Didi disclosed its first financial report since its listing. On December 30, 2021, Didi travel (hereinafter referred to as "didi") announced the unaudited second quarter financial report and the third quarter financial report. The third quarter is also the first quarter for didi to stop registering new users. The financial report shows that in the third quarter of 2021, Didi achieved an operating revenue of 42.68 billion yuan, a year-on-year decrease of 1.67% and a net loss of 30.38 billion yuan. Affected by the suspension of registration of new users, it is expected that Didi's performance will decline. However, unexpectedly, Didi's operating revenue decreased less than expected; But the loss was much larger than expected. The main reason is that didi has made some changes after listing. Sacrifice profits to maintain growth On the surface, the suspension of registration of new users has little impact on Didi. But in fact, Didi increased the driver / user stickiness by increasing subsidies, maintained the existing market scale, and basically kept its revenue flat year-on-year. The price behind it was to expand the loss range. Didi's current operating revenue mainly comes from three businesses: domestic travel business, international business and other businesses. Among them, domestic travel business includes China's online car hailing, taxi, agency driving, downwind and other businesses; International business includes international travel, takeout and other businesses; Other businesses include sharing bicycles and sharing electric vehicles, car services, freight, automatic driving and financial services. Domestic travel business is Didi's core business, contributing more than 90% of its revenue. In 2018, Didi's domestic travel business reached 133.207 billion yuan, with a year-on-year increase of 11.06% to 147.94 billion yuan in 2019, and a year-on-year decrease of 9.66% affected by the epidemic in 2020. However, with the effective control of the domestic epidemic, Didi's domestic travel business recovered, reaching 39.235 billion yuan in the first quarter of 2021, a year-on-year increase of 107.1%. (data source: company announcement) However, due to the suspension of new user registration, Didi's domestic travel business declined in the third quarter of 2021, with a year-on-year decrease of 5.11%, resulting in a year-on-year decrease of 1.67% in Didi's overall business. The logic behind this is that didi is increasing subsidies, improving driver / user stickiness and maintaining the existing market model, which is intended to sacrifice profits to ensure growth. The most intuitive manifestation of increasing subsidy investment is that Didi's sales expense rate has increased significantly. In this quarter, Didi's sales expense was 4.441 billion yuan, with a sales expense rate of 10.41%, an increase of 4.29 percentage points year-on-year. This is mainly due to the serious homogenization of online car Hailing industry, low user switching cost and poor network effect. Especially when didi is in the period of network security review, new users stop registering. Facing the siege and interception of competitors, Didi has to increase subsidies to maintain the scale of existing users, resulting in its high sales expense rate. However, the increase in subsidies is only one of the reasons for Didi's huge losses in the third quarter. Another reason is the investment loss of 20.8 billion yuan caused by the contraction of orange heart. Community group buying slams the brakes Didi is the first Internet giant to arrange community group buying after the epidemic, but it is also the first giant to step on the emergency brake. In June 2020, the orange heart incubated by didi went online and settled in Chengdu, Chongqing, Mianyang, Neijiang and other cities successively. Its founder Cheng Wei once shouted the slogan of "no upper limit on investment" and vowed to win the war. But for Didi, who is deeply trapped in the center of the regulatory storm, burning money is not a long-term plan after all. After burning money for a year, orange heart preferred made drastic reforms and began to shift its focus from growth to profitability. Peng Cheng pomelo investment said that on the one hand, orange heart preferred to take small stores as its core customers, Wholesale goods (i.e. large goods) to them, link brands and small stores, so as to build a no loss performance system; on the other hand, after September, orange heart preferred began to shrink the front, reducing 31 provinces in 9 regions to 9 provinces in 3 regions. It also cut down the first, second and third tier cities, reduced SKUs, focused only on the group purchase of sinking market 2c, and focused on purchasing goods for this consumer group. While shrinking the front and reducing losses, the preferred market share of orange heart has continued to decline since the beginning of the year. CSC said in the monthly report of community group buying industry that as of October 2021, it had fallen to 15%, lower than 54% of meituan's preference, 30% of buying more vegetables and 16% of Xingsheng's preference in the same period. In addition, affected by the great changes in fair value caused by the withdrawal of orange heart preferred, Didi confirmed a net investment loss of RMB 20.8 billion in the third quarter. It is worth noting that Didi's gross profit margin in the third quarter was 4.43%, down 9.57 percentage points year-on-year, further squeezing its profit space, mainly because Didi's bicycle and electric bicycle sharing business generated an asset impairment provision of 2.2 billion yuan in the quarter. In short, in the third quarter of 2021, Didi's net loss was 30.38 billion yuan, which was caused by the increase of user subsidies, the increase of investment loss caused by the contraction of orange heart preference and the increase of asset impairment loss. How far can didi go? According to the data, Didi has always been at a loss (except that in 2021q1, Didi made a profit due to a significant increase in investment income). In 2018, 2019 and 2020, Didi had net losses of RMB 14.979 billion, RMB 9.733 billion and RMB 10.608 billion respectively. This also means that even if Didi occupies 90% of the market share for four consecutive years, it is difficult for one company to make a profit. However, although didi is in huge losses, its cash flow is abundant. By the end of the third quarter of 2021, Didi's book capital (cash and cash equivalents, short-term investment) had accumulated 61.203 billion yuan, including 27.7 billion yuan of listed financing. According to Didi's current money burning progress, it can support half a year. However, the "sword of Damocles" of safety and compliance risk is always hanging over Didi's head, and delisting from the New York Stock Exchange has become inevitable. In the financial report, Didi disclosed the progress of delisting and share conversion in Hong Kong. It said that the board of directors supported the company's delisting from the New York Stock Exchange and approved the company to carry out relevant work. The board of directors also authorized the company to start preparations for listing on the main board of Hong Kong. Didi is not yet profitable. Once the capital chain is broken, the consequences will be unimaginable. This also means that listing and financing in Hong Kong has become Didi's last straw. In addition, the resignation of Zhang Yong, chairman and CEO of Alibaba, as a director of Didi's board of directors may be due to Alibaba's initiative to "exit" businesses unrelated to its main business under the background of strengthening antitrust and preventing disorderly expansion of capital. It is a measure for its capital development from disorderly to orderly, which is conducive to reducing antitrust risk. (Xinhua News Agency)