Q2 2024 GreenTree Hospitality Group Ltd Earnings Call
All rights reserved. © The United States Department of State All rights reserved. © The United States Department of State
Speaker Change: Dr. Wang,
Rene Vanguestaine: Unknown Executive, Rene Vanguestaine
Rene Vanguestaine: Unknown Executive, Rene Vanguestaine
Rene Vanguestaine: [inaudible]
Rene Vanguestaine: [inaudible]
Speaker Change: Hello, ladies and gentlemen. Thank you for standing by for GreenTree's second quarter of 2024 earnings conference call. At this time, all participants are in listen-only mode.
Speaker Change: After management's prepared remarks, there will be a question and answer session.
Speaker Change: As a reminder, today's conference call is being recorded.
Rene Vanguestaine: I would now like to turn the meeting over to your host for today's call, Mr. Rene Vanguestaine of Christensen. Please proceed, Rene.
Rene Vanguestaine: Thank you, Rucco. Hello, everyone, and thank you for joining us.
Speaker Change: GreenTree's earnings release was distributed earlier today and is available on our IR website at ir.998.com as well as on PR Newswire's services.
Speaker Change: As a reminder, we also posted a PowerPoint presentation that accompanies our comments to the same IR website.
Speaker Change: On the call from Green Tree are Mr. Alex Xu, Chairman and Chief Executive Officer, Ms. Selina Yang, Chief Financial Officer, and Mr. Jason Zhang, our new Financial Director.
Speaker Change: Jason replaces our former financial director, Ms. Alan Zhao, who officially retired earlier this month.
Speaker Change: Mr. Xu will present the company's performance overview of the second quarter of 2024, and Ms. Yang and Mr. Zhang will then discuss financials and guidance.
Speaker Change: They will all be available to answer your questions during the Q&A session which follows.
Speaker Change: Before we begin, I'd like to remind you that this conference call contains forward-looking statements.
Speaker Change: Within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995.
Speaker Change: These overlooking statements can be identified by terminology such as may, will, expect, anticipate, aims, future, intents, plans,
Speaker Change: Beliefs, Estimates, Continue, Target, Is or Are Likely to, Going Forward, Confident, Outlook, and Similar Statements.
Speaker Change: Any statements that are not historical facts, including statements about the company and its industry, are forward-looking statements.
Speaker Change: Such statements are based upon management's current expectation and current market and operating conditions.
Speaker Change: and relate to events that involve known and unknown risks, uncertainties, and other factors.
Speaker Change: All of which are difficult to predict, and many of which are beyond the company's control, which may cause the company's actual results, performance, or achievements to differ materially from those in the forward-looking statements.
Speaker Change: You should not place undue reliance on these forward-looking statements.
Speaker Change: Further information regarding these and other risks, uncertainties, or factors is included in the company's filings with the U.S. Securities and Exchange Commission.
Speaker Change: All information provided, including the forward-looking statements made during this conference call, are current as of today's date.
Speaker Change: The company does not undertake any obligations to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.
Speaker Change: It is now my pleasure to introduce our Chairman and Chief Executive, Mr. Alex Xu. Mr. Xu, please go ahead.
Alex Xu: Thanks, Rene, and hello, everyone, and thank you for joining us today.
Alex Xu: In the second quarter, we faced the challenges as China's economy continued to recover.
Alex Xu: We believe both consumers and business exercise the caution in discretionary spending, which had a negative impact on our overall performance.
Alex Xu: However, we continued to upgrade a number of hotels in our portfolio in order to better respond to increasing competition.
Alex Xu: while we believe this will help our performance in the future.
Alex Xu: Second quarter hotel revenue did decrease 14.8% year-over-year.
Alex Xu: We continued to execute on our strategy to return our restaurant business to business.
Alex Xu: to Profitability by Moving Away from Leased and Operated Restaurants in Supermarkets and Regional Shopping Centers towards Franchised Street Stores.
Alex Xu: As a result, the net income turned positive this quarter after breaking even last quarter compared to losses in both corresponding quarters a year ago.
Alex Xu: Our focus is now fully on growing the number of franchise street stores and stores with stable consumer traffic.
Alex Xu: Please turn to Slide 5.
Alex Xu: Compared with the second quarter of 2023, hotel rough power was 125 RMB, down 10.8%, and the restaurant ADS, that's average daily sales per store,
Alex Xu: was 4,737 RMB, down 22.1%.
Alex Xu: Total revenues were 329.7 million R&B, down 20.5%.
Alex Xu: Hotel revenues were 264.6 million RMB. That's down 14.8% mainly due to a 10.8% year-over-year decrease in rural power and the closure of some L.O. hotels.
Alex Xu: and partially offset by new openings.
Alex Xu: Restaurant revenue decreased to 65.3 million RMB as we continued to execute our strategy to reposition this business and closed a number of underperforming restaurants.
Alex Xu: Income from our operations decreased to 84.4 million RMB with a margin of 25.6%.
Alex Xu: Net income was 62.3 million RMB, down 38.9% with a margin of 18.9%.
Alex Xu: The adjusted EBDA non-GAP was 83.1 million RMB down 34.5% with a margin of 25.2%.
Alex Xu: Slide 6 shows detailed the number of total revenues, income from operations, net income, and adjusted EBITDA.
Alex Xu: Slide 7 shows the trend in our quarterly operation performance.
Speaker Change: In the second quarter, compared to a year ago, raw power for our L.O. hotels decreased by 7.3% to 177 RMB.
Speaker Change: Raw power for our FM hotels decreased by 10.9% to 124 RMB.
Speaker Change: ADR for our LL hotel decreased by 2.1% to 250 RMB and ADR for our FM hotel decreased by 4.4% to 117 RMB, 171 RMB.
Speaker Change: Occupancy at our L.O. hotels was down 3.9 percent to 70.7 percent.
Speaker Change: and occupancy at our FM hotels was down 5.3% to 72.6%.
Speaker Change: Slide 8 highlights the growth in our membership programs, which accounted for most of our direct sales.
Speaker Change: Individual memberships grow to $96 million, up from $84 million a year ago, and corporate memberships grow to $2.1 million, up from $1.96 million a year ago.
Speaker Change: Slide 9 shows the operating performance of restaurants with ADS down 22.1% year-over-year at RMB 4737, but up sequentially.
Speaker Change: Starting with slide 11, I will review our strategic execution across our businesses.
Speaker Change: In our hotel business, we further expanded in the mid to upscale segment and in tier 3 and lower cities in South China.
Speaker Change: As you can see on slide 12, we continue to grow our mid to upscale segment with 505 hotels, that's 11.8% of our total portfolio at the end of this quarter.
Speaker Change: While the mid-scale segment remains the core of our hotel business at 69%, we continue our expansion into the higher-end segment.
Speaker Change: The economy segment ended the quarter at 19.2 percent.
Speaker Change: Please turn to slide 13.
Speaker Change: We continued to expand in tier 3 and lower cities.
Speaker Change: and 72.3% of our hotels in our current pipelines are in such cities and we'll further capitalize on the substantial opportunities in these locations.
Speaker Change: on Flight 14.
Speaker Change: We continued to focus on increasing the profitability of our restaurant business.
Speaker Change: to achieve this.
Speaker Change: We have implemented a three-pronged approach to reposition the business.
Speaker Change: first.
Speaker Change: Closing Unprofitable L.O. stores.
Speaker Change: Increasing the proportion of FM stores.
Speaker Change: and expanding the number of street stores.
Speaker Change: Franchised and managed restaurants accounted for 86.9% at the end of the quarter compared to 72.3% a year ago.
Speaker Change: and three stores accounted for 45.4% compared to 37.9% a year ago.
Speaker Change: Next, Selina Yang and Jason Zhang will review Operating and Financial Highlights.
Selena Yang: Thank you, Alex.
Selena Yang: I will review our hotel business.
Selena Yang: Please turn to slide 16.
Selena Yang: In the second quarter, total hotel rack news decreased 14.8% to 264.6 million RMB compared to the second quarter of 2023.
Speaker Change: Total revenues from ARO hotels were 105.9 million RMB, down 19.5% year-over-year.
Speaker Change: The decrease was primarily attributable to a 7.3% year-over-year decrease in the second quarter RAPA of Aero Hotels.
Speaker Change: Five Aero Hotels Closed
Speaker Change: and the reduction of subleased revenues,
Speaker Change: Total revenues from FM Hotels decreased 11.3%.
Speaker Change: to 157.8 million RMB.
Speaker Change: The decrease was mainly due to a decrease in FM Hotels' repa and remodeling.
Speaker Change: Oh, slide 17
Speaker Change: Total hotel printing costs and expenses increased 2.1% year-over-year to 217.7 million RMB.
Speaker Change: Operating costs decreased 4.5 percent to 143.4 million RMB year-over-year.
Speaker Change: which was mainly due to the lower personnel cost.
Speaker Change: Laura Hotel-Related Material Consumption
Speaker Change: and lower utilities give a lower occupancy rate and the closure of L.O. hotels.
Speaker Change: offset by increased rental costs and D&A due to newly opened air or hotels since the third quarter of last year.
Speaker Change: Valiant marketing expenses were 13.2 million RMB.
Speaker Change: A year-over-year decrease of half a million RMB.
Speaker Change: Many due to lower advertising expenses.
Speaker Change: General and administrative expenses were 54.9 million RMB.
Speaker Change: Up 23.6% compared with the same quarter of last year.
Speaker Change: The increase was mainly due to an increase in bad debt provisions for long-aged accounts receivables.
Speaker Change: Turning to slide 18.
Speaker Change: Due to the decline in revenue, our hotel business saw a decrease in profitability in the second quarter.
Speaker Change: Income from hotel operations decreased from 108.5 million RMB to 81.6 million RMB year-over-year.
Speaker Change: Net income was 63.1 million RMB compared to 114 million RMB in the second quarter of last year.
Speaker Change: Adjusted EBITDA of hotel business decreased 37% to 81.9 million RMB and the core net income decreased to 22.4% to 67.6 million RMB year-over-year.
Speaker Change: Next, let me turn the call over to Jason for the review of our restaurant business.
Jason Zhang: Visiting to slide 19, in the second quarter, we continued to recreate our restaurant business and open more franchised and managed stores.
Jason Zhang: Total revenues were $35.3 million RMB.
Speaker Change: down 37.8% year-over-year and the total cost and expenses decreased 44% year-over-year to 34.3 million RMB.
Speaker Change: to lower ADS and decrease in the number of atherosclerosis due to the closure of unprofitable atherosclerosis.
Speaker Change: And on the slide 20, these measures lead to improve profitability, income from operation was 2.9 million RMB.
Speaker Change: At just a bit worth 1.2 million RMB, net profit and core net income turned from loss to profit.
Speaker Change: Next, Selena will reveal the profitability of our group. Thank you. Please turn to slide 21.
Selena Yang: Group net income per ADS, that's basic and diluted, decreased by 39.9% to $0.61 RMB.
Selena Yang: and Core Net Income for ADS, that's basic and diluted non-GAAP, increased by 3% to $0.69 RMB.
Selena Yang: Let's now take a look at slide 22.
Selena Yang: As of June 30, 2024, the company had total cash and cash equivalents, restricted cash, short-term investments, investments in equity securities, and time deposits.
Selena Yang: of 1,737.2 million RMB.
Selena Yang: compared to 1,517.1 million RMB as of March 31st, 2024.
Selena Yang: The increase was mainly attributable to continued operating cash inflow, the disposal of a property and the repayment of loans from franchisees.
Selena Yang: All slide 23.
Selena Yang: Considering our performance during the first half of this year and the impact of closing certain and all hotels due to lease expirations and strategic decisions.
Selena Yang: We have revised our revenue guidance for the hotel business.
Selena Yang: Now we anticipate its performance in 2024 to remain flat compared to the last year.
Selena Yang: As Board of Directors has approved the payment of cash dividend
Selena Yang: of U.S. dollars 10 cents per ordinary share or 10 cents U.S. dollars per American deposit share, that's ADS, payable to holders of the company's ordinary shares.
Selena Yang: show on the company's record as closing of trading on September 30, 2024.
Speaker Change: This concludes our prepared remarks. Operator, we are now ready to begin the Q&A session.
Speaker Change: Thank you. If you would like to ask a question, please press star then 1 on your telephone keypad.
Speaker Change: If you'd like to remove yourself from queue, please press star then 2.
Speaker Change: Once again, that's farther than one if you have a question.
Speaker Change: And today's first question comes from Bruce Mee with UBS. Please go ahead.
Bruce Lee: Hi Alex, Selena, and Jason. Thanks for taking my question. So I have two questions. The first one will be regarding the hotel business.
Bruce Lee: So, could you please introduce a bit about the rare part trend in July and in August so far?
Speaker Change: on a year-over-year change basis.
Speaker Change: And also, we saw that you have changed your four-year hotel revenue guidance. So could you please also provide some color on the report outlook for the second half?
Speaker Change: And that's my first question. And the second question is regarding the shareholder return plan. And we saw that we have declared a cash dividend at this time, so will it be a long-term shareholder return plan? Thank you.
Speaker Change: Thank you. Thank you.
Speaker Change: Regarding the hotel roll call for July and August,
Speaker Change: The Q3 in July, we saw a little bit steeper drop compared with the same period, the same July last year, around 15%.
Speaker Change: Then in August , the first half in August , our raw power is catching up, recovered to about less than 10% of drop compared to last year.
Speaker Change: Last year, I think, was especially in the summer, the stronger year.
Speaker Change: from the previous years. And so there is a correction from the record. I think we, you know, looking back, I think somewhat is more understandable.
Speaker Change: So that's the...
Speaker Change: for the next two months, for the third quarter.
Speaker Change: We anticipate we will operate probably the same levels of reduction as the second quarter comparing with
Speaker Change: of the last year, 2023. For the balance of the year,
Speaker Change: And our projection is our total revenue side will be flat.
Speaker Change: comparing with the year of 2023.
Speaker Change: for several reasons. One, we have reduction in terms of the raw power. We also have an increase in terms of the new openings and we still
Speaker Change: We still anticipate and plan about 480 new openings, even though we have a short dip in the second quarter. But we're looking at the pipeline. The third quarter, fourth quarter, we'll catch up.
Speaker Change: And that also will be offset a little bit by, we have a reduction in the membership income somewhat. And also we have about 400 hotels.
Speaker Change: in the upgrade mode, because...
Speaker Change: about 400 this year will be going through the remodeling slightly more than last year because last year was the first year we're coming out of the pandemic.
Speaker Change: And we have given our franchisees some breathing room, you know, to operate the hotels, to generate some cash.
Speaker Change: to help their businesses. So this year we have.
Speaker Change: planned and also
Speaker Change: encourage a lot more.
Speaker Change: and going through the upgrade and the remodeling. So we have a lot of the, we typically give six months to one year of the.
Speaker Change: grace period if the hotels go through that remodeling phase.
Speaker Change: And also, in light of the challenging, at least on the service, hotel and restaurant industry, we have given our franchisee a little more in terms of
Speaker Change: franchise signing application fees.
Speaker Change: and various services, and we have added the various services.
Speaker Change: So combined, and so we'll see a revenue to remain flat compared with the 2023. Okay, so that's on the hotel business.
Speaker Change: and on the shareholder dividend.
Speaker Change: even though the second quarter we see a drop compared with the same revenue side with the same period of last year.
Speaker Change: However, you can see we still generate a very strong cash flow, and especially with our disposal of one property and added another 120 million cash into the bottom line.
Speaker Change: and the author, we think,
Speaker Change: and anticipating the other growth-needed capital we think it is appropriate for the first half of the year and we declare this dividend. We had a continued dividend policy before which was interrupted by
Speaker Change: the pandemic and our plan is to continue.
Speaker Change: and this dividend practice and the borrowing from any, you know, great growth potential requires further cash infusion will continue to deliver sustainable profitable growth.
Speaker Change: to the bottom line and deliver sustainable returns to our shareholders. So this is our long-term plan and we'll continue to do this.
Speaker Change: So thanks, Bruce, for those two wonderful questions.
Bruce Lee: Thanks, Alex, for the answers. It's super helpful. Thank you.
Speaker Change: And our next question today comes from Luan Liu with China Securities. Please go ahead.
Luan Liu: Okay, thank you. Thank you for the management team. And I have two questions. First is about...
Luan Liu: The Command The Command
Luan Liu: I wonder if there is a difference between the business and the leisure demand.
Luan Liu: Can you draw some colors on this question? And also, the second question is about, is there any difference like for us, for the second quarter, for our hotels, like in first and second tier city and the low tier city? Thank you.
Speaker Change: The first question regarding the pattern changes in terms of the ratio between leisure and businesses.
Speaker Change: We do observe the trend that there is more leisure travels than the business travels.
Speaker Change: and there are also higher demand.
Speaker Change: in the third tier cities that, you know, typically we have the scenery and the resort area.
Speaker Change: And so we do think that the trend will continue considering we have a large number of retirees are going into the retirement mode in the next few years.
Speaker Change: So the leisure travel and especially the economy and the budget leisure travel.
Speaker Change: will continue to rise, and we are anticipating and planning for this. And the hotels in these areas are performing exceedingly well.
Speaker Change: and for instance some of our hotels in those resort and summer retreat areas and achieved even a record earnings and record occupancy.
Speaker Change: With regard to the first, second, and third cities,
Speaker Change: We did have a trend.
Speaker Change: which we can share with you. We see this year the first tier cities, the raw power drops, at least in our business, the most at 12.5 percent.
Speaker Change: and the second tier, a drop of 11.7%. Typically the last year, you know, they, with the finish of the pandemic, I think a lot more travels, business travels, generally businesses, and also government.
Speaker Change: for their presentation.
Speaker Change: business seminars and the business development activities are exceedingly very high.
Speaker Change: and we do see some reduction in that number. So the third tier, the most resilient in our model, has a reduction, has less of an impact, about 9% reduction in viral power.
Speaker Change: So that's the phenomenon trend that we have observed, and we do believe this trend may continue for a while.
Wayne: So thanks, Wayne.
Wayne: Thank you very much.
Speaker Change: Thank you. And our next question today comes from Kelvin Huang with Mica Capital. Please go ahead.
Kelvin Huang: Thank you. Good evening. Thanks for taking my questions. I would like to have three, if I may. I think that it's better for me to ask the question one by one.
Speaker Change: so that that will make you easy to answer that. The first one is more, we will look at it more on a broader, top-down base.
Speaker Change: I would like to know, could you talk about the trend of actually the whole industry?
Speaker Change: And how do you see this trend going forward?
Speaker Change: And at the same time, are you facing any difficulties at the moment? And what measures have you been taking to deal with these difficulties? And we would be glad if you could also give us a comparison of the company's performance in the second quarter compared with other peers.
Speaker Change: So that's my first question. I have another two after you answer this one.
Speaker Change: Okay.
Kevin: All right. Thanks, Kevin.
Speaker Change: Regarding the trend in the, I'll talk about the, especially the hotel industry and then later we can touch about the restaurant.
Speaker Change: We have not seen industry-wide statistics of the performance for the second quarter.
Speaker Change: So we cannot make a meaningful comparison to others, but I can share with you what we have observed.
Speaker Change: and we did get some feedback from the leading.
Speaker Change: Industry OTAs.
Speaker Change: And so we have an idea. So we are at least, I think, a better performing group.
Speaker Change: compared with the same period of last year.
Speaker Change: Ltd.
Speaker Change: Our company has built our strength.
Speaker Change: to face the challenges both up and down. So, when the industry is facing challenges,
Speaker Change: Our main concern
Speaker Change: is the health and the profitability of our franchisees.
Speaker Change: and also the stable, you know, employment environment for our people.
Speaker Change: So in order to fend off this kind of up-and-down volatilities,
Speaker Change: I think the key is...
Speaker Change: How do we increase our core competitiveness?
Speaker Change: You know, I think that the green tree in the past, especially after, you know, the pandemic, we have many aged.
Speaker Change: all their properties.
Speaker Change: that needed to be upgraded.
Speaker Change: And we have worked with our franchisees.
Speaker Change: in the last one and a half years.
Speaker Change: And we continue to increase our brand value proposition. And so, in other words, how we can help our franchisees to maintain
Rene Vanguestaine: Unknown Executive, Rene Vanguestaine
Rene Vanguestaine: and streamline the operation to reduce the leakage.
Speaker Change: Unknown Speaker 08.01.2010
Speaker Change: So, we have a Björk.
Speaker Change: A Better Supporting System.
Speaker Change: in the improved, especially in this year, to have a timely and more efficient
Speaker Change: support to our franchisees. And we also have more focused local sales.
Speaker Change: because everybody is fighting for the national sales, but I think the local sales, local customers.
Speaker Change: I mean, this is not only for the restaurant business.
Speaker Change: for the hotel business as well. And we focus on the local...
Speaker Change: sales and the business development. As a result, we believe our downward trend
Speaker Change: is like-to-like and the same, you know, for instance, the same store or like kind of properties.
Speaker Change: We're not talking about the new, you know, the different composition of the properties.
Speaker Change: and then we'll be, I think we're performing one of the, you know, better ones in the industry.
Speaker Change: We're waiting for the other groups to record the numbers. We'll make a detailed comparison.
Speaker Change: Another effort that we've been focusing on is building and also continue to showcase our brand
Speaker Change: by going, you know, by repositioning, by improving our, you know, by our L.O. hotels.
Speaker Change: You can see from the page...
Speaker Change: . . . .
Speaker Change: Page, I think page seven to eight in the hotel performance side.
Speaker Change: our L.O. Hotels.
Speaker Change: continue to lead the FM hotels in both the raw power and also the occupancy. So as a result, as a result that
Speaker Change: We will transfer, we'll replicate.
Speaker Change: of the Business Practice of the Business Practice Group Ltd.
Speaker Change: to the franchisees and leading the franchisees to face, you know, this downward pressure challenges.
Speaker Change: Okay. So, Kevin, that's our focus for the time being.
Speaker Change: And we are confident that we will continue to be the most profitable value deliverer to our customers.
Speaker Change: front IVs to our businesses.
Speaker Change: Okay, that's very helpful. I would like to have two more questions. The second one, again, a follow-up on the hotel industry.
Speaker Change: I heard that you are going to maintain the plan of opening 480 to 490 hotels.
Speaker Change: throughout the year. But if we look at
Speaker Change: The second quarter, indeed we, is there any special reason for the particularly low number of...
Speaker Change: Hotel openings during the quarter, is it because of competition or franchisee? And at the same time, apart from organic growth, are you also looking for any M&A opportunities?
Speaker Change: Okay.
Speaker Change: Thanks Kevin. The second quarter we did have slower, you know, lower number of openings and for, I think it just happened that some of the scheduled openings
Speaker Change: getting delayed a little bit. I think it's partially because now I think the regulation for opening hotels is a little bit more, you know,
Speaker Change: I would say restrictive and all the required licenses.
Speaker Change: A little bit harder to obtain than before. So we have a, we looked at the, in the pipeline. So we have a number of hotels that takes a little bit longer to obtain.
Speaker Change: all the licenses.
Speaker Change: And we have planned to do a better job in terms of educating our franchisees.
Speaker Change: and to give them a better support in doing so and we have looked at the pipeline in the next quarter I think we are in third quarter we are going to open 170 plus or minuses
Speaker Change: and so we have we have the hotel numbers in the pipeline so we're pretty confident in that. With regard to
Speaker Change: whether we have other competition in the marketplace.
Kevin: our experienced Kevinstead.
Speaker Change: We want to maintain a quality higher growth instead of just for the numbers sake.
Speaker Change: and I think standardization, higher quality of the hotels and the products and services.
Speaker Change: And that is more important to our franchisees, to the long term.
Speaker Change: Growth and Profitability of the Company
Speaker Change: So we want to take a more disciplined approach.
Speaker Change: and every hotel we open, we want to be a...
Speaker Change: profitable one and can be sustainable for our franchisees.
Speaker Change: And so we are not going to be just, you know, for...
Speaker Change: Growth for the sake of growth by growing the numbers. So that's our internal focus and it's absolutely strictly focused on the franchisee's profitability.
Speaker Change: So, and that...
Speaker Change: is our focus, and so even though there may be some
Speaker Change: competitions, but our core customer space is there.
Speaker Change: and so we're helping them to evaluate the site and do a better design and build the products at the most efficient ways and anticipating the future consumers' behavior and the requirement.
Speaker Change: and that's what we're doing and then
Speaker Change: With that, we think we can earn the confidence and the respect from our customers.
Speaker Change: that we still are proud of our loyalty of our green tree franchisees.
Speaker Change: done an aggressive searching in the M&A opportunities.
Speaker Change: partially because we had a two which was not so successful and part of the reason is also because of the pandemic and also the performance guarantee so didn't lead to a good result.
Speaker Change: And so we are going to be more focused on...
Speaker Change: And if we do an M&A and we have to find the group with the same culture, with the same focus on the profitability of the franchisees.
Speaker Change: and the team growth and efficient system and operations and most importantly, their value proposition has to be and the brand proposition has to be complementary to green trees.
Speaker Change: and at this moment I think it's a little harder to find. We do not want to dilute our efforts and focus now.
Speaker Change: and to reposition some of our older properties and also build of new ones and in a very short period of time I think we'll be the leading we hope it will become the most
Speaker Change: value the brand by our employees and the customers in the industry.
Speaker Change: Great, great. The stance is very clear. And one final small question about your...
Speaker Change: Your restaurant business
Speaker Change: So it's actually great to see that it has turned profitable in Q1 and now better in the second quarter. So I would like to know about the company's plan for this business in the future.
Speaker Change: Especially in terms of like store openings, like FM store openings, Lowe's stores, what's your plan on that, any potential difficulties you may face and
Speaker Change: Actually, is there any plan for you to lease or separately lease this restaurant business because it's doing so good?
Speaker Change: Okay, thanks Kevin. Appreciate it for your, you know, praise and it is a tougher business and we have spent
Speaker Change: Some time in reposition our business.
Speaker Change: We have two of the famous but legendary or also a legacy brand. Both of them are over 20 years old.
Speaker Change: and I think in our economy if you can survive and still grow and still be a little bit more you know profitable after 20 years.
Speaker Change: It's almost a miracle to our team.
Speaker Change: and one of the reasons
Speaker Change: were able to turn the business around, I think it's really to
Speaker Change: understand that the consumer demand, the traffic pattern, and also the products mixed.
Speaker Change: and the team efficiency. I think those are the...
Speaker Change: a few factors we've been focusing on. And we're especially focusing on the value creation for the restaurant business. So which part of the area that we can create the most value.
Speaker Change: So to make both Danian Dumplings and also Lugan Café relevant.
Speaker Change: to our consumers.
Speaker Change: So we did quite a bit of reposition, I think our team.
Speaker Change: has made a great effort and we have also been receiving many inquiries to see whether we want to buy or invest in other restaurant brands.
Speaker Change: at this moment.
Speaker Change: I think with our transition is still not completely solidified so we'll take some time and to figure out and what is the best format
Speaker Change: What is the best product mix and value propositions?
Speaker Change: for our customers and for our, you know, the franchisees.
Speaker Change: and then we can speed up the restaurant development.
Speaker Change: The worst case scenario is that we spend a bunch of, or spend the franchisees, a bunch of capex, and end up...
Speaker Change: You know, selling wet milling lost $500,000.
Speaker Change: and that's the area we do not want to get into that. So this year, we still want to be conservative. We planned for about 60 in the beginning of the year, 60.
Speaker Change: New stores, new restaurants, and we're still trying to target to open that.
Speaker Change: It's more in the community, street stores, with the right format.
Speaker Change: And our ADS reduction partially was also due to we shrink, we reduced the footprint, the square footage of those restaurants.
Speaker Change: And in the long run, we hope that
Speaker Change: We can grow that into a separate group, separate business.
Speaker Change: either with a separate M&A with other groups, they can buy us out, or we can have our team to lead a separate spinoff team to be a separate independent business such as IPO. And at this moment,
Speaker Change: We are still not.
Speaker Change: We still do not think that we are capable, we are able to do any kind of...
Speaker Change: M&A in the restaurant business to, you know, to actually to export our business models to other businesses. It's still a tough industry. Service industry, even though it's growing, but it's a tough competition.
Speaker Change: and we have to be really careful in making those kind of decisions.
Speaker Change: So those are the areas we welcome and any recommendations, and we respect the great operators in the industry, so we wouldn't mind doing multiple different kind of joint ventures and cooperation with other leading
Speaker Change: restaurant chains and with the leading restaurant group.
Speaker Change: in order to enhance, further enhance.
Speaker Change: our competitiveness in the restaurant side.
Speaker Change: Okay, great, great. Very helpful. Thanks for answering my questions.
Speaker Change: Thank you. And as a reminder, if you'd like to ask a question, please press star then 1. We'll pause for just a moment to assemble our roster.
Speaker Change: And once again, ladies and gentlemen, a star is in one if you have a question.
Speaker Change: Our next question today comes from Storm Xu with ABC Capital. Please go ahead.
Storm Xu: Hello, my name is...
Storm Xu: Thank you for answering my question, and I have one question about the capital markets.
Speaker Change: Can you comment on how to improve the liquidity?
Rene Vanguestaine: Unknown Executive, Rene Vanguestaine
Speaker Change: Previously, the company considered several tasks. Is there any progress or timeline now? Thank you.
Rene Vanguestaine: Unknown Executive, Rene Vanguestaine
Speaker Change: Thank you.
Speaker Change: I understand, you know, the storm that I didn't, can you refresh the second? I know the first question is, increase the, how do we plan to increase the liquidity? The liquidity, and the second question is, how do we do we plan to increase the liquidity?
Speaker Change: The State of Democracy is the backer, yes.
Speaker Change: Because our company considered several paths for the improved liquidity, is there any progress on the timeline now?
Speaker Change: Timeline for... ...improve the liquidity in the capital market. I see, okay. Thank you, thank you.
Speaker Change: Okay, got it, appreciate it.
Speaker Change: Yes, our shares are pretty concentrated by some of the largest institution investors.
Speaker Change: and our corporate company owns about 90%.
Speaker Change: which is, we are in the process of doing a reverse merger and then to, we are also after that, we plan to, you know, phased
Speaker Change: in the phased stage and we discuss whether we can systematically do an offering to, you know, the outside investors.
Speaker Change: state-by-stage and that detail the timeline and depends on the the restructuring which we hope will be completed anytime soon in the next quarter or so.
Storm Xu: So that's the market liquidity, which is a major concern for ourselves as well, Storm. So we're taking the concrete plan.
Storm Xu: To do that, meanwhile, we'll continue to focus on, again, our core competition.
Storm Xu: Strength Building.
Storm Xu: And I think as long as we continue to deliver the profitable, sustainable growth and continue to grow the product and services in a high quality, standardized way.
Storm Xu: then I think that the long-term value is there for all of our shareholders.
Speaker Change: Okay, got it. Thank you.
Speaker Change: Thank you. And this concludes our question and answer session. I'd like to turn the conference back over to Selena Yang for any closing remarks.
Yiping Yang: Yiping Yang, Unknown Executive, Rene Vanguestaine
Selena Yang: Drone
Selena Yang: In closing, on behalf of the entire GreenTree management team, we thank you for your interest in GreenTree and your participation in today's call. If you require any further information or have plans to visit us, please feel free to contact us. Thank you all. Thank you.