives will promote high-quality growth for quality merchants. For instance, the fee reduction policies we introduced have lowered merchants' costs, enabling them to be more willing and able to reinvest in their products and services. And currently, we are already seeing some positive feedback from these ecosystem investments on our platform.

This year is our 10th anniversary.

This year marks our 10-year anniversary, and standing at this new starting point, we will continue to diligently address the practical challenges faced by our users, merchants, and industries one by one, And we hope to take a greater social responsibility and by building a platform ecosystem that benefits all. Thank you. Okay, operator, I think we have time for one more analyst.

Your next question comes from Kenneth Fong with UBS.

Hey, good evening. Thank you, Dr. Wang, for accepting my question. My first question is from the point of view of revenue. We can see that the company's operating profit rate in this quarter has decreased in the same way as it did in the previous few quarters. However, the management center has just mentioned that it will continue to increase investment. I would like to ask how we should think about the rhythm of our investment and the level of profit. In addition, the management center can also share that in the big tree that just passed, have we observed any relatively new consumer trends? The company operating margin declined this quarter has narrowed compared to the previous quarter. Meanwhile, management just mentioned plans for increased investment. So how should we view the company's upcoming investment pace as well as the profitability level? And my second question is, could management share what the new consumption trend that we observed during the recent annual shopping festival promotion? Additionally, we have seen other industry participants achieving good results with the new business models such as quick commerce during Double 11. So how does management view the competitive landscape under these emerging models? Thank you.

Hi, this is Xiaojiazhen.

Let me answer your question.

This year, the market is growing rapidly. The discounted platform continues to invest in the platform as planned. Our income continues to be suppressed. The profit-loss ratio is also down by double or even by double.

In the third quarter, heightened competition, together with our ongoing investments in the 100 billion support program, put pressure on our revenue growth and also led to a decline in operating margins both year-on-year and quarter-on-quarter.

The competitive structure of the current industry is still changing. In this context, we must insist on the long-term three-year management. Next, we will continue to increase investment around the platform ecosystem. For example, through the reduction of commercial expenses, the investment in commercial services and other measures, to upgrade the industrial chain and create more space. These investments will bring income and profit challenges in finance in a period of time.

At the moment, the industry landscape continues to change rapidly. In this environment, it is crucial for us to maintain our long-term strategic focus. Looking ahead, we will continue to increase investments in our platform ecosystem. This includes measures such as merchant fee reduction and marketing support for high-quality merchants, all targeted at creating more room for the healthy development of the supply chain. These investments will pose challenges to our revenue and profit.

And at the same time, as mentioned in our prepared remarks,

Our global business is currently facing a complex global environment. The policies and industry regulatory landscapes across different countries and regions have undergone and are expected to continue undergoing significant changes. This will bring unforeseeable risks and challenges to our company, which may also impact the company's financial performance in both the short and long term.

Between short-term performance and long-term health and high-end development, we will firmly choose the latter. Our financial performance is not excluded. There will be repeated fluctuations in the future, so it should not be pushed out of line.

As we communicated over the past few quarters, we will firmly prioritize high-quality development in the long term over short-term financial results. Accordingly, our financial performance may fluctuate over the coming quarters, and linear projections may not be appropriate for financial forecasts. As to your second question,

Over the past few months, we have observed an overall positive consumption momentum with gradually recovering market confidence.

And during the Q3 promotional period, consumption needs in the e-commerce sector was further stimulated, showing a steadily improving trend.

At the same time, we can clearly see that the e-commerce competition is still extremely intense. New startups and new models are emerging. The market structure is also constantly evolving. All major participants are investing more and more around the direction of new business. The competition is constantly upgrading. Our business is also facing a lot of challenges.

At the same time, we clearly recognize that the e-commerce competition remains very, very intense. New business models continue to emerge, and the market landscape is constantly evolving. Our major players are increasing investments in new business directions, leading to escalating competition and creating challenges for our businesses on all fronts.

In the face of such an environment, we will further enhance our self-requirements, strengthen the core capabilities of our business, continue to upgrade supply chain optimization and platform development, grow and develop, and look for new growth opportunities.

In such an environment, we will further raise our standards, strengthen our core capabilities, and continue to deepen our efforts in supply chain improvement and platform ecosystem development to identify new growth opportunities. From a long-term perspective, we will increase high-quality investments to translate these capabilities into products and services that offer consumers greater quality for money.

This process will not be long-term. It is a continuous process. In a short period of time, we will be in the middle of a period of short-term loss. At the same time, it may also bring some financial pressure, such as a slowdown in income.

This process will not be immediate, but will demand continuous efforts. For a considerable period of time, we may be at a competitive disadvantage to our competitors, and this will potentially be accompanied by financial pressures, such as slower revenue growth.

But our attitude remains positive but false.

We choose to view competition through a long-term lens and plan on proactively increasing investments to create more possibilities for the healthy and sustainable development of the ecosystem, even if this means forgoing some short-term profits. And these trade-offs are made with the intention to build a more robust and sustainable long-term value amid industry competition.

Thank you. Okay.

Thank you, Dajun. It's about time. And thank you all for joining us today. We look forward to speaking with you again next quarter. Thank you and have a great day.

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