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Edited Transcript of 0780.HK earnings conference call or presentation 25-Nov-19 11:30am GMT

Q3 2019 Tongcheng-Elong Holdings Ltd Earnings Call

Nov 29, 2019 (Thomson StreetEvents) -- Edited Transcript of Tongcheng-Elong Holdings Ltd earnings conference call or presentation Monday, November 25, 2019 at 11:30:00am GMT

TEXT version of Transcript


Corporate Participants


* Heping Ma

Tongcheng-Elong Holdings Limited - CEO & Executive Director

* Jiazhu Wu

Tongcheng-Elong Holdings Limited - Chief Strategy Officer

* Joyce Li

* Lei Fan

Tongcheng-Elong Holdings Limited - CFO


Conference Call Participants


* Brian Gong

Citigroup Inc, Research Division - Equity Research Associate

* Chun Man Poon

Morgan Stanley, Research Division - Equity Analyst

* D. S. Kim

JP Morgan Chase & Co, Research Division - Head of Asia Gaming, Lodging & Leisure




Operator [1]


Ladies and gentlemen, thank you for standing by, and welcome to Tongcheng-Elong Holdings Limited 2019 Third Quarter Results Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your host today, Ms. Joyce Li. Thank you. Please go ahead.


Joyce Li, [2]


Thank you. Good morning and good evening, everyone. Welcome to Tongcheng-Elong's 2019 Third Quarter Earnings Conference Call. I'm Joyce Li. Joining us today on the conference call are Heping Ma, Executive Director and CEO; Mr. Jiazhu Wu, our CSO; Mr. Julian Fan, our CFO.

For today's call, our management team will provide a review of the company's third quarter in 2019. (inaudible) Our CEO, Mr. Ma, will kick off with a short overview of this quarter. Jiazhu will walk us through the company strategies and business highlights of this quarter. And then Julian will address the details of our financial performance accordingly. We will take your questions during the Q&A session that follows.

As always, our presentation contains forward-looking statements. Such statements are based on management's current expectations and the current market operating conditions and the related events that involve known and unknown risks, uncertainties and other factors which may cause the company's actual results, performance or achievements to differ from those in the forward-looking statements.

This presentation also contains some original IFRS financial measures that should be considered in addition to, but not as substitute for measures of the company's financial performance prepared in accordance with IFRS. For a detailed discussion of non-IFRS measures, please refer to our disclosure documents in the IR section of our website.

It is now my pleasure to introduce our CEO, host. Host, please go ahead.


Heping Ma, Tongcheng-Elong Holdings Limited - CEO & Executive Director [3]


Thank you, Joyce. Thank you, everyone, for participating in our conference call today. I'm very happy to share our third quarter result with you.

As the peak season of the tourism industry, the third quarter is a benchmark for tracking the development of the company. It is also an opportunity for the company to expand its ability of bandwidth and further consolidate its core competitiveness. This quarter is also a good chance for industry-wide inspections and a (inaudible).

In the third quarter, the company responded positively to wireless charges by leveraging on top advantages and finding a [long virtue] of breakthrough to achieve a better harvesting for the business and the financial performance.

In the third quarter, the company further developed its advantages and further expanded its user base by leveraging on existing platforms and new expansion channels. We all know that during the third quarter of last year, where it benefits the -- from our all-in mini program strategies and achieved a gratifying growth in terms of MAU. We ranked the #1 in the list of monthly ranking of top 100 Weixin Mini programs for 4 consecutive months, since September 2018. According to the Aladdin Index, now that even with such a large base, we have achieved the highest MAU in the Chinese OTA industry. Our MAU in the third quarter, this year, still further increased by 13.4% year-on-year and reached 234 million. Among them, the monthly MAU reached the company's historic high of over 250 million in August, which means more than 1/6 of Chinese people visit our platforms within 1 month among all the traffic generated on Weixin platform.

Traffic from Weixin Payment and the mini program drop-down bar enjoyed 48% year-on-year growth. This was, on the one hand, underpinned by the proof of the advertisements and the social sharing in the past. And on the other hand, the formulating of user-savvy.

What's more, we started to allocate more resources on our latest apps and quick apps, such as by 2-minute program. And the traffic of these channels achieved over 20% growth in this quarter, which made the traffic associates of the company more balanced and diversified. This shows that the company has always maintained a strong competitive edge in terms of new customer acquisition and other users retention.

Meanwhile, our MPU maintained a higher growth rate than MAU, at 31.9%, when compared with the same period last year and reached a historic high of 30 million in August comparing to the same period last year. Our traffic with high options and higher conversion rates keeps promoting. And our plain use of conversion rate has maintained steady growth, which is attributable to the following reasons. First, the company has already shifted its strategical focus from active use of acquisition to paying user conversion since the beginning of this year. As one of the global leading OTAs with the highest MAU in mobile end, we have to quest further opportunities to convert this user to paying user so as to create a long-term value for the company, no matter from marketing strategy, all the product layout. The company will execute this strategy. Second, our continuos pursuit of products and services where -- very emphasized on user experience and continued to develop new product and services from users' perspective. We're provided with a wide range of the value-rated product, prior to (inaudible) and innovative product. And it expanded to attracting ticketing business in the second quarter.

We are a true one-stop shop for travel

products, from all expects of user travel needs. So the purchase -- some (inaudible) have changed because user demand are changing, and the technology enable us to reach users during their trips. In the past, user's browsing and purchase habits mainly occurred before the trip. But now, user's demand is more and more intense, which speed up user's decision making period. Many user purchase on the road or after arriving at the destination.

Fourth. We continued to optimize the purchase process and streamlined the checkout process to enhance user experience.

But we cut out our refined user management. They encouraged the first time purchase for new use of -- from new users through relatively aggressive promotions. As for older users, we have established a very good loyalty program. We understand user needs through better acknowledged by the platform. And a strive to fulfill them by providing products which are attractive to them with our membership program. Users have also accommodate the track in the platform. So the amount of premium members continued to increase as the repurchase on the platform increased too. The steady growth of user base and the user retention has also brought us continuous growth in business volume.

Our GMV in the third quarter that CNY 47.6 billion, with a year-on-year growth of 21.7%. The revenue has reached CNY 2.1 billion, which is higher than CNY 1.7 billion in the same period of 2018, with a year-on-year growth of 22.3%. The adjusted net profit is CNY 490 million, increased by 33.2% when compared with the same period last year. And our net profit margin is 20.3%.

Further improvement in financials this year was due to our continued execution of our strategies to enhance user stickiness and user value by providing better travel products and services to our customers. Moreover, in the third quarter, we further enhanced the cross-selling strategy with better focus in traffic of the transportation business to other business segments with higher margin, like accommodating under advertisement business to improve our monetization rate and encourage users of transportation products to experience other products, which are -- which will generate greater use of value, therefore, the revenue growth of accommodation business in this quarter exceeded 35% year-on-year growth. Benefited from the strong traffic of transportation business, the total revenue of the other business including advertising and attracting ticketing business increased by 370% to about RMB 230 million, which maximizes the internal value of the company.

Despite a backdrop of macro (technical difficulty) economic uncertainties. China's investment in high-speed rail (technical difficulty) strategy has been stimulating economic development, more low-tier cities travelers benefiting from the countries overall planning and enjoy the convenience brought by the national transportation infrastructure, driving on this dividend period and the extensive coverage of raising traffic.

Our company sees the opportunity to begin low-tier cities expansion strategy. By the end of the third quarter, our annual paid user reached 135 million. And in this quarter, among the new paid users from Weixin channel, the purchasing of the user from the third-tier cities and below is 63.3% and about 85.5% of the units, suggest to the user are from nonfirst-tier cities.

For accommodation business, we have achieved industry-leading growth of 40% in room nights, which is, respectively, over 50% and 30% growth in low-tier cities and higher-tier cities.

The purchasing of sales of air segments in low-tier cities are also higher than those in tier 1 and 2 cities.

Now I will turn the call over to Mr. Wu. He will walk us through the company's strategies and business highlights. Jiazhu, please.


Jiazhu Wu, Tongcheng-Elong Holdings Limited - Chief Strategy Officer [4]


Thank you, all. Hello, everyone. I am very happy to share another satisfying quarterly results with you. This quarter, we have continued our strategic direction and implemented our strategies. First of all, we have further enlarged our user base, riding on an effective user acquisition. The extensive user coverage allowed us to reach the highest average MAU in our record and in the Chinese OTA industry.

The strong traffic from transportation business provided us a great opportunity to distribute the traffic to other business segments with higher margin and intense monetization value. We encourage transportation ticketing users to book hotel rooms by targeted promotion and giving out special coupons. This -- these helped us to achieve a substantial growth in accommodation business. On the other hand, more companies are seeing the value of our platform with a strong user base, more well-known company including travel service providers and the consumer brands choose to contact marketing activities with our company to increase user attention. That explains the strong growth in advertising business in this quarter.

From the perspective of user engagement, the company firmly believes that it is important to enhance frequency and value of purchase by improving user stickiness, for both new users and old users. Since the company's strategic focus on paying user conversion, users retention and the improvement of the membership system have always been the priority of the company's marketing strategy.

This quarter, we are delighted to see that premium member users bring more value to the platform. The black royal members increased by 250% quarter-to-quarter in the third quarter. The app of black royal users reached 2.5x that of other users, and the repurchase rate reached 4x that of other users.

At the same time, we also see that the total number of members at all levels continue to rise. In the third quarter, we have launched an exclusive cooperation with Tencent Video, which substantially enhanced our black royal membership privileges. And hence, will significantly increase the number of black royal members.

In order to provide more benefits to our users, we also reached an in-depth cooperation relationship with numerous suppliers and partners. For example, we commenced in-depth cooperation and the exploration with China CTS Hotel Group in product innovation, brand marketing and other aspects so as to jointly enhance consumer accommodation service experience. Our members can book China CTS Hotel Group's hotel after the authorized membership account connection, and they can receive the corresponding membership of the China CTS Hotel Group and enjoy the membership benefits, including membership discount, room upgrades and late checkout. This allows both members to enjoy a more cost-effective, higher-quality booking service and accommodation experience and a convenient process.

In addition, the official flagship store of China CTS Hotel Group will be launched on the Tongcheng-Elong platform. This kind of cooperation can not only enhance our value proposition to our suppliers with our strong traffic and build up close relationships with the suppliers, but also allow the company to provide better privileges to our users and enhance user stickiness.

In the third quarter, the company leveraged on the advantages of its own traffic and big data to further help suppliers on the platform to improve efficiency by advising them what to do, how to do and when to do. Merchants can carry out corresponding promotions according to their own situation.

In view of the different products provided by our TSPs, we also tailor-made the different promotion plans for our TSPs. For example, for the branding advertisement of the hotel, we have the advertising position in homepage, channel cover page, city exclusive banner, bottom banner, slide page, landing page, et cetera, in Weixin mini program at PC interfaces. The daily average clicks increased by about 200% when compared with the previous figure. And the average room nights and the income doubled for many hotels that use our intelligent marketing solution.

Combining company's advantages and business characteristics, we meet the needs of suppliers through technology innovation output. At the beginning of the third quarter, during the communication with Air New Zealand, we found that they encountered some obstacles in the development of mini programs, especially in payment and page design. With our ability in the development and operation of mini programs, we assisted Air New Zealand to develop a officially launched -- to develop and officially launched its Weixin mini program in just 3 months. All of the numbers of page views, orders and the passengers after launching are beyond their expectations. In terms of business and the product innovation, we continue to develop and apply advanced information technology to provide users with customized product and service and to enhance user experience. We have launched a free cancellation or amendment service for users who purchase air tickets as well as other products such as connecting train tickets, accommodation and other value-added services for the same trip. If there is any change or delay for the flight, users can cancel or amend the following product or service for free.

We have also established a close business cooperations and marketing promotions with airports and the TSPs to enhance the user experience in airport and improve our brand value and influence. At the same time, we are here to our end to transform from an OTA to an ITA, Intelligent Travel Assistance. We further enhanced and promoted our Weixin system, which offers intelligent travel options with product combination of railway and flight and long distance stop to our users. Leveraging on our advanced technology and artificial intelligence and capacities, the Weixin system gathered all the data from the supply and -- supply end and recommends product combination to users according to their preferences. It was well recognized by our users and has created more scenarios and demand for the value-added services. In just the 3 quarters, it has already taken up significantly proportion of the tickets sold in ground transportation.

We also continued to develop different kinds of new products and services, which meet users' long term demand with our outstanding product innovation capabilities. That's all I want to share with you for now.

And I will pass it to Julian for an update on our latest financial results. Julian, please.


Lei Fan, Tongcheng-Elong Holdings Limited - CFO [5]


Thank you, Jiazhu. For the third quarter of 2019, Tongcheng-Elong reported net revenue of RMB 2.1 billion, representing a 22.3% year-over-year increase from the same period of 2018. The revenue from our own platform achieved over 26% year-over-year growth in quarter 3. The impact from distribution channel reduction has been largely narrowed down.

We continue to build on our operating enhancement and delivered a very solid quarter. Our strong results in the third quarter are evidence of our continued products in transformation underpinned by our key strategic objectives to win both user volume growth and the value growth as was mentioned above.

Our MAU, monthly active user, increased by 13.4% year-over-year in the quarter -- in this quarter to CNY 234 million with a modest investment on advertisements and social activities in Weixin platform.

What is more. The traffic service of the company are more diversified and balanced. The traffic of our own app and quick app achieved over 20% growth in this quarter.

Our MPU, monthly paying user, in the third quarter set another record high, up CNY 29.8 million, representing a 31.9% year-over-year growth and a paying ratio of 13% compared with 11% for the same period of last year, benefiting from our further execution on one-stop-shop strategy to offer more products, services and building other.

We continue to enhance user experience and engagement. At the same time, we put more effort on marketing promotion to encourage the first transaction of the new users, especially on a peak season. We are increasingly unlock opportunities of cross-sell commodities of segments. Our cross-selling rates further increased to over 26% in the third quarter of 2019, at more than 6% of the gross purchase happened in the same trip of the customer, which is a very important driver to support the hyper growth in our accommodation room night. As a result, our GMV, achieved RMB 47.6 billion in the third quarter of 2019, with a growth rate of 21.7% year-over-year compared with the same period of 2018.

Accommodation reservation revenue increased by 35% to RMB 694 million in the third quarter or over 40% growth for our own platform sales of accommodation segment. We are continuing to outperform the industry with over 40% year-over-year revenue growth for the third consecutive quarter. This strong result was primarily driven by the increase of the room night volume in the third quarter, with over 40% growth compared with the same quarter last year.

Geographic-wise, we continue to lead industry growth in both low-tier cities and high-tier cities with over 50% and 30% growth, respectively, thanks to our low-tier cities penetration strategy.

Transportation ticketing revenue for the third quarter of 2019 was RMB 1.14 billion, representing a 2% increase from the same period in 2018, driven by the increase in ticketing volume.

Air ticketing business continues to outperform the industry and signal the domestic industry growth in this quarter, thanks to the peak season of summer vacations and traffic contribution from ground transportation as well.

Blended take rate of air ticketing had a slightly increase year-over-year, supported by the stable nonticket attach rate and high commission of the per purchase visits this year. The blended take rate of ground transportation dropped year-over-year due to relatively lower VAS sales, but already starting to recover in the third quarter mainly benefited by increasing contribution, which has already taken more than 20% of the ticket sales in ground transportation.

Meanwhile, as a traffic engine inside the company, we initiatively transferred the target from ground transportation to advertisement business and accommodation business to maximize the monetization for the company.

Other business, including advertisement, attraction, ticketing and membership card business increased by a total 370%, to RMB 230 million in the third quarter. Advertisement business contributed more than RMB 100 million, representing more than 6x increase compared with the same quarter last year, mainly driven by the traffic utilization from ground transportation, which was also a complementary monetization method for transportation business. If we sum up the revenue of transportation business and advertisement business, the growth rate will be above 10% as a whole on a comparable basis.

Gross margin was around 67% for the third quarter of 2019 compared with around 71% in the same period of last year, and recovered from 65% in the previous quarter. Adjusted EBITDA increased by 28% year-over-year to RMB 547 million in the third quarter. Adjusted EBITDA margin increased to 26.5% from 25.4% period-over-period. Adjusted net profit increased by 33% year-over-year to RMB 419 million in the third quarter. Adjusted net margin increased to 20.3% from 18.7% in the same quarter last year.

Excluding share-based compensation targets, cost accounted for 33% of the revenue in the third quarter compared with 29% in the same period of last year. This increase was primarily due to the short-term decrease in blended take rate of ground transportation and its repurchase business from attractions ticketing. Cost accounted for 35% of revenue in the previous quarter.

Total non-IFRS forecast accounted for 50% of revenue in the third quarter compared with 57% in the same period of last year, with a 7-point year-over-year improvement contributed by the improvement in marketing efficiency and operational efficiency.

Sales and marketing spending accounted for 30% of revenue in the third quarter compared with 33% in the same period of last year and 25% in the previous quarter. We are investing more marketing dollars in the peak season for new user promotion and our latest app traffic with an improvement on ROI year-over-year.

By the end of the third quarter, our headcount was consistent with last quarter. Amortization of intangible assets from Tongcheng-Elong acquisition was included in the OpEx financial level, reached to 3.4% of revenue in the third quarter of 2019, and 2.6% in the same period of last year.

As of September 30, 2019, the balance of cash, cash equivalents, restricted cash, cash flow from investment was around RMB 6.8 billion.

Before we move to the business expectation of next quarter, I would like to reemphasize some historical breakthroughs that we made in this quarter. This is the first time that we achieved above CNY 2 billion revenue in a single quarter. In the first 3 quarter of 2019, we have already achieved more than CNY 1.2 billion net profit compared with CNY 1.14 billion for the full year of 2018.

Last, based on the latest market conditions and the business product, we are forecasting a total reporting revenue growth of 25% to 30% in the fourth quarter of 2019.

Looking at the fourth quarter of 2019, accommodation revenue will continue with a very strong growth momentum. And we only expect that they recover for the blended take rate of ground transportation tickets as the peak season coming for ground transportation and new product launch.

We're also anticipating improved performance for our operational system in this first peak season after launch. For the bottom line, we are confident to continue the strong profitability in the fourth quarter.

In conclusion, we had another solid quarter as we delivered average specific initiatives after our IPO last year. We continually penetrated in the market and maintained #1 profitability in the industry because of our advanced supported structure.

Operator, we are ready to take the questions now. Thank you.


Questions and Answers


Operator [1]


(Operator Instructions) The first question comes from the line of Brian Gong from Citigroup.


Brian Gong, Citigroup Inc, Research Division - Equity Research Associate [2]


Congratulations on the third quarter results. I have two questions. First is about transportation business. They both seem still quite weak in the third quarter. And I just wondered if the management will share the detailed number of take rates in the third quarter, and what was the volume growth for air tickets and the trains, respectively? And the management has just mentioned, you see a recovery trend in the third quarter, not for what kind of take rates you expect for the fourth quarter, like 3.3% or 3.2%. That's my first question. And then my second question is about advertising, which was quite strong. And I want to see how the management view the growth outlook on this business, and do you think it will continue to have a strong growth going ahead?


Heping Ma, Tongcheng-Elong Holdings Limited - CEO & Executive Director [3]


Brian, I will explain -- provide some color on the first question. And in terms of the advertising business, I would like Jiazhu to provide some information. Actually, for the transportation business, the blended take rate of air ticketing business slightly increased to around 3.2% year-over-year in this quarter, supported by the stable ground ticket tax rate and high commission of the repurchases this year. The blended take rate of ground transportation year-over-year dropped to 2.6% to 2.7% due to relatively lower -- via asset sales, but already are starting to recover in the third quarter, mainly benefit by our increasing contribution, which has already taken like 20% of the tickets sold in ground transportation.

As you know now in this quarter, we put more effort to shift the ground transportation traffic to advertisement and accommodation visits for higher traffic utilization to pursue -- maximize the monetization. We also estimate that the blended take rate for air will be even higher in quarter 4 because quarter 4 is a very good season for both the air and ground transportation. And also, the contribution from our offline cooperation with airports and also high margins of the purchased tickets in air segment is partly like [2.5%] above for air. And also, for blended take rate for ground transportation will be further recovered quarter-to-quarter, aligned with the peak season coming and increasing contribution is most likely above 3.0% in next quarter. In terms of the volume and air and -- both air and ground transportation keep a high volume growth in quarter 3, it's around 20% to 25% for the volume growth.

So that is some information about the take rate on transportation. And for advertising business, Jiazhu, please.


Jiazhu Wu, Tongcheng-Elong Holdings Limited - Chief Strategy Officer [4]


Yes. Thank you for the question about the advertising business. Actually, in quarter 3, the advertising business contributed over CNY 100 million revenue to the company for the first time, mainly based on our further advantage on traffic and users, monetization strategy on ground transportation. We'll put more efforts in advertising business starting from quarter -- the last quarter of this year. As an important complementary monetization method, we will keep -- in the future, we will keep optimizing the traffic utilization dynamically to pursue a maximized revenue among the auxiliary products and surveys inside transportation business. Also, a cross-selling to accommodation and attraction ticketing business or traffic monetization from advertisement.


Operator [5]


(Operator Instructions) The next question comes from the line of Alex Poon from Morgan Stanley.


Chun Man Poon, Morgan Stanley, Research Division - Equity Analyst [6]


Congratulations on the strong results, and also fourth quarter outlook. And the first question is related to the severe competition in hotel subsidies. In some cases, I have heard negative take rates, and may times room nights saw year-over-year growth also accelerated meaningfully in third quarter. Can you give us an outlook of how this subsidies battle will play out in the longer term? Looks like if this continues, it is bad for everybody's margin. To what -- and especially for low-tier cities users, they are price-sensitive. To what extent you have to match these subsidies? And to what extent, as part of your customers are very loyal, can become very sticky with your membership and one-stop-shop.

Also, my second question is related to your MAU mix of -- which had traffic. So the part that is related to search and sharing has been falling a bit and the -- we've seen wallet and drop-down buy rising. The paying ratio for the wallet and drop-down buy is higher 20%, as I recall from you and search and sharing part is lower. So is this something you would like to see? Or can you explain what is the user behavior change in the Weixin wallet?


Heping Ma, Tongcheng-Elong Holdings Limited - CEO & Executive Director [7]


Alex, I will give some color on the low-tier city competition, especially our accommodation segment. And Jiazhu will provide some information on the MAU and MPU growth. Actually, since the beginning of September, we have already observed that market competition is starting to be a bit more bedrock as our peers have even more substates, we keep monitoring the market dynamics and guarantee a price competitiveness for our customers. That is very important. Due to our corporate structure advantage, the ROI is still very good even with just higher on our company level. As a result, in this quarter, we addressed the base of market share with over 40% room night growth and maintain a 35% of the revenue growth for the accommodation segment. Our accommodation blended take rate, I think, maintained very stable at around 8.4% to 8.5% in the third quarter of this year, along with renewal execution of our one-stop-shop strategy within the accommodation segment still increase revenue contributions from accommodation VAS. The blended take rates up little but was offset by the increase of revenue from accommodation VAS as we offered more production on the whole hotel service chain and destination service like hotel buffet, car parking, attraction ticketing, et cetera. That is why we were able to maintain a stable blended take rate for accommodation visit.

In terms of actual increase of the specific advantage in low-tier cities, we have expansive user coverage from Weixin, stronger (inaudible), not only for hotel and attraction ticketing, but air, train, bus and all kinds of ancillary service and product to remain higher, probably in hotel. The one-stop shop purchase convenience in Weixin to drive competitiveness for all kinds of product lines enable us to create infinite value and benefit to our users.

What is more, the cross-selling and the synergy among deeper product lines also creates value and contribute more (inaudible) to the company. In quarter 3, this quarter, we have successfully penetrated low-tier cities and more than 62% of new paying users from tier 2 of relatively Weixin platform. With that, it has, I think, a competitive 12 months. Total paying users by the end of September was over 135 million. Thanks again to the booming market in low-tier cities. Actually -- at the same time, actually, the relatively low acquisition -- user acquisition cost at our 5 operating facility allow us to achieve large profitability, also share more benefits with our users and suppliers in low-tier cities.

Meanwhile, actually, we're starting to explore more operations with local airport, especially in the mid- to low-tier cities such as Changzhou, Wuxi, Taizhou, for example and also, the investments on online new hotels, also beautiful for the offline customer acquisition in low-tier cities. This has been improved by the offline investment -- or cooperation is a very decent and faster way to accelerate the online penetration for the entire industry and enable the company to take more market share in a short period, and this has competitive advantage in low-tier cities.

Last, actually, we believe that the low-tier cities market is a pure incremental market which can benefit more than 1 OTA at this stage. We have very deeper traffic sources and deeper user scenario. All of the industry players are working hard to penetrate into their own target markets and transfer offline users to online users. So that is about the competition in low-tier cities, definitely on the accommodation side. So in terms of the traffic growth strategy. Jiazhu, please?


Jiazhu Wu, Tongcheng-Elong Holdings Limited - Chief Strategy Officer [8]


Alex, on the traffic question, actually, we are glad that we have already achieved the record high for both MAU and MPU. We believe there is still further space for us to penetrate in Tencent and other channels. In terms of the MAU, the traffic structure became more healthy with higher proportion from payment portals and the mini program, drop-down bar, which are the most effective channels to convert MAU to MPU. The MAU from these 2 channels significantly increased by about 48% year-over-year. This is because we have accumulated a large amount of traffic from advertisement and social sharing in the past. And these users get used to enter our platform through payment portal and drop-down bar with higher stickiness. On other side, as we emphasized, increasing paying users and user value will be our priority this year instead of seeking for the aggressive MAU growth only. That is why we're now disciplined to invest our market dollars on Weixin advertisement, instead, we put more marketing investment on promotion and loyalty program and tightly monitor the ROI at the same time. So overall, already, we are optimistic about the MPU growth with our improving products and services, effective sales and marketing strategies and an intense user engagement and stickiness. Thank you.


Heping Ma, Tongcheng-Elong Holdings Limited - CEO & Executive Director [9]


In terms of the accommodation hyper growth and the trends, I would like to add some more. As I mentioned, actually, we have achieved the industry-leading growth of more than 20% in room nights with respectively over 50% and over 30% growth in low-tier cities and high-tier cities. In particular, the low-tier cities lead to low-end hotels, we achieved more than 80% growth rate in the quarter. This extent was mainly benefit from domestic traveling market boom from online penetration rate gap narrowed down between high-tier cities and low-tier cities and the cross-sell program inside the company, and also our great cooperation with all of our suppliers, including Ctrip. We believe this momentum will continue or even accelerate in quarter 4 and the following. Other than the reason on both, actually, we will invest some more marketing dollar in some targeted areas to pursue even faster market share penetration, both from online and offline as well as the ROI is part of it. In the past, the national holiday, the room night set another record historically, with more than 50% year-over-year growth. So we believe the trend will continue in the following quarters and next year.


Operator [10]


[Operators Instructions) The last question comes from the line of D. S. Kim from JPMorgan.


D. S. Kim, JP Morgan Chase & Co, Research Division - Head of Asia Gaming, Lodging & Leisure [11]


Congrats on the good results. I have two very simple questions. First, can you talk about or remind us how much growth we are baking in for hotel versus transportation for fourth quarter guidance, revenue? And adding to Alex' question earlier, how much hotel take rate does this imply? That's my first question, the guidance.

And second question is, maybe I have missed it, but ground transportation take rate this quarter was 2.6%, 2.7%. And how was it last year, year-over-year comparison? I just want to have it for the modeling purpose.


Heping Ma, Tongcheng-Elong Holdings Limited - CEO & Executive Director [12]


Yes. In terms of the guidance, this -- on the current market condition, and this is for that we still have the -- our total reported revenue growth range 25% to 30% in quarter 4, 2019. In terms of the segment

(technical difficulty)

reservation revenue continued the strong growth momentum from 38% to 42%. That is for accommodations.

Transportation revenue will grow about 10% to 15%, along with the ground transportation blended take rate recovered. Other revenue will increase more than 100% year-over-year, thanks to advertisement, attraction ticketing and membership card contribution. In terms of the bottom line, we have already achieved over CNY 1.2 billion in adjusted net profit in the first 3 quarters, which was already higher than last year, full year. In the last quarter of this year, we will enjoy further operational leverage in this quarter and we brought more investment of this marketing in the peak season of ground transportation to boost the paying user conversions for -- of (inaudible) and user valid growth in the long end, while maintaining a year-over-year improvement on marketing efficiency.

In terms of the year-on-year take rates. Just to mention, this quarter, the ground transportation blended take rate recovered to 2.6% to 2.7%. Last year was about 3.5% for blended take rate on the ground transportation.


Operator [13]


We have reached the end of question-and-answer session. I would like to hand the conference back to Joyce Li for closing remarks.


Joyce Li, [14]


Thank you, everyone. We are closing the call now. If you wish to check out our press release and other financial information, please visit our IR section of our company website. Thank you, and see you next quarter.


Operator [15]


Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.