Ladies and gentlemen, thank you for standing by and welcome to the PDD Holdings Inc. Second Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. There will be a presentation followed by a question and answer session, at which time if you wish to ask a question, you will need to press the star key followed by the number one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today. Please go ahead. Thank you, operator, and hello everyone, and thank you for joining us today. PDD Holdings earnings release was distributed earlier and is available on our website at investor.pddholdings.com and also through the Globe Newswire services. Before we begin, I would like to refer you to a 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 press release which contains a reconciliation of non-GAAP measures to GAAP measures. Joining us today on the call are Mr. Chen Lei, our Chairman and Co-Chief Executive Officer, Mr. Zhao Jiazhen, our Executive Director and Co-Chief Executive Officer, and Mr. Liu Jun, our Vice President of Finance. Lei and Jiazhen will make some general remarks on our performance for the past quarter and our strategic focus. Jun will walk us through our financial results for the second quarter ended June 30, 2024. During the Q&A session, Lei and Jiazhen will answer questions in Chinese that we will help translate. Please note that English translation is for reference only, and in case of any discrepancy, statements in the original language should prevail. Now it's my pleasure to introduce our Chairman and Co-Chief Executive Officer, Mr. Chen Lei. Lei, please go ahead. Hello everyone and thank you for joining our second quarter 2025 earnings conference call. The first half of 2025 has seen rapid trends in the external environment. At this critical juncture when merchants doing business on our platform face challenges, we step up our commitment in high quality development and launch the 100 Billion Support Program. Through this program, we have invested and will continue to invest substantial resources to support the merchant ecosystem. Together with our merchants, we are actively exploring new business models for the global business, seeking new growth opportunities and navigating the ups and downs of the market cycles. This significant ecosystem investment was reflected in our Q2 financial performance. Revenue growth further moderated and operating profit declined by 21%. However, as we have emphasized in the past, we prioritize long term value creation over short term financial results. Our focus remains on investing for the long term, such as strengthening the ecosystem, driving value chain upgrades, and delivering tangible benefits to our consumers. As a result of our investments in the 100 Billion Support Program, we are pleased to see that the platform ecosystem is making steady progress towards sustainable and high quality development. Since August last year, our 10 Billion Fee Reduction Program has brought substantial savings for our merchants, creating room for them to innovate and to offer a wider selection of high quality products to the consumers. At the same time, our Logistics Support Initiative significantly reduced the cost of shipping to remote areas and led to a 40% growth in order numbers from the regions, injecting new energy into the economy. In this first quarter, the entire company rallied behind the 100 Billion Support Program to deliver innovative solutions to help merchants grow their business while further reducing costs and commissions for merchants. We are seeing businesses of all sizes, from established brands to small merchants, gaining new momentum in our ecosystem. Let's look at a few examples where we see established consumer brands successfully reinventing themselves by leveraging consumer insights to shorten product launch cycles, lower R&D costs, and enter into new market segments. Many industrial belt manufacturers were able to make the transition from white label product to a branded offering, breaking away from commoditized competition. With the help of the Duo Duo Premier Produce program, we are seeing farmers and growers earn higher margins by improving quality control and by moving into food processing to capture higher value add. Alongside merchant support, we have also expanded our Consumer Give Back program. In addition to the 10 Billion Program, we introduced new long term consumer campaigns such as the 10 Billion Coupon Program. During this year's June 18 shopping festival, we provided additional coupons on top of a national trading program, driving record sales across multiple categories including fresh produce, electronics, home appliances, and apparel, offering more value for the consumers. Meanwhile, in our global business, merchants and our platform face a more complex business environment to navigate through the market cycle. We are working together with merchants to explore new business models and new markets while at the same time delivering innovative solutions to drive efficiency. As a platform that has its root in agriculture, we continue to invest in agritech through initiatives like this non-agriculture competition, which is now in its fifth iteration. 46 global teams competed in a preliminary held in July this year, showcasing cutting edge technology in AI farming, hydroponics, and ecosystem systems. This event is emerging as an important platform for agriculture technology research and application. Later in this year's competition, the participants will bring their technology from labs to field, testing the commercial applications of their research findings. Looking ahead, as external environment continues to evolve and competition intensifies, we remain committed to long term value creation over short term results. Our team will prioritize high quality growth by creating long term opportunities for merchants and investing in consumer experience. As we ramp up our investments, profitability will inevitably fluctuate and this quarter's result may not represent future earning trends. Now I will hand it over to Zhao Jiazhen to share more details about our performance in the second quarter. Thank you Lei and hello everyone, this is Zhao Jiazhen. Thank you for joining our second quarter 2025 earnings. In Q2, to help merchants tackle emerging challenges, we actively leveraged our role as a platform to take on more social responsibilities. We accelerated our execution of the 100 Billion Support Program, which represents a significant commitment to high quality development. This also marked the first merchant support program of this scale. These substantial investments once again affected our quarterly revenue and profit. As Lei noted, comparing to short term financial performance, we focus more on investments that bring long term value to the platform ecosystem, and this is why we're willing to accept lower profits to consistently reinvest in the platform ecosystem in the long run. [Foreing language]. This quarter, under the unprecedented investment through the 100 Billion Support Program, we dedicated significant resources to initiatives such as the 10 Billion Fee Reduction Program, Logistics Support Initiative, and New Quality Merchant Support Program. We continue to lower costs and increase efficiencies for millions of merchants. Many saved millions of RMB each year just from service fee reductions. These efforts created more momentum and space for industrial upgrades. The Logistics Support Initiative also bridged supply and demand and helped drive rapid order volume growth from remote regions, greatly enriching the daily lives of consumers in these regions. On the supply side, the 100 Billion Support Program expanded support for SMEs, new quality merchants, and branded merchants, ensuring all types of businesses could benefit from the platform's resource support. This helped agricultural and manufacturing regions achieve all-rounded high-quality development to meet diverse consumer needs. Our Douduo Premium Produce team visited multiple agricultural regions including Suizhou rice, Jiao Tong potatoes, Kuimin flowers, Shantiu eggs, bamboo shoots in Fuzhou, seafood in Xiantao and Zhoushan, and prickly bear pears in Guizhou to provide customized support based on local specialties and industry advantages. By enriching product offerings and store matrix, we helped fresh produce merchants overcome seasonal shortages and achieve sustainable growth. For example, local potatoes are particularly tasty and nutritious and have been a main source of income for local farmers. However, due to geographic constraints, these potatoes were traditionally sold as low added value raw produce. In recent years, one of our merchants set up automated production to turn these potatoes into flavored chips. With the platform's help, the product gained national popularity, creating its own online followings. This turned agricultural produce into a key local industry that increased income for 11,000 local farmers. This quarter, the New Quality Supply team also visited industrial belts such as Yiwu small merchandise, Xinjiang snack apparel in Guanyuan, children's wear in Foshan, and fishing gear in Weihai. By making these visits, we gained deeper understanding of consumer and merchant needs and challenges faced by them. Following these visits, leveraging the platform's digital capabilities and promotional tools such as the Black Label stores and Dodo short videos, we were able to help merchants explore new growth models. After decades of development, the local small merchandise market is facing intense commoditized competition, with many merchants and factories operating with thin profit margins and low barriers to entry. Our team integrated the merchant systems with the platform's backend to help them identify hit products. Together with the resource support from the platform, this significantly improved the success rate of new product development, reducing the cost of trial and error. Our support measures created room for merchants to innovate and injected new energy in the transformation of the local industries. In addition to merchants in agricultural regions and industry belts, the 100 Billion Support Program is also empowering consumer brands, especially traditional national brands facing new consumer trends. Many of these traditional brands are dealing with challenges such as lack of product innovation and slowing growth. Leveraging deep consumer insights, our team work with brand partners on an end-to-end solution covering product planning, marketing, and store operations. These partnerships have enabled brands to successfully tap into younger and niche market segments, unlocking new growth opportunities and achieving strategic transformation. Our supply side investments also stimulated consumption demand. During the June 18th promotion, sales hit new heights across dozens of categories. The Super Double discount event alone reached over 3.76 million orders in a single day. Meeting consumers' evolving needs and as competition in the e-commerce industry intensifies around new business models, we remain committed to long-term thinking. We will continue to deepen the 100 Billion Support Program, investing substantial resources in improving user experience, merchant services, and industrial upgrades to build a win-win ecosystem. We also hope our efforts can help guide industry toward a more inclusive and more open environment, creating greater value for the society. I will now hand it over to Jun. She will provide you with an update on our Q2 financial performance. Thank you Jiazhen. Hello everyone. Let me walk you through our financial performance for the second quarter ended June 30, 2025 in terms of income statements. In the second, total revenues increased 7% to RMB 104 billion. This was driven by an increase in revenues from online marketing services and transaction services. Revenue growth further moderated as competition intensified and as we help merchants increase efficiencies. Revenues from online marketing services and others were RMB 55.7 billion this quarter, up 13% from the quarter of 2024. Revenues from transaction services were RMB 48.3 billion, up 1% from the same quarter last year. Moving on to costs and expenses, our total cost of revenues increased 36% from RMB 33.7 billion in Q2 2024 to RMB 45.9 billion this quarter, mainly due to increase in fulfillment fees, bandwidth and server costs, and payment processing fees. On GAAP basis, total operating expenses this quarter increased 5% to RMB 32.3 billion from RMB 30.8 billion in the same quarter of 2024. On non-GAAP basis, total operating expenses increased to RMB 33.4 billion this quarter from RMB 28.4 billion in Q2 2024. In the second quarter, we invested significant resources in rolling out a series of margin support initiatives. Looking ahead, we are committed to supporting the vitality of the ecosystem and we continue to prioritize long-term value creation over short-term results. Our total non-GAAP operating expenses as a percentage of total revenues this quarter was 29%, in line with the same quarter last year. Looking to specific expense items, our non-GAAP sales and marketing expenses this quarter were RMB 26.7 billion, up 5% versus the same quarter last year. Sales and marketing expenses as a percentage of our revenues this quarter were 26%, in line with the same quarter last year. Our non-GAAP general and administrative expenses were RMB 667 million versus RMB 594 million in the same quarter of 2024. Our research and development expenses were RMB 3.1 billion on non-GAAP basis, RMB 3.6 billion on a GAAP basis, up 23% on a GAAP basis. Operating profit for the quarter was RMB 25.8 billion versus RMB 32.6 billion in the same quarter last year. Non-GAAP operating profit was RMB 27.7 billion versus RMB 35 billion in the same quarter last year. Non-GAAP operating profit margin was 27% this quarter, down from 36% from the same quarter last year. The year-on-year decline of operating profit reflects our continued investments in supporting our merchants and ecosystem. Net income attributable to all shareholders was RMB 30.8 billion for the quarter compared to RMB 32 billion in the same quarter last year, down 4%. Basic earnings per ADS was RMB 22.01 and diluted earnings per ADS was RMB 20.75. This compares to the basic earnings per ADS of RMB 23.14 and diluted earnings per ADS of RMB 21.61 in the same quarter of 2024. Non-GAAP net income attributable to ordinary shareholders was RMB 32.7 billion versus RMB 34.4 billion in the same quarter last year. Non-GAAP diluted earnings per ADS was RMB 22.07. This was RMB 23.24 in the second quarter of 2024. The net income in Q2 benefited from e-commerce seasonality and may not represent future earnings. As we remain focused on long-term value creation, the sustained investments may continue to weigh on short-term profitability. That completes the income statement. Now let me move on to cash flow. Our net cash generated from operating activities was RMB 21.6 billion compared with RMB 43.8 billion in the same quarter last year. As of June 30, 2025, we have RMB 387.1 billion in cash, cash equivalents, and short-term investments. Thank you. This concludes prepared remarks. Thank you, Jun. Next, we'll move on to the Q and A session. In today's Q and A session, Lei, Jiazhen, and Jun will take questions from analysts on the line. We could take a maximum of two questions from each analyst. Lei and Jiazhen will answer questions in Chinese, and we will help translate for convenience purposes. Operator will open for questions. Thank you, ladies and gentlemen. We will now begin the question and answer session. If you wish to ask a question, please press Star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key. Participants are requested to restrict the number of questions to two at each time. Your first question comes from Alicia Yap with Citigroup. Please go ahead. Thank you. Thanks management for taking my questions. Two questions. First is that this quarter we saw our e-commerce platform have made substantial investment in the instant retail, instant shopping, launching a new wave of industry investment. At the same time, we also saw some content platforms also continue to step up their e-commerce effort. Compared to the peers, the lead in the company's revenue growth rate has narrowed this quarter. Could management elaborate on the reasons behind these and how management is thinking about navigating these competitive dynamics? The second question is the external environment has shifted rapidly in the first half of this year. Looking ahead, how does management think about the next phase for your global business? What new directions or evolutions do you see in terms of the business model, and from a financial perspective, where do you think the main growth opportunities are and how should we think about the growth target? Thank you. Hello, this is Zhao Jiazhen. Let me take your first question. In the past quarter, industry competition intensified further as the major market participants invested heavily in new business models. Against this backdrop, our revenue growth slowed further in Q2 while operating profit declined meaningfully for the second consecutive quarter. In response to the intensified competition, we will adopt a proactive and long term approach, taking the competition as an opportunity to strengthen the high quality development of the platform ecosystem. Accordingly, we have chosen to increase investment and to forego part of the profits in order to create growth opportunities for the SME merchants. From management's perspective, we believe this is a responsibility that the platform is best placed to take on and at the same time represents a long term investment in strengthening our ecosystem. We do not believe this quarter's profit levels are sustainable and fluctuations in profitability are likely to continue in the coming quarters. Currently, the industry is going through a critical stage of high quality development. We realized that only by taking the initiative and working closely with the supply chain partners can the platform drive sustainable growth for the industry and also achieve high quality development. Amid the intensifying competition, we choose to turn our focus on the individual merchants and specific merchant support cases to deepen our merchant support measures one case at a time. For example, we are seeing merchants on our platform collaborating with college research teams to design and build smart factories and automated production lines which are then used to produce high quality ready to eat fresh salad products. In the past, these products could only be found offline and are now available to consumers through our platform and delivered to their doorsteps. The platform paid special attention to these technology enabled agricultural products and provided targeted support under the 100 Billion Support Program which helped merchants increase their online sales, offered tangible savings to consumers, and at the same time broadened the supply of high quality innovative products on the platform. There are many more examples of such cases that benefit all parties involved and each of these cases is made possible only through the close collaboration between the platform, the merchants, and the supply chain. We understand that to deliver effective support and to ensure that 100 Billion Support Program truly gets to the SME merchants who need it most, we need to go deep into agricultural regions and the industry belts and carefully understand the pain points and difficulties that merchants are dealing with now. Looking ahead, changes in the external environment and intensifying competition will inevitably lead us to staff our investment in the merchant ecosystem, and these factors combined will cause the short term financial results to fluctuate. However, in the long run, if we execute well on each and every one of these merchant support cases, we are confident in achieving sustainable high quality growth together with our merchants. This is how we are approaching today's competitive environment. Hello, this is Chen Lei. Let me take your questions on our global business. [Foreign language]. We noted that in the past few quarters we have seen significant changes across countries and regions, and also shifts in the global. We may continue to see some short term volatility in different markets overall. However, we observe steady consumer demand, and consumer trust in our platform is gradually growing. We will proactively adapt to changes in each region, make timely adjustments to meet the changing regulatory requirements of each region, as well as the diverse needs of consumers. Now, our global business has gone through an initial phase of growth. We are encouraged to see that our products and services are well received by consumers around the world. At the same time, our business is still in its early stages and there is plenty of room for improvement. The vision of our global business has always been to bring more high quality products to consumers worldwide. Looking ahead, we will continue to invest in our supply chain capabilities, service capabilities, and compliance capabilities to strengthen the fundamentals for the next phase of the global business. On the supply chain capabilities, we are continuously strengthening our localized operations, working closely with local merchants to diversify product offerings and improve supply stability and delivery efficiency. On the service capabilities, we are constantly iterating collaborations with our logistics partners to enhance the fulfillment experience. We are continuously building our team's capabilities to meet the high expectations of consumers worldwide. Looking forward, the level of service we currently provide is still in its early stage. Our team will continue to work hard day by day. Through the continuous improvement in service quality, we hope to win over more and more consumers. Thank you for your questions. Thank you. Your next question comes from Thomas Chong with Jefferies. [Foreign language]. Thanks management for taking my question. My first question is about since the launch of the 100 Billion Support Program last quarter, what are the key changes that management has observed in your business operations? From my financial perspective, how is the impact of these investments shown in your f inancial performance and on a mid to l ong term horizon, what will this affect the company's monetization and spending? My second question is about what's the company's view on the grocery business? We noticed that some of the company's main competitors in this business have exited certain markets. What are the company's future plans for this business? Thank you. Hi. Thank you. Thomas, this is. Let me answer your first question. Since the second half of last year, with escalating competition and accelerating changes in the external environment, we have scaled up commission reductions across the platform. Initiatives such as the 10 Billion Fee Reduction Program, the New Quality Merchant Support Program, and the Logistics Support Initiative have been rolled out to lower merchant operating costs and help drive efficiencies. Earlier this year, the management unanimously decided to launch the 100 Billion Support Program as our next strategic initiative, dedicating significant resources and sacrificing the platform's profits to cultivate a sustainable and healthy platform ecosystem. The 100 Billion Support Program is very broad in scope. We focus on our support measures where merchants need it most. Over the past quarter, we have begun to see some of the early effects. For instance, in the agriculture sector, we launched the 2025 Dodo Premium Produce Initiative, expanding support to merchants across hundreds of high quality agricultural regions. It helped our merchants explore new ways to bring agricultural products online, increase the added value captured by the merchants, and drives higher production and income. Beyond agriculture, our dedicated teams for the New Quality Merchant Support Program also visited hundreds of manufacturing belts, assisting more SME merchants with their transformation and accelerating the manufacturers' shift towards high quality development. Similarly, through our Logistics Support Initiative, the platform waived shipping fees from transit warehouses to final destination for orders shipping to remote regions, allowing the merchants to sell their products to these regions by paying only the usual shipping fees, which significantly expanded the market reach. This initiative not only brought down cost and improved efficiency for merchants, but also stimulated regional consumption and allows high quality products to reach more consumers, benefiting the wider consumer base. Going forward, we'll continue to do our best to understand the pain points and difficulties faced by our merchants and, through the 100 Billion Support Program, increase our investments to deliver targeted and meaningful support to deepen our support to the merchant ecosystem. From a financial perspective, the investments made over the past quarter have resulted in slower revenue growth and year-on-year profit decline. This reflects the platform's commitment to investing substantial resources to support merchants. We will continue to ramp up our investments to enable merchants to thrive while building a more sustainable and robust platform ecosystem, and as such we do not believe this quarter's profits are sustainable. There will be fluctuations in profitability in the coming quarters. About your second question on Total Grocery, first of all, Dodo Grocery is a hard business requiring significant long-term investments. The competition chose to exit the business at this juncture to concentrate on investing in new business models. To us, this is not the time to relax. We need to further increase investments based on our own business model and to address the impact from the intensifying competition with relentless execution. As to the Dodo Grocery business itself, when evaluating whether to pursue a new business, the first question that comes to us is always whether we can create our unique value. When we launched the Dodo Grocery business in 2020, we viewed it as a natural extension of our e-commerce operations. The initial reason for us to start this business was seeing the traditional e-commerce supply chains struggle to meet the users' demand for fresh produce, and for example, certain fresh products incur significant spoilage during traditional e-commerce fulfillment. In response to these pain points, we decided to increase our investment in the supply chain to better map demand and local supply, building a supply chain suited for agricultural and fresh products and creating value for both users and merchants in terms of product variety and fulfillment efficiency. After five years of investment, Dodo Grocery now covers 70% of villages nationwide, addressing last-mile delivery challenges in many areas and meeting consumer demand for high-quality affordable products. At the same time, we have established an efficient agricultural product distribution network connecting local farmers and SME merchants with local consumers and expanding the market reach. Since the beginning of this year, with the 100 Billion Support Program, the platform has increased support and traffic allocation to remote regions. In regions where Dodo grocery services were recently launched, local product offerings have greatly improved, expanding the reach of an inclusive consumption network to meet local consumers' growing demand for better products. Meanwhile, the grocery business has created competitive local employment opportunities, contributing to the economic growth in these communities. As I just mentioned, while Dodo grocery business requires substantial investment, we believe it is quite meaningful and we will continue to increase our investments. Going forward, we will deepen our long-term commitments across product supplies, service quality, and delivery efficiency for the Dodo grocery business, creating tangible benefits for consumers and supply chain participants. Thank you for your question. Thank you. Okay, thank you. Thank you, Thomas. I think we have time for one more analyst. Thank you. Thank you. Joyce Ju with Bank of America. Let me translate my questions first. In last quarter's earnings, management mentioned a mismatch between investment cycles and the return cycle was a primary cause of the profit decline in the first quarter. Looking at the second quarter results, it seems the company's expense ratio and profit margin levels show signs of stabilization. Does it indicate the company's investment cycle has already stabilized? How should we actually expect the profit margin trends going forward, both long term and short term? My second question is recently we have seen some signs of improving consumer demand from some industry data. Has management observed a similar trend lately? Any updates on consumer sentiment or behaviors will be appreciated. How does management view macro trends in the third and fourth quarter this year? Thank you very much. Hello Joyce, this is Jun. I would take your first questions. First of all, our profits in Q2 benefited from e-commerce seasonality, and this quarter may not represent future earnings. If we're looking at the numbers, our Q2 revenue growth further slowed to 7%. Operating profit dropped 21%. We believe there are several reasons for this. First, the platform has increased its investment to support merchants, which naturally impacts profitability. Second, intensified industry competition continues to create challenges for our merchants and platform. To help merchants navigate market cycles, the platform will continue to scale up investments. Q2 profit levels should not be seen as a reference for future performance. We do not believe this current profit level is sustainable. There may be fluctuations in profitability in the coming quarters as we have communicated in past and current market environments. Increasing platform investment to help merchants through the cycles is a responsibility the platform can and must take on. We believe that these investments will create a healthier merchant ecosystem in the long run. Our focus remains on long term value creation rather than short term financial performance. As Lei and Jason just mentioned, we will continue to increase our impact. Thank you. Hi, let me answer your second question. China's consumer market demonstrates remarkable potential and resilience, and driven by sustained pro consumption policies, we have observed steady growth in overall retail sales alongside the continuous rise in online retail penetration. We remain very confident in the overall potential of China's consumer market. However, from an industry structure perspective, we are seeing escalating competition, and it is increasingly convenient for consumers to switch between different platforms. The competitive landscape is at risk of being reshaped. In this environment, the platform must take on a more proactive goal by increasing investments. [Foreign language]. During the 2018 shopping festival in Q2, we not only provided substantial support to high quality agriculture and national brand, but also offered extra coupons to consumers to provide consumers more savings for their mid year shopping needs. During the promotion, number of agricultural and new quality merchants participating in the 10 Billion Coupon Program doubled, enabling many SME merchants across multiple categories to reach new milestones. Moreover, categories such as beauty, skincare, maternity and baby, and pet supplies also experienced good growth. Through the promotion, the 10 Billion Coupon Program has reached hundreds of high quality agricultural regions, helping high quality agricultural products reach urban consumers. For example, lychees from Guangdong, Maoming quickly sold over 50,000 kg after being featured in the 10 Billion Coupon Program. Our dedicated team for New Quality Merchant Support Program also continue to engage with hundreds of manufacturing regions such as footwear and apparel in Xinjiang and cameras in Guangdong. Leveraging the momentum of the shopping festival, we helped a large number of quality products quickly reach the market. The platform's proactive investments have created positive feedback from both consumers and merchants. Going forward, in this intensifying competitive environment, we will continue to increase our support on both the supply and demand side, sacrificing part of the platform's profits to foster a healthier and more vibrant ecosystem. By doing so, we hope to help more SME, reduce costs and drive sales and offer consumers more tangible benefits. Thank you. Thank you. Thank you, Joyce, and I think it's about time. Thank you again for joining our call today. We look forward to speaking to you again next quarter. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect.