Pinduoduo Announces Third Quarter 2021 Unaudited Financial Results

SHANGHAI, China, Nov. 26, 2021 (GLOBE NEWSWIRE) — Pinduoduo Inc. (“Pinduoduo” or the “Company”) (NASDAQ: PDD), China’s largest agriculture and interactive commerce platform, today announced its unaudited financial results for the third quarter ended September 30, 2021.

Third Quarter 2021 Highlights

  • Total revenues in the quarter were RMB21,505.8 million (US$13,337.6 million), an increase of 51% from RMB14,209.8 million in the same quarter of 2020.
  • Average monthly active users2 in the quarter was 741.5 million, an increase of 15% from 643.4 million in the same quarter of 2020.
  • Active buyers3 in the twelve-month period ended September 30, 2021 was 867.3 million, an increase of 19% from 731.3 million in the twelve-month period ended September 30, 2020.
  • Operating profit in the quarter was RMB2,139.3 million (US$332.0 million), compared with operating loss of RMB1,295.7 million in the same quarter of 2020. Non-GAAP4 operating profit in the quarter was RMB3,260.7 million (US$506.1 million), compared with non-GAAP operating loss of RMB339.8 million in the same quarter of 2020.
  • Net income attributable to ordinary shareholders in the quarter was RMB1,640.0 million (US$254.5 million), compared with net loss of RMB784.7 million in the same quarter of 2020. Non-GAAP net income attributable to ordinary shareholders in the quarter was RMB3,150.2 million (US$488.9 million), compared with RMB466.4 million in the same quarter of 2020.

“We are placing more focus on investments in R&D, away from the previous emphasis on sales and marketing in our first five years,” said Mr. Lei Chen, Chairman and CEO of Pinduoduo. “We want to leverage our strength in technology to deepen our digital inclusion efforts in agriculture, and will allocate all profits from the third quarter to the ’10 Billion Agriculture Initiative’.”

“Meanwhile, we are seeing the younger generation maturing quickly and will promote more young leaders to critical roles in the next six to 12 months,” Mr. Chen added.

“Our total revenues, excluding contribution from merchandise sales, grew by 55% on a year-over-year basis, to RMB21.4 billion in Q3 2021,” said Mr. Tony Ma, Vice President of Finance. “To lay the foundation for future sustainable growth, we are committed to expanding our investments in R&D and will invest patiently in agricultural technology.”

_________________________
1 This announcement contains translations of certain Renminbi (RMB) amounts into U.S. dollars (US$) at a specified rate solely for the convenience of the reader. Unless otherwise noted, the translation of RMB into US$ has been made at RMB6.4434 to US$1.00, the noon buying rate in effect on September 30, 2021 as set forth in the H.10 Statistical Release of the Federal Reserve Board.
2 “Monthly active users” refers to the number of user accounts that visited the Pinduoduo mobile app during a given month, which does not include those that accessed the platform through social networks and access points.
3 “Active buyers” in a given period refers to the number of user accounts that placed one or more orders (i) on the Pinduoduo mobile app, and (ii) through social networks and access points in that period, regardless of whether the products and services are actually sold, delivered or returned.
4 The Company’s non-GAAP financial measures exclude share-based compensation expenses, fair value change of long-term investments, and interest expenses related to the convertible bonds’ amortization to face value and gain or loss on extinguishment. See “Reconciliation of Non-GAAP Measures to The Most Directly Comparable GAAP Measures” set forth at the end of this press release.

Third Quarter 2021 Unaudited Financial Results

Total revenues were RMB21,505.8 million (US$3,337.6 million), an increase of 51% from RMB14,209.8 million in the same quarter of 2020. The increase was primarily due to an increase in revenues from online marketing services.

  • Revenues from online marketing services and others were RMB17,946.5 million (US$2,785.3 million), an increase of 44% from RMB12,484.8 million in the same quarter of 2020.
  • Revenues from transaction services were RMB3,477.1 million (US$539.6 million), an increase of 161% from RMB1,332.1 million in the same quarter of 2020.
  • Revenues from merchandise sales were RMB82.1 million (US$12.7 million), a decrease of 79% from RMB392.8 million in the same quarter of 2020.

Total costs of revenues were RMB6,558.6 million (US$1,017.9 million), an increase of 101% from RMB3,260.2 million in the same quarter of 2020. The increase was mainly due to higher cost of payment processing fees, cloud services fees, and delivery and storage fees.

Total operating expenses were RMB12,807.8 million (US$1,987.7 million), compared with RMB12,245.4 million in the same quarter of 2020.

  • Sales and marketing expenses were RMB10,050.6 million (US$1,559.8 million), slightly decreased compared to RMB10,071.9 million in the same quarter of 2020.
  • General and administrative expenses were RMB334.8 million (US$52.0 million), a decrease of 9% from RMB368.6 million in the same quarter of 2020.
  • Research and development expenses were RMB2,422.4 million (US$376.0 million), an increase of 34% from RMB1,804.9 million in the same quarter of 2020. The increase was primarily due to an increase in headcount and the recruitment of more experienced R&D personnel.

Operating profit in the quarter was RMB2,139.3 million (US$332.0 million), compared with operating loss of RMB1,295.7 million in the same quarter of 2020. Non-GAAP operating profit in the quarter was RMB3,260.7 million (US$506.1 million), compared with non-GAAP operating loss of RMB339.8 million in the same quarter of 2020.

Net income attributable to ordinary shareholders in the quarter was RMB1,640.0 million (US$254.5 million), compared with net loss of RMB784.7 million in the same quarter of 2020. Non-GAAP net income attributable to ordinary shareholders in the quarter was RMB3,150.2 million (US$488.9 million), compared with RMB466.4 million in the same quarter of 2020.

Basic earnings per ADS was RMB1.31 (US$0.20) and the diluted earnings per ADS was RMB1.15 (US$0.18), compared with basic and diluted net loss per ADS of RMB0.66 in the same quarter of 2020. Non-GAAP diluted earnings per ADS was RMB2.18 (US$0.34), compared with RMB0.33 in the same quarter of 2020.

Net cash flow provided by operating activities was RMB8,736.6 million (US$1,355.9 million), compared with RMB8,321.8 million in the same quarter of 2020.

Cash, cash equivalents and short-term investments were RMB97.9 billion (US$15.2 billion) as of September 30, 2021, compared with RMB87.0 billion as of December 31, 2020.

Conference Call

The Company will host a conference call to discuss the earnings at 7:30 AM U.S. Eastern Time on Friday, Nov. 26, 2021 (8:30 PM Beijing/Hong Kong Time on Friday, Nov. 26, 2021).

The conference call will be webcast live at https://investor.pinduoduo.com/investor-events. The webcast will be available for replay at the same website following the conclusion of the call.

Use of Non-GAAP Financial Measures

In evaluating the business, the Company considers and uses non-GAAP measures, such as non-GAAP operating profit or loss and non-GAAP net income or loss attributable to ordinary shareholders, as supplemental measures to review and assess operating performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company’s non-GAAP financial measures exclude share-based compensation expenses, fair value change of long-term investments, and interest expenses related to the convertible bonds’ amortization to face value and gain or loss on extinguishment.

The Company presents these non-GAAP financial measures because they are used by management to evaluate operating performance and formulate business plans. The Company believes that the non-GAAP financial measures help identify underlying trends in its business by excluding the impact of share-based compensation expenses, fair value change of long-term investments, and interest expenses related to the convertible bonds’ amortization to face value and gain or loss on extinguishment, which are non-cash charges. The Company also believes that the non-GAAP financial measures could provide further information about the Company’s results of operations, and enhance the overall understanding of the Company’s past performance and future prospects.

The non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. The non-GAAP financial measures have limitations as analytical tools. The Company’s non-GAAP financial measures do not reflect all items of income and expenses that affect the Company’s operations and do not represent the residual cash flow available for discretionary expenditures. Further, these non-GAAP measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore their comparability may be limited. The Company compensates for these limitations by reconciling the non-GAAP financial measures to the nearest U.S. GAAP performance measure, all of which should be considered when evaluating performance. The Company encourages you to review the Company’s financial information in its entirety and not rely on a single financial measure.

For more information on the non-GAAP financial measures, please see the table captioned “Reconciliation of Non-GAAP Measures to The Most Directly Comparable GAAP Measures” set forth at the end of this press release.

Safe Harbor Statements

This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “aims,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident,” “potential,” “continue” or other similar expressions. Among other things, the business outlook and quotations from management in this announcement, as well as Pinduoduo’s strategic and operational plans, contain forward-looking statements. Pinduoduo may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to fourth parties. Statements that are not historical facts, including but not limited to statements about Pinduoduo’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Pinduoduo’s growth strategies; its future business development, results of operations and financial condition; its ability to understand buyer needs and provide products and services to attract and retain buyers; its ability to maintain and enhance the recognition and reputation of its brand; its ability to rely on merchants and fourth-party logistics service providers to provide delivery services to buyers; its ability to maintain and improve quality control policies and measures; its ability to establish and maintain relationships with merchants; trends and competition in China’s e-commerce market; changes in its revenues and certain cost or expense items; the expected growth of China’s e-commerce market; PRC governmental policies and regulations relating to Pinduoduo’s industry, and general economic and business conditions globally and in China and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in Pinduoduo’s filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Pinduoduo undertakes no obligation to update any forward-looking statement, except as required under applicable law.

About Pinduoduo Inc.

Pinduoduo is a mobile-only marketplace that connects millions of agricultural producers with consumers across China. Pinduoduo aims to bring more businesses and people into the digital economy so that local communities can benefit from the increased productivity and convenience through new market opportunities.

For more information on Pinduoduo news and industry trends, please visit the content hub at https://stories.pinduoduo-global.com/.

PINDUODUO INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”))

    As of
    December
31, 2020
  September 30, 2021
    RMB   RMB   US$
        (Unaudited)
         
ASSETS            
Current assets            
Cash and cash equivalents   22,421,189   11,132,801   1,727,784
Restricted cash   52,422,447   51,230,161   7,950,796
Receivables from online payment platforms   729,548   667,623   103,613
Short-term investments   64,551,094   86,785,027   13,468,825
Amounts due from related parties   4,240,069   3,896,753   604,767
Prepayments and other current assets   5,159,531   3,380,921   524,710
Total current assets   149,523,878   157,093,286   24,380,495
             
Non-current assets            
Property, equipment and software, net   202,853   2,219,997   344,538
Intangible assets   1,276,751   860,610   133,565
Right-of-use assets   629,827   747,171   115,959
Deferred tax assets     14,224   2,208
Other non-current assets   7,275,305   5,593,471   868,093
Total non-current assets   9,384,736   9,435,473   1,464,363
             
Total Assets   158,908,614   166,528,759   25,844,858
             

PINDUODUO INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”))

    As of
    December
31, 2020
  September 30, 2021
    RMB   RMB   US$
        (Unaudited)
         
LIABILITIES AND SHAREHOLDERS’ EQUITY      
Current liabilities            
Amounts due to related parties   3,385,863     7,240,428     1,123,697  
Customer advances and deferred revenues   2,423,190     1,144,073     177,557  
Payable to merchants   53,833,981     53,201,246     8,256,704  
Accrued expenses and other liabilities   11,193,372     11,406,089     1,770,197  
Merchant deposits   10,926,319     12,966,330     2,012,343  
Short-term borrowings   1,866,316          
Lease liabilities   253,036     338,709     52,567  
Total current liabilities   83,882,077     86,296,875     13,393,065  
             
Non-current liabilities            
Convertible bonds   14,432,792     11,684,597     1,813,421  
Lease liabilities   414,939     437,828     67,950  
Other non-current liabilities   2,918     1,489     231  
Total non-current liabilities   14,850,649     12,123,914     1,881,602  
             
Total Liabilities   98,732,726     98,420,789     15,274,667  
             
             
Shareholders’ equity            
Ordinary shares   159     161     25  
Additional paid-in capital   86,698,660     93,847,981     14,564,978  
Accumulated other comprehensive loss   (1,047,728 )   (1,414,093 )   (219,464 )
Accumulated deficits   (25,475,203 )   (24,326,079 )   (3,775,348 )
Total Shareholders’ Equity   60,175,888     68,107,970     10,570,191  
             
Total Liabilities and Shareholders’ Equity   158,908,614     166,528,759     25,844,858  
             

PINDUODUO INC.
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME/ (LOSS)
 (Amounts in thousands of RMB and US$)

    For the three months ended September 30,   For the nine months ended September 30,
    2020     2021     2020     2021  
    RMB   RMB   US$   RMB   RMB   US$
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Revenues   14,209,782     21,505,758     3,337,641     32,944,156     66,719,077     10,354,638  
Costs of revenues   (3,260,155 )   (6,558,648 )   (1,017,886 )   (7,752,517 )   (25,202,584 )   (3,911,380 )
Gross profit   10,949,627     14,947,110     2,319,755     25,191,639     41,516,493     6,443,258  
                         
Sales and marketing expenses   (10,071,868 )   (10,050,611 )   (1,559,830 )   (26,482,073 )   (33,435,891 )   (5,189,169 )
General and administrative expenses   (368,611 )   (334,806 )   (51,961 )   (1,101,727 )   (1,120,812 )   (173,947 )
Research and development expenses   (1,804,886 )   (2,422,421 )   (375,954 )   (4,940,392 )   (6,969,995 )   (1,081,726 )
Total operating expenses   (12,245,365 )   (12,807,838 )   (1,987,745 )   (32,524,192 )   (41,526,698 )   (6,444,842 )
                         
Operating (loss)/ profit   (1,295,738 )   2,139,272     332,010     (7,332,553 )   (10,205 )   (1,584 )
                         
Interest and investment income, net   485,413     631,913     98,071     1,783,971     2,147,019     333,212  
Interest expenses   (165,638 )   (298,431 )   (46,316 )   (479,190 )   (927,886 )   (144,006 )
Foreign exchange gain/ (loss)   97,861     (10,433 )   (1,619 )   76,191     23,645     3,670  
Other income/ (loss), net   57,936     (52,606 )   (8,164 )   112,553     541,169     83,989  
                         
(Loss)/ profit before income tax and share of results of equity investees  

(820,166

)

 

2,409,715

   

373,982

   

(5,839,028

)

 

1,773,742

   

275,281

 
Share of results of equity investees   35,458     85,011     13,194     35,642     230,148     35,718  
Income tax expenses       (854,766 )   (132,658 )       (854,766 )   (132,658 )
Net (loss)/ income   (784,708 )   1,639,960     254,518     (5,803,386 )   1,149,124     178,341  
                                     

PINDUODUO INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME/ (LOSS)
(Amounts in thousands of RMB and US$, except for per share data)

    For the three months ended September 30,   For the nine months ended September 30,
    2020     2021   2020     2021
    RMB   RMB   US$   RMB   RMB   US$
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
                         
Net (loss)/ income   (784,708 )   1,639,960   254,518   (5,803,386 )   1,149,124   178,341
Net (loss)/ income attributable to ordinary shareholders   (784,708 )   1,639,960   254,518   (5,803,386 )   1,149,124   178,341
                         
(Loss)/ earnings per ordinary share:                        
-Basic   (0.16 )   0.33   0.05   (1.22 )   0.23   0.04
-Diluted   (0.16 )   0.29   0.04   (1.22 )   0.20   0.03
                         
(Loss)/ earnings per ADS (4 ordinary shares equals 1 ADS):                        
-Basic   (0.66 )   1.31   0.20   (4.90 )   0.92   0.14
-Diluted   (0.66 )   1.15   0.18   (4.90 )   0.80   0.12
                         
Weighted average number of outstanding ordinary shares (in thousands):                        
-Basic   4,786,276     5,021,164   5,021,164   4,739,382     5,006,285   5,006,285
-Diluted   4,786,276     5,703,986   5,703,986   4,739,382     5,715,932   5,715,932
                             

PINDUODUO INC.
NOTES TO FINANCIAL INFORMATION
(Amounts in thousands of RMB and US$)

    For the three months ended September 30,   For the nine months ended September 30,
    2020   2021   2020   2021
    RMB   RMB   US$   RMB   RMB   US$
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Revenues                        
– Online marketing services and others   12,484,836   17,946,496   2,785,252   29,031,804   50,138,401   7,781,357
– Transaction services   1,332,124   3,477,147   539,645   3,519,530   9,416,260   1,461,381
– Merchandise sales   392,822   82,115   12,744   392,822   7,164,416   1,111,900
Total   14,209,782   21,505,758   3,337,641   32,944,156   66,719,077   10,354,638
                         

PINDUODUO INC.
NOTES TO FINANCIAL INFORMATION
(Amounts in thousands of RMB and US$)

    For the three months ended September 30,   For the nine months ended September 30,
    2020   2021   2020   2021
    RMB   RMB   US$   RMB   RMB   US$
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Share-based compensation costs included in:                        
Costs of revenues   4,424   9,089   1,411   22,368   20,895   3,243
Sales and marketing expenses   335,331   384,704   59,705   816,672   1,067,727   165,709
General and administrative expenses   236,011   156,731   24,324   714,515   568,266   88,194
Research and development expenses   380,163   570,929   88,607   1,126,258   1,625,137   252,216
Total   955,929   1,121,453   174,047   2,679,813   3,282,025   509,362
                         

PINDUODUO INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of RMB and US$)

    For the three months ended September 30,   For the nine months ended September 30,
    2020     2021     2020     2021  
    RMB   RMB   US$   RMB   RMB   US$
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Net cash provided by operating activities   8,321,792     8,736,568     1,355,894     13,250,058     12,383,236     1,921,848  
Net cash used in investing activities   (455,054 )   (13,764,757 )   (2,136,257 )   (11,735,064 )   (22,869,860 )   (3,549,347 )
Net cash provided by/ (used in) financing activities       146     23     9,624,213     (1,875,347 )   (291,049 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash   (15,868 )   22,160     3,439     43,696     (118,703 )   (18,422 )
                         
Increase/ (decrease) in cash, cash equivalents and restricted cash   7,850,870     (5,005,883 )   (776,901 )   11,182,903     (12,480,674 )   (1,936,970 )
Cash, cash equivalents and restricted cash at beginning of period   36,677,890     67,368,845     10,455,481     33,345,857     74,843,636     11,615,550  
Cash, cash equivalents and restricted cash at end of period   44,528,760     62,362,962     9,678,580     44,528,760     62,362,962     9,678,580  
                                     

PINDUODUO INC.
RECONCILIATION OF NON-GAAP MEASURES TO THE MOST DIRECTLY COMPARABLE GAAP MEASURES
(Amounts in thousands of RMB and US$, except for per share data))

    For the three months ended September 30,   For the nine months ended September 30,
    2020     2021   2020     2021  
    RMB   RMB   US$   RMB   RMB   US$
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Operating (loss)/ profit   (1,295,738 )   2,139,272   332,010   (7,332,553 )   (10,205 )   (1,584 )
Add: Share-based compensation   955,929     1,121,453   174,047   2,679,813     3,282,025     509,362  
Non-GAAP operating (loss)/ profit   (339,809 )   3,260,725   506,057   (4,652,740 )   3,271,820     507,778  
                         
Net (loss)/ income attributable to ordinary shareholders   (784,708 )   1,639,960   254,518   (5,803,386 )   1,149,124     178,341  
Add: Share-based compensation   955,929     1,121,453   174,047   2,679,813     3,282,025     509,362  
Add: Interest expense related to convertible bonds’ amortization to face value and gain or loss on extinguishment, net   147,081     298,443   46,318   433,838     915,917     142,148  
Less: Loss/ (gain) from fair value changes of long-term investments   148,093     90,300   14,014   (90,755 )   38,064     5,907  
Non-GAAP net income/ (loss) attributable to ordinary shareholders   466,395     3,150,156   488,897   (2,780,490 )   5,385,130     835,758  
                         
Non-GAAP diluted weighted-average number of ordinary shares outstanding (in thousands)   5,576,093     5,767,207   5,767,207   4,739,382     5,789,157     5,789,157  
                         
Diluted (loss)/ earnings per ordinary share   (0.16 )   0.29   0.04   (1.22 )   0.20     0.03  
Add: Non-GAAP adjustments to (loss)/ earnings per ordinary share   0.24     0.26   0.04   0.63     0.73     0.11  
Non-GAAP diluted earnings/ (loss) per ordinary share   0.08     0.55   0.08   (0.59 )   0.93     0.14  
Non-GAAP diluted earnings/ (loss) per ADS   0.33     2.18   0.34   (2.35 )   3.72     0.58  
                                 

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