拼多多 (PDD) 2022 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to Pinduoduo Second Quarter 2020 Earnings Conference Call. (Operator Instructions) I must advise you that this conference is being recorded today. I would now like to hand the conference over to your host today, [Mr. Chen Pang]. Sir, please go ahead.

女士們，先生們，感謝大家的支持，歡迎來到拼多多2020年第二季度財報電話會議。 （操作員說明）我必須告訴您，今天正在錄製這次會議。我現在想把今天的會議交給你們的主持人，[Mr.陳龐].先生，請繼續。

Thank you, operator. Hello, everyone, and thank you for joining us today. My name is Chen, and I will help host the earnings call. Pinduoduo earnings release was distributed earlier and is available on the IR website at investor.pinduoduo.com as well as through GlobeNewswire services.

謝謝你，接線員。大家好，感謝您今天加入我們。我叫陳，我將幫助主持財報電話會議。拼多多財報發布較早，可在投資者關係網站investor.pinduoduo.com 以及GlobeNewswire 服務上獲取。

Before we begin, I would like to refer you to our safe harbor statement in the earnings press release, which applies to this call as we will make certain forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to GAAP measures.

在我們開始之前，我想向您推薦我們在收益新聞稿中的安全港聲明，該聲明適用於本次電話會議，因為我們將做出某些前瞻性聲明。此外，本次電話會議還包括對某些非公認會計原則財務措施的討論。請參閱我們的收益發布，其中包含非公認會計原則措施與公認會計原則措施的對賬。

Joining us today on the call are Chen Lei, our Chairman and Chief Executive Officer; Liu Jun, our VP of Finance. Lei will make some general remarks on our performance for the past quarter and our strategic focus. Jun will then take us through our financial results for the second quarter ended June 30, 2022. During the Q&A session, Lei will answer questions in Chinese, and I will help translate. Please kindly note that all translations provided are for reference purposes only. In case of any discrepancy between the original remarks and the translated version, statements in the original remarks should prevail.

今天加入我們電話會議的是我們的董事長兼首席執行官陳磊；我們的財務副總裁劉軍。雷軍將對我們過去一個季度的表現和我們的戰略重點做一些概括性的評論。隨後，Jun 將為我們介紹截至 2022 年 6 月 30 日的第二季度財務業績。在問答環節，雷將用中文回答問題，我將幫助翻譯。請注意，所提供的所有翻譯僅供參考。原文與譯文如有歧義，以原文為準。

Now it is my pleasure to introduce our Chairman and Chief Executive Officer, Chen Lei, please go ahead.

現在很高興介紹我們的董事長兼首席執行官陳磊，請繼續。

Thank you, Chen, 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 was RMB 31.4 billion. This represents a year-over-year increase of 36%. We witnessed the resilience of China's consumption during the second quarter. At being temporarily affected in the early part of the quarter, pent-up demand was released and things returned to normal and consumer sentiment gradually recovered in the second half of Q2.

謝謝陳，大家好。感謝您參加我們 2022 年第二季度的財報電話會議。讓我首先簡要概述一下我們的第二季度業績。本季度我們的總收入為人民幣 314 億元。這意味著同比增長 36%。我們見證了第二季度中國消費的韌性。在季初暫時受到影響的情況下，被壓抑的需求得到釋放，一切恢復正常，消費情緒在二季度後半段逐漸恢復。

Since mid-May, we launched several campaigns and disputed coupons to bolster consumer confidence. Such recovery in consumer confidence was also reflected in a positive reception for this year's June 18 shopping festival. During the June 18 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 such as agriculture produced FMCG, household electronics and cosmetics all experienced solid consumer demand during the festival.

自 5 月中旬以來，我們發起了多項活動並就優惠券提出異議，以增強消費者信心。消費者信心的這種複蘇也反映在今年 6 月 18 日購物節的積極接待上。在 6 月 18 日購物節期間，我們將繼續專注於為客戶帶來更多優惠和更多樂趣。我們很高興看到消費者從廣泛的類別中購買。例如，農業生產的快速消費品、家用電子產品和化妝品等品類在節日期間都出現了強勁的消費需求。

Also, more and more brands are partnering with us and many of them use our platform to launch their new products. These are signs that consumers and merchants are finding 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 investments were affected 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, including promotional events and agri-tech initiatives.

此外，越來越多的品牌與我們合作，其中許多品牌使用我們的平台推出新產品。這些跡象表明消費者和商家正在我們的平台中尋找價值。話雖如此，在完全滿足消費者不斷變化的需求之前，我們還有很長的路要走。我們的業務活動和投資在上個季度受到影響，尤其是在上半年。遠程工作和旅行限制等短期外部因素導致某些項目延遲，包括促銷活動和農業技術計劃。

Even though this might make the quarterly financials look better, the long-term perspective of our platform may be affected, especially considering the current industry dynamics. Therefore, it has become more important than ever to step up our investments and build up our core capabilities. We must make every possible improvement and create value for our consumers, business partners and the society.

儘管這可能會使季度財務狀況看起來更好，但我們平台的長期前景可能會受到影響，尤其是考慮到當前的行業動態。因此，加大投資、打造核心能力變得比以往任何時候都更加重要。我們必須盡一切可能的改進，為我們的消費者、商業夥伴和社會創造價值。

For consumers, we are constantly on the lookout for new unmet needs and iterating 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 set up a special section in the Pinduoduo app for residents to buy fresh food and essential items and have been delivered within 48 hours. On the initial 25 items, we quickly expanded the selection to around 300 products from essentials like rice and the cooking oil to diapers and hygiene products.

對於消費者，我們一直在尋找新的未滿足需求，並迭代我們的服務來滿足這些需求。例如，在 4 月份，我們看到上海消費者對新鮮食品、雜貨和日用品的需求激增。為滿足這一需求，我們在拼多多APP中設置了專供居民購買生鮮和生活必需品的專區，並已在48小時內送達。在最初的 25 種產品中，我們迅速將選擇範圍擴大到約 300 種產品，從大米和食用油等必需品到尿布和衛生用品。

Given the surge in demand and limited logistical capability -- capacity, we also offered more delivery flexibility through the pooling of orders by housing community. Here, we would like to take a moment to express our gratitude to the colleagues who work hard to ensure the operation of our platform in the past quarter. Their hard work served many consumers in their time of need, and we are deeply senseful and proud of their contribution.

鑑於需求激增和有限的後勤能力——容量，我們還通過住房社區的訂單集中提供了更大的交付靈活性。在這裡，我們想花一點時間對在過去一個季度為確保我們平台正常運行而努力工作的同事表示感謝。他們的辛勤工作在他們需要的時候服務了許多消費者，我們為他們的貢獻深感自豪和自豪。

Since gradually we turn 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 discover and enjoy seasonal fruits from across the country. This event was well received by consumers. Sales of lychee first 158% compared with a year ago, while orders increased significantly for other fruits such as watermelon, coconut and the grape.

隨著我們逐漸恢復正常，我們也開展了各種活動來推廣季節性農產品。例如，5月下旬，為了響應消費者的需求，我們發起了一項活動，幫助消費者發現和享用來自全國各地的時令水果。本次活動受到了消費者的一致好評。荔枝銷量同比增長158%，而西瓜、椰子、葡萄等其他水果的訂單量大幅增長。

(inaudible) consumer feedback, we rolled out a year of fresh produce of China initiative together with some daily newspapers. This initiative will introduce the unique characteristics of different agricultural specialties across the country to our consumers and contribute to better income for local farmers.

（聽不清）消費者反饋，我們與一些日報一起推出了中國新鮮農產品一年倡議。這一舉措將向我們的消費者介紹全國不同農業特產的獨特特色，並為當地農民增加收入做出貢獻。

For merchants, we work closely with them to ensure stable supply, especially at the start of the quarter where the supply chain were affected. For example, we proactively provided traffic updates to help our merchants better plan and address their logistics. We also launched (inaudible) and the measures to have small and medium-sized businesses and agriculture merchants on our platform. For example, our total grocery operations quickly contacted local suppliers where we lend that farmers in certain regions were unable to sell their vegetables due to traffic disruption. Within a short period of time, we managed to sell hundreds of tons of vegetables through our platform directly helping the farmers to avoid financial losses. To support our farmer merchant, we will continue to weigh the sales commissions of agricultural produces.

對於商家，我們與他們密切合作以確保穩定供應，尤其是在供應鏈受到影響的季度初。例如，我們主動提供流量更新，以幫助我們的商家更好地規劃和解決他們的物流問題。我們還推出了（聽不清）和在我們的平台上擁有中小企業和農業商人的措施。例如，我們的整個雜貨店業務迅速聯繫了當地供應商，我們向當地供應商提供貸款，讓某些地區的農民因交通中斷而無法出售蔬菜。在短時間內，我們通過我們的平台成功銷售了數百噸蔬菜，直接幫助農民避免了經濟損失。為了支持我們的農商，我們將繼續權衡農產品的銷售佣金。

As a technology company with its roots in agriculture, we firmly believe that the technology can serve as a force for good. We see more communities benefiting flow agricultural e-commerce by new jobs and higher income. Young people now have the opportunity to start their own online businesses in their home town and be close to their families. These benefits are both economic and social, tangible and intangible.

作為一家植根於農業的科技公司，我們堅信科技可以成為向善的力量。我們看到更多社區通過新的就業機會和更高的收入受益於流動農業電子商務。年輕人現在有機會在家鄉開展自己的在線業務，並與家人親近。這些好處既是經濟的，也是社會的，有形的和無形的。

We mentioned before that we have trained hundreds of thousands of new farmers, supporting them to set up online businesses and helping their local communities to sell their produce. In addition to farming, we hope to further unleash the vitality of the rural economy by starting the new (inaudible) program.

我們之前提到，我們已經培訓了數十萬新農民，支持他們建立在線業務並幫助他們的當地社區銷售他們的產品。除了農業，我們希望通過啟動新的（聽不清）計劃來進一步釋放農村經濟的活力。

As with agriculture, we aim to help local artisans and the craftsmen promote traditional crafts, build their brands and widen their access to market. We also expanded our Duo Duo Reading Month campaign to promote a lot of reading among young students in rural areas. As of today, we have donated over 250,000 carefully selected books. We hope that through such efforts, we can do our part in contributing to a better future for this use.

與農業一樣，我們旨在幫助當地工匠和工匠推廣傳統手工藝、建立品牌並擴大市場准入。我們還擴大了“多多閱讀月”活動，在農村地區的年輕學生中推廣大量閱讀。截至今天，我們已經捐贈了超過25萬本精心挑選的書籍。我們希望通過這樣的努力，我們可以為這個用途的更美好未來貢獻自己的一份力量。

To conclude, as we deal with trends from quarter-to-quarter, we remain focused on building long-term intrinsic value and investing for the future. We will stick closely to our core principles of benefit all people first and more open and stay committed to build a platform that serves as the force for good. Thank you. With that, I will hand over to Jun.

總而言之，在我們處理季度趨勢的過程中，我們仍然專注於建立長期內在價值和為未來投資。我們將牢牢堅持造福於眾、更加開放的核心理念，堅定不移地建設好向善的平台。謝謝你。有了這個，我將交給君。

Thank you, Lei. Hello, everyone. I will go through our performance in the quarter ended June 30, 2022. In terms of P&L, our total revenue in the quarter were RMB 31.4 billion, up 36% 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 decrease in revenues from 1P trials. Revenues from online marketing services and others were RMB 25.2 billion this quarter, up 39% compared with the same period of 2021. This was primarily due to increase in merchant activities as the result of consumption recovery.

謝謝你，雷。大家好。我將回顧一下截至 2022 年 6 月 30 日的季度業績。在損益方面，我們本季度的總收入為人民幣 314 億元，比 2021 年同期的人民幣 230 億元增長了 36%。這主要是由於在線營銷服務和交易服務的收入增加，但被 1P 試用收入的減少所抵消。本季度網絡營銷服務等收入為人民幣252億元，較2021年同期增長39%，主要是消費回暖帶動商戶活動增加。

As Lei has mentioned, we experienced a recovery in consumer sentiment in the latter part of the quarter, especially during the June 18 shopping festival. Our transaction services revenue this quarter were RMB 6.2 billion, up 107% versus the same period of 2021. Moving on to cost and expenses. Our total cost of revenues increased 1% from RMB 7.9 billion in Q2 2021 to RMB 8 billion this quarter. Total operating expenses this quarter, were RMB 14.8 billion versus RMB 13.2 billion in the same quarter of 2021. The postponement of certain projects, including promotional events and agricultural initiates as well as lower business-related expenses during the first half of the quarter temporarily affected our overall expenses.

正如雷軍所說，我們在本季度後期經歷了消費者信心的複蘇，尤其是在 6 月 18 日的購物節期間。本季度我們的交易服務收入為人民幣 62 億元，與 2021 年同期相比增長 107%。繼續成本和費用。我們的總收入成本從 2021 年第二季度的 79 億元人民幣增加到本季度的 80 億元人民幣，增長了 1%。本季度總運營費用為人民幣 148 億元，而 2021 年同期為人民幣 132 億元。本季度上半年某些項目的推遲，包括促銷活動和農業啟動以及較低的業務相關費用暫時受到影響我們的總開支。

As things 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 to 41% in this quarter. Looking into specific expenses items. Our non-GAAP sales and the marketing this quarter, RMB 10.8 billion, up 8% versus the same quarter of 2021. On a non-GAAP basis, our sales and marketing expenses as a percentage of our revenue this quarter was 34% compared with 43% for the same quarter in 2021.

隨著事情逐漸恢復正常，我們在本季度下半年發生了更多費用。我們的非 GAAP 總運營費用佔總收入的百分比從 2021 年第二季度的 52% 下降到本季度的 41%。調查具體的費用項目。本季度我們的非公認會計準則銷售額和營銷費用為人民幣 108 億元，與 2021 年同期相比增長 8%。按非公認會計原則計算，本季度我們的銷售和營銷費用佔收入的百分比為 34%，與 2021 年同期相比2021 年同一季度為 43%。

Our non-GAAP general and administrative expenses were RMB 164.7 million versus RMB 213.8 million in the same quarter of 2021. Our non-GAAP research and development expenses were RMB 1.9 million, an increase of 11% from RMB 1.8 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 8.7 billion on a GAAP basis compared with operating profit of RMB 2 billion in the second quarter of 2021. Non-GAAP operating profit was RMB 10.5 billion versus the operating profit of RMB 3.2 billion in the same quarter of 2021.

我們的非美國通用會計準則一般和管理費用為人民幣 1.647 億元，而 2021 年同期為人民幣 2.138 億元。我們的非美國通用會計準則研發費用為人民幣 190 萬元，比上一季度的人民幣 18 億元增長 11% 2021. 增長主要是由於員工人數增加和招聘更有經驗的研發人員。按美國通用會計準則計算，本季度營業利潤為人民幣 87 億元，而 2021 年第二季度的營業利潤為人民幣 20 億元。非美國通用會計準則營業利潤為人民幣 105 億元，而同期營業利潤為人民幣 32 億元2021 年。

Net income attributable to ordinary shareholders of RMB 8.9 billion compared with RMB 2.4 billion in the same quarter of 2021. Basic earnings per ADS was RMB 7.06 and the diluted earnings per ADS was RMB 6.22 versus basic earnings per ADS of RMB 1.93 and diluted earnings per ADS of RMB 1.69 in the same quarter of 2021. Non-GAAP net income attributable to ordinary shareholders was RMB 10.8 billion compared with RMB 4.1 billion in the same quarter last year. Non-GAAP diluted earnings per ADS was RMB 7.54 versus RMB 2.85 in the same quarter of 2021.

歸屬於普通股股東的淨利潤為人民幣 89 億元，而 2021 年同期為人民幣 24 億元。每股 ADS 基本收益為人民幣 7.06 元，每股 ADS 攤薄收益為人民幣 6.22 元，而每股 ADS 基本收益為人民幣 1.93 元，攤薄每股收益為人民幣2021年同季度ADS為人民幣1.69元。非公認會計原則歸屬於普通股股東的淨利潤為人民幣108億元，而去年同期為人民幣41億元。非美國通用會計準則每 ADS 攤薄收益為 7.54 元，而 2021 年同期為 2.85 元。

Now let me move on to cash flow. Our net cash flow generated from operating activities were RMB 19.4 billion compared with RMB 7.4 billion in the same quarter of 2021, primarily due to the increase in net income and changes in working capital. As of June 30, 2022, the company had RMB 119.4 billion in cash, cash equivalents and short-term investments.

現在讓我繼續討論現金流。我們的經營活動產生的現金流量淨額為人民幣 194 億元，而 2021 年同期為人民幣 74 億元，主要是由於淨收入的增加和營運資金的變化。截至2022年6月30日，公司擁有現金、現金等價物和短期投資1,194億元。

To conclude, profitability in the past quarter was mainly attributable to a few short-term factors that may not reappear in the future. First, we saw good user engagement during the past quarter. As competition remains intense, we're not sure whether such engagement momentum will continue. Second, project performance and lower business-related activities affected our overall expenses in Q2. We view this factor just mostly temporary in nature. In fact, we incurred higher expenses in the second half of Q2 when things return to normal. Therefore, given that progress in the second quarter are mainly due to a combination of several short-term factors, we do not expect profitability in the past quarter to serve as a benchmark for future quarters. Thank you. This concludes my prepared remarks.

總而言之，上一季度的盈利主要歸功於一些未來可能不會重現的短期因素。首先，我們在上個季度看到了良好的用戶參與度。由於競爭仍然激烈，我們不確定這種參與勢頭是否會持續下去。其次，項目績效和較低的業務相關活動影響了我們第二季度的總體支出。我們認為這個因素在本質上只是暫時的。事實上，當事情恢復正常時，我們在第二季度的下半年產生了更高的費用。因此，鑑於第二季度的進展主要是由於幾個短期因素的綜合作用，我們預計上一季度的盈利能力不會成為未來幾個季度的基準。謝謝你。我準備的發言到此結束。

Thank you, Jun. Next, we will move on to the Q&A session. For today's Q&A session, Lei and Jun will take questions from analysts on the line. We are happy to take a maximum of 2 questions by analysts. Lei will answer questions in Chinese and I will help translate Lei remarks for ease of reference. Operator, we are now ready to take questions from analysts on the line.

謝謝你，Jun。接下來，我們將進入問答環節。今天的問答環節，雷軍和君將在線回答分析師的提問。我們很樂意回答分析師最多 2 個問題。雷將用中文回答問題，我將幫助翻譯雷的言論，以方便參考。接線員，我們現在準備在線接受分析師的提問。

(Operator Instructions) Our first question comes from Kenneth Fong from Credit Suisse.

（操作員說明）我們的第一個問題來自瑞士信貸的 Kenneth Fong。

(foreign language) I have 2 questions. First, on the second quarter growth rate. We noticed a very strong online marketing service revenue that record a strong growth of 39% year-on-year. And this reaccelerated from the previous 2 quarters. What's the reason behind this quarter strong growth? And the second question is on the brands. Can management speak more about the progress on bringing more brands onto our platform? We saw many brands participate in (inaudible) events. How does this help our growth for this quarter? And what's your overall plan for the brand recruitment?

（外語）我有兩個問題。一是關於二季度增速。我們注意到在線營銷服務收入非常強勁，同比增長 39%。這比前兩個季度重新加速。本季度強勁增長背後的原因是什麼？第二個問題是關於品牌的。管理層能否更多地談論將更多品牌引入我們平台的進展情況？我們看到許多品牌參與（聽不清）活動。這對我們本季度的增長有何幫助？您對品牌招聘的總體規劃是什麼？

(foreign language)

（外語）

[Interpreted] Kenny, I am happy to take your questions. First, about our revenue growth. Starting from the second half of May, we saw a trend of consumption recovery. Also, we actively made efforts to facilitate consumer spending by offering various forms of promotion to help with consumption recovery.

[解釋]肯尼，我很高興回答你的問題。首先，關於我們的收入增長。從5月下半月開始，我們看到了消費回升的趨勢。此外，我們還積極促進消費，通過多種形式的促銷活動助力消費復甦。

(foreign language)

（外語）

[Interpreted] And during this year's June 18 event, we saw many merchants as well as brands actively participating. We also saw solid demand coming from consumers. Given this background on our platform, many categories, including FMCG products, agriculture produce, consumer electronics and cosmetics, these categories all had a decent growth on our platform.

【解讀】在今年6月18日的活動中，我們看到很多商家和品牌積極參與。我們還看到來自消費者的強勁需求。鑑於我們平台的這個背景，包括快速消費品、農產品、消費電子和化妝品在內的許多品類，這些品類在我們的平台上都有不錯的增長。

(foreign language)

（外語）

[Interpreted] In addition, we always try our best to satisfy consumer demand. And this is inseparable from many of our team members' hard work during the past period of time. They worked very hard to help many -- our customers meet their essential demand. And we are grateful towards our team's hard work during this process.

【解讀】此外，我們始終盡最大努力滿足消費者的需求。而這與我們很多團隊成員在過去一段時間的辛勤工作是分不開的。他們非常努力地幫助了許多人——我們的客戶滿足了他們的基本需求。我們感謝我們團隊在此過程中的辛勤工作。

(foreign language)

（外語）

[Interpreted] 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 can further improve. And as I mentioned earlier, due to outside reasons, our overall investment activity during the second quarter was impacted, and this is actually not beneficial to our long-term competitiveness.

【解讀】同時，我們也看到競爭格局依然非常激烈。而在滿足消費者需求方面，我們還有很多可以進一步改進的地方。而且正如我之前提到的，由於外部原因，我們在第二季度的整體投資活動受到了影響，這實際上不利於我們的長期競爭力。

(foreign language)

（外語）

[Interpreted] 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.

【解讀】因此，我們需要進一步加大力度，加強核心能力，為消費者創造更多價值，為社會創造更多價值。

(foreign language)

（外語）

[Interpreted] 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 in different product categories and across different consumption scenarios. Therefore, it is very natural for them to -- need more choices and more products.

【解讀】關於你的第二個問題，我們的品牌，我們看到我們平台上消費者的需求越來越多樣化，不同的消費者，在不同的產品品類、不同的消費場景中有著不同的需求。因此，他們很自然——需要更多的選擇和更多的產品。

(foreign language)

（外語）

[Interpreted] And our goal is always to better serve our consumers and to bring them more savings, more [found] shopping experience.

[解釋] 我們的目標始終是更好地服務於我們的消費者，並為他們帶來更多的節省，更多的 [找到] 購物體驗。

(foreign language)

（外語）

[Interpreted] And in terms of how to serve the consumers, we believe that essentially, the brands go and our goal are well aligned. That is to serve consumers well. So we would continue to focus on our own part and remain to be very down to earth and patient. Thank you. Okay. Operator, we may now move on to the next analyst.

[解釋] 在如何為消費者服務方面，我們認為，從本質上講，品牌和我們的目標是一致的。也就是服務好消費者。因此，我們將繼續專注於自己的部分，並保持腳踏實地和耐心。謝謝你。好的。接線員，我們現在可以轉到下一位分析師。

Your next question comes from Joyce Ju from Bank of America.

您的下一個問題來自美國銀行的 Joyce Ju。

My first question is related to the overseas expansion. Could management share some colors on the reported new initiatives in the overseas market. With the latest status, any main target market? And what's 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 the last quarter to a triple digit year-over-year growth. May we know like what's the reason behind ? (foreign language)

我的第一個問題與海外擴張有關。管理層能否就海外市場報告的新舉措分享一些看法。最新狀態，有什麼主要目標市場？這項新業務的核心價值主張是什麼？我的第二個問題與交易服務收入有關。本季度交易服務收入的增長繼續快於在線營銷收入。此外，我們實際上看到它從上個季度加速到了三位數的同比增長。我們可以知道背後的原因是什麼嗎？ （外語）

(foreign language)

（外語）

[Interpreted] Joyce, so let me address your first question, and I will hand it over to Jun to answer your other question. First, on our overseas business. First of all, we are a young company with a relatively young team. And everyone is continuing to grow and searching for new opportunities during our growth process.

[翻譯]喬伊斯，那麼我來回答你的第一個問題，我將把它交給君來回答你的另一個問題。首先，關於我們的海外業務。首先，我們是一家年輕的公司，擁有一支相對年輕的團隊。在我們的成長過程中，每個人都在繼續成長並尋找新的機會。

(foreign language)

（外語）

[Interpreted] And overseas business is one of the opportunities that we see. And we also see that the possibility of creating value in this opportunity. At the same time, we also see that many peers in the industry are achieving good results. So we believe that it is a direction that is worth trying out for us.

[解讀]海外業務是我們看到的機會之一。而且我們也看到了在這個機會中創造價值的可能性。同時，我們也看到很多業內同行都取得了不錯的成績。所以我們認為這是一個值得我們嘗試的方向。

(foreign language)

（外語）

[Interpreted] 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.

[解釋] 話雖如此，我們不會只是簡單地重複其他人在該領域所做的事情。對我們來說重要的是，我們將從消費者的需求出發，努力創造自己獨特的價值。

(foreign language)

（外語）

[Interpreted] And at the same time, we are sufficiently aware that overseas business will be for us a challenge, and it will require a constant trial and experimentation. This process would not just happen overnight. But the experience gained along the way would prove to be very valuable to our company as well as to our team. Thank you.

【解讀】同時，我們也充分意識到海外業務對我們來說是一個挑戰，需要不斷的嘗試和嘗試。這個過程不會在一夜之間發生。但是一路上獲得的經驗將證明對我們公司和我們的團隊都非常有價值。謝謝你。

Thanks for your question, Joyce. We're testing about transaction service revenue. Well, first, we always remain customer-centric, operating metrics and the financial matrics are a natural result from how we reserve consumers. And over the past quarter, because of consumption recovery, we had user engagement and transactions. This contributed to the revenue growth. And in addition, for us, our business cycle does not always match exactly to our quarterly financial reporting cycle. And we are not managing our business on a quarterly basis. So it is common to see fluctuations between quarters. We remain focused on serving consumers better and investing creates long-term value.

謝謝你的問題，喬伊斯。我們正在測試交易服務收入。嗯，首先，我們始終保持以客戶為中心，運營指標和財務矩陣是我們保留消費者的自然結果。在過去的一個季度，由於消費復甦，我們有用戶參與和交易。這促進了收入的增長。此外，對我們而言，我們的商業周期並不總是與我們的季度財務報告週期完全匹配。而且我們不是按季度管理我們的業務。因此，經常看到季度之間的波動。我們仍然專注於更好地為消費者服務，投資創造長期價值。

Okay, operator, ready to move on to the next analyst on the line.

好的，接線員，準備好接任下一位分析師了。

Our next question comes from Thomas Chong from Jefferies.

我們的下一個問題來自 Jefferies 的 Thomas Chong。

(foreign language) My first question is about cost control and efficiencies. Given the macro uncertainties right now, and we are seeing a lot of Internet companies exercising sort of cost control. I just want 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 expected market expectations, how should we think about the profitability trend in the second half?

（外語）我的第一個問題是關於成本控制和效率。鑑於目前宏觀的不確定性，我們看到很多互聯網公司都在進行成本控制。我只是想從管理層那裡了解一下我們的成本控制策略。我的第二個問題是關於我們的盈利能力。鑑於第二季度的盈利好於市場預期，我們應該如何看待下半年的盈利趨勢？

(foreign language)

（外語）

[Interpreted] 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, we still have a long way to go and a lot of work to do to serve our consumers well.

[解釋]嗨，托馬斯。所以讓我來回答你的第一個問題。首先，我認為我們還處於發展階段，而不是穩定階段。在這個時間點上，我們還有很長的路要走，還有很多工作要做，才能更好地為我們的消費者服務。

(foreign language)

（外語）

[Interpreted] And as a part of our development to constantly satisfy our consumer demand would take a lot of patience. Not only do we need to constantly explore, but we also need to seize the key opportunities and also make the relevant investments.

[解釋] 作為我們不斷滿足消費者需求的發展的一部分，需要很大的耐心。不僅要不斷探索，更要抓住關鍵機遇，進行相關投資。

(foreign language)

（外語）

[Interpreted] And in the past quarter and especially during the first half of the second quarter, our team's investment 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.

【解讀】在過去的一個季度，尤其是第二季度的上半年，我們團隊的投資活動受到了影響。在短期內，這可能會帶來不錯的財務結果。但如果我們從長遠的角度來看，這實際上削弱了我們的競爭力。

(foreign language)

（外語）

[Interpreted] And therefore, looking ahead, we would always think about the long term, and we would remain very committed to investing for the future. We need to further strengthen our core capabilities and to -- continue to focus on investing into the field of agriculture and R&D over the long term in order to create value for our customers as well as for the society. And this would support our long-term and high-quality development. And this is my thinking on our overall strategies and hope it address your first question.

[解釋]因此，展望未來，我們將始終考慮長期，我們將繼續致力於為未來投資。我們需要進一步加強我們的核心能力，並繼續長期專注於農業和研發領域的投資，以便為我們的客戶和社會創造價值。這將支持我們長期高質量發展。這是我對我們整體戰略的思考，希望它能解決您的第一個問題。

Okay. This is Jun. Thanks, Thomas. I will take your second question. For your second question about profit. Well, as mentioned before, we have not changed our strategy to the 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 1 of nature. On the revenue side, we saw a good level of user engagement and consumption, which are mostly boosted by consumption recovery.

好的。我是 Jun。謝謝，Thomas。我會回答你的第二個問題。關於利潤的第二個問題。好吧，如前所述，我們沒有改變我們的戰略，專注於盈利能力。因此，僅在過去一個季度，我們的盈利能力主要歸因於一些外部因素，這些因素大多是短期的或自然因素之一。在收入方面，我們看到了良好的用戶參與度和消費水平，這主要受到消費復甦的推動。

At the same time, we still face very intense competition. For the expense side, factors such as project delays and decrease in business-related activities (inaudible) to the short-term impact in our Q2 expenses. And to sum up, this quarter's profitability is due to short-term factors combined. So it is not a good benchmark for future reference. And this is our view on profitability.

同時，我們還面臨著非常激烈的競爭。對於費用方面，項目延遲和業務相關活動減少（聽不清）等因素對我們第二季度費用的短期影響。綜上所述，本季度的盈利能力是由於短期因素的綜合作用。所以它不是一個很好的基準供將來參考。這就是我們對盈利能力的看法。

Operator, we are ready to move on.

接線員，我們準備繼續前進。

Our next question comes from Bai Yang from CICC.

我們的下一個問題來自中金公司的白楊。

(foreign language) My first question is about Duo Duo Grocery. I think that the Duo Duo Grocery is reaching a relatively steady growth state and players started to care about loss reduction on unit economy. So can management share some color on the future prospects of Duo Duo Grocery? Do we also care more about the efficiency measures?

（外語）我的第一個問題是關於多多雜貨的。我認為Duo Duo Grocery正在達到一個相對穩定的增長狀態，玩家開始關心減少單位經濟的損失。那麼管理層能否對 Duo Duo Grocery 的未來前景分享一些看法？我們是否也更關心效率措施？

Also, how will the increase in Duo Duo Grocery financial leverage contribute to the firm's level margin this quarter? My personal question is also regarding to the operating expense ratio. As the company's revenue continues to grow and the operating leverage continues to play its role. The company's expense ratio has dropped to 47%. Should we expect the situation to be sustainable? And meanwhile, we recorded a 36% year-over-year growth in revenue. Could management comment on how we manage to optimize expense by also maintaining strong growth?

此外，Duo Duo Grocery 財務槓桿的增加對公司本季度的水平利潤率有何貢獻？我個人的問題也是關於營業費用率的。隨著公司收入持續增長，經營槓桿繼續發揮作用。該公司的費用率已降至47%。我們應該期望這種情況是可持續的嗎？與此同時，我們的收入同比增長 36%。管理層能否評論我們如何通過保持強勁增長來優化費用？

(foreign language)

（外語）

[Interpreted] Bai Yang, let me talk a little bit about our Duo Duo Grocery first. First, from a strategy point of view, Duo Duo Grocery is a natural retention 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 would patiently invest into. And this strategy will not be impacted by external short-term changes.

【解釋】白楊，我先說一下我們的朵朵雜貨店。首先，從戰略的角度來看，Duo Duo Grocery 是我們平台的自然保留。而就我們如何能夠利用我們在農業方面的價值主張來更好地為消費者服務而言，它也起著非常重要的作用，這是一個我們會耐心投資的項目。而且這種策略不會受到外部短期變化的影響。

(foreign language)

（外語）

[Interpreted] Since we introduced Duo Duo Grocery in the second half of 2020, we have also seen that in the areas of matching localized demand and localized supply as well as an area of fulfillment. This service can provide our consumers with a fresher, more affordable and more convenient agriculture products. It can create tangible value for consumers.

【解讀】自從我們在2020年下半年推出多多雜貨以來，我們也看到了在本地化需求和本地化供應的匹配以及履行方面。這項服務可以為我們的消費者提供更新鮮、更實惠、更方便的農產品。它可以為消費者創造有形價值。

(foreign language)

（外語）

[Interpreted] And at the same time, for the Duo Duo 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, how to secure more quality products and produce, how to better optimize the distribution network and to further improve our fulfillment service quality just to name a few here. And we are still constantly adjusting and improving all of this as to make an effort to bring better service experiences to our consumers.

【解讀】同時，對於多多雜貨店的服務，我們也看到了很多可以改進的地方。在這裡舉幾個例子，如何更有效地匹配供需，如何確保更多的優質產品和生產，如何更好地優化分銷網絡，進一步提高我們的履行服務質量，這裡僅舉幾例。我們還在不斷調整和改進這一切，努力為我們的消費者帶來更好的服務體驗。

(foreign language)

（外語）

[Interpreted] And we have always remained consumer-centric and would remain to be so. Our top priority is to create value for our consumers, and this would never change. As for the financial metrics, they are a result and a reflection of how well we serve our consumers.

[解釋] 我們一直以消費者為中心，並將繼續如此。我們的首要任務是為消費者創造價值，這一點永遠不會改變。至於財務指標，它們是我們為消費者服務的結果和反映。

Thanks, Bai Yang. On your question on operating expenses trend. Well, our total operating expenses as a percentage of revenue decreased to 47%. This quarter as you just mentioned. But I want to point out here, many short-term factors, such as project delays and lower business activities caused 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 quarterly expenses may not be a good benchmark. Also, just as Lei previously mentioned, we believe Pinduoduo is still in the development stage. Such impact in our investment is not good for us from business perspective. Competition is still intense, so we need to continue to invest. Hope it addressed your questions.

謝謝，白楊。關於您關於運營費用趨勢的問題。好吧，我們的總運營費用佔收入的百分比下降到 47%。正如你剛才提到的這個季度。但我想在這裡指出，許多短期因素，例如項目延遲和業務活動減少導致這種下降。所以不太可能繼續下去。事實上，隨著事情逐漸恢復正常，本季度下半年的支出實際上比上半年有所增加。因此，第二季度的季度支出可能不是一個好的基準。此外，正如雷軍之前提到的，我們認為拼多多仍處於發展階段。從業務角度來看，這種對我們投資的影響對我們不利。競爭依然激烈，所以我們需要繼續投入。希望它能解決你的問題。

Hi, operator, we may now take questions from the next analyst on the line.

嗨，接線員，我們現在可以回答下一位在線分析師的問題。

Our next question comes from the line of Natalie Wu from Haitong International.

我們的下一個問題來自海通國際的 Natalie Wu。

(foreign language) Let me translate myself. I have 2, first one is regarding the development priorities. We have seen some time since later on your leadership [testation] and started to shift more towards the agricultural program in R&D. But we haven't seen a much material impact in terms of the income statement generated from the RMB 10 billion agricultural program. So just wondering have such priorities have changed? And should we expect a change when external factors are different currently? For example, a consumer segment improves, will you prioritize again, a platform-related sales and marketing? And what are your current key priorities to bring PDD to the next level?

（外語）讓我自己翻譯。我有兩個，第一個是關於發展重點。我們已經看到了一段時間以來你的領導[測試]，並開始更多地轉向研發中的農業項目。但就百億農業項目產生的損益表而言，我們並沒有看到太大的實質性影響。所以只是想知道這些優先事項是否發生了變化？噹噹前外部因素不同時，我們是否應該期待改變？例如，消費者細分市場有所改善，您會再次優先考慮與平台相關的銷售和營銷嗎？您目前將 PDD 提升到新水平的主要優先事項是什麼？

It would be great that if we can get a stance regarding your internal strategic priorities for platform e-commerce, agriculture and maybe the new initiatives related with overseas expansion? And also, you have a strong balance sheet with over RMB 100 billion in terms of cash. We have seen some peers have introduced plans to distribute value to shareholders. Just wondering does PDD have similar paths under consideration.

如果我們能就您在平台電子商務、農業以及與海外擴張相關的新舉措方面的內部戰略重點發表立場，那將是很好的？而且，你的資產負債表很強勁，現金超過 1000 億元人民幣。我們已經看到一些同行已經引入了向股東分配價值的計劃。只是想知道 PDD 是否有類似的路徑正在考慮中。

(foreign language)

（外語）

[Interpreted] Natalie, so let me address your question on priority for us. So first of all, we need to look at on which we base our business and from which we start our business. We are dedicated to serving the rapidly evolving consumer needs. And our development is inseparable from the support from our consumers. And this is the duty -- our duty as a company to serve consumers well.

[解釋] Natalie，讓我來為我們解決你關於優先級的問題。因此，首先，我們需要了解我們的業務基礎以及我們的業務起點。我們致力於滿足快速發展的消費者需求。而我們的發展離不開廣大消費者的支持。這就是責任——作為一家公司，我們有責任為消費者服務好。

(foreign language)

（外語）

[Interpreted] And as our user base reaches the current scale, it is our focus to better serve them and also deepen their trust in Pinduoduo as well as increase their mind share. And towards this goal, we have shifted our attention more towards agriculture and R&D, and this remains to be our priorities.

【解讀】隨著我們的用戶群達到目前的規模，我們的重點是更好地服務他們，加深他們對拼多多的信任，增加他們的心智份額。為了實現這一目標，我們將注意力更多地轉移到農業和研發上，這仍然是我們的優先事項。

(foreign language)

（外語）

[Interpreted] We have also seen that the investment in these 2 areas can bring about a tangible value to consumers and the society.

【解讀】我們也看到，在這兩個領域的投資，可以為消費者和社會帶來實實在在的價值。

(foreign language)

（外語）

[Interpreted] First, let's look at agriculture. In the realm of consumption, we are able to enable more efficient online transactions, and we are able to let consumers enjoy fresher and more affordable products. And we also improved the distribution efficiencies through the use of technology and distribution.

【解讀】首先，我們來看看農業。在消費領域，我們能夠實現更高效的在線交易，我們能夠讓消費者享受到更新鮮、更實惠的產品。我們還通過使用技術和分銷來提高分銷效率。

(foreign language)

（外語）

[Interpreted] In terms of agriculture production, we facilitated the technology adoption and usage to help farmers improve yield. And we also actively provided training to small agricultural merchants and producers to help them receive higher as well as stabler income.

【解讀】在農業生產方面，推動技術引進和使用，幫助農民提高產量。我們還積極為小農商和生產者提供培訓，幫助他們獲得更高、更穩定的收入。

(foreign language)

（外語）

[Interpreted] In addition to that, by strengthening our R&D capabilities we are also able to better understand consumers new demands and preferences to improve their shopping experience so that we can create more value for them.

【解讀】除此之外，通過加強我們的研發能力，我們也能夠更好地了解消費者新的需求和偏好，從而改善他們的購物體驗，從而為他們創造更多的價值。

(foreign language)

（外語）

[Interpreted] What is more over the past period of time, I see our young team members growing up through the responsibilities. They ensure the stable operation 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.

【解讀】更何況在過去的一段時間裡，我看到我們年輕的團隊成員在責任中成長。他們確保了我們平台的穩定運行，也幫助滿足了消費者的基本需求，並在此過程中創造了社會價值。我們將為這些團隊成員創造更多的機會，讓他們承擔更多的責任和成長。

(foreign language)

（外語）

[Interpreted] And we are still in the development stage. So we need to continue to invest patiently and improve our team's capabilities so that we can better serve consumers. What I just mentioned are our top priorities.

[解釋] 而且我們還處於發展階段。所以我們需要繼續耐心的投入，提升我們團隊的能力，這樣才能更好的服務消費者。我剛才提到的是我們的首要任務。

Thanks, Natalie. I will take your second question on cash balance. 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 better satisfy our consumers' demand, for example, Agriculture and R&D. So we need to invest patiently in these areas. Meanwhile, I think different companies may be in different development stages. As we have mentioned, for us, we are still in the investment phase. So we will continue to place more focus on these areas to generate long-term value.

謝謝，娜塔莉。我會回答你關於現金餘額的第二個問題。我認為這主要是關於資本配置。那麼，鑑於當前的競爭格局和挑戰，我們仍有許多領域需要改進，以幫助我們更好地滿足消費者的需求，例如農業和研發。所以我們需要耐心地在這些領域進行投資。同時，我認為不同的公司可能處於不同的發展階段。正如我們所提到的，對我們而言，我們仍處於投資階段。因此，我們將繼續更加關注這些領域，以創造長期價值。

Okay. Thanks everyone, 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 team. Thank you, and have a great day.

好的。感謝大家，由於時間限制，今天加入我們的電話會議。我們特此結束通話。如果您還有其他問題，請隨時與我們的團隊聯繫。謝謝你，祝你有美好的一天。

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.

女士們先生們，今天的會議到此結束。感謝您的參與。你們都可以斷開連接。