H World Group Limited

Good day and thank you for standing by. Welcome to HVO Quarter 3 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to turn the call over to your first speaker today, Mr. Jason Chen. Thank you. Please go ahead.

Thank you. Good morning and good evening, everyone. Thanks for joining us today. Welcome to Edgeworth Group 2025 Third Quarter Earnings Conference Call. Joining us today is our founder and chairman, Mr. Ji Qi, our CEO, Mr. Jin Hui, our CFO, Ms. Chen Hui, and our CSO, Ms. He Ji Hong. Following their prepared remarks, management will be available to answer your questions. Before we continue, please note that the discussion today will include forward-looking statements made under the safe harbor provision of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in our public findings with the SEC. S-World Group does not undertake any obligations to update any forward-looking statements except as required and applicable laws. On the call today, we will also mention adjusted financial measures during the discussion of our performance. Reconciliations of those measures to comparable gap information can be found in our earnings release that was distributed early today. As a reminder, this conference call is being recorded. The webcast of this conference call, as well as supplementary slides presentation, is available at ir.edgeworth.com. With that, now I will hand over the call to our CEO, Mr. Jin Hui, to discuss our business performance in the third quarter of 2025. Mr. Jin, please.

谢谢。 各位投资人、分析师,大家好。 感谢大家参加华洲集团2025年第三季度业绩电话会。 相信大家都关注到,两周前在华洲集团成立20周年之际, 我们成功地举办了主题为华洲20年再出发的伙伴大会。 Therefore, before looking back at the performance of the third quarter, I would like to use a few minutes to share with you again our views on the Chinese hotel industry and Huazhou's long-term development in the future. To sum up in one sentence, we think Huazhou is deeply related to China. At present, we see that the supply of the Chinese hotel market is relatively sufficient, but the supply of high quality is clearly lacking. Compared to the very mature American market, I believe many of you have noticed that two weeks ago, on the occasion of Edgeworth's 20th anniversary, we successfully held a partner conference

deemed 20 years young, forging ahead. Therefore, before diving into our third quarter performance review, I'd like to take a few minutes to once again share some of our thoughts on the long-term outlook of China's hotel industry and us. In summary, we believe Edgeworth has great long-term growth potentials by deeply rooted in China market. Currently, we can observe that while the industry supply is relatively ample, high quality supply is in noticeable shortage. Compared to the mature US market, China still has low hotel chain penetration and the industry remains fragmented. As a unified large singular market similar to the US, but with an even larger population base, The increase in charge ratio and the phase-out of low-quality supply will inevitably become a long-term trend.

更为重要的是,中国消费者对于出行旅行的需求开始逐步从或需转变为刚需。 我们看到中国拥有全世界最强大的基础建设。 发达的高铁和高速公路网络大大提高了人们出行的便利性。 More importantly,

The demand for travel is gradually shifting from discretionary demand to necessity for Chinese consumers nowadays. China has the best infrastructure worldwide, with extensive high-speed rail and highway network coverage. This has made traveling much easier and more convenient, facilitating the penetration of accommodation needs from major cities to county-level markets. Additionally, Chinese consumers are beginning to redefine consumption concepts and oriental aesthetics. We can see a substantial increase in consumer design in seeking self-pleasure, which further drives the growth of experiential consumption such as tourism, exhibitions, concerts, and sports events.

假而见,中国酒店行业目前的供给质量 will not be able to fully meet the needs of consumers' desire to upgrade and diversify. Therefore, the supply chain reform will be the main trend for the future development of the Chinese hotel industry, and this will definitely bring huge growth opportunities and space to local brands and chain hotels. As the leading company in the Chinese hotel industry, Huazhou will deepen the Chinese market, insist on high-end development, lead with the brand, create job services, surround quality and efficiency, We are confident in the development of the Chinese hotel industry.

Currently, the current supply quality in China's hotel industry is unable to fully meet consumers' increasingly upgraded and diversified demands. Therefore, supply-side reform will be the main theme of the future industry development. And this will undoubtedly bring tremendous growth opportunities for domestic branded hotels like us. As the leading players in China's hotel industry, we will continue deepening our roots in the China market, pursuing high quality growth and delivering service excellence with a brand-led approach to reduce industry with centering on high quality and efficiency. We are full of confidence in the future development of China's hotel industry.

说完对未来长期发展的展望, 回到三季度的业绩表现, 我们很高兴地看到市场整体趋势如见向好。 在需求方面, 铁路、航空和旅游人次等数据表明 国内的出行需求仍保持稳健增长。 消费者日益增长的出行需求 在国庆中秋假期表现得尤为突出。 After sharing our perspectives on the long-term outlook, now let's turn to our third quarter performance.

We are pleased to see early signs of improvements in the overall market condition. On the demand side, Data from railway aviation and the number of tourists indicate that the domestic travel demands continuously to grow steadily, with the increasing demand for travel being particularly evident during the national day and the mid-autumn festivals holiday period. On the supply side, third-party data shows that the sequential supply growth has stabilized and the year-over-year growth rate has moderated. However, we still need more time to see if this trend is sustainable.

从三季度集团经营变现来看, 华洲在多项核心指标上取得了不错的表现。 我们通过精细化的收益管理, 包括旗舰店、新店与老店的协同定价、 促销管控以及激励机制优化等多项举措, 在维持OCC相对稳定的情况下,

We are glad to report that Edgeworth delivered good results across several key metrics in the quarter. In the third quarter, we achieved a year-over-year increase in ADR while maintaining a relatively stable occupancy rate. Driven by refined revenue management initiatives, including optimizing pricing strategies across flagship hotels, newly opened hotels, and matured hotels, as well as refining promotional strategies and enhancing incentive programs. As a result, our repass stayed largely stable compared to the same period last year.

At the same time, through breakthroughs in regional markets and effective penetration into low-end cities, Huazhou has achieved a high-quality expansion in terms of revenue, With the increase of 17.3% of the revenue, the company's hotel GMV has increased by 17.5% to 306 billion yuan. With the continuous improvement of our network layout and the further improvement of Huazhou's ability, the size of Huazhou's members and the amount of members who have set up a business are also growing continuously. As of the end of the third quarter, the number of Huazhou members has exceeded 300 million. We are breaking through in new cities and the regions and further penetrating in the larger cities.

We achieved another quarter of high quality network expansion. driven by a 17.3% year-over-year increase in the number of rooms in operation, our group hotel GMV grew by 17.5% year-over-year to RMB 30.6 billion. Meanwhile, along with our network expansion and the continuous enhancement of Edge Rewards membership program, our membership base exceeded 300 million by the end of third quarter, up 17.3% year-over-year. and ranking number one globally. In addition, room nights sold to the members rose 19.7% compared to the same period of last year, exceeding 66 million and accounting for 74% of the total room nights sold, which is also a leading position in WorldWild.

作为重要的事,我们未来发展的核心, 新资产的加盟业务,无论在规模,收入,还是利润上,均实现了强劲的增长, More importantly, our monetized and franchised business delivered strong growth in its hotel network, revenue, as well as profit.

Our third quarter growth MNF revenue rose 27.2% year-over-year to RMB 3.3 billion. And the group MNF growth operating profits increased by 28.6% year-over-year to RMB 2.2 billion, contributing over 70% of the group's total growth operating profits.

On the layout of the hotel network, Huazhou Stable Tourism is the core of economic and medium-sized hotels, The strategy of serving the general market is to accurately position this strategy in line with the trend of the current consumer's general pursuit of high-performance ratio, so that Huazhou's competitive advantage can be further reflected. We use continuous upgrading of core products, optimization of customer-centered services to improve the network quality of Huazhou's overall hotel, strengthen the brand power of Huazhou products, and achieve long-term sustainable development. In terms of hotel network expansion, we remain steadfast in executing our strategic focus on economy and middle-scale segments to serve the mass market.

This strategic positioning aligns precisely with the current consumer behavior of seeking value for many products and services and can further demonstrate our competitive advantages. By continuously upgrading our core products and enhancing our excellent service with a customer-centric pricing pool, we are enhancing the quality of our hotel portfolio and strengthening our brand positioning to achieve long-term sustainable growth. The new version of hunting, along with our middle-scale brands, G-Hotel and Orange Hotel, will serve as the key growth engines for our expansion in the lower-tier cities, and provide strong foundations for achieving our strategic goal of 20,000 hotels in 2,000 cities.

At the same time, Huazhou has also made rapid breakthroughs in the mid-high-end track. Since the end of the third quarter, the number of high-end storefront stores in China has surpassed 1,600, with a growth of 25.3%. The most important thing is to pursue quality living, Eastern American studies, and unique experiences for contemporary consumers. In the 20th anniversary, we launched a new high-end storefront brand, Quanji DaGuan. The launch of Quanji DaGuan has further improved our high-end storefront brand. At the same time, Edgeworth has also made rapid breakthrough in the upper mid-scale segments.

At the end of third quarter, our number of upper-mid-scale hotels in operation and in pipeline exceeded 1,600, up 25.3% year-over-year. More importantly, to meet the growing consumer demand for quality living, our rental aesthetics, and unique experiences, we recently launched a brand-new upper-mid-scale brand, G-Icons, during our 20th anniversary. The introduction of G-Icon further enriched our upper mid-scale brand portfolio and helped us to achieve comprehensive coverage from Oriental to Western brands and from selected service to lifestyle hotel offerings. G-Icon's brand embodies a combination of subtle, understated, and elegant Oriental aesthetic, enabling a value leap from Accommodation functionality to a holistic lifestyle experience.

元气酒店的成功印证了中国消费者对于东方审美和文化的喜爱。 我们相信全季大观一定能站在全季的基础上, 进一步深化东方审美及文化。 同时,集团的供应链和模块化建设能力, 以及华族会全球领先的会员体系与职校能力, 将为全季大观在营建成本, The success of G-Hotels has demonstrated Chinese consumers' affinity for oriental aesthetics and culture.

We are confident that building upon GE Hotel's foundation, GE Icon will further deepen the expression of our rental aesthetics and culture element. Moreover, our group's strong supply chain and modular construction capability, as well as our global leading membership and direct sales capability, will effectively support our GE Icons to reach low construction costs high operational efficiency, and high product quality. We believe GE Icons will become one of the big driving forces to support our penetration in the upper-mid-scale segment and has the potential to become another world-class brand after hunting GE Hotel and Orange Brand.

In terms of marketing, we always stick to the core of Huazhou Huiwei. The member system and execution capability is an important core capability that supports the long-term sustainable development of the company's business. As Huazhou Hotel's network covers more cities, our member volume continues to grow steadily. Since the end of the third quarter, the number of Huazhou members has surpassed 300 million. The number of members contributed in the third quarter has increased by 19.7%, and the contribution ratio has increased by the same. In the future, we will continue to improve membership rights, expand the fund application scene, and deepen business cooperation to achieve stronger membership and sales capacity.

We will be focusing on strengthening our direct sales capabilities through Edge Rewards membership program. Our membership program and direct sales capability are vital to our sustainable long-term business growth. Our membership base has been growing as we expand our hotel network and entering into more cities. By the end of third quarter, Edge Rewards membership exceeded 300 million, and the room nights sold to the members grew 19.7% year-over-year, with enlarging portion of contribution to the total room nights sold. Going forward, we will further enhance our membership benefits, expand loyalty points usage scenarios, and explore cross-industry partnership to strengthen member engagement and enhance direct sales capability.

This concludes the business updates for Edgeworth's third quarter 2025.

Now, I will hand over the floor to our CFO, Ms. Chen Hui, to present the group's financial performance for the quarter.

Thank you, Jinghui. Good evening and good morning, everyone. Let me walk you through our third quarter financial overview. During the quarter, our group revenue grew 8.1% year-over-year to RMB $7 billion, and Lexi Huazhou revenue grew 10.8% year-over-year to RMB $5.7 billion. Both surpassed the high end of our previous guidance. It was mainly driven by better-than-expected river park performance, as well as hotel network expansion. Group adjusted EBITDA rose by 18.9% year-over-year to RMB 2.5 billion, with margin improved by 3.3 percentage point year-over-year to 36.1%. The faster adjusted EBITDA growth and the margin expansion were mainly contributed to further enlarge the profit contribution from our asset light business. Cost saving from Lexie DH partially on the absence of RMB 81 million restructuring cost incurred in the third quarter last year, as well as cost optimization efforts from Lexie Huazhou. Looking into our asset-light, monetize, and franchise business in the third quarter, powered by our high-quality asset-light network expansion and better-than-expected real-par performance, our monetize and franchise business revenue recorded a robust 27.2% year-over-year growth to R&B 3.3 billion. More importantly, Managed and franchised business gross operating profit rose by 28.6% year-over-year to RMB 2.2 billion, with a margin of 68% in the third quarter. As a result, gross operating profit contribution from our managed and franchised business further enlarged to 70% in the third quarter, up 11.1% percentage point year over year. Moving to our cash flow and the liquidity position, in the third quarter, we generated RMB 1.7 billion operating cash flow. And at the quarter end, the group had RMB 13.3 billion cash and cash equivalent and RMB 6.6 billion net cash on the balance sheet. Lastly, On our guidance for the fourth quarter of 2025, we expect our group revenue to grow 2% to 6% compared to the same quarter last year, and 3% to 7% if excluding DH. The monetized and franchised revenue in the fourth quarter of 2025 is expected to grow in the range of 17% to 21% compared to the fourth quarter last year. With that, we are ready to take your questions. Operator, please open the line for Q&A.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 11 on your telephone and wait for our name to be announced. One moment for the first question. The first question comes from the line of Dan Chee of Morgan Stanley. Please go ahead.

各位管理層,晚上好。 感謝這個提問的機會。 我是大摩的分析師Dan。 So I want to ask, first of all, in the fourth quarter, China just mentioned that the growth of 3% to 7% of the revenue is based on what kind of REFPA to judge. Then we just saw that the whole REVPAR in the third quarter has actually been completely stable, the decline. So does the company have an outlook for next year? Especially the increase in the demand for new experiences mentioned by President Jin Hui just now. Can you please open up and talk about it? Including this three-week REVPAR repair, it can be said that it is because of the demand for new things, or the demand for business is also increasing. Then I will translate it. Good evening. My question is about REFPA and demand trend. Firstly, on the company's fourth quarter China revenue guidance of 3% to 4% year-on-year growth, what's the implied REFPA assumption? Can the management share any 2026 outlook for us, especially after seeing third quarter REFPA decline turns almost flat, especially on the new experiential demand? Mr. Jing, mentioned versus the original business demand weakness. So which one is driving the REF path stabilization? Thank you.

我来回答这个问题,我是金慧。 的确我们三季度的REF, 应该大家已经看到数据,我们已经在期问。 那么针对于未来的一个基本的判断, 基于几个方面,一方面, 的确在需求方面,我们看到10月份以来, 整体需求呢, Especially in the leisure and tourism markets, there is still a good steady growth. It turns out that we are worried that the market is worried about the supply side. It should be said that it has also been slowed down. Now it is not as fast as it used to be. It should be said that it is also stable compared to before. At the same time, China is more in the past. In the first half of the year, we have developed a relatively strong sales and revenue management capability. Therefore, the trend we have shown so far is also in the process of stabilizing. However, since the fourth quarter is also a dead end, we are also observing further. Of course, there are also some uncertainties related to people. We are also observing. Therefore, our expectations for the fourth quarter are the same as that of the fourth quarter. China's macroeconomic situation is still uncertain, so the entire business demand is relatively in a state that is not so strong. Of course, as we have seen, I just mentioned that travel has become the core of the consumer. What we see more is the steady growth of the tourism leisure market, especially in more new scenes, concerts, marathons, including the old market, the market of entry, have shown a relatively fast growth. This has indeed had a lot of influence on our business. As many of you may notice that in the third quarter, you know, our rough part is a bit stabilized.

On a year-over-year basis, it's kind of, you know, flat, you know, It's not further declining compared to last two quarters. Of course, we observed several trends during the quarter. In terms of the demand, obviously, the demand was mainly driven by the leisure travel demand, especially from the tourism activities, starting from summer holiday to September, and of course, the beginning of the October National Day and Mid-Autumn Festival as well. But on the supply side, as I mentioned before, on a year-over-year basis from the third-party data, we saw the supply growth actually moderated. So it was not growing as fast as before. So it's becoming a bit moderated, which brings some of the benefits to the REFPA stabilization. But more importantly, for us, S4D has been putting a lot of efforts over the last six months in terms to further enhance our, for example, the revenue management, as I mentioned in my prepared remarks, in terms of setting a new pricing strategy among different tiers of hotels, like flagship new hotels and matured hotels. I think, but looking to the fourth quarter, because we are entering into the low season, there's still some of the uncertainties. So as of now, you know, based on our revenue guidance, it implies our fourth quarter REFPA, which is somewhere around a flattish to slightly positive for the fourth quarter. In terms of business demand and leisure demand, Of course, there are still some of the macro uncertainties. So to be very frank, the business demand is not that strong yet. But on the other hand, for the leisure demand, it was continuously growing. As I mentioned previously, for the Chinese consumers nowadays, the leisure traveling demand has gradually become a necessity instead of discretionary demand. and especially for some emerging new demands such as concerts, marathons, sports events, and inbound travel as well. So the leisure remains very strong. In terms of the outlook for the next year, we think it's a bit too early. Let's still take time to see whether, you know, the stabilization in terms of the rep power and the supply demand equivalent is sustainable. So we will give more colors for our first quarter earnings. Thank you. Thank you.

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

Thank you, Guanlitong. I would like to ask more about the disqualification of REFPA. If we disqualify ADR and OCC, we can see that ADR has performed better recently. So I would like to ask what is the reason behind this, and what do we think about the continuity? In addition, if we look at the gap between the entire REFPA and the same-line REFPA, it still maintains the same level as the previous two seasons. Looking forward to the future, will the gap be narrowed? What are the measures needed? I will translate it into English. Thank you, management. My question is about RevPa breakdown. If we look at ADR and OCC, we see that ADR performs better recently. So trying to understand the reason behind this and the sustainability. Also, if we look at the gap between blended RevPa and same hotel RevPa, the gap remained at similar level with last few quarters. So is there any chance that the gap narrows in the future and what measures need to be taken?

Thank you.

I'm Jin Hui, I'm here to answer these two questions. Indeed, in 2025, the improvement of Rehapart has been a key indicator of management. In the past few seasons, in the past half year, two seasons, Huazhou has taken further enhancements in overall revenue management in terms of revenue, pricing, and overall revenue management. Therefore, at the first line, through the foundation, through the ability of revenue management, has achieved a very good performance. But I think a more powerful point is that Huazhou has improved its product power in the past ten years and has improved its turnover rate as a guide. It has gained more customer recognition. I think this is very important. Our products, our services have gained more customer recognition. And in some markets, Huazhou's current product power And the experience of the service does lead the market to a certain price range. So combined with multiple factors, we strengthen sales on the one hand, and strengthen our revenue management on the other. At the same time, we continue to support and promote our products to win more customers. I think we are very happy to see the recovery and growth of ADR. This is about the ADR problem. Regarding the problem of charging, indeed, due to In the central region, there have been more and better products. The situation of old stores has been more obvious in the past six months. Through our strategy of price leadership for new stores, flagship stores, and label stores, we have achieved a low price. We are also very happy to see that in the past quarter, the copper is also shrinking. At the same time, in the future, In terms of the ADR, of course, for 2025,

The improvements of REFPA has been a very key task for our top management team. And of course, they have been putting a lot of efforts on that. So in terms of ADR, as I mentioned earlier, so we have to do a lot of, you know, works on, you know, further enhancing our revenue management capability, especially on the pricing, you know, pricing for different layer of the hotel and different products. And of course, on the front line, we give a lot of various incentives to our salespeople to further motivate them to do a lot of sales activities. However, apart from these things we have been doing over the last six months, actually, the ADR increase in the third quarter results from our continuous efforts on the product upgrade the quality improvements as well as our service excellence, because we have been doing this for many, many years and continuously doing so, and we have more and more recommendations from our customers. So that's why in certain area, or in certain regions, our products and the service is definitely in a leading position, which gave us some of the pricing power, which led us to achieve a better ABR for the third quarter. And in terms of the, you know, like-for-like hotel or matured hotels, the gap, we are glad to see the year-over-year decline was narrowed significantly in the third quarter. On one hand, you know, we... In terms of the pricing, we use a lot of different layers for pricing the different products. Over the last one and a half years, we opened a lot of high-quality hotels, new hotels in some of Tier 1, Tier 2 cities, which created some of the cannibalizations to the existing hotels. But through different pricing strategies for different products, I think we are seeing some of the improvements for our matured hotels. And more importantly, we keep doing a lot of, you know, existing hotels upgrades to further improve the hotel quality itself in order to, you know, rise the, improve the ref part as a whole. Thank you.

Thank you, Jingdong.

Thank you for the questions. One moment for the next question. The next questions will come from the line of Lydia Ling of Citi. Please go ahead.

Hello, Mr. Manager. I'm Lydia from Huaiqi. I have a question about the management of the brand. It's mainly about the brand we just mentioned, the brand that we just launched, the full-season grand prize. Can you share with us your plans for the brand, for example, How many stores will it open? And then include the single-storied model, such as a single-storied CapEx and include a return cycle of our forecast. Compared with some of the leading high-end brands in the current market, what are the advantages of our full-scale official? Because in fact, it was also pushed out for two weeks. What is the response of the brokerage that we have received so far? Let me translate it. Thanks, management. So I have a question regarding the brand, especially for the newly launched upper scale brand. So could you actually share some of your plans for this brand, such as your store opening plan and also the store economics, like the capex and the payback period? and how actually your advantage versus like the current other leading upper-mid-scale brand in the market and how is the feedback from the franchisees so far? Thank you.

This question is also for me to answer. The first one is to promote the high-end products and show Huazhou's determination to develop in the mid- and high-end markets. Huazhou's hope is through China, China, China, China, China. As a result, it showed the way of living of the East Asia Union. As for the business model, I just mentioned that Quanji is one of the Chinese high-end brands that is the core focus of Huazhou. We also refer to it as the favorite and most popular brand of Chinese consumers.

所以进一步的商业的这些细节,我们希望在我们地下店开业以后,再进一步的和大家做更多的分享。 谢谢。 Okay, so in terms of the G-Icons brand, so obviously, you know, the launch of G-Icons brand, has shown a very strong determination for Edgeworth to further break through and develop in the upper mid-scale segment with multi-brand strategy. This trend is very clear. And secondly, based on the current Chinese cultural confidence and also the preference from the Chinese consumers on our rental culture, our rental service, as well as, you know, our rental lifestyle that also, you know, basically support the launch of the G-Icon's brand. And as I said before, G-Icon is going to definitely become one of the core brands in our upper mid-scale segment. And we hope this brand can be, you know, the best brand or the best hotel that Chinese customers will like the most So in terms of the, you know, the UAE, in terms of the capacity aspect, we hope we can share more information after the first hotels opened. Thank you.

Thank you for the questions. Our next question comes from Simon Cheung of Goldman Sachs. Please go ahead.

Thank you, President Jin, and President Chen for your sharing. I have a small question. There are more than 700 stores in the third quarter of this year, so the first three quarters have more than 2,000 stores in total. So I would like to ask what is the rhythm of your opening this year? Because I remember that before it was not said that there were about 2,300 stores in the whole year, right? And then in the same direction, what is the current rhythm of signing? And then the same question is about the mid-high end. Because just now, Mr. Kim also shared with us that there are about 1,500 stores now. For example, we saw that you have about 5,000 stores in Hanting at the low end. And then we also saw that there are about 4,000 stores in Chenji. In the long term, do you think that if you want to do 20,000, 30,000, and 50,000 stores in the mid-high end, how much does the mid-high end account for?

Thank you.

The question is related to the hotel opening. In the first quarter, they've done very well in terms of hotel opening, over 700. And I think in the first nine months, they opened more than 2,000 hotels. That's on track or even exceeded the 2,300 hotels that they have targeted for the full year. Wondering whether there's any update for that, and in particular also on the new signing as well. And then on the related questions, Given the focus and the strong momentum that they have seen in the upscale segments, upper mid-scale segments, where they achieved 1,600 hotels secure, and we have seen, you know, similarly hunting, they've done like 5,000, and that, you know, G-Hotel done 4,000. Wondering whether they have any targets for the upper mid-scale in the long run. Thank you.

Hello, everyone. I'm Ching Hui. I'm here to answer this question. Indeed, as you can see, this year's third quarter, our opening speed is still relatively fast. It is also due to the rapid signing of the epidemic in 2023 and 2024. And we are very happy that it is due to the improvement of China's supply chain and our internal exchange rate. On the one hand, the quality of the economy and the exchange rate have also improved. Because This year, we got a good contract opening in the first quarter. The contract is relatively stable at the moment. There are no major fluctuations. Of course, we will focus on high-quality development. In the past few quarters, we have been emphasizing that Huazhou is turning from a scale growth to a solid quality, especially in the core of high-quality development. 在这样的一个指引下,我们在2025年整个完成开业比我们2300个店应该是略多一些,不略多一些。 具体的数字我想由来于我们财务团的进一步的交流。 在中高端,我们保持了一个非常好的签约和开业的节奏。 我前面也提到了,在未来2030年或更远的目标,希望能成为中国中高端的领导者。 Okay, so...

benefiting from, you know, fast new signings in 2023 and 2024 post-COVID, as well as, you know, further improvements in terms of our supply chain capability, which resulted in improvements in conversion ratio from the pipeline to new openings. So we achieved quite good new openings for the first nine months, which is slightly more than 2000. So therefore, Therefore, for the full year, we could possibly open a bit more than 2,300 hotels as what we guided previously. But again, we emphasized several times over the last several quarters earnings call in terms of the new signings and openings, we will focus more on quality expansion instead of only looking for a scale. So that thing never changed. So we're going to continuously implementing this strategy for high quality, sustainable growth. In terms of the upper segment, as I said, we have reached 1,600 in both pipeline and operations, which also achieved pretty rapid growth. But however, if you look into a longer term, for example, 2030, we're going to still focus on the mass market with the economy and the middle skills. So in terms of the proportion, economy and the middle skills still contributes the majority. But in terms of the growth rate, we hope our upper mid-segments could grow the fastest in the industry and the become the leading players in China markets by 2030.

Thank you.

Thank you for the questions. Our next question comes from Ronald Leung of Bank of America.

Please go ahead. Hello, everyone. I'm Ronald Leung from the U.S. Stock Exchange. I have two questions. The first question is about margins and cost control. The company's margins have improved quite a bit in the past two seasons. Can you share with us your expectations for the cost and margins? This is the first question. The second question is about members. The total number of members has increased by more than three million. Let me translate my questions in English. So I have two questions. My first question is about cost and margins outlook. The company has achieved very decent margins expansion in the past two quarters. Could management share with us the latest outlook on cost control and also margins? My second question is about the memberships program. So the overall memberships has grown decently to over 300 million by the end of 3Q25. Could management share an update on the strategy on how to further enhance memberships' loyalty and also marketing strategies to improve the conversion rates. Thank you very much.

Let me answer the member's question first. The member strategy is the core strategy of Huazhou. We are very happy to see that the number of members has increased in both scale and volume. We are very happy. But we think we haven't done enough. Indeed, there are a lot of jobs that can be improved in the future. First of all, we launched Gui Ji Pei in the past quarter. It is aimed at further strengthening the right of members to ensure that members have the right to experience both the price and the service of the store. We hope to use the Gui Ji Pei project to further strengthen the protection of membership rights. At the same time, our members are also actively connecting with the more diversified and new clients I mentioned earlier, such as marathons, concerts, seniors, and entrants. We hope that Huazhou will not only start from a single commercial market like it did in the past, but can connect with more and more rich clients. Thirdly, we will further strengthen Okay.

So in terms of our members, so definitely, you know, direct sales and membership is one of our core strategy. We are glad to see in terms of the member base as well as the room night sold to our members continuously to grow. But we think that's still not enough. So that's why we have been doing quite a lot of jobs over the past several months. First of all, we introduced a price guarantee program which can ensure our members to get the best price and service as also the unique experiences at the hotel. And secondly, we're also trying to fulfill more diversified demand from the leisure travelers and some of the emerging demands. For example, as I mentioned earlier, like sports events, like inbound travelers, So basically, the X Rewards membership program is gradually shifting from only business travelers to fulfill more diversified demands. And thirdly, we are also enhancing our capability to, you know, receive more business clients and corporate clients to further enhance our exposures. And lastly, we have been experimenting a lot of, you know, cross-industry, you know, cooperation with a lot of, you know, top tier, you know, vertical players trying to enhance, you know, members' experiences and improve their engagement. Thank you.

Thank you for the questions. Our last question. Our last question comes from... Sorry, please continue.

Let me answer the first question about our EBITDA margin. The EBITDA improvement that has been adjusted is mainly due to the green asset strategy of Huazhou and our continuous control and optimization of our costs. In terms of operating costs, we have relied on strong supply chain capabilities, and we have continuously reduced and optimized our business costs. At the same time, we have done a lot of detailed management work on energy consumption, water supply, and catering. At the same time, we are more active in looking for various potential reduction to reduce the cost of renting and renting. In terms of sales management fees, we have continuously optimized and strictly controlled the management fees for the middle and back tables. The reorganization and optimization of the three systems last year also led to a loss of management fees this year. And in terms of marketing fees, we will use ROI as a premise to maintain the necessary investment in hotel brands, market marketing, members, and customers. In addition, as Jinhui mentioned earlier, we have implemented some systematic Okay, let me do the translation.

So overall, the adjusted EBITDA margin improvement was mainly because of our externalized strategy. So obviously the MNF has higher margin compared to lease and own. But in terms of the cost control, in terms of the hotel operating costs, by leveraging our strong supply chain capability, we continuously to reduce the cost per room night sold. And for our lease and own hotels, we continuously seeking for more rental reduction, just trying to improve the profitability level of our leased and owned hotels. And on SG&A perspectives, we continuously optimizing our back office and headquarters, just trying to control the cost. In terms of the sales and marketing, we will, based on ROI, and to do some of necessary investments on, for example, the hotel brands, you know, membership, as well as the new user acquisition. So as mentioned by Jinghui, so we have been, you know, systematically improve our capability to improve our revenue management, so as in the cost control side. So we are also doing a systematically capability improvement. Thank you.

Thank you. We have come to the end of the question and answer session. That concludes the conference call for today. Thank you for your participation. You may now disconnect your lines. you Thank you. Thank you. Good day and thank you for standing by. Welcome to HVO Quarter 3 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to turn the call over to your first speaker today, Mr. Jason Chen. Thank you. Please go ahead.

Thank you. Good morning and good evening, everyone. Thanks for joining us today. Welcome to Edgeworth Group 2025 Third Quarter Earnings Conference Call. Joining us today is our founder and chairman, Mr. Jiqi, our CEO, Mr. Jinghui, our CFO, Ms. Chen Hui, and our CSO, Ms. He Jihong. Following their prepared remarks, management will be available to answer your questions. Before we continue, please note that the discussion today will include forward-looking statements made under the safe harbor provision of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in our public filings with the SEC. S-World Group does not undertake any obligations to update any forward-looking statements except as required and applicable laws. On the call today, we will also mention adjusted financial measures during the discussion of our performance. Reconciliations of those measures to comparable gap information can be found in our Thank you. Hello, investors and analysts.

Thank you for participating in the third quarter of Huazhou Group in 2025. I believe you are all aware that two weeks ago, in the 20th anniversary of the establishment of Huazhou Group, we successfully held the Huazhou 20th Year Friendship Conference. Therefore, before looking back at the third quarter, I would like to take a few minutes to share with you again our views on the Chinese hotel industry and the long-term development of Huazhou in the future. To sum up in one sentence, we believe that China has a lot to offer. Currently, we see that the supply of the Chinese hotel market is relatively abundant, but the supply of high quality is clearly lacking. Compared to the very mature American market, the concentration rate of the Chinese hotel industry is at a lower level. China, as the same big market as the United States, and has greater population technology, the future increase in the chain rate

I believe many of you have noticed that two weeks ago, on the occasion of Edgeworth's 20th anniversary, we successfully held a partner conference deemed 20 Years Young, Forging Ahead. Therefore, before diving into our third quarter performance review, I'd like to take a few minutes to once again share some of our thoughts on the long-term outlook of China's couture industry and us. In summary, we believe Edgewood has great long-term growth potentials by deeply rooted in China market. Currently, we can observe that while the industry supply is relatively ample, high quality supply is in noticeable shortage. Compared to the mature US market, China still has low hotel chain penetration and the industry remains fragmented. As a unified large singular market similar to the U.S., but with an even larger population base, the increase in churn ratio and the phase-out of low-quality supply will inevitably become a long-term trend.

It is important to note that the demand of Chinese consumers for travel has gradually transformed from goods demand to steel demand. We see that China has the world's most powerful infrastructure. The developed high-speed rail and highway networks have greatly improved the convenience of people's travel, and also helped the demand for accommodation from the city to the local market. In addition, Chinese consumers have gradually begun to re-adapt new consumption ideas and Eastern aesthetic. We can see a significant improvement in consumer demand for the month.

More importantly, the demand for travel is gradually shifting from discretionary demand to necessity for Chinese consumers nowadays. China has the best infrastructure worldwide, with extensive high-speed rail and highway network coverage. This has made traveling much easier and more convenient. facilitating the penetration of accommodation needs from major cities to county-level markets. Additionally, Chinese consumers are beginning to redefine consumption concepts and oriental aesthetics. We can see a substantial increase in consumer design in seeking self-pleasure, which further drives the growth of experiential consumption such as tourism, exhibitions, concerts, and sports events.

As you can see, the current supply quality of the Chinese hotel industry cannot fully meet the needs of consumers' desire to upgrade and diversify. Therefore, the supply chain reform will be the main trend for the future development of the Chinese hotel industry, and this will definitely bring huge growth opportunities and space to local brands and chain hotels. As the leading enterprise in the Chinese hotel industry, Huazhou will deepen the Chinese market, insist on high-end development, We are confident in the development of the Chinese hotel industry.

Currently, the current supply quality in China's hotel industry is unable to fully meet consumers' increasingly upgraded and diversified demands. Therefore, supply-side reform will be the main theme of the future industry development. And this will undoubtedly bring tremendous growth opportunities for domestic branded hotels like us. As the leading players in China's hotel industry, we will continue deepening our roots in the China market, pursuing high quality growth and delivering service excellence with a brand-led approach to reduce industry with centering on high quality and efficiency. We are full of confidence in the future development of China's hotel industry.

说完对未来长期发展的展望, 回到三季度的业绩表现, 我们很高兴地看到市场整体趋势如见向好。 在需求方面, 铁路、航空和旅游人次等数据表明 国内的出行需求仍保持稳健增长。 消费者日益增长的出行需求 在国庆中秋假期表现得尤为突出。 After sharing our perspectives on the long-term outlook, now let's turn to our third quarter performance.

We are pleased to see early signs of improvements in the overall market condition. On the demand side, Data from railway aviation and the number of tourists indicate that the domestic travel demands continuously to grow steadily, with the increasing demand for travel being particularly evident during the national day and the mid-autumn festivals holiday period. On the supply side, third-party data shows that the sequential supply growth has stabilized and the year-over-year growth rate has moderated. However, we still need more time to see if this trend is sustainable.

从三季度集团经营变现来看, 华晝在多项核心指标上取得了不错的表现。 我们通过精细化的收益管理, 包括旗舰店、新店与老店的协同定价、 促销管控以及激励机制优化等多项举措, 在维持OCC相对稳定的情况下,

We are glad to report that Edgeworth delivered good results across several key metrics in the quarter. In the third quarter, we achieved a year-over-year increase in ADR while maintaining a relatively stable occupancy rate. Driven by refined revenue management initiatives, including optimizing pricing strategies across flagship hotels, newly opened hotels and matured hotels, as well as refining promotional strategies and enhancing incentive programs. As a result, our repass stayed largely stable compared to the same period last year.

At the same time, through breakthroughs in regional markets and effective penetration into low-end cities, Huazhou has achieved a high-quality expansion in terms of demand. With the increase of 17.3% of the revenue, the company's hotel GNV has also grown by 17.5% to 306 billion yuan. With the continuous improvement of our network layout and the further improvement of Huazhou's ability, Huazhou's membership size and membership volume are also growing continuously. As of the end of the third quarter, the number of Huazhou members has exceeded 300 million. To breaking through in new cities and the regions and further penetrating in the larger cities, we achieved a quarter of high-quality network expansion.

driven by a 17.3% year-over-year increase in the number of rooms in operation, our group hotel GMV grew by 17.5% year-over-year to RMB 30.6 billion. Meanwhile, along with our network expansion and continuous enhancement of Edge Rewards membership program, our membership base exceeded 300 million by the end of third quarter, up 17.3% year-over-year. and ranking number one globally. In addition, room night sold to the members rose 19.7% compared to the same period of last year, exceeding 66 million and accounting for 74% of the total room night sold, which is also a leading position in WorldWild.

更为重要的是,我们未来发展了核心, 轻资产的加盟业务,无论在规模,收入,还是利润上,均实现了强劲的增长, More importantly, our monetized and franchised business delivered strong growth in its hotel network, revenue as well as profits.

Our third quarter growth M&F revenue rose 27.2% year-over-year to RMB 3.3 billion, and the group M&F growth operating profits increased by 28.6% year-over-year to RMB 2.2 billion, contributing over 70% of the group's total growth operating profits.

In the layout of the hotel network, Huazhou Stable Travel is the core of economic and medium-sized hotels, The strategy of serving the general market is to accurately position this strategy in line with the trend of the current consumer's general pursuit of high-performance ratio, so that Huazhou's competitive advantage can be further reflected. We continue to upgrade the core products, optimize the service with customers as the center, to improve the network quality of Huazhou's entire hotel, and strengthen the brand power of Huazhou products to achieve long-term sustainable development. In terms of hotel network expansion, we remain steadfast in executing our strategic focus on economy and middle-scale segments to serve the mass market.

This strategic positioning aligns precisely with the current consumer behavior of seeking value for many products and services and can further demonstrate our competitive advantages. By continuously upgrading our core products and enhancing our excellent service with a customer-centric pricing pool, we are enhancing the quality of our hotel portfolio and strengthening our brand positioning to achieve long-term sustainable growth. The new version of Hanting, along with our middle-skill brands G-Hotel and Orange Hotel, will serve as the key growth engines for our expansion in the lower-tier cities and provide strong foundations for achieving our strategic goal of 20,000 hotels in 2,000 cities.

At the same time, Huazhou has also made rapid breakthroughs in the mid- and high-end channels. Since the end of the third quarter, the number of high-end stores in China has surpassed 1,600, with a growth rate of 25.3%. More importantly, in pursuit of quality living, Eastern American studies, and unique experiences for contemporary consumers, we have launched a new high-end brand, Quan Ji Da Guan, on the 20th anniversary. The launch of Quan Ji Da Guan has further improved our high-end brand reputation. At the same time, Edgeworth has also made rapid breakthrough in the upper mid-scale segments.

At the end of third quarter, our number of upper-mid-scale hotels in operation and in pipeline exceeded 1,600, up 25.3% year-over-year. More importantly, to meet the growing consumer demand for quality living, our rental aesthetics, and unique experiences, we recently launched a brand-new upper-mid-scale brand, G-Icons, during our 20th anniversary. The introduction of G-Icon further enriched our upper mid-scale brand portfolio and helped us to achieve comprehensive coverage from Oriental to Western brands and from selected service to lifestyle hotel offerings. G-Icon's brand embodies a combination of subtle, understated, and elegant Oriental aesthetic, enabling a value leap from Accommodation functionality to a holistic lifestyle experience.

全季酒店的成功印证了中国消费者对于东方审美和文化的喜爱。 我们相信全季大观一定能站在全季的基础上, 进一步深化东方审美及文化。 同时,集团的供应链和模块化建设能力, 以及华族和全球领先的会员体系与执效能力, 将为全季大观在营建成本 The success of GE Hotels has demonstrated Chinese consumers' affinity for oriental aesthetics and culture.

We are confident that building upon GE Hotel's foundation, GE Icon will further deepen the expression of our rental aesthetics and culture element. Moreover, our group's strong supply chain and modular construction capability, as well as our global leading membership and direct sales capability, will effectively support our GE Icons to reach low construction costs high operational efficiency, and high product quality. We believe GE Icons will become one of the big driving forces to support our penetration in the upper-mid-scale segment and has the potential to become another world-class brand after hunting GE Hotel and Orange brands.

In terms of marketing, we always stick to the core of Huazhou Huiwei. The membership system and execution capability are important core capabilities that support the long-term sustainable development of the company's business. As the Huazhou Hotel network covers more cities, our membership volume continues to grow steadily. Since the end of the third quarter, the number of Huazhou members has exceeded 300 million. The number of members contributed in the third quarter has increased by 19.7%, and the contribution ratio has increased by the same. In the future, we will continue to improve membership rights, expand fund application scenarios, and deepen business cooperation to achieve stronger membership and sales capacity.

We will be focusing on strengthening our direct sales capabilities through Edge Rewards membership program. Our membership program and direct sales capability are vital to our sustainable long-term business growth. Our membership base has been growing as we expand our hotel network and entering into more cities. By the end of third quarter, Edge Rewards membership exceeded 300 million and room nights sold to the members grew 19.7% year-over-year with enlarging portion of contribution to the total room nights sold. Going forward, we will further enhance our membership benefits, expand loyalty points usage scenarios, and explore cross-industry partnership to strengthen member engagement and enhance direct sales capability.

This concludes the business updates for Edgeworth's third quarter 2025.

Now, I will hand over the call to our CFO, Ms. Chen Hui, to present the group's financial performance for the quarter.

Thank you, Jinghui. Good evening and good morning, everyone. Let me walk you through our third quarter financial overview. During the quarter, our group revenue grew 8.1% year-over-year to RMB $7 billion, and Lexi Huazhou revenue grew 10.8% year-over-year to RMB $5.7 billion. Both surpassed the high end of our previous guidance. It was mainly driven by better-than-expected river park performance, as well as hotel network expansion. Group adjusted EBITDA rose by 18.9% year-over-year to RMB 2.5 billion, with margin improved by 3.3 percentage point year-over-year to 36.1%. The faster adjusted EBITDA growth and the margin expansion were mainly contributed to further enlarge the profit contribution from our asset light business. Cost saving from Lexie DH partially on the absence of RMB 81 million restructuring cost incurred in the third quarter last year, as well as cost optimization efforts from Lexie Huazhou. Looking into our asset-light, monetized and franchised business in the third quarter, powered by our high-quality asset-light network expansion and better-than-expected REVPAR performance, our monetized and franchised business revenue recorded a robust 27.2% year-over-year growth to RMB $3.3 billion. More importantly, Managed and franchised business gross operating profit rose by 28.6% year-over-year to RMB 2.2 billion, with a margin of 68% in the third quarter. As a result, gross operating profit contribution from our managed and franchised business further enlarged to 70% in the third quarter, up 11.1% percentage point year over year. Moving to our cash flow and the liquidity position, in the third quarter, we generated RMB 1.7 billion operating cash flow. And at the quarter end, the group had RMB 13.3 billion cash and cash equivalent and RMB 6.6 billion net cash on the balance sheet. Lastly, On our guidance for the fourth quarter of 2025, we expect our group revenue to grow 2% to 6% compared to the same quarter last year, and 3% to 7% if excluding DH. The monetized and franchised revenue in the fourth quarter of 2025 is expected to grow in the range of 17% to 21% compared to the fourth quarter last year. With that, we are ready to take your questions. Operator, please open the line for Q&A.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 11 on your telephone and wait for our name to be announced. One moment for the first question. The first question comes from the line of Dan Chee of Morgan Stanley. Please go ahead.

各位管理層,晚上好。 感謝這個提問的機會。 我是大摩的分析師Dan。 我的問題是關於酒店行業REFPA的趨勢。 我看到公司也deliver了一個非常好的三季度的REFPA。 So I would like to ask, first of all, in the fourth quarter, China, as President Chen mentioned, the growth of 3% to 7% is using what kind of REF PAR to judge? And then we just saw that the whole REF PAR in the third quarter has actually been completely stable, this decline. So does the company have any expectations for next year? Especially the new experience-based demand that President Jin Hui mentioned just now, can it be improved? Good evening. My question is about REFPA and demand trend. Firstly, on the company's fourth quarter China revenue guidance of three to four percent year-on-year growth, what's the implied REFPA assumption? Can the management share any 2026 outlook for us, especially after seeing third quarter REF PAR decline turns almost flat, especially on the new experiential demand Mr. Jing mentioned versus the original business demand weakness. So which one is driving the REF PAR stabilization? Thank you.

我来回答这个问题,我是金慧。 的确我们三季度的REF PAR, 应该大家已经看到数据,我们已经在稀稳。 So for the future, a basic judgment is based on several aspects. On the one hand, it is true that in terms of demand, we have seen that since October, the overall demand, especially in the leisure and tourism markets, has still maintained a good steady growth. It turned out that we were worried about the market, worried about the supply side. It should be said that it has also been slowed down. Now it is not as fast as it used to be. Compared to before, it should be said that it is also stable. At the same time, Huazhi is more in the past half year, we have developed a relatively strong self-sustaining sales ability and revenue management ability. Therefore, the trend we have shown so far is also in the process of stabilizing. But the fourth quarter is also a dead end for netizens. We are also observing further. Of course, there are also some uncertainties related to it. 我们也在观察 所以我们目前对四季度的 威尔帕的预估呢 是实现同比持平 到微增的这样的一个状态 关于商务市场 还是旅游市场的这个问题啊 我觉得大家也很关心 目前我们看来 由于中国宏观经济 这个还是存在不确定性 所以整个商务需求呢 相对来讲还是处于一个 It's not such a strong state. Of course, we have seen, as I just mentioned, travel has become a major consumer demand. What we see more is the steady growth of the tourism leisure market, especially in more new scenes, concerts, marathons, including the old market, the market of entry, have shown a relatively fast growth. So as many of you may notice that in the third quarter, you know, our rough part is a bit stabilized.

On a year-over-year basis, it's kind of flat. It's not further declining compared to the last two quarters. Of course, we observed several trends during the quarter. In terms of the demand, obviously, the demand was mainly driven by the leisure travel demand, especially from the tourism activities, starting from summer holiday to September and, of course, the beginning of the October National Day and Mid-Autumn Festival as well. But on the supply side, as I mentioned before, On a year-over-year basis, from the third-party data, we saw the supply growth actually moderated. So it was not growing as fast as before. So it's becoming, you know, a bit moderated, which brings some of the, you know, benefits to the REFPA stabilization. But more importantly, you know, for us, S4D has been putting a lot of efforts over the last six months in terms to further enhance our, for example, the revenue management, as I mentioned in my prepared remarks, in terms of setting a new pricing strategy among different tiers of hotels, like flagship new hotels and matured hotels. And therefore, I think But looking to the fourth quarter, because we are entering into the low season, there are still some of the uncertainties. So as of now, you know, based on our revenue guidance, it implies our fourth quarter REFPA, which is somewhere around flattish to slightly positive for the fourth quarter. In terms of business demand and leisure demand, of course, you know, there are still some of the macro uncertainties. So to be very frank, the business demand is not that strong yet. But on the other hand, for the leisure demand, it was continuously growing. As I mentioned previously, for the Chinese consumers nowadays, the leisure traveling demand has gradually become a necessity instead of discretionary demand. and especially for some emerging new demands such as concerts, marathons, sports events, and inbound travel as well. So the leisure remains very strong. In terms of the outlook for the next year, we think it's a bit too early. Let's still take time to see whether, you know, the stabilization in terms of the web park and the supply demand equivalent is sustainable, so we will give more colors for our first quarter earnings. Thank you. Thank you.

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

Thank you, Guanlitong. I would like to ask more about the disqualification of REFPA. If we disqualify ADR and OCC, we can see that ADR has performed better recently. So I would like to ask what is the reason behind this, and what do we think about the continuity? In addition, if we look at the gap between the entire REFPA and the same-line REFPA, it still maintains the same level as the previous two seasons. Looking forward to the future, will this gap be narrowed down? What are the measures needed? I will translate it into English. Thank you, management. My question is about RevPath breakdown. If we look at ADR and OCC, we see that ADR performs better recently. So trying to understand the reason behind this and the sustainability. Also, if we look at the gap between blended RevPath and same hotel RevPath, the gap remained at similar level with last few quarters. So is there any chance that the gap narrows in the future and what measures need to be taken?

Thank you.

I'm Jin Hui, I'm here to answer these two questions. Indeed, in 2025, Rehapart's improvement is managed to be a very important key business indicator. In the past few seasons, in the past half year, two seasons, Huazhou has taken further enhancements in overall revenue management in terms of revenue, pricing, and overall revenue management. Therefore, at the first line, through the foundation, through revenue management capabilities, has achieved a very good performance. But I think a more powerful point is that Huazhou has improved its product power in the past ten years and has gained more customers' recognition for the improvement of the ZOEF, which has led to the increase in the number of users around it. I think this is very important. Our products, our services have gained more customers' recognition, and in some markets, Huazhou's current product power This is about the problem of ADR. Regarding the problem of charging, indeed, due to In the central region, there are more and better products. The situation of old stores has been more obvious in the past six months. Through our price management strategy for new stores, flagship stores, and label stores, we have achieved a low price. We are also very happy to see that in the past quarter, Tongbi is also tightening. At the same time, in the future, In terms of the ADR, of course, for 2025,

The improvements of REFPA has been a very key task for our top management team. And of course, they have been putting a lot of efforts on that. So in terms of ADR, as I mentioned earlier, so we have to do a lot of, you know, works on, you know, further enhancing our revenue management capability, especially on the pricing, you know, pricing for different layer of the hotel and different products. And of course, on the front line, we give a lot of various incentives to our salespeople to further motivate them to do a lot of sales activities. However, apart from these things we have been doing over the last six months, actually, the ADR increase in the third quarter results from our continuous efforts on the product upgrades the quality improvements as well as our service excellence because we have been doing this for many, many years and continuously doing so. And we have more and more recommendations from our customers. So that's why in certain area, or in certain regions, our products and the service is definitely in a leading position, which gave us some of the pricing power, which led us to achieve a better ABR for the third quarter. And in terms of the like-for-like hotel or matured hotels, the gap, we are glad to see the year-over-year decline was narrowed significantly in the third quarter. On one hand, you know, In terms of the pricing, we use a lot of different layers for pricing the different products. Over the last one and a half years, we opened a lot of high-quality hotels, new hotels in some of Tier 1, Tier 2 cities, which created some of the cannibalizations to the existing hotels. But through different pricing strategies for different products, I think we are seeing some of the improvements for our matured hotels. And more importantly, we keep doing a lot of existing hotels upgrades to further improve the hotel quality itself in order to improve the ref part as a whole. Thank you.

Thank you, Jingdong.

Thank you for the questions. One moment for the next question. The next questions will come from the line of Lydia Ling of Citi.

Please go ahead. Hello, Manager. I'm Lydia from Huaiqi. I have a question about the management of the brand. It's mainly about the brand we just mentioned, the brand we just launched. Can you share with us your plans for the brand, for example, How many stores will it open? And then include the single-store model, such as a single-store CapEx and include a return cycle of our forecast. Compared with some of the leading high-end brands in the market, what are the advantages of our full-scale official? Because in fact, it was also pushed out for two weeks. What is the feedback of the store owners that we have received so far? Let me translate it. I have a question regarding the brand accessory for the newly launched upper scale brand. So could you actually share some of your plans for this brand and such as your store opening plan and also the store economics like the capex and the payback period? and how actually your advantage versus like the current other leading upper-mid-scale brand in the market and how is the feedback from the franchisees so far? Thank you.

This question is also for me to answer. The first one, the launch of the high-end products, shows the determination of Huazhou to develop in the mid-high-end market. Huazhou's hope is through So DaGuan As a result, it showed the way of living of East Asia. As for the business model, I just mentioned that Quanji is one of the most core Chinese high-end brands in China. We are also one of the most popular and most selected brands of Chinese consumers.

所以进一步的商业的这些细节,我们希望在我们地下店开业以后,再进一步的和大家做更多的分享。 谢谢。 Okay, so in terms of the G-Icons brand, so obviously, you know, the launch of G-Icons brand, has shown a very strong determination for Edgeworth to break through and develop in the upper mid-scale segment. With multi-brand strategy, this trend is very clear. And secondly, based on the current Chinese cultural confidence and also the preference from the Chinese consumers on our rental culture, our rental service, as well as, you know, our rental lifestyle that also, you know, basically support the launch of the G-Icon's brand. And as I said before, G-Icon is going to definitely become one of the core brands in our upper mid-scale segment. And we hope this brand can be, you know, the best brand or the best hotel that Chinese customers will like the most So in terms of the, you know, the UE, in terms of the CapEx you asked it, we hope we can share more information after the first hotels opened. Thank you.

Thank you for the questions. Our next question comes from Simon Cheung of Goldman Sachs. Please go ahead.

Thank you, Mr. Kim, for sharing with Mr. Chen. I have a small question. You have more than 700 stores in the third quarter of this year. So, in the first three quarters, you have more than 2,000 stores. So, I would like to ask you about the pace of your stores this year. Because I remember that you didn't say that there were about 2,300 stores this year. 然後同一個方向都是簽約,現在的那個節奏大概是怎麼樣? And then the same question is about the mid-high end. Because just now, Mr. Kim also shared with us that there are about 1,500 stores now. For example, we saw that you have about 5,000 stores in Hanting at the low end. And then we also saw that there are about 4,000 stores in Chenji. In the long term, do you think that if you want to do 20,000 and The question is related to the hotel opening. In the first quarter, they've done very well in terms of hotel opening, over 700. And I think in the first nine months, they opened more than 2,000 hotels. That's on track or even exceeded the 2,300 hotels that they have targeted for the full year. wondering whether there's any update for that and in particular also on the new signing as well. And then on the related questions, Given the focus and the strong momentum that they have seen in the upscale segments, upper-mid-scale segments, where they achieved 1,600 hotels secure, and we have seen, you know, similarly, hunting, they've done, like, 5,000, and that, you know, G-Hotel done 4,000. Wondering whether they have any targets for the upper-mid-scale in the long run. Thank you.

Hello, everyone. to answer this question. Indeed, as you can see, this year's third quarter, our opening speed is still relatively fast. It is also due to the rapid signing of the epidemic in 2023 and 2024. And we are very happy that it is due to the improvement of China's supply chain and our internal exchange rate. On the one hand, the exchange rate has also improved. Because We have recorded a good number of contracts in the past few months. We are relatively stable in terms of contract speed. There are no major fluctuations. Of course, we will focus on high-quality development. In the past few months, we have been emphasizing that Huazhou is changing from a scale growth to a solid quality, especially in the core of high-quality development. 在这样的一个指引下,我们在2025年整个完成开业比我们2300个店应该是略多一些,不略多一些。 具体的数字我想由来于我们财务团的进一步的交流。 在中高端,我们保持了一个非常好的签约和开业的节奏。 我前面提到了,在未来2030年或更远的目标,希望成为中国中高端的领导者。 Okay, so...

benefiting from, you know, fast new signings in 2023 and 2024 post-COVID, as well as, you know, further improvements in terms of our supply chain capability, which resulted in improvements in conversion ratio from the pipeline to new openings. So we achieved quite good new openings for the first nine months, which is slightly more than 2000. So therefore, Therefore, for the full year, we could possibly open a bit more than 2,300 hotels as what we guided previously. But again, we emphasized several times over the last several quarters earnings call. In terms of the new signings and openings, we will focus more on quality expansion instead of only looking for a scale. So that thing never changed. So we're going to continuously implementing this strategy for high quality, sustainable growth. In terms of the upper segment, as I said, we have reached 1,600 in both pipeline and operations, which also achieved pretty rapid growth. But however, if you look into a longer term, for example, 2030, we're going to still focus on the mass market with the economy and the middle skills. So in terms of the proportion, economy and the middle skills are going to still contribute to the majority. But in terms of the growth rate, we hope our upper mid-segments could grow the fastest in the industry and become the leading players in China markets by 2030.

Thank you.

Thank you for the questions. Our next question comes from Ronald Leung of Bank of America.

Please go ahead. Hello, everyone. I'm Ronald Leung from the US Stock Exchange. I have two questions. The first question is about margins and cost control. In the past two seasons, the company's margins have improved considerably. Can you share with us your expectations for the cost and margins? This is the first question. The second question is about members. Currently, the total number of members has increased by more than three million. Let me translate my questions in English. So I have two questions. My first question is about cost and margins outlook. The company has achieved very decent margins expansion in the past two quarters. Could management share with us the latest outlook on cost control and also margins? My second question is about the memberships program. So the overall memberships has grown decently to over 300 million by the end of 3Q25. Could management share an update on the strategy on how to further enhance memberships loyalty and also marketing strategies to improve the conversion rates. Thank you very much.

Okay, I'll answer first. I'm Jinghui. I'll answer the member's question first. The member strategy is the core strategy of Huazhou. We are also very happy to see that the number of members has increased in both scale and volume. We are also very happy. But we think we haven't done enough. Indeed, there are a lot of jobs that can be improved in the future. First of all, we launched Gui Ji Pei in the past. It is aimed at further strengthening membership rights, ensuring membership rights in both prices and services. We hope to use the Gui Ji Pei project to further strengthen the protection of membership rights. At the same time, our members are also actively connecting with these more diversified, more new scenarios of customers. As I mentioned, whether it's a marathon, a concert, an old age, or an entry, we hope that Huazhou will not only start from such a single business market in the past, but can connect with more and more rich customers. Thirdly, we will further strengthen the relationship Okay.

So in terms of our members, so definitely, you know, direct sales and membership is one of our core strategy. We are glad to see in terms of the member base as well as the room night social members continuously to grow. But we think that's still not enough. So that's why we have been doing quite a lot of jobs over the past several months. First of all, we introduced a price guarantee program. which can ensure our members to get the best price and service as also the unique experiences at the hotel. And secondly, we're also trying to fulfill more diversified demand from the leisure travelers and some of the emerging demands. For example, as I mentioned earlier, like sports events, like inbound travelers, So basically, the Edge Rewards membership program is gradually shifting from only business travelers to fulfill more diversified demands. And thirdly, we are also enhancing our capability to, you know, receive more business clients and corporate clients to further enhance our exposures. And lastly, we have been experimenting a lot of, you know, cross-industry, you know, cooperation with a lot of, you know, top tier, you know, vertical players trying to enhance, you know, members' experiences and improve their engagement. Thank you.

Thank you for the questions. Our last question. Our last question comes from... Sorry, please continue.

Let me answer the first question about EBITDA Margin. The EBITDA improvement is mainly due to the green asset strategy of Huazhou and the continuous control and optimization of our costs. In terms of operating costs, we rely on strong supply chain capabilities, and the continuous reduction, efficiency, and optimization of industry costs. At the same time, we have done a lot of detailed management work in terms of energy consumption, water supply, and catering. At the same time, we are more active in looking for various potential reduction to reduce the cost of renting and renting. In terms of sales management fees, we have continuously optimized and strictly controlled the management fees for the middle and back tables. The reorganization of the three systems of DH last year also led to a loss of management fees this year. And in terms of marketing fees, we will use ROI as a premise to maintain the necessary investment in hotel brands, market marketing, members, and customers. In addition, as Jinhui mentioned earlier, we have implemented some systematic Okay, let me do the translation.

So overall, the adjusted EBITDA margin improvements was mainly because of our externalized strategy. So obviously the MNF has prior margin compared to lease and own. But in terms of the cost control, in terms of the hotel operating costs, by leveraging our strong supply chain capability, we continuously to reduce the cost per room night sold. And for our lease and own hotels, we continuously seeking for more rental reduction, just trying to improve the profitability level of our lease and own hotels. And on SG&A perspectives, we continuously optimizing our mid and back office and headquarter, just trying to control the cost. In terms of the sales and marketing, we will, based on ROI, and to do some of necessary investments on, for example, the hotel brands, you know, membership, as well as the new user acquisition. So as mentioned by Jinghui, so we have been, you know, systematically improve our capability to improve our revenue management, so as in the cost control side. So we are also doing a systematically capability improvement. Thank you.

Thank you. We have come to the end of the question and answer session. That concludes the conference call for today. Thank you for your participation. You may now disconnect your lines.