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 and six months ended June 30, 2021.
Company Financial Highlights
For the second quarter of 2021, Meituan continued to serve as China’s leading e-commerce platform for services, providing greater value for our consumers, merchants, delivery riders, business partners, and the larger society. We continued to showcase strong growth momentum, with revenues increasing by 77% in the second quarter of 2021 to RMB43.8 billion from RMB24.7 billion for the same period of 2020. Our food delivery and in-store, hotel & travel segments maintained high growth during the quarter, realizing an aggregate operating profit by segment of RMB6.1 billion in the second quarter of 2021, an increase from RMB3.1 billion for the same period of 2020. On the other hand, operating loss for the new initiatives and others segment widened as we continue to invest in areas that will bring long-term value to the Company and provide consumers and our merchants with better products and services. As a result, both adjusted EBITDA and adjusted net loss experienced negative year-over-year growth for the second quarter of 2021 and decreased to negative RMB1.2 billion and RMB2.2 billion, respectively. Our net cash flows generated from operating activities decreased to RMB2.9 billion in the second quarter of 2021 from RMB5.6 billion for the same period of 2020. We had cash and cash equivalents of RMB71.4 billion and short-term treasury investments of RMB51.1 billion as of June 30, 2021, compared to the balances of RMB17.8 billion and RMB35.3 billion as of March 31, 2021, respectively.
“As the Chinese economy continued to recover steadily, our various business segments maintained healthy growth in the second quarter of 2021. The recent new regulatory environment change reminded ourselves of our role in society and compels us to innovate and better contribute to society at large,” said Meituan Founder and CEO Xing Wang.
“As a technology platform, we will continue to use our systems to empower offline businesses and improve supply chain efficiency, creating more commercial and social value in turn. At the same time, we will continue to develop our businesses around the needs of mass-market consumers, to fulfill our mission: “We help people eat better, live better.”
Company Business Highlights
In the second quarter of 2021, we continued to witness strong growth in the food delivery segment. As food delivery continued to be an essential service, we expanded our supplies with more depth and breadth to better meet the evolving demand from consumers. Furthermore, we continued to improve economies of scale and strengthen our advantages in consumer base, merchant base, and delivery network, enabling us to achieve solid growth and higher efficiency. During the second quarter of 2021, GTV of our food delivery business increased by 59.5% year-over-year to RMB 173.6 billion. Daily average number of food delivery transactions increased by 58.9% year-over-year to 38.9 million. Revenue increased by 59.0% year-over-year to RMB23.1 billion. Operating profit increased 95.2% to RMB2.4 billion in the second quarter of 2021, with operating margin further improving to 10.6% from 8.6%.
As we continued to provide wider selections on our platform and offer longer distance deliveries, we were able to satisfy the increasingly diverse needs from consumers. We maintained solid growth in both transacting users and purchase frequency. Thanks to our enhancement in marketing efficiency, the effective membership program, and the stratified operations among various consumption scenarios. Moreover, we penetrated more deeply in lower-tier markets, with most of our new users coming from lower-tier cities. Order contribution from breakfast, afternoon tea, and late-night snack further increased, and long-distance orders became a more meaningful part of the total food delivery orders. The growth in our consumer base and transaction frequency not only reflects consumers’ increasing preferences for food delivery, but also demonstrates their ongoing trust of our platform and services.
On the merchant side, we continued to onboard high-quality restaurants, as well as small and medium-sized merchants. We introduced a new fee structure that is more transparent and offers greater delivery flexibility to merchants, and it became widely adopted. This quarter, we also focused on helping restaurant merchants run online operations with higher efficiency. We launched a new “Food Delivery Manager” program, aiming to help small and medium-sized merchants adapt to online operations, especially in aspects such as operational diagnosis, store renovation, menu design, event planning, marketing, and so on. We are delighted to see that those who participated in the program posted visible business growth versus before. As the industry leader, we are highly motivated to solve merchants’ pain points, provide more convenience and support, help merchants embrace digitization, and improve their operational efficiency.
With respect to delivery network, we utilized differentiated delivery solutions to cope with different consumption scenarios and different merchant types. To effectively operate such world largest on-demand delivery network, we understand the importance of delivery riders, and we have launched several programs and measures to improve delivery riders’ overall benefits. Through panel discussions with delivery riders, we collected feedback to improve our business operations and enhance the delivery riders’ welfare. We also established and upgraded various charity programs that were designed to improve the well-being of delivery riders’ families and children, providing them with care and support. Moreover, we helped delivery riders with long-term career development through our “Delivery Station Manager” program. Going forward, we believe there are a lot more that we can do with the help of technology. For example, the assimilation of autonomous delivery vehicles and drones into our delivery network in the future would further relieve our delivery riders and help them improve delivery efficiency.
In-store, hotel & travel
Our in-store, hotel & travel segment continued to post steady growth, with revenue growing by 89.3% year-over-year to RMB8.6 billion in the second quarter of 2021. Operating profit increased 93.7% to RMB3.7 billion in the second quarter of 2021 from RMB1.9 billion in the same period of 2020, and with operating margin increasing to 42.6% from 41.6%.
For in-store dining, GTV growth further accelerated from that of the previous quarter. We expanded the coverage of high-quality restaurants, introduced more light-meal options on our platform, and further enhanced operational capabilities. We also upgraded our transaction-based services and advertising products, and offered differentiated solutions to merchants. We intentionally lowered the price for subscription-based services to encourage more merchants to adopt our advertising products. Meanwhile, our CPC advertising products also penetrated more deeply to a broader merchant base. As a result, consumers became increasingly willing to use the transaction products on our platform to dine out, improving transaction frequency and user stickiness for the quarter.
For other in-store services, we continued to see accelerated GTV growth. Categories such as medical aesthetics, pet care, and healthcare all achieved stellar performance. We also leveraged various festivals and campaigns, such as “Labour Day”, “Tomb Sweeping Day”, and “Dragon Boat Festival”, to connect more merchants with consumers. On the operational side, we expanded our direct sales team to cover wider consumption categories and broader lower-tier markets, which effectively increased our annual active merchants base. Nevertheless, we believe that most lower-tier markets are still underserved, with consumer demand and merchant needs yet to be met, leaving ample room for future digitization. Thus going forward, we will continue to expand direct sales team in the appropriate markets, while improving our products and services to reach more consumers.
For hotel booking, demand for travel continued to rise compared to the previous quarter. Our domestic room nights surpassed 140 million for the second quarter of 2021, representing a stellar 81% year-over-year growth, and a two-year CAGR of 22% from the same period of 2019. For high-star hotels, we continued to increase platform supply to meet the changing demand from consumers, and further strengthened our service quality and operational capabilities. For low-star hotels, we solidified our leading position, and continued to penetrate further into lower-tier markets, through the accelerated digitization process and offline traffic conversion.
New initiatives and others
During the second quarter of 2021, we expanded investments in new initiatives, especially around retail, which corresponds perfectly with our “Food+Platform” strategy. Revenues from the new initiatives and others segment increased by 113.6% year-over-year to RMB 12.0 billion, primarily driven by the growth in retail businesses, B2B food distribution services, and bike-sharing and moped services. Operating loss for the segment increased both year-over-year and quarter-over-quarter to RMB9.2 billion in the second quarter of 2021, while operating margin improved sequentially by 4.8 percentage points to negative 76.8%.
Meituan Select, our community e-commerce business, remained our largest investment area in this quarter. We further expanded our geographical footprints, and deepened our penetration into lower-tier markets. We helped hundreds of thousands of villagers to become group leaders, which effectively increased their personal income. We achieved solid user growth and further cultivated consumer behavior, and focused on providing consistently better products and experience to consumers. We also continued to make substantial investments to improve our product offerings, supply chain, and fulfillment capabilities. We built a nationwide cold chain logistics to ensure quality products and delivery of fresh produce. As our business scaled up, the operating efficiency and unit economics also improved. Going forward, we will continue to channel resources to develop long-term capabilities, comply with regulations, create value for all participants in the ecosystem, and fulfill our social responsibility.
For Meituan Instashopping, we further expanded our merchant base and product coverage. By deepening our collaborations with FMCG brands directly, we help these brands reach more target customers and improve marketing efficiency. Moreover, our user growth accelerated, driving solid growth in transaction volume growth and GTV growth. With regard to category breakdown, flowers and medicine maintained high growth momentum, and continued to outperform other categories. We believe that the on-demand delivery of medicine has large potential, so we provided convenient delivery of medicine to consumers on a 24/7 basis to solve people’s most urgent medical needs. As a result, our quarterly number of transactions and GTV growing north of 140% year-over-year in the second quarter of 2021.
For Meituan Grocery, we strengthened our product and service qualities to provide consumer with better experience. We completed our coverage expansion in existing tier-1 cities, and increased our warehouse density. We also optimized our product structure, enhanced warehousing capabilities and strengthened delivery logistics to ensure quality. Thanks to our continuous investments and optimization, we are pleased to see that our quarterly transacting users and quarterly GTV both increased.
As the industry leader, we firmly believe in our mission that “We help people eat better, live better”, and set our business goals from a long-term perspective. In the second quarter of 2021, we broadened our service scope and optimized our product and service qualities to better satisfy consumer demand, enabling us to extend touchpoints with our consumers, particularly for those from lower-tier markets. We also worked towards serving a greater number of merchants, especially small and medium-sized merchants, helping them adapt to digitization and improve daily operations. Moreover, we further enhanced our on-demand delivery network to expand delivery service from food to non-food categories, bringing more convenience and wider selections for consumers. Most significantly, we know what we have achieved today is largely attributable to the hard work of our delivery riders, and we consider their welfare to be of the utmost importance. We have not only continued to improve their benefits, but also taken steps to care for their personal and family well-being as well as their long-term career paths. Going forward, we will continue to listen attentively to our delivery riders, value their perspectives, improve their welfare to the best of our ability, and work side by side with them to jointly promote the development of the industry. During the recent unprecedented flood in Henan Province, our delivery riders stood firmly at their posts, and played valuable role ensuring the livelihood of people from flooded areas. Some even risked their own lives to save others and help evacuate trapped people. In addition, we opened up our warehouse inventories of the retail business in Zhengzhou, and donated food and daily necessities to victims at their most dire needs. We also assisted with the allocation and distribution of emergency goods under the leadership of local governments. Moreover, our hotel business reacted quickly to coordinate a number of hotels that were able to operate during the crisis to provide emergency refuge for the public. To express our sincere gratitude for the support that they offered, we will provide preferential terms such as special subsidies for these merchants in the future. Our Meituan Charity Foundation donated RMB 100 million to provide shelter and post-disaster healthcare services to the suffering people. Our delivery riders, along with our business segments are trying our best to give back to the society for the trust in us, and take on more social responsibilities. We will never stop creating greater value for all the participants in our ecosystem and promoting “common prosperity” for the larger society.