Ctrip.com International, Ltd. (CTRP) Q2 2012 Earnings Call July 25, 2012 9:00 p.m. EDT Executives Michelle Qi – IR Manager Min Fan – President and CEO Jane Sun – COO James Zhang Liang – Chairman Jenny Wu – Deputy CFO Analysts Richard Ji – Morgan Stanley Jin Yoon – Nomura Securities Chenyi Lu – Cowen & Co. Alex Yao – Deutsche Bank Eddie Leung – Merrill Lynch Jiong Shao – Macquarie Securities Andy Yeung – Oppenheimer Mike Olson – Piper Jaffray Alicia Yap – Barclays Capital Fawne Jiang – Brean Murray Catherine Leung – Goldman Sachs [Tien Hao] – [TH Capital] [Ming Zhao] – [86 Research] [Mosai Lee] – Citigroup Presentation Operator
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Min, Jane, James and Jenny will share our business update, operating highlights, industry outlook and financial performance for second quarter of 2012, as well as an outlook for the third quarter of 2012. We will also have a Q&A session towards the end of this call.With that I will turn to Min for our business update. Min Fan Thanks, Michelle, and thank you to everyone for joining us on the call today. In the second quarter of 2012, Ctrip delivered historic results. Net revenues grew by 17% year over year, within the range of our guidance of 15% to 20% year over year. Net income decreased by 55% year over year, mainly due to the intensified investments in product development and marketing campaigns, as well as the withholding tax related to the USD300 million stock buyback plan announced in June. China travel market enjoys explosive growth, yet the competition still intensified, particularly in the low-end leisure travel market. Today I would like to take this opportunity to share with you Ctrip's strategy to win over the competition and enhance our leadership. Ctrip aims to build our business for the long term, where we strive to create most compelling value for our customers and partners. We will achieve our goal to comprehensive [and broad] offerings, convenient customer experience, competitive pricing, and confidence in Ctrip brands. We're investing heavily in product development this year. From comprehensiveness to diversity, we are very creative in new models and consistently improving our platforms faster than ever before. Our Smart Choice Hotels, new international air ticketing platform, luxury travel sites, HH Travel, Tujia vacation rentals, and [Sungko] hostel booking have all planted the seeds for the future growth and for long-term success. We are continuously improving our customer online experience. Beyond efficient online transactions, we also strive to provide the latest travel information available. Our team has made great efforts to enhance the edited content and pictures. The number of reviews posted by travelers has increased significantly. In addition to the online website, mobile platform is a clear priority in Ctrip's business development map. All these investments fuel the increase in online transactions. By end of the second quarter, hotel online transaction exceeded 50% of total bookings. On average, online transactions accounted for about 45% of Ctrip's total bookings.
Offline service is still one of our core competencies that bring our high customer loyalty. We uphold a high level of service quality and strive for continuous improvement. Competitive pricing is important to enhance Ctrip's leadership. In our philosophy, price advantages have to be coped with strong products and services. While strengthening our existing advantages, we join the competition decisively. In July we launched a more aggressive marketing campaign with a series of comparing low-price products across all business lines. This will accelerate our penetration into price-sensitive market.With 12 years in the market, Ctrip is by far the most well-known travel brand in China based on service quality, reliability and integrity combined. Yes, China's travel market is fragmented and our market share is still very small. We have increased our investment in online marketing and actively explore all channels such as search engine optimization, social medium, online radio, web partnerships and other effective online platforms. By the end of the second quarter of 2012, our cumulative numbers of customers has increased to 17.4 million compared to 13.5 million at the same time in 2011. We will continue to improve our marketing efficiencies and take open-minded approach to enhance the Ctrip brand awareness. Our company always takes prudent steps to carefully evaluate the return on investment, timing and priorities for each investment. We are very excited about our future growth. Our team will focus on execution, monitoring the key investors, and delivering the best possible results. We are confident that our investments will ensure Ctrip's success in the coming decade. Read the rest of this transcript for free on seekingalpha.com