Meituan Dianping Ord Cl B

Thank you for standing by and welcome to the Mituan Third Quarter 2025 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, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Scarlett Zhu, VP and Head of Capital Markets. Please go ahead.

Thank you, Teresa. Good evening and good morning, everyone. Welcome to our third quarter of 2025 earnings conference call. Joining us today are Mr. Hsing Wang, Chairman and CEO, and Mr. Xiao Hui Chen, Senior Vice President and CFO of Meituan. For today's call, management will first provide a review of our third quarter of 2025 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 actual results in the future. This presentation also contains an audited non-IFIS accounting standards, 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 IFIS accounting standards. For a detailed discussion of risk factors and non-IFI accounting standard measures, please refer to the disclosure document in the IF section of our website. Now I will turn the call over to Mr. Xinhua. Please go ahead, Xinhua.

Thank you, Scarlett. Hello, everyone. We are in the third quarter. we actively responded to the shift in the competitive landscape of food delivery and quick commerce. Meituan maintains, remains the go-to platform of local services for Chinese consumers. Over 800 million consumers use our services, covering everything from food and dining, quick commerce, to services retail and more. Specifically, The Meituan Apps DAU jumped over 20% year-over-year in the third quarter. On average, users transact with us at least once a week, and our top-tier and high-quality users engage with the platform every day. Across all local commerce businesses, we have stepped up product and service iteration to enhance user mindshare and strengthen our competitive advantages. Thanks to our fully upgraded Meitang membership, Meitang Huiyuan, we have effectively boosted for-selling activities and enhanced core user stickiness. We are also the primary platform for merchants' long-term growth, empowering them with the technology and supply innovations. and helping them to integrate AI into their operation to improve efficiency. First, let's talk about our food delivery business. Here, we continue to leverage our competitive strengths to deliver industry-leading operational efficiency and a superior consumer experience. Our sustained focus on service quality and the healthy development of the industry has enabled us to navigate a quite dynamic market, strengthen our consumer mindset, and reinforce our leadership in the food delivery sector. Amid intense competition, we stepped up supply-side innovation and service upgrades. For our innovative supply models, like Ping Hao Fan, or as branded satellite stores. And we further deepened our collaborations with quality merchants. It allows us to offer consumers a wider range of high-quality products across all price bands. And we also selected top-tier restaurant merchants on based on real and authentic data. and matched these quality offerings precisely with our high-quality food delivery users. Additionally, we have rolled out premium services like on-time guarantee and one-to-one express delivery. These measures have strengthened our core competitiveness in fulfillment and elevated the delivery experience for consumers. and solidified our advantage in user structures. We remain as the Chinese consumer's go-to food delivery platform. In the third quarter, both DAU and MTU as monthly transacting user for food delivery hit an all-time high. We further expanded our advantage in user structures. In addition, we stuck up our efforts to address ecosystem issues and invested in the ecosystem development. Specifically for courier's welfare, we expanded the Courier Pension Insurance Subsidy Program to nationwide coverage beginning in November and extended an occupational injury insurance to 17 provinces and cities. We have also implemented a comprehensive career welfare scheme, which include critical illness support, educational funds for career students, and skill development and academic advancement opportunities for careers, as well as benefits such as work meals health checkups, and travel subsidies. Moreover, we have built courier homes, shizhouzijia, and rest stations across the country to provide our couriers with convenient facilities and services. Going forward, we will keep enhancing couriers' welfare and protection. And as consumers preferred QuickCommerce platform, Meituan Instant Shopping continues to lead the industry's rapid growth and service upgrade. In Q3, both new user growth and core user purchase frequency further increased. As we continue to diversify supply, the proportion of user buying across multiple categories has been steady on the rise. This shows our everything-now consumer mindset is getting even stronger. New spread formats like Meta and Instamart, Shandianshan, expanded rapidly, bringing this high-certainty lifestyle to more regions across China. We also teamed up with the leading brands in the liquid and apparel categories. which reflects these top brands' recognition of QuickCommerce's value and their trust in Meituan. In October, we officially launched a branded flagship Instamart, Dingpai Guanqi Shandiancang, providing retail brands with full QuickCommerce infrastructure, warehousing, on-demand delivery, and a digital system. By leveraging our strengths in user traffic, ecosystem, and online capabilities, we empowered brands to drive user growth, boost sales, and connect more deeply with younger consumers. Beyond that, we are committed to continuously upgrading our quick commerce services. After rolling out the industry's first full-cycle service assurance program, Anxingshan Go. We recently introduced an end-to-end authentic product verification process for Chinese Ricoh and launched the industry's first alliance for high-quality fresh-cut fruit brand, Wojie. As the industry leaders, we will keep setting benchmarks that focus on premium quality and top-tier service. Overall, we have built the world's largest and most efficient intra-city on-demand delivery network, delivering a best-in-class fulfillment experience to consumers. Our platform has accumulated a large base of high-quality users with very strong purchasing power. We also provide merchants with industry-leading services and create the most diverse supply These valuable assets built up over more than a decade will fuel the long-term growth of our food delivery business. They will also serve as a solid foundation for our efficient expansion in the broader quick commerce space. Now let's turn to our in-store business. In the third quarter, Both our merchant base and user base reached new highs with a nearly 20% year-over-year increase. And user transaction frequency continued to grow robustly. We further refined our product and content ecosystem. Our goal is to give every consumer simple, more reliable reference for purchase decisions. To date, Our platform has accumulated over 20 billion authentic user consumer reviews, with nearly 3.5 billion new reviews added in the past 12 months. Additionally, we are now using AI to field out low-quality reviews and those manipulative contents. This way, we can ensure a comprehensive authentic review ecosystem that provides a truly useful decision-making support for consumers. We also expanded the reach and influence of our high-quality lists, including the Black Pearl Guide, Heizhenzhu, and our must-eat list, Bishiba. Currently, these two lists cover 34 and 144 cities, respectively. Moving forward, we will expand to more regions and welcome more quality restaurants to join our list. Beyond that, we have iterated products like Pick Up Now, MiaoTi, smart ordering, one-click payments, extending coverage to more merchants, and meeting consumers' more diverse and personalized needs. Moreover, we further promoted our safe learning program in the broader education space and expanded our safe series to more categories such as fitness. We offer flexible redemption options, which has significantly boosted consumer trust in prepaid services. For self-service formats such as an unmanned chess and playing cards rooms and self-service KTV, we upgraded our booking system to deliver a smoother, hassle-free experience for consumers from reservation all the way into service fulfillment. In healthcare and pharmaceuticals, We expanded our video and phone consultation services to include more doctors from grade 3A hospitals, and we offered 24 by 7 instant consultations, plus 30 minutes prescription drug delivery. We improved in-store verification service for dental care and medical aesthetics, and standardized supply chain management to build end-to-end consumer trust. During the third quarter, we launched the 2025 Polaris Medical Aesthetic Guide , which set industry standards and raises the bar for services quality. These are just a few examples Going forward, we will continue to leverage our deep industry and consumer insights to turn more offline services transactions into trusted online transactions for consumers. And now let's turn to our new initiative segment. And this segment delivered another solid performance in the third quarter. Our grocery retail businesses, especially for Xiaoxiang supermarkets and Kuailui, sustained a strong growth momentum. We not only solidified our market position, but also achieved improvement in operational efficiency. And additionally, Kita accelerated its global coverage After launching in Qatar in August, we entered Kuwait and the UAE in September, deepening our presence in these key Middle East markets. In October, Kita also kicked off a pilot operation in Brazil. Going forward, we will continue to leverage our strength in product, technology, and operation know-how to deliver superior consumer delivery experience for consumers in more parts of the world. After six months of iterating and promoting Meituan membership, we have achieved good progress. We added new member benefits and exclusive offers across multiple local service categories. This has notably strengthened our user management and boosted member transaction frequency. Specifically, a large number of our mid-tier users have upgraded their membership tiers and the number of high value members kept growing steadily even in the recent very fierce competitive environment. It's a clear sign of our unique edge in serving high-value users. What's more, our enhanced meta-membership program is driving growth across businesses in key areas. It supports user acquisition and traffic operation and transaction growth and marketing while also effectively fueling process selling among various businesses and consumption scenarios. Moving forward, we will leverage our competitive advantages and broad coverage in local services, continue to refine the membership program, and increase user engagement and transaction frequency. During the third quarter, we continued to invest in AI and achieved multiple milestones. For example, we launched several models in our Long Cat Flash series, all delivering leading performance. And we rolled out a range of AI decision-making and application tools tailored specifically for restaurant merchants. And we also launched a Xiaomi app a smart life assistant for consumers, and currently is in large-scale testing. Going forward, we will make our AI tools more industry-focused and services-oriented. We will provide effective solutions for merchants across all operational decision-making scenarios and make consumers' decision-making process and consumption experience more intelligent, more convenient, and more personalized. Founded in 2010, Meituan has witnessed and led the digital transformation for China's local service industry. Since 2010, we have built the online purchase, offline consumption, user management in local services through group purchase model. Back in 2013, we stepped into the food delivery space, and our intra-city on-demand delivery network made food delivery services more accessible than ever, turning it into a key food consumption habit for Chinese consumers. And as leading industrial competitive and as the industry competition keeps evolving, we are confident in maintaining our leading position by continuing to strengthen our core competitiveness. Guided by our retail plus technology strategy, we will continue to refine our products and services to better meet consumers' very diverse local services needs while empowering merchants through technology innovation and AI application, all together to drive the sustainable and healthy development of the whole industry. So we are as ever committed to helping people eat better, live better. And with that, I will turn the call.

Thank you, Xin. Hello, everyone. I will now go through our third quarter financial results. During this quarter, our total revenue increased by 2% year-over-year to RMB 95.5 billion. Cost of revenue ratio increased 12.9 percentage points year-over-year to 73.6%. This was primarily driven by, first, high incentives for our queries to maintain industry-leading delivery service quality and experience. Second, the increased cost in our overseas operations. These factors were partially offset by the improved gross margin of our grocery retail business. Selling and marketing expenses ratio increased 16.7 percentage points year-over-year to 35.9%, driven by our increased investments in promotion, advertising, and user incentives to enhance our brand awareness, user acquisition, and core user engagement. R&D frequency ratio slightly increased to 7.3% as a result of our increased investment in AI, while G&A expenses ratio maintaining stable year-over-year at 3.1%. This quarter, irrational competition within the on-demand delivery industry significantly distorted sector-wide profitability. Our deliberate strategy investments to sustain leadership and competitiveness resulted in a total segment operating loss of RMB 15.3 billion and an adjusted net loss of RMB 16 billion. However, we maintain uncompromised service standards while continuing to drive initiatives that force the industry's sustainable development. As of September 30th, 2025, we held cash and cash equivalents and short-term treasury investments totaling RMB 141.3 billion. However, cash generated from operating activities turned to negative RMB 22.1 billion, primarily due to our investments in response to the intensified competition. Now turning first to our core local commerce segment. Revenue declined year-over-year this quarter, primarily driven by two factors. First, intensified competition caused a significant drop in food delivery average order value, weakening commission revenue growth. Second, delivery service revenue saw negative growth due to substantially higher incentives deducted from delivery service revenue. Despite these headwinds, we strategically increase investment across our ecosystem to reinforce market leadership and drive sustainable growth. For consumers, we strengthen marketing efforts to enhance brand positioning and price competitiveness while boosting user engagement. For queries, we expanded incentives to guarantee delivery service quality and experience Besides, supporting merchant partners remains a priority for us. Having empowered over 360,000 restaurant merchants nationwide, we recently commit an additional RMB 2 billion in merchant support funds. We hope to enable more restaurant partners to achieve efficient and sustainable operations. While these investments Weighed on the segment profitability this quarter, they solidified our leadership in both food delivery and mid-term instant shopping. Our market position in core and stock categories also remained stable throughout this period. We sustained our role as consumers' go-to platform for local services. Both order volume and GTV for core local commerce maintained healthy growth this quarter. Notably, on-demand delivery saw accelerating order growth. Call user base grew steadily year over year, with more low to medium frequency users moving up to high frequency. These users are transitioning more often, staying more engaged, and exploring more consumption scenarios. Amid the recent demand boost from the intensified industry competition, we secure the highest quality incremental orders. Moving forward, we will keep focusing on consumption frequency and engagement of core users through better supply and fulfillment capabilities. End-stop business also sustains its strong growth momentum with continued outperforms in lower tier markets. Turning to our new initiative segments. During this quarter, segment revenue grew by 15.9% year-over-year to RMB 28 billion this quarter. Despite the impact of strategic transformation of Meituan Select, our revenue remains solid growth driven by the expansion of our grocery retail business and overseas business. The segment's operating loss and operating loss ratio both narrowed on quarter-of-quarter basis to RMB 1.3 billion and 4.6% respectively. Thanks to our efforts in improving operating and marketing efficiency in our gross retail business and other new initiatives, the year-over-year increase in operating loss was mainly due to our increased investment in overseas business. As we look ahead, we remain confident in our ability to navigate a dynamic and competitive environment. We are making delivery investments in technology, service quality, and our ecosystem. These investments will strengthen our competitive position and unlock new growth opportunity for the industry over time. We have full confidence in our ability to deliver healthy, high-quality growth over the long run when competition normalizes. With that, we are now open for Q&A.

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're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Ronald Keung from Goldman Sachs. Please go ahead.

Thank you. So I want to ask, can management comment on any notable changes in the competitive landscape of the food delivery sector, particularly as we head into the fourth quarter? Have we seen any industry subsidies that is starting to scale back? We've noticed your competition has stepped up investment in membership programs like ADA VIPs and these membership programs. So how is the engagement and retention trending for your core customers? And sorry for a long question, but from a financial standpoint, I want to also ask how should we expect fourth quarter performance for the food delivery, and has there been any change in the long-term outlook for growth and profitability of the business? Thank you.

Well, Rona, thank you for your questions. Before I get into the question, let me restate what we have said very clearly over the last two quarters. First, I think the food delivery price war is an example of evolution, nature, and low price, low quality, and essentially a race to the bottom. We are firmly against it. The last six months have proved one thing, and it doesn't create any real value for the industry, and it cannot be sustainable. And second, we are doubling down on courier's rights and protections, and on supporting for small and mid-sized merchants. That's the only way to keep the industry healthy in the long run. And third, we will focus on doing the right things that's serving consumers, merchants, and crew as well. And we are fully confident in defending our leadership in on-demand delivery and creating real long-term value. In October and November, in the industry, subsidy level temporarily went down versus the summer peak season, and especially after the 2011 promotion period. We are still closely monitoring the market dynamics and will adjust our strategy accordingly. Recently, we have seen a rebound in our market share in order volume. We maintained a consistent leading position in GTV market share for mid to high AOV orders. For example, I think it's very important to focus on higher AOV sector. Our GDP market share for orders with a net AOV above 15 RMB is more than two-thirds. While our GDP market share for orders with a net AOV above 30 RMB is above 70%. I think those are more valuable sectors we want to focus on. And our net AOV per order remained much higher than other platforms. And our core users continued to show high retention rate with their consumption frequency and stickiness still growing steadily. I think this clearly reflects the strong user mind share we have built in the food delivery sectors and as well as our competitive edge in serving our core users. It is common for consumers to have multiple local service apps installed on their phone. However, Meituan remains the go-to platform for services for hundreds of millions of consumers. This is especially true among our core users. Their consumption frequency has been several times higher than that of the average consumers, even in such a highly competitive market. They show strong brand recognition and deeper consumer loyalty. This is because high-frequency or higher AOV consumers value the delivery experience and the supply quality and service reliability far more than just lower price. Our faster and more reliable delivery provides greater certainty particularly during extreme weathers and holiday periods. Our diverse and valuable money offerings across all price ranges allow us to precisely match consumers' needs. Through our Meituan membership program, we offer more attractive deals and exclusive service upgrades to our core users. And we are confident in our ability to deliver higher quality and more comprehensive services to our core users. This will help us further strengthen their stickiness and engagement in the long run. In addition, the investment by industry peers in the premium user segment will expand the overall adjustable market, benefiting us as well. We will leverage our strengths in service quality and breadth to further strengthen our position among a broader base of premium users. In terms of financial data, although I believe food delivery losses has peaked in Q3, and our food delivery business will still incur substantial loss in Q4, we will make necessary investment to maintain our leadership. but we are not interested in engaging price war. So we would adjust our investment dynamically based on the competitive landscape. We will continue to strengthen our advantage in service experience and operational efficiency. In the medium to long term, the competitive landscape will remain dynamic. How the business or industrial revolution typically follows a clear trajectory from capital-driven to efficiency-driven and ultimately to innovation-driven. China's food service has now entered a stage where supply-side innovation and service upgrade and technological solutions are critical for sustainable growth. And traffic gain and scale expansion purely driven by very aggressive subsidy will not be sustainable. And we believe the current irrational competition in food delivery will inevitably transit to a more rational and mature phase. Ultimately, the platform with deeper industrial insights and proven operational excellence and the ability to sustain high quality growth will be the industry leader. Therefore, as I mentioned last quarter, Meituan will stay focused on doing the right things to expand the high quality selections to ensure a fast and reliable delivery and offer consistently affordable prices. We will defend our market position while continuing to create greater value for the whole industry. Food delivery has become a high-certainty lifestyle for more and more consumers with clear long-term growth prospects. Our long-term target of reaching 100 million high-quality daily order remains unchanged. We remain competent in maintaining industrial-leading unit economics with proven operational efficiency advantages. Long term, even with a higher subsidy in a dynamic market, we expect a full-degree profit to return to a reasonable level. Thank you.

Thank you. Your next question comes from Gary Yu from Morgan Stanley. Please go ahead.

Hi. Thank you for the opportunity. I have a question regarding InstaShopping. The other e-commerce platforms are doubling down on quick commerce and bringing more traditional e-commerce brands to the space. How does management view our competitive edge? And after our own Double Eleven event, could you share an instant shopping strategy going forward? Will you scale up investment in the fourth quarter? Thank you.

Thank you, Gary, for our questions. First of all, I would like to highlight that we have a particularly strong competitive advantage in our QuickCommerce native supply that is even stronger than that of our food delivery business in which we are already a leader. From our perspective, QuickCommerce operates on a fundamentally different logic than traditional e-commerce, as well as half-day delivery or next-day delivery. QuickCommerce means no stockpiling You get what you see right away. Platform needs to identify real consumer needs and get the right supply in place. Leveraging years of understanding of the market demand and merchants' pay points, we have digitized offline supply and deployed our Instamart to better address the quick commerce demand. Simply shifting traditional e-commerce supply to the quick commerce channels creates no incremental value for either merchants or consumers. To better serve the lifestyle shaped by quick commerce, we are also driving industry-wide upgrades in infrastructure and service experience. For example, we expanded 20 plus 7 Meituan instant marts and pharmacies, roll out chilling facility for alcohol and beverages. and introduced quality guarantee services for food cart, such as Bright Kitchen, and damage guarantee. More importantly, our food delivery business has already cultivated a group of users who highly rely on 30-minute certainty. Our platform is the best fit for quick commerce. we deliver the highest conversion rates and incremental sales for merchants. As such, we managed to solidify my share among our core user group and defend our leadership across categories despite intensified competition. Under the new competitive landscape, we are deepening omnichannel partnerships with brands beyond physical stores and Medtron instruments. We also launched branded flagship instrument, which operates 24 plus 7 operations for 30-minute delivery of diversified and quality brand products through the native QuickCommerce channel. We provide brands with full QuickCommerce infrastructure, warehousing, delivery, and digital systems. Hundreds of brands have already joined during W11. We also stepped up user education for this initiative. On the first day of the W11 event, hundreds of brands saw 300% sales growth in their branded flagship Instamart. We hope to help brands move beyond the involution in traditional e-commerce and tap into new growth opportunities in quick commerce. Our branded flagship Instamart enables lower operating costs, faster turnover, stronger brand awareness, and more sustainable repurchase for brands. We are also enhancing our brand service tools. For instance, we offer smart distribution tool and AI power decision hub for our FMCG partners. we will keep working to remain the go-to platform for brands to unlock growth in quick commerce. In Q4, we will keep investing in supply-side operations while ensuring best-in-class user experience. We also step up our investment in user education around Double 11 and other campaigns. Operating loss for mainstream shopping in Q4 may slightly widen versus Q3. That said, our competitive modes across supply, user base, and fulfillment will allow us to sustain leadership with higher subsidy and operational efficiency. We are confident in restoring profitability and achieving a reasonable and sustainable margin in the mid to long term. Thank you.

Thank you. Your next question comes from Kenneth Song with UBS. Please go ahead.

Hi. Good evening, management. Thanks for taking my question. Recently, 8MAP has introduced a three-star initiative. Cao Bao also launched a goodbye deal. So how do management view the impact of this move on the competitive landscape to our in-store business? And under this new competitive environment, what specific measure will the company implement to address these challenges? Thank you.

Thank you, Kenneth, for the question about in-store business. Our in-store business model and operational strategy differ from roles of competitors across category mix, merchant scale, and type and marketing of ROI. By building authentic, accurate, and easily accessible POI data over time, we have established a dominant consumer mindshare as the go-to platform for local services. consumers complete most of their local service transactions on our platform. On the other hand, IMAP has a very clear consumer image as a navigation tool. It's a navigation tool that makes it difficult to cultivate consumer mindset for searching for local services. We have built a comprehensive user review ecosystem based on our operation in the past decade, accumulating over 25 billion authenticated reviews. This constitutes one of the key reasons why consumers trust and consistently choose Meituan as their go-to platform for local services. We also have the broadest category coverage and selections in the local service space. We offer consumers one-stop service and seamless experience, including table reservation, diverse group high deals, coupons, and stock ordering, payment, and membership benefits. Moreover, we maintain industry-leading merchant coverage. Leveraging our experienced offline business development team and deep industry insights, we deliver best-in-class service to merchants. These are all the core competencies that we believe other people cannot be quickly replicated in response to the evolving and dynamic competition. We continually iterate our product and operational capabilities to provide more diversified and personalized services to more quality merchants and consumers. First, we continue to captivate an ecosystem conducted to quality merchants. By expanding the coverage of our must-eat list, must-visit list, black-pail guide, and by introducing more specialized leads, we are able to provide merchants with more traffic promotion and better transaction conversion. Second, We have also refined our rating criteria to encourage merchants to focus on product and service quality rather than just the number of consumer reviews. We utilize big data to intelligently identify and help merchants automatically block abnormal reviews, significantly optimizing both merchant and user experience. We believe with the AI technology further penetrating into our business, we have been able to further improve the system. Additionally, we roll out more consumer-friendly products, such as VR merchant tool for reservation, pre-order while curing, and the smart install ordering. This digital solution further enhance consumer experience and improve merchant operational efficiency. The above are just a few examples. In the future, we will continue to focus on three key directions. E-consistence optimization, service innovation, and operation upgrade. We will try to provide consumers with a seamless merchant full lifecycle empowerment across customer acquisition, conversion, and retention. We will continue to foster sustainable industry growth through digital transformation. Competition may temporarily impact margins for our in-store business, but we expect long-term competitive landscape for in-store business remain unchanged. With full confidence, we believe we can maintain our leading market position and continue to lead the evolution of the industry ecosystem. Thank you.

Thank you. Your next question comes from Thomas Chong with Jefferies. Please go ahead.

Hi, good evening. Thanks, management, for taking my question. Company has rolled out AI agent, Xiaomi, for testing. What's the current progress and future plan for Xiaomi? Additionally, will Meituan app integrate in-app AI agents directly in the future? Could management share more about our future plans and investment strategy in AI? Thank you.

Thank you, Thomas. In this quarter, we continue to iterate our AI capability across three core dimensions. The first is training our in-house LLM, and the second is AI in products, and the third is AI at work. So we have rolled out multiple open source long chat flash series model. So we trained the long chat large-dump model in-house. So these models continue to get quite favorable feedback from the broader developer communities. So I think that's the beauty of an open-source model. And our LLM are deeply integrated with our core application use cases. It drives effective innovation based on our real-world needs to support our long-term strategic growth and the online to offline conversions. For AI applications, we have upgraded a bunch of AI tools for local services and offering smarter, more tailored services to our merchants. For example, our kangaroo advisors can help restaurant merchants with product selections and location planning. Another application, our smart operator, 智能掌柜, integrates multifunctional capabilities such as AI reception, AI operational analysis, and AI review responses, enabling intelligent and efficient store operations for merchants. And we also launched our smart app assistant, Xiaomi app, for users. which is now in quite a large-scale testing period. We also introduced our AI agent, Wen Xiaotuan, in our Meituan app. So that answers your question. We are testing both a standalone AI agent app, but at the same time, we are going to integrate an AI agent function in our main Meituan app. And these two agents now cover various... aspects of local services, including dining, accommodation and transportation, travel, entertainment and shopping. And they can complete the process from searching to price comparison and to order placement, which can provide the users with more intelligent, more personalized service. We will also continue to develop tools like AI coding. We have an application that has no code to help employees improve their work efficiency. Looking further forward, we will further enhance our competitiveness in our in-house foundational model and explore more AI agent applications in local services. We will also iterate our AI agent strategy based on operational insights and user feedback and driving deeper AI-enabled empowerment in our ecosystem.

Thank you.

Thank you. Your next question comes from Yajang from Cilix. Please go ahead.

Thank you for taking my time to chat. And my question is about the new initiative-related businesses. And for your people in Hong Kong, is it on track to reach that even thing? And additionally, for the Middle East, following our future expansion into several new digital countries, how is performance shaping up in this market? And also, with recent reports about people entering Bolivia, even when there are strong existing players like iFood and Digi, what will the difference in Bolivia play both to take and differentiate there? And lastly, given the particularly intense competition with the mathematics, what strategic rationale supports exaggerating over safe extension at the center And how does this align with our overall tax allocation framework? And how should we project losses for new initiative segment next year? I have lots of questions.

Thanks. Thank you, Zhang Yang. Thank you for your interest in our new initiatives. Regarding QITA in Hong Kong, I have very good news to share. This October, Kita in Hong Kong has turned profitable. So I think that's a major milestone for us. Remember that we launched Kita in May 2023, and it became profitable in October 2025. So it took us 29 months to get to that point. milestone. So it's actually ahead of our original three years plan. So I think that proves what really works in this industry is a customer centric approach and it improves our deep operational know-how and strong technology capability can bring to better unit economics in And we are going to keep improving on that basis. It will bring more meaningful quarter-over-quarter improvement. And also, we expect to follow the similar paths in other markets, for example, in Saudi Arabia and other GCC markets. Regarding the GCC region, building on our foundation in Saudi Arabia. We launched in several additional market in GCC. For example, right now they are still in very early stage. It's important to point out we launched in Qatar in August and launched in Kuwait and UAE in September. Again, still in very early stage. So I think it's premature to share more details. But given the common market structure and user behavior across the Gulf region, and I think it's reasonable to believe it remains one of the most attractive markets for food delivery. And also compared to Saudi Arabia, consumers in some other GCC countries and not only have more matured food habits, penetration there is already higher, but they also benefit from more diverse, more richer restaurant supply. So that suggests there's a lot of untapped penetration potential in this market. Regarding our latest market, Purdue, have already shared some thoughts in previous earning course. Brazil ranks among the top five food delivery markets in terms of GMB globally. It's still growing at over 20% annually. But when we did the market research in Brazil, we noticed that the transaction profuse through More traditional channels, such as through WhatsApp or very old way phone calls or websites, they are still a very big portion, maybe even exceeding the online food delivery platforms. This indicates immense potential for online penetration over the next few years. And I think it provides an opportunity for Kita to enter these markets. in spite of there are already some incumbents. So in the past, our full-degree operation in China had established the world's most efficient tech platforms, including algorithms and the whole tech system. So that system can support over $150 million and pick daily orders for very organized, very fast on-demand delivery. And furthermore, Cheetah's early success growth in Hong Kong and Saudi Arabia over the past two years, that further proved our capability to localize our operation for different markets. So I think we are competent in bringing better experience service to those market. Because I believe in this industry, it's always important to go back to the basics. Because there are different stakeholders in the industry. What do consumers want? Maybe they have different preference for different cuisines. But I think in any markets, the consumers always want a big selection, a good selection, and they want affordable prices, and they want to have reliable and fast deliveries. I think that's the common need across different markets. No matter if it's in China, mainland China, or Hong Kong, or Saudi Arabia, or other GCC countries, or Brazil, or in other markets. That's what consumers want. And for merchants, they want to have more businesses, and they want to have a reasonable commission rate, and they want to have a good delivery experience. And also, we need to think about what regulators want or what the general society want. So there, I think they are interested in more job creation regulators want to see happy consumers, want to see happy merchants. They want to see more job creation and want to see more talent development. I think we are going to do all that in those markets where we do business. And regarding capital allocation, we should emphasize that Kita is a part of our new initiatives. Our other new initiatives new initiatives, and also increased grocery retail, which is another long-term strategy for us. We scaled back the May time select by the end of Q2, but we can expand our Xiaoshan supermarket. That's doing very well. And we will try other offline retail format, like Happy Monkey, Kuala Lumpur in 2026 to further improve our supply quality in grocery. So, Tita and grocery retail, I think these two represent a high conviction long-term opportunity for us, given this proven model and our transferable expertise from China to some other markets. But near-term, our expansion into GCC markets and Brazil requires substantial upfront investment in Q4. But given our early success in Hong Kong, I think we are confident we can see quite good trajectory in those markets, including Saudi Arabia and other GCC markets. There, we already see rapid improving unit economics, and I think those markets are big enough to have multiple players. Yeah, overall, we expect QTA in GCC countries and Brazil to follow a similar economic improvement trajectory as we have seen in Hong Kong. And overall, we don't expect to see a bigger loss for new initiative segment in next year compared to 2025. Thank you.

Thank you. There are no further questions at this time. I'll now hand back to Scarlet Zoo for closing remarks.

Okay. Thank you for joining our call. We look forward to speaking with everyone next quarter. Thank you so much for your support.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.