Hello, and thank you for standing by for JD.com's Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions]. I would now like to turn the meeting over to your host for today's conference, Sean Zhang, Director of Investor Relations. Please go ahead.

Thank you. Good day, everyone, and welcome to JD.com Q4 and Full Year 2023 Earnings Conference Call. For today's call, CEO of JD.com, Ms. Sandy Xu will share her opening remarks; and our CFO, Mr. Ian Shan will discuss the financial results. Then [indiscernible] the call to questions from analysts. Before turning the call over to Sandy, let me quickly cover the safe harbor. Please be reminded that during this call, our comments and responses to your questions reflect management's view as of today only and will include forward-looking statements and please refer to our latest safe harbor statement in the earnings press release on the IR website, which applies to this call. We will discuss certain non-GAAP financial measures. Please also refer to the reconciliation of non-GAAP measures to the comparable GAAP measures in the earnings press release. Also, please note, all figures mentioned in this call are in RMB, unless otherwise stated. Now let me turn the call over to our CEO, Sandy.

Thanks, Sean. Hello, everyone, and thanks for joining us today to discuss our Q4 and full year 2023 results. In Q4, we delivered healthy top line and bottom line growth and made solid progress on operations, finishing off a productive 2023. In the past year, we stayed focused on constantly improving user experience, lowering costs and increasing efficiency amidst evolving opportunities and challenges. Guided by our business philosophy, we carried out a set of proactive move to drive more sustainable growth for the long term, mainly in the areas of user experience improvement, [indiscernible] and platform ecosystem strategy. Despite some short-term impact in 2023, our strategic focus has successfully steered key operating metrics in a positive direction. 2024 will be a year of execution. Our team will take firm and steady steps to execute our existing strategies and push forward our two priorities for the new year, namely user experience improvement and market share expansion. We are encouraged by what we've seen and are confident that we are on the right path. Let me share some details. First, user engagement. In Q4, we saw the number of costly active customers accelerate at level. If looking at [indiscernible] alone, the growth was at an even faster pace in Q4, particularly in new users. We are excited to see our user momentum pickup in Q1. User behavior also trended better. For example, user shopping frequency on JD continues to rise both in Q4 and the full year. This increase was particularly driven by the growth of our loyal existing users and plus members. This means if users stay longer with us, they tend to shop more frequently with us, a validation of our user focus on user experience and strengthening [indiscernible] share. In addition, the set of growth also translated to a…

Thank you, Sandy, and hello, everyone. We recorded a set of healthy top and bottom line results in Q4, ahead of our expectations as we focus on experience improvements, price competitiveness and platform ecosystem in 2023. We are also committed to sharing our success with our shareholders. The Board has approved our annual cash dividend of USD 1.2 billion for the fiscal year of 2023, representing USD 0.38 per ordinary share or USD 0.76 per ADS. Our dividend per ADS increased by 23% compared to the annual dividend paid in 2023. In addition, with that up share repurchases in Q4 and bought back 15 million ordinary shares for a total of approximately USD 203 million. As the existing program will expand soon, the Board has approved a new share repurchase program of USD 3 billion over the next 36 months. This demonstrated our dedication to returning value to our shareholders. Now let me turn to our Q4 and full year 2023 financial performance. Our net revenues grew by 4% year-on-year to RMB 306 billion in Q4 and RMB 1.1 trillion for full year 2023, as we navigated a mix of macro recovery, seasonality factors and our strategic refocus. Breaking down the revenue mix, product revenues were up 4% year-on-year in Q4 and 1% on a full year basis. By category, electronics and home appliances revenues were up 6% and 4% year-on-year in Q4 and full year, respectively, once again outpacing industry group. We have seen solid market share expansion in these categories across every quarter of 2023 and continue to feel confident in this momentum going into 2024. General merchandise revenue saw a turnaround to positive year-on-year growth in Q4 despite the impact of scaling back of [indiscernible] International business, the high base in Q4 2022 due to stockpiling and…

Thank you, Sandy and Ian. For the Q&A session, you're welcome to ask questions in Chinese and English and our management will answer your questions in the language you asked. We'll provide English translation when necessary for convenience purpose only. In the case of any discrepancy, please refer to our management statement in the original language. Okay. Operator, we can open the call for Q&A session.

[Operator Instructions]. Your first question comes from Ronald Keung with Goldman Sachs.

Thank you, Sandy, Ian and Sean. I have two questions. One is that JD and other e-commerce companies has focused on defending market share, reigniting growth as kind of key focuses in this increasingly zero-sum e-commerce market. So how will management drive the balance between growth and absolute profit or growing profits in the year ahead? And with that, with the profits and kind of cash flow generation, then we've seen the regular dividend of in 2023. We've seen the free cash flow for the business was nearly close to USD 6 billion in 2023. So do we see room to further increase total shareholder return, given the strong free cash flow of the business in the years ahead? Thank you.

Thank you, Ronald. I will answer your first question and Ian second question. So the questions on the growth and versus profits has always been a good question. And in 2023, while will be focusing on the health of our business, we made many efforts and took actions to further enhance our user experience, low-price mindshare and platform ecosystem. So for example, last year, we stepped up our efforts user shopping experience and services by introducing or expanding a series of differentiated shopping and customer services, such as our price guarantee service, a free doorstep pickup service for returns and exchanges, from our 1P to our 3P businesses and also a refund without return services and more. We've seen an accelerated growth in quarterly shopping users in Q4, especially in the new number of new users and we expect the growth trend to continue in Q1. At the same time, any major drop of our profits, which also reflects our efforts to maintain a balance between growth and revenues and profits. And also, we continue to optimize procurement costs and expand our range of low-cost products. In addition, we have introduced a series of measures, including the CNY 10 billion discount program, the [indiscernible] items with free shipping channels and a lower order value threshold for free shipping. Our goal is to provide high-quality products at affordable prices to increase user purchase frequency. We believe that continuous improvement of user experience will promote healthy user growth and purchase frequency, which in turn will help us to increase business scale and market share. So from a platform ecosystem perspective, we have seen more and more new merchants are joining JD's marketplace and the number of active merchants whose business growing our platform is increasing at an accelerated rate. Their participation has…

This is Ian. Thank you, Ronald, for asking about our shareholder returns. So I'd like to take this opportunity to update investors on our current Firstly, JD focus is on the long-term healthy development of our business, aiming for healthy scale expansion and stable growth in profits and cash flow. On top of this, we're committed to long-term shareholder return and will continue to give back to our shareholders in various ways. Our balance sheet is strong and we believe that maintaining a good return to shareholders and continuous investment in our business are not contradictory. We have just announced an annual cash dividend of USD 1.2 billion. This is thanks to last year's rapid earnings growth, which yielded solid return for our shareholders. So over the past three years, we have returned a total of USD 4.2 billion in dividend and we plan to continue to pay annual dividends going forward, sharing the company's value creation with our shareholders. Also, our Board of Directors have approved a new repurchase program to buy back to USD 3 billion worth of company shares over the next three years. We will firmly execute the buyback and communicate with investors regularly. We believe that investors will recognize the company's tangible efforts to share its value with shareholders. Thank you.

Your next question comes from Kenneth Fong with UBS.

My first question is on the platform ecosystem. We have been investing to build our 3P ecosystem. Judging from the total and active merchants, we have received very solid results. Can management share with us under what circumstances we will start to accelerate the monetization of the 3P merchants? And also for 2024, any change and update for our 3P strategy? And my second question is for overseas. We see a lot of e-commerce platform investing overseas. Can management share with us your thoughts on our overseas expansion?

Thank you, Kenny. To your first question about platform ecosystem. As I have previously mentioned, JD's platform ecosystem includes both our self-operated and third-party models. The tools are complementary to other and jointly contribute to create good user experience. Our Net Promoter Score has improved substantially in Q4. For both 1P and 3P, we have been investing in platform ecosystem as a long-term strategic direction, so there is still a lot of room for improvement in our 3P business development. Our first step is to increase the number of merchants and their product offerings. We need to attract more merchants and help them succeed on the platform in order to enrich the platform's product offerings for our shoppers and foster positive business competition across the platform. Over the past year, we have increased our efforts to recruit merchants, simplified their onboarding processes and provided more support and fee reductions for small and medium sized merchants. To date, the number of effective merchants on our platform is close to 1 million, reaching the goals we set for ourselves at the beginning of last year. The number of active merchants have accelerated, more and more new merchants are finding effective ways to do business on our platform and continue to grow. At the same time, we've received positive feedback from users. The number of shopping users and order volume on 3P platform continues to grow with users NPS for 3P rising at the same time. Both our 3P and overall GMV have gradually entered a trajectory of healthy growth. Building JD's unique platform ecosystem is a long-term project, we're still in the early stages. Our focus is not on a fast monetization of 3P in the short term. Instead, our priority in 2024 will be to attract more merchants, especially the small…

Thank you, Kenny.

Your next question comes from Alicia Yap with Citi Group.

In light of the shift of the consumption preference and also the rationale spending behavior amid the macro sentiment, will JD need to or plan to adjust any specific strategy to fulfill the demand shift? If so, what could be the change and growth initiatives? What is management's expectation for China overall retail sales growth this year? How much higher can JD outperform the overall retail sales growth ? Will JD reinvest to aggressively growing new user in tier city? Will that mostly come from additional subsidy or through the improvement of product offering? Do you have a target KPI set for the number of new customers that you plan to acquire this year?

Thank you, Alicia. As you said, we've seen consumers have become more rational in spending. They pay attention to both the quality and the cost effectiveness of the product. They really value the good products with reasonable price. At the same time, they do care about shopping experience. So last year, we took proactive steps in response to consumer trends. While striving to provide consumer users with better shopping experience and differentiated services, we expanded our platform ecosystem and low-cost [indiscernible] share. We also started the latest consumption trends in and we work closely with brands and merchants to jointly develop new products that better meet new user demand. So overall, we see our performance so far has met our expectations. And in 2024, we will stick to our current strategies and firmly focus on execution and optimization without making major adjustments. Yes. We will continuously improve user experience and services and strengthen our core competitiveness to further underpin users mindshare towards our fast delivery and high-quality reputation. At the same time, we will also optimize procurement costs and enrich our low-priced product offerings and to let people to better feel our price competitiveness. And on the side of product diversity, we will continue to expand our merchant base and also improve the richness of the low-priced products on our platform. So in 2024, we've seen there will be a number of economic stimulus plans and the consumption motion policies come into place, including the encouragement of the trading consumptions, et cetera. So we are seeing this is a healthy recovery trend of the overall economy and the [indiscernible] and this will also help us to -- help some of our to categories. So overall, we are optimistic for this year's overall retail sales and we're confident that we will maintain a faster growth rate than that and continue to gain market share. Thank you.

So for the second question on user growth, we will actively drive up user growth and their purchase frequency. Throughout the past year and this year, we have prioritized improving user experience to achieve high-quality growth. We will continue to improve the diversity of product offerings and promote low-price strategy and expand product pool for users from lower-tier markets to better meet their shopping preferences. So this helped us to enhance user products, matching efficiency and user retention rate. Additionally, we continuously enhance services safeguarding user shopping experience during and after sales, like the free doorstep pickup services for returns and a lower threshold order value for free shipping, et cetera. We believe that subsidizing and other marketing activities are all tools for user operations. These measures can serve some special purposes in certain periods of time and should only be used in targeted and disciplined way. And for -- we saw healthy growth in the number of users in Q4, including our new users experienced strong growth, while existing users maintained steady growth. Users from lower-tier markets also achieved an accelerated growth. User purchase frequency showed a healthy growth, particularly among existing users. Furthermore, user satisfaction rate has improved with NPS of both self-operated and the marketplace, achieving an increase year-on-year. We've seen user growth has maintained such momentum. This year, JD was selected to be the exclusive interactive partner for China Media Group's Spring Festival Gala. During the show, we offered a variety of gifts to viewers , reaching a wide range of new users. An outlook of the whole year, we're confident in user growth.

Okay. Thank you, Alicia. Let's have the last question.

Your next question comes from Thomas Chong with Jefferies.

My first question is about the consumer sentiment in 2024. And how should we think about the trend for different -- for the category? And my second question is related to our thoughts about the competitive landscape [indiscernible].

Thank you, Thomas, for your question. So by 2023, we have seen the society and economy had returned to normal. Although the consumption market showed a recovery trend, people's spending ability and confidence still needed a boost. As we enter 2024 in the current two months, which we can observe, the country's -- the national economy is on track for recovery. With the effect -- with the expected effects of the micro stimulus plans and consumption promotion policies, we believe the momentum of consumption recovery and expansion will be further consolidated, will strengthened. From a JD's perspective in 2024, we [indiscernible] to outperform the overall [indiscernible] market. And taking a longer-term view, we believe that most people's desire for a better life remains unchanged. Our business model aims to provide better services and quality products with greater value for money, so -- which has made us unique advantages to satisfy diverse users' needs in various shopping scenarios. So from the industry perspective, as we have seen that the proportion of online retail sales of [indiscernible] continue to [indiscernible] For some industries, they have enjoyed a high penetration rate, whereas for other industries, such as supermarkets, sports, furniture and home, automotive and other industries, their online sales penetration rates still have plenty of room to improve. And for the category perspective in 2023, we maintain -- we continue to be the market leader in electronics categories and deliver a faster growth rate than the overall market in this area, even though this industry is facing challenges last year. So overall, we are confident to maintain faster than industry growth rate in these categories, especially as you see the government is promoting the treating of consumer goods and stimulate the consumption of electronics and other products. So we're confident to maintain a…

We are now approaching the end of the conference call. I will now turn the call over to J.D.'s Sean Zhang for closing remarks.

Thank you. Thank you, everyone, for joining us today on the call and for your questions. If you have further questions, please contact me and IR team. We appreciate your interest in JD.com and look forward to talking with you again next quarter. Thank you.

Thank you for your participation in today's conference. That concludes the presentation. You may now disconnect.