PDD PDD Holdings Inc

Pinduoduo Inc. (“Pinduoduo” or the “Company”) (NASDAQ: PDD), China’s largest agriculture platform, today announced its unaudited financial results for the second quarter ended June 30, 2022.

Second Quarter 2022 Highlights

• Total revenues in the quarter were RMB31,439.6 million (US$14,693.8 million), an increase of 36% from RMB23,046.2 million in the same quarter of 2021.
• Operating profit in the quarter was RMB8,697.2 million (US$1,298.5 million), an increase of 335% from RMB1,997.5 million in the same quarter of 2021. Non-GAAP2 operating profit in the quarter was RMB10,541.5 million (US$1,573.8 million), an increase of 231% from RMB3,185.2 million in the same quarter of 2021.
• Net income attributable to ordinary shareholders in the quarter was RMB8,896.3 million (US$1,328.2 million), an increase of 268% from RMB2,414.6 million in the same quarter of 2021. Non-GAAP net income attributable to ordinary shareholders in the quarter was RMB10,776.3 million (US$1,608.9 million), an increase of 161% from RMB4,125.3 million in the same quarter of 2021.

“We saw a recovery in consumer sentiment in the second quarter especially during the 618 shopping festival, a reflection of the resilience of overall consumption,” said Mr. Lei Chen, Chairman and Chief Executive Officer of Pinduoduo. “We remain committed to building a platform that serves as a force for good.”

“The postponement of certain projects and lower business-related expenses during the first half of the quarter affected overall expenses in short term,” said Ms. Jun Liu, VP of Finance of Pinduoduo. “Looking ahead, we stay dedicated to investing in areas such as agriculture and R&D to better serve our consumers.”

_______________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 RMB6.6981 to US$1.00, the noon buying rate in effect on June 30, 2022 as set forth in the H.10 Statistical Release of the Federal Reserve Board.2 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.

Second Quarter 2022 Unaudited Financial Results

Total revenues were RMB31,439.6 million (US$4,693.8 million), an increase of 36% from RMB23,046.2 million in the same quarter of 2021. The increase was primarily due to an increase in revenues from online marketing services and transaction services, offset by the decrease of revenues from merchandise sales.

• Revenues from online marketing services and others were RMB25,172.7 million (US$3,758.2 million), an increase of 39% from RMB18,080.4 million in the same quarter of 2021.
• Revenues from transaction services were RMB6,216.2 million (US$928.1 million), an increase of 107% from RMB3,007.6 million in the same quarter of 2021.
• Revenues from merchandise sales were RMB50.7 million (US$7.6 million), a decrease of 97% from RMB1,958.2 million in the same quarter of 2021.

Total costs of revenues were RMB7,961.9 million (US$1,188.7 million), a slight increase of 1% from RMB7,897.9 million in the same quarter of 2021.

Total operating expenses were RMB14,780.5 million (US$2,206.7 million), compared with RMB13,150.9 million in the same quarter of 2021.

• Sales and marketing expenses were RMB11,343.4 million (US$1,693.5 million), an increase of 9% from RMB10,387.9 million in the same quarter of 2021, mainly due to increased spending in promotion and advertising activities.
• General and administrative expenses were RMB825.7 million (US$123.3 million), an increase of 90% from RMB434.2 million in the same quarter of 2021, primarily due to an increase in staff related costs.
• Research and development expenses were RMB2,611.4 million (US$389.9 million), an increase of 12% from RMB2,328.8 million in the same quarter of 2021. 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 RMB8,697.2 million (US$1,298.5 million), an increase of 335% from RMB1,997.5 million in the same quarter of 2021. Non-GAAP operating profit in the quarter was RMB10,541.5 million (US$1,573.8 million), an increase of 231% from RMB3,185.2 million in the same quarter of 2021.

Net income attributable to ordinary shareholders in the quarter was RMB8,896.3 million (US$1,328.2 million), an increase of 268% from RMB2,414.6 million in the same quarter of 2021. Non-GAAP net income attributable to ordinary shareholders in the quarter was RMB10,776.3 million (US$1,608.9 million), an increase of 161% from RMB4,125.3 million in the same quarter of 2021.

Basic earnings per ADS was RMB7.06 (US$1.05) and diluted earnings per ADS was RMB6.22 (US$0.93), compared with basic earnings per ADS of RMB1.93 and diluted earnings per ADS of RMB1.69 in the same quarter of 2021. Non-GAAP diluted earnings per ADS was RMB7.54 (US$1.13), compared with RMB2.85 in the same quarter of 2021.

Net cash flow generated from operating activities was RMB19,373.9 million (US$2,892.4 million), compared with RMB7,371.2 million in the same quarter of 2021, mainly due to the increase in net income and the changes in working capitals.

Cash, cash equivalents and short-term investments were RMB119.4 billion (US$17.8 billion) as of June 30, 2022, compared with RMB92.9 billion as of December 31, 2021.

Conference Call

The Company will host a conference call to discuss the earnings at 7:30 AM U.S. Eastern Time on Monday, August 29, 2022 (7:30 PM Beijing/Hong Kong Time on Monday, August 29, 2022).

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 and non-GAAP net income 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 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 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$”))
		As of
		December 31, 2021		June 30, 2022
		RMB		RMB		US$
				(Unaudited)
ASSETS
Current assets
Cash and cash equivalents		6,426,715		13,057,463		1,949,428
Restricted cash		59,617,256		49,806,558		7,435,923
Receivables from online payment platforms		673,737		617,724		92,224
Short-term investments		86,516,618		106,322,578		15,873,543
Amounts due from related parties		4,250,155		4,110,162		613,631
Prepayments and other current assets		3,424,687		1,531,816		228,695
Total current assets		160,909,168		175,446,301		26,193,444
Non-current assets
Property, equipment and software, net		2,203,323		1,450,866		216,609
Intangible assets		701,220		435,841		65,069
Right-of-use assets		938,537		882,300		131,724
Deferred tax assets		31,504		24,148		3,605
Other non-current assets		16,425,966		13,759,949		2,054,306
Total non-current assets		20,300,550		16,553,104		2,471,313
Total Assets		181,209,718		191,999,405		28,664,757

PINDUODUO INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”))
		As of
		December 31, 2021			June 30, 2022
		RMB			RMB			US$
					(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Amounts due to related parties		1,963,007			2,494,855			372,472
Customer advances and deferred revenues		1,166,764			1,242,716			185,533
Payable to merchants		62,509,714			52,897,387			7,897,372
Accrued expenses and other liabilities		14,085,513			13,828,902			2,064,600
Merchant deposits		13,577,552			14,772,915			2,205,538
Lease liabilities		427,164			477,639			71,310
Total current liabilities		93,729,714			85,714,414			12,796,825
Non-current liabilities
Convertible bonds3		11,788,907			14,874,632			2,220,724
Lease liabilities		544,263			462,401			69,035
Deferred tax liabilities		31,291			38,669			5,773
Other non-current liabilities		996			80			12
Total non-current liabilities		12,365,457			15,375,782			2,295,544
Total Liabilities		106,095,171			101,090,196			15,092,369
Shareholders’ equity
Ordinary shares		161			162			24
Additional paid-in capital3		95,340,819			94,889,255			14,166,593
Accumulated other comprehensive (loss)/ income3		(2,519,900	)		864,028			128,996
Accumulated deficits3		(17,706,533	)		(4,844,236	)		(723,225	)
Total Shareholders’ Equity		75,114,547			90,909,209			13,572,388
Total Liabilities and Shareholders’ Equity		181,209,718			191,999,405			28,664,757

_______________3 The Group adopted ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”) on January 1, 2022, using the modified retrospective method with a cumulative-effect adjustment to the opening balance of convertible bonds, additional paid-in capital, accumulated other comprehensive income/ (loss) and accumulated deficits.

PINDUODUO INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME/ (LOSS)
(Amounts in thousands of RMB and US$)
		For the three months ended June 30,															For the six months ended June 30,
		2021					2022										2021					2022
		RMB					RMB					US$					RMB					RMB					US$
		(Unaudited)					(Unaudited)					(Unaudited)					(Unaudited)					(Unaudited)					(Unaudited)
Revenues		23,046,220				31,439,568					4,693,804					45,213,319					55,233,257					8,246,108
Costs of revenues		(7,897,886	)			(7,961,866		)			(1,188,675		)			(18,643,936		)			(15,121,461		)			(2,257,575		)
Gross profit		15,148,334				23,477,702					3,505,129					26,569,383					40,111,796					5,988,533
Sales and marketing expenses		(10,387,873	)			(11,343,447		)			(1,693,532		)			(23,385,280		)			(22,562,515		)			(3,368,495		)
General and administrative expenses		(434,151	)			(825,722		)			(123,277		)			(786,006		)			(1,417,835		)			(211,677		)
Research and development expenses		(2,328,831	)			(2,611,366		)			(389,867		)			(4,547,574		)			(5,279,873		)			(788,264		)
Total operating expenses		(13,150,855	)			(14,780,535		)			(2,206,676		)			(28,718,860		)			(29,260,223		)			(4,368,436		)
Operating profit/ (loss)		1,997,479				8,697,167					1,298,453					(2,149,477		)			10,851,573					1,620,097
Interest and investment income, net		544,629				756,991					113,016					1,515,106					1,553,252					231,894
Interest expenses		(293,999	)			(13,148		)			(1,963		)			(629,455		)			(25,788		)			(3,850		)
Foreign exchange gain/ (loss)		44,452				(199,349		)			(29,762		)			34,078					(179,265		)			(26,764		)
Other income, net		123,391				1,266,235					189,044					593,775					1,506,005					224,841
Profit/ (loss) before income tax and share of results of equity investees		2,415,952				10,507,896					1,568,788					(635,973		)			13,705,777					2,046,218
Share of results of equity investees		(1,372	)			(53,493		)			(7,986		)			145,137					(87,109		)			(13,005		)
Income tax expenses		-				(1,558,063		)			(232,613		)			-					(2,122,877		)			(316,937		)
Net income/ (loss)		2,414,580				8,896,340					1,328,189					(490,836		)			11,495,791					1,716,276

PINDUODUO INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME/ (LOSS)
(Amounts in thousands of RMB and US$, except for per share data)
		For the three months ended June 30,						For the six months ended June 30,
		2021		2022				2021			2022
		RMB		RMB		US$		RMB			RMB		US$
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)			(Unaudited)		(Unaudited)
Net income/ (loss)		2,414,580		8,896,340		1,328,189		(490,836	)		11,495,791		1,716,276
Net income/ (loss) attributable to ordinary shareholders		2,414,580		8,896,340		1,328,189		(490,836	)		11,495,791		1,716,276
Earnings/ (loss) per ordinary share:
-Basic		0.48		1.76		0.26		(0.10	)		2.28		0.34
-Diluted		0.42		1.56		0.23		(0.10	)		2.02		0.30
Earnings/ (loss) per ADS (4 ordinary shares equals 1 ADS):
-Basic		1.93		7.06		1.05		(0.39	)		9.12		1.36
-Diluted		1.69		6.22		0.93		(0.39	)		8.07		1.21
Weighted average number of outstanding ordinary shares (in thousands):
-Basic		5,013,747		5,042,417		5,042,417		4,998,722			5,039,591		5,039,591
-Diluted		5,719,402		5,716,947		5,716,947		4,998,722			5,708,590		5,708,590

PINDUODUO INC.
NOTES TO FINANCIAL INFORMATION
(Amounts in thousands of RMB and US$)
		For the three months ended June 30,						For the six months ended June 30,
		2021		2022				2021		2022
		RMB		RMB		US$		RMB		RMB		US$
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Revenues
- Online marketing services and others		18,080,419		25,172,651		3,758,178		32,191,905		43,331,076		6,469,160
- Transaction services		3,007,638		6,216,207		928,055		5,939,113		11,807,614		1,762,830
- Merchandise sales		1,958,163		50,710		7,571		7,082,301		94,567		14,118
Total		23,046,220		31,439,568		4,693,804		45,213,319		55,233,257		8,246,108

PINDUODUO INC.
NOTES TO FINANCIAL INFORMATION
(Amounts in thousands of RMB and US$)
		For the three months ended June 30,						For the six months ended June 30,
		2021		2022				2021		2022
		RMB		RMB		US$		RMB		RMB		US$
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Share-based compensation costs included in:
Costs of revenues		7,442		6,989		1,043		11,806		16,170		2,414
Sales and marketing expenses		383,540		513,559		76,672		683,023		1,014,664		151,485
General and administrative expenses		220,365		661,019		98,688		411,535		1,044,315		155,912
Research and development expenses		576,416		662,781		98,951		1,054,208		1,291,949		192,883
Total		1,187,763		1,844,348		275,354		2,160,572		3,367,098		502,694

PINDUODUO INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of RMB and US$)
		For the three months ended June 30,									For the six months ended June 30,
		2021			2022						2021			2022
		RMB			RMB			US$			RMB			RMB			US$
		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Net cash generated from operating activities		7,371,215			19,373,871			2,892,443			3,646,668			10,305,775			1,538,612
Net cash used in investing activities		(3,484,056	)		(8,593,271	)		(1,282,942	)		(9,105,103	)		(13,445,360	)		(2,007,339	)
Net cash (used in)/ generated from financing activities		(636,619	)		268			40			(1,875,493	)		311			46
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(192,413	)		(50,839	)		(7,590	)		(140,863	)		(40,676	)		(6,073	)
Increase/ (decrease) in cash, cash equivalents and restricted cash		3,058,127			10,730,029			1,601,951			(7,474,791	)		(3,179,950	)		(474,754	)
Cash, cash equivalents and restricted cash at beginning of period		64,310,718			52,133,992			7,783,400			74,843,636			66,043,971			9,860,105
Cash, cash equivalents and restricted cash at end of period		67,368,845			62,864,021			9,385,351			67,368,845			62,864,021			9,385,351

PINDUODUO INC.
RECONCILIATION OF NON-GAAP MEASURES TO THE MOST DIRECTLY COMPARABLE GAAP MEASURES
(Amounts in thousands of RMB and US$, except for per share data)
		For the three months ended June 30,						For the six months ended June 30,
		2021		2022				2021			2022
		RMB		RMB		US$		RMB			RMB		US$
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)			(Unaudited)		(Unaudited)
Operating profit/ (loss)		1,997,479		8,697,167		1,298,453		(2,149,477	)		10,851,573		1,620,097
Add: Share-based compensation		1,187,763		1,844,348		275,354		2,160,572			3,367,098		502,694
Non-GAAP operating profit		3,185,242		10,541,515		1,573,807		11,095			14,218,671		2,122,791
Net income/ (loss) attributable to ordinary shareholders		2,414,580		8,896,340		1,328,189		(490,836	)		11,495,791		1,716,276
Add: Share-based compensation		1,187,763		1,844,348		275,354		2,160,572			3,367,098		502,694
Add: Interest expense related to convertible bonds’ amortization to face value and gain or loss on extinguishment, net		298,863		13,148		1,963		617,474			25,788		3,850
Add: Loss/ (gain) from fair value change of long-term investments		224,100		22,459		3,353		(52,236	)		88,059		13,147
Non-GAAP net income attributable to ordinary shareholders		4,125,306		10,776,295		1,608,859		2,234,974			14,976,736		2,235,967
Non-GAAP diluted weighted-average number of ordinary shares outstanding (in thousands)		5,784,208		5,716,947		5,716,947		5,795,517			5,708,590		5,708,590
Diluted earnings/ (loss) per ordinary share		0.42		1.56		0.23		(0.10	)		2.02		0.30
Add: Non-GAAP adjustments to earnings/ (loss) per ordinary share		0.29		0.32		0.05		0.49			0.60		0.09
Non-GAAP diluted earnings per ordinary share		0.71		1.88		0.28		0.39			2.62		0.39
Non-GAAP diluted earnings per ADS		2.85		7.54		1.13		1.54			10.49		1.57

For investor and media inquiries, please contact:

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