Q1 2021 Pinduoduo Inc Earnings Call

[music].

Good day, and thank you for standing by and welcome to the Ping, Georgia first quarter 'twenty 'twenty 1 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session. You can press star 1 on your tellers.

Hmm.

Please be advised that today's conference call is being recorded.

If you require any further assistance please press star zero.

I would now like to hand, the conference over to our first speaker today, Mr. Jason true recyclable.

Thank you operator.

Hello, everyone and thank you for joining us today.

Total earnings release was distributed earlier and is available on the IR website, and lesser adult and total hotel com as well as true global Newswire services.

And so on today's call are chairman and Chief Executive Officer will make some general remarks on our performance for the past quarter and our strategic focus going forward.

Our weighted all strategies David Liu.

Operate further our specific strategic initiatives.

Our VP of finance, Tony Mark will then take us through our financial results for the fourth quarter and March 31, 2000 people want.

Before we begin I'd like to refer you to our safe Harbor statement in the earnings.

Price relief, which applies to this call as we will make certain forward looking statements.

And so this call includes discussions of certain non-GAAP financial measures.

Please refer to our earnings release.

Which contains a reconciliation of the non-GAAP measures to GAAP measures.

And now it's my pleasure to introduce our chairman and Chief Executive Officer to lead line. Please go ahead.

Thank you operator.

Hello, everyone and thank you all for joining our first quarter 2021 result announcement.

Yes, it would be over a year since and initial break of COVID-19.

Since then we have Calgary and move towards doubled.

While respecting that and if necessary precautions and <unk> to <unk>.

Right.

After most of the stay in place over a lunar new year holidays in February.

Chinese consumers finally took a well deserved break overlapped may day holidays.

Shopping and traveling around the country.

With some approaches and we hope it there and a global pandemic situation, we will continue to improve as more people receive their vaccination.

I would like to thank the merchants and logistics partners, who work closely with us to serve our users throughout the period.

Together, we created another industry first by staying open and serving users over the lunar new year.

We provide users with share by ensuring that they could get what they required over the holiday.

And eastern presence and care packages to their loved ones back home with just a few clicks on our app.

According to the State Post Bureau.

And the total parcel volume over a period from 11 to 17 February stood at 660 billion.

Growing by 260% over the same period last year.

We are proud to have contributed towards keeping our users period.

While they cabinet and sell their loved 1 and their community safe.

Our overarching commitment to serving our users has helped put yet another strong quarter.

Our annual active buyers increased by 35.4 million from December quarter to reach $823.8 million for the 12 months ending 30 <unk> March 2021.

We continue to build trust and my share with our users.

User activity and our platform continue to decrease.

Over the last over the quarter.

<unk> increased to $724.6 billion.

Presenting 88% and new active buyers.

Total revenues, excluding revenues from merchandise sales.

The $17 billion.

Year on year increase of 161%.

Our gross scale gives us both greater capacity as well as the responsibility to live our mission to benefit all.

We constantly think about how we can best Marshal our resources and reach to catalyze.

Improvements and bring more benefit to society.

Our direct sales to over 800 million consumers and our understanding of them.

Our network of over 8.6 billion merchants on our platform.

Makes us uniquely well positioned to bring Tom My from Iran, and the word together to develop practical solutions to real world problems.

Users encounter every day.

As we work towards our goal of becoming the world's largest agriculture and across the platform.

We must also sees a golden opportunity to transform and modernize the equity from the system.

We won't know how consumers adopt healthier and more environmentally sustainable dialed.

Improving all and links of our supply chain and cost structure of agriculture industry.

And now let me touch on 2 points.

First we are pursuing partnerships as the questions on a future of food.

We had just entered our research partnerships too.

And final impact power plant based needs from human health.

Alternative proteins.

Promising component of a more sustainable diet.

It's useful to know how it affect us.

And as this is our first research partnership and then we will certainly not be lost.

For example, a year ago, we started a project to develop a more portable and low cost test for protect put price.

And style pass throughs.

Upon commercialization that project will improve food safety and quality.

And thereby benefiting and many people.

Second we are rethinking logistics systems and infrastructure.

We have a privilege of being the only if costly mobile commerce players of scale in a word.

This unique characteristics op indoor outdoor has helped us to become the world's largest commerce platform by the number of paying users.

This singular focus on mobile only experiences cannot came about because we recognized back in 2015, the immense immense potential of ubiquitous mobile computing to drive change in consumer behavior and.

And in a totally new era of interactivity and my users.

Similarly, with logistics systems and infrastructure, we are looking at how things can be done with a fresh pair of eyes with no preconceptions.

<unk> advantage in this area.

And with Orange net many patterns over a third of daily puzzles in China last year.

And have expertise in complex technological system design.

We are already working our algorithm design and data analytics analytics, and cold chain logistics development and optimization.

We have applied for some patents as well.

We hope to roll out the wildly operations and help logistic providers.

We have higher efficiency and lower costs.

As we continue to grow.

Leave that we can use our scale for good.

As we search for solutions in science and logistics.

And we remain committed to becoming the world's largest agricultural and across the <unk> platform.

Our mobile only and discount oriented platform.

A team purchase model.

Suited for items and daily Essentials.

We see strong demand for total growth rate, which is giving consumers the chance to buy a greater variety of Paris growth directly from farmers and equity merger and located in the region.

We will continue to iterate, our products and and make growth reported URL, what word affordable and available to our growing number of users.

We foresee pedal door, becoming Inc. Important.

Important and force multiplier and enabler that can truly make a meaningful difference in the world.

And the same time.

We remain committed to our social inclusion effort and support all of visualization of rural communities.

For any advancement to be truly durable.

We must look out for all our stakeholders.

Stakeholders.

It is critical that we panel and empowered partner and empower them with Teck.

This means that we will keep on helping farmers and equity merger and operate better and more.

We will continue to provide training for them to having the full suite of tools on our platform to optimize sales and benefit from our platform visibility into final final demand.

We will have the increase their productivity by working with local government and.

Grid, gnomic and Skus to harness new technologies.

Since the beginning we will have approximately 100000, new farmers back to their hometown and and we have committed to train and another 100000, new farmers over the next 5 years.

We want to be a catalyst in this virtuous cycle.

And with farmers and equity metrics and more collecting VAT, including agriculture agriculture.

In building China's first equity focused infrastructure.

Priority.

Remains partnering existing third party service providers first and foremost on everything from cold chain logistics, and warehousing sorting and delivery.

For total grocery we focus on partnering local community.

<unk> closely.

And we work with existing shops, including Mount and pop stores to serve our pickup point.

Enable enabling them to gain extra income.

We also provide of course, it was and to aid the digital transmission.

In fact since the start of total gross re we have capitalized.

And the creation of millions are job up and down the entire supply chain.

We hope that the system, we build will truly benefit all for a long time to come.

This is in line with our core value up and are doing the right thing.

We hope that this helps you understand better where we are coming from and share our hope for a better tomorrow.

And thank you, let me now and over to Debbie.

Thank you and me.

Hello, everyone.

And so fla, our overarching commitment and serving our users.

We're laser focused on understanding our users constantly changing needs and working with our partners and merchant build them in a way that is respectful of the community and the environment.

With our aim of becoming the world's largest agriculture and grocery platform.

We want to help create food systems that are greener healthier more inclusive and more resilient.

We develop NSS our initiatives against those objectives.

Objectives.

Let me elaborate on how this has worked and 3 key fronts.

First we're gratified by our positive early foray into agriculture focus logistics infrastructure system.

Total grocery and our next day sell pick our grocery service is creating many social benefits.

Intelligently connect our users directly to local farmers and increases the variety of fresh produce they can purchase online.

And the lowest cost by reducing spoilage from storage and transport and.

Improved carbon emission.

Let me start from the last mile.

Farmers and more.

As well along the way, we create new economic opportunities within our communities by tapping our existing shops to serve as collection points and through third party service providers and warehouses that we have built to support it.

We're happy that the growth momentum for total gross free remains very strong.

Continue to see and increasing number of farmers and accurate merchants as well as pickup points joining our platform.

This will only amplified the social benefits of total grocery can bring.

We have also applied for patents for our proprietary coaching logistics network system that is aimed at minimizing the lost and quality degradation of agriculture products and other perishable products and transportation.

The system price novel Technology stack and plant routes based on information of collection and distribution points.

Availability of coaching infrastructure and transit points.

Among others.

It is still early days, but we are optimistic that the solutions. We develop imply will be very positive operating very positive impact going forward.

Second we will introduce our consumer to manufacture our CTV revolution to agriculture.

We already enjoy a very good partnership with farmers and accurate merchants.

More than 12 million and farmers sell through our platform.

This relationship has steepened with initiatives such as to help the farmers licensing session last year, when COVID-19 struck.

We also have longer term partnerships to plant operate and sell better through total Academy and total funds.

And as time to elevate this partnership with <unk>.

And <unk> pioneers TTM and in the process re cash are Chinese manufacturers think that their value in the supply chain.

We have held factory spill, a new generation of brands that is delivering both quality and value for money to our users.

Bagger gating demand and spending patterns of over 800 million users on our platform, we create useful insight for manufacturers.

And they become more responsive to market trends by making more consumers indicate they need and want.

Ctrip and also cost and waste and cost of distribution and marketing and provides better price for consumers.

Our new brand initiatives helped many export oriented OEM partners survive the drought and international demand for their products during the COVID-19 pandemic.

Agriculture will similarly benefit from <unk>.

Agricultural producers diverse and unique.

And our skill and effort going to cultivation.

By helping farmers to sell directly to users on a platform instead of EBITDA multiple intermediaries, we give value to the diversity and uniqueness of their produce as well as site over their final demand.

We're now focused on helping more farmers to sell better by sharing market insights.

As we have held manufacturers.

We have farmers more appraised our market.

Formation.

This enables them to be more responsive to market demand and develop agricultural brands and meet the needs of the market.

China is a treasure trove of agriculture and culinary delights.

There are plenty of Jeff's hidden in plain sight waiting to be discovered by millions of consumers across the country.

We will and these growers and producers a helping hand to better market the products and developed brand recognition.

Third, we're making headway and tapping our science to improve the food system.

As Lee mentioned, we are backing a first of its kind study on the health impact of plant based meat.

There's growing recognition that occur and dietary patterns or need a healthy non environmentally sustainable.

Replacing meet with plant based alternatives is a promising solution to both issues.

When completed the study will help consumers to make informed choices and dietary transition and.

Manufacturers refine their products correspondingly.

The spirit of this partnership is very much in line with our earlier partnership to develop a more portable and lower cost test flow count 10 minutes and produce which will help improve food safety and consumer confidence.

We will continue to actively look for collaboration opportunities and Agri food Tech with partners around the world.

At the same time, we have also been active supportive initiatives to apply the most advanced technology and agriculture.

We're proud to have joined the organized the first China agricultural robot innovation competition.

The competition, which contactor with an award presentation.

Concluded within the word presentation last week.

Attracted over 195 participating teams to apply robotics to agriculture.

We're proud to have supported this competition and robotics is at its early stage and agriculture, and China by wholesale lot of promise.

We are convinced our holistic efforts will bring and progress to our food systems and benefit stakeholders, including our users farmers and merchants the communities, we operating and the planet.

Finally, even as we replace a lot of emphasis on agriculture and food, we have not lost sight of the need to nourish the mine.

In April we launched total reading months.

And so app users could FX classics like Moby, <expletive> or noted under Perry and purchase them at discounts.

Famous historians and writers joining our live streaming sessions to recommend books to readers.

In conjunction with the inaugural China International consumer product Expo and HEICO earlier this month.

We partnered with CCTV and use to bring our $10 billion program and live streaming studio to high net.

Through our lifestream users were transported to Hainan and learned about this specialty products creasing and food fruits as well as interesting items to offer at the Expo we.

We will continue to bring color and new experiences to our users through similar initiatives going forward.

Let me now hand, it over to Tony.

Thank you David.

Now let me take you through our financial results for the first quarter of 2021.

We continue to see solid user growth in Q1 and.

And are pleased with the progress we have made and building trust and winning mindshare with our users.

Our annual active buyers for the last 12 months ending March 31, and 2021 increased to $823.8 million.

Up $35.4 million from the prior quarter.

And they use in Q1 reached $724.6 million from the prior quarter.

This is up 49% compared to the same quarter in 2020.

Our <unk> as a percentage of our annual active buyers was 88% in the quarter.

Our highest engagement record achieved for any first quarter.

According to National Bureau of statistics during the Q1 total retail sales in China grew 34%.

And online sales of physical goods increased 24% from the same quarter in 2020.

And number of express delivery passengers in Q1 grew 75%.

A significant growth rate in both online sales and physical goods and parcel shipment volume.

<unk> has a strong recovery in e-commerce activities from the low base in Q1.2020 into the business interruption caused by the COVID-19 outbreak.

We also saw less pronounced the Chinese new year holiday related seasonality in Q1 this year.

And more merchants state opened in response to People's day inputs.

We collaborated with elections and logistics service providers to ensure uninterrupted order fulfillment and delivery in the quarter.

In terms of P&L, our total revenues in the quarter and March 31, 2021 were RMB $22.2 billion up 239% from RMB 6.5 billion in the same quarter last year.

Excluding revenues from our <unk> trials, our total revenues grew by 161% to RMB 17 billion in Q1.2021.

The main driver of this growth with our online marketing services.

Online marketing services revenue was RMB $14.1 billion this quarter.

157% compared to the same period last year.

Due primarily to continued increase in merchant activity.

We continue to offer better hygiene products and analytic tools to our merchants.

Educate them on how to best leverage these features and improve their services to their targeted users.

And thereby help them meet and exceed the outlay targets.

As a result, we have seen Merck and spending more and exploring new ways to engage with users.

And our users browsing more and discovering more items of interest.

We are pleased to see the growing and led by our merchants and our users.

Our transaction services revenue this quarter amounted to RMB, 2.9 billion, which.

Which is up 180% compared with the same period last year.

The increase in our transaction services revenues was due to 2 primary factors.

Number 1 the increase in our GNP and Q O Q1.

And number 2 the service revenues that we recognized in connection with total growth rate.

And for which we provide fulfillment and other related services.

We also record at RMB $5.1 billion in merchandise sales from our 1 key trials in Q1 and 2021.

As compared to RMB, 5.4 billion in the preceding quarter.

This <unk> trial is meant to temporarily and meet the demand of our users are products, which our merchants cannot and therefore.

And therefore, this number may fluctuate from quarter to quarter. Our strategy is unchanged and this will remain a very small part of the business.

Now moving onto costs, our total cost of revenues increased from RMB, 1.8 billion in Q1.2020.

To RMB 10, 7 billion this quarter.

The increase was mainly due to the costs and expenses attributable to <unk> merchandise sales.

Higher cost of payment processing fee cloud service fee and delivery storage fees.

Total operating expenses this quarter were RMB 15.6 billion.

As compared to RMB 9.1 billion in the same quarter of 2020.

Our total non-GAAP basis operating expenses were RMB 14, 6 billion as compared to RMB, 8.3 billion and the same quarter a year ago.

Our non-GAAP sales and marketing expenses this quarter increased 80% to RMB $12.7 billion from RMB, 7.1 billion and the same quarter of 2020.

This was mainly due to an increase in online and offline advertisement and promotion.

And so we'll continue to invest and user engagement and mind share.

In the first quarter, we had an incentive program for merchants.

And could stay open and continued expansion and others during the spring Festival.

We also recently marked the second anniversary of our hugely popular 10 billion program, which has steadily expanded over time to cover.

All categories, including agriculture products and fresh produce.

In line with our platform vision of helping to accelerate the transformation of the agriculture sector. We.

We will continue to make it 3 for agriculture products and the free cash.

It used to be featured in this program.

At the same time, we will continue to refine and improve the quality of our <unk> 10 billion program by raising the standard re clients from merchant to part.

<unk>.

Our 824 million users trust us to deliver great value and quality to them and.

And we will constantly seek to improve to uphold their trust in us.

And a non-GAAP basis, our sales and marketing expenses as a percentage of our revenue excluding <unk> trials this quarter was 75%.

As compared to 103% and 108% for the same quarter in 2019 and in 2020.

And reduction in sales and marketing expenses as a percentage of revenue is a reflection of our economic of scale and our consistent efforts of sticking to a high standard of our benchmarks.

On a non-GAAP basis, our general and administrative expenses were RMB $161 million and.

And increase of 36% from RMB $118 million in the same quarter of 2020, primarily due to an increase in headcount.

Our non-GAAP.

<unk> and development expenses were RMB, 1.7 billion.

And increase of 55% from RMB, 1.1 billion in the same quarter of 2020 the.

The increase was primarily due to an increase and head count and the recruitment of more experienced R&D personnel.

As well as increase in R&D related cloud services expenses.

On a non-GAAP basis, our R&D expenses as a percentage of our revenues, excluding <unk> contribution was 10% as compared to 17% for the same quarter last year.

To sum up.

Operating loss for the quarter was RMB 4.1 billion on a GAAP basis compared with operating loss of RMB 4.4 billion in the same quarter of 2020.

Non-GAAP operating loss was RMB, 3.2 billion compared with operating loss of RMB 3.6 billion in the same quarter of 2020.

Our non-GAAP operating loss as a percentage of revenue improved from -55% in Q1.2020 to -14% and Q1.2021.

Net loss attributable to ordinary shareholders was RMB, 2.9 billion as compared to net loss of RMB 4.1 billion in the same quarter last year.

Basic and diluted net loss per avs or RMB, 2.3 recently compared with RMB 354, and the same quarter of 2020.

Non-GAAP net loss attributable to ordinary shareholders was RMB, 1.9 billion.

Compared with RMB, 3.2 billion and the same quarter last year.

Non-GAAP basic and diluted net loss per ads were RMB 152, compared with RMB 273 in the same quarter of 2020.

That completes the profit and loss payments for the first quarter.

Our net cash flow used and operating activities was RMB, 3.7 billion compared with outflow of RMB $567 million and the same quarter of 2020.

Primarily due to an increase in restricted cash outflow due to seasonality offset by an increase in online marketing services revenue.

As of March 31, 2021, the company had RMB 83, 4 billion and cash cash equivalents and short term investments.

As of the end of April 2021, U S dollar $756.4 million of our cirrhosis and convertible bond.

Still in 2024 has been converted into equity.

This concludes my prepared remarks, operator, we are ready for questions. Thank you.

Suddenly ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question. Please press star followed by 1 on your telephone keypad and wait for you need to be announced if you wish to cancel your request you can pencil bound on hashed E. Once again it is star 1 to ask a question you have the first.

And coming from the line of Thomas Chong from Jefferies. Please go ahead.

Hi, Good evening management, and taking my questions I have.

2 questions.

First question about monetization can you comment about the feedback on our advertising and our products and how we should think about the monetization rates going forward.

And my second question.

The 1 piece of it.

Is it that the <unk> contribution to our overall <unk>.

Long like 11% and.

And on the back and can you also comment about our long and GAAP net margin growth and.

Without the 1 piece of this and also from a bulk alone and GAAP net margin.

And when Pete and bottlenecks and thank you.

Okay.

And a little bit more than 2 questions, but let me try to address 1 by 1.

Thank you again for the question and.

And.

For the first question.

And I want to emphasize our strategy has always been serving our users well.

And that being said, we believe that either the growth or the monetization and that.

Natural result of that.

And we also believe.

And this is still a lot of room to grow from where we are now.

Today, we see very strong growth performance in Q1.

Cash as of the merchants, our actually it's reflected in our revenue and <unk>.

Can see.

Our revenue and this quarter continued to grow and.

Which is a reflection of our merchant confidence with the platform and with the confidence in the online they achieved.

What the platform is providing a better design.

And our various tools to help them to understand their time and user better and so that they can leverage as well as the total academy to gain more insight.

And how the technology and analysis can help them to enhance their ally I believe <unk> target can be achieved.

Naturally the growth and monetization will follow.

And your second question and the 1 <unk> business.

As I mentioned in the prepared remarks.

And <unk> business is a temporary really measurement and to offer products that our consumer wants but for which our vendor cannot offer at that time.

And so this is not a strategic priority for us.

<unk> contribution of the <unk> business is and material where compared to the <unk> of the plan.

And.

And I guess, that's your third question on the margin profile.

The <unk> business contribution to this.

It does have an impact, but stripping that out our total platform.

Margin profile was stayed more or less the.

Same range.

As previous quarters.

Got it thank you.

Just a quick question please.

The next question comes from the line of Natalie <unk> from Hydro and International. Please go ahead.

Hi, good evening, Thanks for taking my.

My question and congratulations.

And with them.

Just curious how true up.

And without that competitive landscape change on net.

And on 1 hand, Inc.

Thank you Charles.

And that's true.

And I'll be out of hand.

And seems to be getting more and more crowded.

And comfortable that pie and like social content catalog and local life services provider.

1 zone.

Sure.

And no sandy target thank.

Thank you.

And hopefully that there wouldn't be a.

And this is Debbie we bond financing.

Thank you let me go ahead and and addressed this question and <unk>.

Chinese and David will translate it into English servicing.

And you will note that before you do between clinical and tier 2.

Yes.

Moving to physically.

And on television.

Personal loans.

And then kind of what is.

Your line Sunitinib finance and do.

And call it from 2.4 net.

And that's what you can do or notice to equalize and go to quarterly cash flow.

Key to the projects pushing with appeal on the subordinated fees Hong Kong.

Nancy.

So first your question regarding competition.

In China, the Internet space has always been very competitive.

And it's also true that the ecommerce and China is very advanced and in terms of development ahead of the rest of the world.

Many people underestimate the retail opportunity that comes about and the broad market potential that exists.

And if the experiences improve.

And 2.3 years ago, we've seen a day.

And those have been really hull concept. Good noon hunting astonishing is equal to particularly and also includes true to undo the critical share sales volume.

Peter.

Now to reach all of them and they're looking to do Germany.

This is centered growth.

And was hoping to the hernia and sue and good.

Total Peter Yoshimi do traditional incumbents on Houston, and you've shown this year and I, just wonder what kind of nuclear and speak with us.

So taking agriculture as an example.

And the digitalization and the industry remains low and opportunities are abundant for those like PDD back and help drive efficiency and other fundamental changes.

For.

And I'm going to go.

Sure.

2 points here and kind of juices and <unk>.

And so all union thoughtful and losses rule, So you don't want and whatnot.

Features and and Globe Seaway and evolution would be and a good decision.

And also the mutual funds and to clarify your clients changed England is humbling.

So what I thought and <unk> too.

Sorry to Goodyear is only 2.3 and <unk>.

<unk>.

Looking back to 2015, when we entered this business.

And we foresaw the mobile Internet will lead to some very fundamental changes to consumer behaviors, making them more real time, more and spontaneous and <unk>.

Making that access more ubiquitous and we have decided to focus on the development of entirely mobile product and that meant we also had to make some very fundamental changes to the E. Commerce part are available at the time.

And when you kind of off the shelf and the skewing African unquiet could there be a partner and <unk>.

New York and this offering from since you won't you Couldnt do the ship to.

And we love good hot food dishes yogurt and shortly.

Sure so those frequent and 2 weeks ago excuses at BMO.

Susan.

And the tissue cellular losses on loans.

Tony.

Consumers' behaviors can evolve quickly and.

And we believe that people always want more have more choices so to constantly serve our users better and we need to be aware of these constant changes in consumer trends and to investing in technology and business model innovation.

She's done a single day.

And squamous non eikon message from what we thought this transcription.

Transcription.

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Today being the largest agriculture platform in China.

And can do though is well positioned to play another leading role in driving some change and the team is very excited about the value we can bring to the agricultural industry.

Now with all that's happening through the teens ended with Neil.

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So going back to your question around competition I believe that each company's unique and ultimately it boils down to the unique value proposition that each player represents to the consumers.

For us we have been focused on delivering value for money products with finally interactive shopping experiences to our consumers through our mobile only platform from day 1.

User centric is deeply rooted in our principles and it's the first thing that we think of when we need to make tough decisions.

Thank you.

This is building, so how much and leaner with and target.

2 quick thoughts with little net tower system.

<unk> Sciences will always always with the ecosystem and chasing growth you think a switch.

And in Australia would it be also include article shelf as a tier that he said that when we are challenging and some good growth here and in and go to the other blues, hoping to see.

And we won the routine growth quarter.

The market potential is huge and we are still in the early days, particularly early in a business line total grocery.

And the service vendors to improve and the consumer experiences improve we believe this new business model, we will be able to motivate more consumers and further expand the market.

Festival market.

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No.

At the same time, and we think healthy competition is a good thing whether you are talking about the <unk> side of the business or the <unk> side of the business because there's more platforms developed the users can get better.

Services and that is really fundamentally why we entered this business and the first place.

Yes.

Hey, Anthony.

Thank you Devin.

Thank you Mary.

Why don't we move on to the next question.

Yeah.

The next question comes from Robin Zhu from Bernstein. Please go ahead.

Yes.

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1 of these events and that goes to those familiar since you own bonds and border from hiring.

And those are.

And all of the Jupiter, 2 junior and Tom the 2 consumption young Gencon and from there.

And so you're going to do.

Through CMT and pass on to something that you guys and a home.

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And all forms and somebody on the true true to Cook.

The argument.

And do you think the holiday when you wouldn't budge and shouldn't be pure genius and you too.

And so you do.

And the monetization rate.

And that you're using from you all do you could you could you go and so it sounds zone as soon as a young but you got to fusion.

And someone asked 2 questions 1 is on.

Bringing brands onto the platform.

And what are those programs to be shared and Q1 some of the key bottlenecks and challenges that management might want to share and.

And then the second question is again on monetization rates and Q1.

And the last 3 quarters and and and.

And outlook.

How quickly.

And that's going to increase thank you.

Sure Rob and thank you for your questions.

And.

Speak to the brand question that you raised and and our pass it over to Tony to talk about.

Your question on monetization.

So first and foremost I would say that we are making steady progress with brands because we believe our user centric mentality is very much aligned with how brands.

And in terms of looking for new channels to reach and serve their prospective customers. So as our user scale.

And your engagement growth, we're seeing an increasing number of brands approaching us to collaborate.

Since the beginning of year, you'll have seen a number of notable new additions to our platform and turning to fairly deep strategic collaborations.

It includes brand names on the international side, Adidas, Johnson, and Johnson and Unilever and.

And we have also entered into strategic collaborations with the likes of <unk> and <unk>.

<unk>.

So you asked about challenges in terms of working with brands I think is really really helping them to understand the incremental value that <unk> is a platform can bring to brands and how we can work with them to better target and address.

New users and identify users and a very accomplished and cost efficient way.

Improved their own experiences and their own and reach.

Simple there that I would point to our efforts and <unk> side, we're working with them to deliver more value for money and quality products too.

<unk> on our platform by developing a KOL customized flying and Washington machines. So these are the type of a differentiation and at first our strategic collaborations that we can invest and we're investing and brand partners, who are working with us to grow their businesses and PPD.

Let me actually ask Tony to make some more.

Comments on your question on amortization.

And yes.

Again coming back to our vision and our key.

And strategic priority.

<unk> is always focusing on the users how to serve our users better and.

And as you know, we have 824 million users.

And in the past few quarters, basically, we're having incremental new users coming.

To the platform.

Around $15 million per quarter and last quarter was around.

And 35.

Close to 40 and these new users.

And they needed need time.

To build a nice share and trust with the platform and what we are focusing.

Okay.

Now is really helping our merchants by providing them tools and help them.

To understand better to reach.

And that target first therefore, our users can benefit from that.

And the service provided by our platform and and merchant.

And then we can have this fun and interactive experience with us and stay longer time with us and.

Amortization will be a natural result coming out of this.

These targets being achieved.

Uh huh.

Got it thank you.

Thank you.

Present next question.

Thank you. The next question comes from share long sheet from Nomura. Please go ahead.

Good evening and management, Thanks for taking my questions congratulations on a very strong quarter.

My question is can you provide any color as to help us understand the size of the ultimate E grocery business and.

And associated loans, and <unk> and earlier this year and.

We didn't notice and media simple local governments issued warning to community growth platforms due to the late and extensive subsidies provided by power from all products. So I, just wonder opportunity intubation and I'll pick governments have you guys seen any startup and.

Malaysia and the competition.

Thank you.

And let me take the first question.

Let me just repeat.

And the question raised on the overall performance of total grocery business financially I guess, yes.

Yes first of all.

Think we.

Start the total grocery business.

Around a little bit more than 2 quarters and this is still a very young business.

And as previously mentioned by and lay and David and their remarks total grocery is 1 of our strategic priority and it's very very important indicator for us.

2.

To help to refute the agriculture sector helped too.

Bring additional values to our users so to me this is.

A long journey, a journey flow of challenge and excitement.

So up to now outfitted.

Sure.

It's too early to tell.

The business model.

And there's still a lot of room to improve operationally.

So from we have been quite disciplined and our investment in total grocery and we evaluate every acquisition based against a set of internal allied targets.

And we're quite pleased with the progress we have made and.

To date.

We will continue to evaluate and SSA investment on a case to case by case basis.

Yeah.

1 thing to highlight here, we will continue to invest in this area some of the areas.

In the remarks.

And as I mentioned.

And things like.

And the logistic infrastructure.

Technology and also technologies around how to.

That data aggregate demand and each of the location.

This type of investment.

And we'll invest heavily.

General and let me just add to Tony's comments and.

Around your question around competition.

So theyre looking at.

As we have conceived total grocery and extension of our platform business. Our priorities are really focused around how to.

And I give our users a more holistic and integrated experiences.

And they decided that fulfillment and the convenience to the total grocery and makes more sense or they decide to continue to shop or make purchases force and items on the overall platform. So welcome competition. In this space continues to be intense I think is more important and that we focus on serving our users well industrial and the work Preoccupies us as opposed to looking at.

And the people are doing.

Thank you.

Next question. Please thank you the next.

The next question comes from Alicia Yapp from Citigroup. Please go ahead.

And good evening and thanks for taking my questions. Congratulations on the strong set of results.

2 questions the first 1.

When we look at.

And section Commission revenue line.

Is there any change of the payment rate.

Or is that fair to assume order incremental improvement.

In the revenue was mainly due to the fees that you're able to charge for the gross total gross salary and then second question is.

How many of these new users that you are able to acquire or coming to our platform.

It's just purely purchasing.

Total force reported yields.

The original total platform.

Any color you can share would be great. Thank you.

Okay.

Thank you for your question, let me go first on the transaction services revenue.

And our transaction services revenue increased nearly 180% versus last year.

The testing period.

The range itself hasn't changed and we didn't change the range and there's 2 factors contributed to this income.

Great.

Number 1.

And is in line with the GMB.

Growth in Q1 number 2 is the revenue associated.

Associated with total growth rate.

Okay.

And as for your second question.

I will let day, David comment Alicia.

We have not.

Disclosed obviously the breakdown of the users between total grocery.

Versus the.

E Commerce platform, because that's really not how we.

And the management thinks about the business.

And with introduction of total grocery we saw improvement.

Engagement and engagement and purchase frequency among our users. This is because the users' needs and fresh produce and groceries.

And they now have multiple channel so for us that satisfy.

Satisfy those needs whether it goes to the total grocery channels are continuing to the main app from a user's perspective, we're looking at is really a satisfying their needs across different categories.

Across different types of fulfillment so.

This really is meant to be 1 integrated app and yoga as the orders mostly are generated through the goto growth channel through our App. So we don't focus on what percentage of our annual active buyer base uses total grocery only anymore than where you focus on how they are specific for any particular product categories.

Mhm, Okay, great. Thank you.

Okay.

Thank you. The next question comes from Jerry Liu from UBS. Please go ahead.

Hi management. Thank you.

For letting me ask a question.

2 parts. The first is following up on the service fee.

Could we just described the accounting a little bit and a little bit more detail.

Especially.

If we're talking a typical say 10 or 100.

RMB of TMT from total and my tie and then how does that flow through and the services is that just the markup for the platform.

And then secondarily just wanted to ask about the logistics investments.

The additional commentary in a separate press release.

Where could any of these investments show up this year is it still pretty small or could we see R&D and capex or any other forms of investments. Thank you.

Okay I will go with the first question.

And actually I don't get it very clear what your question is.

Like I said the transaction service revenue composed of the <unk>.

The other.

Transaction services piece.

Charging on the maintenance and Inc, also including our parts coming from the total growth rate.

The portion of the total growth rate.

And kind of a transaction services revenue.

As a percentage of total.

And.

Total.

Numbers are actually small.

And I'm not quite sure I get what Youre question on the accounting treatment on this.

Probably you can you can rephrase your question a little bit.

The possibility that you can comment on the second 1 first.

So I'm curious and maybe if I can just jumping here a little bit.

So total growth for you as you know is of.

And in providing the total course through services.

We use our platform offering and incrementally is fulfillment and other transaction and related services and for those we do charge the merchants participating on our platform service fee. So that is included or being categorized as part of the transaction services revenue.

And there is a nationally and you've been complicated from accounting perspective per se and the cost associated with that is booked under cost of goods as part of the cost of episodes.

So coming back to your question around logistics and investments over the long run.

Look I mean, we are looking at logistics.

As really as a result of how consumer purchasing behaviors and fulfillment requirements have evolved over time.

If you take a step back and looked back to the rightful E Commerce and China is going to be it was quite hard for anybody to imagine China today will have an infrastructure that can serve our services handle a $300 million daily parcels.

While the current system, what we have today can cope with the scale. We do think the next wave of efficiency gains and it's going to come from a more flexible system right. So more technology more efficiencies driven.

And that can help reduce the need for example, and multiple chunks shipment.

And then sort of how to leverage the current.

Infrastructure is such that we can deliver greener.

Logistics experience so.

As we look at how the consumer experiences are changing and the new fulfillment methods and better technologies are becoming and being becoming important and this is an area where we are innovating. So from an investment perspective, I think for the time being you will see us.

Reflecting this mostly in R&D.

Also see us looking at our.

Total grocery infrastructure that we have today and looking at where we need to bulk up in terms of our ability to get better provide for user experience..1 example, I can give you is that we have rented additional sorting facilities for fresh produce as a way to improve the service experiences that we can offer to our users so that will be.

And that way and that would result in higher cost of goods sold pharma perform and perspective.

But more specifically, though we are looking ahead, we're looking at the long term, where and how we can invest and we are looking at technology. So we've been investing.

And you mentioned that you are working on algorithms data and analytics and coaching logistics development and optimization. So we will continue to focus on innovation and space to better serve our consumers.

Okay. Thank you guys.

Operator, why don't we take 1 last question and the interest of time.

Suddenly share. The last question comes from films from <unk> from Goldman Sachs. Please go ahead.

Thank you for taking my question.

If I look at DDG and look at the scope of the business could you take us through.

What the footprint is now could you take us through and give us the feel for what the investment line has been if I look at the investment line, that's been bobbing around quite a bit and it's hard to discern how much of that is going into PPE and EU, how much is going into other areas of investment potentially because it's more in line.

So if you could help us better understand where we are and if you could also dwell on the overall impact with TPG on the business and in particular looking at sales and marketing spend in the recent quarter, which as a percentage of revenue. Excluding 1 piece seems to have risen after 2 to 3 quarters of holding steady.

Those are my 3 questions. Thank you.

Yes.

Thank you for the question. So I think your question generally revolves around total grocery.

So I will say to US you know as I mentioned on the last quarterly call our services now available nationwide.

Across all the 300 plus.

And your cities in China, So from a footprint expansion perspective, we have a footprint that we find.

And sufficient and necessary and we are adding to that gradually as the infrastructure on a local basis become more mature and provide for the.

Type of consumer experiences.

<unk>.

So that and.

And your question and then around investment.

Believe you are referring to the investing cash flow line and there may be Tony can come and if I.

Correct me, if I'm wrong, but most of those are investing and you see and there is actually more from a cash management and investment perspective as opposed to investment in hard capital assets. There are some of the infrastructure required and the association to total grocery and by most of the investment to date has been really and build out of the operations.

Which is reflected in the cost of goods sold as opposed to.

And capital assets and keep you and east.

And then Tim.

Tissue.

Last question, you asked was around social marketing expenses.

Hershey to look at this really over a longer term basis right. So.

Obviously, the number in the first quarter.

First quarter being typically the weaker seasonality quarter of course this share because of the sphere location in China, This seasonality and less pronounced but if you look at this quarter versus the <unk>.

Same quarter last year, the euro before sales and marketing intensity as a percentage of revenue excluding the <unk> is coming down right. So I do think you need to take that.

And the algae into accounts, we are seeing the day.

And the efficiency from ourselves and marketing perspective.

First to continue to improve and this is being done so in a way. That's also inclusive of the total grocery as we think about these businesses quite holistically.

IRA and I realized I did and specific comment on your question non total groceries and impact.

Our business and this might be a good way to just kind of touch upon that.

The total grocery business as well.

We had alluded to earlier on this call thus allow us to extend the services that we can provide to each consumer on our platform, allowing us to better fulfill their grocery needs that requires a 24 hour type of fulfillment cycle. What it also does mean is that the users who are participating and total grocery.

And.

It does have a higher frequency of purchase and higher level of engagement activities on our platform and that's and logistics with the overall.

<unk> on the platform and that does have some.

Benefits when it comes through sales and marketing spend.

Over the long run.

Just 1 point to add David here.

I think speak up the investment on total gross it's worth to mention as well.

Investment on people.

Embedded in the lines under the cost of goods or PV and E <unk>.

Dedicated pingo <unk>.

Teens deployed at each location and we are operating and also our employee worked closely with third party contractors to ensure the total grocery service can be implemented.

And manage that meet our quality standards.

And since the start of total grocery we have catalyzed the creation of millions of jobs and.

And.

Up and down the entire supply chain.

Yes.

Thank you.

Operating and interest of time, we will conclude the call here. Thank you everyone for taking the time to join US. This evening. If you have any follow up questions. Please feel free to reach out to our IR team and investor at <unk> Dot com. Thank you very much.

Thank you.

Thank you, ladies and gentlemen that concludes our conference call for today. Thank you all for your participation you may disconnect now.

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Good day, and thank you for standing by and welcome to the Ping, Georgia first quarter 'twenty 'twenty 1 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session. You can press star 1 on your channel.

Hmm.

And just to be advised that today's conference call is being recorded.

If you require any further assistance please press star zero.

I would now like to hand, the conference over well first speaker today, and so Jason true recyclable.

Thank you operator.

Hello, everyone and thank you for joining us today and.

The little earnings release was distributed earlier and herself.

On the IR website and western.

Adult and total hotel com and as far as true Global Newswire services.

And so on today's call are chairman and Chief Executive Officer will make some general remarks on our performance for the past quarter and our strategic focus going forward.

Our VP of strategy, David Liu will elaborate further on our specific strategic initiatives.

Our weighted all financed Tony Mark will then take us through our financial results for the fourth quarter and March 31, 2000 people want.

Before we begin I'd like to refer you to our safe Harbor statement in the earnings.

Price 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 the non-GAAP measures to GAAP measures.

And it's my pleasure to introduce our chairman and Chief Executive Officer to lead line. Please go ahead.

Thank you Jason.

Hello, everyone and thank you all for joining our first quarter 2021 result announcement.

You have to be over a year since and initial break of COVID-19.

And then we have carefully and move towards doubletree, while respecting that and if necessary precautions and occasional mattress to attempt on a fair offer.

Coronavirus.

After most of these day in place over a lunar new year holidays in February.

Chinese consumers finally took a well deserved break overlapped may day holiday shopping.

Shopping and traveling around the country.

With the summer approaching and we hope it there and a global pandemic situation, we will continue to improve as more people receive their vaccination.

I would like to simple emerges and logistic partners, who work closely with us to serve our users throughout the period.

Together, we created another industry first by staying open and serving users over the lunar new year.

We provided users with share by ensuring that they could get what they required over the holiday.

And eastern presence and care packages to their loved ones back home with just a few clicks on our app.

According to the State Post Bureau.

The total parcel volume over a period from 11 to 17 February stood at 660 billion.

Growing by 260% over the same period last year.

We are proud to have contributed towards keeping our users period, while they cabinets sales lead.

The ones and their community safe.

Our overarching commitment to serving our users has helped put yet another strong quarter.

Our annual active buyers increased by 35.4 million from December quarter to reach $823.8 million for the 12 months ending 30 <unk> March 2021.

We continue to build trust and my share with our users.

User activity and our platform continue to create new crude.

Over the last over the quarter, our Mou increased to 724.6 billion.

Representing 88%.

And new active buyers.

Total revenues, excluding revenues from merchandise sales.

RMB $17 billion.

Our year on year increase of 161%.

Our gross scale gives us both greater capacity as well as addressable and the ability to live our mission to benefit all.

We constantly think about how we can best Marshal our resources and reach to catalyze.

Improvements and bring more benefit to society.

Our sales to over 800 million consumers and our understanding of them.

As well as our network of over 8.6 billion merchants on our platform.

Makes us uniquely well positioned to bring Tom Meyers from Iran Awards gather to develop practical solutions to real world problems.

Our users encounter every day.

But as we work towards our goal of becoming the world's largest agriculture and across the platform.

And we must also sees a golden opportunity to transform and modernize the equity from the system.

We won't know how consumers adopt healthier and more environmentally sustainable tires, while improving all the links of the supply chain and cost structure of agriculture industry.

And now let me touch on 2 points.

First we are pursuing partnerships as the questions on the future of food.

We had just entered our research partnerships to quantify the impact of plant based meats from human health.

Alternative proteins.

Thomas and component of a more sustainable diet.

It's useful to know how they affect us.

And as this is our first research partnership and then we will certainly not be locked.

For example, a year ago, we started a project to develop a more portable and low cost test for protect.

Pesticide residues.

Upon commercialization that project will improve food safety and quality.

Thereby benefiting and many people.

Okay.

Second we are rethinking and logistic systems and infrastructure.

We have a privilege of being the only if costly mobile commerce players of scale in a word.

This unique characteristics op indoor outdoor has helped us to become the world's largest commerce platform by the number of paying users.

This singular focus on mobile only experience cannot came about because we recognized back in 2015, the immense immense potential of ubiquitous mobile computing to drive chairs and consumer behavior and.

Asking a totally new era of interactivity and my users.

Similarly, with logistics systems and infrastructure, we are looking at how things can be done with a fresh pair of eyes with no preconceptions.

<unk> has the advantage in this area.

With Orange Nate many patterns.

And third of daily puzzles in China last year.

And have expertise Inc complex technological system design.

We are already looking or algorithm design and data analytics analytics, and our cold chain logistic development and optimization.

We have applied for some patents as well.

We hope to load and the wildly actual operations and logistics providers.

We have higher efficiency and lower costs.

And so we continue to grow.

Leave that we can use our scale for good.

As we search for solutions in science and logistics.

And we remain committed to becoming the world's largest agriculture and the growth rate platform.

Our mobile only and discount oriented platform.

A team purchase model.

Suited for items and daily essential.

We see strong demand for total grocery, which is giving consumers the chance to buy a greater variety of Paris flows directly from farmers and equity merger and located in the region.

We will continue and iterate, our products and and make growth reported or all what word affordable and available to our growing number of users.

We force the pedal door, becoming Inc. Important.

Important and force multiplier and enabler that can truly make a meaningful difference in the world.

And the same time.

We remain committed to our social inclusion effort and support followed by utilization of rural communities.

For any of the management to be truly durable way.

We must look out for all our stakeholders stakeholders.

Stakeholders.

It is critical that we panel and empowered partner and empower them with Teck.

This means that we will keep on helping farmers and equity merger and operate better and any more.

We will continue to provide training for them to having a full suite of tools on our platform to optimize sales and benefits from our platform visibility into final final demand.

We will have the increase their productivity by working with local government and a grid gnomic and skus to harness new technologies.

Since the beginning we will have approximately 100000, new farmers back to their hometown and and we have committed to train and another 100000, new farmers over the next 5 years.

We want to be a catalyst in this virtuous cycle and we.

Farmers and equity and routes earn more color invest in green agriculture agriculture.

In building China's first equity focused infrastructure our priority.

Mens partnering existing third party service providers first and foremost of everything from cold chain logistics, and warehousing sorting and delivery.

Total grocery we focus on partnering local community commodities closely.

We work with existing shops, including Mount and pop stores to serve but our pickup point.

April enabling them to gain extra income.

We also provide of course, it was and to aid the digital transmission.

In fact since the start of total gross re we have capitalized.

And the creation of millions are job up and down the entire supply chain.

We hope that the system, we believe will truly benefit or for a long time to come.

This is in line with our core value often foot are doing the right things.

We hope that this helps you understand better where we are coming from and share our hope for a better tomorrow.

And thank you, let me now hand over to day.

Thank you.

Hello, everyone.

So Eric Le our overarching commitment and serving our users.

We are laser focused on understanding our users constantly changing needs and working with our partners and merchant and procure them in a way that is respectful of the community and the environment.

With our aim of becoming the world's largest agriculture and grocery platform and.

We want to help create food systems that are greener healthier more inclusive and more resilient.

We develop NSS and our initiatives against those objectives.

Objectives.

Let me elaborate.

Operating on how this has worked and 3 key fronts.

First we're gratified by our positive early foray into agriculture focus logistics infrastructure system.

Total grocery and our next day, so I'll pick a grocery service is creating meaning social benefits.

Intelligently connect our users directly to local farmers and increases the variety of fresh produce they can purchase online.

And the lowest cost by reducing spoilage from storage and transport and.

Improved carbon emission.

Eliminate staff from the last mile.

Farmers and more.

As well along the way, we creating economic opportunities within our communities by tapping our existing shops, who served as collection points and through third party service providers and warehouses that we have built to support it.

We're happy that the growth momentum for total gross free remains very strong.

We continue to see and increasing number of farmers and accurate merchants as well as pickup points joining our platform.

This will only amplified the social benefits of total grocery can bring.

We have also applied for patents for our proprietary coaching logistics network system that is aimed at minimizing the lost and quality degradation of agriculture products and other perishable products and transportation.

This system, our price and our technology stack and plant routes based on information of collection and distribution points.

Availability of coaching infrastructure and transit points among others.

It is still early days, but we are optimistic that the solutions, we develop and dry well.

<unk> be very pastel bring very positive impact going forward.

Second we will introduce our consumer to manufacture our CTV revolution to agriculture.

We already enjoy a very good partnership with farmers and accurate merchants.

More than 12 million and farmers sell through our platform.

This relationship has steepened with initiatives such as help the farmers licensing session last year, when COVID-19 struck.

We also have longer term partnerships to plants operate and sell better through total Academy and total farms.

It is time to elevate this partnership with <unk>.

And <unk> the pioneers TTM and in the process re cash how Chinese manufacturers think up but their value in the supply chain.

We have held factories fill a new generation of brands that is delivering both quality and value for money to our users.

Bag regaining demand and spending patterns of over 800 million users on our platform.

And we create useful insight for manufacturers.

And it become more responsive to market trends by making more consumers indicate they need and want.

Ctrip and also kutztown waste and cost of distribution and marketing and provides better price for consumers.

Our new brand initiatives helped many export oriented OEM partners survived trials and international demand for their products during the COVID-19 pandemic.

Agriculture will similarly benefit from Sito and.

Agricultural producers diverse and unique.

And our skill and effort go into cultivation.

By helping farmers to sell directly to users on a platform instead of EBITDA multiple intermediaries.

We give value to the diversity and uniqueness of their produce as well as site over their final demand.

We're now focused on helping more farmers to sell better by sharing marketing insights.

Just as we have held manufacturers.

We have farmers more appraised of marketing information.

This enables them to be more responsive to market demand and develop agricultural brands and meet the needs of the market.

China is a treasure trove of agriculture and culinary delights.

There are plenty of Jeff's hidden in plain sight waiting to be discovered by millions of consumers across the country.

We will and these growers and producers a helping hand to better market their products and developed brand recognition.

Third, we're making headway and tapping our science to improve the food system.

And as Les mentioned, we're backing a first of its kind of study and the health impact of plant based meat.

There's growing recognition that occur and dietary patterns and I need a healthy non environmentally sustainable.

Replacing meet with plant based alternatives is a promising solution to both issues.

When completed the study will help consumers to make informed choices and dietary transition.

And manufacturers refine their products correspondingly.

The spirit of this partnership is very much in line with our earlier partnership to develop a more portable and lower cost test flow count 10 minutes and produce which will help improve food safety and consumer confidence.

We will continue to actively look for collaboration opportunities, our agri food Tech with partners around the world.

At the same time, we have also been active supportive initiatives to apply the most advanced technology and agriculture.

We're proud to have joined the organized the first China agricultural robot innovation competition.

The competition, which contactor with an award presentation.

Concluded within the word presentation last week <unk>.

Attracted over 195 participating teams to apply robotics to agriculture.

We're proud to have supported this competition as robotics is at its early stage and agriculture and China by holds a lot of promise.

We are convinced our holistic efforts will bring and progress to our food systems and benefits stakeholders, including our users farmers and merchants the communities, we operate in and the planet.

And finally, even as we place a lot of emphasis on agriculture and food, we have not lost sight of the need to nourish the mind.

In April we launched total reading months.

So app users could.

<unk> classics like Moby, <expletive> or noted underpowered and purchase them at discount.

Famous historians and riders joined our live streaming sessions to recommend books to readers.

In conjunction with the inaugural China International consumer product Expo and HEICO earlier this month.

We partnered with CCTV news to bring our $10 billion program live streaming studio to high net.

Through our lifestream users were transported to Hainan and learned about the specialty products creasing and food fruits as well as interesting items to offer at the Expo.

We will continue to bring color and new experiences to our users through similar initiatives going forward.

Let me now hand, it over to Tony.

Thank you David now, let me take you through our financial results for the first quarter 2021.

We continue to see solid user growth in Q1.

And I'm pleased with the progress we have made and building trust and winning mindshare with our users.

Our annual active buyers for the last 12 months ending March 31, and 2021 increased to $823.8 million.

Up $35.4 million from the prior quarter.

And they use in Q1 reached $724.6 million from the prior quarter.

This is up 49% compared to the same quarter in 2020.

Our <unk> as a percentage of our annual active buyers was 88% in the quarter.

Our highest engagement record achieved for any first quarter.

According to National Bureau of statistics during the Q1 total retail sales in China grew 34% and.

And online sales of physical goods increased 24% from the same quarter in 2020.

And number of express delivery parcels in Q1 grew 75%.

A significant growth rate in both online sales and physical goods and parcel shipment volume reflected a strong recovery in e-commerce activities from the low base in Q1.2020 due to the business interruption caused by the COVID-19 outbreak.

We also saw less pronounced the Chinese new year holiday related seasonality in Q1 this year.

And more merchants stayed open in response to people as the input.

We collaborated with elections and logistics service providers to ensure uninterrupted order fulfillment and delivery during the quarter.

In terms of P&L, our total revenues in the quarter and March 31, 2021 were RMB $22.2 billion up 239% from RMB 6.5 billion in the same quarter last year.

Excluding revenues from our lumpy trials, our total revenues grew by 161% to RMB 17 billion in Q1.2021.

The main driver of this growth with our online marketing services.

Online marketing services revenue was RMB $14.1 billion this quarter.

Up 157% compared to the same period last year.

And due primarily to continued increase in merchant activity.

We continue to offer better advertising products and.

And analytic tools to our merchants.

Educate them on how to best leverage these features and improve their services to their targeted users.

And thereby help them meet and exceed the alloy targets.

As a result, we have seen Merck and spending more and exploring new ways to engage with users.

And our users browsing more and discovering more items of interest.

We're pleased to see the growing endorsement by our merchants and our users.

Our transaction services revenue this quarter amounted to RMB, 2.9 billion, which.

Which is up 180% compared with the same period last year.

The increase in our transaction services revenues was due to 2 primary factors.

Number 1 the increase in our GNP and Q1.

And number 2 the services revenues that we recognized in connection with those of grocery.

And for which we provide fulfillment and other related services.

We also record at RMB, 5.1 billion in merchandise sales from our 1 key trials in Q1, 2020.1.

As compared to RMB $5.4 billion in the preceding quarter.

This <unk> trial is meant to temporarily and meet the demands of our users are products, which our merchants cannot sofie and therefore.

And therefore, this number may fluctuate from quarter to quarter. Our strategy is unchanged and this will remain a very small part of the business.

Now moving onto costs, our total cost of revenues increased from $91.8 billion in Q1 and 2020.

To RMB 10, 7 billion this quarter.

The increase was mainly due to the costs and expenses attributable to <unk> merchandise sales.

Higher cost of payment processing fee cloud service fee and delivery storage fees.

Total operating expenses this quarter were RMB 15.6 billion.

As compared to RMB 9.1 billion in the same quarter of 2020.

Our total non-GAAP basis operating expenses were RMB 14, 6 billion as compared to RMB, 8.3 billion and the same quarter a year ago.

Okay.

Our non-GAAP sales and marketing expenses this quarter increased 80% to RMB $12.7 billion from RMB, 7.1 billion and the same quarter of 2020.

This was mainly due to an increase in online and offline advertisement and promotion.

And so we continue to invest and user engagement and mind share.

In the first quarter, we had an incentive program for merchants.

And could stay open and continued expansion and others during the spring Festival.

We also recently marked the second anniversary of our hugely popular 10 billion program, which has steadily expanded over time to cover.

And all categories, including agriculture products and fresh produce.

In line with our platform vision of helping to accelerate the transformation of the agriculture sector.

We will continue to make it 3 for agriculture products and the free and fresh produce to be featured in this program.

At the same time, we will continue to refine and improve the quality of our 10 billion program by raising the standard re clients from merchant to participate.

Our 824 million users trust us to deliver great value and quality to them and we will constantly seek to improve to uphold their trust in us.

On a non-GAAP basis, our sales and marketing expenses as a percentage of our revenue excluding <unk> trials this quarter was 75%.

As compared to 103% and 108% for the same quarter in 2019 and in 2020.

And reduction in sales and marketing expenses as a percentage of revenue is a reflection of our economic of scale and our consistent efforts of sticking to a high standard of our benchmarks.

On a non-GAAP basis, our general and administrative expenses were RMB $161 million and.

And increase of 36% from RMB $118 million in the same quarter of 2020, primarily due to engine and increase in headcount.

Our non-GAAP.

<unk> and development expenses were RMB, 1.7 billion.

And increase of 55% from RMB, 1.1 billion in the same quarter of 2020 the.

The increase was primarily due to an increase in headcount and the recruitment of more experienced and personnel.

Hello, and increase in R&D related cloud service expenses.

On a non-GAAP basis, our R&D expenses as a percentage of our revenues, excluding <unk> contribution was 10% as compared to 17% for the same quarter last year.

To sum up.

Operating loss for the quarter was RMB 4.1 billion on a GAAP basis compared with operating loss of RMB 4.4 billion in the same quarter of 2020.

Non-GAAP operating loss was RMB, 3.2 billion compared with operating loss of RMB, 3.6 billion and the same quarter of 2020.

Our non-GAAP operating loss as a percentage of revenue improved from -55% in Q1.2020 to -14% and Q1.2021.

Net loss attributable to ordinary shareholders was RMB, 2.9 billion as compared to net loss of RMB, 4.1 billion and the same quarter last year.

Basic and diluted net loss per ads were RMB, 2.3 fleet compared with RMB 3.5 flow in the same quarter of 2020.

Non-GAAP net loss attributable to ordinary shareholders was RMB, 1.9 billion.

Compared with RMB, 3.2 billion in the same quarter last year.

Non-GAAP basic and diluted net loss per avs or RMB 152, compared with RMB 273 in the same quarter of 2020.

That completes the profit and loss payments for the first quarter.

Our net cash flow used in operating activities was RMB, 3.7 billion compared with outflow of RMB $567 million and the same quarter of 2020.

Primarily due to an increase in restricted cash outflow due to seasonality offset by an increase in online marketing services revenue.

As of March 31, 2021, the company had RMB 83, 4 billion and cash cash equivalents and short term investments.

As of the end of April 2021, U S dollar $756.4 million of our cirrhosis and convertible bonds. Due in 2024 has been converted into equity.

This concludes my prepared remarks, operator, we are ready for questions. Thank you.

Certainly, ladies and gentlemen, and he will now begin the question and answer session. If you wish to ask a question. Please press star followed by 1 on your telephone keypad and wait for your name to be announced do you wish to cancel your request you can pencil bound or hashed E. Once again it is star 1 to ask a question you have the first.

Question coming from the line of Thomas Chong from Jefferies. Please go ahead.

Hi, Good evening, Thanks management for taking my questions I have 2.

2 questions.

First question.

Monetization can you comment about the feedback on our advertising and our products and how we should think about the monetization rate going forward.

And my second question.

The lumpy piece of it.

Is that the <unk> contribution to our overall GMB.

And im like 11% and.

And can you also comment about our long and GAAP net margin and.

Without the lumpy deposits and also from a bulk alone and GAAP net margin.

And 1 Pete and bottlenecks and thank you.

Okay.

And a little bit more than 2 questions, but let me try to address 1 by 1.

Thank you again for the question and.

For the first question.

I want to emphasize our strategy has always been serving our users as well.

That being said, we believe that either the growth or the monetization and.

Net natural result of that.

And then we also believe.

And this is still a lot of room to grow from where we are now.

And today, we see very strong growth performance in Q1.

Cash as of the merchants, our actually it's reflected in our revenue and so you can see.

Our revenue and this quarter continued to grow and.

Which is a reflection of our merchant confidence with the platform and with the confidence in the online they achieved.

What the platform is providing a better design.

And our various tools to help them to understand their time and user better and so that they can leverage as well as the total academy to gain more insight.

And how the technology and analysis can help them to enhance their ally I believe as far as these target can be achieved.

Naturally the growth and monetization will follow.

And your second question and the 1 <unk> business.

<unk>.

As I mentioned in the prepared remarks.

<unk> business is.

A temporary really measurement and to offer products that our consumer wants it but for which our vendor cannot offer at that time.

And so this is not a strategic priority for us.

<unk> contribution of the lumpy business is and material were compared to the <unk> platform.

And.

I guess, that's your third question on the margin profile.

1 key business contribution to this.

It does have an impact, but stripping that out our total platform.

And margin profile was stayed more or less the.

Same range.

As previous quarters.

Got it thank you.

Okay and just a quick question please.

The next question comes from the line of Natalie <unk> from Hydro and International. Please go ahead.

Hi, Good evening, Thanks for taking my question and congratulations nice quarter.

Yes.

EBITDA upbeat about the competitive landscape loans.

Net occupancy on the 1 hand.

Thank you Charles COVID-19.

COVID-19 materially.

Anthony.

And the other hand.

And seems to be getting more and more crowded.

And that's why I asked like social content catalog.

Local life services provider.

1 growth does any of that.

Sure.

And know Sandeep <unk>. Thank.

Thank you.

And hopefully as if it wouldn't be.

We brought online.

Thank you.

Go ahead and address this question.

And Chinese and Teva will translate it into English and servicing.

We thought that was what are your duties and things of the wound team.

Yes.

And as routine twos.

EBITDA.

Due to personal.

And then kind of awards.

But as soon as the financing due from call it 3.

Finally net.

And ordinances to equal it can go through quarterly cash flow.

And so there is a growth.

He is true the projects pushing with appeal.

Please Hong Kong.

Nancy.

So first your question regarding competition.

In China, the Internet space has always been very competitive.

And it's also true that the ecommerce and China is very true.

Events and in terms of development ahead of the rest of the world.

Many people underestimate the retail opportunity that comes about and the broad market potential that exists.

As the experiences improve.

And 2.3 years ago and <unk>.

And really good news hunting solid unit growth so, particularly.

And so and go through to do the volume data.

And Peter.

Now to reach all of them and they're looking to join <unk>.

Cases.

And was hoping to the hernia and sue and good.

Tolls, Peter Yoshimi due to reaching those incumbents on Keystone and you've shown this year and I, just wonder what kind of nuclear and 3 hotels.

So taking agriculture as an example.

And the visualization and industry remains low and opportunities are abundant and for those like PDD that can help drive efficiency and other fundamental changes.

Sure.

And I Wanna.

True.

Sure.

2 points here and kind of juices and concluded that further.

And so.

And you know it's doubtful doses rule so can you.

Hopefully it wont be.

<unk> and <unk>, you would assume Wei and <unk>.

Listen we've been a good decision.

And also the home nutrient ton to clarify your clients trading line is humping.

And so on iPad and Lisa can garner the Japan tour.

Good day is only to fleece and.

<unk>.

Looking back to 2015, when we entered this business.

And we foresaw the mobile Internet will lead to some very fundamental changes to consumer behaviors.

King and more real time more and spontaneous.

And making that access more ubiquitous and we have decided to focus on the development of entirely mobile product and that meant we also had to make some very fundamental changes to the E. Commerce part are available at the time.

And we kind of off the shelf and the skewing African price would it be a partner and <unk>.

New York and this office from since you won't you couldn't do the shear zone.

And we know how the fourth quarter and shortly.

Sure so those true quite suitable excuses IP and.

Susan.

Tissue cellular losses on loans.

Consumers' behaviors King about quickly.

And we believe that people are always wants more have more choices. So to constantly serve our users better and we need to be aware of these constant changes in consumer trends and to investing in technology and business model innovation.

Since our Findlay and the Queen.

And with an icon and assumed growth. We thought this is going to income transcription.

Transcription.

<unk>.

From a bond to 1 that you thought you could put on our soil and water.

And we don't have any of the Caribbean and.

Do you know and then good sites.

Good and 1 time consulting.

And I think a subpoena.

And if we got a boost from the scenery machine from us.

Today being the largest agricultural platform in China.

And can do though is well positioned to play another leading role in driving some change and the team is very excited about the value we can bring to the agricultural industry.

Now with all that time and through the routine visit with you.

Well get into that central and <unk>.

And the 2 of them.

And that's what we can see I saw cash to go mediacom.

<unk> shoppers with allies, we undertook the jobs.

And to the <unk>, 2 <unk> hundreds and even this year.

Turning to net people and close and judge the timing trying.

Turning to <unk> from Gold Award.

You don't know, who we don't share that.

EMEA and Asia.

Sales of the unions and so that's.

And its ucs's elements or could <unk> calorie and sugar.

So going back to your question around competition I believe that each company's unique and ultimately it boils down to the unique value proposition that each player represents to the consumers.

For us we have been focused on delivering value for money products with finally interactive shopping experiences to our consumers through our mobile only platform from day 1.

User centric is deeply rooted in our principles and it's the first thing that we think of when we need to make tough decisions.

Thank you.

Good day closing so that will sit on the share leaner with amdocs.

2 quick thoughts with automatic power assist and AUM.

<unk> Sciences will always always looks sequences and changing go to you and it goes switch.

Would it be also include article shelf as a tier that he said no when we are challenging.

Good day, and that <unk>, T and and angle to lose hoping to Kona Cisco and.

1 we've seen liquid.

Sure.

And the market potential is huge and we are still.

In the early days, particularly early in a business line total grocery.

And the service vendors to improve and the consumer experiences improve we believe this new business model, we will be able to motivate more consumers and further expand the market adjusted.

Festival market.

And so who knows.

And the idea of deposits.

The jeans and women's.

Those 3 shall we say youll either glasses from <unk>.

And kind of further.

So operator and listen to it at school.

Okay.

And so the gcs 3 true to the strongest.

No.

At the same time, we think healthy competition is a good thing whether you are talking about the <unk> side of the business or the 2 sides of the business because theres more platforms developed the users can get better.

Services and that is really fundamentally why we entered this business and the first place.

Sure.

Yeah Tony.

So from the bottom.

Thank you Mary.

Why don't we move on to the next question.

The next question comes from Robin Zhu from Bernstein. Please go ahead.

Yes.

Excuse me about it and maybe we'll do that once you bought and you go through <unk>.

Women Love these events and that goes to those familiar since you own bonds and border.

And those.

Methodology to Virginia.

John.

Jenkins.

And from there.

And 2.4 months.

And through CMT and pass on.

Something that you guys and the format and you'll note.

And to the highlights.

And John Rogers here.

And what it says it all your you had some growth.

And they're going to use all the Egypt, and India and charge them.

But albums and something on the true traditionally like to Cook.

Dr. Glenn Glenn you Jacob.

And you shouldn't be pure genius and you too.

And the Gigamon and monetization rate.

So that your users from you all do you could you could you go and so it sounds from them.

And so you got to Houston.

So my I have 2 questions 1 is on <unk>.

And brands onto the <unk> platform.

And what are those progress and we shared and Q1 some of the key bottlenecks and challenges that management might want to share.

And then the second question is again on monetization rates and Q1.

Compared to the last few quarters and.

And and outlook.

How quickly they think that's going to increase.

Sure Rob and thank you for your questions let me.

Speak to the brand question that you raised and and our pass it over to Tony to talk about.

Your question on monetization.

So first and foremost I would say that we are making steady progress with brands because we believe our user centric mentality is very much aligned with how brands.

And.

And looking for new channels to reach and serve their prospective customers. So.

As our user scale.

And your engagement growth, we're seeing an increasing number of brands approaching us to collaborate.

Since the beginning of year, you'll have seen a number of notable new additions to our platform and turning to fairly deep strategic collaborations.

This includes brand names on the international side, Adidas, Johnson, and Johnson and Unilever.

And we have also anti and distributor collaborations with the likes of <unk> and <unk>.

So you asked about challenges in terms of working with Greg I think is really really helping them to understand the incremental value that <unk> is a platform can bring to brands and how we can work with them to better target and address.

New users and identify users and a very accomplished a cost efficient way.

Improved their own experiences and their own and reach.

Simple there that I would point to our efforts from a D on.

From a <unk> side, we're working with them to deliver more value for money and quality products too.

Consumers on our platform by developing a KOL customized flying and washing machines. So these are the type of a differentiation and.

First our strategic collaborations that we can invest and we are investing and Grand partners, who are working with us to grow their businesses on PDD.

Let me then actually ask Tony to make some more.

Comments on your question on amortization.

And yes.

And again coming back to our vision and our key.

And strategic priority.

<unk> is always focusing on the users how to serve our users better and.

And as you know.

We have 824 million users.

And in the past few quarters, basically we're having incremental new users.

True.

To the platform.

Around $15 million per quarter and last quarter is around.

35.

Close to 40 and these new users.

But they needed need time.

To build and Mindshare and trust with the platform and what we are focusing.

Okay.

Now is really helping our merchants by providing them tools and help them.

To understand better to reach.

And that target first therefore, our users can benefit from there.

And the surface provided by our platform and the merchant.

And then we can have this fun and interactive experience with us and stay longer time with us and non.

And the foundation will be a natural result coming out of this.

These targets being achieved.

Yeah.

Got it thank you.

Thank you.

For the next question.

Thank you. The next question comes from share long sheet from Nomura. Please go ahead.

Good evening and management, Thanks for taking my questions congratulations on a very strong quarter.

And my question is can you provide any color as to help us understand the size of the old commodity grocery business and.

And associated loss and <unk> and earlier this year.

We did notice a media simple local governments issued warning to community growth platforms due to the late and extensive subsidies provided by platform more product zone.

And just wondering opportunity intervention of the government have you guys seen any sort of escalation in the competition.

Thank you.

And let me take the first question.

Let me just repeat.

And the question raised on the overall performance of total grocery business financially I guess.

Yes first of all I think we.

Start the total grocery business.

Around a little bit more than 2 quarters and this is still a very young business.

And as previously mentioned by and Les and David and their remarks total growth rate is 1 of our strategic priority and it's very very important indicator for us.

2.

To help to refute the agriculture sector helped too.

And would bring additional values to our users. So to me this is.

A long journey, a journey flow of challenge and excitement.

And so up to now outfit.

Yes.

And.

It's too early to tell.

And the business model.

And there's still a lot of room to improve operationally.

So from we have been quite disciplined in our investment in total growth rate and we evaluate and recognition based against a set of internal allied targets.

And we're quite pleased with the progress we have made and.

To date.

And we will continue to evaluate and SSA investment on a case to make a case by case basis.

1 thing to highlight here, we will continue to invest in this area some of the areas.

And in the remarks.

And as I mentioned.

Things like.

Logistic infrastructure.

<unk> technology and also technologies around how to.

And that better aggregate demand and each of the location all day.

This type of investment.

And we'll invest heavily.

John and let me just add to Tony's comments and.

Around your question around competition.

Third our look.

We have continued total grocery as an extension of our platform business. Our priorities are really focused around how to.

And I give our users a more holistic and integrated experiences.

And they decided that fulfillment and the convenience to the total grocery and makes more sense or they decide to continue to shop or make purchases force and items on the overall platform. So welcome competition. In this space continues to be intense I think is more important and that we focus on serving our users as well and industrial and we work Preoccupies us as opposed to looking at.

And the people are doing.

Thank you.

Next question. Please thank you the next.

Our next question comes from Alicia Yapp from Citigroup. Please go ahead.

Good evening and thanks for taking my questions. Congratulations on the strong set of results.

2 questions the first 1.

When we look at the transaction Commission revenue line.

Is there any change of the payment rate.

Or is that fair to assume order incremental improvement.

In the revenue was mainly due to the fees that you're able to charge for the growth total gross salary and then second question is.

And how many of these new users that you were able to acquire all coming to our platform.

It's just purely purchasing.

Total force and reproduce.

Versus the original total platform.

Any color you can share would be great. Thank you.

Okay.

Thank you for your question, let me go first and the transaction service revenue.

And our transaction services revenue increased nearly 180% versus last year.

The same.

Period.

The range itself hasn't changed and we didn't change the range and there's 2 factors contributed to this increase.

Number 1 is in line with the GMB.

Growth in Q1 number 2.

<unk> revenue associated with total growth rate.

And as for your second question.

And I will let David comment.

Alicia.

We have not.

Disclosed obviously the breakdown over users between total grocery versus the range.

E Commerce platform, because that's really not how we.

<unk> thinks about the business.

With the introduction of total grocery we saw improvement.

Engagement and engagement and purchase frequency among our users. This is because the users' needs and fresh produce and groceries.

Have multiple channels total flow satish.

Satisfy those needs whether it is to the total grocery channels are continuing to be the main app from <unk>.

Users perspective, we're looking at is really satisfying their needs across different categories.

Across different types of fulfillment. So this really is meant to be 1 integrate the app and yoga as the orders, mostly our January through the delivery channel through our App. So we don't focus on what percentage of our annual active buyer base uses total grocery only any more than where you focus on how they are specific for any particular product.

Categories.

Mhm, Okay, great. Thank you.

Thank you. The next question comes from Jerry Liu from UBS. Please go ahead.

Hi, and management. Thank you.

And for letting me ask a question.

2 parts. The first is following up on the service fee.

Could we just described the accounting a little bit and a little bit more detail.

Especially.

If we're talking a typical say 10 or 100.

RMB of TMT from told all my time, and then how does that flow through and the services is that just the markup to the platform.

And then secondarily just wanted to ask about the logistics investing.

The additional commentary in a separate press release.

And where could any of these investments show up this year is it still pretty small or could we see R&D and capex or any other forms of investments. Thank you.

Okay I will go first.

First question.

Actually I don't get it very clear what your question is like.

And like I said that transaction services revenue composed of the.

Or the other.

Transaction and service fees.

We are charging.

The main platform and Inc, also including our parts coming from the total growth rate.

The portion of the total growth rate.

And.

Kind of a transaction services and revenue.

As a percentage of total.

Yeah.

Total numbers are actually small.

And I'm not quite sure I get what Youre question on the accounting treatment on this.

And probably can you can rephrase your question a little bit.

The day that you can comment on the second 1 first.

Yes, so generally and maybe if I can just jumping here a little bit.

Total gross for you as you know of.

It was really in and providing the data of course through service.

It's a platform offering and incrementally is fulfillment and other transaction related services and for those we do charge the merchants participating on our platform service fee. So that is included or being categorized as part of the transaction services revenue.

So there is a nationally and you've been complicated from accounting perspective per se and the costs.

Associated with that is booked under cost of goods as part of the cost of episodes.

So coming back to your question around logistics and investments over the long run.

Look I mean, we are looking at logistics.

As really as a result of how consumer purchasing behaviors and fulfillment requirements have evolved over time.

If you take a step back and look back to the right. The ecommerce and China is going to be it was quite hard for anybody to imagine China today will have and infrastructure that can serve our service handle a $300 million daily parcels.

And.

While the current system, what we have today can cope with the scale. We do think the next wave of efficiency gains and it's going to come from a more flexible system right. So more technology more efficiencies driven.

And that.

Can help reduce the need for example, and multiple transfer shipment and.

And sort of how to leverage the current Inc.

Infrastructure is such that we can deliver greener.

Logistics experience so.

As we look at how the consumer experiences are changing and the new fulfillment methods and better technologies are becoming and being becoming important and this is an area where we're innovating. So from an investment perspective, I think for the time being you will see us reflecting this mostly in R&D.

Also see us looking at our.

Total grocery infrastructure that we have today and looking at where we need to bulk up in terms of our ability to get better provide for user experience..1 example, I can give you is that we have rented additional sorting facilities for fresh produce as a way to improve the service experiences that we can offer to our users so that will be.

That way and that would result in higher cost of goods, so far and will perform and perspective.

But more specifically, though we are looking ahead, we're looking at the long term, where and how we can invest and we are looking at technology. So we've been investing.

You mentioned that working on algorithms data and analytics and on coaching logistics development and optimization. So we will continue to focus on innovation and space to better serve our consumers.

Okay. Thank you guys.

Operator, why don't we take 1 last question and the interest of time.

Suddenly share. The last question comes from films from <unk> from Goldman Sachs. Please go ahead.

Thank you for taking my question.

If I look at DDG and look at the scope of the business could you take us through what.

And what the footprint is now could you take us through and give us the feel towards the investment line has been if I look at the investment line, that's been bobbing around quite a bit and it's hard to discern how much of that is going into <unk>. How much is going into other areas of investments potentially because its 1 line.

So if you could help us better understand where we are and if you could also dwell on the overall impact with TPG on the business and in particular looking at sales and marketing spend in the recent quarter.

As a percentage of revenue excluding 1 piece seems to have risen after 2 to 3 quarters of holding steady.

Those are my 3 questions. Thank you.

Yes.

Thank you for the question. So I think to your question generally revolves around total grocery.

So I will say that as I mentioned on the last quarterly call our services now available nationwide.

Across all the 300 plus.

And your cities in China, So from a footprint expansion perspective, we have a footprint that would be fine.

Sufficient and necessary and we are adding to that gradually as the infrastructure on a local basis become more mature and provide for the.

And the type of consumer experiences we want.

And so thats and.

And your question and then around investment.

Believe you are referring to the investing cash flow line and there may be Tony can come in.

Correct me, if I'm wrong, but most of the investing and you see and there is actually more from a cash management and investment perspective as opposed to investment in hard capital assets. There are some of the infrastructure required and the association to total grocery but most of the investment to date has been really in build out of the operations.

Which is reflected in the cost of goods sold as opposed to in.

And capital assets, and keeping and east.

And then I think.

<unk> asked the last question you asked was around sales and marketing expenses.

And we encourage you to look at this really over a longer term basis right. So.

Obviously, the number in the first quarter first.

First quarter being typically the weaker seasonality quarter of course this year because of the scale location in China. This is and now there is less pronounced.

If you look at this quarter versus.

And the same quarter last year, the year before sales and marketing intensity as a percentage of revenue excluding the <unk> is coming down right. So do you think you need to take that seasonality into account we are seeing the.

The efficiency from a sales and marketing perspective for us to continue to improve and this is being done so in a way. That's also inclusive of the total grocery as we think about these businesses quite holistically.

And I realized it and.

Specific comment on your question non total groceries and impact.

Our business and this might be a good way to just kind of touch upon that.

The total grocery businesses.

We had alluded to earlier on this call growth allow us to extend the services that we can provide to each consumer on our platform, allowing us to better fulfill their grocery needs that requires a 24 hour type of fulfillment cycle. What it also does mean is that the users who are participating and total grocery.

It.

It does have a higher frequency of purchase and higher level of engagement activities on our platform and thats the logistics with the overall.

Activity on the platform and that does have some.

And benefits when it comes through sales and marketing spend over the long run.

And I have just 1 point to add David here I think speak up the investment on total gross it's worth to mention as well.

Investment on people.

Just embedded in the lines under the cost of goods or <unk>.

We have dedicated pingo <unk>.

<unk> deployed at each location and we're operating and also our employee worked closely with third party contractors to ensure the total growth rate service can be implemented.

And manage that meet our quality standards.

Since the start of total grocery we have catalyzed the creation of millions of jobs.

And.

Up and down the entire supply chain.

Okay.

Thank you.

Operating and interest of time, we will conclude the call here. Thank you everyone for taking the time to join US. This evening. If you have any follow up questions. Please feel free to reach out to our IR team and Investor <unk> Dot com. Thank you very much.

Thank you.

Thank you, ladies and gentlemen that concludes our conference call for today. Thank you all for your participation you may disconnect now.