How far will Pinduoduo go from "profit" to profit

　　Han Xu

　　The biggest difference between NON-GAAP and GAAP is the calculation method of equity incentives.

Since Internet-listed companies often engage in large equity incentives, many companies that make profits under NON-GAAP will "turn" into losses under GAAP.

Therefore, at this stage, there is still some water to talk about Pinduoduo's "profit", so adding quotation marks is not wrong.

However, the good news is that only from the third quarter data, Pinduoduo is trending for the better, and the real overall profit may not be far away.

　　Pinduoduo "profits"!

　　Pinduoduo’s financial report for the third quarter of 2020 shows that Pinduoduo’s revenue this quarter was 14.209 billion yuan, an increase of 89% year-on-year; the net loss attributable to Pinduoduo’s common shareholders was 784.7 million yuan, compared with a net loss of 2.335 billion yuan in the same period last year. .

However, under NON-GAAP, in the third quarter of this year, Pinduoduo's net profit was 466.4 million yuan, compared with a net loss of 1.660.4 billion yuan in the same period last year, making it the first quarterly profit.

　　To make a profit for a while and lose money for a while, to understand Pinduoduo's financial report, you must first understand what NON-GAAP is.

　　To put it simply, the biggest difference between NON-GAAP and the US General Accounting Principles (GAAP) is the calculation method of equity incentives.

Since Internet listed companies often engage in large equity incentives, many companies that make profits under NON-GAAP will "turn" into losses under GAAP.

This is why analysts are "spitting out" that Pinduoduo's claimed profit is actually based on "financial skills."

　　So, what are the financial indicators that determine whether a retail company can really make money?

The answer is operating cash flow.

For retail companies, as long as the number of users continues to expand and the net operating cash flow continues to be positive, the company will sooner or later make a profit.

　　Re-examining Pinduoduo according to this set of standards, we can see that Pinduoduo lost 780 million yuan under the GAAP standard in the third quarter.

From GAAP loss to NON-GAAP profit, the items added back are equity incentives, interest on the amortization of the face value of convertible bonds, and fair value changes brought about by long-term investments.

Among them, the "big head" is equity incentives, which has little impact on business trends.

　　Therefore, at this stage, there is still some water to talk about Pinduoduo's "profit", so adding quotation marks is not wrong.

　　However, the good news is that only from the third quarter data, Pinduoduo is trending for the better, and the real overall profit may not be far away.

　　First of all, the number of active users and the annual consumption of a single user have both soared.

　　As of the end of September this year, the number of active users of Pinduoduo for many years reached 731.3 million, compared with 536.3 million in the same period last year, an increase of 36% year-on-year, an increase of 195 million in one year, of which the single-quarter net growth in the third quarter alone was as high as 48.1 million.

From "Pinduoduo, which is used by 500 million people" to "Pinduoduo, which is used by 700 million people", it took only one year.

　　While the user scale continues to grow, the annual consumption of a single user has increased by 27% year-on-year, reaching 1993 yuan.

It can be seen that Pinduoduo not only surpasses the group in terms of the growth rate of active users, but also the growth rate of per capita consumption level is not low.

Of course, this data still has a big gap compared with the old head platform, and there is huge room for growth.

　　Second, revenue has returned to a high growth trend.

　　From September last year to September this year, thanks to the "restart" of the domestic consumer market, Pinduoduo's GMV (the total transaction volume over a period of time, mostly used in the e-commerce industry) reached 1,457.6 billion yuan, a year-on-year increase of 73%.

　　The growth of GMV drove up revenue.

In the third quarter of this year, Pinduoduo's revenue exceeded 14.2 billion yuan, a year-on-year increase of 89%.

This was mainly due to the growth of online marketing service revenue: online marketing service revenue was 12.877 billion yuan, a year-on-year increase of 92%.

　　Again, cash flow is abundant.

The financial report shows that as of the end of September, Pinduoduo held cash, cash equivalents and short-term investments of 45.6 billion yuan.

　　Finally, the efficiency of capital use has improved.

In the third quarter, Pinduoduo's sales and marketing expenses reached 10.07 billion yuan, an increase of 46% year-on-year, which is equivalent to an average daily "burning" of 100 million yuan in the third quarter.

This shows that Pinduoduo is still increasing its input on the user side.

It should be noted that, in parallel with the high rate of "burning money", the "cost-effectiveness" of the "10 billion subsidy" is getting higher and higher, and the ratio of promotion fees to revenue has dropped to 71%, which is the result since its listing. lowest point.

　　The above are the contents disclosed in the financial report.

　　In fact, apart from the financial report, Pinduoduo has another growth point-"buy more food."

　　Since Chen Lei, the new CEO of Pinduoduo, took office in July this year, he has further increased strategic investment in the new e-commerce ecosystem, especially the agricultural product value chain.

The platform has launched a series of innovative businesses represented by "Buy Duo Duo", and strive to promote the innovation of the whole chain of agriculture from planting, production, circulation to consumption.

According to Chen Lei's idea, Pinduoduo will empower the entire industrial chain from agricultural products to users' tables, and become China's largest agricultural product upstream platform.

In the future, the platform will continue to increase investment in the field of agricultural products, including continuous investment in grocery shopping, building freezers and cold chains with partners, and improving the efficiency of agricultural product circulation.

　　Of course, the "fundamental" of "burning money" cannot be avoided when talking about e-commerce platforms at this stage.

Especially in the face of the "money burning war" of "Double Eleven", all households have given up their "blood capital", and it is reasonable for Pinduoduo to increase subsidies again.

Inferring from this, it is not impossible for Pinduoduo to lose money in the next quarter.

But no matter how you say it, once the profit model has been verified, the rest is only a matter of time.

　　The market's judgment is roughly the same.

Boosted by the earnings report, the US stock market closed on November 12, and Pinduoduo's share price soared by 20.41% in one day.

After rough calculations, Pinduoduo's share price has risen by about 255% this year.

　　I hope Pinduoduo will remove the "profit" quotation marks as soon as possible.