Pinduoduo Announces Third Quarter 2019 Unaudited Financial Results

SHANGHAI, China, Nov. 20, 2019 (GLOBE NEWSWIRE) -- Pinduoduo Inc. ("Pinduoduo" or the "Company") (NASDAQ: PDD), an innovative and fast growing technology platform and one of the leading Chinese e-commerce players, today announced its unaudited financial results for the third quarter ended September 30, 2019.

Third Quarter 2019 Highlights

  • GMV1 in the twelve-month period ended September 30, 2019 was RMB840.2 billion (US$2117.5 billion), an increase of 144% from RMB344.8 billion in the twelve-month period ended September 30, 2018.
     
  • Total revenues in the quarter were RMB7,513.9 million (US$1,051.2 million), an increase of 123% from RMB3,372.4 million in the same quarter of 2018.
     
  • Average monthly active users3 in the quarter were 429.6 million, an increase of 85% from 231.7 million in the same quarter of 2018.
     
  • Active buyers4 in the twelve-month period ended September 30, 2019 were 536.3 million, an increase of 39% from 385.5 million in the twelve-month period ended September 30, 2018.
     
  • Annual spending per active buyer5 in the twelve-month period ended September 30, 2019 was RMB1,566.7 (US$219.2), an increase of 75% from RMB894.4 in the twelve-month period ended September 30, 2018.

"We celebrated our fourth anniversary in early October with an annual active buyer base exceeding half a billion for the twelve-month period ended September 30, 2019," said Mr. Zheng Huang, Chairman and Chief Executive Officer of Pinduoduo. "We continued to invest in our users throughout the third quarter, and stepped our marketing up a notch from the second half of September for the launch of our anniversary sale. This has added to our steady momentum of user growth as our average monthly active users grew by 64 million from the prior quarter to reach 430 million. Coupled with greater user engagement and frequency of visit, annual spending per active buyer has grown 75% year-over-year, driving our last-twelve-month GMV up 144% to reach RMB840.2 billion. We will work even harder to deliver a consistently improving user experience and build up our users’ trust and familiarity with our platform.”

"For the quarter ended September 30, 2019, our total revenues increased by 123% year-over-year to RMB7,513.9 million, as merchant demand for our online marketing services continued to grow," added Mr. David Liu, Vice President of Strategy. “While we continue to invest in sales and marketing, we also maintain a healthy cash position, with positive operating cashflows and over RMB40.3 billion in cash, cash equivalents and short-term investments. This puts us in a good position to make the necessary investments for our long-term growth.”

Third Quarter 2019 Unaudited Financial Results

Total revenues were RMB7,513.9 million (US$1,051.2 million), an increase of 123% from RMB3,372.4 million in the same quarter of 2018. The increase was primarily due to an increase in revenues from online marketing services.

  • Revenues from online marketing services were RMB6,711.4 million (US$938.9 million), an increase of 126% from RMB2,974.1 million in the same quarter of 2018.
     
  • Revenues from transaction services were RMB802.5 million (US$112.3 million), an increase of 101% from RMB398.3 million in the same quarter of 2018.

Total costs of revenues were RMB1,833.3 million (US$256.5 million), an increase of 137% from RMB774.7 million in the same quarter of 2018. The increase was mainly due to higher costs for cloud services, call center and merchant support services.

Total operating expenses were RMB8,472.6 million (US$1,185.4 million), compared with RMB3,867.2 million in the same quarter of 2018.

  • Sales and marketing expenses were RMB6,908.8 million (US$966.6 million), an increase of 114% from RMB3,229.6 million in the same quarter of 2018, mainly due to an increase in online and offline advertisement and promotions.
     
  • General and administrative expenses were RMB436.6 million (US$61.1 million), an increase of 43% from RMB305.6 million in the same quarter of 2018, primarily due to expenses relating to our initiatives where we work with local governments to alleviate rural poverty.
     
  • Research and development expenses were RMB1,127.2 million (US$157.7 million), an increase of 240% from RMB332.0 million in the same quarter of 2018. The increase was primarily due to an increase in headcount and the recruitment of more experienced R&D personnel, and an increase in R&D-related cloud services expenses and share-based compensation expenses.

Operating loss was RMB2,792.0 million (US$390.6 million), compared with operating loss of RMB1,269.5 million in the same quarter of 2018. Non-GAAP operating loss6 was RMB2,123.5 million (US$297.1 million), compared with RMB790.0 million in the same quarter of 2018.

Net loss attributable to ordinary shareholders was RMB2,335.0 million (US$326.7 million), compared with net loss of RMB1,098.3 million in the same quarter of 2018. Non-GAAP net loss attributable to ordinary shareholders was RMB1,660.4 million (US$232.3 million), compared with non-GAAP net loss attributable to ordinary shareholders of RMB618.9 million in the same quarter of 2018.

Basic and diluted net loss per ADS were RMB2.00 (US$0.28), compared with net loss per ADS of RMB1.20 in the same quarter of 2018. Non-GAAP basic and diluted net loss per ADS were RMB1.44 (US$0.20), compared with non-GAAP basic and diluted net loss per ADS of RMB0.68 in the same quarter of 2018.

Net cash provided by operating activities was RMB2,618.2 million (US$366.3 million), compared with RMB1,631.4 million in the same quarter of 2018, primarily due to an increase in online marketing services revenues.

Cash, cash equivalents and restricted cash were RMB34.4 billion (US$4.8 billion) as of September 30, 2019, compared with RMB30.5 billion as of December 31, 2018.

Conference Call

The Company will host a conference call to discuss the earnings at 7:30 AM U.S. Eastern Time on Wednesday, November 20, 2019 (8:30 PM Beijing/Hong Kong Time on Wednesday, November 20, 2019).

Dial-in numbers for the live conference call are as follows:

International +65-6713-5090
Mainland China4006-208-038
U.S.+1-845-675-0437
U.K.+44-203-621-4779
Hong Kong+852-3018-6771
Passcode:Pinduoduo
  
A telephone replay of the call will be available after the conclusion of the conference call until 7:59 AM ET on November 28, 2019.
  
Dial-in numbers for the replay are as follows:
  
International+61-2-8199-0299
U.S.+1-646-254-3697
Passcode:6476266


A live and archived webcast of the conference call will be available on the Investor Relations section of Pinduoduo’s website at http://investor.pinduoduo.com/

Use of Non-GAAP Financial Measures

In evaluating the business, the Company considers and uses non-GAAP measures, such as non-GAAP operating loss and non-GAAP net 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 and interest expenses related to the convertible bonds’ amortization to face value.

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 and interest expenses related to the convertible bonds’ amortization to face value, which is a non-cash charge. 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 third 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 third-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 an innovative and fast growing technology platform that provides buyers with value-for-money merchandise and a fun and interactive shopping experience. The Pinduoduo mobile platform offers a comprehensive selection of attractively priced merchandise, featuring a dynamic social shopping experience that leverages social networks effectively.

For more information, please visit http://investor.pinduoduo.com/

For investor and media inquiries, please contact:

Pinduoduo Inc.
investor@pinduoduo.com
internationalmedia@pinduoduo.com

1  “GMV” refers to the total value of all orders for products and services placed on the Pinduoduo mobile platform, regardless of whether the products and services are actually sold, delivered or returned. Buyers on the platform are not charged for shipping fees in addition to the listed price of merchandise. Hence, merchants may embed the shipping fees in the listed price. If embedded, then the shipping fees are included in GMV. As a prudential matter aimed at eliminating any influence on Pinduoduo’s GMV of irregular transactions, the Company excludes from its calculation of GMV transactions over certain amounts (RMB100,000) and transactions by buyers over a certain amount (RMB1,000,000) per day.

2  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 RMB7.1477 to US$1.00, the noon buying rate in effect on September 30, 2019 as set forth in the H.10 Statistical Release of the Federal Reserve Board.

3  “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.

4  “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.

5  “Annual spending per active buyer” in a given period refers to the quotient of total GMV in that period divided by the number of active buyers in the same period.

6  The Company’s non-GAAP financial measures exclude share-based compensation expenses and interest expenses related to the convertible bonds’ amortization to face value. See “Reconciliation of Non-GAAP Measures to The Most Directly Comparable GAAP Measures” set forth at the end of this press release.


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

 As of
 December
31, 2018
 September 30, 2019
  RMB   RMB   US$
    (Unaudited)
    
ASSETS     
      
Current Assets     
Cash and cash equivalents14,160,322 15,694,045 2,195,678
Restricted cash16,379,364 18,672,032 2,612,313
Receivables from online payment platforms247,586 524,436 73,371
Short-term investments7,630,689 24,560,779 3,436,179
Amounts due from related parties1,019,033 1,253,490 175,370
Prepayments and other current assets953,989 884,602 123,762
Total current assets 40,390,983 61,589,384 8,616,673
      
Non-current assets     
Property and equipment, net29,075 38,153 5,338
Intangible asset2,579,338 2,182,296 305,314
Right-of-use assets- 316,239 44,243
Other non-current assets182,667 449,990 62,956
Total non-current assets2,791,080 2,986,678 417,851
      
Total Assets43,182,063   64,576,062 9,034,524
 


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

 As of
 December
31, 2018
 September 30, 2019
  RMB   RMB   US$
    (Unaudited)
    
LIABILITIES AND SHAREHOLDERS’ EQUITY   
    
Current Liabilities     
Amounts due to related parties478,113  2,085,604  291,787 
Customer advances191,482  379,001  53,024 
Payable to merchants17,275,934  19,819,656  2,772,872 
Accrued expenses and other liabilities2,225,667  4,197,751  587,287 
Merchant deposits4,188,273  6,654,130  930,947 
Lease liabilities-  80,882  11,316 
Total current liabilities24,359,469   33,217,024  4,647,233 
      
      
Convertible bonds-  5,140,305  719,155 
Lease liabilities-  254,508  35,607 
Other non-current liabilities-  7,949  1,112 
Total non-current liabilities-  5,402,762  755,874 
      
Total Liabilities24,359,469  38,619,786  5,403,107 
      
      
Shareholders’ equity     
Ordinary Shares142  148  21 
Additional paid-in capital29,114,527  40,695,277  5,693,479 
Accumulated other comprehensive income1,035,783  1,804,675  252,483 
Accumulated deficits(11,327,858) (16,543,824) (2,314,566)
Total shareholders’ equity 18,822,594  25,956,276  3,631,417 
Total liabilities and shareholders’ equity43,182,063  64,576,062  9,034,524 
      


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

 For the three months ended September 30, For the nine months ended September 30,
 2018 2019 2018 2019
 RMB RMB US$ RMB RMB US$
 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues           
Online marketplace services3,372,418  7,513,948  1,051,240  7,466,068  19,349,160  2,707,047 
Total Revenues3,372,418  7,513,948  1,051,240  7,466,068  19,349,160  2,707,047 
            
Costs of revenues           
Costs of online marketplace services(774,684) (1,833,318) (256,491) (1,481,214) (4,301,341) (601,780)
Total costs of revenues(774,684) (1,833,318) (256,491) (1,481,214) (4,301,341) (601,780)
            
Gross profit2,597,734  5,680,630  794,749  5,984,854  15,047,819  2,105,267 
            
Sales and marketing expenses(3,229,647) (6,908,755) (966,570) (7,417,839) (17,901,713) (2,504,542)
General and administrative expenses(305,569) (436,610) (61,084) (6,135,003) (951,030) (133,054)
Research and development expenses(331,997) (1,127,238) (157,706) (590,844) (2,597,983) (363,470)
Total operating expenses(3,867,213) (8,472,603) (1,185,360) (14,143,686) (21,450,726) (3,001,066)
            
Operating loss(1,269,479) (2,791,973) (390,611) (8,158,832) (6,402,907) (895,799)
            
Interest income164,819  414,615  58,006  351,583  1,069,285  149,598 
Interest expenses-  (6,150) (860) -  (6,150) (860)
Foreign exchange gain5,419  33,542  4,693  6,879  76,416  10,691 
Other income, net918  23,176  3,242  7,138  55,608  7,780 
            
Loss before income tax and share of results of equity investee(1,098,323) (2,326,790) (325,530) (7,793,232) (5,207,748) (728,590)
Share of results of equity investee-  (8,218) (1,150) -  (8,218) (1,150)
Income tax expenses-  -  -  -  -  - 
Net loss(1,098,323) (2,335,008) (326,680) (7,793,232) (5,215,966) (729,740)
 


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,
 2018 2019 2018 2019
  RMB   RMB   US$  RMB RMB US$
 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
            
Net loss(1,098,323) (2,335,008) (326,680) (7,793,232) (5,215,966) (729,740)
Deemed distribution to certain holders of convertible preferred shares-  -  -  (80,496) -  - 
Net loss attributable to ordinary shareholders(1,098,323) (2,335,008) (326,680) (7,873,728) (5,215,966) (729,740)
            
   
Loss per ordinary share:
           
-Basic(0.30) (0.50) (0.07) (3.19) (1.13) (0.16)
-Diluted(0.30) (0.50) (0.07) (3.19) (1.13) (0.16)
            
Loss per ADS (4 ordinary shares equals 1 ADS):           
-Basic(1.20) (2.00) (0.28) (12.76) (4.52) (0.64)
-Diluted(1.20) (2.00) (0.28) (12.76) (4.52) (0.64)
            
Weighted average number of outstanding ordinary shares (in thousands):           
-Basic3,678,051  4,649,429  4,649,429  2,467,082  4,619,623  4,619,623 
-Diluted3,678,051  4,649,429  4,649,429  2,467,082  4,619,623  4,619,623 
                  


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,
 2018 2019 2018 2019
  RMB   RMB   US$  RMB RMB US$
 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues           
Online marketplace services           
- Online marketing services2,974,145 6,711,455 938,967 6,453,197 17,126,942 2,396,147
- Transaction services398,273 802,493 112,273 1,012,871 2,222,218 310,900
Total3,372,418 7,513,948 1,051,240 7,466,068 19,349,160 2,707,047


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,
 2018 2019 2018 2019
 RMB RMB US$ RMB RMB US$
 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Share-based compensation costs included in:           
Costs of revenues559 8,567 1,199 1,370 16,579 2,319
Sales and marketing expenses180,468 219,008 30,640 213,961 623,508 87,232
General and administrative expenses264,782 206,066 28,830 6,040,515 562,118 78,643
Research and development expenses33,652 234,786 32,848 57,715 556,829 77,903
Total479,461 668,427 93,517 6,313,561 1,759,034 246,097

                                                                                                                                                     

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,
 2018 2019 2018 2019
 RMB RMB US$ RMB RMB US$
 (Unaudited)  (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net cash provided by operating activities1,631,413  2,618,232  366,303  2,035,530  5,222,963  730,719 
Net cash used in investing activities(6,217,168) (16,175,856) (2,263,085) (7,309,874) (16,857,806) (2,358,494)
Net cash provided by financing activities11,537,514  6,967,004  974,720  17,358,293  14,960,832  2,093,098 
Effect of exchange rate changes on cash, cash equivalents and restricted cash359,056  292,531  40,927  613,877  500,402  70,009 
            
Increase/(decrease) in cash, cash equivalents and restricted cash7,310,815  (6,298,089) (881,135) 12,697,826  3,826,391  535,332 
Cash, cash equivalents and restricted cash at beginning of period17,816,012  40,664,166  5,689,126  12,429,001  30,539,686  4,272,659 
            
Cash, cash equivalents and restricted cash at end of period25,126,827  34,366,077  4,807,991  25,126,827  34,366,077  4,807,991 


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,
 2018 2019 2018 2019
 RMB RMB US$ RMB RMB US$
 (Unaudited)  (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Operating Loss(1,269,479) (2,791,973) (390,611) (8,158,832) (6,402,907) (895,799)
Add: Share-based compensation479,461  668,427  93,517  6,313,561  1,759,034  246,097 
Non-GAAP operating loss(790,018) (2,123,546) (297,094) (1,845,271) (4,643,873) (649,702)
            
Net loss attributable to ordinary shareholders(1,098,323) (2,335,008) (326,680) (7,873,728) (5,215,966) (729,740)
Add: Share-based compensation479,461  668,427  93,517  6,313,561  1,759,034  246,097 
Add: Interest expenses related to the convertible bonds’ amortization to face value-  6,150  860  -  6,150  860 
Non-GAAP net loss attributable to ordinary shareholders(618,862) (1,660,431) (232,303) (1,560,167) (3,450,782) (482,783)
            
Weighted-average number of outstanding ordinary shares - basic and diluted (in thousands)3,678,051  4,649,429  4,649,429  2,467,082  4,619,623  4,619,623 
Non-GAAP basic loss per share(0.17) (0.36) (0.05) (0.63) (0.75) (0.10)
Non-GAAP basic loss per ADS(0.68) (1.44) (0.20) (2.52) (3.00) (0.40)
Non-GAAP diluted loss per share(0.17) (0.36) (0.05) (0.63) (0.75) (0.10)
Non-GAAP diluted loss per ADS(0.68) (1.44) (0.20) (2.52) (3.00) (0.40)

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