PDD (PDD) 29 Aug 222022 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to Pinduoduo's Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation, followed by a question-and- answer session. [Operator Instructions] I must advise you that this conference is being recorded today. I would now like to hand the conference over to your host today, Mr. [ph]. Pang Chen ahead go Sir, please

distributed Thank GlobeNewswire you, us will you joining investor.pinduoduo.com, release and host the available IR website Hello, My name everyone, at was earnings today. Pinduoduo I well earnings thank and is is the on through for as call. operator. earlier services. Chen, help and

as certain we I reconciliation GAAP measures. would to which our statements. in statement Harbor press call begin, of like release, to includes make to contains measures Before certain measures. the to earnings applies we Also, this call, non-GAAP a this Safe which non-GAAP release, forward-looking Please to refer will our earnings discussions of you refer financial

Chief will then Liu Finance. through quarter Executive VP results of us the some performance focus. make XXXX. our Jun Officer; will take ended June Chen Joining call the and today Jun, Lei on remarks our XX, strategic past are for for quarter us on general and the our second financial Chairman Lei, our our

discrepancy the session, Please in prevail. Lei translate. Chinese original original I In in and will purposes provided of questions and statements remarks for answer help only. case any Q&A all remarks reference note will are translated that kindly version, the translations should between the During

ahead. it my go Chen introduce pleasure Lei, our to Lei. Chairman Now, please is Officer, and Chief Executive

second everyone. quarter and Chen, hello, you in Thank of XXXX. for earnings the you, Thank our joining call

results. me Let a giving overview second start by our brief of quarter

in China's the we XX year's quarter. affected early consumer pent-up And XX%. recovery This and several released the shopping campaigns a consumer confidence for part Our demand May, in temporarily year-on-year a for quarter billion. during in since increase this coupons of launched of second to this of was June the reception Since positive confidence. witnessed resilience of reflected total recovered to half returned Such We represents bolster consumer also being and the sentiment disputed quarter, in was QX. XX.X second RMB was normal. Us gradually the revenue festival. consumption

we bringing savings During festival, shopping and the June to customers XX our focus more more continue fun. on

encouraged are categories. see a of wide range to consumers from We buying

meeting FMCG, all consumer categories the more and such brands use as experienced Also, electronics needs. new partnering and of a still household platform. to These our we solid are and more that cosmetics, festival. are our that, to Having launch products. signs long consumers have demand in agriculture them For merchants fighting evolving values produced, our are said consumer's platform during with before fully us, way many their go example, and in

promotional possible improvement perspective build long-term affected, especially value step must core Our initiatives. in including financials business look business partners make the the better, the investments consumers, and and and and projects, up remote Short-term caused to maybe more our working external it and create than during delays our might such the restrictions capabilities. Even of especially the Therefore, were quarter, society. every our certain investments though up this last factors ever as half. travel dynamics. become considering affected first has current the Agritech industry of and make activities important events We our quarterly the for platform

For consumers, those address we are services for iterating needs. constantly needs to on our the new unmet lookout and

and essentials and to around and To the products, for to have spike a products. Shanghai. the essential we special XXX hygiene and items food fresh cooking from items, residents necessities in consumer during rice the food, in meet for like set delivered diapers example, app within For initial expanded selection hours. XX been Flowing and XX the [ph] April, to quickly a groceries oil section Pinduoduo this buy up demand, we daily demand in flesh we saw

in Given the housing the pooling capacity, limited demand orders of flexibility delivery offer by capability community. through logistical and also surge we more --

a our Their consumers of work like the and deeply of Things the express would proud platform work in returned we past take Here, gratitude and are our moment many to hard normal. hard to in their serves of thankful their ensure to quarter. to we colleagues gradually time need, the operation who contribution. to

seasonal We also to promote launched events various produce. agricultural

consumer a the This of produce introduce orders unique This such as May, and agricultural to launched local different we consumer help increased enjoy late compared Seeing discover grapes. in seasonal demand, XXX% and across the instance, well coconut of For foods foods rolled by consumers for out other lychees income flash across for with surged consumers. received initiative significantly with to campaign newspapers. consumers together some will characteristics initiative China year specialties farmers. feedback, Sales we ago, country our in the contribute country. better to and watermelon, year while to event old daily a was from of response a

with at work to we ensure the them merchants, affected. chain supply, start the closely stable where quarter, the of especially was For supply

to provided help and better adjust For plan our their traffic updates merchants we example, proactively logistics.

and and medium-sized merchants We businesses agricultural to our on also have launched and small – platform. measures campaign

certain farmers a total were sell we their tons our traffic of the example, produces. to waive of short agricultural directly platform, our avoid commissions due sales contacted hundreds we to For Within continue period we of To disruption. merchants, time, where vegetables farmer, local lend quickly sell helping to unable through of losses. operations that in vegetables suppliers, our regions grocery financial will farmers to to support managed

that good. the see agricultural e-commerce serve benefiting we from communities income. As can force rural We a and by technology higher new jobs company firmly rules for agriculture, with as a technology its believe in

set sell start to their up them their before of businesses now and helping have close produce. These intangible. and online We be economic opportunity social, home their to their people we online thousands both mentioned farmers, to have and are Young benefits their the town trained in new that families. and businesses communities to tangible of local supporting hundreds

hope of we new farming, the unleash the vitality to program. addition rural further to by the economy starting In craftsmen

traditional artisans widen we agriculture, build with to brands their As crops, their promote access aim help and market. craftsman to and local

We our campaign in of expanded Duoduo areas. students rural promote also Month to reading a young among lot Reading

As that We future we value investing focused use. this we conclude, remain we through such over have today, long-term trends as the part future. for books. building with of for better selected do hope intrinsic contributing and efforts, carefully a donated quarter-to-quarter, our can from on XXX,XXX we in to To deal

good. will that, over I committed platform force a to to to you. will closely benefit and of stay We more that principles Thank Jun. open With core hand speak build as our a for and people first all serves

Lei. our I quarter ended performance you, June will everyone. Thank Hello, XXXX. go XX, through in

the increase RMBXX.X decrease from and in in result were trials. quarter marketing marketing in billion, period of a P&L, up quarter, in by others offset RMBXX.X the of XP this the XX% merchant RMBXX from quarter revenue online of recovery. XXXX. of driven billion with terms due revenue XXXX. Revenues from compared services our same services activities, This billion from up to transaction increase XX% revenues online In mainly in an as This same the consumption by primarily were total services, and was was

the the in part recovery has during As experienced latter in sentiment festival. mentioned, of consumer we especially XX the quarter, Lei shopping June

same of period were XXX% versus revenue XXXX. services quarter the billion, this up RMBX.X transaction Our

half expenses, cost QX revenue quarter. billion billion expenses RMBX.X X% billion billion Moving XXXX on were events including The RMBXX.X this RMBX to of quarter of expenses. Total total of XXXX. the to business-related promotional the of cost increased affected and this lower from our as well operating RMBXX.X quarter projects, the temporarily postponement in in first our versus and during certain quarter, initiates, as same agricultural overall expenses

more in quarter. the the second gradually we normal, returned As this half expenses incurred things to of

this non-GAAP expenses as [indiscernible] total XXXX from Our to in of has XX% a percentage quarter. total XX% QX operating revenues declined in

non-GAAP sales quarter Looking to expense billion, versus X% RMBXX.X XXXX. marketing up quarter items, specific the [indiscernible] same of and our

of our non-GAAP compared as for and percentage quarter, XX% expenses same revenue was XXXX. Our quarter this XX% in with sales the our basis, a marketing

versus in RMBXXX.X same million Our non-GAAP administrative quarter the were of RMBXXX.X expenses XXXX. general and million

was RMBX.XX ADS ADS the versus XXXX. was RMBX.X RMBX.XX billion Our expenses ordinary ordinary shareholders XXXX. with XXXX. and experienced X.X the was ADS in to attributable quarter an personnel. billion diluted RMB GAAP same recruitment the the was XXXX. profit shareholders billion in the and diluted headcount of year. for same RMBX quarter the quarter per operating RMBX.X per ADS earnings RMBX.XX was R&D of the the primarily increase was of in RMBXX.X to Non-GAAP earnings quarter profit earnings increase billion, non-GAAP was billion Non-GAAP Net was RMBX.X on of The of billion earnings compared operating per income in billion, of billion, ADS same Basic XX% per income same in RMBX.XX compared non-GAAP RMBX.XX more with the and quarter were XXXX. a Operating XXXX. RMBX.X diluted research versus in increase of RMBX.XX profit in quarter operating in net Net the last with an same the due from and same per of quarter of RMBX.X basis development RMBX.X earnings basic same billion quarter billion of of versus attributable profit compared of to RMBXX.X

to on Now cash move let me flow.

same were RMBXX.X of billion, generated working with Our primarily quarter the billion in due from net the XXXX, capital. increase and flow net activities compared cash to in operating in changes income RMBX.X

the had a XX, not short-term saw to engagement June profitability the in future. investments. user we RMBXXX.X But mainly billion in equivalents good past To the short-term factors the quarter. cash cash, past during company quarter was that conclude, of may and attributable As repair few XXXX, in

will sure whether continue. engagement intense, we're such remains competition As momentum not

Second, QX. this project We in expenses view overall in just lower activities nature. business-related temporary and mostly affect factor performance our

of return normal. serve of In process second things quarters. remarks. do several quarter you. combination higher due mainly short-term expect that second a profitability to future the in to QX, my fact, expenses concludes we a half as even when first not are prepared quarter This Therefore, we the the benchmark incurred Thank factors, in in to for

you, Thank Jun.

move to on we the Next, session. Q&A will

For questions session, analysts today's on from Q&A take Jun will and Lei line. the

now Lei happy ready analyst I We Operator, questions translate, we are questions Chinese. help will answer reference. online. per questions take of are ease from And maximum two analysts. Lei's take for to remarks in to will a to of

Thank question from the Instructions] Kenneth go Please you. Credit will and begin from now Suisse. question-and-answer session. ahead. Fong Our [Operator Ladies gentlemen, we comes first

have I [Foreign Language] questions. two

many saw future First, strong the brands. strong this more help on participate And of progress reason on growth record, does that the the speak the in for overall growth online Thank plan growth? How reaccelerated a behind about What's marketing service revenue And more second quarters. noticed We XX% from we question our rate, brands management the quarter growth is quarter brand the previous two this recruitment? second for your onto strong our year-on-year. very And this this platform? brands bringing you. quarter? Can what's our the events. on

to Language] [Foreign I Kenneth, questions. happy take am your

saw half help with consumption offering about second the revenue to of growth, actually of spending efforts we consumer from various May, forms recovery. recovery. our of made First, by Also, starting we trend to consumption facilitate a promotion

this [Foreign during Language] as many well we year's June saw brands XXXX participating. merchants event, And actively as

solid demand saw also coming consumers. We from

these FMCG many consumer platform. on and products, cosmetics all background this Given had our our growth a decent agricultural on electronics including categories platform produce, categories

our is very our as earlier, inseparable help capability, also to demand. have we efforts past this hard create to members -- we addition, hard-work to time. we team best during meet They of intense. for this always In for our landscape well actually reserve, other investment beneficial our competitiveness. same this the of competition worked consumers, satisfy try value so from can second At is further we core the outside many during many activity team's we consumer can is mentioned period during satisfying also And long-term time, that the and And very our needs, are And improve. areas towards as hard-work And our quarter up many was their demand. in our essential step our consumers' to of society. terms process. strengthen overall not therefore, more that consumers still grateful further saw we need we to I as and that impacted And due

need diversified. that different as see And second better our becoming our consumers, to it the the to essentially, on they for more are our in well goal Language] that serve product more across our more And Therefore, them experience. Foreign needs and is different from consumers platform more serve And to choices and is different we terms goal needs is consumption your natural well. our them brand scenarios. different question, That very categories savings, more how and for the And consumers and bring to in serve consumers we and more brands of our products. always are believe consumers to aligned. goal have shopping

focus to continue remain to be to patient. would we Thank our on earth part So own very and you. down and

may we next analyst. move to Operator, the Okay. now on

you. Thank

comes question of America. Next Please your from question. from ask Joyce Bank

accelerated the management. business? what's taking reported proposition Good market first evening the to on continued colors to quarter. question what's latest digit year-over-year Could with to the market main it reason new question grow Thanks than core my revenue. the My the online overseas last Also, And the triple related any service revenue we overseas questions. growth. mean this faster the revenue management we service for some like this initiatives see second behind? is expansion. to and my is from I in related know the quarter new actually a status, share of marketing transaction the Transaction target value

Language] [Foreign Joyce.

So it to hand your will over me address and other first answer to questions. I let question, your Jun

team. the all, grow First, of our a to for business overseas time, with process. are we is see, achieving overseas young we many of the young creating continuing good company that the growth our first during And see we searching of everyone that we opportunities value new one this peers results. a also business, is in relatively possibility Language] the industry [Foreign and opportunity. that on And At see opportunities same in and also

same us unique it that experimentation. require believe value. that is time, done that field. of simply This to and very way Language] needs this worth with will course, And the consumers would we will to that to the team. just be is start us. create What out said, overnight. business sufficiently of strive be, will at not our So will along [Foreign gained we a what is And for that happen would But company others direction own valuable just experience as overseas trials the it our prove important the [Foreign aware to Thank trying we in we and as repeat challenges, you. and Language] is to process are from constant not have well our

Okay. Thanks for your question, Joyce.

transaction and reserve This the and we financial cycle cycle. the had about on we we quarter, exactly are always our recovery, matched basis. business does always metrics services results growth. natural how And metrics Your And in operating quarterly our Well, question remain because business first, financial our use of from past transactions. revenue. to And not reporting managing consumers. consumer-centric, we consumption engagement over quarterly us, contributed revenue addition, to the a for not

Thank we So remain consumers between you. a is quarters, value. fluctuations creates long-term see to focused investing and better serving it common on

to ready line. to down move we’re the on analyst Okay, operator, the next

you. Thank

your Our Thomas comes from Chong ask Please next question. Jefferies. from question

for my question. is lot now, cost My uncertainties seeing question my Internet about just to management control control. of strategies. about cost about profitability. companies some a right cost efficiencies, is taking macro and And from our our sort control given Thanks second exercising Language] of the I we question and first want [Foreign management get color are

market we you. second expected expectations, the about than better profitability think trend the in in comes earnings quarter Thank second the Given how should half?

Thomas. Hi,

So first let me your address question.

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This Thomas. I Okay. Jun. take will your Thanks, second is question.

For the not on profits, as second have on before, changed your strategy question we about -- mentioned profitability. to focus well, our

past the term which factors, mainly a are of nature. mostly alone, profitability to number or for short quarter external was attributable one-off our So

level by same consumption On of the mostly user very recovery. saw revenue face are side, we still we competition. consumption, the engagements At which time, good a and boosted intense

business-related And as activities and project profitability in quarter’s QX this factors up, combined. short-term the impact such factors expenses. to led short-term is sum a to delays side, due to expense the decrease our For in

our is on this future benchmark view So you. is good Thank and it not a for preference, profitability.

to ready on. are we move Operator,

question. from comes CICC. Bai Please Yang question ask your from Next

Duo Duo taking Thanks My about for first question management Grocery. question. Language] is my [Foreign

steady seeing is relatively XQ and Duo Duo state growth that about reaching on Grocery We unit economy. loss reduction players guided are

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revenue, company's the comment grow on expense be has to to continues meanwhile, the and the recorded to Thank we play role, also leverage revenue could managed Should dropped the by strong growth? sustainable? And optimize XX% operating expect As you we year-over-year growth to company's its maintaining in to management situation expense continue XX%. we how a ratio

[Foreign Hi, Language] Bai Yang.

me So bit Duo about Duo Grocery let talk little our a first.

is how to many service, First, quality that products, and by impacted And value some to demand fulfillment, short-term as the from Duo have And is improve. can a supply adjusting we improve examples how strategy Duo how more produce is localized more that not from and can the demand better at network invest our effort serve To efficiently, we for consumers. bring constantly and plays just of leverage be this -- to retention create the match we our our all few to and supply as more consumers. in a distribution terms and have give important same tangible our very we name more our fresher, service this in this the external remained it patiently products agriculture to areas agriculture half terms strategy areas point XXXX, here. would to in localized also fulfillment we to see total of Grocery time, Duo better to view, grocery convenient Since provide the the consumers. are and matching also so. service further of optimize second secure improving we of of project able service in changes. introduced platform. It will to well make area grocery we to here, to how value consumer-centric proposition And for we and always can and role you -- remain natural the with experiences a into. seen an better would be a this of in also And that And still affordable are consumers quality

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metrics, of and we they results As consumers. how for our the reflection you. serve a are Thank financial well

operating I activities as expenses this on decrease. Thanks, Bai. short-term you and to trend, mentioned. many such total operating business as On factors, caused XX% well, point But decreased your out such project percentage expenses and as quarter, question just our delays want here, revenue to lower

So to it continue. is unlikely

of the as fact, actually gradually back to expenses half In normal, first went half. compared second increased quarter the during to things the

on your a we Thank still the quarterly Hope Pinduoduo good believe may a for business QX the Such be continue is is we to to So Competition not in Also, previously good benchmark. as stage. questions. impact to intense, development expenses Lei – us not just still you/ so need investment perspective. mentioned, invest. addressed from our is

Hi, operator. analyst next We may now on take questions from line. the the

Thank you.

next the Wu of line Haitong Natalie. Our question, from comes ask International. Natalie from question your Please

two. for Language] [Foreign So, I question. have my thanks

the regarding XX haven't on your material impact program. shift some agricultural from priorities, payment one started towards income But in later seen the First and to billion it of generated the leadership, time R&D. in the we program agriculture since more much terms seen we have department

changed and change external have when factors priorities a such how wondering, should expect we different just So currently. are

improves, strong a as that terms to related cash. and if For platform-related the priorities e-commerce, have a get sheet agriculture expansion. with over RMB billion key maybe in internal with segment for level? we great regarding overseas initiatives marketing? also, And balance your sense And It strategic and your the you of platform end XXX new next priorities PDD at consumer would bring be will sales what are current example, can prioritize the to you

some have distribute value plans We seen introduced to shareholders. to peers have

PDD Thank consideration? does under wondering Just plans have you. similar

Natalie. Hi, Language] [Foreign

your me us. priority address let for question So, on

our to first business of our business. we on look start which need all, base we and from at we So, which

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your will cash second I question Natalie. on balance. take Thanks,

areas to I on Well, have better us and help given think our allocation. consumer’s improve still to this challenges, many competitive satisfy essentially is the demand. we capital landscape current

purchase For every R&D. example, and

be So, different we patiently these in need stages. Meanwhile, to in areas. may development think I invest different companies

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Okay. conclude us today. Thanks everyone conference on time the for call to call now. we hereby the limits, Due joining

any and day. have reach please out further you If have questions, great to team. our you IR feel do to a free Thank

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our Ladies conference for for participating. does you Thank and conclude today. gentlemen, this

all may disconnect. You