GlobeNewswire Inc | Aug 21, 2020 06:00AM EDT

August 21, 2020

SHANGHAI, China, Aug. 21, 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 second quarter ended June 30, 2020.

Second Quarter 2020 Highlights

-- GMV1in the twelve-month period ended June 30, 2020 was RMB1,268.7 billion (US$2179.6 billion), an increase of 79% from RMB709.1 billion in the twelve-month period ended June 30, 2019. -- Total revenues in the quarter were RMB12,193.3 million (US$1,725.9 million), an increase of 67% from RMB7,290.0 million in the same quarter of 2019. -- Average monthly active users3 in the quarter were 568.8 million, an increase of 55% from 366.0 million in the same quarter of 2019. -- Active buyers4 in the twelve-month period ended June 30, 2020 were 683.2 million, an increase of 41% from 483.2 million in the twelve-month period ended June 30, 2019. -- Annual spending per active buyer5 in the twelve-month period ended June 30, 2020 was RMB1,857.0 (US$262.8), an increase of 27% from RMB1,467.5 in the twelve-month period ended June 30, 2019.

In the second quarter of 2020 we continued to devote resources to support economic recovery across China, and we witnessed great resilience amongst our merchant community, said Mr. Lei Chen, Chief Executive Officer of Pinduoduo. We also continued our investments in user engagement and expanded our promotional offerings to cover more household necessities and agriculture products based on user demand. Our users increasing recognition of Pinduoduos value proposition contributed to the user base growth and user activities on our platform.

For the quarter ended June 30, 2020, our total revenues increased by 67% year-over-year to RMB12,193.3 million, driven primarily by growth in our online marketing services revenues. We observed healthy recovery in advertising demand from our merchants during the quarter, commented Mr. Tony Ma, Vice President of Finance. In addition to merchants deferring their marketing spend to the June quarter, we would attribute such increase to better returns as a result of higher user engagement on our platform and more compelling advertising product offerings.

Second Quarter 2020 Unaudited Financial Results

Total revenues were RMB12,193.3 million (US$1,725.9 million), an increase of 67% from RMB7,290.0 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 were RMB11,054.7 million (US$1,564.7 million), an increase of 71% from RMB6,467.1 million in the same quarter of 2019. -- Revenues from transaction services were RMB1,138.6 million (US$161.2 million), an increase of 38% from RMB822.9 million in the same quarter of 2019.

Total costs of revenues were RMB2,662.1 million (US$376.8 million), an increase of 67% from RMB1,594.7 million in the same quarter of 2019. The increase was mainly due to higher costs for cloud services, call center and merchant support services.

Total operating expenses were RMB11,170.8 million (US$1,581.1 million), compared with RMB7,185.7 million in the same quarter of 2019.

-- Sales and marketing expenses were RMB9,113.6 million (US$1,289.9 million), an increase of 49% from RMB6,103.7 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 RMB394.8 million (US$55.9 million), an increase of 42% from RMB278.3 million in the same quarter of 2019, primarily due to an increase in headcount. -- Research and development expenses were RMB1,662.4 million (US$235.3 million), an increase of 107% from RMB803.7 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 RMB1,639.6 million (US$232.1 million), compared with RMB1,490.4 million in the same quarter of 2019. Non-GAAP operating loss6 was RMB725.1 million (US$102.6 million), compared with RMB898.4 million in the same quarter of 2019.

Net loss attributable to ordinary shareholders was RMB899.3 million (US$127.3 million), compared with RMB1,003.3 million in the same quarter of 2019. Non-GAAP net loss attributable to ordinary shareholders6 was RMB77.2 million (US$10.9 million), compared with RMB411.3 million in the same quarter of 2019.

Basic and diluted net loss per ADS were RMB0.75 (US$0.11), compared with RMB0.88 in the same quarter of 2019. Non-GAAP basic and diluted net loss per ADS were RMB0.06 (US$0.01), compared with RMB0.36 in the same quarter of 2019.

Net cash provided by operating activities was RMB5,495.3 million (US$777.8 million), compared with RMB4,148.0 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 RMB49.0 billion (US$6.9 billion) as of June 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 Friday, August 21, 2020 (7:30 PM Beijing/Hong Kong Time on Friday, August 21, 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/6066567

A telephone replay of the call will be available after the conclusion of the conference call until 9:59 AM Eastern Time on August 29, 2020.

Dial-in numbers for the replay are as follows:

International: +61-2-8199-0299U.S.: +1-646-254-3697Passcode: 6066567

A live and archived webcast of the conference call will be available on the Investor Relations section of Pinduoduos website at http://investor.pinduoduo.com/

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 gain from 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 gain from 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/

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 June 30, 2020 31, 2019 RMB RMB US$ (Unaudited) ASSETS Current assets Cash and cash equivalents 5,768,186 4,209,623 595,833 Restricted cash 27,577,671 32,468,267 4,595,585 Receivables from online payment 1,050,974 429,375 60,774 platformsShort-term investments 35,288,827 44,801,078 6,341,181 Amounts due from related parties 2,365,528 2,428,172 343,685 Prepayments and other current 950,277 1,245,451 176,282 assetsTotal current assets 73,001,463 85,581,966 12,113,340 Non-current assets Property, equipment and software, 41,273 47,525 6,727 netIntangible asset 1,994,292 1,706,291 241,510 Right-of-use assets 517,188 514,926 72,883 Other non-current assets 503,120 3,049,958 431,694 Total non-current assets 3,055,873 5,318,700 752,814 Total assets 76,057,336 90,900,666 12,866,154



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

As of December June 30, 2020 31, 2019 RMB RMB US$ (Unaudited) LIABILITIES AND SHAREHOLDERS? EQUITY LIABILITIES Current liabilities Amounts due to related parties 1,502,892 1,928,353 272,941 Customer advances and deferred 605,970 750,548 106,233 revenuesPayable to merchants 29,926,488 33,978,503 4,809,345 Accrued expenses and other 4,877,062 5,906,412 835,998 liabilitiesMerchant deposits 7,840,912 9,923,180 1,404,535 Short-term borrowings 898,748 2,754,466 389,869 Lease liabilities 115,734 144,293 20,423 Total current liabilities 45,767,806 55,385,755 7,839,344 Non-current liabilities Convertible bonds 5,206,682 5,572,449 788,729 Lease liabilities 428,593 410,531 58,107 Other non-current liabilities 7,389 38,071 5,389 Total non-current liabilities 5,642,664 6,021,051 852,225 Total liabilities 51,410,470 61,406,806 8,691,569 SHAREHOLDERS? EQUITY Ordinary shares 148 153 22 Additional paid-in capital 41,493,949 51,013,118 7,220,438 Accumulated other comprehensive 1,448,230 1,794,728 254,027 incomeAccumulated deficits (18,295,461 ) (23,314,139 ) (3,299,902 )Total shareholders? equity 24,646,866 29,493,860 4,174,585 Total liabilities and 76,057,336 90,900,666 12,866,154 shareholders? equity

PINDUODUO INC.CONDENSED CONSOLIDATED STATEMENTS OF LOSS (Amounts in thousands of RMB and US$)

For the three months ended June 30, For the six months ended June 30, 2019 2020 2019 2020 RMB RMB US$ RMB RMB US$ (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)Revenues Onlinemarketing 6,467,073 11,054,698 1,564,691 10,415,487 16,546,968 2,342,072 servicesTransaction 822,935 1,138,617 161,161 1,419,725 2,187,406 309,607 servicesTotal Revenues 7,290,008 12,193,315 1,725,852 11,835,212 18,734,374 2,651,679 Costs of revenuesCosts ofonline (1,594,709 ) (2,662,115 ) (376,798 ) (2,468,023 ) (4,492,362 ) (635,853 )marketplaceservicesTotal costs of (1,594,709 ) (2,662,115 ) (376,798 ) (2,468,023 ) (4,492,362 ) (635,853 )revenues Gross profit 5,695,299 9,531,200 1,349,054 9,367,189 14,242,012 2,015,826 Sales andmarketing (6,103,703 ) (9,113,584 ) (1,289,944 ) (10,992,958 ) (16,410,205 ) (2,322,714 )expensesGeneral andadministrative (278,345 ) (394,842 ) (55,886 ) (514,420 ) (733,116 ) (103,766 )expensesResearch anddevelopment (803,664 ) (1,662,356 ) (235,291 ) (1,470,745 ) (3,135,506 ) (443,802 )expensesTotaloperating (7,185,712 ) (11,170,782 ) (1,581,121 ) (12,978,123 ) (20,278,827 ) (2,870,282 )expenses Operating loss (1,490,413 ) (1,639,582 ) (232,067 ) (3,610,934 ) (6,036,815 ) (854,456 ) Interest andinvestment 402,568 838,276 118,650 654,670 1,298,558 183,799 income, netInterest - (162,918 ) (23,060 ) - (313,552 ) (44,380 )expensesForeignexchange gain/ 44,760 (2,397 ) (339 ) 42,874 (21,670 ) (3,067 )(loss)Other income, 39,835 67,008 9,484 32,432 54,617 7,731 net Loss beforeincome tax and share of (1,003,250 ) (2,880,958 ) results of (899,613 ) (127,332 ) (5,018,862 ) (710,373 )equityinvestees Share ofresults of - 264 37 - 184 26 equityinvesteesIncome tax - - - - - - expensesNet loss (1,003,250 ) (899,349 ) (127,295 ) (2,880,958 ) (5,018,678 ) (710,347 )



PINDUODUO INC.CONDENSED CONSOLIDATED STATEMENTS OF LOSS (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, 2019 2020 2019 2020 RMB RMB US$ RMB RMB US$ (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net loss (1,003,250 ) (899,349 ) (127,295 ) (2,880,958 ) (5,018,678 ) (710,347 )Net lossattributable (1,003,250 ) (899,349 ) (127,295 ) (2,880,958 ) (5,018,678 ) (710,347 )to ordinaryshareholders Loss perordinary share: -Basic (0.22 ) (0.19 ) (0.03 ) (0.63 ) (1.06 ) (0.15 ) -Diluted (0.22 ) (0.19 ) (0.03 ) (0.63 ) (1.06 ) (0.15 ) Loss per ADS(4 ordinaryshares equals 1ADS): -Basic (0.88 ) (0.75 ) (0.11 ) (2.52 ) (4.26 ) (0.60 ) -Diluted (0.88 ) (0.75 ) (0.11 ) (2.52 ) (4.26 ) (0.60 ) Weightedaveragenumber ofoutstanding ordinaryshares (inthousands): -Basic 4,649,429 4,781,243 4,781,243 4,604,472 4,715,677 4,715,677 -Diluted 4,649,429 4,781,243 4,781,243 4,604,472 4,715,677 4,715,677



PINDUODUO 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, 2019 2020 2019 2020 RMB RMB US$ RMB RMB US$ (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)Share-basedcompensation costs includedin:Costs of 3,731 9,497 1,344 8,012 17,944 2,540revenuesSales andmarketing 208,379 249,542 35,320 404,500 481,341 68,129expensesGeneral andadministrative 187,049 258,316 36,562 356,052 478,504 67,728expensesResearch anddevelopment 192,816 397,156 56,214 322,043 746,095 105,603expensesTotal 591,975 914,511 129,440 1,090,607 1,723,884 244,000

PINDUODUO 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, 2019 2020 2019 2020 RMB RMB US$ RMB RMB US$ (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)Net cashprovided by 4,147,982 5,495,336 777,814 2,604,731 4,928,266 697,549 operatingactivitiesNet cashused in (1,139,423 ) (9,695,818 ) (1,372,354 ) (681,950 ) (11,280,010 ) (1,596,581 )investingactivitiesNet cashprovided by - 8,418,741 1,191,596 7,993,828 9,624,213 1,362,219 financingactivitiesEffect ofexchangeratechanges oncash, cash 436,368 (39,494 ) (5,591 ) 207,871 59,564 8,431 equivalentsandrestrictedcash Increase incash, cashequivalents 3,444,927 4,178,765 591,465 10,124,480 3,332,033 471,618 andrestrictedcashCash, cashequivalentsandrestricted 37,219,239 32,499,125 4,599,953 30,539,686 33,345,857 4,719,800 cash atbeginningof periodCash, cashequivalentsand 40,664,166 36,677,890 5,191,418 40,664,166 36,677,890 5,191,418 restrictedcash at endof period



PINDUODUO 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, 2019 2020 2019 2020 RMB RMB US$ RMB RMB US$ (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)Operating loss (1,490,413 ) (1,639,582 ) (232,067 ) (3,610,934 ) (6,036,815 ) (854,456 )Add: Share-based 591,975 914,511 129,440 1,090,607 1,723,884 244,000 compensationNon-GAAP (898,438 ) (725,071 ) (102,627 ) (2,520,327 ) (4,312,931 ) (610,456 )operating loss Net lossattributable to (1,003,250 ) (899,349 ) (127,295 ) (2,880,958 ) (5,018,678 ) (710,347 )ordinaryshareholdersAdd: Share-based 591,975 914,511 129,440 1,090,607 1,723,884 244,000 compensationAdd: Interestexpense relatedto convertible - 146,445 20,728 - 286,757 40,588 bonds?amortization toface valueLess: Gain fromfair valuechange of - (238,848 ) (33,807 ) - (238,848 ) (33,807 )long-terminvestmentsNon-GAAP netlossattributable to (411,275 ) (77,241 ) (10,934 ) (1,790,351 ) (3,246,885 ) (459,566 )ordinaryshareholders Weighted-averagenumber ofordinary sharesoutstanding - 4,649,429 4,781,243 4,781,243 4,604,472 4,715,677 4,715,677 basic anddiluted (inthousands) Basic anddiluted loss per (0.22 ) (0.19 ) (0.03 ) (0.63 ) (1.06 ) (0.15 )ordinary shareAdd: Non-GAAPadjustments to 0.13 0.17 0.03 0.24 0.37 0.05 loss perordinary shareNon-GAAP basicand diluted loss (0.09 ) (0.02 ) (0.00 ) (0.39 ) (0.69 ) (0.10 )per ordinaryshareNon-GAAP basicand diluted loss (0.36 ) (0.06 ) (0.01 ) (1.56 ) (2.75 ) (0.39 )per ADS

_________________________________

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 atRMB7.0651 to US$1.00, the noon buying rate in effect onJune 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 gain from 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.