PDD's second-quarter revenue was 97.06 billion yuan, an 86% year-on-year increase, with net profit up 144% | Financial Report Insights

Pinduoduo's second-quarter commission income increased by 2.3 times year-on-year, driving revenue to grow by 86% year-on-year, approaching the one trillion mark, with net profit increasing by 1.4 times year-on-year.

Pinduoduo stated that due to the increasing competition in the e-commerce industry, the company will sacrifice some profit in exchange for long-term healthy growth. In the coming year, the company will waive 10 billion yuan in fees for high-quality merchants.

On August 26, Pinduoduo released its second-quarter financial report for 2024 ending on June 30.

1) Key Financial Data:

Revenue: The company's second-quarter revenue was 97.06 billion yuan (approximately 11.34 billion U.S. dollars), an 86% year-on-year increase, with the market expecting 99.99 billion yuan; the quarter-on-quarter growth rate slowed to 11.8%.

Profit: Operating profit was 32.56 billion yuan, a 156% year-on-year increase;

Net profit attributable to ordinary shareholders was 32.01 billion yuan (approximately 4.4 billion U.S. dollars), a 144% year-on-year increase;

Adjusted earnings per ADS were 23.24 yuan, higher than the market estimate of 20.52 yuan.

Cash Flow: The net cash generated from operating activities for the quarter was 43.79 billion yuan, an 87.2% increase from the same period in 2023.

2) Key Business Performance:

Advertising: Online marketing services and other revenue in the second quarter were 49.12 billion yuan, a 29% year-on-year increase, with the market expecting a 33.1% increase;

Commission: Transaction service revenue was 47.9 billion yuan, a 234% year-on-year increase, with the market expecting 248.6%.

3) Performance Outlook:

In the coming year, 10 billion yuan in transaction fees will be waived, with increased investment in agriculture and high-quality development.

Pinduoduo stated that future profits will gradually decline, which is a necessary cost for long-term health.

After the financial report was released, Pinduoduo's U.S. stock plunged by over 12% in pre-market trading.

Liu Jun, CFO of Pinduoduo Holdings, said, "In the previous quarter, our revenue growth rate slowed quarter-on-quarter. Looking ahead, due to intensified competition and external challenges, revenue growth will inevitably face pressure." " As we continue to invest heavily, profitability may also be affected."

Commission income increased by 2.3 times year-on-year, Pinduoduo: Plans to waive 10 billion yuan in fees, prepared to sacrifice profit

Pinduoduo's revenue nearly doubled, mainly driven by the high growth of commissions.

In the second quarter, Pinduoduo's online marketing services and other revenue (mainly advertising revenue) were 49.12 billion yuan (approximately 6.8 billion U.S. dollars), a 29% increase from the same period in 2023;Trading services continued to show strong growth in the first quarter, with second-quarter revenue reaching RMB 47.944 billion (approximately USD 6.6 billion), a 234% increase from the same period in 2023, although the year-on-year growth rate slowed down to 327% from the first quarter, it remains robust.

Chen Lei, Chairman and Co-CEO of Pinduoduo Group, stated that the overall scale of the platform has reached a considerable level, and building a complete ecosystem is not an overnight task. The management team has reached a consensus to be prepared to sacrifice short-term profits for long-term investment.

Chen Lei also mentioned that competition in the e-commerce industry has intensified this year. The platform will invest billions of resources to support new high-quality merchants, and will waive RMB 10 billion in transaction fees for high-quality merchants in the next year, continuously improve the quality and efficiency of the supply chain, enhance ecosystem governance, to cope with the increasingly fierce industry competition.

It is reported that Pinduoduo has introduced resource position technology service fees and refundable rights for promotion software service fees to merchants, providing a package of support policies to help merchants improve quality and efficiency.

In the second quarter, Pinduoduo's R&D investment reached RMB 2.9 billion, a 6% year-on-year increase, mainly due to a new round of investment in operations and research and development.

Zhao Jiazhen, Director and Co-CEO of Pinduoduo, introduced that in order to further strengthen the governance of the merchant ecosystem, the platform has optimized the process of merchant entry and product listing, actively inspected products that have been listed through technological means, combined with the rules team for detailed review, cracked down on illegal cheating merchants, and created a better operating environment for high-quality merchants