HONG KONG, May 25, 2020 /PRNewswire/ -- Meituan Dianping (HKG: 3690) (the "Company" or "Meituan"), China's leading e-commerce platform for services, today announced the unaudited consolidated results of the Company for the three months ended March 31, 2020 ("1Q2020").
Company Financial Highlights
Since late January 2020, the COVID-19 pandemic has already caused severe disruptions to the daily operations of our merchants, including restaurants, hotels and other local services merchants, which in return has exerted downward pressure on our own operations for the first quarter of 2020. Business segments, such as food delivery and in-store, hotel and travel, have all faced significant challenges on both the demand side and supply side.
As a result of the pandemic, our total revenues decreased by 12.6% year-over-year to RMB16.8 billion from RMB19.2 billion in the same period of 2019. Our operating loss for the first quarter of 2020 expanded on a year-over-year basis from RMB1.3 billion to RMB1.7 billion, while operating margin decreased from negative 6.8% to negative 10.2%. Adjusted EBITDA and adjusted net loss were positive RMB41.3 million and negative RMB216.3 million, respectively. Our operating cash flow turned to negative RMB5.0 billion for the first quarter of 2020 from positive RMB3.1 billion for the fourth quarter of 2019. We had cash and cash equivalents of RMB14.1 billion and short-term investments of RMB42.4 billion as of March 31, 2020, compared to the balances of RMB13.4 billion and RMB49.4 billion, respectively, as of December 31, 2019.
Moving on to the remaining of 2020, we expect that factors including the ongoing pandemic precautions, consumers' insufficient confidence in offline consumption activities and the risk of merchants' closure would continue to have a potential impact on our business performance.
"As we enter 2020, the world is confronted with the challenges of the COVID-19 pandemic, which has caused tremendous near-term shocks across industries, and inevitably the local service industry has also been significantly impacted in many ways," said Xing Wang, Chairman and CEO of Meituan. "Despite the obvious short-term disruptions, I would like to underscore that our long-term strategy and targets have not changed. In the long run, we believe that this pandemic will help to better cultivate consumer habits, accelerate online penetration, improve the operational efficiencies of merchants, and ultimately expedite the digitization process of the entire local service industry."
Company Business Highlights
For the first quarter of 2020, GTV of our food delivery business decreased by 5.4% year-over-year to RMB71.5 billion. The daily average number of food delivery transactions decreased by 18.2% year-over-year to 15.1 million. The average value per order of our food delivery business increased by 14.4% year-over-year. Monetization Rate[i] of our food delivery business decreased to 13.3% from 14.2% in the same period of 2019. As a result, revenue decreased by 11.4% year-over-year to RMB9.5 billion for the first quarter of 2020. Our food delivery business experienced operating loss of RMB70.9 million for the first quarter of 2020, compared to operating profit of RMB482.8 million for the fourth quarter of 2019, while operating margin turned to negative 0.7% from positive 3.1%. However, our operating loss from the food delivery business narrowed on a year-over-year basis while operating margin improved by 0.7 percentage points year-over-year.
Affected by the COVID-19 pandemic, our food delivery business was facing significant challenges on both the supply side and demand side for the first quarter of 2020. Especially, from January 20, 2020 until February 20, 2020, local governments issued strict control measures, which led to a shortage of service supplies and a dramatic drop of order volume for our food delivery business. Shortly after February 20, 2020, when orderly resumption of work took place across the country, an increasing number of restaurants started to resume their operations while demand from consumers also gradually recovered. However, as some of consumer demand continued to be negatively impacted by hygiene concerns and quarantine measures, the ongoing closure of universities, and work-from-home policies that applied to many of our high frequency consumers, the order volume still had not fully recovered to its normal levels by the end of March 2020. As a result, the order volume of our food delivery business experienced negative year-over-year growth, with the daily average number of food delivery transactions decreasing by 18.2% year-over-year to 15.1 million.
In spite of the short-term negative impacts, we strongly believe that the COVID-19 pandemic will play a positive role in the industry's long-term development. On the consumer side, the pandemic has further accelerated the cultivation of consumption behavior, helping to further educate some of our targeted potential consumers in a positive way. Our platform's diversified supply and consistently good experience sufficiently meet the demand of most people. Notably, we have seen increasing consumer preference for high ticket size categories during the pandemic due to the increasing adoption of food delivery for formal meals, further diversification of high-quality supplies on our platform and growing preference for branded restaurants. These positive factors in combination have driven the strong growth of the average value per order for the first quarter of 2020, increasing by 14.4% year-over-year.
On the merchant side, the overall catering industry was severely disrupted in the first quarter of 2020. During this period, we worked closely with restaurant merchants, promptly updated our products and operations to assist with their digitization process, and helped them mitigate the negative impact and recover. In addition, we offered a series of rebates, subsidies, free traffic support and more to merchants, in order to relieve some of their operational burden. We also further explored the optimization potential for the meal preparation and packaging process. At the same time, our continuous marketplace product innovation enabled existing merchants to have more marketing capability and improved operational efficiency. More notably, the pandemic has further accelerated the digitization process, especially for many branded restaurants with high quality supply, which have traditionally focused on in-store dining instead of delivery services. In the first quarter of 2020, a large number of premium restaurants, highly-rated restaurants, chain restaurants, Black Pearl restaurants and five-star hotel restaurants, which did not have or had very limited food delivery services, initiated food delivery operations as their primary vehicle for business operations due to the pandemic. Participation by these restaurants increased high-quality supply on our platform in the long term, while we reinforced our importance to small- and medium-sized independent restaurants as food delivery almost became their sole source of income during the pandemic.
On the delivery front, although delivery capacity was not the bottleneck for our food delivery business during the pandemic, delivery cost per order increased both on a quarter-over-quarter basis and a year-over-year basis as a result of the increased incentives paid to delivery riders working during Chinese New Year and pandemic situations, additional costs associated with anti-epidemic measures, and the decline in order density. However, the pandemic has accelerated the adoption of new delivery models and stimulated technological innovation. As a leader and promoter of on-demand delivery, we pioneered the launch of contactless delivery services, which received widespread acceptance and recognition from consumers, merchants and local governments. In addition to helping to mitigate the hygiene risks for both consumers and delivery riders, the contactless delivery model improves delivery efficiency and creates more opportunities for the exploration of diversified delivery models and new technology for autonomous delivery.
In-store, hotel & travel
Revenues from our in-store, hotel & travel businesses decreased by 31.1% year-over-year to RMB3.1 billion in the first quarter of 2020. Operating profit of our in-store, hotel & travel businesses decreased by 57.3% year-over-year and by 70.8% quarter-over-quarter to RMB680.2 million in the first quarter of 2020, while operating margin decreased by 13.5 percentage points year-over-year and by 14.7 percentage points quarter-over-quarter to 22.0%.
During the pandemic, our in-store business was more severely challenged in comparison to the food delivery segment, and its recovery was noticeably lagging behind that of the food delivery segment. As the majority of the in-store service categories are classified as discretionary or entertainment-related services, which usually involve close contact with others and/or large crowds, both supply and demand remained low in the first quarter of 2020 due to consumers' hygiene concerns and local governments' restrictions. As a result, commission revenue declined significantly by 50.6% year-over-year and by 62.6% quarter-over-quarter, respectively. Moreover, in-store merchants' marketing demand was significantly impacted by the pandemic, creating headwinds for cost-per-click online marketing product sales in particular, which contributed the majority of the in-store online marketing services revenue last quarter. In comparison, subscription-based online marketing services revenue was much less affected and accounted for the majority of the total segment online marketing services revenue in the first quarter of 2020. As a result, online marketing services revenue declined by 8.2% year-over-year and by 39.8% quarter-over-quarter, respectively. In order to help merchants recover, we launched various supportive measures to directly help small- and medium-sized merchants solve short-term liquidity problems and restore their operations. These measures included commission exemption, extension on subscription-based service period, and access to business loans with favorable interest rates. To stimulate consumption, we utilized our online capabilities to establish safety programs, such as Safe QR Code, Safe-Dining and Safe-Play to guide merchants in streamlining, standardizing, and digitizing their safety measures. We led the establishment of industry safety and sanitation standards to help restaurants develop their own measures. As the leading platform in local services, we began to work with local governments in March 2020 to launch the Safe-Consumption Festival and issued vouchers to consumers to use in local services, especially in restaurant dining, which sustained the most impact during the pandemic. We believe that consumer vouchers could not only stimulate one-off consumptions, but also have strong leverage effects that stimulate the recovery of the overall consumption demand in relevant regions and industries. As a platform that connects 448.6 million annual transacting users and 6.1 million local merchants, we can effectively direct consumers to merchants and service categories, so our platform is capable of distributing traffic, allocating subsidies, and stimulating consumption with accuracy and effectiveness.
Our hotel business also experienced enormous impact from the pandemic, with the number of domestic room nights consumed on our platform in the first quarter of 2020 decreasing by 45.5% year-over-year and by 61.0% quarter-over-quarter to 42.8 million. As a result of government-issued travel bans, self-quarantine policies for travelers, and a general fear of virus infection, many consumers canceled their travel plans. While local accommodation and business travel activities, especially in lower-tier cities, have started to gradually rebound at a faster pace along with the general recovery process, consumers were still taking conservative measures and postponing travel-related activities and expenditures even after the peak of the pandemic. To further support industry recovery, we leveraged our platform capabilities and launched the Safe-Stay Program. Under the Safe-Stay Program, we established precautionary measures and increased service capabilities for our partner hotels, such as the adoption of strict health precautions for all employees and consumers, close tracking of consumer information, free booking cancelations, and discounts for additional nights. This program has achieved noteworthy progress, successfully engaging numerous hotels in hundreds of cities nationwide.
New initiatives and others
Revenues from the new initiatives and others segment increased by 4.9% year-over-year to RMB4.2 billion in the first quarter of 2020. On a sequential basis, operating loss from the new initiatives and others segment expanded by 3.4% to RMB1.4 billion for the first quarter of 2020 from RMB1.3 billion for the fourth quarter of 2019. Operating margin decreased to negative 32.7% for the first quarter of 2020 from negative 21.7% for the fourth quarter of 2019. Operating loss from the new initiatives and others segment narrowed on a year-over-year basis, while operating margin improved by 32.3 percentage points.
The pandemic caused severe disruptions to most of our new initiatives, including bike-sharing services, car-hailing services, and B2B food distribution services. However, we are proud that many of our new initiatives were essential to fulfill people's daily needs during the pandemic. Particularly, our grocery retail business continued to provide stable supply and efficient delivery of high-quality fresh produce and other daily necessities to our consumers. The pandemic has served as an opportunity for consumers to realize the value and convenience of purchasing many other items besides meals using our on-demand delivery service, which has helped to better cultivate consumer habits with relatively low marketing cost. Moreover, during the first quarter of 2020, under the marketplace model, we launched a separate brand, known as Caidaquan, to enable traditional farm markets to digitize their operations and provide high-quality fresh produce to consumers with more efficiency. During the first quarter of 2020, our bike-sharing services temporarily suspended fee collection from consumers in Hubei Province using our bikes and donated more than two million monthly riding passes to medical professionals. To assist local governments with tracking the extent of virus transmission, our car-hailing services helped local public transportation authorities to roll out the first real-name public transport system in China. Our B2B food distribution service also helped many restaurants ensure the adequate supply of raw materials for operations during the pandemic. We also opened green channels for medical institutions in 34 cities to ensure adequate supply of food during the pandemic.
Meituan Dianping (HKG: 3690) (the "Company" or "Meituan") 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. Meituan is the world's leading on-demand food delivery service provider and China's leading e-commerce platform for in-store dining services. 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, Dianping, China's leading online destination for discovering local services, Meituan Waimai for on-demand delivery services, and Meituan Bikes for bike-sharing services. Meituan has 450.5 million Annual Transacting Users and 6.2 million Annual Active Merchants as of December 31, 2019. The Company operates in over 2,800 cities and counties in China.
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 realized 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.