Meituan (3690) Earnings Call Transcript

Welcome to the Meituan First Quarter 2023 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to Scarlett Xu, VP and Head of Capital Markets.

Thank you, operator. Good evening, and good morning, everyone. Welcome to our first quarter 2023 earnings call. Joining us today are Mr. Xing Wang, Chairman and CEO; and Mr. Shaohui Chen, Senior Vice President and CFO of Meituan. For today's call, management will first provide a review of our first quarter 2023 results and then conduct a Q&A session. Before we start, we would like to remind you that our presentation contains forward-looking statements, which include a number of risks and uncertainties and may differ from the actual results in the future. This presentation also contains unaudited non-IFRS financial measures, that should be considered in addition to, and not as a substitute for, measures of the company's financial performance prepared in accordance with IFRS. For a detailed discussion of risk factors and non-IFRS measures, please refer to the disclosure documents in the IR section of our website. Now I will turn the call over to Mr. Xing Wang. Please go ahead, Xing.

Thank you, Scarlett, and good evening, everyone. And since the beginning of 2023, China has experienced gradual consumption recovery. We are glad to see that the recovery of local services has been outpacing many other sectors, particularly during festivals and holidays. At the retail technology platform that deeply used in the on-demand retail and local services, Meituan has captured consumers' diverse demand for goods and services during the consumption recovery with the various businesses posting healthy growth. For the first quarter of 2023, our total revenue reached by 26.7% year-over-year to RMB 58.6 billion. And adjusted EBITDA is RMB 6.3 billion and adjusted net profit RMB 5.5 billion, and especially on-demand delivery has become increasingly popular among consumers, probably not only restaurant food, but also broader retail categories. We have continued to expand our categories and selections to deliver almost everything to the consumer's doorsteps. Moreover, we have explored and developed diversified operating solutions, marketing tools that allow millions of merchants in local services to see the post-pandemic recovery opportunities, increased their revenue and improved their operating efficiency. We are firmly committed to creating more value for all the participants in our ecosystem. And we will continue to fulfill our mission to help people eat better, live better. Now let me walk you through each business in more detail. The Food Delivery business has continued to recover since the beginning of this year. During the first quarter, we committed to help the new merchants to start businesses and empowering all merchants to improve online operations and devised all the growth by better understanding the diverse consumer demand, dynamically iterating our operational strategies and providing consumers with better products and services. We believe that food delivery is not simply moving in-store dining supply online and providing fulfillment services, but the restructuring of restaurant and product supplies to match and create consumer demand. In the first quarter, the number of active merchants and transacting users for our platform continued to grow steadily for our food delivery business. On the supply side, we further expanded our high-quality merchant base to enlarge high-quality supplier on our platform. During the quarter, the number of newly unfolded key accounts and city key account merchants increased year-over-year. We supported chain restaurant in their new store openings and existing store upgrades. Meanwhile, at the end of March, we piloted a brand new promotional event called Shen Qiang Shou for merchants in Shenzhen and later expanded to Beijing in May. Shen Qiang Shou is a promotional event that integrates live streaming, short-form videos and other formats with their discounted high-quality products. In April, we also upgraded our monthly marketing campaign, Shen Quan Jie. In these events, merchants to offer deep discounted deals through flash sales, live streaming or short-form video to promote the low-priced, high-quality dishes. These events help merchant market their megahit products and enhance their growth potential in combination with our existing shelf-based model. On the demand side, as the food delivery industry experienced a rapid recovery, we strictly adjusted our marketing strategy using incentive schemes aligned with the regional recovery pace and holiday demand. This resulted in notable order volume growth in travel scenarios and mid- to high AOV orders in the first quarter. Moreover, we continue to explore traffic growth and stimulate non-instant demand, incentivize consumers to stockpile attractive coupons in our live streaming events. Meituan Instashopping maintained its high growth momentum during the first quarter. We reinforced the consumer mindshare of Meituan being able to deliver almost everything to their doorstep. Driven by growth in both use pace space and transaction frequency, Meituan Instashopping order volume increased by about 35% year-over-year in the first quarter. Leveraging the various marketing events. We further expanded the quality and diversity of supply on our platform, annual active merchants on Meituan Instashopping increased by over 30% year-over-year with non-goods specialty stores, liquor, beverages and flowers maintaining high growth. We also further expanded the coverage of Meituan InstaMart [Foreign Language] and total mix for Meituan InstaMart continued to grow. We are delighted to see the consumption categories and scenarios continue to rise. During our Chinese New Year shopping festival [ Nian Huo Jie ], more and more consumers chose on-demand delivery for purchasing holiday gifts for friends and families. Categories such as liquor and beverage, fruits, seafood, dairy products and small appliances were quite popular among consumers. Ahead of Valentine's Day at Women's Day this year, demand for categories such as flowers, beauty and personal care products, electronics and home appliances [ categories all surged ]. In addition, we strengthened the consumer mindshare for consulting doctors and buying medicines on Meituan. During the Chinese New Year, we offered incentives and traffic support for pharmacies as they stay open for business while providing free online consultation service for people in certain regions. We also promoted our online consultation services for seasonal epidemic diseases, driving high growth in order volume and consumer base in a medicine category this quarter. As demand restored, offline consumption and travel activities have gradually recovered since the beginning of the year with particularly robust growth during the Chinese New Year. Merchants' willingness to hold online promotion recovered very rapidly. So as consumers demand to find local stores at discount. We proactively capture the off-line consumption demand recovery, collaborating with the local governments and merchants to stimulate demand for local services and satisfy consumers' diverse needs. In the first quarter, GTV of the in-store, hotel & travel business increased by more than 52% year-over-year, with the year-over-year GDP growth in March exceeding 100%. Merchants' willingness to open new stores have gradually picked up and the number of annual active merchants, reached a new high. For the in-store business, both GTV and revenue growth accelerated month by month. We captured the consumption demand for group gathering and family meals during the Chinese New Year holiday and launched precept in-store manuals, [indiscernible] and more. We have millions of merchants across services categories, including catering, karaoke, [indiscernible] for Chinese New Year [Foreign Language] and promoted keyword searches such as go to place for Chinese New Year. [Foreign Language]. As we continue to expand our merchant supply, we also enriched our marketing and content format, iterated our product operating strategy and what optimize the service capability of our business development team. We improved our merchant service quality and enhanced synergies across different business lines and providing merchants with more promotional channels. For example, leveraging holiday promotion such as Labor Day [Foreign Language], we launched a comprehensive Meituan platform, live streaming program, to incentivize participants -- participation from any high-quality merchants provide consumer big discounted high-quality products. [ To cope with ] the evolving consumption trends, we supported all medium-sized merchants with a feature -- characteristic that makes creative ideas with traditional [indiscernible] such as flower arrangement, [ new houses ], magic crafts to operate online and standardize their services. On the consumer side, we continue to strengthen our content capability and iterate short-form video content. Through piloted program as a Special Deals [Foreign Language], we provided the merchants with the new marketing tools to promote megahit products through a flash sales while offering the consumer higher-quality services at deeper discounts and strengthened the consumption of consumer mindshare for finding the best deals on Meituan. In future, leveraging our competitive advantage in organizational capabilities, consumer mindshare, merchant service, we will further iterate our operations and diversify our product and service offerings for both merchants and consumers and ultimately gather online penetration of the in-store industry. Demand for travel recovered strongly during the first quarter with a significant growth in both hotel room nights and GTV. During Chinese New Year holiday, year-over-year room night growth versus 2022 and 2021, both exceeded at 40%. As the weather become warmer after the Chinese New Year, local accommodations and short-distance travel scenarios continue to recover and peaked for several consecutive weekends. [ Following the ] consumption trends [ enriched ] our product mix and leverage holiday promotions to enhance brand awareness. We see the post-pandemic industry recovery opportunity adopted various new marketing tactics, including an optimized subsidy strategy and increase in live streaming frequency. In the high-star hotel branch, we expanded [ supply ], optimize our pricing mechanism, improves the merchant information available on our platform that explores in-depth collaborations with high-star chain hotels. We also optimized our packaged products and enhanced distribution channels. In addition, we further diversified our Hotel+X product offerings and onboard high-star hotel restaurants for our food delivery platforms. As a result, room night contribution from high-star hotel reached [ 19% ] in the first quarter to a record high. In addition, we launched the outbound hotel and travel sales events and worked with the Hong Kong authorities to distribute travel consumption coupons to Mainland visitors. On the low-star front, we continue to optimize our room renovation program and further develop our CRM tools and marketing solutions. These tools have helped the merchant enhance their pricing mechanism to better match market demand, allowing them to capture the industry recovery opportunities and satisfy diverse consumer needs. On the alternative accommodations side, we continued to focus on user experience, operating efficiency and growth in supply. Our strong performance in the first quarter demonstrated our ability to capture the industry recovery and meet the diverse accommodation needs of consumers while continuing to optimize our operating efficiency. Now moving on to our new initiatives that to maintain the [ industry leading position ] and continually improve operation efficiency. We continue to optimize our pricing and product management capability while maintaining high quality standards. We provided consumers with a wider, more diverse selection for value to our nationwide next-day logistics and self pickup network that covers cities, counties and vast rural areas. At the end of March, we accumulated number of transacting users that reached 450 million with the consumer habits further [ cultivated ]. In addition, we actively promoted the circulation of agricultural products and helped farmers increase their income. During the first quarter, agricultural products accounted for more than 40% of the total sales of Meituan Select. We established partnerships with many local governments and suppliers in the product' places of origin and expanded our efforts in the direct procurement of high-quality agricultural products. The centralized procurement of fresh fruits and vegetables accounted for more than 20% of the total sales. There are some categories even exceeding 50%. Our initiatives have helped us bring high-quality products directly from farms to consumers' dining tables. Our engagement in rural areas also allow us to offer more employment opportunities locally with the number of pickup stations in lower density markets now exceeding 1.3 million. Another business [Foreign Language] Meituan Grocery recorded over 50% year-over-year GTV growth in the first quarter and continue to lead the growth of the industry. During the quarter, we continued to focus on controlling costs and improving efficiency, achieved a notable year-over-year enhancements in operational efficiency. Thanks to our digitized system, co-chain, logistics and on-demand delivery capability, we accelerated our product circulation efficiency and elevated the consumer experience which will [indiscernible] [Foreign Language]. In addition, the increase in SKU offerings and improve the delivery experience also strengthened our consumer mindshare. AOV and order frequency both increased compared to the same quarter last year. We continue to deepen our partnership with the government authorities and farmers in the product' place of origin, offering more seasonal locally sourced selected products [Foreign Language]. This effectively diversified our platform supply and helped farmer increase their income. We also established in-depth collaboration with brands and launched the joint branding program in selected categories to match our differentiated and customized marketing campaigns, helping brand increased sales. As the macro economy recovers further through the rest of 2023, we will continue to incentivize consumption recovery and increase demand by optimizing our products on the offerings and fulfillment network. We will continue to enrich our marketing tools to better meet merchants' diverse needs and increase their revenue and profit. We will actively support merchants in expanding their service coverage facilitating new store openings, enabling the vast number of small- and medium-sized merchants benefited from online operations especially at a company that [ integrated retail and ] technology. We fully believe that technology will bring new advancements and growth opportunities to retail in the long run. We will increase our investment in technology and [indiscernible] and actively explore the implementation of cutting-edge solutions. Whether this will be AI, autonomous delivery or something else, so we seek to capture the tech-enabled industry growth. In the meantime, we remain committed to our mission to help people eat better, live better. With that, I will turn the call over to Shaohui for an update on financial results.

Thank you, Xing. Hello, everyone. I will now go through our first quarter financial results. During this quarter, total revenue increased by 26.7% year-over-year to RMB 58.6 billion, boosted by strong local consumption recovery post reopening and our effective marketing measures. Cost of revenue ratio decreased on both year-over-year and quarter-over-quarter basis to 66.2% primarily due to the improved gross margin of our food delivery, Meituan Instashopping and the goods retail business. Selling and marketing expenses ratio, R&D expenses ratio and the G&A expenses ratio all remained flat sequentially but decreased on a year-over-year basis to 17.8%, 8.6% and 3.4%, respectively, primarily benefiting from improved operating leverage driven by our focus on high-quality growth and improving operating efficiency. Total segment operating profit and operating margin increased remarkably to RMB 4.4 billion and 7.5%, respectively, compared to operating loss on the operating margin of RMB 3.7 billion and a negative 8.1% for the same period of 2022. On a consolidated basis, our adjusted EBITDA and adjusted net profit were RMB 6.3 billion and RMB 5.5 billion for this quarter, turning from loss to profit on a year-over-year basis and further increasing on a sequential basis. Turning to our cash position. As of March 31, 2023, we continue to maintain a strong net cash position with our cash and cash equivalents and short-term treasury investments totaling RMB 111.4 billion. Cash from operating activities in the first quarter improved significantly to RMB 8.1 billion compared to cash outflow of RMB 11.3 billion in the same period of 2022. Now let's look at our segment results. Starting with core local commerce. Our core local commerce segment revenue increased by 25.5% year-over-year to RMB 42.9 billion. Operating profit increased by 100.7% on a year-over-year basis to RMB 9.4 billion. Operating margin for the segment increased by over 8 percentage points year-over-year to 22%. On-demand delivery achieved 14.9% year-over-year order volume growth this quarter of food delivery. The overall performance of order volume growth in the first 2 months of the year was negatively impacted by the home returning effect of Chinese New Year. During the first 2 months of 2022, consumer demand for food delivery and merchants' willingness to operate during the holiday season was quite high due to strict policy as a result of pandemic control. In contract, this year, many people, including delivery riders returned to their hometowns earlier following December reopening. In addition, many merchants were not open for business during the holiday season this year; however, we have seen a rapid recovery in order volumes starting in early February, which further accelerated to over 20% on a year-over-year basis in March. With regards to food delivery revenue, its year-over-year growth far outpaced order volume growth, [ mid-to ] high-end supply recovered faster than low-end supply during the quarter. In addition, dealers were more willing to pay for premium large ticket size and long-distance orders during the Chinese New Year. The favorable order mix drove the year-over-year increase in commission and delivery service revenue. Operating profit and operating margin for our food delivery business both increased meaningfully on a year-over-year basis, primarily thanks to the business scale recovery, favorable order mix change, and abundant courier supply. Turning to Meituan Instashopping. Order volume growth in January was also affected by the home returning effect. However, as work has resumed after the Chinese New Year, consumer demand also recovered with order volume increasing rapidly starting in early February and retaining to its high-growth trajectory in March. The average order volume from Meituan Instashopping accounted for around 11.1% of our total on-demand delivery orders during the first quarter. Average order value continued to increase year-over-year because of heightened consumption demand for COVID and the flu-related medicines as well as increasing demand for high ticket size nonessential products such as [ 3C ] electronics. The business unit economics improved significantly year-over-year, thanks to an increased order volume contribution from higher margin [indiscernible] such as flowers, improved economies of scale and asset efficiency and higher AOV. The improved AOV also driven by a rapid growth of online marketing revenue primarily contributed by the expansion of online marketing merchant space and merchants’ increased ARPU. Let's now turn to our in-store, hotel & travel business, which achieved strong revenue growth on both year-over-year and quarter-over-quarter basis. On the one hand, we benefited from strong demand recovery for local service consumption and travel with strong GTV growth for in-stock travel and hotels drove robust year-over-year and quarter-over-quarter growth in our transaction revenue this quarter. The revenue growth rate for hotel & travel were particularly significant anything from a faster rebound in the sale of room night and an increase in ADR. On the other hand, we also -- we see also the willingness of merchants to hold online promotion is gradually recovering. However, revenue growth was slower than GTV growth, which was mainly caused by the following factors. First, we strategically lowered the threshold of our subscription-based services for flagship service category in lower-tier cities to encourage more merchants [ to own ] our platform. Second, the regular [ resin ] of hotel booking has boosted GTV growth while contributing to a smaller portion of ad revenue. Third, merchant's willingness to spend on advertising needs more time to recover. Operating profit margin for our in-store, hotel & travel business increased on both a year-over-year and on a quarter-over-quarter basis, thanks to the increased operating leverage due to business scale recovery. This was partially offset by a higher revenue contribution from lower-margin hotel booking and travel business and increases in our traffic [ additional ] expenses and merchant rebate. Let's now turn to our new initiatives segment. During the quarter, revenue in this segment increased by 30.1% year-over-year to RMB 15.7 billion, mainly due to the development of our goods retail business. The segment operating loss further narrowed down to RMB 5 billion from RMB 6.4 billion in the fourth quarter of last year. From Meituan Select, the continued operating efficiency improvement led to the decrease in operating loss and operating loss margin on a sequential basis. Most specifically, fulfillment costs reduced thanks to [ more smart ] warehousing efforts and refined operations. Group leader efficiency improved attributable to better stock management, [indiscernible] expenses as a percentage of [indiscernible] also went down. For Meituan Grocery, operating loss continue to narrow on a sequential basis, thanks to better operating efficiency. Meanwhile, we also continue to improve our operating efficiency and cut losses for other new initiatives. In summary, we are pleased to see that our core local commerce segment recovered fast and delivered strong growth riding on the recovery of local consumption. Both our adjusted EBITDA and adjusted net income achieved a remarkable growth in both operating cash flow and free cash flow increased significantly. We expect the recovery of China's economy to drive strong growth in our core business in the next few quarters. Our business metrics covers a wide range of categories and price band helping us meet different consumer needs across different stages of consumption recovery. The frequency of our users has increased over the past years and still has huge potential to grow. Overall, we remain confident in the non-growth potential for our core local commerce segment. Meanwhile, we will continue to narrow the operating loss of our new initiatives and improved operating efficiency. With that, we are now open for Q&A.

[Operator Instructions] Your first question today comes from Ronald Keung with Goldman Sachs.

So we recently noticed that Meituan's Food Delivery and in-store businesses launched some new marketing formats. These include live streaming, short-form videos and some special deal sessions. Could you share the progress of these attempts and initiatives and future plans?

Okay. Thank you. So the short answer is that we are just getting started. And the longer answer is, we started to pilot new marketing formats for both food delivery and in-store, hotel & travel business since a few months ago. We launched live streaming, short-form videos, flash sales that direct user traffic to the products that the merchants want to promote helping merchant create a mega-hit product. In our existing shelf-based model that provides the merchant with regular marketing and transaction boost and our new mega-hit product promotion at [indiscernible]. It's an important supplement to satisfy merchant's comprehensive marketing needs. In March, we launched a promotional event for the food delivery business for Shen Qiang Shou in Shenzhen and later expanded to Beijing in May. Going forward, we will introduce this event to more regions. Shen Qiang Shou is a promoting event that integrates a live streaming, short-form video and other formats with the discounted high-quality products. On April 18, we fully upgraded our monthly marketing campaign, Shen Quan Jie and due to the live streaming we have a high-quality merchants created mega-hit products. And on April 18, the event day, we witnessed a 50% year-over-year growth in food delivery order volume and 75% year-over-year growth in daily active users and an over 30% week-over-week growth in the GTV or on top of key account merchants who participated in the event. Further growth from categories such as tea, coffee, formal meals were quite impacted. On May 18, merchant who participated in the event, once again, achieved notable growth with the categories expanding to [ non-foods ]. Going forward, we will continue to provide the merchants with a larger traffic and more mutually appealing marketing boost through this mega-hit products at [indiscernible]. We will also better serve the consumers' need for both instant consumption and stockpiling. Consumer can stockpile coupons and deals in advance and then preferably place order in multiple times. This will encourage consumers to open our Meituan app more frequently even during a non-meal time and incentivize the food delivery demand in non-instant scenarios. We have also noticed that when the consumer validates coupons online and they tend to add more products to their checkout, thereby driving sales growth for other shelf-based product and the overall ARPU. We will further focus on content creation and live streaming to stimulate consumer demand for both instant consumption and stockpiling. We believe the mega-hit product and shelf-based product formats reinforce each other and have great synergies with the food delivery. This will open up more long-term growth potential for food delivery. And also, we introduced the special deals [Foreign Language] for in-store, hotel & travel at the end of March, expanded across the country in April. We partnered with national and regional chain merchants and [ civic-level ] high-quality merchants across various categories to provide consumers with high-quality food supply. By directing more traffic to these mega-hit products, we helped the merchants to further increase sales. We also helped strengthen consumer mindshare of finding the better deals on Meituan. On April 27, [indiscernible] [Foreign Language] live streaming campaign. In this campaign, we offered deep discounted coupon for in-store dining categories such as hot pot, tea and café. We also worked with theme park, hotels, travel agencies and other in-store service merchants to provide consumers with a wide range of high-quality selections. Our visually appealing recommendation helped reduce [ barriers ] in consumer decision-making process and provided them with a diverse choices specifically during the Labor Day live streaming event, sale of a single product grown [indiscernible] coffee and [indiscernible] coffee 1.5 million cups. In the future, we will continue to optimize special deals [Foreign Language] and other marketing campaigns [ especially on ] Meituan platform live streaming, the merchant live streaming and KOL live streaming. We will also use the content to empower marketed product promotions, improve our merchant and build recommendation capabilities to better satisfy consumer demand. Meanwhile, we will enhance synergies with our food delivery business by offering more coupons that can be used for both in-store consumption and food delivery. And this will become a more convenient and user-friendly to our consumers. Thank you.

The next question comes from Thomas Chong with Jefferies.

I have a question on the food delivery side. Can management [indiscernible] recent performance of the business, including the order volume recovery and the growth? And how should we think about the order volume and the unit economics for the second quarter?

Thank you so much for the question. We see strong growth on food delivery since March. The March order volume growth exceeds 20% year-over-year. And in April, we see the daily order volume growth continuing to rise on a monthly -- on month basis. Thanks to the economic recovery and our continued support in merchants' online operations and new store openings. We actually saw 25% year-over-year growth in new store openings in April. Chain restaurants and high-quality merchants were quicker to react to the consumption recovery and ramp up their supply. Small and medium-sized merchants also started to catch up in terms of new store openings. Therefore, supply recovered strong across all price bands. To further intensify demand, we offered subsidy in certain scenarios and time periods in selected cities. For example, we subsidized late-night net orders in cross-city orders especially in popular tourist cities during holidays. We further stimulate consumption to live streaming and other formats, which has brought up additional traffic and order volume growth. Since April, demand from lower-tier cities, low-frequency users and low AOV orders continued to recover as well. Overall, we believe that food delivery will achieve high order volume growth on a year-over-year basis in the second quarter. And we also continue to believe that food delivery will benefit from the overall economic recovery, and we continue to believe 100 million transaction orders target remains our medium to long-term goal. On the unit economic side, starting from second quarter, we have expanded our marketing efforts. We increased user [indiscernible] during some marketing events such as Shen Qiang Shou and Shen Quan Jie to incentivize consumption and help merchants sell mega-hit products. In addition, as I mentioned, demand for low AOV orders continue to rise, so we are going to direct marketing resources to this area. Although [ cost per delivery ] increased compared to the same period last year, order volume growth will bring economy of scale on the cost structure. From a seasonality perspective, usually second quarter has [indiscernible] unit economics thanks to favorable weather, and we expect the quarterly supply will continue to be favorable in Q2. As expected, I just mentioned, we have offset the increase in subsidy. Overall, we will continue to invest to incentivize consumption demand while focusing on high-quality growth and operating efficiency. Thank you.

The next question comes from Gary Yu with Morgan Stanley.

I have one question related to the in-store business. Could you please share some color on the latest recovery and growth trend for the in-store, hotel & travel business? And a related question to that is to confront competition, what measures has the management taken since the first quarter and what are the results and performance so far? And based on the current strategy, how should we think about the growth and operating margin for the in-store segment in Q2?

Thank you, Gary, for your question. Local consumption in China continues to recover. Our in-store, hotel & travel business also benefit from the strong demand and maintained robust growth on a year-over-year basis, especially during [ Qing Ming ] and Labor Day holidays. April GTV of in-store, hotel & travel continues to grow rapidly on both year-over-year and month-over-month basis, reaching 3x the scale of last April. During the recent Labor Day holiday, GTV of our in-store, hotel & travel business also increased by over 200% compared to the same period in 2022. Driven by the recent offline consumption recovery, we continue to take proactive measures to solidify our competitive advantages. For example, we optimize and enrich our product format and improve the service quality of both merchants and consumers. We customize our online marketing solutions based on [ key tiers ] and service category. We lowered the threshold of subscription-based services for certain service categories in lower-tier cities and simplifying the merchant onboarding process. [indiscernible] encourage more merchants to onboard our platform and to use our online marketing services and help us increase online penetration in lower-tier cities. In addition, we refined and stratified our operation based on merchant tiers, launched a new merchant incentive scheme and leveraged offline [indiscernible] teams to provide better services and to deepen our partnership with the key merchants. As we mentioned earlier, the [ lunch ] promotion such as special deal and live streaming event in the second quarter is an opportunity for merchants to create and promote mega-hit products. It satisfied consumer demand to stockpile coupons and incentivize consumption through recommendations. It further solidify our leading position and we will continue to enhance the video content, improve our user review scheme and optimize our LBS-based recommendations. We also actively explore new traffic acquisition channels. For example, we work with third-party platforms and broaden our distribution channels such as [ Wei Xin ] and short-form video platform. We expand our efforts in offline marketing and [ join trend ] in promotion. Looking ahead to the second quarter, we will continue to ride on the consumption recovery train, accelerate our operational and marketing strategies and solidify our advantages especially, we will further expand the supply of high-quality shelf-based products while strengthening our capability to promote mega-hit products through special deals [Foreign Language] and the live streaming. We will focus on expanding and maintaining our merchant base and allocate more resources to our merchant incentive program. We will stimulate consumer non-instant demand using more video content and more [ deep discount deals ], and enhance consumer mindshare of finding the best deals at Meituan. Starting from the second quarter, we will roll out these strategies to broader regions to accelerate GTV growth. The increased merchant and consumer incentives will [indiscernible] for revenue growth will be lower than GTV growth and the more marketing expenses will further impact our operating margin. I would believe that these investments for the long-term growth of the business is necessary. This investment will not only help us improve in the product [ traffic ] and content format, but also accelerate online penetration and further solidify our leading position in the local service industry. We remain confident in the long-term growth and the long-term operating margin of our in-store, hotel & travel business. Thank you.