Q2 2019 Earnings Call
<unk> looking statements that you will see over to risks and uncertainties as such our results may be materially different from the views expressed today.
A number of exposure risks and uncertainties are outlined at six years public filings with the security and they could change Commission [laughter] not undertake any obligation to update any forward looking statement, except as required under applicable law.
James Jane and Cindy will share with strategy and business updates operating highlights and financial performance for the second quarter of 2019 as well as the outlook for the third quarter of 2019.
After the prepared remarks, we will have an end to end the session.
With that I will turn the call over to Jim Jim G.
Thank you Michelle thanks to everyone for joining us on the call today.
Let's begin with a quick update on all business growth hormone.
I'm pleased to report solid results for the second quarter of 2019.
Net revenues grew 19% year over year, reaching 8.7 billion RMB.
We have increased our shares with the Mets travel market, we can be world right.
Well, both domestic hotels and make a good thing.
And accelerated.
Even against the backdrop of a softer market environment.
Our international business is also seeing great performance.
Well the growth rate.
Well international hotels to be able to get more than doubling that of China outbound traffic growth in the same period.
As we continue to evolve as an industry leader in the China.
We have great opportunities ahead to realize about global vision.
Each of us develop the t. competencies to provide services.
Travelers in China and around the world.
Including a one stop platform.
That covers more than 60 products globally.
That's a one stop.
Well the operating empower our mobile platform.
Without the superior.
Mobile.
County, well over 80% of speaking so the booking.
Furthermore, we have continuously making investments in technology, including open platform and ensures the competitiveness of each product and collaboration between Paula.
No. They open platform to make several hundred thousand direct intermediates suppliers.
Ranging from individual professionals to worldwide travel either.
Today.
We also announced a proposal to change the company me Ctrip Dot Com Group limited.
The new name reflects the services and products we provide.
And it can be easily remembered by global users.
Sure Dotcom group includes a range of brands, including C chip.
Sure.
Sure, Doug Skyscanner and them anymore.
We have total will accelerate we'll celebrate.
The twentyth anniversary of the company.
Your first two decades.
We have become the leader in China's travel industry.
Over the next decade, which strives to become one of the most innovative and their respective companies seem to global travel industry.
With that I will turn the call to Jane for operating highlights.
Thanks James.
Today I would like to start with why we are aiming at the international market.
In the domestic market, we have already grown to become the undisputed leaders across all travel segment.
From accommodation to transportation.
We have confidence in the continued to sustainable growth and profitability of our business in China.
At the same time, China has become the largest a source market for international travel.
Taking advantage of this feature has skewed a comprehensive and extensive product can network.
And developed global service capabilities to serve album travelers.
Well you know, we will leverage our existing products services and technologies to serve to traveling outside of mainland China, especially in the Asia Pacific Korea a region.
In the long run this will enhance our scalability reduce seasonality and diversify our potential risks from Geo uncertainties.
Our efforts in global product expansion.
Quality and brand development are setting the pace to real life. This long term goal.
I would like to share some of the recent highlights in this area.
Firstly, our global product extension.
In the second quarter, our product coverage continue to expand in scope and adapt.
As we know from experience transportation is typically the first step for our customers when they book their chips.
We therefore work hard to provide comprehensive cost effective and convenient transportation solution.
And believe this will help our customers to boost Uh huh.
Customer acquisition efficiency and cross sell to the other products.
The company recently launched a strategic partnership with East Japan Railway company.
The partnership allows us to purchase Japan, Japan real tickets. In addition to enjoy services such as airport ticket pickups and hotel delivery.
Today, our international chain products cover its train tickets high speed rail and airports link services in more than 50 countries in the region.
Across the world.
Global users can access international train services through the C chip chip Dot com and Tim how mobile iOS platforms.
We have also launched.
And overseas right holding service, which integrated mainstream local ride hailing services.
Turning to our own platforms.
The service is currency.
[laughter] available in over 700.
85 cities across 47 countries in southeast Asia in the United States and in Europe .
Speech of users were also enjoy 24 times seven customer services and translation services.
See Ctrip launched the hotel more program and 2018.
For our hotels can sale no room offerings such as meals.
Our sessions pickup and drop off services meeting room bookings and more so far a large majority of the high star hotels on secret platform has opened up their relative hotel more and we have received encouraging feedback from our customers.
Secondly, we continue to focus on service quality.
We see improving match promotion scores across all of our product lines in the second quarter.
This reflects our consistent efforts.
Upgrading our services.
One of the many initiatives we have rolling out recently is that appeared to cancellation policy.
For hotel booking.
So far hundreds and thousands of the hotels have participated in our program and this program has benefited more than 3 million ctrip customers.
We're committed to upholding to our customer centric principles in every market toward outbreak.
And to what extent.
Hi quality customer services to the goalpost habilis.
Today, well off our overseas core centers I am operations.
As we continue to scale our call center to serve the growing needs of their respective markets, we expect to operational efficiencies to improve in the coming years.
Certainly looking at the growth of the main brands.
Due to the strength of our products and services.
We continued to gain market share across our key business areas why didnt, our gap with the other domestic competitors in China.
Domestic revenue maintained a solid growth rate and outpace the industry at a higher multiple.
International revenue accounted for over 35% of the total revenue in the second quarter of 29 team.
What is the rapid growth of outbound travel and our global brands.
We expect this to become 40% to 50% in the next three to four years.
Our hotel and a flight tickets sell for cross border travel activities maintain faster growth during the quarter.
More than doubling the growth of China's outbound trip.
Although the recent fluctuations in some destinations will impact Q3 outbound travel figures.
Historically, we have gained market share when see the macro headwinds.
In the long run we remain optimistic about the China outbound tourism market.
For Ctrip Dot Com air ticket volume delivered triple digits year over year growth for the 11th consecutive quarter and hotel growth is accelerating.
We are extremely pleased to see the rack to users for trips outcomes first the batch our focus to market I increase in numbers confirming the efficiency of our local brand strategy.
In South Korea tipped up Com was named the brand of the year in the travel category by Korea customer come so.
[noise] Skyscanner continues healthy momentum with its the rock the booking business maintaining triple digits growth. It has generated great synergies in many markets with dotcom, mainly through their direct booking initiatives.
We expect to replicate such success across more international markets going forward.
Our other facilities we completed.
Our share transactions with Naspers limited.
And become the largest shareholders of make my chip.
A leading online travel company in India.
We will give full support to make my chip team.
And we are confident that make my trip will continue its success in the years to come.
To conclude we're encouraged by our results across all the business lines and a market.
Today, we are confident and excited about the long term future for the travel industry in China and in the World.
We're focused on our mission to provide the best products and the services for global Tubeless, while creating long term value for business partners employees and shareholders.
With that I will now turn the call to Cindy.
Thanks, Jane Thanks, everyone for the second quarter.
Citrus reported net revenue of RMB 8.7 billion, representing a 19% increase from the same period in 2018 net revenue for the second quarter of 2019 increased by 6% from the previous quarter accommodation reservation revenues for the second quarter of 2019 was RMB 3.4 billion, representing a 21% increase from the same period. In 2018. This was primarily due to the strong execution, increasing accommodation choices and quality of services that we offer for our customers.
During the second quarter Ctrip brand it low Star Hotel room night increased to over 50% year on year. This directly reflect the effectiveness of our promotions in this segment.
In addition, we observed a continual increase of the travel consumption from customers. We acquired through this low comparatively lower end hotel segment.
We will continue to extend our promotions in this segment as long as we see good return on investment.
In the domestic mid to high end hotel segment, our growth rate accelerated sequentially.
Growth in our International Hotel segment was more than twice as far as the China outbound traffic grocery transportation ticketing revenues for the second quarter of 2019 was RMB 3.4 billion, representing a 13% increase from the same period. In 2018. This was primarily driven by faster growth international travel demand and an increase in ground transportation.
The international Air ticket business maintained strong growth.
Physically took dot com air ticketing volume recorded triple digit growth for the 11th consecutive quarter.
Ground transportation registered healthy volume growth this quarter International train ticket volume grew more than seven times year over year.
Packaged tour revenues for the second quarter of 29, he was RMB 1.1 billion, representing a 25% increase from the same period in 2018.
In the second quarter GMB from offline stores continued to see strong growth with the daily transaction value, peaking at R&D 120 million. We are delighted that the large majority of our offline stores become profitable within 12 months.
Customize the tours and dynamic packages also delivered outstanding performance.
Corporate travel revenues for the second quarter of 2019 was RMB three.
Phil nine Min 309 million.
Representing a 21% increase from the same period in 2018. This was primarily driven by extension in our corporate customer base as well as the trend for more list of products and packages.
Revenues from other business increased by 22% beyond here in the second quarter of 2019.
Reaching RMB 524 million.
This was primarily driven by strong growth in our advertisements and financial services business.
Gross margin was 79% for the second quarter of 2019 compared to 80% in the same period in 2018 and remained consistent with the with the previous quarter.
Excluding share based compensation charges.
Total non-GAAP operating expenses grew 11% young year, and 1% quarter over quarter in the second quarter of 2019 total headcount in IC supplier management and administration was largely consistent with the previous quarter marketing efficiency continued to improve this was due to our ROI driven marketing strategy and continued efforts in customer services project product Castelli and content building.
Despite the sequential decrease.
Our marketing investment we were able to maintain stable growth in both EMEA you traffic and the acquisition of new transacting customers. We also saw steady improvement in the cross sell ratio between product line.
non-GAAP operating profit in the quarter was RMB $1.7 billion rose, 43% year on year, and 26% quarter over quarter.
non-GAAP operating margin for the second quarter was 20% increases on 16% in the same period of 2018 and 17% in the previous quarter. This increase was mainly due to improvements in operational efficiency.
Hi, looted earned a diluted loss per Hds was RMB 73 cents. Our U.S. dollar 11 cents for the second quarter of 2019, the less loss was primarily due to the loss recorded for fair value changes of equity securities investments.
Excluding share based compensation charges and fair value change of equity security investments non-GAAP diluted earnings per ATM were RMB 2.25, our U.S. dollar 33 cents for the second quarter of 2019.
As of June 30, 2019, the balance of cash and cash equivalents restricted cash and short term investments.
Health to maturity.
Deposit and financial products were RMB 67.8 billion, our U.S. dollar 9.9 billion.
In July the company announced a transfer bone term loan facility of up to U.S. dollar 2 billion equivalent with the Greenshoe option of up to U.S. dollar 500 million.
In August the company repaid.
At U.S. dollar 500 million of convertible notes, all maturity, which reduce the potential dilution of approximately 1.5 million ordinary shares.
We also announced the puts rights notification.
For one point, 25% convertible senior notes due 2022.
If all our outstanding notes I surrendered for repurchase through the exercise of ports right. The aggregate purchase price will be U.S. dollar 907, and $75 million, which will further reduce potential dilution of approximately 1.9 million ordinary shares.
On August Thirtyth.
The company completed a sheer exchange transaction with Naspers limited.
Following the transfer sea trip, all ordinary shares and class B shares representing approximately 49% of make my trips outstanding voting security.
Featured apply for the equity method of accounting.
To pick up the gain or loss of make my trip through or from August thirtyth.
On a one quarter lag basis.
Now turning to the future outlook.
For the third quarter of 2019.
The company expects net revenue growth to continue at a year over year rate of approximately 10% to 15%.
This forecast to reflect potential impact of about 400 to 500 basis points on the gross rate due to short term macro and industry headwinds.
Excluding share based compensation the company expects non-GAAP operating income will be in the range of RMB 2.3 billion to RMB 2.6 billion.
For the rest of the year the company expects to outperform the market while delivering continuous operating.
Leverage compare with the previous year.
This forecast to reflect citrus current and preliminary view, which is subject to change.
With that.
Operator, please open the line for questions.
Thank you.
We will now begin the question and answer session.
Please note. This session is only open to sell side analysts due to time restrictions and each analyst. It's only allowed to ask one question each time.
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Your first question comes from Thomas Chong from Jefferies.
Please go ahead.
Hi, Good morning, James Jane Cindy and Michelle a bright spots within my question.
Given your comments about does so as well, but the long term impactful macro.
The Street.
How would you.
Mitigate impact buttons.
Thanks.
Yeah.
Thank you for the question.
Yeah, we.
The.
There are some headwinds in some of the Asian markets.
Due to the.
Difficult geopolitical situation.
Well I think Lisa its short term impact as people will rearrange the plan to travel later this year and.
Well in the future.
For the holidays.
Oh, you Milan I think.
Particularly in Asia, we are still very positive because the.
Yeah, China is still going to be the.
Fastest growing one of the fastest growing.
Large economies in the world and the overall Asia is still going to be remain the fastest growing.
Economically.
The region.
In the World and feature with our strong presence in Asia, we are very well positioned to take advantage of that so in the long run we're still very positive about our growth prospects.
In China and internationally because feature but has a strong presence.
The fastest growing.
Thank you Mark Thank you.
Yes.
Thomas.
So it's not for the next quarter.
Now for questions.
Potential impact of about 400 to 500 basis points on the gross rate mainly due to the short term macro uncertainties and industry have wings.
Ah, which mainly come from recent slowdown of Hong Kong, and Taiwan, together with our slight price decrease so in the first half of this year outbound travel to Hong Kong and Taiwan accounted for about one third of total Chinese outbound travelers. Therefore, we included some negative impact from these two markets in our Q3 guidance and in addition, based on their travel Sky report average price of outcomes Air tickets dropped about four 750 basis points year over year in July as a result of softer demand and macro uncertainties.
Hover in the mid to long term as James said not only the most comprehensive extensive for defamation offerings, but also our expansion into the other global markets will help us to reduce or even mitigate risks from certain geography, uncertainties and therefore, we are still very confident.
That's as long as we continue to invest in our products and services.
The trip.
Able to further strengthen our market leadership and market positions in China, not only the China market, but also the global travel market, especially during the macro slowdown as we always achieved in the past 20 years. Thank you.
Thank you.
Your next question comes from Benny Wong from HSBC. Please go ahead.
Hi, Good morning management. Thank you for taking my questions.
My question is on outbound strategy, so as it become a more significant contribution to US can you comment comment on are we competing more on pricing our partnership with local partners or would it be for more inorganic investments just wanted to see how does it impact our margin trends and also as it relates to our operating margin improvement. We also see the improvement this quarter, both online why Q on Q basis, and exceeding 20%. This quarter. So would that be mainly contributed by rising contribution from higher margin and how should we expect this continuing thank you.
Okay any other for outbound business, yes, we are doubling the industry growth and has gained a lot of market share of the high end customers continuously to travel outbound.
In Q3, there were certain regions displayed so to uncertainty however, our product offerings I with our comprehensive product composition radiate attract our customers to use our brand and the products and the go over the world and.
For Iraq International business outside of Asia.
They kept about Tom also is focusing mainly on the international Air tickets, which has show three digits growth for the past two years more than two past two years.
So we are confident that our bond as well as foreign to Florida International tickets will be the future driver for our business and he will comment on the margin.
Ah, yes, operating margin or what continuously to improve.
Through the operational efficiency gaming and not only from the album business of course alcohol is more towards the mid to high end of the market because the average selling price is that.
At a much higher compared with the domestic product.
And that's a <unk> event and our domestic product. So we see continuous operating efficiency gaming across all the business units.
Thank you.
Thank you. Your next question comes from Ronald Kim from Goldman Sachs. Please go ahead.
[noise].
Thank you James James Indian Michelle Ah. So my question would be on margins as well just seeing how.
Your third quarter guidance seems to already be suggesting 20.
To be 25%. So just wanted to hear any color that management can cheer on your cost control, mostly on the Opex side given the flow of revenue can you share some color on how this will play out for the fourth quarter given last year, you invested heavily in the fourth quarter 18, and whether we're still sticking to the 20% 2020.
EBIT margin target and that now that I think the first nine months ago.
Even if the COVID-19, just beating that.
Quite already so after here.
Hearing on that thank you.
I think you have on that we will provide guidance for the fourth quarter.
Oh, no im not quite sure Oh by speaking Oh, well, yeah, although against them I met with no downtime I'm, not close which will impact our top line growth, but Oh my pocket, a Q continuously outpaced the industry calls and at the same time as we already achieved we achieved a significant operational efficiencies across all expense line items. So we asked you quite confident that we can achieve a 20.
Like I said, Oh, non-GAAP operating margin and.
Amen Amen Amen immediate him. Thank you.
Thank you. The next question comes from James Lee from Mizuho Securities. Please go ahead.
Thanks for taking my questions here Cindy first.
Thanks, you provide a upper income guidance for [noise].
Three q. 19, I'm not quite sure I heard that and also can you provide segment guidance.
For your revenues and also for Jane specifically can you provide an update on competition would may twond, specifically last quarter, you sort of indicated things are stabilizing here.
Are you seeing any changes there thanks.
I think it will Oh I provide the revenue guidance or E business that line item. So it does pick up in the third quarter to 2019 out comedy show revenue will grow at about 13% to 18% beyond yet and the transportation revenue will grow about 3% to 8% year over year and packaged tour revenue will continue to grow at a healthy rate, so that 15% to 20% year on year corporate travel well grow at about 20% to 25%.
So here comes the total revenue will grow at about 10% to 15%.
And regarding the competitive landscape. So our goal is for a high end, we'll have double the industry growth rate and continuous play to serve as a high end customers very well with our high quality services comprehensive product and for a lot of kids to take a we will or seek to Brent would deliver above 50% year over year growth. So the trajectory is very strong and we will keep coupled with our strong investment both online and offline to make sure. We said stay ahead of the game. Thank you.
Thank you. Your next question comes from Natalie can see I see see please go ahead.
Hi, Good morning, Thanks for taking my question I'm. Just curious did mentioned doesn't see any impacts of 10 kids take rate I don't take me know GMB growth Dcs given the you know that a one to sneeze, who says initiated.
Thank you.
I think in that tend to so see cats are starting from a one to two years ago, we started to diversify our revenue sources, including a global train ticket product to not only just oh cover the Asia Pacific region, but we also cover almost all the European countries. We also launched a a 10 pound which targeted debt to the European customers, who can't book that train tickets through that mobile mobile app.
And so we see very healthy and gross and Ashley So national growth opportunity in the global train ticket market. The international train grow about seven times a year over year and in addition, we also introduced a.
High speed train travel channel, which helps us to book, helping our customers to book a train high speed rail train travel, especially during the weekend. So putting all these efforts we will make sure that you took what continue to provide the best user experience in the in the industry and most importantly, we can cross sell a variety of other products together with the huge traffic that coming from the train business.
Thank you.
Thank you.
Your next question comes from Gregory Zhao from Barclays. Please go ahead.
Hi mechanism for taking my question or the full story. It's a follow up question on your margin guidance for Jeff longer understand towards the opening comments I'll put the margin.
Before you could walk you know a macro and the Hong Kong, our hardworking our in country and there have been questions. Just wanted to clarify accounted for 45% growth has slowed down in Q3 is only due to the geopolitical issue or also for for you to monitor factors like the foreign currency kind of macro slowdown.
Well, we're putting on your another way to live Hong Kong and Taiwan contribution to our total revenue for just want to make sure I heard before too far but time through down assumptions NOG Army overcome don't like Steve. Thank you.
Thank you so as Oh, we already achieved dead sea trip or Oh, a whole team, we're working very hard to increase our operational efficiency across all expense line items that across all business units or so to make sure that they're in the macro Florida uncertainties, we can still achieve a very profitable.
Uh huh.
Oh, great operation this out.
And Oh regarding your questions on the Hong Kong, Taiwan, and Hong Kong, Taiwan in the first half of this year.
<unk> outbound travel to these two destinations accounted for about one third of the total Chinese outbound travelers. So it's a very significant portion of the total markets. That's why you see.
These two markets.
Because of the uncertainties in this to market and sea trip, Oh, we and if they do some conservative and negative impact.
But yes, Oh of course, all the currencies older and macro uncertainties like a trade war between a U.S. in China also up the puts them up crashes flat for us in a in a in a short time and.
In addition, Ashley.
Based on the travel study report the average price of the album Air ticket also dropped about 750 basis points year over year, which we believe also because of their shots and macro uncertainty.
And as always our management Oh was the strong strongly believes that doing these ah a slow down here. It. It's always is the best opportunity as a market leader to continuously too.
Gaining market share and.
During this period.
Thank you thanks.
Thank you.
Our next question comes from doing the young from Haitong International. Please go ahead.
[noise].
Pardon me, we have just lost at that question well go to the next one your next questioner is Joyce Tran from Bank of America. Please go ahead.
Good morning, James Jane they need on Michelle Thanks for taking my question I kept my question and actually related to the it's also the outbound destined it travel destinations just try to understand cost James or only a motion that T X back like most of the Chinese leisure travelers, what actually I'm sensitive to those you know vendors all like you know destinations with problems with other definitions.
Could you elaborate more to help us understand is the more likely to subs did use them was like you know as their outbound destinations or in news like we were actually replaced by you know on some domestic destinations, which probably have lower ASP.
HM Okay. Thanks for the question a different customers will react differently in the history of our business.
We noticed that there are a couple of factors that's so important.
When our customers make that decision as to where they want to go. The first thing is the visa.
Thank goodness of the visa application whatever country gets the most easiest way to apply for visa normally well I talked to lots of customers, particularly for these visit customers who have a last minute changes on their agenda, but second nothing is direct flight whichever city Oh first direct flight again will attract a lot of customers because they save time going there. The first thing we feel is the French the lateness of the destination and so historically countries such as Thailand always received very good incoming customers because the.
Hospitality business in Poland is very well developed.
Oh affecting all these things are different customers, who are to take different approaches are doing but a lot of them.
Vacation customers tend to go to the long haul or they can pull Europe .
Australia, New Zealand, Oh quite attractive this year and then some customers will tend to convert their overseas plan on tour domestic plan that because see tips product to cover both domestically in Asia in the rest of the world and our product will be suitable for different customers depending on their preference.
Thank you.
Thank you. Your next question comes from Alec <unk> from Morgan Stanley . Please go ahead.
Hi, James Jane Cindy and Michelle Thanks for taking my question I had a question regarding your margin.
Three recall you have reached a record margin guidance.
On capital PMO, 20% in 2020.
Since your head count is now growing your revenue is still growing on what margins do you plan to achieve this steady state before you start investing more.
If next year margin still 20%.
And for specifically for transport business, and the guidance growth rate of 3% to 8% year over year, if I have to break it down into domestic international business, the domestic business should be a little bit slower.
In case that you seem to have negative growth territory.
Is there any negative operating leverage should we expect.
At the same time as years your margin also expense. Thank you very much.
Yeah.
Oh, the ER segment as off the domestic markets, if given our existing mochis year out, we probably would not expect to exceed national growth opportunities in terms of the market share, but we would still make sure that we will continuously and making.
Gaining more market share by offering them back.
A user experience in the market, we actually created a lot of fair value not only in the transportation segment not only the airport air Air ticket, but also like train tickets.
Let us take it et cetera.
And in terms of the margin, yes, we will achieve operational efficiencies across all business units not only the outbound travel related business. The also the domestic.
Business as well so yeah, we like we are quite confident that we can achieve the 20 plus above non-GAAP operating margin in the next one to two years.
Thank you.
Okay. Thank you.
Your next question comes from Alice Yang from Citigroup. Please go ahead.
Hi, Good morning, James Jane Cindy Michelle Thanks for taking my question I have couple of quick follow up questions regarding.
The guidance can you actually walk us through a little bit given I think the package tool.
Guidance was actually holding up quite strong and given the the outbound travel that you mentioned one third is actually coming from Hong Kong and Taiwan market worsen as I didn't your hotel and air ticketing revenue guidance is a bit soft. So can you quantify these 400 to 500 basis point impact from Hong Kong and Taiwan is it mainly no related to the hotel and air ticketing rather than to package to watch and then just a follow up on a trip dot com should not be a colder in the outbound right. So just wondering how much Hong Kong and Taiwan revenue is coming from these treat dotcom. Thank you.
So [laughter]. Thank you Alicia for the packaged tour business that because it's a there are two parts one is that cool tool and the second one is like the that package to Oh, a dynamic package product to two bundle hotel and air tickets together. So a majority of the packaged tour business contributed from the group tool 'cause sea trip and most of the sea trip a customer at toward the mid to high end. So when they choose the destination like Hong Kong and Taiwan. They tend to use they tend to travel independently rather than travel with that group. This is one of the reasons why you see a net impact to ultra deep to destinations up from the package tour versus the other accommodation and.
A transportation business.
Oh for the trip Dot Com and yes, it's a melee and custom remote almost the old almost Ah Ah most of their customers off trip dot com or they are coming from Denmark had other than domestic China, China market and Hong Kong is one of the focus the market for trips all comp but pets.
The pocket tapes customer off trip Dot com mainland is the Hong Kong me speak travel to China or to the world would typically less impacted by the recent to.
Ah event.
Thank you Alicia thanks.
Thank you. Your next question comes from Jerry Lee from GBM. Please go ahead.
Hi, Thank you I have two questions. The first is if we look long term on the operating margin profile on as a trip dot com.
Finally to capture the demand of those local travelers.
Oh, what kind of impact do we see on margins.
Through an investment period.
And then in the early days is the corporate travel if we look at the corporate travel revenues it looks pretty healthy so could we just get some comments on the did that that would be fun for the Tc saw.
Seems like there's less the impact on on geopolitics and details of headwinds. Thank you.
As for the utterance Dot com business out a week covered Ah Ah I believe more than 20 markets in a in a world that many focus so as to currently mainly focused in the Asia Pacific region, and so we will steal for each individual market, we were low cap to Oh, the operating margins and based on the development stage, we won't look at it we will set the ROI thresholds for each individual market for the more mature markets. For example, the Hong Kong market, we already achieved the.
Quite to a sustainable profitability in debt markets and just for the for example, the Korea enter Japanese market, we are very close to that.
Break even point already but again for the trip they'll call. We are still in the very early stage also expanding our market share outside the four walls. So we are still expecting something bafflement in that not only the marketing, but more importantly in the product development side to make sure that we have to faster product to serve the local market.
In corporate travel, yes, Ah I think within China.
Hopefully travel for C. Chip is a thing there well Oh Wow, if the our business is leading a second a player by wide margin.
In addition to that globally. We will also try to extend our Austrian incorporates hobbled from the China market to Hong Kong, Taiwan, and the rest of Asia and try to serve our customers not only within China, but along the way when they taught where ever they travel will be happy to offer our products and services to follow their footsteps.
Thank you.
Thank you. Your next question comes from 10 Hari from T.H. capital. Please go ahead.
Yeah I'm wondering.
My question is you know we have already entry. It's a it's a lot smarter re queue. So the guidance is it 10 to 15 year on year. So if we look at the tribal numbers most of the time, they mostly costumer plan that impacted.
So what Youre just not when you gave the guidance the five percentage.
One yeah. So.
Under what circumstances.
You know you know you guys see the lower end.
The what kind of the circumstances of September you will accomplish the high end of the guidance.
So what makes the the the the key factor of this one thank you.
[noise], Oh gosh, the booking window.
We in the last.
In the last 20 years says he took a match to be with them. Most a comprehensive product offerings and compact with very competitive pricing and especially now over 80% of bookings coming is on the mobile app. So the booking window really is very shocked or and what is 70% off our customizable chapada. So within a five day. So its really [laughter] hearts full access as we already explained it to all the analysts that it's very difficult for us to provide a very precise guidance.
For the for example for the fourth quarter or even the whole year, yeah, and again and we well all see took t., we're working very hard to achieve at high growth rates as possible, but again, we tend not to promise that which are low end or high end just because of the short booking windows, but we will work very hard to achieve.
The higher one.
Thank you.
Thinky. Your next question comes from tooling Shi from Nomura. Please go ahead.
Hi, Good morning management. Thank for taking my question My question, you're talking about your international business. So I just wonder how much of your revenue is contributed by by by the International business and if we further breakdown the international business how much of the international revenue is coming in from the Chinese outbound travel and how much of that is contributed by pure overseas markets I.E., serving a long Chinese travelers and if we caught up with your international business. What was the growth rate in Q2 for international revenue that includes Skyscanner Ctrip dot com and trying to give up on travel and what is the margin profile for this business. Thank you.
In terms of the international contribution for the hotel accommodation business that international revenue contributed about 20% to 25% of our total revenues and a in that for the air for the Air business International has already contributed about 40% to 45% of our total air ticket draft.
And her packaged tour many accounts contributed from the outbound travel.
And the international one international revenue contributed about 40% to 50% of the total packaged tour revenue.
So.
If it regarding the question about the split of outbound versus the international Oh contribute about 20 to 25 over all of our total revenue and the pure internationally, including Skyscanner and their trip dot com contribute about that.
No team tend to low teen percentage of total revenue.
And the margin profile as I said, Oh ball because of the average selling price is much higher than compare with the domestic one so in terms of the margin it's contribute to a higher margin compare with the our average margin level.
And for the pure international business, especially Ctrip Dot Com, we are still in the stage also early investment.
Ah, but again, we will closely monitored the margin profile for each individual market based they're different growth stage.
Thank you.
Thank you. Your next question comes from everybody else from high Tony International. Please go ahead.
Hi, Thank you Mike for taking my question, sorry, I got cut off earlier I'm. Just one just one question I just wanted to ask management, if they could share your thoughts on international expansion, what kind of difficulties or hurdles that have we faced when we go to seize it a pricing issue. It's just these are dealing with local partners or integrating out and international brands.
Just to share your thoughts on on difficulties or hurdles in international business. Thanks.
International business through it presents a great opportunity for us however in order to grow that business, we need to recruit talent at the local level. So we are putting come so to the efforts to identify and recruit any claim I want keane each market. So that we can build a strong team understand our customers and build our product offering that is suitable for the local customers and and moves methodically into each region. So.
Isn't it you know it has great potential and were moving as quickly as possible, namely the people will make the.
Isn't it.
Penetrate further into each region. Thank you.
Thank you. Your next question comes from James Sheehan, something I see please go ahead.
Hum like a very quick follow up I don't think so quarter margins historically and margin will trend up quick second quarter on quarter. During the peak season, but that this year given the weaker than expected revenue trend should we still be expecting margin expansion quarter on quarter can too.
Thank you Oh, we provide margin guidance of this third quarter, excluding share based compensation Oh, we stuck to our non-GAAP operating income will be in the range of RMB 2.3 billion to.
2.6 in Ah. Thanks.
Thank you.
There are no further questions at this time I'll now hand back to Michelle T for closing remarks.
Thank you everyone for joining us today, you can find a transcript and the webcast of today's call on the IR Bostic tip Dotcom, we look forward to speaking with you on our third quarter 2019 earnings call. Thank you and have a good day. Thank you very much.
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