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

According to the news on the evening of November 28, Beijing time, pinduoduo (Nasdaq:PDD) today released its results for the third quarter of 2022, which ended September 30. Pinduoduo's total revenue in the third quarter was 35.5043 billion yuan ($4.9911 billion), up 65 percent from 21.5058 billion yuan in the same period last year, according to the financial report. The net profit attributed to pinduoduo's common shareholders is 10.5886 billion yuan ($1.4885 billion). Net profit attributable to pinduoduo's common shareholders, excluding Non-GAAP, was 12.4472 billion yuan ($1.7498 billion), up 295% from 3.1502 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 analyst Q & A session in this conference call: bank of America analyst Joyce Ju: first question, the company's advertising business grew faster this quarter than last quarter. What are the reasons for the company's accelerated growth in the third quarter? How to understand the future growth trend? Second, could you ask the management to brief us on the current progress of overseas business? Did you meet the previous expectations? What experience do you get from practice? Are there any data and observations that can be shared with us?

Chen Lei: first of all, about growth. In the third quarter, we work with businesses to further create value for consumers and continue to provide consumers with a multi-affordable and fun shopping experience, through coupons, promotions and other ways to better serve consumers. At the same time, we also see that on pinduoduo's platform, consumers' demand for quality goods is also increasingly strong, and we also need to actively meet their needs. Since the beginning of this year, more and more brands have cooperated with us, providing consumers with more choices, including agricultural products, 3C, home appliances and beauty makeup, and we have received good feedback from consumers. I am very grateful to consumers for their trust in us all the time. However, it should also be noted that the competition in the industry is still very fierce, and the needs of consumers are becoming more and more diversified, which means that we have a lot of room for improvement. The passive reduction of short-term investment is actually not conducive to the development of our long-term business competitiveness, so we will continue to increase investment and continue to take root in industry by better understanding and serving consumer demand. Through scientific and technological investment in different links of agricultural entities and manufacturing industries, value creation can be done in a down-to-earth manner, which is the support for the long-term and high-quality development of this platform.

On your second question, we mentioned at the second quarter results meeting that we are planning international business, and I believe many people have noticed that we launched our own international e-commerce platform in September this year. This business has been going on for several months now. International business is a new exploration for our whole team, or we need to start from the needs of consumers and make full use of our previous experience in operation and supply chain. I hope to strive to create a unique value. At the same time, we will fully respect the diversity between different markets, we also understand that this business needs to keep trying, the process will be full of challenges, we will be patient and work with our partners to create long-term value for consumers. At present, this business is still in the early exploratory stage, there are many places where we can continue to optimize the services we provide, we will continue to learn and improve ourselves, this process takes time, but the experience accumulated from it will be very meaningful for the company's team.

Jeffery analyst Thomas Chong: the first question is about the drivers of the company's revenue growth in the third quarter. What is the trend of these two indicators if you split the revenue into sales contribution and business cash? In addition, is there any change in the company's cash flow for merchants? The second question is, in addition to the cash policy for merchants, does the company have any supportive policies and measures for merchants and the upper reaches of the industry? In the direction of power supply, what are the company's plans and prospects for the future?

Chen Lei: with regard to the issue of assisting the manufacturing industry and the supply side, since the inception of the company, we have been improving the efficiency of the manufacturing industry through our own technical background. Our first order-sharing model can help manufacturers reduce the middle links by pooling orders and directly connecting the demand side and the supply side, thus helping them directly reach consumers and, in the process, help them build their own brands. In the past seven years, we have helped to build nearly a thousand manufacturing brands through technology. It should be said that we have been growing together with manufacturing enterprises. At the same time, we also help traditional enterprises and manufacturing plants upgrade in informatization by providing comprehensive digital services for manufacturing partners. We help manufacturing enterprises design and adjust products, greatly reducing the uncertainty of these enterprises in the R & D and production process. What we have done also enables consumers to get more affordable prices, buy good quality goods, create value for consumers, and realize a positive value cycle among consumers, manufacturing partners and our pinduoduo platform. Since the beginning of this year, we have launched a number of special programs to support the manufacturing industry. In many areas, such as home appliances, clothing, sports, beauty makeup, daily chemical home furnishings and many other manufacturing areas, we use technology to help manufacturing enterprises. Next, we will further increase investment in the manufacturing sector to help upgrade the supply side.

Liu Yan: on the issue of sales contribution, in the third quarter, we worked closely with merchants to serve consumers, enhance consumer experience and boost the growth of users. Merchants also came to the platform to look for growth opportunities. Sales contribution revenue growth is also a natural occurrence. We need to focus on improving value creation, increasing investment, increasing users' mental share and participation, and enhancing technical strength, so as to lay a solid foundation for the long-term development of the company.

Macquarie analyst Ellie Jiang: I have two questions. The first is to ask the management to introduce the overall trend of the e-commerce industry recently, including what we have seen so far in the fourth quarter. What is the company's performance during the Singles Day promotion period, and what are the latest industry changes? The second question is about the company's overseas business development, can you ask the management to talk about the impact of overseas business on the company's financial aspects, mainly in which financial reporting columns will be reflected? What is the overall impact of the third quarter? Does the management have a plan for the future investment scale?

Chen Lei: with regard to the trend of the industry, our own idea is always to proceed from the fundamental needs of consumers. in fact, we hope that every day of the year can continue to create value for consumers, and the development of the industry is also the driving force for our own development. We also fully understand that optimizing consumers and deepening their trust in us is a process that takes time and gradual development. Shopping festivals and promotional activities are just one of the many ways we serve our consumers. We hope that consumers can get more affordable and fun shopping experience on pinduoduo, so when we plan this kind of shopping festival, we are also consumer-centered, through simple rules, so that consumers can enjoy shopping. This year, we have joined forces with many brands and merchants to bring more quality goods to consumers and meet their more diverse needs in different categories and different scenarios. At the same time, the competition in the whole industry is still very fierce, and we still have a lot to improve. Therefore, we need to patiently invest in the supply side, increase investment in technological innovation, and further improve the efficiency of the supply chain. Promote the development of agricultural entities, promote the upgrading of the supply side, so as to better serve the quality and quality needs of consumers.

Liu Yan: with regard to the embodiment of international business in financial statements, first of all, our international business is still in its infancy and is still experimenting to create unique value for all parties. We believe that financial performance is the natural embodiment of the value we have created. We will pay close attention to the return on all investments.

Kenneth Fong, an analyst at Credit Suisse: the first question is, does the company have any new ideas or progress on agricultural strategy? Do you have any cases to share with us? How did the progress in the company's agricultural strategy affect our finances over the past quarter? In addition, what is the new progress of the company's 10 billion agricultural research project? The second question is about profit. I see that the company has made profits for six consecutive quarters, and other Internet companies have begun to reduce costs and increase efficiency. May I ask whether the company's profits in the past few quarters are also due to the company's efforts to reduce costs and increase efficiency? Can we expect the company to achieve sustained profitability in the next few quarters?

Chen Lei: we have shared agricultural issues before. Agriculture is our long-term strategy, and we hope to support the development of agriculture by promoting science and technology. at present, many of our efforts are still in the early stage, but we do see a lot of room for value creation. I can take this opportunity to introduce it to you. First of all, we have improved the efficiency of farmers' circulation through our own technical background. in the third quarter, we covered thousands of producing areas through a series of special promotion activities for agricultural products, such as bumper harvest festival and super agricultural festival. to help local farmers continue to expand the market. At the same time, consumers can get fresh and high-quality agricultural products in the shortest time, and the increase in sales can also enable more agricultural research products to enter the market faster and improve the speed of scientific and technological transformation. For example, during the harvest festival, we promoted to consumers a variety of agricultural products cultivated through the latest agricultural technology, and with the input of our resources, we helped these products quickly open up the market and improve the conversion rate of agricultural science and technology. In view of the 10 billion agricultural research project, we have also recently demonstrated the groundbreaking new wheat varieties cultivated by China Agricultural University supported by this project. In the field of agriculture, we will continue to make long-term investments to help more agricultural scientific and technological achievements enter the market, and we will continue to share the progress in this area with you.

Liu Yan: on the question of profitability, first of all, the company's profitability in the third quarter is unlikely to continue in the future. In the past quarter, some of our projects, including some agriculture-related projects, are affected by the investment timeline and investment pace, and the corresponding expenditure will also be affected. On the other hand, the increase in revenue and profits in the third quarter is the result of increased business activities, and our business cycle and financial statement release cycle may be different, so the current profitability is unlikely to continue in the future. In addition, our business is still in the stage of development, profitability is not our priority goal, the company will continue to increase investment, through technology to help agriculture and manufacturing, which may cause future profitability fluctuations.

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