Earnings Call Transcript - PDD Q4 2021

Operator, Operator

Ladies and gentlemen, thank you for standing by and welcome to Pinduoduo’s Fourth Quarter and Full Year 2021 Earnings Conference Call. I must advise you that this conference is being recorded today. I would now like to hand the conference over to your host for today’s conference, Mr. Chen Penn. Please go ahead, sir.

Chen Penn, Host

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’s earnings release was distributed earlier and is available on our investor relations website as well as through global newswire services. Before we begin, I would like to refer you to our Safe Harbor statement in the earnings press release, which applies to this call as we will make certain forward-looking statements. Also, this call contains discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of the non-GAAP measures to GAAP measures. Joining us today on the call are Chen Lei, our Chairman and Chief Executive Officer; Liu Jun, our VP of Finance. Liu will make some general remarks on our performance for the past quarter and fiscal year 2021 and our strategic focus. Jing will then take us through our key operating and financial results for the fourth quarter and fiscal year ended December 31, 2021. During the Q&A session, Lei will answer the 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 original remarks and the translated version, statements in the original language should prevail. Now, it is my pleasure to introduce our Chairman and Chief Executive Officer, Chen Lei. Lei, please go ahead.

Chen Lei, Chairman and CEO

Thank you, Chen, and thank you everyone for joining us on our earnings call for the fourth quarter and fiscal year of 2021. Let me first recap our results in Q4 and full year 2021. Our total revenue in the fourth quarter, excluding revenue from merchandise sales, was RMB27.1 billion. This represents a year-on-year increase of 28%. Our annual active buyers reached RMB868.7 million for the 12 months ending on December 31, with RMB733.4 million average quarterly MAU. Our GMV in 2021 was RMB2,441 billion, representing 46% year-on-year growth. Total revenue for 2021, excluding revenue from merchandise sales, was RMB86.7 billion, representing 61% growth year-on-year. 2021 was a year of transition for Pinduoduo. Over the course of the year, during which I took over the role of Chairman, we shifted our priority from sales and marketing towards research and development. I am glad to see that this shift is well on track. It will lay a solid foundation for us over the long run. We are grateful for our users’ continued trust and support. To keep up with the evolving and increasingly multi-dimensional preferences, we currently ask ourselves how we can serve them better. As a team with an engineering background, our focus has always been to use technology to benefit all. We were fortunate to be early in identifying opportunities to contribute to and increase value in agriculture. Agriculture is a sector that touches everyone’s daily life yet has low levels of digitalization. Since Pinduoduo’s establishment in 2015, we have been facilitating agricultural modernization and digital inclusion to create an efficient, resilient, sustainable, and vibrant agricultural sector that benefits all stakeholders in the value chain, and we remain focused on our goal. In 2021, we deepened our agricultural digital inclusion efforts in various ways, which include: helping farmers to expand their access to the market; advancing the use of smart agriculture; and encouraging and enabling more young, tech-savvy talent in the agricultural sector. And now let me elaborate. In the downstream, we continue to bring farmers into the digital economy by expanding their market access. We are working hard to build a platform that effectively matches consumer demand in agricultural production across the country. This enables farmers to ship their fresh and perishable agri-food products directly to consumers, bypassing layers of distribution to deliver in the shorter timeframe. The result is higher income for farmers, lower prices for consumers, and fresher produce for consumers' cuisine. Our platform has opened up a market of nearly 870 million users to farmers and agriculture producers in China directly. We have also provided them with various tools to promote their unique agricultural produce. One commitment that we have is our zero commission policy on agricultural products. We waived sales commissions and proactively gained more exposure for agricultural products. We plan to continue this zero commission policy on agricultural products. We aim to create a virtual cycle like what we have done for SMEs in the past, in which farmers spend more while consumers get fresher and more affordable produce. To amplify its effectiveness, we launched numerous promotional events. In 2021, we worked with various regions to create a series of agri-focused shopping festivals that introduce consumers across China to different regional specialties. We also collaborated with key partners, such as CCTV, to launch live streaming events to promote China’s agricultural heritage. These events not only enhanced user awareness and appreciation of local specialties but enabled farmers to directly talk to consumers and understand consumers’ preference data, which have helped in brand building and production upgrades for quality agricultural produce. For instance, we initiated an Orange Festival to promote high-quality orange specialties from seven major orange-producing areas across the country, bringing regional orange varieties to consumers nationwide. This resulted in a significant increase in sales for local orange and agriculture merchants in Hunan Province, which means a large increase in sales. This increase in sales not only improves farmers’ living standards but also gives them confidence to invest in the future, many of whom are reinvesting with our partners into developing better products, including sorting machines and packaging design. Moving upstream, we are advancing the adoption of agricultural technology to help growers improve their productivity. A few practical and affordable technologies came out of our Smart Agriculture Competition last year, including automated crop monitoring, program dynamic adjustment for changing climate conditions, and irrigation. We have several teams commercializing these technology solutions. Today, these solutions have been applied in major strawberry growing regions across China, such as Liaoning, Anhui, and Yunnan provinces. They have helped transitional growers more than double their management capacity. Such progress is inspiring and valuable for the entire industry. We regularly organize knowledge-sharing sessions to encourage the adoption of technology in this sector. Earlier this month, we jointly hosted a sharing session with FAO China on harnessing smart agriculture to boost food production and security. Representatives from FAO, China Agricultural University, Chinese Academy of Agricultural Sciences, Pinduoduo, and the finalists of the smart agriculture competition presented their insights at a webinar. We are honored to work closely with world-class partners in the agri-food sector, such as China Agricultural University, Zhejiang University, UN FAO, Singapore, and Wageningen University. We look forward to collaborating with more like-minded organizations and individuals in the future. Another important part of Pinduoduo’s agricultural strategy focuses on encouraging and enabling more young, tech-savvy talent in the agriculture sector. We are glad to see more and more young agricultural entrepreneurs choosing to start their businesses with Pinduoduo. As of the end of October 2021, over 126,000 young farming professionals, born after 1995, have joined the Pinduoduo platform, up from 85,700 in 2020 and 29,700 in 2019. Most of these young entrepreneurs are well-educated. They are digital natives who grew up with mobile technology. Therefore, they are used to buying things online and using innovations like live streaming. At the same time, many of them are motivated by the desire to contribute to the rural communities. To assist them, we have offered dedicated training programs providing the necessary know-how to operate their e-commerce businesses. We will devote more resources to support them, as we believe we will play a key role in facilitating agricultural modernization and rural revitalization. Looking back on our efforts in agriculture, we are happy with the positive impact that we have generated. However, we have only scratched the surface in the field of technology advancement and digital inclusion in agriculture. Therefore, we are stepping up our investment in this sector as a long-term commitment. The focus of our long-term vision may not always translate into near-term results, but we will be patient as we do our part to contribute to agricultural modernization. As mentioned last year, I personally oversee our RMB10 billion agricultural initiatives, which aims to facilitate the advancement of agri-tech, promote digital improvement, and provide agri-tech talent with greater motivation and a sense of achievement. Profits from this quarter will continue to be allocated to this initiative. Lastly, as a platform serving over 868 million consumers, we are also showing more social responsibility. In July, we rapidly responded to assist with emergency relief work, making donations and launching a portal to support emergency relief distribution. In October, we carried out similar efforts for disaster relief and post-disaster construction. In December, we contributed towards relief efforts in Xi'an and worked with the local government to maintain necessary provisions as a result of the COVID-19 outbreak. To support rural communities, we launched Duoduo Reading Month. Today, we have donated carefully selected farming books to rural communities around the country with an organized reading program. We hope that this effort will broaden the horizons of the youth and contribute to a better future for the community. As we step into another year, we remain laser-focused on our goals, and we will continue to do our best to serve all our stakeholders. Thank you all in advance for your continued support. And now, let me pass the time to Jim. Jim has been with us since 2017 and has been recently promoted to VP of Finance as part of our plan to grow more young generation leaders. And Jing, please?

Jing Ma, VP of Finance

Thank you, Lei. Hello, everyone. Nice to meet you here. Let me first walk you through our operating results for the fourth quarter and fiscal year ended December 31, 2021. Our annual active buyers for the 12 months ended December 31, 2021, was 868.7 million. This is an increase of 80.3 million from the end of 2020 or 1.4 million from the 12 months ending September 30, 2021. In Q4, we observed a quarter-over-quarter decline in MAU. Average MAU in Q4 was 733.4 million. This is a 13.5 million increase from the same quarter in 2020 or an 8.1 million decline from Q3 2021. At our current scale, we are approaching a plateau and do not see it as a meaningful driver of future growth. To us, it is more important to focus on meeting our existing users’ needs and to serve them in the best way we can. Our GMV for the last 12 months ended December 31, 2021, was RMB2,441 billion, an increase of 46% compared to 2020. Average annual spending per active buyer for the last 12 months ending December 31, 2021, which is the result of GMV divided by the number of active buyers over the same period, increased by 33% year-over-year to RMB2,810. We are encouraged by their growing trust and are committed to serving them better. Last year, our platform generated a total of 61 billion orders, an increase of 59% from a year ago. There has been a significant increase in agricultural orders on our platform. In line with the stepped-up forecast and resources allocation, the average order value for agricultural products is lower. This resulted in a decrease in AOV over the same period. Our AOV came down 8% to RMB40 in 2021 as compared to RMB44 in 2020, where the average number of orders per active buyer was 70% in 2021, an increase of 45% from 2020. We are glad to see that our investment in agriculture is addressing our users’ real needs. We plan to deepen our efforts in agriculture. Next, I will go through our financial performance in the quarter ended December 31, 2021. In terms of P&L, our total revenue in the quarter was RMB27.2 billion, up 3% from RMB26.5 billion in the same quarter of 2020. This was mainly driven by the increase in revenues from online marketing services and revenue from transaction services, offset by a decrease in revenue from our 1P trials. Excluding revenue from our 1P trials, our total revenue was RMB27.1 billion in Q4 2021, up 28% from RMB21.2 billion in the same quarter of 2020. Revenue from online marketing services and others was RMB22.4 billion this quarter, up 90% compared to the same period of 2020. This was primarily due to increased merchant activities, which is a testament to our platform’s capability to help them reach their target customers effectively and efficiently. Our transaction services revenue this quarter was RMB4.7 billion, up 108% compared to the same period of 2020. The increase in our transaction services revenues was due to: first, the increase in total transaction processing fees as a result of higher GMV; and second, more diversified services that we provide to merchants, such as fulfillment services. Moving on to costs and expenses. Our total cost of revenue decreased from RMB11.5 billion in Q4 2020 to RMB6.5 billion this quarter. The decrease came mainly from the reduction of 1P trials and a decrease in various costs due to one-off rebates, offset by increased fulfillment fees. Total operating expenses this quarter were RMB13.8 billion, compared with RMB17.1 billion in the same quarter of 2020. On a non-GAAP basis, our total operating expenses as a percentage of revenue, excluding 1P, have been declining from 94% to 76% to 45% for Q4 of 2019, 2020 and 2021 respectively. As we observed lower user and top-line growth, we proactively controlled our expenses. This resulted in lower operating expenses in the quarter. As we face more competition from existing and new players, we expect relevant expense items to increase in the future. Looking into specific expense items, our non-GAAP sales and marketing expenses this quarter was RMB10.8 billion, down 25% versus the same quarter of 2020. As we continue to shift away from our previous forecast on sales and marketing, on top of this, we further controlled our expenses in the face of slower user and revenue growth. As a result, on a non-GAAP basis, our sales and marketing expenses as a percentage of our revenues in this quarter was 40% compared with 84% and 54% for the same quarter in 2019 and in 2020. Our non-GAAP general and administrative expenses were RMB195.8 million compared with RMB153.1 million in the same quarter of 2020. Our non-GAAP research and development expenses were RMB1.3 billion, a decline of 16% from RMB1.6 billion in the same quarter of 2020. The decrease in non-GAAP R&D expenses was due to a one-off rebate from one of our service providers. If we take into account the impact of this rebate, our R&D expenses would have risen. We do not expect a rebate to recur. As a result, operating profit for the quarter was RMB6.9 billion on a GAAP basis compared with an operating loss of RMB2 billion in the same quarter of 2020. Non-GAAP operating profit was RMB8.4 billion compared with an operating loss of RMB1.1 billion in the same quarter of 2020. Net income attributable to ordinary shareholders was RMB6.6 billion compared with a net loss of RMB1.4 billion in the same quarter of 2020. Basic earnings per ADS was RMB5.26, and diluted earnings per ADS was RMB4.66 compared with basic and diluted net loss per ADS of RMB1.13 in the same quarter of 2020. Non-GAAP net income attributable to ordinary shareholders was RMB8.4 billion compared with a net loss of RMB184.5 million in the same quarter last year. Non-GAAP diluted earnings per ADS was RMB5.88 compared with non-GAAP diluted net loss per ADS of RMB0.15 in the same quarter of 2020. To conclude, profitability in the past quarter was mainly attributed to: first, controlled spending in the face of slow growth; and second, reduction of costs and expenses due to a one-off rebate. We expect profits to fluctuate as we continue to invest in the agriculture space, including agricultural technology. As we mentioned in previous quarters, we are also facing more competition, and therefore, we do not expect profitability in Q4 to serve as a benchmark for the following quarters. Similar to previous quarters, proceeds from this quarter will be allocated to the $10 billion agriculture initiative. That concludes the profit and loss statements for the fourth quarter of 2021. Our net cash flow provided by operating activities was RMB16.4 billion, compared with RMB14.9 billion in the same quarter of 2020. As of December 31, 2021, the company had RMB92.9 billion in cash, cash equivalents, and short-term investments. With that, I conclude my prepared remarks.

Chen Penn, Host

Thank you, Jing. Next, we will move on to the Q&A session. For today’s Q&A session, Lei and Jing will take questions from analysts on the line. We can take a maximum of two questions per analyst. Lei will answer questions in Chinese, and I will help translate Lei’s remarks for easier reference. Operator, we may now take questions on the line.

Operator, Operator

Our first question is from Thomas Chong with Jefferies. Your line is open.

Thomas Chong, Analyst

Thanks management for taking my questions. My first question is more about the macro uncertainties that we are facing. How should we think about the impact to the consumers as well as to Pinduoduo? And my second question is about our RMB10 billion agriculture initiatives. Can management comment about the progress so far, the P&L impact this year’s KPI, as well as if there will be a step-up in investment going forward? Thank you.

Chen Lei, Chairman and CEO

Thank you, Thomas, for your questions. Let me take your questions. You asked about the macro-economy. Well, for us, we always look internally and see what areas we can improve through technology. A big area for us is agriculture. There are many aspects and areas in agriculture that one can improve. In production, we can increase yield, reduce the environmental impact, and also help farmers get higher and stable income. In terms of consumption, through our efforts, we can provide consumers with fresher and more affordable agricultural produce while reducing waste at the same time. In addition, another area of interest for us is in distribution. We can use technology to improve the distribution efficiency of agricultural produce and strengthen the rural logistics system. In the agriculture sector, which is fundamental and crucial, we see many opportunities. This reflects our confidence about the potential of the industry and its future development. However, investment in agriculture takes time, and the process is gradual. So we must be patient. With that, this naturally brings us to your next question about our RMB10 billion agriculture initiative. We announced this initiative in Q2 last year. For this initiative, profitability or commercial value is not the aim. We hope it can address the critical needs in the agriculture sector and rural areas. In terms of where we would allocate our investment, we hope this initiative will facilitate the advancement of agri-tech, promote digital inclusion, and also provide more motivation and a sense of achievement to agriculture talent and workers. We really hope the RMB10 billion agri initiative can maximize its potential and impact in advancing agri-tech and digital inclusion. Therefore, we are diligently evaluating different proposals and projects, considering our past experiences in agriculture and technical background. Here, I can share some examples of our focus areas. Some examples include how to improve distribution efficiencies through technology, how to reduce transportation times, and how to minimize the environmental impact with logistics technology. Furthermore, we aim to use technology in production to improve efficiency and quality throughout the agricultural value chain. This is a long-term project that requires dedication and patience. We are still in the early days, and we hope everyone can be patient. As we invest, we look forward to sharing our progress on the RMB10 billion agri initiative and hope that I have addressed your questions.

Thomas Chong, Analyst

We are focused on reducing transportation times and minimizing the environmental impact through logistics technology. Additionally, we aim to leverage technology in production to enhance efficiency and quality in the agricultural value chain. This is a long-term project that demands dedication and patience. Being in the early stages, we ask for your continued patience as we invest, and we look forward to updating you on our RMB10 billion agricultural initiative. I hope I have addressed your questions.

Chen Penn, Host

Operator, we’re going to take questions from the next analyst on the line.

Operator, Operator

Our next question comes from Yang Bai with CICC. Your line is open.

Yang Bai, Analyst

Thank you management for taking my questions. My first question is regarding the future competitive landscape. I noticed that Pinduoduo always focuses more on the value to consumers instead of pressure from competitors. From your perspective, what is needed or what kind of improvement should be emphasized for the company to make the cut? And my second question is regarding your branding strategy. For the past six years, Pinduoduo has distinguished itself from other competitors, especially for your value-for-money merchandise. However, when it comes to branding, it seems that the past advantage is becoming somewhat of a bottleneck. I’d like to know your strategy on how to efficiently help the brand business on Pinduoduo’s platform. Thank you.

Chen Lei, Chairman and CEO

Thank you, Bai Yang, for your questions. I will share my views on those fronts. As for competition, since the day Pinduoduo was established, we have been in this highly competitive space. The China e-commerce space is a huge industry, and it has always been highly competitive. We now see more large platforms entering e-commerce, providing different options to consumers. As technology continues to upgrade, consumers’ needs will also evolve, and we expect more engagement formats will emerge, with more platform companies joining e-commerce. As you mentioned in your question, internally, we focus on users and whether we are effectively serving their needs. Thus, we aim to offer users a unique experience with more savings and more fun when shopping. This is our company’s competitive advantage. Indeed, we do not focus too much on competition. But I acknowledge that in terms of understanding and catching up with rapidly changing user needs and addressing those needs effectively and efficiently, there is still room for us to improve. Admittedly, some competitors have done a better job in some of these aspects, and we need to learn from them. Especially under intensified competition, we need to introspect on how to perform better, improve our services, and raise user satisfaction levels. I mentioned a few quarters ago that Pinduoduo cannot always be perfect or the best. We will inevitably slow down as we transition in leadership and adjust strategies. But these are part of our company’s development process. Additionally, we have chosen to invest in agriculture, which differs from pure internet technology. We need to be more patient with our investments due to this sector's nature. We remain committed to investing in agriculture because we see that compared to categories that have undergone digitization earlier or categories with higher online penetration rates, agriculture's online penetration rate is still very low. Moreover, in terms of existing fulfillment experiences, many consumer needs remain unmet. This is why we are investing in agriculture without hesitation, as well as in core agricultural technology, promoting agri-tech and digital inclusion, which we see as central to our company's mid-to-long-term development outlook. My team and I are confident. However, for our confidence to translate into actual results, we require dedication and hard work from everyone on our team. Regarding your question about branding, our platform now has nearly 870 million users with diverse needs, and we aim to satisfy these user needs and improve their shopping experience. Branding is certainly a key part of that. However, building a brand is not an overnight task; it takes time. Ultimately, I believe that the goals for our brands and us are aligned, to serve the consumers effectively. Thus, we will continue to be patient and attentive to what we can do within our capabilities. In this collaborative process, we see a trend that brands taking early opportunities tend to generate higher returns. This, in turn, attracts more brands to learn about us and seek collaboration. Whether bringing in more brands will help increase ARPU or AOV is not our primary focus. Instead, we concentrate on user satisfaction. We will adhere to our principles of benefiting all, prioritizing people, and maintaining an open mindset. I believe this approach will positively impact brands, users, and our platform.

Operator, Operator

We may now take a question from the next analyst. Our next question comes from Joyce Ju with Bank of America. Your line is open.

Joyce Ju, Analyst

Congrats on the solid quarter and thanks for taking my questions. My first question is regarding the continued leverage and decline in sales and marketing expenses this quarter. Is there any specific reason that led the company to further control sales and marketing spending this quarter, or is it simply an improvement in your sales and marketing ROI? My second question is, PDD has delivered another quarter of strong profit. Can you share with us how the management team is looking at the balance between profitability and growth? Are we seeing a pivot in strategic priorities? Also, how should we expect the future profitability trend? And how much was the one-time rebate contributing to this quarter’s higher profitability?

Jing Ma, VP of Finance

Thank you for your question, Joyce. Regarding sales and marketing expenses, you may see that we are changing our investment direction based on our results from past quarters. During Q1 through Q3 last year, our expenses showed a consecutive quarter-on-quarter decrease in absolute dollar amounts. In Q4, our selling and marketing expenses decreased by 23% year-over-year, representing 42% of revenues — our lowest level in our history. We believe this is a strategic shift as Lei just mentioned; we need to focus on investing more in technological development, such as agri-tech. At the same time, with a slowing growth rate, we are being more cautious, proactively controlling expenses. This is also why we are seeing higher profitability margins in the past quarter. The recent fluctuations in user activities and slowing revenue growth reflect that we are not fulfilling user needs effectively. Consequently, our team is working diligently to explore how to better meet user needs more quickly. This will require continued investment, and, indeed, the expenses are very likely to increase in the future. As for the second question regarding profitability, I would like to highlight that we are not changing our strategy to focus on profitability. This quarter’s higher profit was due to a one-time rebate and controlled spending in the face of slower growth. To elaborate, we are currently experiencing low growth and concurrently making adjustments, so we are taking a cautious approach and regulating our expenses. Additionally, part of this quarter’s profit was due to cost and expense reductions related to a one-off rebate from our service provider. This one-time rebate resulted in lower costs and expenses and higher profitability in the quarter. However, if we strip away the one-off rebate, costs and expenses would be higher than the reported number, and profitability would be lower. As for the one-time rebate, while it is of a one-off nature, it was a case-by-case negotiation with our service providers, and we do not expect it to recur in the future. Due to confidentiality obligations with the service providers, we cannot disclose specific amounts, but I can confirm that it contributed significantly to this quarter’s profit.

Chen Penn, Host

We have time to take questions from one more analyst.

Operator, Operator

Our last question comes from Ken Fong with Credit Suisse. Your line is open.

Ken Fong, Analyst

Hi. Thank you, management for taking my questions. I have a question on the online market service revenue, which in Q4 recorded a slower growth rate of only 19% compared with previous quarters. What’s the reason behind this? Is this mainly due to slower GMV growth or due to changes in take rate policies? Have we carried out more merchant support measures in the recent quarter that also depressed our take rate? As an investor, how should we think about the growth outlook for the first quarter and the next few quarters? Thank you.

Chen Lei, Chairman and CEO

Kenneth, let me take your question and offer some insight on our revenue growth. Jing will supplement with some insights on take rates. First of all, as we reached our current scale, investors should not expect continuous, ultra-high growth. Regarding our future growth, we believe we need a strategic upgrade. We underwent adjustments last year to focus more on agriculture and core technology for long-term, high-quality development. For example, we are exploring how to apply our core technology to improve efficiency and reduce waste in agriculture so that consumers can access high-quality, affordable produce while farmers can increase yields and enjoy improved income through digital inclusion. We believe our focus on agriculture and investment in core technology creates long-term value. We are fortunate to have nearly 870 million customers who choose Pinduoduo. Serving these users and addressing their constantly changing needs is our long-term focus. In the past year, we have seen many different platforms entering e-commerce, as well as new e-commerce formats. As I mentioned before, we must learn from them and improve our services. This serves as a reminder for us to iterate and bring more young talent into our management team to keep up with market development. For these adjustments to show results, it takes time. The development of our business cycle does not necessarily align smoothly with our financial reporting cycle. Therefore, we do not recommend investors use one quarter of results to predict the next. Jing may help supplement with insights on take rates.

Jing Ma, VP of Finance

Thank you, Kenneth. Before I answer your question regarding take rates, I would like to talk more about SMEs. From the beginning, Pinduoduo was built on principles of benefiting all, prioritizing people and maintaining openness. Since agriculture is our core, many agriculture merchants are SMEs themselves. Therefore, we have always sought ways to support SME merchants and their products. Regarding take rates, it's not a metric that we prioritize. Over the past three quarters, as you know, we continue to implement the zero commission policy for agricultural products. We actively extended support to agricultural merchants and SMEs and provided more exposure and traffic for agricultural products. All these efforts affect our take rates. In the long run, our revenue and monetization depend on how much value we are able to create. As our user experience improves, our platform could provide more value to merchants, attracting more merchants to invest in our platform. As the percentage of agriculture products increases, it’s unlikely for monetization rates to grow as it affects our overall scale. However, our users’ needs will always be our primary concern. As emphasized earlier, agriculture is our core focus and strategic direction, and we will remain committed to it.

Ken Fong, Analyst

Thank you. Very clear.

Operator, Operator

Thank you. I would now like to turn the call back over to Chen Penn for closing remarks.

Chen Penn, Host

Alright. Thank you, everybody, for joining us on the conference call today. If you have any further questions, please feel free to reach out to the IR team. Thank you. Have a great day.

Operator, Operator

This concludes today’s conference call. Thank you for participating. You may now disconnect.