Shulou(Shulou.com)11/24 Report--

According to news on the evening of August 29, Beijing time, pinduoduo today released its financial results for the second quarter of 2022, which ended on June 30. Pinduoduo's total revenue in the second quarter was 31.4396 billion yuan ($4.6938 billion), up 36 percent from 23.0462 billion yuan in the same period last year, according to the financial report. The net profit attributable to pinduoduo's common shareholders was 8.8963 billion yuan ($1.3282 billion), up 268% from 2.4146 billion yuan in the same period last year. Without Non-GAAP, the net profit belonging to pinduoduo's common shareholders was 10.7763 billion yuan ($1.6089 billion), up 161% from 4.1253 billion yuan in the same period last year.

After the release of the results, pinduoduo CEO Chen Lei and Vice President of Finance Liu Jie attended the subsequent earnings call to interpret the main points of the results and answer analysts' questions.

The following is the main content of the question and answer session of the analyst in this conference call:

Credit Suisse analyst Kenneth Fong: I have two questions. The first question concerns advertising revenue for the current quarter. Pinduoduo's advertising revenue grew very strongly this quarter, at about 39%, and accelerated growth for two consecutive quarters. What is the driving factor behind this? The second question is about brands. Can the management update the progress of pinduoduo's branding with us? We see that many brands have participated in pinduoduo's "618" sales activities. how much does this help pinduoduo's performance this quarter? What methods will pinduoduo use to attract more brands to join the platform in the future?

Chen Lei: about growth. Since late May, we have seen a gradual recovery in consumption, and we have contributed to the recovery in a variety of ways for the first time. In this year's "618" activity, we see that many merchants and brands are actively participating, but also see the strong shopping demand of consumers. In this context, the platform, including daily chemical, agricultural products, small household appliances, cosmetics and many other categories have made a certain growth. On the other hand, we always try our best to meet the needs of consumers. This is inseparable from the hard work of pinduoduo employees in the past period of time, and their efforts have helped consumers to meet the needs of many necessities of life. Our company is also very grateful to the team for their efforts during this period of time.

At the same time, we also see that competition in the industry is still fierce. We still have a lot of room for improvement in meeting the needs of consumers. As I just mentioned, our overall investment actually decreased passively in the second quarter because of foreign debt, which is actually not conducive to the cultivation of pinduoduo's long-term competitiveness. Therefore, we need to step up our efforts to further consolidate core competencies in order to create more value for consumers and society.

The second question about you is the brand. We can see that the consumer demand on pinduoduo platform is becoming more and more diversified, and each consumer will have different needs in different categories and different scenarios. So, naturally, they need more goods and more choices. Our goal is always to better serve consumers and bring them a "more affordable and fun" shopping experience. We believe that in the direction of serving consumers well, the brand is consistent with our goal. Therefore, we will continue to do what the platform should do, and maintain a down-to-earth and patient attitude in the process.

Joyce Ju, analyst at Merrill Lynch: I have two questions. First of all, there are recent media reports that pinduoduo is about to launch a cross-border e-commerce platform. Can the management share with us pinduoduo's strategic plan in this area? How's it going so far? What are the main target markets? What are pinduoduo's advantages, goals and budget? My second question is about Pinduoduo's revenue from trading services. We see that revenue in this sector continues to exceed advertising revenue in this quarter, which is also accelerating further compared with the previous quarter, and has now achieved triple-digit year-on-year growth. What is the driving force behind this growth of management?

Chen Lei: about "going to sea". First of all, to be clear, we are a young company, the team is also relatively young, in the past period of time, everyone has been growing. In the process of growing up, we continue to explore new opportunities. We see opportunities in overseas business, and the most important thing is that we see the possibility of creating user value. Of course, we also see that many colleagues have made good achievements. Therefore, we think this is a direction worth trying. However, we do not simply repeat what others have done. I think the most important thing is to start from the needs of consumers, and then create our unique and unique value.

At the same time, we are fully aware that overseas business will be full of challenges, we need to keep trying, the whole process will not be achieved overnight. But I think it is very valuable for the company and the team to accumulate experience in this process.

Liu Yan: in terms of revenue from trading services. First of all, we always focus on consumer demand, and operating indicators and financial income are the natural result of our active service to consumers. Over the past quarter, as spending power has picked up, user participation and transactions have gradually recovered, which has contributed to revenue growth. In addition, it is worth noting that our business cycle does not necessarily match the quarterly reporting cycle, so it is extremely common for us to fluctuate from quarter to quarter. In the future, we will continue to focus on providing better services to consumers and creating long-term value.

Jefferies analyst Thomas Chong: the first question is about reducing costs and increasing efficiency. Under the uncertain global macro environment, we see that many Internet companies have taken positive measures to control costs. What are pinduoduo's ideas and strategies for reducing costs and increasing efficiency?

The second question is about profitability. We saw that pinduoduo's profit in the second quarter was higher than the market expected. Can the management share with us the profit trend in the second half of the year?

Chen Lei: first of all, I think pinduoduo is still in the stage of growth and instability. Standing on this time node, we still have a lot of work to do and a long way to go in serving good consumers. In the process of our development, constantly meeting the needs of consumers is a matter of patience. On the one hand, this requires us to constantly explore, on the other hand, we need to seize the key opportunities and make a corresponding scale of investment.

In the past quarter, especially in the first half, our team's investment actually decreased passively. In the short term, this may lead to good financial data, but in the long run, it will actually affect the overall competitiveness of our platform. Therefore, we still have to gain a foothold in the long term and invest in the future. On the one hand, we should consolidate our core competencies, on the other hand, we will still focus on long-term investment in agriculture, scientific and technological research and development to create more value for consumers and society. This will also support our platform to achieve long-term, high-quality development.

Liu Yan: as mentioned earlier, our profit strategy has not changed at present. In the last quarter alone, our profits were mainly due to some short-term external factors. On the income side, with the gradual recovery of consumption, we see that user participation and consumption levels are picking up. But at the same time, we also face fierce competition. In terms of expenses, the reduction in related business activities has had a short-term impact on expenses, but in view of future fluctuations, I do not recommend that you use this as a benchmark.

Yang Bai, CICC analyst: I have two questions. The first question is about "buy more vegetables". We see that the growth in community group buying is not as fast as it used to be, and we are also seeing some companies in the industry starting to rein in spending. Is pinduoduo also paying attention to the improvement of efficiency? how does the financial improvement of "Buy more vegetables" help the overall financial affairs of this quarter?

My second question is about the expense rate. With the further growth of pinduoduo's income, the role of operating leverage continues to come into play, and I have seen the expense rate drop to 47% this quarter. Can we predict that this leverage effect is sustainable? In addition, we have observed that the company has a very good growth in revenue. How can pinduoduo optimize the cost while taking into account the growth?

Chen Lei: first of all, let me say "buy more vegetables". Strategically, we have always believed that "buy more vegetables" is a natural extension of our platform business, and it is also an important part of us to give full play to our agricultural characteristics to better serve consumers. This is a project that we will patiently invest in, and its implementation strategy will not be affected by external short-term changes. Since we launched "Buy more vegetables" in the second half of 2020, we have also seen that "Buy more vegetables" can bring fresh, more affordable and more convenient agricultural products to consumers in terms of supply and demand matching and implementation of local agricultural products. create real value.

At the same time, we also see that there are still many areas that can be improved in this business, such as how to match supply and demand more effectively, explore high-quality sources of goods, how to further optimize the distribution system, improve the quality of performance services, and so on. We are still making constant adjustments and improvements. All this is to bring a better experience to consumers. For a long time, we have always been consumer-oriented. The primary goal of a project is to create value for consumers. This point has never changed. The specific financial indicators are actually the embodiment of the results brought about by serving consumers.

Liu Yan: our expense rate has dropped to 47% this quarter. However, I would like to point out that many short-term factors, such as project delays and reduced related business activities, have had an impact. But these effects will not last. In fact, the expense rate actually rose in the second half of the quarter as the market gradually returned to normal. Therefore, we need to make it clear that the expense rate in the second quarter is not a good benchmark. Just now Chen Lei also mentioned that pinduoduo is currently in the stage of development. Therefore, from a business point of view, competition in the industry is still fierce and we will continue to invest.

Haitong international analyst Natalie Wu: the first question, the current pinduoduo internal investment in each business strategic priority? It has been a year and a half since Chen Lei took over as CEO, and it has been a year and a half since you proposed pinduoduo's "10 billion agricultural research" project. At the same time, we saw some changes in the external situation in the second half of the year, such as the gradual end of the impact of the epidemic, the gradual recovery of consumer purchases, and the gradual fading of live e-commerce pressure. Pinduoduo's growth rate in the second quarter was obviously faster than that of the industry, and the profit margin was also very good. The management also mentioned that more money should be spent on the platform in the second half of the year, or does the management plan to continue to invest in agriculture and R & D? At this point in time, what is the management's view on the strategic priorities of each line of business for the second half of the year? For example, the marketing of the platform, the project "going out to sea" and so on, how to sort these projects?

The second question, I see that there is already more than 100 billion yuan in cash on the Paddo account at the end of the second quarter, and we also see that other companies are also using their own account representatives to give back to shareholders, such as dividends, buybacks, and so on. Does pinduoduo have a similar plan?

Chen Lei: let me answer the question about priority first. I think we should still pay attention to the most basic starting point of pinduoduo. First of all, we are always committed to meeting the changing needs of consumers. I have always believed that development is inseparable from the support of consumers. It is our duty as an enterprise to serve consumers well. As pinduoduo users reach the existing scale, how to better serve them and further deepen their trust and mind in Pinduo is the focus of our work. It is for this purpose that we further turn to agriculture and research and development, taking both as the focus of our attention. We also see that these two aspects of investment can really create value for consumers and society.

First of all, on the agricultural consumer side. Through a more efficient upstream of agricultural products, we can enable consumers to buy fresh and more affordable agricultural products. At the same time, we also use technology to improve the circulation efficiency of agricultural products and optimize the agricultural circulation end. Secondly, on the production side. Through the promotion of agricultural science and technology, we help farmers increase their output, actively promote training for small farmers and businesses, and help them obtain higher and more stable incomes. On the other hand, by improving our R & D capabilities, we can better understand consumers' new needs and preferences, enhance their shopping experience, and create more value for them. At the same time, we also see that, especially in the past period of time, young team members have been growing. They have ensured the smooth operation of the entire platform, helped consumers meet their basic needs, and created new social value. We have also created more development opportunities for them. Pinduoduo is still in the stage of growth, so we need to continue to invest patiently and continuously improve the ability of the team, so as to better serve consumers. The above is the focus of our business development.

Liu Yan: as for your second question, I think the core is the allocation of capital. Considering the current competitive environment and challenges, pinduoduo still has a lot of room for improvement in order to better meet the needs of consumers, such as agriculture and research and development. Therefore, I think we need to continue to make patient and long-term investments in these areas. Different companies are at different stages of development. Pinduoduo is currently in a period of investment development. Therefore, we will continue to pay attention to and invest in the above areas with a view to bringing long-term value.

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