Q2 2021 Trip.com Group Ltd Earnings Call
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Thanks.
[music].
Thank you for standing by and welcome to the trip Com Group 2021 Q2 earnings conference call.
All participants are in a listen the army marred there'll be a presentation followed by a question answer session. If you wish to ask a question here.
You will need to press the star key followed by the number one on your telephone keypad.
I'd now like to hand, the conference over to Michelle Qi.
Head of Investor Relations. Please go ahead.
Thank you.
Good morning, and welcome to trip Com Group 21.
<unk> Q2 earnings conference call.
Joining me today on the call are Mr. James Liang Executive Chairman of the Board, Jim Some Chief Executive Officer, and MS. Cindy Wang Chief Financial Officer.
During this call, we will discuss our future outlook and fulfillment.
Oh man, which are forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995.
Forward looking statements involve inherent risks and uncertainties.
As such our results may be materially different from the views expressed.
Yesterday.
A number of potential risks and uncertainties are outlined in trip Com group's public filings with the Securities and Exchange Commission.
They'll come group does not undertake any obligation to update any forward looking statements, except as required under applicable law.
Jim Jim and Cindy will share our strategy and business update operating highlights and financial performance for the second quarter of 2021.
Well as some of the color for the third quarter of 2021.
After the prepared remarks, we will have a Q&A session.
With that I will turn the call over to Jim.
James Please.
Thank you Michelle Thank you everyone for joining us.
And speaking.
Yeah.
This quarter.
Witnessed a strong recovery momentum.
Demand unleashed.
Patient.
Yes.
All right.
And the temporary impact of Covid.
Our activities in the country continue alone.
Victory.
Vaccination rates in China is still ramping up.
Hey, Dan.
Chinese citizens.
As of March vaccinated population.
A more stable.
Okay.
During the quarter.
We continue to.
Thanks to the Chinese domestic market.
Okay.
So domestic travelers.
Okay.
This progress is a major focus area.
Yes.
Service technology and supply chain.
James will share more details.
Thanks Chip.
Okay.
We embraced the recent regulatory changes and domestic.
The markets as we believe they will taper.
Competition and promote innovation in the industry.
Foster a sustainable market.
Thanks.
Okay.
Benefits from the organized and regulated.
Violence to cultivate our growth efficiently.
Amanda over the past 22 years.
We proactively communicated with.
So are these not abide by the rules.
The new regulation will benefit all players in the industry.
Okay.
Pledged to get back more to the society to heat the government's call comment.
Prosperity.
Over the past quarter, we launched a five year rule revitalization initiative to boost the local tourism and support low income communities.
An initiative aimed at building 10 country with sheets, a five star hotel quantity.
Barring.
100 rural villages and training.
<unk>.
Tourism talents for the industry.
He believes in rural Tourism is a golden key open the door to rural revitalization.
Sure.
Sure.
Retreats low sales.
Example, a benchmark for future development of rural tourism.
As well as attracting younger generations to returns and to create social values.
Tom.
On the international fronts. Many countries also.
Physician towards normalcy.
As we see right vaccination rates and more favorable policies in place.
Sure.
Facilitate travel.
Travel and tourism is getting back on track.
We have established a leading position in the Asia Pacific market with strong China outbound travel in the past years.
Following a local focus global vision strategy, we have continued to strengthen.
Product.
Europe over the past few years.
On top of strong stewardship.
Yes.
The Asian markets.
Besides of air ticket booking markets in Europe, it's close to that.
Asia.
Pacific <unk>.
Yes.
About 60% of <unk>.
With our strategic layoffs in both Asia Pacific and Europe, we see lot of potential in the global air ticket booking market.
Right.
Yeah.
On book.
And the domestic development such a beautiful.
What's your strategy.
Sure.
Group.
In the face of pandemic Jonathan.
So going forward, we will continue to be adaptive and responsive.
And market condition.
A little bit demand, so post pandemic countless.
As we have mentioned in the previous quarters, we will continue.
To leverage our content to inspire travelers and to leverage our supply chain to provide users with most appealing product choices.
All of these offerings are backed by our crew.
Product capabilities and service quality.
It is our mission to bring forth the most enjoyable experience.
You can see the value.
As we exceed the needs and demands of a car.
Our service.
With that I'll turn the call over to Jane for operating highlights.
Thanks, James Good morning, everyone I would like to start with a brief overview of our performance in the past quarter and update.
Our strategic focus is Chris.
First overall performance over in.
In the second quarter, our total net revenue increased by 86% year over year, and 43% quarter over quarter, driven by strong recovery momentum of China domestic market.
Despite a regional resurgence of Covid cases in Guangdong.
Domestic revenue increased by 80% year over year and has surpassed the pre COVID-19.2019 level.
Both our domestic hotel and air ticket to GMB increased by about.
About 150% year over year.
And the bookings increased by double digits, when we compared with the.
The same period pre COVID-19 in 2019.
Notwithstanding the effect of Guangdong cases in June the rest of the country with largely.
Affect it.
It has demonstrated a strong growth momentum.
Domestic hotel and air ticket booking in non Guangdong area.
For approximately 30% compared to the same period in pre Covid 2019.
Our corporate travel.
Management business and other revenue also continued to right on the.
Great.
Grew by double digits compared to the same periods pre COVID-19 in 2019.
As we further penetrate it.
The second tier cities, we are glad to see.
Total hotel bookings, our Ctrip platform increased significantly growing by more than 50% in Q2, when we compared to the same period in 2019.
Vacation travel continues to serve as a major driver for domestic recovery.
With local hotel booking growing nearly 80% versus pre COVID-19 in 2019.
And the cross selling ratio from transportation to a hotel also improved by more than 20% versus pre Covid 2019.
Second.
Second our magic major focus on domestic market.
Throughout the second quarter, we continued to stick with our focus on domestic market in terms of supply chain content capabilities service quality and technology advancement.
In order to lay out a solid foundation for new growth dry drivers beyond the pandemic.
First on supply chain.
We scaled up our support for our suppliers by providing lighting technology supporting the trainees for hoteliers to support.
Enhancing their revenue management market effectiveness and many other aspects. We also consistently invest in developing new products and services to empower suppliers to better capture evolving customer needs.
For example, our dual.
Dual membership program with airlines create value for both sides by rewarding customers for their loyalty and extending the airlines customer space. We also cooperated with domestic Chinese airport to improve the efficiency.
C of connecting flights many of them have seen significant year over year growth in passenger traffic.
Second in terms of the content, we're making good progress in our content strategy has begun to bear fruit.
In Q2 the quality.
The quantity of the content published on our platform nearly doubled and the number of the influences on our platform increased by approximately 50% when compared to Q1.
User engagement also improved.
This quarter with more than 35% of our unique visitors accessing.
Content platform and spending more time on our multimedia offerings.
New users have shown a high level of engagement with our content platform.
Our content to transaction conversion rate.
Also.
On the rise this quarter, we continued to reinforce our infrastructure and output of our first class live streaming and promotion capabilities for travel industry, we're glad to have.
To see the top players on our style hub benefits from the rewarding conversion rates.
We also.
Continuing to extend the startup upon a base to empower more market players.
We continue to invest.
In the service quality and technology, we enhanced our service reliability and.
Price transparency.
We also have consistently invested in our R&D capabilities and continue to improve operating efficiency.
We can now handle booking changes.
Inquiries much more efficiently.
MIT the resurgence of the domestic Covid cases in August.
So where the reservation were cancelled on trip Com group platforms.
Close to our 'twenty 'twenty level during the first wave of the outbreak.
Yet.
<unk> of the phone calls handled by real person operatives has decreased by 50%.
The number of the customers waiting in the line for core pickup also shrunk by 90%, which are empowered by our investment in technology.
On the international front, our global brands have enhanced our collaboration in terms of the supply chain and technology capabilities to generate strong synergy in order to better capture the recovery trends in the global market.
We are glad to see.
<unk> that our brands in Europe show strong showed a strong and continuing sequential improvement in the air ticket booking over the past few months.
With several countries, such as Germany, France, and Italy already surpassing.
The comparative 2019 level.
Chip Dot com become the first OTA to offer.
Euro a rail and into real train passes which are very popular among millennials and generation Z travelers in Europe. It.
It is a great opportunity to tap into these markets as we further our contribution to the global travel recovery.
Regarding the recent regulatory changes, we fully support and abide by new policies and guidelines as they aim at first.
History.
Sustainable digital ink.
Economy in the long run.
Over the past two decades.
We have grown in the healthy and organize the market environment.
Digitalization continues to drive industry.
Evolution today, we're all digitally connected and the boundaries between online and offline engagement, becoming blurred.
The whole travel industry has witnessed with a rising wave of online and offline integration.
Digital transformation is further accelerated by the pandemic.
In 2019 chip Dot Com group also kicked.
<unk> Dot Com group only accounted for nearly 13, 7% of market share of China domestic travel.
Market and still has ample room to grow as Chinese economy grows.
We anticipate to see or players to thrive in the market with fair and transparent.
Guidelines of the new regulation.
In terms of our rural revitalization initiatives, our first three trip Com group country retreats in <unk> Province, Henan Province, and Hunan Province.
Already opened for business.
Large majority.
All of the employees of decent retreats come from the local areas and are receiving professional trainings and enjoy a higher than average salary from a local standard.
By holding the local people skills and improving their livelihood, we hope.
To narrow the gap between the poor and of which we look forward to leading by example, and encouraging more industry players to enjoyed the development of rural tourism and leverage Rouleau revitalization.
Amidst the height.
Of pandemic chip Dot Com group made significant efforts to support the supply chain and voice to the recovery of our travel industry, we facilitate the guarantee cancellations and cover losses.
Our customers in order to protect.
The best interest.
And also financial assistance to support our business partners during a very challenging period.
As of August 2021 trip Com Group has also donated three millions medical masks.
And hundreds of oxygen concentrators to more than 25 countries and the regions around the world battling Covid, we hope to inspire more companies to contribute to the common prosperity of the society.
And so in an industry leader will take home more responsibility to take care of our customers our partners and our employees.
There have been and will continue to be challenges along the way, but we're always in Denver.
Two.
Maximize our social impact why increasing our company's value.
We will keep on improving as we strive towards our ideals.
With that I will now turn the call over to Cindy.
Thanks Jay.
Everyone.
For the second quarter of 2021 chip, Hong who reported net revenue of RMB, five 9 billion, representing an 86% increase year over year, and 43% increase quarter over quarter.
Primarily.
Due to our strong recovery momentum.
The domestic market.
Despite regional and temporary impact of the pandemic and travel restrictions in the Guangdong Province.
Accommodation reservation revenue for the second quarter of 2021 was RMB one.
A $7.0 billion.
Representing a 96% increase year over year, and up 55% increase quarter over quarter.
Recovering 272% of the 2019 level.
This was from mainly due to the stronger.
<unk> release of panic domestic travel demand following the lifting of restrictions.
Despite regional call the outbreaks hotel booking in the domestic China.
Also saw double digit growth when compared with the same period in 2019.
Transportation ticketing revenue for the second quarter of 2021 was RMB two 1 billion.
Resenting, an 80% increase year over year.
37% increase quarter over quarter.
Recovery, 261%.
2019 level.
Among which domestic air ticket booking revenue doubled year over year and increased by double digits when compared to the same period in 2019.
Packaged tour revenue for the second quarter of 2021.
RMB $367 million, representing a 182% increase year over year, and 117% increase quarter over quarter.
Recovering to 35% after 2019 level.
This was contributed.
It by a modest recovery of the domestic China market.
Domestic attraction ticketing booking tripled year over year and nearly doubled when compared to the same period in 2019.
Corporate travel revenue for the second quarter of 2021.
<unk> was RMB $390 million.
Presenting a 141% increase year over year and 55% increase.
<unk> over quarter.
This segment continues to gain momentum with revenue growth growing.
By 26% when compared to the same period in 2019.
Mainly driven by strong growth of accommodation bookings.
Revenues for our other business for the second quarter of 2021 was RMB $614 million.
Representing a 33% increase year over year, and 2% increase Q on Q.
<unk> and increasing of 17%.
When compared to the same period in 2019.
This is mainly contributed by rapid growth in our travel.
Financing services and domestic advertising business.
Gross margin was 79% for the second quarter of 2021, increasing from 75% in the previous quarter, mainly driven by strong top line recovery and improved operation.
Operating efficiency.
Excluding share based compensation charges, our adjusted operating expenses decreased by 22.
23% compared to the same period in 2019.
Adjusted product development expenses for the second.
Second quarter stayed approximately the same in the previous quarter and achieved the savings offset the 16%.
Compared to the same period in 2019, as we continue to run lean and maintain a stable headcount in product development personnel.
Adjusted selling and marketing expenses for the second quarter increased by 47% from the previous quarter, primarily due to the increase in expenses related to sales and marketing promotion activity in response to increase the travel demand in this quarter.
This reflects.
Savings of 34% when compared to the same periods in 2019, as we follow more prudent spending protocols.
[noise] adjusted.
G&A expenses for the second quarter state approach.
Basically the same.
As in the previous quarter and increased by 77% year over year.
I'm not really due to a reversal of bad debt provision in the second quarter of 2024, the company's travel suppliers.
Kelly as a savings of 16% when compared.
To the same period in 2019.
Adjusted EBITDA for the second quarter was RMB $916 million compared to RMB negative $216 million in the previous quarter.
Adjusted EBITDA margin was 16% for the second quarter compared to a negative 5% in the previous quarter.
Diluted loss per ordinary share and per ads were.
Were RMB 1.0.
Go to our U S dollars 16 for the second quarter.
Excluding share based compensation charges and fair value changes of equity security investments and exchangeable senior notes non-GAAP diluted earnings per ordinary share and per ads was.
Was RMB 113 or U S dollar.
<unk> for the second quarter.
As of June 2012 June 32021, the balance of cash and cash equivalents restricted cash.
Short term investments held to maturity time deposit and financial products was RMB 17, 5 billion or U S. Dollar.
12 billion.
Turning to the third quarter of 2021, we would like to share some.
Recent colors of our businesses.
The growth momentum of the China domestic market continues to carryover to July, especially for regional and local travel.
Domestic hotel bookings have grown by more than 20% and domestic air revenue.
<unk> has grown by double digits when compared to 2019.
S Cross province travel was disrupted in August.
Domestic China hotel occupancy rate and air ticket booking decreased by more than 50% compared to the same period.
In 2019.
Local staycation travel was less affected and our local hotel reservations maintained about 30% growth comp.
Paired with 2019.
During September the Covid situation was generally under control.
In most parts of China and domestic situation is gradually recovery.
In a past mid autumn festival, although lasted hotel reservations reached the double digit growth compared to the same period.
In 2019, and domestic air ticket business.
We're on track to fully recovery.
Due to uncertainties over changing COVID-19 related travel restrictions.
Travel booking window has shaped.
And travel radius has shortened significantly.
We expect to see more travel booking or national Han.
In the following weeks.
On the other hand, while outbound travel is still muted.
Europe and the U S market.
Seeing a significant improvement and our global brand starts to recover sequentially.
Yeah.
During challenging times.
Today, we'll be adaptive and responsive to the changing market conditions.
Try to grow our market share why continue to maintain a lean operation.
With that operator, please open the line for questions.
Thank you.
I wish to ask a question.
Please press star one on your telephone and wait for your name to be announced if.
If you wish to cancel your request. Please press star two if you're on a speaker phone. Please pick up the handset to ask your question.
We ask that you limit your questions to one per person if you wish to ask.
Our questions. Please free joined the queue.
Your first question comes from Ronald Keung of Goldman Sachs. Please go ahead.
Thank you. Thank you James Jane Cindy and Michelle Ma.
My question is more on the international recovery just wondering here what is our strategy for Internet.
But particularly how we see it.
Probably trajectory, especially for pure international that you've shared some encouraging signs for Skyscanner and I believe for Dot Com and then how we think about the outbound which at this point has been slower than the pure international just wanted to know strategy that thank you.
Nationals.
Yes.
Thanks Lucas.
China domestic travel.
Okay.
Great.
Despite short term COVID-19 interruptions.
We believe the continuing great and domestic markets gradually.
Yeah.
Travel.
Thanks.
Right.
Travel restrictions.
These markets are the same promising recovery.
Overseas brands, such as Skyscanner and trip Com <unk>.
Sequential improvement in recent week, Europe, and APAC together accounts for about 60.
Yeah.
Got it.
Yes.
<unk>.
Potential.
This is Matt.
Yeah.
Domestic China.
Yes.
Okay.
Brands will continue to upgrade products and services offering.
To strengthen our competitiveness and European markets.
This will enable us to gain additional market share.
Solid foundation for sustainable growth beyond Covid.
In the long run.
But the vaccination rates continue to rise globally.
Evidence and the resumption of international.
<unk>.
And at this time.
Yes.
Okay.
In terms of price product service.
These users.
The best positioned to capture.
Thank you.
Sure.
<unk>.
Thank you Jim Thank you.
Thank you. Your next question comes from Alex Yao of J P. Morgan. Please go ahead.
Oh.
Thank you management I have a couple of questions on the content operation how do you guys in.
The content ecosystem.
And what's the progress on our pricing power.
Hum operation. Thank you.
Thank you Eric.
We have been making quite good progress on our Cogs.
That ecosystem development.
Following.
<unk> suite strategy right, we have further enrich the content offerings on our platform.
Our total content okay.
Second quarter.
Nearly doubled compared with the previous quarter.
And the number of sites and Kols also.
In all free and nearly 50% sequentially in the second quarter and the second we are encouraged to see better user engagement through a content platform.
For example in the second quarter, we are glad to see an average of 35% of our app unique visitors.
Auto immune content related channels with the peaks that has reached over 40% during the holiday.
Meanwhile, our diverse content format are gaining increasing traction from new users.
The third and third our contextual transaction conversions with.
Life as we continue to improve infrastructure development.
We're happy to see that over 180, leading travel business has signed up travel stop at.
<unk> channel.
<unk>, which is our new travel marketing hub launched.
On the April.
Top.
Players have seen their conversion rate improving.
As we are the leading travel transaction platform in China, and many of our users have already got strong travel desire and Glen when they come to our platform.
Our strong product development capabilities make content to transaction conversion more easier and frictionless.
We have built.
Technology and product team for our content strategy, which were mainly leveraging our existing infrastructure and we.
Carefully evaluate future investment for the long term for this long term opportunity. Thank you.
Thank you. Your next question comes from Alex Poon of Morgan Stanley. Please go ahead.
Thank you management.
For taking my question My question is regarding our margins.
Can the management.
Down the non-GAAP operating margin of 11, 7% in second quarter into China business, Skyscanner and trip dotcom separately.
Assuming our China business.
Management revenue stays around the same level, Ken I'll, China margin continued to improve on the same revenue level and for Skyscanner at what level of revenue of 2019 level.
Skinner margin can go back to 20% margin level in 2019.
Thank you Alex.
With regards to the margin.
We think we are we still we are still targeting a very healthy 20% to 30% normalized margin level.
But at the second quarter for the domestic travel.
Our business is almost fully recovered. So we have already maintained a very healthy margin for the domestic business while for the international parts for example, skyscanner.
As it is.
They are still suffering some losses.
But as we already see some.
Pent up demand and the normalized.
Travel demand, especially starting from Europe and U S market.
We've already seen very healthy sequential increase.
Fourth our international business.
I think as long as the travel demand will recover gradually recover our international business, including Skyscanner.
Well going back to a normalized margin level. Thank you.
Yeah.
Thank you your next question.
Comes from Thomas Chong of Jefferies. Please go ahead.
Hi.
Good morning, Thanks management for taking my questions I have a question regarding the hotel business management.
Management comments about.
The competitive landscape.
In the lower tier cities and how we should think about.
The overseas accommodation as well.
In the second half any qualitative color would be great. Thank you.
Yes for the hotel platform.
Gabe.
We further penetrate into the second tier and lower tier cities. Many of the contributors to work well together our transportation business also cross sell into our lower tier cities are very significantly the cross sell ratio during December.
Boom here has increased compared to pre COVID-19 levels.
By 20%, we also have seen a generation see how to use our product to significantly coming from Oh, the cities around China into the overseas hotels.
This is a waste of recovery in Europe, and United States, We have seen the vaccination rate also increases and recently our U S.
We have announced to open to many of the European countries and with that our air transportation business.
Tell it will further.
Increased volume, which will also help us to lift our sales for overall products.
Wow competitiveness E are providing the comprehensive product offerings as well as a high service level with.
This unit usage or enable us to gain market share in the growing market overseas.
Thank you.
Thank you. Your next question comes from U N Zhang of height hung International. Please go ahead.
Thanks.
With James James Santana Michele for taking my question. My question is regarding the regulation could you share with us any thoughts on everything that's kind of environment and any potential regulatory pressure through your sector or another company for example, our collaboration with hotels.
Right and your cross sell rates et cetera. Thank you.
Thanks.
Okay.
We believe the tightened regulations will bring positive impact to the.
Internet industry.
Actually in the long run in terms of the bidding males practices.
Intelligent innovation and fostering a sustainable and.
The environment.
Picked up call group has a long battery status and organized and a regulated environment to cultivate our own growth and efficient manner in the past 22 years.
We strongly support the proposed regulation in the market, which.
<unk>.
We will then which will eventually create value too.
To order to all the stakeholders.
In terms of the different potential regulation with at this moment, we are not considered to.
It was indeed, a significant impact to our <unk> business practices.
And going forward, we will continuously to follow all the rules and regulations are in both domestic China as well as for the international market. Thank you.
Thank you. Your next question comes from Brian Gong of Citi. Please go ahead.
Yes, Thanks management for taking my question. So my question is about the competitive landscape.
Recent regulatory change and there's some regional.
Potential cases.
You'll see any material change on competitive landscape.
Any behavioral change for our key competitor. Thank you.
Mhm.
Yeah, I think we fully support the New War center regulation as Sandy said.
So our company has grown in the past two decades in a very healthy and the regulated environment and going forward. We believe the new policy and the regulation will will further fostering a very healthy growth in the industry. So I think everyone is just stunning.
All these rules and regulation very carefully and we believe in the new environment that will enable everyone to operate in a very transparent and fair.
Environment, which we had confidence in thank you.
Thank you. Thank you.
There are further questions at this time I'll now hand, it back to Michelle Qi for closing remarks.
Thank you thanks, everyone for joining US today, you can find the transcript and webcast of today's call on Investor <unk> Com, We look forward to speaking with you on the third.
2021 earnings call. Thank you and have a good day. Thank you.
Thank you.
That does conclude our conference for today. Thank you for participating you may now disconnect.
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Thank you for standing by and welcome to the trip Com Group 2021, Q2 earnings Conference call.
All participants are in a listen the.
<unk> Mart there'll be a presentation followed by a question answer session.
If you wish to ask a question you will need to press the star key followed by the number one on your telephone keypad.
I would now like to hand, the conference over to Michelle Qi.
Head of Investor Relations. Please go ahead.
Thank you. Thank you all good morning, and welcome to trip Com Group 2021, Q2 earnings Conference call. Joining me today on the call are Mr. James Liang Executive Chairman of the board.
Jim <unk>, Chief Executive Officer, and MS. Cindy Wang.
Chief Financial Officer.
During this call, we will discuss our future outlook and fulfillment, which are forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995.
Forward looking statements involve inherent risks and uncertainties.
Certainties.
As such our results may be materially different from the views expressed today.
A number of potential risks and uncertainties are outlined in chip dotcoms groups.
<unk> filings with Securities and Exchange Commission.
They'll come group does not undertake any.
Any obligation to update any forward looking statements, except as required under applicable law.
Jim Jim and Cindy will share our strategy and business update operating highlights and financial performance for the second quarter of 2021 as well as some other color.
For the third quarter of 2021.
After the prepared remarks, we will have a Q&A session.
With that I will turn the call over to Jim.
James Please.
Thank you Michelle Thank you everyone for joining us today.
And speaking of China.
Okay.
Got it.
We have witnessed.
So very good momentum.
Demand unleashed following the relaxation of travel restrictions.
Despite the.
A temporary impact of Covid.
And then what kind of activities.
Mackenzie continue alone.
Victory.
Explanation rage in China is still ramping up more than a billion Chinese citizens.
The effects of changes in the law.
Vaccinated population.
Thank you.
Thanks.
Thanks, guys.
Okay.
Okay.
Yes.
We continue.
Thanks to the Chinese domestic market.
And demands.
All of us.
This progress is a major focus area.
Product and service technology.
Thanks Shannon.
Sure.
Sure.
Thanks Chip.
We're delighted to be embraced the recent regulatory changes.
Domestic market as we believe they will favor fair competition and promote innovation in the industry.
Yes.
Yes.
Okay.
Thanks.
Okay.
Income group has not benefited from the organized and regulated.
<unk> to cultivate outgrowth and efficient Amanda over the past 22 years.
Collectively it communicates.
And abide by the rules.
We believe the new regulation will benefit all players.
Players and industry.
Just to get back more to the societies to keep the government's call common prosperity.
Over the past quarter, we launched a five year revitalization initiative.
Boost the local tourism and support low income communities.
And in Asia.
It is.
Moving to the country repeats of five star hotels quantity.
Sorry.
100 rural villages and training.
Tourism talents for the industry.
I believe your real tourism is a golden key open the door to.
Rural revitalization.
Yes.
<unk>.
Which feeds low sales as an example, a benchmark for future development of rural tourism.
As well as integrity.
James returns.
Your guidance.
Tom.
On the international crisis many countries.
Oh, sorry.
In addition to what.
Its normal state.
Thank you Ray.
Favorable policies in place.
Good.
Facilitate travel.
Travel and tourism.
<unk>.
We have established a leading position in the Asia Pacific market with strong China outbound travel in the past years.
Following a local focus global vision strategy, we have continued to strengthen our product competitiveness.
The Europe over the past few years.
On top of strong synergies.
Kip.
So the Asian markets.
Besides of air tickets for key markets in Europe is close to that.
Yes.
Okay.
Hello.
Thanks.
Hello.
Strategically in both Asia Pacific and Europe, we see a lot of potential in the global air ticket booking market.
Okay.
On bulk globalization and the domestic development such a beautiful.
Well Fortunately outcomes.
But in the face of academic cabinet.
Going forward, we will continue to be adaptive and responsive.
Market condition.
Well the demand so post pandemic countless.
As we have mentioned in the previous quarters, we will continue to leverage our content.
And to leverage our supply chain to provide users with the most appealing product choices.
All of these offerings are backed by our <unk>.
<unk>.
And they look capabilities and service quality.
It is our mission to be the most enjoyable experience.
You can see the value as we exceed the needs and demands of our.
Customer of us.
With that I'll turn the call over to Jay operate them highlights.
Thanks, Tim good.
Everyone I would like to start with a brief overview of our performance in the past quarter and update on our strategic focuses for.
First overall performance overview in.
In the second quarter, our total net revenue increased by 86% year over year.
Morning, 43% quarter over quarter, driven by strong recovery momentum of China domestic market.
Spike original resurgence of Covid cases in Guangdong.
Domestic revenue increased by 80% year over year and has surpassed the pre COVID-19.
And 2019 level.
Both our domestic hotel and air ticket to <unk> increased by about 150% year over year.
<unk> bookings increased by double digits, when we compared with the.
The same period pre COVID-19 in 2019.
Notwithstanding the effect of Guangdong cases in June the rest of the country was largely affected and have demonstrated a strong growth momentum.
<unk> hotel and air ticket booking in non Guangdong areas well up for approximately 30.
Compared to the same period in pre Covid 2019.
Our corporate travel management business and the other revenue also continued to right on the.
Great.
Grew by double digits compared to the same periods pre COVID-19 in 2019.
As we further penetrate it does.
The second tier cities, we are glad to see total hotel bookings.
Our ctrip platform increased significantly growing by more than 50% in Q2, when we compared to the same period in 2019.
Staycation travel continues to serve as a major driver for domestic recovery with local hotel bookings growing nearly 80%.
Versus pre Covid in 2019.
And the cross selling ratio from transportation to a hotel also improved.
By more than 20% versus pre Covid 2019.
Second our magic major focus on domestic market.
Throughout the second quarter, we continued to stick with our focus on domestic market in terms of supply chain.
Roof to content capabilities service quality and technology advancement.
Order to lay out a solid foundation for new growth drivers.
Drivers beyond the pandemic.
First on supply chain.
We scaled up our.
Support for our supply.
By providing lighting technology supporting the trainees tailors to support enhancing their revenue management market effectiveness and many other aspects.
We also consistently invest in developing new products and services to empower suppliers.
To better capture evolving customer needs.
Our dual membership program with airlines create value for both sites bye.
Rewarding customers for their loyalty and expanding to airlines customer space.
We also.
Years rated with domestic Chinese airport to improve the efficiency of connecting flights many of them have seen significant year over year growth in passenger traffic.
Second in terms of the content, we're making good progress and our content.
<unk> strategy has begun to bear fruit.
Q2, the quality the quantity of the cockpit published our platform nearly doubled.
And the number of the influences on our platform increased by approximately 50% when.
Tend to church to Q1.
User engagement also improved this quarter with more than 45% of our unique visitors accessing.
The content platform and spending more time on our multi media offerings.
New users.
Income pills, a high level of engagement with our content platform.
Our content to transaction conversion rate with also.
On the right. This quarter, we continued to reinforce our infrastructure and output.
Our first class life.
<unk> and promotion capabilities for travel industry.
We're glad to have.
To see the top players unless the hub benefits from the rewarding conversion rates.
We also.
Continue to extend the startup upon a base to empower.
<unk> market players.
We continue to invest in the service quality and technology.
<unk> enhanced our service reliability and price.
Price transparency.
We also have consistently invest at our R&D capabilities and continue.
We'll have more to improve operating efficiency, we can now handle bookings.
Changes.
Inquiries much more efficiently.
Omit the resurgence of the domestic Covid cases in August millions, rather reservation were cancelled on trip Com group platforms.
Continuous close to our 'twenty 'twenty level during the first wave of the outbreak.
Yet the amount of the phone calls handled by real person upper tests has decreased by 50%.
A number of the customers waiting in the line for core pickup also shrink.
By 90% weaker empowered by our investment in technology.
On the international front, our global brands has enhanced our collaboration in terms of the supply chain and technology capabilities to generate.
Synergy in order to better capture the recovery trend in the global market.
We are glad to see that our brands in Europe show strong showed a strong and continuing sequential improvement in the air ticket booking over the past few months.
Strong with several countries, such as Germany, France, and Italy already surpassing the comparative 2019 level.
Chip Dot com become the first OTA to offer.
Euro a rail and into real train passes.
Which are very popular among millennials and generation Z travelers in Europe.
It is a great opportunity to tap into these markets as we further our contribution to the global travel recovery.
Regarding the recent regulatory changes with.
Display support and abide by new policies and guidelines as they aim at first tree.
Sustainable digital.
Our economy in the long run.
Over the past two decades.
We have grown in the healthy and organized the market.
With Ford in Ireland.
Digitalization continues to drive industry.
Lucian today, we're all digitally connected and the boundaries between online and offline engagement are becoming blurred.
The whole travel industry has.
<unk> interest with a rising wave of online and offline integration.
Digital transformation is further accelerated by the pandemic in.
In 2019 trip Com group also kept.
Kept all Com group only accounted.
Which for nearly 13, 7% of market share of China domestic travel market and still has ample room to grow as Chinese economy grows.
We anticipate to see our players to thrive in the market with fear.
And transparent our guidelines of the new regulation.
In terms of our rural revitalization initiatives, our first three trip Com group country retreats in <unk> Province, Henan Province, and Hunan.
Probably.
<unk> already opened for business.
Large majority of the employees of decent cheats come from the local areas and are receiving professional trainings and enjoy a higher than average salary.
From a local standard.
And by holding the local people skills and improving their livelihood, we hope to narrow the gap between the poor and of which we look forward to leading by example, and encouraging more industry players to enjoyed the development of rural tourism.
Average rouleau revitalization.
Amidst the height of pandemic chip Dotcom Coupe made significant efforts to support the supply chain and boys to the recovery of our travel industry with specific take the guarantee cancellation.
And the cover losses for our customers in order to protect the best interest.
And also financial assistance to support our business partners during a very challenging period.
As of August 2021.
Chip Dot Com group has also donated three millions medical masks and hundreds of oxygen concentrators to more than 25 countries and the regions around the world that truly COVID-19, we hope to inspire more companies.
To contribute to the common prosperity of the society.
And so in the industry leader will take com more responsibility to take care of our customers our partners and our employees.
There have been and will continue.
Challenges along the way, but we're always in Denver.
To maximize our social impact why increasing our company's value.
It was a key point improving as we strive towards our ideals.
With that I will now turn.
Two people over to Cindy.
Thanks, Jay Good morning, everyone for the second quarter of 2021 Chip on group reported net revenue of RMB, five 9 billion, representing an 86% increase year over year.
Year, and 43% increase quarter over quarter.
Primarily due to a strong recovery momentum of the China domestic market is.
Despite regional and temporary impact of the pandemic and travel restrictions in the Guangdong Province.
Okay.
Turning to Quito reservation revenue for the second quarter of 2021 was RMB two 5 billion.
Representing a 96% increase year over year, and up 55% increase quarter over quarter recover.
Recovering 272%.
Comedy <unk> 19 level.
This was from mainly due to the strong release of panic in domestic travel demand following the lifting of restrictions.
Despite regional call the outbreaks hotel booking in the domestic China.
Awesome.
The double digit growth when compared with the same period in 2019.
Transportation ticketing revenue for the second quarter of 2021 was RMB two 1 billion.
Representing an 80% increase year over year and 37.
Small increase quarter over quarter.
Recovery, 261% of 2019 level.
Among which domestic air ticket booking revenue doubled year over year and increased by double digits when compared to the same period in 2019.
Perfect.
Packaged tour revenue for the second quarter of 2021, RMB $367 million, representing a 182% increase year over year, and 117% increase quarter over quarter.
<unk> covering to 35% of the 2019 level.
This was contributed by a modest recovery of the domestic China market.
Domestic attraction ticketing booking tripled year over year and nearly doubled when compared to the same period.
Like lumpy 19th.
Corporate travel revenue for the second quarter of 2021 was RMB $390 million.
Presenting a 141% increase year over year and 55% increase.
Over the quarter.
In this segment continues to gain momentum with revenue growth growing by 26% when compared to the same period in 2019.
Mainly driven by strong growth of accommodation booking.
Revenues for our other business for the.
Third quarter of 2020, what was RMB $614 million, representing a 33% increase year over year, and 2% increase Q O Q.
Joey and increasing of 17%.
When compared to the same periods in 2000.
Secondly.
This is mainly contributed by rapid growth in our travel financing services and domestic advertising business.
Gross margin was 79% for the second quarter of 2021, increasing from 75%.
My previous quarter, mainly driven by strong top line recovery and improved operating efficiency.
Excluding share based compensation charges, our adjusted operating expenses decreased by 22.
23% compared to the same period.
In the 2019.
Product development expenses for the second quarter stayed approximately the same.
Previous quarter.
Keep the savings offset a 16% when compared to the same period in 2019, as we continue to run lean.
Maintain a stable headcount in product development personnel.
Adjusted sales and marketing expenses for the second quarter increased by 47% from the previous quarter, primarily due to the increase in expenses related to sales and marketing.
Promotional activity in response to increased travel demand in this quarter.
This reflects a.
Saving of 34% when compared to the same periods in 2019, as we follow more prudent spending protocols.
Okay.
Marketing at <unk>.
<unk> expenses for the second quarter stayed approximately the same as in the previous quarter and increased by 77% year over year, primarily due to a reversal of bad debt provision in the second quarter of 2020 for the company.
Jeff I'll suppliers.
Kelly as a savings of 16% when compared to the same period in 2019.
Adjusted EBITDA for the second quarter was RMB 916.
Million compared to.
Trying to be negative $216 million in the previous quarter.
Adjusted EBITDA margin was 16% for the second quarter compared to a negative 5% in the previous quarter.
Diluted loss.
Two our ordinary share and per ads were RMB.
1.0 to our U S dollars 16.
For the second quarter.
Excluding share based compensation charges and fair value changes of equity security investments and exchange.
No.
Non-GAAP diluted earnings per ordinary share and per ads was RMB one once III our U S dollar 18.
For the second quarter.
As of June 2012 June 30.
Both 2021, the balance of cash and cash equivalents restricted cash and short term investments held to maturity time deposit and financial products was RMB 17, 5 billion or U S. Dollar.
12 billion.
Turning to the third quarter of 2021, we would like to share some recent color of our businesses.
The growth momentum of the China domestic market continues to carryover to July, especially for regional and local travel.
Domestic hotel.
We have grown by more than 20% and domestic air revenue has grown by double digits when compared to 2019.
As cross Province travel was disrupted in August.
Domestic China hotel occupancy rate and air.
Okay looking decreased by more than 50% compared to the same period in 2019.
Local state patient travel was less affected and our local hotel reservations maintained about 30% growth.
Compared with 2019.
He kept during September the Covid situation was generally under control in most parts of China and the domestic situation is gradually recovering.
In the past mid Autumn festival, although lasted hotel reservations reached the double digit growth compared to the same.
In 2019, and domestic air ticket business was on track to fully recovery.
Due to uncertainties over changing COVID-19 related travel restrictions.
Travel booking window has shaped.
And travel radius has shortened significantly.
Thank you.
We expect to see more travel booking for a national holiday in the following weeks.
On the other hand, why outbound travel is still muted.
Europe and the U S market has seen a significant improvement in <unk>.
Our global brands start to.
Consumer sequentially.
During challenging times will be adaptive and responsive to the changing market conditions and strive to grow our market share while continue to maintain a lean operation.
With that operator, please open.
Couple questions.
Thank you 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 you're on a speakerphone, please pick up the handset to ask your quest.
The line, we ask that you limit your questions to one per person if you wish to ask further questions. Please free join the queue.
Your first question comes from Ronald Keung of Goldman Sachs. Please go ahead.
Thank you. Thank you James Jane Cindy and Michelle My question.
<unk> on the international recovery, just wondering here what is our strategy for international, particularly how we see the recovery trajectory firstly for pure international that you've shared some encouraging signs for Skyscanner and I believe for Dot Com and then how we think about the outbound which at this point has been slower.
Question would be a pure international just wanted to ask strategy that thank you.
We're still pushing.
Local focus.
<unk> strategy.
China domestic travel market is generally right.
Trajectory, despite short term COVID-19 interruption.
Lower than continuing great and domestic markets.
Good evening.
Travel.
Thanks.
Right.
Travel restrictions.
These markets are the same.
We're seeing recovery.
These brands.
Skyscanner.
Tom.
Please.
Great sequential improvements in recent week, Europe, and APAC together account for about 60% of awards totaling traffic.
Therefore, it's huge.
Potential OSB.
Overseas markets.
We will exhibit strong competitiveness in domestic China.
Yes.
Okay.
These brands will continue to upgrade products and services offering.
Strengthen our competitiveness.
The changes will enable us to gain additional market share.
Solid foundation for sustainable growth beyond Covid.
In the long run.
And the vaccination rates continue to rise globally.
Our confidence and the resumption of international travel.
At this time, our teams continue to enhance the fundamentals in terms of price product service.
Thanks.
Overseas users.
The best position.
To capture that.
Thank you.
Real quick.
Thank you Jim Thank you.
Thank you. Your next question comes from Alex Yao of J P. Morgan. Please go ahead.
Oh.
Position, Thank you management.
Have a couple of questions on the comps in operation.
Do you guys into beta the content supply ecosystem, and then whats the progress on it.
Pricing monetization on income from operation. Thank you.
Thank you Alex.
We have been making quite good progress on our content ecosystem development.
Following all of our suite strategy first we have further enrich the content offerings on our platform.
Our total content 14th.
Second quarter.
Nearly doubled compared with the previous quarter.
And the number of sites.
Kols also increased to nearly 50% sequentially in the second quarter and the second we are encouraged to see better user engagement through a content platform.
For example.
In the second quarter, we are glad to see an average of 35% of our app unique visitors viewed content related channels with the peak value reached over 40% during the holiday.
Meanwhile, our diverse content format are gaining increasing traction.
Standpoint from new users.
The third and third our contextual transaction conversion was otherwise as we continue to improve infrastructure development. We are happy to see that over 180, leading travel business has signed up travel.
Faction.
Stop channel.
<unk>, which is our new travel marketing hub launched in April.
Talk about how players have seen their conversion rates improving.
As we have a leading travel transaction platform in China.
Many of our users have already got strong travel desire and Glen when they come to our platform.
Our strong product development capabilities make content to transaction conversion.
Easier and frictionless.
We have built.
Technology.
<unk> product team for our content strategy.
Which will mainly leveraging our infrastructure and we will carefully evaluate future investment for the long term for this long term opportunity. Thank you.
Thank you your next.
And Jim comes from Alex Poon of Morgan Stanley. Please go ahead.
Thank you management for taking my question. My question is regarding our margins.
<unk> management.
Breakdown the non-GAAP operating margin of 11, 7% in second quarter.
Quest to China business, Skyscanner, and Ctrip dot com separately, and assuming China business that revenue stays around the same level, Ken all China margin continued to improve on the same revenue level and for Skyscanner at what level of revenue of 2019.
Level.
Skinner margin can go back to 20% margin level in 2019.
<unk>.
Thank you Alex.
But with regard to the margin.
We think we are.
We still talk we are still targeting.
Barry.
In the 20 to 30.
To normalize the margin level.
At the second quarter for the domestic travel.
Smith.
It's almost fully recovered so we have already maintained a very healthy margin for the domestic business while for the.
We held national Parks for example, Skyscanner.
As it is.
They are still suffering some losses.
But as we already see some.
Pent up demand and the normalized.
Travel demand, especially starting from Europe.
Into the U S market with.
We've already seen very healthy sequential increase for our pure international business I think as long as.
The travel demand will recover gradually recover our international business, including Skyscanner.
And going back to a normalized margin level. Thank you.
Thank you. Your next question comes from Thomas Chong of Jefferies. Please go ahead.
Hi.
Thanks management for taking my questions.
We'll have a question regarding the hotel business terminally German comment about.
The competitive landscape in the lower tier cities and how we should think about.
The overseas accommodation as well.
In the second half.
Any qualitative color would be great. Thank you.
Yes for the hotel.
Platform.
We further penetrate into the second tier and lower tier cities many of the contributors to work well together our transportation.
Our business also cross sell into our lower tier cities are very significantly the cross sell ratio. During this year have increased compared to pre COVID-19 levels.
By 20%. We also have seen a generation Z are have to.
Our product significantly coming from Oh, the cities around China into the.
Overseas hotels are with the recovery in Europe, and United States, We have seen the vaccination rates also increases and recently.
He used to have announced to open to many of the European countries and with that our air Transportation business unit will further.
Increased volume, which will also help us to lift our sales for overall products.
You asked why competitiveness are.
Providing the comprehensive product offerings as well as a high service level with App usage will enable us to gain market share.
The growing market overseas.
Yes.
Yes.
Your next question comes from U N Zhang of Hot Hong International. Please go ahead.
Thanks, Thanks, James Jane and Cindy I'm going to show up for taking my question. My question is regarding the regulation could you share with us any thoughts on everything that's where an environment and any potential regulation.
Sure through your sector or company for example, our collaboration with hotels, you'll take rate of your cross sell rates et cetera. Thank you.
Thank you.
We believe the tightened regulations will bring positive impact to the internet.
Firstly it is.
Definitely in the long run in terms of bidding now practices.
Encourage an innovation and fostering a sustainable and healthy environment picked up call group has a long battle and optimized our regulated environment to cultivate our.
All growth in an efficient manner in the past 22 years with <unk>.
Slowly support the proposed regulation in the market.
Which we believe we will event, which will eventually create value.
To order to all the stakeholders.
Our.
In terms of the different potential regulation with at this moment.
Not considered to have a significant impact to our existing business practices.
And going forward, we will continuously to follow all the rules.
And regulation.
In both domestic China as well as for the international market.
<unk>.
Thank you. Your next question comes from Brian Gong of Citi. Please go ahead.
Yes, Thanks management for taking my question. So my question is about competitive landscape.
Recent regulatory change and there's some original which suggests in all cases, we will see any material change on competitive landscape.
Any behavioral change for our key competitor. Thank you.
Hmm.
Yeah, I think we fully support the new awards in their regulation as Sandy said our company has grown in the past two decades in a very healthy in a regulated environment and going forward, we believe the new policy and the regulation will.
We'll further fostering a very healthy growth in the industry.
So I think everyone is studying these rules and regulation very carefully and we believe in the new environment that will enable everyone to operate in a very transparent and fair.
Full argument, which we have confidence in.
Yeah.
Yeah.
Thank you. Thank you.
There are no further questions at this time I'll now hand, it back to Michelle Qi for closing remarks.
Thank you thanks, everyone for joining us today.
You can find the transcript and webcast of today's call on Investor <unk> Com, We look forward to speaking with you on the third quarter of 2021 earnings call. Thank you and have a good day. Thank you.
Thank you.
That does conclude our conference for today. Thank you for participating you may.
Day disconnect.