Atour Lifestyle Holdings Limited

Ladies and gentlemen, thank you for standing by and welcome to the A2O Lifestyle Holdings Second Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Alison Chang, Director of Investor Relations. Please go ahead, ma'am.

Thank you, Operator. Good morning and good evening, everyone. Welcome to our second quarter 2024 earnings conference call. Today, you will hear from our founder, chairman, and CEO, Mr. Wang Haijun, and our co-staffer, 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 results, please refer to the earnings release issued earlier today. Furthermore, a webcast replay of this conference call will be accessible on our website at ir.yaduo.com, where a copy of the results presentation is also available. Now, I will turn the call over to Mr. Wang, our CEO. Thank you, Sijia.

Hello, everyone. Thank you for attending the second quarter of Yanduo Group's business call conference in the second quarter of 2024.

Thank you, Alex. Hello, everyone. And thank you for joining Atour's second quarter 2024 earnings call today.

During the second quarter of 2024, domestic travel market demand remained steady.

with leisure tourism extending its healthy upward trajectory alongside continuously evolving customer demand. By proactively adapting to these shifting market dynamics, we further strengthen our leadership in the upper-mid-scale hotel market.

In the first half of the year, we not only continued to upgrade our experience in the accommodation industry, We consistently elevated the Chinese experience in our accommodation business

during the first half of the year to better address our customers' personalized, diverse, and quality-driven expectations. Meanwhile, we adaptively capitalized on emerging opportunities presented by the latest wave of retail business development. We made substantial headway in propelling holistic, high-quality growth across our business and brand portfolio while continuously deepening our insight into customer needs and amplifying our brand reputation.

下面我將展開介紹2024年第二季度各項業務的具體情況。 Now I would like to provide more details on our performance for the second quarter of 2024. 首先是住宿業務,請大家翻到我們PPT的第四頁。 二季度我們的Roller Pod達到359元。 Let's begin with our hotel business.

Please turn to slide four of our second quarter 2024 results presentation. Our REVPAR reached the RMB 359 in the second quarter of this year, representing 93.5% of its level in the same period of 2023. Notably, our OCC growth remained solid, reaching 101.7% of 2023's level for the same period further underscoring a tour's resilient demand and strong brand influence. ADR was 92.8% of its level in the same period of 2023, largely due to last year's high-comparison base effect.

Please turn to page 5. Over 18-month-old mature hotels are still performing better than large-scale businesses. The structural impact of new electricity climbing Please turn to slide 5. Our mature hotels in operation for more than 18 months.

continued to outpace Group's overall performance during the second quarter. Excluding structural impacts such as the ramp-up of new hotels, same-hotel RevPar in the second quarter of 2024 reached 96.2% of 2023's level for the same period, outperforming the Group's blended performance by 2.7 percentage points. Specifically, OCC increased by 2.2 percentage points year over year, and ADR stood at 94.4% of the same period in 2023. Please turn to the sixth page.

Thanks to the joint development of Yaduo and Qingju, the group's growth has been clearly reflected. In the second quarter, our hotel network expansion trend is still strong. Please turn to slide six.

our synergistic development of Atour and Atour Lite has unlocked the substantial growth potential for our group. In the second quarter, we maintained vigorous momentum in our hotel network expansion with 123 new hotel openings, up 76% year-over-year, setting a record pace in new openings for a single quarter. As of the end of the second quarter, we had a total of 1,412 hotels in operation, representing a 37% year-over-year increase, accelerating our progress toward our goal of 2,000 premier hotels nationwide by 2025. Please turn to page 7.

We rely on Yaduo's firm brand and product power. Our partners are full of confidence. Please turn to slide 7. Franchisees' confidence remains strong and steadfast this quarter, both to

bolstered by our robust brand influence and product competitiveness. We made significant strides in both the number and efficiency of our new signings. With a notable pipeline expansion, the number of hotels under development reached 712 as of the end of the second quarter, underpinned by a substantial number of high-quality projects laying a solid foundation for a tour's sustained growth and nationwide expansion.

Next, I would like to introduce the latest progress we have made in Yaduo and Qingzhu. Please turn to page 8. On June 28, this year, at the 11th anniversary of the establishment of Yaduo, the first store of Yaduo 4.0 officially opened in Xi'an. As Yaduo returns to its original work, Yaduo 4.0 is inspired by Yaduo Village. Next, let me share a tour and a tour of Light's latest development. Please turn to slide 8. On June the 28th,

To mark Attour's 11th anniversary, we proudly unveiled our first Attour 4.0 hotel in Xi'an, embodying Attour's commitment to its original aspirations. Attour 4.0 is inspired by Yaduo Village's natural beauty, transforming the hotel into a serene retreat amid the city's hustle and bustle. With extensive upgrades across various aspects of the hotel, including multifunctional workspaces, premium sleep settings in guest rooms, and upgraded dining services, a Tour 4.0 adopts an experience-driven approach, aiming to create an enhanced operating model characterized by superior quality, greater pricing potential, and optimized efficiency.

The first OCC opened in South Asia was 91%, and RERPA was more than 710 yuan. Strong business performance not only reflects the full recognition of the market for Yaduo 4.0, but also reaffirms the strong position of Yaduo in the high-end hotel brand. As of now, Yaduo 4.0 has signed 50 projects in more than 30 key cities across the country, and the core business circle benchmark projects will also be launched. We believe that the interview of Yaduo 4.0 not only represents our deep insight into the needs of users,

During its first month of operation, Xi'an Nanmen Attour Hotel achieved an OCC surpassing 91% and a rev par exceeding RMB 710. This exceptional performance not only underscores the market's resounding endorsement of Attour 4.0, but also reaffirms Atour's leading position in the upper mid-scale hotel market. To date, we have signed 50 Atour 4.0 projects across more than 30 cities nationwide, with flagship projects in core business districts set to be launched successively. As a pioneering product reflecting our deep understanding of customer needs, we believe that Atour 4.0 will propel the upper-mid-scale hotel market into a new stage of high-quality development.

Please turn to page 9 and 10. Since the launch of our mid-range brand, QingJu 3.0, we have received many positive reviews from users and partners. We are full of confidence in making QingJu 3.0 the second flagship brand of our group. In the second quarter, QingJu 3.0 has accumulated 37 awards, Please turn to slides 9 and 10 for a closer look at Ator Lite. Since its launch,

Attourlite 3.0, our mid-scale product, has garnered broad praise and recognition from customers and franchisees. We are confident of growing Attourlite 3.0 into our second 1,000 hotel brand. In the second quarter, a total of 37 new Attourlite 3.0 hotels were signed, accounting for more than 20% of our total new signings for the period. As of the end of the second quarter, we had a total of 54 Attour Lite 3.0 hotels in operation. Among those Attour 3.0 hotels that have been in operation for more than three months, RevPar exceeded RMB 310 in the second quarter, highlighting Attour Lite's strong competitive edge in the mid-scale hotel segment.

Notably, with the opening of the Attour Light Hotel in Liuliqiao, Beijing in late May,

Attour Light 3.0 has now established a comprehensive presence across all Tier 1 cities. In July, Liulitiao Attour Light Hotel realized an outstanding operational performance with OCC exceeding 90% and Revpar surpassing RMB 600, setting a new benchmark case for Attour Light 3.0 hotels.

In addition, while we optimize the focus of QingJu 3.0 to bring more high-quality service experiences to users, we also continue to build the brand content of QingJu's characteristics and deepen users' knowledge of QingJu's brand. In the second quarter, we jointly launched the QingJu 3.0 special activities with well-known creative IPs to create deep interactions with users and continue to accumulate brand volume.

Furthermore, as we expanded Attourlite's various service touchpoints to provide our customers with a superior service experience, we also crafted distinctive marketing campaigns for Attourlite to deepen customer awareness of the brand. In the second quarter, We partnered with renowned cultural IPs to launch a series of summer events at Attourlite 3.0 hotels, fostering stronger connections with customers and further enhancing Attourlite's brand visibility. As we explore and embrace a more vibrant and diversified Chinese experience, we have observed a notable rise in the proportion of young and female customers at Attourlite hotels.

Moving now to our retail business. Please turn to slide 11. As our second growth driver,

Our retail business sustained its outstanding performance in the second quarter, with GMV up by 157.6% year-over-year to RMB 620 million, and sales from online channels accounting for over 90% of the total GMV. 今年618购物节期间,亚朵星球GMV达到3.1亿, 再次刷新大触销售记录。

And the same increase is far ahead of many major e-commerce platforms. Yaduo planet deep sleep products continue to gain market popularity. The sales volume is ever-increasingly high. Yaduo deep sleep coolers have also received widespread praise from consumers since its launch this year. During the 618 period, the market power of deep sleep coolers and new products continued to explode. The total sales volume exceeded 170,000.

A tour planet excelled once again during this year's June 18th shopping festival with total GMV reaching RMB 310 million, setting a new sales record for shopping festivals and significantly outpacing other brands' year-over-year sales growth across many major e-commerce platforms. Furthermore, our Deep Sleep Lightweight Comforter has garnered extensive acclaim since its release earlier this year, underscored by surge in sales momentum during the June 18th shopping festival, with total sales exceeding 170,000 units, topping the sales charts in its category on Tmall, JD.com, and Douyin.

Please turn to page 12. The rapid growth of Ador Planet in the second quarter is the core of Ador's profound and unceasing pursuit of deep sleep. As well as our efficient new product development mechanism, we successfully achieved the landing of more than half of the products, and continued to drive product replacement and upgrade according to the needs of users. Since this year, Ador Planet has made major breakthroughs in new product development and landing in bed products. After deep sleep and cool down,

Please turn to slide 12. Ator Planet's impressive growth in the second quarter, despite market softness, stems from Ator's deep insight into and relentless pursuit of the deep sleep concept, coupled with an efficient new product development mechanism. This approach has successfully brought multiple blockbusters to market and consistently drives iterative product upgrades based on customer demands. Since the beginning of this year, AtorPlanet has achieved significant breakthroughs across research and development, as well as new product launches in the comforter category. Following the DeepSleep lightweight comforters' success, We introduced another groundbreaking product in July, the DeepSleep Thermal Regulating Comfort Pro.

We introduced another groundbreaking product in July, the DeepSleep Thermal Regulating Comfort Pro. This new product features our innovative dual layer temperature control system, significantly enhancing its warmth and breathability.

Crafted from cutting edge fiber materials, the thermal regulating comforter outperforms silk in temperature and humidity variation tests, delivering superior temperature regulation and dryness. Additionally, it adopts our deep sleep lightweight comforter's highly praised coverless design and is also machine washable and dryer friendly, ensuring a minimalist and authentic deep sleep experience that allows deep sleep to occur naturally.

Looking ahead, we will remain focused on customer needs

as we further develop and enrich our deep sleep product offerings, enhancing and perfecting the Attour experience. Our goal is to bring deep sleep into more homes and immerse customers in Attour Planet touchpoints, fostering a deeper connection with the Attour brand. 会员业务方面,请大家翻到第13页。

The continuous improvement of the membership system and the rapid growth of the volume have put new energy into the development of Ado. As the awareness of Ado brands continues to increase, our membership size will expand rapidly. By the end of the second quarter, the number of Ado registered members has broken 76 million, which is 72.5% of the total growth. At the same time, the CRS channel continues to maintain a healthy level. Transitioning to our membership business, please turn to slide 13.

Our consistent refinement of the membership program and the resulting rapid growth of our membership base have dynamically propelled Ator's development. As Ator's brand recognition flourishes and climbs, our membership base has rapidly expanded. As of the end of the second quarter, our registered individual members surpassed 76 million, marking a 72.5% increase year-over-year. Meanwhile, our CRS channel remained healthy, contributing 62.9% to the total room nights sold during the second quarter. The contribution of room nights sold to corporate members rose to 19.3% during the second quarter, up 0.9 percentage points from the same period last year, further solidifying a tour's leading position as the preferred brand for business travel.

Please turn to page 14. In the second quarter, we also launched a series of cleaning activities to continue to expand the membership rights and experience. During the holiday period of May 1 this year, we successfully held the Asia-South Tangtang Life Festival in Nantong. The whole country's cultural consumption promotes new public areas, accurately matching the needs of the current differentiated leisure tourism, digging for users and providing comfortable leisure tourism experiences. Please turn to slide 14. We launched a series of distinctive events in the second quarter to further enhance membership benefits and experiences.

During the Labor Day holiday in May, we successfully hosted the Tour Lying Down Festival in Nantong, catering to the new wave of tourism consumption and precisely aligned with today's diverse leisure travel demands for comfortable and relaxing travel experiences. Furthermore, we continue to tap into new consumption drivers in the hospitality and lodging industries. such as the music plus and the sports plus concepts, ensuring that every stay at a tour is memorable and reinforces the distinctiveness of the tour experience.

Finally, let's turn to page 15. I would like to share with you the progress of Yaduo in ESG practice. Since the first ESG report released in the first half of the year, Yaduo has continued to implement sustainable development ideas. Please turn to slide 15. Last but not least, I would like to highlight Ator's ESG progress. Following the release of our first ESG report earlier this year,

A tour has deepened our commitment to sustainable development, extending our warm, caring efforts to a broader range of communities and natural environments. In June, we proudly launched the Yuanmeng Project in partnership with a non-profit organization. This initiative helps to protect the critically endangered Skywalker hoolock gibbon, one of China's rarest and most valuable primate species.

Yunnan Gaoli Gongshan is one of the few homesteads that only exists in Tianxing Changbi Garden. As a rare animal in China, Tianxing Changbi Garden has less than 200 of them. We have created a special image of Yaduo for Tianxing Changbi Garden. Through scientific activities and related products, we call on the public to defend the survival of Tianxing Changbi Garden together with Yaduo. In the future, we will also use more practical actions to protect biodiversity,

The Gaoligong Mountains in Yunnan are one of the last remaining habitats for the Skywalker hulock gibbon. As one of China's critically endangered species, fewer than 200 of these gibbons remain in existence today. To raise awareness, we have created an exclusive Attour-branded image of the Skywalker hulock gibbon and are conducting educational campaigns as well as merchandise sales featuring this image, calling on the public to join us in safeguarding one of China's most endangered species. Moving forward, we remain committed to taking tangible steps to preserve biodiversity and protect endangered species.

下面請我們的聯繫CFO吳建峰為大家介紹公司的財務情況。

Now I will turn the call over to our co-CFO, Mr. Wu Jianfeng, to discuss our financial results.

Thank you, Haijun. Now I would like to present the company's financial performance for the second quarter of 2024. Please turn to slide 17 of the result presentation. Our net revenue for the second quarter of 2024 grew by 64.5% year-over-year, and 22.4% quarter-over-quarter to RMB 1,797 million. The year-over-year increase was driven by robust growth in the monetized hotel business and retail business. The quarter-over-quarter increase was mainly attributable to an increase in rent power, which reached RMB 359 for the second quarter of 2024, compared with RMB 328 for the previous quarter. Revenues from our monetized hotels for the second quarter of 2024 were RMB 1,027 million, up by 63.9% year-over-year and 22.8% quarter-over-quarter. The year-over-year increase was primarily fueled by our ongoing hotel network expansion and the rapid growth of our supply chain business. The total number of monetized hotels increased to 1,382 as of June 30, 2024, up by 38.1% year-over-year. The quarter-over-quarter increase was mainly due to an increase in repa. Repa of our monetized hotel was RMB 355 for the second quarter of 2024, compared with RMB 324 for the previous quarter. Revenues contributed by our leased hotels for the second quarter of 2024 were RMB $180 million, reflecting a 17.9% year-over-year decline by a 7.3% quarter-over-quarter increase. The year-over-year decline was primarily due to a decrease in the number of leased hotels as a result of our product mix optimization, as well as a decrease in rep power. The quarter-over-quarter increase was driven by an increase in red power. Our leased hotel's red power was RMB 503 for the second quarter of 2024, compared with RMB 455 for the previous quarter. Revenues from our retail business for the second quarter of 2024 were RMB 537 million. marking a significant increase of 153.6% year-over-year and 28.8% quarter-over-quarter. These increases were driven by widespread recognition of our retail brands and effective product innovation and development as we successfully broadened our range of product offerings. In the second quarter of 2024, converters' sales accounted for over 20% of retail revenues, further accelerating the growth of our retail business. Revenues from others for the second quarter of 2024 were RMB $53 million, up 51.2% year-over-year and 11.5% quarter-over-quarter, driven by our fast-growing membership business. Now let's move to costs and expenses. Please turn to slide 18. Operating costs and expenses for the second quarter of 2024 totaled RMB 1,400 million, including RMB 24 million share-based compensation expenses, compared with RMB 816 million, including RMB 10 million share-based compensation expenses for the same period of 2023. Hotel operating costs for the second quarter of 2024 increased by 52.3% year-over-year and 17.2% quarter over quarter to RMB $776 million. These increases were primarily due to the increase in variable costs, such as supply chain costs associated with our ongoing hotel network expansion. The gross margin of our hotel business was 35.7% for the same quarter of 2024, compared with 39.8% for the same period of 2023. due to an increase in RAPA attributable to a high base effect in the same period of 2023, as well as an increased share of revenue generated by the lower-margin supply chain business. Retail costs for the second quarter of 2024 rose by 146.4% year-over-year and 28.6% quarter-over-quarter to RMB $265 million. These increases were associated with the rapid growth of our retail business. The gross margin of our retail business was 50.6% for the second quarter of 2024, compared with 49.2% for the same period of 2023, driven by an increasing contribution from higher margin online sales. Now please turn to slide 19. Selling and marketing expenses for the second quarter of 2024 were RMB 225 million, compared with RMB 94 million for the same period of 2023. This increase was mainly due to our enhanced investment in brand recognition and the effective development of online channels, aligned with the growth of our retail business. Selling and marketing expenses accounted for 12.5% of net revenues for the second quarter of 2024, compelled with 8.6% for the same period of 2023. General and administrative expenses for the second quarter of 2024 were RMB 91 million, including RMB 15 million share-based compensation expenses, compelled with RMB 73 million, including RMB 9 million share-based compensation expenses for the same period of 2023. Excluding share-based compensation expenses, The increase was primarily due to an increase in labor cost. General and administrative expenses, excluding share-based compensation expenses, accounted for 4.2% of net revenues for the second quarter of 2024, compared with 5.9% for the same period of 2023. Technology and development expenses for the second quarter of 2024 were RMP 33 million, compared with RMB 18 million for the same period of 2023. This increase was mainly due to increased investment in technology systems and infrastructure to support our expanding hotel network and retail business and to improve customer experience. Technology and development expenses accounted for 1.8% of net revenues for the second quarter of 2024, compared with 1.6% for the same period of 2023. Now please turn to slide 20. Adjusted net income for the second quarter of 2024 was RMB 328 million, representing a 31.6% increase year-over-year. Adjusted net profit margin for the second quarter of 2024 was 18.2%, representing a decrease of 4.6 percentage points year-over-year. Adjusted EBITDA for the second quarter of 2024 was RMB $443 million, up by 28.6% year-over-year, with an adjusted EBITDA margin of 24.6%, which decreased 6.9 percentage points year-over-year. The decreases in both margins were primarily due to a decline in RAPA and an increased revenue contribution from lower-margin supply chain business, along with organic growth in sending and marketing expenses amid our retail business expansion. Please turn to slide 21 and 22. Operating cash inflow for the second quarter of 2024 was RMB $577 million. Investment cash outflow for the second quarter of 2024 was RMB $306 million. There were no cash flows from financing activities for the second quarter of 2024. We also maintained a healthy cash position with a stable growth momentum. As of June 30, 2024, our cash and cash equivalents totaled RMB 3,323 million, with net cash of approximately RMB 3,231 million. Please turn to slide 23. For the full year of 2024, we currently expect the company's total net revenue to increase by 48% to 52% compared with full year 2023. Please turn to slide 24. As part of the company's ongoing efforts to enhance shareholder value, today we also announced a three-year annual dividend policy. annual dividend policy, we plan to declare and distribute dividends with an aggregate amount of no less than 50% of net income for the preceding financial year in each of the three financial years commencing this year. In accordance with the annual dividend policy, today we declared a cash dividend of U.S. dollar 0.15 per ordinary share or US$0.45 per ADS. The aggregate amount of the cash dividends to be distributed will be approximately US$62 million. That concludes our financial highlights for the second quarter of 2024. Now 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 and wait for a name to be announced. For the benefit of all participants on today's call, if you raise your questions in Chinese, please immediately repeat your questions in English. Please limit your questions to one at a time. If you wish to have follow-up questions, please rejoin the queue. One moment for the first question. Our first question comes from the line of Dan Chee from Morgan Stanley. Please go ahead.

Thank you, Mr. Guan. First of all, congratulations to the company on the re-opening of the new business in the second quarter. So my question today is about opening and signing. I have two related questions I would like to ask. The first is, we saw that the whole contract is very strong. I would like to ask, is the current rhythm of the third quarter and the second quarter Thank you. Please allow me to translate my question. This is Dan from Morgan Stanley. First of all, congratulations on the new quarterly record on hotel new openings. I have two related questions on hotel opening and signing. We saw signing progress trended very well in Q2, but Mr. Wang also mentioned about REFPA year-on-year decline due to high base. So will this change in REFPA affect the signing progress in second half this year? compared to the number of signings in the first half of this year? My second question is, given the strong opening so far year-to-date, will the company change the full-year opening target of 360 hotels? That's all for my question. Thank you.

Okay, thank you, Dan.

First of all, we can see that this year, our overall opening and signings have made very good progress. Thank you, Dan.

Well, first, we have seen some quite nice progress in both new openings and new signings overall this year. And in that second quarter, we maintained a very positive trend in hotel network expansion with 123 new hotel openings, which also once again broke our quarterly record. And due to this acceleration of openings in the first half of the year, we are now confident that this full year's new openings target will increase from 360 to 400.

In terms of contracts, our brand power and product power should remain constant in the mid-high and mid-high markets. The investors are full of confidence and have a high desire to invest. Our pipeline project has also exceeded 700 by the second quarter. At the same time, we have higher requirements in terms of project quality than last year. And as for new signings, due to our continuously strengthening brand influence and product competitiveness in the upper mid-scale and mid-scale markets,

It's fair to see that we have franchisees having very great confidence and being strongly willing to join our tour system. We have now more than 700 hotels under development by the end of the second quarter. Meanwhile, we have also applied more stringent requirements on projects' quality this year because we aim to achieve quality growth with quality. Franchisees also recognize that. They recognize our leading operating performance and the long-term investment return of our brand across the market. And we will maintain that momentum to have a healthy and solid signing space in Q3.

In addition, we also believe that with the continuous improvement of the chain rate of Chinese high-end and mid-end hotel market brands, we can see that the demand for high-quality products and accommodation experiences is also increasing. Besides, we believe that now in China with the increasing chain rate of upper mid-scale and mid-scale hotel market,

Also that we see the customers are having increasing demand for higher quality products and better accommodation experiences. And we do have enough capabilities to leverage our Attour and Attourlite brands to differentiate ourselves and exert our brand influence to bring some impact to the hotel market. And there is enough room for our future growth of both Attour and Attourlite. Thank you.

Thank you, Dan. Next question, please.

One moment for the next question. Next question comes from the line of Sing Chen from UBS. Please go ahead.

Good evening, leaders. Thank you for giving me this opportunity. I have two questions to ask. The first question is to ask about the performance of the company's UiPath since July and the company's guidance on the UiPath this year and the whole year. The second question is to ask about the change in the income structure in our slide. Can we look at the expectation of the annual profit rate? Thank you. Let me translate. I'm Chenxin from UBS. Thanks to my mentor for giving this chance to ask questions. The first question is that may you share with us the company's WIPA performance since July? And does the company have guidance for the full year 2024 WIPA? The second question is that considering the changes in the group's revenue structure, may you give us some color on the full year margin outlook?

Thanks.

Thank you, Chengxin. I will answer your question.

Thank you, Chengxin. Let me try to answer your questions. In the last three seasons, with the full recovery of domestic tourism, Shuxi has traveled more than 19 years. Our performance since July this year has been very resilient. However, due to the high-tech pressure brought by Shuxi's forgetfulness last year, it still exists in July and August this year.

Well, in quarter three last year, with the full recovery of domestic tourism, we saw the number of tourists embarked on their summer trips significantly exceeded 2019's level. And this year, our performance in the tourism market actually showed some resilience. However, we still do expect that a high base effect due to the summer peak season last year will still exist in this year's July and August performance.

Looking on the whole year, we do notice that there are still some uncertainties remain for REVPAR.

But at Ator, we are quite confident of our performance, especially after removing the impact of new hotels ramping up. We can see that the same hotel ref are for mature hotels in operation for more than 18 months. Their performance is expected to outperform the group's blended performance by about 2 percentage points, which is maintained at a relatively stable position.

The second question is about financial expectations. Although our RAPPA may face some fluctuations, we still expect that our income in 2024 will maintain a high-speed growth. As we mentioned in the introduction, we will direct our company's annual income in 2024 from 40% in the previous quarter to 48% to 52% in the next quarter, maintaining a high-speed growth in the industry. and as for our revenue guidance despite some volatility in revpar we do expect the group's 2024 revenue to maintain a faster growth and like we previously mentioned we would like to raise our 2024 full year revenue growth guidance

from 40%, as we estimated in the last quarter, to 48% to 52% year-over-year, maintaining our industry-leading growth rate driven by our continued expansion of hotel network and a rapid development of our retail business.

As for profit, considering the fluctuation of REVPAR this year and like you have mentioned, our revenue structure change and continuous optimization of our cost structure,

our adjusted net profit margin is expected to remain at about 18% for the whole year. Thank you.

Thank you, Xin. Next question.

Thank you for the questions. One moment for the next question. Next question comes from the line of Fujie Ling from CICC. Please go ahead.

Thank you, Manager Cheng. Congratulations, we have another season of strong performance. I have a question about product and brand upgrade. I am very happy to see that we have continued to make breakthroughs in product upgrades. I would like to ask about the opening plan of Adore 4.0 this year and how much contribution this has made to RevCard. In addition, can you share the relevant progress of the upgrade of high-end brands? So congratulations for another strong quarter, and very happy to see that we achieved continuous breakthrough in product upgrades. Could you please share with us the opening guidance of A24.0 this year, and how would this contribute to REFPA increase? And regarding our upscale brand, we mentioned before we are doing some brand upgrades, so how's the progress? Thank you.

Thank you, Sijia. Thank you, Sujie, for your question. With the grand opening of our first Attour 4.0 hotel,

Our upper mid-scale hotel market has entered a new stage of high-quality development as we see it. Now there are 50 Atour 4.0 hotels in our pipeline. The benchmark projects in various core business areas will be introduced to the market gradually, and it is expected that 8 to 10 Atour 4.0 hotels will be opened within this year.

For the first batch of Ator 4.0 projects, we are having higher standards and requirements on those projects.

For example, such as on-site selection and property conditions, we have strict screening because we aim to create a batch of benchmark Ator 4.0 hotel projects to better demonstrate our brand value and market competitiveness.

As we just introduced, Ator 4.0 hotels are doing very well. Like we previously said, during its first month of operation,

Our first Ator 4.0 hotel achieved a rev par exceeding RMB 710 and an OCC surpassing 91%. Its outstanding operating performance has far exceeded our product model expectation, and that further boosted our confidence in this product of Ator 4.0. We believe that with the scale of Ator 4.0 hotels gradually expand, those hotels will also make a positive contribution to the rev part of the whole group as a whole.

And you also mentioned in your question you want to know about our upscale brand.

Well, our plan is to officially launch our next generation upscale brand within this year, hoping to continuously boosting the development of our brand with some new vitality. Thank you. Thank you.

Thank you, Sijie. Next question, please.

Thank you for the question. Next question comes from Lionel Leung from Bank of America. Please go ahead.

Hey, good evening. Thank you for giving me the opportunity to ask questions. First of all, congratulations to the company for quickly expanding in the mid-term market. My question is about the development of this year's G3.0. What is the goal of the management of this year's G3.0 business? And what are the measures to re-organize the brand and user youth? Congratulations to management for achieving very rapid expansion in the mid-scale market. Could you elaborate on the new opening target for a tour light 3.0 this year? And also, could you share some color on the initiatives of a tour light to connect with younger demographic and enhance brand recognition? Thank you very much.

Okay, thank you, Ronald. Since we launched 3.0, we have received a wide range of positive reviews from the market. Thank you, Ronald. Since the launch of our Tour Lite 3.0, it has been highly recognized in the market.

In the second quarter this year, we had a total of 37 new signings of AtorLight 3.0, and that accounted for more than 20% of our total new signings. As of the end of June, the number of AtorLight 3.0 hotels in operation had reached 54, and we expect that the number of new openings of AtorLight 3.0 hotels within this year will be around 70 to 80. and the number of tour-like 3.0 hotels in operation could possibly reach 100 by the end of this year.

Due to the diversification and youth exploration of China's experience, the ratio of young and female residents has significantly improved. In the first half of this year, the population of residents under the age of 30 has increased by 30%, which is nearly 5% higher than in 2023. The ratio of female users has increased by half.

And based on our initiatives of the diversification and youngness of the Chinese experience, we now see a significant increase in the proportion of young consumers and female consumers, both of them, for Atorlite. In the first half of this year, the proportion of under 30 years old consumers of Atorlite increased to 30%, and nearly VATS was nearly 5 percentage points higher than 2023. The proportion of female consumers was also close to 50%. 我们围绕自在轻生活的理念不断细化和升级我们轻居的特色服务, 比如说联名一些知名的IP,以更好地去满足年轻商旅用户的需求, 深化我们用户对于轻居品牌的认知, 持续地丰富了我们的会员和用户的群体。 To build upon our ethos of life at ease, we've been consistently introducing and refining the distinctive services at Tour Life hotels, such as we expanded co-branded collaborations with renowned cultural IPs. We better address the needs of young business travelers to deepen their awareness of our brand, Tour Life, and to continue to grow our membership and our consumer base. Thank you.

Thank you, Ronald. Next question, please.

Thank you for the questions.

One moment for the next question. Next question comes from the line of Liu Qiwei from Citix.

Please go ahead.

Good evening, Mr. Guan. I'm Liu Qiwei from Central Bank. I translated my question. I'm Jiwei from Citix. I saw the company announced the dividend plan for the next three years. Roughly calculating, the dividend payout ratio is about 60% of the last year net profit. So what's the guidance on the dividend payout ratio for the next two years? Also, I want to know if the company will consider other shareholder return plans, such as share reputations. Thanks.

Thank you, Jiwei. Thank you, Jiwei, for your question. We have always been evaluating and implementing sustained returns for our shareholders. Based on our confidence

In the company's future long-term development and upon careful consideration of our profit distribution, we have declared the distributed dividends with an aggregate amount of no less than 50% of its net income for the preceding financial year in each of the announced three financial years commencing this year.

However, as our company is still now in a rapid growth phase, we will maintain some flexibility in capital utilization while ensuring business development.

The specific dividend amounts will be comprehensively evaluated based on the company's actual and projected results of operations, financials, and cash positions, capital requirements, and as well as other factors. And in addition to cash dividends, we will continue to explore and actively consider other feasible ways to share the benefits of our growth with our shareholders. Thank you.

Thank you, Jiwei. Next question, please.

One moment for the next question. Next question comes from Lydia Ling from Citi. Please go ahead.

Oh. Our retail business in the second quarter is still in a relatively strong trend. So I would like to ask the management to share. We also see that consumption is relatively weak at the moment. We still maintain a relatively high growth. Can the management be able to look at the latest income expectation of our retail business? What new products will be released in the second half of the year? And we also want to know the latest trend of the OP margin of retail business. Since management, I have a question regarding the retail business, which we saw still have very solid momentum in the second quarter. So can management share, like, what's the growth driver behind this very solid growth? And also, could you share your latest retail revenue guidance for the retail business? And, yes, and also, like, what kind of the new products you're planning on the pipeline and also the OP margins for the retail business? Thank you.

Thank you, Lydia.

Atour Planet focuses on deep sleep scenarios and we address consumer needs for improving their sleep quality. We are not only paying attention to the innovation of design and materials during our new products R&D, but we also pay special attention to the iterative upgrading of products to ensure that Atour Planet products can timely capture the needs of consumers and whatever the market is changing towards. and so that we can continue to provide better sleep experiences to them.

As for the new product you mentioned, we have recently launched our deep sleep air temperature back pro. This is the new single product of our Asus deep sleep series. It has been a revolutionary innovation on many levels, and it has once again verified the development capabilities of a product based on user needs.

And as you asked about any new products, we previously mentioned that we recently had the official launch of our DeepSleep Thermal Regulating Comforter Pro. And that product is a groundbreaking addition to our AttuaPlanet DeepSleep series. And it had for another time reinforced our commitment to product development driven by user needs.

In terms of revenue, the revenue of our second quarter sales has reached 5.37 billion, which is more than 150% of the total growth. Not only does it maintain the growth rate of a long-term industry, but it also drives the overall growth of the relevant products on the entire e-commerce platform. Based on our strong performance in the first half of the year, we expect that the sales of the sales business in Asia will achieve a three-fold growth.

And as for retail revenue, our second quarter retail revenue reached 537 million yuan, a year-over-year increase of above 150%. This not only maintained well because it's above the growth rate of the industry, but it also even led to the overall growth of the relevant categories on those e-commerce platforms. And based upon this strong performance in the first half of the year, We believe our retail revenue for the full year of 2024 is expected to double year over year.

In terms of the efficiency of the investment of the entire sales fee, we have also achieved a very good control. As for the OP margin of retail, we are currently able to reach a level of two digits.

And as for retail OP margin, you can see that with our product's gross margin being improved, and because of our product structure and our channel structure being optimized, and in the second quarter, The gross margin was maintained at 51%, and expenses are being well controlled. And we do believe that the retail OP margin will be maintained within a double digit. Thank you.

And that concludes the question and answer session. I would like to turn the conference back over to Alice and Zhang for any additional or closing comments.

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

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. Thank you. Ladies and gentlemen, thank you for standing by and welcome to the A2O Lifestyle Holdings Second Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Alison Chang, Director of Investor Relations. Please go ahead, ma'am.

Thank you, Operator. Good morning and good evening, everyone. Welcome to our second quarter 2024 earnings conference call. Today, you will hear from our founder, chairman, and CEO, Mr. Wang Haijun, and our co-staffer, 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 results, please refer to the earnings release issued earlier today. Furthermore, a webcast replay of this conference call will be accessible on our website at ir.yaduo.com, where a copy of the results presentation is also available. Now, I will turn the call over to Mr. Wang, our CEO. Thank you, Sijia.

Hello, everyone. Thank you for participating in the second quarter of the Yanduo Group's performance call conference in the second quarter of 2024.

Thank you, Alex. Hello, everyone. And thank you for joining Atour's second quarter 2024 earnings call today.

During the second quarter of 2024, domestic travel market demand remained steady.

with leisure tourism extending its healthy upward trajectory alongside continuously evolving customer demand. By proactively adapting to these shifting market dynamics, we further strengthen our leadership in the upper mid-scale hotel market. 上半年,我們不僅在住宿業務方面持續升級中國體驗,

We consistently elevated the Chinese experience in our accommodation business

during the first half of the year to better address our customers' personalized, diverse, and quality-driven expectations. Meanwhile, we adeptly capitalized on emerging opportunities presented by the latest wave of retail business development. We made substantial headway in propelling holistic, high-quality growth across our business and brand portfolio, while continuously deepening our insight into customer needs and amplifying our brand reputation.

下面我將展開介紹2024年第二季度各項業務的具體情況。 Now I would like to provide more details on our performance for the second quarter of 2024. 首先是住宿業務,請大家翻到我們PPT的第四頁。 二季度我們的Roller Pod達到359元, Let's begin with our hotel business.

Please turn to slide four of our second quarter 2024 results presentation. Our REVPAR reached the RMB 359 in the second quarter of this year, representing 93.5% of its level in the same period of 2023. Notably, our OCC growth remained solid, reaching 101.7% of 2023's level for the same period further underscoring a tour's resilient demand and strong brand influence. ADR was 92.8% of its level in the same period of 2023, largely due to last year's high-comparison base effect.

Please turn to page 5. Over the past 18 months, Zaining's mature hotel industry has shown a better performance than DaPan. The structural impact, such as the removal of new electricity, Please turn to slide 5. Our mature hotels in operation for more than 18 months.

continued to outpace groups' overall performance during the second quarter. Excluding structural impacts such as the ramp-up of new hotels, same-hotel RevPar in the second quarter of 2024 reached 96.2% of 2023's level for the same period, outperforming the group's blended performance by 2.7 percentage points. Specifically, OCC increased by 2.2 percentage points year-over-year, and ADR stood at 94.4% of the same period in 2023. Please turn to page 6.

Thanks to the joint development of Yaduo and Qingju, the group's growth has been clearly reflected. In the second quarter, our hotel network expansion trend is still strong. Please turn to slide six.

our synergistic development of Ator and Ator Lite has unlocked the substantial growth potential for our group. In the second quarter, we maintained vigorous momentum in our hotel network expansion with 123 new hotel openings, up 76% year-over-year, setting a record pace in new openings for a single quarter. As of the end of the second quarter, we had a total of 1,412 hotels in operation, representing a 37% year-over-year increase, accelerating our progress toward our goal of 2,000 premier hotels nationwide by 2025. Please turn to page 7.

Thanks to Yaduo's firm brand and product power, our partners are full of confidence. Please turn to slide seven. Franchisees' confidence remains strong and steadfast this quarter, both to

bolstered by our robust brand influence and product competitiveness. We made significant strides in both the number and efficiency of our new signings. With a notable pipeline expansion, the number of hotels under development reached 712 as of the end of the second quarter, underpinned by a substantial number of high-quality projects laying a solid foundation for a tour's sustained growth and nationwide expansion.

Next, I would like to introduce the latest progress of our two brands in Yaduo and Qingzhu. Please turn to page 8. On June 28, this year, at the 11th anniversary of the establishment of Yaduo, the first store of Yaduo 4.0 officially opened in Xi'an. As a return to the original production of Yaduo, Yaduo 4.0 is inspired by Yaduo Village. Next, let me share a tour and a tour of Light's latest development. Please turn to slide 8. On June the 28th,

To mark Attour's 11th anniversary, we proudly unveiled our first Attour 4.0 hotel in Xi'an, embodying Attour's commitment to its original aspirations. Attour 4.0 is inspired by Yaduo Village's natural beauty, transforming the hotel into a serene retreat amid the city's hustle and bustle. With extensive upgrades across various aspects of the hotel, including multifunctional workspaces, premium sleep settings in guest rooms, and upgraded dining services, Ator 4.0 adopts an experience-driven approach, aiming to create an enhanced operating model characterized by superior quality, greater pricing potential, and optimized efficiency.

Ator 4.0 opens its first OCC in the South China Sea, exceeding 91%, and RERPA exceeding 710 yuan. Strong business performance not only reflects the full recognition of the market for Yaduo 4.0, but also reaffirms the strong position of Yaduo in the high-end hotel brand. As of now, Yaduo 4.0 has signed 50 projects in more than 30 major cities across the country. The core business circle standard project will also be launched. We believe that the interview of Yaduo 4.0 not only represents our deep insight into the needs of our users, It will drive high-end hotels into a new phase of high-end development.

During its first month of operation, Xi'an Nanmen Attour Hotel achieved an OCC surpassing 91% and a rev par exceeding RMB 710. This exceptional performance not only underscores the market's resounding endorsement of Attour 4.0, but also reaffirms Atour's leading position in the upper mid-scale hotel market. To date, we have signed 50 Atour 4.0 projects across more than 30 cities nationwide, with flagship projects in core business districts set to be launched successively. As a pioneering product reflecting our deep understanding of customer needs, we believe that Atour 4.0 will propel the upper-mid-scale hotel market into a new stage of high-quality development.

Please turn to page 9 and 10. Since the launch of our mid-range brand, QingJu 3.0, we have received many positive reviews from users and partners. We are full of confidence in making QingJu 3.0 the second signature brand of our group. In the second quarter, QingJu 3.0 has accumulated 37 awards, Please turn to slides 9 and 10 for a closer look at Ator Lite. Since its launch,

Attourlite 3.0, our mid-scale product, has garnered broad praise and recognition from customers and franchisees. We are confident of growing Attourlite 3.0 into our second 1,000 hotel brand. In the second quarter, a total of 37 new Attourlite 3.0 hotels were signed, accounting for more than 20% of our total new signings for the period. As of the end of the second quarter, we had a total of 54 Attour Lite 3.0 hotels in operation. Among those Attour 3.0 hotels that have been in operation for more than three months, RevPar exceeded RMB 310 in the second quarter, highlighting Attour Lite's strong competitive edge in the mid-scale hotel segment.

Notably, with the opening of the Attour Light Hotel in Liuliqiao, Beijing in late May,

Attour Light 3.0 has now established a comprehensive presence across all Tier 1 cities. In July, Liuliquiao Attour Light Hotel realized an outstanding operational performance with OCC exceeding 90% and RevPar surpassing RMB 600, setting a new benchmark case for Attour Light 3.0 hotels.

In addition, while we optimize the 3.0 service focus to bring users more high-quality service experiences, we also continue to build the brand content of Qingju's characteristics and deepen users' understanding of Qingju's brand. In the second quarter, we jointly launched the Qingju 3.0 special activities with well-known and well-known IPs to create deep interactions with users and continue to accumulate brand volume.

Furthermore, as we expanded Attourlite's various service touchpoints to provide our customers with a superior service experience, we also crafted distinctive marketing campaigns for Attourlite to deepen customer awareness of the brand. In the second quarter, We partnered with renowned cultural IPs to launch a series of summer events at Attourlite 3.0 hotels, fostering stronger connections with customers and further enhancing Attourlite's brand visibility. As we explore and embrace a more vibrant and diversified Chinese experience, we have observed a notable rise in the proportion of young and female customers at Attourlite hotels.

Moving now to our retail business. Please turn to slide 11. As our second growth driver,

our retail business sustained its outstanding performance in the second quarter, with GMV up by 157.6% year-over-year to RMB 620 million, and sales from online channels accounting for over 90% of the total GMV. 今年618购物节期间,亚朵星球GMV达到3.1亿, 再次刷新大促销售记录,

And the same increase is ahead of many major e-commerce platforms. Yaduo planet deep sleep products continue to gain market trust. The sales volume is ever-increasingly high. Yaduo deep sleep coolers have also received widespread praise from consumers since its launch this year. During 618, the market power of deep sleep coolers and new products continued to explode. The total sales volume exceeded 170,000.

A tour planet excelled once again during this year's June 18th shopping festival with total GMV reaching RMB 310 million, setting a new sales record for shopping festivals and significantly outpacing other brands' year-over-year sales growth across many major e-commerce platforms. Furthermore, our Deep Sleep Lightweight Comforter has garnered extensive acclaim since its release earlier this year, underscored by surge in sales momentum during the June 18th shopping festival, with total sales exceeding 170,000 units, topping the sales charts in its category on Tmall, JD.com, and Douyin.

Please turn to page 12. The rapid growth of Ador Planet in the second quarter is the core of Ador's deep-rooted and unyielding pursuit of deep sleep. And our efficient new product development mechanism successfully achieved the landing of more than half of the products, and continued to drive product replacement and upgrade according to the needs of users. Since this year, Ador Planet has made major breakthroughs in new product development and landing in bed products. After deep sleep and cool down,

Please turn to slide 12. Ator Planet's impressive growth in the second quarter, despite market softness, stems from Ator's deep insight into and relentless pursuit of the deep sleep concept, coupled with an efficient new product development mechanism. This approach has successfully brought multiple blockbusters to market and consistently drives iterative product upgrades based on customer demands. Since the beginning of this year, AtorPlanet has achieved significant breakthroughs across research and development, as well as new product launches in the comforter category. Following the DeepSleep lightweight comforters' success, We introduced another groundbreaking product in July, the DeepSleep Thermal Regulating Comfort Pro.

We introduced another groundbreaking product in July, the DeepSleep Thermal Regulating Comfort Pro. This new product features our innovative dual layer temperature control system, significantly enhancing its warmth and breathability.

Crafted from cutting edge fiber materials, the thermal regulating comforter outperforms silk in temperature and humidity variation tests, delivering superior temperature regulation and dryness. Additionally, it adopts our deep sleep lightweight comforter's highly praised coverless design and is also machine washable and dryer friendly, ensuring a minimalist and authentic deep sleep experience that allows deep sleep to occur naturally.

Looking ahead, we will remain focused on customer needs

as we further develop and enrich our deep sleep product offerings, enhancing and perfecting the Attour experience. Our goal is to bring deep sleep into more homes and immerse customers in Attour Planet touchpoints, fostering a deeper connection with the Attour brand. 会员业务方面,请大家翻到第13页。

The continuous improvement of the membership system and the rapid growth of the volume have put new energy into the development of Ado. As the awareness of Ado brands continues to increase, our membership size quickly expands. By the end of the second quarter, the number of Ado registered members has broken 76 million, which is 72.5% of the total growth. At the same time, the CRS channel continues to maintain a healthy level. Our digital CS to sell social media. I mean, wait, but I don't know. So I didn't choose to see a social media. I mean, she seems to be. I mean, she's doing it. I mean, she's doing it. I mean, she's doing it. I mean, she's doing it. I mean, she's doing it. I mean, she's doing it. I mean, she's doing it. I mean, she's doing it. I mean, she's doing it. I mean, she's doing it. I mean, she's doing it. I mean, she's doing it. I mean, she's doing it.

I mean, she's doing it. I mean, she's doing it. Our consistent refinement of the membership program and the resulting rapid growth of our membership base have dynamically propelled Ator's development. As Ator's brand recognition flourishes and climbs, our membership base has rapidly expanded. As of the end of the second quarter, our registered individual members surpassed 76 million, marking a 72.5% increase year-over-year. Meanwhile, our CRS channel remained healthy, contributing 62.9% to the total room nights sold during the second quarter. The contribution of room nights sold to corporate members rose to 19.3% during the second quarter, up 0.9 percentage points from the same period last year, further solidifying a tour's leading position as the preferred brand for business travel.

Please turn to page 14. In the second quarter, we will continue to launch a series of special activities to continuously expand the membership rights and experience. During the May 1st holiday this year, we successfully held the Asian Tangtang Life Festival in Nantong. We took the opportunity to promote the consumption of new construction sites across the country and accurately match the needs of the current differentiated leisure tourism to dig for users and provide comfortable and comfortable leisure tourism experiences. Please turn to slide 14. We launched a series of distinctive events in the second quarter to further enhance membership benefits and experiences.

During the Labor Day holiday in May, we successfully hosted the Attour Lying Down Festival in Nantong, catering to the new wave of tourism consumption and precisely aligned with today's diverse leisure travel demands for comfortable and relaxing travel experiences. Furthermore, we continue to tap into new consumption drivers in the hospitality and lodging industries. such as the Music Plus and the Sports Plus concepts, ensuring that every stay at a tour is memorable and reinforces the distinctiveness of the tour experience.

Finally, I would like to turn to page 15. I would like to share with you the progress of Yaduo in ESG practice. Since the first ESG report released in the first half of the year, Yaduo has continued to implement sustainable development ideas. Please turn to slide 15. Last but not least, I would like to highlight Ator's ESG progress. Following the release of our first ESG report earlier this year,

A tour has deepened our commitment to sustainable development, extending our warm, caring efforts to a broader range of communities and natural environments. In June, we proudly launched the Yuanmeng Project in partnership with a non-profit organization. This initiative helps to protect the critically endangered Skywalker hoolock gibbon, one of China's rarest and most valuable primate species.

Yunnan Gaoli Gongshan is one of the few homesteads in Tianxing Changbi Garden. As a rare animal in China, Tianxing Changbi Garden is less than 200 years old. We have created a special image of Yaduo for Tianxing Changbi Garden. Through scientific activities and related products, we call on the public to jointly defend the survival of Tianxing Changbi Garden with Yaduo. In the future, we will also use more practical actions to protect biodiversity,

The Gaoligong Mountains in Yunnan are one of the last remaining habitats for the Skywalker Hulag gibbon. As one of China's critically endangered species, fewer than 200 of these gibbons remain in existence today. To raise awareness, we have created an exclusive Attour-branded image of the Skywalker Hulag gibbon and are conducting educational campaigns as well as merchandise sales featuring this image, calling on the public to join us in safeguarding one of China's most endangered species. Moving forward, we remain committed to taking tangible steps to preserve biodiversity and protect endangered species.

Next, let's have our CFO, Wu Jianfeng, introduce the company's financial situation.

Now I will turn the call over to our co-CFO, Mr. Wu Jianfeng, to discuss our financial results.

Thank you, Haijun. Now I would like to present the company's financial performance for the second quarter of 2024. Please turn to slide 17 of the result presentation. Our net revenue for the second quarter of 2024 grew by 64.5% year-over-year and 22.4% quarter-over-quarter to RMB 1,797 million. The year-over-year increase was driven by robust growth in the militarized hotel business and retail business. The quarter-over-quarter increase was mainly attributable to an increase in rent power, which reached RMB 359 for the second quarter of 2024, compared with RMB 328 for the previous quarter. Revenues from our monetized hotels for the second quarter of 2024 were RMB 1,027 million, up by 63.9% year-over-year and 22.8% quarter-over-quarter. The year-over-year increase was primarily fueled by our ongoing hotel network expansion and the rapid growth of our supply chain business. The total number of monetized hotels increased to 1,382 as of June 30, 2024, up by 38.1% year-over-year. The quarter-over-quarter increase was mainly due to an increase in repa. Repa of our monetized hotel was RMB 355 for the second quarter of 2024, compared with RMB 324 for the previous quarter. Revenue was contributed by our leased hotel for the second quarter of 2024, or RMB 180 million, reflecting a 17.9% year-over-year decline by a 7.3% quarter-over-quarter increase. The year-over-year decline was primarily due to a decrease in the number of leased hotels as a result of our product mix optimization, as well as a decrease in rep power. The quarter-over-quarter increase was driven by an increase in red power. Our leased hotel's red power was RMB 503 for the second quarter of 2024, compared with RMB 455 for the previous quarter. Revenues from our retail business for the second quarter of 2024 were RMB 537 million. marking a significant increase of 153.6% year-over-year and 28.8% quarter-over-quarter. These increases were driven by widespread recognition of our retail brands and effective product innovation and development as we successfully broadened our range of product offerings. In the second quarter of 2024, converter sales accounted for over 20% of retail revenues, further accelerating the growth of our retail business. Revenues from others for the second quarter of 2024 were RMB $53 million, up 51.2% year-over-year and 11.5% quarter-over-quarter, driven by our fast-growing membership business. Now let's move to costs and expenses. Please turn to slide 18. Operating costs and expenses for the second quarter of 2024 totaled RMB 1,400 million, including RMB 24 million shell-based compensation expenses, compared with RMB 816 million, including RMB 10 million shell-based compensation expenses for the same period of 2023. Hotel operating costs for the second quarter of 2024 increased by 52.3% year-over-year and 17.2% quarter over quarter to RMB $776 million. These increases were primarily due to the increase in variable costs, such as supply chain costs associated with our ongoing hotel network expansion. The gross margin of our hotel business was 35.7% for the same quarter of 2024, compared with 39.8% for the same period of 2023. due to an increase in RAPA, attributable to a high base effect in the same period of 2023, as well as an increased share of revenue generated by the lower-margin supply chain business. Retail costs for the second quarter of 2024 rose by 146.4% year-over-year and 28.6% quarter-over-quarter to RMB $265 million. These increases were associated with the rapid growth of our retail business. The gross margin of our retail business was 50.6% for the second quarter of 2024, compared with 49.2% for the same period of 2023, driven by an increasing contribution from higher margin online sales. Now please turn to slide 19. Setting and marketing expenses for the second quarter of 2024 were RMB 225 million, compared with RMB 94 million for the same period of 2023. This increase was mainly due to our enhanced investment in brand recognition and the effective development of online channels, aligned with the growth of our retail business. Setting and marketing expenses accounted for 12.5% of net revenues for the second quarter of 2024, compelled with 8.6% for the same period of 2023. General and administrative expenses for the second quarter of 2024 were RMB 91 million, including RMB 15 million shell-based compensation expenses, compelled with RMB 73 million, including RMB 9 million shell-based compensation expenses for the same period of 2023. Excluding shell-based compensation expenses, The increase was primarily due to an increase in labor cost. General and administrative expenses, excluding share-based compensation expenses, accounted for 4.2% of net revenues for the second quarter of 2024, compared with 5.9% for the same period of 2023. Technology and development expenses for the second quarter of 2024 were IMP $33 million, compared with RMB 18 million for the same period of 2023. This increase was mainly due to increased investment in technology systems and infrastructure to support our expanding hotel network and retail business and to improve customer experience. Technology and development expenses accounted for 1.8% of net revenues for the second quarter of 2024, compared with 1.6% for the same period of 2023. Now please turn to slide 20. Adjusted net income for the second quarter of 2024 was RMB 328 million, representing a 31.6% increase year-over-year. Adjusted net profit margin for the second quarter of 2024 was 18.2%, representing a decrease of 4.6 percentage points year-over-year. Adjusted EBITDA for the second quarter of 2024 was RMB $443 million, up by 28.6% year-over-year, with an adjusted EBITDA margin of 24.6%, which decreased 6.9 percentage points year-over-year. The decreases in both margins were primarily due to a decline in RAPA and an increased revenue contribution from lower-margin supply chain business, along with organic growth in selling and marketing expenses amid our retail business expansion. Please turn to slide 21 and 22. Operating cash inflow for the second quarter of 2024 was RMB $577 million. Investment cash outflow for the second quarter of 2024 was RMB $306 million. There were no cash flows from financing activities for the second quarter of 2024. We also maintained a healthy cash position with a stable growth momentum. As of June 30, 2024, our cash and cash equivalents totaled RMB 3,323 million, with net cash of approximately RMB 3,231 million. Please turn to slide 23. For the full year of 2024, we currently expect the company's total net revenue to increase by 48% to 52% compared with full year 2023. Please turn to slide 24. As part of the company's ongoing efforts to enhance shareholder value, today we also announced a three-year annual dividend policy. annual dividend policy, we plan to declare and distribute dividends with an aggregate amount of no less than 50% of net income for the preceding financial year in each of the three financial years commencing this year. In accordance with the annual dividend policy, today we declared a cash dividend of U.S. dollar 0.15 per ordinary share or US$0.45 per ADS. The aggregate amount of the cash dividend to be distributed will be approximately US$62 million. That concludes our financial highlights for the second quarter of 2024. Now 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 and wait for a name to be announced. For the benefit of all participants on today's call, if you raise your questions in Chinese, please immediately repeat your questions in English. Please limit your questions to one at a time. If you wish to have a follow-up questions, please rejoin the queue. One moment for the first question. Our first question comes from the line of Dan Chee from Morgan Stanley. Please go ahead.

Thank you, Mr. Guan. First of all, congratulations to the company on the re-opening of the new business in the second quarter. So my question today is about opening and signing. I have two related questions I would like to ask. The first is, we saw that the whole contract is very strong. I would like to ask about the current rhythm of the third quarter and the second quarter. Will it affect the whole contract pace after the fall of the house price high-end number last year? This is the first question. The second question is, because there are a lot of opening numbers in the first half of the year, will the company adjust the opening value of 2024? Thank you. Please allow me to translate my question. This is Dan from Morgan Stanley. First of all, congratulations on the new quarterly record on hotel new openings. I have two related questions on hotel opening and signing. We saw signing progress trended very well in Q2, but Mr. Wang also mentioned about REFPA year-on-year decline due to high base. So will this change in REFPA affect the signing progress in second half this year? compared to the number of signings in the first half of this year? My second question is, given the strong opening so far year-to-date, will the company change the full-year opening target of 360 hotels? That's all for my question. Thank you.

Okay, thank you, Dan.

First of all, we can see that this year, our overall opening and signings have made very good progress. Thank you, Dan.

Well, first, we have seen some quite nice progress in both new openings and new signings overall this year. And in that second quarter, we maintained a very positive trend in hotel network expansion with 123 new hotel openings, which also once again broke our quarterly record. And due to this acceleration of openings in the first half of the year, we are now confident that this full year's new openings target will increase from 360 to 400.

In terms of contracts, our brand and product power should remain constant in the mid-high and mid-high segment of the market. We have a lot of confidence in our suppliers, and we have a high desire to invest. Our pipeline project has also exceeded 700 by the second quarter. At the same time, we have higher requirements in terms of project quality than last year. And as for new signings, due to our continuously strengthening brand influence and product competitiveness in the upper mid-scale and mid-scale markets,

It's fair to see that we have franchisees having very great confidence and being strongly willing to join our tour system. We have now more than 700 hotels under development by the end of the second quarter. Meanwhile, we have also applied more stringent requirements on projects' quality this year because we aim to achieve quality growth with quality. Franchisees also recognize that. They recognize our leading operating performance and the long-term investment return of our brand across the market. And we will maintain that momentum to have a healthy and solid signing space in Q3.

In addition, we also believe that with the continuous improvement of Chinese high-end and mid-end hotel market brands, at the same time, we see that the demand for high-quality products and accommodation experiences of users is also increasing. And besides, we believe that now in China with the increasing chain rate of upper mid-scale and mid-scale hotel market,

Also that we see the customers are having increasing demand for higher quality products and better accommodation experiences. And we do have enough capabilities to leverage our Attour and Attourlite brands to differentiate ourselves and exert our brand influence to bring some impact to the hotel market. And there is enough room for our future growth of both Attour and Attourlite. Thank you.

Thank you, Dan. Next question, please.

One moment for the next question. Next question comes from the line of Sing Chen from UBS. Please go ahead.

Good evening, leaders. Thank you for giving me this opportunity. I have two questions to ask. The first question is to ask about the performance of the company's UiPath since July and the company's guidance on the UiPath this year and the whole year. The second question is to ask about the change in the income structure in our slide. Can you look at the expected profit rate for the whole year? Thank you. Thank you for giving this chance to ask questions. The first question is that, may you share with us the company's WebPath performance since July? And does the company have guidance for the full year 2024 WebPath? The second question is that, considering the changes in the group's revenue structure, may you give us some color on the full year margin outlook?

Thanks.

谢谢陈欣,我来回答你这个问题。 Thank you, Chen Xing, and let me try to answer your questions. However, due to the high-tech pressure of this industry caused by the last year's summer holidays, it still exists in July and August this year.

Well, in Q3 last year, with the full recovery of domestic tourism, we saw the number of tourists embarked on their summer trips significantly exceeded 2019's level. And this year, our performance in the tourism market actually showed some resilience. However, we still do expect that A high base effect due to the summer peak season last year will still exist in this year's July and August performance.

Well, looking on the whole year, we do notice that there are still some uncertainties remain for RevPAR. But as a tour, we are quite confident of our performance, especially after removing the impact of new hotels ramping up

we can see that the same hotel ref are for mature hotels in operation for more than 18 months. Their performance is expected to outperform the group's blended performance by about 2 percentage points, which is maintained at a relatively stable position.

The second question is about financial expectations. Although our RAPPA may face some fluctuations, we still expect that our income in 2024 will maintain a high-speed growth. As we mentioned in the introduction, we will direct our company's annual income in 2024 from 40% in the previous quarter to 48% to 52% in the next quarter, maintaining a high-speed growth in the industry. This is mainly due to the continuous expansion of our hotel network and the rapid development of our retail business.

And as for our revenue guidance, despite some volatility in REVPAR, we do expect the Group's 2024 revenue to maintain a faster growth. And like we previously mentioned, we would like to raise our 2024 full-year revenue growth guidance from 40%, as we estimated in the last quarter, to 48% to 52% year-over-year. maintaining our industry leading growth rate driven by our continued expansion of hotel network and a rapid development of our retail business.

As for profit,

Considering the fluctuation of REVPAR this year, and like you have mentioned, our revenue structure change and continuous optimization of our cost structure, our adjusted net profit margin is expected to remain at about 18% for the whole year. Thank you.

Thank you, Xin. Next question.

Thank you for the questions. One moment for the next question. Next question comes from the line of Sujie Lin from CICC. Please go ahead.

Thank you, Mr. Guan. Congratulations. We have another season of strong performance. I have a question about the product and platform upgrade. I am very happy to see that we have seen continuous breakthroughs in product upgrades. I would like to ask about the opening project of ADO 4.0 this year and how much contribution this has made to the improvement of REVPAR. Then the other question is, can you share the progress of the high-end brand? So congratulations for another strong quarter and very happy to see that we achieved continuous breakthrough in product upgrades. Could you please share with us the opening guidance of A24.0 this year and how would this contribute to RAFPA increase? Regarding our upscale brand, we mentioned before we are doing some brand upgrades, so how's the progress? Thank you.

Thank you, Sijia. With the opening of our Yaduo 4.0, we believe that the high-end hotel market is entering a new stage of high-quality development. Currently, there are 50 Yaduo 4.0 projects in our project pipeline. Thank you, Sujie, for your question.

With the grand opening of our first Attour 4.0 hotel, our upper mid-scale hotel market has entered a new stage of high-quality development as we see it. Now there are 50 Attour 4.0 hotels in our pipeline. The benchmark projects in various core business areas will be introduced to the market gradually, and it is expected that 8 to 10 ATOR 4.0 hotels will be opened within this year.

We have higher standards and requirements for ADO 4.0. For example, in terms of selection and property conditions, we will carry out a more rigorous selection. For the first batch of ATOR 4.0 projects, we are having higher standards and requirements on those projects. For example, such as on-site selection and property conditions.

We have strict screening because we aim to create a batch of benchmark Attour 4.0 hotel projects to better demonstrate our brand value and market competitiveness. 刚才也介绍到了我们首家开业的亚朵4.0的酒店,业绩表现是非常的好。

Like we previously said, during its first month of operation,

Our first Ator 4.0 hotel achieved a rev par exceeding RMB 710 and an OCC surpassing 91%. Its outstanding operating performance has far exceeded our product model expectation, and that further boosted our confidence in this product of Ator 4.0. We believe that with the scale of Ator 4.0 hotels gradually expand, Those hotels will also make a positive contribution to the REVPAR of the whole group as a whole.

And you also mentioned in your question you want to know about our upscale brand.

Well, our plan is to officially launch our next generation upscale brand within this year, hoping to continuously boosting the development of our brand with some new vitality. Thank you.

Thank you, Sijie. Next question, please.

Thank you for the question. Next question comes from Lionel Leung from Bank of America. Please go ahead.

Hey, good evening. Thank you for giving me the opportunity to ask questions. First of all, congratulations to the company for quickly expanding in the mid-term market. My question is about the development of this year's G3.0. What is the business goal of the management of this year's G3.0? And what are the measures to rejuvenate the brand and user youth? Congratulations to management for achieving very rapid expansion in the mid-scale market. Could you elaborate on the new opening target for a tour light 3.0 this year? And also, could you share some color on the initiatives of a tour light to connect with younger demographic and enhance brand recognition? Thank you very much.

Thank you, Ronald. Since we launched 3.0, we have received a wide range of praise from the market. Thank you, Ronald. Since the launch of our Touralight 3.0, it has been highly recognized in the market.

In the second quarter this year, we had a total of 37 new signings of AtorLight 3.0, and that accounted for more than 20% of our total new signings. As of the end of June, the number of AtorLight 3.0 hotels in operation had reached 54, and we expect that the number of new openings of AtorLight 3.0 hotels within this year will be around 70 to 80. and the number of tour-like 3.0 hotels in operation could possibly reach 100 by the end of this year.

Due to the diversification and youth exploration of China's experience, the proportion of young and female residents has significantly improved. In the first half of this year, the population of residents under the age of 30 has increased by 30%, which is nearly 5% higher than in 2023. The proportion of female residents has increased by half.

And based on our initiatives of the diversification and youngness of the Chinese experience, we now see a significant increase in the proportion of young consumers and female consumers, both of them, for Atorlite. In the first half of this year, the proportion of under 30 years old consumers of Atorlite increased to 30%, and the nearly That was nearly 5 percentage points higher than 2023. The proportion of female consumers was also close to 50%. 我们围绕自在轻生活的理念不断细化和升级我们轻居的特色服务, 比如说年名一些知名的IP, 以更好地去满足年轻商旅用户的需求, 深化我们用户对于轻居品牌的认知, 持续地丰富了我们的会员和用户的群体。 To build upon our ethos of life at ease, we've been consistently introducing and refining the distinctive services at Tour Life hotels, such as we expanded co-branded collaborations with renowned cultural IPs. We better address the needs of young business travelers to deepen their awareness of our brand, Tour Life, and to continue to grow our membership and our consumer base. Thank you.

Thank you, Ronald. Next question, please.

Thank you for the questions.

One moment for the next question. Next question comes from the line of Liu Qiwei from Citix. Please go ahead.

I translated my question. I'm Jiwei from Citix. I saw a company announced a dividend plan for the next three years. Roughly calculating the dividend payout ratio is about 60% of the last year net profit. So what's the guidance on the dividend payout ratio for the next two years? Also, I want to know if the company will consider other shareholder return plans, such as share reputations. Thanks.

Thank you, Jiwei. Thank you, Jiwei, for your question. We have always been evaluating and implementing sustained returns for our shareholders. Based on our confidence

In the company's future long-term development and upon careful consideration of our profit distribution, we have declared the distributed dividends with an aggregate amount of no less than 50% of its net income for the preceding financial year in each of the announced three financial years commencing this year.

However, as our company is still now in a rapid growth phase, we will maintain some flexibility in capital utilization while ensuring business development.

The specific dividend amounts will be comprehensively evaluated based on the company's actual and projected results of operations, financials, and cash position, capital requirements, and as well as other factors. And in addition to cash dividends, we will continue to explore and actively consider other feasible ways to share the benefits of our growth with our shareholders. Thank you.

Thank you, Jiwei. Next question, please.

One moment for the next question. Next question comes from Lydia Ling from Citi. Please go ahead.

Oh. Our retail business in the second quarter is still in a relatively strong trend. So I would like to ask the management to share. We also see that consumption is relatively weak at the moment. We still maintain a relatively high growth rate. Can the management look at the latest income expectation of our retail business? What new products will be released in the second half of the year? And we also want to know the latest trend of the OP margin of retail business. Thanks, management. I have a question regarding the retail business, which we saw still have very solid momentum in the second quarter. So can management share, like, what's the growth driver behind this very solid growth? And also, could you share your latest retail revenue guidance for the retail business? And, yes, and also, like, what kind of the new products you're planning on the pipeline and also the OP margins for the retail business? Thank you.

Thank you, Lydia.

Atour Planet focuses on deep sleep scenarios and we address consumer needs for improving their sleep quality. We are not only paying attention to the innovation of design and materials during our new products R&D, but we also pay special attention to the iterative upgrading of products to ensure that Atour Planet products can timely capture the needs of consumers and whatever the market is changing towards. and so that we can continue to provide better sleep experiences to them.

And as you asked about any new products,

We previously mentioned that we recently had the official launch of our DeepSleep Thermal Regulating Comforter Pro, and that product is a groundbreaking addition to our AttuaPlanet DeepSleep series, and it had for another time reinforced our commitment to product development driven by user needs.

In terms of revenue, the revenue of our second quarter sales has reached 5.37 billion, which is more than 150% of the total growth. Not only does it maintain the growth speed of a long-term industry, but it also drives the overall growth of the relevant products on the entire e-commerce platform. Based on our strong performance in the first half of the year, we expect that the sales of the sales business in Asia will achieve a growth of three times the total year.

And as for retail revenue, our second quarter retail revenue reached 537 million yuan, a year-over-year increase of above 150%. This not only maintained well because it's above the growth rate of the industry, but it also even led to the overall growth of the relevant categories on those e-commerce platforms. And based upon this strong performance in the first half of the year, We believe our retail revenue for the full year of 2024 is expected to double year-over-year.

As for our retail revenue for the full year of 2024 is expected to double year-over-year. As for our retail revenue for the full year of 2024 is expected to double year-over-year. As for our retail revenue for the full year of 2024 is expected to double year-over-year. In terms of the efficiency of the entire sales fee, we have also achieved a very good control. As for the retail OP margin, we are currently able to reach a level of two digits.

And as for retail OP margin, you can see that with our product's gross margin being improved, and because of our product structure and our channel structure being optimized, and in the second quarter, the gross margin was maintained at 51% and expenses are being well controlled. And we do believe that the retail OP margin will be maintained within a double digit. Thank you.

And that concludes the question and answer session. I would like to turn the conference back over to Alice and Zhang for any additional or closing comments.

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

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation.