Meituan Dianping Ord Cl B

Thank you for standing by and welcome to the May 1, third quarter 2023 earnings conference call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, please press star then 1 on your telephone keypad. I would now like to hand the conference over to Scarlett Chu, VP and Head of Capital Markets. Please go ahead.

Thank you, operator. Good evening and good morning, everyone. Welcome to our third quarter 2023 earnings conference call. Joining us today are Mr. Hsing Wang, Chairman and CEO, and Mr. Shao Hui Chen, Senior Vice President and CFO of Meiquan. For today's call, management will first provide a review of our third quarter 2023 results and then conduct a Q&A session. Before we start, we would like to remind you that Our plantation contains four locking statements, which include a number of risks and uncertainties, and may differ from actual results in the future. This plantation also contains an audited RFI's 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 RFIs. For a detailed discussion of risk factors and non-IFI measures, please refer to disclosure documents in the IR section of our website. Now, I will turn the call over to Hsin. Please go ahead.

Thank you. Good evening, everyone. In the first quarter, our total revenue increased by 22.1% year-over-year to 65.5 billion RMB. And our adjusted net profit increased to 5.7 billion RMB, representing 62.4% year-over-year growth. Meanwhile, our annual transaction users and annual active merchants both experienced accelerated growth and achieved record highs. Furthermore, user purchase frequency also reached a new break peak, to continue to innovate by introducing the everything-now lifestyle to consumers and further facilitate industrial digital transformation. We have expanded the service scope that the consumer can enjoy on our platform and further diversified our product formats. Through years of business operations, we have reached a point where we are helping over 10 million merchants generate more income while also creating job opportunities for millions of careers. Going forward, we will continue to implement our retail plus technology strategy and provide more diverse local services to Chinese consumers, fulfilling our mission that we help people eat better, live better. During the quarter, Our food delivery business maintained its robust growth momentum, especially its peak daily order volume reached a new record high of $78 million in the summer, doubled at that level over three years ago. To capture more opportunities from the consumption recovery and further unlock consumption potential, we further enhanced our understanding of consumer needs across different income levels and different consumption scenarios, empowering merchants to digitize their operations. The scale of our medium and high-frequency user base, along with their purchase frequency, continued to grow rapidly, and user stickiness also improved. We iterated our membership program offering coupon packages of different sizes, which effectively boosted user transaction frequency. In addition, we continue to enhance consumer mindshare for a high-growth consumption scenario. For instance, during this year's multi-marketing campaign, on the first day of autumn, Over 21 million newbie orders were made in a single day, showing a large potential of the afternoon tea category. Order growth for late-night snacks was also particularly strong in the summer, thanks to our effective marketing and subsidy strategy. During the National Day holiday, we also witnessed strong growth from travel scenarios like at hotels, airports, and train stations. In addition, the value of Ding Hao Fan has become increasingly evident as more and more high-quality selections at affordable prices emerge. Ding Hao Fan allowed us to effectively cater to the food delivery needs at a low price band. Moreover, campaigns and events that promotes net heat products such as Shen Qiangshou help cultivate consumer behavior in viewing live streaming and shopping on Meituan and further enhance their transaction frequency. At the same time, they also help merchants accumulate customers, improve operation efficiencies, and enhance brand image. In September, Shen Qiangshou launched a special live streaming session for time-honored brands as Lao Chi Hao to celebrate a mid-autumn festival in Beijing, Shanghai, Shenzhen, and Xi'an. The session was intended to facilitate digital transformation for time-honored brands and find new growth opportunities in food delivery for them. We also offered merchants new tools for customer management, which will help them grow their customer base and revenue. Through these efforts, we further expanded the diversity and improved the quality of our platform's supply. Right now, InstaShopping, once again, grows strongly in the third quarter with all the volume, merchant base, and user base all increasing notably. We further promoted the integration of online and offline retail and facilitated the rapid growth of on-demand retail. To better adapt to the evolving consumption trends, the retail industry is actively embracing the new on-demand model, which meets the needs of live now, business now, and service now. In fact, The everything-now shopping style has emerged as a new norm among younger generations. Even against the backdrop of last year's high base, NetOnline's shopping order volume continues to achieve long growth, reaching a peak of over 13 million daily orders on Chinese Valentine's Day in August. We further expanded our user base across the city tiers, The consumers from lower tier cities were at a faster rate than average. Users' transaction frequency had further accelerated, particularly among users aged 18 to 25. Young people have emerged as the primary consumer force of Meta InstaShopping. Moreover, people have started to use Meta InstaShopping in a wider variety of timeframes and consumption scenarios. For example, order mix from late night snacks has further increased. Notably, during the third quarter, our annual active merchants grew by 30% year over year. We have not only empowered the digital transformation of small retail model retailers, but have also established the partnerships with nearly 400 brands. In addition, the number of our Meituan Instamart, Meituan Shandiancang, now exceeded 5,000, complementing traditional offline supply. Revolving consumer demands are also driving changes from the supply side. We see retailers and brands constantly diversifying their SKU offerings align with the on-demand retail channel. During the third quarter, 140 categories such as electronics, home appliances, and beauty products remained as key growth drivers. Categories such as freshly cut food and iced beer have also emerged, catering to consumers' diverse demands for quality products. We believe that on-demand retail will continue to drive consumption expansion and transform the offline retail in the future. And we are very confident that Meituan Instant Shopping will remain its robust growth as a leading on-demand retail platform. And our in-store hotel and travel business maintained its strong growth momentum since the beginning of this year. with the GDP increasing by over 90% year-over-year in the third quarter. Quarterly active merchants grew by over 50% compared to the same period of last year. And quarterly transacting users also increased substantially. Throughout this period, we further solidified our competitive advantages in a shelf-based model and leveraged short-form videos and live streaming to promote the mega-hit products. Our efforts have effectively revitalized the growth for our offline merchants, facilitated transactions on our platform, and provided consumers with better quality, more cost-effective products and services. Our in-store business grew robustly during this summer, achieving a new record in monthly GDP in August. Throughout the third quarter, we continued to iterate and refine our live streaming and special deals. Then we introduced the Master Eat Festival this year for the first time, offering consumers hot interactive products and engaging content. By leveraging our in-depth understanding of consumer behavior, and LBS features. Coupled with the improvement in our product capabilities, our live streaming session can effectively bring in nearby consumers with specific consumption needs. We also seized opportunities during the Mid-Autumn Festival and National Day holiday peak seasons. Optimizing our made-time platform live streaming has been possible to showcase special events such as the duty expert, Mei Bo Hui, and the wedding expert, Hung Bo Hui, and more. With the Meituan platform live streaming now covering more than 200 cities, the number of live streaming sessions has increased 10 times exponentially, and their GDP contribution has grown substantially. We also enhanced our service offerings and boosted our AI capabilities to reduce the entry barrier for merchants to engage in live streaming on May 10. Furthermore, we refined our operations and optimized the user traffic allocation for special bills at AdvanGo, reinforcing consumer mindset as the sole-two platform for value-for-money purchases. These initiatives also motivated more merchants to offer high-quality cost-effective products, resulting in increased transaction volumes on our platform. During the summer holidays and the National Day Golden Week, we proactively launched a number of marketing events and theme-based promotions to drive growth. For example, we jointly launched the first online beauty expert in collaboration with over 30 brands We introduced over 150 megahertz products covering a broad range of services, including facial treatment, hair salons, manicures, dental cares, and medical aesthetics. And these initiatives sparked significant consumer interest in energy consumption. During the quarter, we collaborated with 20,000 merchants when launching the first-ever must-eat festival, Di Shi Jie. During the festival, we encouraged merchants to offer consumers must-eat set meals, Di Shi Tao Chan, at affordable prices. In addition, we introduced the must-eat festival market, Di Shi Jie Shi Ji, an offline event that allows consumers to sample dishes from various restaurants featured on our on our must-eat list. This initiative helped boost in-store dining consumption at nearby shopping centers. Our hotels and travel business continue its strong growth trajectory in the third quarter, with both GDB and room nights growing robustly compared to both the third quarter of 2022 and 2019. We successfully captured the summer peak season closely tracked the evolving consumption trends, and further diversified our products offering. For example, we introduced a greater number of deep discounted deals and increased the frequency of live streaming sessions on our platform. We also expanded quality supply and optimized the price competitiveness to meet the increasingly diverse needs from consumers. After launching the Stay for More Grants to the one last quarter, we further enriched our HotelPlusX active use and enhanced our consumer mindset through promotions, marketing campaigns, and live streaming events. In August, we unveiled the last must-stay list for 2023, earning a selection of over 900 hotels. We expanded our promotional efforts through live streaming and joint marketing collaborations with high-star hotels. For small and medium-sized hotel merchants, we made our best effort to understand their different operational needs and pain points. We helped them improve traffic acquisition, provide room renovation solutions, and broadened promotional channels, all aimed at boosting their earnings. Room nights for alternative accommodation also continued to grow rapidly during the third quarter. We enhanced our platform's self-service capabilities, helped consumers make more efficient and better informed choices, and enhance the host's operational efficiency. And now turning to our new initiative segment. First, Maitan Select maintained its market position in the third quarter with enhanced operating efficiency. We reinforced our product pricing capabilities to provide more value for money selections. We also continually refined our logistic network and increased the density of high-quality pickup stations. Elevating the overall fulfillment experience for consumers, we continued to expand Meituan Select's user base and have accumulated 490 million transacting users by the end of September. Meanwhile, we have been helping farmers increase income facilitating the circulation of agricultural products and boosting the earnings for small business owners. Meitang Grocery, that's Meitang Mai Cai, delivered a further strong growth, with the GDP growing rapidly in the third quarter. And we are pleased to see that Meitang Grocery has increasingly become the preferred choice for consumers, with its user base, purchase frequency, and average order value for increasing quality. During the quarter, we've identified our pricing advantages, optimized our logistics network, and improved operational efficiency across the entire supply chain. In addition, we enhanced the breadth and depth of our product offerings and leveraged the holiday promotions to satisfy consumers' diverse needs and strengthen consumer mindset. For example, scales of mooncakes and seafood experienced high growth during the holiday season. Moreover, our continuous improvement of private label products ensure that our consumers can access a wider range of high-quality items with a guaranteed supply. Since the beginning of the year, a number of macro policies aimed to promote economic growth and consumption have been unveiled, and we believe consumer demand will gradually recover next year. And we will adapt to the evolving consumption trends and iterate our products and operational strategies and provide consumers with more cost-effective goods and services. We intend to play an active role in enhancing the industry ecosystem and create more job opportunities and help stimulate consumption. Looking ahead, we will continue to focus on our retail plus technology strategy to help people eat better, live better. With that, I will turn the call over to Shaohui for an update on our latest financial results.

Thank you, Xin. Hello, everyone. I will now go through our third quarter financial results. During this quarter, our businesses delivered resilient growth, with our total revenue increasing by 22.1% year-over-year to RMB 76.5 billion. Cost of revenue ratio decreased 5.7 percentage points year-over-year to 64.7%. primarily due to the improved gross margin of our food delivery, between instant shopping and goods retail businesses, as well as the increased contribution of online marketing service revenue. Selling and marketing advantage ratio increased 4.7 percentage points year-over-year to 22.1%, mainly due to our increased promotions, advertising, user incentives, and employee benefits. to stimulate consumption and solidify our competitive advantage. MD expenses ratio and G&A expenses ratio both decreased year-over-year to 7% and 3.3% respectively, primarily benefiting from improved operating leverage. Our focus on stimulating high-quality growth and improving operating efficiency drove substantial year-over-year growth in total segment operating profit and operating margin, Total segment operating profit increased from RMB 2.5 billion to RMB 5 billion, and the operating margin increased from 4.1% to 6.5%. On a consolidated basis, our adjusted net profit increased significantly year-over-year, reaching RMB 5.7 billion this quarter. Turning to our tax position, As of September 30, 2023, we maintain our strong net cash position with our cash and cash equivalents and short-term treasury investments, totaling RMB $133.6 billion. In the third quarter, cash generated from operating activities improved significantly year-over-year to RMB $11.2 billion. Now let's look at our segment results. Starting with core local commerce, Our core local commerce segments revenue increased by 24.5% year-over-year to RMB 57.7 billion. Operating profit increased year-over-year to RMB 10.1 billion. Operating margin was 17.5% this quarter. During the third quarter, our on-demand delivery delivered resilient growth, with order volume growing 23% year-over-year. For food delivery, We saw a steady growth in both monthly tragedy users and their average purchase frequency. Order volume two-year trigger slightly increased as compared to the second quarter, despite the external challenges and the negative impact of extreme weather. On the economic side, average order value declined year-over-year against last year's high base. The decline was also a natural result of the recovery of small and medium-sized restaurants At the same time, our strength and marketing efforts to stimulate consumer demand and acquire users led to a year-over-year increase in subsidy spending. However, we continue to benefit from the abundant supply of queries. All the volume growth also drove economic scale on the cost side. Meanwhile, the increase in marketing demand from merchants drove the strong growth in online marketing service revenue this quarter. These favorable factors help to offset the increase in subsidy and lower AOV. Notably, operating profit per order continues to increase on a year-to-year basis. From a financial standpoint, order volume grows robustly, with daily average order volume reaching $7.6 million this quarter. Importantly, The year-over-year growth rate of order volume continued to accelerate from the second quarter even against last year's high base. We further invested in user mindshare to drive growth and ramp up marketing expenditure for holiday promotions and medicine categories. These investments yield positive results with both the scale of transaction users and their purchase frequency grow rapidly. At the same time, we saw that offline retailers and brands were increasingly willing to allocate marketing budget to our platform. As a result, online marketing services were new, achieved a remarkable year-over-year growth of about 120%. Again, driving Meituan Entertainment Shopping's revenue growth to outpace all the volume growth this quarter. Earning economics improved compared to the same period of last year, driven by heightened advertising monetization. abundant query supply, and enhanced economy scale. Now let's turn to our Instant Hotel and Travel business. The third quarter was peak season for local services. We strategically increased investments to support merchants and incentivize consumers. At the same time, we allocated sufficient resources to marketing and promotional events to successfully drive growth. PTV for in-store hotel and travel achieved very robust growth and revenue grew at a slower pace than PTV. Lastly, the transition-based service revenue growth for our in-store hotel and travel business was very strong year-over-year. We have seen an accelerated digitization of various local service industries. the consumer demand for services like KTV, UT, sports, and fitness, along with other leisure and entertainment services, was particularly high. Our hotel and travel business maintained its robust growth in both the Room 9 scale and ADR exporter. Online marketing services revenue growth was slower compared to commission revenue, as subscription-based revenue remained flat compared to the same period last year, due to the adjustment on annual fee in certain categories in lower tier cities. However, we are pleased to see that merchants' willingness to marketing online gradually recover. This trend is reflecting in the fast growth in both the number of merchants and their spending on placing performance-based ads, which has led to rapid recovery in performance-based advertising revenues. operating profit remained relatively stable compared to the second quarter. The sequential decline in operating profit margin was mainly due to our increased marketing efforts to capture peak season opportunities and strengthen our competitive advantages. Nevertheless, we remain confident in the long-term profitability potential of the in-store hotel and travel business. Turning to our new initiative, During this quarter, revenue in this segment increased by 15.3% year-over-year to RMB 18.8 billion, mainly due to the development of our goods retail business and partially offset by the contraction of our self-operated right-sharing business model. The segment operating loss ratio further narrowed to 27.2% from 31% in the second quarter of this year. The third quarter is traditionally the investment season for grocery. In fact, we increase the subsidy for seasonal summer products and roll out more seasonal promotions. We also maintain significant expenditure on cold chain and logistics to handle the challenges posed by high temperatures. Despite these factors, our improved business operating efficiency led to a narrowing of the quarterly operating loss ratio on a sequential basis. Meanwhile, many of our other new initiatives continue to make good progress in enhancing their operating efficiency. In summary, despite external challenges, our core business once again grew resilient, setting new records across multiple performance metrics. We are actively exploring more effective measures to navigate changes in the external environment. Our confidence in the long-term potential for our core business remains intact, Its business has proven their resilience and strong adaptability over the past decade. We believe our experience and the strong execution capability will equip us to confront challenges, strengthen our competitive modes, and capitalize on new opportunities in the future. Meanwhile, we will continue to pursue high-growth strategies for our new initiatives and continue to improve operating efficiencies. Thank you.

If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you are on a speaker phone, please pick up the handset to ask your question. The first question today comes from Gary Yu with Morgan Stanley. Please go ahead.

Hi, thank you for the opportunity to ask questions. In light of the current macro environment and consumer sentiment, I just wanted to see how would the demand and order growth for food delivery be affected? And also, will the medium and long-term growth targets for food delivery still be intact? And also, have you seen any impact on Meituan instant shopping? Thank you.

Thank you, Gary, for the questions. Firstly, as we mentioned, despite external challenges, our on-demand delivery business still posted high growth rate in other consumption-related sectors. Its order volume grew by 23% year-over-year. Order volume of food delivery peaked at 78 million during this summer, double from three years ago. Main-point African shopping also maintained rapid growth, peaking at 13 million orders on Chinese Valentine's Day, the new record. That said, consumers tend to be more cautious and prefer value-for-money selections. The demand growth for food delivery and work scenarios was affected, but we proactively adapted to these changes. For example, we expanded supply in more low-ticket size and high-quality selections. We also accelerated our strategy and efficiency in Ping Hao Fan, so that we can better meet consumers' evolving demands through a more efficient delivery format. In addition, for those who prefer high-quality or group-feathering meals, we also provide value-for-money high-quality selection through Shen Qiang Shou. We partner with high-quality restaurants and leverage live streaming to stimulate consumers' non-instant demands. We also optimize our membership program and cultivate consumer mindshare in looking for value-for-money deals on Meituan, helping boost transaction frequency. Meanwhile, we are continuously exploring other effective ways to cope with the changing consumption trend. For Meituan Instant Shopping, its order volume two-year period was around 50% for the past three quarters. On-demand retail is a natural extension of food delivery and has large potential for online penetration across geography, across category, and across consumption scenarios. Innovative supply formats such as Meituan Instant Mart, Meituan Shandian Cang are specifically tailored to cope with the on-demand channel. It generates incremental growth for our business. Consumer mindshare in on-demand retail has increasingly deepened post-pandemic. Demand has increased across different scenarios in the third quarter, especially during nighttime and in travel scenarios. Data show that maritime assistant shop users order food delivery much more frequently compared to non-maritime assistant shop users. They represent our high-quality user base who have stronger purchasing power and loyalty to our platform. We expect huge upside in the transition frequency and up-pull for these core users as we continue to enhance the platform. In the immediate to long-term, we believe microeconomics in China will steadily recover. We have strong confidence in long-term growth potential for food delivery and for Meituan instant shopping. With our competitive mode and execution record, we believe we can capture the growth opportunity. We remain confident on this business, and the outlook of the long-term growth target remains unchanged. Thank you. Thank you.

The next question comes from Thomas Chong with Jefferies. Please go ahead.

Hi, good evening. Thanks, management, for taking my questions. Could management share about what you are seeing in food delivery and may plan in-store shopping lately? How should we expect the order growth and financial for these two businesses as we head into Q4? Thank you.

Okay, I will further take this question to explain our outlook for Q4. We think two-year cases of our order volume in Q4 could be similar as that of the first nine months of this year. There are several factors affecting the order volume growth. First, the impact from current macroenvironment on order volume growth, especially in workplace scenarios. Second, this year's weather is pretty warm in October and November. Warm weather doesn't help Super Delivery order growth in the winter season. Third, more people return to offline consumption as compared to last year, so that could impact Super Delivery's order volume growth. Here, we try our best to expand supply, optimize operations, and improve efficiency. We think in Q4, these efforts will help drive consumption frequency among high-quality users and better satisfy demand and low ticket size meals for more mass market consumers. Economy, finance, and shopping. Despite having a high base in Q4 last year, the recent order volume is still growing healthily. We will continue to provide better supply across categories and enhance consumer mindshare. We expect the two-year paper of order volume in Q4 to be around 45%. notably outpacing the growth in broader e-commerce space. On financial outlook, we think in Q4, revenue year-over-year growth for food delivery will be slightly lower than the Q3 growth rate. Q4 revenue growth for major and state shopping will be similar as that of the order volume. First, we think AOV will decline compared to the last Q4 of both business. For the food delivery business, large ticket size Timely orders and long-distance orders contribute a much higher percentage in Q4 last year due to COVID. In the meantime, many SME merchants suspended operations in Q4 last year. These reasons lead to an extreme high pace for AOV in last Q4. The slow recovery of SME merchants and the consumption behavior changes this year lead to the meaningful decline in AOV in Q4 for first delivery. Former clients then shopped in consumer demand to stockpile daily necessities and medicine were extremely high in Q4 last year. So ALV in Q4 last year was also an extremely high base. In addition, we spent less in marketing and subsidy last year due to the strong demand. In this Q4, we are stepping up our marketing efforts to stimulate demand under the current consumption environment. Higher subsidy will also counter revenue. On profit side, the cost of savings from the sufficient cooler with supply and improved economy of scale will be offset by decreased NLV. At the same time, such bigger order will increase chronologically into four on a year-to-year basis to stimulate demand. Thank you.

Thank you.

Thank you. The next question comes from Kenneth Fong with UBS. Please go ahead.

Hi. Good evening, management. Thank you for taking my questions. For many categories in in-store hotel and the travel sector usually benefit from the consumption upgrade. Given the recent macro headwind, how should we think about the impact to our in-store hotel and travel business? And how should we forecast this GTV growth in the next one to two years? Thank you.

Thank you for this question. In the first three quarters, we noticed that the service retail grew by 18.9% every year in China, much higher than the total retail sales of consumer goods. This shows that demand for service retail is still very strong. And thanks to our decade-long experience in this, sector neurotic growth in online penetration, our in-store hotel and travel business maintains very high growth in Q3. In this environment, more and more consumers actually prefer value-for-money selections online. They are more presentive and usually compare prices among different channels before they make purchase decisions. Omicron offers a broad range of coupons and tax deals in more affordable prices and offline walking prices. Through our decade-long operation, we have gained strong consumer mindshare in finding stores and discounts on the Meituan platform, which can help us adapt to the changing consumption trend. In addition, we have strong know-how in the pricing of patch deals and LB ad syndrome, so we can help merchants design popular patch deals that match consumer demands. We also help merchants with traffic acquisition so that the merchants can effectively attract consumers and encourage more consumers to complete transactions online. We are glad to see our quarterly active merchants and quarterly transacting users both reach record highs, and there is still a lot of room for further online penetration. Now, merchants and consumers pay more attention to the value that the online platform offers. if consumption trends also start to emerge. For example, self-service tea house, 自助茶馆, self-service aliens, 自助台球, are becoming popular among young people. Co-branding and beverage, 茶饮联名, and post-concept dining also grow increasing popularity. We keep up with the latest consumption trends and innovate our offerings and services to meet consumers' demands. We not only activate our existing share-based model, also enhance our special deals section to promote low price. In addition, we use live streaming to help merchants sell mega-heat value-for-money package deals and incentivize consumers to stockpile coupons. GTV contributions from live streaming rapidly increased in the past quarter. With all these measures, we are better positioned to meet the changing consumption trends amid demand, all in one place. Looking ahead, service retail will continue to be a key growth engine of China's economy. Online penetration of service retail is way behind that of goods retail. So we believe there is still a lot of room to grow. Also, consumer demand and service retailing is becoming more diverse. we are confident that our in-store hotel and travel business will continue to benefit from this progress. And considering the competitive landscape, we are going to roll out a series of measures to capture the growing market and strengthen our market position. While these measures might impact the short-term monetization rate and profit margin, we expect this business to maintain a high growth rate over the next few years, given the accelerate in my pensions.

Thank you.

The next question comes from Yajian with CITIC Securities Company. Please go ahead.

Hi, good evening. Thank you for taking my question. My question is also about in-store hotel and travel business. Can you please provide some color on the performance during Mid-Autumn Festival and the National Day Holiday And how should we anticipate Q4 growth in the competition? And if the competition becomes more intense, will Q4 OPM be lower than Q3? Thank you.

Yeah, we have continued to enhance our live streaming capability in the last two quarters. As a result of live streaming sessions successfully satisfying consumer demand during the holidays, The average number of live stream sections per day during the September increased by 300% from June. GTV even surged by over 40 times. During the National Day Golden Week, we also launched a variety of holiday themed promotions, helping boost daily transaction value of instant hotel travel to increase by over 150% versus 2019. For the hotel business, many tourist destinations experience greater popularity and even had a hotel room shortage during the Golden Week. And in some niche but special tourist cities, room nights increased versus 2019. This year, we further enhanced internal traffic location and cross-selling on our platform. We also expanded external marketing channels. These measures help strengthen consumer mindshare in our state-owned mall brand, Du Zhe Wan, In addition, we set up our marketing effort to help merchants on our must-stay list. We organized delicate live streaming sessions for these merchants. As a result, merchants on our must-stay list experienced 120% increase in number of bookings compared to the pre-holiday period. During the summer holiday and National Day Golden Week, we see strong growth momentum in service retailing we refine and diversify our marketing strategy, which generate positive results. We also strengthen consumer mindshare, enhance our content capability, and offer more marketing tools for merchants. In Q4, we just had the Level 11 campaign. We will launch more promotions and activities for the year-end Shopping Festival. The market is still at a high growth stage. Particularly, there's large potential for online penetration in lower tier cities and lots of new categories. We want to further enhance the existing users' mindshare and to penetrate deeper into lower tier markets. So in Q4, we will make more targeted investments and dynamically adjust our marketing strategy to drive growth. We estimate to further step up our marketing expenses on a sequential basis and significantly expand our local business development team in two-fold in the lower tier cities, which will impact profitability. We are confident that our business scale should continue to grow rapidly during this investment. As for competition, we always view it from a positive perspective. There is still a lot of potential for online penetration in the local service industry, We believe competition helps accelerate its process and its benefits, both consumer and merchant. It also pushes harder to make more innovations and positive changes. We need to make short-term investments to develop new markets or to optimize our products, and these may impact near-term profitability. These investments are necessary. It's not just about the carbon-converged environment. I would also believe this will help us make long-term sustainable growth. Looking ahead, we will dynamically assess our investment ROI and ERP resources accordingly. We will strengthen our capability in content operations as well as consumer and merchant market share. We will make confident in the long-term growth and long-term profitability for in-store hotel and travel business. Thank you.

Thank you, it's helpful.

The next question comes from Alex Yao with JP Morgan. Please go ahead.

Good evening, management. Thank you for taking my question. Based on the recent two quarters financials, there seems to be challenges to the loss reduction of the new initiative segments. In addition, the segment growth is much slower than the core business. Given the loss mainly came from made-to-select, do you plan to make any strategic changes or adjustment to made-to-select? How should we expect its revenue growth and operating loss going forward? Do you have a sense of the break-even point for made-to-select? And lastly, Any update for all the other new initiatives? How should we think about their long-term financial returns? Thank you.

Thank you, Alex. I will take this question. So, I totally understand shareholders may be quite concerned about the revenue growth of our new initiative segment. So, first, allow me to clarify. Our new initiative segment consist of not one business, but a bunch of different businesses. And they have different accounting treatments and revenue recognition ways, which may impact revenue growth. So revenue growth of our new initiative segment slowed down in Q2 and Q3, mainly due to revenue exchange. So first, for writer sharing, And we shut down the self-operating model in March. So Q3 revenue operator sharing declined sharply because it declined sharply year over year. And the second, our B2B full-service distribution business, known as Quarry, recorded a faster growth from its marketplace model, that 3D service. But you know 3P service revenue on net basis compared to the 1P service, which can be booked on false basis. So the 3P, 1P exchange negatively impacted its revenue growth. Actually, the quality is growing very nicely. It's just a different accounting treatment. Through these two factors, growth of this segment is actually quite similar as the growth of the core segment in Q3. In Q4, we will face more pressure from new industries' revenue growth. The impacts from ride-sharing, scale-back, scaling-back, and quite-ish revenue exchange will still be there. It will persist. In addition, those Meituan Mai Cai and Meituan Select had a very high base in Cuba last year due to COVID surge at that time. As you probably know, a very big chunk of the loss is from the Meituan Select. So I will address it here. And because the recent macro headwind and offline consumption recovery, the growth of the meta-selects slowed down a little bit. And we need more time to iterate our operations. But first, I probably need to elaborate how we look at the meta-selectedness. So this way, part of our growth rate strategy remember that the mission of the company to help people eat better live better we are very serious about our mission so I believe in future has been proven in the past several years in future more and more people will use food delivery they don't have to cook for themselves they are still a external people who prefer for whatever reason to cook for themselves and they need to buy grocery so that means grocery is a particularly important and particularly big category of retail it's big it's important but it's particularly difficult so in the past 20 years either in the in the u.s or in china People have tried many ways to make online grocery work. So far, it hasn't been very successful. But because grocery is such an important category of retail, and also along the way, if you can make online grocery work, you must have a problem of building a different type of registered network. And on top of that, that's a huge potential for other general merchandise. So I think that's why online grocery, in general, or Maitland Select in particular, I believe they have big potentials. It's very difficult because it requires the platform to build a different type of fulfillment network. So that's why we have been doing trial and error for the past three years or so. So that's the first strategic value of Meitang Select, because both itself is big. And second, our Meitang Select business is effectively helping us bring new users and increase the user frequency and create cost-sale opportunities. So that is the value. As I said, it's quite difficult. because of all the reasons. So if you look at the numbers, it's growing, but the growth has slowed down a little bit. We are looking into the regions, and I think we have identified the regions, and we have revised the strategy to improve the operation. So this way, we are very focused on building and improving the business, and we will make adjustments in strategy and operations, but not the kind of strategic investment you are talking about. I think we are going to improve the business. So for the past quarter and the coming quarters, I think the revenue will keep growing, operating loss, in a particle, the operating loss remains sort of flat on sequential base. But because the total size is bigger, so that means the loss margin keeps narrowing down sequentially. So I think that's a good sign. Of course, we are trying our best to improve faster. I think it will take some time. So going forward, we will keep focusing on high-quality growth and improved efficiency in all plants. And we expect the loss will narrow significantly in the next three years. In the long run, we still believe it can achieve a standalone profitability and create a bigger value. So that's my take on Meitang Select. And for other new initiatives, I think they have more good news. Efficiency continues to improve, and their path to profitability is clear. For example, our Kuaidui and our restaurant SaaS business have both become the number one player in China, and efficiency improved continually during the past two years. and they help increase merchant's thickness with our platform. And also, our bike-sharing business has achieved a positive EBIT for two consecutive quarters. And also, our electric moped-sharing business also improved and realized a positive cash flow. And last year, our shared power bank business already become profitable. And this year, we further improved the operating efficiency. So overall, we remain quite competent to be able to achieve stand-alone profitability for most of our new initiatives, not to mention the tremendous strategic value they may bring to us. On the other hand, I think that we are a rational company. So if we realize, we came to the realization that any of the new initiatives has very limited chance to make end-alone significant profit in the long run, we will adjust our strategy. And also, accordingly, we will adjust the resource allocation. I think that's the rationale. Thank you.

The next question comes from Ronald Cheung with Goldman Sachs. Please go ahead.

Thank you. Thank you, Xin Ge, Xiaohui, and Scarlett. So we've seen that the operating cash flow has significantly improved this year and has become more stable. So when the company has sufficient net cash and as the core business generates stable profits, just what is management's plan for capital allocation? And do we have a buyback plan as we see share price upside from a long-term perspective? Thank you.

Thank you, Ronald. Yes, we have noticed a lot of companies are doing share buybacks lately. We understand it's a good way to allocate capital for those companies, particularly those companies with mature and stable businesses and strong cash reserves. Especially if the price is significantly lower than a company's so-called intrinsic values. It will benefit both the company itself and its shareholders for longer term. So for us, I think first we need to make sure we have enough cash. So given the current interest rate of the U.S. dollars, I think we need to make sure we have enough cash overseas. Not just enough cash, but enough cash overseas we pay our bonds in the coming future. So I think that's number nine. On the business side, I think our new industry are still at investment stage. We are also exploring overseas opportunities. So we believe investing resources into our businesses can help us better capture market opportunities. Also, they will allow us to participate more in the industry transformation process and solidify our competitive modes. At the same time, from a longer-term perspective, of course, I believe our company is undervalued at the current share price. So we are confident about the long-term growth and the long-term value of our company. So we think that the target share price only reflects value of one business as a food delivery. So we have had a very serious discussion about share buyback at our board, last board meeting. And the board has discussed and authorized us to do a share buyback up to $1 billion. Of course, we will take into consideration And they mentioned investment opportunities in our businesses and our cash flow and cash position with onshore and offshore and our stock price. I think that's the answer you want to hear. Thank you.

Thank you, Cinco.

There are no further questions at this time. I'll now hand the call back over to Scarlett Chu for closing remarks.

Okay, thank you for joining our call. We look forward to speaking with everyone next quarter. Thank you. That does conclude our conference for today.

Thank you for participating. You may now disconnect.