Good day, and thank you for standing by. Welcome to the H World Group Limited Q2 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 this session, you will need to press *1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jason Chen. Please go ahead. Thank you, Heidi. Good morning and good evening, everyone. Thanks for joining us today. Welcome to H World Group 2025 Second Quarter Earnings Conference Call. Joining us today are our Founder and Chairman, Mr. Ji Qi, our CEO, Mr. Jinhui, our CFO, Ms. Chen Hui, and our CSO, Ms. Jihong He. 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. H World Group does not undertake any obligations to update any forward-looking statements except as required under 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 GAAP 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 slide presentation, is available at ir.hworld.com. With that, now I will hand over the call to our CEO, Mr. Jinhui, to discuss our business performance in the second quarter of 2025. Mr. Jin, please. [Foreign language] Dear investors and analysts, good day. Thank you for joining our second quarter 2025 earnings conference call. First, I'd like to share some observations on the overall market. On the demand side, the domestic number of travelers continues to grow steadily according to the data released from railways, airlines, and tourism statistics. However, due to the rapid increase in hotel supply over the past two years, grouped with the negative impacts of various macro factors on business traveling and consumer spending wellness, the hotel industry is still facing some challenges. [Foreign language] Despite the current challenging market conditions, we remain committed to focus on the long-term business development, emphasizing on high-quality growth, securing prime locations in the major cities, further deepening our presence in the lower-tier cities, and optimizing the location and quality of our existing hotels. In the second quarter, by breaking through into more new cities and regions and further penetrating into the lower-tier cities, we achieved another quarter of high-quality network expansion. Driven by an 18.3% year-over-year increase in the number of rooms in operation, our group hotel GMV grew by 15% year-over-year to RMB 26.9 billion. Meanwhile, along with our hotel network expansion and continuous enhancements of our H Rewards membership program, our member base also grew by 17.5% year-over-year to nearly 290 million in the second quarter, while the number of room nights booked by members exceeded 60 million nights, representing a 28.8% year-over-year growth. [Foreign language] More importantly, our SLI's management and franchised business delivered robust growth in hotel network revenue and profit. M&F revenue rose 22.8% year-over-year to RMB 2.9 billion in the second quarter, while its gross operating profit increased by 23.2% year-over-year to RMB 1.9 billion, contributing nearly two-thirds of the group's total gross operating profit. [Foreign language] Macro uncertainties and weakened consumer spending wellness should have more pronounced impacts on the high-end consumption. H World remains steadfast in our strategic focus on the economy and the midscale segments to serve the mass market. Against the backdrop of consumers favoring value-for-money products and services, H World is well positioned to demonstrate even stronger competitive advantages. By enhancing our brands, optimizing and upgrading our products, and improving our services, we will further solidify our core competitiveness, earn long-term customers' loyalty, and achieve resilience while navigating through cycles. [Foreign language] We are delighted that after 20 years of development, our Hanting Hotel brand ranked number one on the latest Hotels Magazine's World's Top 50 Hotel Brands list, becoming the world's largest hotel brand by room count. However, we believe this is just the beginning, and we continue to refine and upgrade our product to improve product quality and to better meet customers' demands. Recently, we officially launched Hanting 4.0 version. This is not just a simple product upgrade, but a revolutionary supply chain reform. Through systematic optimization across CapEx, construction, maintenance, and operations, we have successfully developed a benchmark product with lower cost, higher quality, and greater efficiency. Hanting will serve as a key driver for our further penetration into the lower-tier cities. [Foreign language] Hanting Hotel has undoubtedly become the leading hotel brand in the economy segment, while Ji Hotel has been leading the midscale segment. Nevertheless, we are more excited to see our Orange Hotel recently surpassing the 1,000 hotels milestone. With its industry-leading products, cost competitiveness, and operational capabilities, Orange Hotel is well positioned to become our second growth engine in the midscale segment. Together, Hanting, JI, and Orange form the golden triangle brands of our limited service segment, demonstrate a formidable competitiveness, and serve as the core driver to reach our 20,000 hotels in 2,000 cities' strategic target in the midterm. [Foreign language] At the same time, H World has made rapid breakthroughs in the upper-midscale segment. As of the second quarter, the number of upper-midscale hotels in operation and in pipeline exceeded 1,500, up 23.3% year-over-year. In particular, our IntercityHotel has been rapidly gaining traction among both franchisees and consumers, and achieving remarkable growth in the recent quarters, thanks to its clear brand positioning, exceptional product quality, and strong operational performance. In the second quarter, the IntercityHotel achieved a positive year-over-year growth in its same hotel RevPAR. [Foreign language] Whether it's the limited service or the upper-midscale segment, continuous product optimization and upgrades relies on strong supply chain capabilities. We firmly believe that supply chain strength is a critical pillar of high-quality development. Therefore, we continue to innovate and optimize our supply chain through enlarging our supplier pool, strengthening modular applications, and optimizing product design to achieve higher product quality, lower OpEx and CapEx, and a shorter construction period, which is in turn further strengthening our core competitiveness. [Foreign language] Lastly, we remain focusing on our direct sales capability through H Rewards membership program. Our membership and direct sales are vital to our sustainable long-term business growth. As we expand our hotel network and enter more new cities, our membership base continues to grow. By the end of the second quarter, H Rewards membership reached nearly 290 million members, with direct bookings through CRS rose 5.2% year-over-year to 65.1%. Recently, we introduced the price guarantee features in our H Rewards app, ensuring our members get the best room rate. Going forward, we will further enhance membership benefits, expand loyalty points usage scenarios, and explore cross-industry partnerships to improve member engagement and stickiness and further boost our direct sales capability. [Foreign language] This concludes the business updates for H World's second 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, Jinhui. Good evening and good morning, everyone. Let me walk you through our second quarter financial overview. During the quarter, our group revenue grew 4.5% year-over-year to RMB 6.4 billion, near the high end of our previous guidance, of which Legacy-Huazhu 's revenue increased 5.7% year-over-year. We are glad to report that as we continue carrying out SLI strategy and the cost optimization efforts, we saw year-over-year margin improvements from both Legacy-Huazhu and Legacy-DH. As a result, our group adjusted EBITDA rose by 11.3% year-over-year to RMB 2.3 billion. Adjusted net income increased 7.6% year-over-year to RMB 1.3 billion. More importantly, as you may notice, we started providing revenue and gross operating profit breakdown for our management and franchise, and leased and owned business in our presentation. We believe it could better demonstrate our future business development strategy, especially on the profit growth driver during our SLI transformation period. Looking into the numbers, in the second quarter, our management and franchise business revenue reported a robust 22.8% year-over-year growth to RMB 2.9 billion, and the gross operating profit rose by 23.2% year-over-year to RMB 1.9 billion in the second quarter, respectively. The robust growth in both revenue and profit was mainly driven by hotel network expansion. More importantly, given the nature of SLI business model, management and franchise margin profile is relatively stable and is less impacted by RevPAR movement compared to leased and owned. On the leased and owned business front, we continue reducing the exposure. In the second quarter, our leased and owned revenue and leased and owned gross operating profit decreased 7.6% year-over-year and 13.4% year-over-year, respectively. Our SLI transformation resulted in a further enlarged profit contribution management and franchise business. In the second quarter, our management and franchise business contributed to 64% of our total gross operating profit, up 7.5% year-over-year. Moving to the cash flow and the liquidity position, in the second quarter, we generated RMB 2.7 billion operating cash flow. As the quarter ends, the group had RMB 13.7 billion cash and cash equivalent and RMB 6.2 billion net cash on the balance sheet. We are committed to pay out dividends consistently and stick to our shareholder return plan. For the first half of 2025, we are glad to declare a $250 million interim cash dividend, which represents 74% of our first half net profit and together with roughly $62 million share buyback. Lastly, on our guidance for the third quarter of 2025, we expect our group revenue to grow 2%- 6% compared to the same quarter last year and 4%- 8% if excluding DH. The management and franchise revenue in the third quarter of 2025 is expected to grow in a range of 20% - 24% compared to the third quarter last year. With that, we are ready to take your questions. Operator, please open the line for Q&A. Thank you. As a reminder to ask a question, you will need to press *1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press *1 1 again. Please stand by while we compile the Q&A roster. We will take our first question, and the question comes from the line of Ronald Leung fro m Bank of America. Please go ahead, your line is open. [Foreign language] Good evening, management. Thank you for taking my question. I have two questions. My first question is about RevPAR. What is your expectation for the RevPAR in Q3 and also 2025? Is there any change to the full-year revenue guidance? This is my first question. My second question is about any potential impact on RevPAR from new hotel openings. Do you see any potential cannibalization when new hotels open and ramp up, and that could affect the old hotels? If yes, are there any initiatives that management can take to address this conflict? Thank you very much. [Foreign language] Okay, let me translate. So, I understand, you guys are still very much looking at the RevPAR movements. First of all, we hope you can focus more on a long-term H Rewards performance in terms of the market share gaining, our improvements in terms of the products and the brands, as well as a lot of improvements from different fronts to create our core competency. In terms of the RevPAR guidance for the third quarter and the full year, for the third quarter, especially during the summer holiday, we observed that a lot of local governments are promoting the tourism industry, for example, by providing deep discounts in terms of the tickets, even free tickets, just trying to boost the demands for the leisure traveling. However, in some regions and areas, it was affected by some extreme weather conditions, plus some of the macro uncertainties, some of the weakened consumer spending wellness. The overall performance till now for the summer holiday is slightly below our previous expectation. Therefore, we think the third quarter's RevPAR will still have a very slight year-over-year decline. However, it's going to be quite significantly narrowed on a sequential basis. In terms of the full-year RevPAR, again, because of some of the macro uncertainties, especially, as I mentioned previously, there was quite a lot of supply increased over the last two years, it's still creating some of the challenges currently. Combining the performance for the first half as well as the current summer holiday performance, we are currently expecting the RevPAR for the full-year performance will be slightly below our previous guidance. However, as I mentioned, we have been putting a lot of efforts in terms of improving our products, our sales capability, our supply chain capability, just to make sure that we can be much more resilient even under this kind of challenging market conditions. Therefore, in terms of the revenue, we will strive to achieve our previous guidance. [Foreign language] In terms of the impacts from the new hotels to the old hotels, we have to admit, over the past 20 years of development, especially in those tier one to tier two, where we have higher market share, we have a much higher basis, there are a lot of old versions of the products which have been running for many, many years. Of course, in the current environment, this kind of products' competitiveness is quite low. As you may notice, we have been constantly introducing new products. For example, we upgraded Ji Hotel from previous 3.5 or 3.0 to currently 5.0, the Orange Hotel from 1.0 to the current 3.0, and Hanting from previous maybe 2.0 to the latest 4.0. All the products itself, the quality has been improved massively. Of course, we are adding some of the pressures to the old products. In addition to this, in the tier one, tier two cities, because of the real estate market weakness, there's a lot of high-quality properties coming out to the market, which we can have much better property to open new hotels with much higher quality products. We have to admit that kind of creating some of the negative impacts to the existing old hotels. We do believe it is a short-term plan, and we have to go through this because our target is not only gaining market share, but we want to gain market share with high-quality products. That tactic has never been changed. We are looking for some of the solutions to solve this kind of problem. Firstly, we are actively looking for upgrades for the existing hotels. Secondly, we will be more rational, in terms of the positioning for the new hotel openings. Thank you. Thank you. We will take our next question. Your next question comes from the line of Dan Chee from Morgan Stanley. Please go ahead, your line is open. [Foreign language] Thank you, management, for this opportunity. We saw the company break down the gross operating profit between the asset-heavy leased and owned and asset-light franchised and manage business segments. What's the key message behind the new disclosure in terms of strategic focus between these two business segments? Is there any change we should expect in the future? Another follow-up question on this topic is asset-light franchised and managed segment is now 64% of total gross operating profit, with this segment revenue growing 23% this quarter. So GOP margin increased slightly, but the GOP for asset-heavy leased and owned declined by 13%. Legacy China Huazhu business leased and owned GOP down by 20%. GOP margin also declined. Going forward, what's the outlook for the margin of this segment? Is there any operation adjustment we can expect to support the margin of this leased and owned business? Thank you. [Foreign language] Okay, thanks again for the questions. As you may notice, over the past several years, we have been quite actively doing the SLI transformation for the group. As over the last few quarters, you know, our managed franchise business has been growing quite rapidly, driven by the high-quality network expansion, and also drives the revenue growth as well. In terms of the leased and owned business, you have been seeing that, you know, the exposure for the leased and owned business has been gradually reducing. Of course, the stable, you know, the SLI business has a much stable gross margin, and also it shows a real, you know, business development and the strategy for the group going forward. That's why since starting from this quarter, we started to giving, you know, a breakdown between our SLI business and the asset-heavy business. [Foreign language] For the margin performance for our leased and owned business, as you said, the margins declined on a year-over-year basis. This was mainly because we are gradually exceeding the exposure or reducing the exposure for the leased and owned. Therefore, no matter from the volume or from the margin or from the absolute dollar amount in terms of the profits, it's in a declining trend. However, in order to maintain a relatively healthier and stable margin performance for the leased and owned business, we are doing several key measures. One is we are actively seeking for the rental reduction with the landlord. For example, in the first half of this year, we actually signed up around RMB 390 million in total for the contract value for the rental reduction. Secondly, in terms of the revenue management as well as the sales and marketing and the cost optimization, we are doing a lot of works for our leased and owned business as well. Even though we are gradually reducing the exposure for our leased and owned business, we are still putting a lot of efforts for the existing properties, trying to improve their performance, not only the top line but also the bottom line as well. Thank you. [Foreign language] Thank you. Thank you. We Thank you. We will take our next question. Your next question comes from the line of Lydia Ling from Citi. Please go ahead, your line is open. [Foreign language] Hi management, I have two questions. The first one is on the store expansion. We saw some deceleration in the second quarter. Given the current macro background, how about the franchise sentiment over the openings? Is there any adjustment in your planning for the new openings for this year? If possible, could you share with us some color on the new signing momentum? My second question is on the margin side. At group level, do you have any further optimization in terms of the cost? Could you actually give some items on the full-year margin trend? Thank you. [Foreign language] Okay. As you may notice, over the past several years, we have been implementing a high-quality sustainable growth strategy. We are not only looking for scale growth. I mean, the quality is much more important than the scale itself. We are going to continuously do this, implementing this strategy. Going forward, we will be even more strict on new signings in terms of the property, in terms of the location, as well as making sure that our franchisees can make a profit and the hotel product itself has a high quality. Under these kinds of standards, we think we still can maintain a relatively healthier pace of new openings in the near future. Thank you. [Foreign language] In terms of the margin performance, in the second quarter, benefiting from our asset-light transformation, we have more revenue and profit contributing from the asset-light business, as well as our cost optimization leveraging on our supply chain capability, as well as our CRS contribution increase, and also a little bit part from the rental reduction. Putting them together helped us to achieve 11.3% adjusted EBITDA growth for the group despite the RevPAR decline. In terms of the SG&A, if you're excluding the SBC, actually, the SG&A declined by roughly 1%. For the second half, of course, we could make some of the investment, but definitely we cannot consider a rational ROI when we do some of the investment. In the longer-term perspective, we believe along with more asset-light contribution, we could achieve stable or gradual margin improvements in the future. Thank you. Thank you. We will take our next question. Your next question comes from the line of Simon Cheung from Goldman Sachs. Please go ahead, your line is open. [Foreign language] Let me translate that into English. So I have two questions. The first question is in relation to the same store RevPAR performance of the company that has been somewhat affected by some of the old store under the Hanting brand that management mentioned about, wondering how long would it take them to kind of resolve the issue in such a way that we would start to see stabilization on the same store RevPAR. Then secondly, just on the mid-upscale segments, particularly the upscale segments for the Crystal Orange as well as the IntercityHotel brand has done very well in the last, I think, a couple of quarters. Just wondering, you know, how management think about the long-term growth potential as well as the market share expectation. Thank you. [Foreign language] In terms of your question regarding the Hanting brand, currently, as we discussed previously, we launched the Hanting 4.0 version. Over the last several years, we have been consistently upgrading the Hanting brand. We believe the 4.0 should be a relatively mature product. The product itself, probably not only in China but also globally, in terms of its design and hotel quality, should be at the leading position. It is definitely leveraging our strong capability from the supply chain because it is creating a much lower CapEx, lower OpEx, a shorter construction, and also better performance. Regarding the pressures from the new hotels to the older hotels, as I said previously, we noticed that, and especially our observation internally, those Hanting 2.0, 2.5 version and below are facing the biggest pressure in terms of the RevPAR performance. It is probably going to take one or two years to solve this problem because of the large basis over the past 20 years. However, we are very glad to see the new signings for the Hanting brand actually this year have been very strong. There are two major things that we are going to do. One is we keep signing new contracts and opening new hotels in different areas. Also, we have to do some major substitutions by using the new products to replace the old products, or continuously upgrading the existing hotel to improve the competitiveness. Thank you. [Foreign language] Okay. In terms of our Orange brand and the IntercityHotel brand, I'm very happy to share something with you. In terms of the Orange brand, you know, after launching the 3.0 version, we have been getting a lot of, you know, traction from the franchisee and its customers. We want the Orange brand to become a back-to-back brand for Ji Hotel. We just achieved, you know, a thousand milestones for the Orange brand recently. In terms of the Ji Hotel, currently, you know, the hotel in operation and in pipeline, putting them together, has already exceeded around 4,000 hotels. We definitely hope, you know, the Orange Hotel could be the second, you know, growth driver in our midscale segment. Together with Ji Hotel, we want them to become the number one and number two, you know, hotel brands in the midscale segment for the overall market. In terms of the IntercityHotel, because of, you know, the high quality and the very accurate, you know, brand and product positioning, you know, we have been achieving quite rapid, you know, development of this IntercityHotel over the past several quarters. More importantly, you know, IntercityHotel achieved a positive growth, you know, in terms of the like-for-like or same hotel RevPAR in the second quarter, which is probably something quite few other brands can achieve, the positive RevPAR growth. Therefore, in the next probably three to five years, we definitely want our IntercityHotel brand to become a leading brand in the upper midscale segment. Because we are also taking the benefits, you know, from the weakness of the real estate market, we do see a lot of, you know, A-grade office buildings have been out in the market, especially in the tier one to tier two cities in some of the prime locations. That definitely creates or gives us a lot of, you know, opportunity to build a very nice and high-quality hotel product. It's going to be a new standard or a new generation. IntercityHotel is going to be a new standard and new generation, you know, or new definition of the upcoming, you know, upper midscale segment hotel in the near future. Thank you. Thank you. We will take our next question. Your next question comes from the line of Sijie Lin from CICC. Please go ahead, your line is open. [Foreign language] Thank you, management. I have two questions. The first is on the supply chain. How do we strengthen our supply chain capability in detail? Could you explain more about this? To what extent will this contribute to future decrease of operating costs? The second question is about DH. What will be the pace of the future shift towards asset-light model for DH? Thank you. [Foreign language] In terms of our supply chain capability, obviously, as we always said, the supply chain capability becomes a very core competency for us to maintain or to achieve a high-quality long-term sustainable growth. Since 2024, we have been comprehensively upgrading our supply chain capability, mainly through enlarging and attracting a lot of top-tier suppliers and cooperations with them closely, as well as increasing more modularization application and optimizing some of the product design and increase the quality standard and the reviewing system as well in order to achieve a higher quality product and a lower CapEx and OpEx, as well as shorter construction periods. I can share with you some of the data. As of now, in terms of, for example, furniture and furnishing, the consumables, some basic material, we have achieved around 10% to 20% cost of decline on a year-over-year basis. Also in terms of the construction periods, taking Hanting 4.0 as an example, because we are applying a more modularization that actually helped the construction period for Hanting 4.0 products by 30 days. Therefore, the strong and the strengthening, the supply chain capability could definitely help us to grow in a longer term with definitely a cost of leadership and as well as the high efficiency. Thank you. This is Jihong. I can address the DH asset-light business model and the development. In Europe, especially in Germany or Central Europe, the legal requirement is not as easy to dissolve any lease contract. We are working hard on discussing and negotiating with the landlord. Not everything would turn out exactly as we expected. We continue to try this out. We are continuously screening the profitability of our lease hotels, especially for low-performing or non-performing hotels. We are constantly engaged in a discussion. We cannot disclose anything yet, but some of the lease negotiation and some of the change of the lease are in the works. We will report as soon as we have any information about that. In the future, we are also trying very hard to go on asset-light model. We are very, very careful in signing any potential lease contracts. We really need to look at the commitment and also the return in the longer term as well. Thank you. This concludes today's question and answer session. I will now hand back to Jason Chen for closing remarks. Thank you, everyone, for taking your time with us today. We look forward to seeing you in the upcoming quarter. Thank you and bye-bye. This concludes today's conference call. Thank you for participating. You may now disconnect.