Q3 2021 Pinduoduo Inc Earnings Call
Good day, ladies and gentlemen, thank you for standing by and welcome to the opinion do would do with third quarter 2021 earnings conference call.
At this time all participants are in a listen only mode. After the Speakers' prepared remarks, there will be a question and answer session. Please be advised at today's conference is being recorded I will now turn the call over to your host for today's call. Mr. Cheung Kong. Please go ahead Sir.
Thank you operator, Hello, everyone and thank you for joining US today. My name is Chen and Al will help host the earnings call today Pingo <unk> earnings release was distributed earlier and is available on the IR website at Investor <unk> Pingo, <unk> dot com as well as through global Newswire services.
Before we begin I would like to refer you to our safe Harbor statement in earnings press release, which applies to this call as we will make certain forward looking statements. Also this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of the non-GAAP measure.
Yours to GAAP measures.
Joining us today on the call Tonight, our chairman and Chief Executive Officer, Tony Mok, our VP of finance.
They will make some general remarks on our performance for the past quarter and our strategic focus going forward.
He will elaborate further on specific strategic initiatives and take us through our financial results for the third quarter ended September 32021.
After that we will open the floor to questions from analysts.
During the Q&A session layer will answer your questions in Chinese and Preston will help translate.
Please note that all translation provided for yourself reference only.
In case of any discrepancy between the original remarks and translated version statements in the original language should prevail.
Now it is my pleasure to introduce our chairman and Chief Executive Officer Chen Lei.
Please go ahead.
Okay.
Thank you.
Hello, everyone and thank you for joining our results for the third quarter I would really want.
Our total revenue for the quarter, excluding revenue from our merchandise sales.
The $71 4 billion.
Was that a year over year increase.
Increased 55%.
Our annual active buyers reached 867 points.
For the 12 months ending September 30.
Over the quarter.
<unk> increased to 741 5 million.
Pingo <unk>.
Last month.
We're grateful for the opportunities to still argue with farmers.
I mean every one who has incurred.
In the past six years, and we hope to continue serving them.
It has been over a year since I took over.
And how are you.
Chairman of the board.
Over this period.
We have been busy working on a transmission, which I'm happy to report has been gradual and on track.
There are two major theme to leap transition that's happening behind the scenes.
The first is gloomy younger talent and leaders for their second it's shifting to a more focused investments in the R&D from a previous focus sales and marketing.
Five year.
And now let me elaborate.
First on Kobe youngest habit a leader.
Since the beginning of last year.
Weakness in many of our younger team members.
To take more responsibility.
These young men and women demonstrating the core value of commitment to argue.
When COVID-19 was truck and disrupted daily life.
Many of our young team immediately took actions to shore essential supplies.
The birth of usually you need.
When heavy rains.
In July.
They ran into action to show all of our stockholders.
The logistics, so that our UC one.
The 15th.
This also.
That's it.
Surety is saying.
All of whom are users and supply.
Well have even carved them see more with potential to become future BD of openness.
Lately practical business activities.
To me, that's probably exceeding our expectations.
I'm proud to work alongside.
This young team.
Despite their age many of that has been with the company for a number of years and have been killed on the job.
Now shaping the future of this company.
Young talented green creativity in the bakery and constantly evolving.
Do you see more of them taking on critical roles in the next six to 12 months, but we continue to create opportunities for them to step up.
And the second shifting to more focus and investment in research and development.
We're already serving 867 million users.
To leverage from Australia, and I'm, having a measurement with years and.
And just really training.
The increase in all these safety rather the investment.
This is a significant shift in strategy from our first five years, we were focusing much more sales and marketing.
Agriculture has been advancing and at that point.
Since the beginning.
What was the update is to create value green agriculture into a digital economy.
Trained engineers.
Can I have devoted ourselves to find technology solutions to increment across agriculture supply chain.
We have only scratched the surface after six years.
Still much more for us to do in agriculture.
Especially with technology.
Therefore, we plan to deepen our investment in Tech enabled agriculture solutions.
Address critical.
Sector.
These include first bringing more agriculture person.
Brick house committees into a digital economy and a second further improving efficiency in agriculture is approaching to meet user demand and reduce waste.
Over the past six years pedal door has provided to consumers across China with a wide variety of agricultural produce at better prices.
Helping farmers increase their income.
Well, we started six years ago, we were in.
The first precision agriculture produce online.
And now we are connecting 16 farmers to $867 3 million consumers nationwide.
During China's Golden week in October.
Culturally linked quarter as our platform for 279% over the same period last year.
We hope you will do will be the go to platform for quality agricultural products for farmers and consumers.
We look forward to leveraging our platform to have more fun groups in order to improve their lives.
And the benefit of their communities.
Police and we will continue to focus on default in digital inclusion in agriculture.
We will expand our course offerings.
Kennedy.
Farmers E Commerce and store operation.
It happened there to control price quantity, taking away the old definitely all hands. So they can sell directly to consumers.
In August.
I can recall for Digitization.
Perhaps to a zero commission policy agricultural product.
And it's been tough we would continue to improve consumer awareness and appreciation of agricultural produce geographical indications and agriculture brand through technology innovation.
Live streaming video marketing et cetera.
The multiple wireless consumers have advocated.
The more value can be created agriculture community in China.
We're also designing tech enabled services to increase the price of efficiency to agriculture sector.
And at some time, you have to reduce unnecessarily transit to provide fresh options for consumers.
To further cut down transportation time and reduced foot.
Wait.
We are developing proprietary technology solution.
Plenty of operating and design and the Olympics and the culture optimization.
This solution how to lay the foundation for infrastructure, that's more suitable agriculture put views and more environmentally sustainable.
Hi.
Flying.
Macau trip technology go beyond matching supply and demand.
Extend into identifying upstream technology solutions to improve productivity.
Additional profiles and environmental sustainability.
Our strategy accurate type applications, we also hope to make agriculture.
Two a tech savvy younger generation.
A good example.
In this area is our smart agriculture competition.
He has demonstrated is that precision farming techniques can make a real improvement to farm output.
Some things will all competition last year.
Are there to commercialize that technology.
Coffee Beijing.
Sure.
All staff and to bring tangible productivity gains to farmers.
This year, we have joined Ford China Agriculture.
University and Suzanne M D.
With technical opinion for human food and agricultural Foundation, Hello, well I didn't get the University and research.
He has a lot of the waste our priorities.
Pending the challenge to accept.
Not just yield.
Nutritional value.
Mental such as sustainability and commercial viability.
Contestants have adopted a multidisciplinary approach.
Nutritional science precision farming all of that.
Other than technology will calculate to make them.
The.
The final thing cultural cross Disappointedly bedrock.
From agriculture to computer Sciences.
Currently that would be mostly planning tomatoes are smart greenhouse base in June.
We are encouraged to see that 80% of the team members they are tricky.
Three fatality and new ideas to a traditional agriculture sector.
And I think Todd we are partnering with world class agriculture excuse to offer these young ethnic tech talent Taylor to courses and training.
On top et cetera, greenhouse horticulture cross measurement and monitoring.
Agriculture industry with great potential for young people Kasinga future technical.
Aspire to lag impact on society.
As an equity focused platform, we want to leverage our platform and technology to provide more opportunities for young person to join the agriculture sector.
What can we apply technology to improve I really accurate agriculture.
I can recall just approach it.
In investing in technology to improve the agriculture sector.
You had a challenging task.
Our long term commitment and we will be patient and systematic.
We hope that some of our efforts, we can help build a smarter and more sustainable future for agriculture.
Last quarter, which allows the lungs public tends to be the agriculture initiative.
Which seeks to address critical needs in the agriculture sector and rural areas.
The initiative will not be driven by profit our commercial goals.
Drives a facility.
First when I pretax promote digital inclusion.
Africa talent with a greater motivation as sales of achievement.
Profit for the second quarter and any potential profit in the future quarters. We will go into this initiative in June our final goal of 10 billion is met.
The profit for the third quarter, but we also go into this initiative.
After retiring board involvement we held the ECM and end of September and the initiative was approved by our shareholders.
Peter is closely connected to the communities that we operate in.
Their support has been crucial to our department and we aim to where they're supposed to put our best of our ability.
Therefore, we have committed to take on more responsibility to society.
In July we swung into action.
We've donated 100 million RMB, two flogging leaf lounge, a portal to support emergency relief distributions.
The total roughly networking Cisco took stock of food.
And it worked with suppliers.
Inside Opex Goodnight.
Cure and disputes.
15th through our nearly 20000 partners there.
In October we also contributed to the leaf therefore in fact, he responds where have you been there.
Donating 15, maybe.
15 million IP <unk> science, the childhood foundation to carry our emergency disaster relief imposed without the construction work.
Looking forward, we plan to do more to contribute to a society.
We will continue.
Yeah.
Actively leverage our platform and resources to serve our users farmers mercury and their communities better.
Thank you and now let me pass the time to time.
Thank you Li Hello, everyone.
Let me begin by sharing highlights of some of our agriculture initiatives in cost quarter.
Then I will discuss our financials for the quarter.
First.
As part of our efforts toward the digital inclusion of Commerce, we initiated and supported a serious of agriculture of promotion activities.
Trends in the direct connection between commerce and the consumers.
Alta is a harvest season and this September we were our main platform off the farmers Harvest Festival, and it's Gordon Aten consumption season.
We launched a total harvest Hawk and designed a series of initiatives to help farmers to sell better including live streaming merchant training traffic support et cetera.
But with 202 hundred 80000 active merchants participated in our event this year nearly double the number last year.
In September we joined the Ministry of Agriculture, and Rural Affairs, Pharmacy Daily and the China growing food development center to kick off the 2021 campaign of China's G I agricultural products tour.
The campaign helped to promote the agriculture products and their original heritage.
Helping to recognize quality agricultural products across China.
To support the campaign, we provided the technical and platform support we offered online and offline training, including marketing and branding techniques tailored to Gi products.
Yeah.
Doing China Golden week in October a plan when families typically reunite and enjoy moves together, we rolled out various initiatives to make more agriculture produce across the nation easily accessible through our platform.
These initiatives helped us to increase agriculture related others, which is the 279% over the same period last year.
Second we are stepping up efforts to raise consumer awareness appreciation and the demand for quality agriculture produce.
Producing regions.
In October we launched our Apple Golden week.
We work with farmers in six major Apple producing regions. Thanks.
She sang he central colossal.
And King County.
To develop a grading and the director distributions from framework.
This framework helps to provide consumers with delicious and high quality apples and build awareness of the places where these apples cut.
Cultivated.
As part of this initiative our fruit selection team stationed in these regions for months to state and local markets and help train high quality Apple mentioned with strong supply chain capabilities.
Alongside these strikes were also working with research institutes to implement industry standards for agricultural products.
We partnered with the channels through freshwater fishery Research Institute, our industry standards for Chinese mainland correct.
Diesel standards cover quality site packaging and transport.
Which will provide consumers with a clear basis to make an informed decision on their purchases.
We hope to have commerce to promote their products better meet the demand and the expectations of the consumers quality goods and services and build a sustainable business on our platform.
Therefore, we will continue to maintain our zero Commission policy for agricultural products.
Now, let me walk through our third quarter results our annual active buyers for the last 12 months ending September 30 of 2021 increased to $867 3 million up $17 4 million from the prior quarter.
Our Mou in Q3 reached $741 5 million.
This is up 15% compared to the same quarter in 2020.
Given our current scale, our user growth will inevitably be more moderate going forward.
At the same time as we serve a larger user base.
We also face more diversified and even involving user needs.
Our task has become increasingly difficult.
We hope that our younger team leaders could have embraced the challenges and continue to serve users needs innovation.
In terms of P&L, our total revenues in the quarter end September 30 of 2021 were RMB $21 5 billion up 51% from RMB 14, 2 billion in the same quarter last year.
Excluding revenues from our one P trials, our total revenue grew by 55% to RMB $21 4 billion in Q3 2021 and.
The key driver was online marketing services.
Online marketing services revenue was RMB $17 9 billion this quarter up 44% compared to the same private same period last year.
Similarly, due to the increase in merchant activity.
Our transactional service revenues this quarter amounted to RMB, three 5 billion, which is up 161% compared with the same period last year.
The increase in our transaction services revenues was due to two primary factors number one the increase in transaction processing fees.
Number two the service revenues that were recognized in connection with total grocery for which we provided the fulfillment and other related services.
Revenue from the merchandize cells from our one P trials was RMB $81 million in Q3 2021.
As compared to RMB 2 billion in the preceding quarter.
One P business was a temporary solution to meet the demand of our users on products, which our merchants could not fulfill.
We see more product offering from our merchants, we expect contribution from one key trials to be insignificant.
Now moving onto cost and the expenses.
Our total cost of revenues increased from RMB, three 3 billion in Q3 2020 to RMB six 6 billion this quarter.
The increase was primarily due to higher cost of payment processing fees.
Our services piece and the delivery and storage fees.
Total operating expenses this quarter were RMB 12, 8 billion as compared to RMB 12, 2 billion in the same quarter of 2020.
Our total non-GAAP basis operating expenses were RMB 11, 7 billion as compared to RMB 11, 3 billion in the same quarter a year ago.
Our non-GAAP sales and marketing expenses. This quarter is RMB nine 7 billion decreased decreasing 1% compared to the same quarter of 2020.
Although non-GAAP basis, our sales and marketing expenses as a percentage of our revenues this quarter was about 45%.
As compared to 89% and 69% for the same quarter in 2019 and in 2020.
So continue with the reduction in sales and marketing expenses as a percentage of revenue reflects our efforts to proactively reduced sales and marketing expenses.
As we gravitate.
Towards more investment on R&D.
On a non-GAAP basis, our general and administrative expenses was RMB $178 1 million compared to RMB $132 6 million in the same quarter of 2020.
Non-GAAP research and development expenses were RMB, one 9 billion.
An increase of 30% from RMB, one 4 billion in the same quarter of 2020. This increase in R&D was primarily due to an increase in headcount and the recruitment of more experienced R&D personnel.
So we're continuing to strengthen our technical bench.
To lay the foundation for future sustainable growth and continue improving our services to meet the evolving user demand we have.
Our committed to expand our investments in R&D and expect a continued increase in R&D expenses.
To sum up.
<unk> profit for the quarter was RMB, two 1 billion on a GAAP basis compared with operating loss of RMB, One 3 billion in the same quarter of 2020.
Non-GAAP operating profit was RMB, three 3 billion compared with operating loss of RMB $339 8 million in the same quarter of 2020.
Our non-GAAP operating profit as a percentage of our revenue improved from minus two 4% in Q3 2020.
215, 2% in Q3 2021.
Net income attributable to ordinary shareholders was RMB, one 6 billion as compared to net loss of RMB $784 7 million in the same quarter last year.
Basic earnings per ads was RMB 131, and the diluted earning per ads was RMB one one time.
Paired with basic and diluted net loss per ads of.
<unk> 066 in the same quarter of 2020.
Non-GAAP net income attributable to ordinary shareholders was RMB three 2 billion compared with net income of RMB $466 4 million in the same quarter last year.
Non-GAAP diluted earning per ads was RMB 218, compared with non-GAAP diluted net earnings per ads of RMB zero upon its reasonably in the same quarter of 2020.
In August we announced the launch of 10 billion Agriculture initiative.
Which aims to address the critical needs in the equity cultural sector and the rural areas.
The indicators would not be driven by profits our commercial goals.
To facilitate the advancement of equity Tac promote digital inclusion and provide equity tack talent with greater motivation and their sense of achievement.
The initiative received shareholder approval at the AGM at the end of September.
Profit from the third quarter, we also go into the initiatives.
We expect that the initiative to have a near term impact on earnings per share for shareholders.
That completes the profit and loss payment for the third quarter.
Net cash flow provided by operating activities was RMB eight 7 billion compared with RMB eight 3 billion in the same quarter of 2020.
As of September 32021, the company had RMB 97, 9 billion in cash cash equivalents and short term investments.
With that I conclude my prepared remarks.
Thank you Tony for today's Q&A session, we'll have like our chairman and Chief Executive Officer, and Tony <unk> Finance on the line.
<unk> will help translate later remarks in Chinese to English for ease of reference operator, we will now take questions from the first analyst on the line.
Suddenly.
If you wish to ask a question you will need to press star one on your telephone to withdraw your question press the pound or husky.
Once again, if you wish to ask a question. Please press star and the number one on your telephone keypad.
Your first question comes from the line of Natalie <unk> of HEICO International. Please ask your question.
Hi, Good evening, Thanks for taking my question I have two.
Two questions here.
So far it seems to have sales and marketing.
Paul.
Just wondering changing Oh, I, almost as a marketing channel how should investor on Ms. Danielle Joseph Bachmann strategy.
This is also the second consecutive quarter that our company is showing both non-GAAP and GAAP Opex, but just wondering are you powered housing public entity almost goes going forward.
Sure.
Expect profitability for 2021 and going onward as well.
And my second question is regarding the agriculture.
I was just wondering.
John can you provide an update on that I can't get in and make sure that you started last quarter.
Any investment being reflected in our latest financial results.
Which financial line items has been affected thank you.
Uh huh.
Oh I'm.
If you wanted to sell.
Sales and digital marketing and it wouldn't be.
Oh sure.
Energy.
Yeah.
Do it for me.
Wholesale.
Alrighty.
Sure Matt.
Okay.
Especially if you don't.
Gal.
Fisher nut exactly on that she said you've got the 200.
Wait hold the whole fall out of Washington.
Yes.
So she won't know.
Again, a lot of future development.
Yeah.
Yeah.
Thank you Natalie for the question.
And to answer a question our high standards.
For sales and marketing investments ROI have not changed.
But as our user base expands and our user needs diversified. We are also constantly applying macro adjustment to our ROI model and the goal is actually to better serve our users diversified demand.
Okay.
Does she want floor.
With Keytruda Teco pool goal.
Okay.
I mean, we couldn't keep up.
Sure.
Sure.
Thanks, John Michelle holding Oh.
Sure Jim.
Good.
They also helped in the teens.
Hi, Donald.
Okay.
So the food.
This is Jim.
Yes.
Hum.
S locations.
You want them.
Golar <unk> Thomas with Sidoti.
Oh, yes.
And that will come in two weeks.
Sheba towards.
Sure.
Sure.
So we seem to a supervisor to see what comes out.
So when we were just starting we were hoping that with the application of technology. We can serve the wider consumer pool for our principal of benefit at all.
So when our user base was relatively small then investment goal is actually to attract more users to get to know about us try different features and also try out our platform now at our user base is much larger with more and more users starting to use Pandora our new challenge.
<unk> now.
How can we constantly encourage them to try out new categories to explore new experiences and how can we actually meet their changing and much higher expectations of us. So that we can improve our trust and beauty longer term user mindshare.
Sure.
Similar to Q3.
123 months ago.
<unk> density.
It's also a machine you guys into quality.
It's designed to move.
More for essential intelligence.
Hello.
When you shop on dress.
So we think we.
Okay.
The threshold.
Including all of the old shortage issue.
In Canada.
The initial goal.
It is a challenging task to constantly satisfy users, especially given that we have such a large and diversified base of users.
It is also the challenge for our new generation of leaders.
We are also learning and adjusting through integration.
But one thing that is not changing is that we will continue to hold ourselves to high ROI standards and.
In terms of sales marketing and spend our sales and marketing dollars in a highly disciplined disciplined manner.
No you should also not only.
We are closely atone coupons on that Casey.
Until we get towards the latter.
Welcome to.
The total number.
Yeah, So when I talk.
And then are you looking for.
Sales and marketing who has a good profit.
Great.
Tanya Thanks Alicia.
At the same time, we are also stepping up our investment and investing patiently for long term.
Development of our company you may have noticed that we are increasing our R&D investment, which is a key area for our future investments and no question. You also touch upon profitability. So let me ask Tony to help address that okay.
Coming back to your question regarding the.
Conceptus being profitable for the past two quarters. The main contribution of our profitability in the past two quarters is deleverage efforts from sales and marketing expenses.
<unk> is showing a declining percentage of our revenue.
But for US the profitability is not any teams kpis internally, we are more focused on our long term investment to address users fundamental needs.
As we have been communicating with the market to us investment into sales and marketing.
Similar in nature to capital expenditure.
Which crystallized as user mindshare and long term asset for us. So this is a strategy that we have been digitally executing for the first five years and an area, where we will continue to practice financial prudence.
It is worth to highlight that we are shifting our focus and investments towards R&D.
And expect to step up our investment there to lay the foundation for a solid long term growth and as a result, we expect R&D expenses to increase going forward.
To your second question I think.
I will address that question, but let me just pull out one.
Comment on that I think you mentioned about the financial impact in the third quarter for the $10 billion.
Our program.
Since this program as the only get the AGM approval at the end of September.
So in the Q3 financial results Theres nothing has been booked all reflected yet.
Okay.
Later pass the floor back to you.
For example.
KBR tissue shipments in.
Q1 political.
By email.
Okay.
Right.
Finally in the door or something with the <unk>.
Okay.
Due to the refinery.
I'd like to add one point here. So after we announced our tender in their IRA initiatives last quarter.
Have received many quality product proposals and devices from various stakeholders in the industry. So together with my team I am also diligently studying various proposals.
And.
So that will now conclude the answer for this.
Got it very clear thank you later and Tony.
Okay.
Your next question comes from the line of Thomas Chong of Jefferies. Please ask your question.
Hi, Good evening, Thanks management for taking my questions I have two questions. The first question is about the competitive landscape in online shopping.
Well as the impacts of our sites due to the increase in popularity in lights to remain online shopping and my second question is about our support measures.
10 minutes you meant the highlights about the support measures.
And how should we expect the growth.
Won't wait between G M B and advertising.
So to support measures.
Thank you.
Well, Noah <unk> with ICR.
Thank you Thomas.
So you're working takeaways here.
The two one.
Policy going forward.
And I want you to see you go.
Poorly.
I see.
No.
The truth is.
You don't usually don't forget puzzle.
Hey, Sean.
Sure.
Alcohol sulfates.
Sure.
<unk> got the tier one.
The modality.
Even though I mean, you have a legal opinion.
I think each year.
Hi.
There is only one year's winner.
Lithium.
Okay.
Thank you Thomas for your question.
Let me address this question.
So my view E Commerce in China is a shooting the three full of vibrancy and potential as we see mobile technologies.
<unk> to develop and the relevant infrastructure continues to mature and also at the same time consumer demands and it's also constantly evolving with all these moving pieces and these changes commercially we do expect more and more platform entering this space and this would make.
Commercial test.
And then the same thing.
Joseph.
Yeah.
Would you say you expect tweaking some good CFO Javier <unk>.
So you'll see the fund 75%.
All growing.
Good day.
Yes.
Yeah.
Yes.
Some contingency to Asia.
At the same time, we automotive.
Recently, you should view that.
And our regulatory measures are promoting healthy competition and the orderly development of the entire e-commerce sector.
In our view, we think that's more competition always goods in terms of.
Promoting positive benefits and providing benefits to users the industries and all the companies involved.
Hum about quarter, one needs without the capacity again.
Yes.
We will get from the EMA.
Sure.
We don't know.
Issue.
European leaders.
Obviously, you lose their point of view.
Sure.
When we come out stronger.
As usual.
Okay.
Towards that change.
Possibly.
Yeah.
For example, we have seen platform companies, including the short video platforms entering the e-commerce sector.
To us it is not surprising to see these companies with search.
Huge user base and high user frequency.
The short video platforms to enter this space.
At the same time, we are also seeing more and more platforms with sizable user base and engagement level entering this space.
Okay.
Okay.
Sydney Hollywood technical dose, while pushing legitimacy.
Yes.
Listen the hostile without consent should each year.
Just a couple of leases.
Pinos altos as whole loans Huntington a.
A woman political dollars.
Talking about the future.
You won't go into them now.
Chinese OEM counsels.
Yes.
Hmm.
Typically in most years afterwards.
The bulk of it.
<unk>.
So next Javier.
And so that's not discussed.
External factors, but I think it's always important to come back soon.
Into ourself, and see what kind of value we provide them.
So <unk> actually started off from selling agriculture produce.
We always aim to help address users' daily necessity and basic needs. So it might be a data sets us apart from the other e-commerce players and potential new entrants.
Well do.
Do you think order for <unk> software.
So I'm gonna southeast posture from a store.
He'll.
Each of these fronts.
Okay.
What he said.
Q4 traffic.
And of course, it's a simple way.
Yes sure.
Thank you Lisa.
He was part of an acquisition.
Sure.
Sure.
We recently sold our jobs.
She took the flu.
Goodbye.
Good morning.
Although it sounds hallway width to so that people do it right.
Kingdom into OTT.
Thank you.
And so for US helps us serve our nearly 870 million users better and remain user centric.
Our pension as a company.
So the question that we constantly ask ourselves are how can we continuously iterate to serve our users better at the same time are we creating value for the society.
Promoting a cleaner environment and sustainability so for us our key strategy as a company has always been took in user traffic and to create value for society, which we believe will also become our long term asset.
Thank you.
It's about how.
How should we think about the support measures at merchants and the weight.
Between <unk> and advertising.
Thank you.
Thank you Thomas.
Let me try to address your question.
Thank you your question is pretty much linked to the outlook of monetization.
Let me shed some of our views our strategy has always been serving our users as well as Les just mentioned are in history.
Our response, we believe the revenue growth and monetization a natural result of that and.
Merchants ally is already reflected in our revenues as you can.
Can see our revenue this quarter shoes.
Healthy our merchants are seeing where and when.
We sell more on our platform.
We do not focus on the.
The monetization on a quarterly basis and it is a result of user satisfaction and merchants ally.
And our merchant the monetization rates.
Has that been frustrated in the past and it won't be the case going forward.
We're also raising the bar on the quality of merchants and products to meet our users' needs.
To help promote agriculture produce to users on a stress on PDD as a go to platform for agricultural products.
Therefore, we are committed to keeping a zero commission policy for agriculture in the fresh produce.
Got it thank you.
Thank you Tom.
Your next question comes from the line of Eddy Wang of Morgan Stanley. Please ask your question.
Thank you later on.
Thanks for taking my question I also have two questions. The first one just regarding.
Our effort to attract more brands and.
Brendan products merchants.
So to start to see a merchant merchandise.
So it's actually declined significantly on a quarter on quarter basis.
Sure.
We'll start with defense.
Alright.
Progress for us in the last quarter actually accurate.
Truck more.
Our brands in our platform.
Question number one.
The second question about the Russian weak consumption environment in China.
Culture so.
We see.
Some of the.
Competitive platform.
Actually it has been affected by just a weak consumption significantly Boston seem to be very resilient or just won't do.
View on how.
The weak consumption.
In fact on PDD.
Especially given that we.
I have high exposure to the agriculture product.
I'm from value for money does that mean start to our <unk> growth or revenue growth actually is more residents.
Under this environment. Thank you.
Hello.
It wouldn't be a hydrogen plant.
It wouldn't be.
Now, we'll see the hard tissue.
Sure.
EBITDA number one.
So it kind of after school.
Sure.
Angel.
Don't want Ashish on the B shoot.
Key influentials Shaun to walk them through the Tempe.
Yeah.
So it could be lumpy.
That's a major European Pi.
I was hoping.
Hi, Jeff.
Sure this agenda.
I'm not.
Sure.
Take care.
Covid.
Okay.
Okay.
Hello.
Sure.
Got it.
Switching to booking probably go to summer.
So this is Joe.
So we got to go through the door.
So let me answer your question I believe your first question and Tom brand.
So as our user base increased we are noticing that our users need and demand to also becoming more and more diversified.
At the same time.
We are observing that.
Our users' needs.
Require more and they also require more abundant supply of.
Our offering and Brian.
So.
From our view when we do think that in terms of getting more brands.
At this point that we'll do take some time at the same time that with an anti <unk> measures.
<unk> had some initial impact.
Whereby we have no test out a number of brands final desire to come to the platform and start offering.
And <unk>.
However, so opening.
It's a gradual process, which requires both the platform and Nebraska to putting resources energy and time and to build trust and foster successful partnership. So we do expect this to take some time and the price has to be more gradual.
Yeah.
If I look to switch from the truth.
Sure.
Okay.
Thank you Nicholas.
Yeah.
Most of the tier three.
<unk>.
Similar to the quarter two a C C.
Surely the SG&A lines personnel.
<unk> was a tool.
So now let me see him kind of used in machine to machine.
Sure.
Coming to <unk>.
Yes.
Turning to the full year.
Sure.
Got it already spoken to API partner, who has a hurdle.
Yeah.
Okay.
Yeah.
No.
Okay.
Please hold the conference will resume shortly thank you for your patience.
Okay.
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Okay.
Yeah.
Yeah.
Hi, operator, when they resume.
Yeah.
Thank you for standing by we're now back on.
If you wish to ask a question. Please press star one on your telephone.
Your next question comes from the line of the choices of Bank of America. Please ask your question.
Okay.
Okay.
Okay.
Yeah.
Once again for the line of Joyce Ju Your line is on.
You May ask your question.
Oh.
Thanks management for taking does give me the chance to taking my questions I have two questions Mike.
My first question is related to the regulatory environment.
Could management give us an update on the recent regulatory environment, that's exactly does Tencent barbour opening up affect our operations.
Also share some colors on if there are any regulatory measures that affect your operations.
And second my question, we have seen our one key business continued to decline in the third quarter.
Does this mean that you have are winding down this business.
Comment on the future of lumpy business contribution thanks, a lot.
Yeah.
D G box to heal.
So really the two two times.
Sure.
Thank you.
Uh huh.
Uh huh.
Okay.
Sure.
Uh huh.
Jim.
I mean, you didn't hear the question.
So I'm glad that you got some thoughts.
Yeah.
So we think the recent series of revenue from ushers and help to promote the high quality both off the platform economy and the entire industry.
So we have always been fully embracing our supporting their regulatory measures and will continue to affirm the authority implement all relevant guidance and measure.
No matter what comes out of that.
Uh huh.
I think it would be a one off.
Yeah.
Hum.
Thank you.
Okay.
Yes.
Oh, the gross to net.
Things I see.
Yeah.
Yeah.
Got it.
We saw that many companies are taking action and are continuing to optimize under the backdrop of these changes brought profiles by regulation and industry.
One of these companies our company as a whole is proactively taking this as an opportunity to improve our top and also to further enhance compliance with regulation.
Sheila I kind of backed up.
Thanks J P.
Yeah.
Two questions.
Okay.
Hum.
Yes.
Thank you.
I'm sorry.
So in the short term you may notice the impact from these changes but.
But in the medium to longer term, though we believe that these changes would be very beneficial to our users are the history and the companies involved in this industry.
Okay.
Okay.
George Let me just go back.
Uh huh.
I'm sorry.
Hmm.
So with all of them.
Well you said it well.
You bet.
Some point next year, that's it for me.
Uh huh.
Even though they're doing some good.
Thank you.
He most recently.
Not a whole lot.
Right right.
Chiquita chunky.
Uh huh.
Yeah.
We are also falling.
Development of opening up as you mentioned and we believe that such.
Measure, which set a great example of our platform companies that entire sector and so we believe such measures food eventually be very beneficial for the users and the healthy development of the sector.
Barbara.
Okay choice, let me come to address your question regarding the one P. A pessimist.
As we mentioned at the outset when we started this this one P business.
We already stated very clearly our <unk> trial is a temporary measure to offer products that our consumers want.
Our merchants cannot offer at that time, so lumpy if not a strategic priority for us.
As we see more product offering from merchants on our platform and we do not expect significant revenue contribution from <unk> going forward.
Thank you Todd.
Yeah.
Thank you everyone for joining us on the conference call. Today. If you have any further question. Please refer to our team's email address thank you I have a great day.
Yeah.
Yeah.
This concludes today's conference call. Thank you for participating you may now disconnect.
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