Pinduoduo : Fourth Quarter 2019 Results Presentation

Pinduoduo 4Q 2019 Results

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Disclaimer

The following presentation has been prepared by Pinduoduo Inc. ("Pinduoduo" or the "Company") solely for informational purposes and should not be construed to be, directly or indirectly, in whole or in part, an offer to buy or sell and/or an invitation and/or a recommendation and/or a solicitation of an offer to buy or sell any security or instrument or to participate in any investment or trading strategy, nor shall any part of it form the basis of, or be relied on in connection with, any contract or investment decision in relation to any securities or otherwise.

This presentation does not contain all relevant information relating to the Company or its securities, particularly with respect to the risks and special considerations involved with an investment in the securities of the Company. Nothing contained in this document shall be relied upon as a promise or representation as to the past or future performance of the Company. Past performance does not guarantee or predict future performance.

You acknowledge that any assessment of the Company that may be made by you will be independent of this document and that you will be solely responsible for your own assessment of the market and the market position of the Company and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of the business of the Company.

This document contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward- looking statements can be identified by terminology such as "will," "expects," "anticipates," "aims," "future," "intends," "plans," "believes," "estimates," "confident," "potential," "continue" or other similar expressions. Among other things, the business outlook and quotations from management in this announcement, as well as Pinduoduo's strategic and operational plans, contain forward-looking statements. Pinduoduo may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the "SEC"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including but not limited to statements about Pinduoduo's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Pinduoduo's growth strategies; its future business development, results of operations and financial condition; its ability to understand buyer needs and provide products and services to attract and retain buyers; its ability to maintain and enhance the recognition and reputation of its brand; its ability to rely on merchants and third-party logistics service providers to provide delivery services to buyers; its ability to maintain and improve quality control policies and measures; its ability to establish and maintain relationships with merchants; trends and competition in China's e- commerce market; changes in its revenues and certain cost or expense items; the expected growth of China's e-commerce market; PRC governmental policies and regulations relating to Pinduoduo's industry, and general economic and business conditions globally and in China and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in Pinduoduo's filings with the SEC. Pinduoduo undertakes no obligation to update any forward-looking statement, except as required under applicable law.

This document also contains non-GAAP financial measures, the presentation of which is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America. In addition, the Company's calculation of these non-GAAP financial measures may be different from the calculation used by other companies, and therefore comparability may be limited. The reconciliation of those measures to the most comparable GAAP measures is contained within this document or the earnings press release.

This document speaks as of Dec 31, 2019. Neither the delivery of this document nor any further discussions of the Company with any of the recipients shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since that date.

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4Q 2019 Highlights

LTM(1) GMV(2)	Revenues
RMB1,006.6bn	RMB10,792.7mn
113% YoY Growth	91% YoY Growth
LTM(1) Active Buyers(3)	Average MAUs(4)
585.2mn	481.5mn
40% YoY Growth	77% YoY Growth

Notes:

1. "LTM", Last Twelve Months, references to the twelve-month period that ends on the last day of the month or quarter indicated.
2. "GMV" refers to the total value of all orders for products and services placed on the Pinduoduo mobile platform, regardless of whether the products and services are actually sold, delivered or returned. Buyers on the platform are not charged for shipping fees in addition to the listed price of merchandise. Hence, merchants may embed the shipping fees in the listed price. If embedded, then the shipping fees are included in GMV. As a prudential matter aimed at eliminating any influence on Pinduoduo's GMV of irregular transactions, the Company excludes from its calculation of GMV transactions in certain product categories over certain amounts and transactions by buyers in certain product categories over a certain amount per day.
3. "Active buyers" in a given period references to the number of user accounts that placed one or more orders (i) on the Pinduoduo mobile app, and (ii) through social networks and access points in that period, regardless of

whether the products and services are actually sold, delivered or returned.

(4) "MAUs", Monthly Active Users, refers to the number of user accounts that visited the Pinduoduo mobile app during a given month, which does not include those that accessed the platform through social networks and	3
access points.

Fiscal Year 2019 Highlights

LTM(1) GMV(2)	Revenues
RMB1,006.6bn	RMB30,141.9mn
113% YoY Growth	130% YoY Growth
LTM(1) Active Buyers(3)	Total Orders(4)
585.2mn	19.7bn
40% YoY Growth	77% YoY Growth

Notes:

1. "LTM", Last Twelve Months, references to the twelve-month period that ends on the last day of the month or quarter indicated.
2. "GMV" refers to the total value of all orders for products and services placed on the Pinduoduo mobile platform, regardless of whether the products and services are actually sold, delivered or returned. Buyers on the platform are not charged for shipping fees in addition to the listed price of merchandise. Hence, merchants may embed the shipping fees in the listed price. If embedded, then the shipping fees are included in GMV. As a prudential matter aimed at eliminating any influence on Pinduoduo's GMV of irregular transactions, the Company excludes from its calculation of GMV transactions in certain product categories over certain amounts and transactions by buyers in certain product categories over a certain amount per day.
3. "Active buyers" in a given period references to the number of user accounts that placed one or more orders (i) on the Pinduoduo mobile app, and (ii) through social networks and access points in that period, regardless of

whether the products and services are actually sold, delivered or returned.
(4) "Total orders" are to the total number of orders for products and services placed on our Pinduoduo mobile platform, regardless of whether the products and services are actually sold, delivered or returned.	4

Strong GMV Growth of 113% YoY …

GMV

(LTM, RMB in billions)

113% YoY

1,006.6

840.2

709.1

141.2

557.4

471.6

344.8

262.1

198.7

LTM Dec-17

LTM Mar-18

LTM Jun-18

LTM Sep-18

LTM Dec-18

LTM Mar-19

LTM Jun-19

LTM Sep-19

LTM Dec-19

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… Driven by Rapidly Expanding User Base and Spending per Active Buyer

														40% YoY
														483.2	536.3	585.2
Active Buyers			294.9	343.6	385.5	418.5	443.3
244.8
(LTM, in millions)
		LTM Dec-17		LTM Mar-18		LTM Jun-18		LTM Sep-18		LTM Dec-18		LTM Mar-19		LTM Jun-19		LTM Sep-19		LTM Dec-19
														53% YoY
														1,467.5	1,566.7	1,702.1
												1,257.3
Annual Spending					762.8	894.4	1,126.9
576.9	673.9
Per Active Buyer(1)
(LTM, RMB)		LTM Dec-17		LTM Mar-18		LTM Jun-18		LTM Sep-18		LTM Dec-18		LTM Mar-19		LTM Jun-19		LTM Sep-19		LTM Dec-19
															77% YoY
																429.6	481.5
														366.0
MAUs					195.0	231.7	272.6	289.7
141.0	166.2
(Average, in millions)
		4Q17		1Q18		2Q18		3Q18		4Q18		1Q19		2Q19		3Q19		4Q19

Notes:	6
(1)	"Annual spending per active buyer" in a given period refers to the quotient of total GMV in that period divided by the number of active buyers in the same period.

Increasing Revenues and Monetization Rate

Revenues

(RMB in millions)

91% YoY

10,792.7

7,290.0 7,513.9

5,653.9

4,545.2

3,372.4

2,709.0

1,179.4 1,384.6

Monetization Rate(1)

(%, LTM)

2.9% 2.9% 3.0% 3.0%

2.8%

2.5%

2.2%

1.6%

1.2%

4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19

LTM Dec-17LTMMar-18LTMJun-18 LTM Sep-18LTMDec-18LTMMar-19LTMJun-19 LTM Sep-19LTMDec-19

Notes:	7
(1)	"Monetization Rate" is revenues expressed as a percentage of total GMV for a given LTM period.

Cost Structure

Non-GAAP(1) Cost of Revenues(2)

(RMB in millions)
% of	32%	23%	14%	23%	25%	19%	22%	24%	19%
Revenues

2,030.2

1,824.8

1,591.0

1,421.9

Non-GAAP Sales & Marketing Expenses

(RMB in millions)
% of	64%	88%	108%	90%	103%	103%	81%	89%	84%
Revenues

9,035.2

6,689.7

5,832.1 5,895.3

4,693.1

774.1

373.8 318.4 387.3

869.0

2,938.4 3,049.2

1,216.3

753.4

4Q17

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

4Q19

4Q17

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

4Q19

Notes:
(1)	Our Non-GAAP measures exclude share-based compensation expenses and interest expenses related to the convertible bonds' amortization to face value. Please refer to our earnings press release for more details.	8
(2)	Adjusting for a payment rebate from Tencent, our gross profit margin in 1Q19 would have been 73%

Cost Structure (Cont'd)

Non-GAAP(1) General & Administrative Expenses

(RMB in millions)
% of	1%	2%	1%	1%	1%	1%	1%	3%	1%
Revenues

230.5

																121.2
												91.3
								65.9	67.1
				30.0	40.8
		23.7
12.0
	4Q17		1Q18		2Q18		3Q18		4Q18		1Q19		2Q19		3Q19		4Q19

Non-GAAP Research & Development Expenses

(RMB in millions)
% of	4%	5%	6%	9%	8%	12%	8%	12%	9%
Revenues

942.8

892.5

610.8

537.9

446.8

298.3

169.0

50.2 65.7

4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19

Notes:	9
(1)	Our Non-GAAP measures exclude share-based compensation expenses and interest expenses related to the convertible bonds' amortization to face value. Please refer to our earnings press release for more details.

Margin Improvement with Rapid Growth

Non-GAAP(1) Operating Loss			Non-GAAP Net Loss Attributable to Ordinary Shareholders
(RMB in millions)				(RMB in millions)
% of	-1%	-17%-30%-23%-37%-36%	-12%	-28%-12%	% of	2%	-19%-25%-18%-34%-30%	-6%	-22%	-8%
Revenues	Revenues

	4Q17		1Q18		2Q18		3Q18			4Q18			1Q19	2Q19			3Q19			4Q19			4Q17		1Q18		2Q18		3Q18			4Q18			1Q19	2Q19			3Q19	4Q19
(10.0)																						26.3
		(239.5)
				(815.7)	(790.0)								(898.4)											(267.9)												(411.3)
																													(618.9)
																			(1,336.6)							(673.4)													(815.0)
											(1,621.9)
								(2,112.9)																						(1,379.1)
										(2,123.5)											(1,895.9)			(1,660.4)

Notes:

(1) Our Non-GAAP measures exclude share-based compensation expenses, impairment of a long-term investment (which so far we recorded in 4Q17 only) and interest expenses related to the convertible bonds' 10 amortization to face value. Please refer to our earnings press release for more details.

Balance Sheet

Ending Cash, Cash Equivalents and Restricted Cash(1)

(RMB in millions)

33,345.9

30,539.7

12,429.0

Dec 31, 2017	Dec 31, 2018	Dec 31, 2019
Notes
(1) As the Company lost its EGC status on December 31, 2018, the Company adopted the guidance of ASU 2016-18 issued by FASB in November 2016, which requires that a statement of cash flows explain the
change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Pursuant to the guidance, the Company retrospectively restated	11
the statement of cash flows in the comparative periods.