GreenTree Hospitality Group Ltd. American depositary shares, each representing one Class A ordinary share

Good day and welcome to the Green Tree second quarter 2020 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, please press star then one. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Rene Van Gestein. Please go ahead.

Thank you, Rachel. Hello, everyone, and thank you for joining us. GreenTree's earnings release was distributed earlier today and is available on our IR website at ir.998.com, as well as on PR Newswire services. As a reminder, we also posted a PowerPoint presentation that accompanies our comments to the same IR website. On this call, we are going to refer to this presentation, so please make sure you open it now. Thank you. On the call from Green Tree, I'm Mr. Alex Xu, Chairman and Chief Executive Officer, Ms. Celina Yang, Chief Financial Officer, Ms. Megan Wang, Vice President of Sales and Marketing, and Mr. Nicky Jang, our IR Manager. Mr. Xu will present the company's Q2 2020 performance overview, followed by Ms. Wang, who will discuss business operations, and Ms. Yang will then discuss financials and guidance. They will be available to answer your questions during the Q&A session that will follow. Before we begin, I'd like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as may, will, Expects, anticipates, aims, future, intends, plans, believes, estimates, continue, target, is or are likely to, going forward, confident, outlook, and similar statements. Any statements that are not historical facts, including statements about the company and its industry, are forward-looking statements. Such statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known and unknown risks, uncertainties, and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance, or achievements to differ materially from those in the forward-looking statements. You should not place undue reliance on these forward-looking statements. Further information regarding these and other risks, uncertainties, or factors is included in the company's filings with the U.S. Securities and Exchange Commission. All information provided, including the forward-looking statements made during this call, are current as of today's date. The company does not undertake any obligation to update any forward-looking statement as a result of new information, future events, or otherwise, except as required under applicable law. It is now my pleasure to introduce our chairman and chief executive officer, Mr. Alex Xu. Mr. Xu, please go ahead.

Thank you, Rene, and thanks, everyone, for joining our second quarter earnings call today. Let's start with the slide five. During the quarter, our performance as that of the hospitality industry as a whole continued to be impacted by the COVID-19 with reductions in both business and leisure travel. Overall, though, and despite some local resurgence of infections in June, our business continued to recover. Our blended ADR decreased 17.4% year-over-year to 142 RMB. Our occupancy rate dropped to 63.4%, and the raw power decreased 35.4% to 90 RMB. If we exclude hotels under requisition, temporary closures, and impact from consolidated entities, the raw power for the same hotel price 22.2% to 112 RMB. Nonetheless, we continued to expand our market presence across China. By the end of the quarter, we had grown our geographic coverage to 343 cities across China with 111 new hotels opened and reached a new milestone exceeding the 4,000 mark, with 4,066 hotels in operation. We ended the quarter with 1,087 hotels in our pipeline, up 82.4% year over year. Total revenues were 216 million RMB, a 21.4% decrease compared to the second quarter of 2019. Gross profit decreased 38.2% to 121.1 million RMB. Net income decreased 26.3% to 93.7 million RMB. Non-GAAP adjusted EBITDA decreased 47.2% to 91.4 million RMB. Net income per ADS decreased 19.7% to 1.01 RMB, and the core net income per ADS decreased 40.9% to 0.72 RMB. Let's now turn to slide seven for further update on the impact of COVID-19. China effectively contained the spread of COVID by second quarter of 2020, albeit with some restrictions on certain consumer-related activities. So our business was inevitably affected by some business closures and travel restrictions imposed by governments that continued throughout the second quarter, especially during the June. As COVID-19 came under control and the restrictions, were gradually lifted, we saw a return at domestic tourism and business travelers. According to the SDR data, occupancy rate, ADR, and the rare power of hotels in China improved steadily during the second quarter, partially offsetting the decline observed in the first quarter. Once again, Green Tree's overall performance was better than the average performance across the hospitality industry in China, i.e. around a 20% less of a decrease of raw power. This is thanks to the tireless work and dedication of our hotel staff and franchisees and the strong support of our loyal individual and corporate members. During June and July, New COVID-19 cases were reportedly in several cities, including Beijing and Dalian. Total measures, including strict travel restrictions, temporary closure of entertainment places, and many other leisure places, were reimposed, helping to bring the resurgence of COVID-19 quickly under control. Now let's turn to slide eight. We continue to act quickly and strategically to ensure that we are providing as much support as possible to all our franchisees and employees to protect the long-term health of our business. With the resumption of business travel and domestic tourism, we increased our cooperation with our corporate clients and provided additional sales support to our franchisees. During the quarter, we expanded our cooperation with a number of travel management companies to attract more corporate clients and business travelers. Also, every one of our hotels is expanding joint promotion programs and cooperation with local merchants. With all these efforts and assistance from Green Tree Central Office, the performance of our hotel has quickly improved. even with a slight dip in June due to the resurgence. Our occupancy rate increased from a low of 21.5% at the end of January to averaging 65% during the second half of May, to exceed 75% on the second half of July, and to exceed 82% further during the first two weeks of August. With these encouraging trends, we are confident that we can achieve our revenue target during the third quarter of 2020. I am proud of the Q2 result we achieved, especially considering the difficult environment that we operated under as a result of the COVID-19. Through it all, our business remained resilient and highly adaptable. We quickly adjusted our operation and marketing campaigns to meet involving consumer preferences and weaker market conditions. We protected our margins thanks to our flexible cost structure and the measures we implemented over recent quarters and that we will continue to implement for the rest of the 2020. As a result, our sales recovered and we returned to profitability for this quarter. With the Chinese government's efforts to bring the spread of COVID-19 under control, domestic tourism and business is gradually bouncing back. On July 15, 2020, the Ministry of Culture and Tourism lifted restrictions on intra-provincial travel. The lifting of these restrictions is stimulating business travel and summer travel and helping the hospitality sector to deliver steady and improved performance. After the lifting of the restrictions, we have observed another 10% increase of our occupancy with assistance and support from the government and our business partners. Together with our core strengths, such as our large, loyal membership base and the strong operational capabilities and our proprietary technologies, we are well positioned to deliver another year of outstanding service to our guests, strong performance to our franchisees, and sustainable growth to our shareholders. I will now pass the call to Megan Huang, Megan, please go ahead.