Trip.com Group Limited (TCOM) Q4 2019 Earnings Report, Transcript and Summary

Thank you for standing by and welcome to the Trip.com Group 2019 Q4 Earnings Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator instructions] I would now like to hand the conference over to Ms. Michelle Qi, Senior IR Director. Please go ahead.

Thank you, Ben. Thank you everyone. Good morning and welcome to Trip.com Group’s 2019 Q4 and full year earnings conference call. Joining me today on the call are Mr. James Liang, Chief Executive Chairman of the Board; Ms. Jane Sun, 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 Safe Harbor provisions of the US 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 Group 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 the financial performance for fourth quarter and full year 2019, as well as an outlook for the first quarter of 2020. After the prepared remarks, we will have a Q&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 the formative year for us. We celebrated our 20 birthday and announced rebranding into Trip.com Group. Looking back, we are pleased with the solid performance at our 2019. Total operating income increased to 94% year-over-year reaching RMB 5 billion. Non-GAAP operating margin reached 19% right on track to our original target. We continued margin expansion coincided with our teams to regular distribution expanding our share across the market [indiscernible]. In China, we further liquidated the multiples of our core business growth rates, but the industry is seeing particularly strong goodwill from third and second tier cities. Outside of China, our Trip.Com brand made a solid progress entering in the new markets and gaining the market share in the APAC region. At the end of 2019, brand Trip.com is operating in the 27 markets and supporting 20 languages. For the full year 2019 our core ITA brands achieved a total GMV of RMB 365 billion or $124 billion, up 19% year-over-year. I'd like to thank our team again that they are delivering excellent results despite stress in the industry headwinds. In the beginning of 2020 has been challenging for the travel industry worldwide due to the novel coronavirus. Initially, of course, there are tens of millions cancellations in the Chinese New Year and we would see any travel activity after the holidays. We were encouraged to see the banks that were successful containment of the virus in China at an initial recovery of [indiscernible]. Trip.com Group was the first to name a few to respond to the pandemic with a set of comprehensive protection measures including safe drug, cancellation guarantee policy and our partnership with [Indiscernible] As the outbreak evolved over time we have expanded our guarantee to improve effects of the customer worldwide. We are extremely proud of our team especially customer preferences for what they were able to achieve during the special time. Many of them worked over the holiday and after our in order to handle the sudden pike in customer request. I like to thank all of our team for their top quality services and efforts in the joint fight against the impacts of coronavirus, our customers and on the company, which further illustrates our belief that people are most important asset and retaining and motivating talent will always be a top priority. During this period we received many customer processes are timely and professional service. We believe the customer good work will translate into long term engagement and retention which will support our sustainable growth in the future. We also consider and appreciate the support from our value departments 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 and products once this outbreak is contained. Last but not least, we would like to give our highest gratitude for healthcare professionals all over the world which are fighting tirelessly to keep everyone safe during the crisis. I’m pleased to announce that company will donate RMB 1.32 million to affected countries worldwide and we will provide our VIP benefits to healthcare real workers in China. Despite midterm challenges we believe that impact from the novel coronaviruses will be one-off. We remain confident for the long-term prospects of both the travel industry and our business fundamentals. In the past few decades, the travel industry has witnessed a series of global health crisis each time global travel demand proved its resilience and revived strongly after a successful containment by our providers. In recent weeks we are encouraged to see the 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 re-bolster recovery of the tourism industry. Nowadays traveling has become a necessity for more and more people in China and abroad. We believe the coronavirus has not dented healthy fundamentals of China's travel markets where we will accelerate the industry with current acceleration and online penetration into low tier cities. Similarly for international markets we believe that underlying travel demand remains promising and we expect to see strong recovery once the outbreak is behind us. With that I'll turn to Jane for operating highlights.

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 a certain definition, we are glad to see Trip.com Group delivered a solid execution on our strategy. First, the 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 future’s new resource. Lower-end hotels and transportation products have proven to be effective takeaway products for new customer, each of the blended lower-end hotel grow about 50% year over year in the fourth quarter. In addition, our offline store continues to act as part of our core strategy to increase our influence in low tier cities. In the market where we enjoyed clear advantages, we have been working to further improve service quality thereby enhancing our competitiveness. For example, over 15,000 hotels have agreed to provide outstanding benefits to our transportations across our customers, so participating hotels have seen significant incremental volume through these programs. Second, for the outbound travel market, certain China outbound destinations continued to be impacted by macro headwinds while others still grow at even faster pace. In Q4, revenue growth for hotels excluding Great China destination reached 51% year over year. For our overseas brand [indiscernible] made additional progress in increasing its direct booking shift. Trip.com trend 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 in our 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 cancelled due to the outbreak totaling over RMB 31 billion in GMV terms. The company was the first in the industry to announce a set of customer protection measures upon initial outlook which subsequently extended to become the most comprehensive among Trip providing strong backing for our customers. Our safeguard cancellation guarantee policy covers customers in China and abroad who are unable the travel due to the travel restrictions or cancellations [ph] as well as those who work so hard at the medical center 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 through the best of our ability the company will take on one time financial fit of the results. But we think it is wise for us to be for our customers for our industry and for our shareholders in the long run. The accumulated customer goodwill were below the long-lasting sustainable growth from the [indiscernible]. Next I would like to spend a minute to think of a few for their contribution during these special times whether remote or on site. Our customers team worked tirelessly work tirelessly day and night to assist our customers with changes in their travel plan. Many of them sacrificed the holidays and worked for extended hours for our customers could be – were taken care of as quickly as possible. New record 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 are able to 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 request were sales completed online. Such speed and the responses has elected Trip.com highly dedication through service quality, especially during the times of need for our customers. We also would like to think our most valued hotel, airline, and other travel partners for their timely assistance during this difficult situation. As of now, more than 1 million global hotels have joined us for safe cancelation guarantee initiatives and over 110 domestic and international airlines have agreed to provide free cancelation for qualified products. In response guarantee to help our customers through this period of period of economic hardship. We also announced a set of measures to alleviate their burden. This includes campaign and marketing assistance for participating hotels in our Safeguard Cancellation Guarantee initiative, including waiving and reducing marketing costs and offering additional campaign, waiving of nonrefundable cost for package suppliers incurred during the recent cancellation, capital assistance for our hotels and other travel suppliers, including RMB 1 billion fund and well assistant program with our business partners and over 2,003 online courses for our business partners. And two weeks ago, we launched tourism revival VPM, V stands for victory, which contributed over RMB 1 billion 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 will take the lead in these recovery efforts. In January, we have taken this opportunity to advance ourselves and improve our core competences in order to prepare for the business recovery when the virus is contained. First, we are combining through products and services in more details to improve our experience, our customer satisfaction rate has kicked a record high in past months. We are confident that the improved customer satisfaction rate will translate into long term customer retention and enrichment. Second, we are working on streamlining and optimizing our operating processes and invest in technology and data clustering to improve our infrastructure. Third, we will see that our globalization as a product and backend technology infrastructure in order to bring four types of products and services to our global leaders. As we have started to see the early signs of recovery in China, the virus continued to spread with subsequent declines in travel activities in the overseas market. Therefore we are preparing for a domestic industry rebound, while also getting ready for a program battle against the potentially weak international demands. As a result we are executing on ways conserving resources and adopting to the challenges around the world. Last week we announced that senior management team will take a volunteer take-up up to 50% with James and I taking zero salary until the situation improves. 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 the brand. Together with our employees and valued commerce we will now firmly overcome the challenge but also lead the recovery of the travel industry back in China. With that I now will turn the call to our CFO, Cindy.

Thank you, Jane. Thanks, everyone. For the fourth quarter of 2019, Trip.com Group reported net revenue of RMB 8.3 billion, representing a 10% increase from the same period in 2018. Despite a full quarter impact from certain destinations such as Hong Kong and Taiwan we believe our solid performance in other destinations [ph] collected at multiples of our core business growth rates against the industry. For the full year ended December 31, 2019 net revenue was RMB 35.7 billion representing a 15% increase from 2018. Accommodation reservation revenue for the fourth quarter of 2019 was RMB 3 billion or $426 million representing a 12% increase from the same period in 2018. During the fourth quarter low end hotels sustained strong room night growth with the Ctrip brand reaching around 60% year-on-year. It has become one of the most important getaway places for us to acquire new business which reflects the effectiveness of our dynamic pricing strategy. In the domestic mid to high-end hotel segment, we also saw accelerated growth momentum which has raised our competitive moat as an increasing portion of mid to high-end hotels joined our TripPLUS program and accommodation plus transportation dynamic package programs providing extra discounts to end users while gaining incremental volumes. The recent net growth that industry happening in that nations such as Hong Kong have put pressure on related travel demand and hotel prices. However, in other overseas, now Greater China destinations we were glad to see hotel revenue growth over 50% young in the fourth quarter. For the full year ended December 31, 2019 accommodation reservation revenue was RMB 13.5 billion or $1.9 billion representing a 17% increase from 2018. Transportation ticketing revenue for the fourth quarter of 2019 was RMB 3.5 billion or $498 million, representing a 2% increase from the same period in 2018. Cutting in certain international destinations continued to put pressure on the May Day travel demand and prices in the fourth quarter. Besides these destinations growth rates for both domestic and international air ticket business achieved a higher multiples against the industry. Trip.com brands recorded another strong quarter of double digit year-on-year growth in international air ticketing volume. For the full year ended December 31, 2019 transportation ticketing revenue was RMD 14 billion or $2 billion representing an 8% increase from 2018. Package-tour revenue for the fourth quarter of 2019 was RMB 800 billion, a $150 million, representing an 11% increase from the same period in 2018. For the full year ended December 31, 2019, package-tour revenue was RMB 4.5 billion, a $651 million, representing a 20% increase from 2018. At the end of the year, Trip.com Group had around 8,000 offline franchise course in operation and in the pipeline, covering over 290 prefecture level cities and over 500 country level cities. Our online ticket tour platform attracted more than 1,800 travel planning agencies and 6,000 planners, servicing millions of customers. Corporate travel revenue for the fourth quarter of 2019 was RMB 373 million, a $54 million, representing a 33% increase from the same period in 2018. Corporate travel saw sequential growth acceleration in the fourth quarter primarily driven by expansion in corporate customer base and optimize the product mix trend. In the full year ended December 31, 2019, corporate travel revenue was RMB 1.3 billion, a $180 million, representing a 28% increase from 2018. Revenues for other businesses increased by 42% Well year-on-year in the fourth quarter of 2019 a 35% for the full year 2019. This was primarily driven by strong growth in our advertisements and financial services. Gross margin was 79% for the fourth quarter 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 fourth quarter of 2019 increased by 1% year-on-year and by 3% quarter-over-quarter. Cost savings and product development in the fourth quarter [Technical Difficulty] streamlining of our saving process and travel efficiency of brands ended in the past year. For the full year ended December 31, 2019 product development expenses increased by 11% for 2018 excluding share-based compensation charges, non-GAAP product development expenses for the full year 2019 accounted for 27% of the net revenue compared to the 28% in 2018. Sales and marketing expenses for the fourth quarter of 2019 decreased by 5% year-on-year and remains 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 continual ROI-driven marketing strategy. Despite this, our main brand maintained stable traffic growth and consistent amount of new customers reflecting the continued improvement in marketing efficiency. Conversions and cross-sell ratio also improved due to the inherent the competitiveness of products and services. G&A expenses for the fourth quarter for 2019 increased by 5% year-on-year and by 5% quarter-over-quarter primarily due to an increase in G&A personnel related expenses. For the full year ended December 31, 2019 G&A expenses increased by 17% from 2018. Excluding share-based compensation charges, non-GAAP G&A expenses accounted for 7% of the net revenue, which remained consistent with 2018. The head count for G&A stock was largely stable throughout the year. Excluding share-based compensation charges, non-GAAP operating margin was 12% for the fourth quarter 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 40% in 2018. Diluted earnings per ADS was RMB 3.23 or $0.46 for the fourth quarter of 2019. Excluding share-based compensation charges and fair value changes of equity security investments, non-GAAP diluted earnings per ADS were RMB 1.94 or $0.28 for the fourth quarter of 2019. For the full year ended December 31, 2019, diluted earnings per ADS was RMB 11.5 billion or $1.65 excluding share based compensation charges and fair value changes of equity security investments, non-GAAP diluted earnings per ADS was RMB 10.75 or $1.45. As of December 31, 2019, the balance of cash and cash equivalents, restricted cash, short-term investments held to maturity term deposits and financial product was RMB 59.9 billion or $8.6 billion. Now turning to the first quarter of 2020, our original outlook is exactly a continuation of the momentum last year, which includes sustained top line growth penetration into lower tier city overseas in expansion and margin improvement. We were delighted to see January bookings up to the 20s grow at double digits year on year. So, obviously, the development of the coronavirus has since caused a significant disruption in China and the global travel industry. Third, for the first quarter of 2020 the company currently expects net revenue to decrease by 35% to 50% year-on-year excluding share-based compensation but including one-time expenses related to our customer protection measures especially during the Chinese New Year holiday. The company expects non-GAAP operating net loss will be in the range of RMD 1.75 billion to RMD 1.85 five billion. This forecast reflects Trip.com group’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&A. Operator, please.

Thank you. [Operator Instructions] Your first question comes from Ronald Keung of Goldman Sachs. Please go ahead.

Thank you Jane, James, Cindy and Michelle and for the very useful sharing. My question will be more on the demand side, on the macro side. Just on the assumption that you talked about domestic travel mainly cover most of the international, just could you share your strategies and how are you doing in these times and have you any forward-looking trends that you could also share to help us sort of gauge how things are going at this point. Thank you.

Yeah, we are reasonably optimistic about the recovery of the domestic travel. We continue to shanghai and government has removed some of the restrictions of [Indiscernible] and other businesses that will require growing that probably will be just limited to certain types of businesses and we received many requests from different governments towards destinations to help them to promote their travel products and I’m going to trip to few destinations, resort destinations to this coming week and looks likely the interest was 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 I expect it to - have to contain the threat. But I think given the general trend given the trend that’s in today that we expect a very quick and strong recovery of the domestic travel and we certainly in a very good position to capture the demand however we're hopeful we are quite optimistic about the domestic 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 maybe someone comment about the [indiscernible] pricing and the take rate in accommodation and air ticketing in domestic and international travel in Q1 as well as the trend that we should expect going into Q2 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 [indiscernible] still some headwinds going on, how should we think about our spending and the margin out of in Q2 and beyond, any qualitative color would be great? Thank you.

Sure. The trend we have seen is [indiscernible]. So the first two-week – first month of January, the volume growth for us was very strong as Cindy said it's more than 10% year-over-year growth both for domestic and outbound and in international places. But when the virus hit 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 two months. So the trend is the last side of the issue. However as of now, we already see positive recovery in the China domestic travel business. We saw airlines, hotels and also the travel destinations had put a great effort to resume the business. So at the beginning there are only very few airlines taking effective call outs within China. Now we have seen more than 50% percent of the airlines are targeting. And then we saw at the beginning the price was very cheap because I think all the business partners wants to make sure consumers have confidence to the recovery. Now the price is climbing. Now, to the full price yet but it's on a good trend to climbing up. So we I think that, I think we have got lots of request from all over the country for the travel bureau try to participate in our tourism revival V plan, V stands for victory. So everyone wants to put their effort to attract the customers. So our expectation will, for the people living in big cities, will probably we thought was travel in a nearby cities by taking one day tour, weekend tour. And gradually it can expand into a trip to Sanya or some popular travel destinations. So what we have done, first of all is to initiate the leadership in the revival plan, more than 100 destinations have participated in this plan by giving more than 50% of all 80% discount. So the customers can pre-purchase lot 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 contain the virus to continue the escalated content the virus with continuous effort by Trip.com and our business partner. We will be able to build the demand through our business partners in different travel destinations within China.

And regarding the cost side, excluding one-time expenses related to our customer retention is partially especially during the Chinese new year already a non-GAAP operating expenses in the first quarter are expected to decrease 20% year-over-year. Actually a large portion of our for example the cost of our service as well as the marketing expenses were variable cost of truly discretionary costs such as performance based marketing expenses. So these two items account for more than half of our personnel cost 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 these times. So a quick question here is that given the lower top line you see where are the areas that you think the investment 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 the recovery the areas that you see recovery signs can you just comment on in terms of whether like hotel of air maybe which segment you think the recovery signs are more visible? And do you think that Sars was bigger than because when you look at truffle say the air passengers, the train passengers is a sharp rebound right. Do you think it's realistic for saying so? Thank you.

Thank you, Binnie. Maybe I’ll provide breakdown for each business line items, the growth rates of each business line item to give you a sense. In the third quarter of 2020, we expect our accommodation reservation revenue to decrease about 60% to 65% year-on-year. The potential reservation to decreased about 35% to 40% year-on-year. Packaged tour business will decrease about 50% to 60% year-over-year with corporate travel business to decrease about 50% to 60% year-over-year. As Jane mentioned earlier, we delivered solid double digit growth in the January up through the 20s. Booking volume quickly dropped to about 10% to 20% of previous year's levels during the holiday and the following weeks across product segments. But in recent weeks, we have observed the volume rebound to over 30% of previous year's level in the domestic transportation section, but was certainly negative for the accommodation activities. The restrictions for packaged tour business is still not yet missed and corporate travel activity remain like weak. Outbound and overseas business continue – will continue to decline about evolving outbreak situations abroad. Therefore, actually it’s very difficult for us provide a reliable prediction for the third, the second quarter or the full year due to the fast development of the pandemic situation and to allow this for travel restrictions. But in general, as James and Jane explained we expect that the domestic accommodation and transportation will continue on track towards with current level while the other international remains weak until maybe global situation improves. With this, just presented with accurate when we conducted contain by the summer for most of the regions in the world, we can be cautiously optimistic about the recovery in the second half of possible alternative life but if the outbreak extends into alternate region we may be looking at a full-year impact given the seasonality. We will monitor the situation and update our market on a timely basis. Despite this 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 growth there, travel industry and our business fundamentals. And on the next slide, on the next slide as I explained a large portion in our content revenues and marketing expenses, these are variable cost of truly discretionary. So, if you look at the Q1 costs, if you look at the Q1 cost saving expenses excluding onetime expenses related to customers here measurement [ph] actually our cost was down about 15% to 20% year-on-year.

Thank you. The next question comes from Alex Poon from Morgan Stanley. Please go ahead.

Hi, management. First of all, I wish everyone good health and stay safe. 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 V plan etcetera. Where are the 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 [indiscernible] through mid-star hotels. After this whenever getting 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 hotel industry. During this time we have seen a couple of points mainly from three fronts. First of all, to gain the heart from our customers during the most challenging time. When the virus hits, when the travel ban was imposed they come to us asking for help and that was the moment we really put customers’ interests 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 will stay in the night 24 hours non-stop, although the volume increased to 15 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 term. 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 for airlines is all-time low. So we listen to our partners and really work with them to come up with other plan. The [ph] tourism revival V plan was a joint effort by industry players and future team. So we asked them to come together with innovative products by getting very good deals to the customers. And our customers are able to partake 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 is out team. Even during this very challenging time, our team is highly motivated. So we want to mature going forward. We will work very hard with our global team to make sure we stay together with our customers and partners together to – we took efforts for recovery starting from China. So China market and the market overseas are in the different stages of the [Indiscernible] so China we’re already seeing the bottom up with effective measures by the government. We expect we can – with 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, the non-Korea 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 as Jim said we are donating 1 million masks to the countries that's that were the impacted by this virus. I think not only we will take care of future Trip.com’s customers, partners and employees we also want to make sure we take the responsibility to help global community during this challenging time. Thank you.

Thank you. Your next question comes from Matthew [Indiscernible] from BICC. Please go ahead.

Hi, good morning. Thanks for taking my questions. Wish everyone is safe and healthy. I just thought that Expedia actually announced it recently that it was suspending its share repurchase program so that it can obtain maximized profitability to maneuver during the epidemic. Given that we announced the Safeguard cancellation guarantee in end of January, you may believe as the cancellation which is quite nice for your ecosystem products. But just curious what’s the financial implication of this part, the guarantee policy and how do we ensure your liquidity or healthy cash inflow in part over time. Thank you.

Thank you. Till date the cumulative GIV [ph] for canceled orders reached more or less RMB 30 billion. Our product team worked very closely with our supplier partners to reduce the potential loss, cost of buying free cancellation policy. A large majority of our suppliers that were willing to raise relevant charges. We expect a one-time cost related to customer cancellation, is manageable and it’s already being reflected in our Q1 guidance. The customer refund policy mostly temporary to our cash flow. A large majority of the refunds, has been paid by the company in advance but we have collected refunds. While we have collected funds by our suppliers in weeks following the holiday. And on the cash side we actually have a very strong captive reserve to weather through this tough situation. By the end of 2019 we have about RMB 20 billion in cash and cash equivalent or about RMB 50 billion if we include short-term investments and held to maturity deposits. In addition, we have a large low cost credit facility from multiple commercial banks, and therefore we have a very strong cash flow generation to support our business operations for maybe an even prolonged recovery timeline as well as pay back all debts. Thank you.

Thank you. Your final question comes from Gregory Zhao of Barclays. Please go ahead.

Hi management. Thanks for taking my question and best wishes about your health. So I have two quick questions. The first one, so if we recall the SARS outbreak back to 2003, so I think it only took you about one quarter to fully recover to the level pre-outbreak. So would you please remind us what kind of defensive policies you used at that moment to stimulate online booking demand and what kind of policy you think you are doing again at the current situation to recover the growth? So the second one, I want to understand what the market competitive dynamics during the epidemic period. And I think James mentioned you had almost RMB 60 billion cash position. Can we assume it was strong balance sheet is more defensive and can you take more market share from other smaller players so during the market – the travel market recovery? Thank you.

Yeah. Thank you for your questions. With travel them stars with on the Chinese New Year and now we already saw the market showed early signs of recovery. [indiscernible] the efforts to encourage the consumer to protect themselves meanwhile also travel within, the safety areas within China. And as Jane said right after this phone call, he personally will leave to the airport to go to different travel destinations and encourage people to travel within China. We believe the pent up demand is there because lot 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 present view by isolating each family and individuals to prevent the faster spread of the virus, which is the right thing to do. And I think the Chinese government is very disrupted 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 signs of recovery and the consumers have the buying power to resume the trouble. We just need to make sure the competence is there, the infrastructure is there and [indiscernible] is very well positioned to bring the demand to allow business prominence around the country. So, we hope the recovery being very real under the [indiscernible]. The second is the leadership. Yeah, I think normally we are in the difficulty time is the best time for us to reach out to both our consumer side as well as our partner side with the strong returns on our balance sheet. Really, we will be able to extend our leadership as we always do during the difficult time. And our team is very well positioned for that. Thank you.

Thank you. And that does conclude our Q&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 the webcast of today's call on investors.trip.com. We look forward to speaking with you on the first quarter 2020 earnings call. Thank you and have a good day.