GlobeNewswire Inc | Nov 12, 2020 05:00AM EST

November 12, 2020

SHANGHAI, China, Nov. 12, 2020 (GLOBE NEWSWIRE) -- Pinduoduo Inc. ("Pinduoduo" or the "Company") (NASDAQ: PDD), an innovative and fast growing technology platform and one of the leading Chinese e-commerce players, today announced its unaudited financial results for the third quarter ended September 30, 2020.

ThirdQuarter 2020 Highlights

-- GMV1 in the twelve-month period ended September 30, 2020 was RMB1,457.6 billion (US$2214.7 billion), an increase of 73% from RMB840.2 billion in the twelve-month period ended September 30, 2019. -- Total revenues in the quarter were RMB14,209.8 million (US$2,092.9 million), an increase of 89% from RMB7,513.9 million in the same quarter of 2019. -- Average monthly active users3in the quarter were 643.4 million, an increase of 50% from 429.6 million in the same quarter of 2019. -- Active buyers4in the twelve-month period ended September 30, 2020 were 731.3 million, an increase of 36% from 536.3 million in the twelve-month period ended September 30, 2019. -- Annual spending per active buyer5in the twelve-month period ended September 30, 2020 was RMB1,993.1 (US$293.6), an increase of 27% from RMB1,566.7 in the twelve-month period ended September 30, 2019.

This quarter we continued to invest in user engagement, which resulted in strong growth of MAUs and active buyers, commented Mr. Lei Chen, Chief Executive Officer of Pinduoduo. Our strategic priorities are informed by the changes in consumer habits that we observe and anticipate. We continue to innovate in order to meet such needs, especially in the agricultural industry.

This quarter we started Duo Duo Maicai to address the structural changes we see in how consumers fulfill their daily grocery needs. Duo Duo Maicai is a natural extension of our existing business and offers consumers a complementary experience to our main app, added Mr. David Liu, Vice President of Strategy. It is a long-term business that aligns well with our commitment to digitize Chinas agricultural value chain and to be Chinas leading agriculture platform. We are committed to continued investments into the agricultural supply chain and ecosystem.

Despite industry seasonality, we continued to deliver solid execution through the third quarter and generated positive cash flow from operations, added Mr. Tony Ma, Vice President of Finance. As a result, our trailing 12-month GMV grew 73% from a year ago, and our total revenues in the September quarter increased by 89% year-over-year.

ThirdQuarter2020Unaudited Financial Results

Total revenues were RMB14,209.8 million (US$2,092.9 million), an increase of 89% from RMB7,513.9 million in the same quarter of 2019. The increase was primarily due to an increase in revenues from online marketing services.

-- Revenues from online marketing services and others were RMB12,877.7 million (US$1,896.7 million), an increase of 92% from RMB6,711.4 million in the same quarter of 2019. The increase was primarily attributable to higher advertising demand from merchants on our platform given continued advancement in our brand and market position. -- Revenues from transaction services were RMB1,332.1 million (US$196.2 million), an increase of 66% from RMB802.5 million in the same quarter of 2019, primarily due to the increase in GMV.

Total costs of revenues were RMB3,260.2 million (US$480.2 million), an increase of 78% from RMB1,833.3 million in the same quarter of 2019. The increase was mainly due to higher payment processing fee, higher costs for cloud services, and other expenses directly attributable to online marketing services and other revenues.

Total operating expenses were RMB12,245.4 million (US$1,803.5 million), compared with RMB8,472.6 million in the same quarter of 2019.

-- Sales and marketing expenses were RMB10,071.9 million (US$1,483.4 million), an increase of 46% from RMB6,908.8 million in the same quarter of 2019, mainly due to an increase in advertising expenses and promotion and coupon expenses. -- General and administrative expenses were RMB368.6 million (US$54.3 million), a decrease of 16% from RMB436.6 million in the same quarter of 2019. Our G&A expenses in the third quarter of 2019 included certain expenses relating to our initiatives to alleviate rural poverty. We did not incur such expenses this quarter. -- Research and development expenses were RMB1,804.9 million (US$265.8 million), an increase of 60% from RMB1,127.2 million in the same quarter of 2019. The increase was primarily due to an increase in headcount and the recruitment of more experienced R&D personnel, and an increase in R&D-related cloud services expenses.

Operating loss was RMB1,295.7 million (US$190.8 million), compared with RMB2,792.0 million in the same quarter of 2019. Non-GAAP operating loss6was RMB339.8 million (US$50.0 million), compared with RMB2,123.5 million in the same quarter of 2019.

Net lossattributable to ordinary shareholders was RMB784.7 million (US$115.6 million), compared with RMB2,335.0 million in the same quarter of 2019. Non-GAAP net gain attributable to ordinary shareholders6 was RMB466.4 million (US$68.7 million), compared with non-GAAP net loss of RMB1,660.4 million in the same quarter of 2019.

Basic and diluted net lossper ADS were RMB0.66 (US$0.10), compared with RMB2.00 in the same quarter of 2019. Non-GAAP basic net gain per ADS were RMB0.39 (US$0.06), compared with RMB1.44 loss in the same quarter of 2019. Non-GAAP diluted net gain per ADS were RMB0.33 (US$0.05), compared with RMB1.44 loss in the same quarter of 2019.

Net cashprovided by operating activities was RMB8,321.8 million (US$1,225.7 million), compared with RMB2,618.2 million in the same quarter of 2019, primarily due to an increase in online marketing services revenues.

Cash, cash equivalents and short-term investments were RMB45.6 billion (US$6.7 billion) as of September 30, 2020, compared with RMB41.1 billion as of December 31, 2019.

Conference Call

The Company will host a conference call to discuss the earnings at 7:30 AM U.S. Eastern Time on Thursday, November 12, 2020 (8:30 PM Beijing/Hong Kong Time on Thursday, November 12, 2020).

Please pre-register to join this conference using the registration link below. Please dial in using the participant dial-in numbers, direct event passcode, PIN and unique registrant ID which would be provided to you upon registering.

Pre-register at: http://apac.directeventreg.com/registration/event/9476278

A telephone replay of the call will be available after the conclusion of the conference call until 7:59 AM Eastern Time on November 20, 2020.

Dial-in numbers for the replay are as follows:

International: +61-2-8199-0299U.S.: +1-646-254-3697Passcode: 9476278

A live and archived webcast of the conference call will be available at http://investor.pinduoduo.com/

_______________1 GMV refers to the total value of all orders for products and services placed on the Pinduoduomobile 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 Pinduoduos GMV of irregular transactions, the Company excludes from its calculation of GMV transactions in certain product categories over certain amounts and transactions by buyers in certain product categories over a certain amount 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 atRMB6.7896 to US$1.00, the noon buying rate in effect onSeptember 30, 2020as 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 thePinduoduomobile 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 thePinduoduomobile 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 The Companys non-GAAP financial measures exclude share-based compensation expenses, interest expenses related to the convertible bonds amortization to face value and fair value change of long-term investments. See Reconciliation of Non-GAAP Measures to The Most Directly Comparable GAAP Measures set forth at the end of this press release.

Use of Non-GAAP Financial Measures

In evaluating the business, the Company considers and uses non-GAAP measures, such as non-GAAP operating loss and non-GAAP net 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 Companys non-GAAP financial measures exclude share-based compensation expenses, interest expenses related to the convertible bonds amortization to face value and fair value change of long-term investments.

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, interest expenses related to the convertible bonds amortization to face value and fair value change of long-term investments, which are non-cash items. The Company also believes that the non-GAAP financial measures could provide further information about the Companys results of operations, and enhance the overall understanding of the Companys 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 Companys non-GAAP financial measures do not reflect all items of income and expenses that affect the Companys 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 Companys 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 Pinduoduos 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 Pinduoduos 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: Pinduoduos 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 Chinas e-commerce market; changes in its revenues and certain cost or expense items; the expected growth of Chinas e-commerce market; PRC governmental policies and regulations relating to Pinduoduos 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 Pinduoduos 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.

Pinduoduois an innovative and fast growing technology platform that provides buyers with value-for-money merchandise and fun and interactive shopping experiences. ThePinduoduo mobile platform offers a comprehensive selection of attractively priced merchandise, featuring a dynamic social shopping experience that leverages social networks effectively.

For more information, please visit http://investor.pinduoduo.com/. We also share Pinduoduo news and thought pieces on industry trends at our content hub at https://stories.pinduoduo-global.com/ which may be of interest to investors.

For investor and media inquiries, please contact:

Pinduoduo Inc.investor@pinduoduo.cominternationalmedia@pinduoduo.com

PINDUODUO INC.CONDENSED CONSOLIDATED BALANCE SHEETS(Amounts in thousands of Renminbi (?RMB?) and U.S. dollars (?US$?)) As of December September 30, 2020 31, 2019 RMB RMB US$ (Unaudited) ASSETS Current assets Cash and cash equivalents 5,768,186 5,715,676 841,828 Restricted cash 27,577,671 38,813,084 5,716,549 Receivables from online payment 1,050,974 531,009 78,209 platformsShort-term investments 35,288,827 39,859,089 5,870,609 Amounts due from related parties 2,365,528 3,449,126 508,001 Prepayments and other current 950,277 1,802,585 265,492 assetsTotal current assets 73,001,463 90,170,569 13,280,688 Non-current assets Property, equipment and software, 41,273 46,509 6,850 netIntangible asset 1,994,292 1,486,959 219,005 Right-of-use assets 517,188 534,076 78,661 Other non-current assets 503,120 7,172,813 1,056,441 Total non-current assets 3,055,873 9,240,357 1,360,957 Total assets 76,057,336 99,410,926 14,641,645

PINDUODUO INC.CONDENSED CONSOLIDATED BALANCE SHEETS(Amounts in thousands of Renminbi (?RMB?) and U.S. dollars (?US$?))

As of December September 30, 2020 31, 2019 RMB RMB US$ (Unaudited) LIABILITIES AND SHAREHOLDERS? EQUITY LIABILITIES Current liabilities Amounts due to related parties 1,502,892 3,298,767 485,856 Customer advances and deferred 605,970 1,042,093 153,484 revenuesPayable to merchants 29,926,488 40,299,835 5,935,524 Accrued expenses and other 4,877,062 6,904,953 1,016,988 liabilitiesMerchant deposits 7,840,912 10,574,559 1,557,464 Short-term borrowings 898,748 2,773,023 408,422 Lease liabilities 115,734 182,318 26,853 Total current liabilities 45,767,806 65,075,548 9,584,591 Non-current liabilities Convertible bonds 5,206,682 5,504,873 810,780 Lease liabilities 428,593 390,803 57,559 Other non-current liabilities 7,389 36,040 5,308 Total non-current liabilities 5,642,664 5,931,716 873,647 Total liabilities 51,410,470 71,007,264 10,458,238 SHAREHOLDERS? EQUITY Ordinary shares 148 153 23 Additional paid-in capital 41,493,949 51,969,053 7,654,214 Accumulated other comprehensive 1,448,230 533,303 78,547 incomeAccumulated deficits (18,295,461 ) (24,098,847 ) (3,549,377 )Total shareholders? equity 24,646,866 28,403,662 4,183,407 Total liabilities and 76,057,336 99,410,926 14,641,645 shareholders? equity



PINDUODUO INC.CONDENSED CONSOLIDATED STATEMENTS OF LOSS(Amounts in thousands of RMB and US$) For the three months ended September 30, For the nine months ended September 30, 2019 2020 2019 2020 RMB RMB US$ RMB RMB US$ (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues 7,513,948 14,209,782 2,092,875 19,349,160 32,944,156 4,852,150 Costs of (1,833,318 ) (3,260,155 ) (480,169 ) (4,301,341 ) (7,752,517 ) (1,141,823 )revenuesGross profit 5,680,630 10,949,627 1,612,706 15,047,819 25,191,639 3,710,327 Sales andmarketing (6,908,755 ) (10,071,868 ) (1,483,426 ) (17,901,713 ) (26,482,073 ) (3,900,388 )expensesGeneral andadministrative (436,610 ) (368,611 ) (54,291 ) (951,030 ) (1,101,727 ) (162,267 )expensesResearch anddevelopment (1,127,238 ) (1,804,886 ) (265,831 ) (2,597,983 ) (4,940,392 ) (727,641 )expensesTotaloperating (8,472,603 ) (12,245,365 ) (1,803,548 ) (21,450,726 ) (32,524,192 ) (4,790,296 )expenses Operating loss (2,791,973 ) (1,295,738 ) (190,842 ) (6,402,907 ) (7,332,553 ) (1,079,969 ) Interest andinvestment 414,615 485,413 71,494 1,069,285 1,783,971 262,751 income, netInterest (6,150 ) (165,638 ) (24,396 ) (6,150 ) (479,190 ) (70,577 )expensesForeign 33,542 97,861 14,413 76,416 76,191 11,222 exchange gainOther income, 23,176 57,936 8,533 55,608 112,553 16,577 net Loss beforeincome tax andshare of (2,326,790 ) (820,166 ) (120,798 ) (5,207,748 ) (5,839,028 ) (859,996 )results ofequityinvesteesShare ofresults of (8,218 ) 35,458 5,222 (8,218 ) 35,642 5,249 equityinvesteesIncome tax - - - - - - expensesNet loss (2,335,008 ) (784,708 ) (115,576 ) (5,215,966 ) (5,803,386 ) (854,747 )

PINDUODUO INC.CONDENSED CONSOLIDATED STATEMENTS OF LOSS(Amounts in thousands of RMB and US$, except for per share data) For the three months ended September 30, For the nine months ended September 30, 2019 2020 2019 2020 RMB RMB US$ RMB RMB US$ (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net loss (2,335,008 ) (784,708 ) (115,576 ) (5,215,966 ) (5,803,386 ) (854,747 )Net lossattributable (2,335,008 ) (784,708 ) (115,576 ) (5,215,966 ) (5,803,386 ) (854,747 )to ordinaryshareholders

Loss per ordinaryshare:-Basic (0.50 ) (0.16 ) (0.02 ) (1.13 ) (1.22 ) (0.18 )-Diluted (0.50 ) (0.16 ) (0.02 ) (1.13 ) (1.22 ) (0.18 ) Loss per ADS(4 ordinaryshares equals 1 ADS):-Basic (2.00 ) (0.66 ) (0.10 ) (4.52 ) (4.90 ) (0.72 )-Diluted (2.00 ) (0.66 ) (0.10 ) (4.52 ) (4.90 ) (0.72 ) Weightedaveragenumber of outstanding ordinaryshares (inthousands):-Basic 4,649,429 4,786,276 4,786,276 4,619,623 4,739,382 4,739,382 -Diluted 4,649,429 4,786,276 4,786,276 4,619,623 4,739,382 4,739,382

PINDUODUO INC.NOTES TO FINANCIAL INFORMATION(Amounts in thousands of RMB and US$) For the three months ended September 30, For the nine months ended September 30, 2019 2020 2019 2020 RMB RMB US$ RMB RMB US$ (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)Revenues Onlinemarketing 6,711,455 12,877,658 1,896,674 17,126,942 29,424,626 4,333,779 servicesand othersTransaction 802,493 1,332,124 196,201 2,222,218 3,519,530 518,371 servicesTotal 7,513,948 14,209,782 2,092,875 19,349,160 32,944,156 4,852,150 Revenues



PINDUODUO INC.NOTES TO FINANCIAL INFORMATION(Amounts in thousands of RMB and US$) For the three months ended September 30, For the nine months ended September 30, 2019 2020 2019 2020 RMB RMB US$ RMB RMB US$ (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)Share-basedcompensation costs includedin:Costs of 8,567 4,424 652 16,579 22,368 3,294 revenuesSales andmarketing 219,008 335,331 49,389 623,508 816,672 120,283 expensesGeneral andadministrative 206,066 236,011 34,761 562,118 714,515 105,237 expensesResearch anddevelopment 234,786 380,163 55,991 556,829 1,126,258 165,880 expensesTotal 668,427 955,929 140,793 1,759,034 2,679,813 394,694

PINDUODUO INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in thousands of RMB and US$) For the three months ended September 30, For the nine months ended September 30, 2019 2020 2019 2020 RMB RMB US$ RMB RMB US$ (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)Net cashprovided by 2,618,232 8,321,792 1,225,667 5,222,963 13,250,058 1,951,521 operatingactivitiesNet cashused in (16,175,856 ) (455,054 ) (67,022 ) (16,857,806 ) (11,735,064 ) (1,728,387 )investingactivitiesNet cashprovided by 6,967,004 - - 14,960,832 9,624,213 1,417,493 financingactivitiesEffect ofexchangeratechanges oncash, cash 292,531 (15,868 ) (2,337 ) 500,402 43,696 6,436 equivalentsandrestrictedcash (Decrease)/increase incash, cashequivalents (6,298,089 ) 7,850,870 1,156,308 3,826,391 11,182,903 1,647,063 andrestrictedcashCash, cashequivalentsandrestricted 40,664,166 36,677,890 5,402,069 30,539,686 33,345,857 4,911,314 cash atbeginningof periodCash, cashequivalentsand 34,366,077 44,528,760 6,558,377 34,366,077 44,528,760 6,558,377 restrictedcash at endof period

PINDUODUO INC.RECONCILIATION OF NON-GAAP MEASURES TO THE MOST DIRECTLY COMPARABLE GAAPMEASURES(Amounts in thousands of RMB and US$, except for per share data) For the three months ended September 30, For the nine months ended September 30, 2019 2020 2019 2020 RMB RMB US$ RMB RMB US$ (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)Operating loss (2,791,973 ) (1,295,738 ) (190,842 ) (6,402,907 ) (7,332,553 ) (1,079,969 )Add: Share-based 668,427 955,929 140,793 1,759,034 2,679,813 394,694 compensationNon-GAAP (2,123,546 ) (339,809 ) (50,049 ) (4,643,873 ) (4,652,740 ) (685,275 )operating loss Net lossattributable to (2,335,008 ) (784,708 ) (115,575 ) (5,215,966 ) (5,803,386 ) (854,747 )ordinaryshareholdersAdd: Share-based 668,427 955,929 140,793 1,759,034 2,679,813 394,694 compensationAdd: Interestexpense relatedto convertible 6,150 147,081 21,663 6,150 433,838 63,897 bonds?amortization toface valueAdd/Less: Loss/(gain) from fairvalue change of - 148,093 21,812 - (90,755 ) (13,367 )long-terminvestmentsNon-GAAP net(loss)/gainattributable to (1,660,431 ) 466,395 68,693 (3,450,782 ) (2,780,490 ) (409,523 )ordinaryshareholders Weighted-averagenumber ofoutstanding 4,649,429 4,786,276 4,786,276 4,619,623 4,739,382 4,739,382 ordinary shares- basic (inthousands)Weighted-averagenumber ofoutstanding 4,649,429 5,576,093 5,576,093 4,619,623 4,739,382 4,739,382 ordinary shares- diluted (inthousands) Basic loss per (0.50 ) (0.16 ) (0.02 ) (1.13 ) (1.22 ) (0.18 )ordinary shareAdd: Non-GAAPadjustments to 0.14 0.26 0.03 0.38 0.63 0.09 (loss)/gain perordinary shareNon-GAAP basic(loss)/gain per (0.36 ) 0.10 0.01 (0.75 ) (0.59 ) (0.09 )ordinary shareNon-GAAP basic(loss)/gain per (1.44 ) 0.39 0.06 (3.00 ) (2.35 ) (0.35 )ADS Diluted loss per (0.50 ) (0.16 ) (0.02 ) (1.13 ) (1.22 ) (0.18 )ordinary shareAdd: Non-GAAPadjustments to 0.14 0.24 0.03 0.38 0.63 0.09 (loss)/gain perordinary shareNon-GAAP diluted(loss)/gain per (0.36 ) 0.08 0.01 (0.75 ) (0.59 ) (0.09 )ordinary shareNon-GAAP diluted(loss)/gain per (1.44 ) 0.33 0.05 (3.00 ) (2.35 ) (0.35 )ADS