Meituan's Wang Xing responds to JD.com's 10 billion subsidy for food delivery: will spare no effort to win the competition | Earnings Call

On May 26, Meituan announced its Q1 2025 financial report, showing strong growth in both revenue and net profit. Total revenue reached 86.6 billion yuan, a year-on-year increase of 18.1%, with operating profit soaring by 102.8% year-on-year. The profit margin of core business significantly improved, and losses in new businesses narrowed considerably.

He stated that Meituan has also experienced several rounds of intense competition in the past and believes that Meituan can win this time as well. Meituan welcomes new players entering this market and recognizes the enormous potential of the food delivery industry. At the same time, Meituan has noted that some subsidies in the current industry competition are irrational, accompanied by low quality and low prices.

Host:

Welcome to our Q1 2025 earnings conference call. Joining us today are Mr. Wang Xing, Chairman and CEO of Meituan, and Mr. Chen Shaohui, Senior Vice President and Chief Financial Officer.

In today’s conference call, the management will first review the performance of Q1 2025, followed by a Q&A session. Now, I will hand the meeting over to Mr. Wang Xing.

Wang Xing:

Hello everyone. In the first quarter, our business maintained stable growth, with revenue increasing by 18.1% year-on-year to 86.6 billion yuan. The number of annual transacting users and annual active merchants both reached new heights. We are pleased that more and more consumers and merchants are choosing Meituan as their preferred platform for local services.

In addition to our ongoing efforts to enhance products and services to improve their experience, we continue to expand our investments in ecosystem development, actively promoting the healthy development of the industry and unlocking greater consumption potential for local services in China through improved supply and service innovation.

Since we launched our food delivery business over 11 years ago, we have continuously diversified our product offerings, broadened our price range, and optimized our 30-minute delivery network to provide better services and choices for hundreds of millions of consumers. Over the years, we have also supported millions of merchants, especially small and medium-sized enterprises, helping them reach new customers, achieve business growth, and cope with industry cycles. To facilitate the industry's transition to a phase focused on healthy development, we aim to further promote industry transformation, improve the online business operating environment, and create greater value for the entire service industry through our innovative and refined supply models. We continue to help restaurants and merchants discover new growth opportunities. For example, we actively promote brand satellite stores, which enable chain restaurants to rapidly expand their geographical coverage at a much lower cost than traditional dining venues.

As of the end of the first quarter, over 480 brands have successfully launched more than 3,000 high-quality brand satellite stores on Meituan. Even more impressively, the average revenue per store is several times that of typical dining establishments. In addition to brand satellite stores, we have also designed other innovative offline business formats, providing customized growth strategies and operational solutions for chain restaurant merchants. Furthermore, we have launched our self-operated cloud kitchens tailored specifically for chain restaurant brands.

At the same time, we fully recognize that small and medium-sized merchants are the cornerstone of China's catering service industry. These businesses are also an important part of local employment and community economies. We remain firmly committed to providing more support for small and medium-sized merchants Our goal is to ensure that small and medium-sized merchants who operate diligently on our platform gain consumer recognition and trust, gradually becoming the preferred choice for consumers.

In the first quarter, we further implemented a series of comprehensive measures to support high-quality small and medium-sized merchants. These measures include providing financial assistance, traffic support, free digital tools, and online services. By doing so, we effectively help these merchants improve supply, enhance service quality, and offer a wider range of choices.

In addition, recognizing the importance of food safety and product quality, we launched the "Bright Kitchen" program and other food safety measures to enhance the supply quality on our platform. We believe that greater transparency will make it easier for consumers to discover high-quality restaurants. To support micro-merchants, including family restaurants and community restaurants, we provide targeted subsidies to cover the hardware procurement and installation costs for joining our "Bright Kitchen" program. Looking ahead, we plan to invest 100 billion RMB over the next three years to promote high-quality growth across the entire food service industry. These resources will be used to support various types of merchants.

Over the past decade, we have consistently committed to improving measures to protect the rights of riders and enhance their work experience. Since July 2022, we have provided over 1.5 billion RMB in occupational injury insurance for all riders on the platform. Currently, this insurance has been implemented in seven pilot provinces, and we plan to expand it to more provinces this year, aiming for nationwide coverage by the end of next year. In April of this year, we also launched a pilot project for rider pensions, which will gradually be promoted nationwide in the future.

At the same time, we offer comprehensive talent development programs and career advancement paths for riders. Notably, 86% of management positions in our delivery network are filled by promoted frontline riders. We also provide diverse job transfer opportunities within our platform for riders and have sponsored hundreds of riders to pursue higher education at universities.

In addition to work support, we provide life and medical assistance to riders and their families. For example, through our "Kangaroo Baby Public Welfare Program," we have allocated over 100 million RMB in critical illness assistance to more than 6,000 riders and their families. We have also provided tens of millions of RMB in medical assistance funds and educational support for riders' children. We place great importance on supporting the career development of female riders. In 2024, the number of female riders earning income from our platform exceeded 700,000. In March of this year, we provided one year of free coverage for female riders under critical illness insurance.

Looking ahead, we will gather more feedback and suggestions from riders, continue to enhance their benefits, and ensure that their hard work is fully recognized and rewarded.

In the first quarter, Meituan Flash Purchase continued to maintain strong growth, tapping into the enormous potential of instant retail. In April, we officially launched our own instant retail brand "Meituan Flash Purchase." Consumers can easily access the instant shopping page directly from the homepage of the Meituan app, browse and purchase various daily necessities, achieving 24-hour uninterrupted shopping. This next-generation shopping platform enables Meituan Flash Purchase to collaborate with millions of retailers, brands, and local small and medium-sized merchants to meet the daily shopping needs of over 300 million consumers nationwide, delivering high-quality products to consumers within 30 minutes Provide an unparalleled experience.

This public brand makes its debut to directly respond to the growing trend of instant retail. Our goal is to offer higher quality products while enhancing convenience and providing a more reliable shopping experience for every consumer. We also aim to leverage the opportunities brought by industry transformation and supply chain upgrades in collaboration with millions of merchants on the platform, providing important new sales channels for retailers and brand owners. Meituan Flash Purchase will continue to introduce more online tools to support merchants across all categories in expanding their business on Meituan.

Meituan Flash Warehouse adapts to demand trends and the new macroeconomic environment, actively expanding product categories and services to meet diverse consumer preferences. For example, in response to the evolving consumption trends, we have launched initiatives such as "Anxin Xue" to provide consumers with more flexibility and restore their confidence in prepaid services. "Anxin Xue" has attracted over 20,000 educational institutions nationwide, covering a wide range of educational scenarios, with courses in sports, arts, and more. Consumers can seamlessly place orders, redeem services in installments, and apply for refunds with a single click when needed on our platform. Building on this success, we recently launched "Anxin Lian" and "Xin Lian," covering fitness training and extending this worry-free consumption model to a broader range of installation categories.

At the same time, by utilizing efficient, user-friendly online tools and extensive marketing programs, we also help merchants reach a larger customer base, improve conversion rates, and enable them to benefit from digital transformation, achieving business growth in various consumption scenarios. In the first quarter, the number of annual active in-store merchants increased by over 25% year-on-year.

In addition to offline merchants, our platform also hosts numerous independent artisans, such as photographers, hairstylists, and massage therapists. As a platform connecting artisans, merchants, and consumers, we have introduced a set of services for artisans, covering everything from onboarding processes, review management, content display, operational support to consulting services. These services enable over 1 million active artisans to develop their personal brands online. We have also streamlined the collaboration between merchants and artisans, allowing consumers to easily access their preferred artisans, providing a wider selection, better value for money, and a unique service experience.

Since integrating medical beauty and health businesses into the healthcare department, we have further strengthened cross-selling in the first quarter, deepening our penetration into the industry supply chain and providing comprehensive healthcare solutions for consumers during the flu season. We work directly with pharmaceutical companies to ensure a sufficient supply of medications while consolidating our leading position in the instant drug delivery field. We have expanded our supply to meet the demand for chronic disease medications and medical devices, further increasing user purchase frequency.

At the same time, we have also expanded cooperation with medical beauty providers, dental clinics, traditional Chinese medicine clinics, and more. We cross-sell more medical and health services to our existing user base. For example, in dental beauty, we focus on thoughtful consumption such as dental implants, enhancing the price comparison experience and decision-making process for consumers. We have also introduced a "Safe Implementation Functional Area" to provide guarantees to alleviate consumer concerns and risks. Looking ahead, we will continue to innovate our products and services to meet the evolving one-stop medical and health needs of consumers At the end of March, we launched the Meituan Membership Program, which covers all our business categories. It features "New Selections" as a universal benefit, encompassing various aspects of consumers' daily lives. Our goal is to provide members with a broader range of benefits, enhanced experiences, and this membership framework. Users can accumulate growth points to elevate their membership level and unlock additional privileges. Currently, the privileges mainly include hotels, travel, and various other local service categories.

Looking ahead, we will continue to expand membership benefits to more categories. Additionally, we will introduce specific level privileges, such as priority delivery services for takeout, free comprehensive gifts, beverages, or installations, and continuously enhance the user experience for Meituan members. We expect to occupy consumers' mind share in Meituan by offering benefits that cover all categories and scenarios, becoming the preferred platform for discovering local stores and deals. By providing benefits that encompass all categories and scenarios, we aim to increase user stickiness, boost transaction frequency, and optimize cross-selling efficiency.

Now, let's turn to our new business segment. In the first quarter, we further refined our operations, achieving significant efficiency improvements in grocery retail software and hardware services, making notable progress compared to the same period last year.

Through our grocery retail business, such as "Little Elephant Supermarket" and Meituan Preferred, we began to provide comprehensive support for export enterprises, covering marketing, channel expansion, and branch cooperation, helping them distribute high-quality export products in the domestic market.

Our overseas business has also made significant breakthroughs in Saudi Arabia. Kitah effectively showcased our product capabilities and technological advantages by providing enhanced consumer experiences in transactions and deliveries. We gained widespread recognition from local consumers and quickly became one of the most popular takeout applications in the region. Looking ahead to the remainder of 2025, we are committed to promoting the healthy development of our ecosystem.

For merchants, we will introduce more support measures to improve the online operating environment and help merchants iterate and innovate their supply formats. For riders, we will provide a broader range of measures to safeguard their rights, enhance their benefits, and promote social recognition of their contributions. For consumers, we are dedicated to providing more comprehensive services, products, and membership benefits, especially for those consumers who have supported us for a long time. By leveraging artificial intelligence technology, we will continuously improve user experience and enhance merchant operational efficiency. Furthermore, we will actively align with national strategies aimed at promoting consumption and expanding domestic demand. By focusing on emerging consumption trends, discovering new markets and opportunities, we will promote consumption growth and industry transformation, contributing to the broader economic landscape.

At this point, I will hand the meeting over to Chen Shaohui, who will update us on our financial results.

Chen Shaohui:

Next, I will present our financial performance for the first quarter. In this quarter, our business maintained a healthy growth trend, with total revenue increasing by 18.1% year-on-year, reaching RMB 86.6 billion. The cost of revenue decreased by 2 percentage points year-on-year, reaching 62.6%, mainly due to the improvement in gross margin of our grocery retail business and enhanced operational leverage, although the increase in costs related to overseas business partially offset this decline Thanks to the improvement in our marketing efficiency, the sales and marketing expenses ratio decreased by 1 percentage point year-on-year, reaching 18%. The R&D expenses ratio and the general and administrative expenses ratio remained stable at 6.7% and 3%, respectively.

Our strategic focus on quality, growth, and operational efficiency continued to yield strong results this quarter. The total segment operating profit increased to RMB 11.2 billion, up from RMB 6.9 billion last year. The total segment operating profit margin improved from 9.5% to 13%. From a consolidated perspective, our adjusted net profit grew year-on-year, reaching RMB 10.9 billion this quarter. As of March 31, 2025, we maintained a strong net cash position, with cash and cash equivalents and short-term government bond investments totaling RMB 180.4 billion. Cash flow from operating activities increased year-on-year, reaching RMB 10.1 billion this quarter.

Now, let’s review the performance of each segment, starting with the core local business. In this quarter, our takeaway business achieved a continuous recovery in year-on-year order volume growth, despite headwinds from reduced subsidies, with daily order growth in the first quarter still exceeding that of the fourth quarter. Engagement from mid-to-high frequency users continued to significantly improve. This is a direct result of our focus on execution, supply-side optimization, product iteration, and operational enhancements. Meanwhile, we continued to iterate our new supply formats this quarter. Notably, New Good Meal maintained a strong growth trajectory, with core consumer retention rates steadily increasing year-on-year.

In this quarter, Meituan Flash Purchase maintained strong growth momentum. Numerous consumption categories, including beverages, snacks, 3C, home appliances, beauty and personal care, and other non-food categories, performed outstandingly. The performance during Valentine's Day was particularly remarkable, with daily order volume nearly doubling year-on-year. In addition to floral gifts, we also observed a significant expansion in demand for non-gift categories, such as small appliances, jewelry, and beauty products, indicating that our platform is continuously evolving to serve more consumers, especially among the younger generation and across more categories.

Furthermore, Meituan East Market demonstrated our ongoing progress on the supply side. The number of Meituan East Markets and their order contributions continued to increase, particularly in lower-tier markets. Our installation business effectively seized the opportunity of increased consumer spending during key holidays, with order volume growing approximately 50% year-on-year. This quarter, we enhanced our special offer program. It not only continued to gain traction in high-frequency categories such as light meals, fast food, and beverages but also stimulated increased demand in seasonal consumption categories during holidays.

In lower-tier markets, we continued to maintain strong growth momentum in the first quarter, with merchant coverage, user engagement, and transaction volume all increasing. Importantly, we further improved profitability in lower-tier cities. The optimized membership program has become another powerful growth accelerator this quarter, effectively supporting the installation hotel and travel business. It not only attracted new users to re-engage but also increased transaction frequency among inactive users. Our core local business segment continued to achieve strong year-on-year growth of 17.8%, with revenue reaching RMB 64.3 billion. The operating profit and operating profit margin of the core local business segment both improved year-on-year, reaching RMB 13.5 billion and 21%, respectively We have achieved greater efficiency in the operation of our core local business and realized greater operational leverage.

Next, let's take a look at the new business segment. In this quarter, the revenue of this segment grew by 19.2% year-on-year, reaching RMB 22.2 billion, mainly due to the development of our grocery clearance business and overseas operations. Thanks to our efforts to improve operational and marketing efficiency in the grocery retail business, the operating loss and operating loss margin of this segment have both narrowed year-on-year, reaching RMB 2.3 billion and 10.2%, respectively. The quarter-on-quarter increase in operating loss is mainly due to increased investment in our overseas business.

Finally, I want to emphasize that over the years, our core local business has demonstrated resilient performance under complex and changing market conditions. Every challenge has made us stronger, sharpened our competitive advantages, driven operational excellence, and achieved continuous financial improvement.

Looking ahead, we remain confident in the tremendous growth potential of all businesses in the core local business segment. The increasing synergies will further amplify our advantages. We are confident in our long-term ability to continue achieving healthy, high-quality growth. At this point, we open the floor for questions. Thank you.

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