Q3 2020 Trip.com Group Ltd Earnings Call
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[noise] and.
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Thank you for standing by and welcome to the Chip Dot Com Group Ltd, Q3, Twentytwenty 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 won't need to press the star keep other by the number one on your telephone keypad.
I would now like to hand, the conference over to Michel Chief Senior IR Director. Please go ahead.
Thank you Kaylee. Thank you Oh, good morning, and welcome to keep Docomo Group third quarter Twentytwenty earnings Conference call. Joining me today on the cool and Mr., James Sam Executive Chairman of the board, Mr and some chief Executive Officer, and the mid Cindy Wong Chief financial.
Losses, there you are.
And in this call we will discuss other future all day weekend performance, which are forward looking statements made under the safe Harbor provision over the U.S., probably Securities Litigation Reform Act of 1995.
Forward looking statements evolve here for two weeks and uncertainties.
As such our results may be materially different from the views expressed a day.
A number of potential risks and uncertainties are outlawed the interest income groups public filings with the security and Exchange Commission.
Sure they'll come group does not undertake any obligation to up the gate update any forward looking statement, except as required under applicable law.
Jim Jim and Cindy will share no strategy and business updates operating highlights and financial performance for the third quarter of Twentytwenty as well and outlook for the fourth quarter of 2020.
After the prepared remarks, we will have two and the session.
With that I will turn the call over to Jim Jim Please [noise].
Thank you Michelle Thank you everyone for joining us today.
[noise] true Donegal group turned and 21.
In October this year.
Relative to have hooks.
Celebrated the anniversary with many of our suppliers.
Partners and customers.
Because all China domestic business normalizes.
I presume sometime true lucky and the learnings from [noise].
Talk to you and what we will focus all as a company to flow future growth and.
The new environment today, I'd like to share a few questions.
Firstly, we will focus on Compton.
Oh company will not only be a platform for transaction.
And also a hub for Travelex integration.
Secondly, we'll focus on product.
Well, there's a renewed focus on domestic markets for customers.
We will work on security book.
For Tiet and diversified for inventory.
In addition to sourcing deals of mass popularity Oh.
Our customers preferences are evolving and their needs have become more and more personalized book.
Oh peak products, such as alternative accommodation.
And seemed to hotels and dining.
And become important elements of each memorable true.
Combining sales strength and platform sourcing and operational support well able to run a diversified product offering and skill and.
Only with competitive product for us clause.
Right well too.
Attract and retain customers for the long run.
Certainly we will focus on supply chain and parliament.
Building on existing for next year.
We will provide for their support to supply us and marketing.
Content creation technology, and finally, your true to further improve the efficiency and the conversion.
Oh, sorry.
In addition, we will focus on quality.
Earlier this year, our customer for us to approach and processing COVID-19ien related the refunds.
<unk>.
Great complements and public.
On multiple fronts.
As a result, all net promotions school hit an all time high.
I'm proud of the team's collective the spouse during the pandemic and will continue to identify.
And the work on the new area too.
To improve our customer experience and the product quality.
Lastly, I would like to cuts from the topic of global vision is.
As a company we need to have local focus [noise].
And global vision.
Yeah, and long run global markets still presents a significant opportunity for growth and.
And that make has not changed that.
However in the near term.
We have to lead you know.
Domestic markets for recovery and then sure I'll product line up is perfected to capture such opportunities and.
The same time will be ever watchful of the prospects.
Global markets.
Ensuring that our technology architecture is easily fixable too and corporate international adaptations.
Recent breakthroughs.
Maxime for covered 90 have been encouraging.
With the continued hard work of the global community, we are hopeful that more meaningful recovery for international travel is underway.
In summary real.
We are focused on domestic markets, including content product supply chain and quality.
And the same time will retain all global vision for the long run with that I will turn the call over to Jane.
Thanks, James Good morning to everyone I will start with a brief overview I'll follow up for full names in the past quarter.
Total net revenue in Q3 declined by 48% year over year and increased by 73% quarter over quarter main.
Mainly driven by the continued strong sequential recovery and sound like China domestic businesses.
During the third quarter the company remained lean operations wireless talking to investors.
In resources to capture market to rebound.
We are pleased to see the company achieved non-GAAP operating income of RMB 1.3 billion.
Representing 24% of net revenue.
And to the same time <unk> operating cash flow at the group level also turned positive for the quarter.
And what domestic China business achieved a few key milestones during the third quarter.
Most significantly domestic air and hotel bookings both turned positive starting August.
Short haul hotel reservation increased by around 20 per cent for the first quarter and mid to high and hotel bookings grew at double digits year over year. It's it seems kids for me.
Strong recovery momentum and extended into the fourth quarter.
During the October Golden week holiday, and what domestic hotel GMB reached double digit growth year over year.
Regional travel continued to lead with our local GMB growth over 50%.
Attraction tickets increased over 100%.
I'm here to last year.
And our current until services, so more than 50% year over year growth.
As we enter into the winter season, we're glad to see I like agnostic Air and hotel booking have achieved a positive growth momentum quarter to date.
Despite the weak caught troubles seasonality.
In particular mid to high and domestic hotel reservation have maintained double digit growth compared to the same period last year.
As I watched the massive business gradually turn to full capacity I would like to recap a few important contributors.
That have propelled our company towards a speedy recovery.
Firstly.
I will enhance to content strategy strength and our more type range, one stop platform to attract and engage users and.
Across the spectrum.
And what brand secret continued to lead the recovery, especially at the mid to high and segment.
Recent content efforts, such as our lifestream platform improved chip moving and every day and use it and if they have all contributed to positive user engagement.
Our optimized inflammation. That's the play has helped hotel partners to improve conversion rate by 5%.
She non electric motor for.
Milestones despite of the pandemic with a focus on providing quality product and services for travellers a budget.
I'm on this years and you users approximately 40%.
Our and a 25 and close to half from first tier cities and the young.
Millions of users book did their first flight tickets through Chinachem last year.
Reach and a five year high.
In addition, the one stop shopping nature of <unk> and also encompass content and the transaction [noise].
Net to afford the increase of for user retention and conversion.
As a result, we saw a double digit improvement yeah, well cross sell ratio from our ear to hotel compared to the same period last year.
We are fully confident that our more type range. One stop platform will continue to drive for the customer and market share gains in the future.
Secondly, we further enhanced our product competitiveness and.
Enriching domestic and boutique product such as seems chip and private tools.
Our customer and then shifted from large group tool for smaller tools and from popular products to more customized products.
We have also been for the promotion strategy and your stones to display and.
Many of these product have delivered high double digit growth compared to the last year.
With our white product coverage and a strong operational capability were able to target promote and net to the products to our customers in the most accurate and efficient manner.
Thirdly, we continued to focus and supply chain empowerment.
We have opened up our service capability to our hotel partners is here, who can then get rack to late connector with our customers.
Our hotel partners are able to monitor their ROI of each campaign by using our system in order to make informed decisions about their operations.
Moreover, I see chip Hotel University have produced more than 150 freak losses since the beginning of this year with over 1 million attendees for the hotel industry.
Deep integration and a close partnership has produced meaningful improvement and traffic and conversion for our hotel partners and.
And ensure the Ais a high quality user experience for our customers.
In Q3, we maintained our leadership in domestic hotel coverage and saw.
For the double digits quarter over quarter growth in a number of the hotel that's the Canadian as debt preferred distributor.
Now turning to our international business. Despite the ongoing pressure faced by all the international channel.
Traffic to our brand she kept all income has recovered to.
Proximately, 70% and the third quarter.
This was primarily driven by the domestic travel demand such as Staycation and the local travel.
Well Mitch to the challenging international environment we.
Yeah for that to see many got done and have taken targeted and that measures to revitalize.
The travel industry recently, we announced our cooperation with single for Tourism Board to launch their single pool Rediscover voucher sales.
Moreover, we have also been able to work with different trouble authorities globally on similar with vital plans right.
Recent development and effective vaccine and the treatment for cobot Tonineteen has been encouraging we.
We believe a global rollout will be crucial to support for the recovery you know what international and cross border business.
As James mentioned due to pandemic, we have opted to focus primarily on China domestic market. This year. However, our vision for long term global expansion remain the same.
We will work hard with our partners to well prepare our sales for the global recovery with.
With that I will turn the call over to Cindy.
Thanks, Jane Thanks, everyone for the third quarter of Twentytwenty Chip Telkom Group reported net revenue RMB 5.5 billion, representing a 48 per cent decrease from the same period and 2019 net revenue for the third quarter of Twentytwenty.
<unk> increased by 73% from the previous quarter, driven by a continued strong recovery of our China domestic business.
Accommodation reservation revenues for the third quarter of Twentytwenty was a and B 2.5 billion, representing a 40% decrease from the same period and 2019 and a 98% increase from the previous quarter.
Sequential increase of accommodation reservation revenue was mainly driven by the strong recovery and momentum of domestic markets.
Accommodation reservations for China domestic market reached a positive year over year growth from the second half of August was pricing that would bother moderately from the same period last year short haul reservations grew by more than 20% year over year interest.
National Hotel recovery remain minimal however, domestic bookings and branch took dot com has seen strong growth momentum in the third quarter.
Transportation ticketing revenue for the third quarter of Twentytwenty was RMB 1.9 billion, representing a 49 per cent decrease from the same period in 2019, and 60 per 66% increase from the previous quarter the.
The sequential increase of transportation ticketing revenue from the second quarter of Twentytwenty was mainly due to continued strong recovery of domestic market.
Air ticketing business for China domestic market reached a positive year over year growth for this quarter, although pricing remains debt is counted compared with last year.
Packaged tour revenue for the third quarter of Twentytwenty was RMB 326 million, representing an 80 per cent decrease from the same period.
2019, and a 151% increase from.
From the previous quarter, the sequential increase of packaged tour revenue was mainly driven by China domestic cross ridge and package to product being resumed seems to lie.
International package to products, a student not permitted to operate.
[noise] corporate travel revenue for the third quarter of Twentytwenty was RMB 282 million, representing a 16% decrease from the same period in 2019, and a 74% increase from the previous quarter.
Revenue from other businesses declined by 31% year over year for the third quarter of Twentytwenty and increased the two per cent from the previous quarter day.
The year over year decline was mainly driven by a decline in overseas advertising revenue.
Gross margin was 81 per cent for the third quarter of Twentytwenty, which increased from 17 high per cent for the same period in 2019 and 72 per cent for the previous quarter.
Excluding share based compensation charges total non-GAAP operating expenses decreased by 45% year over year. Thanks to all generally flexible cost structure and efficient operational management.
Total non-GAAP operating expenses increased by 25% quarter on quarter over quarter in response to the improving domestic business sales and marketing expenses for the third quarter of Twentytwenty decreased by 54%.
To RMB 1.1 billion from the same period, and 29 team and increased by 71% from the previous quarter sequential increase from the second quarter is primarily driven by increased and marketing spending and domestic China market as demand rebound.
So strongly.
We may choose to increase marketing spending in coming quarters to stimulate further growth as much market demand continues to recover.
Product development expenses for the quarter of Twentytwenty decreased by 28% to RMB 2 billion from the same period in 2019 and increased about 11% from the previous quarter, primarily due to fluctuations in it.
This is related to product development person now a significant portion of the expenses can be considered variable [noise].
[noise] general and edgy and they expenses for the third quarter of Twentytwenty decreased by 38% to RMB five or 5 million from the same period in 2019 and decreased by 2% from the previous quarter.
[noise] day year over year decline was mainly due to a reversal of bad debt provision for our travel suppliers.
Offset partially by personnel research and costs related to certain overseas subsidiaries if.
Excluding the factors mentioned above G and H expenses for the third quarter of Twentytwenty decreased modestly from the same period and 29 T.
Excluding share based compensation charges.
Non-GAAP net income from operations was RMB 1.3 billion non-GAAP operating margin reached a 24% compared to 25% in the same period in 2019 and negative 6% in the previous quarter.
Diluted earning per 80, EPS was RMB 2.6 to six one and our U.S. dollar so the eight cents for the third quarter of 2020.
Excluding share based compensation charges and fair value changes of equity Securities investment and exchangeable senior notes non-GAAP diluted earning per 80, S. was RMB 2.3 to our U.S. dollar study for sense for this quarter of 22.
<unk>.
Now turning to the fourth quarter of Twentytwenty, we expect a sustained year over year recovery in China domestic business for all international does.
It continues to be under pressure due to the ongoing pandemic worldwide.
For the fourth quarter of Twentytwenty Count the day currently expect natural avenues to decrease by 37% to 42% year over year it.
Excluding share based compensation charges. The company expects non-GAAP operating income will be between RMB 300 million to RMB 400 million.
This forecast reflects trip they'll call group's current and preliminary view, which is subject to change the increasing uncertainties due to the current run a virus outbreak has for the restricted our visibility we will continue to.
To monitor the market and provides more details to investors in time.
With that we will open up for UQM day operator please.
Thank you we will now begin the question and answer session open to sell side analysts and Mike. Please limit your question to one and rejoin the queue. If you have for other questions.
If you wish to ask a question. Please press star one on your telephone and wait for your name to be announced if you wish to cancel your request. Please press star two if.
If you're on a speakerphone please pick up the handset to ask your question.
Your first question comes from July is true with Bank of America. Please go ahead.
Oh, good morning, Jane Jane Cindy and Michelle Congrats on the solid quarter and thanks for taking my questions. I have two questions are first could you share for some reason and chinas domestic business recover a second and given the lateness. Good news on the Caribbean My team that's and.
And do you think the international tableau to start to recover and when it to fully recover and color.
[noise] Oh, China domestic travel has mostly reach full recovery.
As we shared earlier.
Domestic hotel and air booking simple turned positive growth since August.
And especially the high and.
Business and short haul travel for the recovered.
Well.
[noise] International travelers, especially all bump as this will remain low and the next few months.
And just takes time for the vaccine to reach general.
Population.
And a full recovery of international travel.
Oh and take.
At least a year or even longer.
Oh considering [noise].
That oh.
No just a.
And location and vaccine, but also a political and.
International arrangement and [noise].
And and the Corporation.
From between a different.
The from government. So it takes a while for the and.
And our school community.
True slowly.
Again embrace it so the international travel so will definitely prepared.
Oh for the next.
Oh, yeah for too.
I'll take full advantage of the true gradual but other thing steady recovery of international travel Mark.
<unk>.
Your next question comes from Jialong Shi with Nomura. Please go ahead.
Good morning, and managements and for taking my questions and congratulations on a very solid quarter and back in November and China. So sorry to be released eight jobs and kind of talk about line for the internet platforms could.
Could you provide sun corners on health and it's now a regulation will empower China's OTN managed to come and landscape and most specific home and health is regulation won't impact true outcomes operation and the financials. Thank you.
And thank you for your question, we always supports a kill them and initiatives to prepare to protect at the market and so our team is working very hard to make sure Oh the rules and regulations are carefully studied and and we stay in line for the rules.
And regulations to be published and finally thank.
Thank you [noise].
Your next question comes from Thomas Chong with Jefferies. Please go ahead.
Hi, Good morning, and friends management novelty and my question is Oh and management up wise from Ah I used and about the tools they are going up and Neil up my sentiment.
And my second question is about how we should think about the competitive landscape in the wholesale business and lower tier cities and.
Hi, and hotel.
I was actually go into 22 and the one I. Thank you.
Sure the recovery El Salto Mastic, GAAP business Force Us day to the fourth quarter. Despite a weaker winter seasonality, we expect total revenue to decrease or day, 7% to 42% he and here from Q4.
And in General we would we expect a full recover of domestic hotel and air ticketing reservation.
Despite the unfavorable a winter seasonality.
And and in terms of revenue guidance for each other and the revenue items, we expect revenue for accommodation reservations to decreased 25% to study for Santiago and yet our China domestic hotel reservations achieved a double digit Jane.
And the growth doing a golden week holiday and maintained positive yahya growth quarter to date.
And especially our high and hotel and grow at a double digit.
All other coverage on the domestic hotel business.
Net significantly outperformed the industry average and especially in the mid to high and hotel segment.
While all other international hotel revenue remained at very low level.
Compared to 20 to 25 per cent revenue contributions and fourth quarter last year.
And.
With regard to the transportation reservations, we it's back to revenues will decrease 47% to 52% yellow year out domestic air ticket reservations achieved the double digit Yahya growth fueling Dakota week holiday and maintained positive yellow yet.
Growth quarter to date.
And international business from a name and.
Compare and say less the hotel business, our international business remained at very low level compared to 40 to 50 per cent revenue contribution in fourth quarter last year.
No.
Oh, well, we expect to revenue for packaged tour business to decrease 55% to 60% year on year.
Domestic package tour business continued to recover and gradually leading by the local activities and customize the tour packages International package tour business have not yet we started due to the travel restrictions and that international and the pandemic.
Which accounted for 40% to 50% of total packaged tour revenue in fourth quarter last year.
We expect to revenue for corporate travel business to decrease 50, 15, one 5% to 20%.
[noise], yes, and himself the competition or less a adjusted income, possibly or official for a income from a product offering we want to make sure our product offering is comprehensive to provide the best product for high and you don't care and also.
[noise].
Mark and.
And so as James said wouldn't help initiatives aware PQI to capitalize on the domestic market is to make sure. We thought would be product offering secondarily on the supply chain and also a win not only focusing on the first tier second tier cities were also going wider and more comprehend.
Just to make sure wherever our customers are are we have the product to cover that and certainly as.
As we discussed to pay for a when we look at our new customer acquisition and the majority of our customer acquisition focus is on you and the young customers and not only are centered around that the first tier and second tier cities and also Gopi Ah Ah.
And 60 Hot and intensify why sales and marketing strategy not only we are well exposed a in the first tier second tier cities. We also utilized our cross sell opportunities to further penetrate into that for cash and the young cities to reach out to our customers and also.
And our offline stores or more than eight south and offline stores are also located in the cities outside also for 10 states and so tier cities, which gave us a very good exposure to for the recount <unk> to these market.
Which is there and new to us so going forward.
We will be very aggressive and in terms of extending product line sales channel and also I want reach and for our brand exposure. Thank you.
Your next question comes from Alex Barron with Morgan Stanley. Please go ahead.
Oh.
Hi, Good morning, Thanks management for taking my question.
My first question is related to Youre for focus and 2021 on quality quantity and quality content products and supply chain.
We have to quantify these how should we think about the domestic revenue growth between 20, and 19 and 2021, considering there is also outbound demand returning to being converted into domestic demand and.
And my second question is related to your operating margin level and 2021.
And is it possible to maintain a 20% non-GAAP operating margin and 2021 without outbound business and also considering the competition and some other cost savings could reverse and also the user acquisition, new user acquisition strategy or not.
Only and do you want to cities, but also new and tier cities and thank you very much.
Thank you.
And with regard to the 2021 guidance.
Yes.
HM due to the very short booking window, it's very difficult for us to provide a full guidance, however, oh and the general picture would be Ah. We believe there's still uncertainty as we get into the new year I'm, assuming we'll get 19, I will still be and there was good control and true.
China and the <unk>, our domestic business shall sustain a that a recovery trend and next year.
But the international travel environment at this moment just very challenging.
However, with the effective vesting and the treatment for the COVID-19 on the way hopefully there will be some picking up on the international travel business toward the second half for starting from two other second half of next year.
With regard to Ah Ah Ah and margins.
And our company I will speak to a very lean and efficient operations.
But at the same time, we always we strongly believe that continuously and given the huge market potential globally and the travel space and there's huge growth opportunities. So we and our first priority is to continuously and gaining market share.
And we will keep investing in the key business fundamentals as James and Jane explained earlier and for example, the product the technology as well as the service global service capabilities to make sure that a week and the best positions us to capture.
For the opportunities.
And in the travel market globally.
There for of course, we.
Half, a very healthy margin, but if the target.
We are going to continuously to and.
To focus.
But any market share at this moment, we do think if not more important priority.
Thank you.
Your next question comes from 10 next to the T.H. capital LLC. Please go ahead.
Yeah, Good morning management Kinda regulations on the quarter and so one thing it's really about the all book, it's not near term, but rather a if we look out for 2000 and punching one so unlucky Chinese and people start to plan their international trip so well.
One thing you know I haven't read some news about but that's true inquiries and have seen a shop several for its compared with net before so I wonder from and Youre, a day or you know how how.
Well, how do you see you know what do you see about you know people and stuff you know enthusiasm about the traveling and in the middle or second half of next year. You know how many people are starting to see what you plan. Your mother trip so what that means.
And maybe back and give us some some indication about how you know how big other international travel recover it can be and that's my question. Thank you.
HM. Thanks for your question Oh first of for for domestic travel Oh, we're quite confident because in Q3, I, China and that their recovery economically by delivering a for a percent plus GDP growth and slice I like Honda me is in a recovering Chen at the last day.
Kabul, they'll keep up for very healthy growth second to late and tend to come to one or we are hopeful that every government to put to account for it to the exports to make sure. The vaccine is being injected and and the improvement and for the control of combat pandemic and well be and.
And prove intent and when we look at our search results and the international search and for our sites have already recovered to 100% to year over year and so I think other people have been locking down a whipping the borders and the desire to travel abroad.
Very strong however, we really need to make sure two things one is the health and use of the population is ascertained so and to the vaccine is that take to many people will be a careful to make sure wherever they travel and they're protected secondly, oh sorry.
Scientists and these shouldn't be share consensus EPS true, when and where quarantine used to required.
For the countries that have demonstrated their ability to control Oh.
Oh, and then Nick their route high hope for these countries to start with troubled by both but tough for the countries that have not demonstrated their ability to control the pen and mix and customers will be very careful in terms of whether they travel into the region and also lastly.
Whether when they return to their home country and whether the current tedious and required if the palm and he is required then again a lot and people will not have such a long time to stay at home. So all these factors and he should be taken into consideration when we really take p.
<unk> abroad, but so far and with the good news and the signs and C. O a with the government's concerted efforts to content. This virus Oh, we're hopeful and to see a recovery gradually another way then.
Thank you.
Your next question comes from James Lee with net debt of please go ahead.
Great. Thanks for taking my questions and my first questions for Jane maybe and can you talk about from the government policy that you're saying.
They'll be driving a domestic travel demand and maybe international travel demand you seem to be pretty enthusiastic support recently and for international travel last quarter and I was wondering if there's any update from.
From that perspective, and also for Cindy It seems like the old <unk> guidance, it's little bit lower than what we've seen from the street consensus here and can you talk about maybe some of the investments that you plan to step up and for Q. Thanks.
Sure. Thank for your posture and let me address your question and to parts for so for what the massive China Ah I think for Cabo represents 10% of the GDP growth and approximately a 10% and their job opportunity and so I won't cover.
And is very supportive to revitalize the travel industry policies have been put in place and and.
Ah the domestic infrastructure is also are there and for people to travel to not only for the top popular most popular total definition, but also have lots from exploration and the new tablet destinations, which is very good in the long range for domestic travel.
Secondly for international government and I think every gum and mint, we have talked to are very eager to receive Chinese tourists.
Because not only they bring the buying power into the region, but also it creates job opportunities and to local level. So every cobbled Bureau, we have worked with Oh, so very much like to market, a day or countries and for their popular travel destinations.
And recently, we launched a campaign with the Singapore government to rediscover a single pool and Oh, we work with them on different initiatives to stimulate the interest and so that when the vaccine is ready and we will be able to promote.
To different destinations to address the increasing and demand for the Chinese outbound customers and so again, a real positive in terms of for working with their governments around the world and promote the travel destinations when the vaccine is ready when the safety.
Oh for other customers is acetate and thank you.
Yes for the second question.
The fourth quarter for is nominally a low season flow season for the travel industry.
Especially this year, we noticed this and cases and some of the cities, including major cities like Shanghai, which will also have some a negative impact.
And have to our business in the fourth quarter.
And and the other hand, just starting from the second half off from third quarter.
Oh, we notice very strong revolve and and nationally a net by the government. So as James and Jane explained, we will continuously to make investment and.
And our core competencies that to make sure that we are in the best position to capture the market growth opportunity. Thank.
Thank you.
Your next question comes from Brian Baum with Citi. Please go ahead.
Oh, good ammonia and management and congratulations on solid results. So thanks for taking the question. So I have another question for competition. We are also seeing some points and the platforms like the yen and the show and from some troubled per Dutch are being sold and was there a placements and opens there, especially not specialization and homes.
And still see them or the strides to OTI industry. Thank you.
Thanks for your question Oh with all these partners were very open to collaborate with all the partners in the ecosystem for Doe Yahoos true our product is inserted in that process and so what do you see you have booking capability a lot of them is linked to our web site.
<unk> and empowered by us and so again, we want to make sure the quality of our product and the service off the product. It's the best in the industry and when customers see these content, whether on our site or whether it's in the other ecosystem they will.
And back to trip they'll come make their reservation because I was so this is the best in the industry.
Thank you.
[noise]. Your next question comes from Binnie Wong with HSBC. Please go ahead.
[noise], Hi, James Jane and Cindy and share congrats on a strong quarter and is also well in your domestic business or can you share the structural cost savings. The C group has a cheap debt this year and how these can be extended into future years and.
In other words eat every equal the business is among the industry's recovery and how do you think like a margin and what other structural cost savings that can be lost interest in 21. Thank you.
Oh. Thank you for me a in this quarter was the continued to recovery also our domestic business Ah we adjusted the spending across all the major expenses and not a light and accordingly are there for our non-GAAP costs and operating expenses.
Decreased to 47% year over year.
Thanks to our largely flexible cost and expenses structure and efficient.
Operating management.
Total non-GAAP costs and the operating expenses increased to 23% from the second quarter as a result of our recovery a customer they meant the non-GAAP sales and marketing expenses increased to 75 per cent, a Q on Q and a.
Our domestic travel demand response, and it and non-GAAP product development expenses increased to 12% Q on Q as our personnel.
Expenses normalized with the recovery of domestic business and no GAAP gn expenses decreased and 9% sequentially.
Mainly due to a decrease in our bad debt provision, which was partially offsetted by restructuring costs in sports and subsidiary of going forward.
As I explained before we owe it to achieve a very healthy margin definitely a one off and he goes for for the management team. However, we see what do you see with a strong recovery and.
Starting saw China domestic business, we still see.
A huge growth opportunities both.
Both domestic as well as international markets.
So our top priorities to further.
Investment in our cold competencies and to.
To make sure that we'll capture the growth opportunity.
Thank you.
That does conclude the question and answer session I'll now hand back to Michelle cheap for closing remarks.
Thanks to everyone for joining us today, you can find the task force now webcast for today's call and investors don't trip Dotcom, we look forward to speaking with you on our fourth quarter 2020 earnings call. Thank you and have a good day. Thank you very much.
That does conclude our conference for today, Thank you for participating and I now disconnect.
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[noise]. Thank you for standing by and welcome to the Chip Dot Com Group Ltd, Q3, Twentytwenty earnings Conference call, all participants and and listen only mode. There will be a presentation followed by a question and answer session.
If you wish to ask a question you won't need to press the star keep other by the number one on your telephone keypad.
I would now like to hand, the conference over Kinda Sheltie Senior IR director. Please go ahead.
Thank you Kaylee. Thank you Oh, good morning, and welcome to Ctrip Dot Com group third quarter Twentytwenty earnings Conference call. Joining me today on the call are Mr., James Lamb Executive Chairman of the Board Ms. Jensen, Chief Executive Officer, and image sensing Wong Chief financial.
Officer.
And in this call, we will discuss our future outlook and performance we try to forward looking statements made and and safe Harbor provision over the U.S., probably Securities Litigation Reform Act of 1995.
Forward looking statements evolve here for two weeks and uncertainties.
As such our results may be materially different from the views expressed a day.
A number of potential risks and uncertainties are outlined the interest don't come groups public filings with the Securities and Exchange Commission.
<unk> Dot Com group does not undertake any obligation to update update any forward looking statement, except as required under applicable law.
Jim Jim and Cindy will share no strategy and business updates operating highlights and financial performance for the third quarter of 2020, as well and outlook for the fourth quarter of 2020.
After the prepared remarks, we will have a couldn't and session.
With that I will turn the call over to Jim Jim Please [noise].
Thank you Michelle Thank you everyone for joining us today.
Sure Doug I'll group turned at 21.
In October this year.
Relative to have hooks celebrated the anniversary with many of our suppliers partners.
Partners and customers.
'cause all China domestic business normalizes.
I'll take them sometime true lucky and the learnings from [noise].
GAAP did and what we will focus all as a company to flow future growth and.
Net the new environment today, I'd like to share a few points.
Firstly, we will focus on comps and a company will not only be a platform for transaction.
But also a hub for travel and it's.
Gration.
Secondly, we will focus from products.
Well, there's a renewed focus on domestic markets for customers.
[noise], we will work on security book.
Teak and diversified inventory.
In addition to sourcing deals of mass popularity.
So much per froze, all evolving and their needs have become more and more personal life.
Total product such as alternative accommodation and.
Themed hotels and dining.
And become important data amongst each mobile trip.
Combining sales strength and platform sourcing and operational support for well able to run a diversified product offering and skill and.
Only one competitor the probable cause.
Right well too.
Attract and retain customers for the long range.
Certainly, we'll focus on supply chain and Parliament.
Building on existing connection.
We will provide for the support to suppliers and marketing.
Content creation technology, and finally free Youre true to further improve the efficiency and the conversion.
Oh platform.
In addition, we will focus on quality.
Earlier this year, all customer for us to approach and processing Covidien related the refunds received great complements and public on multiple fronts.
As a result, all net promotion of school hit an all time high as well.
I'm proud of the team's collective the spots during the pandemic and will continue to identify.
And the work on the new area.
To improve our customer experience and the product quality.
Lastly, I would like to cut from the topic of global vision.
As a company we need to have local focus [noise].
And global vision.
You long run global market still presents a significant opportunity for growth and.
And that mic has not changed that.
However in the near term.
We have to leave it all.
Domestic markets for recovery and ensure all product lineup is perfected to capture such opportunities and.
The same time and will be ever watchful of the prospects.
Global markets.
Ensuring that all technology architecture is easily fixable too and corporate international adaptation.
Recent breakthroughs.
Sales for covered 90 have been encouraging with.
With a continued hard work and the global community, we are hopeful that more meaningful recovery for international travel is underway.
In summary, we'll focus on domestic market, including income fence product supply chain and quality.
And then same time will retain all global vision for the long run with that I will turn the call over to Jane.
Thanks, James Good morning to everyone I will start with a brief overview of our performance in the past quarter.
Total net revenues in Q3 declined by 48% year over year and increased by 73% quarter over quarter.
Mainly driven by the continued strong sequential recovery of our China domestic businesses.
During the third quarter the company remained lean operations wireless stocking to invest.
In resources to capture market to rebound.
We are pleased to see the company achieved non-GAAP operating income of RMB 1.3 billion.
Representing 24% of net revenue.
At the same time operating cash flow at the group level also turned positive for the quarter.
And what the Mastic, China business achieved a few key milestones during the third quarter.
Most significantly domestic air and hotel bookings both turned positive starting August.
Short haul hotel reservation increased by around 20 per cent for the fourth quarter and mid to high and hotel bookings grew at double digits year over year, it's it excuse me.
Strong recovery and momentum and extended into the fourth quarter.
During the October Golden week holiday, and what domestic hotel chain and be reached double digit growth year over year.
Reaching though travel continued to lead with our local GMB growth over 50%.
Attraction ticket increased over 100 per se compared to last year.
And our current until services, so more than 50% year over year growth.
As we enter into the winter season, we're glad to see I like and Mastic Air and hotel booking have achieved a positive growth momentum quarter to date.
Despite the weak caught troubled seasonality.
In particular mid to high and domestic hotel reservation have maintained double digit growth compared to the same period last year.
As I watched the massive business gradually and two full capacity I would like to recap a few important contributors.
That have prepared for a company towards a speedy recovery.
Firstly.
I watched intense to content strategy strength and our more type range, one stop platform to attract and engage users and.
Across the spectrum.
And what Brent secret continued to lead the recovery, especially at the mid to high and segment.
Recent content exports such as our lifestream platform improved trip moment, and every day and user interface have all contributed to positive user engagement.
Our optimized information gets a play has helped hotel partners to improve conversion rate by 5%.
She now [noise] deliberate from multiple.
Milestones despite of the pandemic with a focus on providing quality product and services for travellers a budget.
I'm on this years and your users approximately 40%.
Our and a 25 and close to half from third tier cities and the young.
Millions of users book did their first flight tickets through Chinachem last year.
Reach and a five year high.
In addition, the one stop shopping nature of <unk> and also encompass content and the transaction [noise].
Led to a for the increase for user retention and conversion.
As for breaks out we saw a double digit improvement yeah, well cross sell ratio from our ear to hotel compared to the same period last year.
We are fully confident that our more copper and one stop platform will continue to drive for the customer and market share gains and the future.
Secondarily, we further enhanced our product competitiveness and.
Rich and domestic and boutique product such as seems chip and private tools.
Our customer and then shifted from large group tool because more other tools and from popular products to more customize the product.
We have also been for the promotion strategy and your stones true distant.
Many of these product have delivered high double digit growth compared to the last year.
With our white product coverage and a strong operational capability were able to target promote and connect to the product to our customers in the most accurate and efficient manner.
Thirdly, we continued to focus and supply chain empowerment.
We have opened up our service capability to our hotel partners. This year, who can then Iraq till they connect with our customers.
Our hotel partners are able to monitor their ROI of each campaign by using our system.
And to make informed decisions about their operations.
Moreover, I see true hotel University have produced more than 150 day free classes since the beginning of this year with over 1 million attendees for the hotel industry.
Deep integration and a close partnership has produced meaningful improvement in traffic and conversion for our hotel partners and ensure the Ais a high quality user experience for our customers.
In Q3, we maintained our leadership in domestic hotel coverage and school and.
For the double digit quarter over quarter growth and then number off the hotel that the Canadian that as debt preferred distributor.
Now turning to our international business.
Despite the ongoing pressure faced by all the international travel true.
Tactic to our Brent kept telecom has recovered to approximately 70% and the third quarter.
This was primarily driven by the domestic travel demand such as Staycation and the local travel.
Well Mitch to the challenging international environment.
Yeah for that to see many got done and have taken targeted and that meshes to revitalize.
The travel industry recently, we announced our cooperation with single for Tourism Board to launch their single pool Rediscover voucher sales.
Moreover, we have also been able to work with different trouble authorities globally on similar with I. Coke plants right.
Recent development team effective vaccine and the treatment for Corbett to 19 have been encouraging we.
We believe a global rollout will be crucial to support for the recovery you know what international and cross border business.
As James mentioned due to pandemic, we have opted to focus primarily on China domestic market. This year, However, our vision.
For long term global expansion remained the same.
We will work hard with our partners to well prepare ourselves for the global recovery.
With that I will turn the call over to Cindy.
Thanks, Jane Thanks, everyone for the third quarter of Twentytwenty script, I'll call group reported record revenue I and the 5.5 billion, representing a 48 per cent decrease from the same period.
2019, net revenue for the third quarter of Twentytwenty increased it by 73% from the previous quarter driven by a continued strong recovery of our China domestic business.
A combination reservation revenue for the third quarter of Twentytwenty, what I and the 2.5 billion, representing a 40% decrease from the same period, and 2019 and that 98% increase from the previous quarter sales.
Sequential increase of accommodation reservation revenue was mainly driven by the strong recovery and momentum of the elastic market.
Accommodation reservations for China domestic market reached a positive year over year growth from the second half of August was pricing down by other moderately from the same period last year short haul reservations grew by more than 20% year over year into.
National Hotel recovery remain minimal however, domestic bookings and brands took the call has seen strong growth momentum in the third quarter.
Transportation ticketing revenue for the third quarter of Twentytwenty, what's our and be 1.9 billion, representing a 49 per cent decrease from the same period and 29 team and 60 for 66% increase from the previous quarter.
The sequential increase of transportation ticketing revenue from the second quarter of Twentytwenty was mainly due to continued strong for recovery of domestic market.
Air ticketing business, what China domestic market reached a positive year over year growth for the quarter, although pricing remains debt is counted compared with last year.
Packaged tour revenue for the third quarter of Twentytwenty was RMB 326 million, representing an 80 per cent decrease from the same period and.
2019, and a 151% increase from.
From the previous quarter, the sequential increase of packaged tour revenue was mainly driven by China domestic cross ridge and package to product being pursued since July.
International package to products, a student not permitted to operate.
[noise] corporate travel revenue for the third quarter of Twentytwenty was RMB 282 million, representing a 16% decrease from the same period in 20, and 19 and a 74% increase from the previous quarter.
Revenue from other businesses declined by 31% year over year for the third quarter of Twentytwenty and increased the two per cent from the previous quarter day.
The year over year decline was mainly driven by a decline in overseas advertising revenue.
Gross margin was 81 per cent for the third quarter of Twentytwenty, which increased from 17 high per cent for the same share with a 2019 and 72 per cent for the previous quarter.
Excluding share based compensation charges total non-GAAP operating expenses decreased by 45% year over year. Thanks to all generally flexible cost structure and efficient operational management.
Total non-GAAP operating expenses increased by 25% caught her quarter over quarter in response to the improving domestic business sales and marketing expenses for.
For the third quarter of Twentytwenty decreased by 54% to RMB 1.1 billion from the same period, and 2019 and increased by 71% from the previous quarter debt.
<unk> increased from the second quarter is primarily driven by increased and marketing spending and domestic China market Act and meant rebounded strongly.
We may choose to increase marketing spending in coming quarters to stimulate for the growth as more and kit demand continues to recover.
Product development expenses for the second quarter of Twentytwenty decreased by 28% to eye and be 2 billion from the same period, and 29 too and increased by 11% from the previous quarter, primarily due to fluctuations in.
Expenses related to product development personnel [noise], a significant portion of the expenses can be considered area [noise].
[noise] general and edgy and they expenses for the third quarter of Twentytwenty decreased by 38% to our and be five or $5 million from the same period, and 2019 and decreased by 2% from the previous quarter.
[noise] day year over year that clearly wasn't mainly due to a reversal of bad debt provision for our travel suppliers.
Offset partially by personnel restricted and costs related to certain overseas subsidiaries it.
Excluding the factors mentioned above G and H expenses for the third quarter of Twentytwenty decreased and modestly from the same curate and 29 to it.
Excluding share based compensation charges.
No GAAP income from operations was RMB 1.3 billion non-GAAP operating margin reached a 24 per cent compared to 25% in the same period in 20, my team and negative 6% in the previous quarter.
By looted earning per 80, EPS was I and B 2.6 to six we want them all U.S. dollar so the eight cents for the third quarter of 2020.
Excluding share based compensation charges and fair value changes of equity securities investments and exchangeable senior notes non-GAAP diluted earning per 80, S. was a and B 2.3 to all U.S. dollar study for sense for this quarter of 22.
<unk>.
Now turning to the fourth quarter of Twentytwenty, we expect a sustained year over year recovery in China domestic business for our international business.
It continues to be under pressure due to the ongoing pandemic worldwide for.
For the fourth quarter off Twentytwenty call. Today currently expect natural avenues to decrease by 37% to 42 per cent yelled at year end.
Excluding share based compensation charges for the company expects non-GAAP operating income will be between RMB 300 million to RMB 400 million.
This for cost reflects trip they'll call group's current and preliminary view, which is subject to change the increasing uncertainties due to the colella virus outbreak has for their restricted our visibility we will continue to.
To monitor the market and provide more details to investors and time.
With that we will open up for Q and a operator please.
Thank you we will now begin the question and answer session open to sell side analysts and Mike. Please limit your question to one and rejoin the queue. If you have for other questions.
If you wish to ask a question. Please press star one on your telephone and wait for your name to be announced if you wish to cancel your request. Please press star two if.
If you're honest speakerphone, please pick up and sent to ask your question.
Our first question comes from delays Chu with Bank of America. Please go ahead.
Oh, Good morning, Jane Jane then Dnbi shell congrats on the solid quarter and thanks for taking my questions I have two questions first could you share for some reason Hans and Chinas domestic business recover.
And given the late and it's good news on the Caribbean My team that and when do you think the international tableau to start to recover and when it to fully recover and color.
[noise] [noise] and the domestic travel has mostly reach full recovery.
And as we shared earlier.
Domestic hotel and air booking simple turned positive growth since August.
And especially the high and.
Business and shuffle travel and recovered.
Well.
[noise] [noise] Ah International travel, especially all bump is this will remain low and the next few months.
And it just takes time for the vaccine to reach general.
Population.
And and full recovery of international travel Oh and take.
At least a year.
Year or even longer.
Oh considering [noise].
That oh it.
Just to be.
Uh huh.
What Titian open vaccine, but also a political and ER.
International arrangement so [noise].
Well and.
And and the Corporation.
From between a good.
And from government. So it takes a while for the and.
And our school community.
Too slowly.
Again embraces a the international travel so and it will definitely prepared.
Oh for the next Oh year or two.
I'll take full advantage of the true gradual book being steady recovery open international travel market.
Thank you.
Your next question comes from Jialong Shi with Nomura. Please go ahead.
Good morning, and management for taking my questions and congratulations on a very solid quarter and back in November and China. So far to you released a trough and kind of talk Scott line for the Internet platforms could you provide sun colors, all health and this new regulation will impact China's OTN and.
On Medscape and most specific told me help and shrink solution and will impact <unk> com's operation and the financials. Thank you.
And thank you for your question, we always support and governments initiatives to prepare to protect the market and so our team is working very hard to make sure Oh, the rules and regulations I kept for leased by date and and things like that.
Rules and regulations to be published and finally.
Thank you.
Your next question comes from Thomas Chong with Jefferies. Please go ahead.
Hi, Good morning, and claims management and Mike pressures.
Okay, and really coming up wise from and about a two day, Oh go up and Neil and my sentiment.
And then on my second question news about and how we should think about the competitive landscape.
Therapies, and this lower tier cities and.
Hi, and hotels and should be going to try to try and one thank you.
Sure the recovery El Salto Mastic GAAP business was just day to day or fourth quarter. Despite a weaker winter seasonality, we expect total revenue to decrease or day, 7% to 42% young there from Q4.
And in general we would at least back to a fully cover off domestic hotel and air ticketing and reservations.
Despite the unfavorable a winter seasonality.
And and in terms of revenue guidance for each other.
And the revenue items, we expect revenue for accommodation reservations to decreased 25% to study for Santiago and yet our China domestic hotel reservations achieved double digit GMB growth doing a golden week holiday and maintained positive yellen year growth.
Quarter to date.
And debt, especially our high and hotel and grow at a double digit.
Our coverage on the domestic hotel business.
Net significantly outperformed the industry average and especially in the mid to high and hotel segment.
While all other international hotel revenue remained at very low level compared to 20% to 25% for revenue contribution and fourth quarter last year.
And.
With regard to the transportation reservations, we it's back to revenues will decrease 47% to 52% young year, all domestic air ticket reservations achieved a double digit Yahya growth doing Dakota week holiday and to maintain positive yelling yeah.
Sales quarter to date.
And international business from a name and.
Compared to the same as the Ah Ah Hotel business, our international business remained at very low level compared to 40 to 50 per cent revenue contribution in fourth quarter last year.
No.
Oh, well, we it's back to revenue for packaged tour adjusted to decreased 55% to 60% he all year.
Domestic package tour business continued to recover gradually leading by the local activity and customize the tour packages International package tour business have not yet we started due to their travel restrictions and and international and the pandemic and why.
Which accounted for 40 to 50 per cent of total packaged tour revenue in fourth quarter last year.
We it's back to revenue for corporate travel business to decrease 50, 15, one five per cent to 20%.
[noise], Yeah and himself the competition and let's say adjusted net income <unk> for their official for a in terms from the product offering we want to make sure our product offering is comprehensive to provide the best product for high and you don't care and also.
Mark and so as James said wouldn't help the initiatives to where P. T to capitalize on the domestic market is to make sure. We go deep product offering secondarily on the supply chain and also a win not only focusing on the first tier second tier cities will also go.
And why either and more comprehensive to make sure and wherever our customers Oh, we have the product to come back and certainly as we discussed the pay for a when we look at a one new customer acquisition and the majority of our customer acquisition book has its own you.
And the young customers and not only are centered around at the first tier and second tier cities and also Gopi Ah Ah beef and 60 huh.
And intensify why sales and marketing strategy, not only where well exposed a in the first tier second tier cities. We also utilized our cross sell opportunities to further penetrate into that for care and to be young cities to reach out to call a customers and also Oh Wow.
Offline stores or more than eight south and offline stores are also located in the cities outside out for Chris and you stick and so tier cities, which gave us a very good exposure to for the recount <unk> to these markets, which is there and you too.
So going forward.
He will be very aggressive and in terms of extending product line sales channel and also our reach for our brand exposure. Thank you.
Your next question comes from Alex 10, with Morgan Stanley. Please go ahead.
Hi, Good morning, Thanks management for taking my question.
My first question is related to Youre for focus and 2021 on quality quantity and quality content product and supply chain.
We have to quantify these how should we think about the domestic revenue growth between 20, and 19 and 2021, considering there is also outbound demand returning to being converted into domestic demand and.
And my second question is related to your operating margin level and 2021.
And is it possible to maintain a 20% non-GAAP operating margin and 2021, whats Veloce <unk> outbound business and also considering the competition and some other cost savings could reverse and also and see a user acquisition news and acquisition strategy or not.
Only in Q1, two cities, but also lower tier cities. Thank you very much.
Thank you.
And with regard to the 2021 guidance.
Yes.
And due to the very short booking window, it's very difficult for us to provide a full guidance however, and the general picture would be a we believe there are still uncertainties as we get into the new year I'm, assuming that's probably and 19, a will still be under good control interest.
China and the <unk>, our domestic business shall sustain a that it would cover a trend and next year.
But the international travel environment at this moment is very challenging.
However, with the effective vaccine and the treatment for the COVID-19 on the way hopefully there will be some picking up on the international travel business toward the second half for starting from two other second half a day next year.
With regard to our margins and.
And I'll come play with stick to a very lean and efficient operations.
But at the same time are we all wish we strongly believe that continuously and given the huge market potential globally and the travel space, there's huge growth opportunities and so we and our first priority is to continuously and gaining market share.
And we will keep investing in the key business fundamentals ask James and Jane explained earlier for example, the product the technology as well and the service global service capabilities to make sure that we are in the best position to capture.
And the opportunities.
And in the travel market globally.
Adair for of course, we have.
Half, a very healthy margin and.
The target.
We are going to continuously to to.
To focus.
But gaining market share at this moment, we still think case have more important priority.
Thank you.
Your next question comes from 10 next to the T.H. capital LLC. Please go ahead.
Yeah, Good morning management kind of regulations on the quarter and so one thing is really about the although it's not near term, but rather a if we look out to 2000 and punch and one so all of that Chinese and people start to plan their international trip. So a one.
One thing you know haven't read some news about the church inquiries and asking notch shop several for its compared with net before so I wonder from and Youre a data you know how how would.
For you how do you see you know what do you see about that you know people and said you know enthusiasm about the traveling and in the middle or second half of next year.
How many people are start and she wants to plant you love their trip. So I'll, let you know that may maybe back and give us some some indication and about how you know how big other international travel recover it can be.
My question. Thank you.
Mm thick for your question of Crystal for for domestic travel Oh, we're quite confident because in Q3, I try not and that their recovery economically by delivering a for a percent kept plus GDP growth and flights I like Honda me is in a recovery and Chen and.
Last pik toggle they'll keep up a very healthy growth second to late and tend to come to was a we are hopeful that Eric other men to well put conflicts to exports to make sure. The vaccine is be injected and debt and the improvement and for the control I'll come back and then make a well.
The and improving and when we look at our search rates out on the international search and for our sites have already recovered to 100% and to year over year. So I think other people have been locking down a whipping the borders and the debt side to travel abroad.
And it's very strong however, we really need to make sure. It two things one is a health and this off the population is ascertained, so and to the vaccine is to take to many people well be careful to make sure wherever they travel and they're protected secondly.
Oh, so that scientists and these shouldn't make a consensus EPS true, when and where and quarantine and get to acquired for the countries that have demonstrated their ability to control and the.
And then Nick Day Route high hope for these countries to start with a couple bubble.
But tough for the countries that have not demonstrated their ability to control the pen and mix and customers who want to be very careful income south whether they travel into the region and also lastly, whether when they return to their home country and whether the player and T. as required if they'll come and.
He is required then again a lot of people would not have such a long time to stay at home. So all these factors and he should be taken into consideration when we really take people abroad, but so far and with the good news and signed sealed a waste the Gabon.
And concerted effort to.
Two content this virus and we're hopeful and to see a recovery gradually and or the way I think.
Thank you.
Your next question comes from James Lee with net debt of please go ahead.
Great. Thanks for taking my questions and my first question is for chain, maybe can you talk about from the government policy that you're saying.
They'll be driving.
Domestic travel demand and maybe international travel demand you seem to be pretty enthusiastic so book recently and for international travel less water and I was wondering if there's any update from.
From that perspective, and also for Cindy seems like the old <unk> guidance is loop and lower than what we've seen from the street consensus here and can you talk about maybe some of the investments that you plan to step up and for Q. Thanks.
Sure. Thank for your posture and let me address your question and to a part for so for what the massive China Ah I think for a couple represent 10% of the GDP growth and approximately a 10% off the job opportunity and so I will cover.
And is very supportive to revitalize the cable industry and policies and happy putting pace and and.
The domestic infrastructure.
Oh, so are there for people to travel a true not only for the top up popular most popular teletext nations, but also have lots from exploration and then you travel destinations, which is very good in the long range for domestic travel.
Secondly for international government and I think every commitment we have to talk to a very eager to receive Chinese tourists.
Because not only they bring a GAAP buying power into the region, but also it creates job opportunities and to local level. So every cobbled Bureau, we have worked with Oh, so there and much like to market a day, our country and for their popular travel destinations.
And recently, we launched a campaign with the Singapore government to rediscover a single pool, and Oh, we work with them and different initiatives to stimulate the interest.
And so that when the vaccine is ready and we will be able to promote to different destinations to address the increasing and demand for the Chinese outbound customers and so again, we are positive in terms of for working with the government run for the world.
And promote the travel destinations went the vaccine is ready when the safety and for our customers is ascertained. Thank you.
And for the second question.
[music].
The fourth quarter for is nominally a low season slow season for the travel industry, especially this year, we no discuss and cases and some of the cities, including major cities like Shanghai, which will also have some a negative.
The impact to our business in the fourth quarter.
And on the other hand, and starting from the second half off for US third quarter for a we notice very strong we bought and and nationally.
Led by the government, so as James and Jane explained and we will continuously to make investment in our core competency that to make sure that we are in the best position to capture the market growth opportunity.
Thank you.
Your next question comes from Brian Baum with Citi. Please go ahead.
Oh, good ammonia and management well congratulations on the solid results also for tickets look quite true. So [laughter] on other puts and book completion. We are also seeing some flow into the classroom book and the show and true some troubled products are being sold and larger accounts, which you know given sales, especially not specialization and home.
And still seem zone or the strides to OTI industry. Thank you.
Thanks for your question Oh with all these partners were very open to collaborate with other partners and ecosystem all for door Yankee a whole show our product is inserted in that product from us. So what do you see you have book he capability a lot of them if they try wet.
Hi, Tech and empowered by us and so again, a we want to make sure the quality of our product and the service off the product. It's the best in the industry and when customers see be a content whether on our site or whether it's in the other ecosystem they were.
Come back to trip outcome and make their resubmission because I was so this is the best in the industry.
Thank you.
[noise]. Your next question comes from Binnie Wong with HSBC. Please go ahead.
[noise], Hi, James Jane and Cindy and channel Congrats on a strong quarter and is it possible for your domestic business Oh can you share the structural cost savings. This each group has achieved this net and how these can be extended into future years and.
In other words eat every me equal the businesses and the industry recovery and how do you think like a margin and what other structural cost savings that can be locked and between 21 and <unk>.
I think if they need a in this quarter was the continued to recovery off our domestic business to.
We adjusted the spending across all the major expenses for that light and accordingly are there for our non-GAAP costs and operating expenses decreased to 47% year over year, Saks to our largely flexible cost and expenses structure and efficient.
Operating management.
Total non-GAAP costs and the operating expenses increased to 23% from the second quarter as a result of our recovery a customer they meant the non-GAAP sales and marketing expenses increased debt 75 per cent Q on Q and a.
Our domestic travel demand treats all and it and non-GAAP product development expenses increased to 12% Q on Q as our personnel.
And expenses normalized with the recovery, all domestic business and non-GAAP GE and they expenses decreased and 9% sequentially, mainly due to a decrease in our bad debt provision, which was partially offset by restructuring costs piece parts and subsidiary.
Going forward and as I explained before we owe it to achieve a very healthy margin definitely one of the key goes for for the management team. However, we see what do you see with a strong recovery and starting saw China domestic business, we still see a.
Huge growth opportunities.
Both domestic as well as international markets. So our top priority is to further and investment in our coal competencies and to.
To make sure that we'll capture the growth opportunity.
Thank you.
That does conclude the question and answer session I'll now hand back to Michelle cheap for closing remarks.
Thanks to everyone for joining us today, you can find and Trackways now webcast for today's call and investors. So true dotcom, we look forward to speaking with you all know for fourth quarter 2020, the earnings call. Thank you and have a good day. Thank you very much.
That does conclude our conference for today. Thank you for participating and May now disconnect.