Pinduoduo Announces Second Quarter 2018 Unaudited Financial Results
SHANGHAI, CHINA – August 30, 2018 – Pinduoduo Inc. ("Pinduoduo" or the "Company")(NASDAQ:PDD), an innovative and fast growing “new e-commerce” platform and one of theleading Chinese e-commerce players, today announced its unaudited financial results for thesecond quarter ended June 30, 2018.
Second Quarter 2018 Highlights


GMV1 in the twelve-month period ended June 30, 2018 was RMB262.1 billion (US$ 2
39.6 billion), an increase of 583% from RMB38.4 billion in the twelve-month period ended
June 30, 2017.



Total revenues were RMB2,709.0 million (US$409.4 million), an increase of 2,489% yearover-year.

Average monthly active users3 in the quarter were 195.0 million, an increase of 495%
from 32.8 million in the same quarter of 2017.



Active buyers4 in the twelve-month period ended June 30, 2018 were 343.6 million, an
increase of 245% from 99.7 million in the twelve-month period ended June 30, 2017.

Annual spending per active buyer5 in the twelve-month period ended June 30, 2018 was
RMB762.8 (US$115.3), an increase of 98% from RMB385.0 in the twelve-month period
ended June 30, 2017.

“I am pleased to report strong operational and financial results this quarter,” commented Mr.
Zheng Huang, Chairman and Chief Executive Officer of Pinduoduo. “GMV in the last twelve
months increased 583% year-over-year to RMB262.1 billion while active buyers jumped 245%
year-over-year to 343.6 million, which I believe demonstrates the value of our differentiated‘new e-commerce’ business model and our ability to serve China’s strong domestic“GMV” refers to the total value of all orders for products and services placed on the Pinduoduo mobile 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 Pinduoduo’s GMV of irregular transactions, the Company excludes fromits calculation of GMV transactions over certain amounts (RMB100,000) and transactions by buyers over a certain amount (RMB1,000,000)
per day.
2This announcement contains translations of certain Renminbi (RMB) amounts into U.S. dollars (US$) at a specified rate solely for theconvenience of the reader. Unless otherwise noted, the translation of RMB into US$ has been made at RMB6.6171 to US$1.00, the noonbuying rate in effect on June 29, 2018 as 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 the Pinduoduo mobile app during a given month, which does notinclude 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 the Pinduoduo mobile 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.
1

1

consumption demand. We continue to allocate resources towards enhancing user engagement
and strengthening our brand recognition, and we remain committed to investing in technology,
with a focus on the long-term growth of our platform. I am confident in our conviction andability to capture the enormous and growing opportunities in China.”
Mr. Tian Xu, Vice President of Finance of Pinduoduo, added, “Revenues increased 2,489% yearover-year and 96% sequentially during the quarter which I believe is a testament to our ability
to monetize while driving GMV growth. Net loss was in line with our expectations as we
continue to generate strong positive cash flow. We launched a number of marketing campaigns
to strengthen our brand and facilitate greater user engagement, and we will continue to invest in
developing new and innovative technologies and in hiring the best talent for our long-termsustainable growth.”
Second Quarter 2018 Financial Results
Total revenues were RMB2,709.0 million (US$409.4 million), an increase of 2,489% fromRMB104.6 million in the same quarter of 2017 and an increase of 96% sequentially from
RMB1,384.6 million in the previous quarter. The increases were primarily due to an increase inrevenues from online marketing services.


Revenues from online marketing services were RMB2,371.0 million (US$358.3 million),a significant increase from RMB32.1 million in the same quarter of 2017, and an increaseof 114% sequentially from RMB1,108.1 million in the previous quarter.



Revenues from Commission fees were RMB338.1 million (US$51.1 million), an increaseof 366% from RMB72.5 million in the same quarter of 2017, and an increase of 22%
sequentially from RMB276.5 million in the previous quarter.

Total costs of revenues were RMB387.8 million (US$58.6 million), an increase of 260% fromRMB107.6 million in the same quarter of 2017.
Total operating expenses were RMB8,957.4 million (US$1,353.7 million), compared with
RMB119.8 million in the same quarter of 2017.
Sales and marketing expenses were RMB2,970.7 million (US$448.9 million), a
significant increase from RMB88.9 million in the same quarter of 2017, mainly due to anincrease in branding campaigns and online and offline advertisement and promotions.



General and administrative expenses were RMB5,800.7 million (US$876.6 million), a
significant increase from RMB6.0 million in the same quarter of 2017, primarily due to anincrease in headcount and share-based compensation expenses.



Research and development expenses were RMB186.0 million (US$28.1 million), an
increase of 648% from RMB24.9 million in the same quarter of 2017. The increase wasprimarily due to an increase in headcount and the recruitment of more experienced R&D
personnel, as well as an increase in the R&D related cloud services expenses.
2

Operating loss was RMB6,636.2 million (US$1,002.9 million), compared with operating lossof RMB122.7 million in the same quarter of 2017. Non-GAAP operating loss6 was RMB815.7
million (US$123.3 million), compared with RMB119.9 million in the same quarter of 2017.
Net loss attributable to ordinary shareholders was RMB6,493.9 million (US$981.4 million),compared with RMB109.5 million in the same quarter of 2017. Non-GAAP net loss
attributable to ordinary shareholders 7 was RMB673.4 million (US$101.8 million),compared with RMB106.7 million in the same quarter of 2017.
Basic and diluted net loss per ADS were RMB13.40 (US$2.04), compared with RMB0.24 in
the same quarter of 2017. Non-GAAP basic and diluted net loss per ADS were RMB1.40(US$0.20), compared with RMB0.24 in the same quarter of 2017.
Net cash provided by operating activities was RMB360.9 million (US$54.5 million),compared with RMB1,283.6 million in the same quarter of 2017, primarily due to an increase inoutbound cashflow associated with sales and marketing spending.
Cash and cash equivalents were RMB9.0 billion (US$1.4 billion) as of June 30, 2018,
compared with RMB3.1 billion as of December 31, 2017.

6

Non-GAAP operating income/(loss) is defined as operating income/(loss) excluding share-based compensation expenses. See“Reconciliation of Non-GAAP Measures to The Most Directly Comparable GAAP Measures” set forth at the end of this press release.
7
Non-GAAP net income/(loss) attributable to ordinary shareholders is defined as net income/(loss) attributable to ordinary shareholders
excluding share-based compensation expenses. See “Reconciliation of Non-GAAP Measures to The Most Directly Comparable GAAP
Measures” set forth at the end of this press release.

3Conference Call
The Company will host a conference call to discuss the earnings at 9:00 PM U.S. Eastern Timeon Thursday, August 30, 2018 (9:00 AM Beijing/Hong Kong Time on Friday, August 31, 2018).
Dial-in numbers for the live conference call are as follows:
International
Mainland China
U.S.
U.K.
Hong Kong
Passcode:+65-6713-5090
4006-208-038+1-845-675-0437+44-203-621-4779+852-3018-6771
Pinduoduo

A telephone replay of the call will be available after the conclusion of the conference call for
one week.
Dial-in numbers for the replay are as follows:
International
U.S.
Passcode:+61-2-8199-0299+1-646-254-3697
4371648

A live and archived webcast of the conference call will be available on the Investor Relations
section of Pinduoduo’s 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 nonGAAP operating income/(loss) and non-GAAP net income/(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 withaccounting principles generally accepted in the United States of America (“U.S. GAAP”). The
Company defines non-GAAP operating income/(loss) as operating income/(loss) excluding
share-based compensation expenses. The Company defines non-GAAP net income/(loss)
attributable to ordinary shareholders as net income/(loss) attributable to ordinary shareholders
excluding share-based compensation expenses.
The Company presents these non-GAAP financial measures because they are used bymanagement to evaluate operating performance and formulate business plans. The Company
believes that the non-GAAP financial measures help identify underlying trends in its businessby excluding the impact of share-based compensation expenses, which is a non-cash charge. The
Company also believes that the non-GAAP financial measures could provide further information
about the Company’s results of operations, enhance the overall understanding of the Company’s
past performance and future prospects.
4

The non-GAAP financial measures are not defined under U.S. GAAP and are not presented inaccordance 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 andexpense 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 theircomparability may be limited. The Company compensates for these limitations by reconcilingthe non-GAAP financial measures to the nearest U.S. GAAP performance measure, all of whichshould 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 Pinduoduo’s strategic andoperational 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 writtenmaterials 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 Pinduoduo’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: Pinduoduo’s growth strategies; its future business development, results ofoperations 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 andreputation 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 andcompetition in China’s e-commerce market; changes in its revenues and certain cost or expense
items; the expected growth of China’s e-commerce market; PRC governmental policies andregulations relating to Pinduoduo’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 Pinduoduo’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 Pinduoduo undertakes no obligation to update any forward-looking statement,
except as required under applicable law.
5

About Pinduoduo Inc.
Pinduoduo is an innovative and fast growing “new e-commerce” platform that provides buyers
with value-for-money merchandise and fun and interactive shopping experiences.
The Pinduoduo mobile platform offers a comprehensive selection of attractively priced
merchandise, featuring a dynamic social shopping experience that leverages social networks as
an effective and efficient tool for buyer acquisition and engagement.
For more information, please visit http://investor.pinduoduo.com/
For investor and media inquiries, please contact:
Pinduoduo Inc.
investor@pinduoduo.com
Christensen
In China
Mr. Christian Arnell
Phone: +86-10-5900-1548
E-mail: carnell@christensenir.com
In U.S.
Ms. Linda Bergkamp
Phone: +1-480-614-3004
Email: lbergkamp@christensenir.com

6

PINDUODUO INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”), except for number of sharesand per share data)

As ofDecember
31,2017
RMB(Audited)

June 30, 2018
RMB

US$
(Unaudited)

ASSETS
Current Assets
Cash and cash equivalents
Restricted cash
Receivables from online payment
platforms
Short-term investments
Amounts due from related parties
Prepayments and other current
assetsTotal current assets
Non-current assets
Long-term investment
Property and equipment, net
Intangible asset
Loan to a related party
Total non-current assets
Total Assets

3,058,152
9,370,849

9,030,874
8,785,138

1,364,778
1,327,642

88,17350,000442,91294,4431,300,000
588,078

14,273
196,461
88,872

127,742
13,137,828

673,405
20,471,938

101,766
3,093,792

5,000
9,279
162,363
176,642

14,8762,786,690
2,801,566

2,248
421,135
423,383

13,314,470

23,273,504

3,517,175

7

PINDUODUO INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”), except for number of sharesand per share data)
As ofDecember 31,2017
RMB(Audited)

June 30, 2018
RMB

US$
(Unaudited)

LIABILITIES, MEZZANINEEQUITY AND
SHAREHOLDERS’ DEFICITSCurrent Liabilities
Amounts due to related parties
Customer advances
Payable to merchants
Accrued expenses and otherliabilities
Merchant deposits
Total current liabilities

76,05756,453
9,838,519

294,201
105,013
9,318,220

44,461
15,8701,408,203

360,393
1,778,085
12,109,507

971,1033,194,609
13,883,146

146,757
482,7812,098,072

Total Liabilities

12,109,507

13,883,146

2,098,072

Mezzanine equity

2,196,921

10,950,505

1,654,879

54
61,32662
5,848,893

9883,906(23,101)(1,030,237)(991,958)

396,540(7,805,642)(1,560,147)

59,926(1,179,617)(235,776)

13,314,470

23,273,504

3,517,175

Shareholders’ deficits
Ordinary Shares
Additional paid-in capital
Accumulated other comprehensive(loss)/income
Accumulated deficits
Total shareholders’ deficits
Total liabilities, mezzanine equity,and shareholders’ deficits

8

PINDUODUO INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)

For the three months ended June 30,
2017

For the six months ended June 30,

2018

RMB
(Unaudited)

RMB(Unaudited)

2017
US$
(Unaudited)

2018

RMB
(Unaudited)

RMB(Unaudited)

US$(Unaudited)

Revenues
Online marketplace services
Merchandise sales
Total Revenues

104,617
104,6172,709,046
2,709,046

409,401
409,401

138,251
3,385
141,636

4,093,650
4,093,650

618,647
618,647

Costs of revenues
Costs of online marketplace services
Costs of merchandise sales(107,605)-(387,830)-(58,610)-(158,986)(3,052)(706,530)-(106,773)-

Total costs of revenues(107,605)(387,830)(58,610)(162,038)(706,530)(106,773)

Gross (loss)/profit(2,988)2,321,216

350,791(20,402)3,387,120

511,874

Sales and marketing expenses
General and administrative expenses
Research and development expenses(88,902)(5,963)(24,885)(2,970,734)(5,800,673)(186,029)(448,948)(876,619)(28,113)(162,772)(114,560)(40,913)(4,188,192)(5,829,434)(258,847)(632,935)(880,965)(39,118)

Total operating expenses(119,750)(8,957,436)(1,353,680)(318,245)(10,276,473)(1,553,018)

Operating loss

(122,738)(6,636,220)(1,002,889)(338,647)(6,889,353)(1,041,144)

13,738(860)
319

136,601
3,596
2,135

20,644543
323

21,241(996)
1,138

186,764
1,460
6,220

28,224221
940(109,541)(109,541)(6,493,888)(6,493,888)(981,379)(981,379)(317,264)(317,264)(6,694,909)(6,694,909)(1,011,759)(1,011,759)

Interest income
Foreign exchange gain/(loss)
Other income, net
Loss before income tax
Income tax expenses
Net loss

9

PINDUODUO INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)

For the three months ended June 30,
2017

2018

RMB
(Unaudited)
Net loss
Deemed distribution to certain
holders of convertible preferredsharesContribution from a holder ofconvertible preferred shares
Net loss attributable to ordinary
shareholders

For the six months ended June 30,

RMB(Unaudited)

2017
US$
(Unaudited)

2018

RMB
(Unaudited)

RMB(Unaudited)

US$(Unaudited)(109,541)(6,493,888)(981,379)(317,264)(6,694,909)(1,011,759)

-

-

-

-

(80,496)(12,165)---

26,413--(109,541)(6,493,888)(981,379)(290,851)(6,775,405)(1,023,924)

Earnings per share for Class A andClass B ordinary shares:-Basic-Diluted(0.06)(0.06)(3.35)(3.35)(0.51)(0.51)(0.16)(0.16)(3.66)(3.66)(0.55)(0.55)

Earnings per ADS (4 Class A
ordinary share equals 1 ADSs ):-Basic-Diluted(0.24)(0.24)(13.40)(13.40)(2.04)(2.04)(0.64)(0.64)(14.64)(14.64)(2.20)(2.20)

1,758,769,820
1,758,769,820

1,940,536,606
1,940,536,606

1,940,536,606
1,940,536,606

1,770,928,809
1,770,928,809

1,850,155,331
1,850,155,331

1,850,155,331
1,850,155,331

Weighted average number of Class
A and Class B ordinary shares
outstanding:-Basic-Diluted

10

PINDUODUO INC.
NOTES TO UNAUDITED FINANCIAL INFORMATION(Amounts in thousands of RMB and US$, except for number of shares and per share data)

For the three months ended June 30,
2017
RMB(Unaudited)
Revenues
Online marketplace services- Online marketing services- Commission fees
Merchandise sales
Total

32,14072,477
104,617

For the six months ended June 30,

2018
RMB
(Unaudited)

2,370,952
338,094
2,709,046

11

2017
US$
(Unaudited)358,307
51,094409,4012018

RMB(Unaudited)

RMB(Unaudited)

US$(Unaudited)

32,140106,111
3,385
141,6363,479,052
614,598
4,093,650

525,767
92,880618,647

PINDUODUO INC.
NOTES TO UNAUDITED FINANCIAL INFORMATION(Amounts in thousands of RMB and US$, except for number of shares and per share data)

For the three months ended June 30,
2017

2018

RMB
(Unaudited)
Share-based compensation cost
included in:
Costs of revenues
Sales and marketing expenses
General and administrative expenses
Research and development
Total

For the six months ended June 30,

203
391
1,153
1,115
2,862

RMB
(Unaudited)511
32,2915,770,706
16,9825,820,490

12

2017
US$
(Unaudited)

77
4,880
872,0902,566
879,6132018

RMB(Unaudited)

RMB(Unaudited)

US$(Unaudited)382
777
107,078
2,110
110,347

811
33,493
5,775,733
24,063
5,834,100

123
5,062
872,850
3,636
881,671

PINDUODUO INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in thousands of RMB and US$, except for number of shares and per share data)

For the three months ended June 30,
2017
RMB(Unaudited)

For the six months ended June 30,

2018
RMB
(Unaudited)

2017
US$
(Unaudited)

2018

RMB
(Unaudited)

RMB(Unaudited)

US$(Unaudited)

Net cash provided by operating activities
Net cash provided by/(used in) investing
activities
Net cash provided by/(used in) financing
activities
Effect of exchange rate changes on cash
and cash equivalents

1,283,568

360,904

54,542

1,673,548

989,828

149,587

701,624(291,150)(44,000)

286,426(1,092,706)(165,134)

645,704(3,789)(573)

1,413,211

5,820,779

879,657(17,203)

330,620

49,964(16,796)

254,82138,509

Increase in cash and cash equivalents
Cash and cash equivalents at beginningof period

2,613,693

396,585

59,933

3,356,389

5,972,722

902,619

2,062,539

8,634,289

1,304,845

1,319,843

3,058,152

462,159

4,676,232

9,030,874

1,364,778

4,676,232

9,030,874

1,364,778

Cash and cash equivalents at end of
period13

PINDUODUO INC.
RECONCILIATION OF NON-GAAP MEASURES TO THE MOST DIRECTLY COMPARABLE GAAP MEASURES(Amounts in thousands of RMB and US$, except for number of shares and per share data)

For the three months ended June 30,
2017

2018

RMB
(Unaudited)
Operating loss
Add: Share-based compensation
Non-GAAP operating loss

For the six months ended June 30,

RMB(Unaudited)

2017
US$
(Unaudited)

2018

RMB
(Unaudited)

RMB(Unaudited)

US$(Unaudited)(122,738)
2,862(119,876)(6,636,220)
5,820,490(815,730)(1,002,889)
879,613(123,276)(338,647)
110,347(228,300)(6,889,353)
5,834,100(1,055,253)(1,041,144)
881,671(159,473)(109,541)
2,862(6,493,888)
5,820,490(981,379)
879,613(290,851)
110,347(6,775,405)
5,834,100(1,023,924)
881,671(106,679)(673,398)(101,766)(180,504)(941,305)(142,253)

Non-GAAP basic earnings per share(0.06)(0.35)(0.05)(0.10)(0.51)(0.08)

Non-GAAP basic earnings per ADS(0.24)(1.40)(0.20)(0.40)(2.04)(0.32)

Non-GAAP diluted earnings per share(0.06)(0.35)(0.05)(0.10)(0.51)(0.08)

Non-GAAP diluted earnings per ADS(0.24)(1.40)(0.20)(0.40)(2.04)(0.32)Net loss attributable to ordinary
shareholders
Add: Share-based compensation
Non-GAAP net loss attributable to ordinary
shareholders

14