H1 2023 Trip.com Group Limited Earnings Call
Okay.
Hello, everyone. Thank you for standing by and welcome to Chip Dot Com Group 2023, Q2 earnings Conference call.
At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session at which time. If you wish to ask a question you can press star one one boyfriend name to be announced.
I must advise you that today's call crazy screens to call it.
With that I'd like to now hand, the call over to your host today Ms. Michelle Qi Investor Relations director. Thank you. Please go ahead.
Thank you.
Oh, good morning, and welcome to chip they'll come for second quarter of 2023 earnings conference call joining.
Joining me today on the call are Mr. Jim <unk> executive.
Executive Chairman of the Board Ms Jane Sun, Chief Executive Officer, and MS, Cindy Wang Chief Financial Officer.
During this call we will discuss our future outlook and 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 involve inherent risks and uncertainties.
As such our results may be materially different from the views expressed today.
A number of potential risks and uncertainties are outlined in chip they'll come group's public filings with the Securities and Exchange Commission.
<unk> Dot Com group does not undertake any obligation to update any forward looking statements.
As required under applicable law.
Jim Jim and <unk>.
Cindy we're sharing our strategy and business update.
Highlights on the financial performance for the second quarter of 2023 as well as the outlook for the third quarter of 'twenty three.
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 Andrew.
Today.
Well in the second quarter.
Good morning, Steve.
Thank you Steven.
All research.
Goodbye.
Thank you Mitch.
Please continue.
Thank you.
Yeah.
Hey, good evening.
Sure.
In China.
Thanks, Jeremy.
Anthony.
Shifts in consumer spending.
And then just tidbits.
Thanks, Charlie.
Domestic and international business.
It's still limited.
Thank you.
As I mentioned worldwide.
Our recently expanded.
And then additionally international flights.
Thank you.
Good morning.
Thank you.
Confidence.
Encouraging trend.
Okay. Thanks for the future.
Okay.
And travel this passion and fulfilled.
Our unique crystallized.
We have launched.
Hey, guys how are the tools as we embrace it.
It's to provide enhanced user experience.
Users can chat twitch.
Hey.
Sure Jamie.
Okay.
Another re crafting.
And can now go directly to the product bookings.
Okay. Thanks.
Yes.
Thanks.
Yes.
Sure.
Okay.
Hey, good to us.
Yes.
Capturing real time information and data.
These AI powered content marketing tools also.
Open up new ways.
Congress to highlights now.
<unk>.
Captivated audiences.
Operator: Hello, everyone. Thank you for staying by and welcome to tip.com Group 2023 Q2 earnings conference call. At this time, all participants are in the recent only mode. After the speakers presentation, there will be a question and answer session. And which time if you wish to ask question, you can press star 11 and wait for a name to be announced. I must apply to you that today's conference is being recorded. With that, I would like to now hand the call over to your host today.
We will continue to explore.
The potential leveraging AI to self travelers enjoy.
Okay.
And pursue their perfect.
To conclude.
So just by the challenge kind of the demand.
And we will continue to enhance.
Okay.
Okay.
Please go ahead.
I will turn the call over to Jamie.
Michelle Qi: Michelle Qi, investor relations start. Thank you. Please go ahead. Thank you. Thank you all.
Hi, guys.
Thank you Tom good morning, everyone.
Michelle Qi: Good morning. And welcome to tip.com Group's second quarter of 2023 earnings conference call.
A quick overview I'd like now to revenue.
100 <unk>.
Jianzhang Liang: Joining me today on the call are Mr. Jianzhang, executive chairman of the board.
Yea over year.
Thank you Nicole.
Yes.
Michelle Qi: Ms. Jian Sun, chief executive officer and Ms. Cindy Wang, chief financial officer. During this call, we will discuss our future outlook and performance, which are forward looking statement made under the safe harbor provisions of the U.S, private security litigation reform act of 1995, forward looking statement involved in heritage roots and uncertainties. As such, our results may be material or different from the views expressed today. A number of potential rates and uncertainties are outlined in trip.com groups public filing with the security and exchange commission. Trip.com group does not undertake any obligation to update any forward looking statement, except as required and their ethical low.
We continue to see strong.
Duncan.
Joel.
Okay.
In the second quarter.
That's helpful.
2019.
Perfect.
Okay.
Right.
Industry level International Inc.
Fully recovered.
I would now like to study.
In Q2 compared to 2019, we have.
Rent coverage.
60% of the.
The pre pandemic level.
Please go ahead.
<unk>.
Thanks, Andrew.
Thank you Brian .
Okay.
Level.
For capital.
Michelle Qi: Jianz, Jianz and Cindy will share no strategy and business updates operating highlights and financial performance for the second quarter of 2023, as well as the outfit with third quarter of 2023. After the prepared remarks, we will have a Q&A session.
Thank you.
Roni.
Yes.
Hence our six last year.
Okay.
Also reached a new all time high.
Year over year.
Let's talk about the different markets.
China market.
Jianzhang Liang: With that, I will turn the call over to Jianz. Jianz, please. Thank you, monsieur.
The China domestic travel market.
Hey, good strong rebound.
Thank you Juan.
Jianzhang Liang: Thank you, everyone, for joining us on the call today. Throughout the second quarter, China's traveling industry has experienced the notable resurgence supported by an ordinary travel demand. While we are at a pace, it is still limited. Travelers desire to gear up and eventually worldwide to remain intense. The recently expanded list of travel on group tour of patients in an additional international place, potential booms for international travel. The capital has this encouraging trend of how on travel recovery will persist into the future.
Next question comes from Paul Cheng.
And for the second quarter, our domestic hotel reservation.
Anthony.
Here at <unk>.
Thank you.
Okay.
Okay.
Yes.
Great.
Thank you.
Okay.
Our shortfall for capital.
Your line is now.
She is now.
Okay.
No.
China market continues to witness.
Actually.
Everyone is now in Calgary.
That should not.
Got it.
Alright.
Yes.
Oh, sorry.
Can you call out.
Cross border.
Alrighty.
Q2 average international freight capacity.
So around 98%.
However.
Jianzhang Liang: A few of the travelers passion and fulfill their evolved needs for unique and personalized experience. We have launched an array of AI tower that tools, as we embrace innovative ways to provide the head user experience. Users can chat with our unscrupulous AI assistant, Kipagini, for the school, interdisciplinary, crafting, and can now go directly to the product booking pages. They can also get inspirations and select the best experiences from our AI tower, curated lists, which cater to users, diverse needs, and preferences by capturing real-time information in our computer.
Power and air Reservation chip.
Backhaul.
Thank you.
Correct.
Pre pandemic level.
Named the industry recently.
While there has been a notable growth.
And capacity.
In China and for areas such as Europe .
Remains a powerhouse of outbound travel.
Of assays.
<unk> include Hong Kong, Macau Southeast Asia.
Okay.
Our global markets.
Turning to our global business and returning of Chinese tourists in greater number.
A major rising catch it.
Our recovery.
Jianzhang Liang: These AI tower become content marketing tools, also open up new ways for our partners to highlight their offerings to a captivated audience. We'll continue to explore and unlock the potential of leveraging AI to self-travelers, enjoy the best booking experience and pursue their perfect trip.
Of global travel market.
We continue to see.
Strong momentum in our global banking.
And which APAC region.
Powerhouse.
And ticket booking.
Our global platform.
Michael Good country.
Yes.
Hey, Michael.
Jianzhang Liang: To conclude, we are encouraged by the strong travel demands so far, and we'll continue to enhance our offerings, and we prepare to capture the opportunities ahead.
Oh of course.
Okay.
Hi, good morning.
Okay back to level.
With global travel momentum on the rise we continue to fortify our supply chain and strengthens our synergies.
Michelle Qi: When that, I will turn the call over to James for operational highlights. Thank you James.
All business units.
Okay.
James Lee: Good morning everyone. This is a quick overview from a natural audience into two groups by 180 percent year-over-year. As we exceeded the 2019 level by 29 percent.
Brian and capital markets.
We have successfully captured a substantial increase in our market share.
Areas.
Hong Kong Korea, and Southeast Asia.
James Lee: We continue to see strong demand and robust momentum in travel booking in the second quarter. For the last week, our hotel booking have already exceeded 2019 by 60 percent. All around, inside of the fact that the industry level, international air passenger volume, only recovered to about 37 percent into two compared to 2019, we have recovered to almost 60 percent of the pre-pandemic level. Moreover, our global business remains a robust and continuing to advance as a travel agent to rate at a 2019 level.
We will continue to scale up marketing personal investments Andy power market.
Our global <unk>.
Also showing a strong upward trend.
Rocco.
Hi, Brian .
Our Google or Apple will also help the expense leverage that international traveler. Thank you.
Captions to potential.
Empowering us.
I wanted to protect itself.
Market.
I would like to highlight a couple of strategic points as follows.
Accommodation.
The strong growth in China, a couple of markets, we continue to fortify our competitive advantage.
James Lee: Well, overall, hotel booking has set a new record high by growing over 160 percent versus last year. Well, overall, air booking also reached a new or time high and nearly leveled year-over-year.
For travel.
Beginning of the year.
To serve the evolving needs of.
Our customers.
Great values for our products.
Okay.
Applying our products and services to.
James Lee: Let's talk about the different markets. First, China market. A China domestic travel market has demonstrated a strong rebound since its opening in Q1, and such contrast in momentum has persisted into the second quarter. The global domestic hotel reservation grew by around 170 percent in over a year at 160 percent.
To match a wider range.
Keith and I will reveal.
We continue to print with.
With product innovation.
And differentiation to provide users with novel and unique experiences.
Our video package deal.
And then 8000.
With Cowen.
The value.
For customers to choose from.
440000 hotels.
With our last call.
Tom Brad.
Got it.
Our high quality customers.
Lord.
Sure.
And on one or two.
50% of our.
Perhaps for installation.
James Lee: [inaudible] Group Group Group Group Group Group Group[inaudible] Group Group Group Group Group Group[inaudible] First, accommodation. Following the strong growth in the China travel market, we continue to present our real. We continue to press on with product innovation and differentiation to provide users with normal and unique experiences. On a high value package deal, also more than 8,000 million hotels, which best value for price, for customers to turn from, over 240,000 hotel conduits, which are our 10-plus program to offer extra benefits to our high-quality customers in reward for their costs and our loyalty.
Okay.
I would now like.
Penetration strategy.
Next year or so.
Continued to pay off.
Three questions.
Our product coverage pricing and customer acquisition.
Oh afterwards happy.
I had two gain actions to significant amount of new customers.
Right.
Great.
Okay.
Pete.
In a post pandemic era.
Should not be asked from Wunderlich.
Please proceed.
And if you didn't cover that.
Oh <unk>.
Yes.
And all from steep.
And part of the solution.
To plan their trips in today's fast paced world.
With advancements in technology and the rise of AI. Many couple company embracing in a week.
Customers with Sandy.
He has the potential to drive a wave of disruption that's true.
On it with the launch of <unk>.
Which can integrate.
Yes.
And so question.
And directly link the relevant information to the right patient.
Hum.
We also upgraded our travel buckets just to provide users a strong content.
I wanted to make.
Hey.
The generation denied breakaways.
Our travel norms next week.
In context.
We have also been establishing an infrastructure.
We generated content protection.
Rich our App created.
A key element.
Our content creation I'm trying to enhance our content monitoring.
Any deficiencies.
In Q2.
Generation pipeline.
You too morale and evening waste number.
Kilowatt hours.
Kris.
Expense year over year.
User generated content.
Great. Thank you.
Compared to last quarter.
Content marketing strategy will be around the product and technology innovation.
We'll continue.
Okay.
Okay.
Hence our content offerings.
Improving.
Zero.
Our customers and provide them.
Opportunities for our comments.
No no. It does talk about corporate responsibility, which we're focusing all while strengthening our capability.
Fire and serve customers.
Through the world.
Christian <unk>, our corporate responsibility works to make contributions to our site.
Alright.
On prosperity initiatives.
Makes sense to contract.
Yes. Thanks.
Okay.
<unk> Mitra Alcon.
Hum Laurel road maximizing strategy.
Once we have established 23 countries.
Across the country.
Thanks, Glenn there's opportunity.
Greetings.
Our local residents.
Hi.
Two Oh awesome.
Barrington.
Childcare subsidy also dedicated to empower reward than in the workplace and have recently launched a subsidy program.
Alleviate the financial burden of <unk>.
Tayo with birds, all our employees with a hope to encourage our employees to support our growth Anthony.
James Lee: With 50% of our 10-plus reservation, we continue to pay off, and we persist in enhancing our product, coverage, pricing, and customer acquisition. Our efforts are being, forging a head to gain traction, to a significant amount of new customers, and successfully spending our use of this.
Alrighty.
A question on costs and achievement.
Good sustainability with a growing focus.
Google of sustainable development.
We have been actively exploring the integration of business value and a social event.
We initiated.
Yes, Hi, Bob.
Okay last year.
Providing users with a wider range of green travel options and a half.
Great.
160 million people or.
Or no cover travels through our platform.
James Lee: Second, AIGT, in a post-apendemic era, for us, it should not be seen as a monolith, and it is key to understand that innovative travel that has their own demands and behaviors. They often seek efficient and personalized solutions to plan their journey in today's best-paced world, with advancements in technology and the rise of AI, many travel companies are embracing innovative ways to enhance customers' experience. Seeing the potential to drive a wave of disruption in the industry, we're funded with the launch of 15, which can interpret demands as a question and directly link the relevant information to the right pages.
Incentivizing.
How sustainable initiatives.
Honors.
Act more like minded organization.
Going to have all kind of encore.
Okay.
No country.
T Z decarbonization goals.
In conclusion, we are encouraged by the strong recovery in <unk> III, we are proud of the Atlas and the results delivered by our team even when international and it is still limited.
Backlogs remain which all point to a considerable untapped potential.
Travel recovery in a future.
We remain optimistic about downtime outlook.
Industry and will continue to strengthen.
James Lee: So, content, we also upgraded our travel market list to provide users strong content, in order to make travelers evolving. In other generations, designed to break away from traditional travel laws as seek-oriented encounters. We have also been establishing an infrastructure of AI-generated content production to enrich our ads created with AIGT elements. It has surprised our content creation. I'm trying to enhance our content quality and improve.
Product right.
All right.
Breaks down Council Bancshares.
With that I will now turn the call to Sandy.
Thanks, Jay good morning, everyone.
For the second quarter of 2023 chip they'll call group reported net revenue of RMB 11, 2 billion, representing a 180% increase from the same period last year and a 22% increase from the previous quarter.
Primarily due to a strong recovery in the travel market.
Accommodation reservation revenue for the second quarter was RMB 4.3 billion.
Cindy Wang: [inaudible] Group Group Group Group Group Group Group Group Group Group[inaudible] Group Group Group Group Group Group[inaudible] Group Group Group Group Group Group Thanks Jain, good morning everyone. For the second quarter of 2023, Trip.com Group reported a net revenue of RMB 11.2 billion, representing a 180% increase from the same period last year, and a 22% increase from the previous quarter, primarily due to strong recovery in the travel market. A accommodation reservation revenue for the second quarter was RMB 4.3 billion, representing a 216% increase year-over-year, and a 23% increase quarter-over-quarter, which is 26% higher than the 2019 level.
Representing a 216% increase year over year, and 23% increase quarter over quarter.
Which is 20% to 26% higher than the 2019 level.
Both domestic and outbound hotel have seen robust growth and outpace the industry.
Overall hotel bookings have achieved a record high and have grown over 50%.
Above the pre pandemic level.
Transportation ticketing revenue for the second quarter was RMB 4.8 billion.
Representing a 173% increase year over year, and a 16% increase quarter over quarter, which is 41% higher than the 2019 level.
This is mainly due to robust recovery of all about ear and strong growth in domestic and global air business.
Packaged tour revenue for the second quarter was RMB 722 million.
Representing a 492% increase year over year, and 87% increase quarter over quarter.
Recovering to 16, 9%.
Of the 2019 level.
Domestic package tour has outgrown the 2019 level, while a recovery in the outbound package tour was still lagging behind.
Corporate travel revenue for the second quarter was RMB $584 million.
Representing a 178% increase year over year, and a 31% increase quarter over quarter.
Which is 89% higher than the 2019 level with air ticket booking increased by double digit above 2019 level and hotel bookings.
Lifeboat the 2019 level.
Excluding share based compensation charges, our total adjusted operating expenses.
Was 18% higher than the previous quarter and 12% higher than the same period in 2019.
Okay.
Adjusted product development expenses for the second quarter increased by 9% from the previous quarter and increased by 12% compared with the same period in 2019.
Adjusted G&A expenses for the second quarter increased by 2% from the previous quarter and increased by 11% from the same period in 2019.
This is mainly due to increase in pest personnel related expenses.
The increase was mainly related to regular wage inflation at high performance based compensation in recognition of the exceptional performance achieved in this quarter.
The total head count of our product development and G&A teams was significantly lower.
Then the same period in 2019.
Okay.
Adjusted sales and marketing expenses for the second quarter increased by 34% from the previous quarter. It increased by 11% compared with the same period of 2019.
The sequential increase was primarily due to increased marketing and promotion activities.
Okay.
Adjusted EBITDA was RMB 3.7 billion for the second quarter compared with RMB 355 million in the same period last year.
In RMB, two 8 billion in the previous quarter.
Adjusted EBITDA margin was 33% for the same for the second quarter compared with 9% in the same period last year and 31% in the previous quarter.
Cindy Wang: Both domestic and outbound hotels have seen robust growth in outpaced industry. Overall hotel bookings have achieved a record high and have grown over 50% above the pre-pandemic level. Transportation ticketing revenue for the second quarter was RMB 4.8 billion, representing a 173% increase year-over-year, and a 16% increase quarter-over-quarter, which is 41% higher than the 2019 level. This is many due to robust recovery of outbound air and strong growth in domestic and global air business.
Diluted earnings per ordinary share and per ads was RMB <unk> 90.
94 cents or U S. Dollar 13 cents for the second quarter of 2023.
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 were RMB 5.11, our U S dollar 70 cents.
For the second quarter.
Okay.
As of June 32023, the balance of cash and cash equivalents.
Cindy Wang: Package tour revenue for the second quarter was RMB 722 million, representing a 492% increase year-over-year, and a 87% increase quarter-over-quarter, recovering to 69% of the 2019 level. Domestic package tour packed outgrown the 2019 level while recovering in the outbound package tour was still lagging behind. Corporate travel revenue for the second quarter was RMB 584 million, representing a 178% increase year-over-year, and a 31% increase quarter-over-quarter, which is 89% higher than the 2019 level, with air ticket booking increased by double digits above 2019 level and hotel booking, five votes, the 2019 level.
Restricted cash and short term investment.
Two maturity time deposit and financial products was RMB 17, 5 billion or U S. Dollar Tam point 3 billion.
Okay.
Turning to the third quarter of 2023.
We would like to share some colors of all business.
The travel market continued to.
To show very strong momentum in the third quarter.
Primarily driven by leisure travel demand.
In July the industry level air passenger involvement in effect in the domestic market with 10% to 15% higher than the 2019 level industry level Hotel Revpar was above 10% higher.
International Air passenger volume has also recovered to over 50%.
Quarter to date.
Our domestic hotel bookings have increased by over 70% when compared to the same period in 2019.
Cindy Wang: Excluding share-based compensation charges, our total adjusted operating expenses was 18% higher than the previous quarter, and 12% higher than the same period in 2019. Adjusted product development expenses for the second quarter increased by 9% from the previous quarter, and increased by 12% compared with the same period in 2019. Adjusted GMA expenses for the second quarter increased by 2% from the previous quarter, and increased by 11% from the same period in 2019.
And has increased by more than 100%.
In peak weeks.
In the almost segment all hotel and air bookings have recovered to 80% of the 2019 level and has even surpassed the pre pandemic levels during peak weeks.
In addition.
Our global Otas platform has also continued to maintain a triple digit growth when compared to the same period.
Before pandemic.
To conclude the strong level of bookings in the second quarter of 'twenty 'twenty suite across market segments is encouraging.
Cindy Wang: This is mainly due to increase in personnel-related expenses. The increase was mainly related to regular wage inflation and high performance-based compensation in recognition of the exceptional performance achieved in this quarter. The total account of our product development and GNA teams was significantly lower than the same period in 2019. Adjusted sales and marketing expenses for the second quarter increased by 34% from the previous quarter, and increased by 11% compared with the same period of 2019.
We are confident in travelers unwavering travel demand and the long term market outlook.
The main keen on capitalizing on the opportunities that lie ahead with us.
With that operator, please open the line for questions.
Thank you management.
I will begin the question and answer session to ask a question. Please press star one on your telephone.
<unk>, Okay. So you're requesting compressed star one again as a reminder, currently limit your questions to one question.
And you may join.
Steve.
Hello again.
Yeah.
First question comes from the line, Brian Gong from Citi. Please go ahead.
Cindy Wang: The sequential increase was primarily due to increase the marketing promotion activities. Adjusted EBITDA was RMB 3.7 billion for the second quarter compared with RMB 355 million in the same period last year, and RMB 2.8 billion in the previous quarter. Adjusted EBITDA margin was 33% for the second quarter compared with 9% in the same period last year, and 31% in the previous quarter. Diluted earnings per ordinary share and per ADS was RMB 94 cents or USD $13 cents for the second quarter of 2023, excluding share-based compensation charges and fair value changes of equity security investments and exchangeable senior notes.
Yeah, Good morning, James Jane Cindy and Michelle Thanks for taking my question and congratulations on solid results.
I have a quick question on AI.
James ended June Justin discussed.
So could you please provide more color on your January two.
As you know <unk> also adopting generative.
To try to improve search experience.
How do you evaluate the potential risks.
James on the platform with all of that traffic.
Replace otas or 'twenty, okay toward more like provider of travel products.
Thank you.
Thank you for the question.
Okay.
<unk>.
Chip.
Thank you.
Recently.
G which is capable.
Text and voice commands.
Fantastic.
And provides.
Cindy Wang: Nung Gap diluted earnings per ordinary share and per ADS were RMB 5.11 or USD $70 cents for the second quarter. As of June 30, 2023, the balance of cash and cash equivalents restricted cash, short term investment held to maturity time deposit and financial products was RMB 75 billion or USD $10.3 billion.
<unk> expenses.
We also launched an infrastructure.
January did the content production as a supplement to and Tom.
<unk> creation pipeline.
All content quantity and improve efficiency.
I believe January technology.
Okay platforms.
Is capable to help improve.
Efficiency of the OTT platforms.
So <unk> I.
Oh, well positioned to do that.
Okay.
Okay.
Charlie transaction data and deep understanding.
Cindy Wang: Turning to the third quarter of 2023, we would like to share some colors of our business. The travel market continued to show very strong momentum in the third quarter, primarily driven by leisure travel demand. In July, the industry level air passenger volume in the domestic market was 10 to 15 percent higher than the 2019 level. An industry level hotel Raspar was above 10 percent higher. International air passenger volume has also recovered to over 50 percent, quarter to date.
Yes.
Thank you that's very helpful.
Thank you.
Okay.
So we can move onto the next question.
Cindy Wang: Our domestic hotel bookings have increased by over 70 percent when compared to the same period in 2019 and have increased by more than 100 percent during peak weeks. In the album segment, our hotel and air bookings have recovered to 80 percent of the 2019 level and has even surpassed the pre-pandemic levels during peak weeks. In addition, our global OTA platform has also continued to maintain a triple-digit growth when compared to the same period before pandemic.
Okay.
Yes.
Okay.
Hello, operator.
Now operator, we can move onto the next question.
Cindy Wang: To conclude, the strong level of bookings in the second quarter of 2023 across market segments is encouraging. We are confident in travelers unwavering travel demand and long-term market outlook and remain keen on capitalizing on the opportunities that lie ahead with us.
Operator: With that operator, please open the line for questions. Thank you, management. We will now begin the question and answer session. To ask a question, please press star 11 on your telephone and wait for a name to be announced. To cancel your request, we can press star 11 again. As a reminder, can you limit your questions to one question? It's not, and you may join the queue again for a full-up question.
Excuse me this is the operator speaking.
Brian Gong: First question comes from the lawyer Brian Gong from City, please go ahead. Good morning, James James, Cindy and Michelle. Thanks for taking my question and the congratulations on solid results. I hope you have a question on AI that James and the Eugene just discussed. Could you please provide more color on your generative AI assistant? As such engines are also adopting generative AI technology to improve search experience, how do you evaluate the potential risks that search engines and the platform with large online traffic that might replace OTAs or turning OTA to a more like a mere provider of travel products. Thank you.
Thank you Bobby.
Next question is from Alex.
Joe.
J P Vulcan bundle, but that makes sense.
<unk> trend of China's a carnival market, including both leisure and business travel. Thank you.
Hi, Alex somehow we could not hear your full question can you. Please repeat the full question.
James Lee: Yes, thank you for the question. As mentioned, the alpha-period remarks were launched on first AI assistant's trip Jan earlier in February this year. We have recently rolled out an appropriate version of Cimcini, which is capable of each opening text and voice commands. Our first contextual assistance has provided actionable responses. We also launched an infrastructure of AI generated content production and the supplement to our content creation pipeline to enhance our content quality and improve efficiency.
Okay.
First part of the question is.
In the past few quarters <unk> seen any indication of consumption downgrades.
In China, as a leisure and business travel activity and then the second question is on your.
Your thoughts around long term client of China's travel markets, including both leisure and business.
Business travel thank you.
Thank you Alex.
James Lee: We believe generated AI technology will not replace OTA platforms, but assess its capable to help improve the operating efficiency of the OTA platforms. Also, OTA is well-provisioned to develop their own AI travel assistance with the help of their large travel transaction data and deep understanding of customer requirements. Thank you. That's very helpful. Thank you.
There has been concerns that a weakening consumer spending and investment may have a negative a spill over effect on the demand for travel.
Nevertheless, we maintained an optimistic outlook on the launch and growth of China's travel market as leisure travel holds a greater influence on industry growth and the demand for leisure travel.
<unk> early 2023 has remained very robust.
Operator: We can move on to the next question. Thank you.
And there has been a.
A couple of reasons why we have the while we keep quite optimistic on the mountain.
There has been a shift in the consumer spending away from goods and into the services and we expect to travel to occupy a larger share of the household expenditure as it is a significant component of explorer Rancho and service consumption.
Moreover, the continuous online penetration in the travel industry will drive further growth for otas, helping to offset some.
Some potential negative impacts.
Stemming from economic fluctuations.
So far we have seen no sign of consumers trading down in terms of a hotel.
Our rating or shortening dare lands of.
The average spending per customer on our platform in the first half of 2023 has already outgrown the pre.
Pandemic level increased amount and higher frequency of spending have seen for both new users and to repeating users.
Operator: Hello, operator. We can go on to the next question. Thank you.
With regard to the business travel.
Since normally at this minute.
This business travel.
Fitbit stronger correlation with economic activities we.
We just think anomic feel could create FERC hurdle for the growth of business travel spending in the short term. Meanwhile, we anticipate that the business will increasingly adopted managed corporate travel service as an effective approach to optimize their total travel budget.
That being said our corporate travel business has continued to show a robust performance. This year, primarily driven by an expanded range of hotel products and a growing corporate client.
Furthermore, according to a recent survey around 85, and 75% of Companys anticipate.
Raising there they were raised their domestic and international travel budget for this year.
And last but not least <unk>.
Recently, the government has also published a series of policies to promote service consumption and the travel industry.
L. Jiao: Our next question is from L. Jiao from JPMorgan Fundamentation. The first part of the question is, in the past a few quarters have you seen any indication of consumption downwards in China's leisure or business travel activity and then the second question is on your thoughts around long-term trends of China's travel markets, including both leisure and business travel.
We strongly believe that the innovation and infrastructure.
Development will inject energy into the recovery of the industry in general Thank you.
You.
Thank you for the questions as a reminder to ask question. Please press star one on your telephone and wait printing.
Yeah.
One moment for the next question.
Next question is from the line and excluding from Morgan Stanley . Please go ahead.
Good morning management, and thank you and congratulation on a very strong quarter.
Can management share more information about the recent performance of different segments.
Including domestic business outbound business and international travel and is there any additional color you could highlight for the upcoming national holiday in October and how should we think about the momentum in Q4 and beyond thank you so much.
Sure.
Domestic.
China travel market has already fully recovered and has outgrown.
The pre pandemic level the capacity of outbound flights further recovered to around 50% of the 2019 level.
James Lee: Thank you. Thank you, Alex. There has been the concerns that weakening consumer spending and investment may have a negative but spill over effects on the demand for travel. Nevertheless, we maintained an optimistic outlook on the long-term growth of China's travel markets as leisure travel holds a greater influence on industry growth and the demand for leisure travel since early 2023 has remained very robust. There has been a couple of reasons why we keep quite optimistic on the long-term.
According to the China Air Aviation Association outbound flight capacity is expected to reach 60% to 65% in the second half of 2023.
We will continue to outpace we continued to outpace the industry recovery in both the domestic Chinese and outbound travel market Aldo.
Our domestic hotel bookings has surpassed the 2019 level by 70%.
Bound hotel and air reservations on our platform has also recovered to more than 80% of the 2019 level.
James Lee: There has been a shift in the consumer spending away from goods and into the services and we expect travel to occupy a larger share of the household expenditure as it is a significant component of experiential and service consumption. Moreover, the continuous online penetration in the travel industry would drive further growth for OTAs, helping to offset some potential negative impacts and stemming from economic fluctuations. So far, we have seen no side of consumers trading down in terms of hotel star rating or shortening their lens of day.
In spite of the high base in the comparison period.
<unk> Oh T. Our overseas OTT platforms maintained a troubled digit growth over 2019 level.
With regard to the Commie Aten and National day holiday, we expect to see another wave of strong travel activity activities. The majority of its booking will be reflected in our Q3 results.
Since the current booking window remains quite short.
James Lee: The average spending per customer on our platform in the first half of 2023 has already outgrown the pre-pandemic level. Increased amount and higher frequency of spending have seen for both new users and repeating users. With regard to the business travel, since normally this business travel exhibits stronger correlation with economic activities. We do think economic field could create hurdle for the growth of business travel spending in the short term. Meanwhile, we anticipate that the business will increasingly adopt it, manage the corporate travel service as an effective approach to optimize their total travel budget.
So in terms of the <unk> the <unk>.
Q4 number we have a very limited visibility.
While our China domestic travel momentum may slow down due to weaker seasonality.
Outbound travel could see further recovery with the increase.
It was with the increased international flight capacity. Thank you.
Thank you for the questions one more Michael next question.
Next question comes from the line of Simon Cheng of Goldman Sachs. Please go ahead.
Hi, Good morning, Thanks for taking my question iPhone accurate two questions.
Good to see that you have outperformed the market and that the market continued to improve quite strongly.
And I think you had mentioned that thats largely driven by leisure travel.
James Lee: [inaudible] Today, they are domestic and international travel budgets for this year. And last but not least, recently the government has also published a series of policies to promote service consumption and the travel industry. We strongly believe that the innovation and infrastructure development were injecting energy into the recovery of the industry in general.
I think to the extent that you can give us some numbers how is the business travel.
As a percentage of total or even when you compare with the $2 and lighting level.
And some of the momentum that you have.
In the recent month or week on week that will be helpful. Guys. So first question.
And then the second question wanted to touch on the beat on the competitive landscape in China.
We've been hearing some of your peers, increasing subsidies on the Holy Cow Assortments.
And obviously one of the concern has been toadying stepping up cutting more aggressively.
And the market as well.
Providing different format chop up okay.
Wondering whether you how would you have been addressing it so we'd be expecting.
Sales and marketing expenses to.
Operator: Thank you. Thank you for the question. As a reminder to ask questions, please press star 1-1 on your telephone and wait for an interview. One moment for the next question.
That's great.
What we've seen in the last quarter. Thank you.
Thank you.
Have seen.
Basically a very strong recovery or increase in our <unk>.
This is across different.
Segment, so the corporate travel revenues for the second quarter.
Alex Poon: Next question is from Alex Poon from Morgan Stanley. Please go ahead. Good morning, management. Thank you. And congratulations on very strong quarter.
Represent 178% increase year over year.
And a 31% increase quarter over quarter.
Alex Poon: Can management share more information about the recent performance of different segments, including domestic business, outbound business and international travel? And is there any additional color you can highlight for the upcoming national holiday in October? And how should we think about the momentum and Q4 and beyond? Thank you so much.
In general, even though corporate travel business has that.
Chief have achieved the 89%.
If you compare it.
Other than the 2019 level.
Which mainly driven by the both the air and.
Especially the hotel bookings.
James Lee: Sure. Domestic China travel market has already fully recovered and has outgrown on the pre-bendemic level. The capacity of outbound flights further recovered to around 50% of the 2019 level. According to the China Aviation Association, outbound flight capacity is expected to reach 60% to 65% in the second half of 2023. We will continue to outpace, we continued to outpace the industry recovery in both the domestic Chinese and outbound travel market. Although domestic hotel bookings have surpassed the 2019 level by 70%, outbound hotel and air reservations on our platform has also recovered to more than 80% of the 2019 level. In spite of the high base in the comparison period, our overseas OTA platforms maintained a travel digit growth over 2019 level.
So the hotel bookings in the corporate travel business have achieved a five vote.
If you compare five times compared with the 2019 level, which has been up.
Gross leader for our corporate business.
Yeah Si explained corporate travel business are business travelers.
We'll have a higher correlation with the general macros, but we also see.
On the trend that the and Ashley the manage the business travel services has created a lot of our values to help our customers to manage their total travel spending therefore.
We to some extent see acceleration of the new user acquisitions.
In the corporate travel business.
Which to some extent will offset the potential negative impact.
And.
The second question.
Is about the content.
Competing with the content providers the content providers they have the.
Different core competence compared to the Otas in general and they primarily focusing on providing inspiration, whereas otas well S. S will prioritize transactions and service fulfillment.
James Lee: With regard to the coming autumn and national day holiday, we expect to see another way of strong travel activities. The majority of its booking will be reflected in our Q3 results. Since the current smoking window remains quite short, so in terms of the Q4 number, we have a very limited visibility. While our kind of domestic travel momentum may slow down due to weaker seasonality, our bound travel could see further recovery with the increase with the increase the international flight capacity. Thank you. Thank you for the questions. One moment for the next question.
Throw the robust supply chain management and high quality customer service.
Well, we are able to offer competitive products smooth booking experience personalized and reliable travel services.
Which all these factors. They so critical success factors to provide travel related services and I think for the content platform.
They will find it very difficult to replicate.
And at the same time.
We will continue to invest in our own content strategy, helping users to find inspiration and make well informed decisions.
Simon Turm: Next question comes from the light of Simon Turm of Gorbinsak. Please go ahead. Hi, Monning. Thanks for taking my question. I have actually two questions. Good to see that you have outperformed the market and that the market continue to improve quite strongly.
<unk>.
Okay.
Simon Turm: And I think you did mention that as largely children by leisure travel, I think to the extent that you can give us some numbers, how is the business travel as a percentage or total, or even when you compare with the 2000 lighting level. And some of the momentum that you have seen in the recent month or recent week, that will be helpful. That's the first question.
Hello.
Question comes from James Lee from Mizuho. Please go ahead.
Great. Thanks for taking my questions I have a big picture question here for Jay and if I can.
James Lee: And then the second question is, I wanted to touch on a bit on the competitive landscape in China. We've been hearing some of your payers' increasing subsidies on the old house admins. And obviously, one of the concern has been doing stepping up, turning more aggressively in the market as well, providing different formats of booking. Wondering whether you have been adjusting it, and so we be expecting to serve the marketing expenses to further escalate what we have seen in the last quarter.
Maybe help us understand how you think about the normalized growth rate.
Post the Covid recovery is it.
A friend them before since I am hearing that outbound ADR to entertain inflation are higher and stickier and also help us think about what drivers.
We should think about going forward in the past you talked about advertising just want to revisit some of the initiatives you're working on long term. Thanks.
Uh huh.
Sure. Thanks James.
In the long term, we look at a couple of baseline.
First of all the GDP growth rate, if we assume the GDP growth rate is somewhere around 5%.
James Lee: Thank you. We have seen basically very strong recovery or increase in our business across different segments. So the corporate travel revenues for the second quarter represent 178% increase year-over-year and 31% increase quarter-over-quarter. In general, even the corporate travel business have achieved the 89% if you compared higher than the 2019 level, which may be driven by both the air and especially the hotel bookings. So the hotel bookings in the corporate travel business have achieved the five-fold if you compare five times compared with the 2019 level, which has been a growth leader for our corporate business.
Normally the industry for travel will outpace the GDP growth rate by a couple percentage because people can't afford to Kabul normally burns and it has been more than average.
The people so we assume travel probably will be somewhere around eight.
And seven 8% and.
The third line, we're looking at is offline to online in.
I know, we can outpace the general industry growth by a couple of percentage so somewhere around 15% to 25% in the next couple of years is what we're targeting for.
The second thing is on the ADR.
Right.
We send more people from China to the rest of the world normally the air tickets is more expensive and hotel well state customers when they travel abroad OSD longer.
James Lee: As I explained, corporate travel business or business travelers will have a higher correlation with the general macos, but we also seen the trend that actually the managed business travel services have created a lot of values to help our customers to manage their total travel spending. Therefore, we to some extent see acceleration of the new user acquisitions in the corporate travel business, which to some extent will affect the potential negative impact.
Both on the ADR and <unk> will increase when we increase the percentage of outbound travel so whether positive on that.
The third one is on the drivers.
On the drivers we like you said the content.
Plus advertisement.
One of the drivers the second thing is on the technology piece.
How we can use your technology to explore new potential by offering better user interface and provide the targeted product. Therefore, we can increase the conversion better.
James Lee: And the second question is about the content competing with the content providers. The content providers, they have different core competence compared to the OTAs in general. And they primarily focusing on providing inspirations, whereas OTAs were prioritized transactions and service fulfillment. Through the robust supply chain management and high quality customer service, we are able to offer the competitive products, smooth booking experience, personalized and reliable travel services, which all these factors, these critical success factors to provide travel related services.
It's also another generation.
The addition of <unk>.
Our potential the third one year's geographic expansion as our customers are traveling from China to Asia from Asia to Australia, and New Zealand to the rest of the world.
We are also going to have more and more suppliers get on our on our system and therefore increase our footprint in the global places. So we're very excited for the future.
Future of the tower industry, and we will work very hard with our partners with our service teams to provide excellent service to our customer and bring new customers to our suppliers.
Thank you for your question. Our next question comes from <unk> <unk> from UBS. Please go ahead.
James Lee: And I think for the content platform, they will find it's very difficult to replicate. And at the same time, we will continue to invest in our own content strategy, helping users to find inspirations and make well informed decisions. Thank you.
Thank you management for taking my questions and congrats on another solid quarter.
I want to ask about the outbound travel because the recovery our all platform again exceeded the record pace of the industry and recently, we have further relaxation of group towards extending to 70 more countries and regions. So just wondering how should we think about the impact.
Outbound travel and our overall business. It also once we see better recovery on the outbound travel side will there be any cannibalization to the domestic travel side. Thank you.
Thank you.
<unk> level.
The the industry level outbound flight capacity is back to reach 60% to 65% in the second half of 2023.
James Lee: The next question comes from James Lee from Me Too Hope, please go ahead. Great. Thanks for taking my questions.
Jianzhang Liang: I have a big picture question here for Jane if I can. Maybe help us understand how do you think about the normalized growth rate post the COVID recovery? Is it different than before since I'm hearing that outbound ADRs, international inflation, a higher and stickier and also helpless think about what drivers we should think about going forward in the past. You talk about advertising. Just want to revisit some of the initiatives you're working on long term. Thanks. Sure. Thanks, James.
In the yeah in during the during the summer.
The holidays are.
While the industry level air capacity.
It's about 50% recovery, we already achieved.
Both our air and hotel.
Outbound business have recovered to about 80%.
If you compare with the pre pandemic level.
The expand its list of overseas tour destinations will contribute to the recovery.
Our outbound group tour business.
Jianzhang Liang: In the long term, we look at a couple of baseline. First of all, the GDP growth rate. If we assume the GDP growth rate is somewhere around 5%. Normally, the industry for travel will outpace the GDP growth rate by a couple of percentage because people who care for the travel normally earns a little bit more than average of the people. So we assume travel probably will be somewhere around 8% and the third line we're looking at is offline to online and we can outpace the general industry growth by a couple.
And with the total number of approved destination increased to 138.
Outbound travel to most destinations and.
And right now is.
Restricted and this development is it's back to instill the confidence in the travel market and potentially expedient. The restoration of international air capacity and local service capacity in the destinations, which will benefit across the board not only the.
The group tour, but also more importantly to our hotel air and all other product offering business targeting to the outbound business.
Jianzhang Liang: So somewhere around 15 to 25% in the next couple of years is what we're targeted for. The second thing is on the ADR, the increase when we increase the percentage of our own trouble. So we have a positive on that. The third one is on the drivers. On the drivers, we, like you said, the content plus advertisement is not the drivers. The second thing is on the technology is how we can use new technology to explore new potential by offering better user interface and provide the targeted product.
I think in general.
Our outbound business has come.
Comparatively higher.
Selling price while the service cost is pretty much the similar compare with our domestic business. So I don't think there will be a cannibalization.
After a 15th for example, the domestic business is just the four customers. They have a wider range of options for the destinations they can choose and outbound travel business definitely will become fewer.
<unk> future growth driver for our business moving forward. Thank you.
Thank you for the question.
Next question comes from Bruce <unk> from HSBC. Please go ahead.
Hello, Bruce Your line is now open. Please go ahead.
Hi can you hear me.
Yes, Yes go ahead, yes, hi.
Hi, This is <unk> equity that Bruce help me that just took on the line.
Ed.
One question for me two part.
Jianzhang Liang: Therefore, we can increase the commercial better. That's also another generation addition to our potential. The third one is geographic expansion. As our customers are traveling from China to Asia, to Australia, New Zealand, to the rest of the world, we are also going to have more and more suppliers get on our system and therefore increase our footprint in global places.
This quarter's results.
Hi bar compared to the pre COVID-19 level, both in terms of the domestic business as well as in terms of profitability do you think that the transition from offline to online or some of the pent up demand from the market share gain.
And then settle around this level and incremental growth will be more as the underlying business growth or you think that the adoption of AI in a dilutive AI.
Jianzhang Liang: So we are very excited for the future of the power industry and we will work very hard with our partners, with our service team to provide excellent service to our customers and bring new customers to our suppliers. Thank you.
Pace of offline to online that distorted from Covid, probably has further more room to go and we did that from the dot com and take a larger share.
Yeah, and AI definitely as said James and Jane explained.
So well have that impact.
Wei Xiong: Thank you for the question. Our next question comes from Wei Xiong from UPX. Please go ahead.
For all the industries.
For our industry it will impact for example.
Well help us to increase the efficiencies of our service center and on the same tie well.
Jianzhang Liang: Thank you, management for taking my questions and congrats on another solid quarter. I want to ask about the outbound travel because the recovery are our platform again, exceeded the recovery pace of the industry and recently we have further relaxation on group tours, extending to 70 more countries and regions. So just wondering how should we think about the impact on outbound travel and our overall business. And also once we see better recovery on the outbound travel side, will there be any categorization to the domestic travel side?
Change that potentially change the user behaviors.
<unk>.
Our result.
In general I think in travel industry steel our gross well.
What based on the a couple of fundamental things.
First is the.
The service capability, all excellent service quality that we offer to the users which will help the user to have a peace of mind peace of mind, especially when they travel for example in the long haul or to the outbound destinations as second is the.
Jianzhang Liang: Thank you. Yes, the industry level, the industry level outbound flight capacity is expected to reach 60 to 65% in the second half of 2023. During the summer holidays, while the industry level air capacity is about 50% recovery, we already achieved both our air and hotel outbound business have recovered to about 80%. If you compare with the pre-pandemic level and the expanded list of overseas group tour destinations will contribute to the recovery of our outbound group tour business.
And competitiveness of our inventory.
Once you have the best inventory to serve your customers you would definitely.
And.
Weighing a lot of users.
I think going forward.
Definitely move from offline to online will continue to fuel our future growth, but a couple a few things that I think Jay already explained in early question that we think to our long term gross were half or even after the COVID-19, we think Hal.
<unk> growth will be in the range.
The team's two twenties.
There's a couple of growth drivers.
Jianzhang Liang: And with the total number of approved vaccination increased to 138. The outbound travel to most destinations right now is unrestricted. And this development is expected to instill the confidence in the travel market and potentially expedient the restoration of international air capacity and local service capacity in the destinations, which will benefit across the board. Not only the group tour, but also more importantly to our hotel air and all other product offering business targeting to the outbound business.
And the first one is the expansion of our user basis as a result of our increased online penetration.
Particularly in the mid to lower tier cities. This larger population increase the GDP per capita present opportunities for our future business growth.
And the second one is <unk> and.
Increase the purchasing frequency and cross selling ratios, which will also contribute to the continuous growth of our business our transportation to the accommodation cross selling ratio has improved by more than 40% as compared with the as compared with the pre COVID-19 level.
Jianzhang Liang: Business. I think in general, our all-bound business has comparatively higher selling price, while the service cost is pretty much the similar compared with our domestic business. So, I don't think there will be a cannibalization of the existing, for example, the domestic business is just for customers. [inaudible] in general, in general Particularly in the mid to lower tier cities, this larger population increased the GDP per capita present opportunities for our future of business growth.
Last but not least the robust growth and improve the profitability of our trip Dot com business.
Our global OTC business will also significantly contribute to the group's long term development.
<unk>.
Thank you for the questions. Our next question comes from Thomas Chong of Jefferies. Please go ahead.
Hi, Good morning, Thanks management for taking my questions and congratulations on a strong set of results.
My question is about capital allocation.
Can management comment about the capital allocation plan for the utilization of your cash. Thank you.
Sure.
Our capital allocation approach is guided by a disciplined framework that prioritize the four key objects the first.
Is on ensuring.
And a sustainable operation in the face.
The macro economic uncertainties, especially we just experienced.
A pandemic during a pandemic the top priority for us is to have a positive.
Operating cash flow that is the.
That is the key success.
Success factor to help us to went through the whole pandemic period.
And the second one is investing in the strategic initiatives that will drive our long term growth for example, our investment into the AI our investment.
In the in our global business trip Dot com et cetera.
And the third one is to fulfilling our debt obligations.
And the last one and most important one Asa we will consider how to return our capital to return it back to our shareholders long term shareholders. Thank you.
Thank you.
We've got it out we would like to come to a close for the Q&A session allow me to hand, the call back to Michelle Qi for closing remarks.
Thank you thanks, everyone for joining us joining us today, you can find the transcript and webcast of today's call on <unk> Dot trip Dotcom, we look forward to speaking with you on our third quarter of 2023 earnings call. Thank you and have a good day. Thank you everyone you.
Ladies and gentlemen that concludes today's conference call. Thank you for your participation you may now disconnect your lines.
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Jianzhang Liang: And the second one is an increased purchasing frequency and cross-selling ratios, which will also contribute to the continuous growth of our business. Our transportation to the accommodation cross-selling ratio has improved by more than 40% as compared with the pre-COVID level. Last but not least, the robust growth and improve the profitability of our trip.com business. Our global OTA business will also significantly contribute to the group's long-term development. Thank you.
James Lee: Thank you for the questions.
Thomas Chong: Our next question comes from Thomas Chong of Jeffrey's Peace Corps Head. Hi, good morning. Thanks for management for taking my questions and congratulations on the strong set of results. My question is about capital allocation. Can management comments about the capital allocation plan for the utilization of your cash? Thank you.
Cindy Wang: Our capital allocation approach is guided by a disciplined framework that prioritized the four key objects. The first is ensuring the sustainable operation in the face of the macroeconomic uncertainties, especially we just experienced the pandemic. During the pandemic, the top priority for us is to have a positive operating cash flow. That is the key success factor to help us to go through the whole pandemic period. And the second one is investing in the strategic initiatives that will drive our long-term growth, for example, our investment into the AI, our investment in our global business trip.com etc. And the third one is to fulfilling our debt obligations. And the last one, and the most important one is we will consider how to return our capitals to return it back to our shareholders. Thank you.
Okay.
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Michelle Qi: With that, I would really like to come to the close for the Q&A session, allow me to hand the call back to Michelle Chi for a call very well. Thank you. Thanks everyone for joining us today. You can find the transcripts and webcasts of today's call on www.kingwapers.trip.com.
Michelle Qi: We look forward to speaking with you on our third quarter of 2023 earnings call. Thank you and have a good day. Thank you everyone. Thank you.
Yes.
Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect your lines. Group.com[inaudible] Group.com Group.com Group.com Group.com Group.com[inaudible] Group. Group.com.com. Group.com. [inaudible] Group. Group. [inaudible] Group. Group. [inaudible] Group. Group. [inaudible] Group. Group. Group.com Group.com. Group.com.
Operator: Thank you for your time, and I'll see you next time. Thank you for your time. [inaudible] Group Group Group Group Group[inaudible]
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