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Pinduoduo Announces Second Quarter 2018 Unaudited Financial Results

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SHANGHAI, China, Aug. 30, 2018 (GLOBE NEWSWIRE) -- Pinduoduo Inc. ("Pinduoduo" or the "Company") (NASDAQ:PDD), an innovative and fast growing "new e-commerce" platform and one of the leading Chinese e-commerce players, today announced its unaudited financial results for the second quarter ended June 30, 2018.

Second Quarter 2018 Highlights

  • GMV1 in the twelve-month period ended June 30, 2018 was RMB262.1 billion (US$2 39.6 billion), an increase of 583% from RMB38.4 billion in the twelve-month period ended June 30, 2017.
     
  • Total revenues were RMB2,709.0 million (US$409.4 million), an increase of 2,489% year-over-year.
     
  • Average monthly active users3 in the quarter were 195.0 million, an increase of 495% from 32.8 million in the same quarter of 2017.
     
  • Active buyers4 in the twelve-month period ended June 30, 2018 were 343.6 million, an increase of 245% from 99.7 million in the twelve-month period ended June 30, 2017.
     
  • Annual spending per active buyer5 in the twelve-month period ended June 30, 2018 was RMB762.8 (US$115.3), an increase of 98% from RMB385.0 in the twelve-month period ended June 30, 2017.

"I am pleased to report strong operational and financial results this quarter," commented Mr. Zheng Huang, Chairman and Chief Executive Officer of Pinduoduo. "GMV in the last twelve months increased 583% year-over-year to RMB262.1 billion while active buyers jumped 245% year-over-year to 343.6 million, which I believe demonstrates the value of our differentiated ‘new e-commerce' business model and our ability to serve China's strong domestic consumption demand. We continue to allocate resources towards enhancing user engagement and strengthening our brand recognition, and we remain committed to investing in technology, with a focus on the long-term growth of our platform. I am confident in our conviction and ability to capture the enormous and growing opportunities in China."

Mr. Tian Xu, Vice President of Finance of Pinduoduo, added, "Revenues increased 2,489% year-over-year and 96% sequentially during the quarter which I believe is a testament to our ability to monetize while driving GMV growth. Net loss was in line with our expectations as we continue to generate strong positive cash flow. We launched a number of marketing campaigns to strengthen our brand and facilitate greater user engagement, and we will continue to invest in developing new and innovative technologies and in hiring the best talent for our long-term sustainable growth."

Second Quarter 2018 Financial Results

Total revenues were RMB2,709.0 million (US$409.4 million), an increase of 2,489% from RMB104.6 million in the same quarter of 2017 and an increase of 96% sequentially from RMB1,384.6 million in the previous quarter. The increases were primarily due to an increase in revenues from online marketing services.

  • Revenues from online marketing services were RMB2,371.0 million (US$358.3 million), a significant increase from RMB32.1 million in the same quarter of 2017, and an increase of 114% sequentially from RMB1,108.1 million in the previous quarter.
     
  • Revenues from Commission fees were RMB338.1 million (US$51.1 million), an increase of 366% from RMB72.5 million in the same quarter of 2017, and an increase of 22% sequentially from RMB276.5 million in the previous quarter.

Total costs of revenues were RMB387.8 million (US$58.6 million), an increase of 260% from RMB107.6 million in the same quarter of 2017.

Total operating expenses were RMB8,957.4 million (US$1,353.7 million), compared with RMB119.8 million in the same quarter of 2017.

  • Sales and marketing expenses were RMB2,970.7 million (US$448.9 million), a significant increase from RMB88.9 million in the same quarter of 2017, mainly due to an increase in branding campaigns and online and offline advertisement and promotions.
     
  • General and administrative expenses were RMB5,800.7 million (US$876.6 million), a significant increase from RMB6.0 million in the same quarter of 2017, primarily due to an increase in headcount and share-based compensation expenses.
     
  • Research and development expenses were RMB186.0 million (US$28.1 million), an increase of 648% from RMB24.9 million in the same quarter of 2017. The increase was primarily due to an increase in headcount and the recruitment of more experienced R&D personnel, as well as an increase in the R&D related cloud services expenses.

Operating loss was RMB6,636.2 million (US$1,002.9 million), compared with operating loss of RMB122.7 million in the same quarter of 2017. Non-GAAP operating loss6 was RMB815.7 million (US$123.3 million), compared with RMB119.9 million in the same quarter of 2017.

Net loss attributable to ordinary shareholders was RMB6,493.9 million (US$981.4 million), compared with RMB109.5 million in the same quarter of 2017. Non-GAAP net loss attributable to ordinary shareholders7 was RMB673.4 million (US$101.8 million), compared with RMB106.7 million in the same quarter of 2017.

Basic and diluted net loss per ADS were RMB13.40 (US$2.04), compared with RMB0.24 in the same quarter of 2017. Non-GAAP basic and diluted net loss per ADS were RMB1.40 (US$0.20), compared with RMB0.24 in the same quarter of 2017.

Net cash provided by operating activities was RMB360.9 million (US$54.5 million), compared with RMB1,283.6 million in the same quarter of 2017, primarily due to an increase in outbound cashflow associated with sales and marketing spending.

Cash and cash equivalents were RMB9.0 billion (US$1.4 billion) as of June 30, 2018, compared with RMB3.1 billion as of December 31, 2017.

Conference Call

The Company will host a conference call to discuss the earnings at 9:00 PM U.S. Eastern Time on Thursday, August 30, 2018 (9:00 AM Beijing/Hong Kong Time on Friday, August 31, 2018).

Dial-in numbers for the live conference call are as follows:
         
International       +65-6713-5090
Mainland China        4006-208-038
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 for one week.
         
Dial-in numbers for the replay are as follows:        
         
International        +61-2-8199-0299
U.S.        +1-646-254-3697
Passcode:       4371648

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 income/(loss) and non-GAAP net income/(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 defines non-GAAP operating income/(loss) as operating income/(loss) excluding share-based compensation expenses. The Company defines non-GAAP net income/(loss) attributable to ordinary shareholders as net income/(loss) attributable to ordinary shareholders excluding share-based compensation expenses.

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, 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, 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 expense 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 "new e-commerce" platform that provides buyers with value-for-money merchandise and fun and interactive shopping experiences. The Pinduoduo mobile platform offers a comprehensive selection of attractively priced merchandise, featuring a dynamic social shopping experience that leverages social networks as an effective and efficient tool for buyer acquisition and engagement.

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

For investor and media inquiries, please contact:

Pinduoduo Inc.
investor@pinduoduo.com

Christensen
In China
Mr. Christian Arnell
Phone: +86-10-5900-1548
E-mail: carnell@christensenir.com

In U.S.
Ms. Linda Bergkamp
Phone: +1-480-614-3004
Email: lbergkamp@christensenir.com

PINDUODUO INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS 
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"), except for number of shares and per share data)

         
      As of  
      December 312017   June 30, 2018  
       RMB    RMB    US$  
      (Audited)   (Unaudited)  
             
ASSETS                
Current Assets                
Cash and cash equivalents     3,058,152   9,030,874   1,364,778  
Restricted cash     9,370,849   8,785,138   1,327,642  
Receivables from online payment platforms     88,173   94,443   14,273  
Short-term investments     50,000   1,300,000   196,461  
Amounts due from related parties     442,912   588,078   88,872  
Prepayments and other current assets     127,742   673,405   101,766  
Total current assets     13,137,828   20,471,938   3,093,792  
                 
Non-current assets                
Long-term investment     5,000   -   -  
Property and equipment, net     9,279   14,876   2,248  
Intangible asset     -   2,786,690   421,135  
Loan to a related party     162,363   -   -  
Total non-current assets     176,642   2,801,566   423,383  
                 
Total Assets     13,314,470   23,273,504   3,517,175  
                 

PINDUODUO INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS 
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"), except for number of shares and per share data)

         
      As of  
      December 312017   June 30, 2018  
      RMB   RMB   US$  
      (Audited)   (Unaudited)  
             
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS' DEFICITS                
Current Liabilities                
Amounts due to related parties     76,057     294,201     44,461    
Customer advances     56,453     105,013     15,870    
Payable to merchants     9,838,519     9,318,220     1,408,203    
Accrued expenses and other liabilities     360,393     971,103     146,757    
Merchant deposits     1,778,085     3,194,609     482,781    
Total current liabilities     12,109,507     13,883,146     2,098,072    
                 
Total Liabilities     12,109,507     13,883,146     2,098,072    
                 
                 
Mezzanine equity     2,196,921     10,950,505     1,654,879    
                 
                 
Shareholders' deficits                
Ordinary Shares     54     62     9    
Additional paid-in capital     61,326     5,848,893     883,906    
Accumulated other comprehensive (loss)/income     (23,101 )   396,540     59,926    
Accumulated deficits     (1,030,237 )   (7,805,642 )   (1,179,617 )  
Total shareholders' deficits     (991,958 )   (1,560,147 )   (235,776 )  
Total liabilities, mezzanine equity, and shareholders' deficits     13,314,470     23,273,504     3,517,175    
                 

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

         
    For the three months ended June 30,   For the six months ended June 30,
    2017     2018     2017     2018  
    RMB   RMB   US$   RMB   RMB   US$
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Revenues                        
Online marketplace services   104,617     2,709,046     409,401     138,251     4,093,650     618,647  
Merchandise sales   -     -     -     3,385     -     -  
Total Revenues   104,617     2,709,046     409,401     141,636     4,093,650     618,647  
                         
Costs of revenues                        
Costs of online marketplace services   (107,605 )   (387,830 )   (58,610 )   (158,986 )   (706,530 )   (106,773 )
Costs of merchandise sales   -     -     -     (3,052 )   -     -  
Total costs of revenues   (107,605 )   (387,830 )   (58,610 )   (162,038 )   (706,530 )   (106,773 )
                         
Gross (loss)/profit   (2,988 )   2,321,216     350,791     (20,402 )   3,387,120     511,874  
                         
Sales and marketing expenses   (88,902 )   (2,970,734 )   (448,948 )   (162,772 )   (4,188,192 )   (632,935 )
General and administrative expenses   (5,963 )   (5,800,673 )   (876,619 )   (114,560 )   (5,829,434 )   (880,965 )
Research and development expenses   (24,885 )   (186,029 )   (28,113 )   (40,913 )   (258,847 )   (39,118 )
Total operating expenses   (119,750 )   (8,957,436 )   (1,353,680 )   (318,245 )   (10,276,473 )   (1,553,018 )
                         
Operating loss   (122,738 )   (6,636,220 )   (1,002,889 )   (338,647 )   (6,889,353 )   (1,041,144 )
                         
Interest income   13,738     136,601     20,644     21,241     186,764     28,224  
Foreign exchange gain/(loss)   (860 )   3,596     543     (996 )   1,460     221  
Other income, net   319     2,135     323     1,138     6,220     940  
                         
Loss before income tax   (109,541 )   (6,493,888 )   (981,379 )   (317,264 )   (6,694,909 )   (1,011,759 )
Income tax expenses   -     -     -     -     -     -  
Net loss   (109,541 )   (6,493,888 )   (981,379 )   (317,264 )   (6,694,909 )   (1,011,759 )
                                     

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

         
    For the three months ended June 30,   For the six months ended June 30,
    2017     2018     2017     2018  
     RMB    RMB    US$   RMB   RMB   US$
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
                         
Net loss   (109,541 )   (6,493,888 )   (981,379 )   (317,264 )   (6,694,909 )   (1,011,759 )
Deemed distribution to certain holders of convertible preferred shares   -     -     -     -     (80,496 )   (12,165 )
Contribution from a holder of convertible preferred shares   -     -     -     26,413     -     -  
Net loss attributable to ordinary shareholders   (109,541 )   (6,493,888 )   (981,379 )   (290,851 )   (6,775,405 )   (1,023,924 )
                         
Earnings per share for Class A and Class B ordinary shares:                        
-Basic   (0.06 )   (3.35 )   (0.51 )   (0.16 )   (3.66 )   (0.55 )
-Diluted   (0.06 )   (3.35 )   (0.51 )   (0.16 )   (3.66 )   (0.55 )
                         
Earnings per ADS (4 Class A ordinary share equals 1 ADSs ):                        
-Basic   (0.24 )   (13.40 )   (2.04 )   (0.64 )   (14.64 )   (2.20 )
-Diluted   (0.24 )   (13.40 )   (2.04 )   (0.64 )   (14.64 )   (2.20 )
                         
Weighted average number of Class A and Class B ordinary shares outstanding:                        
-Basic   1,758,769,820     1,940,536,606     1,940,536,606     1,770,928,809     1,850,155,331     1,850,155,331  
-Diluted   1,758,769,820     1,940,536,606     1,940,536,606     1,770,928,809     1,850,155,331     1,850,155,331  
                         

PINDUODUO INC.
NOTES TO UNAUDITED FINANCIAL INFORMATION
(Amounts in thousands of RMB and US$, except for number of shares and per share data)

                         
    For the three months ended June 30,   For the six months ended June 30,
    2017   2018   2017   2018
     RMB    RMB    US$   RMB   RMB   US$
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Revenues                        
Online marketplace services                        
- Online marketing services   32,140   2,370,952   358,307   32,140   3,479,052   525,767
- Commission fees   72,477   338,094   51,094   106,111   614,598   92,880
Merchandise sales   -   -   -   3,385   -   -
Total   104,617   2,709,046   409,401   141,636   4,093,650   618,647
                         

PINDUODUO INC.
NOTES TO UNAUDITED FINANCIAL INFORMATION
(Amounts in thousands of RMB and US$, except for number of shares and per share data)

         
    For the three months ended June 30,   For the six months ended June 30,
    2017   2018   2017   2018
     RMB    RMB    US$   RMB   RMB   US$
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Share-based compensation cost
included in:
                       
Costs of revenues   203   511   77   382   811   123
Sales and marketing expenses   391   32,291   4,880   777   33,493   5,062
General and administrative expenses   1,153   5,770,706   872,090   107,078   5,775,733   872,850
Research and development   1,115   16,982   2,566   2,110   24,063   3,636
Total   2,862   5,820,490   879,613   110,347   5,834,100   881,671
                         

PINDUODUO INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
(Amounts in thousands of RMB and US$, except for number of shares and per share data)

         
    For the three months ended June 30,   For the six months ended June 30,
    2017     2018     2017     2018  
     RMB    RMB    US$   RMB   RMB   US$
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
                         
Net cash provided by operating activities   1,283,568     360,904     54,542     1,673,548     989,828     149,587  
Net cash provided by/(used in) investing activities   701,624     (291,150 )   (44,000 )   286,426     (1,092,706 )   (165,134 )
Net cash provided by/(used in) financing activities   645,704     (3,789 )   (573 )   1,413,211     5,820,779     879,657  
Effect of exchange rate changes on cash and cash equivalents   (17,203 )   330,620     49,964     (16,796 )   254,821     38,509  
                         
Increase in cash and cash equivalents   2,613,693     396,585     59,933     3,356,389     5,972,722     902,619  
Cash and cash equivalents at beginning of period   2,062,539     8,634,289     1,304,845     1,319,843     3,058,152     462,159  
                         
Cash and cash equivalents at end of period   4,676,232     9,030,874     1,364,778     4,676,232     9,030,874     1,364,778  
                                     

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

         
    For the three months ended June 30,   For the six months ended June 30,
    2017    2018    2017    2018 
     RMB    RMB    US$   RMB   RMB   US$
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
                         
Operating loss   (122,738 )   (6,636,220 )   (1,002,889 )   (338,647 )   (6,889,353 )   (1,041,144 )
Add: Share-based compensation   2,862     5,820,490     879,613     110,347     5,834,100     881,671  
Non-GAAP operating loss   (119,876 )   (815,730 )   (123,276 )   (228,300 )   (1,055,253 )   (159,473 )
 

 

Net loss attributable to ordinary shareholders
  (109,541 )   (6,493,888 )    (981,379 )    (290,851 )   (6,775,405 )   (1,023,924 )
Add: Share-based compensation   2,862     5,820,490     879,613     110,347     5,834,100     881,671  
Non-GAAP net loss attributable to ordinary shareholders    (106,679 )   (673,398 )    (101,766 )   (180,504 )   (941,305 )   (142,253 )
                         
                         
Non-GAAP basic earnings per share   (0.06 )   (0.35 )   (0.05 )   (0.10 )   (0.51 )   (0.08 )
Non-GAAP basic earnings per ADS   (0.24 )   (1.40 )   (0.20 )   (0.40 )   (2.04 )   (0.32 )
Non-GAAP diluted earnings per share   (0.06 )   (0.35 )   (0.05 )   (0.10 )   (0.51 )   (0.08 )
Non-GAAP diluted earnings per ADS   (0.24 )   (1.40 )   (0.20 )   (0.40 )   (2.04 )   (0.32 )
                                     

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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 RMB6.6171 to US$1.00, the noon buying rate in effect on June 29, 2018 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 Non-GAAP operating income/(loss) is defined as operating income/(loss) excluding share-based compensation expenses. See "Reconciliation of Non-GAAP Measures to The Most Directly Comparable GAAP Measures" set forth at the end of this press release.

7 Non-GAAP net income/(loss) attributable to ordinary shareholders is defined as net income/(loss) attributable to ordinary shareholders excluding share-based compensation expenses. See "Reconciliation of Non-GAAP Measures to The Most Directly Comparable GAAP Measures" set forth at the end of this press release.

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