Q3 2021 Trip.com Group Ltd Earnings Call
Thank you for standing by and welcome to the trip Dotcom 2021 Q3 earnings conference call.
All participants are in a listen only mode. There will be a presentation followed by a question and answer session.
If you wish to ask a question you will need to press the stocky followed by the number one on your telephone keypad.
I would now like to hand, the conference over to Michelle Qi tripped up Hum IR director. Please go ahead.
Thank you Dorothy and thank you all good morning.
They'll come to keep they'll come 2021 Q3 earnings conference call. Joining me today on the call are Mr. James Liang Executive Chairman of the Board Ms Jane Sun, Chief Executive Officer and Cindy.
Cindy Wang Chief Financial Officer.
During this call we will discuss our future all chicken performance, 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 you won't hear it risks and uncertainties.
Our results.
Here are a little different from the views expressed today.
A number of potential risks and uncertainties are outlined into they'll come group's public filings with the securities and Exchange Commission.
She's still come group does not undertake any obligation to update any forward looking statements exempt as required under applicable law.
Jim Jim and Cindy will share strategy and business updates operating highlights and financial performance for the third quarter of 2021 as well as our outlook for the fourth quarter of 2021.
After the prepared remarks, we will have in the Q&A session.
With that I will turn the call over to Jim.
James Please.
Yes.
Yeah.
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Yeah.
Okay.
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[laughter].
[laughter].
Thanks.
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Yeah.
All of this.
[laughter] movement.
Yeah.
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Our policy.
International travel.
I'm sorry.
Yes.
It's Joe.
T J.
Okay.
[noise].
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Thank you Sir.
Over 85%.
Okay.
David.
Yeah.
Hi.
Internationally.
Okay.
Sure.
Yes.
So discovery.
Sure.
Yeah.
Okay.
Anna.
Right.
Yes.
Yeah.
Okay.
Ongoing issue.
Two months.
Yeah.
What does that mean.
Yes.
The change is the key.
<unk>.
Yes.
The focus on both.
The Chinese domestic.
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Okay.
It's Cindy.
And then that changed.
Okay.
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So you reach some sort of offerings to cover more.
Okay Sam.
Yep.
Okay.
Okay got it.
Yes.
Uh huh.
Yes.
Got it.
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Yeah.
Sure.
And then afterwards.
Hum high quality users.
More than 200.
As he was all cash.
Okay.
5% definitely unique visitors.
Good habits of promising okay.
As a leading one stop travel platform all contents of this transaction.
Conversion rate is also higher.
Yeah.
This is Thomas K enjoy a small stake.
It's just hard to enjoy it.
Okay.
Encouraging them to be enforced.
Right.
On the International Front Asia Pacific and Europe will continue to be all key focuses.
APAC market, a global Grand chip downtown.
Hum.
Cindy.
Japan and South Korea.
With increasing brand awareness and App usage.
During a pandemic.
So what's great about it could be different.
Okay I'll stay patient.
Okay.
Okay.
Can you ask all of our brands have been closely collaborating.
The previous quarters.
Given our strong boosted your dot com product competitiveness in the region.
Yeah.
It does sound a little confusing answers right now.
John.
And strengthening.
Okay.
Europe.
[noise] local focus.
Okay.
Of course strategy in coming years.
We will remain focused on strengthening the competitiveness.
So you're right the global travel revival and tourism boom.
Hope to see such inputs start to bear fruit and to be reflected in the performance of that business over the next two five years.
With that I will turn the call over to James.
Thank you James.
Morning, everyone I would like to start with a brief overview of our performance in the past quarter and updates on our strategic focuses.
In the third quarter, our total net revenue remained stable year over year and decreased by 9% quarter over quarter, mainly due to natural disasters and the new round of infections, which affect multiple provinces in China.
We are glad to see the world moving ahead in normalizing International tourism, Yes.
Yes, the roads to global recovery, if not without to ups and downs.
The performance of trouble market in major economy has been divergent.
They tried like Hubble market has been frequently interrupted by the resurgence of Covid cases.
It has witnessed a strong recovery in July.
So a natural disasters and that they will pay their rent emerged to slow it down.
Industrial life, the hotel occupancy rates and air ticket bookings in Q3, we're down by around this 30% when compared to the pre Covid 1919 level four market performances.
Nevertheless, I want domestic hotel business was able to outpace the market performance by 20% to 25%.
Our domestic air ticket booking recovery was much higher than the market levels as well.
The global market on the other hand has been making great progress.
In returning to normalcy, especially in Europe, and United States.
Their ticket bookings in these markets made some major strides towards pre pandemic levels in the past months.
While the global flight volume was still below twin teen 19 level Chip Dotcoms, Oh Boy International Air ticket booking have increased by around 40% quarter over quarter with air ticket bookings in Europe growing by 170%.
Skyscanner also saw air ticket booking increased by approximately 100% year over year and around 35% quarter over quarter.
While COVID-19 pandemic has negatively affected the coal industry. There is no doubt the industrial what emerge out from the trenches and come back stronger we hope to see the travel industry takeoff in mid 2022.
Vaccination level right in the key markets and colorless become used to some level of travel restrictions and feel more comfortable booking trips again.
Looking beyond 2021 our long term mission is to pursue the perfect fit.
For a better world.
It has never changed.
As James just mentioned, we will continue to stick to our strategy of local focus global vision and focus on the following areas.
First bill.
<unk> strong user cases, and make probably part of our daily lives.
As the pandemic and result in a resulting health and have trouble measures make people shy away from long distance trips, we cant region, though as vacation travel has become more popular in a frequent.
In Q3, we were glad to see our intra province of hotel bookings grew by approximately 35% and our local hotel bookings grew by more than 60% compared to the same period pre COVID-19 in 2019.
In order to build strong use of cases to attract motivate teams as well collaborated with more than 6000 high star hotels to provide value added hotel packages, which included catering and many other in hotel services.
Such packages contributed around 30% to our cells of these partner hotels.
We strive to seize this opportunity to attract young generations.
And to help users in Greece travel as part of their daily lives.
Our response to addressing the need for east biracial for short haul and the local chips, we continue to make solid progress in our content strategy.
The total amount of content published on our platform increased by 100% year over year.
Compared to Q2, our number of Kols have sequentially increased by 35%.
Mom to abuses, who interacted with our content increased by 20%.
And the monthly content to transaction conversion rate reached 30% in July.
Second tied to meet our relationships with business partners by empowering them to optimize customer structure and improve efficiency.
Not only us and he's biracial hubs for uses our content channels also served as the go to platform, where suppliers are empowered to improve making efficiencies and gain traction with Pip dotcom group's high quality users.
That's an important part of our content strategy startup.
Aims to help improve supply years conversion rate and the infill feet to increase that exposure. We have seen the number of the professionally generated content content exposure and content G&A increases by a monthly average of 50.
Cindy for past consecutive seven months.
In order to help expand our partners' customer base, we're also able to.
Are pushing forward with multiple co Brent membership programs. We uses are entitled to benefit from both parties.
There are no more than 30 million cobranded members between chip they'll come poop and our hotel partners.
And this number has grown by about six times since 2019.
We also strengthened our partnership with airlines to help them with operating efficiencies and enhance our growth in the first.
And business class bookings.
Third strengthening the scene that Gee am Oh, Brent I'll follow a group of trip Com group to increase our market response to global paid spaces in strengthening the synergies among our group companies globally.
The strengthening of the synergy among our group companies globally has continuously.
The goal for the past quarters, leveraging the strong combined the brand's awareness and a global presence, we're able to establish closer relationship with local suppliers.
And the two field, the Skyscanner and trip dotcom with improved competitiveness enhanced product offerings and our service reliability.
Grasping the opportunity preference by the pandemic, we launched a serious value added services to address our global clientele, a full user friendliness and the flexibility. We believe these will enable us to better respond to the post depend on.
They could travelers evolving demands and afford a gain market share.
Strong local supply chain and bolster product capabilities will enable chip they'll come to better utilize skyscanner is strong traffic in Europe.
Fourth corporate responsibility.
Following up on our rural revitalization initiatives on top of all these picked outcome group countries, which means that we're already opened in the business in Q2, two more will open this quarter.
Our facility and you'll provinces has now grown into a foundation of our rural revitalization Academy.
Co created with the local government.
Online and offline channels, we provide local talent with professionally training and develop skills and contribute to improved global services quality.
On top of the developing moodle tourism.
The country retreats also help facilitate the sales of our local products beyond affinity as a mean to improve local economy and their livelihoods.
With a strong diverse workforce trip Com group also strive to create an inclusion inclusive and friendly working environment.
<unk>, a clear codell comeback to support working mothers and a cure for pregnant employees.
In October we were happy to receive the women's empowerment principles award by U N woman, China as a recognition of our efforts in promoting gender equality and a female empowerment.
The travel industry has proven its resilience over the time from 911, two Sars and what definitely weathered the storm of COVID-19 as well.
With crisis comes opportunity.
We're mainly a trial in the face of the challenge.
Us to seize opportunities and come back stronger.
And to reestablish our competence in travelers.
And to pursue the perfect trip for a better word is our ambitions stated.
With that I will now turn the call over to Cindy.
Ah Thanks, James Good morning, everyone.
The second quarter of 2021 trip Com group reported net revenue of RMB, five 3 million billion, representing a 2% decrease year over year, and 9% decrease quarter over quarter.
I'm not really due to the influence of natural disasters and new rounds of pandemic outbreak in multiple regions of China.
Combination of reservation revenue for the third quarter of 2021 was RMB, two 2 billion, representing 11% decrease year over year, and 11% decrease quarter over quarter recovering to 53% of the 20th 19 level.
This is a natural result, all such steady growth in July offset it by the disruption of natural disasters and resurgence of Covid cases, spreading over multiple provinces beginning at the end of July.
China domestic hotel booking have been have seen high single digit growth year over year, while a D. R and blended take rate are both affected by the depressed the demand.
Transportation ticketing revenue for the third quarter of 2021 was RMB, one 8 billion.
Representing <unk>.
And 5% decrease year over year, and a 12% decrease quarter over quarter.
Recovering 249% off the 2019 level.
Knowledge domestic transportation recovering momentum was disrupted by that natural disasters and refrigerants of Covid cases in summer.
While international Air ticket bookings increased by approximately 40% when compared to the previous quarter.
Contributed by the recovery in Europe.
Packaged tour revenue for the third quarter of 2021 was RMB 392 million, representing a 20% increase year over year, and a 7% increase quarter over quarter recovering 224% after.
2019 level.
This was contributed by our increase of leisure travel demand in July before the new round of pandemic outbreak.
Corporate travel revenue for the third quarter of 2021 was RMB 338 million, representing a 20% increase year over year, and 13% decrease quarter over quarter slight.
Slightly higher than 2019 level. This segment continues to gain momentum as a result of the expanding user base and improving cross selling from transportation to accommodation.
Gross margin was 17, 7% for the third quarter of 2021 decreasing from 17, 9% in the previous quarter, mainly due to reduced the top line recovery interrupted by new wave of infections.
Excluding share based compensation charges, our adjusted operating expenses decreased.
32% compared to the same period in 2019.
Adjusted Pro.
Product development expenses for the third quarter increased by 20% from the same period in 2020 and increased by 2% from the previous quarter.
Mainly reflecting the general increase in salary of product development personnel.
We continued to run lean and maintain a stable headcount in.
In the in the in the teams.
It is a saving of 19% when compared to the same period in 2019.
Adjusted sales and marketing expenses for the third quarter decreased by 10% from the previous quarter as we swiftly adapt to the changing market conditions and followed a more prudent spending protocol in response to the uncertainty brought a ball brought them.
But by the pandemic.
This reflects a saving of 14, 9% when compared to the same period in 2019.
Adjusted G&A expenses for the third quarter decreased by 5% from the previous quarter.
It also increased by 83% year over year, primarily due to a reversal of bad debt provision in the third quarter of 2024, the company's travel suppliers.
And it is a saving of 20% when compared to the same period in 2019.
Adjusted EBITDA for the third quarter was RMB 537 million compared to RMB 916 million in previous quarter.
Adjusted EBITDA margin was 10% for the third quarter compared to 16% in the previous quarter.
Diluted loss per ordinary share and per a D S where I M b.
One point 32 are U S dollar 20 cents for the third quarter.
Excluding share based compensation charges and fair value changes of equity securities investments and exchangeable senior notes no GAAP diluted earnings per ordinary share and per ads were RMB.
81, since our U S dollar 13 cents for the third quarter.
Yeah.
As of September surveys 2021 the balance of cash and cash equivalents restricted cash.
Clarkson investment held to maturity time deposits and financial products was RMB 67.6 billion all U S dollar $10 5 billion.
We redeemed early a U S dollar 500 million off the 2025 booking and Hugh House notes in the quarter and another U S. Dollar 500 million off the same convertible note in December.
Reducing our potential dilution of 14.6 million.
Million ordinary shares.
Turning to the fourth quarter of 2021 we would like to share some color of our business.
Business in.
In China during the National day holiday, our domestic hotel reservations reached the double digit growth doing during the beginning of the holiday while transportation reservation as close to the pre cool cool that level.
Multiple rounds of Covid cases that began in mid October and spread to more than 20 provinces largely impact the entire China domestic travel industry.
In November the industry level hotel occupancy rate was down by 30% to 40%.
And air tickets passengers down 50% to 60%.
Both compared with the same period in 2019.
Trip Com group was also affected but we continue to lead market performance by at least a 10% to 20%.
Okay.
I would travel remain rather muted in current conditions.
Oh Wow outside of China, the recovery momentum in Europe, and the U S continues to carryover to October with increased a fright segment benefiting from the relaxation of travel restrictions and that's seen a roll outs.
The path to global recovery is set but not without ups and downs, we will continue to be adaptive and responsive to changing market conditions and be flexible and agile to seize opportunities to create value for our users and partners.
With that operator, please open the line for 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 question.
In the interest of time, we please ask that you limit to one question per person.
Your first question comes from Thomas Chong from Jefferies. Please go ahead.
Hi, James Jane Cindy Good morning principal taking my questions. Okay, you share some color about the company's pen.
International business, how do you think about the pace of recovery in outbound travel restrictions on this thank you.
Okay.
In the recent months many countries.
Border reopening plans.
Alright.
Makes sense.
And when people are back on the road and travel further.
So some of this.
The restrictions.
Recently Amit.
Time variant.
Temporary will.
It will not change the ultimate claims travel recovery.
Under normal conditions, we may see China.
Inbound and outbound travel policies in the second half 2022.
Okay.
And as expected.
Sure.
No.
Without international habits.
Yes.
Thanks.
And the pandemic.
And related markets.
Okay.
Okay.
No.
Okay.
Okay.
Hello.
International markets.
In the past two years.
Is it some resilience.
Leaving the industry recovery, despite COVID-19 headwinds.
Yeah.
Okay.
Okay.
Okay.
Our strategy.
Dan.
Uh huh.
Thank you. Your next question comes from James Lee from Mizuho. Please go ahead.
Great. Thanks for taking my questions two quick ones here hygiene, how should we think about maybe the travel activity heading into Chinese new year that being first and second for outbound travel to Hong Kong and early read that you have seen on consumer demand and behavior.
Thank you.
Sure. Thanks, James the opening up of our Macau really provide a very good leading indicator for further consideration of Hong Kong. So we were just to EMA call holding our global partnership to meet T and the control of the.
Iris over there is being conducted to very well so that provides a everyone in the travel industry. Some experience as to what will happen if Hong Kong opens up. So we are very much looking forward to a very good control of the virus in Hong Kong continuously.
And with that a condition are there might be oh, good consideration for opening up off of Hong Kong and that also connects to our plan for the Chinese new year.
Historically, a D. A Hong Kong is a very popular travel destination for Chinese new year as people try to go visit a different cities and doing some shopping in Hong Kong.
So hopefully there won't be a enough supporting evidence as to the well control the environment.
Both in mainland, China, and Hong Kong, which gave us the support to further consideration of opening up a Hong Kong in addition to call in.
Yeah.
Great. Thank you.
Thanks.
Thank you. Your next question comes from Brian Gong from Citi. Please go ahead.
Hum such James Jane Cindy and Michelle for taking my question. So my question is about the lessons so our expectation so how does management see.
Several performance outlook.
Water.
And the next year.
The first quarter next year with some local governments right now encouraging people not comparable across regions.
The Winter Olympics.
In March we still expect the messenger, who most of these drugs, but travel restriction and also with the loan payoffs in the second half of this year, we see a more normalized year on year rolls.
Uh Huh next year with the most of the market. Thank you.
Oh yeah.
Yes, so what we have seen a for the domestic travel Ah is for S. A by a faithful as I. We have seen people are paying more attention to safety. So we encourage our suppliers to make sure. They have a very good safety measures such as <unk>.
The hand, Sanitizers masks to our travelers are the second the S is but people prefer to travel with much smaller groups rather than big groups. So normally our customized tour is selling very well our customers prefer to hire.
Car and 12 sites are with family then to take their family along.
So it is with a much shorter booking window.
Because of the virus of control a lot of time, and we will catch notification from different destinations.
So the booking window, we have seen is much shorter in the last four Oh went out before US is a short distance. So what we have seen is people prefer to travel a nearby their hometown.
Anywhere within the full 300 kilo becomes the gradients people feel more comfortable to travel to the and also we have seen young generation prefer to travel a much more so we have to see the.
The young spenders, who will bomb E. Ah 90 days and generation Z a couple quite a lot. So these are the trend we have seen so far again I think a lot of it will be dependent on how well the virus is being controlled.
During the first quarter in the second quarter. However, these demands I'm not disappearing from our data off the search customers' pent up of demand is accumulating and a very strong.
Is your sense of what we saw in May holiday. This year are the search.
Our demand is very strong so we're very hopeful that oh, the vaccination rates will be continuously increasing the measures off the virus control will prove to be.
Effective and then gradually the market will increase so your assessment of the second half of 2022 will be stronger than the first half are we very much hope so.
Thank you.
Yeah.
Thank you. Your next question comes from Ronald Keung from Goldman Sachs. Please go ahead.
Thank you. Thank you James Jane Cindy.
Michelle My question is more on the.
Recent travel patterns.
That we saw in recent months lots for longer and with omni Kron and government dynamic zero corporate strategies, then how does management see the trajectory for domestic and international travel.
'twenty two.
If the recent trends last longer and how we plan all costs accordingly.
Patients to either a person close on margins in the next one to two years. Thank you.
Thank you yeah. Thank you Ron.
I'll watch actually decided by both the top line as well as the cost of control of cost of control on the top line on the revenue side.
Oh of course, we are in the travel industry, so outperformance will be pretty much decided.
By the industry growth however, as always we will.
Do our best to continuously outpace the industry growth for example in the third quarter. This year, we outpaced that are 10% to 20% at least for.
For different segment compared with the industry growth.
In the travel industry and on the cost side, we will continuously to whether the the COVID-19 to weather the storm.
We have to have a very disciplined too close to policies cost structures and to.
Two weathers the storm.
The first one firstly, we have a very strong cash position at the end of the Q3, we have about 10.5 billion U S dollars are in our cash balance, which probably is the best among one of the best in the travel industry.
And the secondly on the cost side.
Our total adjusted cost and operating expenses actually decreased by more than 35% in Q3 compared with a cold.
Before COVID-19 level next to our very largely flexible cost and expenses structure and as well as efficient operating management.
During the past few quarters, we streamlined streamlined operation across our different business lines. In addition to certain adjustments related to the Covid and in addition, our improvements on the content cross selling and technology have further lifted.
The our marketing efficiencies.
<unk>.
In terms of the cost trend.
Going forward.
We are we will expect a very modest increase in the personnel expenses only on our international AR market.
And for the domestic market, we expect our total head count will be a pretty much a stable, especially for our core businesses.
But we need to add some investment.
To capture the pent up demand.
That has already been seen in the in the in the in the international market, especially in the Europe market.
On the selling marketing expenses, we will continuously to adapt adopt and I'll jump in.
<unk> strategy and.
We will have a very disciplined.
Our policies in terms of selling and marketing spending.
Spendings.
Both for the domestic China market as well as for the international market.
Thank you.
Thank you once again, if you'd like to ask a question. Please press star one on your telephone.
Your next question comes from Alex Yao from J P. Morgan. Please go ahead.
Yeah.
Oh, Hi, good morning management and thank you.
My question.
I have a question on the investment up to teach them about the potential.
Time, and also more regions in the markets the rest of the world are universal.
Hum.
Additional.
Last month's Oh two countries.
Thank you.
Hum.
Yes, so thanks, Alex in terms of our investment strategy. Historically, we're very disciplined there are three presuppose, a we adhere to a first of all it needs to be very closely related to our core competence and secondly, we need to.
To really look for are the companies that is our number one number two in there but to coach and thirdly. The valuation you speed there are reasonable. So historically, we are very very selective and very careful in terms of our investment however in.
<unk> of our organic investments in our core competence of for the long term investment such as technology and services and products. We're taking advantage of this a slow season to make sure we focus on the projects, which we are strengthening our competitive.
In the long term.
With limited resources.
Also prioritizing our internal projects to make sure we keep the priority for the project, which will extend our competence in the long run. Thank you.
Thank you there are no further questions at this time I'll now hand back for closing remarks.
Yes.
Thank you. Thank you everyone for joining US today, you can find the transcript and webcast of today's call Investor don't trip Bill Com. We look forward to speaking with you on our fourth quarter 2021 earnings call. Thank you and have a good day. Thank you very much. Thank you.
Yeah.
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 Dotcom 2021 Q3 earnings conference call.
All participants are in a listen only mode. There will be a presentation followed by a question and answer session.
If you wish to ask a question you will need to press the stocky followed by the number one on your telephone keypad.
I would now like to hand, the conference over to Michelle Qi tripped up Hum IR director. Please go ahead.
Thank you Dorothy and thank you all good morning, and the evening will come to trip they'll come 'twenty 'twenty. One Q3 earnings conference call. Joining me today on the call are Mr. Kinsman Executive Chairman of the Board Ms Jane Sun, Chief Executive Officer.
Cindy Wang Chief Financial Officer.
During this call we will discuss our future all chicken performance, 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 you won't eat here with risks and uncertainties.
As such our result.
Here are a little different from the views expressed today.
A number of potential risks and uncertainties are outlined in crypto com group's public filings with the Securities and Exchange Commission.
She still Com group does not undertake any obligation to update any forward looking statements exempt as required under applicable law.
Jim Jim and Cindy will share strategy and business updates operating highlights and financial performance for the third quarter of 2021 as well as our outlook for the fourth quarter of 2021.
After the prepared remarks, we will have in the Q&A session.
With that I will turn the call over to Jim.
Jim Please.
Okay.
[laughter].
Okay.
Yes.
Okay.
Right.
Uh huh.
Okay.
Patients.
Okay.
Thanks.
Thanks Jake.
Yeah.
Okay.
Yeah.
Okay.
The movement.
Thanks, Nick.
Okay.
I will finish policies.
Well international travel and tourism.
Yes.
Yeah.
Yes.
Vacation season.
Okay.
Sure.
Right.
It continues to rise.
Expectation.
85% doesn't change.
At this point.
Yeah.
Hi.
Internationally.
Yes.
Got it.
Yes.
So discovery.
[noise] and travel restrictions.
[laughter].
I'm doing well thank you.
Yeah.
Yes.
Yeah.
Hey, Joe.
You know things have changed.
Okay.
Yes.
Okay.
Our strategy to focus on.
Domestic.
Thank you.
Sure.
Okay.
Do you see any opportunity.
That changed.
Yes.
And in China.
Okay.
Hi.
And retail product offerings to cover yeah.
Okay.
Yes.
Okay.
Got it.
Yes.
Okay.
Yeah.
Uh huh.
Yeah.
Okay.
In Asia.
Hi.
Yes.
More than three months.
Yes.
Okay.
[laughter].
Okay.
Okay.
As a leading one stop travel platform.
Sometimes it transaction.
Conversion rate.
Hi.
This is Thomas J enjoying it because.
This is.
Great.
Yes.
That's encouraging to me.
Yeah.
On the international front.
And Europe will continue to be our key focus.
APAC markets are global brands downtown.
Yes.
Okay.
Japan and South Korea.
Okay.
Yes.
Fish.
Okay.
Yeah.
Excellent.
Okay. It sounds vacation.
Okay.
Okay.
All of our brands have been closely collaborating.
The previous quarters.
Trump dot.
Dot com.
In the region.
Yeah.
That will continue to answer.
<unk>.
Yes.
Yes.
[laughter] Europe.
Sure.
Okay.
Of course.
Yes.
Well remain focused on strengthening the base okay.
Yes.
Right.
Travel and tourism.
It could be such inputs start to bear fruit.
One stop business over the next two five years.
I will turn the call over to Jay.
Yeah.
Thank you James.
Good morning, everyone I would like to start with a brief overview of our performance in the past quarter and updates on our strategic focuses.
In the third quarter, our total net revenue remained stable year over year and decreased by 9% quarter over quarter, mainly due to natural disasters and the new round of infections, which affect multiple provinces in China.
We're glad to see the world moving ahead in normalizing International tourism Yeah.
Yet the road to global recovery, it's not without the ups and downs.
The performance of trouble market in major economies has been diluted.
They try and like Hubble market has been frequently interrupted by the resurgence of Covid cases.
It has witnessed a strong recovery in July.
So a natural disasters and the delta there emerged to slow it down.
Industrial life, the hotel occupancy rates and air ticket bookings in Q3, we're down by around 30% when compared to the pre COVID-19 level four market performances.
Nevertheless, I want domestic hotel business was able to outpace the market performance by 20% to 25%.
Our domestic air ticket booking recovery was much higher than the market levels as well.
The global market on the other hand has been making great progress.
In returning to normalcy, especially in Europe, and United States.
Their ticket bookings in these markets made some major strides towards pre pandemic levels in the past months.
While the global flight volume, we're still below $20 19 level tripped outcomes overall international air ticket booking have increased by around 40% quarter over quarter with air ticket bookings in Europe growing by 170%.
Skyscanner also saw air ticket bookings increased by approximately 100% year over year and around 35% quarter over quarter.
While COVID-19 pandemic has negatively affected the coal industry. There is no doubt the industry emerge out from the trenches and come back stronger we hope to see the travel industry takeoff in mid 2022.
Vaccination level right in a key market and travelers become used to some level of travel restrictions and feel more comfortable booking trips again.
Looking beyond 2021 our long term mission is to pursue the perfect.
For a better world.
It has never changed.
As James just mentioned, we will continue to stick to our strategy of local focus global vision and focus on the following areas.
First bill.
<unk> strong user cases, and make probably part of our daily lives.
As the pandemic and result in a resulting health and have trouble measures make people shy away from long distance trips weekend regional Staycation travel has become more popular infrequent.
In Q3, we were glad to see our intra province of hotel bookings grew by approximately 35% and our local hotel bookings grew by more than 60% compared to the same period pre COVID-19 in 2019.
In order to build strong user cases to attract motivate teams as well collaborated with more than 6000 high star hotels to provide value added hotel packages, which included catering and many other in hotel services.
Such packages contributed around 30% to our sales of these partner hotels.
We strive to seize this opportunity to attract young generations.
And to help users in Greece travel as part of their daily lives.
He responds to addressing the need for inspiring for short haul and the local chips, we continue to make solid progress in our content strategy.
The total amount of content published.
Our platform increased by 100% year over year.
Compared to Q2, our number of Kols have sequentially increased by 35%.
Our mom to abuses, who interacted with our content increased by 20%.
And the monthly content to transaction conversion rate reached 30% in July.
Second time.
Did you mean, our relationships with business partners by empowering them to optimize customer structure and improve efficiency.
Not only as an inspiration hubs for uses our content channels also served as the go to platform, where suppliers are empowered to improve making efficiencies and gain traction with picked off com group's high quality users.
As an important part of our content strategy startup aims to help improve supply years' conversion rate and the info feat to increase that exposure, we have seen the number of the professionally generated content content exposure and content.
G&A increases by a monthly average of 50% for past consecutive seven months.
In order to help expand our partners' customer base, we're also able to.
Are pushing forward with multiple co brand membership programs. We uses are entitled to benefit from both parties.
There are no more than 13 million co branded members between chip Dot Com group and our hotel partners.
And this number has grown by about six times since 2019.
We also strengthened our partnership with airlines to help them with operating efficiencies and enhance our growth in the first and business class bookings.
Third strengthening does seem that Gee am Oh rents of our group of trip Com group to increase our market response to global PE spaces.
He's strengthening the synergies among our group companies globally.
The strengthening of the synergy among our group companies globally has continuously.
The goal for the past quarters, leveraging the strong combined the brand's awareness and a global presence, we're able to establish closer relationship with local suppliers.
And the two field, the Skyscanner and trip dotcom with improved competitiveness.
<unk> product offerings, and our service reliability grasping the opportunity preference by the pandemic, we launched a serious value added services to address our global clientele.
For user friendliness and the flexibility. We believe these will enable us to better respond to the post pandemic travelers' evolving demands and the Florida gained market share.
Our strong local supply chain and bolster product capabilities will enable chip I'll come to better utilize skyscanner strong traffic in Europe.
Fourth corporate responsibility following up our rural revitalization initiatives.
Couple of these picked outcome group countries, which means that we're already opened in the business in Q2, two more will open this quarter.
Our facility I mean annual provinces has now grown into a foundation of our rural Revitalization Academy co created with the local government.
Through online and offline channels, we provide local talent with professionally training and develop skills and contribute to improved global services quality and.
On top of that developing moodle tourism.
The country retreats also help facilitate the sales of our local products beyond affinity as a mean to improve local economy and their livelihoods.
With a strong diverse workforce trip Com group also strive to create an inclusion inclusive and friendly working environment.
Not a clear code of conduct to support working mothers and a cure for pregnant employees.
In October we were happy to receive the women's empowerment principles award by U N woman, China as a recognition of our efforts in promoting gender equality and a female empowerment.
The travel industry has proven its resilience over the time from 911, two Sars and what definitely weathered the storm of COVID-19 as well.
With crisis comes opportunity.
It made me a trial in the face of the challenge.
Us to seize opportunities and come back stronger.
And to reestablish our competence in travelers.
And to pursue the perfect trip.
We are back to work as our mission statement.
With that I will now turn the call over to Cindy.
Ah Thanks, James Good morning, everyone.
The third quarter of 2021 trip Com group reported net revenue of RMB, five 3 million billion, representing 2% decrease year over year, and 9% decrease quarter over quarter.
Primarily due to the influence of natural disasters and new rounds of pandemic outbreak in multiple regions of China.
Accommodation reservation revenue for the third quarter of 2021 was RMB, two 2 billion, representing 11% decrease year over year, and 11% decrease quarter over quarter recovering to 53% of the 2019 level.
This is a natural result, all such steady growth in July offset it by the disruption of natural disasters and resurgence of Covid cases, spreading over multiple properties beginning at the end of July.
Our China domestic hotel booking have been have seen high single digit growth year over year, while a b R and blended take rate are both affected by the depressed the demand.
Transportation ticketing revenue for the third quarter of 2021 was RMB, one 8 billion.
Representing <unk>.
And 5% decrease year over year, and a 12% decrease quarter over quarter.
Recovering 249% of the 2019 level.
Among which domestic transportation recovery momentum was disrupted by that natural disasters and refrigerants of Covid cases in summer.
While international Air ticket bookings increased by approximately 40% when compared to the previous quarter.
Mainly contributed by the recovery in Europe.
Packaged tour revenue for the third quarter of 2021 was RMB 392 million, representing a 20% increase year over year, and a 7% increase quarter over quarter recovering 224% after.
2019 level.
This was contributed by our increase of leisure travel demand in July before the new round of pandemic outbreak.
Corporate travel revenue for the third quarter of 2021 was RMB 338 million, representing a 20% increase year over year, and 13% decrease quarter over quarter flat.
Slightly higher than 2019 level. This segment continues to gain momentum as a result of the expanding user base and improving cross selling from transportation to accommodation.
Gross margin was 17, 7% for the third quarter of 2021 decreasing from 17, 9% in the previous quarter, mainly due to reduced the top line recovery interrupted by new wave of infections.
Excluding share based compensation charges, our adjusted operating expenses decreased.
32% compared to the same period in 2019.
Adjusted Pro.
Product development expenses for the third quarter increased by 20% from the same period in 2020 and increased by 2% from the previous quarter.
Mainly reflecting the general increase in salary of product development personnel.
We continued to run lean and maintain a stable headcount in the in the in the teams.
It is a saving of 19% when compared to the same period in 2019.
Adjusted sales and marketing expenses for the third quarter decreased by 10% from the previous quarter as we swiftly adapt to the changing market conditions and followed a more prudent spending protocol in response to the uncertainty brought about.
What about by the pandemic.
This reflect a savings of 14, 9% when compared to the same period in 2019.
Adjusted G&A expenses for the third quarter decreased by 5% from the previous quarter.
It also increased by 83% year over year, primarily due to a reversal of bad debt provision in the third quarter of 2024, the company's travel suppliers.
And it is a saving of 20% when compared to the same period in 2019.
Adjusted EBITDA for the third quarter was RMB 537 million compared to RMB 916 million in previous quarter.
Adjusted EBITDA margin was 10% for the third quarter compared to 16% in the previous quarter.
Diluted loss per ordinary share and per a D S where I M b.
One point 32 are U S dollar 20 cents for the third quarter.
Excluding share based compensation charges and fair value changes of equity securities investments and exchangeable senior notes no GAAP diluted earnings per ordinary share and per ads were RMB.
81, since our U S dollar 13 cents for the third quarter.
As of September 30th 'twenty, 'twenty, one the balance of cash and cash equivalents restricted cash.
Watson investment held to maturity time deposits and financial products was RMB 67.6 billion all U S dollar $10 5 billion.
We redeemed early a U S dollar 500 million off the 2025 booking and Hugh House notes in.
Quarter and another U S dollar 500 million off the same convertible notes in December.
Reducing our potential dilution of 14.6 million.
Million ordinary shares.
Turning to the fourth quarter of 2021 we would like to share some color of our business.
In China during the National day holiday, our domestic hotel reservations reached the double digit growth doing during the beginning of the holiday while transportation reservation as close to the pre COVID-19 level.
Multiple rounds of Covid cases that began in mid October and spread to more than 20 provinces largely impact the entire China domestic travel industry.
In November the industry level hotel occupancy rate was down by 30% to 40% and air ticket passengers down 50% to 60%.
Both compared with the same period in 2019.
Trip Com group was also affected but we continue to lead market performance by at least a 10% to 20%.
Okay.
Oh boy would travel remain rather muted in current conditions.
Oh Wow outside of China, the recovery momentum in Europe, and the U S continues to carryover to October with increased the fright segment benefiting from the relaxation of travel restrictions and vaccine.
Roll outs.
The path to global recovery effect, but not without ups and downs, we will continue to be adaptive and responsive to changing market conditions and be flexible and agile to seize opportunities to create value for our users and partners.
Yeah.
With that operator, please open the line for questions.
Okay.
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 question.
In the interest of time, we please ask that you limit to one question per person.
Your first question comes from Thomas Chong from Jefferies. Please go ahead.
Hi, James Jane Cindy Good morning, Brentsville, taking my questions are can you share some color about the company's pen.
International business Uh-huh brings.
About the pace of recovery in outbound travel as the restrictions on this thank you.
Yeah.
In the recent months many countries have adopted border reopening plants. So the lack of travel.
Restrictions.
And when people are back on the road and travel further.
So sometimes.
Recently.
When the time variance, but temporary.
Will not change the ultimate claims travel recovery.
In a normal conditions, we may see China inbound.
Inbound and outbound travel policies in the second half 2022.
Okay.
<unk> is expected to begin with.
I understand.
Hi.
No.
With that in international markets.
Lastly, depending on all that.
And the pandemic.
And related markets.
Okay.
So there is some bad news.
Yes.
Okay.
Hello.
In all markets.
In the past two years.
Demonstrated its resilience and leaving the industry recovery despite headwinds.
Yeah.
<unk>.
Okay.
Globalization strategy.
Right.
Oh.
Thank you. Your next question comes from James Lee from Mizuho. Please go ahead.
Great. Thanks for taking my questions two quick ones here hygiene, how should we think about maybe the travel activity heading into Chinese new year that being first and second for outbound travel to Hong Kong any early read that you have seen on consumer demand and behavior.
There. Thank you.
Sure. Thanks, James the opening up of our Macau really provide a very good leading indicator for further consideration of Hong Kong. So we were just to EMA call holding our global partnership to meet T and the control of the.
Iris over there is being conducted very well so that provides a everyone in the travel industry. Some experience as to what will happen if Hong Kong opens up so we're very much looking forward to.
To a very good control of the virus in Hong Kong continuously and with that a condition are there might be a good consideration for opening up off of Hong Kong and that also connects to our plan for the Chinese new year historically a D.
Our Hong Kong is a very popular travel destination for Chinese new year as people try to go visit different cities and doing some shopping in Hong Kong.
So hopefully there won't be.
Enough supporting evidence as to the well control the environment.
Both in mainland, China, and Hong Kong, which gave us the support to further consideration of opening up a Hong Kong in addition to Macau.
Thank you.
Great. Thank you.
Thanks.
Yeah.
Thank you. Your next question comes from Brian Gong from Citi. Please go ahead.
Hum such James Jane Cindy and Michelle for taking my question. So my question is about the lessons coal Ah is.
Rotation, so how does management see the trouble performance outlook.
Quarter three was the next year.
The first quarter next year with some local governments right now encouraging people not controllable cost regions.
The Winter Olympics.
In March we still expect the message for most of these drugs, but travel restriction and also with a low base in the second half of this year, we see.
A more normalized year on Europe rose in the second half next year with the most of the market. Thank you.
Oh yeah.
Yes, so what we have seen for the domestic travel Ah is full S. A by faithful as I. We have seen people are paying more attention to safety. So we encourage our suppliers to make sure. They have a very good safety measures such as <unk>.
But hand, sanitizers masks to our travelers are the second the S is oh, but people prefer to cobble with much smaller groups rather than big groups. So normally our customize the tour is selling very well our customers prefer to hire.
Car and that's towards like a with a family then to take their family along.
So it is with a much towards booking result, because of the virus of control a lot of time, and we will catch notifications from different destinations.
So the booking window, we have seen is much shorter in the last four Oh went out before US is a short distance. So what we have seen is people prefer to travel a nearby their hometown.
Anywhere within the full 300 kilo becomes a gradients people feel more comfortable to travel to the.
And also we have seen young generation prefer to travel a much more so we have to see the.
The young spenders, who along E. Ah 90 days and generation Z are troubled quite a lot. So these are the trend we have seen so far again I think a lot of it will be dependent on how well the virus is being controlled during the first quarter in the second.
However, these demands I'm not disappearing.
From our data off the search customers' pent up of demand is accumulating and a very strong.
And so what we saw in May holiday this year the search.
Our demand is very strong so we're very hopeful that the vaccination rates will be continuously increasing the measures off the virus control will prove to be a effect.
Effective and then gradually the market will increase so yeah. Your assessment that the second half of 2022 will be stronger than the first half we very much hope so.
Thank you.
Yeah.
Thank you. Your next question comes from Ronald Keung from Goldman Sachs. Please go ahead.
Thank you. Thank you James Jane Cindy.
Michelle My question is more on the.
Recent preble persons.
What we saw in recent months lots of a long ago, and with omni Kron and governments dynamic zero corporate strategies then huh.
The management see the trajectory for domestic and international travel.
'twenty two.
If the recent trends last longer and how we plan all costs accordingly.
Patients to either a person close on margins in the next one to two years. Thank you.
Thank you yeah. Thank you Ron.
I'll watch actually decided by both the top line as well as the cost to come true all cost of control on the top line on the revenue side Oh of course, we are in the travel industry. So outperformance will be pretty much decided.
By the industry growth however, as always we will.
I'll pass it to continuously outpace the industry growth for example in the third quarter. This year, we outpaced it 10% to 20% at least for.
So a different segment compared with the industry growth.
In the travel industry and on the cost side we.
We will continuously to weather this the COVID-19 to weather the storm.
We have to have a very disciplined too close to policies cost structures.
To weather the storm I'm. The first one firstly, we have a very strong cash position at the end of the Q3, we have about 10.5 billion U S dollars are in the.
Our cash balance, which probably is the best among them.
One of the best in the travel industry. The secondly on the cost side.
Our total adjusted cost and operating expenses actually decreased by more than 35% in Q3 compared with a cold.
Before COVID-19 level next to our very largely flexible cost and expenses structure and as well as efficient operating management.
During the past few quarters, we streamlined streamlined operation across our different business lines. In addition to certain adjustment related to the Covid and in addition, our improvements on the content Cross Sally and technology have further lifted.
Our marketing efficiencies.
<unk>.
In terms of the cost trend.
And going forward.
We are we will expect a very modest increase in the personnel expenses only on our international.
Market.
And for the domestic market, we expect our total head count will be a pretty much a stable, especially for our core businesses.
But we need to act.
Our investment just to capture the pent up demand.
That has already been seen in the in the in the in the international market, especially in the Europe market on the selling marketing expenses, we will continuously to adapt adopt and all I drove in our strategy and the.
We will have a very disciplined.
Our policies in terms of myself and marketing spending.
Spendings.
Both for the domestic China market as well as for the international market.
Thank you.
Thank you once again, if you'd like to ask a question. Please press star one on your telephone.
Your next question comes from Alex Yao from J P. Morgan. Please go ahead.
Yeah.
Hi, Good morning management and thank you for taking.
My question.
I have a question on the investment.
To teach them so much more potential.
Time, and also more regions in the markets in the rest of the World are you going to come from.
Additional.
And <unk> to come true.
Thank you.
Hum.
Yes, so thanks, Alex in terms of our investment strategy. Historically, we're very disciplined there are three presuppose, we adhere to a first of all it needs to be very closely related to our core competence and secondly, we need to.
To really look for are the companies that is our number.
Number one or number two in their coach and thirdly, the valuation you speed there are reasonable. So historically, we are very very selective and very careful in terms of our investment. However in terms of our organic investments in our core competence of for the long term.
<unk> such as technology and so this is in products. We're taking advantage of this a slow season to make sure we focus on the projects, which we are strengthening our competitiveness in the long term.
So with limited resources, we're also prioritizing our internal projects to make sure we keep the priority for the projects, what which will extend our competence in the long run. Thank you.
Yeah.
Thank you there are no further questions at this time I'll now hand back for closing remarks.
Yes.
Thank you. Thank you everyone for joining US today, you can find the transcript and webcast of today's call on Investor Field trip Dotcom, we look forward to speaking with you on our fourth quarter 2021 earnings call. Thank you and have a good day.
Very much thank you.
Thank you that does conclude our conference for today. Thank.
You for participating you may now disconnect.