Ladies and gentlemen, thank you for standing by, and welcome to PDD Holdings Inc. Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your host today. Sir, 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 as well as through the Globe 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 as we will make certain forward-looking statements. This call also 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. Joining us today are Mr. Chen Lei, our Co-Chairman and Co-Chief Executive Officer; and Mr. Zhao Jiazhen, our Co-Chairman and Co-Chief Executive Officer. Our VP of Finance, Ms. Liu Jun, is unfortunately on medical leave. Delivering the prepared remarks today will be Mr. Li Jiong, our Finance Director. Jiazhen and Lei will make some general remarks on our performance for the past quarter and our strategic focus. Jiong will then walk us through our financial results for the fourth quarter and fiscal year ended December 31, 2025. During the Q&A session, Lei and Jiong will answer questions in Chinese and will help translate. Please kindly note that English translation is for reference only. In case of any discrepancy, statements in the original language should prevail. Now it's my pleasure to introduce our Co-Chairman and Co-Chief Executive Officer, Jiazhen. Jiazhen, please go ahead.

Hello, everyone, and thank you for joining our earnings call for the fourth quarter and fiscal year 2025. In 2025, we celebrated our company's 10th anniversary and made our largest investments in high-quality development. For the first time in the e-commerce industry, we launched a 100 billion support program to assist merchants. The entire company collaborated to enhance support for farmers and merchants. During the shareholders' meeting at the end of last year, we improved our corporate governance by introducing the code share structure and sharpened our strategic focus on investing deeply in the supply chain, concentrating on high-quality brand-oriented growth to advance the entire supply ecosystem up the value chain. Over the past year, we achieved steady results. This quarter, our group's revenue reached RMB 123.9 billion, growing 12% year-on-year, while full-year revenue was RMB 431.8 billion, up 10% year-on-year. Both the quarterly and annual net income saw a year-on-year decline, primarily reflecting our ongoing investments on both the supply and demand sides. As communicated previously, we prioritize long-term value generation by nurturing our ecosystem rather than focusing on short-term financial outcomes. Benefiting from our long-term investments on both sides through initiatives like the RMB 100 billion support program, our platform and supply chain ecosystem have made steady progress. Key participants in the supply chain, including agricultural regions and industrial belts, have become essential pillars supporting the platform and ecosystem, providing consumers with more affordable, high-quality products. With continued investments from the RMB 100 billion support program, dedicated projects like Duo Duo Local Specialties and improved supply and logistics support for remote areas have broadened our assistance from top merchants and SMEs to every segment of the supply chain, aiding businesses to pursue differentiated growth. This transition has shifted the focus from merely supplying products to emphasizing quality and brand building, significantly enhancing supply chain efficiency and overall industrial capabilities while creating opportunities for profit and innovation for agricultural regions and industrial belts. In the fourth quarter, the Duo Duo Local Specialties team visited agricultural areas such as Anyue lemons, Pu'er coffee, Wuhan seeds, Meizhou pomelos, Wenshan blueberries, Fuzhou abalone, and Lianyungang seaweed. Through tailored One Product One Plan support programs, the team tackled issues like product standardization and low added value. These initiatives encouraged farmers and growers to embrace standardized planting, premiumization, and deep processing, effectively increasing the added value of agricultural products and retaining more profits in their places of origin, fostering sustainable growth in specialty agriculture. In industrial belts, we advanced the execution of the new quality supply program by intensifying our support efforts. Our dedicated teams visited manufacturing clusters like Yiwu Accessories, Pinghu down jackets, Hunan Spicy Snacks, Anhui Roasted Seeds, Tianjin Potato Chips, Zhongshan Small Appliances, and Shanghai Chocolate, examining every segment of the supply chain from raw materials to components. Through a mix of fee reductions and support, we helped unlock potential within the supply chain, enhancing supply chain operations and aiding industrial belts in transitioning from commodity competition to brand building. While increasing our investments in the supply chain, we also tapped into consumption potential in remote areas through our logistics support program, creating new growth opportunities for merchants. In the fourth quarter, we built on the success of this campaign and continued to address the last mile of parcel delivery to villages across several provinces and cities, extending e-commerce benefits from western provinces to vast rural areas. So far, we have established end-to-end delivery networks, including transfer warehouses at the country level and pickup points in over 10 provinces and municipalities. We also covered transshipping fees for orders delivered to villages, integrating more remote rural areas into free shipping zones. In terms of trust and safety, we are continually enhancing the business environment and improving service levels for consumers and merchants. During the spring festival, we implemented a series of food safety measures, including business qualification checks, reviews of food advertisements, controls on live streaming, minor protection, IP protection, and the development of a food database, ensuring consumer safety during the festivities. In our global business, despite significant external changes, we achieved steady growth over the past year, mainly due to the competitive advantages established through our long-term supply chain focus. At the last shareholders' meeting, we reiterated our commitment to transforming the supply chain and building another Pinduoduo. This remains our priority. Over the past few months, the three-year strategy discussed during the Annual General Meeting has been put into action, leading to fundamental changes within our business and organizations. In the next phase of our journey, our strategic focus will not be on business diversification but rather on the high-quality development of the supply chain. Leveraging our long-established strengths in the supply chain, we will reinvent the platform and enhance the ecosystem of the value chain. As we enter 2026, marking PDD's 11th year, we view this as a new starting point for our next decade. We are embracing a fresh approach with a strong commitment to execution. We will allocate more talent and resources to deepen our investments in the supply chain, accelerating its upgrade and transformation. We believe that over the next three years, we will have the opportunity to build another Pinduoduo.

Thanks, Jiazhen, and hello, everyone. 2025 marked our 10th anniversary. As Jiazhen just mentioned, we took on greater responsibilities this past year and launched the RMB 100 billion support program to move back to the virtual ecosystem. We also established a co-chair structure to further improve our governance and firmly anchored our company's strategic focus on the high-quality development of supply chain. Through these efforts, we continue to create long-term value for consumers, for merchants, the industry and society has been nearly a year since we launched RMB 100 billion support program. During this time, we continue to reinvest in our ecosystem through measures such as fee reductions, merchant support, trust and safety initiatives. Our dedicated team has gone deep into agriculture regions and manufacturing hubs to have hundreds of regions establish standardized production system and to explore differentiated and brand-oriented growth models. This effort has significantly improved the efficiency and quality of supply chain operations, driving the supply chain transformation from scale driven to value driven. This also brings more high-quality affordable products to our consumers. Our consistent investment in the supply chain have unlocked strong consumer demand on Pinduoduo platform. The platform delivered strong performance during major promotions such as June 18, Double 11 as Spring Festival. Quality products from different regions flow through geographic boundaries and offering consumers more diverse selection and further enhancing their quality of life. Our global e-commerce business continued to deliver steady growth and has reached meaningful scale in most countries we serve, accomplished in 3 years was to build a Pinduoduo business 10 years to complete. However, over the past year, the global geopolitical landscape has grown more complex. Trade and regulatory policies across different countries and regions continue to evolve. This has introduced greater uncertainty to our global business and will impact and even reshape our development model. In this context, we need to rely more than ever on the collective capabilities of our supply chain ecosystem. Therefore, we will continue to anchor our strategy in investing deeply in supply chain capabilities and direct more efforts, capital and resources to its transformation. We aim to empower our merchants and manufacturers to become innovators with go-to-market capabilities, developing consumer insights, coming up with product sizes and building brands. This will drive towards high-quality and brand-oriented growth, creating real value for consumers. Over the past few months, we have been making steady progress on the execution of the 3-year strategy adopted at a shareholders' meeting, and we are pleased to see some results. In the fourth quarter, our long-term investment in agriculture research achieved new results. Last October, for the second consecutive year, we were invited to attend the World Food Forum hosted by the UN Food and Agriculture Organization, representing Asian enterprises. We shared our experience and achievements in supporting digital agriculture innovation, and we also sponsored 2 great agriculture research teams that took the stage at the forum, bringing new energy into agriculture research and development. Since the start of 2026, competition in the e-commerce sector has continued to intensify around new business models and new technologies. At the same time, the global environment has become more complex than last year with increased uncertainty in the economic and trade climate as well as in regulatory policies across various countries and regions. This will inevitably bring more challenges and weigh on our future performance, putting pressures on our profitability in short term. However, we will continue to uphold our long-term philosophy and faithfully execute our strategy of investing deeply in the supply chain, dedicating more resources to give back to the industry and the society.

Well, thank you, Lei. Hello, everyone. This is Jiong. Now let me walk you through our financial performance in the fourth quarter and fiscal year ended December 31, 2025. In terms of income statement, in Q4, our total revenues increased 12% year-over-year to RMB 123.9 billion and 10% year-over-year to RMB 431.8 billion for full year 2025. This was mainly driven by the increase in revenues from both online marketing services and transaction services. Revenues from online marketing services and others were RMB 60 billion this quarter, up 5% compared to the same period 2024. Our transaction services revenues this quarter were RMB 63.9 billion, up 19% versus the same period of 2024. Moving on to costs and expenses. Our total cost of revenues increased 15% from RMB 47.8 billion in Q4 2024 to RMB 55.2 billion this quarter. For the full year, our total cost of revenues increased 23% to RMB 188.8 billion, mainly due to increased fulfillment fees, bandwidth and server costs and payment processing fees. On a GAAP basis, total operating expenses this quarter increased 10% to RMB 41 billion from RMB 37.2 billion in the same quarter of 2024. On a non-GAAP basis, our total operating expenses increased to RMB 39.3 billion this quarter from RMB 35.1 billion in Q4 2024. Our total non-GAAP operating expenses as a percentage of total revenues was 32% in Q4. For full year 2025, total non-GAAP operating expenses were RMB 140.7 billion, up from RMB 122 billion in 2024. Looking to specific expense items. Our non-GAAP sales and marketing expenses this quarter were RMB 34 billion, up 9% versus the same quarter of 2024. On a non-GAAP basis, our sales and marketing expenses as a percentage of our revenues this quarter was 27% compared to 28% in Q4 of 2024. For the full year, non-GAAP sales and marketing expenses increased from RMB 109.1 billion to RMB 123.3 billion in 2025. Our non-GAAP G&A expense were RMB 907 million in Q4 versus RMB 998 million in the same quarter of 2024. Our annual non-GAAP G&A expenses were RMB 3.2 billion in 2025 versus RMB 2.8 billion last year. Our research and development expenses were RMB 4.4 billion in the fourth quarter on a non-GAAP basis and RMB 5 billion on a GAAP basis. On a GAAP basis, operating profit for the quarter was RMB 27.7 billion versus RMB 25.6 billion in the same quarter 2024. Non-GAAP operating profit was RMB 29.5 billion versus RMB 28 billion in the same quarter 2024. Non-GAAP operating profit margin was 24% this quarter compared with 25% for the same quarter 2024. For the full year, non-GAAP operating profit was RMB 102.6 billion compared with RMB 18.3 billion in 2024. Net income attributable to ordinary shareholders was RMB 24.5 billion for the quarter and RMB 99.4 billion for the full year. In the fourth quarter, basic earnings per ADS was RMB 17.50 and diluted earnings per ADS was RMB 16.51 versus basic earnings per ADS of RMB 19.76 and diluted earnings per ADS of RMB 18.53 in the same quarter of 2024. Non-GAAP net income attributable to ordinary shareholders was RMB 26.3 billion for the quarter and RMB 107.3 billion for the full year. In the fourth quarter, non-GAAP diluted earnings per ADS was RMB 17.69 versus RMB 20.15 in the same quarter of 2024. That completes the income statement. Now let me move on to cash flow. Our net cash flow generated from operating activities was RMB 24.1 billion in Q4 and RMB 106.9 billion for the full year of 2025, compared with RMB 29.5 billion in the same quarter of 2024 and RMB 121.9 billion in 2024. As of December 31, 2025, the company had RMB 422.3 billion in cash, cash equivalents and short-term investments. Thank you, and this concludes my prepared remarks.

Thank you, Jiong. Next, we'll move on to the Q&A session. Today's Q&A session, Lei and Jiazhen will take questions from analysts on the line. We could take a maximum of 2 questions from each analyst. Lei and Jiazhen will answer questions in Chinese, and we will help translate. Operator, we are open for questions.

I have two questions. First, the company made some organizational adjustments at the shareholder meeting at the end of last year. Currently, the company is operating in over 90 markets and is facing new challenges from the complex regulatory environment. How does the company maintain flexibility and quality of execution in such an environment? My second question is about the slowdown in the growth of e-commerce platforms in China over the past quarter, as well as the decline in the company's online marketing revenue growth over the last two quarters. Could management share your views on the current state of the China e-commerce market and where the next phase of growth for the industry might come from?

This is Zhao Jiazhen. Let me address your first question. In recent years, our global business has made significant strides, now reaching nearly 100 markets and achieving substantial scale. However, our corporate governance and talent development have not kept pace with this growth, making it challenging for us to maintain our momentum in several areas. Simultaneously, the international geopolitical landscape is changing swiftly, with trade and regulatory policies evolving and tightening. This creates new challenges for our company. Thus, we see both an opportunity and a need for a comprehensive transformation of our organization, culture, and governance, which will be a gradual process. The culture, structure, and new leadership announced at our shareholders' meeting last December mark the beginning of this transformation. In the coming period, we will focus more resources, energy, and capital on upgrading and reinventing our supply chain to achieve an overall transformation of our operations. Now, regarding your second question, we have observed that the e-commerce industry has entered a phase of increased competition and slower growth. In response, we have developed a strategy focused on making deep investments in our supply chain. This strategy comes from the understanding that an e-commerce platform should go beyond being a mere transaction site; it should create more value for all parties involved in the supply chain. Our substantial investments in the supply chain include various initiatives, such as Duo Duo local specialties and logistics support for remote areas, all aimed at making the supply chain more inclusive. I would like to highlight two specific programs. The first program is free delivery to villages, a new initiative we started in the last quarter of last year to tackle high logistics costs and incentivize merchants to serve remote areas, thereby expanding the free shipping zones. We have established last-mile logistics infrastructure, including transit warehouses and pickup points in several regions of China, with the platform covering transportation fees for orders to these villages. Merchants are only required to send their products to the transport warehouses, and we manage the logistics from the warehouse to the village pickup points. This model enhances the shopping experience in remote locations and opens new market opportunities for our merchants. The second initiative is the quality supply program. For merchants interested in improving product quality and service, the platform offers industry insights and supply chain support. These efforts help merchants upgrade their operations throughout the entire product lifecycle, from research and development to sales, ultimately transforming the supply chain system. There is much that the platform can accomplish in this area. For example, while traditional product development often relies on trial and error, our merchant development teams compile crucial product information and share it with merchants in a timely manner. Coupled with traffic support for new product testing, these strategies allow merchants to refine their products more effectively and enhance the return on investment for their R&D expenses. These are two examples of how we are working to improve the supply chain. In light of the industry's slowdown and rising competition, we are deliberately directing resources towards establishing a high-quality supply chain. Our commitments to foundational capabilities like quality supply and village delivery will be essential for our company's sustainable growth over the next decade.

The company's global business has faced some challenges recently. Since last year, we've encountered major regulatory inquiries in key markets and significant changes in trade policy that affect our operations. Could management discuss the current external environment and the strategic focus for our global business moving forward? Additionally, the company's profitability has fluctuated over the past two quarters. Could management explain how the launch of different business models might influence profitability and what the long-term profit margin expectations are?

This is Chen Lei. I will take your first question. Over the past period, we have received inquiries from regulatory authorities. As our global business has grown rapidly and reached a significant scale in various countries, it's understandable that this has raised some concerns and attracted closer scrutiny. However, our management believes that the current regulatory scrutiny will establish a solid foundation for our next phase of growth and will guide us in evolving our model within the rapidly changing international political and regulatory landscape. Since launching our global business, we've consistently focused on the long term. Leveraging our strong supply chain roots, we are dedicated to achieving sustainable development in each market and delivering real value to consumers. As the regulatory landscape across regions changes rapidly, we recognize that compliance is essential. As a company embedded in local communities, we have a fundamental responsibility as an e-commerce platform to address local needs and remain true to our core mission, fulfill our obligations, and contribute positively to the societies we operate in. Thus, our management team invests significantly in business compliance. However, trade policies, taxation, data regulations, product compliance requirements, and various other regulatory frameworks are evolving significantly across different regions. These requirements can vary widely and sometimes contradict each other, generating greater challenges and uncertainty. We are actively learning, adapting to these changes, and continuously improving our compliance capabilities to create sustainable societal value. You also mentioned changes in global trade policies. Since the start of last year, we've indeed observed shifts in trade policies within many major markets. To ensure business compliance, the team has swiftly adjusted our business model based on the regulatory environment and market conditions in different areas to provide reliable services to consumers. This is closely linked to the supply chain capabilities we've developed over the years. Therefore, looking ahead, our company's strategic focus on global business will continue to revolve around investing in supply chain capabilities. Each aspect of this directly affects the consumer shopping experience, making it a crucial area for our investment.

This is Zhao Jiazhen. Let me answer your second question. First, I want to emphasize that currently, the company is still in a strategic investment phase. The external environment and competitive landscape are changing rapidly. To meet the evolving needs of consumers, we are working closely with our merchants to explore and launch new business models that fit the new conditions. Any new model, from launch to full rollout, requires the platform to commit substantial resources in its early stages. Both the exploration of new business models and strategic investments in the supply chain are fundamental and long-term initiatives. The timing difference between investment and return will inevitably impact our performance at certain stages. As we have communicated multiple times, we will choose the long-term value of the platform ecosystem over short-term financial performance. Therefore, as we continue our strategic investments in a complex and volatile macro environment, fluctuations in our profit margins from quarter to quarter may occur. Over the past few months, the strategy we announced at the shareholders' meeting is being translated into concrete projects. The business and organization are undergoing deep transformation. We suggest not to focus too much on the profitability of a single quarter, but rather to pay more attention to the high-quality development of our platform ecosystem. Only with a healthy platform ecosystem and a robust supply chain can we achieve sustainable growth in intrinsic value over the long term.

My first question is about the profit margin. Since last year, the company has initiated several investment programs, including a RMB 100 billion support initiative and significant investments in the supply chain. Could management provide more details on how the company views the investment and return cycles for these projects? What will be the long-term effects on the company's financial performance? My second question concerns online retail sales, which have seen strong growth in the first two months of the year. Can management share their perspective on the consumer market, particularly regarding categories that are experiencing faster growth? Does the company have specific strategies to capitalize on new opportunities in these rapidly growing product categories?

This is Zhao Jiazhen. I'll address your question. About a year ago, we recognized the importance of developing the ecosystem for the long term and launched various merchant support initiatives, including a fee reduction of RMB 10 billion and a support program of RMB 100 billion, committing real resources to assist merchants and industries, thereby fostering more innovation. Our management unanimously believes that as the platform becomes a public entity with social influence, we must consider the company's development with a broader view of public interest and the long-term health of the industry ecosystem. The strategy we announced at the shareholders' meeting last year, which focuses on our core business and making significant investments in supply chain upgrades, is an extension and reinforcement of this approach. After years of development, the e-commerce ecosystem is maturing, and merchants’ needs on the platform have diversified. The platform's role has shifted from merely facilitating transactions to becoming a comprehensive business partner. Consequently, the support merchants require has expanded from just traffic assistance to include various aspects of their operations, such as research and development, production, and sales. This necessitates a deeper operational involvement from us to devise specific support plans catered to different industries, thus building a more competitive supply chain. These investments involve thousands of merchants and cannot be realized overnight, so we are ready for long-term, patient investments, and we are pleased that many of these have already shown positive results. For example, with the backing of the new quality supply initiative I mentioned earlier, some merchants are using the fee reductions provided by the platform to enhance their R&D teams and upgrade production lines. Together with the platform's digital solutions, they are embarking on a journey of product differentiation and transformation. These long-term structural investments may not show immediate financial results, but they are vital for the platform’s and ecosystem’s sustainable growth in the long run. We will faithfully implement these long-term projects by reinvesting tangible resources into the ecosystem. Our goals are to reduce merchant costs, improve supply chain quality, and enhance consumer experience. By investing in the supply chain, we aim to transform the platform and elevate the ecosystem up the value chain. Regarding your second question, we are glad to see improvements in the overall consumer market. However, we acknowledge that we still face challenges in today’s competitive environment. The future performance of e-commerce platforms will rely increasingly on their ability to create additional value for the entire supply chain rather than just focusing on traffic acquisition. Thus, we have made a decisive choice to invest heavily in the supply chain. For different product categories, our merchant development teams will collaborate closely with sellers to offer tailor-made industry solutions that promote new quality transformations and drive the high-quality growth of the supply chain. We firmly believe these investments are crucial for high-quality development in e-commerce moving forward, and we are dedicated to persistently advancing these efforts for the long term. Thank you. Thank you, Joyce. Thank you, Jiazhen. Thank you for joining us today. We look forward to speaking with you again next quarter. Thank you, and have a great day.

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