Meituan Announces 2019 First Quarter Results

HONG KONG, May 23, 2019 /PRNewswire/ -- Meituan (HKG: 3690) (the "Company"), China's leading e-commerce platform for services, today announced the unaudited consolidated results for the three months ended March 31, 2019 ("1Q2019").

Financial Performance Highlights
In the three months ended March 31, 2019:

• Total revenues increased by 70.1% year-over-year to RMB19.2 billion from RMB11.3 billion in the same period of 2018, benefiting from strong revenue growth across all major business segments, and decreased by 3.2% quarter-over-quarter from RMB19.8 billion in the three months ended December 31, 2018 due to seasonality.
• Total gross profit increased by 57.8% year-over-year to RMB5.1 billion from RMB3.2 billion in the same period of 2018, resulting from our constant improvement in gross margin of our core businesses, and increased by 13.1% quarter-over-quarter from RMB4.5 billion in the three months ended December 31, 2018, driven primarily by narrowing loss of our new businesses.
• Selling and marketing expenses as a percentage of total revenues decreased to 19.3% from 25.2% in the same period of 2018 and 22.9% in the three months ended December 31, 2018, attributable to economies of scale, healthy operating leverage, and our stronger brands.
• Adjusted EBITDA and adjusted net loss were RMB458.9 million and RMB1.0 billion, respectively. Adjusted EBITDA turned to be positive, which is an important milestone we have achieved. Adjusted net loss continued to narrow from the three months ended December 31, 2018. Adjusted net loss as a percentage of revenues was negative 5.4%, compared to negative 8.7% in the three months ended March 31, 2018 and negative 9.4% in the three months ended December 31, 2018. The improvement in adjusted net loss and adjusted EBITDA was due to the continuous improvement in the operating margin of our core businesses as well as our ongoing efforts to streamline the operating losses of new initiatives.

Operating Highlights
In the three months ended March 31, 2019:

• Total Gross Transaction Volume (GTV) on our platform grew by 27.9% to RMB138.4 billion from RMB108.2 billion in the same period of 2018.
• Annual Transacting Users on our platform in the last twelve months ended March 31, 2019 grew by 26.4% to 411.8 million from 325.8 million in the last twelve months ended March 31, 2018. Average number of transactions per annual Transacting User on our platform increased to 24.8 transactions in the twelve months ended March 31, 2019 from 20.1 transactions in the twelve months ended March 31, 2018.
• Annual Active Merchants on our platform grew by 27.3% to 5.8 million in the twelve months ended March 31, 2019 from 4.5 million in the twelve months ended March 31, 2018.
• Overall monetization rate^[1] increased to 13.9% in the three months ended March 31, 2019 from 10.4% in the same period of 2018.

"In the first quarter of 2019, we continued our 'Food + Platform' strategy to add value to our one-stop services platform, and achieved strong revenue growth across all our major business segments," said Xing Wang, Chairman and CEO of Meituan. "For our food delivery business, our market share continued to increase while operating results continued to improve in the first quarter of 2019, on both a year-over-year and quarter-over-quarter basis. With our clear scale and structural advantages in user base, merchant base, and delivery network through long-term investments, we have the capability and flexibility to both strengthen our market position and improve our financial performance."

Company Business Review

Food delivery
Our food delivery business sustained its strong growth momentum. GTV of our food delivery business increased by 38.6% to RMB75.6 billion in the three months ended March 31, 2019 from RMB54.5 billion in the same period of 2018. The number of food delivery orders increased by 35.8% to 1.7 billion in the three months ended March 31, 2019 from 1.2 billion in the same period of 2018. The average value per order of our food delivery business improved by 2.1% year-over-year. Monetization rate for food delivery increased from 12.9% to 14.2% year-over-year. As a result, revenue from food delivery increased by 51.7% year-over-year to RMB10.7 billion in the three months ended March 31, 2019 from RMB7.1 billion in the same period of 2018. Gross profit from food delivery increased by 187.9% to RMB1.5 billion in the three months ended March 31, 2019 from RMB535.1 million in the same period of 2018, while the gross margin expanded to 14.4% from 7.6%.

The first quarter is usually a low season for our food delivery business. Users' demand for the service during the Chinese New Year tends to be much lower than in the other months, and many restaurants suspend operations during the holiday season. However, we withstood such seasonality and further cemented our market-leading position, which is mainly driven by our clear advantages in scale and quality of user base, merchant base, and on-demand delivery network.

On the consumer front, we have competitive advantages in terms of user matrix, attributable to our earlier investments in our on-demand delivery network and AI-powered intelligent order dispatching system. Therefore, we have a significant percentage of users who are less-price sensitive and value factors such as food selection and service quality. During the Chinese New Year, these users increasingly preferred food delivery services which offer convenience and a widening selection of food for family gatherings.

In addition, our established user base, combined with our dominant scale of merchant base and delivery network throughout most lower-tier cities, enjoyed a nice multiplier effect. During the Chinese New Year, millions of people who travelled from top-tier cities to visit their families in lower-tier cities used Meituan as their go-to app for food delivery services. As a result, both the number of Transacting Users and the percentage of orders made in locations other than such users' regular residences increased during the Chinese New Year period year-over-year.

On the merchant front, we continued to strengthen our operational capabilities to enhance merchants' vitality on our platform. During the Chinese New Year, our "Open in Spring Festival" campaign encouraged more merchants, especially top merchants, to continue their operations during the holiday season. This helped provide consumers with adequate, high-quality supplies of food and satisfy their increasing demand for food delivery services during the holiday season. Additionally, more merchants resumed operations earlier as compared to the Chinese New Year period last year. Our ability to assemble merchants during the Chinese New Year has further demonstrated our advantages of developing a strong merchant base and cultivating merchant relationships.

Regarding our delivery service, we continued to enhance the management of our delivery riders, especially during holiday seasons and tough weather conditions. Our competitive advantages in the scale and operations of our on-demand delivery network have allowed us to cope with food delivery orders with sufficient delivery capacity and consistent delivery service quality during special holiday season like the Chinese New Year.

In-store, hotel & travel
Our in-store, hotel & travel businesses continued to solidify the market leadership and further demonstrated strong monetization potential during the three months ended March 31, 2019. While GTV of our in-store, hotel & travel businesses grew by 15.1% to RMB46.4 billion in the three months ended March 31, 2019 from RMB40.3 billion in the same period of 2018, the monetization rate increased to 9.7% from 7.8%, which was primarily due to the increasing contribution of online marketing services revenue. As a result, revenues from our in-store, hotel & travel businesses increased by 43.2% to RMB4.5 billion in the three months ended March 31, 2019 from RMB3.1 billion in the same period of 2018. Gross profit from our in-store, hotel & travel businesses increased to RMB4.0 billion in the three months ended March 31, 2019 from RMB2.8 billion in the same period of 2018, while the gross margin expanded to 88.3% from 87.8%.

We continued to make progress in merchant penetration, service category expansion, optimization of product offerings, and operational efficiency for our in-store, hotel and travel businesses despite the typical low season. Advertising revenue generated from this segment as well as the number of active advertising merchants continued to grow robustly year-over-year. In particular, advertising revenue from our mature and large-scale service categories such as beauty, parent & child and leisure and entertainment maintained rapid growth as a result of our deepened merchant penetration. Our new service category, namely, medical aesthetic services, achieved more than doubled year-over-year revenue growth in the three months ended March 31, 2019.

On the product side, we continued to innovate and create customized services to add value and help merchants improve membership management, boost online operational efficiency, and attract and retain customers. For example, we introduced membership discount cards for foot massage merchants and expanded our multi-session cards into additional beauty sub-categories.

On the operation side, we also hosted promotions customized for certain categories to help merchants increase brand exposure and acquire user traffic. For example, in a four-day promotion event hosted for beauty merchants in honor of International Women's Day, both the number of Transacting Users and GTV for beauty categories on our platform increased significantly.

As an important category of our in-store, hotel & travel businesses, we further solidified the leading position of our hotel booking business. Domestic room nights consumed increased by 29.8% to 78.6 million in the three months ended March 31, 2019 from 60.6 million in the same period of 2018. In the three months ended March 31, 2019, contribution from high-end hotels further increased, and the average daily rate per room night experienced a steady year-over-year increase. We continued to foster synergy between our hotel booking and other in-store businesses. Through cross-selling reservations for restaurants, wedding venues, spa, gyms and others, we have been able to help hotels further substantiate their revenue streams from non-lodging services.

New initiatives and others
GTV from the new initiatives and others segment increased by 22.4% to RMB16.4 billion in the three months ended March 31, 2019 from RMB13.4 billion in the same period of 2018. Revenues from the new initiatives and others segment increased by 267.8% to RMB4.0 billion in the three months ended March 31, 2019 from RMB1.1 billion in the same period of 2018. Compared to the three months ended December 31, 2018, gross loss of the new initiatives and others segment continued to narrow in the three months ended March 31, 2019. Gross margin was negative 11.1% in the three months ended March 31, 2019, improving by 12.2 points on a quarter-over-quarter basis.

In alignment with our overall strategy, we are actively exploring the opportunities in grocery retail sector, experimenting with both the self-operating model and the platform model. With respect to platform model, we operate non-food delivery business to connect local retailers and consumers, which is known as Meituan Instashopping or "Meituan Shangou". We are disciplined on capital allocation for our new initiatives. With respect to self-operating model, we closed our Ella supermarkets in lower-tier cities in the first quarter as their returns were below our expectation and we will focus on improving the shopping experience and operational efficiency in the remaining two stores in Beijing. We have also launched pilot program of operating smaller grocery stores in residential communities as part of our further exploration in the grocery retail sector.

Meanwhile, in order to further narrow the losses in our bike-sharing service, we continued to restructure Mobike's overseas operations that we believe cannot bring sufficient strategic synergy to our platform to justify their costs. The restructuring in multiple overseas markets, proceeded as scheduled in the three months ended March 31, 2019.

In the three months ended March 31, 2019, we significantly scaled back the subsidies for our car-hailing services, which resulted in a meaningful improvement of margin profile of our new initiatives and others segment. In late April 2019, we launched a new business model for our car-hailing business in Shanghai and Nanjing. In addition to our existing car-hailing and taxi-hailing services, we adopt an aggregated model to aggregate supplies from other leading car-hailing service providers and connect them with users on Meituan app and Meituan Dache app. Users will enjoy increased selection of pricing, cars, and services on our mobile applications at the touch of their fingertips. Such ability to better satisfy users' transportation needs through a more cost-efficient approach will increase user satisfaction and enhance user stickiness. On May 19, 2019, we further introduced the new aggregated model on the Meituan app in another 15 cities such as Shenzhen, Guangzhou, Hangzhou, and Chengdu and plan to roll this out in more cities within 2019.

For the full announcement of Meituan 2019 first quarter results, please visit:
http://meituan.todayir.com/attachment/2019052316350100003507205_en.pdf

About Meituan
Meituan (HKG: 3690) (the "Company") is China's leading e-commerce platform for services. With the mission of "We help people eat better, live better," the Company's platform uses technology to connect consumers and merchants. Service offerings on the platform address people's daily needs for food, and extend further to broad lifestyle and travel services. According to the iResearch Report, Meituan is the world's largest on-demand food delivery service provider and China's largest e-commerce platform for in-store dining services in 2017. It currently operates the world's largest on-demand delivery network in terms of the number of deliveries in 2017. Meituan helps consumers discover merchant information, make informed decisions, complete online and offline transactions and enjoy on-demand delivery. The Company currently owns several household brands in China, including Meituan, China's leading online marketplace for services by GTV in 2017, Dianping, China's leading online destination for discovering lifestyle services by MAU in 2017, Meituan Waimai for on-demand delivery services, and Mobike for bike-sharing services. Meituan had 400.4 million Annual Transacting Users and 5.8 million Annual Active Merchants by the end of 2018. The Company operates in over 2,800 cities and counties in China.

Forward-Looking Statements
This press release contains forward-looking statements relating to the business outlook, forecast business plans and growth strategies of the Company. These forward-looking statements are based on information currently available to the Company and are stated herein on the basis of the outlook at the time of this press release. They are based on certain expectations, assumptions and premises, some of which are subjective or beyond our control. These forward-looking statements may prove to be incorrect and may not be realised in future. Underlying the forward-looking statements is a large number of risks and uncertainties. Further information regarding these risks and uncertainties is included in our other public disclosure documents on our corporate website.

For media inquiries, please contact:

Meituan
[email protected]
[email protected]

Jeff Pei
ICR Inc.
Email: [email protected]
Tel: +86 (10) 6583 7514

SOURCE Meituan Dianping

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