PDD Holdings Announces First Quarter 2023 Unaudited Financial Results

DUBLIN and SHANGHAI, May 26, 2023 (GLOBE NEWSWIRE) -- PDD Holdings Inc. (“PDD Holdings” or the “Company”) (NASDAQ: PDD), today announced its unaudited financial results for the first quarter ended March 31, 2023.

First Quarter 2023 Highlights

• Total revenues in the quarter were RMB37,637.1 million (US$¹5,480.4 million), an increase of 58% from RMB23,793.7 million in the same quarter of 2022.

• Operating profit in the quarter was RMB6,929.0 million (US$1,008.9 million), an increase of 222% from RMB2,154.4 million in the same quarter of 2022. Non-GAAP² operating profit in the quarter was RMB8,462.4 million (US$1,232.2 million), an increase of 130% from RMB3,677.2 million in the same quarter of 2022.

• Net income attributable to ordinary shareholders in the quarter was RMB8,101.0 million (US$1,179.6 million), an increase of 212% from RMB2,599.5 million in the same quarter of 2022. Non-GAAP net income attributable to ordinary shareholders in the quarter was RMB10,126.4 million (US$1,474.5 million), an increase of 141% from RMB4,200.4 million in the same quarter of 2022.
  

“Technology is the cornerstone of sustainable and inclusive growth that creates positive value for society,” said Mr. Lei Chen, Chairman and Co-Chief Executive Officer of PDD Holdings. “We will channel more resources to R&D as it is the key catalyst in driving efficiency and uncovering opportunities.”

“We are entering a new phase of development where we are fully committed to fostering high-quality growth and further strengthening our ecosystem,” said Mr. Jiazhen Zhao, Executive Director and Co-Chief Executive Officer of PDD Holdings. “We are launching a dedicated ‘10 Billion Ecosystem Initiative’ to facilitate an environment where quality merchants can flourish.”

“Patient investment is essential for us to promote ecosystem vibrancy and sustainability,” said Ms. Jun Liu, VP of Finance at PDD Holdings. “We are still in the investment stage, and we plan to step up our investment to further support quality growth.”

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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 RMB6.8676 to US$1.00, the noon buying rate in effect on March 31, 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.

First Quarter 2023 Unaudited Financial Results

Total revenues were RMB37,637.1 million (US$5,480.4 million), an increase of 58% from RMB23,793.7 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 RMB27,244.4 million (US$3,967.1 million), an increase of 50% from RMB18,202.3 million in the same quarter of 2022.

• Revenues from transaction services were RMB10,392.6 million (US$1,513.3 million), an increase of 86% from RMB5,591.4 million in the same quarter of 2022.

Total costs of revenues were RMB11,125.3 million (US$1,620.0 million), an increase of 55% from RMB7,159.6 million in the same quarter of 2022. The increase mainly came from the increased fulfilment fees and payment processing fees.

Total operating expenses were RMB19,582.7 million (US$2,851.5 million), an increase of 35% from RMB14,479.7 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 RMB16,259.7 million (US$2,367.6 million), an increase of 45% from RMB11,219.1 million in the same quarter of 2022, mainly due to the increased spending in promotion and advertising activities.

• General and administrative expenses were RMB816.4 million (US$118.9 million), an increase of 38% from RMB592.1 million in the same quarter of 2022, primarily due to an increase in staff related costs.

• Research and development expenses were RMB2,506.7 million (US$365.0 million), a slight decrease of 6% from RMB2,668.5 million in the same quarter of 2022.
  

Operating profit in the quarter was RMB6,929.0 million (US$1,008.9 million), an increase of 222% from RMB2,154.4 million in the same quarter of 2022. Non-GAAP operating profit in the quarter was RMB8,462.4 million (US$1,232.2 million), an increase of 130% from RMB3,677.2 million in the same quarter of 2022.

Net income attributable to ordinary shareholders in the quarter was RMB8,101.0 million (US$1,179.6 million), an increase of 212% from RMB2,599.5 million in the same quarter of 2022. Non-GAAP net income attributable to ordinary shareholders in the quarter was RMB10,126.4 million (US$1,474.5 million), an increase of 141% from RMB4,200.4 million in the same quarter of 2022.

Basic earnings per ADS was RMB6.13 (US$0.89) and the diluted earnings per ADS was RMB5.55 (US$0.81), compared with basic earnings per ADS of RMB2.06 and diluted earnings per ADS of RMB1.84 in the same quarter of 2022. Non-GAAP diluted earnings per ADS was RMB6.92 (US$1.01), compared with RMB2.95 in the same quarter of 2022.

Net cash generated from operating activities was RMB1,338.0 million (US$194.8 million), compared with net cash used in operating activities of RMB9,068.1 million in the same quarter of 2022, mainly due to the increase in net income and the changes in working capitals.

Cash, cash equivalents and short-term investments were RMB157.0 billion (US$22.9 billion) as of March 31, 2023, compared with RMB149.4 billion as of December 31, 2022.

Conference Call

The Company’s management will hold an earnings conference call at 7:30 AM ET on May 26, 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 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 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 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 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 China’s and global e-commerce markets; changes in its revenues and certain cost or expense items; the expected growth of China’s and global e-commerce markets; PRC governmental policies and regulations relating to the Company’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 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.