Q2 2022 Pinduoduo Inc Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Ladies and gentlemen, thank you for standing by and welcome to Ping doors second quarter of 2022 earnings Conference call.
At this time all participants are in a listen only mode.
It will be a presentation, followed by question and answer session at which time. If you wish you asked the question.
Need to press Star one one on your telephone.
Must advise you that this conference is being recorded today.
I would now like to hand, the conference over to your host today, Mr. John Paul Sir. Please go ahead.
Thank you operator.
Hello, everyone and thank you for joining us today.
My name is Chad and I will help host the earnings call.
The earnings release was distributed earlier and is available on our website.
The adult Pandora dot dot com as well as through global Newswire services.
Before we begin I would like to refer you to our safe Harbor statement in the earnings press release.
Which applies to this call.
We will make certain forward looking statements.
Also this call includes discussions of certain non-GAAP financial measures.
Refer to our earnings release, which contains a reconciliation of non-GAAP measures to GAAP measures.
Joining us today on the call are Chen Lei, our chairman and Chief Executive Officer.
No Jamie our VP of finance.
They will make some general remarks on our part.
Format for the past quarter and our strategic focus.
Jim will then take us through our financial results for the second quarter ended June 32022.
During the Q&A session they will answer.
<unk> in Chinese.
I will help translate.
Please note that all translation provided for reference purposes only.
In case of any discrepancy between the original remarks and that translated version statements and the original remarks should prevail.
Now it is my pleasure to introduce our chairman and Chief Executive Officer Chandler.
Please go ahead.
Thank you Ted.
Hello, everyone.
Thank you for joining our earnings call for the second quarter of 2022.
Let me start by giving a brief overview of our second quarter results.
Our total revenue for this quarter was RMB 31 4 billion.
This represents a year over year increase.
36%.
We wish.
Symptoms of China's consumption during the second quarter.
Upbringing temporarily affected in early part of the quarter.
Pent up demand once the disease as things return to normal.
<unk>.
And consumer sentiment and gradually recovered in the second half of Q2.
Since mid May we launched several campaigns and disputed a coupon to bolster consumer confidence.
How should recovery consumer confidence was also reflected in a positive reception for this year's June 18th shopping Festival.
During the June 18th shopping festival.
We continue to focus on bringing our customers more savings and more fun.
We are encouraged to see consumers buying from a wide range of categories.
For example categories.
Cultural produce.
Mcg household electronics and cosmetics.
All experienced solid consumer demand during the festival.
Also more and more brands partnering with us.
Maybe I'll use our platform to launch their new products.
With ISI.
And merchant.
Fighting values in our platform.
Having said that we saw.
Still have a long way to go before fully meeting our consumers' evolving needs.
Our business activities and investment.
During the last quarter.
Especially in the first half.
Short term external factors, such as remote working and the travel restriction caused delays of certain projects.
<unk> promotional events and Agri tech initiatives.
Even though this might make quarterly financials look better.
The long term prospect of our platform may be affected.
Especially considering the current industry dynamics.
Therefore.
It has become more important than ever.
Our investment in.
The core.
Core capabilities.
We must make every possible improvement.
Value for all consumers business partners and the society.
For consumers.
Constantly on the lookout for new unmet need.
<unk> hundred 18, our services to address those needs.
For example during April .
We saw a spike in consumer demand for fresh food groceries and daily necessities in Shanghai.
To meet this demand, we setup, especially section Lapindo, though.
For residents to buy fresh food.
Two items.
And have been delivered within 48 hours.
Hello.
We show 25.
We quickly expanded the collection to around 300 for that.
Essentials like right to the cooking oil.
To diapers and hygiene products.
Given the surge in demand and limited logistical capability.
We also offered more delivery flexibility through the pooling orders.
Housing community.
Here, we will likely take a moment to express our gratitude to our colleagues who work hard to ensure the operation of our platform in the past quarter.
The hard work.
You can see a listing we have titles.
We are deeply thankful and proud of their contribution.
I will say is gradually returned to normal.
We also launched merit badges to promote seasonal agricultural produce.
For instance in late May.
In response to consumer demand.
We launched a campaign to help consumers.
Cover it enjoys seasonal true.
Across the country.
This event was well received by consumers.
Sales of Lee Chief surged, 158% compared with a year ago.
While orders increased significantly for other food.
What the Mylan cocoanuts and equipped.
Being a consumer feedback.
We wrote off a year of fresh produce of China initiative.
There's always a daily newspaper.
This initiative will each skus.
The unique characteristics of <unk>.
Different agricultural specialties across the country to all consumers.
This contributed income for local farmers.
Well merchant.
We work closely with that issue.
Sure stable supply.
Especially at the start off a quarter, where the supply chain.
<unk>.
For example.
Actively provided traffic updates.
To help our merchants backup.
The chart their logistics.
We also launched two campaign and the measures to have a small and medium sized businesses.
Kosta merchants on our platform.
For example.
Our total across the operations quickly contacted local suppliers.
<unk> learned that farmers in certain regions.
To sell their vegetables due to traffic disruption.
We've seen a strong periodic time.
They manage to sell hundreds of vegetables through our platform.
Directly helping our farmers avoid financial losses.
To support our pharma elections.
We will continue to waive the sales Commission hope agricultural producers.
As a technology company with its roots agriculture.
We firmly believe that the technology can serve as a force for good.
We see rural communities by May 15th so great.
e-commerce by new jobs and higher incomes.
Young people now have the opportunity to start the <unk>.
Online recently.
In their hometown.
Those to their families.
This benefits both.
And social tangible and intangible.
We mentioned before we have training hundreds of thousands of new farmers.
Supporting good to set up all of our businesses and helping the local communities to sell their produce.
In addition to Tommy.
We hope to further unleash the vitality of the rural economy.
Starting the new craftsmen progress.
So with agriculture.
We are going to have a local artisan.
Craftsman promote traditional crop.
Built there Brad.
Why does that says.
Says two bucket.
We also expanded our total reading about campaign to promote a lot of reading my young student rural areas.
Today, we have donated over 250000 carefully selected books.
We hope that such efforts, we can do our part in contributing to a better future for the future.
To conclude.
As we deal with trend from quarter to quarter.
We remain focused on building long term intrinsic value.
Adjusting for the future.
We will speak closely to our core principles of benefit or.
People first.
<unk>.
And stay committed to build a platform that serves as our fourth focus.
Thank you.
With that I will hand over to Jean.
Thank you Li Hello, everyone.
I'll go through our performance in the quarter ended June 32.
2020 carriers.
In terms of P&L, our total revenue in the quarter were RMB 31 4 billion.
They're just 6% from RMB 23 billion in the same quarter of 2021.
This was mainly driven by an increase in revenues from online marketing services and transaction services.
Offset by a decrease in revenues from <unk> trials.
Revenues from online marketing services, and others were RMB 25, <unk> this quarter.
39% income pouch with different peer out Jeff 2021.
This was primarily due to increases in merger activities as a result of tougher consumption recovery.
As Les has mentioned.
Thanks to your answer Rick cabaret in consumer sentiments and delight to parch after quarter.
Especially during the June 18th shopping festival.
Our transaction services revenue this quarter were RMB six 2 billion.
107%, but just a sense here of 2021.
Moving on to cost and expenses.
Our total cost of revenues increased 1% from RMB seven Nigel in Q2, 2021 to RMB 8 billion this quarter.
Total operating expenses this quarter were RMB 14 8 billion.
Then just RMB 13, 2 billion in the same quarter of 2021.
The postponement of certain projects, including promotional events and agriculture reshaped.
As well as lower business related expenses during the first half of the quarter.
Temporarily affected our overall expenses.
Thanks gradually returned to the normal.
We incurred more expenses in the second half of this quarter.
Our total non-GAAP operating expenses as a percentage of total revenues has declined from 52% in Q2 2021.
41% in the fourth.
Carter.
Looking into specific expensive items.
Our non-GAAP sales and marketing next quarter, RMB 10 8 billion.
Up 8% versus the same quarter of 2021.
Our non-GAAP basis, our sales and marketing expenses as a percentage of <unk>.
This quarter was 34%.
<unk> with 43% for the same quarter in 2021.
Our non-GAAP general and administrative expenses.
RMB $164 7 million.
That's just RMB $213 8 million in <unk> 2021.
Our non-GAAP research and development expenses were RMB, one 9 billion.
An increase of 11% from RMB, one 8 billion and the same quarter of 2021.
The increase was primarily due to an increase in headcount and the recruitment of more experienced R&D personnel.
Operating profit for the quarter was RMB eight 7 billion on a GAAP basis.
Compared with operating profit of RMB 2 billion in second quarter of 2021.
non-GAAP operating profit was RMB 10 5 billion.
Relative to operating profit of RMB, three 2 billion in the same quarter of 2021.
Net income attributable to ordinary shareholders were RMB eight 9 billion.
Compared with RMB, two 4 billion in the same quarter of 2021.
Basic earnings per ads was RMB 7.0, sex and dilute earnings.
Yes worth RMB 622.
Basic earnings per ads of RMB 193, and diluted earnings per ads of RMB 169 in the same quarter of 2021.
non-GAAP net income attributable to ordinary shareholders was RMB 10 8 billion.
Compared with RMB, four 1 billion in the same quarter last year.
non-GAAP diluted earnings per ads was RMB <unk> 54.
It's RMB 285, <unk> <unk> 2021.
Now, let me move forward to cash flow.
Our net cash flow generated from operating activities to RMB, two 4 billion.
Compared with RMB, seven 4 billion in <unk> 2021.
Primarily due to the increase in net income and changes in working capital.
As of June 32022, the company had RMB 119 point full bill in cash cash equivalents and short term investments.
To conclude.
Profitability in the past quarter, which mainly attributable to a few short term factors that may not repeat it in the future.
But we saw good user engagement during the past quarter.
As competition remains intense.
Not sure whether such engagement momentum will continue.
Second project performance and lower business related activities.
<unk> expenses in Q2.
We view this factor is just relatively temporary in nature.
In fact.
We incurred higher expenses in the second half of Q2, when things return to normal.
Therefore, even that process in the second quarter are mainly due to a combination of several short term factors.
We do not expect to profitability in the past quarter to serve as a benchmark for future quarters.
Thank you.
This concludes my prepared remarks.
Thank you Jamie.
Next we will move on to the Q&A session.
For today's Q&A session.
Jim will take questions from analysts on the line.
We are happy to take a maximum of two questions panelists.
Larry will answer your questions in Chinese and I will help translate.
Place remark for ease of reference.
Operator, we are now ready to take questions from analysts on the line.
Thank you ladies and gentlemen, we will now begin the question and answer session.
If you wish you asked the question.
Please press star one on your telephone and wait for a name to be announced participants are requested to restrict to two questions. Each time, our first question Alex.
Hello.
Credit Suisse.
Go ahead.
So just wondering if you can give us on what you what we don't know.
<unk> do you guys look when you take the <unk>.
You've got freedom counting their conferences.
Archie as soon you issue that got you to the task.
And Joe you said a woman behold it you don't use it as a mono.
Thiago <unk> Python Amanda.
Copa Oklahoman Constantia implementing by quarter I don't know.
What kind of a docking pie you tell you them in total they are all part is helpful.
It took a few moments either way to utilize our bank to them.
Well many of them are phone parts, you're seeing brought up in Pi.
Title tissue, well excuse me finally Asia.
I have two questions first on the second quarter growth rate, we noticed a very stronger online marketing service revenue.
A strong growth of 39% year on year and this.
We are celebrating the previous two quarter, what's the reason behind this quarter's strong growth.
And the second question is on the brands, Ken management speak more about our progress on bringing more brands onto our platform with so many brands participate in our <unk> you bet.
Our growth this quarter and what's your overall plan for the brand recruitment. Thank you.
Yeah.
Uh huh.
Hello, Glenn.
Google.
Sure.
Tom.
Sure.
Shell fees and taxes.
Yes.
Yes.
Can you walk through the phone.
Truly choppy.
Kenneth.
I am happy to take your questions.
First about other revenue growth.
Starting from the second half of May.
We saw trends.
<unk> recovery.
Also we absolutely made efforts to facilitate consumer spending by offering various.
Forms of promotion to health with consumption recovery.
Good morning.
Hi, Julien.
They are all about.
Hum.
Okay.
Alright, thank you.
A portion.
So I'll.
Touch on the future.
I mean, thats kind of a big picture.
It's a bulk order your path.
So that's the idea.
The convener those figures you can see.
Yes.
And during this year's June 18 event.
We saw a man in margin as well as brands actively participating.
We also saw solid demand coming from consumers.
Given this background.
Our platform.
Many categories, including.
FMC J products how.
Agricultural produce.
Consumer electronics and cosmetics these categories all had a decent growth our platform.
So anyway, if on me and EMEA is consumed.
This one that she is shopping.
We operate in the future.
Okay.
Goldman Sachs.
Ed.
<unk>.
Covenant point.
Going to the south of Israel.
Sure.
<unk> with Citi.
In the future.
Got it.
Hey, Hey, guys again fits literally.
In addition, we.
We always try our best to satisfy consumer demand.
And.
This is an inseparable from many of our team members' hard work during the past period of time.
They worked very hard to help many consumers.
<unk> essentially demand.
And we are grateful towards our teams hard work during this process.
Thank you Mr. Thompson.
How many of the teams in TV.
I kind of meant shelf with Ashish.
Tom.
Got it he can compare.
General kind of Uganda and.
Sure.
Uhm.
Andy that whole system on a ship. So these are frequency a shocker.
I thought you said nothing really.
Hum.
At the same time.
We also saw that competition landscape is still very intense.
And in terms of satisfying consumers' needs, we have many areas.
We can further improve.
And as I mentioned earlier due to our salary this.
Our overall investment activity during the second quarter was impacted.
And this is actually not as beneficial to our long term competitiveness.
Now Michelle.
<unk> with the Hines Cushing.
Yes.
It's all Fayetteville cleanup transactions will adapt.
And therefore, we need to further step up.
Our efforts.
And also strengthen our core capabilities.
So that we can create more value for our consumers as well as for the society.
Yeah.
Youre going to need at Yahoo.
So if you want you can pile on.
<unk> sure well keeping pace.
On the topic of the seasonal.
Alright.
Yes.
Yeah.
Maybe you can talk to you soon.
Taking the PMA is important as Huntington's John that.
But on the future.
Hum.
And we wish you all you can do the funding conditions.
Okay.
And as for your second question.
Our brand.
We see that the needs from our consumers on our platform.
Are becoming more and more diversified.
And different consumers they have different needs.
Different product categories.
And across different consumption scenarios.
Therefore, it is a very natural.
Sure.
Two needs more choices.
And more products.
Well, let me be honest.
Okay.
Jonathan.
Hum.
<unk> dos <unk>.
Got it.
And our goal is always to better serve our consumers.
And to bring the.
More savings more fun shopping experience.
And the same thing there.
Two questions on that.
Peanuts.
Cool.
All of this.
Thanks, Rina Mccoy tissue, that's a hard to achieve.
Cynthia.
I think two questions on that.
Paul.
Tush quite nicely.
Sure.
And in terms of how to serve the consumers.
Believe that essentially the brands go and our goal are well aligned that is to serve our consumers as well.
So we would continue to focus on our own part and remain to be a very down to earth and patient.
Okay. Operator, we may now move on to the next analyst. Thank you. Your next question comes from Josh <unk> from Bank of America. Please ask your question.
Good evening management. Thanks for taking my questions. My first question is related to the <unk> expansion.
Let me share some colors on the reported.
In the overseas market with the latest data and the main target market and what the core value proposition of this new business.
And my second question is related to the transaction service revenue.
Transaction service revenue continued to grow faster than the online marketing revenue. This quarter also we actually see it accelerated from last quarter to a triple digit year over year growth.
We now like you know what the reason behind.
What did you find that with <unk>.
Okay.
We will now Glenn.
<unk> you should go what are you thinking may keep all at all point toward a woman.
Hi gear Junkie, Hal mentioned, Glenn Econ Goldman safer with element that drove home electronics.
Which ended in Zhengzhou together Miguel <unk> will calculate yourself with your stock that you want to deal with.
And with it the arc events you should go Glenn do you want me to take the transaction service showing with Jay inquired about our move.
<unk> to the two questions one on tissue that Oh shall we move the tongue beat yourself into the final you should think which ASUR within that and kind of I'll. Let you go that way so that can be done and I'm wondering if that is actually to pay.
The only issue so much this year.
And Josh.
Hey, guys.
Yeah.
Okay.
Please.
Two questions.
Hi.
But you're definitely Canadian Patricia.
Sure John .
Thank you.
Hi, Mona.
Primary maybe any of the team.
And then of course, you did that.
We've done it for you though.
Number one.
I don't know.
So this year the potential synergies.
Choice. So let me address your first question.
And I will hand, it over to Jane to answer your other question.
First of all.
Of our oversea.
<unk>.
First of all we are young company with a relatively young team.
And everyone is continuing to grow and searching for new opportunities during our gross process.
And then.
Hi.
Just as a woman.
She's going to quit.
And.
Let me I'll, let you know if you want between garner controller.
Sure.
Okay.
She got up with Toyota.
Sure.
The secret to the accounting for the future.
And overseas business is one of the opportunities that we see and we also see that the possibility of creating value in this opportunity.
Same time, we also see that many peers in the industry.
Achieving good results.
So we believe that it is a direction that is worth trying out for us.
Okay.
Okay.
<unk> done that <unk>.
Got it.
You just actually jump into the future.
You talked about.
We can see.
Could we touch.
And with that said.
We will not just simply repeat what others have done in this field.
It is important to us is that.
We will start from the needs of consumers and strive to create our own unique value.
Okay.
EMEA.
Yeah.
Right.
John .
Two main telecom to shock time that she's hungry Sheila.
Good quarter.
China increasingly towards Europe .
Okay.
So it's important.
You may continue.
We'll see.
Can you try and do it.
Yes.
And at the same time.
We are sufficiently aware that overseas business will be for challenges and it's well require constant trial and experimentation.
This process with not just happen overnight.
But the experience gained along the way with proved to be very valuable to our company as well to our team. Thank you.
Okay.
Thanks for your CASM guide.
We are talking about transaction with service revenue.
Well first we always remain customer centric.
<unk> financial Mac, just a natural result from however serve consumers.
And over the past quarter, because your consumption recovery.
We had key user engagement and transactions this contribute to.
<unk> growth.
And in addition for US our business glycol, which does not always match exactly two hour quickly financial reporting cycle and.
We are not managing our business on a quarterly basis.
So ill just comment just see fluctuations between quarters.
We remain focused on serving customers better and in question creates a long term value.
Sure.
Okay, operator, we're ready to move on to the next down is down the line.
Thank you. Our next question comes from Thomas Chong from Jefferies. Please ask your question.
What are you guys.
Whether it be Eagle is why did we find the right.
Alright.
Let's see what comes out.
Thanks, Reuben close April Torchwood, Lasalle TCE that you talk about what are you, saying Tom.
If I may.
Hi, Alan.
The argument is daily you sound wonder kind of <unk>.
Let me draw the Tommy.
Well, maybe just talk about maybe a need that tissue.
Thanks management for taking my questions. My first question is about cost control and efficiencies.
The macro uncertainties right now and we are seeing a lot of internet companies.
The cost control just wanted to get some color from management about our cost control.
Strategies and my second question is about our profitability given the second quarter earnings comes in better than market.
Market expectations.
How should we think about the profitability trend in the second half. Thank you.
Yeah.
And I pulled out in the hall here.
Yeah.
Okay.
So shimon.
Now moving on to Youtube.
Thank you.
Okay.
I think the city, Arizona.
To grow our shelf.
This is gino.
Hi, Thomas So let me address your.
Our first question.
First of all.
I believe that we are.
Our SKU in the development stage not the stabilized stage.
And at this point in time, we still have allow us to go and a lot of work to do to serve our consumers as well.
And the settlement with <unk>.
Throughout the month.
Celebrate the future on that.
Yes.
Yeah.
This is Sean <unk> senior citizens.
<unk> done the tangible.
<unk>.
I'll try to.
<unk> feature.
<unk>.
<unk> agreement with Hulu.
And as a part of our development too.
To constantly satisfy consumer demand would take a lot of patients.
Not only do we need to constantly explore but we also need to see.
Key opportunities and also make the relevant investments.
No.
Once you're going to get you're doing the <unk>.
IP issues.
Yes.
Chip bumping trend, though.
Okay.
Sure hold on the.
Some savings here in Charlotte.
I'm just wondering in C&I.
Great.
Each quarter.
Okay awesome. Thanks.
Councillor icon.
So uhm.
United NTT value.
And in the past quarter, and especially during the first half of the second quarter our teams.
Activity was impacted.
And during the short term this might bring about decent financial results.
But if we look at it with a long term perspective, this actually weakens our competitiveness.
Okay.
Yeah.
Yeah.
Okay.
And then.
<unk> funding.
Finally in the Haynesville.
Question.
Yes.
Hi.
Yes.
Quickie in transforming the company to hold them.
Wade shelf to control.
Do the job.
Each home.
We're maintaining high timesheet cut through that and the fact that if you answered the amendment with our dock.
Okay.
And therefore looking ahead, we would always think about the long term and we remain very committed to.
Two investing for the future.
We need to further strengthen our core capabilities.
To continue to focus on investing into the field of agriculture, and R&D over all over the long term.
Order to create value for our consumers as well as for the society and this would support our long term and high quality development and this is my thinking of overall strategies and hope it to address your first question.
Okay. This is Jay Thanks, Thomas I will take your second question.
For your second question about <unk>.
Well as mentioned before we have not changed our strategy on.
Two to focus on profitability, so for the past quarter alone.
Our profitability was mainly attributable to a number of external factors.
Which are mostly short term or whenever you nature.
On the revenue side.
Still a good level of user engagement and consumption, which are mostly boosted by consumption recovery.
At the same time.
Still face very intense competition.
For the first five factors such as project delays and decrease in business related activities.
Late to the short term impact to our Q2 expenses.
And to sum up this quarters profitability is due to short term factors combined.
So it is not a good benchmark for the future of backgrounds.
This is our view on profitability. Thank you.
Operator, we are ready to move on.
Okay.
Question comes from <unk> Yang from fee ICC. Please ask your question.
Hi, This is Anthony.
Negotiate with <unk> Tec.
That shows you talk I'm going to get it done.
Neil what you turn them acquire tissue are coming shortly and kind of.
<unk> hundred virtual contact Glenn who yogi.
That's the only type of ship.
Those ships are.
Quanta has told you.
You got to be sure.
Okay. So donuts titled condition, So you could say that Kevin all.
The amount of bankrupt.
Yes.
Yes sure.
Great.
So I think with them.
Got it.
It shows you that way.
And I think that people will if they only.
Okay.
They don't see income gotten it down to you guys tell you ship a tissue culture.
I think so.
Yeah.
Thanks, Jason.
Thank you.
T shirt on wholesale dot failing.
But I think the.
Management for taking my question. My first question is about total growth rate basing that total growth rate, reaching a relatively steady state until you got into two care about loss reduction on the unit economy. So can management management share some color on the future prospects of total growth.
Two we also care more about the efficiency measures also how really the increase in total gross financial leverage contributor to your firm level margin this quarter.
My first question was also regarding to the operating expense ratio at the company's revenue continue continues to grow and the operating leverage continue to play is to grow the company's expense ratio has dropped to 40000 person shall.
Should we expect the situation to be best in Nepal, and Meanwhile, we recorded.
Growth in revenue could management comment.
How we managed to optimize expense, but also maintaining strong growth. Thank.
Thank you.
Paul.
Suicide Bloom at Tampa.
Uh huh.
On the phone.
Total my time a short.
Sure.
Excellent.
Yes.
Hmm.
There's going to be it.
If we don't do that.
CECO with Macquarie.
I think we will assemble the pieces.
Please go down.
Alright.
Tom.
Thank you.
Yeah.
Hi by Al So, let me talk a little bit about our total growth rate first.
First from a strategy point of view.
Total grocery is a natural extension from our platform.
And in terms of how we are able to leverage our value proposition in terms of.
Agriculture to better serve consumers. It also plays a very important role.
And this is a project that we have good patiently.
Patiently investing too.
And this strategy will not be impacted by external short term changes.
No.
One woman.
The Chevron tweak.
<unk>, who is leading that team.
Let me come back.
Okay. Thank you.
Hum.
Thanks <unk>.
And then going to be something that I can.
Sure Okay great.
Sure.
Yes.
Since we introduced to the grocery.
The second half of 2020.
<unk> also seen gas.
In the areas of matching localized demand and localized supply as well as the area of <unk>.
Humans.
Service can provide consumers with a fee.
Sure more affordable and more convenient agriculture products.
Can create tangible value.
For consumers.
Yes sure.
Hum.
No no no.
<unk>.
Look we will.
Sure.
<unk> <unk> <unk> co.
<unk> with a <unk> patient.
TSA yet.
Well timna towards.
But Houston.
Cumulative willa, finishing it sounds like that I think all of this year.
And at the same time.
For the total grocery service, we also see many areas that we can improve.
To give you some examples here.
How to match supply and demand more efficiently.
Wow.
Secure.
More quality products and produce.
How to bear.
Better optimize the distribution network and to further improve our fulfillment service quality just to name a few here.
And we are constantly adjusting and.
Improving all of this is to make.
Make effort to bring better service experiences to consumers.
And I know once again.
So all the departure.
Some women, suggesting ways.
Hello, Josh on the <unk>.
Sure.
Thank you <unk>.
Yes.
She said.
And we have always remained a.
Consumer centric and wood.
<unk> to be so.
However, our top priority is to create value for our consumers and this wood.
Never change.
As for the financial metrics, they are right now and a reflection of.
How else we serve consumers. Thank you.
Okay.
All your question on operating expenses to trend.
Well.
Our total operating expenses.
Percentage of revenue decreased to 14, 7% this quarter.
As you just mentioned.
Yes.
I want to point out here and manage short term factors, such as project delays and lower business activities.
Cost of such decrease so it is unlikely to continue.
In fact.
Thanks, congratulate went back to normal expenses during the second half of the quarter actually increased compared to the first half. So the Q2 hopefully expense us may not be a good benchmark.
Also Joseph.
Joseph lay previous mentioned, we believe in total is still in the development stage.
Such impact and our investment is not as good for us from <unk>.
Specify please.
Competition is still intense.
So we need to and continue to invest.
Hello, Egypt addressed your question. Thank you.
Hi, operator, we may now take questions from the next analyst on the line.
Thank you.
Our next question comes from the line of Natalie <unk> from Hi, Tal International. Please ask your question Natalie.
Uh Huh, she said by any chance or something if you want your.
And I'm going to let D. The Lasalle raised that since then it would take because I am with how really got samuelson.
Not too much.
Our maintenance.
Thank you, Jamie and banish it down I guess, you see true value in Orlando.
Some whining about it.
So I would say I'll tell you to me Patrick you cant Natasha Caballero will depend on what.
This requires a deadline to Charlotte.
Allison this issue I just covered.
Would that be.
Well go now to the reconciliation.
Yes.
Please let me assure standby now don't have any chance that can tie shot they are high.
For them, how do you can you parse out maybe they will allocate that capital should then be onshore.
Good how are you, saying that you have by nickel from India or China using the cancer.
<unk> had a self marketing now.
India has been a true.
Yes.
Hi, Josh at this idea of a divided at Dunkin'.
Depending upon the Changsha is valuable.
Oh boy.
Well Neal.
It should have a stable <unk>, so glad downtown quicker, but we don't do for Lasalle.
Lastly, glad to say that.
John I'll take that.
Neil Neil it needs to be done.
Let me check by myself.
Sure. Thank you for taking my question I ask to Chris wanted to regarding that Department policy.
Has seen some time asking Nathan.
Leadership, Jefferson and started to ship in more towards the agriculture program.
But we haven't seen much material impact in terms of.
Goldman generative Fonda or Pembina agriculture program.
Wondering how much.
That's priority <unk>.
Should we expect change.
One external factor that Goodman currently.
Consumer sentiment improves when you prioritize Yang a pact on related to marketing.
What are your current key priorities.
Bringing <unk> to the next level would be great. If we can get a stance regarding your internal sector.
Alright peaceful platform E Commerce, agriculture, and we'll do that unless you that later with overseas expansion.
And also yes.
Have a strong balance sheet with Oba.
A 100 billion RMB income from our cash that we have.
<unk> integration plan to distribute value to shareholders.
Just wondering at the PBT haptics in their class.
Consideration thank you.
And that simply.
Great guys. Thank you Gwen.
You seem to you Wendy.
So we've seen that that's all kind of in general.
Sure.
Okay.
Keep in the toolbox.
I'm also on channel machines. Thank you Michelle.
Sure.
It can be in the future.
Well Stephen window.
Okay sure.
Sure.
Emily.
So I'm sure you could see it.
Hi, Matt sleep, So let me address your question.
A priority for us so first of all we need to look at.
Which we face of her business and.
From which we start our business.
We are dedicated to serving the rapidly evolving consumer needs and however development.
Separable from the support from our consumers and this is the duty.
Our duty as a company to serve consumers well.
Thank you.
I'm seeing that we've won.
And then we will go with them.
Team with adjusting to it.
Sure.
So I think the Moody's down there.
Good.
Sure.
Yes.
<unk> can be.
And as our user base, our richest color scale.
Is our focus to.
Better serve them and also deepen their trust and Kindle door sys.
Increased mindshare.
And toward this goal we have shifted our attention.
More toward agriculture, and R&D and this will remain to be our priority.
No I mean, you can't download.
Colombia at whole Luna Gold Tricia is though we saw Fayetteville, historically talked about yards.
We have also seen that.
Investments in these two areas can bring about a tangible value to consumers and the society.
Muscle CMO com site.
EMEA the sulfate O&M.
Walgreens, showing the meantime function.
Golar Michel Foucault, now adopting ccs lucrative and sampling.
Of course, you don't maybe clean core tissue Houston.
We continue to believe I'm sure I'll do that.
Thats in EMEA.
Underlying this.
First let's look at agriculture.
Our realm of consumption, we are able to.
Enable more efficient online transactions and.
We are able to latch consumers enjoy a fresher.
More fort for all parties.
And we also improved the distribution efficiencies through the use of technology.
Distribution.
Some of the symptoms.
Tom will tweak what we accrued.
<unk> hundred 90 <unk> yeah.
GT the tweedle Cindy shown in this half with the patient.
Hum.
Go ahead.
No.
In terms of agriculture production.
We facilitated the technology.
The option.
And usage to help farmers improve yield.
And we also actively provided training.
Two small agricultural merchants and producers to help them receive higher sys Stabler income.
Is there any family.
So you can find that Linda.
Okay.
Okay.
The official opinion call.
He said I'm going to go with yet.
Maybe coming back and doing their jobs.
In addition to that by strengthening our R&D capabilities.
We are also able to better understand consumers, new demands and preferences to improve the shopping experience.
So that we can create more value for them.
A portion of it will come down.
Got it.
Through these actions.
New team that is hungry and Uh huh.
On the tender.
Paul.
The Puma AE.
Thank you Sean good amount towards neutral issue.
<unk> seen the slippage.
When we come in.
<unk> bought them.
Two quick.
What is more over.
Past period of time.
Oliver Young team members growing up through their responsibilities.
Ensured the stable operations of our platform.
And they also helped satisfy consumer essential demand and created social value in the process.
We'll create more opportunities for.
Sure.
Members to take on more responsibilities and grow.
Right.
We will then tumor conducts screening xiang issued that nicely.
Tissue that Houston.
Thank you.
You saw in the <unk>.
That's what we see.
And we are still in the development stage, so we need to continue to invest patiently and.
Improve our teams' capabilities, so that we can better serve consumers.
What I've just mentioned are our top priorities.
Thanks Natalie.
I will take your second question on cash balance.
And I think this is essentially on capital allocation.
Well, given the current competitive landscape and challenges.
We still have many areas to improve.
To help us satisfy consumers' demand.
For example.
<unk> and R&D, so when entering fast patiently in these areas.
Meanwhile.
Different companies may be in different development stages.
As we have mentioned for US we are still in the investment phase.
Well, we continue to place more focus on these areas.
Two general loan 10 values. Thank you.
Okay. Thanks, <unk> for joining us on the conference call today due to time limits.
We hereby conclude the call now if you have any further questions. Please do feel free to reach out to our IR team. Thank you and have a great day.
Thank you ladies and gentlemen, this does.
Conclude our conference for today. Thank you for participating you may all disconnect.
Okay.
The conference will begin shortly.
As Johan during Q&A, you can dial star one one.
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Ladies and gentlemen, thank you for standing by and welcome to <unk> second quarter 2022 earnings Conference call.
At this time all participants are in a listen only mode.
There will be a presentation, followed by question and answer session at which time. If you wish you ask a question you will need to press star one on your telephone.
Advise you that this conference is being recorded today.
I would now like to hand, the conference over to your host today, Mr. John Paul Sir. Please go ahead.
Thank you operator.
Hello, everyone and thank you for joining us today.
My name is Chad and I will help host the earnings call.
<unk> earnings release was distributed earlier and is available on the IR website.
The Pandora dot com as well as through global Newswire services.
Before we begin I would like to refer you to our safe Harbor statement in the earnings press release.
Which applies to this call.
We will make certain forward looking statements.
Also this call includes discussions of certain non-GAAP financial measures.
Please refer to our earnings release, which contains a reconciliation of non-GAAP measures.
<unk> GAAP measures.
Joining us today on the call are Chen Lei, our chairman and Chief Executive Officer.
<unk>, our VP of finance.
Later, we will make some general remarks on our performance for the past quarter and our strategic focus.
James will then take us through our financial results for the second quarter ended June 32022.
During the Q&A session layer will answer your questions in Chinese and I will help translate.
Please note that all translations provided for reference purposes only.
In case of <unk>.
Discrepancy between the original remarks and that translated version statements and the original remarks should prevail.
Now it is my pleasure to introduce our chairman and Chief Executive Officer, Chen Lei Lei. Please go ahead.
Thank you, Ken and Hello, everyone.
Thank you for joining our earnings call for the second quarter of 2022.
Let me start by giving a brief overview of our second quarter results.
Our total revenue for this quarter.
The 31 4 billion.
This represents a year over year increase of 36%.
We witnessed.
China's consumption during the second quarter.
Upbringing temporarily affected in early part of the quarter.
Pent up demand once the diseased things return to normal.
And consumer sentiment in the graduate be recovered in the second half of Q2.
Since mid May we launched several campaigns and disputed a coupon.
Both consumer confidence.
Such a recovery in consumer confidence was also reflected in a positive reception for this year's June 18th shopping Festival.
During the June 18th shopping festival.
We continue to focus on bringing our customers more savings and more funds.
We are encouraged to see consumers buying from a wider range of categories.
For example categories.
Cultural produce.
C G.
<unk> electronics.
<unk> all experienced solid consumer demand during the festival.
Also mol.
And more brands partnering with us.
I think maybe I'll use our platform to launch their new products.
This ISI.
That consumers and merchants are fighting values in our platform.
Having said that we still have a long way to go before fully meeting our consumers' evolving needs.
Our business activities and investment.
During the last quarter.
Especially in the first half.
Short term external factors, such as remote working and the travel restrictions caused delays of certain projects.
<unk> promotional events and Agri tech initiatives.
Even though this might make quarterly financials look better.
The long term prospect of our platform may be affected.
Especially considering a color that industry dynamics.
Therefore.
Has become more important than ever to step up our investment and the beauty of our call.
All capabilities.
We must make any possible improvement and create value for all consumers business partners and <unk>.
Okay.
For consumers, we're constantly on the lookout for new unmet need.
Deteriorating services.
Address those needs.
For example.
April .
A spike in consumer demand for fresh food groceries in the daily necessities in Shanghai.
To meet this demand.
We set top especially section European global App for residents to buy fresh food and essential items.
And have been delivered within 48 hours.
Hello easily initio 20 by ICANN.
We quickly expanded the collection to around 300 for that.
Essentials like right at the cooking oil.
To diapers and hygiene products.
Given the surge in demand and limited logistical capability.
We also offered more delivery flexibility through the pooling of orders by housing company.
Here, we will likely take a moment to express our gratitude.
We work hard to ensure the operation of our platform in the past quarter.
The hard work third many consumers in real time.
And we are deeply thankful and proud of their contribution.
I will say is gradually returned to normal.
We also launched various events to promote seasonal agricultural produce.
For instance in late May.
In response to consumer demand, we launched a campaign to help consumers.
<unk> enjoys seasonal June .
Across the country.
This event was well received by consumers.
Sales of Lee Chief surged, 158% compared with a year ago.
While orders increased significantly for other food.
What the Mylan Coco not in the quake.
Consumer feedback.
We wrote off a year of fresh produce of China in nature It Dave.
<unk> daily newspaper.
This initiative will introduce.
The unique characteristics of <unk>.
Different agricultural specialties across the country to all consumers.
And contribute bank income for local farmers.
Well merchant.
We work closely to ensure a stable supply.
Especially at the start off a quarter, where the supply chain will affect it.
For example, <unk>.
Actively provided traffic updates to.
To help our merchants backup.
The chart then adjusting.
We also launched the campaign and the measures to have a small and medium sized businesses agriculture merchants on our platform.
For example.
Total crossing the operations quickly contacted local suppliers.
Maybe a blend that farmers in certain regions.
<unk> to sell their vegetables due to traffic disruption.
We've seen a strong periodic time.
We manage to sell hundreds of.
That's both through our platform.
Directly helping our farmers avoid financial losses.
To support our final merchant.
We will continue to waive the sales commission.
Equity cultural produces.
As a technology company with its roots in agriculture.
We firmly believe that the technology can serve as a forward look.
Good.
We see rural communities by May 15th so great culture.
e-commerce by new jobs and higher incomes.
Young people now have an opportunity to start the online recently.
In their hometown.
Close to their families.
This benefits, both economic and social tangible and intangible.
We've mentioned before that we have trained hundreds of thousands of new farmers.
Supporting again to set up all of our businesses and helping the local communities to sell their produce.
In addition to Tommy.
We hope to further unleash the vitality of the rural economy by starting the new craftsmen progress.
So with agriculture.
We are going to help local artisan craftsman promote traditional crop.
Butte there Brad.
Why does the.
Says two bucket.
We also expanded our total redo months campaign to promote a lot of reading my young students.
Yes.
After today, we have donated over.
250000 carefully selected books.
We hope that such efforts.
Can do our product and contributing to a better future for the future.
To conclude.
We deal with trend from quarter to quarter.
We remain focused on building long term intrinsic value and investing for the future.
We will speak closely to our core principles of benefit all.
People first at the moment.
And stay committed to build a platform that serves as a fourth local.
Thank you.
With that I will hand over to Jean.
Thank you Li Hello, everyone.
We'll go through our performance in the quarter ended June 32022.
In terms of P&L Alberto.
Our total revenue in the quarter were RMB 31 4 billion.
They're just 6% from RMB 23 billion in the same quarter of 2021.
This was mainly driven by an increase in revenues from online marketing services and transaction services.
Offset by a decrease in revenues from <unk> trials.
Revenues from online marketing services, and others were RMB 25, <unk> this quarter.
39% income pouch with different peer out Jeff 2021.
This was primarily due to increases in merchant activities as a result of a consumption recovery.
As Les has mentioned.
Just your answer Rick cabaret in consumer sentiment and the light to parts of the quarter.
Especially during the June 18th shopping festival.
Our transaction services revenue this quarter.
<unk> six <unk>.
Of 107% versus the same peer of 2021.
Moving on to cost and expenses.
Our total cost of revenues increased 1% from RMB seven 9 billion in Q2, 2021, RMB 8 billion this quarter.
Total operating expenses this quarter were RMB 14 8 billion.
So I was just RMB 13, 2 billion in the same quarter of 2021.
The postponement of certain projects, including promotional events and agriculture reshaped.
As well as lower business related expenses during the first half of the quarter.
Temporarily affected our overall expenses.
Thanks gradually returned to the normal.
We incurred more expenses during the second half of this quarter.
Our total non-GAAP operating expenses as a percentage of total revenues has declined from 52% in Q2 2021.
241% in the fourth.
Carter.
Looking into specific expensive items.
Our non-GAAP sales and marketing next quarter, RMB 10 8 billion.
Up 8% versus the same quarter of 2021.
Our non-GAAP basis, our sales and marketing expenses as a percentage of <unk>.
Revenue this quarter.
34%.
Compared with 43% for the same quarter in 2021.
Our non-GAAP general and administrative expenses were RMB $164 7 million.
That's just RMB $213 8 million in <unk> 2021.
Our non-GAAP research and development expenses were RMB, one 9 billion.
An increase of 11% from RMB, one 8 billion in the same quarter of 2021.
The increase was primarily due to an increase in headcount and the recruitment of more experienced R&D personnel.
Operating profit for the quarter was RMB eight 7 billion on a GAAP basis.
Compared with operating profit of RMB 2 billion in same quarter of 2021.
non-GAAP operating profit was RMB 10 5 billion.
Relative to operating profit of RMB, three 2 billion in the same quarter of 2021.
Net income attributable to ordinary shareholders were RMB eight 9 billion.
Compared with RMB, two 4 billion in the same quarter of 2021.
Basic earnings per ads was RMB seven point is there a sex and dilute earnings.
As worth RMB 622.
Basic earnings per ads of RMB, 193, and diluted earnings per ads of.
RMB 169 in the same quarter of 2021.
non-GAAP net income attributable to ordinary shareholders was RMB 10 8 billion.
Compared with RMB, four 1 billion in the same quarter.
Yes.
non-GAAP diluted earnings per ads was RMB <unk> 54.
Versus RMB 285, <unk> <unk> 2021.
Now, let me move on to cash flow.
Our net cash flow generated from operating activities to RMB <unk> 4 billion.
Compared with RMB, seven 4 billion in some quarter of 2021.
Primarily due to the increase in net income and changes in working capital.
As of June 32022, the company had RMB 119, 4 billion in cash cash equivalents and short term investments.
To conclude.
Profitability in the past quarter, which mainly attributable to a few short term factors that may not repeat it in the future.
But we saw good user engagement during the past quarter.
As competition remains intense.
Not sure whether that she engagement momentum will continue.
Second project performance and lower business related activities.
<unk> expenses in Q2.
We view this factor just relatively temporary in nature.
In fact, we.
Incurred higher expenses in the second half of Q2, when things return to normal.
Therefore, even that process in the second quarter are mainly due to a combination of sabra short term factors.
We do not expect to profitability in the past quarter to serve as a benchmark for future quarters.
Thank you.
This concludes my prepared remarks.
Thank you Jamie.
Next we will move on to the Q&A session.
For today's Q&A session late in June we will take questions from analysts on the line.
We are happy to take a maximum of two questions panelists.
Let me answer your questions in Chinese and now will help translate.
Place remarks for ease of reference.
Operator, we are now ready to take questions from analysts on the line.
Thank you ladies and gentlemen, we will now begin the question and answer session.
If you wish you asked the question.
Please press star one one on your telephone and wait for a name to be announced.
They are requested to restrict to two questions each time.
First question.
Alice Wong from credit Suisse.
Go ahead.
So is it one is okay. So what if you would.
<unk> do you guys look when you say the <unk> when we got we got recently chanting that conference it sounds good.
RJ as soon you issue that got you to the task.
Joe You said, a woman beholder Trudeau using some mono.
Thiago <unk> Python Amanda one is.
Copa Oklahoman comes to you gentlemen, can pile quanta <unk> don't know.
What kind of a docking pie you Tania Almond total bill upon us helpful Corrado.
It took a few women Tito again, youre going to have a banking too.
You're talking about a woman who have smartphone parts, you're seeing brought up in Pi.
If you can kind of tissue well excuse me finally Asia.
I have two questions first on the second quarter growth rate, we noticed a very strong online marketing service revenue.
A strong growth of 39% year on year and.
We celebrate some of the previous two quarter, what's the reason behind this quarter strong growth.
And the second question is on the brand can management speak more about our progress on bringing more brands onto our platform with so many brands participate in our <unk> you bet.
Our growth for this quarter and what's your overall plan for the brand recruitment. Thank you.
Yeah.
Okay.
We've got good morning.
According to Google.
Sure sure.
Tom.
Hi.
And kind of shelf tags.
Uh huh.
Yes.
Can you go to the phones.
Will be choppy.
Kenneth.
Happy to take your questions.
First about other revenue growth.
Starting from the second half of May.
We saw trends of consumption recovery.
Also we absolutely made efforts to facilitate consumer spending.
Offering.
Forms of promotion to help with consumption recovery.
Good morning.
Got it.
About one point on that.
Okay.
Okay.
Alright, thank you.
A portion.
So I'll.
Touch on the accordion feature.
And that's kind of a big.
Peter is a bulk order your path.
Yes.
So I'll handle convener those trigger.
And.
This year's June 18 event.
We saw a man in margin.
Ralph brands actively participating.
We also saw solid demand coming from consumers.
Given this background.
Our platform many categories, including <unk>.
<unk> products.
Agricultural produce.
Consumer electronics and cosmetics these categories all had a decent growth our platform.
So anyway, if an mi.
Yes, Jonathan.
This one two months.
So I think in the future.
Okay.
Goldman Sachs.
Cynthia.
<unk>.
Covenant.
Thank you.
<unk> got some issues.
In the future.
Understood.
Okay. So you guys can join Switzerland.
In addition, we always try our best to satisfy consumer demand.
And this is separable from many of our team members' hard work during the past period of time.
They worked very hard to help many consumers meet their essential demand.
And we are grateful toward our teams hard work during this process.
Thank you Mr. Thompson.
Hi, any of the teams.
Thank you Lee.
Our comments will shortly to Ashish what it took for some time.
Got it even Colombia.
Got it.
Sure.
Yes.
Well, Andy that whole Swisher cynosure. So these are frequency of shawcor.
I thought you said that being relieved.
Hum Cedar concurrently.
At the same time.
We also saw that competition landscape is still very intense.
And in terms of satisfying consumers' needs, we have many areas that we.
We can further improve.
And as I mentioned earlier due to our salaries is.
Our overall investment activity during the second quarter was impacted.
And this is actually not as beneficial to our long term competitiveness.
Alright now Michelle.
We achieved the highest cushing.
Okay.
So I'll tell you Bill Shaw.
And we will adapt.
And therefore, we need to further step up our efforts and also strengthen our core capabilities.
So that we can create more value.
For consumers as well as for the Society.
You got Yahoo.
So you can pile on.
Sure.
Hi Hassan.
<unk> is the official alright, so is that being done.
Yes.
Oh.
Maybe you guys hopefully.
I think on the PMA is a component coming from China.
Between the <unk>.
Yes.
And we wish you all you can do the same thing.
Sure.
And as for your second question.
Our brand.
We see that the needs from our consumers on our platform.
Are becoming more and more diversified and different consumers they have different needs.
Different product categories.
And across different consumption scenarios.
Therefore, it is very natural.
Sure.
Then two needs more choices.
And more products.
Well, let me beyond the systems.
Jennifer you too.
Hum.
Sure.
Sure.
And our goal is always to better serve our consumers.
And to bring the.
More savings more fun shopping experience.
Yes.
Okay.
So two questions on that.
Peanuts.
Cool.
Beyond this.
Serena.
Tissue, that's so hard to achieve.
<unk> future is I think your questions on the.
Paul.
Okay.
Tissue.
And in terms of how to serve the consumers.
Believe that essentially the brands go and our goal are well aligned that is to.
Consumers well.
Okay.
Continue to focus on our own part and remain to be a very down to earth and patient.
Okay. Operator, we may now move on to the next analyst.
Your next question comes from Josh <unk> from Bank of America. Please ask your question.
Good evening management. Thanks for taking my questions. My first question is related to the <unk> expansion.
Management share some colors on the reported new initiatives in the overseas market with the latest data any main target market and what the core value proposition of this new business.
And my second question is related to the transaction service revenue.
Transaction service revenue continue to grow faster than the online marketing revenue. This quarter also we actually see it accelerated from last quarter to a triple digit year over year growth.
We now like you know what the reason behind.
What did you find that with <unk>.
Okay.
We will now Glenn.
<unk> you should go what are you thinking maybe Paul I'll quit doing a woman.
I didn't get.
John Kinney, Hal mentioned, Glenn <unk>, Hong Goldman <unk> from Zelman <unk>.
Which entity and John Gould.
<unk> sure well calculate yourself with your stock that you won't do that.
The article Vince you feel glad you opened that user transaction service Joel J required that our Macondo GT two the two question Luna tissue that help us.
So the Tung.
Thank you Sean due to the highly interesting zaslow within that and Ken I'll. Let you guys know is where there can be some time I'm wondering is helpful.
I don't see so much this year.
And Josh.
Oh gosh.
Yeah.
Okay.
Yeah.
Two questions.
Hi.
Could you have done some Canadian Patricia.
Sure John .
Sure.
Hi, Mona.
$10 million.
And then of course you do.
Got it.
And on the Croissant donut.
So this year the potential utility of it.
Joyce So let me address your first question.
And I will hand, it over to Jane to answer your other question.
First on <unk>.
Our oversea.
Business.
First of all we are young company with a relatively young team.
And everyone is continuing to grow and searching for new opportunities during our growth process.
And then.
Hi.
Due to the woman kind of above that.
She's going to guide to quit.
And.
Just give me all the DNR tool in between Zone controller.
Sure Jonathan.
Okay.
<unk>.
She got up quarter.
Sure.
The secret to the council of onshore.
And overseas business is one of the opportunities that we see.
And we also see that the possibility of creating value in this opportunity.
The same time, we also see that many peers in the industry.
Achieving good results.
So we believe that it is a direction that is worth trying out for us.
Okay.
Okay.
And then the <unk>.
What are the future.
So we haven't actually Colm.
Jumping to the street.
Sure Sean.
We can see.
Could we touch.
And with that said.
We will not just simply repeat what others have done in this field.
What is important to us is that.
We will start from the needs of consumers and.
Strive to create our own unique value.
Okay.
EMEA.
Yeah.
Right.
Cheng.
I apologize to see all the time.
She's hungry sugar.
Okay.
China.
Sure Julien.
Okay.
So I think a question Donna.
You may continue.
David while doing so.
Yes.
And at the same time.
We are sufficiently aware that overseas business will be for challenges.
It's will require constant trial and experimentation.
This process with not just happen overnight.
But.
<unk> gained along the way would prove to be very valuable to our company as well to our team. Thank you.
Okay. Thanks for you Catherine guys.
We are talking about transaction service revenue.
Well first we always remain customer centric.
March extended finisher Mac, just a natural result from however serve consumers.
And over the past quarter, because your consumption recovery.
We had key user engagement and transactions.
This contribute to.
<unk> growth.
And in addition for US our business glycol, which does not always match exactly two hour quickly financial reporting cycle and.
We are not managing our business on a quarterly basis.
So can you just comment just see fluctuations between quarters.
We remain focused on serving customers better and invest and create long term value.
Sure.
Okay, operator, we're ready to move on to the next downturn is down the line.
Thank you. Our next question comes from Thomas Chong from Jefferies. Please ask your question.
What is helpful guys.
Got it.
You bet.
What is the problem is when you're done with that.
Alright.
Thanks, Jim.
Thanks, Reuben closed April Torchwood Lasalle.
So I'm wondering Tom if.
If I may.
Hi, Alan.
They all carbon issue can you kind of wonder combo.
Let me just finally, you say well, maybe just talk about the immediate need to issue.
Thanks management for taking my questions. My first question is about cost control and efficiencies.
The macro uncertainties right now and we are seeing a lot of internet companies.
The cost control just wanted to get some comments from management about our cost control.
Strategy and my second question is about our profitability given the second quarter earnings comes in better than market.
Market expectations.
How should we think about the profitability trend in the second half. Thank you.
Taught us anyhow.
ICL.
Yeah.
So shimon.
Since youre doing now moving on to.
<unk> <unk>.
Got it.
Antonio.
To grow our shelf trauma.
This is gino.
Neither one of them.
Hi, Thomas.
So let me address your first question.
First of all.
I believe that we are still in the development stage not the stabilized stage.
And at this point in time.
You have allow us to go and a lot of work to do to serve our consumers as well.
No ma'am.
My first question.
Good luck.
Celebrate the street you on that.
Steve.
This is Sean.
And finally in shell.
Donna Townsell.
For me and I'll try to.
<unk> feature.
Do you agree with Hulu.
And as a part of our development too.
To calculate satisfy consumer demand would take a lot of patients.
Not only do we need to constantly explore but we also need to see.
Key opportunities.
Also make relevant investments.
No.
Once you get to doing that.
Being issued.
No.
Chip bumping trend, though.
Okay.
Sure I mean, 'twenty with whole Luna savings here in Charlotte.
I'm just wondering.
Great.
Each quarter.
Cool.
Got it.
Councillor icon T cell <unk>.
Thank you Doug.
And in the past quarter, and especially during the first half of the second quarter our teams.
That's an activity was impacted.
And during the short term this might bring about decent financial results.
But if we look at it.
Long term perspective.
Actually weakens our competitiveness.
Okay.
Your line on mute.
Yeah.
Uh huh.
Okay.
Funding of the Heinz question in my opinion.
Yes.
Hi, Glenn.
Damon year.
Transforming the company to hold them.
Okay.
Wait shelf for consumers.
I can do the job.
Each home.
We're going to need high tons sheet.
To answer the amendment.
<unk>.
<unk>.
Okay.
And therefore looking ahead.
We would always think about the long term and we remain very committed to.
<unk> investing for the future.
We need to further strengthen our core capabilities.
And.
To continue to focus on investing into the few itself agriculture and R&D over over the long term.
Order to create value for our consumers as well as for the society.
This would support over long term and high quality development and this is my thinking of overall strategies and hope it to address your first question.
Okay. This is Jay Thanks, Thomas I will take your second question.
For your second question about <unk>.
Well as mentioned before we have not changed our strategy on.
Two to focus on profitability, so for the past quarter alone.
Our profitability was mainly attributable to a.
A number of external factors.
Which are mostly short term or whenever you nature.
On the revenue side.
So a good level of user engagement and consumption, which are mostly boosted by consumption of recovery.
At the same time, we still face very intense competition.
For the first five factors such as project delays and decrease in business related activities.
Late you had a short term impact to our Q2 expenses.
And.
To sum up this quarters profitability is due to short term factors combined.
So it is not a good benchmark.
Gotcha backgrounds.
And this is our view on profitability. Thank you.
Operator, we are ready to move on.
Our next question comes from <unk> Yang from fee ICC. Please ask your question.
Sure.
<unk> will go into loan that attack.
Note that shows you arent going to get it done.
Now with Japan, and then Macquarie law tissue are controlling kind of on the table.
It takes you 100 virtual contact.
That's the only type of ship.
Yes, okay.
I'll tell you I understand.
You got to be sure.
Monica told Amit Hi, Tayo this is Sean.
So you would think that Q2, Joe mosquitoes wheelchair mountain the bankrupt.
Yes.
Yes sure.
Zero zero, and they're showing where the things with them.
Got it.
Sure shoot it that way.
And I think it was the only.
Thank you.
Okay.
They don't see income gotten it down to you guys tell you should pay Tricia kosher.
Hello, Glenn.
Thanks, Josh.
Well thanks, Jason.
Then they.
They go to Sherri I'm also feeling.
Please go ahead Sir.
I think thanks management for taking my question. My first question is about total growth rate basing that total grocery is reaching a relatively steady state.
<unk> got to care about loss reduction on the unit economy.
Can management management share some color on the future prospects of total growth rate. After we also care more about the <unk>.
<unk> also how really the increase in total growth rate financial leverage contributor to the firm's level margin this quarter.
My question question also regarding to the operating expense ratio at the company's revenue continue continues to grow and the operating leverage continue to play is to grow the company's expense ratio has dropped to 47%.
Should we expect the situation to be best in Nepal, and Meanwhile, we recorded.
Do you think the growth in revenue could management comment.
How we manage to optimize expense, but also maintaining strong growth. Thank.
Thank you.
Hi al.
Suicide Bloom at Tampa.
Okay.
Yes.
Google My time that she does.
Sure.
Sure.
Yes.
We assume there's going to be it.
Sure.
Sure.
I'm sorry.
Right.
Zero with Macquarie.
No I think we will assemble.
This is Andrew in the completion of Dol.
Alright.
Tom.
Thank you.
Hi by Al So, let me talk a little bit about our total growth rate first.
First from a strategy point of view.
Grocery.
Is a natural extension from our platform.
And in terms of how we are able to leverage our value proposition in terms of.
Agriculture to better serve consumers. It also plays a very important role.
And this is the project that we would pay.
Patiently investing too.
And this strategy will not be impacted by external short term changes.
Good morning.
One woman.
The Chevron tweak.
<unk> maintained INR.
<unk> come back.
Okay. Thank you.
Thanks <unk>.
Mingle with you shortly.
Okay great.
Sure.
Yes.
Since we are in.
Traduce Google grocery.
The second half of 2020.
We have also seen that.
In the areas of matching localized demand and localized supply as well.
Area.
Fulfillment.
Service can provide consumers with a fresher.
More affordable.
And more convenient agriculture products.
It can create tangible value for consumers.
Yes sure.
Yes.
And then on <unk> Dupont.
Thank you.
<unk>.
Hey, Bob.
Give us a call yet.
The <unk> patient.
TSA yet.
Okay.
Timna towards.
But Houston.
Cunard is willa, finishing it sounds like that.
Yes.
And at the same time.
For the total grocery service, we also see many areas that we can improve.
To give you some examples here.
Now to match supply and demand more.
Efficiently.
<unk>.
Secure.
More quality products and produce.
Now too.
To optimize the distribution network and to further improve.
Fulfillment service quality just to name a few here.
And we are constantly adjusting and.
Improving all of this is to make.
Make effort to bring better service experiences to consumers.
And I know once again.
So all the departure.
So moving suggesting ways.
Hello, Josh <unk> at BMO.
Beyond that.
Thank you.
Sure.
Yes.
And we have always remained a key.
Consumer centric and would remain.
It remains to be so.
However, our top priority is to create value for our consumers and this would never change.
For the financial metrics.
Our retail and a reflection.
<unk>, we serve consumers. Thank you.
Okay. Thanks.
On your question on operating expenses trend.
Well I'll.
Our total operating expenses as a percentage.
Percentage of revenue decreased to 14, 7% this quarter.
As you just mentioned.
<unk>.
I want to point out here.
<unk> NAND short term factors, such as project delays and lower business activities.
Cost of such decrease so it is unlikely to continue.
In fact.
As things gradually went back to normal expenses during the second half of the quarter actually increased compared to the first half. So the Q2 hopefully expense us may not be a good benchmark.
Also just as previous mentioned, we believe can do though is still in the development stage.
Such impacting our investment is not as good for us from business perspective.
Competition is still intense.
So we need to continue to invest.
Hello, Egypt addressed your question. Thank you.
Hi, operator, we may now take questions from the next analyst on the line.
Thank you.
Our next question comes from the line of Natalie <unk> from Hi, Tal International. Please ask your question Natalie.
Uh-huh since the Atlanta.
No longer in queue.
The D. The Lasalle raised at.
And then maybe Dave because I am already got Danielson.
It depends.
Nathan Milton.
<unk> got I guess your attitude.
And again the same way.
Okay.
To me Patrick you cant Natasha Caballero will depend on.
<unk> one <unk>.
Canadian <unk> conference.
Would that be.
Alright.
Now to the reconciliation.
Yes, I do any of their fleet.
Please let me assure lesser Danielle Huntington Sachin Shah.
Hi.
All of them, how do you <unk>, yes, yes.
Can you spell out the exact as you will see them be onshore.
Then.
Good how are you also underscored by nickel, but maybe Doug I know you. Thank you. Thank you.
I'll, probably challenging European head of marketing now.
India has been a true high accuracy.
The parachute.
She can use ikea dividing it downturn, depending upon that Joshua So how would you do more.
Maybe they didn't do so well.
It should have a stable <unk> does that won't be the grilled dogs Africa, who don't do shut down.
Michael This is John .
Is that <unk> needed to.
And then check me myself.
Sure. Thank you for taking my question to Chris wanted to regarding that Department policy.
We have seen some time asking Nathan.
Data generation that started to shift more towards a quick culture program.
But we have been too much.
The impact in terms of Goldman.
Goldman generative Thunder pump in Agriculture program.
Wondering have.
That's priority <unk>.
Should we expect.
When external factors that discipline concrete.
Consumer sentiment improves when you prioritize Yang.
Our pipeline related marketing and what are your current key priorities.
Bringing <unk> to the next level would be great. If we can get SaaS regarding our internal objective.
Alrighty platform E Commerce, agriculture, and maybe that new initiatives related with overseas expansion.
And also yes.
Have a strong balance sheet with Oba.
100, <unk> income from our cash we have.
<unk> introduced plan to distribute value for shareholders.
Just wondering at the PBT have seen their applause anger.
Consideration thank you.
And that will.
Great guys. Thank you Glenn.
You seem to you Wendy.
So we've seen that that's all kind of in general.
Uh huh.
Thank you for that.
I'm also on channel machines. Thank you.
So Michelle for Utah.
It can be hard to shoot.
Sure.
Steven Arena.
Okay sure.
And when the lunch offerings and the jewelry.
You bet.
Hi, Matt sleep, So let me address your question.
Priority for us.
So first of all we need to look at.
Which we face of her business and.
From which we start our business.
We are dedicated to serving the rapidly evolving consumer needs and however development.
Ethan separable from the support from our consumers and this is the duty.
Our duty as a company to serve consumers well.
Sure.
I don't see that we've won.
And then we will go ahead.
Great.
Team with adjusting to it.
You didn't see CDP schulman into machine.
So I think the mood you sound manner.
Good.
Gotcha.
Yes.
Yes.
We can be.
And as our user base our richest color.
Scale it is our focus to.
Better serve them.
And also deepen their trust in Kingdom door sys.
Increased mindshare.
Towards this goal we have.
Shifted our attention more toward agriculture, and R&D and this will remain to be our priority.
No I mean, you can't download.
Prominent whole Luna gold Tricia system, then we shall Fayetteville historically in that kind of accounts.
We have also seen that.
Investments in these two areas can bring about a tangible value to consumers and the society.
<unk> Com site.
EMEA the sulfate the window.
Thank you Sean.
Some machine.
Got it on the shelf right.
Thanks <unk>.
Located in Tempe.
Unfortunately won't make it.
Tissue Houston.
We continue to believe.
Sure.
Let me underline that this is an important.
Yeah.
First let's look at agriculture.
In the realm of consumption.
April two.
Enable more efficient online transaction and.
We are able to large consumers enjoy a fresher and more.
Fourth for our party and we also improved.
The distribution efficiencies through the use of technology.
Distribution.
So there's some time Glenn.
<unk>, maybe it could bump.
<unk> got now.
GT the tweeting Cindy shown in this half with the patient.
Hum.
On the call.
With DSO.
In terms of agriculture production.
We facilitated the technology adoption.
And usage to help farmers improve yield and we also actively provided training.
Two small agricultural merchants and producers to help them receive higher stay.
Stabler income.
Okay was there any farm in <unk>.
You can find that Linda I'm going to go.
Hum.
Okay.
The official opening call.
He said I'm going to go with yet.
Maybe coming back and doing the caps.
In addition to that by strengthening our R&D capabilities.
We are also able to better understand consumers new demands and preferences.
<unk> improved the shopping experience.
So that we can create more value for them.
And a portion of it will come down.
With these actions.
<unk> team that under his Honeywell.
Understood.
I'm not talking about the future.
The Puma AE.
Thank you Sean.
With this issue.
<unk> seen the slippage.
Hum.
Come on board.
Two quick.
What is more.
Over the past period of time, I see Oliver young team members growing up through their responsibilities.
De ensured the stable operations of our platform and they also helped satisfy consumer essential demand and created social value in the process.
We will create more opportunities for these team members to take on more responsibilities and grow.
Okay TDD.
Tumor treating dogs.
So in that tissue that nicely.
Can you see that Houston.
Towards the Harlequin, which as you.
Sure.
Slide number 20.
And we are still in the development stage, so we need to continue to invest patiently and.
Improve our teams' capabilities, so that we can better serve consumers.
What I've just mentioned are our top priorities.
Thanks Natalie.
I will take your second question on cash balance.
And I think this is essentially on capital allocation.
Well, given the current competitive landscape and challenges.
We still have many areas to improve.
To help us satisfy consumers' demand.
For example.
<unk> and R&D, so when entering fast patiently in these areas.
Meanwhile.
Different companies may be in different development stages.
As we have mentioned for US we are still in the investment phase.
While we continue to place more focus on these areas.
Two general loan 10 value. Thank you.
Okay. Thanks airline for joining us on the conference call today due to time limits.
We hereby conclude the call now if you have any further questions. Please do feel free to reach out to our IR team. Thank you and have a great day.
Thank you ladies and gentlemen, this does.
Conclude our conference for today. Thank you for participating you may all disconnect.