PDD(PDD) - 2024 Q4 - Annual Report

Executive Summary Management Commentary PDD Holdings' management emphasized a commitment to driving sustainable growth for its platform ecosystem and the broader supply chain, focusing on high-quality development and continuous investment to benefit consumers, merchants, and all participants - Committed to driving sustainable growth for both the platform ecosystem and the broader supply chain[3] - Driving a high-quality development strategy through targeted innovations in platform operations and industry support policies[3] - Invested consistently in the platform ecosystem, leveraging digital capabilities to give back to consumers and support quality merchants[3] - Prioritizing investments in the platform ecosystem as the cornerstone of long-term value creation strategy[3] Fourth Quarter 2024 Financial Highlights PDD Holdings reported strong financial growth in Q4 2024, with total revenues increasing by 24% and operating profit by 14%, while net income attributable to ordinary shareholders also saw an 18% increase, reflecting robust performance Fourth Quarter 2024 Key Financials (YoY Growth) | Metric | Q4 2024 (RMB million) | Q4 2023 (RMB million) | YoY Change | | :--------------------------------- | :--------------------- | :--------------------- | :--------- | | Total Revenues | 110,610.1 | 88,881.0 | +24% | | Operating Profit (GAAP) | 25,592.2 | 22,395.0 | +14% | | Operating Profit (Non-GAAP) | 27,996.5 | 24,579.9 | +14% | | Net Income Attributable (GAAP) | 27,446.6 | 23,280.3 | +18% | | Net Income Attributable (Non-GAAP) | 29,850.9 | 25,476.5 | +17% | Fiscal Year 2024 Financial Highlights For the full fiscal year 2024, PDD Holdings achieved significant growth, with total revenues surging by 59% and operating profit by 85%, while net income attributable to ordinary shareholders increased by 87%, demonstrating exceptional annual performance Fiscal Year 2024 Key Financials (YoY Growth) | Metric | FY 2024 (RMB million) | FY 2023 (RMB million) | YoY Change | | :--------------------------------- | :--------------------- | :--------------------- | :--------- | | Total Revenues | 393,836.1 | 247,639.2 | +59% | | Operating Profit (GAAP) | 108,422.9 | 58,698.8 | +85% | | Operating Profit (Non-GAAP) | 118,306.4 | 65,777.6 | +80% | | Net Income Attributable (GAAP) | 112,434.5 | 60,026.5 | +87% | | Net Income Attributable (Non-GAAP) | 122,343.6 | 67,899.3 | +80% | Fourth Quarter 2024 Unaudited Financial Results Revenues Total revenues for Q4 2024 increased by 24% year-over-year to RMB 110,610.1 million, primarily driven by a 17% increase in online marketing services and a significant 33% surge in transaction services Q4 2024 Revenue Breakdown (YoY Growth) | Revenue Type | Q4 2024 (RMB million) | Q4 2023 (RMB million) | YoY Change | | :----------------------------- | :--------------------- | :--------------------- | :--------- | | Total Revenues | 110,610.1 | 88,881.0 | +24% | | Online Marketing Services & Others | 57,011.1 | 48,675.6 | +17% | | Transaction Services | 53,599.0 | 40,205.4 | +33% | - The increase in total revenues was primarily due to the increase in revenues from online marketing services and transaction services[5] Costs and Expenses Total costs of revenues increased by 36% in Q4 2024, mainly due to higher fulfillment and payment processing fees, while total operating expenses rose by 19%, driven by increased sales and marketing spending on promotion and advertising activities Q4 2024 Costs and Expenses (YoY Growth) | Expense Type | Q4 2024 (RMB million) | Q4 2023 (RMB million) | YoY Change | | :----------------------------- | :--------------------- | :--------------------- | :--------- | | Total Costs of Revenues | 47,798.4 | 35,078.3 | +36% | | Total Operating Expenses | 37,219.5 | 31,407.8 | +19% | | Sales and Marketing Expenses | 31,356.9 | 26,638.5 | +18% | | General and Administrative Expenses | 2,085.4 | 1,904.8 | +9.5% | | Research and Development Expenses | 3,777.2 | 2,864.4 | +31.9% | - Increase in costs of revenues mainly came from increased fulfillment fees and payment processing fees[6] - Increase in total operating expenses was primarily due to increased spending in promotion and advertising activities[6][7] Profitability Operating profit for Q4 2024 increased by 14% year-over-year to RMB 25,592.2 million (GAAP) and RMB 27,996.5 million (Non-GAAP), while net income attributable to ordinary shareholders grew by 18% (GAAP) and 17% (Non-GAAP) respectively Q4 2024 Profitability (YoY Growth) | Metric | Q4 2024 (RMB million) | Q4 2023 (RMB million) | YoY Change | | :--------------------------------- | :--------------------- | :--------------------- | :--------- | | Operating Profit (GAAP) | 25,592.2 | 22,395.0 | +14% | | Operating Profit (Non-GAAP) | 27,996.5 | 24,579.9 | +14% | | Net Income Attributable (GAAP) | 27,446.6 | 23,280.3 | +18% | | Net Income Attributable (Non-GAAP) | 29,850.9 | 25,476.5 | +17% | Earnings Per Share (EPS) Basic earnings per ADS for Q4 2024 increased to RMB 19.76, up 16.2% from RMB 17.00 in the prior year, with diluted EPS per ADS and Non-GAAP diluted EPS per ADS also showing similar growth Q4 2024 Earnings Per ADS (YoY Growth) | Metric | Q4 2024 (RMB) | Q4 2023 (RMB) | YoY Change | | :-------------------------- | :------------ | :------------ | :--------- | | Basic EPS per ADS | 19.76 | 17.00 | +16.2% | | Diluted EPS per ADS | 18.53 | 15.83 | +17.1% | | Non-GAAP Diluted EPS per ADS | 20.15 | 17.32 | +16.3% | Cash Flow and Balance Sheet Net cash generated from operating activities in Q4 2024 was RMB 29,547.2 million, a decrease from the prior year, however, cash, cash equivalents, and short-term investments significantly increased by 52.7% year-over-year to RMB 331.6 billion as of December 31, 2024 Q4 2024 Cash Flow & Balance Sheet Highlights | Metric | Q4 2024 (RMB million) | Q4 2023 (RMB million) | YoY Change | | :------------------------------------ | :--------------------- | :--------------------- | :--------- | | Net Cash from Operating Activities | 29,547.2 | 36,890.7 | -19.9% | | Cash, Cash Equivalents & Short-term Investments (as of Dec 31) | 331,600.0 | 217,200.0 | +52.7% | | Other Non-current Assets (as of Dec 31) | 83,400.0 | 48,000.0 | +73.7% | - Other non-current assets mainly included time deposits, held-to-maturity debt securities, and available-for-sale debt securities[11] Fiscal Year 2024 Unaudited Financial Results Revenues Total revenues for fiscal year 2024 increased substantially by 59% year-over-year to RMB 393,836.1 million, driven by a 29% increase in online marketing services and a remarkable 108% surge in transaction services revenue FY 2024 Revenue Breakdown (YoY Growth) | Revenue Type | FY 2024 (RMB million) | FY 2023 (RMB million) | YoY Change | | :----------------------------- | :--------------------- | :--------------------- | :--------- | | Total Revenues | 393,836.1 | 247,639.2 | +59% | | Online Marketing Services & Others | 197,934.2 | 153,540.6 | +29% | | Transaction Services | 195,901.9 | 94,098.7 | +108% | - The increase in total revenues was primarily due to the increase in revenues from online marketing services and transaction services[12] Costs and Expenses For fiscal year 2024, total costs of revenues increased by 68%, mainly due to higher fulfillment and payment processing fees, while total operating expenses rose by 35%, primarily driven by increased sales and marketing spending and a significant rise in staff-related general and administrative costs FY 2024 Costs and Expenses (YoY Growth) | Expense Type | FY 2024 (RMB million) | FY 2023 (RMB million) | YoY Change | | :----------------------------- | :--------------------- | :--------------------- | :--------- | | Total Costs of Revenues | 153,900.4 | 91,723.6 | +68% | | Total Operating Expenses | 131,512.9 | 97,216.9 | +35% | | Sales and Marketing Expenses | 111,300.5 | 82,188.9 | +35% | | General and Administrative Expenses | 7,553.0 | 4,075.6 | +85% | | Research and Development Expenses | 12,659.4 | 10,952.4 | +15.6% | - Increase in costs of revenues mainly came from increased fulfillment fees and payment processing fees[13] - Increase in sales and marketing expenses mainly due to increased spending in promotion and advertising activities[18] - Increase in general and administrative expenses primarily due to the increase in staff related costs[18] Profitability Operating profit for fiscal year 2024 significantly increased by 85% year-over-year to RMB 108,422.9 million (GAAP) and 80% to RMB 118,306.4 million (Non-GAAP), while net income attributable to ordinary shareholders grew by 87% (GAAP) and 80% (Non-GAAP) respectively FY 2024 Profitability (YoY Growth) | Metric | FY 2024 (RMB million) | FY 2023 (RMB million) | YoY Change | | :--------------------------------- | :--------------------- | :--------------------- | :--------- | | Operating Profit (GAAP) | 108,422.9 | 58,698.8 | +85% | | Operating Profit (Non-GAAP) | 118,306.4 | 65,777.6 | +80% | | Net Income Attributable (GAAP) | 112,434.5 | 60,026.5 | +87% | | Net Income Attributable (Non-GAAP) | 122,343.6 | 67,899.3 | +80% | Earnings Per Share (EPS) Basic earnings per ADS for fiscal year 2024 more than doubled to RMB 81.24, up 83.3% from RMB 44.33 in the prior year, with diluted EPS per ADS and Non-GAAP diluted EPS per ADS also showing substantial growth FY 2024 Earnings Per ADS (YoY Growth) | Metric | FY 2024 (RMB) | FY 2023 (RMB) | YoY Change | | :-------------------------- | :------------ | :------------ | :--------- | | Basic EPS per ADS | 81.24 | 44.33 | +83.3% | | Diluted EPS per ADS | 76.01 | 41.15 | +84.7% | | Non-GAAP Diluted EPS per ADS | 82.71 | 46.51 | +77.8% | Cash Flow Net cash generated from operating activities for fiscal year 2024 increased by 29.5% to RMB 121,929.3 million, primarily due to the increase in net income and favorable changes in working capital FY 2024 Cash Flow Highlights (YoY Growth) | Metric | FY 2024 (RMB million) | FY 2023 (RMB million) | YoY Change | | :------------------------------------ | :--------------------- | :--------------------- | :--------- | | Net Cash from Operating Activities | 121,929.3 | 94,162.5 | +29.5% | - Increase in net cash from operating activities mainly due to the increase in net income and the changes in working capitals[17] Financial Statements Condensed Consolidated Balance Sheets As of December 31, 2024, PDD Holdings reported a significant increase in total assets by 45.1% to RMB 505.03 billion, driven by higher cash, cash equivalents, and short-term investments, while total liabilities increased by 19.2% and total shareholders' equity grew by 67.3% Condensed Consolidated Balance Sheets (as of Dec 31) | Metric | Dec 31, 2024 (RMB thousand) | Dec 31, 2023 (RMB thousand) | Change | | :-------------------------- | :--------------------------- | :--------------------------- | :----- | | Total Assets | 505,034,316 | 348,078,120 | +45.1% | | Total Liabilities | 191,721,192 | 160,836,513 | +19.2% | | Total Shareholders' Equity | 313,313,124 | 187,241,607 | +67.3% | - Current assets increased from RMB 294,750,472 thousand in 2023 to RMB 415,648,232 thousand in 2024[29] - Short-term investments increased from RMB 157,415,365 thousand in 2023 to RMB 273,791,856 thousand in 2024[29] Condensed Consolidated Statements of Income The consolidated statements of income show robust growth in revenues and profitability for both the fourth quarter and the full fiscal year 2024, with total revenues for FY 2024 reaching RMB 393.84 billion, leading to a net income of RMB 112.43 billion Condensed Consolidated Statements of Income (RMB thousand) | Metric | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :--------------------- | :-------- | :-------- | :-------- | :-------- | | Revenues | 110,610,106 | 88,881,036 | 393,836,097 | 247,639,205 | | Costs of Revenues | (47,798,376) | (35,078,272) | (153,900,374) | (91,723,577) | | Operating Profit | 25,592,215 | 22,394,968 | 108,422,862 | 58,698,762 | | Net Income | 27,446,637 | 23,280,309 | 112,434,512 | 60,026,544 | Notes to Financial Information Revenue Breakdown PDD Holdings' revenue growth in both Q4 and FY 2024 was significantly driven by transaction services, which more than doubled year-over-year for the full fiscal year, alongside solid growth in online marketing services Revenue Breakdown (RMB thousand) | Revenue Type | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :----------------------------- | :-------- | :-------- | :-------- | :-------- | | Online Marketing Services & Others | 57,011,061 | 48,675,618 | 197,934,192 | 153,540,553 | | Transaction Services | 53,599,045 | 40,205,418 | 195,901,905 | 94,098,652 | | Total | 110,610,106 | 88,881,036 | 393,836,097 | 247,639,205 | Share-based Compensation Expenses Share-based compensation expenses increased across most categories in FY 2024, with a notable rise in general and administrative expenses, reflecting the company's compensation structure, with total share-based compensation for FY 2024 reaching RMB 9.88 billion Share-based Compensation Expenses (RMB thousand) | Category | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :-------------------------------- | :-------- | :-------- | :-------- | :-------- | | Costs of Revenues | 312,776 | 46,404 | 412,721 | 132,470 | | Sales and Marketing Expenses | 256,314 | 411,048 | 2,216,792 | 2,354,097 | | General and Administrative Expenses | 1,087,472 | 1,230,358 | 4,742,816 | 2,289,272 | | Research and Development Expenses | 747,693 | 497,134 | 2,511,235 | 2,302,955 | | Total | 2,404,255 | 2,184,944 | 9,883,564 | 7,078,794 | Condensed Consolidated Statements of Cash Flows For fiscal year 2024, net cash generated from operating activities increased significantly to RMB 121.93 billion, while net cash used in investing activities more than doubled to RMB 118.36 billion, with financing activities remaining minimal Condensed Consolidated Statements of Cash Flows (RMB thousand) | Activity | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :------------------------------------ | :-------- | :-------- | :-------- | :-------- | | Net Cash from Operating Activities | 29,547,160 | 36,890,671 | 121,929,292 | 94,162,531 | | Net Cash Used in Investing Activities | (30,545,257) | (16,470,671) | (118,356,036) | (55,431,278) | | Net Cash (Used in)/Generated from Financing Activities | 274 | (8,968,297) | 1,164 | (8,960,626) | - Increase in cash, cash equivalents and restricted cash for FY 2024 was RMB 4,414,516 thousand[42] Non-GAAP Financial Measures Definition and Use PDD Holdings uses non-GAAP financial measures to evaluate operating performance and formulate business plans, excluding non-cash charges like share-based compensation, fair value changes of investments, and convertible bond interest expenses, to provide a clearer view of underlying business trends, though these measures are supplemental and not a substitute for U.S. GAAP - Non-GAAP financial measures exclude share-based compensation expenses, fair value change of certain investments, and interest expenses related to convertible bonds' amortization to face value[20][21] - Used by management to evaluate operating performance and formulate business plans, helping identify underlying trends by excluding non-cash charges[21] - Non-GAAP measures are not defined under U.S. GAAP, are not a substitute for GAAP, and may differ from those used by other companies, thus comparability may be limited[22] Reconciliation to GAAP The reconciliation table provides a clear bridge between GAAP and non-GAAP figures for operating profit, net income attributable to ordinary shareholders, and diluted earnings per ADS for both the fourth quarter and the full fiscal year 2024, detailing the adjustments made Reconciliation of Non-GAAP Measures to GAAP (RMB thousand, except per share data) | Metric | Q4 2024 (GAAP) | Q4 2024 (Non-GAAP) | FY 2024 (GAAP) | FY 2024 (Non-GAAP) | | :----------------------------------------- | :------------- | :----------------- | :------------- | :----------------- | | Operating Profit | 25,592,215 | 27,996,470 | 108,422,862 | 118,306,426 | | Net Income Attributable to Ordinary Shareholders | 27,446,637 | 29,850,921 | 112,434,512 | 122,343,561 | | Diluted Earnings per ADS (RMB) | 18.53 | 20.15 | 76.01 | 82.71 | - Non-GAAP adjustments primarily include share-based compensation expenses, interest expenses related to convertible bonds' amortization to face value, and loss from fair value change of certain investments[44] Additional Information Conference Call Details PDD Holdings will host an earnings conference call on March 20, 2025, at 7:30 AM ET to discuss the financial results, with a live webcast and replay available on the investor relations website - Earnings conference call scheduled for 7:30 AM ET on March 20, 2025 (11:30 AM GMT and 7:30 PM HKT)[19] - The conference call will be webcast live at https://investor.pddholdings.com/investor-events, with a replay available at the same website[19] Safe Harbor Statements The report includes standard safe harbor statements, cautioning readers about forward-looking statements and the inherent risks and uncertainties that could cause actual results to differ materially from projections, such as growth strategies, market trends, and regulatory changes - Contains forward-looking statements identified by terminology such as 'will,' 'expects,' 'anticipates,' 'aims,' 'future,' 'intends,' 'plans,' 'believes,' 'estimates,' 'confident,' 'potential,' 'continue' or other similar expressions[24] - Forward-looking statements involve inherent risks and uncertainties, with factors like growth strategies, business development, buyer retention, market trends, competition, and regulatory changes potentially causing actual results to differ materially[24] - The Company undertakes no obligation to update any forward-looking statement, except as required under applicable law[24] About PDD Holdings PDD Holdings is a multinational commerce group focused on integrating businesses and individuals into the digital economy to foster increased productivity and new opportunities for local communities and small businesses - PDD Holdings is a multinational commerce group that owns and operates a portfolio of businesses[26] - Aims to bring more businesses and people into the digital economy[26] - Goal is for local communities and small businesses to benefit from increased productivity and new opportunities[26]