Meituan (HKG: 3690) (the “Company”), China’s leading e-commerce platform for services, today announced the unaudited consolidated results of the Company for the three months ended March 31, 2021.
Company Financial Highlights
Thanks to the PRC government’s effective measures to contain the COVID-19 pandemic in China, our businesses experienced strong recovery during the first quarter of 2021. Total revenues increased by 120.9% in the first quarter of 2021 to RMB37.0 billion from RMB16.8 billion for the same period of 2020. Our food delivery and in-store, hotel & travel segments posted stellar growth, realizing an aggregate operating profit by segment of RMB3.9 billion in the first quarter of 2021, an increase from RMB0.6 billion for the same period of 2020. Operating loss for the new initiatives and others segment expanded as we accelerated our investment effort to provide services with more breadth. Both adjusted EBITDA and adjusted net loss for the first quarter of 2021 decreased year-over-year to negative RMB2.4 billion and RMB3.9 billion, respectively. Our net cash flows used in operating activities decreased to RMB4.4 billion in the first quarter of 2021 from RMB5.0 billion for the same period of 2020. We had cash and cash equivalents of RMB17.8billion and short-term treasury investments of RMB35.3 billion as of March 31, 2021, compared to the balances of RMB17.1 billion and RMB44.0 billion as of December 31, 2020, respectively.
“We are proud that our government’s effective containment of COVID has led to a strong recovery in demand for local services consumption in the first quarter. Meanwhile, growth across the different business segments on our platform has been strong, and we are pleased to see that our platform has continued to generate more quality services and value for consumers and merchants, while also reinforcing our strong brand as the leading local services platform in China,” said Meituan Founder and CEO Xing Wang.
“We are always open to and ready for change, and are fully committed to our social responsibilities. We will continue supporting the national development strategy of domestic circulation, which will help further stimulate domestic consumption and boost rural revitalization, servicing a larger group of consumers and merchants across different markets with diverse needs,” Wang concluded.
Company Business Highlights
Food delivery continued to be an essential service in the post-COVID-19 era, primarily driven by the ongoing evolution of consumer behavior and the increasingly diverse supplies on our platform. Our strength in consumer base, merchant base, and delivery network remained strong and continued to reinforce each other, enabling us to achieve solid growth in the first quarter of 2021. In this quarter, GTV of our food delivery business increased by 99.6% year over year to RMB142.7 billion. Daily average number of food delivery transactions increased by 113.5% year over year to 32.3 million. The average value per order of our food delivery business decreased by 5.5% year over year. Monetization rate of our food delivery business increased to 14.4% from 13.3% in the first quarter of 2021. Subsequently, revenue increased by 116.8% year over year to RMB20.6 billion. Operating profit from food delivery business increased to RMB1.1 billion in the first quarter of 2021 from a loss of RMB70.9 million for the same period of 2020, while operating margin increased to positive 5.4% from negative 0.7%. Our strong business performance in the first quarter of 2021 was a testament to the value we provide and our strong execution capabilities.
Food delivery became not only a necessity and a service needed regularly during work days, but also a high-quality source of food for family gatherings. Especially, as people were encouraged to stay put for Spring Festival, demand for food delivery increased during the holiday this year, compared to same period in previous years. During this Spring Festival, we launched the “Open for Business” initiative, in which we cooperated with millions of merchants to provide consumers with convenient deliveries of quality products including meals, liquor, snacks, groceries, and more. As a result, we have witnessed stronger order volume growth during this Spring Festival period than previous years. In addition, we continued to allocate sufficient resources to our effective membership program and organize various promotional campaigns and optimized operations among different consumption scenarios. We are delighted to see that quarterly transacting users and their purchase frequency both achieved healthy growth year over year, especially in the high-quality consumer base. To satisfy the increasingly diverse and constantly evolving consumer demand, we broadened our service scope to cover more consumption scenarios and longer distance delivery orders. Therefore, order contribution from the breakfast, afternoon tea, and late-night snack categories further increased, and long-distance orders became a more meaningful part of the total orders. The growths reflected consumers’ increasing preference for food delivery and our unparalleled brand awareness among consumers.
On the merchant side, as we continued to refine our merchant operational strategies to be more differentiated and specialized, and on the back of the order volume growth, both our annual active merchants and annual advertising merchants for food delivery grew to record highs in the first quarter of 2021. Meanwhile, sales from high-quality merchants increased, comprising a larger proportion of total orders. Since the introduction of our “New Restaurant Manager” program last quarter, we continued to train more digital-savvy talents and helped them become better adaptable of digital operations. Effectively, the restaurant industry has evolved into one where dining-out and order-in services are equally important to business owners and collaboratively constructive for each other’s growth. It is gratifying to see that our effort to accelerate industry digitization not only generated additional revenue for restaurant owners, but also helped them improve efficiency. Going forward, we will continue to enhance our service quality, diversify our product offerings, provide support for small- to mid-sized merchants, and help promote the vigorous development of the industry.
For the delivery network, in response to the PRC government’s advocacy to stay put for the Spring Festival, we preemptively strategized around our operations to better satisfy consumer demand. In particular, we focused on providing sufficient delivery capacity during the period. We continued to implement our “Tongzhou Project,” which we rolled out in the fourth quarter last year to provide welfare to our delivery riders. During the first quarter of 2021, we designed benefits and incentives specifically for the Spring Festival. The total benefits and incentives that we offered for delivery riders surpassed RMB500 million during the seven-day holiday. And we are dedicated to providing deeper understanding and better caring for our delivery riders and helping improve their career path and personal growth. In the first quarter of 2021, we held more panel sessions with delivery riders, listened attentively to their feedbacks, complaints, and suggestions, which we would then appropriately incorporate into our business planning and development. To further enhance efficiency and work experience for the delivery riders, we upgraded the hardware used by the delivery riders, including smart helmets and delivery pick-up lockers at restaurants in some pilot areas. Having an efficient delivery network with sufficient delivery capacity lays the foundation of our food delivery business, which also ensures optimal user experiences. Thus, we will continue to optimize this on-demand delivery network and enhance delivery rider welfare on a continuous basis.
In-store, hotel & travel
Benefitting from the effective containment of the COVID-19 pandemic in China, our in-store, hotel & travel segment fully recovered in the first quarter of 2021. Revenue of the segment increased by 112.7% year over year to RMB6.6 billion in the first quarter of 2021. Operating profit increased 304.0% to RMB2.7 billion in the first quarter of 2021 from RMB680.2 million in the same period of 2020, and operating margin increased to 41.7% from 22.0%.
For in-store dining, since we introduced the “Open for Business” initiative for Spring Festival, both our GTV and transaction volume growths accelerated to historical highs during the Spring Festival this year, and we achieved nearly 30% two-year GTV CAGR in the first quarter of 2021. Gathering dining events fully recovered, and light-meal consumption scenario maintained high growth. We further increased quality supply on our platform and continued to penetrate more high-quality chain restaurants. Our tailored services and innovative transaction-based products continued to support the unique advertising needs from chain restaurants. In March, we refreshed our 2021 “Black Pearl” lists in cities both domestically and abroad. The “Black Pearl” lists are well established among both consumers and merchants as a compass for reputable culinary and other recommendations.
For other in-store services, our two-year revenue CAGR exceeded 30% in the first quarter of 2021 from the same period of 2019. Categories such as medical aesthetics maintained strong growth momentum, while categories such as leisure and entertainment, which were severely impacted during the pandemic, resumed normal growth. We continued to identify the evolving consumption trends, and managed multiple service categories to better satisfy the changing demand from consumers. We also launched various marketing and promotional festivals, such as the “Wedding Festival” and “Back to School Festivals” to help lift merchants’ advertising budgets. As a result, we strengthened our competitive advantages in serving high-quality merchants and fast expanding coverage of small- to mid-sized merchants this quarter.
With respect to our hotel booking business, we achieved over 100 million domestic room nights in the first quarter of 2021, representing a stellar 135.8% year-over-year growth, and a two-year CAGR of 13.3% from the same period of 2019. Although the PRC government’s recommendations for people to stay put during the Spring Festival led to less travelling during the seven-day holiday season this year compared to normal years, consumer demand for hotels continued to rise during the quarter. Notably, we expanded rapidly in high-star hotels, with room night contribution from high-star hotels surpassing 16.7% in the first quarter of 2021, thanks to our continuous investment in supply expansion, customer service, and product experience. With regard to low-star hotels and low-tier cities, we further solidified our existing advantage, enhanced brand awareness, and improved offline traffic conversion.
New initiatives and others
During the first quarter of 2021, we ramped up our investments in new initiatives. Retail, especially the community e-commerce business, continued to be our largest investment area. For the first quarter of 2021, revenues from the new initiatives and others segment increased by 136.5% year over year to RMB9.9 billion, primarily driven by the growth in retail businesses, B2B food distribution services, and ride-sharing services. Operating loss for the segment increased both year over year and quarter over quarter to negative RMB8.0 billion in the first quarter of 2021, while operating margin decreased to negative 81.6%.
The retail business is of strategic importance to us, and fits well into our “Food+Platform” strategy. During the first quarter of 2021, our community e-commerce business, Meituan Select, further expanded its geographical coverage to over 2,600 cities and counties, practically completing our nationwide expansion objective. Despite the seasonally quieter period for retail in February due to the Spring Festival holiday, Meituan Select continued to record healthy growth during the quarter. As the community ecommerce industry is still at early stage, we continued to make substantial upfront investments to enhance our product and service capabilities, incentivize user consumption, and expand our group leader base. We continued to strengthen our warehousing and logistics networks to reach broader consumers, especially in some less-developed regions. We upgraded our commission mechanism for group leaders and designed differentiated operational strategies to inspire their motivation. On the supply side, we continued to enrich our product selections and improved quality management capabilities, to satisfy the growing consumer demand for value-for-money products. We also explored various user acquisition tactics to achieve commendable growth in user base, with both user retention and transaction frequency steadily increasing. Meanwhile, as the business scaled up, we also continued to improve operating efficiency and unit economics of this business during the quarter.
For Meituan Instashopping, we continued to leverage our platform capabilities to fulfill the rising consumer demand for on-demand delivery of local goods and products. In the first quarter of 2021, we channeled more resources into categories, such as supermarkets, flowers, and prepared fruits, fueling the business growth of the quarter. In response to the “stay-put” policy during Spring Festival, we successfully converted many food delivery users into Meituan Instashopping users, leveraging our complex on-demand delivery network. Specifically, we precisely captured the evolving consumption trend from busy-working younger generations and their preference for same-day delivery of holiday goods and gifts. During the week leading up to Valentine’s Day, flowers and gifts sales exploded. Roses, watches, and iPhones were all popular gifts sold on our platform, with sales multiplying by double-digit week over week in the period. Therefore, number of high-ticket size items also grew exponentially, and we successfully further cultivated user habits and consumer mindsets that Meituan delivers everything to their doorsteps.
For Meituan Grocery, we continued to take our service quality and consumer experience as priority. Because of the PRC government’s “stay-put” policy for the Spring Festival this year, consumer demands for grocery and fresh produce rose during the season. We actively prepared inventories and adjusted our supply strategy in advance to meet this growing demands. In addition, we stepped up our delivery rider pays to ensure adequate delivery capacity and to provide our riders with additional benefit for working during the holidays. Moreover, we opened more warehouses in the four cities that we operate in, to increase our warehouse density, capacity, and product selections. As a result, quarterly transacting users grew by more than 400% year over year, and transaction frequency also improved, allowing us to realize higher operating efficiency and better unit economics.
As the leading platform for local services, we continued to provide better products and services to both consumers and merchants, facilitated the acceleration of industry digitization, and created and distributed more value to the society at large. In the first quarter of 2021, our food delivery and in-store, hotel and travel businesses posted another strong growth, thanks to the PRC government’s effective containment of the COVID-19 pandemic. This growth also reflects the strong mindshare that we have cultivated among consumers and merchants as the go-to-destination for local service exploration. In addition, our investment in the retail business enabled us to extend our touch point with consumers to provide them with ever-increasing product selections, particularly for consumers from low-tier markets. We further optimized our on-demand delivery network, while also built a new “next-day” delivery logistics network across the country. On the merchant front, we continued to serve a wide and diverse range of small- to mid-sized merchants, providing a more comprehensive suite of services, such as advertising products, digital tools, B2B food distribution services, and RMS services, to help them improve daily operations. Going forward, with a better use of technology and our commitment in innovations, we will continue to create more long-term value for consumers, merchants, delivery riders, and all the other participants in our ecosystem, and shoulder our social responsibilities.