Earnings Call: Q4 2019

Mar 19, 2020

I would now like to hand the conference over to Michelle Key, Senior IR Director. Please go ahead. Thank you, Ben. Thank you, everyone. Good morning, and welcome to Tripelconstitu's 2019 Q4 and full year earnings conference call. Joining me today on the call are Mr. Jim Tian, Chief Executive Chairman of the Board Ms. Chen Song, 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.com Group's public filings with the Securities and Exchange Commission. Trip.com 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 Q4 full year 2019 as well as the outlook for the Q1 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. 2019 was a formative year for us. We celebrated our 20th birthday and announced the rebranding into TripTap 1 Group. Looking back, we are pleased with the solid 2019. Total operating income increased to 94% year over year, reaching RMB5 1,000,000,000. Non GAAP operating margin reached 19% right on track to our original target. The continued margin expansion coincided with our team's rigorous execution to expand our share across markets to the operator. In China, we further lifted the multiples of our core business growth rates against the industry, seeing particularly strong user growth from 5th and 5th to 2nd tier cities. Outside of China, our trip.com brand made solid progress entering new markets and gaining market share in APAC region. At the end of 2019, brandtrip.com is updating in 20 7 markets and supporting 20 languages. For the full year 2019, our core OTA brands achieved a total GMV of RMB855 865,000,000,000 or US124,000,000,000, up 19% year over year. I'd like to thank our team again for delivering excellent results despite certain industry headwinds. The beginning of 2020 has been challenging for the travel industry worldwide due to the novel coronavirus. The initial outbreak dropped tens of millions of cancellations during the Chinese New Year and the strained travel activities after the holidays. We recently we're encouraged to see signs of the successful containment of the virus in China and initial recovery of domestic travel activities. Shipyardong Group was the 1st in the industry to respond to the pandemic with a set of comprehensive protection measures, including safeguards, cancellation, guarantee policy and our partnership support program. As the outbreak evolves over time, we have expanded our guarantee to include effective customers worldwide. We're extremely proud of our team, especially customer services for what they were able to achieve during this special time. Many of them worked over the holidays and after hours in order to handle the sudden spike in customer requests. I'd like to thank all of our team for their top quality services and efforts in the joint spike against the impact of coronavirus, our customers and our company. This further illustrates our belief that CECO, our most important asset and retaining and motivating talent will always be a top priority. During this period, we received many customer praises, timely and professional service. We believe the customer goodwill will translate into long term engagement and retention, which will support our sustainable growth in the future. We also sincerely appreciate the support from our valued partners and have announced a set of measures to help them manage through this difficult period. Along with our partners, we look forward to providing the best travel services and for these products once this outbreak is contained. Last but not least, we would like to give our highest gratitude to health care professionals all over the world, which have been fighting tirelessly to keep everyone safe during the crisis. I'm pleased to announce that the company will donate 1,000,000 surgical masks to affected countries worldwide and will provide our VIP benefits to healthcare real workers in China. Despite near term challenges, we believe the impact from the novel coronavirus will be 1 off. We remain confident for the long term prospects of both the travel industry and our business fundamentals. In the past 2 decades, the travel industry has witnessed a serious and global health crisis. Each time, global travel demand proved resilient and rebounded strongly after successful containment of the virus. In recent weeks, we are encouraged to see the massive travel starting to pick up as China continues on its path to recovery. While the country is still on alert, many local municipalities are rolling out measures to bolster recovery of tourism industry. Nowadays, traveling has become an necessity for more and more people in China and abroad. We believe the coronavirus has not dent the healthy fundamentals of China's travel markets, rather it will accelerate the industrial consolidation and online penetration into lower tier cities. Similarly, for international markets, we believe that underlying travel demand remains promising, and we expect to see strong recovery once operators demand. With that, I will turn to Jane for opening follow-up. Thank you, James. Good morning, everyone. I would like to start with a quick recap of the last quarter of 2019. Despite the market headwinds around certain destinations, we are glad to see trip.comgroupdelivered a solid execution on our strategy. 1st, for domestic travel market, we continue to expand our market share, especially in targeted second and third tier cities, which accounted for more than 60% of Ctrip's new users. Lower end hotels and transportation products have proven to be effective gateway products for new customers. Ctrip branded lower end hotel grew out 50% year over year in the 4th quarter. In addition, our offline store continue to act as part of our core strategies to increase our influence in low tier cities. In the markets where we enjoy clear advantages, we have been working to further improve service quality, thereby enhancing our competitiveness. For example, over 50,000 hotels have agreed to provide outstanding benefits to our transportation cross sell customers. The participating hotels have seen significant incremental volume through these programs. 2nd, for the outbound travel market, certain China outbound destinations continued to be impacted by macro headwinds, while other saw growth at even faster pace. In Q4, revenue growth for hotels excluding Great China destination reached 51% year over year. For our overseas brand, Skycenter made additional progress in increasing its direct booking ratio. Trip.com brand recorded another strong quarter with triple digits year over year growth in the international air ticketing volume. As James mentioned, the beginning of 2020 has been challenging with the outbreak of the coronavirus. However, the strong operational efficiency and the financial resources we have built over the years have prepared us well for times like this. To date, tens of millions of travel orders have been canceled due to the outbreak, totaling over RMB 41,000,000,000 in GMV terms. The company was the 1st in the industry to announce a set of customer protection measures upon initial outbreak, which subsequently expanded to become the most comprehensive among us, providing strong backing for our customers. Our safeguard cancellation guarantee policy covers customers in China and abroad who are unable to travel due to the travel restrictions or diagnosis, as well as those who work so hard at the medical front lines in the fight against the virus. The outbreak of the virus is an unfortunate global development that has affected many families and lives directly and indirectly. We strongly believe it is our responsibility to protect affected customers to the best of our abilities. The company will take on one time financial hit as a result, but we believe it is the right thing for us to do for our customers, for our industry and for our shareholders in the long run. The accumulated custom goodwill will deliver long lasting sustainable growth down the road. Next, I would like to spend a minute to thank our team for their contributions during this special time. Whether remote or on-site, Our customer service team worked tirelessly day and night to assist our customers with changes in their travel plans. Many of them sacrificed the holiday and worked for extended hours so our customers could be well taken care of as quickly as possible. New records and milestones were reached, which are extremely appreciative which we are extremely appreciative and proud of. During the Chinese New Year, even though peak core volume was over 10 times of regular capacity, our customer satisfaction rate increased significantly. In addition, our technology and product team also responded with great speed. We're able to launch auto cancellation for certain qualified products with new policies issued. This greatly shortened the waiting time for our customers as approximately 90% of accommodation transportation cancellation requests were sales completed online. Such speed and the responses reflected trip.com's highly dedication to service quality, especially during the times of need for our customers. We also would like to thank our most valued hotel, airlines and other travel partners for their timely assistance during this difficult situation. As of now, more than 1,000,000 global hotels have joined us for safe cancellation guarantee initiatives And over 110 domestic and international airlines have agreed to provide free cancellation for qualified products. In response to help our customers through this period of economic hardship, we also announced a set of measures to alleviate their burdens. This includes campaign and marketing assistance for participating hotels in our safeguard cancellation guarantee initiatives, including waiving and reducing marketing costs and offering additional campaign resources. Weighting of non refundable costs that package suppliers incurred during the recent cancellation Capital assistance for our hotels and other travel suppliers, including RMB1 1,000,000,000 fund in the loan assistance program with our banking partners and over 2,000 free online courses for our business partners. And 2 weeks ago, we launched Tourism Revival V Plan, V stands for Victory. Ctrip contributed over RMB1 1,000,000,000 of resources to work with over more than 100 local destinations travel bureaus, industry partners and other organizations to prepare for the recovery in China and we have take the lead in the recovery efforts. Internally, we have taken this opportunity to examine ourselves and improve our core competencies in order to prepare for the business recovery once the virus is contained. 1st, we are combining through products and services in more details to improve our experience. Our customer satisfaction rate has hit a record high in past months. We are confident that the improved customer satisfaction rate will translate into long term customer retention and enrichment. 2nd, we are working on streamlining and organizing our operating processes and invest in technology and data platform to improve our infrastructure. 3rd, we will speed up our globalization of the product and back end technology infrastructure in order to bring full sets of products and services to our global users. As WeChat started to see the early signs of recovery in China, the virus continued to spread with subsequent decline in travel activities in the overseas market. Therefore, we are preparing for a domestic industry rebound, while also getting ready for a prolonged battle against the potential weak international demands. As a result, we are executing on ways to conserving resources and adapting to the challenges around the world. Last week, we announced that senior management team will take a voluntary pickup up to 50%, with James and I taking 0 salary until the situation increase. We believe every challenge brings with an opportunity. While the virus represents a challenge for the entire world, we also give ourselves the opportunity to show our strength and extend our leadership. With strong financial reserves to weather the storm, we will continue to elevate our services, products, technology and brand. Together with our employees and valued partners, we will not only overcome the challenge, but also lead the recovery of the travel industry starting in China. With that, I now will turn the call to our CFO, Cindy. Thank you, Andy. For the Q1 of 2019, Trip.com Group reported net revenue of RMB8.3 billion, representing a 10% increase from the same period in 2018. Despite a Q4 impact from certain destinations such as Hong Kong and Taiwan, we delivered solid performance in other destinations and lifted the multiple of our core business growth rates against the industry. For the full year ended December 31, 2019, net revenue was RMB35.7 billion, representing a 15% increase from 2018. Accommodation reservation revenue for the Q4 of 2019 was RMB3 1,000,000,000 or US426 million dollars representing a 12% increase from the same period in 2018. During the Q4, low end hotels sustained strong room mark growth for the Ctrip brand, reaching around 50% year on year. It has become one of the most important gateway for us to acquire new users, which reflects the effectiveness of our dynamic pricing strategy. In the domestic mid to high end hotel segment, we also saw accelerated growth momentum. We have raised our competitive note as an increasing portion of mid to high end hotels joined our trip plus program and accommodation plus transportation dynamic package program, providing extra discounts to end users while gaining incremental volume. The recent macro and industry headwinds in destinations such as Hong Kong have put pressure on related truck demand and hotel prices. However, in other overseas non Great China destinations, we were glad to see hotel revenue growth over 50% year on year in the Q4. For the full year ended December 31, 2019, accommodation reservation revenue was RMB13.5 billion or US1.9 billion dollars representing a 17% increase from 2018. Transportation ticketing revenue for the Q4 of 2019 was RMB3.5 billion, a US498 million dollars representing a 2% increase from the same period in 2018. Headwind in certain international destinations continued to put pressure on related travel demand and prices in the Q4. Besides these definitions, growth rates for both domestic and international air ticket business achieved higher multiples against the industry. Trip.combrands recorded another strong quarter of triple digit year on year growth in international air ticketing volume. For the full year ended December 31, 2019, transportation ticketing revenue was RMB14 1,000,000,000 or US2 1,000,000,000 representing an 8% increase from 2018. Packaged tour revenue for the Q4 of 2019 was RMB800 1,000,000 or 100 and $15,000,000 representing an 11% increase from the same period in 2018. For the full year ended December 31, 2019, packaged tour revenue was RMB billion or US651 million dollars representing a 20% increase from 2018. By the end of the year, trip.comgroup has around 8,000 offline franchised stores in operation and in the pipeline, covering over 290 prefecture level cities and over 500 country level cities. Our online customized tour platform attracted more than 1800 travel planning agencies and 6,000 planners, servicing millions of customers. Corporate travel revenue for the Q4 of 2019 was RMB373 1,000,000 or 54,000,000 representing a 33% increase from the same period in 2018. Corporate travel saw sequential growth acceleration in the 4th quarter, primarily driven by expansion in corporate customer base and an optimized product mix trend. For the full year ended December 31, 2019, corporate travel revenue was RMB1.3 billion or 180,000,000 dollars representing a 28% increase from 2018. Revenues for other business increased by 42% year on year in the Q4 of 2019 and 35% for the full year 2019. This was primarily driven by strong growth in our advertisement and financial service business. Gross margin was 79% for the Q4 of 2019, consistent with that for the same period in 2018 and the previous quarter. For the full year ended December 31, 2019, gross margin was 79% compared to 80% in 2018. Product development expenses for the Q4 of 2019 decreased by 1% year on year and by 3% quarter over quarter. Cost savings in product development in the Q4 and past year efforts are first quarter and past year, efforts of continuing to streamlining operating process and improving efficiency across brands and entities in the past year. For the full year ended December 31, 2019, product development expenses increased by 11% from 2018. Excluding share based compensation charges, non GAAP other development expenses for the full year 2019 accounted for 27% of the net revenue compared to 28% in 2018. Sales and marketing expenses for the Q4 of 2019 decreased by 5% year on year and remained consistent with those for the previous quarter. For the full year ended December 31, 2019, sales and marketing expenses decreased by 3% from 2018. Excluding share based compensation charges, non GAAP sales and marketing expenses accounted for 26% of the net revenue, which decreased from 30% in 2018. The decrease in sales and marketing expenses was due to the continued ROI driven marketing strategy. Despite this, our main brands maintained stable traffic growth and consistent amount of new customers, reflecting the continued improvement in marketing efficiency. Conversion and cross sell ratio also increased steadily, thanks to the enhanced competitiveness of products and services. G and A expenses for the Q4 of 2019 increased by 5% year on year and by 5% quarter over quarter, primarily due to an increase in G and A personnel related expenses. For the full year ended December 31, 2019, G and A expenses increased by 17% from 2018. Excluding share based compensation charges, non GAAP G and A expenses accounted for 7 percent of the net revenue, which remained consistent with 2018. The headcount for GME staff was largely stable throughout the year. Excluding share based compensation charges, non GAAP operating margin was 12% for the Q4 of 2019 compared to 3% in the same period in 2018. For the full year ended December 31, 2019, non GAAP operating margin was 19% compared to 14% in 2018. Diluted earnings per ADS was RMB3.23 or US0.46 dollars for the Q4 of 2019. Excluding share based compensation charges and fair value changes of equity security investments, non GAAP diluted earnings per ADS were RMB1.94 or $0.28 for the Q4 of 2019. For the full year ended December 31, 2019, diluted earnings per ADS were RMB 11.5 or US1.65 dollars Excluding share based compensation charges and fair value changes on happily secured departments, non GAAP diluted earnings per ADS was RMB10.75 or US1. $5 As of December 31, 2019, the balance of cash and cash equivalents, restricted cash, short term investments held to maturity time deposits and financial products was RMB59.9 billion or US8.6 billion dollars Now turning to the Q1 of 2020. Our original outlook reflected a continuation of the momentum last year, which includes sustained top line growth, penetration into lower tier cities, overseas expansion and margin improvement. We were delighted to see January booking up to 20s growing at double digit year on year. But obviously, the development of the coronavirus has since caused significant disruption in China and the global travel industry. Thus, for the Q1 of 2020, the company currently expects net revenue to decrease by 45% to 50% year on year. Excluding share based compensation, but including one time expenses related to our customer protection measures, especially during the Chinese media holiday, The company expects non GAAP operating net loss will be in the range of RMB1.75 billion to RMB1.85 billion. This forecast reflects trip.comgroup's current and preliminary view, which is subject to change. The increase in 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 up for Q and A. Operator, please. Thank Your first question comes from Ronald Keung of Goldman Sachs. Please go ahead. Thank you, James, Jane, Cindy and Michelle, And thank you for the very useful sharing. My question will be more on the demand side and the macro side. Just on the assumption that you talked about domestic travel may recover faster than international. Just could you share your strategies and priorities during these times? And is there any forward booking trends that you could also share if you help us gauge how things are going at this point? Thank you. Yes. We are reasonably optimistic about the recovery of Internet travel. The in big cities, Shanghai, the government has removed some of the restrictions in the restaurants and other businesses, for example, requiring wearing a mask probably will be just limited to certain types of businesses. And we received many requests from different government tourist destinations to help them to promote their travel products. And I'm going to trip to a few destinations, resort destinations to this coming week. And it looks like the interest is very strong and the government is really the next phase of their task will be to accelerate the recovery of the overall economy. So unless there's another outbreak or something unexpected of the container effort. But I think given the general trends, given the trends we're seeing today that we expect a very quick and strong recovery of the mass travel. And we are certainly in a very good position to capture that demand. So we're hopeful, we are quite optimistic about the net travel. Thank you. Your next question comes from Thomas Chong of Jefferies. Please go ahead. Hi, good morning. Thank you for taking my questions. Can management comment about the volume, pricing and the take rate in accommodation and air ticketing in domestic and international travel and in Q1, as well as the and the following quarters. And my second question is, and the following quarters? And my second question is also about the trend in operating expenses. Given the fact that we are facing the coronavirus headwinds and we are seeing the recovery in domestic business, while outbound, probably there are still some headwinds going on. How should we think about our spending and the margin outlook in Q2 and beyond? Any qualitative color would be great. Thank you. Sure. The trend we have seen is the V shape. So the first 1st month of January, the volume growth for us is very strong. As Cindy said, it's more than 20% year over year growth, also domestic and outbound and in international places. But when the virus hits, all of a sudden, travel is not allowed in many places. So we saw a decline during starting from the Chinese New Year and it lasted for the past 2 months. So the trend is the left side of the V shape. However, as of now, we already see positive recovery in the China domestic travel business. We saw airlines, hotels and also the travel destination have put great efforts to resume the business. So at the beginning, there were only very few airlines taking specific routes within China. Now we have seen more than 50% of the airlines' routes, I believe. And then we saw at the beginning the price was very cheap because I think all the business partners want to make sure consumers have confidence for the recovery. Now the price is climbing up, not to the full price yet, but it's on a good trend to climbing up. So we as Jim said, I think we have got lots of requests from all over the country for the travel bureaus try to participate in our tourism revival D plan, V stands for victory. So everywhere wants to put their efforts, attract to the customers. So our expectation is for the people living in big cities, they probably were thought with travel in the nearby cities by taking one day tour, weekend tour and gradually extend the extend into a trip to Sanya or some popular travel destination. So what we have done, 1st of all, is to initiate the leadership in the revival plan. More than 100 destinations have participated in this plan, giving more than 50% or 80% discount so the customers can pre purchase lots of products. The reaction from the market is very strong and the reaction from our partners is very strong. So we are hopeful that with the concerted efforts by the government to continuously content the virus with the continuous efforts by trip.com and our business partner, we will be able to bring the demand to other business partners in different travel destinations within China. And regarding the cost side, excluding one time expenses related to our customer protection measures, especially during the Chinese New Year, our regular non GAAP operating expenses in the Q1 are expected to decrease 15% to 20% year over year. I'd say a large portion in our, for example, the cost of service as well as marketing expenses, either variable costs or purely discretionary costs such as performance based marketing expenses. So these two items account for more than half of our total costs and non GAAP operating expenses. Thank you. Your next question comes from Binnie Wong of HSBC. Please go ahead. Good morning, management. And first of all, I wish everyone safe and healthy in this time. So a quick question here is that given the slower top line you're seeing, where are the areas that you think your investments or your spending can be optimized to protect your margins in this quarter or maybe in first half of the year? And then second, follow-up on your recovery. The areas that you see recovery signs, can you just comment on in terms of whether like hotel or air, maybe which segment you think the recovery signs are more visible? And do you think like SARS is because when you look at the travel trends, say the air passengers, the train passengers, it is a sharp rebound, right? Do you think it's realistic for SINGHU? Thank you. Thank you, Binny. Maybe I'll provide a breakdown for each business line items, the growth rate of each business line item to give you a sense. In the Q1 of 2020, we expect our accommodation reservation revenue to decrease about 60 percent to 65% year on year and transportation reservation to decrease about 35% to 40% year on year. Packaged tour business will decrease about 50% to 60% year on year with coffee travel business to decrease about 50% to 60% year on year. As Jane mentioned earlier, we delivered solid double digit growth in the January up to 20s booking volume quickly dropped to about 10% to 20% of previous year's level during the holiday and the following weeks across product segments. In recent weeks, we have observed the borrower rebound to over 30% of previous year's level in the domestic transportation sector, but with certain netting for the accommodation activities. The restriction for package tour business is still not yet missed it and corporate travel activities remain quite weak. Other and overseas business continue will continue to be caused by the evolving outbreak situations abroad. Therefore, actually it's very difficult for us to provide a reliable prediction for example, the Q2 or the full year due to the fast involvement of the pandemic situation and related travel restrictions. But in general, as Jane explained, we expect that domestic accommodation and transportation will continue on track towards recovery from current level, while the outbound international remains weak until the global situation improves. We think if, for example, if the outbreak will be successfully contained by the summer for most regions in the world, we can be cautiously optimistic about the recovery in the second half of the across all our business drives. But if the outbreak expands into alternate even later, we may be looking at a full year impact given the seasonality. We will monitor the situation and update our investors on a timely basis. Despite these near term challenges, as James explained, we believe the impact will be one off and we remain very confident for the long term prospects of both the travel industry and our business fundamentals. On the cost side, as I explained, a large portion in our cost and service and the marketing expenses are either variable costs or truly discretionary costs. So if you look at the Q1 non GAAP operating expenses excluding one time expenses related to customer care measurement, Actually, our cost was down about 15% to 20% year on year. Thank you. Thanks, Binbin. The next question comes from Alex Turn from Morgan Stanley. Please go ahead. Hi, management. First of all, I wish everyone good health and status. My question is about the opportunities in future. So the virus has severe damage to the travel industry. So can you give us an assessment of the whole tourism value chain, upstream, downstream with your better infrastructure resources, market leadership, your recovery B plan, etcetera, what other opportunities you think you can strengthen your moats in future? And gain market share, for example, you mentioned about mid to high end hotel segments. And how about the low to mid start hotels? After this, when everything back to normal, is it possible to grow even grow faster than before with your market share gain over this period? Thank you very much. Thank you, Alex. We are very positive about the growth in the long term for travel industry. During this time, we have been a couple of things, mainly from 3 things. First of all, to gain the hearts from our customers during the most challenging time. When the virus hit, when the travel ban was installed, they come to us asking for help. And that was the moment we really put customers' interest in the center of our business. Our tech team worked overnight to launch products that allows our customers to auto cancel their orders. Our customer service team was day in the night 24 hours some stop, although the volume increased to 10 times. So as I said in the opening comments, the customer satisfaction rate during this challenging time reached all time high. So we believe the investment we put in the customer service and technology and infrastructure will benefit us in the long run. And it helps us to accelerate a lot of technology products as well as the infrastructure and put it in the front line. So our development actually was accelerated during this challenging time. The second thing is also listen to our partners. Right now, the occupancy rate for hotels and the loading rate to airlines is all come low. So we listen to our partners and really work with them to come up with the revival plan. The tourism revival B plan was a joint effort by industry players and Ctrip team. So we asked them to come together with innovative products by giving very good deals to the customers. And our customers are able to pay for these products. So it's a win win win situation where our partners will be able to get some cash flow during this challenging time, but our customers will also get very good deals if they have indicated their orders. And thirdly, with our team, even during this very challenging time, our team is highly motivated. So we want to make sure going forward, we will work very hard with our global team to make sure we stand together with our customers and partners together to lead the efforts for recovery starting from China. So China market and growth of the markets overseas are in the different stage of the V shape. For China, we already seen a bottom up with effective measures by the government. We expect we can lead the recovery of the domestic travel market within the next few months. For the market outside of China, I think they're starting the process of taking care of the cancellation, taking care of the customers' needs. We've already seen the similar trends in Korea and Japan, but now Korea and Japan is stabilizing. So we are confident that with the experience we accumulated in the China market, we will be able to help our global customers as well. And also during this time, I think it's good for us to take the responsibility to help our global customers. So we, as James said, we are donating 1,000,000 masks to the countries that's badly impacted by this virus. I think not only we will take care of ctrip.com's customers, partners and employees, we also want to make sure we take the responsibility, help global communities during this challenging time. Thank you. Thank you. Your next question comes from Matson Yu from BICC. Please go ahead. Hi, good morning. Thanks for taking my question. I just thought to start, Expedia actually announced recently that it was suspending its share repurchase program so that it can retain maximum flexibility to maneuver during the epidemic. And given that we announced that this card cancellation guarantee in end of January, enabling fleet cancellation, which is quite nice for your ecosystem product. But just curious what's the financial implication of the safeguard guarantee policy? And how do you ensure your liquidity or healthy cash itself in such difficult time? Thank you. Thank you. A few days, the cumulative GMV for the canceled orders reached more than RMB30 1,000,000,000. Our product team worked very closely with our supplier partners to reduce the potential loss caused by free cancellation policy. A large majority of our suppliers were willing to waive relevant charges. We expect the one time costs related to customer cancellation is manageable and it's already being reflected in our Q1 guidance. The customer refund policy mostly temporarily treat our cash flow. A large majority of the refund requests were paid by the company in advance that we have collected refunds. So we have collected the funds for our suppliers in weeks following the holiday. On the cash side, we actually have a very strong capital reserve to weather through this tough situation. By the end of 2019, we have about RMB20 1,000,000,000 in cash and cash equivalent or about RMB60 1,000,000,000 if we include short term investments and healthy maturity deposits. In addition, we have a large low cost credit facilities from multiple commercial banks. Therefore, we have a very strong cash reserve to support our business operations for maybe an even prolonged recovery timeline as well as paying back all debts. Thank you. Thank you. Your final question comes from Gregory Bell of Barclays. Please go ahead. Hi, management. Thanks for taking my question and best wishes to your health. So I have two quick questions. The first one, so if we recall the FAS outbreak back to 2,003, so I think it only took you about 1 quarter to fully recover to the level pre the outbreak. So, would you please remind us what kind of incentive policies you used at that moment to stimulate the online booking demand? And what kind of policy you think you can use again right at this current situation to recover the growth? So the second one is you want to understand was the market competitive dynamics during the epidemic period? I think Jeff mentioned are almost $60,000,000,000 cash position. Can we assume your strong balance sheet is more defensive and taking more market share from other smaller players during the market the travel market recovery? Thank you. Yes. Thank you for your question. The travel ban starts with on the Chinese New Year and now we already saw the market shows early signs of recovery. And Ctrip will lead the efforts to encourage the consumers to protect themselves, meanwhile, also travel within the safe areas within China. And as James said right after this phone call, he personally will leave his efforts to go to different travel destinations and encourage consumers to travel within China. We believe the pent up demand is there because lots of customers before Chinese New Year already booked their trips within China and overseas. And because of the virus outbreak, the whole market took a very prudent view by isolating each family and individuals to prevent the fastest spread of the virus, which is the right thing to do. And I think Chinese government was very progressive taking the right approach, getting the virus under control with a very rapid speed. So with that under control, we believe the market has already showed a sense of recovery and the consumers have the buying power to resume the travel. We just need to make sure the confidence is there, the infrastructure is there and Ctrip is very well positioned to bring the demand to our business partners around the country. So we hope that the recovery will be very well underway. The second thing is the leadership. Yes, I think normally during the difficult time, it's the best time for us to reach out to both our consumer side as well as our partner side with the strong reserve on our balance sheet. We will be able to extend our leadership as we always do during the difficult times. And our team is very well positioned for that. Thank you. Thank you. That does conclude our Q and A session for today. I will now hand back to Michelle for closing remarks. Thanks to everyone for joining us today. You can find the transcript and webcast of today's call on investor. Qip.com. We look forward to speaking with you on the Q1 2020 earnings call. Thank you and have a good day. Thank you very much. Thank you.