• Revenue: RMB99.4 billion, a 44% year-over-year increase.
• Net Income: RMB25 billion for the quarter.
• Operating Profit: RMB24.3 billion on a GAAP basis; RMB26.8 billion on a non-GAAP basis.
• Non-GAAP Operating Profit Margin: 27% for the quarter.
• Revenue from Online Marketing Services: RMB49.4 billion, up 24% year-over-year.
• Revenue from Transaction Services: RMB50 billion, up 72% year-over-year.
• Operating Expenses: RMB35.4 billion on a GAAP basis; RMB32.9 billion on a non-GAAP basis.
• Sales and Marketing Expenses: RMB29.8 million, up 40% year-over-year.
• Research and Development Expenses: RMB2.4 billion on a non-GAAP basis; RMB3.1 billion on a GAAP basis.
• Net Cash from Operating Activities: RMB27.5 billion.
• Cash, Cash Equivalents, and Short-term Investments: RMB308.5 billion as of September 30, 2024.

• Warning! GuruFocus has detected 1 Warning Sign with PDD.

Release Date: November 21, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• PDD Holdings Inc (NASDAQ:PDD) reported a robust revenue increase of 44% year-over-year, reaching RMB99.4 billion, driven by growth in online marketing and transaction services.
• The company launched a RMB10 billion fee reduction program, benefiting over 10 million merchants by reducing costs and improving efficiency.
• PDD Holdings Inc (NASDAQ:PDD) introduced logistics support measures, eliminating transshipment fees for orders to remote regions, which significantly boosted order volume growth.
• The high-quality merchant support program empowered merchants with product and technology innovation capabilities, enhancing the platform's supply chain.
• The company observed strong consumer engagement during the Double 11 Shopping Festival, with notable sales growth in agricultural products, small home appliances, and daily necessities.

Negative Points

• PDD Holdings Inc (NASDAQ:PDD) faced a moderation in revenue growth and lower profits due to intensified competition in the e-commerce sector and external challenges.
• The company's profitability is expected to trend lower over the long run as it continues to invest in ecosystem development and merchant support.
• Despite positive feedback, the company's investments in the merchant ecosystem have led to increased operating expenses, impacting short-term financial results.
• The competitive environment in China's e-commerce market remains intense, affecting PDD Holdings Inc (NASDAQ:PDD)'s growth rate and profitability.
• The company acknowledged limitations in leveraging macroeconomic shifts due to its operational model, resulting in higher costs compared to peers.

Q & A Highlights

Q: Can management share the current progress of the merchant support initiative and elaborate on future plans? Also, what are the future plans for the global business considering the evolving external environment? A: (Jiazhen Zhao, Co-CEO) We have made substantial investments in the merchant ecosystem, including the RMB10 billion fee reduction program. This includes service fee refunds, lower security deposits, and enhanced after-sales support. These efforts aim to guide high-quality merchants towards sustainable growth. (Lei Chen, Chairman and Co-CEO) For the global business, we aim to deliver unique value to consumers across different countries. We are actively engaging with external stakeholders to enhance our service standards and compliance posture. Despite challenges, we are committed to strengthening our capabilities to deliver a better shopping experience globally.

Q: Can management share detailed measures taken for compliance and platform ecosystem, and what goals are expected in this area? Also, what are your thoughts on the slight decline in profit and profitability this quarter? A: (Jiazhen Zhao, Co-CEO) We have scaled up trust and safety initiatives to fortify our compliance systems, including building a strong compliance team and enhancing merchant onboarding processes. Our goal is to foster a healthier merchant ecosystem. (Jun Liu, VP of Finance) The decline in profitability aligns with our strategy to invest in a sustainable platform ecosystem. We are seeing positive feedback from merchants, and these investments will benefit the platform in the long run.

Q: What new consumption trends were observed during this year's Double 11 Shopping Festival, and how does management rate PDD's performance? What are your thoughts on domestic competition pressure? A: (Jiazhen Zhao, Co-CEO) We observed strong sales growth in agricultural products, small home appliances, and daily necessities during the Double 11 Festival. Our 10 billion voucher campaign was well-received. Regarding competition, the e-commerce market remains intense, and our growth may not be linear. We are committed to enhancing our core capabilities and making long-term investments in our supply chain and ecosystem.

Q: How is PDD Holdings addressing the challenges posed by intensified competition and external factors? A: (Jun Liu, VP of Finance) We communicated that revenue growth may moderate due to competition and external factors. Our investments in the merchant ecosystem are laying the foundation for sustainable development. We will continue to explore more investments to drive impactful results.

Q: What are the strategic initiatives PDD Holdings is implementing to support high-quality merchants and promote a sustainable platform ecosystem? A: (Jiazhen Zhao, Co-CEO) We have introduced measures like service fee refunds and logistics fee reductions to support high-quality merchants. These initiatives aim to lower operational costs and improve efficiency, enabling merchants to invest more in product and service improvements.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.