Good day, ladies and gentlemen, and welcome to the Second Quarter 2015 Ctrip.com International Ltd. Earnings Conference Call. My name is Lacy, and I'll be your coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of the presentation. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Cecilia Jung (00:46), IR Manager of Ctrip. Please proceed.

Thank you, Lacy. Thank you for attending Ctrip's second quarter 2015 earnings conference call. Joining me on the call today, we have Mr. Jim Liang, Chairman of the Board and Chief Executive Officer; Ms. Jane Sun, Co-President and Chief Operating Officer; Ms. Jenny Wu, Chief Strategy Officer; and Ms. Cindy Wang, Chief Financial Officer. We may, during this call, discuss our future outlook and the performance, which are forward-looking statements made under the Safe Harbor provisions of the U.S. 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 Ctrip's public filings with the Securities and Exchange Commission. Ctrip does not undertake any obligation to update any forward-looking statements except as required under applicable law. Jim, Jane and Cindy will share our strategy and the business updates, operating highlights, and financial performance for the second quarter, as well as the outlook for third quarter of 2015. We will also have a Q&A session toward the end of this call. With that, I will turn to Jim for our business update. Jim, please.

Thanks Cecilia, and thanks to everyone for joining us today. We're pleased with the great results achieved in all business segments this quarter. Accommodation reservation volume increased to 55% year-over-year. Transportation ticketing volume again delivered a record-breaking year-over-year growth of 106% with air ticketing volume increasing 60% on a yearly basis. Packaged tour business growth accelerated to 61% year-over-year in revenue with robust volume growth. Net revenue of the company reached over RMB2.5 billion, up 47% year-over-year, the highest organic growth rate of the company since 2008. Net commission earned was RMB2.49 billion, up 45% year-on-year. Net commission earned is calculated by deducting from revenue, the inventory cost to where the company takes inventory risks. The company also treats steep discount, which generates losses at contra revenue. Together with such a strong top-line growth, we delivered a great bottom-line performance that we committed to the market. We generated RMB214 million as non-GAAP operating income in the second quarter, making us the most profitable online travel company in China. Unavoidably, the competition in the online travel market remains fierce when other players try to boost high growth at the cost of low ROI and heavy losses. We're very confident that Ctrip has a superior model enabling us to gain market share aggressively and achieve higher earnings. Today, I will focus on mobile penetration, superior service, and competitiveness in outbound travel market. First, our mobile penetration. Mobile remains the key driver of our fast-growing business. By the end of Q2 2015, the accumulated downloads for the Ctrip app reached over 1 billion compared with 200 million one year ago. Total mobile transaction value this quarter spiked over a 120% year-over-year. Mobile has become the most important booking platform for the majority of our business operations. Over 85% of the bookings on Ctrip…

Thank you, James. Hello, everyone. This is Jane. I am pleased to share the updates about Ctrip's main businesses with you. First of all, our hotel and other accommodations. At the end of the second quarter 2015, Ctrip's domestic hotel coverage reached 330,000, a 200% surge from a year-ago. International hotel coverage also expanded to 670,000 indicating a 55% increase year-over-year. We have expanded our hotel pool and strengthened our product competitiveness by offering a wide collection of both agent model and merchant model. Our agent model products include prepaid, weekend and packaged hotel offerings. Customers can easily pick the product that best fits their budget and flexibility. We achieved the goal through internal innovations as well as working with the best suppliers from our open platform. In the second quarter, the open platform hotel volume jumped to 200% year-over-year growth. With the strong momentum into both high-end and at low-star-rated hotel, total hotel volume grew 55% compared with the second quarter of last year. International hotels continue to achieve triple-digits growth this quarter despite of the headwinds brought by MERs in certain regions. Secondly, transportation ticketing services. Following last quarter's phenomenal performance, the volume growth of transportation ticket increased further with a record high of 106% year-over-year growth in the second quarter of 2015. Air tickets maintained strong momentum with 60% higher volume growth over the same quarter last year. It was worth noticing that the vast majority of our growth comes from the tickets sold to the end user, not to the B2B channels. Ctrip has the largest market share, serving the individual travelers in China, which demonstrates our real power in the value chain. The air ticket distribution industry is experiencing a structural change, while the major airlines cut the front-end fixed portion of the commission in…

Thanks, Jane, thanks everyone. For the second quarter of 2015, Ctrip reported total revenue of RMB2.7 billion or $430 million, representing a 46% increase from the same period in 2014. Total revenues for the second quarter of 2015 increased by 9% from the previous quarter. Accommodation reservation revenues amounted to RMB1.1 billion or $178 million for the second quarter of 2015, representing a 47% increase year-on-year, primarily driven by an increase of 55% increase in accommodation reservation volume. Accommodation reservation revenues increased by 16% quarter-on-quarter. Transportation ticketing revenues for the second quarter of 2015 were RMB1.1 billion or $170 million, representing a 45% increase year-on-year, primarily driven by an increase of 106% in ticketing volume – 106% increase in ticketing volume. Transportation ticketing revenues increased by 11% quarter-on-quarter. Packaged tour revenues for the second quarter of 2015 were RMB329 million or $53 million, representing a 61% increase year-on-year, primarily driven by an increase in volume growth of organized tours and self-guided tours. Packaged tour revenue decreased by 17% quarter-on-quarter, primarily due to seasonality. Corporate travel revenues for the second quarter of 2015 were RMB121 million or $19 million, representing a 34% increase year-on-year, primarily driven by an increased corporate travel demand from business activities. Corporate travel revenues increased by 30% quarter-on-quarter, primarily due to seasonality. For the second quarter of 2015, net revenues were RMB2.5 billion or $408 million, representing a 47% increase from the same period in 2014. Net revenue for the second quarter of 2015 increased by 9% from the previous quarter. From this quarter, we introduced a new concept of net commission earned, which is a non-GAAP number, which was RMB1.49 billion for the second quarter, up 45% year-over-year. Net commission earned is calculated by deducting from the revenues of the cost of transactions where the company…

Thank you. Due to the large volume of participants, we'll ask that all questioners limit themselves to two questions. You may re-enter with any initial questions you may ask. And our first question comes from the line of Dick Wei with Credit Suisse. Please proceed. Dick Wei - Credit Suisse (Hong Kong) Ltd.: Hi, good morning. Thanks for taking my question, and congrats on the strong quarter. I have two questions. First question is, wondering if management team can update more on the competitive landscape in the travel industry, particular maybe with Qunar (31:29), and maybe with the announcements for eLong privatization offer from Tencent. And secondly, and a bigger picture question is about, does the company see any macro slowdown that could impact the travel market in China going to the second half? Thank you.

Thanks. On a competitive landscape, I think on the low-end actually is getting more competitive with Qunar (32:03) and also in terms of the lay of the market air ticketing, hotel goes aggressive and made (32:06) China also aggressively. And they are adopting burning money strategy, where they offer the low-cost prices and with almost no ROI and negative ROI. So on this market, Ctrip, of course, with the deep pocket we can also do that, but we want to do it a bit more smarter way. So we will compete aggressively on this market, will maintain our market share on the low-end market as well. On the high-end because the customer is less sensitive, they value service and brand so we seem we are to able to maintain a high growth, at the same time still keep a very reasonable profitability. So we can actually use part of the money generated from high-end customers to compete aggressively on the low-end, and that seems to be a very successful strategy.

And the privatization, eLong just disclosed that they have received an offer from Tencent that the offer price is at $18. You see higher than the current price. And clearly, Tencent has seen the great potential of eLong as a company. So as a shareholder, we are very glad to see that. And also, I think, Tencent is a very well-respected company. We always have very good relationship with them, working closely with them. And I think Ctrip also is the largest player in the market, and Tencent is the largest social networking platform in the market. So if we can work closely with each other to explore great opportunities and drive more volume onto the platform that will serve our customer with great product, excellent services. I think it will be a win-win for our customers and our partners, and will generate great value for our shareholders. And James will talk about the micro slowdown, microeconomic slowdown.

Actually, we don't see much slowdown in the travel market. Actually we see very high growth rates, especially in the high end of the market. For example, outbound travel, we believe, is growing probably over 20%. And of course, our growth rate is much higher than that. So I think the slowdown is mostly in the manufacturing and other traditional industries, but on the travel market, I think, it's still very healthy.

And our next question comes from the line of Fawne Jiang with Brean Capital. Please proceed.

Good morning. Thank you for taking my questions. First question is actually regarding your net commission earned. It seems like the first time you've disclosed the measure. Just wonder whether you can give us a little bit of color in terms of key components that makes up the difference between your revenue versus the net commission earned, particularly, regarding your merchant model. Just wonder what's the current percentage of your overall IT business. And actually, do we see that underperforming or outperforming your agency model? Second components to your, I think, net commission earned, it seems like you mentioned that you may sell products that's actually below the cost. Just wonder what's the percentage of that volume right now.

Yeah, thank you. Different companies in this industry may use different ways to recognize revenue. In order to help our investors to have an apple-to-apple comparison, we introduced the concept of net commission earned, which will basically take the following two items into consideration. First, difference from other players, we excluded any negative revenue from loss-making sales we offered to our customers in our U.S. GAAP numbers. And second, compared with the U.S. GAAP number to be more prudent, we further excluded revenue for the cost of transaction, where the company take inventory risk. And we believe the concept of net commission earned is the best way to present the real revenue performance for all players in the travel industry. And if we exclude the transactions for certain discontinued metasearch channels, our net revenue will grow in higher rate, approximately 48% year-over-year. And as compared to merchant as well as the agent model, both business models grow very rapidly. And the merchant model actually, for those merchant models, we don't actually record the growth revenue for all merchant business models. We take a very prudent accounting risk to recognize the growth apart only where we take inventory risk. This actually is different from the accounting treatment of other players.

Our next question comes from the line of Wendy Huang with Macquarie. Please proceed.

Thank you. I have two questions. My first question is about your outbound travel business. Obviously you mentioned that a lot in your prepared remarks. Could you provide some details about the top destinations purchased through your perform at the moment? And also the margin difference between the organized tour and the self-guided tour, and also what's volume and revenue contribution respectively from these two type of tools. Secondly, there is a follow-up question on that accounting change about the net commission revenue. So you mentioned the loss-making revenue part, is that part mainly actually resulting from the Baby Tiger project or is that mainly from open platform volume? Thank you.

Sure. Wendy, this is Jane. Thanks for your question. I will take your question and address it one by one. First of all, on the outbound travel, it has the top growth trajectory for us. Our consumers as they are making more money, they start to travel from Asia and then to Europe to Australia, New Zealand and further to North America and South America. So we have seen strong growth in outbound business. In terms of top travel destination, I think in Asia, Japan for this quarter is strong and in Southeast Asia, Thailand, Singapore, Malaysia has always been very strong travel destination. And as summer comes, people can take longer vacation then our long distance tour start to grow very well. So traditionally, the travel packages to Europe and America and Australia all grow very well during the long holidays. So we have seen strong growth in the outbound business. The second question you have is the margins for packaged tour and also for group tour. In terms of the price, dynamic package probably has some premium. In terms of cost efficiency, group tour has some premium. So margin wise, if you aggregate these two together, it's similar margin; both grow very strongly addressing different markets. Normally, when the older generation go abroad and particularly for their first trip abroad, they tend to join a group tour. And the younger generation, who can speak very good English, they tend to join dynamic packaged tour. So both side has been demonstrated strong growth in the past. And your third question is on accounting change. And as Cindy explained, in the market some players report GMV as their revenue, some players report loss-making revenue on the top line and then report sales and marketing in the expense and therefore it's a growth revenue and expense. In order to provide apple-to-apple comparison, we believe one number will put everyone on the same line, and that number is net commission earned. So what we do is, we take out the loss-making revenue which might generate negative revenue as a counter revenue on the top line. And Ctrip hardly do any loss-making marketing. So the number for the contra-revenue is limited in our number. The second one is during the Golden Week holiday, we have to take some inventory risk by booking a gross number in revenue. And that number also needs to be adjusted to reflect the true condition we earned. So if you adjust for these two numbers that gives you a true revenue you earned for each transaction. So 99% of our transaction has a very positive net commissioned earned, and that will put everybody on the same line and give investor a very clear apple-to-apple comparison in terms of earnings ability for each transaction.

Your next question comes from the line of Mike Olson with Piper Jaffray. Please proceed. Michael J. Olson - Piper Jaffray & Co (Broker): Hey, good morning. I just had a couple questions, mostly on the guidance. Could you please run through any guidance detail that you can provide on each segment of the business? And then also what you're anticipating for Q3 operating margins. And if you can provide any detail on what you're expecting for full-year 2015 operating margins. Thank you.

Thank you, Mike. I'll take your question. On the top line, we maintained a very strong growth momentum to achieve overall year-over-year 45% to 50% growth. For each of the line items, our hotel accommodation reservation will grow at a year-over-year 40% to 50% in the revenue, and transportation will also grow 40% to 50% in the revenue. And thanks to the very strong volume growth as well as the commission recovered from the last year's comparatively lower base, our packaged tour business will achieve 50% to 60% revenue growth for the third quarter. On the bottom line, we improved our operational efficiency for all our business unit. And thanks to the heavy investment we made last year. All Baby Tiger's revenue ramped up, which largely help us to improve our operation margin. In the third quarter, we will work very hard to achieve a non-GAAP operating income at about RMB400 million to RMB500 million, which actually represent a year-over-year growth of about 80% to 120% growth.

Our next question comes from the line of Alicia Yap with Barclays. Please proceed.

Hi. Good morning, James, Jane, Jenny and Cindy. Thanks for taking my question. I have a follow-up question on the eLong proposed private transactions with Tencent. Can you give us a little bit more color, what is the current relationship now between Ctrip and eLong, given this announcement today? And then, how would this change the Ctrip's role in eLong, as well as any partnership between Ctrip and Tencent?

Sure. eLong just received the offer from Tencent. So the ticketing project proposal was made by Tencent to eLong. So they have more details. If you have questions, please feel free to ask them. But as the shareholder of eLong, whatever is good for the company and for the shareholder, we will be very supportive. In terms of the relationship with Tencent and eLong, as we discussed, Ctrip is one of the shareholders of eLong. And eLong is an independent company with its independent board members and it also is a separate independent company listed on NASDAQ. In terms of our relationship with Tencent, we always had very good relationship with Tencent. We work with them closely. We have very high respect for that team because they shared a similar gene, which is product driven, very social networking, sophisticated. So yeah, I think, if we focus on the customers' needs and every company has its strength to offer to our customers. I think we'll be able to provide the best for our customers and our partners.

I see. And then can I follow-up on the margin? Cindy gave the margins outlook for the third quarter. What about if we look at entire second half of this year, what does it compare for the first half versus also last year second half? Thank you.

This year, I think, the topic is how to balance the investment versus operational efficiency. So thanks to the strategy, most of our business unit, they achieved a much higher operational efficiency. So we do believe with the very strong bottom line we delivered in the first half, we can achieve very good in the bottom line for the second half. For the full year this year, although we still have a very limited visibility, but we do believe we will at least achieve last year's margin. And there's a potential we can improve our margin a little bit.

Okay. Great. Thank you.

Thanks, Alicia.

Our next question comes from the line of Jin Yoon with Mizuho Securities. Please proceed.

Hey. Good morning, guys. Just couple of things. First of all, we're seeing nice operating margin leverage starting to really kick in. Now that you've partnered with eLong, when should we start to see further operating margin expansion from collaboration with eLong going forward? That's my first question. My second question is on your visibility. I think in the recent past, you mentioned that you were going to report your earnings towards the end of the reporting season, given the fact that the visibility remains little bit more shortsighted. And the last couple quarters, you've been reporting towards the earlier part of the earnings season. Does that mean your visibility in your business has changed materially over the last few quarters? I'll stop there. Thanks, guys.

Thanks, Jin. Our operating margin, I think mainly it's self-driven. We look at our top line and bottom line. On the top line, our goal is aggressively to gain market share, and we also carefully calculate the ROI for each transaction. So for matured product, each transaction has to make money, has to generate positive ROI. For immature and start-up type of products, then we will look at the lifetime value of a new customer and calculate the ROI. But no matter what happened, the money we spent on a customer has to be recovered through direct transaction or through carefully calculated lifetime value from a customer. So that's on the top line. Our goal has always been aggressively gain market share in this fast growing market. Now on the below the line item, we, first of all, heavily invest our IT system to enable our team to achieve greater efficiency. The example James gave just now is a highlight, the air ticketing business has been growing over 50% year-over-year in the past two years, yet, the head count decreased. So all the extra savings through these IT investment head count reduction has been a positive drop into our bottom line. And going forward, we will continuously working, investing heavily on technology to automate the procedures that can be done by machine. On the other hand, there are things that cannot be replaced by machine, which will very much be appreciated by our customer then Ctrip has the best trained workforce to help our customer to get the service. For example, when typhoon comes, when there is storm, when there is earthquake, our thousands of the call center employees will go to the call center and reach out to our customers and rearrange the tours with them, while the other…

Great. Hey, thanks, guys.

Thanks so much, Jin.

Our next question comes from the line of Tian Hou with T.H. Capital. Please proceed.

Good morning, management. Congratulations on a good quarter. I have a question related to your train ticket sales. So on July 22, you made announcement to acquire a ticket booking software company in Guangzhou for about RMB100 million. And I wonder how are you going to integrate this business with your existing train ticket business at (54:01). And also, how this new acquisition will impact the transportation volume growth in Q3? Also, related to your train ticket business, and since you do not make money out of any commissions of the train tickets, and you benefit more from the traffic generation from the train tickets. So I wonder in the past several quarters, how much the traffic contribution has this train ticket made to your main business. That's all my questions. Thank you.

Hi. Thank you. This is Jenny. And for our investment in Suanya.cn, you're right, we made this investment recently. This company is one of the most popular third-party train ticketing booking service providers. Suanya currently operates two popular train ticketing booking apps. One is Smart Travel (55:10) Suanya apps have build a strong brand among the others, with over 100 million apps downloads due to their advanced functions such as automated train ticketing booking. Combining these two mobile apps, Suanya is the largest train ticket booking platform in China right (55:38) 12306.com. This is official train ticketing booking platform operated by Ministry of Rail. The achievement is quite remarkable given the fact that the company has only eight persons with no much marketing dollars spend yet. This investment will definitely strengthen Ctrip's leadership in transportation ticketing segment. Meanwhile, these two apps will expand Ctrip's user demographics to more low-end users. And on the other hand, Ctrip's one-stop travel platform reached full travel products and advanced service will definitely help Suanya to achieve new success and gradually improve its monetization. And this company will continue to be run independently, but will have very close to cooperation and synergy with Ctrip. The overall impact on Ctrip's P&L will be very limited. And as I mentioned, we will work with the team and try to help them to improve their overall servers and monetization. And but at the current stage, the impact to our P&L will be very immaterial. And I will pass Cindy for the...

Yeah. Just to present on Jenny's point, on the whole train ticket market as well as Ctrip's own train ticket business, train ticket market is around six times to seven times as large as the air ticket market in terms of travel volume. Around 2.4 billion passengers took train trip in 2014, grow 12% year-on-year. And as high speed rail network spread out, train has become a very attractive alternative travel method for both business and leisure travelers. And Ctrip's train ticketing business maintain a very strong volume growth of around 200% year-on-year in the second quarter of 2015. Now the total train ticket volume is very close to the air ticket volume, and we expect our train ticketing volume will surpass air ticket volume in the next few quarters.

Thank you.

Yeah. Train ticket have even higher percentage coming from our mobile platform. Over 80% of the train ticket were purchased through Ctrip's mobile app. But to now the revenue contribution of train ticket is still very small at roughly about 5% of the total transportation revenues. But since we run fully automated operations, the train ticket business itself has been very profitable already.

Okay. Thank you. That's all my questions.

Thank you.

Thank you, Hou.

Our next question comes from the line of Vivian Hao with Deutsche Bank. Please proceed.

Hi. Thank you for taking my question. I have two quick questions. It looks like we have achieved a better net average commission improvement on hotel side quarter-over-quarter. And also, our gross margin was up 150 bps quarter-on-quarter. What is the key reason behind, if I can ask, what is the outbound hotel contribution to our current hotel portfolio in terms of both volume and revenue? And also, if we can anticipate any further relieving coupon magnitude. I do have a follow-up question after this one. Thank you.

Sure. So thanks for your question, Vivian. The margin improvement, as we discussed before, comes from both top line and bottom line. On a top line, again our goal is aggressively gain market share. And all the business team in different business unit have been motivated to aggressively come up with new products and penetrate into the new market in order to get the market share in this fast growing market. So if the Baby Tiger program this year have been very successful, they're able to target in their specific vertical such as train, bus, attraction tickets et cetera. So they have been very aggressive. Our main product has also demonstrated strong ability to gain market share particularly for hotels and air ticket. I think the growth there have been demonstrated compared to such a big base is still very amazing. So the team has been very motivated to drive up to gain market share and increase our top-line revenue. The second thing is also the yield management, our team also have been working very hard to make sure we customize and personalize products for our customers. So the yield management has achieved a good results and it's still on the uprising trend. And the third thing is on the cost side, as we discussed before, we have been heavily invest in the IT technology in order to save head count. And this has resulted, very good results in operating margin. And your second question is in the outbound business. For different business line, outbound business is a little bit – has represents very different percentage. For hotel business, the outbound business if you include Taiwan and Macau that is about 10% volume and around 15% to 20% revenue. In terms of air ticketing, if you include – the number…

Thank you. One very quick follow-up on the last question. We notice this general trend in step-up promotion into the summer season. And given that one of our key competitors has also raised capital and carry out large-scale mobile promotion, can you please elaborate a bit more on our promotional strategy in second half? Thank you.

Yeah, I think we will continue to be very aggressive especially in the low-end, but we also calculate our return very carefully. Because – the reason we put out this net commission earned is just to give investor a better picture on how effective once campaign – the result of the campaign is. I think it's still too easy to use shareholders' money to buy revenue. So this number is not the best, it's the second best measure of how effective the marketing campaign is. The best measure of course is still the profit. And especially in the low-end, I think customers is not very loyal. If you give a below cost price to the customers and the customer may actually try you once, but the second time and third time the customer may still compare prices. So the lifetime value of those budget customers is very low. So if you try to boost your revenue using shareholder money to buy inventory or below prices promotions and this kind of strategy we don't believe is a very profitable or very sustainable. So, we would do it very aggressively, but we will do it very smartly, and to generate the best value for our shareholders long run.

And also to add to James' comments, when you have loss-making strategy, what we have noticed in the market is that it creates a chain of the third party that will get these inventory at deeper discount from the company who is doing loss-making campaign. And they'll buy these inventory at very deep discounted price and then they sell it at a higher price at the other platform. And therefore, these deep discount campaign is not reaching out to end users, but is reaching out to this chain of the third party who are taking advantage of the loss-making campaign, which we want to be very careful to avoid.

Our next question comes from the line of Eddie Leung with Merrill Lynch. Please proceed.

Good morning. Couple of questions. The first one is about a couple of key factors affecting your hotel and air take rates. Could you just comment on the trend you have seen in industry ASP as well as the impact from a mix shift in your hotel tiering? And then secondly, just a housekeeping question, could you give us some color on the dilution in share counts from the convertible bond? Thank you.

Yeah. So for the question for the ASP of our accommodation business, hotel business, because we both – for the – for the both high-end as well as for the low-end of the market, we both grow very strongly. And also we are working very hard to deliver better result, the best result on the outbound international hotels, which actually has the highest ADR in the market. So, overall speaking, our ADR has been very stabilized even though we are very aggressive to enter into the lower-end of the market. For the – for your second question, the dilution, the CD dilution, we calculate the dilution as long as it has – because this quarter we've been profitable, so there's some dilution on the ADRs, on the share count especially for the first CD we offered – we issued in 2012.

Got it. Very helpful.

But the impact...

Thank you.

Yeah. But the impact is limited.

Got it. Thanks.

Thanks, Eddie.

Our next question comes from the line of Jed Kelly with Oppenheimer. Please proceed. Jed Kelly - Oppenheimer & Co., Inc. (Broker): Good morning. Good morning. Can you just provide a little color on what drove the sequential decline in product development cost?

For product development cost, we always protect that line. So if the IT has a need to ramp up the hiring, there is no limit for them. I think to increase the investment in product development has always been our goal. What happening this year is that, if you remember in Q4, we aggressively invest in 16 Baby Tiger programs. We hired lot of engineers from Silicon Valley, from all the other hi-tech companies and build up the team. So the investment has generated a very good scalability for this quarter. So our team didn't feel we need to hire aggressively from the market. But, going forward, yes, our team has new initiatives that they feel, in the future, will help our company to penetrate into a new area. Definitely, they have – we have the financial bandwidth, we're able, and we're willing to make the investment anytime that is necessary. So that's what happened in decline. Jed Kelly - Oppenheimer & Co., Inc. (Broker): Thank you.

Thanks.

Our next question comes from the line of Chin Cho (01:10:27) with 86Research.

Hi, good morning. Good morning, James, Jane, Jenny, Cindy and Jay (01:10:34). Congratulations on a very strong quarter. I just have two questions. The first one is regarding our open platform progress. I'm wondering, what is the current revenue and the volume contribution to the hotel, air and packaged tour business from open platform? And my second question is about our gross margin. You mentioned that the open platform volume grew by almost 200% year-over-year for packaged tour business in the second quarter. Does that mean the gross margin improved for the ticketing and the hotel business itself or whether that's mainly because of the improving couponing for the second quarter or whether that's mainly because of the operating efficiency for hotel and air ticket booking business for the second quarter. Thank you very much.

Thank you. For the open platform contribution, hotel in terms of volume contributed – open platform contributed about 10% of the total hotel volumes. For air ticket, it contribute roughly 60% in volume. And for the packaged tour, from last year, we invest heavily in the open platform strategy in the packaged tour business. So now we have approximately 25% volume contributed from the open platform. And from – for the margin part, yes, we – this as Jane mentioned, we actually, for the couponing part, if you compare year-over-year, it remain flattish. But if you compare quarter-over-quarter, because of our yield management effort, we said couponing as a percentage of total net revenue at about 1% to 2% debt, one of the reason why sequentially our gross margin improved. Of course across all business units, we increased our operational efficiency. So, overall, our operating – gross margin improved slightly from the last quarter.

Thank you, Cindy. Very helpful.

Thanks.

Our next question comes from the line of Thomas Chong with Citigroup. Please proceed.

Hi, good morning. Hi, thanks, James, Jane, Jenny and Cindy. I have two questions. The first question is about the third quarter guidance. Given that you have generated synergies with eLong, can we get some color or quantify some numbers? What is – about the amount in terms of the savings, in terms of marketing as well as the key important impact from the synergies? And the second question is about the Baby Tigers initiative, can management give us some color or any update about the profitability, about the Baby Tiger initiative from the last call? Thanks.

Sure. For the first question on eLong investment, eLong will remain as a standalone business and it will operate independently. And eLong's board, we believe, will make the right strategy to bring eLong to be a much better company. Ctrip's vision is to become the most comprehensive platform for the Chinese travelers and eLong has the potential to become the best booking platform in China focusing on the online and mobile hotel bookings. After this investment, of course, it is good for the two leading players to create a healthy ecosystem, which is good for the whole industry, the business partners, as well as for our customers. And your second question is for the Baby Tigers, yes, last year, we heavily invested in the Baby Tiger, all 15 Baby Tigers and we build up separate IT system to support each of the Baby Tigers. And this year, we do see their revenue ramped up. And as we evaluate their performance both on the top-line as well as the bottom line, so their operational efficiency increased significantly compared with last year. And by the end of this year, we do believe most of the Baby Tigers will be at least breakeven and some of them have already been very profit for like the train ticket business.

Our next question comes from the line of Min Ho (01:15:39) with UBS. Please proceed.

Morning. Congratulation to the strong quarter. So I have three questions. First is regarding the follow-up on the industry competition landscape. I think apart from your original competitor, recently we see (01:15:59) after receiving the investment (01:16:04) becoming much more aggressive in spending. Could you comment on that? And secondly, could you update on your cruise business? And also apart from the cruise business, do you have any plan to make other investment into these kind of more asset-heavy business model? I think I read some news regarding that you are interested in leasing some islands in Greece. Is that true or is there any comment on that? And thirdly, I think you made a very remarkable improvement in product development expenses as a percentage of revenue. And is there any further room for improvement going forward? And also, on the sales and marketing side, any upside we can look forward? Thanks.

Okay. There is lot of questions. I think the first question, I already talked about quite a bit. So on the low end, there's lot of the new aggressive competitors and they are burning money and I don't believe the ROI is justified, but you know that's the nature of the market and we'll also compete aggressively, but we'll do smartly. And the...

On the cruise industry, I think, if you look at the growth in this market, I think the cruise industry is just at a baby infant stage. So there are lots of interest in the market. And if you look at the matured market, at least a 1% to 2% of the people will travel as their income increases. In China, we don't have even one million people to travel via cruise yet. So the market is very promising. Now on Ctrip, we made a passive investment by holding about 30% to 35% of the SkySea by forming a joint venture with Royal Caribbean. We believe we can contribute our China knowledge to this JV. And Royal Caribbean is very strong in operating the cruise business. So that's how the JV is formed. And I think, for us going forward, it's always, we want to invest in the promising market, but we want to invest it in a smart way, which we can contribute to our knowledge and our strength into the business. The third thing you mentioned is the island, I think it's just a marketing...

I think, the best way to help Greece government is sending them more Chinese customers.

Yeah. I think our marketing team did a good job if you have already noticed it, I think they have done a very good job try to attract an attention. But I think Ctrip's strength again is aggregate the customers' need and send it to attractive destinations and provide these customer with the best service. So they have peace in mind, they enjoy their travel journey, and they will come back to us. So that's our strategy, but we're not interested in buying any islands in Greece.

Our next question comes from the line of Henry Guo with Winabi Research (01:19:53). Please proceed.

Hey, thanks for taking my question. So question about air ticket business. So we know that you mentioned the 60% of all air tickets is actually from open platform. But as airlines continue to lower commission when we know that the air tickets and contribution from the open platform may be less than an income decrease because some smaller agency open platform may not survive due to the commission cut. On the other hand, the direct sales, the air ticket commission may continue to trend down with the commission cut. So how should we think about the economics, the take rates of this air ticket business going forward? Thank you.

Yeah. Air tickets take rates for Ctrip as we maintained within the 4% to 5% very healthily. Although throughout the past few years, airlines have been cutting the commission rate. The way we did it is because we provide excellent services to our customers. And on Ctrip's platform, not only we sell air tickets, we also have more than 20 products to be sold including hotel, attraction ticket, trains, et cetera, cruise tickets. So when the customer come and travel with us by booking a ticket, we know exactly where they are going and we can target our products very effectively by cross-selling certain products to them. And therefore, on aggregate, the cross-selling plus some incentives from the airlines has been maintained at a healthy level. Secondly, the reduction on the air ticketing commission really hits the smaller players, which does not have the efficiency as Ctrip does. For Ctrip, because of our scalability, has enabled us to achieve greater operations leverage. So we can offer 24 hours, seven days service without adding too much labor cost. But if it is a mom-and-pop smaller shops, it's very difficult to do that. So, again, the high level service Ctrip has enabled us to attract high end customers, which are willing to buy cross sold products, that's helpful. And also the strong platform and IT investment we have made enabling us to create a greater scalability than the other player, which also is helpful to increase our margin. That's how we become a very efficient sales and marketing channel for airlines. And we will keep up with our hard work to become the most efficient sales channel for airlines and also help them to up-sell their product. As we discussed during the opening comments, for certain routes, we're able to sell more than 40% of the business class and the first class tickets for airlines, which is very helpful for airlines to up-sell their products and improve their revenues as well.

Thank you.

Thanks.

Our next question comes from the line of Amanda Chen with Morgan Stanley. Please proceed.

Hi, good morning. Thank you for taking my question. My question is regarding the eLong privatization proposal. If I read the number correctly, it seems that the proposal price, which is $18 per ADS is lower than the price that we bought shares from Expedia, which was $29 per ADS. And also according to Jane's answer previously, I think that we're quite positive to this privatization proposal. So could you please share some more rationale behind this attitude? Thank you.

Sure, sure. I think each company independently evaluate the market condition and the value of the company. When we get the shares from Expedia, we got some shares at high-voting power; therefore the price is a little bit higher. And how Tencent comes up with this number, Tencent will be the best company to address it. But I'm sure they also take into consideration of the current trading volume and also trading price. And they make a very generous premium based on the trading prices. So every company independently evaluate the value and come up with different proposals. The second thing is the rationale behind it. Again, I think the privatization is between Tencent and eLong. So they will be able to help you with the details. We are only a passive shareholder. And whatever is good for the company for both shareholders, we definitely will be positive about it.

Thank you.

And, yes, given Ctrip's very leading position in the travel industry, and also Tencent with their extensive user reach and cross platform capability, we believe that the privatization open the chance that Ctrip and Tencent, we both can cooperate with each other in the future.

Our next question comes from the line of Yong Wang with JPMorgan. Please proceed. Yong Wang - JPMorgan Securities (Asia Pacific) Ltd.: Hi.

Hello. Yong Wang - JPMorgan Securities (Asia Pacific) Ltd.: Thank you for taking my question. My question is related to call center head count. So you mentioned that the call center head count will remain stable in the quarter. And my question is as volume contribution from online and mobile continue to trend up and we continue to invest in IT capability, do we have any plan to further streamline call center head count? And what could be the potential margin impact in the long run? Thanks.

Call center actually has been the most profitable sales channel for us. If you look at revenue generated per call, on average, call center can generate 20% higher AD (01:27:02) price than the other two channels. And also the room nights or ticket number call center generate also is 20% higher. And for call center sales, we do not issue coupon. So if you aggregate these factors and compare the sales channel with our mobile and PC channel, the revenue per call for the call center is around 60% to 70% higher than the other two channels. The second thing is we aggressively – again in the IT system to make it as efficient as possible, so although the volume has increased significantly, we are able to handle a lot of routine transactions through automated services, such as change, cancel the tickets. If it's very easy transaction without needing the human intervention, we will encourage our customers to do it on our apps or on our PC platform. But in the time that customer badly need to get hold of our employees, then we want to make sure Ctrip provide the best service to our customers. So that's a very good combination to increase as much as possible on automated services meanwhile also supplement by very high-end customers with timely responsiveness, with very considerate service when customer needed.

Our next question comes from the line of David Jin with Goldman Sachs. Please proceed. Ge (David) Jin - Goldman Sachs: Hi, good morning, good evening, and thank you management for taking my question. I just have a follow up question because management mentioned in the opening up saying that you will see more government support for the travel industry. I'm just wondering can you give us a sense of what kind of changes we will see from the income statement perspective. Will there be like lower tax rate or more subsidies into the travel segment, which will impact us. Thank you very much.

I don't think there is any specific plan, but I think at every level of government, they will invest more resources to build more travel supplies or travel products. I think the government still has – in China, the government still has a lot of resources. So once they focusing travel as the primary industry for future growth, they will see a lot more products available for Chinese consumers that will boost travel demands for the long run. So we are positive and in this sense we haven't seen any specific plans in terms of tax breaks or things like that yet. Ge (David) Jin - Goldman Sachs: Thank you very much.

Thanks, David.

Ladies and gentlemen, this concludes the question-and-answer portion of today's call. I would like to turn the call back to Cecilia Jung (01:30:26) for closing comments.

Thank you, everyone, for joining us on the call today. We look forward to convening with you again next quarter. Thank you.

Thank you very much for your time. Thank you.

Thank you.

Thank you.

Thank you.

Thank you for your participation in today's conference. This concludes your presentation. You may all disconnect. Good day, everyone.