On the evening of May 27, Beijing time, Pinduoduo released its financial results for the first quarter of 2022. During the reporting period, Pinduoduo's revenue reached 23.794 billion yuan, up 7% year on year; Net profit attributable to common shareholders was rmb2.60bn, compared with a net loss of RMB2.905bn in the same period last year. In the 12 months ended March 31, 2022, pinduoduo had 881.9 million active buyers, an increase of 7% year-on-year.

Overall, Pinduoduo posted better-than-expected results for the quarter, sending its shares up 15.19 percent to $48.30 per share by the U.S. stock market close on Thursday, giving the company a market value of $61.07 billion.

As a matter of fact, the company revenue and subscribers are maintain in low growth state, the spell of the chairman and chief executive officer Chen lei said at a conference in earnings "inevitable", and suggests that "we don't focus so hard on this quarterly fluctuations, and should focus on what we're doing can create value, the growth of high quality" for the company.

Growth rebounds slightly month-on-month, long-term slowdown 'inevitable'

In the first quarter of 2022, Pinduoduo's revenue growth mainly came from increased revenue from online marketing services and transaction services, according to the earnings report. Among them, online marketing services revenue reached 18.158 billion yuan, up 29% year on year; Transaction service revenue was 5.591 billion yuan, up 91 percent year-on-year, and the combined growth rate was 39 percent year-on-year. The latter, by contrast, contributed only 43.9 million yuan to a 99 percent drop in revenue as the company continued to strategically shrink its proprietary business.

Source: Pinduoduo earnings screenshot

That offset pinduoduo's 7 percent quarterly growth, the second-lowest revenue growth since going public in 2017, behind the 3 percent growth in the fourth quarter of 2021.

Ti Media App mapping, data source: Pinduoduo financial statements

Although the user performance is also better than the previous quarter -- as of March 31, 2022, pinduo multi-year active buyers reached 881.9 million, an increase of about 13.2 million in a single quarter, and an increase of about 1.4 million in the fourth quarter of 2021; The average number of monthly active users was 751.3 million, up 17.9 million from the previous quarter and down from the previous quarter -- but again, the year-over-year growth was in the single digits.

In response, Chen Lei said,In the past period of time, Pinduoduo has been adjusting its development strategy, focusing more on r&d and agricultural investment, and pursuing long-term and high-quality development. It takes a certain amount of effort and time for such adjustment to bring about results, so the growth rate may be affected in the short term. Moreover, with such a large base of users, the long-term trend is clear: slower growth is inevitable, despite quarterly fluctuations.

In fact, not only Pinduoduo, but its competitors posted "the lowest revenue growth since going public" in the first quarter of 2022. It is worth noting that aside from the end of the e-commerce dividend period, the impact of the epidemic has become the target of "public criticism", and Chen Lei unsurprisingly talked about relevant aspects.

Like many of its peers, Pinduoduo has actively used its advantages to provide services to consumers during the epidemic, he said. During the process, I felt that there were some deficiencies in the operation of the whole company, such as the perception of market changes and the understanding of consumer needs, and there was still a lot of room for improvement. "This is the biggest impact of the epidemic on us."

Therefore, "Pinduoduo's current focus remains on better serving its existing users, being consumer-oriented, consolidating their trust in the platform and improving their minds. And hopefully through research and development, through investment in agriculture, through creating value for consumers."

Marketing expenses year-over-year falling 14%, increased investment "more confident"

In fact, for more than a year under Mr. Chen's leadership, Pinduoduo has been cutting back on marketing and spending more on research and development, especially in agriculture.

Reflected in the financial results: In the first quarter of 2022, Pinduoduo's sales and marketing expenses decreased by 14% year-on-year to 11.219 billion yuan, and the proportion of pinduoduo's revenue also further decreased to 47%, from 59% in the same period last year. At the same time, research and development expenses hit a record high, rising 20 percent year-on-year to 2.668 billion yuan, due to the growth of staff numbers and the recruitment of more senior research and development personnel.

Source: Pinduoduo earnings screenshot

That was followed by better earnings. This quarter, Pduo Duo's net profit attributable to common shareholders was 2.60 billion yuan, a year-on-year loss, and a significant decrease from 6.62 billion yuan in the previous quarter, mainly due to the one-time rebate provided by pduo Duo's technical service provider in the fourth quarter of last year. Although the exact amount is not known, it is said to have contributed a significant part of the quarterly profit.

But even after four consecutive quarters of profitability, Pinduoduo claims profitability is not a current priority. Liu Jun, its vice president of finance, explains,"Over the past several quarters, our profits have continued to be driven by the release of operating leverage, particularly a reduction in marketing expenses. We have also reined in spending in the face of lower growth."

"But with increased competition, we still have a lot of room for improvement in serving our customers." Therefore, Liu Jun said,Pall Needs to ramp up investment, which could lead to volatile quarterly profits in the future.And the profitability of the past few quarters gives it more confidence to continue investing for the long term.

Chen is also a firm believer that investment in R&D can lead to high-quality development. "We will continue to increase our investment and this will be reflected in our future financial results."

In agriculture, he said, the team and he have spent a lot of time and energy over the past year evaluating projects and figuring out how to use funds where they are most needed. Some progress has been made, but enabling agriculture through technology is a matter that requires great care and patience.

"We have a long-term strategy in this area. Overall, the current spending is still in the early stages." According to Chen Lei,For such a large investment field, neither the investment cycle nor the intensity of investment will be affected by short - and medium-term fluctuations.

Referring to the outlook for the next few quarters, Liu Jun said that conversion rate or monetization rate is not a predictable indicator and suggested not to pay attention to fluctuations between quarters. In the long run, pinduoduo's monetization rate depends on how much value it creates. "We will continue to adhere to the 'zero commission' policy for agricultural products to fully support farmers and merchants; It also repeatedly said it would invest more in agriculture to improve consumer experience.As the proportion of agricultural products increases, monetization rates may be affected.”

(Author | Liu Mengmeng)