PDD(PDD) - 2023 Q4 - Annual Results

Financial Performance Overview This section presents an overview of the company's financial performance, including management commentary and key highlights for Q4 and fiscal year 2023 Management Commentary Management highlighted 2023 as a pivotal year for high-quality development, emphasizing continued focus on consumer experience, technology innovation, and value delivery, supported by significant R&D investments - Mr. Lei Chen, Chairman and Co-CEO, stated that 2023 was a "pivotal chapter" focused on transitioning towards high-quality development, a strategy that will continue in 2024 with a focus on consumer experience and technology innovation[2] - Mr. Jiazhen Zhao, Executive Director and Co-CEO, noted growing consumer demand and reiterated the company's dedication to offering great value and exceptional service[2] - Ms. Jun Liu, VP of Finance, confirmed that R&D investment surpassed RMB 10 billion for the second year in a row, underscoring a commitment to technology and agricultural advancements[2] Fourth Quarter 2023 Financial Highlights PDD Holdings reported exceptionally strong Q4 2023 growth, with total revenues surging, primarily driven by transaction services, leading to substantial increases in both operating profit and net income Q4 2023 Key Financial Metrics (YoY Growth) | Metric | Q4 2023 (RMB Million) | YoY Growth | | :--- | :--- | :--- | | Total Revenues | 88,881.0 | 123% | | Operating Profit | 22,395.0 | 146% | | Net Income | 23,280.3 | 146% | | Revenues from Transaction Services | 40,205.4 | 357% | Fiscal Year 2023 Financial Highlights For fiscal year 2023, the company achieved robust revenue growth, with substantial increases in operating profit and net income, reflecting strong performance driven by transaction services Fiscal Year 2023 Key Financial Metrics (YoY Growth) | Metric | FY 2023 (RMB Million) | YoY Growth | | :--- | :--- | :--- | | Total Revenues | 247,639.2 | 90% | | Operating Profit | 58,698.8 | 93% | | Net Income | 60,026.5 | 90% | | Revenues from Transaction Services | 94,098.7 | 241% | Detailed Financial Results This section provides a detailed breakdown of the company's financial performance for the fourth quarter and full fiscal year 2023, covering revenue, costs, expenses, profitability, and cash flow Fourth Quarter 2023 Financial Results Q4 2023 revenue growth was propelled by online marketing and transaction services, while operating expenses increased, resulting in strong GAAP diluted EPS and operating cash flow Revenue Total Q4 revenues significantly increased, driven primarily by strong growth in transaction services, complemented by online marketing services Q4 2023 Revenue Breakdown (RMB Million) | Revenue Source | Q4 2023 | Q4 2022 | YoY Growth | | :--- | :--- | :--- | :--- | | Online marketing services and others | 48,675.6 | 31,023.4 | 57% | | Transaction services | 40,205.4 | 8,796.6 | 357% | | Total Revenues | 88,881.0 | 39,820.0 | 123% | Costs and Expenses Total operating expenses increased significantly, primarily due to higher sales and marketing expenses and a substantial rise in costs of revenues reflecting increased fulfillment and payment processing fees Q4 2023 Operating Expenses (RMB Million) | Expense Item | Q4 2023 | Q4 2022 | YoY Growth | | :--- | :--- | :--- | :--- | | Costs of revenues | 35,078.3 | 8,926.7 | 293% | | Sales and marketing | 26,638.5 | 17,732.4 | 50% | | General and administrative | 1,904.8 | 1,640.5 | 16% | | Research and development | 2,864.4 | 2,406.7 | 19% | Profitability and Cash Flow Q4 saw substantial growth in operating profit and net income, alongside a significant increase in diluted EPS and strong net cash generated from operating activities Q4 2023 Profitability (RMB Million) | Metric | Q4 2023 | Q4 2022 | YoY Growth | | :--- | :--- | :--- | :--- | | Operating Profit | 22,395.0 | 9,113.7 | 146% | | Net Income | 23,280.3 | 9,453.7 | 146% | - Diluted earnings per ADS was RMB 15.83, compared to RMB 6.52 in Q4 2022. Non-GAAP diluted earnings per ADS was RMB 17.32[6][27] - Net cash generated from operating activities was RMB 36.9 billion, up from RMB 26.6 billion in Q4 2022, mainly due to the increase in net income[6] Fiscal Year 2023 Financial Results Full year 2023 results show robust revenue growth, particularly in transaction services, with increased operating expenses leading to substantial gains in operating profit, diluted EPS, and operating cash flow Revenue Full-year 2023 revenue saw significant growth, primarily driven by exceptional performance in transaction services, complemented by strong contributions from online marketing services Fiscal Year 2023 Revenue Breakdown (RMB Million) | Revenue Source | FY 2023 | FY 2022 | YoY Growth | | :--- | :--- | :--- | :--- | | Online marketing services and others | 153,540.6 | 102,931.1 | 49% | | Transaction services | 94,098.7 | 27,626.5 | 241% | | Total Revenues | 247,639.2 | 130,557.6 | 90% | Costs and Expenses Total operating expenses for FY2023 increased, primarily driven by higher sales and marketing expenses, with a modest rise in research and development costs Fiscal Year 2023 Operating Expenses (RMB Million) | Expense Item | FY 2023 | FY 2022 | YoY Growth | | :--- | :--- | :--- | :--- | | Costs of revenues | 91,723.6 | 31,462.3 | 192% | | Sales and marketing | 82,188.9 | 54,343.7 | 51% | | General and administrative | 4,075.6 | 3,964.9 | 3% | | Research and development | 10,952.4 | 10,384.7 | 5% | Profitability and Cash Flow FY2023 profitability saw substantial growth in operating profit and net income, with diluted EPS nearly doubling and strong net operating cash flow driven by increased net income Fiscal Year 2023 Profitability (RMB Million) | Metric | FY 2023 | FY 2022 | YoY Growth | | :--- | :--- | :--- | :--- | | Operating Profit | 58,698.8 | 30,401.9 | 93% | | Net Income | 60,026.5 | 31,538.1 | 90% | - Diluted earnings per ADS was RMB 41.15, compared to RMB 21.93 in 2022. Non-GAAP diluted earnings per ADS was RMB 46.51[31] - Net cash generated from operating activities was RMB 94.2 billion, compared to RMB 48.5 billion in 2022[31] Financial Statements This section presents the company's key financial statements, including condensed consolidated balance sheets, statements of cash flows, and reconciliation of GAAP to non-GAAP measures Condensed Consolidated Balance Sheets As of December 31, 2023, PDD's balance sheet reflects significant growth in total assets, primarily driven by cash and investments, alongside increases in total liabilities and shareholders' equity Key Balance Sheet Items (RMB Billion) | Item | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash, cash equivalents and short-term investments | 217.2 | 149.4 | | Total Assets | 348.1 | 237.1 | | Total Liabilities | 160.8 | 119.3 | | Total Shareholders' Equity | 187.2 | 117.8 | Condensed Consolidated Statements of Cash Flows For FY2023, the company generated substantial cash from operating activities, primarily due to higher net income, while utilizing cash for investing and financing activities, ending the year with a strong cash balance Fiscal Year 2023 Cash Flow Summary (RMB Billion) | Cash Flow from | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Operating Activities | 94.2 | 48.5 | | Investing Activities | (55.4) | (22.4) | | Financing Activities | (9.0) | 0.01 | Reconciliation of GAAP to Non-GAAP Measures The company provides non-GAAP financial measures, excluding certain non-cash charges, to offer an alternative view of operating performance, showing higher non-GAAP operating profit and net income compared to GAAP for FY 2023 - Non-GAAP measures exclude share-based compensation expenses, fair value change of certain investments, and interest expenses related to the convertible bonds' amortization to face value[21][31] GAAP vs. Non-GAAP Reconciliation for FY 2023 (RMB Million) | Metric | GAAP | Non-GAAP | | :--- | :--- | :--- | | Operating Profit | 58,698.8 | 65,777.6 | | Net Income | 60,026.5 | 67,899.3 |