PDD Holdings - Earnings Call - Q1 2025

Transcript

Operator (participant)

Ladies and gentlemen, thank you for standing by and welcome to PDD Holdings' first quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session, at which time, if you wish to ask a question, you will need to press the star key followed by the number one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today. Sir, please go ahead.

Thank you, Operator. Hello everyone, and thank you for joining us today. PDD Holdings' earnings release was distributed earlier and is available on our website at investor.pddholdings.com, as well as through the Globe Newswire services. Before we start, I'd like to refer you to our safe harbor statement in the earnings press release, which applies to this call, as we'll 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, and 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 first quarter ended March 31, 2025. 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, Chen Lei. Lei, please go ahead.

Chen Lei (Chairman and Co-CEO)

Hello everyone. Thank you for joining our earnings call for the first quarter 2025. Over the past year, we assimilated the execution of our high-quality development strategy, extending our efforts from platform operations to the broader ecosystem, covering both the supply side and demand side. Through initiatives such as the $10 billion fee reduction program, logistics support for the remote regions, and the high-quality supply initiatives, we broadened the product selection for consumers and accelerated supply chain transformation. This marks a new chapter in the e-commerce sector that prioritizes merchant support and ecosystem investments. Starting at the beginning of this year, we made substantial investments in our platform ecosystem and made a rapid shift in the external environment.

To increase merchant support, we established the Merchant Rights Protection Committee and launched the $100 billion support program, which is a major strategic decision for the next phase of the high-quality development strategy. On one hand, the program is designed to further lower fees for our merchants, improving the business environment on our platforms. On the other hand, we also invest more to drive sales for our merchants and to help them better adapt to new challenges. In Q1, our revenues were RMB 95.7 billion, which slowed down notably amid rapid changes in the external environment and, at the same time, due to the mismatch between the business investment and return cycles. Lower revenue growth and our substantial ecosystem investments led to a significant drop in profit.

As communicated a few times in the past quarters, as our business grows and new challenges emerge, a slowdown in growth rate is inevitable. This trend has been further accelerated by the change in the external environment in the past quarter. While a disproportionate drop in profit this quarter can be attributed to three different factors, they all trace back to one underlying consideration, and that is, during a period of uncertainties where merchants face difficulties, we choose to invest more to help our merchants grow their business and reduce costs. Looking at the factors one by one, at first, competition in the Chinese e-commerce sector has further intensified. As a third-party marketplace, we face inherent limitations when it comes to passing on policy incentives to consumers, which puts our merchants at a clear disadvantage compared to our competitors that have a first-party business.

While this issue has been discussed last year, the challenge is still here due to the limitations in our team's capabilities. Second, in our global business, radical changes in external policy environments, such as tariffs, have created significant pressure for our merchants, who often lack the capability to adapt quickly and effectively. Third, since the second half of last year, we significantly expanded our fee reduction program for merchants under the $10 billion fee reduction program, which is a key initiative in driving the high-quality development of the platform ecosystem. This year, after it has become increasingly clear that the merchants are expected to face further pressure and convinced in the long-term value of our merchant support initiatives, the management team made the strategic decision to launch the $100 billion support program.

Under this updated program, we are committing significant resources to support the platform ecosystem through uncertain times. This is not an empty slogan, but a real commitment backed by tangible investments. We understand a marketplace platform is built on the collective success of its merchants. In challenging times like these, it's essential for us to step forward and to help our merchants endure and emerge more resilient. If we do nothing, merchants could be overwhelmed by these external shocks. Only when merchants strive can consumers receive quality products and services, and only then can a platform achieve long-term sustainable development. Our management team believes that in a fast-changing market where merchants are facing challenges, it's our obligation to invest decisively to support consumers and merchants, putting their needs ahead of those of the platform.

We believe that these initiatives are investments that will ultimately lead to a stronger and higher-quality merchant ecosystem over the long run. This effort will likely weigh on our profitability in the short term and even for a considerable period of time to come. However, as stated in our first shareholder letter, we are not a conventional company, and we do not evaluate our strategic decisions based on quarterly financial results. Instead, our focus is on long-term intrinsic value over five years, ten years, or even longer, and we believe our long-term investors will share this perspective. When seen from another angle, the decline in profit this quarter can be attributed to one overarching factor, which we consider our merchant support initiatives' long-term investments. They are treated as accounting expenses.

A timing mismatch between when expenses are recorded and when the long-term returns materialize is expected to persist for some time to come and will continue to weigh on our profitability. We are firmly committed to long-term investments in our platform ecosystem and to deepening our execution of high-quality development strategy. We believe by prioritizing the needs and interests of our merchants and consumers through these uncertainties, we can help them emerge stronger and create a room for focus on high-quality, sustainable growth. I will hand it over to our Co-CEO, Zhao Jiazhen, to share more about our development plans in 2025.

Zhao Jiazhen (Executive Director and Co-CEO)

谢谢陈磊。大家好，我是赵嘉珍。感谢大家参加2025年第一季度业绩的发布会。

Thank you, Lei. Hello everyone. This is Zhao Jiazhen. Thank you for joining our first quarter 2025 earnings call.

过去几个季度，我们的高质量发展战略进入了新阶段。简勉加扶持的一系列会商举措也收获了不错的成效。我们全力构建的共赢生态正在为广大用户、千万商家带来更多的普惠。

Over the past few quarters, our high-quality development strategy has entered a new phase. A series of initiatives such as fee reductions and merchant support programs have delivered solid results. Our fully committed efforts to build a win-win ecosystem are now generating tangible benefits to a broad base of users and tens of millions of merchants.

今年以来，如陈磊所说，为了与商家共同应对新的挑战，我们加大了对高质量发展的投入，将百亿减免等举措升级为千亿扶持，要求公司上下力出一统，全面投入这一新战略。在关键时刻，发挥平台企业的社会效能和责任担当，努力为商家提供更多确定性，同时也为消费者创造更值得信赖的购物环境。

Since the beginning of this year, as Chen Lei mentioned, to tackle new challenges together with our merchants, we have scaled up our commitment to high-quality development and upgraded initiatives such as the $10 Billion Fee Reduction Program to the more comprehensive $100 billion support program. This upgraded strategy calls for the entire company to work together and fully devote ourselves to take on our social responsibilities as a platform at such a critical stage, providing merchants with greater certainty and offering consumers a more trustworthy shopping environment.

在供给侧，千亿扶持针对薪资供给的资源投入将进一步加码。薪资商家帮扶范畴也将从头部、腰部逐步拓展到中小商家，要将功夫着重花在中小商家身上，敢于啃高质量发展中的硬骨头。一方面，我们将继续探索更多的降佣举措，持续为商家降本减负，创造更多的成本空间、经营空间和创新空间。另一方面，平台的流量引擎、黑标店铺、数据资源、技术支持等也将向中小商家全方位的倾斜，最大化地释放中小商家的潜力，推动产业带实现更大规模、更高质量的整体升级。

On the supply side, under the $100 billion support program, we will further increase investments in high-quality supply, expanding our support for high-quality merchants from top and mid-tier merchants to small and medium-sized. We are committed to focusing more on supporting the smaller merchants, which is a hard but critical step toward achieving high-quality growth. On one hand, we will continue exploring more fee reduction initiatives to help merchants lower costs and create more room for cost flexibility, business growth, and innovation. On the other hand, we will extend comprehensive support, including traffic resources, flexible premium store programs, digital resources, and technology capabilities to empower small and medium-sized merchants, unlock their potential, and drive broader, higher-quality upgrades across the supply chain.

今年以来，薪资供给专项团队先后深入永康、厨具、温州、女贤、深圳、数码、静佳、运动、静安、跑鞋等产业一线。我们也可喜地发现，在平台的全方位扶持下，商家及产业的转型升级已经颇具成效。很多商家正在从传统的代工思维、经销思维转变为用户思维、品牌思维，从而在产业带的同质化竞争中走出了差异化的发展路径，并将减免的费用重新投入到新品研发、仓储升级和供应链改造上，带动各大产业带加速完成薪资转型。

Since the beginning of this year, our dedicated team for High Quality Merchant Support Program has visited frontline manufacturing bases such as cookware in Yongkang, women's footwear in Wenzhou, consumer electronics in Shenzhen, athletic shoes in Xinjiang, and running shoes in Xin'an. We're pleased to see that the merchants and the broader supply chain have made notable progress in transformation with the platform's comprehensive support. Many merchants are transitioning from traditional OEM and distribution mindsets toward user-oriented and brand-driven approaches. This shift has enabled them to pursue differentiated development paths amid homogeneous competition. Moreover, fee savings are being reinvested into new product developments, warehouse upgrades, and supply chain transformation, accelerating high-quality transitions across major industries.

作为移动产品旗下的平台，我们的千亿计划也将进一步加码对农副产品的扶持力度。不久前，我们正式启动了2025年多多好特产的专项行动，首批行动已经走进江苏连云港、福建宁德、海南万宁、山西运城、广东茂名、四川成都、辽宁大连等农特产区，针对各地的农货、水果、海鲜、水产和肉禽等类目，推出定制化方案，与当地的农特产业深入融合，并对中小商家进行一对一的讲解，探索农货转型的新模式，助力产业提升附加值，推动农牧产业增产增收。

As a platform rooted in agriculture, our $100 billion support program will also enhance support for agriculture products. Recently, we officially launched the 2025 Doudou Specialty Initiative. The first phase of the initiative has covered key agriculture regions, including Jiangsu Lianyungang, Fujian Ningde, Hainan Wanning, Shanxi Yuncheng, Guangdong Maoming, Sichuan Chengdu, and Liaoning Dalian. We're implementing tailored strategies across agriculture product categories, such as local farm products, fruits, seafood, and poultry, deeply integrating with regional agriculture industries and providing one-on-one guidance to small merchants. Through these initiatives, we aim to explore new models for agriculture product distribution, enhance value add, and drive production and income growth across the agriculture industry.

在云南蒙市的木瓜塘区，三地商家在平台支持下研发出了一套农产品运营的数字系统，实现了农产品产灾、上架、定价、物流、售后和溯源等环节的自动化运营，解决农产品定价模糊、损耗率高的产业痛点，实现了农产品运营从人工经验到数字驱动的变革，完成了对传统农业供应链的升级改造。

In the papaya-producing region of Mengzi, with the support from our platform, local merchants have developed a digital system for agriculture product operations, enabling automation across harvesting, listing, pricing, logistics, after-sales services, and traceability. This system addresses key industry pain points such as unclear pricing and high spoilage rates, driving the transition from experience-based to data-driven operations and enabling the modernization of the traditional agriculture supply chain.

在消费侧，千亿扶持也落地了多项补贴政策，为消费者带去实惠。平台百亿补贴频道新增了100亿商家回馈计划，先后投入100亿消费券，通过百亿消费券、百亿加倍补等专项活动，对全品类商品进行超额补贴，满足消费者的功能性、个性化等多方面的消费需求，同时提升供需匹配的效率，助力薪资商家、薪资品牌拓展新增量。

On the demand side, the $100 billion support program has also launched several give-back initiatives to benefit consumers. Our $10 billion program has introduced a new $10 billion merchant give-back program, rolling out RMB 10 billion consumer coupons. Through dedicated campaigns such as the $10 billion coupon program and $10 billion double-up program, we deliver additional coupons across all product categories to meet consumers' functional and personalized needs while improving supply-demand matching efficiency and supporting business growth for high-quality merchants and brands.

此外，我们还进一步探索了平台支付的创新模式。在充分保障商家权益的基础上，多类目对标国补价格标准，全面普惠消费者，激发消费需求与活力，以弥补我们在国补政策下的竞争劣势，帮助平台商家建立足够的市场竞争力。当然，这样的投入意味着我们平台的收益短期会下降，但是我们平台的中小商家将收获增长的稳定性和高质量差异化发展的窗口期。我们认为这样做是应该的，也是非常值得的。

In addition, we further enhanced our Direct Discount Program. We're fully safeguarding merchants' interests. We benchmark prices against the national subsidy program across multiple categories to provide real savings to consumers and stimulate consumer demand, aiming at compensating for the disadvantages under the national subsidy schemes and support merchants in strengthening their overall market position. While such investments may weigh on short-term profitability, we believe they are necessary and worthwhile, as they help create unique opportunities to achieve high-quality growth for the small and medium-sized merchants on our platform.

面对复杂多变的环境，我们将继续坚持构建用户、商家、平台多方共赢的商业生态，在消费和供给侧加大投入，助力商家穿越周期，为消费者创造更具价值的体验，也为社会创造更大的正向价值。

In the face of a complex and evolving environment, we remain committed to building a business ecosystem in which users, merchants, and the platform thrive together. We will continue to increase investments on both the supply and demand side to help our merchants emerge stronger from these uncertainties, create more valuable experiences for consumers, and generate greater positive impact for society.

接下来，我把时间交给刘俊，由他为大家介绍我们一季度的财务表现。

I will now hand it over to Jun. She will provide you with an update on our Q1 financial performance. Thank you, Jun.

Liu Jun (VP of Finance)

Hello, everyone. Let me walk you through our financial performance for the first quarter ended March 31, 2025. In terms of income statements, in the first quarter, our total revenues increased 10% year over year to RMB 95.7 billion. This was mainly driven by an increase in revenues from online marketing services and transaction services. Revenues from online marketing services and others were RMB 48.7 billion this quarter, up 15% from the same quarter of 2024. Revenues from transaction services were RMB 47 billion, up 6% from the same quarter last year. 我们用去 cost and expenses. Our total cost of revenues increased 25% from RMB 32.7 billion in Q1 2024 to RMB 40.9 billion this quarter, mainly due to increases in fulfillment fees and payment processing fees.

On a GAAP basis, total operating expenses this quarter increased 37% to RMB 38.6 billion from RMB 28.1 billion in the same quarter of 2024. On a GAAP basis, total operating expenses increased to RMB 36.5 billion this quarter from RMB 25.6 billion in Q1 2024. In the first quarter, we further increased our platform ecosystem investments through expanded merchant support initiatives to help merchants increase sales and reduce costs. Our total non-GAAP operating expenses as a percentage of total revenues this quarter was 38%, compared to 29% in the same quarter last year. Looking to specific expense items, our non-GAAP sales and marketing expenses this quarter were RMB 32.8 billion, up 44% versus the same quarter last year. In the past quarter, we continued to give back to consumers through promotional programs and increased marketing support for high-quality merchants to help grow their businesses.

On a non-GAAP basis, our sales and marketing expenses as a percentage of our revenues this quarter was 34% versus 26% for the same quarter last year. Our non-GAAP general and administrative expenses were RMB 735 million versus RMB 572 million in the same quarter of 2024. Our research and development expenses were RMB 3 billion this quarter on a non-GAAP basis and RMB 3.6 billion on a GAAP basis, up 23% year over year. On a GAAP basis, operating profit for the quarter was RMB 16.1 billion versus RMB 26 billion in the same quarter last year. Non-GAAP operating profit was RMB 18.3 billion versus RMB 28.6 billion in the same quarter last year. Non-GAAP operating profit margin was 19% this quarter, down from 33% for the same quarter last year.

Net income attributable to ordinary shareholders was RMB 14.7 billion for the quarter, compared to RMB 28 billion in the same quarter last year. Basic earnings per ADS was RMB 10.59, and diluted earnings per ADS was RMB 9.94 versus basic earnings per ADS of RMB 20.33, and diluted earnings per ADS of RMB 18.96 in the same quarter of 2024. Non-GAAP net income attributable to ordinary shareholders was RMB 16.9 billion versus RMB 30.6 billion in the same quarter last year. Non-GAAP diluted earnings per ADS was RMB 11.41 versus RMB 20.72 in the same quarter of 2024. In the first quarter, we see a slowdown in revenue growth as our business scales and challenges match. Looking ahead, our financial results may continue to reflect the impact of sustained investments in the ecosystem as we support merchants and consumers through uncertain times. That completes the income statements.

Now, let me move on to cash flow. Our net cash generated from operating activities was RMB 15.5 billion, compared with RMB 21.1 billion in the same quarter last year. As of March 31, 2025, we have RMB 364.5 billion in cash, cash equivalent, 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 the analysts on the line. We will take a maximum of two questions from each analyst. Lei and Jiazhen will answer questions in Chinese and will help translate for convenience purposes. Operator will open for questions.

Operator (participant)

Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press Star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press Star 2. Participants are requested to restrict the number of questions to two at each time. Your first question comes from Alicia Yap with Citigroup. Please go ahead.

Alicia Yap (Equity Research Analyst)

Thank you. 管理层晚上好。谢谢接受我的提问。我有两个问题，我先用中文问。第一就是我们其实注意到管理层在刚刚这个发言中提到，就是说包括这个关税在内的一系列宏观政策的变化，对平台商家产生了不小的压力。那么市场也其实非常关心。所以在这种高度不确定的环境中，平台自身面对这样的外部环境，我们都做了哪些准备，然后有什么样的这个应对措施？我们在一些市场的业务模式上会有怎么样的去做调整，然后目前的进展如何？然后第二个问题是，这个季度我们其实也看到公司的这个利润率有明显的降低，然后利润金额同比也有下降。可否请管理层对盈利下降的因素再做一些分析？然后从二季度的情况来看，管理层能预期预计这样的这个趋势其实接下来是否也有可能会延续？我自己翻译一下。

I have two questions. First is that we noticed in management prepared remarks that recent macro policy changes, including the tariffs, have placed considerable pressures on the merchants, and the market is also keen to understand what preparations and measures the platform has taken in response to such a highly uncertain external environment. How are we adjusting our business model in certain markets, and also what's the current progress? The second question is, this quarter we obviously noticed a very significant decline in the company's net profit margins, along with a year-over-year decrease in the net profit number. Can management elaborate a little bit more on the factors that are contributing to this decline, and what are we seeing in the second quarter? Does the management expect this trend to continue? Thank you.

Hi, Alicia. This is Chen Lei. Let me take your first question. Because we have emphasized in the past few quarters, in response to macro policy changes and external headwinds, we'll continue to take proactive actions while strictly upholding regulatory compliance. Over the past few years, our long-term investments in the supply chain, together with our work in advancing new business models, have enabled us to accumulate substantial supply chain and operational know-how. Guided by our high-quality development strategy and operating under strict regulatory compliance, we'll stay focused on our core business and enhance our competitive strength through sustained investments in supply chain, service capabilities, and the platform ecosystem. Our merchants are under considerable pressure given the recent policy changes, and many lack the capability to respond effectively, making it very challenging for them to keep up. In this situation, as a platform, we believe it is necessary to shoulder our platform responsibility and make significant investments to prioritize merchant support. The 10 Billion Fee Reduction Program we just mentioned is aimed at increasing support and subsidies for a wide range of small and medium-sized merchants, helping platform merchants stabilize sales, further reduce operating costs, and better cope with the current environment and related risks, thereby securing more time and space for our platform merchants.

In light of these circumstances, we believe it is our obligation as a platform to increase support for merchants and invest platform resources to support their businesses. The 100 billion support program we mentioned earlier is designed for this exact reason and to increase our support efforts for small and medium-sized merchants. Through stabilizing sales and lowering costs for them, we seek to help them manage risks arising from the rapidly evolving market environment and giving them the time and the flexibility that will be necessary to pursue sustained growth.

Chen Lei (Chairman and Co-CEO)

此外，我们也会持续地在业务模式上做新的尝试，从而加深在各个市场的深度，拓展新的品类、新服务，来构建一个更加稳健的平台生态。在快速变化的外部环境中，我们全球化业务正在和不同地区的商家一起，尽自己最大的努力，为全世界各地的消费者带去价格稳定、供给充足的商品。无论政策如何变化，我们都会持续地加强我们的本地化业务运营，帮助更多的当地商家在我们的平台上成长，实现更多的订单本地发货。目前我们已经看到这些商家变得更加积极和主动，库存跟上来了，也通过差异化的商品和服务，为消费者创造了更多的价值。

In addition, we'll continue to explore new business models, deepen our market presence, and expand into new product categories and services to build a more robust platform ecosystem. Amid the rapidly changing external environment, our global business is working with merchants across the region to bring stable prices and abundant supply to consumers around the world.

No matter how policies shift, we'll continue to strengthen our operations in the markets we serve, helping more local merchants grow on our platform and enabling more orders to be fulfilled from local warehouses. Right now, we're seeing these merchants becoming more proactive, with better stock inventory and more value passed on to consumers through differentiated products and services.

平台其实是商家的聚合。只有商家长期稳定地发展，我们的消费者才有可能享受到更好的产品和服务。因此，在面对环境和政策的变化、商家应对不足的时候，平台为商家提供支持，与商家一起共同应对外部市场的不确定性。我们觉得这是平台所必须要承担的责任。也是正因为这个原因，我们推出了千亿扶持的计划，来营造一个长期的健康的商家生态环境，从而实现高质量发展的目标。谢谢。

Platform is a collective of merchants. We believe only when merchants achieve long-term sustainable growth can our consumers receive high-quality products and services. Therefore, in times of external shocks or policy changes, when merchants face difficulties, we feel a strong obligation to support our merchants to navigate through these external uncertainties. This is why we launched the 100 billion support program to foster a long-term and healthy merchant ecosystem that will be essential to achieving high-quality development. Thank you.

Liu Jun (VP of Finance)

Hi, Alicia. This is Jun.

Let me take your second question regarding profitability. As we have communicated over the past few quarters, a slowdown in growth rate is inevitable as our business scales, competition intensifies, and external uncertainties emerge. This trend has been further accelerated by the changes in the external environment in the first quarter, and our revenue growth has slowed significantly. At the same time, the slowing revenue growth and our continuous ecosystem investments result in a significant drop in profit this quarter. This is mainly due to the mismatch between the business investments and return cycles. As mentioned in our prepared remarks, the market is undergoing rapid changes at the moment. As an e-commerce platform, merchants and platforms work together in serving our consumers. To help them adapt to such changes, we have increased our investments in the platform ecosystem, putting our consumers and merchants first.

We believe this is a responsibility the platform must take on in this environment. Only by doing so, we can build an ecosystem that benefits all stakeholders in the long term. Our initiatives to support the merchant ecosystem include merchant fee reduction and marketing support for high-quality merchants. This will have financial impacts on revenue growth and expenses. While we view these expenses as long-term investments, there remains a mismatch between the return and business investment cycles. Therefore, our profitability is likely to face challenges in the near term and potentially over a longer period. As I mentioned, we're not a conventional company. In our investment decisions, we do not place too much emphasis on financial performance in a single quarter, but prioritize long-term intrinsic value. Certain fluctuations will not change our focus on long-term value creation.

In the past two quarters, through initiatives such as the Tian Xuan fee reduction program, we're already seeing positive impacts on the ecosystem. Going forward, we'll expand the reach of our merchant support initiative to benefit more SME businesses, helping them navigate market cycles and achieve high-quality growth.

Alicia Yap (Equity Research Analyst)

Thank you.

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

Operator (participant)

Thank you. Your next question comes from Kenneth Fong with UBS. Please go ahead.

Kenneth Fong (Analyst)

晚上好，谢谢管理层接受我的提问。我有两个问题。第一个就是我们看到公司去年推出了八亿补贴的政策来扶持商家。在这个基础以上，我们今年有新级的千亿扶持计划。其实市场也非常关心千亿扶持是通过什么形式来给到商家，对我们业绩的长期影响，我们应该怎么想呢？另外一个问题就是管理层去年以及刚刚的发言之中也说到，就是我们面对一些政策的宏观政策的红利，公司有一些先天的不足，然后目前还有一些劣势。能否请管理层也分享一下，就是革补方面公司做了什么具体的措施，应对措施，接下来计划有什么方面去改变目前的形势呢？我继续翻译一下。

Thank you, Management, for taking my question. We noted that following the company's substantial support for the merchants through the 10 Billion Fee Reduction Program last year, you have initiated an upgrade 100 billion support program. The market is keen to understand how this initiative will be delivered to the merchants, and would this be a—and how would you think about the long-term impact on the company's financial performance?

The second question is, a few quarters ago in the prepared remarks just now, Management mentioned that the company has certain limitations and disadvantages when it comes to benefiting from the macro policy initiative. Could Management elaborate on how the company responds to the policies such as the national subsidies program, and what plans are in place to address the current situation? Thank you.

Zhao Jiazhen (Executive Director and Co-CEO)

你好，我是赵家珍。由我来回答一下你关于千亿扶持的问题。

Hello, this is Zhao Jiazhen. Let me take your question on 100 billion support program.

从去年下半年开始，我们推出的百亿减免、电商吸金，还有新制商家扶持计划等一系列的会上的举措取得了不错的成效，也为超千万的商家实现了提质增效，助力商家和产业带逐步转向新制供给的发展阶段。

Since the second half of last year, our merchant support initiatives, including the 10 Billion Fee Reduction Program, logistics support for remote regions, and the High Quality Merchant Support Program have delivered solid results, enabling tens of millions of merchants to enhance operational efficiency and reduce costs, and building merchants and the broader supply chain transition towards a new stage of high-quality supply.

我们也深刻地意识到，通过对商家生态的投入，为商家和供给侧的转型升级提供助力，最终能够转化为更高质量的产品和服务，从而普惠消费者侧，建立多方共赢的平台生态。这个也是平台长期发展的健康路径。

We're fully aware that our investments in the merchant ecosystem and supporting measures for supply chain transformation will ultimately translate into higher-quality product offerings and services, which benefit consumers and create a win-win platform ecosystem. We believe this is the path to long-term healthy development for our platform.

在当下，外部环境的不确定性加剧，我们认为作为平台，加大力度反补生态，优先保障商家和消费者，是我们作为平台的责任所在。因此，我们本次升级的千亿扶持，它不是一句空的口号，是真金白银的投入。

In the face of increasing external uncertainties, we believe it is our responsibility as a platform to strengthen ecosystem support and prioritize the interests of merchants and consumers. Therefore, our upgrade 100 billion support program will be backed by substantial financial commitment and is not an empty slogan.

千亿扶持计划升级的核心是在于对供需两侧投入的进一步加码。在供给侧，产业带帮扶的数量将会扩大，新制商家的帮扶的范畴也将从头部、腰部逐步拓展到中小商家。这也意味着会有更多的优质商家分享到平台高质量发展的红利。我们也希望释放这些中小商家的潜力，推动产业带实现更大规模、更高质量的整体升级。

The core of the upgraded 100 billion support program is the significant increase in investments on both the supply and demand side.

On the supply side, more merchants will receive our support as we extend the coverage of High Quality Merchant Support Program from top and mid-tier merchants to small and medium-sized ones. This means more high-quality merchants will benefit from the platform's high-quality development. We aim to help release the full potential of these smaller merchants and drive broader and higher-quality supply chain upgrades across the platform.

在这种情况下，除了供给侧的升级所带来的服务和投资的提升，千亿扶持也落地了多项补贴政策。例如，在百亿补贴频道，我们新增了100亿商家回馈计划，对全品类的商品进行了超额的补贴，满足消费者多元化的消费需求。此外，我们还进一步升级了平台直补的模式，多类目的对标国补的价格标准，为消费者提供实在的优惠，也为商家的脱单征收构建了更良性的运营环境。

On the demand side, beyond the improvements in product and service quality brought by the supply side upgrades, the 100 Billion Fee Reduction Program also includes a range of new give-back initiatives. For example, under the 10 Billion Fee Reduction Program, we launched a new 10 Billion merchant give-back program, offering additional coupons across all categories to meet diverse consumer demand.

In addition, we have further upgraded our direct discount programs by benchmarking prices against the national subsidy program across multiple categories, offering real savings to consumers while improving sales for merchants, fostering a healthier operating environment.

我们是一个商家聚合的平台，以广大商家共同为消费者提供优质的产品和服务。这个是我们发展道路上的根本。我们也相信，对平台生态的长期投入，以及在不确定的大环境中优先保障消费者和商家，是当下平台实现长期高质量发展和可持续发展的必经之路。

We are a platform that is a collective of merchants. Working together with merchants to deliver high-quality products and services to consumers is the foundation of our business development. We believe that long-term investment in the platform ecosystem and prioritizing the needs of consumers and merchants amid external uncertainties is the only path to achieving long-term high-quality and sustainable growth in today's environment.

还有关于你的第二个问题，正如我们在发言稿中所提到的，我们的第三方的业务模式在承接一些宏观政策的过程中，确实暴露出来一些先天的不足。相较于以自营模式为主的其他平台，会有一定的劣势。这也影响到了我们平台的商家在一些类目中的价格竞争力。

Regarding your second question, as stated in our prepared remarks, our third-party marketplace model has inherent limitations when it comes to certain policy incentives, and we are at disadvantages compared to platforms that primarily operate under the first-party model.

This also affects the price competitiveness of our merchants in certain categories.

为了保障平台消费者和商家，我们充分调动自身资源，坚决地跟进和投入，帮助我们平台的中小商家保持市场竞争力，助力商家脱单征收。

To protect the interests of both consumers and merchants on our platform, we have leveraged internal resources and responded resolutely with increased investments, helping our merchants and medium-sized merchants maintain competitiveness and increase sales.

在今年的1月起，我们上线了国家补贴的专题页。此外，在我们的千亿扶持专项内，除了对商家的扶持和反补，在消费端，我们也继续扩大了对各类商品的补贴范围，并加大了补贴力度。目前，我们的国补频道已经覆盖了20多个省份，平台在国补的基础上，为消费者提供折上折的补贴折价。

Since January this year, we have launched a dedicated page for the national subsidy program. In addition, apart from our support for merchants and the 100 billion support program, we are also enhancing our promotional efforts on the consumer side. Currently, our dedicated national subsidy channel already covers more than 20 provinces, and we provide additional coupons on top of the government subsidies, delivering further savings directly to consumers.

此外，平台还将对标国补的价格力度，将补贴范围扩大到日用百货等类目，全面普惠消费者，进一步激发消费活力，主动为新制商家开拓市场增量。尽管这些投入会影响平台的短期利润，但能为平台的中小商家盘活库存与产能，创造高质量差异化的发展的窗口期，我们认为这是平台应当做的，也是值得的。谢谢。

Moreover, the platform will continue to benchmark prices against the national subsidy program and expand the promotion coverage to categories such as daily necessities. Although these investments may affect the platform's short-term profits, they can help our small and medium-sized merchants revitalize inventory and capacity, creating a window for high-quality, differentiated development. We believe this is what the platform should do, and it is worthwhile. Thank you.

These measures aim to provide more savings to consumers, stimulate broader consumer demand, and create incremental market opportunities for the merchants. While such investments may weigh on short-term profitability, we believe they are necessary and worthwhile, as they help the merchants improve inventory position, manage capacity, and give the small and medium-sized merchants the room to focus on high-quality, differentiated growth on our platform.

Kenneth Fong (Analyst)

谢谢。

Thank you, Kenny. Operator, let's move on to the next analyst.

Operator (participant)

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

Joyce Ju (VP and Senior Equity Analyst)

管理层晚上好，感谢接受我的提问。我们知道中国的电商市场一直以来都变化迅速，竞争激烈。刚刚管理层也提到了多多和一些自营平台相比，近期在国补带动比较多的品类里面还是面临一些困难和挑战的。那么作为一个第三方平台，公司是怎么思考目前市场环境下的竞争的，又是怎么看咱们这个平台模式在长期的发展和竞争里的优势和面临的压力的？我的第二个问题是关于当前的消费趋势。目前今年的618促销也已经开始了一段时间，管理层能不能分享一下大促期间平台的表现，还有什么值得我们大家去观察的、注意的趋势还有变化？

I will translate myself. First, we know China's e-commerce competition remains intense, and as Manager mentioned, Doudou is facing challenges in competing with first-party online retailers due to disadvantages in getting trading subsidies. How does management view competition in the current market environment, and what are strengths and limitations of your third-party platform model?

Secondly, may we have an update on overall consumption momentum? As this year's June promotion is already underway, could management share some colors on platform performance and also key trends observed so far? Thank you very much.

Chen Lei (Chairman and Co-CEO)

你好，我是陈磊。我来回答一下你的第一个问题。

Hello, this is Chen Lei. Let me take your first question.

我们在刚才的发言中也提到，平台就是商家的聚合，平台的发展和商家生态的繁荣是相辅相成的。那么在当前竞争加剧以及外部的政策迅速变化的这样的一个大环境里，不少商家抗风险的能力不足，的确他们面临着一些挑战。

As you mentioned earlier in the prepared remarks, a platform is a collective of its merchants, and our development cannot be separated from the health of the merchant ecosystem. In today's environment, with the increasingly intensifying competition and rapidly evolving policy landscape, many of the merchants lack the capabilities to respond and adapt, and are indeed facing challenges.

作为平台，我们深刻地认识到自己是无法独善其身，而这因为我们作为纯平台的定位，应对当前的挑战的时候，我们的思路也更加地简单直接。就是如果商家遇到了困难，而平台不做牺牲的话，那么商家很有可能是难以承受过大的短期的波动的。只有商家好，我们才能够为消费者提供更高质量的产品、更好的服务，满足新消费的多元需求。那么这既是我们认为电商平台所应当承担的责任，也是我们对健康、可持续的电商生态的理解。

As an e-commerce platform, we are very aware that we and the merchants are in this together. Our business model is a marketplace that naturally shapes a simpler and more direct response to the challenges we face.

If the platform fails to step in and offer support when merchants are experiencing difficulties, the merchants may be overwhelmed by the short-term market volatilities. It is only when merchants are doing well that can we deliver high-quality products and services to consumers and meet their increasingly diverse consumption needs. We believe this is not only a responsibility that e-commerce platforms should take on, but also fundamental to building a healthy and sustainable e-commerce ecosystem.

那么在商家赋能的层面，过去的很长一段时间里面，我们一直在深耕供给侧，利用技术和规模的优势，以及平台数字化能力和资源，我们在助力产业带的商家在产品、技术、经营模式上进行多方面的创新，帮助商家扩大市场的触及范围。以上这些长期的投入，让为我们在供给侧积累了很多的经验和能力。

Over the years, in order to better serve the merchants, we have rooted ourselves in the e-commerce supply chain and made substantial investments. Leveraging our technology, economies of scale, and the platform's digital capabilities and resources, we supported merchants to innovate in their product development, technology, and operations, and help them expand market reach. These long-term efforts have allowed us to accumulate the relevant supply chain know-how and capabilities.

我们看到去年的下半年先行的百亿减免的一系列的举措，为商家带来了实实在在的提质和增效。那么在这个基础上，我们决心升级千亿扶持的计划，进一步地扩大商家赋能的范围，覆盖更多的中小商家，让更多的商家能够分享到高质量发展的果实。

We saw encouraging results from the 10 Billion Fee Reduction Program launched in the second half of last year, which brought tangible benefits for our merchants. Building on this foundation, we decided to launch the updated 100 billion support program to further expand the coverage of our merchant support efforts. This initiative will extend support to more small and medium-sized merchants, enabling more high-quality merchants to benefit from the platform's high-quality development.

在当下这样一个市场环境中，我们觉得加大平台的投入，助力商家穿越周期，是平台在这个阶段所必须要承担的责任。我们坚信这样的投入，从长期来看，会给我们带来更优质的商业生态。谢谢。

In this current environment, we believe it is the platform's responsibility to invest more to help merchants navigate the market cycles. We are confident that such efforts will ultimately lead to a more robust merchant ecosystem over the long run.

Zhao Jiazhen (Executive Director and Co-CEO)

你好，我是赵佳臻。我来回答一下你的第二个问题。

Hello, this is Jiazhen Zhao. Let me take your second question.

When it comes to shopping festivals, what consumers value are simplified mechanisms and real savings, which is the philosophy that aligns with our approach we've always taken on the consumer side. We've continued to uphold this principle in this year's June 16 shopping festival. By combining the campaign with our 10 Billion Fee Reduction Program, we are enabling consumers to access high-quality products at compelling prices while driving sales for our merchants. Building on this, we are also enhancing quality and services to better cater to consumers' evolving needs. This year, we've introduced the price drop protection service for products participating in the June 16 promotions to further improve consumers' shopping experience. We hope that our platform and our merchants can together excel in quality and service, build consumer trust, safeguard consumer rights, and in turn, drive sustainable sales growth. This is also part of our efforts to build a win-win e-commerce ecosystem. Thank you.

This is part of our vision for a win-win e-commerce ecosystem that benefits all stakeholders. Thank you.

Joyce Ju (VP and Senior Equity Analyst)

谢谢管理层。

Thank you, Joyce. Thank you all for joining us today. It's about time, and 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.