Thank you for standing by, and welcome to the Meituan Second Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Scarlett Xu, VP and Head of Capital Markets. Please go ahead.

Thank you, operator. Good evening, and good morning, everyone. Welcome to our second quarter of 2025 earnings conference call. Joining us today are Mr. Xing Wang, Chairman and CEO and Mr. Shaohui Chen, Senior Vice President and CFO of Meituan. For today's call, management will first provide a review of our second 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 unaudited non-IFRS accounting standard financial measures that should be considered in addition to and not as a substitute for measures of the company's financial performance prepared in accordance with IFRS accounting standards. For a detailed discussion of risk factors and non-IFRS accounting standard measures, please refer to disclosure documents in the IR section of our website. Now I will turn the call over to Mr. Xing Wang. Please go ahead, Xing.

Thank you, Scarlet. Hello, everyone. In the second quarter, the competitive dynamics of both food delivery and more generally, the on-demand retail evolved rapidly. Our business maintained a steady growth with revenue increasing by 11.7% year-over-year to RMB 91.8 billion. The total MAU exceeded 600 million, while the MAU of our major app alone surpassed 500 million. An annual transaction frequency hit a new record with the average user transaction volume transacted at least once a week. So this underscores Meituan's position as the preferred platform for local services among a growing number of consumers, leveraging our extensive categories and merchant coverage and coupled with our industry-leading efficiency, efficient reliable on-demand delivery network, we deliver comprehensive, high-quality and convenient services to our consumers. And looking ahead, we will further enhance our products and services to better address consumer needs by applying technology and rolling out more innovative supplies, we will continue to empower the local service industry and further unlock the industry's long- term potential. In the second quarter, the on-demand delivery industry entered a new phase and another round of intense competition and drawing on the operational capabilities and the unparalleled efficiency we have built over a decade. We further solidified our market leadership, hitting an important milestone in July as our high steady on-demand delivery order finally surpassed 150 million orders per day, and that day is not per day. And that being said, what truly matters more than these figures is our steadfast commitment to service quality and consumer experience. And more importantly, the intensified competitive landscape will not change our commitment in building a healthy ecosystem. We understand deeply that only by fostering sustainable ecosystem, can we ensure the long-term development and deliver sustainable win-win outcomes for all participants. In the second quarter, our Food Delivery business successfully attracted a larger base of new users while solidifying the royalty of our core users. This achievement stems from our comprehensive offerings of value for money products across all price bands and the reliable service experience that we offer. In using Meituan membership and diversified marketing initiatives, we effectively enhanced user stickiness and transaction frequency among our core users while deepening penetration into high-value scenarios such as The Family Meals and Premium Meal options. As a result, we maintained an unrivaled market leadership in the Food categories. Meanwhile, we remain focused on building a sustainable ecosystem for the whole industry. Through collaborative efforts with the merchants to drive supply side innovations, we continue to lead the industry-wide advancement in quality standard user experience. In July, we had partnered with over 800 restaurant chains to launch more than 5,500 branded satellite stores while helping them optimize their online operational efficiency and lower costs with our AI-driven solutions. Our target is to expand this network to over 10,000 branded satellite stores by the end of this year. And our centralized kitchen initiative, [indiscernible] cloud kitchen continued its expansion, setting new benchmarks for food safety across the industry. It delivers end-to-end infrastructure support to restaurants of all types, encompassing supply chain management and Bright Kitchen program in [indiscernible] and digital operations, all under a unified food safety management framework. Over the next 3 years, we plan to invest in building 1,200 [indiscernible] cloud kitchens nationwide, enabling tens of thousands of restaurants to upgrade quality, creating a fully traceable and trustworthy food delivery model for consumers. In addition, we continue to iterate the supply diversity and service quality of our Pin Hao Fan [indiscernible], making sure they meet consumer demand for value for money across different price ranges. Notably, Pin Hao Fan has emerged as the fastest-growing innovative product in the industry over the past 5 years, serving as a reliable revenue stream for small and medium-sized merchants as well as restaurant brands. Recently, we launched [indiscernible], a 10,000 brands initiative for Pin Hao Fan, which provided tailored support for 10,000 branded restaurants nationwide. Throughout the second quarter, we continued to promote the [indiscernible], the Bright Kitchen program, directing more traffic to participating quality merchants and providing hardware subsidies to small- medium-sized merchants. We also simplified our marketing schemes to alleviate operational burden on merchants, redirecting industry focus towards quality enhancement. Moreover, we are committed to developing a robust welfare schemes for couriers, ensuring competitive compensation flexible hours and safety protection. Starting July 1, we have expanded the coverage of occupational injury insurance to all couriers in 17 provinces and cities. Following successful pilot in Changzhou and Nantong, our pension insurance subsidy program will be expanded nationwide by the end of this year. We expect it to cover more -- over 1 million couriers. And we have also upgraded additional supportive measures for couriers. For example, we set up RMB 1.6 billion, summer subsidy fund. Our critical illness fund has been expanded to cover more disease and now include children for a part-time cross-sourcing couriers. In collaboration with the ecosystem partners, we have built couriers homes in multiple provinces and cities, offering free services such as emergency assistance, rest areas, supplies and battery replacement and charging facilities to all couriers or even including couriers from other platforms. In the second quarter, Meituan Instashopping solidified its leading position with a rapid growth of on-demand retail industry and evolving consumer needs. GTV achieved a much stronger growth than order volume. User growth also accelerated. Not only the more food delivery users converted to Meituan Instashopping users, but also around 20 million new users have tried our 30-minute delivery service for the first time this quarter. And transaction frequency of core users increased notably with the consumption scenarios and expanding beyond grocery to encompass 3C electronics, cosmetics, mother and child products and more. And this quarter marked our first June 18 shopping festival era for on-demand retail, during which we helped nearly 1 million off-line stores serve over 100 million users. It was a June 18 event dedicated to offline merchants enabling brick-and-mortar retailers to enjoy the benefit of online shopping festivals and drive sales growth through on-demand retail channel. During this June 18 shopping festival, GTV for over 60 product categories on our platform doubled while overall GTV of Meituan Instamart nearly doubled. High AOV items such as mobile phones or Chinese [indiscernible] milk powders and home appliances experienced a 200% GDP growth. In the liquor category, we enhanced the shopping experience for chilled beer and strengthened consumer mind share of purchasing Chinese liquor or Meituan [indiscernible]. Through the introduction of national subsidy and a series of shopping protection measures, we significantly elevated the shopping experience for 3C electronics. And we also added more snack discount stores to enrich the supply of leisure food on our platform. On the service front, we launched a service insurance plan, [indiscernible], upgrading services across 3 dimensions

the service experience and fulfillment and post sales support. Notably, we partnered with numerous home appliances brands to offer value-added services such as half-day delivery and installation service through off-line stores. As the on-demand retail industry grows, we continue to lead supply-side transformation. By the end of the second quarter, we have collaborated with retailers and brands to set up over 50,000 instamart nationwide at [indiscernible]. Through instamarts, we facilitated the digital transformation of numerous local mom and pop stores, expanding the service radius and enhancing operational efficiency. This quarter, our in-store business maintained its strong growth momentum with order volumes surging over 40% year-over-year, and annual transacting users increased by more than 20%. And annual active merchants hit a new high and GTV of hotel and travel during the Labor Day Golden Week also reached a new high. On the merchant side, we have actively seized the emerging opportunities in the service retail industry, such as the new categories innovative supply models and the growth potential of lower-tier cities and continue to promote merchants' digital upgrade and standardization by providing integrated services, including train store management, business decision-making, marketing, customer acquisition and organizational management. We help merchants improve their efficiency and their business scale. We remain committed to empowering merchants to build their online presence and strengthen their online brand images. For example, we help merchants refine store pages displays with more sophisticated, more accurate and diversified information, help them simplify store management through more efficient systems and leverage digital assets such as user reviews, photos and videos and various feature rankings list to enhance their brand influence. In addition, we helped over 1 million independent artisans digitize their profile, matching them with consumer demand, while providing them with more convenient online management tools. And our goal is to turn a good craftsmanship into good business. And recently, we launched a series of AI assistant in the merchant interface, which have started to be rolled out to more services, retail merchants. And on the consumer side, we have further solidified the consumer mindshare of finding stores and deals on Meituan. Particularly, we leveraged the Meituan membership to provide the consumers with richer benefits and better service experiences. This quarter, we launched more in-store benefits for members of different tiers, such as member exclusive free offers and member exclusive discounts, covering various categories, including restaurant dining, beverage, leisure and entertainment as well as housekeeping and laundry services. These efforts have continuously improved user loyalty, transaction frequency and the efficiency of cross-selling across different businesses. We also leveraged Meituan membership to direct high-quality users to the hotel and travel business, upgrading the membership benefits in hotel and travel to deliver greater value. Notably, we have witnessed a growing trend among high-tier members to expand their engagement with our travel-related products and explore more categories on our platform. For example, the proportion of the high-tier members purchasing hotels and travel offerings rose markedly during the Labor Day holiday. This quarter, we deepened our strategic partnership with Marriott International with the official launch of our joint membership program. On the first day of the partnership, the number of bookings of Marriott hotels on our platform surged by 88% year-over-year, with bookings from young users under the age of 30, surging over 148%, a clear indicator of our expanding growth potential in the high- star hotel segment. And next, let's turn to our new initiatives. In the second quarter, we refined our grocery retail strategy while accelerating the overseas expansion of our food delivery brand, Keeta. In June, we launched a strategic transformation for Meituan Select. We exited underperforming regions with sustained losses while continuing to explore this next-day delivery plus self-pickup model and new community retail formats in core regions. Concurrently, we are accelerating the expansion of our Xiaoxiang Supermarket, that's our self-operated on-demand grocery business with a clear road map to gradually extend this model to all first- and second-tier cities nationwide. During this quarter, Xiaoxiang Supermarket maintained a very high growth, significantly outpacing the industry average. We now operate nearly 1,000 brand distribution centers in 20 cities. In Beijing, Shanghai, Guangzhou, Shenzhen, all Xiaoxiang Supermarket locations have extended operating hours to 2

00 a.m., enhancing coverage of consumers' nighttime shopping needs. We are also continuously elevating product qualities and diversities with both the number of our private brand products and their contribution to our total sales growing steadily. On the international front, Keeta delivered a very robust growth in both order volumes and GTV this quarter. In Hong Kong, our first market, we further strengthened our leading position while driving continuous improvements in efficiency. And in Saudi Arabia, Keeta's footprint has expanded to 20 cities by the end of July. Additionally, we officially launched Keeta in Qatar last week. Looking ahead, we will continue to leverage our strength in product, technology and operations know-how to bring superior experiences to consumers around the world. Over the years, we have stayed committed to pursuing what's challenging yet right in the long term. Guided by our retail plus technology strategy, we have deepened our roots in the retail sector, while driving industry growth through relentless innovation. We believe that industry progress does not come from temporary scale expansion driven by massive short-term subsidies. Instead, it lies in empowering merchants to reduce operational costs, enhance operational efficiency and improve quality through digital transformation. And this is exactly why we are firmly against the evolution nature. We aim to remain our focus towards improving user experience and enhancing supply and bringing competition back to the track of value creation. As a platform that connects hundreds of millions of users, tens of millions of merchants and millions of couriers, we adhere to the principle of achieving win-win outcomes for all stakeholders. Whether through technology breakthrough or business model innovations, we will always prioritize sustainable industry growth for a healthy ecosystem and unlock greater consumption potential. With that, I will turn the call over to Shaohui for an update on our latest financial results.

Thank you, Xing. Hello, everyone. I will now go through our second quarter financial results. During this quarter, our total revenue increased by 11.7% year-over-year to RMB 91.8 billion. Cost of revenue ratio increased 8.1 percentage points year-over-year to 66.9%. This was primarily driven by

first, higher incentives for our couriers to maintain industry-leading delivery service quality and reliability amid the current intensified competition. 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 6.5 percentage points year-over-year to 24.5%, reflecting our strategic investments in promotion, advertising and user incentives to enhance our brand awareness, accelerate new user conversion, enhance core user frequency and stickiness in the competitive market. Both R&D expense ratio and G&A expense ratio maintained stable year-over-year at 6.8% and 2.9%, respectively. This quarter, total segment operating profit and adjusted net profit declined significantly this quarter to RMB 1.8 billion and RMB 1.5 billion, respectively. The significant financial volatility reflects unprecedented competitive intensity across the on-demand delivery sector with industry-wide subsidy reaching record highs. In response, we deliberately increased investments to defend our market leadership while fortifying long-term competitiveness. Throughout this process, we maintain unwavering focus on operational efficiency with industry-leading service quality from consumer merchants and riders. We are cultivating structural modes whose value compounds independently beyond the current market condition. Turning to our cash position. As of June 30, 2025, we maintained a strong net cash position with our cash and cash equivalents and short-term treasury investments totaling RMB 171 billion. However, cash generated from operating activities reduced meaningfully year-over-year to RMB 4.8 billion, primarily due to our competitive investments that push operating profitability. Now let's review our segment results, starting with core local commerce. This quarter, our core local commerce segment maintained healthy growth in both order volume and GTV. However, revenue growth significantly lagged behind scale expansion with segment's revenue increasing 7.7% year-over-year to RMB 65.3 billion. This is mainly due to a large portion of incentive, carter delivery service revenue as the result of higher incentive spending. Meantime, we also stepped up marketing investments to reinforce our on-demand delivery brand awareness and price competitiveness on the user side. We also provided more incentives to couriers to guarantee a stable competitive delivery capacity, providing consumers with better delivery experience. As a result, segment's operating profit declined year-over-year to RMB 3.7 billion, with margin contracting to [ 57% ] this quarter. However, both our Food Delivery and Meituan Instashopping sustained their leadership. The overall on-demand delivery order volume achieved a modest year-over-year growth acceleration this quarter. while the year-over-year growth in GTV maintaining the same pace as compared to that in last quarter despite AOV drop. It's important to highlight that core user engagement metrics across both business have showed sustained improvement this quarter. Our demonstrated ability to drive higher purchase frequency and the stickiness among core user base will serve as the key efficiency of our innovative supply models. Meanwhile, the interior operational efficiency model of our innovative supply model such as Pin Hao Fan and [indiscernible] allow us to cost effectively serve our rapidly expanding price-sensitive user base while delivering an increasingly diverse and stable selection of value-for-money offerings. Our core competitive strengths remain structurally intact throughout the period. Our operational strength also continue to allow us to deliver better unit economics than industry average, positioning us well for the eventual market normalization. Our in-store business maintained strong growth momentum this quarter, achieving record highs in both order volume and GTV with upgraded supplies and enhanced service quality. We've successfully capitalized on elevated consumer spending in local service, especially during peak holiday period. During this quarter, various categories, including fitness, photography, education and others delivered robust growth across the board. As on-demand delivery traffic grew rapidly, our upgraded membership program has deepened cross-business collaboration within core local commerce. Through tailored short-term promotions, integrated market service benefits and long-term loyalty benefits, our membership program is driving higher engagement across all user groups while converting growing food delivery demand into incremental transaction growth for In-store, hotel and travel business. This demonstrating the strong fly-wheel effect of our local commerce ecosystem. Turning to our new initiatives. During this quarter, segment revenue grew by 22.8% year-over-year to RMB 26.5 billion this quarter. The accelerated year-over-year growth was primarily driven by the fast expansion of our grocery retail operation and overseas business development. The segment's operating loss and operating loss ratio both narrowed on a quarter-over-quarter basis to RMB [ 1.5 ] billion and 7.1%, respectively. Thanks to our efforts in improving operating and marketing efficiency in our grocery retail business and other new initiatives. The year-over-year increase in operating loss was mainly due to our increased investment in overseas business. In closing, while we expect there will be continued fierce competition in the near term and that will bring negative impact on our financial results. I want to emphasize that resilience of our core local commerce business has been proven across multiple cycles. Every challenge eventually will strengthen our competitive positioning, sharpening our execution and driving operational excellence. Look beyond short-term volatility, we have full confidence in our ability to sustain healthy quality growth over the long term. With that, we are now open for Q&A.

[Operator Instructions] Your first question comes from Thomas Chong with Jefferies.

My question is about competition. Given that competitors continue to offer high subsidies, could management elaborate on our response strategies and their effectiveness? Has the competition significantly impacted our market share? What is our view on the impact of the industry evolution driven by [indiscernible] .

Thank you, Thomas. Well, allow me to begin with a very clear message. We are firmly against the evolution. So we are [indiscernible] S.o the regulators have made it very clear. That's not something they want to see in the market. But that being said, when the competition continues and become -- well, as I even more fierce, we will do our part to defend our market position. So this is not the first time we face this kind of intense competition. So in the past many years, we grew and we grew through competition. And through competition, it had shaped our leading position. So let's focus on what makes us the market leader in the past and what we plan to do to continue innovating and being in the market leader. So I think at the end of the day, on-demand retail is a format of retail and to succeed in retail business, after all kind of fancy stuff, it all boils down to the fundamentals, the basics, the selection and the price and the service will be more specific delivery. So we have always focused on doing the right things. So we make sure we can deliver -- we have the best growing selection, and we make sure we can have a fast and reliable delivery, and we make sure we have a consistently affordable price. Yes, nothing fancy, but just go back to the basics. And also, well, in the past, put it this way, so for investors who have been with us for a long time, going back to 2018 during our IPO Roadshow. So we -- while we showed the road map, we promised we can grow to -- back then, our average daily number of daily orders is below 20 million. We set a goal -- we can grow to 100 million orders per day by 2025, and we are going to make RMB 1 profit per order. So that's too very easy to understand, goal that we set 7 years ago. So in the past year or 2 in quite several quarters, we have proved that we can -- well, we get to RMB 1 profit per order per day. So I think that's reasonable because it's about 3% profit margin if you count the average order value, it's around RMB 30 and RMB 1 profit, that's just about 3%. I think that's a reasonable long-term profit margin. And also this month -- for this past quarter because of the very fierce competition, we not only reached the 100 million orders -- daily orders. And actually, we have -- we significantly surpassed that, reached 150 million. At the same time, we were not able to get to RMB 1 per order. So I think we have reached each of the 2 goals at different stage. Now I think it will take several more years' effort to be able to achieve those 2 goals at the same time. So it will take some time. I think we are on the right track. So no matter what happens in the market in the competition, we will focus on doing the right things, going back to the basics that's providing a better selection, make sure we can do fast and reliable delivery and make sure we offer consistently affordable price. So that's how we operate our business. And that's how I think we are going to grow the market, grow the volume and over longer term, improve the unit economics and delivering more values to both consumers, merchants and couriers. So that's our plan. So we are not going to be greatly affected by short-term price war. And that's it.

Your next question comes from Ronald Keung with Goldman Sachs.

So I want to ask, could management share your -- kind of what are the core advantages that could sustain our competitiveness given this intense competition? Do we have kind of any new insights in the long-term kind of TAM, which is the total addressable market for the food delivery sector? And what are our medium- to long-term growth targets for order volume, GTV and market share given what you've shared just now. So how can we quantify the impact on both short-term profits and the medium- to long-term profit recovery trajectory?

Thank you, Roland. Let me get back to your sub questions one by one. The first one is on competition advantage, I believe. So I think -- so to echo on what Xing just mentioned, I think our competitive advantage is always built on really focusing the right thing on the right fundamentals of the whole business model by providing the value that consumer is looking for. Early in the industry development, we already understand our business is essentially part of the retailing business. So we need to have good selection and good services and good price. For the selection we are working very hard to bring the merchants on board, digitize their operating process and help them build the capability to operate online. We also invest heavily to build a standardized large-scale intracity fulfillment network and continue to improve the delivery efficiency. We also work very hard on the supply side innovation and efficiency of the whole ecosystem to continue to offer good price deal for the consumers. Through elevated service and diverse supply, we have accumulated a large base of high-quality users with increasing engagement. We have seen all the cohorts of our previous and existing consumers continue to show very strong traction. The longer they stay with us, the higher loyalty they showed. Our competitive moat in the user merchant rider, flywheel and operational efficiency reflect over a decade of committed investment and continuous acceleration. Our team has also demonstrated strong execution capability through various challenges in the past. And today, our core local commerce continue to enhance cross-business synergies. We also continue to invest in industry ecosystem and solidify long-term moat and drive high-quality industry growth. So this is for the competition advantages. For your next questions on the total addressable market, we -- in all our previous quarters, we have always emphasized that food delivery has been an indispensable part of consumers' daily lives and of the whole food service industry. And we are very certain it will really become a lifestyle for the new generation of consumer. It has very clear long-term growth potential. This is also why I mentioned that early on, we already committed to a long-term goal of 100 million average daily orders. Current intense competition is likely to accelerate the order volume growth. And we have seen that 100 million orders is no longer just a long-term target. It's an achievable daily number during this competition. But at the same time, we have seen the AOV volatility during this competition. So we believe not just the order volume, but also the high-quality orders over the long term is more meaningful. While the industry acceleration has speed up, we believe that when the competition normalized, consumer merchants and couriers will ultimately choose the platform with richer supply, higher quality services and optimal operational efficiency. And we remain committed to a healthy ecosystem and also very confident that the long-term leadership in GTV for our food category. To your last question on the financial impact, while we are very certain that we remain absolute industry-leading operational efficiency, actually, based on our market intelligence compared to the industry peers, our unit economics advantage the UE gap has further widened amid intensified competition during this period. Having said that, we do expect the core local commerce to incur substantial loss in Q3, driven by strategic investments. The investments will cover the high incentive to secure price competitive and industry-leading delivery services. It will also be spent on marketing to strengthen our brand awareness. We will adjust this investment dynamically. But for longer term, we remain very confident that the unit economics of this business will come back and will return to a reasonable level. Thank you.

Your next question comes from Gary Yu with Morgan Stanley.

I have a question regarding on-demand retail. As major e-commerce companies continue to expand investment in on-demand retail, what differentiated competitive edge does Meituan hold in this market? And what kind of progress has been made in recent category expansions? Given the current competitive landscape, has management formed new perspective on long-term TAM and profit potential of on-demand retail? And what are Meituan InstaShopping medium- to long-term growth and profit targets?

Thank you, Gary. So as I mentioned a moment ago, to succeed in this on-demand retail, we have to go back to the basic focus on doing the right things. But the 3 most important things are selection and delivery and price. So because we started earlier in this, we have the largest network. So I'm confident to say that in on-demand retail, we have the largest selection. And because we are in a hyperlocal business, it's not just one unified national supply. You have to make sure you have good supply in each sale. So because we have been doing this for -- since 2018, so we have the best selection and also because we have the largest delivery network built on top of not only other on-demand services but also in the restaurant. So we have the scale and the density. That's why we are able to offer fast and reliable delivery. And also, we have invested a lot in building the infrastructure, including the IT system and also the kind of marketing tools to help a seller to streamline their operation to make sure we have consistently affordable price, that's the 3 most important things. But compared with restaurant delivery, I would say, the more general on-demand retail is still in a relatively early stage of market penetration. So in this past the second quarter, yes, we have seen more e-commerce players ramping up their investment in this sector. So I think that underscore its growth potential. So similar to food delivery, we believe that by delivering stable high-quality services and better supply can on-demand retail be truly well cultivated and become consumption habits for more and more users, and that will grow the whole industry and creating a real incremental value for retail industry. So now we have accumulated over 1 million retailers spread out over the country and that enable us to provide consumers with access to nearly all off-line retail categories. To further grow the supply, we have launched a lot of new supply format. One of the most important initiatives is [indiscernible] like Meituan InstaMart. Well, many years ago, we started with trying to work with existing suppliers. But for all kinds of reasons, it didn't work out very well. So we have decided many years ago that we need to grow with new supply formats. And Meituan InstaMart has been growing for many years and leveraging the years of industry insights and all the data we have accumulated. Now we have empowered tens of thousands of Meituan InstaMart, and they operate in many different categories and effectively addressing the unmet consumer demand from traditional supply. And this innovation model is very rapidly penetrating not only the top-tier cities, but also the lower-tier markets. I would say, they perform even better in lower-tier markets because before we go there, the offering in those markets is significantly less than in top-tier cities. And along the way, we have deepened the collaboration with brands to explore offline inventory tailored to the on-demand retail channels because you need to go deeper and deeper. You cannot just offer existing inventory through a new channel. You have to tailor the offering to the specific channel. So beyond the supply expansion, we have enhanced the supply quality and expanded all kind of use cases and improve the user experience. For example, people need to -- well, from time to time, people need to buy medicines. So we work with not only a lot of pharmacies, but we also built a new initiative that's our 24-hour pharmacies because you never know when you [indiscernible] medicines. So the 24-hour Meituan pharmacy is very popular because it can meet the 9x consumption needs. And also for another category, the flowers, we have built our own [indiscernible] as the brand for premium flower shops, and they can meet high-end gifting needs. That's a very important subcategory of flowers. And those all represent incremental market opportunities and untapped by offline retail or traditional e-commerce. At the same time, we are also upgrading the service experience. For example, while on Meituan, you cannot only buy beers, you can also get the chilled beers because you don't want your beer to be not chilled. So in order to be able to offer chilled beer, we will have the [indiscernible], and they can make sure you get your beer quickly and it's chilled. So that's a better user experience. And also, we take a lot of efforts to guarantee the freshness of the fruit cut [indiscernible] and all kind of fresh food. And also, we offer a 7-day return service for many categories. So through this evolving supply ecosystem and a stable fulfillment and elevated consumer experience, we have established a strong consumer mind share of having everything delivered to the doorstep within 30 minutes. That's becoming a lifestyle consumer habit. And a growing number of Meituan Instashopping users are naturally converted from our Food Delivery business. So most of them have a strong consumption power, quite a high royalty and rely heavily on this convenient and reliable lifestyle. For our core users, we continuously refine the user experience and introduced a membership benefit to boost purchase frequency and category expansions. So we are confident that as industry competition rationalize, we will capture larger portion of the consumer wallet share with the riches supply and most reliable services. And also in the past quarter, while this year marks our first June 18 promotion [indiscernible] finally, we are in the -- from the main game of e-commerce. So we have long explored extending traditional e-commerce categories such as 3C electronics and daily necessities, apparels. And through our first June 18's marketing campaign, we further strengthened the consumer mindshare in Instashopping for everything on Meituan with a standard performance in high-value categories. For example, GTV of [indiscernible] surged over 10x with an average 28 minutes delivery time and GTV of large home appliance grew over 11x and GTV of early educational [indiscernible] rose over 3x. And also notably, our members demonstrated a strong purchasing power. The average spending of our top-tier members was 3x that of our enterprise members during the event, thanks to our high-value membership coupons. And moreover, the growth momentum of lower-tier markets was more outstanding with over 50% year-over-year growth rate. And going forward, we will continue to build a differentiated supply and expanding the product categories while deepening supply chain innovations. And also the increased investment from other players will help accelerate the whole industry penetration in the long run. And I believe the on-demand retail market will become much bigger than most people have originally thought. However, the low price demand stimulated by short-term very aggressive subsid, and they can only replace existing off-line or traditional e-commerce. I don't think that's the best way to create real value. I think the true incremental demand requires not just subsidy, but it requires a consistent supply-side cultivation. So we will remain patient and continue to strengthen the core capabilities. And overall, we are increasingly confident in Meituan Instashopping growth rate over the next few years. And we believe we can capture more incremental demand amid the market expansion. And regarding profitability, Meituan Instashopping has been profitable for several consecutive quarters in the past. But now we are in a different -- a new stage of the growth. So in short term, we will prioritize growth over profitability. We will continue to invest to solidify consumer mindshare and ensure a stable use experience so as to maintain the market leadership. However, our long-term profit target remains unchanged. And as the subsidy went down hopefully over the years, certainly not over the quarters. And I think Meituan Instashopping profitability will return to a reasonable value. So all in all, I understand because a lot of more investment has been put into this industry in the past quarter, and we expect even more to come in the coming quarters. So I would say there's nothing more exciting than being an underdog in a bigger game. So that's very exciting. Thank you.

Your next question comes from Kenneth Fong with UBS.

I want to shift gears to the in-store business. What's the competitive landscape latest? And also, could management elaborate on the recent progress for in-store dining and service retail? Additionally, since the launch of Meituan membership, any positive developments to share, particularly like cross-selling along with quantitative results?

Thank you. Regarding the competition in in-store, our primary focus remains on the long-term healthy development of the business. We differ from competitors and business models and operational strategy with unique strength in category mix, merchant ecosystem and operational efficiency. Recently, amid growing demand for value for money in-store dining and services, we have expanded coverage of high-quality, low-priced offerings, refined subsidy strategy and enhanced consumer mindshare. To address service retail merchants' rising needs for enhanced online operation and customer acquisition, we have extended the scenario coverage of our AI business systems. We try to cover end-to-end workflows from simple daily task to complex operations, helping merchants reduce cost and improve efficiency. In lower-tier markets, we have strengthened our marketing capabilities and launched targeted group byproducts. As a result, both transacting users and GTV in lower-tier markets grew rapidly. Currently, industry-wide subsidy levels remain stable and the merchants are increasingly focused on ROI for daily operations and marketing. Competition in our core categories also remained stable, and we are confident in further solidifying our advantage in the in-store. As for the Meituan membership, it has continued to make positive progress. We have rolled out member benefits, spanning from food delivery and in-store dining, service, retail, hotel and travel, Meituan Instashopping, medical and health bike sharing, enriching the benefit scheme and driving sustainable growth and member engagement. In the second quarter, the net number of members who upgraded their membership tiers exceeded 10 million with a higher proportion among top-tier Black Gold and Black Diamond members, fueling faster growth in their order volume and GTV. Rotating benefits across different services has boosted cross sales. Additionally, we are working to position Meituan membership as a universe program for local service. By partnering with external merchant membership schemes, we offer members more premium benefits while enabling merchants to pricely reach target customers. For example, we have launched joint membership program with Marriott Hotel Group. Going forward, we will introduce more joint membership benefits and expand the ecosystem's reach. Thank you.

Your next question comes from Ya Jiang with CTC Securities.

My question is regarding the new initiatives segment. We see that Meituan recently announced a significant scaling back of Meituan Select and also accelerated expansion of Xiaoxiang Supermarket. And besides, we noticed that Meituan plans to explore the offline hard discount model through Happy Monkey in Chinese [indiscernible]. Could you please share rationale behind these adjustments? And what are your key considerations for exploring the hard discount model? And after scaling back Meituan Select, what's your capital investment plan in grocery retail? Additionally, what's the growth expectation for Xiaoxiang Supermarket over the next 2 to 3 years? And how we should view its long-term profit potential?

Thank you, Jiang Ya. And as I explained in the previous questions, I think in order to further grow on-demand retail, it's very important to target different categories. There are so many different categories, but grocery is probably one of the most important ones, both because grocery can be very big and also because it really fits our mission to help people eat better, live better. So we have been working and investing in grocery through different formats for many years since 2018. And the most recent progress in the past quarter is that -- well, you have mentioned that all. So we scaled back on Meituan Select. At the same time, we accelerate expansion of Xiaoxiang Supermarket and we also have plan to explore a different format. So let's start with Xiaoxiang Supermarket. So I can confidently say that Xiaoxiang is growing very quickly. And I believe we are among the largest online grocery operations and also because we are among top 2 and we are growing the fastest. So I think we are in a very good position to provide the best offering in online groceries. And we control the supply and we can iterate and improve the selection. I think we are particularly strong in those fresh food. So we plan to invest more in Xiaoxiang Supermarket. And actually, many of my friends told me besides Meituan Food Delivery, Xiaoxiang Supermarket is the most frequently used business, Meituan business they rely on because the grocery is just a high frequency behavior. And also, along the years, we realized the Xiaoxiang Supermarket can probably cover more cities than we originally thought. Today, we have almost 1,000 Xiaoxiang Supermarket and across 20 cities. And following the restructuring of Meituan Select, I think we will have more resources to invest in the expansion of Xiaoxiang Supermarket. We plan to cover all first and second-tier cities. And also, we anticipate that Xiaoxiang Supermarket will continue to outpace the overall industry growth in coming years. In terms of profitability, I think while we never expect grocery to be a hugely profitable business. But I think when we grow to a big scale with a good overall efficiency, we should be able to target to achieve a low single-digit profit margin. I think the 3% is a rule of thumb. And you also mentioned a new initiative in the Happy Money [indiscernible] I think while China's grocery retail market has very substantial growth potential, and there's still a lot of users who prefer -- especially in lower tier cities, they prefer to shop in stores. So here, we have to try more like an omnichannel model, not only online but also offline. And well, discount retail, I think that's just a term. So we don't obsess with the term. I think we are trying to offer a new format with a limited selection with a very competitive price and mostly in-store shopping. So while this is still in a very, very early stage, so I think we don't have much detail to share at this stage, and it's just an experiment. Well, next quarter, I think we will have a little bit more detail to share with all investors. So -- but that being said, because we have been planning this, and I think we will fully consider the capital needs of the business because we have scaled back Meituan Select. So the overall CapEx in our whole grocery division will be significantly less than the past 2 years. So I think we are patient in this. So we are -- after the streamlining, I think we are in a better position to get to the long-term growth.

Your next question comes from Alicia Yap with Citigroup.

I have a question on your overseas business. So beyond the Saudi Arabia, Keeta has just launched in Qatar and also plans to enter Brazil in the coming months. Could management share the updates on TD's overseas progress and also the future expansion plans? So what competitive edge does Meituan or Keeta have over the local players, given the need to allocate resources to cope with the intense competition in the domestic food delivery market? Will the company actually control the pace and also the scale of the overseas investment?

Well, thank you, Alicia, for your interest in Keeta. So as I said in the past, Meituan is going to be a global company, and we remain open to new market opportunities in international markets. But at the same time, in terms of the expansion phase, so we are not in any hurry. We didn't start Keeta until 2023, it's slightly over 2 years old, but I think we are already -- we have already made very good progress. So now we are already #1 in Hong Kong, and we entered the Saudi Arabia in last September. So we are fairly 1 year old there. I think we have become one of the top 2 players in Saudi Arabia. So I think we have been able to make very fast progress because we -- again, we focus on doing the right things, the 3 basic, the selection and the fast and reliable delivery and consistently affordable price because we have operated at a huge scale in China, and we have built the IT infrastructure. So we have been able to reuse that and adapt that to the different needs in different markets. But because we have the better IT infrastructure. So we were able to achieve get to scale and achieve an efficient operation in a quite fast pace. And in July, we expanded -- we covered more cities in Saudi Arabia. Now we operate in about 20 cities in Saudi Arabia. I think we have mostly done with geographical expansion in Saudi Arabia. And also, we have entered a new market, Qatar. So Qatar is our second destination in GCC in the Gulf States. Well, Qatar is not a country with a huge population, but its per capita is among the highest in the world. And Qatar, consumers have a strong willingness to pay for services. So which provides a good foundation for the development of food delivery or more generally on-demand retail in the future. And so I think we are going to keep growing in both Saudi Arabia and Qatar. And as for Brazil, I think we are still doing market research. We have a small team there, and we plan to grow our team there, and we are prepared for the market entry. And we are quite optimistic about the potential, but we understand it's among -- although it's a big -- it's among the top 5 food delivery market in terms of GMV, but we understand that the competition is also going to be quite fierce. So I don't see we want to -- we are not in any rush. We want to make sure we do our research. We have built a good team -- we have a good team in place and then we can truly create new values for consumers, merchants and couriers. And so I think for Keeta, in general, I think we are very optimistic about the long-term growth potential as we -- our plan is to get to HKD 100 billion run rate GMV in 10 years. So since we started in Hong Kong in May 2023. So the 10-year goal is set at May 2033. So we are not in any hurry. So we will take consideration of the -- all the recent situation in both domestic and international markets, and we will grow in our existing markets and make a good preparation for launch in new markets. So that's the overall strategy. Thank you.

Your next question comes from Charlene Liu with HSBC.

I would like to ask if the company plans to set a cap for overall investment when addressing competition in food delivery and on- demand retail in the short term. Obviously, we have seen core local commerce profit come under pressure. How would it affect the company's budget for investment in overseas expansion and grocery retail going forward? And can we ask the management to kindly outline the company's capital allocation priorities and strategies and share a little bit more on whether the increased business investments could potentially impact shareholder return, including buyback?

Thank you, Charlene. I understand the question is mainly focused on how we plan to allocate our capital going forward. So similar to the philosophy that we shared in previous quarters, the key principle for us to considering capital allocation needs, what makes the best ROI? What's the best way of the use of the capital and generate long-term return. In the domestic opportunity, we truly believe that our core business, including the Food Delivery, broader on-demand retail as well as our in-store business has huge potential, and it's also our core business. So we will always prioritize our resources for this core business. We believe this is a market with huge potential and still at its early stage. And while there is different level of competition in different segments, we feel this will all help and educate the market and speed up the growth of the market. So we will always see from a long-term perspective, whether we can create value to this segment. Specifically, as we mentioned earlier, we believe the value we create for this business is by providing the best selection, the best services and the best price. As long as our investment can help us build on those long-term capabilities we will be very determined to invest. But at the same time, we do not like the irrational spending in the unsustainable manner. So we believe that it's important that we make investments but focus on ROI. Given the competition now is very intense and we expect the competition will continue for -- in the short term, we expect there will be significant loss for both Food Delivery and our core local commerce segment in Q3. At the same time, I want to highlight that our efficiency and growth quality have consistently outpaced peers with recent trends indicating that this competitive gap is widening further amid intensified competition. So while the short-term profit may fluctuate due to the increased investments, we anticipate core local commerce will be able to generate stable cash flow once the industry subsidy is back to rational level. For your questions on allocation into new business, particularly the gross retailing and Keeta. As Xing mentioned, we have very clear long-term target and have very strong confidence about the potential of these 2 areas. But at the same time, we are also taking a more long-term view and long-term patience in growing this business. For grocery retailer, we have accelerated the growth in our self- operating on-demand retail such as [indiscernible]. And this will also strengthen our overall capability in this self-operating model, but we also respect the complexity in covering more cities and building more frontier warehousing. So we will manage the pace to make sure the growth is a high-quality growth. For Keeta, as mentioned, we will consider resource availability and market opportunity, while we are very determined that the investment can generate high ROI. We respect the complexity and managing overseas. So it's very important we learn along the way to understand the local market demands and local different industry dynamics. Both grocery retail and Keeta has very clear long-term profitability potential at scale, and we will continuously to optimize the operational efficiency to drive the high-quality growth. Meanwhile, as mentioned in earlier quarters, we continue to believe share repurchase is our current most effective approach for enhancing shareholder returns. But at the same time, given the opportunity we mentioned, we plan to prioritize the use of cash on to our core business. So we will continue to evaluate the market situation and seize favorable market windows to reduce the outstanding shares and enhance shareholder return. For a longer period of time, we believe we can create solid shareholder returns for our shareholders. Thank you.

That does conclude our question-and-answer session. I'll now hand back to Scarlet Xu for closing remarks.

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

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