On August 29th, PDD released its unaudited financial report for the second quarter ending on June 30, 2023.
The financial report shows that during the reporting period, PDD’s total revenue was 52.281 billion yuan ($7.17 billion), a 66% increase compared to the same period last year. The net profit attributable to ordinary shareholders was 13.108 billion yuan ($1.81 billion), a 47% increase compared to the same period last year. The non-GAAP net profit attributable to ordinary shareholders was 15.269 billion yuan ($2.11 billion), a year-on-year increase of 42%, exceeding market expectations. Previously, Bloomberg predicted PDD’s revenue and adjusted net profit to be 43.282 billion yuan($5.95 billion) and 10.87 billion yuan ($1.49 billion) respectively.
The revenue growth is mainly driven by the increase in online marketing and other service income, as well as transaction service income. During the reporting period, PDD’s network marketing services and other income reached 37.933 billion yuan ($5.21 billion), a year-on-year increase of 50%, while transaction service income reached 14.348 billion yuan ($1.97 billion), a year-on-year increase of 131%.
At the same time, PDD’s operating expenses for this quarter also saw a significant increase. During the reporting period, PDD’s total operating expenses amounted to 20.872 billion yuan ($2.86 billion), representing a 41% growth compared to the same period last year. In its financial report, PDD mentioned that the increase in expenses was mainly due to higher sales and marketing expenditures. Specifically, PDD’s sales and marketing expenses for Q2 were 17.542 billion yuan ($2.41 billion), showing a 55% YoY growth, primarily used for promotional and advertising activities.
Recently, PDD’s cross-border platform Temu officially launched in the Philippines, taking its first step into Southeast Asia after previously launching in Chile. Public information shows that as of now, Temu has covered 38 markets worldwide, including various countries and regions in Asia, Europe, North America, Latin America, and Oceania. As Temu continues its low-cost expansion strategy overseas, PDD may continue to increase its sales and marketing expenses. In 2022, Liu Jun, the Vice President of Finance at PDD stated during a financial report meeting that Temu is not driven by financial indicators.
At the same time as the financial report was released, PDD also announced that its board of directors has appointed Professor Ivonne Rietjens as an independent director. Professor Rietjens has been a professor at Wageningen University in the Netherlands since 2001 and currently serves as the head of the Toxicology Department. Toxicology is a discipline that studies the effects of food and drugs to ensure their safety.
The financial report also shows that PDD’s net profit margin in the second quarter was 25%, which decreased compared to the same period last year. In the second quarter of 2022, PDD’s net profit margin was 27.66%. Regarding this, Liu Jun, the Vice President of Finance at Pinduoduo, stated that PDD will not excessively focus on revenue and other financial data. In the process of implementing its strategy, PDD will increase investment in key areas, such as rewarding consumers. At the same time, PDD will also further invest in agriculture and manufacturing supply chains with hopes to further leverage its value within the billion-dollar ecosystem project.
Facing industry competition and the problem of e-commerce platforms competing with low prices through subsidies, PDD’s Co-CEO, Zhao Jiazhen, said, “Starting from consumer demand, this is a healthy competition that actually benefits the overall development of the entire industry and is good for both consumers and platforms. For PDD, the core response to rapid changes in the industry is not focusing on competitors’ strategies but rather based on consumer needs, improving our own capabilities, and facing competition directly.
At the same time, Liu Jun mentioned that Temu also faces many challenges in its development process, such as cultural differences, social environment differences, and consumer demand differences. He said that the overall purpose of PDD and Temu is to create greater value for consumers through such a platform. PDD will continue to explore and strive to better understand how the platform should be promoted globally, thus bringing more value to consumers from different markets.
As of August 29th, PDD’s US stock has risen over 11%, with a price of $80.76.