Earnings Call: Q1 2020

May 29, 2020

Earnings release

Thank you for standing by, and welcome to the trip.comgrouplimitedq1 2020 Earnings Conference Call. All participants are in a listen only mode. There will be a presentation followed by a question and answer I would now like to hand the conference over to Ms. Michelle Chi, Head of Investor Relations. Please go ahead. Thank you, Ashley. Thank you, everyone, for joining on the call today. Good morning, and welcome to Trifocalcom Group's 2020 Q1 earnings conference call. Joining me today on the call are Mr. Zheng Liang, Chief Executive Chairman of the Board Ms. Jane Sam, Chief Executive Officer and Ms. Cindy Wang, Chief Financial Officer. During this call, we will discuss our future outlook and performance, which are forward looking statements made under the safe harbor provisions of the U. S. Private Securities Litigation Reform Act of 1995. Forward looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in trip.comgroup's public filings with the Securities and Exchange Commission. Trip.comgroup does not undertake any obligation to update any forward looking statements, except as required under applicable law. James, Jane and Cindy will share our strategy and business updates, operating highlights and financial performance for the Q1 of 2020, as well as outlook for the Q2 of 2020. After the prepared remarks, we will have a Q and A session. With that, I will turn the call over to James. James, please. Thank you, Michelle. Thank you, everyone, for joining us on the call today. 2020 thus far has been a challenging year for all of us. COVID-nineteen made its way across the world, affecting global economy and social orders and hitting the travel industry especially hard. In China, we are glad to see continued recovery of domestic travel in the past few months. However, international demand plummeted as more and more countries adopted the home quarantine and border control policies. In the past quarter, our first priority was to provide maximum protection for our customers. Between January April, the company extended coverage and the scope of cancellation provisions multiple times in response to the global development of coronavirus. To the greatest extent possible securing refunds for travelers, our direct expense related to the customer refunds topped RMB1.2 billion in the Q1. At the same time, we expanded the membership status for effective customers worldwide. In addition, trip.com launched COVID-nineteen International Travelers Guide to help customers navigate the travel restrictions and access the latest refund and cancellation policies. As a result of all our efforts, our NPS score reached a new high in Q1, demonstrating customer satisfaction and confidence in our service quality. We believe the accumulated customer goodwill will translate into long term loyalty and increasing lifetime value. By now, cancellation rates have stabilized in most of our markets and we are seeing increasing new orders in many areas. Given the level of uncertainties outside of China, we will focus our attention on China's domestic business in the near term. So far, we have seen recovery coming back fastest in the short haul segments and lower tier cities due to travel restrictions impacting customer confidence, which disproportionately affect the top tier cities. As of recently, the reservations for third haul travel bookings have almost fully recovered compared to last year as more and more regions lift travel restrictions. Long haul business and leisure travel demands are gradually increasing as well. Our product marketing team have been working closely with industry partners to launch products, which cater to new customer needs in the COVID-nineteen new normality. For example, in the past 2 months, I've been spending 1 hour every week on live streaming platforms to promote our presale products, featuring attractive discounts and flexible cancellations. In addition to bookings, we have gained new customers, reactivating existing ones and increased exposure of our high end products through the live streaming channels. It is worth noting that more than half of presales in the past months also have been concentrated in high star hotel products. Meanwhile, our international business are still under pressure from COVID-nineteen, giving the uneven approaches adopted by different regions. It may take longer for international travel to come back in full. Despite the challenges, we are glad to see in recent weeks, local travel has started to show signs of recovery in certain international markets. Our operation will continue to be flexible and ready to adapt to the pandemic continue as the pandemic continues to develop across the world. The team will also take advantage of the business downtime to focus on internal improvement, such as enhancing our technology infrastructure. In the end, I'd like to say thank you to our entire team again for their tireless efforts in working together and getting through this difficult time period with the company. With everyone's heart and flesh, we have been able to achieve new goals and reach new milestones, despite the challenging external environment. I'd like to reiterate my sincere appreciation to our global partners, who have worked with us along the way to protect customer interests and now promote industry recovery. We firmly believe that COVID-nineteen will eventually pass and travel demand will persist. In the meantime, we will continue to focus on improving our product competitiveness and service quality in order to best position ourselves for the coming recovery. Hello, everyone. This is Jane. I would like to update you with the previous quarter. The Q1 of 2020 was hit hard by COVID-nineteen. Total net revenue in Q1 decreased by 42% year over year, reflecting COVID-nineteen impact on China related travel from late January and overseas activities from the Q2. The company took immediate actions to ensure that we protect our customers' interests, support industry partners and make appropriate internal adjustments in response to the pandemic. In the Q1, we achieved breakeven on operating income, excluding expenses related to customer refunds. Although Q2 may present an even further decline with 4 quarter impact from COVID-nineteen, especially our international business. We have already seen improving results across the board in recent weeks. First of all, let me walk you through the domestic travel. We have seen the recovery is well on track. As James mentioned, China domestic travel has been on the track of consistent recovery since hitting a low in February. During the May Labor Day holiday, tourist number in China doubled compared to the previous Qingming Festival in April. Recently, new reservation for domestic hotel and air have rebounded to more than 70% of previous level. All of these are encouraging trends we believe will continue in the coming months. Short haul travel activities are the first to recover in China. To date, reservations for short haul travel products, such as hotel within same provinces and same cities, attraction tickets and car rental services are approaching a full recovery. Long haul business and leisure activities lagging due to certain regional travel restrictions and customers' concerns. However, we have seen a combination of China's effective containment measures, local governments lifting travel As a result, long haul travel As a result, long haul travel activities have also begun to catch up after the Labor Day holiday on May 1. 2nd, for the international travel, activities are still at a low level due to global spread of COVID-nineteen, with early signs of recovery in certain markets. The outbound travel activities has been at a low level since late January due to tight international travel restrictions across countries and jurisdictions. We believe part of China's outbound travel demand will convert to high end domestic travel activities if such situation continues. Our overseas business has also been under pressure since March for the same reason. However, on the positive note, we did start to see certain small, but positive sign of recovery in markets where the virus is being well contained. For example, in the past 2 weeks, the Korean market for Korean market, the domestic hotel booking has gained positive year over year growth. We are focusing on improving the product and services, strengthening our partnership and increasing operation efficiencies. As pandemic continues to evolve, we will make sure our team remain vigilant and quick to adjust to the situation. Throughout the crisis, we are extremely proud of our employees for their exceptional hard work to protect our customers' interest. At the beginning of the outbreak in China, our service, product and technology team all poured in together and worked overnight to respond promptly to customers' cancellation and the refund requests, which came in more than 10 times of regular volume. In addition, we quickly launched international travel guide, providing easy access to the most updated information to our international travelers. In the past months, our team came up with new products, catering to specific consumers' needs arising from the pandemic. For example, together with our hotel partners, we launched TELUS Guardian Alliance Safety Standards in order to boost consumers' travel confidence. We also worked with partners to put together attractive deals Through creative marketing tools such as live streaming, we are able to reach out to a wide audience and enhance our customers' interest for long haul and for high end travel packages. As a result, in the recent week, our high end hotel recovered meaningfully and outpaced the other segments. Our outlook our collaboration with the industry partners has further strengthened our strength in this tough environment. Since our announcement of tourism revival V Plan in March, with V standing for victory, we have received participation from 10,000 hotel operators, 500 airlines and hundreds of attractions. As of today, we have facilitated more than 17,000 loans through our financing platform, offering more than RMB10 1,000,000,000 loans to our suppliers to cope with the economic hardship brought by the COVID-nineteen. Just 2 weeks ago, Continental Hotel Group also launched inaugural flagship stores on our platform. At this collaboration, the 2 companies agreed to a membership matching program that recognized each other's membership benefits, which will be providing our customers with the best interest as well as the collaboration for our partners. In addition to show our support to our global partners, we have also donated more than 3,000,000 surgical masks to more than 25 countries around the world. Due to the uncertainty in international markets, we were well prepared for possibilities, including a potential prolonged crisis overseas. As of March 31, our company had US9.6 billion dollars on hand in capital reserve To ensure maximum financial flexibility, we further announced a revolving credit facility of up to US1.5 billion dollars in early April. The company also taken measures such as reducing discretionary spending and voluntary management pick ups to ensure our organization are lean and efficient in response to the pandemic. The combined efforts will provide ample liquidity for the company to be able to emerge as a stronger player for the future. During this challenging time, we will work hard with our employees, customers, business partners and all stakeholders to streamline our organization and increase our efficiency. We want to thank everyone for their hard work and contribution. With that, I will now turn the call over to Cindy. Thank you, Jane. Thanks, everyone. The company's results for the Q1 of 2020 have been significantly and negatively impacted due to COVID-nineteen. The pandemic drove a significant decline in travel demand, resulting in customer cancellation and reduced new orders. The impact also included the increase in bad debt provisions and impairments of long term investments. Because the COVID-nineteen is still evolving, we may also need to continuously assess the amount of impairments and bad debt provision in the following periods. For the Q1 of 2020, trip.comgroupreportednetrevenueofrmb4.7 billion, representing a 42% decrease from the same period in 2019 and a 43% decrease from the previous quarter. Accommodation reservation revenue for the Q1 of 2020 was RMB1.2 billion, representing a 62% decrease from the same period in 2019 and a 61% decrease from the previous quarter. Hotel bookings maintained double digit growth in the 1st 20 days of January. Demand started to fall as the outbreak spread in China, hitting bottom in the following weeks. Since then, we have seen domestic bookings gradually recover month over month, while international demands remain at low level. Transportation ticketing revenue for the Q1 of 2020 was RMB2.4 billion, representing a 29% decrease from the same period in 2019 and a 31% decrease previous quarter. Compared to other travel segments, total transportation ticketing revenue was less impacted by the COVID-nineteen during the Q1 of 2019, mainly due to a higher revenue mix from international business. International transportation sustained solid growth in the first half of the quarter and benefited from an increase in ticketing price. Packaged tour revenue for the Q1 of 2020 was RMB523 1,000,000, representing a 50% decrease from the same period in 2019 and a 35% decrease from the previous quarter. Group and dynamic package products delivered strong results for travel activities made before Chinese New Year. Cross region and outbound packaged tour business have been on restricted list since late January, while travel activities such as attraction tickets gradually resumed in the second half of the quarter. Corporate travel revenue for the Q1 of 2020 was RMB126 1,000,000, representing a 47% decrease from the same period in 2019 and a 66% decrease from the previous quarter. Revenues from other business sustained growth by 4% year on year for the Q1 of 2020, primarily driven by a strong performance of travel financial services. Gross margin was 74% for the Q1 of 2020, which decreased from 79% for the same period in 2019 and the previous quarter. Product development expenses for the Q1 of 20 20 decreased by 33% to RMB1.7 billion from the same period in 2019 and decreased by 37% from the previous quarter. Cost saving in product development in the first quarter was mainly driven by a decrease of performance based bonus due to the pandemic. Headcount in product and development was stable on a year over year basis. Sales and marketing expenses for the Q1 of 2020 decreased by 38% to RMB1.4 billion from the same period in 2019 and decreased by 44% from the previous quarter. Cost saving in sales and marketing expenses in the Q1 was mainly driven by decrease of variable and discretional spending across marketing channels. G and A expenses for the Q1 of 2020 decreased increased by 136 percent to RMB1.9 billion from the same period in 2019 and increased by 130% from the previous quarter. G and A expenses in the Q1 of 2020 included bad debt provision of RMB1.2 billion for the increased receivables, mainly due to the refunds for reservation cancellations we paid on behalf of our travel suppliers and increased credit risk as a result of the COVID-nineteen pandemic. Excluding the bad debt provisions, G and A expenses for the Q1 of 2020 decreased by 9% from the same period in 2019 and 3% from the previous quarter. Excluding share based compensation charges, non GAAP loss from operations was RMB1.2 billion. Adjusting for expenses related to customer refunds, our non GAAP operating income reached breakeven level. Other expenses for the Q1 of 2020 was RMB3.8 billion, mainly related to fair value changes of equity security investments and impairment of certain long term investments due to the COVID-nineteen. Diluted losses per ADS were RMB8.98 or US1.27 dollars for the Q1 of 2020. Excluding share based compensation charges and fair value change of equity security investments, Non GAAP diluted loss per ADS were RMB3.73 or US0.53 dollars for the Q1 of 2020. As of March 31, 2020, the balance of cash and cash equivalents, restricted cash, short term investment held to maturity time deposit and financial products was RMB68.2 billion or US9.6 billion dollars To ensure maximum financial flexibility, in April, the company entered into a facility agreement with certain financial institutions US1 $1,000,000,000 transferable term and revolving loan facility with an incremental facility of up to US500 $1,000,000,000 in which US1 $1,000,000,000 had been successfully drawn down in May 2020 with effective interest rate between 1.15 percent to 1.25 percent. In addition, by today, we have repaid US250 $1,000,000 of convertible notes and plan to settle additional convertible notes worth US700 $1,000,000 maturing in July and US400 $1,000,000 with putable date in July, should investors choose to exercise such rights, which altogether potentially reduce fully diluted ordinary share count by up to 3,150,000. The outbreak of COVID-nineteen has negatively impacted our cash flow during the Q1 of 2020, which could continue into subsequent periods depending on the speed of recovery, both domestically and internationally. We frequently assess our liquidity position and the company is confident to conclude that the combination of our existing cash reserve, cash flow from operations and financing sources are sufficient to meet our anticipated cash needs, including working capital, capital expenditures and repayment of financial obligations for the foreseeable future. Now turning to the Q2 of 2020, we impact of COVID-nineteen despite sequential improvements across the board in recent weeks. For the Q2 of 2020, the company currently expects net revenue to decrease by 67% to 77% year over year. Excluding share based compensation, the company expects non GAAP operating net loss will be in the range of RMB1.1 billion to RMB1.3 billion. This forecast reflects trip.comgroup's current and preliminary view, which is subject to change. The increasing uncertainty due to the coronavirus outbreak further restricted our visibility. We will continue to monitor the market and provide more color to investors in time. With that, we will open it for Q and A. Operator, please. Thank Your first question comes from Gregory Zhao with Barclays. Please go ahead. Hi, James, Jane, Cindy and Michelle. Thanks for taking my question. So I just want to understand how do you think about the COVID-nineteen will reshape the long term travel industry demand and the user behavior as we see some of the business driven travel demand has been replaced by some virtual technologies during the past pandemic period. So how shall we think about the long term dynamic about this? Thank you. In the short or mid term, we believe business travel demand is generally resilient and a strong correlation with economic prosperity. For example, according to the recent survey for corporate travel clients, more than 80% of corporate clients believe their travel budgets will recover and grow once the pandemic is over. In the long run, our technology reshape the business travel demand is still to be watched. In the past decade, business travel activities have enjoyed continual growth despite the fast evolving telecom technologies. For leisure travel demand, as I have shared many times, the only evergreen and ever growing industries are the ones that fulfill people's spiritual needs rather than materialistic needs. In many parts of the world, including China, tourism is one of the most resilient industry. We believe the disruption caused by the pandemic will eventually disappear and travel demand will come back stronger after the pandemic. Your next question comes from Thomas Chong with Jefferies. Please go ahead. Hi. Thanks management for taking my questions. I have a question about the Q2 revenue guidance as well as the second half outlook. Can management provide some guidance about how the performance across different segments in accommodation, transportation, corporate travel and others will trending in Q2 as well as second half? Thank you. Sure, Thomas. We expect so Q2 reflected a full quarter due to the COVID-nineteen, especially for the international travel activities, which accounted for about 35% to 40% of our group's total revenue in the Q2 last year. Therefore, we expect total revenue to decrease 67% to 77% year on year. For different segment, we expect revenue for the accommodation reservation to decrease 67% to 70 7% year on year. Within the accommodation reservation business, our domestic travel activities continued to recover in the past 3 to 4 months. To date, the new reservations for the domestic hotel reached over 4 reached over 70% compared with last year, while the price still is heavily discounted. The new reservation for our international travel activities are expected to close to almost 0 for the full quarter due to the strict international travel restrictions, especially for the China outbound business. However, in some countries and markets we noticed early signs of recoveries in their domestic travel segment. Just for your information, our international hotel revenue accounted for 20% to 25% of the total accommodation reservation in the Q2 last year. On the with regard to the transportation reservation revenues, we expect it will be increase 70% to 80% year over year. The domestic travel activities continued to recover in the past 3 to 4 months. To date, the reservations for our domestic air also recovered over 70% compared with last year. But the new reservations for our international activities are expected close to 0 due to strict international travel restrictions for both China outbound as well as the international travel. And for your information, international transportation accounted for close to half of our total transportation revenue in the second half in the second quarter last year, which mainly improved our outbound air ticket as well as our air revenues from our international brands. We expect revenue for packaged tour business to decrease 80% to 90% year on year. Although the cross region and international travel package list. We are happy to see reservations for our short haul activities in China such as traction ticket have been fully recovered and even recorded positive growth in recent weeks. With regard to our corporate travel business, we forecast it will decrease about 65% to 75% year over year. Many large corporations only resume travel activities in recent months. We expect our revenue from other business to decrease about 15% to 25% year over year. Thank you. Your next question comes from Binnie Wong with HSBC. Please go ahead. Hi, good morning, James, Jane and Cindy and Michelle. I think it's very understandable in terms of the pandemic hit to the travel business and here. So with that, I just want to understand that following on James' comment in terms of the opening remarks saying that there will be improvement in the technology side, improvement in the efficiencies. And then should we expect like down the road, right, the improvement at the end, right, should be able to help us to preserve the potential like a stable or maybe flattish earnings growth despite a hit to the top line, maybe towards on the latter part of the year? And then also, can you also comment on because 3Q upcoming Q3 would be seasonally the strongest quarter. So I guess with the focus shifting more in the domestic business, how is Ctrip positioning differently to gain better market share in the domestic market? Thank you so much. Thanks, Benny. Yes, I think during the crisis, our technology team and product team have been strengthened. A lot of projects was accelerated to handle the 10x volume due to the crisis for cancellation orders, etcetera. So we took this opportunity to preserve and strengthen our technology and product team and they build stronger scalability so that we can handle the expansion of the business going forward. In Q3, we are looking forward to the summer months based on a couple of observations, first of all, I think the government has done a very good job controlling the outbreak of the viruses. So we have seen consumers' confidence has been increasing. Secondly, during the recent quarter recent weeks, we also have seen the faster recovery, particularly on the high end of the product, has been gaining its momentum after May 1, Labor Day weekend. So we are hoping this trend will continue on into the Q3 summer week. And thirdly, we expect certain outbound demand will be converted into the high end of the products and long haul products in the summer months. So our team is working very hard to develop products that can satisfy the high end customers' need, because this year, they will not be able to go abroad as they do every year. So we would like to capitalize this demand and convert it in domestic demand for high end product and long haul product. So in technology front as well as product innovation front, we are full force to be as innovative as possible. And our Chairman, James, even leaded efforts. He is going through all the provinces with the promotion to encourage the consumers' confidence. So far, the result has been very positive. Thank you. Your next question comes from Jed Kelly with Oppenheimer. Please go ahead. Great. Thanks for taking my question. Can you just talk about how as you've been beginning to gradually recover into the second half of this year and into next year, how you're thinking sort of positioning your overall cost structure over the next 12 to 18 months? Sure. We have a large portion in our cost structures, for example, cost of service and sales cost of service as well as the marketing expenses, they are variable cost or purely discretional cost such as performance based marketing expenses. And these two items account for more than half of our total cost and non GAAP operating expenses. So for personnel related expense, a significant portion is variable such as performance based bonus. We are also executing on ways to conserve resources and adapt to the changing market demand. For example, our management team have taken voluntary pay cut since the Q1. And in response to the pandemic, we have swiftly fleet adopted cost control measures to reflect a significant slowdown in consumer demand. Our total cost and operating expenses actually decreased about 31% year over year in the first quarter. And in the second quarter, we expect our total cost saving will be around 40% to 50% compared with last year. Thank you. Your next question comes from James Lee with Mizuho. Please go ahead. Yes. Thanks for taking my questions. Two questions here. One small policy related for Jane here. Anything coming out of National Congress specifically on the policy perspective that could be positive for travel going forward? I'm also wondering what's the status of summer vacation for students that could impact the travel during the summer season as well? And a question for Cindy here. How should we think about the expense level for Q2, given the revenue challenge that you provided in your guidance here? Thanks. Thanks, James. I think the government has put in very decisive policies first to contain the outbreak of the virus. So the whole country right now is very safe and consumers' confidence in the control of the pandemic has been very positively enhancing. Secondly, on economic front, the government also in stimulus package to improve the employment level to increase the recovery of the economy, which is very positive for our travel industry. And we are hoping that city to city, state to state travel will also be more open and more enhanced going forward. We have already seen positive recovery starting from May 1, Labor Day holiday, particularly on the high end of the products. So we are confident that going forward that we will see recovery and particularly some of the demand from overseas will be converted into domestic demand. So our product team is working very hard to make sure we capitalize on this demand. Thank you, James. Yes. On the cost control side, in the Q2, we expect our total cost saving will be about 40% to 50% decrease compared with last year. And for the Q1, actually we already implemented a lot of cost control measures, which resulted an instant significant decrease on the cost side. And excluding one time bad debt provisions that we made in the Q1 in relation with our refund policy. Actually, we achieved breakeven level on the non GAAP operating level. Thank you. Your next question comes from Tian Hou with TH Capital. Please go ahead. Yes. Thank you. Thanks management. So I have two questions. One is regarding Skyscanner. As European starts to go back to work with some of the business operations, I wonder how Skyscanner is recovering. And so what can management do there in terms of Skyscanner's business? And also in terms of OTA penetration in China, I can imagine after the coronavirus, a lot of agencies, offline agencies are hard to survive. So is that a true statement that OTA penetration post the virus is going to be much higher than before? So that's the 2 questions. Thank you. Thank you. For our global team outside of China, we they are also reviewing their business and make adjustment for the cost structure very carefully, including our teams in Europe, in America, everywhere else outside of China. So I'm sure the cost structure will also reflect their business recovery progress as we're monitoring the situation very carefully. 2nd on OTA, yes, every time there is crisis, it's always a good time for us to reexamine our technology team as well as product team and make sure we extend our leadership in the travel industry. Thank you. Your next question comes from Ronald Keung with Goldman Sachs. Please go ahead. Thank you, James, Jane, Cindy and Michelle. So my question is on the shift back to domestic. As we shift more focus to domestic travel in the near term, do we have different strategies for our Ctrip, Tunar brands and even your affiliate, Dongzhang Yilong, just between the higher and lower tier markets? And I'm thinking about, are you also re attracting your original outbound travelers to domestic? So what are the kind of strategies with this and the different brands? Thank you. Sure. We have different brands to cover different segments and penetrate provinces. Ctrip brand is known for high quality, for business travelers and high end of the products. So with the limitation of the outbound business, this brand will be fully innovative to make sure we capitalize on the recovery of the business travelers as well as the international demand, which is being converted into the high end of the product into China. So our Chairman is leading the efforts for every province to open up more travel resources to be able to satisfy the high end of the needs. And there are lots of high end of the hotels and resorts being discovered through these efforts. And we have seen after the May holiday, the recovery of the high end hotels has outpaced the other segments, which is very positive. And secondly, we also think that in the summer, normally our outbound travel will hit a new high during the summer break with families and children going abroad. This time, because of the COVID-nineteen, these demand will be converted into the domestic need. So our team also are being very innovative and creative in order to convert this demand into the long haul travel as well as the luxury products within China. We hope to capitalize on these conversions. Yes. Just share some color on the recent developments on each segment on different segments. We noticed our short haul travel activities almost fully recovered in recent weeks. For example, our hotel reservations within the province and our car rental business are almost approaching fully recovered. And our reservations for the local attraction tickets resumed growth recently. Thank you. Your next question comes from Alex Poon with Morgan Stanley. Please go ahead. Hi, James, Jane, Cindy, Michelle. Thanks for taking my questions. I have two questions. First is regarding your hotel business. How should we think about the balancing of like bargaining power between OTAs, hotels and offline suppliers. And looks like the pandemic is going to help OTA more because you have the most traffic. And so going forward, if I think about the next year, would there be any changes to the tick rates, advertising revenue coming from these hotels, helping your overall domestic margins? And because your domestic business, my second question is, it's much more controllable and it's recovering. And assuming next year, can we expect the operating margin to go back to 20%? The pandemic hit the global travel industry and no country and no industry has ever had the opportunity to rehearse for this kind of hit. So therefore, it's very important for us to team up with all our partners in the global places to make sure we bring demands to our hotel partners and support them as much as possible. So we'll reach out to our partners in the global spaces to make sure we understand their needs and their potential for the recovery. What we have done is launched our Revival V plan in the travel industry, where hotels and attractions have idle and perishable inventory. We're able to link them up with increased demand from our consumers. So at a very de minimis incremental cost, we're able to bring demand to us, which is tremendous for them to gradually reach the breakeven point. So we are working very hard to make sure we understand our ecosystem and stimulate the demand from our consumer side and bring them to our partners, which have idle perishable inventory. So we'll work very hard to try to be very innovative to support our partners in the global places. Your next question comes from Natalie Wu with CICC. Please go ahead. Hi, good morning. Thanks for taking my question. A couple of questions here. Firstly, have you noticed any takeaway change during the outbreak given the travel inventory issues you just mentioned? And also, how should we see the competition landscape evolution, especially in lower tier cities due to the outbreak? And lastly, regarding your live streaming, how does that contribute to your GMV users and financials? It would be great if management can share more colors on that. Thank you. For take rate, I think it's very much a dynamic equation. So we allow all kinds of hotels to be on our platform. And depending on how much inventory they have, how much demand they need, it's a dynamic balancing. So we enable them to use any kind of method. For example, certain hotel will say we use a set top model. The more revenue you bring, the more commission you will get. Some other hotels will say, okay, we give you a fixed rate. So as the volume increase, the total amount of the revenue increases as well. We are very open minded and work with our hotel partners in any kind of mechanism that they feel comfortable to support them. And in terms of the penetration into the local market, as we discussed, we have seen the short haul packages and hotels and business recover fully already. Going forward after May 1 holiday, we feel that state to state, city to city travel will enhance and we already see across the line, including transportation, high end hotels, etcetera, have seen positive recovery after the May holidays. Thank you. That is all the questions we have time for today. I'll now hand back to Ms. Qi for closing remarks. Thank you. Thank you, everyone, for joining us today. You can find the transcript and webcast of today's call on investor. Trip.com. We look forward to speaking with you on our Q2 2020 earnings call. Thank you and have a good day. Thank you.