PDD PDD Holdings Inc

PDD Holdings Inc. (“PDD Holdings” or the “Company”) (NASDAQ: PDD), today announced its unaudited financial results for the second quarter ended June 30, 2023.

Second Quarter 2023 Highlights

• Total revenues in the quarter were RMB52,280.7 million (US$17,209.8 million), an increase of 66% from RMB31,439.6 million in the same quarter of 2022.
• Operating profit in the quarter was RMB12,718.8 million (US$1,754.0 million), an increase of 46% from RMB8,697.2 million in the same quarter of 2022. Non-GAAP2 operating profit in the quarter was RMB14,609.4 million (US$2,014.7 million), an increase of 39% from RMB10,541.5 million in the same quarter of 2022.
• Net income attributable to ordinary shareholders in the quarter was RMB13,108.1 million (US$1,807.7 million), an increase of 47% from RMB8,896.3 million in the same quarter of 2022. Non-GAAP net income attributable to ordinary shareholders in the quarter was RMB15,269.4 million (US$2,105.7 million), an increase of 42% from RMB10,776.3 million in the same quarter of 2022.

“Technology serves as a pivotal driving force of sustainable, high-quality development,” said Mr. Lei Chen, Chairman and Co-Chief Executive Officer of PDD Holdings. “We remain unwaveringly committed to leveraging our resources and technology background to spearhead innovation, champion digital inclusion and generate a positive impact on society at large.”

“Over the recent quarter, we saw a positive shift in consumer sentiment, leading to a rise in demand across various product sectors,” stated Mr. Jiazhen Zhao, Executive Director and Co-Chief Executive Officer of PDD Holdings. “We are deeply dedicated to high-quality development to create values for every party of our ecosystem.”

“In Q2, we seized the opportunities of favorable consumption trends and invested firmly and responsibly,” said Ms. Jun Liu, VP of Finance at PDD Holdings. “Looking ahead, we will continue to invest with determination and patience to execute our high-quality development strategy.”

Second Quarter 2023 Unaudited Financial Results

Total revenues were RMB52,280.7 million (US$7,209.8 million), an increase of 66% from RMB31,439.6 million in the same quarter of 2022. The increase was primarily due to an increase in revenues from online marketing services and transaction services.

• Revenues from online marketing services and others were RMB37,932.8 million (US$5,231.2 million), an increase of 50% from RMB25,223.4 million in the same quarter of 2022.
• Revenues from transaction services were RMB14,347.9 million (US$1,978.7 million), an increase of 131% from RMB6,216.2 million in the same quarter of 2022.

Total costs of revenues were RMB18,689.8 million (US$2,577.4 million), an increase of 135% from RMB7,961.9 million in the same quarter of 2022. The increase mainly came from the increased fulfilment fees and payment processing fees.

Total operating expenses were RMB20,872.2 million (US$2,878.4 million), an increase of 41% from RMB14,780.5 million in the same quarter of 2022. The increase was primarily due to an increase in sales and marketing expenses.

• Sales and marketing expenses were RMB17,542.2 million (US$2,419.2 million), an increase of 55% from RMB11,343.4 million in the same quarter of 2022, mainly due to the increased spending in promotion and advertising activities.
• General and administrative expenses were RMB596.0 million (US$82.2 million), compared with RMB825.7 million in the same quarter of 2022.
• Research and development expenses were RMB2,734.0 million (US$377.0 million), compared with RMB2,611.4 million in the same quarter of 2022.

Operating profit in the quarter was RMB12,718.8 million (US$1,754.0 million), an increase of 46% from RMB8,697.2 million in the same quarter of 2022. Non-GAAP operating profit in the quarter was RMB14,609.4 million (US$2,014.7 million), an increase of 39% from RMB10,541.5 million in the same quarter of 2022.

Net income attributable to ordinary shareholders in the quarter was RMB13,108.1 million (US$1,807.7 million), an increase of 47% from RMB8,896.3 million in the same quarter of 2022. Non-GAAP net income attributable to ordinary shareholders in the quarter was RMB15,269.4 million (US$2,105.7 million), an increase of 42% from RMB10,776.3 million in the same quarter of 2022.

Basic earnings per ADS was RMB9.64 (US$1.33) and the diluted earnings per ADS was RMB9.00 (US$1.24), compared with basic earnings per ADS of RMB7.06 and diluted earnings per ADS of RMB6.22 in the same quarter of 2022. Non-GAAP diluted earnings per ADS was RMB10.47 (US$1.44), compared with RMB7.54 in the same quarter of 2022.

Net cash generated from operating activities was RMB23,396.0 million (US$3,226.5 million), compared with RMB19,373.9 million in the same quarter of 2022.

Cash, cash equivalents and short-term investments were RMB179.5 billion (US$24.8 billion) as of June 30, 2023, compared with RMB149.4 billion as of December 31, 2022.

Recent Development

Independent Director Appointment

PDD Holdings today announced the appointment of Ms. Ivonne M.C.M. Rietjens to serve as an independent director of the Company, effective on August 29, 2023. Ms. Rietjens has more than 25 years of experience in food safety. She has been a full professor at Wageningen University since 2001 and is currently head of the division of toxicology. She is also an elected member of the Royal Netherlands Academy of Arts and Sciences (KNAW) and the chairperson of the KNAW Scientific Council for Natural Sciences and Engineering. Adding Ms. Rietjens to the Board increases the total number of board members to 7, of which 4 are independent directors.

Legal and Compliance Committee

PDD Holdings has formed a Legal and Compliance Committee, chaired by Mr. Lei Chen, which replaces the General Counsel role and function, effective on August 29, 2023.

Conference Call

The Company’s management will hold an earnings conference call at 7:30 AM ET on August 29, 2023 (12:30 PM IST and 7:30 PM HKT on the same day).

The conference call will be webcast live at https://investor.pddholdings.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, non-GAAP net income attributable to ordinary shareholders, non-GAAP diluted earnings per ordinary share and non-GAAP diluted earnings per ADS, 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 the impact of share-based compensation expenses, fair value change of certain investments, 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, fair value change of certain investments, and interest expenses related to the convertible bonds’ amortization to face value, which are non-cash charges. The Company also believes that the non-GAAP financial measures may 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 Company’s 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. These 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 the Company’s strategic and operational plans, contain forward-looking statements. The Company 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 the Company’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: the Company’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 the e-commerce markets globally and in the countries or regions where the Company has operations; changes in its revenues and certain cost or expense items; the expected growth of e-commerce markets globally and in the countries or regions where the Company has operations; developments in the relevant governmental policies and regulations relating to the Company’s industry; and general economic and business conditions globally and in the countries or regions where the Company has operations; and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in the Company’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 the Company undertakes no obligation to update any forward-looking statement, except as required under applicable law.

About PDD Holdings

PDD Holdings is a multinational commerce group that owns and operates a portfolio of businesses. PDD Holdings aims to bring more businesses and people into the digital economy so that local communities and small businesses can benefit from the increased productivity and new opportunities.

PDD HOLDINGS INC. CONDENSED CONSOLIDATED BALANCE SHEETS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”))
		As of
		December31, 2022		June 30, 2023
		RMB		RMB		US$
				(Unaudited)
ASSETS
Current assets
Cash and cash equivalents		34,326,192		31,379,326		4,327,407
Restricted cash		57,974,225		52,055,133		7,178,731
Receivables from online payment platforms		587,696		1,559,765		215,101
Short-term investments		115,112,554		148,129,260		20,427,959
Amounts due from related parties		6,318,830		5,097,426		702,967
Prepayments and other current assets		2,298,379		2,985,263		411,687
Total current assets		216,617,876		241,206,173		33,263,852
Non-current assets
Property, equipment and software, net		1,044,847		1,064,374		146,784
Intangible assets		134,002		22,651		3,124
Right-of-use assets		1,416,081		2,121,964		292,632
Deferred tax assets		1,045,030		1,544,634		213,015
Other non-current assets		16,862,117		28,325,561		3,906,273
Total non-current assets		20,502,077		33,079,184		4,561,828
Total Assets		237,119,953		274,285,357		37,825,680

PDD HOLDINGS INC.CONDENSED CONSOLIDATED BALANCE SHEETS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”))
		As of
		December31, 2022		June 30, 2023
		RMB		RMB		US$
				(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Amounts due to related parties		1,676,391		1,832,025		252,648
Customer advances and deferred revenues		1,389,655		1,639,290		226,068
Payable to merchants		63,316,695		60,115,463		8,290,301
Accrued expenses and other liabilities		20,960,723		30,889,820		4,259,900
Merchant deposits		15,058,229		16,131,012		2,224,568
Convertible bonds, current portion		13,885,751		14,431,092		1,990,139
Lease liabilities		602,036		955,395		131,755
Total current liabilities		116,889,480		125,994,097		17,375,379
Non-current liabilities
Convertible bonds		1,575,755		1,634,852		225,456
Lease liabilities		870,782		1,248,107		172,122
Deferred tax liabilities		13,025		64,222		8,857
Total non-current liabilities		2,459,562		2,947,181		406,435
Total Liabilities		119,349,042		128,941,278		17,781,814
Shareholders’ equity
Ordinary shares		170		176		24
Additional paid-in capital		99,250,468		102,681,784		14,160,466
Statutory reserves		5,000		5,000		690
Accumulated other comprehensive income		3,322,238		6,254,971		862,600
Retained earnings		15,193,035		36,402,148		5,020,086
Total Shareholders’ Equity		117,770,911		145,344,079		20,043,866
Total Liabilities and Shareholders’ Equity		237,119,953		274,285,357		37,825,680

PDD HOLDINGS INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME   (Amounts in thousands of RMB and US$)
		For the three months ended June 30,									For the six months ended June 30,
		2022			2023						2022			2023
		RMB			RMB			US$			RMB			RMB			US$
		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenues		31,439,568			52,280,748			7,209,844			55,233,257			89,917,798			12,400,231
Costs of revenues		(7,961,866	)		(18,689,787	)		(2,577,439	)		(15,121,461	)		(29,815,072	)		(4,111,686	)
Gross profit		23,477,702			33,590,961			4,632,405			40,111,796			60,102,726			8,288,545
Sales and marketing expenses		(11,343,447	)		(17,542,209	)		(2,419,181	)		(22,562,515	)		(33,801,897	)		(4,661,495	)
General and administrative expenses		(825,722	)		(596,033	)		(82,197	)		(1,417,835	)		(1,412,435	)		(194,784	)
Research and development expenses		(2,611,366	)		(2,733,964	)		(377,031	)		(5,279,873	)		(5,240,621	)		(722,715	)
Total operating expenses		(14,780,535	)		(20,872,206	)		(2,878,409	)		(29,260,223	)		(40,454,953	)		(5,578,994	)
Operating profit		8,697,167			12,718,755			1,753,996			10,851,573			19,647,773			2,709,551
Interest and investment income, net		756,991			2,287,741			315,494			1,553,252			3,751,340			517,333
Interest expenses		(13,148	)		(11,937	)		(1,646	)		(25,788	)		(23,624	)		(3,258	)
Foreign exchange (loss)/ gain		(199,349	)		155,717			21,474			(179,265	)		139,680			19,263
Other income, net		1,266,235			1,106,471			152,589			1,506,005			2,333,991			321,872
Profit before income tax and share of results of equity investees		10,507,896			16,256,747			2,241,907			13,705,777			25,849,160			3,564,761
Share of results of equity investees		(53,493	)		9,781			1,349			(87,109	)		116,170			16,021
Income tax expenses		(1,558,063	)		(3,158,442	)		(435,569	)		(2,122,877	)		(4,756,217	)		(655,912	)
Net income		8,896,340			13,108,086			1,807,687			11,495,791			21,209,113			2,924,870

PDD HOLDINGS INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME(Amounts in thousands of RMB and US$, except for per share data)
		For the three months ended June 30,						For the six months ended June 30,
		2022		2023				2022		2023
		RMB		RMB		US$		RMB		RMB		US$
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Net income		8,896,340		13,108,086		1,807,687		11,495,791		21,209,113		2,924,870
Net income attributable to ordinary shareholders		8,896,340		13,108,086		1,807,687		11,495,791		21,209,113		2,924,870
Earnings per ordinary share:
-Basic		1.76		2.41		0.33		2.28		3.96		0.55
-Diluted		1.56		2.25		0.31		2.02		3.63		0.50
Earnings per ADS (4 ordinary shares equals 1 ADS):
-Basic		7.06		9.64		1.33		9.12		15.82		2.18
-Diluted		6.22		9.00		1.24		8.07		14.53		2.00
Weighted average number of outstanding ordinary shares (in thousands):
-Basic		5,042,417		5,438,394		5,438,394		5,039,591		5,360,987		5,360,987
-Diluted		5,716,947		5,833,348		5,833,348		5,708,590		5,845,398		5,845,398

PDD HOLDINGS INC.NOTES TO FINANCIAL INFORMATION(Amounts in thousands of RMB and US$)
		For the three months ended June 30,						For the six months ended June 30,
		2022		2023				2022		2023
		RMB		RMB		US$		RMB		RMB		US$
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Revenues
- Online marketing services and others		25,223,361		37,932,831		5,231,176		43,425,643		65,177,257		8,988,354
- Transaction services		6,216,207		14,347,917		1,978,668		11,807,614		24,740,541		3,411,877
Total		31,439,568		52,280,748		7,209,844		55,233,257		89,917,798		12,400,231

PDD HOLDINGS INC.NOTES TO FINANCIAL INFORMATION(Amounts in thousands of RMB and US$)
		For the three months ended June 30,						For the six months ended June 30,
		2022		2023				2022		2023
		RMB		RMB		US$		RMB		RMB		US$
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Share-based compensation expenses included in:
Costs of revenues		6,989		28,276		3,899		16,170		65,644		9,053
Sales and marketing expenses		513,559		989,326		136,435		1,014,664		1,478,099		203,838
General and administrative expenses		661,019		225,799		31,139		1,044,315		703,861		97,067
Research and development expenses		662,781		647,228		89,257		1,291,949		1,176,427		162,237
Total		1,844,348		1,890,629		260,730		3,367,098		3,424,031		472,195

PDD HOLDINGS INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands of RMB and US$)
		For the three months ended June 30,									For the six months ended June 30,
		2022			2023						2022			2023
		RMB			RMB			US$			RMB			RMB			US$
		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Net cash generated from operating activities		19,373,871			23,395,981			3,226,453			10,305,775			24,734,003			3,410,975
Net cash used in investing activities		(8,593,271	)		(11,519,860	)		(1,588,661	)		(13,445,360	)		(34,140,107	)		(4,708,136	)
Net cash generated from financing activities		268			7,233			997			311			7,286			1,005
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(50,839	)		881,105			121,510			(40,676	)		532,860			73,484
Increase/ (decrease) in cash, cash equivalents and restricted cash		10,730,029			12,764,459			1,760,299			(3,179,950	)		(8,865,958	)		(1,222,672	)
Cash, cash equivalents and restricted cash at beginning of period		52,133,992			70,670,000			9,745,839			66,043,971			92,300,417			12,728,810
Cash, cash equivalents and restricted cash at end of period		62,864,021			83,434,459			11,506,138			62,864,021			83,434,459			11,506,138

PDD HOLDINGS INC.RECONCILIATION OF NON-GAAP MEASURES TO THE MOST DIRECTLY COMPARABLE GAAP MEASURES(Amounts in thousands of RMB and US$, except for per share data)
		For the three months ended June 30,						For the six months ended June 30,
		2022		2023				2022		2023
		RMB		RMB		US$		RMB		RMB		US$
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Operating profit		8,697,167		12,718,755		1,753,996		10,851,573		19,647,773		2,709,551
Add: Share-based compensation expenses		1,844,348		1,890,629		260,730		3,367,098		3,424,031		472,195
Non-GAAP operating profit		10,541,515		14,609,384		2,014,726		14,218,671		23,071,804		3,181,746
Net income attributable to ordinary shareholders		8,896,340		13,108,086		1,807,687		11,495,791		21,209,113		2,924,870
Add: Share-based compensation expenses		1,844,348		1,890,629		260,730		3,367,098		3,424,031		472,195
Add: Interest expenses related to convertible bonds’ amortization to face value		13,148		11,937		1,646		25,788		23,624		3,258
Add: Loss from fair value change of certain investments		22,459		258,704		35,677		88,059		738,980		101,910
Non-GAAP net income attributable to ordinary shareholders		10,776,295		15,269,356		2,105,740		14,976,736		25,395,748		3,502,233
Non-GAAP diluted weighted-average number of ordinary shares outstanding (in thousands)		5,716,947		5,833,348		5,833,348		5,708,590		5,845,398		5,845,398
Diluted earnings per ordinary share		1.56		2.25		0.31		2.02		3.63		0.50
Add: Non-GAAP adjustments to earnings per ordinary share		0.32		0.37		0.05		0.60		0.71		0.10
Non-GAAP diluted earnings per ordinary share		1.88		2.62		0.36		2.62		4.34		0.60
Non-GAAP diluted earnings per ADS		7.54		10.47		1.44		10.49		17.38		2.40

 

_____________________

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 RMB7.2513 to US$1.00, the noon buying rate in effect on June 30, 2023 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 certain investments, 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. 

For investor and media inquiries, please contact:

investor@pddholdings.com
media@pddholdings.com