Q3 2019 Earnings Call
Hi.
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Hello.
Yeah.
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Thank you for standing by and welcome to the <unk> Dot Com, Great Limited Q3 2019.
French coal.
All participants are in listen only mode. They won't be a presentation, followed by accretion and observations.
If you wish to ask a question.
Price the stockade, Oh, if I could number one on your telephone keypad.
I would now like to have the conference all that said as Michelle cheap senior IR Director. Please go ahead.
Thank you Ashley Thank you all.
I mean, a welcome to people come close to tell my Kids quarterly earnings Conference call. Joining me today on the call on mix just Yung Kim.
I can tell me a board makes Jen Wong.
Well I think Youd Altisource I mean, it can be warm chief financial officer.
During this call.
With all future I'll make some good qualities, which I'll pull on looking at two months later I'm. They keep how could they shake ever you had called it the kids in the kitchen is optimizing likewise.
Well, we're looking statements Walton county to its almost 10 gig.
I pledge always like making the killer what they've done some the beat it calls today.
One, but potentially uncertainties Oh my interest they'll come goes public filings with the comparison on these change Commission.
Two they'll come close to not only take on obligation to update forward looking statements, except as required under applicable.
Jim then on somebody with shell delegate ambiguous update I'll put and call like if I'm interested Thalmann said, he said a quarter to sell the Nike I will also take quarter of 2000 Nike.
I'm going to play to having a lot we will hold my question when I take action.
It's not I will turn the call over to Jim just chase.
I know, it's usually when Virginia, Santa Claus today.
Let's begin with a quick update some business sales in Canada.
If you could give it sadly results. It is good it you've got a monkey.
Maybe I'll be talking year over year.
Got you can think that feeling allenby <unk>.
He just been true now.
When you do multi here and then cases, you make you both domestic and almost.
Neither vessel market.
That's very good that's something we'll take your junk was ammonia we see savvy.
Communicate cheesy operating leverage at this point since then.
Adjusted operating profit.
60% ideas.
Well I feel the same way we celebrated the tend to be sent me a 70 lucky.
You bet diversity departments and loved the Midland.
What you said some limited.
I can be a good thing I see a into China domestic travel market, we entered the king.
The lead even actually doubled Debbie its many probably just making a when they see.
Well I could say real poorly leverage.
And then he just said we have good evidence so [noise].
Which all now said less mobile technology multiply that doing it themselves activity [noise].
Looking forward to outpatient visits on a good quality improved utilization.
Quality food they said because it's all that so many of you basically collaborative and advanced mobile technologies.
Although they can recall, but keep in civil and at the local.
According to this is supply chain over Sanderson technologies that generally universal across geographies [noise].
Mr Marketing and operations Lloyd here to the regulations either have which.
She said she loves it.
Let me pick yet I said.
I've already become.
I know it wont do no harm and everything.
That's that's something you said it should sell something.
Well it should be something to do.
Is it doesn't it.
You had started to see that should step on the international if if you love doing it typically gets the over yet for the casual looking at all.
Sitting seems to be able to make it said seven [noise].
[noise] again, you may need to case, you're going to depend the most you I would tell us something and [noise] wants us to make and make every trip to purposes.
Realize this machine.
Just like we have always been be achieved all contiguous to tremendously.
Always just to provide the best traversing plus I tend to do away.
Well, that's our plan across again, while saving about it.
Thank you Karen good morning, everyone, Yeah, Peach reports that chips off the comps.
I'll take a rights house seeing trends of Maki shifting and increase the profitability. Despite the challenges.
So I'm I could cause sockets globally.
In China, and they continue to acquiring high quality users.
Travel demand.
Saks fifth maxing the channel.
In the public at the city.
They haven't deployed aggressive yes, it's a clean.
Sadly Hello, and hotel product.
Capturing an important tend to grow user base.
In addition, our net promoter scores increased my says across its isn't it sit on which again demonstrate that our improved so this.
Qualities.
I love the growth came under pressure due to weak and macro and industry heart disease, it's actually been destinations such as Hong Kong.
However, as when each like always done in the past environment Chip Dotcom group, we have continued to be laser focus.
Our business fundamentals.
Take advantage of the market condition to further enhance our leadership.
Next I would like to shift some of the recent highlights the product extension.
The flight empowerment and international system itself.
Firstly.
The extension of our product emissivity [noise].
In the fourth quarter I got caught up to coverage continues to extend in states and adopt.
In recent years.
I have to see assembly increase the customer cessation activities.
Two tickets then his job. So we have further extended our product to them both in China and abroad.
He just because we can slip became the first or T. China to launch a voice guide on our platform.
Integrating multiple voice guy.
Suppliers. The service now covers a wrong 8000 attraction sites over 800 switches along with it.
In addition to foster says Chinese all going put it in over two topics. We recently they couldn't our partnership is to do.
By launching their Europe in destination activities.
Product teach platform after which more than half half designed exclusively for our customers.
44, it pretty good well continue to take them, there rich I'll step products, I'm teaching and well launch their product tripped outcomes and in the first half off 22 kids.
Secondly, I watch empowerment of supply network.
On October contained one which helps the second global strategic partner summit in Shanghai.
After the summit.
Oh, the makeup business units sheared ambition waste respected industry partners.
She continued to blame I watch we couldn't get the million users to our business partners around the world feel open platform.
That's actually participate so hotels participating yeah, I'll watch plus program have seen 30% incremental growth in traffic.
Also as financing has become a Bakken well come back for numerous suppliers on our platform. We have recently introduced a new online financing product chain that for small and Michael packaged tour supply.
I've always thought making service.
He talked empowered our popular.
Well, it's working frightening to me.
I love to fiction I've been looking for data analysis.
Going forward, we will continue to utilize chip thought punk roots leases insights traffic blossom into operation team and backend to pools to empower our thomas across the world.
Definitely on the progress of our international business.
In the fourth quarter of competing on to it smoking.
So turning it into play to China destinations.
Our revenue growth for overseas Telx accelerated to 50% year over year in the fourth quarter.
We have come to think to reach that 40% and 50% off international business will contribute to the political revenue of 53 to four years topic.
With all the logic customer base, the comprehensive product offering and extensive market expertise, we have demonstrated ability to send incrementally travelers to global travel destinations.
To date, we didn't have signed a strategic partnerships with over 50 travel destinations.
In the third quarter, the chips outcomes and.
The topic abroad, and deliver it took big <unk> year over year gross for the 12 consecutive quarters.
It's it's hotel booking will continue to accelerate.
October chip Dot Com was awarded.
Hey, good material at this I'm a war.
During the two global uses it through a combination is reflective of the increase to recognition of the core market to them.
In summary, we encourage to fight the performance of our international business.
However, I like you're making the overseas market has just at the gym.
Currently only a portion of the assumption magnitude on future Chinese them up all the global uses two trips on calm and we won't work hard to increase the functionalities and make a trip dot com CPP as comprehensive after transportation.
Last week, we announced a strategic partnership with Ctrip Dot Com always trip had a brighter.
True global.
Sure It stands out global cooperation consisting of a joint venture as chip to devise a trainer.
The content collaboration and governance agreement, which we have previously disclosed.
Through this partnership we will gain access to try to devices hundreds and millions of Americans abuse and pictures, so accommodation and activities.
Right.
The quips with the headset information generated by global Choppiness.
Our customers will have greater confidence in what they happen to book through our platform and have them more comprehensive idea of what to expand upon arrival and you get the intent that uses experience.
52 weeks ago, we calculated our printed anniversaries repeat at our past Sheepmen.
Anything yet even the excited about what we accomplished in the future.
Older to create value for our customers, our Pawnee and food industry.
We are working hard to provide the most innovative and reliable services for our customers both in China and not good.
With that I will now turn to pour over to can be [noise].
I think since World War.
For the third quarter of 49 to trickle up comfortable with 44, Scorpio arms, and 10.5 billion, representing a 12% increase promising to at least once it is.
And that's rapidly or for dessert fortune 29 to increase it by 21 person.
In the previous quarter revenue growth decelerated from previous quarter, mainly due to influence Nacco industries.
Accommodation reservation revenues for the third quarter of 29 to was RMB <unk> point 1 billion, representing a 40% increase from the Theorising 28 to.
During the third quarter, no no and hooks lost profit house sustained strong might go towards future. It's spot snacking about another comparison base [noise].
It's continued to reflect the effectiveness of our aggressive pricing strategies and we won't continue to actively acquired Pogatetz user is exactly.
And they're going after it could get too high and hotel. We also maintained healthy growth momentum from previous quarters.
It is worth nursery back the total number of heart and hotels join our troops life program has exceeded 10000.
Bringing more bookings just come in a wide range of hotel benefits to our members.
The recent macro and industry happily see backwardation protect Hong Kong has put pressure on related travel demand and hotel prices.
Thanks, Colby great try not to activation our revenue growth from overseas hotel accelerated to 50% young here in the third quarter.
Transportation ticketing revenue for the first quarter of 29 to was RMB 3.7 billion, representing a 3% increase from the same here. It is 28 two.
Lower year over year revenue rose compared to Q2 was mainly due to the week outbound travel demand is certain vaccinations and a decrease of international air ticket price.
Our international Air ticketing business actually it's how higher multiples I guess the industry growth really slow quarter.
The triple comp rents scared to Borland recorded triple digit growth for the 12 consecutive quarter.
[noise] packaged tour Rapidio reported third quarter of 29 to was RMB 1.6 billion, representing 19% increase from the same period is 28 two.
In this third quarter G.M. Healy from all trifle continued to see strong growth.
In August .
And now sit back Atoll Gmbh falls off my sold each 10 billion times each year to date.
I mean, we said MISO full monkeys earlier than the previous year.
Corporate travel revenue for the third quarter Oftwenty My two what I'd three countries 35 million.
Okay represented a 26% from the same carats in 28 two.
This was primarily driven by extension how quick customer base.
And then and optimize the property expense.
Revenues from other businesses increased by 37% year over year through the third quarter of 29 to reach an RMT 688 feeling.
This was primarily driven by strong growth advertisements and financial service business.
Gross margin was 79% go to third quarter of 29 tea, which it becomes persons with that in their same period of last year than in previous quarter.
Excluding share based compensation charges.
non-GAAP operating expenses grew 4% year over year, and 10% quarter over quarter in the third quarter of 29 too.
Total headcount I T supplier management and other restrictions, what's laclede consistent with the previous quarter.
Marketing efficiency continues to improve.
It was primarily due to al I liked your democracy services and continued efforts in customer services.
Progress across guarantee its contents Moody's.
[noise] average new customer acquisition costs continued to decrease in the third quarter Wow conversion and cross sell ratios continue to improve here to the entire second package that list of products and services.
non-GAAP operating profit in a quarter, what I'd be 2.6 billion.
Almost 40% year over year and 63%.
Quarter over quarter [noise].
non-GAAP operating margin for the third quarter or 25%.
Creepier Francois perfect stay the same period of 28 two.
And the previous quarter.
The increase is mainly due to improvement.
Operational efficiencies.
Hi, usually it's early for avionics, where I'd be 1.3.
Hi.
All U.S. dollar Nike swim.
What is your partner of 29 too.
[noise], excluding share based compensation charges and fair value changes of equity security investments.
No GAAP diluted early crazy as where I'd be 3.7, our U.S. dollar 52 cents.
It is third quarter of 29 too.
As of September 30, 29 to the balance of cash and cash equivalents.
Restricted cash shocks and he was asking them.
And how to maturity deposit and financial products, what I do see once daily.
The U.S. dollar 8.5 feeling.
Oh September 16th.
The company announced the completion optics previously announced a sports rights offering related to its 1.25% convertible senior notes few 2022.
Approximately U.S. dollar 924 million aggregate principal amount off and no.
That is mostly surrender.
And not withdrawn for I'm trying to the spot price to the expiring shortly after quirks right offer.
Finally, the second one off we purchased from the snow.
The total number of ordinary shares of accomplish our fully diluted state.
Worked with you supply 1.8 million shares.
I guess to 26.
The common shareholders approve the proposal to chase and laying off the company hockey Ctrip Dot com and rational to took out Conkle limited.
[noise] at their annual General meeting.
Okay.
Now can depository shares of the company has started to trade ended at no cost estimate since November the pit 29 to and accomplished to current has to change pretty calm.
Oh, no matter how November the six.
Trip Telkom group announced a strategic partnership with trip advisor it accordingly.
Operational Corporation and Randy is active.
Exactly what you find yourself through cash on hand, there will be cost decline after a long time to rapidly and on the balance sheet.
We are happy with the potential shareholding.
Corporation.
And and the related global partnership.
And have no intention to further increase our stake beyond all contract for contractual obligation.
Now turning to the future outlook.
Order for fourth quarter of 29 too.
The company expects not to wrap your growth to continue at a year over year rate of approximately eight.
Searching for fan.
It's all costs were flat at 600 to 700 basis points.
Good.
Related to the leases macro industry halfway.
In particular relate it to event in Hong Kong.
Oh, it's truly a share based compensation the company expects non-GAAP operating income.
Well he is a range of Iraqi 800, feeling to find the 1 billion.
It will cost through a snack shipped all kinda groups current.
Preliminary views.
It is which is subject to change.
With that operator, please open the line for customers.
Thank you.
Just to ask a question. Please press star one on your Palestine, and White feel nine for being out.
If you wish to cancel your acquit placed frisco occur.
If you're on a speakerphone please pick up the handset ask your question.
Your first question today comes from Ronald Kim with Goldman Sachs. Please go ahead.
Thank you, Thank you Jane and Cindy and Michelle and congratulations on a very strong margin and that's.
My question would be on their revenue guidance and sort of what's your view on a normalized growth rates.
Because on the fourth quarter, you just mentioned there would be a insights around six to eight percentage points.
It is more than the four to five percentage points that we Oh, you mentioned in there isn't much <unk> second quarter results as we head into the fourth quarters. They like the impact from the macro economical has increases they just if you can't he's played out what's the impact from Hong Kong, given the current situation and Michael.
At the made it very tough to that bigger entrants into the fourth quarter and if you can provide the revenues rose by segments.
That's constitutes to the so sort of revenue guidance and watch the like there's Hong Kong impact what do you see the business could grow on a normalized gross rate, let's say from the second half makes sense you beyond where do we see the business growing in terms of is it mostly as this either hygiene once you lap seed input.
Okay.
Your question, probably can't do separate kicked in two parts of our trim and came to me I'll address that macro or a full cost and I I won't be on it and do well I trust that detail question about our guidance.
Yes.
Yeah, certainly there is.
Recurring event in Hong Kong It is certainly.
The negative impact I saw all bump business, so not just or Hong Kong phone call. Mccall also you know parallel greater China regions or.
In negatively impacted and also or not just from China.
Oh, he's onto Hong Kong, and it's almost a [noise].
Completely gone.
Correct.
I think there's no longer.
No I'd people he objective travel plans English three to six months right.
Right then we'll be.
Sector would be a limited.
So as to go readjust their trust and.
He said anything traveled to get places like Japan, So we see well see a pick up though other destinations so I think as Lauren.
Six months period.
He keeps exposed Syria, there's a sector will be.
I'm much more limited.
[noise] and regarding the cadence compare with throughout history, the cadence or for the Q4 reflected there additional 2% to 3% a intact out a growth rate related to the macroeconomic and know how to Ah due to the assumption after a full quarter a tax issue.
For based on their latest star status.
Yes, yes, if you recall eight excuse me actually that impacted our sobbing Oh from August which is not the beginning Oscar search quadrant.
Okay lets you for a we actually get Olivia fourth quarter intact.
The airport or we could start I wish list, which is 3% impact on the closely thank you.
Your next question comes from Grigory down with Barclays. Please go ahead.
[noise] aren't going to central kitchen, My question [laughter] first the considering a future expansion our to bring more international tourists to China. So we feel right true are attracted to oversee user traffic.
To treat dot com and where do we see people skew our the top off guard for user traffic funnel.
We came out today.
You do more marketing Oh surcharge in general that promotion or you find that store for your our troops out calm down at a quick follow up on your we're trying to continue to the margin.
Okay. If we see no if you take on issue.
Okay.
Turning to trendy tricky to do still maintained or above 20%.
The margin targets. Thank you.
Let me let me first.
Just a question that things are markets, a year or thinking about market as lot of potential but still there's quite a few bottlenecks on the Chinese sites.
The leap on payment.
And.
The.
Yes.
Like the.
So the hotel.
For a restriction is for deploying a foreign there.
And also he Oh, you know like Internet access to all each I bought on it.
Yeah, we're working very closely with the Chinese government that Chinese government as Craig.
Active in solving these issues and.
Ah, but just markets are we likely working with the.
Many.
Governments and get to Cook promotes are trying to for example, Japan Cross country tourism, So based on Japan, China and trying to Japan.
And working with the best major destination markets in China.
Like she and government. So we're working with close they were the Chinese government and the other.
Other countries to promote tourism.
And Oh Oh.
Sure Bill comes actually increasingly become.
And then the venue for people to books International travel in Asia. So that's really we have the ability to.
To promote.
Actually meant you just mentioned not just China.
And then make sure that makes you see in Asia.
So that's really a a was a strategy to on one hand to promote a a branded but also each worked with the other governments to reinvest she resource you branding and other facilities to promote cross country club.
[noise] Ah, yes, I'll address the marketing question I think if we have a very scary.
Oh, Okay group. So we have are very scalable business model and words, there obviously side continues to increase or they are can achieve for higher efficiency a portable extends glad incidents.
What's already have a snack to death or a this quarter stuff I wish her famous.
Even better huge growth opportunity ahead of us not it's probably not the optimal strategy for us to maximize Martin at this moment a in the future work continuously to make he was asking them in our products and services, it's actually in the international markets or an hour marketed sandy.
We're continuously to be Julie our children I think to our dominance in down mid to high end markets, especially in China I'm.
You know without peculiar to the document into future out, but I can't speak to achieve a healthy margin and I think on next year, 20%.
Locking in some topics I didn't react go into Oh, yeah, we want to out faster I tried to chief.
Thank you.
Your next question comes from Benny Wong with HSBC. Please go ahead.
Hi, Good morning management. Thank you for taking my question, so with the update and himself the strategies have been the overseas markets and also a we've seen a step up actually need to cross sell them. They show right on that because Easter hotels into the other products and also with the last 40 on behalf of the Skyscanner. So how can you.
You can national Oh, Oh trends and also in some softness or any uptick in terms of costs only because we I think recall in the Investor day, we heard earlier that has a very be improving quite significantly from 20% last year to around 30% on a quarterly racial I think there's very I encourage you to.
Can you update in terms of the international growth Hoggins. He is and also where would you see kind of like a turned around in terms of the situations that potentially could shift away all the impact from Hong Kong will be I'm going to get like.
Tourist maybe going into the our markets, where the CW drifting impact and how he and overcoming it.
Sure. Thanks, Penny I think so to chip I assume it's really a the one stop shop to model and our ability to cross sell between different views.
And keep our international Air ticket it normally in the first to product our customer Simops I wouldn't say a native integration. We are immediately no. There the customers I played and by leveraging that's knowledge or will be able to pockets.
Customers by providing a relevant because and in destination, a 22 kids I tend to potentially upsetting to them to include span.
Right.
Okay, and accomplishing that I said that the outset, if they didn't want to watch are we going to come to pass to make sure. We provide their rights product is customers crossing and make sure I was.
Okay. They see a fear the walking is improving everything I see that I said is very much.
The way in it's very consistent I take my older prison limits and as we are.
Same thing plays when they are there any me select tipped Oh destination right now there is a air ticketing business.
Given this is moving further into that there's a there's there's opportunities to I guess to the coinciding with the intent.
I'd say, they say they can't say system.
So as I said check check that volumes, so I'm trying not to get into Houston and to intends to award or twice in Austin and product comprehensiveness. It actually was a very protective savages to make sure that every customer mm hmm is it.
On the T. Smith I put it can't be.
Thank you for us to our customers.
Good.
So I can't support costs on scale, yet intent on like the views in the future.
Thank you.
Your next question comes from a JV Kelly with Oppenheimer. Please go ahead.
Oh, great Oh, sorry, because my question and.
Congratulations on the Twentyth anniversary was a nice to see all your suppliers. That's the generally happy figure show so well dog. So my boss is just on the accommodation.
Good to celebrate.
I mean, I watch a batteries.
Mix between lower volumes versus lower commissions are lower AG ours can you touch on that.
Then on your sales and marketing it actually was out again like 8%.
Given your.
Dishes for trip doctrine.
Are you waiting for build off you know product to a certain amount of.
Six of our international supply before you accelerate barking that Brad just how should we think about your marketing strategy, both domestically and internationally. Thank you.
Ah Yes, our corridor, that's what are some there are a slower revenue growth.
I didn't expect itself, which is mainly due to a the slower than expected there are travel demand, they're two at a macro had to especially certain.
It is right and I can contact lens that the China, which it [noise].
For example, do not October holidays, and there. So we can regular capital among some of their travel demand T. all year change due in October holiday, what's the lower phenomenal for both domestic and al bonds in the hospital eight years its actually.
Well I'll bomb to travel industry, which was decreased their I said, 2% not yet and outbound traffic to Hong Kong decline I'm almost 50% a in recent months, which also resulted in a steep decline in that accommodation unfair hits.
I see.
Walter outbound travel want to sleep.
The cruise ship from store to to 40% young here in the first half of this year to address the 1% young here into third quarter.
However, as I wish that we will continue to place a two outpaced industry growth for example in that accommodations. Its revenue from the overseas hotel in cities and quit trying to doctors and overseas hotel cool about 50%.
Yes, and did a feature brand snow and for Talcott liver close to 40% water wells.
And rather you saw outdoor Mastercard and for snow located very strong growth momentum as similar to our accommodation business our international air tickets business.
Choose a higher.
The higher multiples I guess there are eight of trade girls are doing I smoke Hartford.
And that should dotcom, there's it's fallen continuously to deliver a triple digit growth.
Got it was ourselves marketing strategies.
Huh.
I said snacks, we will continue to upgrade to a half are truly our ideas on a market strategy, both domestically and internationally Oh, we will continue its nice to see more focus execute a lot faster and more at Johnston mobile app.
They said products.
We will continuously to promote more in the mobile.
I'm not going to China.
Thank you.
Your next question comes from it change really what's next year, how secure assays. Please go ahead.
Yeah. Thanks for taking my questions a change I was wondering Dan if you can.
Comment on the competitive situation when we can hardly heard that you know one of your key competitors.
Recently stepped up on the discounting us maybe session that moved here.
No small star hotels I'm, just wondering if you can talk about that a little bit how you guys responding and do you expect to competition to stabilize ends or should I expect there to continue going to for Q and also Cindy I'm not quite sure I'd be providing operating margin guidance before Q.
So we can break down the segmentation.
And so forth Qs, while there will be helpful. Thank you.
Yeah, we have always.
The kids quite killed.
So that's just the pricing strategy of the low on the market I think again, if I animals gets oh.
Customers are generally thought.
That price sensitive and originally.
Sure.
Quality services Uh huh.
And the law and the customer data, but let's just take everything else.
All right just to look for sure.
Personally strategy.
He gained market share, that's gonna be or or long term strategies.
So you tend to make him shortly.
[noise].
Our guidance for the margin so actually it could you share based compensation.
Target the compromise.
Back to non-GAAP operating income in the fourth we're being a range of 500 million two idea 1 billion.
Right.
On the top line side is that are either that accommodation reservation basis or.
For the fourth quarter, though we we actually made there it's well continue to have a healthy gross rates at about 10% to 50% ads for transportation that typically business.
There are cheerful Midas walking in the range of zero percent to 5% a young Liberals and the package tour Rapidio will continue to have or 15% to 20% growth rates at corporate travel or half a 20% to 25%.
He told to our match Rapidio work well in the range HM 250%. Thank you.
Your next question comes from it naturally you work with China International Capital Corporation. Please go ahead.
Hi, Good morning. Thanks for taking my question I was just kids case like I'm Sad news, what kind of thing that you should do except a yard she's got device that JV and I think of it.
It had thing almost four years since you upgrade the ideal opens half one strategy and launched a I should point there I should tell you know bhushan system.
I just wonder do you mind sharing with US more details on did you actually saw than that in Michigan.
Especially with respect to a baseline and contribute to feel some major simos inches.
Sure well.
Like the for Entresto device, Oh, we have very excited about the partnership because I want you to well be able to access.
Maybe it's off the reviews and pick chess generated by global uses and when they make their reputation they were already on t., what they're going to see in the destination and that's really intense other uses experience so whether we're excited to choose.
Collaborate with the bike achieved a to make sure our youth experience. Its intent secondly on open platform a it's a very innovative strategies I see coupled with the first one ah to do that and a Wi Fi.
I never take into effect shops, then it enables us to has the coverage or we want to have a crossover old and pembinas offset product that has offered to our customers and also a hot the best pricing structures I batches.
Available for our top 10, or so so far I think kept Oh platform has also anywhere depending on the defense.
Our product line it can be anywhere between two to compete to 45% of so while the impact coming from the open top home and Ah Challenge for US is to make sure the quality, it's very well controlled and teach people will be behind to see I'm the keys.
Sure. Okay. So this level is not up by Oh, that's a positive onto the platform. So every day, we went it's impossible to make sure not only we've got stuff off the price coverage on product, but also we offer the ball.
Services to get into a lupus feeling for all our customers when they go abroad.
Thank you.
Your next question comes from 10 here, what's th capital. Please go ahead.
<unk> money management I have a two questions or two quick ones why is that last year, we actually mentioned the lock step outside go he down.
And the lower tier cities that should look I too much we actually did this year a lots of them if say rather go abroad. So I wonder how small change our strategy or if that's going downstairs. It's just it sounds good going down to the lower tier cities I've already finished.
So what's the future strategy each himself expansion and that's number one number two experienced a theater Lady set just a need for someone wants to go a browse the to travel and even for a Hong Kong I, just some things they can actually ultra destination to other places.
So I wonder how cheap because simply a chip.
Hi, we're experiencing until the theory I just mentioned I think it's got the two questions.
Sure So teacher, who have faced in China. So for the penetrate into the lower ticket has always been our strategy and the wealthy.
Future. However, we have seen oh, great potential uplift as well so Ah that's true campaign interested I'm moving some they tend to take a while at the mask and he is moving very aggressive by opening up Uh huh.
Cost of applying to source and they're making very good progress further penetrating into the flip chip with kids to teach and how what pricing structure and supports our strategy and a half he's very positive flows into lower tier cities.
A lot international cheap on the other hand also moved very rapidly to make sure we capitalized on the opportunities for outbound travel as well as the other opportunities globally. So these two strategies are putting aside with each other and moving pending.
Tended to be very rapidly into both our daughter entities as well as Rick.
And your second question is so replacement <unk> Hong Kong.
Yeah. So.
In the people will gradually looks to attend the tip nom Hong Kong, it's not a down to a place to go how whatever it takes time and if the what's going on it's not only a impact you can call also it can make people kids.
I think so it it has peripheral impact you can't know markets and but again I see because were still diversified Oh, we will work very hard to make sure gradually we're able to get through to two topics to other alternatives.
But it takes time.
As I said service provider.
We have to most comprehensive Ah Ah Pago tasks capture and they travel demand from the users that path in terms of their pockets with back to get to the field, we always ask them to outpace the industry flows so he's already.
Just like the slow our goal sleep slowed down but compare with the industry growth rate, we have to outpaced Ah Ah electric gross in a much factor was doing so Tom.
Thank you.
That's fair and I set of questions at this time I'll now hand back 10, this country for closing remarks.
Thank you Ashley thanks, everyone for joining US today, you can find a trusted and a webcast of today's call on not just so she's cellcom.
We look forward to speaking with you on our fourth quarter 2019 earnings calls. Thank you I'm My thing.
Thank you.
That does conclude our conference for today. Thank you for participate. Thank you may now disconnect.
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