Pinduoduo continues to "surge"! Q1 net profit soared by 202% year-on-year, revenue increased by 131% | Financial Report Insights

After three months, Pinduoduo once again presented an impressive quarterly performance: in the first quarter, revenue increased by 131%, net profit surged by 202% year-on-year, and transaction service revenue skyrocketed by 327% to $44.36 billion, surpassing online marketing business to become Pinduoduo's largest source of income.

On Wednesday, May 22nd, Pinduoduo released its financial report for the first quarter of 2024. The results showed that Pinduoduo's first-quarter revenue increased by 131% year-on-year to RMB 86.81 billion, exceeding market expectations of RMB 76.86 billion; operating profit increased by 275% year-on-year to RMB 25.97 billion, net profit attributable to ordinary shareholders increased by 246% to RMB 28.00 billion year-on-year; non-GAAP adjusted net profit increased by 202% year-on-year to RMB 30.60 billion, significantly exceeding the expected RMB 15.53 billion.

Diluted earnings per ADS for Pinduoduo in the first quarter were RMB 18.96, compared to RMB 5.55 in the same period of 2023, an increase of about two times. Non-GAAP diluted earnings per ADS were RMB 20.72, while it was RMB 6.92 in the same period of 2023. In addition, Pinduoduo generated net cash from operating activities of RMB 21.07 billion in the first quarter, compared to RMB 1.34 billion in the same period of 2023, mainly due to the increase in net profit.

After the financial report was released, Pinduoduo's pre-market stock price fell by 8%, but quickly recovered and is now up by 6.1%.

"During the first quarter, we continued to invest in key areas of high-quality development strategy," said Liu Jun, Vice President of Finance at Pinduoduo Holdings. "We place more emphasis on creating long-term value rather than focusing on short-term performance, and will continue to increase our investment in the future."

Transaction Services Become Revenue Pillar

Pinduoduo stated that the revenue growth was mainly driven by the increase in online marketing services and transaction service revenue. Among them, transaction service revenue surged by 327% to $44.36 billion, surpassing online marketing business to become Pinduoduo's largest source of income in the first quarter

• Online marketing services and other revenue reached 42.46 billion yuan, a year-on-year increase of 56%.
• Transaction service revenue reached 44.36 billion yuan, a year-on-year increase of 327%.
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Cost Doubled

With a significant increase in revenue, Pinduoduo's total cost in the first quarter increased by 194% year-on-year to 32.69 billion yuan.

Pinduoduo stated that the increase in costs mainly came from the increase in fulfillment costs, payment processing fees, maintenance costs, and call center expenses. Specifically in the first quarter:

• Total operating expenses were 28.14 billion yuan, a year-on-year increase of 44%, mainly due to the increase in sales and marketing expenses.
• Sales and marketing expenses were 23.41 billion yuan, a year-on-year increase of 44%, mainly due to increased spending on promotions and advertising activities.
• General and administrative expenses were 1.82 billion yuan, a year-on-year increase of 123%, mainly due to increased employee-related costs.
• Research and development expenses were 2.91 billion yuan, estimated at 3.31 billion yuan, compared to 2.51 billion yuan in the same period in 2023