PDD Holdings Inc.

Thank you for standing by and welcome to the PDD Holdings Incorporated 1Q2026 earnings conference call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to our host today. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining us today. PDD Holdings earnings release was distributed earlier and is available on our website at investor.pddholdings.com, as well as through the Globe Newswire services. Before we start, I'd like to refer you to our safe harbor statement in the press earnings release, which applies to this call. as well make certain forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our readiness release, which contains a reconciliation of non-GAAP measures to GAAP measures. Joining us today on the call are Mr. Chen Lei, our co-chairman and co-chief executive officer, Mr. Zhao Jiazhen, our co-chairman and co-chief executive officer, as well as Mr. Li Jiong, our financial director. Lei Yangjiajun will make some general remarks on our performance for the past quarter and our strategic focus. And Jun will then walk us through our financial results for the first quarter ended March 31, 2026. During the Q&A session, Lei Yangjiajun will answer questions in Chinese and will help translate. Please note that 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 Co-Chairman and Co-Chief Executive Officer, Zhao Jiazhen. Jiazhen, please go ahead.

Hello everyone, this is Zhao Jiazhen. Thank you all for joining the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the And this year marks the beginning of PDD's second decade.

Following my appointment as chairman, This is also a critical year for the complete reinvention of our corporate organization and culture, which is centered on the high quality development of a new decade. We are calling on everyone across all levels of the company to pull together in a sustained effort to drive a deep transformation in our business life, teams, internal processes, and organizational management. The whole team is required to treat safety, compliance, and social responsibility as the absolute prerequisite for everything we do and maintain a clear focus on high-quality development. We are committed to stepping up to our responsibilities as a platform enterprise to create positive value for users, the industry, and society as a whole.

In the first quarter of this year, the major strategy we proposed last year to build Tendodo began to enter a new stage of commercialization and development. Newly established brand business is steadily advancing. Through the new model, In Q1, the company entered a new phase of the three-year strategy to build another Pinduoduo, which was launched last year.

Our new first-party brand business is making steady progress. and we are doubling down on our supply chain to innovative models and fresh investments. At the same time, our long-term 100-billion support initiatives continue to generate value for merchants and the broader industry. The team is accelerating the rollout of free shipping to rural villages, enhancing platform governance and compliance, and proactively taking on broader social responsibilities.

In the past quarter, our performance has remained stable. We delivered solid results in the past quarter.

Group revenue in the quarter was RMB 106.2 billion, a year-over-year increase of 11%. As communicated in the past, our priority is long-term value creation to sustain investment in the ecosystem and the supply chain, rather than short-term results.

In March this year, our specialized company in Shanghai officially launched a brand self-sufficiency business. The initial capital investment was 1.5 billion yuan. In the next three years, we plan to invest 100 billion yuan in cash. At present, our team is steadily advancing the brand self-sufficiency business, entering the industry front, accelerating the integration of industrial chain resources, co-operating with global self-sufficiency IPs,

In March, we incorporated a dedicated company in Shanghai, marking the official launch of our first-party brand business with an initial cash injection of 15 billion RMB and a plan to invest 100 billion RMB over the next three years. Currently, our team is steadily advancing this business by going deep into industry hubs to accelerate the consolidation of supply chain resources. We are also collaborating closely with global ITs for deep co-creation to incubate new brands tailored to various markets and product categories. This holistic approach will empower our supply chain's transition toward brand development, catalyzing a breakthrough across the entire supply chain.

In the first quarter, our signing and support of the meeting policy remains highly invested, and carry out joint upgrades for many specialties, new technologies, and special operations such as power generation and suction. In the field of agriculture, we have launched many specialties projects in 2026. Based on last year's service to products and businesses, we have deep-rooted agricultural products for crop cultivation, cold chain logistics, and improved production and processing. We have assisted agricultural products supply chain to improve its effectiveness, and drive agricultural areas to improve their value chain. Currently, the first project has been completed in Nanning,

During the first quarter, our $100 billion support program continued to see high levels of investment, rolling out upgraded iterations of initiatives such as Dozo Premium Produce, new quality supplies, and logistics support to remote regions. In agriculture, we launched the 2026 Dozo Premium Produce program, building on last year's support for products and merchants, We are now deepening our support across the entire value chain, including planting and cultivation, culture and logistics, and deep processing of agricultural products. This helps improve the quality and efficiency of the agricultural supply chain and enable production regions to move up the value chain. The first phase of this project has been launched in specialty regions such as Nanjing oranges, Hainan pineapples, Tongren matcha, Mingxia, goji berries, and then we go to seafood.

In the industry, we see many stores and factories are going out to compete with each other on what people sell and what we sell. They are turning to the self-development model of the user-centered self-development model. They are constantly digging into the diversification and diversification needs of platform consumers, Within the industrial belt, the latest brand of our new quality supply initiative continues to deliver tangible results.

The initiative has been introduced to manufacturing hubs such as Zhangzhou Snacks, Zhangzhou Skincare, Qtory, Qingdao Porcelain Enamel, Zhongshan Lighting, and Tianjin Chocolate. And merchants and factories are starting to move away from the homogeneous competition of selling whatever others are selling and shifting towards a consumer-centric, R&D-driven model. They are uncovering highly specific and differentiated consumer demands on platform and successfully building their own brand. Former screwdriver factories are rapidly growing into automated smart factories. The efficiency and quality achieved through this transformation offers a new roadmap to industry upgrades.

此外,我們的電商吸引政策也為廣大商家帶來了新增量。 以中山照明產業為例,一款大型的吸引燈從中山運輸到甘肅,原來的運費達到四五十元。 在平台兜底二次物流中等費用後,運費已降至十元左右。 很多商家在西部地區的訂單量呈現了年均百分之三十以上的高速增長。

In addition, our logistics support to remote regions has also unlocked new growth opportunities to a wide range of merchants. Take the lighting industry in Zhongshan as an example. Shipping a large ceiling light from Zhongshan to Gansu used to cost 40 to 50 RMB. By covering the transshipping fees for the merchants, the platform is able to cut the shipping costs to around 10 RMB. Many merchants are seeing order volumes to Western provinces growing at an annual rate of over 30%.

On the basis of the construction of Xijing, we will do our best to promote express delivery of goods for free to the village. Currently, it is also in the process of construction. In Henan, part of the county town is used as an example. Through the construction of the county-level middle and short-term village, the village-level take-home point, etc., and the end-to-end base network, by the end of March, the number of administrative villages covered by the local county town of Songhuo Jingchun has exceeded 70%. The total number of Japanese army units in the middle and short-term village has reached nearly 30,000. Not only has more villages become resorts, but also more jobs have been created for the local area. for the county and rural economy.

Since the beginning of this year, building on our logistics support to remote regions, we are rolling out the Free Shipping to Villages initiative at full speed and have achieved some initial results. Taking some counties in Henan as an example, by setting up large-mile delivery networks such as county-level transport warehouses and village pickup points, we have expanded the direct-to-village coverage to over 70% of local villages by March. The daily order volume at these transfer warehouses has approached 10,000 orders. This not only brings more rural areas into free shipping zones, but also creates more local job opportunities, injecting greater vitality into county and rural economies.

In terms of platform governance, we have launched multiple rounds of governance initiatives, constantly strengthening the platform's governance level, improving the platform's regulatory capabilities, and continuously improving users' and customers' service experience. In the first quarter, Starting platform governance, multiple rounds of initiatives have been rolled out

to continuously strengthen platform oversight, enhance our compliance capabilities, and improving the overall experience for our users and merchants. In the first quarter, the platform introduced over 20 food safety initiatives. These include compliance review of business qualifications, food advertising content moderation, food live streaming monitoring, and building a dedicated food database. We have also enhanced compliance inspection of live streaming, upgraded food safety reporting channels, and strengthen automated and manual monitoring. Further, the turnaround time for handling store violations has been shortened to within hours, safeguarding food safety for consumers.

開局之難在所難免,但困難恰恰是團隊自我革命的驅動力。 新的發展階段也是塑造新的團隊,新的機制和文化的契機。 我們這屆團隊將迎難而上,踏踏實實埋頭苦幹,用扎實的行動與可檢驗的成果。

initial challenges are inevitable, but these difficulties will be the very fuel that powers our self-transformation. This new phase of growth also provides a good opportunity to build new teams, new systems, and culture. Our current leadership team will tackle these challenges head-on, putting our heads down and working diligently. We will answer the public's concerns and expectations with concrete actions and measurable results, and live up to the trust and support that are placed in us by all stakeholders. Now I'll hand it over to Chen Lei for further remarks.

Thank you, Captain, and hello, everyone.

This is Chen Lei. Thank you all for joining our earnings call today. The last year's annual general meeting we officially put forward a three-year strategy of building another Pinduoduo, focusing the company's strategic priority on investment in the supply chain. In the first quarter of this year, a dedicated company was established to launch a first-party brand business, making the first full quarter under a three-year strategy. In the first quarter, steady progress was made in our first-party brand business, The teams went deep into the industrial belt across different product categories to integrate the integration of high-quality supply chain resources and to lay the foundation of the first-party business model. Big corporations are taking place with merchants and manufacturers across different categories to design and develop first-party brand products tailored to different global markets. This initiative aimed at raising supply chain standards and driving the transformation and upgrade the supply chain. This quarter, our global business continues to grow at a steady pace, opening great market opportunities. At the same time, continuous investments under the $100 billion support program have yielded valuable insights and first-hand experiences, which will guide future investment in the supply chain. Since the beginning of this year, we have stepped up our investment in our platform and a wider ecosystem through multiple initiatives under the $100 billion support program. We enhance the overall experience for our merchants and customers, making agriculture supply chain more efficient and resilient. We have merchants upgrade their business model, extending free shipping coverage to more remote areas and rural regions companies consistently delivering value to both supply and demand side of our platform. In the industrial belt, many merchants are leveraging our platform support to build their own brand. Many merchants have been optimizing their product portfolio to be more focused and curated, transitioning from standard bench manufacturing to demand-driven customization. This transition is enabling them to quickly grow into emerging brands in the respective categories. At the same time, many traditional OEM factories are also moving beyond basic productions, investing in product development, technology, branding, and distribution channels that are evolving from a volume-driven model to quality-driven. bringing more resilience and value to the supply chain, acting as a new catalyst for industry transformation. The results from our $100 billion support program demonstrate that brand development is the next major opportunity for supply chain upgrades, which gives us conviction in the first-party brand model. Branded products are getting started on our global platform with consumer demand still underserved in different markets. This creates significant potential in launching branded products in various product categories. Through the first-party brand model, our goal is to systematically incubate a portfolio of globally recognized brands, which in turn will drive transformation of the supply chain. And this year has been continued investment in agricultural research. Just recently, we launched the finals of the smart agriculture competition. The four finalist teams have designed and built their own plant factories. Relying on these facilities, the participants will explore strawberry cultivation, activation solutions that maximize yield and quality, minimizing cost and energy use. This year marks the sixth iteration of the Smart Agriculture Competition. Over the years, it has evolved from an industry contest to a testing ground for turning agricultural technology innovations into real-world applications. It has also become an incubator for the next generation of agricultural research talent, making its own contribution to the modernization of agriculture. 2026 marks the new starting point for PDD's next decade. Justin just mentioned, we have reflected carefully on our shortcomings and have taken decisive steps to rectify our operations. restructuring our internal management, and strengthening our team's compliance awareness. We are building a foundation that benefits the long-term health growth of the company and the industry. Founded in gratitude and a deep sense of duty, We move forward with the firm belief that staying true to our roots is the foundation, prerequisite, and a guiding principle for all our future undertakings. And we will serve as a compass for the next phase of our journey. We will increase investment in the new business, resolutely advance the first-party brand business, and step up investments in the supply chain. Through these efforts, our objective is to build another Pinduoduo in the next three years and to drive the transformation of the supply chain as a whole. And now, let me hand it over to Li Zhong, who will walk you through our financial performance for the first quarter of 2026. Thank you, Lei.

Hi, everyone. This is Zhong. Let me walk you through our financial performance for the first quarter ended March 31, 2026. In terms of income statements, in the first quarter, our total revenues increased 11% year-over-year to RMB 106.2 billion. This was mainly driven by the increase in revenues from transaction services. Revenues from online marketing services and others were RMB 49.9 billion this quarter. compared with RMB 48.7 billion in the same quarter of 2025. Revenues from transaction services were RMB 56.3 billion, up 20% from the same quarter last year. Moving on to costs and expenses. Our total costs of revenues increased 15% from RMB 40.9 billion in Q1 2025 to RMB 46.9 billion this quarter, mainly due to increase in fulfillment fees bandwidth and server costs, and payment processing fees. On a gap basis, total operating expenses this quarter were RMB 39.8 billion compared with RMB 38.6 billion in the same quarter of 2025. On a non-gap basis, total operating expenses increased to RMB 38.3 billion this quarter from RMB 36.5 billion in Q1 2025. Our total non-GAAP operating expenses as a percentage of total revenues this quarter was 36%, compared to 38% in the same quarter last year. Looking into specific expense items, our non-GAAP sales and marketing expenses this quarter were RMB 33.4 billion, compared to RMB 32.8 billion in the same quarter last year. On a non-GAAP basis, our sales and marketing expenses as a percentage of our revenue this quarter was 31%, versus 34% for our same quarter last year. Our non-GAAP general and administrative expenses were around $872 million, versus around $735 million in the same quarter of 2025. Our research and development expenses were around $4 billion this quarter, on a non-GAAP basis, up 32% year-over-year. On a GAAP basis, operating profit for the quarter was RMB 19.6 billion versus RMB 16.1 billion in the same quarter last year, up 22% year-over-year. Non-GAAP operating profit was RMB 21.1 billion versus RMB 18.3 billion in the same quarter last year. Non-GAAP operating profit margin was 20% this quarter compared to 19% for the same quarter last year. Net income attributable to ordinary shareholders was RMB 12.5 billion for a quarter compared to RMB 14.7 billion in the same quarter last year. Basic earnings per ADS was RMB 8.94 and diluted earnings per ADS was RMB 8.48 versus basic earnings per ADS of RMB 10.59 and diluted earnings per ADS of RMB 9.94 in the same quarter of 2025. Non-GAAP net income attributable to ordinary shareholders was RMB 14.1 billion versus RMB 16.9 billion in the same quarter last year. Non-GAAP diluted earnings per ADS was RMB 9.51 versus RMB 11.41 in the same quarter of 2025. That completes the income statements. Now, let me move on to cash flow. Our net cash generated from operating activities was RMB 16.4 billion compared with RMB 15.5 billion in the same quarter last year. As of March 31, 2026, we had RMB 436.1 billion in cash, cash equivalents, and short-term investments. And thank you. This concludes my prepared remarks.

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

Thank you. 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. If you're on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Alicia Yap with Citigroup. Please go ahead.

Thank you. 王女晨,晚上好。 谢谢接受我的提问。 两个问题。 第一个问题是公司一直以来的定位是电商平台。 但我们看到上个季度公司发布的这个品牌自营项目, 想请公司介绍一下现在这个十点发起品牌自营的主要考虑是什么。 然后我们是否应该把它理解为公司整体的一个战略的转型。 The second question is, Thanks, management, for taking my questions. First is that the company has been positioned as an e-commerce platform, but we saw the company launch the new first-party brand initiative last quarter. So could management elaborate on the key considerations behind doing this? at this current moment? And then should we interpret this as a major pivot in the company overall strategy? Number two, second question is from the third-party data that we see, you know, PVD's global business has achieved good user growth. What will be the primary focus for the business moving forward? Has user growth met expectations? And how does the company plan to retain and service consumers?

Well, thank you. Thank you. Hi, this is Zhao Dazhen.

Regarding your first question, since the beginning of this year, we have been driving a deep restructuring for our organization and internal management. These efforts are centered on safety, compliance, and social responsibility, and we are striving to create greater value for users, the industry, and the society. The formation of the dedicated company in the first quarter and the launch of the first-party brand model represents a continuation in this direction.

In the process of many years of deepening the industry, we are more and more clearly aware that the current supply chain is facing some challenges. There are many excellent manufacturing companies that are limited in terms of talent, information, scale, and other factors. They have not yet completed the standardization transformation, and are also facing the competition of comradeship.

Through years of deep engagement with the industrial field, it has become clear to us that supply chain is facing certain challenges at the moment. And many good manufacturers, constrained by factors such as talent, information, and skill, have not yet completed their brand transformation and are caught in homogeneous competition.

As a platform, we have the responsibility and the ability to deepen the investment in the supply chain and propose solutions to the challenges of the industry.

As a platform, we have both the responsibility and the capability to deepen our investment in the supply chain and bring our own solutions to the challenges that is faced by the industry. The formation of the dedicated company aims to consolidate platform resources to advance the new first-party brand by taking a deeper and more active role in product development and standard setting.

通过品牌自营, 平台承担起更多的责任和风险, 让我们的产业代伙伴能够专注在高品质的生产和制造上。 我们认为这是推动平台和整个电脑生产系统 迈向下一个阶段高质量发展的必经之路。 利用平台的规模,

Through the first-party brand model, the platform takes on greater responsibility and also risks, allowing our industrial partners to focus on high-quality production. We believe this is necessary in order to drive the platform and the entire e-commerce ecosystem towards the next stage of high-quality growth. And leveraging the platform's scale, we will take on more risks while sharing rewards with the supply chain manufacturers, providing certainty for the participants across the whole ecosystem.

We believe that this certainty can greatly improve the efficiency of the entire chain, and make the factory able to invest in product development and technology innovation to form a positive cycle. In this complex and diverse market environment,

We believe this certainty will significantly enhance the overall efficiency of the supply chain and empower factories to reinvest into product development and R&D and driving a positive cycle. And in a complex and fast-changing market environment, the platform must take on greater responsibility and deepen our operations. And we will remain highly focused, continue to invest heavily in the supply chain, and drive the next phase of high-quality development for the supply chain.

Hello, Mr. Lin. I'm Chen Lei. I want to answer your second question. After three years of development, our globalized business has gained a lot of support from consumers all over the world. As the business grows, our management team is also thinking about how to make the global market of competitive machines more sustainable and different in the long term. We believe that the key is to return to the essence of e-commerce and the construction of supply chain capabilities.

Hi, this is Chen Lei. Let me take your second question. After nearly three years of growth, our global business has received support from many consumers worldwide. As the business grows, the management team has also been reflecting on how to create more sustainable and differentiated value for consumers in a highly competitive global market. We believe the key is to return to the roots of e-commerce, which is supply chain capabilities.

We will start from two aspects. First, we will continue to promote the integration and optimization of supply chain resources, and open the bottlenecks in various areas. This not only enriches the product category of the platform, but can also realistically improve the consumer's shopping experience. In this process, we will actively accommodate the entry of good businessmen and ecological partners,

on this core priority, we will direct our efforts on two fronts. First, we will advance the integration and optimization of our supply chain, eliminating bottlenecks from end to end. This will not only expand the platform's product offerings, but also meaningfully enhance the consumer shopping experience. Throughout this process, we will actively onboard high-quality merchants and ecosystem partners, integrating the platform into the business ecosystem of various markets.

其次,我們將深化的發展品牌自營的模式, 特別是在全球市場, 尤其是要通過品牌化的建設, 增強消費者對於平台商品優質優價的用戶心智, Second, we will deepen the development of the first-party brand model.

In the global market, brands are particularly crucial in strengthening consumers' mindshare of the value proposition of great quality and great value. At the same time, brand development is also an important pathway to raising product quality standards, enabling us to strengthen the platform's compliance capabilities in an increasingly complex regulatory environment.

电商行业竞争其实是非常激烈的。 我们和消费者在不同的平台之间传报成本很低。 你们大家看得到的是平台间通过营销的手段争取消费者。 The e-commerce industry is highly competitive with low switching costs for consumers.

While people often see platforms winning over consumers through marketing, the true driver of long-term and sustainable competitive advantage lies in the supply chain capabilities that are often unseen.

工业投入也是一项长期的系统的工程 无论我们短期面临怎样的波动或者挑战 都会不忘初心 持续的推动团队 Thank you.

Supply chain investment is a long-term, systematic undertaking. Regardless of the challenges we may face, we will stay true to our roots, continue to drive deep transformations across our teams, business process, and organizational management, and continue to grow our global business with tangible supply chain improvements. Thank you.

Thank you.

All right, thank you, Alicia. Operator, let's move on to the next analyst on the line.

Thank you. Your next question comes from Ronald Kang with Goldman Sachs. Please go ahead.

Thank you, John and Carrie. I have two questions. First, we saw that the company announced a 3-year $1 billion brand self-investment plan. My question is, where will these plans go? 那预计什么时候我们会开始能看到反映在这个公司的财务表中 那市场应该我们应该怎么去思考这个战略可能带来的一个增量的空间 第二就想问我们看到这个整体的消费大盘这个摄灵数在一季度的增长也不错 线上这个渗透率其实还在提升那在这个背景下我们广告收入 Thank you, Major, for taking my question.

Two questions.

One is we note the announcement of the three-year, $100 billion investment plan for the first-party brand initiative. So my question is in which areas do the company plan to allocate these investments? When can we expect this to begin to reflect in the company's financials? And how should we evaluate the incremental growth potential driven by this strategy? My second question is we've seen from the National Bureau of Statistics consumption growth in the first quarter was quite solid. Online penetration rate for physical goods is still rising. So what In that backdrop, we see the online marketing service growth rate slowed in the first quarter for PDD. So could you outline just where the future growth for GMV and online marketing services from here? Thank you.

您好,我是戴耀真。 针对你的第一个问题呢, 首先这个品牌建设涉及到多方面的能力, 从产品设计、标准制定、协同制造、 Hi, this is Zhao Jiazhen. To your first question, first,

Brand building involves a range of capabilities, from product design, standard setting, manufacturing to quality control, warehousing and fulfillment, legal and compliance, customer service, and so on. And each requires long-term and patient investment. And many SME manufacturers in the industrial belt are very good at mass production and cost control. However, due to a lack of branding capabilities, they have not yet moved up the value chain.

By setting up a special company, we are deeply integrating the technology, scale, and organizational capabilities of the platform. By strengthening the construction of the underlying capabilities, we can make up for the shortcomings of the commercialization of the industry chain. Under the brand-based mode, the platform will bring the certainty of sales directly to the industry chain. The manufacturing section uses the gas to invest in product development and supply innovation, which can greatly reduce the cost of sales and the uncertainty in the process of brandization.

And through the creation of the dedicated company, we are leveraging the platform's strength in technology, scale, and organization to build the foundational capabilities that are required to help our supply chain partners in developing brands. Under our first party brand model, we provide a certainty of sales volume to the supply chain and empowering the manufacturers to confidently invest in R&D and process innovation and significantly cutting down the costs and risks that are inherent in the innovation and brand building.

We believe that this is done by the platform in the correct direction. Because of the advantage of the platform in terms of technology, scale, market trend, etc., we have the ability to handle and digest these uncertainties. By categorizing the risk of the manufacturing sector as the responsibility of the platform, we are using certainty to replenish supply. We believe it is the right strategic direction for the platform to step in and to play this role.

Our advantages in technology scale and market insights allows us to take on and digest these uncertainties. By internalizing some of the risks faced by the manufacturers, we empower the supply chain with certainty, creating a win-win situation for the industry ecosystem. The manufacturers are enabled to break free from the homogeneous competition and focus on quality of upgrades. Consumers can enjoy quality products at reasonable prices, and the platform further deepens its supply chain capabilities.

enabling the reinvention of the platform. If we want to solve the challenges of the platform, we must take on more responsibilities.

And looking back at our history, from the early initiative of improving agriculture supply chain to later efforts such as Dozo Grocery, the global business, and the $100 billion support program, the platform has continuously deepened its operations in the supply chain through the process of identifying and solving problems. And if you are to fundamentally address the challenge of homogeneous competition that is faced by platform merchants, we must take on greater responsibility and enable deeper supply chain integration. And we believe this is an inevitable path in the evolution of the platform ecosystem.

今年是平台新十年高质量发展的开局之年。 那我们将以此为契机。 商化组织和内部的管理变革,以重新出发的姿态, And this year kicks off a new decade of high-quality development.

We will start afresh, taking this opportunity to reshape our organization and internal management and focus on building supply chain capabilities. And the first-party brand initiative is the first strategic move that we implemented after announcing the strategy of happy investment supply chain a few months ago. As we roll out more supply chain initiatives, we believe we'll have the opportunity to build another Pinduoduo over the next three years.

关于你的第二个问题, 线上的零售市场目前依然充满了潜力, 我们也觉得我们能做的事情还有很多。 但是与此同时呢, And to our second question, the online retail market continues to hold great potential, and there's much more that we can do.

However, at the same time, the industry has entered a critical phase of high-quality development. The only way to realize sustainable and healthy industry growth is to take the necessary initiatives to deeply empower the supply chain.

以这个判断,我们去年4月推出了千亿扶持计划之后, 紧接着启动了一系列的供应链的扶持专项。 我们的团队也深入到了全国各大的农产区产业带, 通过解决供应链的实际问题, 来推动行业和平台的进一步的增长。

Based on this understanding, following the launch of the 100 billion support program in April last year, we rolled out a series of supply chain support initiatives. Our team has gone deep into the agricultural regions and industrial belt by solving practical supply chain issues. We are unlocking further growth for both the industry and the platform.

比如说我们的团队正在把快递进村的春节快递驿站 and upgraded into multi-functional digital village micro-complexes. This new system is the starting point for villagers to collect and pack their produce, and it is also the first 1 km of the local specialty agricultural products. It helps farmers to solve the needs of packing bases one by one, and let more high-quality agricultural products go to the market. In this way, through direct employment and agricultural products export, these micro-complexes bring truth to local residents,

And for instance, our team is in the process of upgrading the village pick-up point to a multifunctional digital rural micro-hubs. And this new model operates as both a parcel pick-up point and a first-mile logistics node for the distribution of local specialty agricultural products. And by giving farmers a one-stop solution for packaging and shipping, we're actually helping quality agricultural goods reach the broader markets. Through the creation of direct employment and sale of agricultural products, these micro hubs are increasing the income of local communities.

再比如說,平台的電商吸金的專項團隊, 通過搭建中短艙,並且由平台承擔物流中短費的方式, 將偏遠地區消費者納入這個包郵區, 通過實實在在的供應鏈的改造, 將部分偏遠地區的物流成本降低了接近八成, Another example is the logistics support for remote regions.

Our team is bringing more consumers from remote areas into the free shipping zones by creating transit warehouses and by covering the transshipping costs. And through tangible supply chain improvements like these, the logistic costs for shipping to some remote regions have been reduced by nearly 80%, and leveling the operational costs between the different regions. Many merchants are saving millions of RMB in shipping costs alone. With these substantial investments, the platform is bridging the gap between supply and demand, and creating more effective demand.

There are many more examples like this. Next, I will continue to talk about

And these are just a few examples, and looking ahead, we will continue to work on concrete supply chain projects, and through these initiatives, deliver more value to our users, the industries, and the society.

Thank you, Ronald.

Operator, let's move on to the next analyst on the line.

Thank you. Your next question comes from Joyce Zhu with Bank of America. Please go ahead.

Good evening, Carrie. Thank you for accepting my question. 我有两个问题 第一是我们看到电商行业现在不断涌现一些新的业务模式 包括直播电商啊 即时零售这些 不知道公司怎么看这些新模式对整个行业的影响 公司在这些领域呢 有没有一些布局的考虑 Let me translate myself. First, we have seen the continuous emergence of new e-commerce models in e-commerce industry, including live streaming commerce and quick commerce. How does the company assess the impact of these new models on the broader industry landscape? And are there any plans of the companies to expand into these areas? Second is, in the first quarter, we saw a slight increase in sales and marketing expense ratio of the company, alongside a fluctuation in overall profit margins. how should we expect the margin trends going forward and what will be a reasonable expectation as to do a steady state profit margin level?

Thank you. Hello, I'm Zhaizhen. The traditional retail sales of the e-commerce industry, the cost of conversion of consumers is lower. As a result, the delivery speed will be faster, and the competition will be more intense. 我们关键城也在密切地 关注新技术的发展动态。 Hi, this is Zhao Zazhen.

Compared to traditional retail, e-commerce has much lower switching costs, which leads to faster industry evolution and more intense competition. The management team is also closely monitoring the development of new technologies.

但无论前端的模式怎么创新, 回归到电商的本质, 消费者的核心诉求始终是 However, regardless of the innovations in the front-end business models, the core needs of consumers remain unchanged, which are wider product selection, competitive prices, and better services.

As we mentioned earlier, competition among the different e-commerce platforms or business models ultimately boils down to competition in the underlying supply chain capabilities.

这也是为什么我们去年底明确了聚焦重头供应链升级的集团战略方向。 在这个战略指导下,我们正在稳步地推进各项供应链的投入,这里面就包括了品牌自营业务。 And this is why we set a clear group strategy at the end of last year to focus on and invest heavily in supply chain.

And under this strategy, We're steadily advancing various supply chain initiatives, particularly the first-party brand business. And currently, our dedicated teams are working in major industrial belts to accelerate the integration of high-quality supply chain resources and building a framework for the first-party brand business. And we're working closely with manufacturers to design and develop first-party brand products for the different global markets while elevating the transformation and upgrading of the supply chain.

The coming period represents a critical window for our supply chain investments.

We will advance the first-party brand initiative at full speed, step up the investments in the foundational supply chain capabilities, and we also navigate an evolving industry landscape by constantly creating our unique value onto the supply chain ecosystem.

Hi, this is Joe. Let me take your second question. As we have regularly communicated in the past, our objective is the long-term sustainable growth of the platforms intrinsic value. And in this process, due to seasonality and our only investment circle, it is normal to see some fluctuation in our quarter-to-quarter financial results. The long-term value of the platform is fundamentally tied to the value we create for consumers and the broader ecosystem. And that's why we remain steadfast in our commitment to long-term supply chain investments. Whether it's our first-party brand strategy, direct-to-village delivery, or quality supply chain initiatives, These are all high-impact projects that unlock long-term value and new growth for the industry. We will continue to invest in them resolutely. Instead of focusing on short-term financial performance, we prioritize the healthy development of the platform ecosystem and the accumulation of foundational supply chain capabilities. These more enduring sources of competitive advantage will determine the trajectory of the platform's intrinsic value.

Thanks. Okay. Thank you, Jim. And thank you, Joy.

And thank you all once again for joining us today. I think it's about time. We look forward to speaking to you at the end of next quarter. Thank you.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.