Atour Lifestyle Holdings Limited

Ladies and gentlemen, thank you for standing by and welcome to Attour Lifestyle Holdings' second quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be question and answer session. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Alison Zhang, Director of investor relations. Please go ahead, ma'am.

Thank you, operator. Good morning and good evening, everyone. Welcome to our second quarter 2023 earnings call. Joining us today, our founder, chairman, and CEO, Mr. Wang Haijun, and our co-chief financial officers, Mr. Wang Shoudong and Mr. Wu Jianfeng. Before we continue, please be aware that today's discussion will include forward-looking statements under federal securities laws. These statements are subject to various risks and uncertainties, and actual results may differ significantly from what is stated or implied in our comments today. The company is not obligated to update any forward-looking statements, except as required by applicable laws. Additionally, during this call, our management will discuss certain non-GAAP financial measures solely for comparison purposes. For a clear understanding of these measures and a reconciliation of GAAP to non-GAAP financial please refer to the earnings release issued earlier today. Furthermore, a webcast replay of this conference call will be available on our website at ir.yaguo.com. Now I will turn the call over to Mr. Wang, our CEO.

Thank you, Allison.

Hello, everyone, and thank you for joining Atour's second quarter 2023 earnings call today.

We are very pleased to see that Atour's various businesses have continued to make positive progress in this quarter. The hotel and retail businesses have made significant growth and breakthroughs. Our positive enthusiasm and continuous commitment to providing high-quality experience to our users We are thrilled to report another strong quarter.

benefiting from the robust ongoing recovery trend since the beginning of this year. During the second quarter, we achieved a remarkable growth and breakthroughs in both our hotel and retail businesses. Our passion for progress and the dedication to providing customers with exceptional experiences continued to differentiate Ator and magnify our competitive advantages. further enhancing our brand awareness and influence. As we look ahead to 2023, we are confident that our core value proposition and commitment to establishing the Chinese experience as the industry benchmark will continue to drive our sustainable growth. Additionally, we are steadily executing a plan to grow our portfolio to 2,000 premium hotels nationwide by 2025, which will propel further prosperity across our business.

下面我将展开介绍各项业务的具体表现。 Now I would like to discuss our performance in detail across our business lines. optimized customer channels, and high-quality and efficient management capabilities have led to a strong growth in our hotel business. Our roll-up rate has reached the same level as in 2019, which is 115%, 456%, and 120%, 108%, and 117% in three months. Among them, ADR and OCC are two indicators are above the same level as in 2019. Our mature stores are still outstanding. In the second quarter, with more than 18 months of mature stores, the recovery rate of the same roll part is 114% of the same level as in 2019, which is basically the same as the overall performance of the group. It reflects the longer life cycle of our products and the longer market competitiveness.

Let's begin with our hotel business. In the second quarter, the continued recovery in both business and leisure travel stimulated a rapid increase in accommodation demand. Leveraging our optimized customer channel and strong operational capabilities, we achieved a robust growth in our hotel business during the quarter. Our RevPar recovered to 115% of 2019's level, with April, May, and June reaching 120%, 108%, and 117% respectively. Both ADR and OCC fully recovered and continued to surpass 2019's level this quarter. Furthermore, our mature hotels in operation for more than 18 months continued to outperform, with same hotel RAVPAR recovering to 114% of 2019's level in the second quarter. This was largely in line with the overall performance of our hotel business, illustrating our product's enduring competitiveness over a longer life cycle compared with that of the broader industry.

At the same time, we are very happy to see that Yaduo's comfortable accommodation experience has also continued to attract the attention and praise of more leisure travelers. The recent increase in demand has also increased the motivation for the continued improvement of our RORPAD. In July, our ADR broke through 500 yuan, with an entry rate of more than 84% and a record high in history. Thanks to our signature experience combining warmth, comfort, and ease,

we garnered wide recognition from business travelers who have always been highly engaged with the tour. Meanwhile, we were pleased to see that our exceptional experience continues to attract the attention and the praise of more leisure travelers. In July, our ADR exceeded RMB 500 and OCC surpassed 84%, reaching a monthly all-time record high and together driving REF are up to 122% of its level in the same period of 2019. The comprehensive recovery in room rate and occupancy further underpins our ability to drive high-quality, sustainable growth over the long run, and we are confident of delivering strong results in the upcoming third quarter.

With the market demand trend going well, The confidence of the joiners continues to warm up. We have also made a solid progress in the expansion of the network. There are 70 new businesses in the second quarter. More than 180 contracts have been signed. It has created a historic height in the quarter. As of June 30th, we have 523 new hotels under development in the pipeline. The growth rate is more than 50%.

We also made solid progress with respect to network expansion during the second quarter as market demand trended positively, enhancing franchisees' confidence and encouraging them to engage more deeply with us. During the quarter, we celebrated 70 new openings and signed a quarterly record high of over 180. new hotels. As of June 30th, we had 523 hotels in our pipeline, representing a year-over-year increase of over 50% and forming a solid foundation to support our mid-term goal of having 2,000 premium hotels by 2025.

On the product level, we have upgraded our mid-term brand, Qing Ju, in February this year. launched the 3.0 version of QingJu. The main target is young businessmen who pursue high-quality experience. With fashion, texture, trend design aesthetics, differentiated market positioning, and competitive investment returns, after the launch of QingJu 3.0, it has been widely welcomed by partners. In the second quarter of this year, we signed a total of 30 QingJu 3.0 projects. The signing ratio exceeded 15%. with respect to our hotel product offerings, we initiated an upgrade plan for our mid-scale brand and launched the Attour Lite 3.0 version in February this year.

Attour Lite 3.0 is uniquely positioned to cater to young urban business travelers who seek quality services and exceptional experiences. With the stylish, fashionable, and trendy design, as well as its differentiated market positioning and competitive investment return, Attour Lite 3.0 attracted franchisees' recognition shortly after its launch. We signed 30 Attour Light 3.0 projects in the second quarter, accounting for over 15% of the quarter's total signings. Following the gradual openings of our first batch of Attour Light 3.0 hotels since late June, the hotel brand made a comprehensive breakthrough across the mid-scale market as they quickly gained popularity among young customers and realized a rapid operational growth Atour Lite 3.0 precisely captures young customers' aesthetic preferences and caters to their demand for high-quality experiences, creating a brand new experience for the Gen Z Plus demographic in the mid-scale hotel market, while enhancing its brand recognition and value proposition. We believe Atour Lite has great potential to become our second brand to reach the 1,000 hotel milestone. given its strong product competitiveness and widespread market recognition.

Following Attour Lite 3.0's successful debut, we are proactively developing the next-generation product for our flagship Attour brand in Shanghai.

We expect to introduce this product to the market by the end of this year.

For example, if the user chooses the choice of the A-plus service when pre-ordering, then they will experience the peace of mind sleep experience brought by the A-plus planet deep sleep pillow when they enter. So far, we have carefully selected and designed more than 20 A-plus services for users. The user usage rate is also constantly increasing. Looking forward to the future, we will promote Before I move on from hotels, I would like to touch on our A-plus offerings for A-card loyalty members. At Ator,

Customer experience has always been the core competitive advantage that sets us apart from our competitors. We continue to redefine the ultimate in customer experiences through our A-plus offerings, which in turn promotes healthy and sustainable growth in our member base. For example, if a customer chooses the pillow selection service from the A-plus menu at the time of booking, they will receive a cozy, superior sleep experience with our self-developed deep sleep pillow. To date, we have carefully selected and designed over 20 A-plus services for our ACARD members, and we are witnessing an increasing adoption rate. Going forward, we will advance our A-plus product development with practical, warm, and congenial experiences in mind as we identify customers' real demands and provide them with innovative offerings, which are standardized yet personalized, to ensure an exceptional experience during their stay at Ator properties and beyond.

Through continuous innovation, stability, and improved experience, our membership scale continues to maintain a healthy growth trend and reached 44 million at the end of the second quarter. Our commitment to continuous innovation and consistent delivery of elevated experiences resulted in healthy growth across our membership base. By the end of the second quarter,

Over 44 million individual members had joined the ACARD membership program. Our ongoing efforts to optimize customer channels, alongside a rising number of both individual and corporate members, propelled an increase in the percentage of room nights sold through our CRS, which reached 63% in the second quarter. 接下来是我们的场景零售业务。

In this quarter, the retail business is growing again. The total GMV reached 267 billion RMB, which is nearly three times the growth. Among them, our sleeping brand, Ado Planet, also performed well. The GMV contribution ratio of the second quarter is close to 90%. During the 618 shopping festival, the total GMV of the online and offline markets exceeded 130 million RMB.

Moving to our scenario-based retail business, we achieved another strong quarter, with GMV increasing almost three times year-over-year to RMB 267 million. Our sleep brand, Attour Planet in particular, demonstrated extraordinary performance, contributing nearly 90% of our total GMV in the second quarter. Total GMB, including both online and offline sales during the June 18th shopping festival, surpassed RMB 130 million.

Currently, our hotel network covers more than 1,000 stores and 120,000 rooms. Each hotel is the exhibition hall of our retail products. Each room provides users with an immersive experience. The real feedback of the users allows us to continue exploring the needs of the user's constant change and the corresponding expansion of our long-term retail product category. This will extend the outstanding life experience to hotels and expand the concept of managing the crowd. We have successfully developed and launched the Ador Planet Deep Sleep Pill and continue to upgrade the product. Today,

We have more than 1,000 hotels encompassing 120,000 rooms within our hotel network. Each hotel represents an exhibition hall for our retail products while each room functions as an immersive shopping destination for our hotel customers. Their feedback enables us to continuously and organically explore customers' ever-evolving demands and expand our retail product categories accordingly. This, in turn, empowers us to extend our exceptional lifestyle experience beyond accommodation to serve more people. Our commitment to continuous product refinement in pursuit of a truly superior sleep experience has made the Attour Planet Deep Sleep Pillow a blockbuster product. During the June 18th shopping festival, AtualPlanet topped the best-selling pillow brands with total sales of 220,000 units across multiple mainstream e-commerce platforms. Furthermore, in March 2023, we launched AtualPlanet's new product, the Summer Cool Quilt, which has already demonstrated promising growth momentum.

In the future, we will continue to upgrade the deep sleep field Going forward, we will invest further and expand our penetration in the field of deep sleep as we continue to leverage big data and customer feedback to advance product development

and broaden our offering categories.

2023 is a special year for Yaduo. It not only marks the beginning of the post-pandemic era, but also marks the 10th anniversary of the establishment of the company. Ten years ago, we met with Yaduo Village, and were touched by the nature, quietness, warmth, and common sense of Yaduo Village. The inspiration of Yaduo's name also comes from this. In the past 10 years, the services provided by ADO are far more than a comfortable rest area. We care about every passenger and care about their feelings and experiences during their stay. We have always been working hard to integrate the ultimate Chinese experience into every scene of ADO's 1,000 hotels, from their stay to their departure. Throughout the journey, 2023 is a special year for Ator.

as it not only marks the commencement of the post-pandemic era, but also the 10th anniversary of our company. When we first set foot in Yaduo Village 10 years ago, we were instantly captivated by its natural beauty, peace, warmth, and purity, which subsequently inspired us to choose the name Atour. Over the past 10 years, Our focus has been on providing more than just a comfortable place to stay. We generally care about each and every one of our customers, and we strive to ensure that every aspect of their stay with us is exceptional. We are committed to incorporating the essence of the Chinese experience into all of our services, from the moment customers check in through the moment they depart. In each of our 1,000 plus hotels, Our faith in the vision of Yaduo Village has guided us throughout our journey as we extended our footprint across 176 cities nationwide. While we provide customers with premium offerings and exceptional experiences, we also share Yaduo Village's fragrant specialty as well as its warmth and peace with travelers, creating an intimate ambience where people can warmly connect.

Before I wrap up,

I would like to take this opportunity to welcome our new co-CFO, Mr. Wu Jianfeng. He will mainly be responsible for overseeing the company's capital market matters, including investor relations and financing management, as well as providing administrative and other support to the board and assisting in daily operations. I believe he's distinguished the leadership skills and extensive experience in the capital markets will play an essential role in the company's long-term sustainable growth as we progress towards our next phase of development. Now, I'll turn the call over to our co-CFO, Mr. Wu Jianfeng, to discuss our financial results.

Thank you, Haijun. Good evening and good morning, everyone. Now I would like to present the company's financial performance for the second quarter of 2023. Our net revenue for the second quarter of 2023 grew by 112.3% year-over-year and 41.2% quarter-over-quarter to RMB $1,093 million. The strong increase in the second quarter was driven by the robust growth in both our hotel and scenario-based retail businesses. Revenues from our monetized hotels for the second quarter of 2023 were RMB $626 million, up by 112.3% year-over-year and 40.2% quarter-over-quarter. This increase was primarily driven by the ongoing expansion of our hotel network and the increase in rep power. The total number of monetized hotels increased to 1,001 as of June 30, 2023, up by 25.0% year-over-year and 7.1% quarter-over-quarter, while rep power recovered to RMB 377 for the second quarter. Revenues contributed by RV's hotels for the second quarter of 2023 were RMB $220 million, representing an increase of 53.6% year-over-year and 17.2% quarter-over-quarter. The increase was primarily due to the rebound in RAPAR, driven by recovering customer traffic and stronger customer sentiment since the beginning of 2023. Rest part of all these hotels recovered to RMB 537 for the second quarter. Revenues from retail and others for the second quarter of 2023 increased by 222.2% year-over-year and 76.4% quarter-over-quarter to RMB 247 million. with scenario-based retail revenues growing by 297.8% year-over-year to RMB 212 million. These increases were attributable to our ongoing efforts to tap into ever-changing customer needs, as well as data-driven product development, which enabled us to consistently launch sleep products favored by users. In addition, we continued we continue to leverage both online and offline channels, expanding our customer base and enhancing our brand recognition. Now let's move to cost and expenses. Our hotel operating costs for the second quarter of 2023 increased by 56.7% year-over-year to RMB 510 million, mainly due to the increase in variable costs such as supply chain costs associated with the ongoing expansion of our hotel network. Hotel operating costs accounted for 60.2% of total hotel revenues for the second quarter of 2023, compared with 74.2% for the same period of 2022. The decrease was due to the robust recovery of Red Park, and the economics of scale brought by our rapid network expansion, which led to a significant increase in the gross profit margin of the hotel business. Other awaiting costs for the second quarter of 2023 for RMB 121 million, representing an increase of 189.9% year-over-year, driven by increased costs in line with the rapid growth of our scenario-based retail business. Other operating costs accounted for 49.0% of retail revenues and others for the second quarter of 2023, compared with 54.4% for the same period of 2022. The decrease was attributable to the improving profitability of our retail business. Setting and marketing expenses for the second quarter of 2023 increased by 197.3% year-over-year to RMB 94 million. Setting and marketing expenses accounted for 8.6% of net revenues for the second quarter of 2023, compared with 6.2% for the same period of 2022, primarily driven by the increased investment in branding initiatives. and rapid growth of the scenario-based retail business through online channels. General and administrative expenses for the second quarter of 2023 were RMB $73 million. Excluding shell-based compensation expenses of RMB $9 million, adjusted general and administrative expenses increased by 54% year-over-year to RMB for the second quarter. General and administrative expenses, excluding the impact from share-based compensation expenses, accounted for 5.9% of net revenues for the second quarter of 2023, compared with 8.1% for the same period of 2022. Our technology and development expenses for the second quarter of 2023 will RMB $18 million. compared with RMB 16 million for the same period of 2022. And adjusted EBITDA for the second quarter of 2023 was RMB 344 million, up by 232.4% year-over-year. Adjusted net income for the second quarter increased by 312.9% year-over-year to RMB 249 million. Adjusted profit margin for the second quarter of 2023 was 22.8%, increasing by 11 percentage points year over year. The significant increase in gross profit margin in both our hotel and scenario-based retail businesses, along with our optimizing operating leverage led to an improvement in the group overall net profit margin. Notably, we have maintained a healthy cash position with a stable growth momentum. As of June 30, 2023, our cash and cash equivalent totaled RMB 2.53 billion. Among them, net cash was RMB 2.46 billion, representing an increase of 39.4% quarter over quarter. Also, we declared a cash dividend of 0.05 U.S. dollar per ordinary shares today or 0.15 U.S. dollar per ADS. The total amount of cash to be distributed for the dividend is expected to be approximately U.S. dollar 21 million. That concludes our financial highlights for the second quarter of 2023. With that, let's open for Q&A. Thank you.

We will now begin the question and answer session. To ask a question, please press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. For the benefit of all participants on today's call, if you raise your question in Chinese, please immediately repeat your question in English. Please limit your questions to one at a time. If you wish to have a follow-up question, please rejoin the queue. Our first question comes from the line of Sujie Lin from CICC. Please ask your question, Sujie.

So I have a question on REFPA. What's the trend of REFPA recovery during the summer vacation? And then how should we expect the rest of recovery rates in Q3? We will adjust for your guidance. Thank you.

Thank you for your question. This year, the demand is very strong. Compared to last year, the flow started earlier. In the first week of July, we can see the increase in the flow. Last year, the trend was to increase gradually. Thank you very much for your question, Ms. Lin.

The demand in summer this year was very strong. The summer traffic started earlier when compared to previous years. Also, the increase in traffic this year was clearly visible even in the first week of July, while in previous years, those were more of a trend of gradual growth. In July, our ADR had exceeded RMB 500,000, and our OCC exceeded 84%. both of which were monthly all-time highs. And the REVPAR rebounded 122% compared to the same period of 2019. This overall increase in both our ADR and OCC demonstrates our capability to maintain long-term, sustainable, and high-quality growth.

Based on the good performance of the REVPAR and the advantage of Yago as a first-rate brand for business travel, Based on this summer's good performance and Ator's advantages as we consolidate our foundation of our competitive advantage, being the preferred brand for business travelers, we expect a good RAVPAR performance for the full year.

The full year-round par recovery is expected to be in the range of 113% to 117%. Thank you very much, Zijie, for your question.

Thank you. Let's have our next question, please. Thank you.

Our next question comes from the line of Ronald Leung from Bank of America. Please ask your question, Ronald.

Thank you. I will ask my question in English. Management just mentioned that the rough part guidance for fiscal year 2023 has been uplifted to 113% to 117%. May I ask what is the latest expectation for the full year revenue and profit? Thank you very much.

Thank you for your question. Let me answer this question. With 113% to 117% of the whole-year real-estate recovery, we expect the whole-year revenue to increase by 72% to 76%. The sales revenue is expected to reach 6.5% to 7 billion RMB. As the hotel continues to expand, the scale of independent release and the continuous development of our retail business, we expect the capacity to attract more customers.

Thank you very much, Ronald, for your question. Just now, we said that our full-year REVPAR recovery is expected to reach 113% to 117%. And in terms of revenue, we expect a YOY growth, year-over-year growth of 72% to 76%, of which retail revenues are expected to be able to reach RMB 6.5 million yuan to 700 million yuan. With our continued expansion of the hotel network, the gradual release of our scale effects, and the continuous development of our retail business, we expect profitability to continue to improve. Thank you very much, Ronald.

Thank you. Let's have next question, please.

Certainly. Our next question comes from the line of Lydia Lin from CT. Please ask your question, Lydia.

Okay, thank you. Thank you, Manager Chen. I'm Lydia. I would like to ask about the situation in terms of opening up. Based on the current opening progress and some of the confidence of the investors, will the company adjust its opening target for the whole year? In addition, we have seen that the contract situation of the company in the first half of the year is also good, especially in the second quarter. What changes will there be to the contract guidance in the second half of the year? Let me translate this. Thanks, management. So I want to ask about the expansion. So based on the year-to-date expansion, so are you going to adjust your full-year opening target? And also we saw very encouraging improvement in the new signs in the first half. So any guidance for the second half? Thank you.

Thank you for your question. The opening of our first quarter was affected by the epidemic last year and this year's Spring Festival holiday. Thank you very much, Lydia, for your question. Our new hotel openings in the first quarter this year was affected by last year's epidemic and the spring festival holiday.

We opened 70 new hotels in the second quarter, showing clear acceleration when compared with the first quarter. In the second half of the year, we will continue to maintain the rhythm of active new hotel openings, maintaining the annual opening target of 280. We signed 94 new hotels in Q1 and 180 new hotels in Q2.

In first quarter this year, we signed 94 projects. And in our second quarter, we signed a record high of more than 180 projects. The rapid growth in signings reflected the restoration of the franchisees' confidence in us

and also their recognition of Ator's three high strategies, namely high quality, high value, and high efficiency, as well as our operational model.

We expect the next half of the year to have a very good performance. We are also pursuing quality in the growth trend in the first half of the year. The stock of this project in the pipeline this year is also very strong. It also set a solid foundation for our 2,000 good stores in 2025. Thank you.

We expect the signings to continue to perform well in the second half of the year, while we would strive for better quality on the basis of the first half year's growing trend. This year, our pipeline can provide a solid foundation for our goal of having 2,000 premium hotels by 2025. Thanks, Lydia.

Thank you. Let's invite our next question. Thank you.

Our next question comes from Jiwei Liu from Citix. Please ask your question, Jiwei. Hi, everyone.

I'm Liu Jiwei from Central Stock Exchange. I'd like to ask two questions about QG 3.0. The first question is that I'd like to ask the management to help us introduce the current brand positioning of QG 3.0. I repeat my question. Could you tell us more about a tour life waypoint or warrant, such as the brand positioning and the advantage in the mid-scale hotel industry? Besides, can you share the performance of those stores after opening? Thanks.

Thank you for your question. QingJu 3.0 was officially released on February 22nd. It is a young business brand that is in the middle of our group. At this time, we are pushing QingJu 3.0 to the market, mainly because we saw two opportunities. The first opportunity is that we believe that the current hotel products in the middle of the market today Thank you very much Jiwei for your question.

Atour Light 3.0 was officially launched on February 22nd and is our group's mid-scale brand uniquely catering to young urban business travelers. We launched Atour Light 3.0 at this time mainly due to two great opportunities we saw. One was that the significant mismatch between the existing hotel products in the mid-scale market and the customer demands. As we saw, the young business travelers had got increasing demand for high-quality accommodation experiences. And the other was the opportunity to upgrade those properties in the core business districts. There will be more properties in that kind of hot areas suitable for a tour-lite in the future.

The product we launched, the 3.0 product, is fashionable in terms of design and trend. Our tour light 3.0 product

with its fashionable, stylish, and trendy design and the quality service experience up to Atour's standard, has won a good user reputation upon its launch. Up to now, we have had four Atour Live 3.0 hotels open, in which three hotels had reached a full occupancy within a week of opening. With that significantly shortened ramping up period, it was a very decent performance. Meanwhile, The leading Red Power performance, among others, in the same business districts greatly enhanced the investment confidence of those franchisees and had been proven to be a very competitive product in the current mid-scale hotel market. As of June 30, we have signed a total of 46 Attour Life 3.0 projects, and by 2025, We plan to open 250 to 300 AttourLight hotels. Thank you, Jiwei.

Thank you. Please invite next question.

Thank you. Next question comes from Zhiyi Wang from Hightown International. Please ask your question, Zhiyi.

Thank you, Manager Chen, for accepting my question. Congratulations, Manager Chen. I can translate myself. We noticed the retail segment broke the rapid growth. Could you please kindly share with us some advantages of the business and what's the driver behind the growth? And also, what's the current profitability of the retail segment? And do you have any expectation on the scale of the retail segment in the next few years? Thank you.

Thank you. Thank you for your question. So, Yago, our location is a brand group based on the way of living. So, retail business is the first extensive exploration of our business community. Thank you, Zhiyi, for your question.

A tour is positioned as a lodging-centric lifestyle brand, and our retail business is the first extension we explore to serve more people. Relying on our hotel scenes and the real user experiences, the sleep products we developed have been loved by a large number of customers and have gradually expanded from seat users who stayed in our hotels to a wider group of consumers. gradually winning consumers' minds when it comes to the concept of deep sleeps. And our products have achieved very good sales results on multiple e-commerce platforms.

The continuous improvement of brand influence and the growth of product power based on user understanding and innovation, the synchronization of online and offline channels, the interaction between hotels and retail businesses,

Our continuously improving branding awareness together with the product power growth based on our understanding of the consumers and our R&D innovations. Plus, they synchronize the drive of online and offline channels and the interactive integration with our hotel business have jointly brought about the rapid development of our retail business and shaped Atour's unique advantages in that. We expect our retail business revenue to reach RMB 6.5 hundred million to 700 million yuan in 2023, with a year-over-year growth of 150%, making it the second growth engine of our group, also demonstrating a further step towards Ator's vision of being a leading lifestyle brands group. Thank you.

Thank you. Please have next question.

Thank you. Our next question comes from Xin Chen from UBS. Please ask your question, Xin.

Good evening, everyone. I'm Chen Xin from UBS. I'm very happy to have this opportunity to ask a question. Because I saw another announcement from the company about our fund. It may be a big surprise for the company, Thank you for your question. This is the first dividend decade in our history in the past 10 years.

Also, this is the first dividend declared after our IPO last year. We have considered several factors to determine the amount of this dividend, including our cash position. You may notice that we have $2.5 billion cash as of June 30, 2023. The amount of this dividend accounts for approximately 6% of our cash position. and we also take into consideration of our accumulated profit in the previous years and the overall business situation and our future demand in capital. So we hope to express our gratitude to the shareholders for their long-term support. So going forward in terms of our future dividend plan, we also consider various factors including our cash position, our future capital needs, We will also make reference to the market practice or the industry practice and also consider the net market condition to determine our future dividend. Thank you.

Thank you. And that concludes the question and answer session. I'd like to turn the conference back to Alice and John for any additional or closing comments.

Thank you once again for joining us today. If you have any further questions, please feel free to contact our investor relations team. We look forward to speaking with you again next quarter. Thank you and goodbye.

This concludes today's conference call. Thank you for participating. You may now disconnect.