Pinduoduo Inc
NASDAQ:PDD
Earnings Call Analysis
Q3-2023 Analysis
Pinduoduo Inc
The company has achieved a stunning 94% year-on-year revenue increase, reaching RMB 68.8 billion in the third quarter. This massive growth is credited to ongoing investments in the platform that enhance user satisfaction through a more extensive selection of affordable, high-quality products.
Strategic investments continue, notably in agritech and supply chain technology, with a substantial RMB 2.8 billion allocated to research and development, demonstrating a relentless pursuit of innovation.
The company's philanthropic spirit shines through its RMB 30 billion donation to support affected regions, along with initiatives aimed at helping young people achieve a brighter future, showcasing corporate social responsibility and community integration.
The earning of the 12th China Charity Award underscores the company's impact in charitable initiatives. The company's international foray, via Temu, has connected over 10,000 manufacturers to consumers across more than 40 countries, indicative of substantial global reach and influence.
Evolving quickly to meet international competition, the company is focused on creating next-generation supply chains and has implemented strategies such as the RMB 10 billion program. These efforts have seen certain brands experience rapid growth, up to 40 times over just 2 years.
The financial framework of the company is robust with revenues from online marketing and transaction services, which have increased by 39% and 315% respectively, indicative of diverse and growing income streams. Cost of revenues has climbed significantly, mainly due to increases in fulfillment and payment processing fees.
Operating expenses on a GAAP basis rose by 44%, while non-GAAP expenses softened, dropping from 44% of total revenue last year to 35% this quarter. Sales and marketing expenditures have grown by 58% as the company continues to promote brand and consumer engagement.
Operating profit and net income both show notable increases, underlining the company's profitability. Operating profit on a GAAP basis jumped to RMB 16.7 billion, and net income for shareholders was RMB 15.5 billion, reflecting a healthy financial state and return on investment for shareholders.
With an impressive RMB 32.5 billion generated from operating activities and a solid reserve of RMB 202.8 billion in cash and short-term investments, the company is well-poised to sustain future growth and strategic investments.
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Ladies and gentlemen, thank you for standing by, and welcome to PDD Holdings Inc. Third Quarter 2023 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. 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 GlobeNewswire services.Before we begin, I would like to refer you to our safe harbor statement in earnings press release, which applies to this call as we will make certain forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to GAAP measures.Joining us today on the call are Mr. Chen Lei, our Chairman and Co-CEO; Mr. Zhao Jiazhen, our Executive Director and Co CEO; as well as Ms. Liu Jun, our VP of Finance. 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 the third quarter ended September 30, 2023.During the Q&A session, Lei and Jiazhen will answer questions in Chinese, and we will help translate. Please note that the English translation is for reference only. In case of any discrepancy, management statement in the original language should prevail.Now it's my pleasure to introduce our Chairman and Co-CEO, Chen Lei. Lei, please go ahead.
Hello, everyone. Thank you for joining our earnings call for the third quarter of 2023. I will start by giving a brief overview of our third quarter results. In Q3, we achieved total revenue of RMB 68.8 billion, representing a 94% year-on-year increase. This is a result of the improving consumer segment and our efforts to carrying out the high-quality development strategy. As one of the largest e-commerce platforms in China, we clearly felt the continuous recovery of the economy as well as the potential and the resilience of the consumption market. With the introduction of a series of policies to support consumption, we are also seeing robust demand for consumption upgrades. Consumer behavior is telling us that consumption upgrade is not just about quality, but equally about price. It's the balance of quality and price that consumers care most about.Recognizing this trend, we are more confident about our value proposition of more savings and better services. And in Q3, we continued to invest platform resources to make it easier for our users to enjoy an ever greater selection of quality products at affordable prices and with great service satisfaction.In Q3, we continued exploring new ways to offer our users special promotions through a series of campaigns such as Duo Duo Harvest Festival, National Brand Festival, Duo Duo Reading Month and National Day sales. Consumers get to enjoy attractive prices that are typically only available a few times a year during shopping festivals.We have always been confident in the vitality of China's consumer market. While we are laser focused on the shop experience, our efforts go beyond the service. Investing in technology innovation is the key to achieving high-quality development.In Q3, we continue to invest decisively in areas such as agritech, supply chain technology, and our core R&D capabilities. Our investment in R&D reached RMB 2.8 billion, setting a new high. Technology innovation is the core driving force behind our pursuit of high-quality development and we will continue to step up investment in this area.At the same time, we are proactively taking on more social responsibilities. In August, [ Xinjiang ] area was hit by severe weather. We immediately went into action and donated RMB 30 billion to the China Charity Federation to support affected region. At the same time, we launched dedicated relief campaigns and charity live streaming events to support affected companies. For example, to help book merchants in the region, resume normal operations, we set up a dedicated channel on our platform and provided relief measures such as traffic support and zero commission policy.In Q3, we went back to places in several provinces and hosted a series of Reading for You book donation events. We also donated food and helped build libraries for schools in Gansu and Hubei provinces. We are hopeful that through these efforts, we can do what we can to broaden the horizon of the young people and help them to achieve a brighter future.I'm pleased to report that we were awarded the 12th China Charity Award in September. This is in recognition of our efforts in rural revitalization, disaster relief, and knowledge sharing. Although our business outside of China is still at early stage, it has made a meaningful progress since its launch a year ago.Drawing on our supply chain capabilities, we have accumulated over the years, we are able to assist many manufacturers in expanding their presence and to directly engage consumers. Through Temu, our cross-border services now help manufacturers with consumers in over 40 countries.While we have broadened our reach, the business is still in its early stage, and we will face uncertainties. We are excited and intrigued by the opportunities and challenges that come with international development.We look forward to working with more manufacturers and all our partners to create a next-generation supply chain and shopping experience, fit for the evolving trends of our times. Our mission is to serve all and benefit all and to empower consumers all around the world to live their best lives.This year is a year of recovery and also a year of heightened competition. As always, we will maintain our strategic direction and focus on the execution of our high-quality development strategy. We will keep reminding ourselves of the day one mentality and explore new and better ways to serve our users.Through rapid product iterations and feedback cycles, we will gain valuable insights that enable sustainable, high-quality goals. Through our efforts, we hope we can better the lives of our users and bring up our positive trends to the world as a whole. Towards this goal, we will move ahead steadily and tirelessly.And now, I will hand it over to Co-CEO, Jiazhen. He will talk more about our high-quality development strategy.
[Interpreted] Thank you, Lei. Hello, everyone. This is Zhao Jiazhen. Thank you all for joining this earnings call.[Interpreted] In the first 3 quarters, market vitality has continued to improve as the effects of consumption support policies gradually worked its way into the economy. We are seeing stronger demand for consumption upgrades. Against this backdrop, in Q3, we launched a series of promotions such as the Summer Carnival, Duo Duo Harvest festival, National Brand Festival, and Duo Duo Reading Month; guided by our principle of serve all and benefit all, we stepped up our investment to offer more savings and better services.[Interpreted] And during this year's Singles Day, we continued to simplify our growth promotions. For the first time, we offered direct price reduction on top of our RMB 10 billion program. We now also cover many imported groups under the RMB 10 billion program, bringing our users a wider selection of quality products at reasonable prices. As a result of our efforts, we saw good momentum during Singles Day and over 620 million consumers benefited from the RMB 10 billion program.[Interpreted] The Singles Day promotion is one aspect of our high-quality development strategy. With the goal of creating incremental value for the consumers and the society, we focused relentlessly on execution to deliver high-quality assumption, high-quality supply and to improve platform governance and merchant ecosystem.[Interpreted] Now, let me walk you through the key initiatives my team and I have worked on during Q3. Firstly, we focus on high-quality consumption. Since Q3, we continue to work on improving our core capabilities in offering more savings and better services. By adopting the appropriate platform policies and incentives, we are constantly making affordable quality products more accessible to the public.[Interpreted] Take the Duo Duo Harvest festival, as an example, in September, as the largest agricultural platform in China, Pinduoduo invested 1 billion platform resources and partnered with over 300,000 agriculture merchants in more than 1,000 production regions across the country to launch the Duo Duo Harvest Festival. At the same time, we expanded the RMB 10 billion program to cover the full selection of participating agriculture product categories.[Interpreted] We'll continue to invest to support quality in agriculture products. And in this process, we help farmers participate in the national market and grow their income. Our farmer merchants are encouraged by the results they received on our platform and are ever more committed to a career in agriculture.[Interpreted] In addition to the Duo Duo Harvest Festival, which was dedicated to agricultural products. In Q3, we also collaborated with over 100 Chinese national brands to launch the National Group Festival in partnership with CCTV more than 50 top Chinese brands, such as Shanghai Soap, [ 361, Cofinix, and Arke ] were invited to live streaming sessions hosted on our RMB 10 billion program to showcase their products and tell their brand stories to a nationwide audience.[Interpreted] The consumer demand was boosted by our various support measures such as featured live stream event, RMB 10 billion program and large group buying. We are pleased to see that some national brands achieved rapid growth in partnership with us. Some even experienced the 40x growth in the past 2 years, and the business is still growing quickly.[Interpreted] The high-quality supply is the foundation for high quality consumption. In Q3, we continue to invest in our supply chain capabilities, which in turn enable more local manufacturing and agriculture producers to emerge as leaders of certain product categories and expand international and even global markets.[Interpreted] In the third quarter, our team returned to key agricultural production areas such as Jiangsu for [ higher crop ] and Northwest for Foods. Under our agricultural cloud initiative, we brought digital solutions to local producers to improve the resilience and the competitiveness of the local supply chain. In recent years, with the help of Pinduoduo, we are happy to see that the new generation of growers and farmers is emerging in these divisions. Among them are post-90's Finance Master Degree Holders who said no to investment banking and devoted themself to the higher crop trade and a post 58 Village Director who helped farmers sell 4 million kilograms of sweet potatoes over 3 years. They are playing a vital role in driving growth revitalization.[Interpreted] Innovation is a crucial element of the agricultural value chain. In Q3, we continued to promote digital inclusion and technology adoption in agriculture. To this end, we hosted the Singles Day Academy growing competition for the second year, which serves as a platform to bring wider recognition for innovative tax-driven agriculture practices across the nation. This year's event attracted 96 research teams. At the same time, our platform also provided strong traffic support and coupons for agritech enabled products championed by participating teams. This is to promote standardization, brand building, and digitization in agriculture. Our support covered a wide range of products, including oranges, citruses, limes, and kiwi fruit from top production regions.[Interpreted] In the third quarter, we continued the rapid business model integration for our global initiatives. We made it easier than ever for manufacturers to reach consumers over 40 countries and regions worldwide. We now serve more than 10,000 manufacturers from over 100 industrial belts across Guangdong, Zhejiang, Shandong, and Anhui provinces.[Interpreted] In our pursuit of high-quality development, high-quality ecosystem is the foundation that nurtures a mutually beneficial environment that supports the growth of the platform and its participants.[Interpreted] In the past quarter, we improved the protection mechanism for minors that now covers account verification, search and browsing, order restrictions, and content management. In addition, we also deepened our commitment to copyright protection through a series of dedicated campaigns. We are proactively looking for areas where we can take on more social responsibilities as we strive for a greener and healthier platform ecosystem.[Interpreted] Last month, Pinduoduo celebrated its 8th anniversary. Looking back on the journey, we sincerely thank the consumers, farmers, merchants, investors, and other stakeholders for all the support we received. Looking ahead, we will move forward with a relentless focus on execution of a high-quality development strategy.On the demand side, we'll continue to be consumer oriented to provide more savings and better services. On the supply side, we remain firmly rooted in the growing economy, driving industrial modernization through innovation. On platform ecosystem, we will allocate more resources to upgrade platform governance, support quality SME merchants and foster a healthy and mutually beneficial environment.Now let me hand it over to Jun. She will provide you with an update on our financial performance.
Thank you, Jiazhen. Hello, everyone. Let me walk you through our financial performance for the third quarter ended September 30, 2023. In terms of income statement, in the third quarter, our total revenues increased 94% year-over-year to RMB 68.8 billion. This was mainly driven by the continued recovery in consumer sentiment and encouraging results from executing our high-quality development strategy.Revenues from online marketing services and others were RMB 39.7 billion this quarter, up 39% from the same quarter of 2022. Revenues from transaction services were RMB 29.1 billion, up 315% from the same quarter last year.Moving on to costs and expenses; our total cost of revenues increased 263% from RMB 7.4 billion in Q3 2022 to RMB 26.8 billion this quarter, mainly due to increase in fulfillment fees, payment processing fees, maintenance cost, and call center expenses.On a GAAP basis, total operating expenses in the third quarter increased 44% to RMB 25.4 billion from RMB 17.7 billion in the same quarter of 2022. On a non-GAAP basis, total operating expenses increased to RMB 23.9 billion this quarter from RMB 15.8 billion in Q3 2022.In the past quarter, guided by our high-quality development strategy, we invested decisively and responsibly in key strategic initiatives. Our total non-GAAP operating expenses as a percentage of total revenue this quarter was 35% compared to 44% in the same quarter last year.Looking to specific expense items; our non-GAAP sales and marketing expenses this quarter were RMB 21.3 billion, up 58% versus the same quarter last year. On a non-GAAP basis, our sales and marketing expenses as a percentage of our revenue this quarter was 31% versus 38% for the same quarter last year.Throughout the past quarter, we continued to give back key consumers and rolled out a series of promotional campaigns. We have seen good consumer feedback to our efforts.On a non-GAAP general and administrative expenses were RMB 403.3 million versus RMB 226.3 million in the third quarter of 2022. Our research and development expenses were RMB 2.2 billion this quarter on a non-GAAP basis and RMB 2.8 billion on a GAAP basis, hitting the new highs. Technologies are the heart of our value creation and will be a long-term focus for us. We're committed to stepping up our investments in areas such as agriculture technology, supply chain, and our core R&D capabilities.Operating profit for the quarter was RMB 16.7 billion on a GAAP basis compared with RMB 10.4 billion in the same quarter last year. Non-GAAP operating profit was RMB 18.1 billion versus RMB 12.3 billion in the same quarter last year. Non-GAAP operating profit margin was 26% this quarter compared with 35% for the same quarter last year.Net income attributable to ordinary shareholders was RMB 15.5 billion for the quarter compared to RMB 10.6 billion in the same quarter last year. Basic earnings per ADS, was RMB 11.38 and diluted earnings per ADS was RMB 10.60 versus basic earnings per ADS of RMB 8.38 and diluted earnings per ADS of RMB 7.34 in the second quarter of 2022.Non-GAAP net income attributable to ordinary shareholders was RMB 17 billion versus RMB 12.4 billion in the same quarter last year. Non-GAAP diluted earnings per ADS was RMB 11.61 versus RMB 8.62 in the same quarter of 2022.We delivered solid financial results in the past quarter. Looking ahead, we will continue to invest patiently to execute our high-quality development strategy. That completes the income statement.Now let me move on to cash flow. Our net cash generated from operating activities was RMB 32.5 billion compared with RMB 11.7 billion in the same quarter last year. As of September 30, 2023, we had RMB 202.8 billion in cash, cash equivalents, and short-term investments.Thank you. This concludes my prepared remarks.
Thank you, Jun. Next, we'll move on to the Q&A session. Today's Q&A session, Lei, Jiazhen, and Jun will take questions from analysts on the line. We could take a maximum of 2 questions from each analyst. Lei and Jiazhen will answer questions in Chinese and we'll help translate for convenience purposes. Operator, we are open for questions.
[Operator Instructions] Your first question will come from Natalie Wu of Haitong International.
[Foreign Language] Let me translate myself. I have 2 here. First one is regarding the company strategy. How does management think about your strategic priorities? The business showed very strong momentum in the past quarter. So from a forward-looking perspective, just wondering what are the key strategies on the top of the mind of management? And then my second question is regarding the agriculture. We understand that agriculture has always been called merchandise cater grade for Pinduoduo. So just wondering, can management elaborate on why this category is key to our platform? And we recently learned that after so many years of efforts in this sector. This product category has continued to perform well and booked a meaningful growth in the past quarter.Can management give us some color on what are some of the key initiatives you have implemented in agriculture so as to achieve that growth?
[Interpreted] Hello, this is Zhao Jiazhen. Let me take this question on strategy. [Interpreted] And as we mentioned last quarter, starting this year, we are entering a stage of high-quality development. And for us, this is not an empty cash rate. We are implementing it in every aspect of our business.[Interpreted] And first, on the supply side, on the one hand, we are strengthening our capabilities in agriculture. And going forward, we will continue to invest in agritech and in supporting infrastructure. This is to improve the overall quality of the agricultural products that are sold on our platform.[Interpreted] And at the same time, we launched the RMB 10 billion ecosystem earlier this year to support the high-quality merchants and other ecosystem partners doing business with us. And this is to provide the right kind of incentives to facilitate the high-quality development of the whole ecosystem.And at the same time, we are working very hard on improving our platform governance efforts, which is one of our top priorities since I took office. We are making steady progress in areas such as minor protection and also product safety.[Interpreted] And from the consumer side, first, I want to say that our RMB 10 billion program is making some of the higher ticket items more accessible to our consumers. And during the most recent Singles Day, the number of users who benefited from the RMB 10 billion program, went over 620 million.And a positive user mind share is our most valuable asset. And it takes years of efforts to build up one order at a time, but could be easily destroyed very quickly. So we will not relax in this area.[Interpreted] And from the consumer side, secondly, we have been improving our capabilities to provide better services to our users since the beginning of this year. And so far, we've received positive feedback. Over the long run, through better service satisfaction, we hope to strengthen users' trust in our platform and deepen the better services mind share. And by doing so, consumers will be more likely to try new product categories on the platform. So we can also better serve their diverse needs.[Interpreted] We are prepared to work long and hard for the high-quality development of our business and our platform. We are very pleased to see that the strategy is starting to deliver results even sooner than we had hoped.[Interpreted] And also coming back to your question on our strategic priorities, the Board and Management team adopted a high-quality development strategy when I took office earlier this year and this will continue to be our focus during my tenure. Thank you.
[Interpreted] Hello, this is Chen Lei. I will answer this question on your agricultural strategy.[Interpreted] As you mentioned, agriculture is a strategic importance to us. We started out in agriculture and that's how many users first came to know us. We are able to retain those users by serving them well through our agricultural offerings.Today, the online penetration of agricultural products is still relatively low. So there remains a huge potential in this product category.[Interpreted] Last quarter, we launched the Duo Duo Harvest Festival and brought agriculture products directly from more than 1,000 productive regions to consumers across the country. We're allocating more platform resources to improve the quality of agricultural products and shopping experiences on our platform. We also brought many regional specialties to the national market for the first time by connecting farmers with suitable logistics resources. In doing so, we were able to better address consumers' demand for high-quality, fresh and healthy agricultural products. That's what we have been doing to improve the quality and efficiency of the supply chain for agriculture products.[Interpreted] At the same time, we understand that improving supply chain is just one aspect of agricultural modernization. We also need to accelerate the adoption of Agritech innovation to improve productivity and product quality.[Interpreted] This year, we hosted the third smart agriculture competition and the second Pinduoduo Academy growing competition to promote Agritech innovation and adoption. We also supported talent specializing in agricultural areas and helped farmers increase productivity and reduce losses.Meanwhile, we recognized the importance of fundamental research. In May, we donated RMB 100 million to establish a dedicated research fund at China Agricultural University to address critical needs in agricultural research.[Interpreted] In August, we were pleased to welcome Ivonne to our Board as an Independent Director. Ivonne is an expert in agriculture and food safety. With her on board, we will be more targeted in our investment in agricultural research. Our goal is to utilize cutting-edge research to solve practical problems in China.[Interpreted] Going forward, agriculture will remain a cornerstone of our high-quality development strategy. We will continue to leverage our advantages in technology and platform resources to streamline the supply chain of agriculture products, promote agritech innovation and adoption and bring more quality products that are cut from farm to table, thereby creating tangible benefits to our farmer merchants. Thank you all.
Thank you, Natalie. Operator, we can move on to the next analyst on the line.
The next question comes from Ronald Keung of Goldman Sachs.
[Foreign Language] So my first question is that since the beginning of this year, many of your competitors have been putting more emphasis on value for money merchandise and made it easier for manufacturers to set up storefronts on those platforms and some of the PSF observed some strong user and merchant momentum. So how would you evaluate the competitive landscape and what are some of the key initiatives to defend your competitive position in this environment?And my second question is that we've seen your global business get a good strong momentum since launch a little over a year ago. So can you share with us the latest development, your strategy for this business going forward? And what's your vision for the business in the near to medium term?
[Interpreted] This is Zhao Jiazhen. Thank you for your question. And let me share my thoughts on competition. [Interpreted] As Lei just mentioned, this year is a year of recovery, but it's also a year of heightened competition. As the macro project policies are gradually rolled out, we are not surprised that our industry peers have been increasing investments to boost consumption.[Interpreted] Our industry needs to face directly the constantly evolving consumer needs. And consumers nowadays have different platforms to true funds. So competition is investing inevitable. There is no permanent solution to dealing with competition. And instead, we are always thinking about how to improve our core competencies and work with ecosystem partners to create greater value for our consumers.[Interpreted] In the third quarter, we continued to be innovative and promoting more savings and better services and to offer more quality and affordable products to our consumers and at the same time with great shopping experience.[Interpreted] While we are continuing to deepen the more savings mind share, which is our strong suit traditionally. We hope we can also deepen consumers' trust in our platform providing better services. This will hopefully invite more users to explore new product categories on the platform. So we can better serve our users' demand for consumption upgrade.[Interpreted] And on the supply side, we continue to be rooted in the real economy and to promote digital inclusion in agriculture and manufacturing sectors across the nation. By helping the producers sell their products directly to consumers, both in China and now globally. We enabled more producers to enjoy the benefits of digital economy and at the same time, broadened the merchandise selection on our platform.[Interpreted] Our approach to competition has always been clear, which is we don't focus on what our competitors do, but what our consumers need. We have been seeing a clear trend of consumption upgrade among our users. And against this backdrop, we formulated the high-quality development strategy to better adapt to this trend. The idea is very simple, but simple does not mean easy.[Interpreted] There is both healthy and malicious competition. Sometimes competition can easily evolve into unhealthy market practices. And those who do well will always attract attacks. And for example, we noted a short-tail report on our company was issued in early September. The allegations in the report are totally faceless and a short sale had a spotty track record. And on this page, the report was published with the intent to create panic and to drive down stock prices and enabling the firm to -- the short seller to profit from short position.[Interpreted] As we investigated further, we found out that there were actually more follow-up actions taken by the integrator behind the reports. Their motive and the unusual actions are quite apparent. We are encouraged to see that most investors understood the underlying in motive and saw through the Gansu acquisitions.[Interpreted] And looking forward, we will continue to focus on our consumers and our high-quality development strategy. With a clear and focused mind, we will relentlessly focus on execution. And in the end, we believe consumers will vote with their wallets. And this is our view on competition. Thank you.
This is Jun. Thanks, Ronald. Let me take your question on Global business. Well, for our global business, the idea is to leverage the supply chain expertise accumulated over the years to create a new form of channel and shopping experience which directly connects the factories with consumers and is based on flexible supply chain. Currently, consumers from all over 40 countries with diverse cultural backgrounds are able to purchase directly from high-quality factories through our services. However, this is still in a very early stage.Many of our initiatives are in the beta testing phase. Our team is actually learning about the different markets and consumer needs around the world. This will be iterative process that will be challenging, but at the same time, interesting.We look forward to working with our margin partners on this journey to make the lives of consumers around the world more enjoyable. Thanks.
And operator, I think we have time for one more analyst.
The next question comes from Ellie Jiang of Macquarie.
[Foreign Language] Let me translate myself. Two questions, first is on the revenue. It seems the company achieved very robust revenue growth of 94% year-over-year. What do you think contributed to this growth? What do you think you have done right in the past quarter? And how you think about the growth sustainability into the fourth and next year? And then the next is about the margin. We've noticed that your margin decreased on a year-over-year and quarter-over-quarter basis. What are some of the key investment areas that you're putting your resources into? Is this related to the competition? How is your global business impacting your profitability? And how should we think about the trend for the margin in the next few quarters?
[Interpreted] Hello, this is Zhao Jiazhen. I'll start by addressing the question about growth. [Interpreted] As Lei mentioned earlier, our financial performance this quarter is a combined result of improving consumer sentiment and the execution of our high-quality development strategy.[Interpreted] And in the past quarter, driven by consumption recovery, the Chinese economy grew at a rate that went over market expectations, which demonstrates the resilience of the Chinese economy.What we are seeing on our platform also confirms the potential of the consumer market. We have confidence in the Chinese consumption market. There remains much to be done to better serve the consumer demand.[Interpreted] Although the industry players do not have any major promotions planned during Q3, we still practice everyday low-price philosophy and worked hard to provide consumers with a wider selection of quality products at affordable prices. And this is to deepen our cost saving value proposition.And while we serve the basic needs, of our consumers, our cooperation with branded merchants also generated good results. During the National Goods Festival, we invested in coupons and also invested platform resources to help more national brands to quickly gain popularity. In partnership with our platform, some brands were able to achieve multiple, growth in the past year or two.[Interpreted] And we put in place the appropriate policies and offers platform resources to incentivize our merchants to work with us together providing more savings and better services.We are very pleased to see growing trust in our platform and higher user activities, which in turn provide more sales opportunities for the merchants. And merchants in turn are naturally more willing to increase the investment on our platform.[Interpreted] And we have been saying that revenue is a natural outcome of the value we create for our ecosystem partners. We will maintain our strategic direction and focus on the execution of the high-quality development strategy.And instead of paying too much attention to short-term revenue trends, we will drive our attention to work on improving our core capabilities for serving the consumers and our merchants.
This is Jun. Thanks, Ellie, for your question. I will answer your question about profitability. First and foremost, we are still in the development phase. Profitability in the short run is not our priority. Instead, our team is like focused on executing our high-quality development strategy, which we hope will increase the value of the platform in the long run. In the past quarter, guided by the high-quality development strategy, we step up our investment in key areas such as promotion activities and service upgrades to deepen our more savings and better services [ for merchants ]. We also further built on our supply chain capabilities and ecosystem improvements. We are seeing encouraging results from our execution. And we continue to invest firmly when we see good ROI potential.In terms of future trends, we operate in a fast-paced market environment where investment opportunities change on a daily basis. Because of this, our business execution will not match the financial reporting schedule. And going forward, our profitability may continue to fluctuate on a quarterly basis. Thank you.
And thank you all once again for joining us today. It's about time. And if you have any further questions, please reach out to our IR team. Thank you and see you next quarter.
Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. And you may now disconnect.[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]