Earnings Call: Q2 2021

Aug 23, 2021

Thank you. Good morning and good evening, everyone. Welcome to Tungtuan Yilong's 2021 Second Quarter and Interim Results Conference Call. I'm Kylie Yang, Investor Relations Director of the company. Joining us today on the conference call are Mr. Hope Ma, Executive Director and CEO Mr. Julian Feng, CFO and Ms. Joyce Li, VP and Head of Capital Markets. For today's call, our management team will provide a review of the company's performance for the Q2. Hope will walk us through the company's business performance for the quarter. Joyce will discuss our operational highlights, and then Julian will address the details of financial performance accordingly. We'll take your questions during the Q and A section that follows. As always, our presentation contains forward looking statements. Such statements are based on management's current expectations and current market operating conditions and relate to events that involve known and unknown risks, uncertainties and other factors, which may cause the company's actual results, performance or achievements to differ from those in the forward looking statements. This presentation also contains some unaudited non IFRS financial measures. They should be considered in addition to, but not as a substitute for measures of the company's financial performance prepared in accordance with IFRS. For a detailed discussion of non IFRS measures, please refer to our disclosure documents in the IR section of our website. Now, let me introduce our CEO, Ho. Ho, please go ahead. Thank you, Carly. Good evening, everyone. Thank you for joining our 2021 Q2 earnings call. The past quarter was fundamentally encouraging for China's domestic travel industry. In April May, we saw a strong recovery momentum in the sector with enhanced willingness and demand for travel in late May. However, we saw a slowdown in the industry recovery as stricter travel restrictions were imposed to contain a new outbreak of COVID in Guangdong province. All the market players were inevitably impacted, but thanks to our strong operational capability and excellent market adaptability, we overcame all the difficulties and delivered outstanding results for the Q2, continuously upshined the market. Moreover, we were awarded the best mini program for the first half of twenty twenty one by a well known 3rd party mini program monitor, Aladdin, for our exceptional performance in the first half of the year. Even under the shadow of the regional outbreak, our accommodation business, a key growth driver for the company, maintain its robust growth momentum in the Q2 as we made continuous efforts to step up investments in lower tier cities and build up our market influence there. Over the past quarter, we increased our efforts in leveraging the enormous traffic from our train and air ticketing business to drive cross sell to our hotel products and services, which added to the decent growth in our accommodation business. Moreover, we further pushed ahead with our offline user acquisition initiatives by cooperating not only with hotels, but also with other offline traffic hubs so as to acquire more users. For the Q2, our domestic room lines saw an impressive year over year growth of over 65% compared with 2019, while the room nights sold in lower tier cities registered an accelerated growth of more than 100% over 2019 levels. In addition, we continuously developed and innovated our value added products and services by digging into the underlying needs of users and suppliers, expanding new revenue resources and improving monetization for the accommodation business. Despite of uncertainties caused by COVID, the surging in Guangdong region, our transportation business, positioned as the backbone of the company, still saw solid growth in the Q2 and outperformed the industry of several consecutive quarters. Our domestic air ticket volume for the quarter witnessed a satisfying growth of nearly 30% when compared to 2019, mainly attributable to our solid market position in lower tier cities and our strategic focus on younger generations as well as effective cross sell initiatives. In late March, we launched an innovative project are called blended books of air tickets, which was overwhelmingly welcomed by younger users. And as a result boosted our brand recognition. As for our train ticketing business, we remained focused on enhancing user value. Throughout the Q2, we made greater efforts in diverting the traffic to our air ticketing business by tapping deeper into users' needs in an attempt to increase the value of train traffic. We continuously developed and innovated our value added products and services to better fulfill our users' needs and make their journey easier and more convenient. Meanwhile, we keep refining the infrastructure of our intelligent Huixin system to further enhance the ticketing and the refund efficiency for the sake of users' convenience. As an effective channel for the company to expand the user base, our bus ticketing business has shown thrilling volume growth since last year. Over the past quarter, its volume almost tripled when compared with 2019. As we rolled out more bus ticket vending machines to further penetrate lower tier cities and even villages and towns. We also enhanced the geographical layout of the vending machines to strive for higher user acquisition efficiency. By the end of June, we had more than 9,000 machines installed across almost 300 cities. For the current state, given the extremely low online penetration rate of the market, we will remain focused on amazing user base and we'll make gradual efforts to leverage the bus traffic. In the past quarter, we had made a preliminary attempt in cross selling other products to bus ticketing users so as to enhance our monetization capability. As for our other businesses, they also saw rapid growth in the past quarter, largely thanks to stronger recovery in the advertising business, the addition of corporate travel as well as a quicker expansion of paid membership program. Going into the Q3, we were pleased to see stronger travel demand rebound at the beginning of July. However, later in July, the control was sequentially struck by natural disasters. First, once in a Malaysia ring in central city of Zhengzhou, then a formidable typhoon that caused massive damages in the eastern region. What was a new outbreak of COVID in nineteen spread to several cities across the country. All those have caused severe disruption to the economy and travel in these regions. As a social responsible enterprise, we reacted swiftly and immediately introduced a low penalty cancellation policy for the sake of our users. Meanwhile, together with Tencent Map, we co launched a map of goodwill hotels through which users in Shenzhou can easily locate hotels that provide rest areas, drinking water and other relief services free of charge. Furthermore, this map also enables users to track flooding conditions in different areas, which help them plan travel routes. There are the surges of COVID in the end of July And in August, we brought the country again under a witness which has put a pause on the emerging travel demand and that caused big fluctuations in our business. However, we are equipped to handle all the difficulties and uncertainties since we are experienced in coping with market changes caused by COVID. As you may have seen over the past few quarters, we adopted flexible operational strategies and implemented a stringent cost control amid COVID to alleviate the adverse impact and still managed to lead the industry recovery. Since the outbreak of the COVID pandemic in early 2020, China's travel industry has been undergoing dramatic changes from user behavior to the supply end. Users are more inclined to adi hoc travel and online booking. Smart technologies are being widely adopted by industry players. All these changes, though causing challenges for the traditional industry, has also created great opportunities for all industry players. More importantly, the Chinese government has been making continuous efforts to promote the development of the industry, especially after COVID. Travel is in the best need for everyone and it's been happiness and satisfaction to people. Before closing my speech, I would like to reiterate our optimistic stance for China's travel industry, especially the market in lower tier cities, where we see greater opportunities and huge growth potential. Although facing uncertainties in the short run, we remain confident that with our strong execution capability, flexible operational strategy, and more importantly, our strategic focus on lower tier cities as well as empowering the travel industry with our technology. We will overcome all the challenges and emerge as a stronger company. We will consistently need the industry growth and unwavering promote the development of the country, thus creating value for society. With that, I will turn the call to Joyce. She will walk you through our operational highlights for the Q2. Joyce, please go ahead. Thank you, Hope. The resurgence of COVID in Guangdong Province did put a break on the robust recovery in China's travel industry in the past quarter. As a veteran industry, we quickly responded and calibrated our operational strategies to adapt to the ever changing market conditions and managed to outperform industry for another consecutive quarter. In the Q2, we continued to set up investments in our branding campaign to strengthen our brand influence in low tier cities and among younger generations. Our innovative and phenomenal product, Blind Box of Air Tickets, debuted in later March, has demonstrated its popularity among younger users and has successfully seen the robust opportunities in training and the Labor Day holiday, contributing greatly to our NDA growth for the Q3. We joined hands with China's most influential beer brand to launch various messaging activities during simplification to enhance our brand presence among targeted users. Recently, we also launched an innovative marketing campaign called 48 Hours, aiming to build a branded short haul travel product, so as to better serve emerging needs for short haul journey post COVID. As part of the 48 hours initiative, we launched blind box containing hotel coupons, COVID charging ticket and transportation ticket. As for next step, we will have tourist destinations on board to co launch more marketing activities for the younger users, such as further enrich our 48 hours campaign. In addition, our paid membership loyalty program continues to expand rapidly with the number of cumulative BlackRock members approaching 9,000,000 as of the end of June, since we stepped deeper into users' needs and launched different membership versions targeting different user cohorts. Moreover, we further expanded cooperation with third parties to enrich our paid members' privileges to great extent. Throughout the second quarter, we continue to seek cooperation within the Tencent ecosystem, to attribute a stronger bond with our users. We're entitled to several IP rights by Tencent, which enable users to enjoy user privileges at our corporate hotels as well as helping our partners attract more traffic. This just in partnership has not only helped increase our brand awareness among younger generation, but also reinforced our influence in the hotel's time chain. Besides, we joined hands with Weixin Pay to launch promotional campaigns to enhance our online user acquisition efficiency. More importantly, we successfully renewed our agreement with Tencent in later July, through which we continue to have 2 entry points in Weixin Pay space. In the future, we are full exploration ecosystem to build deeper engagement with our targeted users. Apart from the Tencent ecosystem, we also explore cooperation with other traffic platforms. Since last year, we have established solid partnership with China's major handset vendors and have continuously deepened the mutual cooperation. In the past quarter, we co launched a marketing campaign with 1 of influential handset vendors and had our brand Hali Explode at their tens of thousands of bricks and mortar stones, which are mainly located in low tier cities. Meanwhile, to provide users with seamless experience, we call virtually one of the handset vendors to create access for users to check their travel orders on their smartwatches. With our continuous efforts in diversifying our traffic channels, the MAU of our click app continue to grow tremendously in the past quarter. At the same time, we continue to push forward with our offline acquisition initiatives to further penetrate low tier cities and enhance our market presence there. Apart from hotels, we keep seeking cooperation with other offline traffic hubs to seize more offline users from low tier cities. We also extend rollout of bus and trash and tea vending machines across the country with the help of our strong execution capability and well established relationships with the upstream suppliers. This initiative has bring us a considerable amount of paying users in the past few quarters and will continue to serve as an effective instrument for us to enlarge our user base. With above efforts we had made, our average NPE for the last quarter reached a record high of $277,900,000 a notable growth of 53% compared to the same period of 2019. Our average NPUs for the quarter also hit historical high of 33,400,000, a decent growth of 20% on the basis of 2019, mainly thanks to our comprehensive product service offerings, outstanding ability to enhance conversion and effective offline acquisition initiatives. Moreover, our 12 month rolling paying users maintained its growth momentum and reached 181,900,000 at the end of June, representing a robust increase of 39% when compared with the same period in 2019. Cross selling has been a crucial tactic for the company to leverage our huge traffic in the transportation sector. In the last 3 months, we have geared to strategy and made more aggressive efforts to enhance efficiency within transportation segment as well as diverting the traffic, travel accommodation and the traction cleaning business. Thus, even under the shadow of COVID outbreak in Guangdong province, our one trip cross selling rate returned to high level in the Q2, which was also dented by strict restrictions in the Q1. As a customer oriented company, aiming to transport from OT to IT, we are dedicated to enhancing not only our international efficiency, but also the efficiency in the travel industry. On one hand, we proactively adopt technology innovation to consistently protect users' experience and make their journey easier and more joyful. During the last quarter, we successfully developed and launched an intelligent customer experience platform, which can automatically analyze users' concerns and their underlying technical changes, has been helping our customer service team to promptly respond to compliance and optimize our service. This not only improved customer service satisfaction, but also enhanced our customer service efficiency. Besides, we can optimize our intelligent travel solution switching system to enhance the user experience. We further optimized the fundamental functions within the system in the last 3 months and greatly elevate our ticketing and respond efficiency. On the other hand, we're devoted to empowering the business of our partners with our Internet expertise and technology solutions, start to build a more resilient and highly efficient travel ecosystem. We have comprehensive sub solution to assist individual hotels and small chain hotels in daily operations and the management of inventory, revenue and marketing. Besides, we provide technology solutions to airports with our well built big data capability to help with them enhance operational efficiency. In the last quarter, we deepened our structure of cooperation to the Xian Airport. Apart from developing mini program for the airport, we've built a more effective data analysis system to help it improve its internal efficiency. Furthermore, we joined hands with Beijing Daxing International Airport to establish structured cooperation to provide users with more privileges. The 2 of us will have in-depth cooperation concerning product innovation to attract more passengers for the airport as well as sharing or membership benefits. With this, I will hand over the call to our CFO, Julian. He will talk through our financial highlights for Q2 of the year. Julian, please go ahead. Thank you, Joyce. Good evening, everyone. For the Q2 of 2021, we still use the number of Q2 2019 as the main basis of a comparison due to the COVID in 2020. In the Q2, we reported a net revenue of RMB2.14 billion, representing a 34% year over year increase from the same period of 2019 or a 78% year over year increase from the same period of 2020. If we don't consider the impact of the flows to international travel and the reduced prepurchase visits, the like for like net revenue achieved 45% growth compared with 2019. We are very satisfied to set another record in terms of the revenue this quarter. Meanwhile, we achieved a RMB398 1,000,000 adjusted net profit with 18.6% net margin compared with 18.4% net margin in quarter 1 2021. The resurgence of COVID-nineteen in Guangdong in late May June had limited very limited impact on our operations and financials, thanks to our strategic focus on lower tier cities and our geographically balanced revenue contribution across Mainland China. At the same time, our management team has always kept monitoring COVID situation to timely adjust the market execution in different channels and different areas, so as to minimize the impact by COVID as well as pursuing a higher growth and a better ROI. In the Q2, we booked RMB 43,900,000,000 with a 6% year over year increase compared with 2019 or a 96% increase from 2020. The growth rate of our net revenue in this quarter surpassed the debt of the GMV when compared with 2019, mainly benefiting from larger proportion of high cigarette products such as recommendation as well as higher VF attach rates. However, the ADR and ATV were still down when compared with 2019. Accommodation reservation revenue achieved RMB 743,000,000, representing a 34% increase compared with 2019 or 93% increase compared with 2020. If we don't consider the negative impact of international travel and precursors business, like for like accommodation reservation revenue recorded a 44% growth compared with 2019. Domestic real net growth in the Q2 further accelerated to more than 65% compared with 2019. And geographically, room net sales grew over 50% and more than 100%, respectively, in high tier cities and low tier cities. Thanks to the booming demand for vacation and short haul travel in the weekend, Qingming, Labor Day and Dragon Boat Festival. In this quarter, we further strengthened our efforts in air train cross sell execution, offline QR code scanning at hotels and online promotions to bring more users to our accommodation segment as well as improving the conversion and repurchase rates. We also made initial efforts in leveraging the traffic from the bus ticketing visits to cross sell other products to improve the value of users that we got from bus ticket vending machines. ADR still dropped compared with 2019 due to short term headwinds faced by the hotel industry as well as our strategy to further penetrate lower tier cities. The take rate slightly improved if we compared with that of 2019 as the VAS revenue contribution continues to increase along with the expected implementation of our accommodation one stop shop strategy. Transportation ticketing revenue for the Q2 of 2021 was RMB1235 1,000,000, representing a 32% increase compared with 2019 or a 70% increase compared with the same period in 2020. Bus ticket volume achieved more than 2 70% growth compared with 2019 as a result of our strategic focus on and investment in bus ticket vending machine across the country. Domestic air ticket volume increased by nearly 30% compared with 2019, which significantly beat overall market growth. Other business revenue achieved RMB161 1,000,000 in the Q2, representing a 60% increase compared with the same period of 2019 or a 78% increase compared with 2020. The increase was mainly contributed by new initiatives such as hotel advertisement, hotel PMS, TMC Business and paid membership cards. Gross margin was 76.4 percent for the Q2 of 2021, increased from 64.7% for the same period in 2019 and 74.6% for the previous quarter. The continuous margin improvement was mainly driven by our streamlined operations, intelligent customer serviceability and revenue mix change in the past year. In the Q2 of 2021, our adjusted EBITDA achieved RMB530 1,000,000 with 24.8 percent EBITDA margin, slightly decreased from 25.9 percent quarter over quarter as we invested more in marketing in this quarter to pursue user growth more aggressively. Adjusted net profit achieved RMB398 1,000,000 with margins increased to 18.6 percent from 18.4 percent quarter over quarter. Service development and administrative expenses in the Q2 of 2021 increased by 1% from the same period of 2019. Excluding service compensation charges, service development and administrative expenses in total accounted for 19.4% of revenue in the 2nd quarter, compared with 24.5% of revenue in the same period of 2019 and 22.7% of revenue in previous quarter. Selling and marketing expenses in the Q2 of 2021 increased by 117% from the same period of 2019 and increased by 43% from previous quarter. In this quarter, we aggressively increased investments in marketing campaigns to see the clear recovery opportunities. We expanded advertisement placement at different offline scenarios. We heightened our efforts in offline user acquisition initiatives in lower tier cities through our bus ticket and attraction ticket vending machines. We also stepped up investment in online promotions to accelerate cross selling. All the efforts aforementioned are aimed at enhancing the purchase frequency at user value for the long run. We also successfully launched innovative marketing initiative, Flybox Apparel Ticket to closely engage with younger generations, which contributed about around 10% of our total MAUs in this quarter. Excluding share based compensation charges, selling and marketing expenses accounted for 41.1 percent of revenues in the 2nd quarter, compared with As of June 30, 2021, the balance of cash, cash equivalents, restricted cash and short term investments was RMB6.4 billion. Now let's turn to our estimates for the Q3 of 2021. The resurgence of COVID in the city of Nanjing, Wunan Province and some other areas is more severe than that occurred in Guangdong in Portuguese. Meanwhile, the Henan provinces in July were one of the worst national disasters in China in many years, followed by a powerful typhoon in Eastern China that caused a massive constellation of flights and trains in the region. Consequently, the traveling demand in summer is being held back and our performance in Q3 is unavoidably impacted. However, with the increasing destination rates in Mainland China and effective control measures in the government, we believe new COVID offerings will be contained and the impact will be temporary. After 1 year cultivation and preparation, the whole company is now in a best position to capture the post COVID recovery opportunities and outperform the market no matter what challenges that we would encounter. Based on the situation in the first half of quarter three, we are now expecting our net revenue to decrease by 10% to 5% compared with 2019 or as similar as quarter 3 2020 level. If we don't consider the impact of international travel and repurchase business reduction, the like for like revenue is expected to grow by 0% to 5% if we compare it with 2019. Our adjusted net profit is expected to be in the range of RMB300 1,000,000 to RMB350 1,000,000. This forecast reflects our current and preliminary view, which is subject to change. With that, operator, we are ready to take questions now. Thank you. Thank you. We will now begin the question and answer session. Your first question is from Brian Gong of Citigroup. Please ask your question. Thanks, management, for taking my question. Congratulations on the decent 10 quarter results. So I have two questions. I know the first one is about the second half top line expectation. I know it may be too early to say, but given liquid run of outbreak almost under control in China right now, how does management say that they are not during the National Day? And do you think there will be some travel restriction during the National Day? Yes. Yes. My second question is the margin trend in the second half and next year. We just renewed the company with percent. I know to probably talk about the demand for the quarter, but how should we see marketing expense trend and the margin trend in the second half of the year? Thank you. Thanks, Brent. First, I would like to explain the recent situation after the regional outbreak of the COVID and what the things look like in the second half of this year for both of the top line and the bottom line. And then I will give more comments, colors on the cost structure and the margin side for this year and in the future. Actually, as we talked in the prepared remarks, we all of us can see that the travel demand rocketed up when COVID was basically under control and the travel restrictions was loosened in quarter 2. I think the enthusiasm of leisure travel and also the necessity of business travel were astonishing released in the past quarter, which gave us very strong confidence more than ever in the China domestic travel industry in the long run, along with the stronger consumption power and also the infrastructure improvement, especially in lower tier cities. However, to answer your question, the COVID virus changed to the new delta variant in the past quarters and caused, I think, more severe impact on travel industry during this summer vacation, which is the hottest season, peak season of the travel industry. First appeared in Nanjing in the middle of July and then brought to Hunan, the Sichuan, Hunan Province and finally got Beijing and Shanghai in early August. Actually, the travel restriction in Beijing and Shanghai was a very important signal of negative atmosphere of the whole travel industry, which implied a pause on reemerging travel demand. So, our business this quarter was very fluctuated. However, on the good side, the government was very experienced and quickly responded to stop the spread of delta and the situation was basically under control. The number of new cases was reduced in the middle of the August or just within 2 weeks. And what's more, according to today's news, Beijing has already cleared all the middle to high risk areas. So currently, we are eagerly looking forward to the carnival of domestic travel industry in the mid autumn festival in September and the National Day in October. As we experienced for the past couple of quarters, travel demand could be paused and come up, but it will be I think it will be released later in a far more stronger way. In terms of the margin side, actually, in the past several quarters, our I think our cost and expense structure were relatively stable and became more and more competitive than before. Selling and marketing spending as of revenue kept increasing to pursue an accelerated penetration in our targeted users and targeted areas post COVID and to support our hyper growth, which outpaced the industry in several dimensions. While our GP margin kept improving, benefited from the change in revenue structure, just like what I mentioned since revenue contribution from accommodation side increased a lot, and our continuous improvement in operation efficiency. At the same time, and very important point, our headcount, the total headcount of the company was relatively stable, so that service development and general administrative spending as of revenue dropped driven by the scaling effect when our revenue recovered and increased. The filling and the marketing spending actually was the nowadays is the biggest portion in our culture structure. And but it could be flexible, adjusted and controlled by adopting different operation tactics by the management team according to the market situation and COVID situation. In this quarter, in quarter 3, as I mentioned in prepared remarks, we promptly reduced the sales and marketing investments in all kinds of channels and scenarios after the resurgence of COVID cases since the end of July. So actually, we saved a lot of bullets for the rebound in National Day. Based on the situation that we have seen, actually, we are expected to achieve the RMB 300,000,000 to RMB 350,000,000 adjusted net profit in quarter 3, which means we are capable to maintain a very stable net margin during this difficult period caused by COVID resurgence compared with the first half of this year, very stable margin. And what is more, the renewed price of Huixin portal has already been fully considered in our estimation. In the long run, post I think post the pandemic, the main target of the company is still to maintain a sustainable growth with our dedication to provide better products and services to our users and contribute to the digitalization of the travel industry in the future. So, I think that is my comments for your 2 questions. Thank you. Your next question is from Alex Poon of Morgan Stanley. Please ask your question. Hi, management. Congratulations on very strong execution. I have two questions. My first question is regarding our MAUs. Apart from Tencent MAUs, the non Tencent part grew by around 86% year over year to more than 60,000,000. It's a very strong number. Can we explain the driver behind it and how should we forecast this MAU in future and how is the monetization of these users going? My second question is regarding our very strong gross margin, again record high at 76%. From Q3 onwards, should we expect this level to maintain or even increase a little bit further? Thank you very much. Thank you, Alex. I will take the first question and then Drew will adjust in a second. The first question is to consider the menu from the non Weixin platform that you can see we have enjoyed growth year over year. I think it can contribute to our strategy that we keep diversifying our traffic channels. In the second quarter, the MAU, our own app, also increased significantly because of innovative black box of air tickets. We have achieved overwhelming response from this initiative. And now we have positioned this as an effective way for our brand building. And we'll continue to develop the new product and service to attract the users. And in fact, I think we have been exploring Bright's user acquisition channels even under the impact of the COVID. So in addition to Weixin and the Stone stand alone apps, we also have added online channels such as the quick apps, other mini programs and so on. We also continue to set up our efforts in the offline user position, especially in the low tier cities with an aim to diversify our traffic channels as a user base. So later, we will also see the rebound opportunity from the travel industry and increase our investments in different channels to further up our business. Yes. In terms of the GP margin trends, Alex, actually, I think in the past 2 years, our GP margin have already improved a lot since 2019. Like what I said, mainly because the revenue structure improvement and also our continuous improvement in operating efficiency, especially the automation in our call centers. In the long run, I think there must be some room to improve for the GP margin because the accommodation segment is the most important part for the company to pursue a hyper growth. So, I believe the revenue structure will shift to accommodation side more in the following quarters as well. And also, there's also some space to improve the operating efficiency as well. But the other thing is that for this quarter and the last quarter, the prepurchase business is very limited. But if we increase the prepurchase business after the COVID, the post COVID period, I think next year or in the long run, I think the GP margin might be slightly dropped due to this reason, but it's not impacted on the bottom line. Thank you. Thank you very much. The next question is from Thomas Chong of Jefferies. Please ask your question. Thanks management for taking my question. I have two questions. The first one is about our annual paying user. So our annual paying user has reached over 180,000,000 in Q2. So can you share some color on the long term annual paying user trend? And do we have any target on that? And my second question is on the takeaway for the accommodation. Can management share the trend of the takeaway in top TST and the low TST? Thank you. Thank you for your questions. I will take your first question about the entertainment users. We all can see that our addressable market is still very huge. So the online penetration rate for the low tier cities, for example, for the hotels, only 25%. And the online penetration rate for the bus 16 is still very low. It's just low single digit, although we have achieved high growth last year. And for the users that we acquired from the best vending machine, still more than 60% are completely new to our platform. After the pandemic, I think it's a golden time for us to dig into the offline market and accelerate the digitalization and online penetration. So we have previously mentioned we have the target to achieve the goal of 200,000,000 annual paying users for the year of 2021. Although there is still uncertainties of the COVID ahead, we think we will stick to our strategy here. We will strive to increase our annual paying users through the strategies. Firstly, we will continue to prompt our offline user position initiative by cooperating with the hotel to acquire user offline and send out vending machines at bus stations, tourist attractions and other offline habits. Especially, we believe our bus ticketing volume will increase and bring a significant amount of paying users in 2021. And we will keep in mind to the ROI and adjust our coverage of hotels and location of vending machines to improve the Internet efficiency. And secondly, we will enhance the operation on our online platform, which as many program, our own app quick apps we have mentioned with more precise marketing and tailor made recommendations to our users. And certainly, we will try to acquire the traffic through the new channels such as we have initiated a cooperation with handset vendors since last year. We work with location based apps and the short video platforms to attract new traffic. Moreover, we will further enhance our product services. For example, you can see that we have launched innovative product like the blind box of air tickets to fulfill the users' ever changing needs. And recently, the 48 hour initiative also helped us to capture the need for the short haul travel during the COVID. So our paying user in the 12 month period ended June has already reached 181,900,000. I think the number will further increase in July before the virus outbreak in Nanjing. So with our effective user creation initiative, efficient operational on the online platforms, as well as our enhanced product and service innovation capability supported by our advanced technology. We are very confident to further expand our user base. Okay. Then let's talk about the take rate from the accommodation side. Actually, I think people are caring about the take rate very much for the accommodation because I think that is a very important signal for the competition level of the OTA area and also I think it's a signal of the relationship between OTA and hotels. Actually, in the past, I think 3 years from 2018 to nowadays, the take rate of accommodation is very, very stable, no matter the high tier cities and low tier cities. There's only some kind of slight fluctuation recently for the take rate for the accommodation take rate. It depends on the COVID situation. When the COVID is under well under control, I think most of the players would like to invest more on the coupon side to appeal more and more users. So, the take rate might be slightly dropped. But when the COVID is most severe, for example, this quarter in August, the players are more and more disciplined to investment on the co mining side. But anyway, generally speaking, it's quite stable. I believe it will be stable in the future. What is more, for us, our blended take rate I mean blended take rate for the accommodation is steadily improved, I think, since last year. That is because the one stop shop strategy of the accommodation would provide more and more BAS on accommodation side. So, in past quarter and in quarter 2, the BAS revenue contribution has already take like more than 12% of our total accommodation revenue. So, that is another reason why our accommodation blended take rate has increased quarter to quarter year on year. I think the trend might be continued for, I think, the following several quarters as well. Thank you. That's very helpful. Thank you. At this stage, I would now like to hand the call back to Kylie Yang for the closing remarks. Thank you. In lieu of the time constraint, we are closing the call now. If you wish to check out our presentation and other financial information, please visit the IR section of our company website. Thank you and see you next quarter. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now all disconnect.