Pinduoduo Stock

Ladies and gentlemen, thank you for standing by, and welcome to PDD Holdings Inc. Second Quarter 2026 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your host today. Sir, please go ahead.

Thank you, operator, and hello, everyone, and thank you for joining us today. PDD Holdings earnings conference -- earnings release was distributed earlier and is available on our website at investor.pddholdings.com, as well as through the Global newswire services.

Before we begin, I'd like to refer you to our safe harbor statement in the 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 Co-Chairman and Co-Chief Executive Officer; Mr. Zhao Jiazhen, our Co-Chairman and Co-Chief Executive Officer; as well as Mr. Liu Jun, our Financial Director. Lei and Jiazhen will make some general remarks on our performance for the past quarter and our strategic focus. Jun will then walk us through our financial results for second quarter ended June 30, 2026.

On today's call, certain management remarks will be in Chinese and we will help translate. Please kindly 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, Mr. Zhao Jiazhen. Jiazhen, please go ahead.

[Interpreted] Hello, everyone. This is Zhao Jiazhen, and thank you for joining our earnings call for the second quarter of 2026.

Before we formally begin, we would like to take this opportunity to express our deep business condolences on the passing of our independent director, [indiscernible] And to pay our highest tribute to significant contributions and dedicated service during her tenure with us.

Professor served a long tenor as Chair of the toxicology department at University of Research in the Netherlands and earned an international reputation in the sales of food research and drug effects. Since joining the company as an independent director in August 2023, Professor provided invaluable professional advice on the company's governance and development.

At the same time, as a long-standing partner of our agricultural competition, Ramanan University & Research has consistently brought international perspectives and expert guidance to the event, helping it become an important global platform for innovation in agricultural technology as well as for talent development. We will carry forward for passion for agriculture research and continue to increase our investment in agriculture and agricultural research. And through these long-term commitments, honor for professional legacy and make greater contributions to agriculture and food safety research worldwide.

And now let us return to the results for the quarter.

The second quarter this year marked a new phase, a new decade of high-quality development as we moved from initial rollout to deeper execution. Our CNY 100 billion support program has entered a phase in which our sustained investment is beginning to yield tangible results. The positive effects across our platform and industry are being unlocked at a faster pace, with improvements in both the quality and efficiency across the supply and demand side.

At the same time, we continue to make steady progress on our strategic goal of building another PD over the next 3 years. Although the initial rollout of our third-party brand model over the past 6 months was slower than expected due to certain external factors, the overall momentum remains positive. The operations are now fully underway and progressing smoothly.

We will made fully transperforming the supply chain for higher quality growth, drive the upgrade of traditional industries and continue to unlock the supply chain's new growth potential from within. Furthermore, to accelerate supply chain transformation and upgrades, we have established a dedicated company in the new area and purchased an office building there to focus on new opportunities created by intelligent technologies.

And to support upgrading and high-quality development of traditional manufacturing, we have also established a data processing service center for traditional industries and integrated service center to help traditional manufacturers move up the value chain and pursue high-quality development.

We delivered solid results for the quarter. Group revenue was RMB 112.4 billion, representing a year-over-year increase of 8%, while group net income was RMB 27.2 billion, declining 12% year-over-year. This mainly reflected our continued investments in our platform and the broader industry ecosystem, which partly weighed on our performance this quarter.

In the first half of this year, competition in the e-commerce industry remained intense, a complex and rapidly evolving market environment placed greater demand on both platform governance and industry development, presenting us with new challenges. We continue to start up investment in our platform and industry ecosystems through a coordinated set of measures focused on governance, fee reductions and merchant support with the goal of building a platform ecosystem that creates value for all participants.

We have significantly increased our R&D spending on platform governance in addition to upgrading our technology-enabled risk prevention and control systems, we significantly expanded our specialist trust and safety teams and strengthen our oversight across all product categories by taking into account specific characteristics of the different categories and launching targeted governance initiatives, we made ecosystem governance more regular, granular and role-based.

To date, the platform has introduced more than 150 comprehensive trust and safety measures. In June alone, we launched over 50 targeted initiatives addressing key areas such as product listing controls, food and drug safety, qualification reviews, advertising compliance, intellectual property protection, misleading marketing, live stream e-commerce standards and prevention of technology misuse. We are dedicated to upholding high compliance standards through rigorous rules taking a systematic approach to reshaping our governance framework and fostering a safer, better regulated and more trustful shopping environment.

In food safety, we launched a dedicated governance initiative that prohibits the sale of freshly prepared food and beverage products. We further tightened merchant qualification reviews as well as information disclosure requirements to prevent and mitigate food safety risks early on. At the same time, the platform introduced more detailed requirements governing the permitted scope of food products sold via live streaming, live streamer conduct and how products are described and presented. From product estimation to live stream presentation, we guide merchants throughout the food process to operate with integrity and present products truthfully, so that consumers can purchase and consume the food products with ease of mind.

In early June, we also produced and released a number of video courses addressing common challenges and pain points in platform governance. These courses encourage merchants to familiarize themselves with the rules relevant to their industry, avoid violations and protect their legitimate rights and interest in accordance with platform rules, namely, the course frequently asked questions about store business licenses received 340,000 within 24 hours of launch.

Building on the systematic upgrade of our platform governance we have continued to start up investment in the CNY 100 billion support program. Our support now extends beyond our broad merchant base to upstream and downstream participants across agricultural production regions and industrial classes, helping drive comprehensive upgrades throughout the supply chain.

In agricultural production regions, the 2026 total premium product initiative has reached dozens of specialty agricultural regions, including those for products, plants, Chinese [Foreign Language] To the initiative, we help this region to develop new products, raise cultivation standards and improve culture and logistics, thereby unlocking greater value for the agriculture products.

finance, -- an growing region, as an example. In recent years, local merchants have begun introducing a new variety known as the golden diamond Unlike traditional varieties, it has a distinct sweetness and required removing eyes or skin in soft water before serving and supported by high traffic programs on our platform, including flash cell and 10,000 people grouped by the variety of quickly gained market traction and became one of the season's most popular foods.

The greater certainty provided by e-commerce orders has also given goes the confidence to expand production. To date, the local cultivation area for Golden Diamond has grown from scattered trials to more than 100,000

Across the industrial belts, our dedicated new quality supply team has visited manufacturers across different regions and sectors, including home textile in manufacturers in outdoor products in cosmetics in Guangzhou, menswear in and Textile in to provide a suite of support measures to these merchants, such as traffic support, data enablement, expansion of market reach, cost reduction, smart manufacturing and warehousing upgrade. As a result, many factories have cut production cycles by half and have substantially improved their fulfillment capabilities. They cannot rapidly handle large order volumes on our platform while tailoring to consumers' customization needs. This cut enabled manufacturers to take a transformative leap from traditional manufacturing to building brands of their own, while accelerating the shift from traditional to new growth drivers across this industrial

Textile industry is a good example. [indiscernible] was one is the major source of micron labor, with more than 200,000 local residents previously working in the textile industry in Jiangsu and Juan provinces alone. In recent years, younger generation from the company has begun establishing factories locally and selling textile products nationwide to Their annual sales have grown by an average of 4 to 5x and have built leading brands in niche categories such as mosquito mats that are exported to Southeast Asia and Europe during the summer season.

Today, the local economy has moved beyond its traditional reliance on labor migration and has established an integrated path to industrial development that brings together capital, technology, talent and sales channels.

In addition, our free shipping to villages program has continued to deliver positive results since its launch 6 months ago. We have now established last mile delivery networks across more than 10 provinces and municipalities nationwide, including county-level transit hubs and village pickup points. These networks have brought significant job creation to counties and rural communities while accelerating the distribution of consumer goods, home appliances, agricultural supplies and farming equipment to rural markets. In doing so, we are helping merchants unlock new growth opportunities and enabling consumers in remote villages to improve quality of life.

[indiscernible] as an example, as one of China's leading agricultural it is a key region for free shipping to villages program and earlier pilots in and in issue have already produced significant results with order volumes in the villages increasing several food and meanwhile, is a major domestic production hub for water-soluble and innovative fertilizers. And many local agriculture supply companies are building on this momentum to reach more villages across the country.

As a platform serving the public, we have always sought to fulfill our social responsibilities and give back to the society, and recently typhons and heavy rainfall caused severe flooding in several parts of the country to support frontline disaster relief efforts. Pagoda made a cash planation of CNY 10 million to the affected areas. The funds were used to procure relief supplies and equipment, provide assistance and temporary shelter to affected residents and support post disaster recovery and reconstruction.

As we embark on our next decade, we are more convinced than ever that high-quality development caused for both the intensity of Sprint and more importantly, the perseverance of Marathon. We will stay committed to taking a long-term approach and execute our new decade of high-quality development strategy with patients and results to deliver solid and tangible progress at every step. We will continue to invest resolutely in our supply chain, in power merchants and industries and deliver better products and services to consumers. Through concrete actions, we aim to create greater positive value for our users merchants and the society as a whole.

With that, I will turn the call over to Chen Lei, who will provide further details. .

Hello, everyone. I'm Chen Lei, and thank you for joining our earnings call for the second quarter of 2026. In the first half of the year, we made tangible progress under the new decade of high-quality development strategy and laid a solid foundation for long-term growth. As Jiazhen just mentioned, we focus on two key areas. First, through the CNY 100 billion support program, we continue to give back to both consumers and merchants. At the same time, we upgraded our platform governance framework across the board. This initiative has helped foster a healthier environment, both on our platform and in a broader industrial ecosystem. And second, we continue to work towards our 3-year initiative of building another PDD.

We step up supply chain investments and help pricing partners build and develop their own brands. During the quarter, our long-term investment in the CNY 100 billion support program started to materialize into games in a healthier platform ecosystem. On the supply side, our merchants benefited from a combination of fee reductions, merchant support initiatives and a stronger governance. These initiatives are a lot greater innovation among merchants leading to the launch of new products and new brands, which drove incremental demand and new sources of growth.

Many manufacturers adopted digital and intelligent technology to enable customized production, and this drove improvements in quality and efficiency across the supply chain enable manufacturers to transition towards a new development model.

On the demand side, we continue to serve consumers' evolving needs for different product categories and diverse consumption occasions. This was particularly evident in the rural areas where our free shipping to village program for a much milder selection of products within the reach of our consumers, helping improve their quality of life.

Joining all the supply chain capabilities and brand development experience gained through the CNY 100 billion support program, we took staff in this quarter to further integrate the supply chain. Our teams delve into the industrial band of different product categories and started early-stage cooperations with high-quality suppliers.

Our setting clear standards for products, production processes and quality control, we have merchants and manufacturers adapt their operations and deep a range of higher-quality products with higher margins. Through these efforts, we continue to unlock the strength and the potential within the supply chain, driving the manufacturing sectors of the value chain.

Since the beginning of the year, global statutory and compliance landscape have undergone significant shifts. This change created challenges as well as opportunities and they also come with greater responsibilities. We find ourselves a unique intersection of global trade, constantly navigating diverse international regulatory frameworks. At the same time, our position is a unique one. The business touches the daily life of billions of people around the world.

While there is substantial potential for growth, it is accompanied by increased expectation and higher standards of accountability. We will stage through our mission and continue to do a part of our work with dedication and discipline. First, we will keep strengthening our compliance capabilities and fine-tuning platform governance. To protect intellectual property, we can buy screening technologies with expert review to monitor and assess product listings across all categories in realtime. This enables us to address IP risks earlier in our process and has led to systematic improvement of hydro production across the platform.

And second, we continue to invest resolutely in the supply chain by truthfully executing on these structural upgrades, our ultimate goal is to build a highly resilient e-commerce platform that consumers around the World can rely on for competitive price and great quality.

As we step into our next decade, we remain laser focused on our core e-commerce business. By deepening our supply chain investments will continue to empower our merchants and broader industry, delivering a wider range of high-quality products and services.

We are confident in our ability to translate our 3-year initiative of building another PDD into tangible verifiable results. And in doing so, we will strive to help the traditional supply chain to capture the opportunity in this new intelligent area and empowering them to transform and move our value chain and build brands with global reach.

And now let me turn it over to Liu Jun, who will walk you through our results for the second quarter 2026.

Well, thank you, Lei. Hello, everyone. This is Jun. Now let me walk you through our financial performance for the second quarter ended June 30, 2026. First, income of income statements. In the second quarter, our total revenues increased 8% year-over-year to RMB 112.4 billion. This was mainly driven by an increase in revenues from transaction services. Revenues from online marketing services and others were RMB 57.6 billion this quarter compared with RMB 55.7 billion in the same quarter of 2025. Revenues from transaction services were RMB 54.7 billion, up 13% from the same quarter last year.

Moving on to costs and expenses. Our total cost of revenues increased 5% from RMB 45.9 billion in Q2 2025 to RMB 48 billion this quarter. On a GAAP basis, total operating expenses this quarter increased 13% to RMB 36.6 billion from RMB 32.3 billion in the same quarter of 2025.

On a non-GAAP basis, total operating expenses increased to RMB 35.3 billion this quarter from RMB 30.4 billion in Q2 2025. Our total non-GAAP operating stance as a percentage of total revenue this quarter, was 31% versus 29% in the same quarter last year.

Looking into specific expense items. Our non-GAAP sales and marketing expenses this quarter were RMB 29.3 billion, up 10% versus the same quarter last year. On a non-GAAP basis, our sales and marketing expenses as a percentage of our revenues this quarter was 26%, in line with the same quarter last year. For non-GAAP general and administrative expenses or $1.7 billion versus RMB 0.7 billion in the same quarter of 2025. Our research and development expenses were RMB 4.3 billion this quarter on a non-GAAP basis, up 40% year-over-year. On a GAAP basis, operating profit for the quarter was RMB 27.8 billion versus RMB 25.8 billion in the same quarter last year, up 8% year-over-year. Non-GAAP operating profit was RMB 29.1 billion versus 27.7 billion in the same quarter last year. Non-GAAP operating profit margin was 26% this quarter, versus 27% for the same quarter last year.

Net income attributable to ordinary shareholders was RMB 27.2 billion for the quarter compared to RMB 30.8 billion in the same quarter last year. Basic earnings per ADS was RMB 19.32 and diluted earnings per ADS was RMB 18.45 versus basic earnings per ADS of RMB 22.01 and diluted earnings per ADS of RMB 20.75 in the same quarter of 2025.

Non-GAAP net income attributable to ordinary shareholders was RMB 28.5 billion versus RMB 32.7 billion in the same quarter last year. Non-GAAP diluted earnings per ADS was RMB 19.33 versus RMB 22.07 in the same quarter of 2025. That completes income statements.

Now let me move on to cash flow. Our net cash generated from operating activities was RMB 25.7 billion compared with RMB 21.6 billion in the same quarter last year. As of June 30, '26, we had RMB 156.4 billion in cash, cash equivalents and short-term investments.

Thank you, and this concludes my prepared remarks.

Thank you, Jun.

We'll now move on to the Q&A session. In today's Q&A session, Lei, Jiazhen and Jun will take questions from the analysts on the line. [Operator Instructions] Lei and Jiazhen will answer questions in Chinese and we will help translate for convenience purpose.

Operator, we are open for questions.

[Operator Instructions] Your first question comes from Thomas Chon with Jefferies.

[Foreign Language] I will try and state myself. My first question is about the company's global business. We noticed that the EU introduced a temporary customs duty or low-value cross-border consignments starting from July this year. Can management help us understand the expected impact of this change on the company's overall order volume. In ninth of these policy headwinds, what will be the company's growth strategy for the global business going forward?

And my second question is on the company's first-party brand business announced last quarter. Could management provide an update about the rollout and the progress made so far. And more broadly, how should investors frame the potential impact of these initiatives on the company? How are you thinking about the mix and the positioning of first-party versus third-party products? And what will guide to our pricing strategy for first-party products?

[Interpreted] Thomas, this is Chen Lei. Let me take your first question about our global business. Over this period, the regulatory and compliance landscape facing our global business has changed significantly. These changes have created challenges as well as opportunities for our business. They also come with great responsibilities.

We believe we stand at a unique intersection in the global economy and global trade. We face pressure from different regulatory policies while also occupying a distinctive position. Currently, our business purchased the daily lives of billions of people around the world. While there is substantial potential for growth, it is accompanied by increased expectations and higher standards of accountability.

On the changes to the EU customer studies that you mentioned, our team is actively assessing and adapting to them, on the experience that we have gained over the over the years. We have adjusted our supply chain, and we are optimizing our fulfillment processes. With compliance as our bottom line, we are working to balance consumer experience, merchant operations and the long-term development of our business. In the short term, cross-border orders in the affected markets will face lower fulfillment efficiency and higher costs, which will have a considerable impact on those parts of our business.

However, over the medium to long term, changes in the external environment have further underscored the importance in our supply chain and has prompted us to accelerate the development of the relevant capabilities. First, the platform will continue to onboard and support more high-quality local merchants to broaden the supply of local products.

Second, we are accelerating the build-out of local warehousing and fulfillment infrastructure and expanding the coverage of local fulfillment. Through these investments, we hope to integrate more deeply into every market we serve, strengthen the foundation and resilience of our supply chain and better navigate changes and volatility in the environment.

In addition to supply chain capabilities, compliance capabilities and platform governance are also critical foundational capabilities in which we will invest for the long term. We will continue to enhance platform governance, further improve product quality and strengthen consumer protection with the goal of providing consumers around the world with a platform they can trust.

At the same time, we have done extensive work on intellectual property compliance to provide a healthy business environment and level playing field for merchants around the world. Building on technology-enabled monitoring and manual review, the platform has developed systematic IP protection capabilities. Our recent favorable ruling in the IP litigation involving an industry peer has further demonstrated the effectiveness of our IP protection mechanism. We will remain committed to protecting the legitimate rise in interest of our ecosystem partners and to fostering a fair and reliable business environment.

Regulatory and policy changes are issues that the entire industry must address. We are confident in our execution capabilities and organizational resilience. Short-term volatility will not change the long-term direction of our global business. Going forward, we will continue to steadily advance our work across supply chain, fulfillment, compliance and consumer service. We will strive to provide consumers around the world with a shopping platform that remains stable over the long term and offers compelling prices and reliable quality, a platform that they can count on, trust and enjoy using. Thank you.

[Interpreted] This is Jiazhen. Regarding your second question, our first-party brand business is an important extension of our long-term investment in supply chain capabilities. We aim to work closely with manufacturers that have strong capabilities and willingness to invest in long-term product development. By leveraging the platform's take insights and global reach, we seek to bring greater certainty to brand development and value creation across the industry value chain. And in turn, turn on incremental value into tangible benefits for all the participants.

And in terms of execution, we will first focus selectively on core product categories where our platform and supply chain capabilities provide some distinctive advantages. We will work with manufacturers over the long term from product planning and R&D to setting quality standards and market

The business requires an extended period of development and collaboration and the initial rollout has taken longer than we originally expected. And nevertheless, it remains a clear long-term strategic priority for the platform, and we will remain patient and focused on getting every step right and we are confident in the long-term prospects of our first-party brand model.

And in terms of our operating strategy, our commitment to maintaining an open and fair marketplace will not change. We have always believed that consistently delivering quality products and services to consumers requires a healthy, fair and diverse supply chain ecosystem. And going forward, our first-party brand products and products offered by third-party merchants will complement each other in meeting consumers' diverse needs across different use cases and market segments, and ultimately creating an ecosystem that benefits all participants. Thank you.

And operator, we can move on to the next analyst on the line.

Your next question comes from Alicia Yap with Citigroup.

[Foreign Language] So two questions. First is that we have seen many global e-commerce company invest in their own warehousing and also delivery capabilities at the scale, for example, by building out their own warehouse networks and also delivery capabilities. How should we think about the company investment priority in this area over the long term?

And the second question is on the quick commerce, so many global peers have made significant investment in this area. How does management assess the potential impact of the shift in consumer behavior on the industry competitive landscape and also the company's core business? As the industry ramp up investment in the same-day delivery, what strategy is the company pursuing to strengthen user my share and also defend your market share?

[Interpreted] This is Zhao Jiazhen. As with our other investments and our investments in logistics and fulfillment are guided by the need to improve consumer experience and address the practical challenges the merchants face in doing business. We make prudent and targeted investments where we believe we can create tangible value. And accordingly, our investment priorities vary across markets and business models.

In the domestic market, e-commerce logistics network are already quite well developed across most regions. However, last mile delivery remains a significant bottleneck in remote Western regions and many rural communities. And to address this problem, we have committed substantial resources to strengthening logistics network and on our CNY 100 billion support program, we are firmly advancing the free ship into villages initiative and our logistics support for remote regions.

And since the end of last year, under the free shipping to villages initiative, we have established local service stations covering all 177 villages in -- In we have increased the number of parcels delivered to villages to more than 100,000 per day. And this infrastructure not only helps agricultural supplies, such as fertilizers reach farmers more directly but also enables a wider range of high-quality products to reach rural consumers more efficiently. And in doing so, we are helping unlocking significant consumer demand in underserved regions and meaningfully improve order conversion for our merchants that serve these communities.

In certain overseas markets, fragmented point-to-point shipping by individual merchants oftentimes makes it very difficult to achieve the economies of scale that is made possible through the consolidation of shipments. This results in higher overall fulfillment costs and leads some consumer demand unmet.

In markets facing these challenges, we invest targetedly in development and operations of transit warehouses. These investments help local merchants streamline their fulfillment processes and lower logistics barriers while providing local consumers with a more reliable delivery experience.

And back to your question, we will continue to take a practical and solution-oriented approach to fulfillment-related investments and by building stronger supply chain capabilities and improving the efficiency and reliability of the field services, we aim to enhance the consumer experience, create a virtuous cycle between supply and demand and strengthen the platform's capacity for sustainable organic growth over the long term.

And to your second question, retail and e-commerce business models are constantly evolving, and we are seeing a growing range of innovative business models emerge across the market. A quick commerce serves different consumer needs and use cases as compared to our core e-commerce and businesses. And given the current stage of our business, these are fairly different in terms of both supply chain requirements and operating model and with limited goals for synergies. We have, therefore, chosen to focus our resources and efforts areas where we have established strength and are best positioned to create differentiated value.

As the industry matures, platforms will take different approaches to serving consumers based on their respective capabilities and experience. Our path has always been quite clear, which is we will continue strengthening our supply chain capabilities.

Our current supply chain investments have two complementary priorities: Firstly, is ensuring a strong supply of quality products; and second is building the infrastructure to deliver them efficiently.

And on the product supply side, through initiatives such as new quality supply and total premium produce, we continue to help capable traditional manufacturers, strengthen their product development and brand building capabilities, enabling them to move up the value chain and giving consumers greater access to high-quality products and compelling value. And on the infrastructure side, to projects such as free shipping to villages, we are improving our distribution network and addressing last-mile delivery gaps in remote areas and enabling consumers in more regions to benefit from the convenience and affordability of e-commerce.

The supply chain investments we have chosen to make may not yield immediate results. But we believe over the long term, it will create tangible value for the industry, consumers and our merchant ecosystem. We remain focused on this foundational yet very important work and continue creating differentiated value for consumers and merchants. Thank you.

Operator, I think we have time for one more analysts.

Your final question comes from Joyce Ju Bank of America.

[Foreign Language] My first question is on long-term commercialization potential. It has always -- it has been like almost a year since the company launched the RMB 100 billion support program. Could management provide an update on the health and activity of the merchant ecosystem following the investments? As the ecosystem improves, are you seeing or would you expect to see a corresponding increase in merchants willingness to spend on advertising?

My second question is on the revenue growth outlook. Based on the trend of the in the first half, how are you thinking about the consumer spending outlook for the full year? Looking ahead, platform revenue have the potential to outgrow the broader consumer market.

[Interpreted] This is Zhao Jiazhen. And as mentioned earlier, the CNY 100 billion support program is starting to show results from the CNY 10 billion fee reduction program introduced in 2024 to the CNY 100 billion support program early last year. The resources and the supply chain support that we have provided have reached a major region and manufacturing clusters.

And we're encouraged to see that these efforts have enabled many merchants in industrial belts to make meaningful gains in both quality and efficiency. For example, with the support from the platform, a cosmetics company in Guangdong significantly reduced this customer acquisition and operating costs. This company reinvested the profits in a 2-year R&D effort successfully transitioning into patented and national brands and merchants in Johnson lighting manufacturing belt have also leveraged the platform's fast product taxing capabilities to increase investment in high-quality lifting components and smart product features, which led to the launch of a back-selling product that generated several millions in sales within just a few months.

And these tangible results demonstrate our efforts to reinvest in the supply chain ecosystem are working. Of course, building a healthier merchant ecosystem takes time. We will remain committed to these investments and help more merchants achieve healthier and more sustainable growth.

And e-commerce platforms are two-sided networks, and merchant growth prospects are closely tied to a high-quality consumer experience and a healthy platform ecosystem. Our CNY 100 billion support program is, therefore, focused first and foremost, improving product quality, strengthening the supply chain and supporting the merchant ecosystem, such that small and medium-sized merchants can reinvest the efficiency gains and product upgrades. Over the long term, lower operating costs, stronger profitability and greater business confidence among merchants will ultimately drive sustainable organic value creation across the platform. Thank you.

This is Jun, and let me take your second question. In the first half of the year, as consumption support policies continue to take effect, China's consumer market expanded steadily and online retail penetration continue to grow. We remain confident in the long-term potential of China's consumer market and e-commerce industry.

As e-commerce enters a new stage of development, platforms need to take a more proactive role in unlocking your growth by addressing fundamental supply chain bottlenecks. Like for example, through a free shipping to village initiative, we're investing in a more comprehensive last-mile delivery network, including transit warehouses and manage pickup points. These efforts are helping strengthen rural commerce and distribution networks and stimulate consumer demand in these regions.

In the first half of this year, retail sales in rural areas grew faster than the overall market, showing significant potential.

On monetization, just as Jiazhen mentioned, we remain focused on strengthening the platform ecosystem and helping our merchant grow. Over time, by getting these fundamentals right, we believe sustainable growth in the platforms intrinsic value will now follow. Thank you.

Okay. Thank you, Jun, and thank you all for joining us today. It's about time, and we look forward to seeing you next quarter.

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

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Thank you for standing by, and welcome to the PDD Holdings, Inc. 1Q 2026 Earnings Conference Call. [Operator Instructions] 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 as 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 Co-Chairman and Co-Chief Executive Officer; Mr. Zhao Jiazhen, our Co-Chairman and Co-Chief Executive Officer; as well as Mr. Liu Jun, our Financial Director. Lei and Jiazhen 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 and Jiazhen will answer questions in Chinese and we 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.

[Foreign Language]

[Interpreted]

Hello, everyone. This is Zhao, Jiazhen. Thank you all for joining the first quarter 2026 earnings call. 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 lines, 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 our users, the industry and society as a whole.

In Q1, the company entered a new phase of the 3-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 through innovative models and fresh investments. At the same time, our long-term RMB 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.

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 through sustained investments in the ecosystem and the supply chain rather than short-term results.

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 RMB 15 billion and plan to invest RMB 100 billion over the next 3 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 IPs 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 towards brand development, catalyzing a breakthrough across the entire supply chain.

Throughout the first quarter, our RMB 100 billion support program continued to see high levels of investment, rolling out upgraded iterations of initiatives such as Duo Duo Premium Produce, new quality supply and logistics support to remote regions. In agriculture, we launched the 2026 Duo Duo 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, cold chain logistics and deep processing of agricultural products. This helps to improve the quality and efficiency of the agricultural supply chain and enable production regions to move up the value chain. The first phase of these projects has been launched in specialty regions such as Ningming Oranges, Hainan Pineapples, Tongren matcha, Ningxia goji berries, and Lianyungang seafood

Within the industrial belt, the latest round of our new quality supply initiative continue to deliver tangible results. The initiative has been introduced to manufacturing hubs such as Zhangzhou snacks, Zhangzhou skincare, [indiscernible] Zhongshan Lighting and [indiscernible] chocolates 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 brands.

Former screwdriver factories are rapidly growing into automated smart factories. The efficiency and quality achieved through this transformation offers a new road map to industry upgrades.

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 RMB 40 to RMB 50. By covering the trans-shipping fees for the merchants, the platform is able to cut the shipping costs to around RMB 10 Many merchants are seeing order volume to Western provinces growing at an annual rate of over 30%.

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 last-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 within county and rural economies.

Regarding 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 through live streaming monitoring and building a dedicated food database.

We have also enhanced compliance inspection of live streaming, upgraded food safety reporting channels and strengthened automated and manual monitoring. Further, the turnaround time for handling store violations has been shortened to within hours, safeguarding food safety for consumers.

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 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 will hand it over to Chen, Lei for further remarks.

Thank you, Jiazhen, and hello, everyone. This is Chen Lei. Thank you all for joining our earnings call today. At last year's Annual General Meeting, we officially put forward a 3-year strategy of building another Pinduoduo, focusing the company's strategic priority on the investment in the supply chain. In the first quarter of this year, dedicated company was established to launch the first-party brand business based in the first full quarter under the 3-year strategy.

In the first quarter, steady progress was made in our first-party brand business. The teams went deep into the industrial belts across different product categories to accelerate the integration of high-quality supply chain resources and to lay the foundation of the first-party business model. Deep cooperations are taking place with merchants and manufacturers across different categories to design and develop first-party brand products tailored to different global markets.

These initiatives aim at raising supply chain standards and driving a transformation and upgrade of the supply chain. This quarter, our global business continued to grow at a steady pace, opening great market opportunities. At the same time, the continuous investments under the RMB 100 billion support program have yielded valuable insights and first-hand experiences, which will guide the future investment in the supply chain.

Since the beginning of this year, we have stepped up our investment in our platform and wider ecosystem for multiple initiatives under the RMB 100 billion support program to enhance the overall experience for our merchants and customers, make agriculture supply chain more efficient and resilient. We help merchants upgrade their business model, extending free shipping coverage to more remote areas and rural regions. The company is 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 and transitioning from standard-batch manufacturing to demand-driven customization. This transition is enabling them to quickly grow into emerging brands in their respective categories.

At the same time, many traditional OEM factories are also moving beyond basic production, 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 RMB 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 only 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 final of the fifth Smart Agriculture Competition. The 4 finalist teams have designed and built their own plant factories. Relying on these facilities, the participants will explore strawberry cultivation solutions that maximize yield and quality, minimizing cost, energy use.

This year marks the sixth iteration of the Smart Agriculture Competition. And over the years, it has evolved from an industry contest to a testing ground for turning agriculture 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. As Jiazhen 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.

Grounded 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 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 3 years and to drive the transformation of the supply chain as a whole.

And now let me hand it over to Liu Jun, who will walk you through our financial performance for the first quarter of 2026.

Thank you, Lei. Hi, everyone. This is Jun. Let me walk you through our financial performance for the first quarter ended March 31, 2026. In terms of income statement, 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 cost 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 GAAP 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-GAAP 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 revenue this quarter was 31% versus 34% for the same quarter last year. Our non-GAAP general and administrative expenses were RMB 872 million versus RMB 735 million in the same quarter of 2025.

Our research and development expenses were RMB 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 the 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 statement. 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. In today's Q&A session, Lei, Jiazhen and Jun will take questions from analysts on the line. We could take a maximum of 2 questions from each analyst. Lei and Jiazhen will answer questions in Chinese, and we will help translate for convenience purpose.

Operator, we're open for questions.

[Operator Instructions] Your first question today comes from Alicia Yap with Citigroup.

[Foreign Language]

First is that the company has been positioned as an e-commerce platform. And then -- but we saw the company launched 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, PDD's global business has achieved good user growth. What will be the primary focus for the business moving forward? Has user growth met expectation? And how does the company plan to retain and serve this consumer?

[Foreign Language]

[Interpreted]

This is Zhao Jiazhen. Regarding your first question, since the beginning of this year, we have been driving a deep restructuring of our organization and internal management. And these efforts are centered on safety, compliance and social responsibility, and we are striving to create greater value for our 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.

Through years of deep engagement with the industrial belt, 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 scale have not yet completed their brand transformation and are caught in homogeneous competition.

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 business model by taking a deeper and more active role in product development and standard setting.

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 next stage of high-quality growth.

And leveraging the platform scale, we will take on more risks while sharing rewards with the supply chain manufacturers, providing certainty for the participants across the whole ecosystem.

And 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.

[Foreign Language]

This is Chen, Lei. Let me take your second question. After nearly 3 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.

[Foreign Language]

[Interpreted]

Centered on this core priority, we will direct our efforts on 2 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.

Second, we will deepen the development of the first-party brand model. In the global market, brands are particularly crucial in strengthening consumers' mind share 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.

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.

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

Your next question comes from Ronald Keung with Goldman Sachs.

[Foreign Language]

Two questions. One is we note the announcement of the 3-year RMB 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 the strategy?

My second question is we've seen from the National Bureau of Statistics, consumption growth in the first quarter was quite solid and online penetration rate for physical goods is still rising. So 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?

[Foreign Language]

[Interpreted]

This is Zhao Jiazhen. To your first question, first, brand building involves a range of capabilities from product design, standard setting and 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 belts 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.

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 brand, in developing brands. And 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 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, the platform further deepens its supply chain capabilities, enabling the reinvention of the platform.

And looking back at our history from the early initiative of improving agriculture supply chain to later efforts such as Duo Duo Grocery, the global business and RMB 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 we 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.

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 heavy investment in supply chain a few months ago. And as we roll out more supply chain initiatives, we believe we'll have the opportunity to build another Pinduoduo over the next 3 years.

And to your 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.

And based on this understanding, following the launch of the RMB 100 billion support program in April last year, we rolled out a series of supply chain support initiatives. Our teams have gone deep into the agricultural regions and industrial belts. By solving practical supply chain issues, we are unlocking further growth for both the industry and the platform.

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

Another example is the logistics support for remote regions. Our team is bringing more consumers into remote -- 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, 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.

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.

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

Your next question comes from Joyce Ju with Bank of America.

[Foreign Language]

Let me translate myself. First, we have seen the continuous emergence of new e-commerce models in e-commerce industry, including live stream e-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 margin. How should we expect margin trends going forward? And what will be a reasonable expectation at Duo Duo's steady-state profit margin level?

[Foreign Language]

[Interpreted]

This is Zhao, Jiazhen. 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.

However, regardless of innovations in 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.

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

This is Jun. Let me take your second question. As we have regularly communicated in the past, our objective is the long-term sustainable growth of the platform's intrinsic value. And in this process, due to seasonality and our own investment cycle, 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 new 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. So instead of focusing on short-term financial performance, we prioritize the healthy development of the platform ecosystem and the accumulation of foundation of supply chain capabilities. These more enduring sources of competitive advantage will determine the trajectory of the platform's intrinsic value.

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

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

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Ladies and gentlemen, thank you for standing by, and welcome to PDD Holdings Inc. Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your host today. Sir, please go ahead.

Thank you, operator, and 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 the earnings press release, which applies to this call as we will make certain forward-looking statements. This call also 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 are Mr. Chen Lei, our Co-Chairman and Co-Chief Executive Officer; and Mr. Zhao Jiazhen, our Co-Chairman and Co-Chief Executive Officer.

Our VP of Finance, Ms. Liu Jun, is unfortunately on medical leave. Delivering the prepared remarks today will be Mr. Li Jiong, our Finance Director. Jiazhen and Lei will make some general remarks on our performance for the past quarter and our strategic focus. Jiong will then walk us through our financial results for the fourth quarter and fiscal year ended December 31, 2025.

During the Q&A session, Lei and Jiong will answer questions in Chinese and will help translate.

Please kindly note that English translation is for reference only. In case of any discrepancy, statements in the original language should prevail. Now it's my pleasure to introduce our Co-Chairman and Co-Chief Executive Officer, Jiazhen. Jiazhen, please go ahead.

[Foreign Language]

[Interpreted] Hello, everyone, and thank you for joining our earnings call for the fourth quarter and fiscal year 2025. In 2025, we celebrated the 10th anniversary of the company's founding, and it is also the year in which we made our largest investments in high-quality development. For the first time in the e-commerce industry, we launched a 100 billion support program to support merchants. The entire company joined efforts in stepping up our support to farmers and merchants. And during the shareholders' meeting at the end of last year, we improved our corporate governance structure by introducing the code share structure and further sharpened our strategic focus to investing deeply in the supply chain and concentrating on high-quality brand-oriented growth to drive the entire supply ecosystem to move up the value chain.

In the past year, we delivered steady results. This quarter, the group's revenue reached RMB 123.9 billion, growing 12% year-on-year, while full year revenue reached RMB 431.8 billion, up 10% year-on-year. Both this quarter and the annual net income decreased year-on-year, which primarily reflects our sustained investments on both the supply side and demand side. As we have communicated in the past, we prioritize long-term value generation by nurturing our ecosystem rather than short-term financial results.

And benefiting from long-term investments on both supply and demand side through initiatives like the RMB 100 billion support program, the platform and supply chain ecosystem have been moving steadily in the right direction. Key participants of the supply chain, such as agricultural regions and industrial belts have become core pillars supporting the platform and ecosystem, while also bringing consumers more affordable, high-quality products. With the continued investments under the RMB 100 billion support program, dedicated projects such as Duo Duo Local Specialties, new quality supply and logistics support for remote regions have gradually broadened our support from top merchants and SMEs to every segment of the supply chain, helping businesses across all categories pursue differentiated growth.

This has enabled the transition from merely supplying products to pursuing quality and to brand building, greatly improving supply chain efficiency and overall industrial capabilities, while at the same time, create room for profit and innovation for agricultural regions and industrial belts. In the fourth quarter, the Duo Duo Local specialties team visited agricultural regions such as Anyue lemons, Pu'er coffee, Wuhan seeds, Meizhou pomelos, Wenshan blueberries, Fuzhou abalone and Lianyungang seaweed. Through customized One Product One Plan support programs, the team addressed issues such as the lack of product standardization and low value add. These efforts guided farmers and growers to adopt standardized planting, premiumization and deep processing, effectively increasing the added value of agricultural products and retaining more profits in the places of origin, thereby enable sustainable growth in specialty agriculture industries.

In industrial belt, we accelerated the execution of new quality supply program by doubling down on our support efforts. Our dedicated teams visited manufacturing clusters such as Yiwu Accessories, Pinghu down jackets, Hunan Spicy Snacks, Anhui Roasted Seeds, Tianjin Potato Chips, Zhongshan Small Appliances and Shanghai Chocolate and delved deep into every segment of the supply chain from raw materials to components. Through a combination of fee reduction and support, we helped unlock the potential in the supply chain, driving an overall upgrade in supply chain operations and helping industrial belt transition from commoditized competition to brand building.

While stepping up our investments in the supply chain, we also unlocked the consumption potential in remote regions through our logistics support program, driving new growth opportunities for merchants. In the fourth quarter, building on the success of this campaign, we continue to tackle the last mile of parcel delivery into villages across multiple provinces and cities, extending the benefits of new e-commerce from western provinces to vast rural areas. To date, we have deployed and built end-to-end delivery networks, including country-level transfer warehouses and village level pickup points in over 10 provinces and municipalities. We also covered the transshipping fees for orders delivered to villages, bringing more remote rural areas into the free shipping zones.

In terms of trust and safety, we continue to improve the business environment and further enhance the service levels for both consumers and merchants. During the spring festival, we rolled out a series of food safety measures, including compliance checks on business qualifications, reviews of food advertisements, controls on full live streaming, protection of miners, IP protection and the development of a food database, all to safeguard the food safety for consumers during the festivities. In our global business, despite the drastic changes in external environment, we delivered steady growth over the past year, mainly reflecting the competitive advantages built through our long-term focus on the supply chain.

At the last shareholders' meeting, we announced our all-out efforts in investing in the transformation of the supply chain and in building another Pinduoduo. This remains our duty and primary focus. Over the past few months, the 3-year strategy we committed to during the Annual General Meeting has been translated into concrete actions and fundamental changes are taking place within the business and our organizations. In the next phase of our journey, our strategic priority will not be business diversification, but rather concentrating on the high-quality development of the supply chain.

Leveraging our strength in the supply chain accumulated over the years, we will reinvent the platform and propel the ecosystem of the value chain. 2026 marks PDD's 11th year and a new starting point as we head into our next decade. We are starting a refresh and moving forward with an all-in attitude and a persistent focus on execution. We will dedicate more talent and resources to deepen our investments in the supply chain, accelerating its upgrade and transformation. We believe that in the next 3 years, we will have the opportunity to build another Pinduoduo. Now I'll hand it over to Chen Lei for further remarks.

Thanks, Jiazhen, and hello, everyone. 2025 marked our 10th anniversary. As Jiazhen just mentioned, we took on greater responsibilities this past year and launched the RMB 100 billion support program to move back to the virtual ecosystem. We also established a co-chair structure to further improve our governance and firmly anchored our company's strategic focus on the high-quality development of supply chain. Through these efforts, we continue to create long-term value for consumers, for merchants, the industry and society has been nearly a year since we launched RMB 100 billion support program. During this time, we continue to reinvest in our ecosystem through measures such as fee reductions, merchant support, trust and safety initiatives.

Our dedicated team has gone deep into agriculture regions and manufacturing hubs to have hundreds of regions establish standardized production system and to explore differentiated and brand-oriented growth models. This effort has significantly improved the efficiency and quality of supply chain operations, driving the supply chain transformation from scale driven to value driven. This also brings more high-quality affordable products to our consumers. Our consistent investment in the supply chain have unlocked strong consumer demand on Pinduoduo platform. The platform delivered strong performance during major promotions such as June 18, Double 11 as Spring Festival. [Quality products] from different regions flow through geographic boundaries and offering consumers more diverse selection and further enhancing their quality of life.

Our global e-commerce business continued to deliver steady growth and has reached meaningful scale in most countries we serve, accomplished in 3 years was to build a Pinduoduo business 10 years to complete. However, over the past year, the global geopolitical landscape has grown more complex. Trade and regulatory policies across different countries and regions continue to evolve. This has introduced greater uncertainty to our global business and will impact and even reshape our development model. In this context, we need to rely more than ever on the collective capabilities of our supply chain ecosystem.

Therefore, we will continue to anchor our strategy in investing deeply in supply chain capabilities and direct more efforts, capital and resources to its transformation. We aim to empower our merchants and manufacturers to become innovators with go-to-market capabilities, developing consumer insights, coming up product size and building brands. This will drive towards high-quality and brand-oriented growth, creating real value for consumers. Over the past few months, we have been making steady progress on the execution of 3-year strategy adopted at a shareholders' meeting, and we are pleased to see some results.

In the fourth quarter, our long-term investment in agriculture research achieved new results. Last October, for the second consecutive year, we were invited to attend World Food Forum hosted by UN Food and Agriculture Organization, representing Asian enterprises. We shared our experience and achievements in supporting digital agriculture innovation, and we also sponsored 2 great agriculture research teams that took the stage at the forum, bringing new energy into agriculture research and development. Since the start of 2026, competition in e-commerce sector has continued to intensify around new business models and new technologies.

At the same time, the global environment has become more complex than last year with increased uncertainty in the economic and trade climate as well as in regulatory policies across various countries and regions. This will inevitably bring more challenges and weigh on our future performance, putting pressures on our profitability in short term. However, we will continue to uphold our long-term philosophy and faithfully execute our strategy of investing deeply in the supply chain, dedicating more resources to give back to the industry and the society. And now I will turn the call over to Li Jiong, who will walk you through our financial performance for the fiscal year of 2025.

Well, thank you, Lei. Hello, everyone. This is Jiong. Now let me walk you through our financial performance in the fourth quarter and fiscal year ended December 31, 2025. In terms of income statement, in Q4, our total revenues increased 12% year-over-year to RMB 123.9 billion and 10% year-over-year to RMB 431.8 billion for full year 2025. This was mainly driven by the increase in revenues from both online marketing services and transaction services.

Revenues from online marketing services and others were RMB 60 billion this quarter, up 5% compared to the same period 2024. Our transaction services revenues this quarter were RMB 63.9 billion, up 19% versus the same period of 2024. Moving on to costs and expenses. Our total cost of revenues increased 15% from RMB 47.8 billion in Q4 2024 to RMB 55.2 billion this quarter. For the full year, our total cost of revenues increased 23% to RMB 188.8 billion, mainly due to increased fulfillment fees, bandwidth and server costs and payment processing fees. On a GAAP basis, total operating expenses this quarter increased 10% to RMB 41 billion from RMB 37.2 billion in the same quarter of 2024. On a non-GAAP basis, our total operating expenses increased to RMB 39.3 billion this quarter from RMB 35.1 billion in Q4 2024.

Our total non-GAAP operating expenses as a percentage of total revenues was 32% in Q4. For full year 2025, total non-GAAP operating expenses were RMB 140.7 billion, up from RMB 122 billion in 2024. Looking to specific expense items. Our non-GAAP sales and marketing expenses this quarter were RMB 34 billion, up 9% versus the same quarter of 2024. On a non-GAAP basis, our sales and marketing expenses as a percentage of our revenues this quarter was 27% compared to 28% in Q4 of 2024. For the full year, non-GAAP sales and marketing expenses increased from RMB 109.1 billion to RMB 123.3 billion in 2025. Our non-GAAP G&A expense were RMB 907 million in Q4 versus RMB 998 million in the same quarter of 2024. Our annual non-GAAP G&A expenses were RMB 3.2 billion in 2025 versus RMB 2.8 billion last year. Our research and development expenses were RMB 4.4 billion in the fourth quarter on a non-GAAP basis and RMB 5 billion on a GAAP basis.

On a GAAP basis, operating profit for the quarter was RMB 27.7 billion versus RMB 25.6 billion in the same quarter 2024. Non-GAAP operating profit was RMB 29.5 billion versus RMB 28 billion in the same quarter 2024. Non-GAAP operating profit margin was 24% this quarter compared with 25% for the same quarter 2024. For the full year, non-GAAP operating profit was RMB 102.6 billion compared with RMB 18.3 billion in 2024. Net income attributable to ordinary shareholders was RMB 24.5 billion for the quarter and RMB 99.4 billion for the full year. In the fourth quarter, basic earnings per ADS was RMB 17.50 and diluted earnings per ADS was RMB 16.51 versus basic earnings per ADS of RMB 19.76 and diluted earnings per ADS of RMB 18.53 in the same quarter of 2024.

Non-GAAP net income attributable to ordinary shareholders was RMB 26.3 billion for the quarter and RMB 107.3 billion for the full year. In the fourth quarter, non-GAAP diluted earnings per ADS was RMB 17.69 versus RMB 20.15 in the same quarter of 2024. That completes the income statement. Now let me move on to cash flow. Our net cash flow generated from operating activities was RMB 24.1 billion in Q4 and RMB 106.9 billion for the full year of 2025, compared with RMB 29.5 billion in the same quarter of 2024 and RMB 121.9 billion in 2024. As of December 31, 2025, the company had RMB 422.3 billion in cash, cash equivalents and short-term investments. Thank you, and this concludes my prepared remarks.

Thank you, Jiong. Next, we'll move on to the Q&A session. Today's Q&A session, Lei and Jiazhen will take questions from analysts on the line. We could take a maximum of 2 questions from each analyst. Lei and Jiazhen will answer questions in Chinese, and we will help translate. Operator, we are open for questions.

[Operator Instructions] Your first question comes from Alicia Yap with Citigroup.

[Foreign Language] I have 2 questions. First is that the company made some organization adjustment at the shareholder meeting at the end of last year. So currently, the company is operating in over 90 markets and at the same time, also face new challenges from the complex regulatory environment. So how does the company maintain the flexibility and also the quality of execution in such an environment?

And then second question is, over the past quarter, we have seen a slowdown in the growth of e-commerce platform in China and the company's online marketing revenue growth also show a slowdown over the past 2 quarters. So could management share with us your view on the current state of China e-commerce market and where the next phase of growth for the industry might come from?

[Foreign Language]

[Interpreted] This is Zhao Jiazhen. Let me take your first question. Over the past few years, our global business has indeed achieved some progress, now serving nearly 100 markets and achieving meaningful scale. And throughout this process, our corporate governance and the development of internal talent have lagged behind the business growth, and that leaves us difficult to keep up in many areas. At the same time, the international geopolitical landscape is evolving rapidly with trade and regulatory policies across regions changing quickly and becoming increasingly tightened. This places new demands on our company as a whole.

And therefore, we believe there is both an opportunity and a necessity to undertake a systemic and structural transformation of our organization, culture and corporate governance. And of course, this will be a gradual process. The culture, structure and the appointment of new leaders that was announced at our shareholders' meeting last December is the beginning of this systematic transformation. In the period ahead, we will dedicate greater energy, capital and resources to upgrading and reinventing the supply chain and to achieve an overall transformation of our supply chain operations.

I will also address the second question. As you mentioned, over the past few quarters, we have seen e-commerce industry enter a new phase of intensified competition and slowing growth. In this new stage, our strategy of investing deeply in the supply chain was formulated. It was formulated from the recognition that an e-commerce platform should not just be a simple transaction platform, rather, it can and should do more and creating greater value for all participants across the entire supply chain.

Our deep investments in the supply chain covers multiple aspects and initiatives recently such as Duo Duo local specialties and logistics support for remote regions are all projects empowering the supply chain to be more inclusive. Here, I will also highlight 2 specific programs. The first program is free delivery to villages. This is a new project we piloted in the fourth quarter of last year, aimed at addressing the challenges of high logistics costs and merchants lack of incentives to shift to remote rural villages, bringing more villages into the free shipping zone. And currently, we have built last-mile logistics infrastructure, including transit warehouses at the country level and pickup points at the villages level across multiple regions in China and with the platform covering the transshipping fees for orders delivered to these villages.

And under this new model, merchants only need to send their products to the transport warehouses and the transportation from the warehouse to the village level pickup points is then handled by the transit warehouse. And building on our existing experience, we applied the transshipping model to the last-mile delivery to the villages, improving the shopping experiences in remote areas and helping our merchants to tap into new market opportunities.

The second example is new quality supply. For merchants willing to improve their product quality and services, the platform empowers them by providing industry insights and supply chain support. These measures support merchants to upgrade their operations across the entire product life cycle from R&D and production to manufacturing and sales and driving the transformation of the supply chain system. There is actually a lot the platform can do here. For instance, in product development, traditional approaches often rely on trial and error. However, within today's ecosystem, critical product information is compiled by our merchant development teams and promptly relate to the merchants.

Together with traffic support for new product testing, these measures enable merchants to iterate their products with more success and improve the ROI of their R&D investments. And these are 2 examples of our efforts to upgrade the supply chain. Faced with slowing industry growth and heightened competition, we are proactively choosing to channel resources into building a high-quality supply chain. Our investments in foundational capabilities like new quality supply and delivery to villages will become the driving force behind the company's sustainable and healthy growth in the next decade.

Operator, we are ready for the next analyst on the line.

Your next question comes from Kenneth Fong with UBS.

[Foreign Language] The company global business has experienced some ups and downs. Since last year, we have seen high-profile regulatory inquiries in some key markets and significant changes in trade policy highly relevant to our operations. Could management share your thoughts on the current external environment and under such conditions, where is your global business strategic focus in the next phase?

And my second question is about the profitability. The company profitability over the past 2 quarters has experienced some fluctuation. So could management share how different business model launch that might impact the profitability? And how should we think about the company long-term profit margin level?

[Foreign Language]

[Interpreted] This is Chen Lei. I will take your first question. Over the past period, we have indeed received inquiries from regulatory authorities. As our global business grew rapidly and reached a meaningful scale in different countries, it is understandable that this has drawn surprise, concerns and closer scrutiny. However, our management believes that the current regulatory scrutiny will lay a solid foundation for our next stage of growth and will also provide direction for iterating our model amid the rapidly evolving international political and regulatory landscape. Since the launch of our global business, we have consistently focused on the long term.

Building on our deep roots in the supply chain, we are committed to achieving sustainable development in each market and creating real value for consumers. As our business skills and regulatory environment across regions change rapidly, we deeply recognize that regulatory compliance is the baseline requirement. As a company operating within local communities, it is our fundamental responsibility as an e-commerce platform to meet local needs and stay true to our core mission, fulfill our duties and contribute meaningfully to the societies we operate in. Therefore, our management team invests significantly in business compliance.

However, trade policies, taxation, data regulations, product compliance requirements and other regulatory frameworks are undergoing significant changes across different countries and regions. These requirements often vary considerably and can sometimes contradict one another, inevitably bringing greater challenges and uncertainty. We are actively learning, adapting to these changes and continuously enhancing our compliance capabilities to create sustainable value for society. You also mentioned changes in global trade policies. Since the beginning of last year, we have indeed seen some shifts in trade policies in many major markets. Ensuring business compliance, the team has quickly iterated our business model based on the regulatory environment and market conditions in different regions to deliver reliable services to consumers. This is closely tied to the supply chain capabilities we have accumulated over the years.

Therefore, moving forward, the strategic focus of our company's global business will remain on investing in supply chain capability. Every aspect of this directly impacts the consumer shopping experience, and accordingly will be a key area of our investment. Thank you.

[Foreign Language]

This is Zhao Jiazhen. Let me answer your second question. First, I want to emphasize that currently, the company is still in a strategic investment phase. The external environment and competitive landscape are changing rapidly. And to meet the consumers' evolving needs, we are working closely with our merchants to explore and launch new business models that is suited to the new conditions. Any new model from launching to a full rollout requires the platform to commit substantial resources in its early stages.

Whether it is exploring the new business models or making strategic investments in the supply chain, these are fundamental and long-term initiatives. The timing difference between investment and return will inevitably have a direct impact on our performance in certain stages. As we have communicated on multiple occasions, between short-term financial performance and the long-term value of the platform ecosystem, we will resolutely choose the latter. And therefore, as we continue our strategic investments, coupled with a complex and volatile macro environment, it could be normal to see fluctuations in our profit margins from quarter-to-quarter.

And over the past few months, the strategy we announced at the shareholders' meeting is being translated into concrete projects. The business and organization are undergoing deep transformation. And we suggest not to focus too much on the profitability of a single quarter, but rather pay more attention to the high-quality development of our platform ecosystem because only with a healthy platform ecosystem and a robust supply chain, can the platform achieve sustainable growth in the long-term intrinsic value. Operator, let's move on to the next analyst on the line. Hi Joyce, please go ahead.

[Foreign Language] I will translate myself. My first question is related to the profit margin as well. Since last year, the company launched several investment initiatives, including last year's RMB 100 billion support program and the management just mentioned heavy investment in the supply chain in the remarks. Could management elaborate a bit on how the company thinks about the investment and return cycles for these projects?

And what will be the long-term impact on the company's financial performance? My second question is online retail sales showed very strong growth momentum in the first 2 months of the year. Could the management share the company's view on the consumer market like regarding categories with faster growth in the market? Does the company have targeted strategies to capture new opportunities in the fast-growing product categories?

[Foreign Language]

[Interpreted] This is Zhao Jiazhen. I'll answer your question. About a year ago, we further recognized the importance of the long-term development of the ecosystem, and we launched a series of merchant support initiatives such as the RMB 10 billion fee reduction and RMB 100 billion support programs, committing tangible resources to help the merchants and the industries, creating more room for innovation.

Our management unanimously agrees that as the platform grows into a public platform with social influence, we should consider the company's development from the broader perspective of public interest and the long-term health of the industry ecosystem. The strategy of focusing on core business and investing deeply in supply chain upgrades that was announced at the shareholders' meeting at the end of last year is an extension and reinforcement in this direction.

And after years of development, the e-commerce industry's ecosystem is becoming more mature and merchants demand on the platform have also become more diverse. The platform's role has evolved from initially being a transaction platform to now becoming a comprehensive business partner. Accordingly, the support that merchants need the most from the platforms has also extended from traffic support to all aspects of their operations, including R&D, production and sales. This requires us to go deeper in our operations to come up with targeted support plans tailored to different industries and thereby building a more competitive supply chain.

Such investments involve thousands of merchants and cannot be achieved overnight. We are prepared for long-term and patient investments and are very pleased to see that many of these investments have already yielded some results. For example, with the support of the new quality supply project I just mentioned, some merchants have chosen to reinvest the fee reductions provided by the platform into expanding their R&D teams and upgrading production lines.

And together with the platform's digital solutions, they have started on a path of product differentiation and transformation. These long-term structural investments will not be immediately reflected in the financial performance in the short run, but they are a crucial part of the long-term sustainable growth of the platform and ecosystem. We will diligently implement these long-term projects by reinvesting concrete resources back into the ecosystem. We target to lower merchant costs, enhance supply chain quality and improve consumer experience. Through investing in the supply chain, we will seek to reinvent the platform and move the ecosystem up the value chain.

And regarding your second question, we are also very pleased to see the improvement in the overall consumption market. However, at the same time, we also clearly recognize that in today's competitive landscape, we still face some challenges. The future performance of e-commerce platforms will increasingly be dependent on how much incremental value they can create for the entire supply chain rather than relying solely on traffic acquisition and allocation. And therefore, at this juncture, we have made a firm decision to invest deeply in the supply chain. And for different product categories, our merchant development teams will work closely with sellers. And based on industry insights, we will provide them with tailored industry solutions to help merchants achieve new quality transformation and driving the high-quality development of the supply chain.

And we firmly believe that these investments are essential for the e-commerce high-quality development in the next stage, and we are committed to patiently furthering these efforts in the long run. Thank you.

Thank you, Joyce. And thank you, Jiazhen. Thank you for joining us today. We look forward to speaking with you early 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 all disconnect.

Ladies and gentlemen, thank you for standing by, and welcome to the PDD Holdings, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today. Please go ahead.

Thank you, operator, and 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 and through the Globe Newswire services.

Before we begin, I'd like to refer you to our safe harbor statement in the earnings press release, which apply 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, our VP of Finance, Mr. Liu Jun, is unfortunately on medically delivering prepared remarks on Jun's behalf today will be Ms. Sin iLine, from our Investor Relations team, who has spoken on our earlier earnings call. Lei and Jiazhen will make some general remarks and on our performance for the past quarter and our strategic focus.

And Jun Liu then walk us through our financial results for the third quarter ended September 30, 2025. And during the Q&A session, Lei and Jiazhen 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 tenth anniversary of the company's founding. Just before this earnings release, we celebrated our tenth best day. When we started in 2015, we pioneered the team purchase model, which offers the value proposition of more savings and more fun at scale and create a new e-commerce defined by 3 characters, namely benefit all people first and more open.

Since then, we have gradually grown from staff 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 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 offer concern adhere firmly to our own duties and principles and maintain focus on our core business of e-commerce. To 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 an effort in giving back to the industry ecosystem, driving the industry to become more benefit or more people first and more open. Since day 1, 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 drive the challenges faced by the farmers and growers as well as industrial belt metrics.

This e-commerce model has helped a large base of farmers and everyday workers increased their income while offering urban and rural consumers across through quality fruits and daily necessities at affordable prices. Today, 10 years later, our focus remains on a day-to-day of people from all works of life. We continue to provide consumers with quality goods at affordable prices and help merchants, many of which SMEs expand their market rate.

And ultimately, we help producers and consumers live a better life. As a new e-commerce platform formed in the mobile Internet area, we rolled beyond the traditional online shopping model that plate products center. And instead, we put people first.

We built our model around a consumer focus. We try to understand a human touch behind every click and we order 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 integration, 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 trading, we have faced fierce and persistent industry competition. And yet, we have remained stead first in our focus on the company's intrinsic value in the long run, and we promote the high-quality growth of the pref ecosystem, and we advocate for a more open industry environment.

Since last year, we first elevated our ecosystem development and roll out substantial merchant support initiatives such as the RMB 10 billion fee reduction program and RMB 100 billion support program. Through these initiatives, we made investments in our merchants and a wide creating room for innovation and growth for both established brands and SMEs.

We hope to play our part in asserting supply chain upgrade in addressing a long-standing challenge faced by our merchants who had quality but less 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 have guided us for the past 10 years, staying true to our mission of creating value for our consumers and focus on investing in a 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 area, we must do so in a way that prioritizes the interest of wider public and the long-term outlook of the entire ecosystem.

Going forward, more strategic initiatives similar to $100 billion support program will be rolled out to support both supply side and demand side. We will also strengthening our efforts in giving back to the industry at a broader society. 3 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 shift in the platform's regulatory environment, including in trade policies, tax rules, data security and 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 trips. However, there remains significant uncertainties exposing the 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. As elevator fierce industry competition, a complex global environment and our continuous ecosystem investments.

Our quarterly profitability will fluctuate and is inherently unpredictable. And 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 the consumers. It is with our firm commitment to high-quality development, we embarked on the next decade towards our mission of COSCO plus Disney. And with that, we will turn the call over to Zhao Jiazhen for further remarks.

[Foreign Language]

Good day, everyone. This is Zhao Jiazhen Jan. Thank you again for joining our Q3 2025 earnings release. [Foreign Language]

Third quarter this year marks the company's tenth 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 help deliver 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. [Foreign Language] In this quarter, our revenue growth continued to be under pressure and operating profit grew 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 not be considered as guidance for future performance. We cannot rule out the possibility that the financial performance in the next few quarters will continue to fluctuate.

[Foreign Language]

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. And through initiatives such as total premium products, new quality supply and logistics support remote regions we continue to drive the high-quality development of the platform ecosystem.

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

[Foreign Language] In the third quarter, our total premium project team visited dozens of agricultural specialty regions, including Hubei, Changchang, [indiscernible] This year, on the back of $100 billion support program, we launched the Duo premium product initiative to step up our investments into agriculture.

Based on the 2025 agriculture product half-year report that we just issued, our investments in agriculture have yielded significant results. And in the first half of this year, agriculture sales grew by 47% year-over-year, and we saw a similarly rapid increase in the number of agriculture merchants with a particularly notable increase of over 30% year-over-year in the generation of merchants [indiscernible] in the 2000. This demonstrates that the online distribution of agricultural products continues to hold the mandate.

[Foreign Language] In the third quarter, our total premium product team visited a dozen of agriculture specialty regions, including Uber, [indiscernible] Shandong La Yang, nap and Suzanne to develop tailored solutions for the merchants and help them make the transition from a model that prioritizes its scale to wind to prioritize quality.

And during the harvest season starting in September, we allocated $1 billion subsidy and $2 billion traffic reports and in collaboration with the 300,000 agriculture merchant platform. We rolled out the total harvest season program to facilitate the timely distribution of products from rural areas to corporate markets, helping farmers increase income.

[Foreign Language] In the early days of our company, our team purchase model brought about a solution to the legacy challenges within the industrial belt and enable the industries to quickly scale across regions. The number of e-commerce merchants in many of these regions grew from just 102 to 7,000. However, this growth has also led to commoditized competition. And today, these industrial belts have reached a critical juncture that calls for transformation.

[Foreign Language] 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 Pingo snacks in queso children's square in [indiscernible] Bags&Luggage in Chardon and Hainan, 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.

[Foreign Language] At the end of September, we released a 1-year development report on new quality supply. The report shows rapid growth in a number of industrial brand merchants, the number of merchants between the age of 25 and 30 grew by 31% year-over-year, and those born in the 2000 grew by 4%. 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 from these industrial cuts. And these figures demonstrate that the key industrial belts are steadily moving towards high-quality development.

[Foreign Language]

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 enamor while young people in small towns by trend designer toys. We see mountain villages enjoying high-quality seafood, while [indiscernible] regions were 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 implants among other product categories. This greatly stimulated economic activities between the regions.

[Foreign Language] Starting a fresh 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 driving platform that benefit of taking out greater social responsibility and creating value for the public.

[Foreign Language] Now I'll hand it over to [indiscernible] to provide you with an update on our Q3 financial performance.

Thank you, Zhao Jiazhen. Hello, everyone. This is Cindy 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 30, 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 million 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 GAAP 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 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 Zhao 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 our prepared remarks.

Thank you, [indiscernible] . And next, we will move on to the Q&A session. In today's Q&A session, Lei and Zhao Jiazhen take questions from analysts on the line. [Operator Instructions] Lei and Zhao Jiazhen will answer questions in Chinese and will help translate for convenient purposes. Operator, we'll open for questions.

[Operator Instructions] Your first question comes from Joyce Shi with Bank of America.

[Foreign Language] My first question is in a quarter we see a recovery in overall online retail sector as the industry's year-over-year growth with its best level in the past few quarters. Could management share the company's perspective on the recent industry trend?

In the meantime, we noticed a slowdown in Duo Duo'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 driving 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 powerful companies through major business innovations and ramp up investments 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?

[Foreign Language] This is Zhao Jiazhen. Let me take this question.

[Foreign Language] 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 on the board. 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.

[Foreign Language] And as we see it from here onwards, 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.

[Foreign Language]

At the beginning of this year, we further recognize 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, and 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.

[Foreign Language] And 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 cell service system and implemented multiple evolvement improvements to address issues like abnormal order disties. And these efforts are all focused on optimizing the business environment for our merchants and nurturing platform ecosystem where all participants can strive together.

[Foreign Language] And 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 a 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 the period, that has -- we plan to roll out more strategic initiatives that benefit both merchants and consumers, programs such as the 100 billion support program and further intends our efforts to invest in the industry and give back to the society.

[Foreign Language] And back to the topic of growth rates. We mentioned several quarters ago that as the platform increase 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 the industry, our financial performance may experience ups and downs in the coming period. However, we will always maintain a long-term perspective, focusing on creating a unique value for consumers and merchants and building our intrinsic value.

[Foreign Language] And in terms of your second question about competition.

[Foreign Language] And as you have observed, the competition in our industry has intensified. And over the past few months, we've seen many industry players deploying significant capital and resources to aggressively develop new business models, leading to increasingly fierce competition around the emerging business models in the e-commerce sector.

[Foreign Language] And in this environment, we'll 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 lag some of the profits to create room for the development of the entire ecosystem. We view this as our long-term investments.

[Foreign Language] And for instance, as mentioned earlier, this year, we launched the Duo premium product campaign under our $100 billion support program, which has significantly helped quality [indiscernible] merchants increase their scale and improve the efficiency of product distribution. There are numerous initiatives like this.

[Foreign Language]

And these long-term investments will naturally impact our revenue and profit performance. And moving forward, amidst 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, Joyce. Operator, we're ready for the analyst -- next analyst on the line.

Your next question comes from Alicia Yap with Citigroup.

[Foreign Language] 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 these initiatives? And how should we assess the financial impact of this initiative? And what are the company's future plans?

[Foreign Language]

Alisa, this is Lei. Let me answer your first question. After more than 3 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 see profound responsibility.

[Foreign Language] 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 will become an organic part of the local economies.

[Foreign Language] The growth of our business alongside regulatory trends across different markets now set a higher standard wise. We have always believed that providing consumers with a safe and trust with the 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.

[Foreign Language] And on the 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.

[Foreign Language] 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 implement adjustments in our business operations.

[Foreign Language] And 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.

[Foreign Language] 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.

[Foreign Language]

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.

This is George. Let me answer your second question.

[Foreign Language] And over the past 10 years, we have undergone an extraordinary growth journey evolving from a start-up to a public platform, 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.

[Foreign Language]

And as part of this journey, we launched strategic initiatives, such as the $10 billion agricultural research program to inject new energy into agriculture modernization. And this year, we took another critical step to launch the first $100 million support program in the e-commerce sector and through the key measures such as total premium products new quality supply and logistics support for remote regions.

We are continuously improving the platform ecosystem and brought more high-quality merchants and products to the broader consumer market driving the high-quality development of different industries.

[Foreign Language] 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 consumer as well. And therefore, a healthy and sustainable merchant ecosystem is a fundamental pillar of the platform's high-quality development.

[Foreign Language]

We hope these initiatives will promote high-quality growth for quality merchants. For instance, the fee reduction policies we introduced have lowered merchant 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.

[Foreign Language]

And this year marks our 10-year anniversary and spending this new starting point. We will continue to diligently address the practical challenges based 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.

Okay. Operator, I think we have time for one more analyst.

Your next question comes from Kenneth Wong with UBS.

[Foreign Language]

The company operating margin decline 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 a grid management share. What the new consumption trend that we observed during the recent and new shopping festival promotion.

Additionally, we have seen other industry participants achieving good results with the new business model such as pre commerce during [indiscernible] So how does management view the competitive landscape under these emerging models.

This is Zhao Jiazhen. Let me answer your question.

[Foreign Language] 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 not to a decline in operating margins both year-on-year and quarter-on-quarter.

[Foreign Language] At the moment, the industry landscape continues to change rapidly. And 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 and all targeted at creating more room with a healthy development of the supply chain, and these investments will put changes to our revenue and profit.

[Foreign Language]

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 our foreseeable risks and challenges to our company, which may also impact the company's financial performance in both the short and long term.

[Foreign Language]

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

[Foreign Language] And over the last past few months, we have observed an overall positive consumption momentum with gradually recovery in market confidence. And during the Q3 promotional period, consumption needs in the e-commerce sector was further stimulated showing a steadily improving trend.

[Foreign Language] 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 accelerating competition and creating challenges for our businesses on --

[Foreign Language] 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. And from a long-term perspective, we'll increase high-quality investments to translate these capabilities into products and services to offer consumers greater quality for money.

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.

[Foreign Language] Our attitude remains positive, but first, we choose to view competition to a long-term land 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 profit. 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, Zhao Jiazhen. 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.