GreenTree Hospitality Group - Q2 2024

Transcript

Operator (participant)

Hello, ladies and gentlemen. Thank you for standing by for GreenTree's second quarter of 2024 earnings conference call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question-and-answer session. As a reminder, today's conference call is being recorded. I would now like to turn the meeting over to your host for today's call, Mr. René Vanguestaine of Christensen. Please proceed, René.

René Vanguestaine (Head of Investor Relations)

Thank you, Rocco. 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 the call from GreenTree are Mr. Alex Xu, Chairman and Chief Executive Officer, Ms. Selina Yang, Chief Financial Officer, and Mr. Jason Zhang, our new Financial Director. Jason replaces our former Financial Director, Ms. Ellen Zhao, who officially retired earlier this month. Mr. Xu will present the company's performance overview of the second quarter of 2024, and Ms. Yang and Mr. Zhang will then discuss financials and guidance. They will all be available to answer your questions during the Q&A session, which follows.

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, expect, anticipate, 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 expectation 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 conference call, are current as of today's date.

The company does not undertake any obligations 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.

Alex Xu (Chairman and CEO)

Thanks, René, and hello, everyone, and thank you for joining us today. In the second quarter, we faced challenges as China's economy continued to recover. We believe both consumers and business exercised caution in discretionary spending, which had a negative impact on our overall performance. However, we continued to upgrade a number of hotels in our portfolio in order to better respond to increasing competition. While we believe this will help our performance in the future, second quarter hotel revenue did decrease 14.8% year-over-year.

We continued to execute on our strategy to return our restaurant business to profitability by moving away from leased and operated restaurant in supermarkets and regional shopping centers towards franchised street stores. As a result, the net income turned positive this quarter after breaking even last quarter, compared to losses in both corresponding quarters a year ago.

Our focus is now fully on growing the number of franchised street stores and the stores with a stable consumer traffic. Please turn to slide 5. Compared with the second quarter of 2023, hotel RevPAR was RMB 125, down 10.8%, and the restaurant ADS, that's average daily sales per store, was RMB 4,737, down 22.1%. Total revenues were RMB 329.7 million, down 20.5%....Hotel revenues were RMB 264.6 million. That's down 14.8%, mainly due to a 10.8% year-over-year decrease in RevPAR, and the closure of some LO hotels, and partially offset by new openings.

Restaurant revenue decreased to RMB 65.3 million, as we continued to execute on our strategy to reposition this business, and closed a number of underperforming restaurants. Income from our operations decreased to RMB 84.4 million, with a margin of 25.6%. Net income was RMB 62.3 million, down 38.9%, with a margin of 18.9%. Adjusted EBITDA, non-GAAP, was RMB 83.1 million, down 34.5%, with a margin of 25.2%. Slide 6 shows detailed number for total revenues, income from operations, net income, and adjusted EBITDA. Slide 7 shows the trend in our quarterly operation performance. In the second quarter, compared to a year ago, RevPAR for our LO hotels decreased by 7.3% to RMB 177.

RevPAR for our FM hotels decreased by 10.9% to RMB 124. ADR for our LO hotels decreased by 2.1% to RMB 250, and ADR for our FM hotels decreased by 4.4% to RMB 171. Occupancy at our LO hotels was down 3.9% to 70.7%, and occupancy at our FM hotels was down 5.3% to 72.6%. Slide 8 highlights the growth in our membership programs, which accounted for most of our direct sales. Individual memberships grew to 96 million, up from 84 million a year ago, and the corporate memberships grew to 2.1 million, up from 1.96 million a year ago.

Slide 9 shows the operating performance of restaurants with ADS down 22.1% year-over-year at RMB 4,737, but up sequentially. Starting with slide 11, I will review our strategic execution across our businesses. In our hotel business, we further expanded in the mid to upscale segment and in Tier 3 and the lower cities in South China. As you can see on slide 12, we continued to grow our mid to upscale segment with 505 hotels. That's 11.8% of our total portfolio at the end of this quarter. While the midscale segment remains the core of our hotel business at 69%, we continue our expansion into the higher end segment. The economy segment ended the quarter at 19.2%. Please turn to slide 13.

We continued to expand in Tier 3 and the lower cities, and 72.3% of our hotels in our current pipelines are in such cities, and we will further capitalize on the substantial opportunities in these locations. On slide 14, we continued to focus on increasing the profitability of our restaurant business. To achieve this, we have implemented a three-pronged approach to reposition the business. First, closing unprofitable LO stores, increasing the proportion of FM stores, and expanding the number of street stores. Franchised-and-managed restaurants accounted for 86.9% at the end of the quarter, compared to 72.3% a year ago, and street stores accounted for 45.4%, compared to 37.9% a year ago. Next, Selina Yang and Jason Zhang will review operating and financial highlights.

Selina Yang (CFO)

Thank you, Alex. I will review our hotel business. Please turn to slide 16. In the second quarter, total hotel revenues decreased 14.8% to RMB 264.6 million, compared to the second quarter of 2023. Total revenues from LO hotels were RMB 105.9 million, down 19.5% year-over-year. The decrease was primarily attributable to a 7.3% year-over-year decrease in the second quarter RevPAR of LO hotels. Five LO hotels closed, and the reduction of sublease revenues, mainly due to the disposal of property.... Total revenues from FM hotels decreased 11.3% to RMB 157.8 million. The decrease was mainly due to a decrease in FM hotels RevPAR and the remodeling.

On slide 17, total hotel operating costs and expenses increased to 2.1% year-over-year to RMB 217.7 million. Operating costs decreased to 4.5% to RMB 143.4 million year-over-year, which was mainly due to the lower personnel costs, lower hotel-related material consumption, and lower utilities, given lower occupancy rate and the closure of LO hotels. Offset by increased rental costs and D&A due to newly opened LO hotels since the third quarter of last year. Selling and marketing expenses were RMB 13.2 million, a year-over-year decrease of RMB 0.5 million, mainly due to lower advertising expenses. General administrative expenses were RMB 454.9 million, up 23.6% compared with the same quarter of last year.

The increase was mainly due to an increase in bad debt provisions for long-aged accounts receivables. Turning to slide 18. Due to the decline in revenue, our hotel business saw a decrease in profitability in the second quarter. Income from hotel operations decreased from RMB 108.5 million to RMB 81.6 million year-over-year. Net income was RMB 63.1 million, compared to RMB 114 million in the second quarter of last year. Adjusted EBITDA of hotel business decreased to 37% to RMB 81.9 million, and core net income decreased to 22.4% to RMB 67.6 million year-over-year. Next, let me turn the call over to Jason for the review of our restaurant business.

Jason Zhang (Financial Director)

Please turn to slide 19. In the second quarter, we continued to reposition our restaurant business and open more franchised-and-managed stores. Total revenues were RMB 35.3 million, down 37.8% year-over-year, and the total cost and expenses decreased 44% year-over-year to RMB 34.3 million, mainly due to lower ADS and a decrease in the number of LO stores, due to the closure of unprofitable LO stores. On slide 20, these measures lead to improved profit, profitability. Income from operation was RMB 2.9 million, adjusted EBITDA was RMB 1.2 million. Net profit and core net income turned from loss to profit. Next, Selina will review the profitability of our group.

Selina Yang (CFO)

Thank you. Please turn to slide 21. Group net income per ADS, that's basic and diluted, decreased by 39.9% to RMB 0.61, and core net income per ADS, that's basic and diluted non-GAAP, increased by 3% to RMB 0.69. Let's now take a look at slide 22. As of June 30, 2024, the company had total cash and cash equivalents, restricted cash, short-term investments, investments in equity securities, and time deposits of RMB 1,737.2 million, compared to RMB 1,517.1 million as of March 31, 2024. The increase was mainly attributable to continued operating cash inflow, the disposal of a property, and the repayment of loans from franchisees.

On slide 23, considering our performance during the first half of this year and the impact of closing certain LO hotels due to lease expirations and strategic decisions, we have revised our revenue guidance for the hotel business. Now, we anticipate its performance in 2024 to remain flat compared to the last year. The Board of Directors has approved the payment of cash dividend of $0.10 per ordinary share, or $0.10 per American Depositary Share, that's ADS, payable to holders of the company's ordinary shares shown on the company's record at the closing of trading on September 30, 2024. This concludes our prepared remarks. Operator, we are now ready to begin the Q&A session.

Operator (participant)

... Thank you. If you'd like to ask a question, please press star then one on your telephone keypad. If you'd like to remove yourself from queue, please press star then two. Once again, that's star then one if you have a question. And today's first question comes from Bruce Lin with UBS. Please go ahead.

Bruce Lin (Managing Director of Wealth Management)

Hi, Alex, Selina, and Jason. Thanks for taking my question. So, I have two questions. The first one will be regarding the hotel business. So could you please introduce a bit about the RevPAR trend in July and in August so far, on a year-over-year change basis? And also, we see also that you have changed your full year hotel revenue guidance. So could you please also provide some color on the RevPAR outlook for the second half? And that's my first question. And the second question is regarding the shareholder return plan, and we saw that we have declared a cash dividend at this time, so will it be a long-term shareholder return plan? Thank you.

Alex Xu (Chairman and CEO)

Thanks, Bruce. And regarding the hotel RevPAR for July and August, the Q3, in July, we saw a little bit steeper drop comparing with the same period, the same July last year, around 15%. Then in August, the first half in August, our RevPAR and is catching up, recovered to about less than 10% of drop compared with the last year. Last year, I think, was, especially in the summer, was a stronger year than the previous years. And so, there is a correction from the record. I think, you know, as looking back, I think somewhat is more understandable. So that's the next two months.

For the third quarter, we anticipate we will operate probably the same levels of reduction as the second quarter, comparing with the last year, 2023. For the balance of the year, and our projection is, so our total revenue side will be flat, comparing with the year of 2023, for several reasons. One, we have reduction in terms of the RevPAR. We also have an increase in terms of the new openings. We still, we still anticipate and planned about 480 new openings, even though we have a short dip in the second quarter. But we're looking at the pipeline, the third quarter, fourth quarter will catch up.

That also will be offset a little bit by we have a reduction in the membership income somewhat, and also we have about 400 hotels in the upgrade mode, because about 400 this year will be going through the remodeling, slightly more than last year. Because last year was the first year we're coming out of the pandemic, and we have given our franchisees some breathing room, you know, to operate the hotels, to generate some cash, to help their businesses. So this year we have planned and also encouraged a lot more hotels in going through the upgrade and the remodeling. So we have a lot of we typically give six months to one year of the grace period if we, the hotels, go through that remodeling phase.

And also, in light of the challenging, at least on the service hotel and restaurant industry, we have given our franchisee a little more in terms of, franchise, signing application fees and various services, and we have added the various services. So in combined, and so we'll see a revenue to remain flat compared with 2023. Okay, so that's on the hotel, business. And, on the shareholder, dividend, even though the second quarter we see, a drop comparing with the same, you know, revenue side, with the same period of last year. However, you can see we still generate a very strong, cash flow, and especially with our dispose of one property and added another RMB 120 million, cash, into the bottom line.

And therefore, we think, and anticipating the other growth needed capital, we think it is appropriate for the first half of the year, and we declare this dividend. We had a continued dividend policy before, which was interrupted by the pandemic, and our plan is to continue. And this dividend practice and the borrowing from any, you know, great growth potential requires for the cash infusion, will continue to deliver sustainable, profitable growth to the bottom line and deliver sustainable returns to our shareholders. So this is our long-term plan, and we'll continue to do this. So thanks, Bruce, for those two wonderful questions.

Bruce Lin (Managing Director of Wealth Management)

Thanks, Alex, for the answers. It's super helpful. Thank you.

Operator (participant)

Our next question today comes from Lewen Liu with China Securities. Please go ahead.

Lewen Liu (VP and Sell Side Analyst)

Okay, thank you. Thank you for managing team, and I have two questions. First is about the demand. I wanna know if I wonder if there's a difference between the business and the leisure demand, and can you draw some colors on this question? And also, second question is about, is there any difference, like, for us, for the second quarter for our hotels, like, in Tier 1 and Tier 2 city and the low-tier city? Thank you.

Alex Xu (Chairman and CEO)

Okay. With regard to the operation issues, I'll take them, Selina, then with the financial numbers, so you'll take them. I'll take Lewen's question. The first question regarding the pattern changes in terms of the ratio between leisure and the businesses, we do observe the trend. There is more leisure travels than the business travels. And there are also higher demand in the third tier cities that, you know, typically we have the scenery and the resort area. And that also the cities where they have a, you know, friendly climate, temperatures attract a lot more leisure travelers in the summer, especially in the July, August.

So we do think that the trend will continue, considering we have a large number of retirees are going into the retirement mode in the next few years. So the leisure travel, and especially the economy and the budget leisure travel, will continue to rise, and we are anticipating and planning for this. The hotels in these areas are performing exceedingly well. For instance, some of our hotels in those resort and summer retreat areas and achieved even a record earnings and record occupancy. With regard to the first and third, second, third tier cities, we did have a trend which we can share with you.

We see the this year, the Tier 1 cities, the RevPAR drops, at least in our business, the most at the 12.5%, and the Tier 2, a drop of 11.7%. Typically, the last year, you know, they with the finish of the pandemic, I think a lot more travels, business travels, generally, businesses and also government for their business seminars and business development activities are exceedingly very high, and we do see some reduction in that number. So the third tier, the most resilient in our model, had a reduction, had a less of impact, about 9% reduction in RevPAR. So that's the phenomenon trend we have observed. And we do believe this trend may continue for a while. So thanks, Lewen.

Lewen Liu (VP and Sell Side Analyst)

Thank you very much.

Operator (participant)

Thank you. And our next question today comes from Kelvin Wong with Mica Capital. Please go ahead.

Kelvin Wong (Senior Analyst)

Thank you. Good evening, Morning to everyone. Thanks for taking my questions. I would like to have three, if I may. I think that it's better for me to ask the question one by one, so that will make it easy to answer that. The first one is more we look at it more on a broader top-down base. I'd like to know, could you talk about the trend of actually the whole industry, and how do you see this trend going forward? And at the same time, are you facing any difficulties at the moment? And what measures have you been taking to deal with these difficulties? And we will be glad if you could also give us a comparison of the company's performance in the second quarter compared with other peers.

That's my first question. I have another two after you answer this one.

Alex Xu (Chairman and CEO)

Okay. All right. Thanks, Kelvin. Regarding the trend in the, I'll talk about, especially the hotel industry, and then later can touch about the restaurant. We have not seen, you know, industry-wide, the statistics of the performance for the second quarter. So we cannot make a meaningful comparison to others, but I can share with you what we have observed. We did get some feedback from the leading, you know, industry OTAs, and so we have an idea. So we are, at least, I think, a better performing group among our peers in terms of the price, occupancy, reservation numbers, comparing with the same period of last year. Our company has built our strengths to face the challenges both up and downs.

So, when the industry is facing challenges, our main concern is the health and the profitability of our franchisees, and also the stable, you know, employment environment for our people. So in order to fend off this kind of up and down volatilities, I think the key is, how do we increase our core competitiveness? You know, I think that, to GreenTree in the past, especially after, you know, the pandemic, we have many aged, older properties that needed to be upgraded. Okay? And, we have worked with our franchisees in the last one and a half years, and, we continue to increase our brand value proposition.

In other words, how we can help our franchisee to maintain the revenue, or even increase the revenue, meanwhile, streamline the operating systems and streamline the operation to reduce the leakage, the waste, and, or the cost. So we have built a better supporting system in the improved, especially this year, to have a timely and more efficient support to our franchisees. And we also have more focused local sales, because everybody is fighting for the national sales. But I think the local sales, local customers, I mean, this is not only for the restaurant business, for the hotel business as well, and we focus on the local sales and the business development. As a result, we believe our downward trend is like to like, and the same, you know, for instance, the same store or like kind of properties.

We're not talking about the new, you know, the different composition of the properties. Then we'll be... I think we're performing one of the, you know, better ones in the industry. We're waiting for the other groups to report their numbers. We'll make a detailed comparison. Another effort we've been focusing on is building and also continue to showcase our brand by going, you know, by reposition, by improving our, you know, by our LO hotels. You can see from the page, page, I think page 7 to 8, in the hotel performance side, our LO hotel, LO hotels continue to lead the FM hotels in both the RevPAR and also the occupancy.

So as a result, we will transfer, we'll replicate the business practice to the franchisees and leading the franchisees to face, you know, this downward pressure challenges. Okay. So, Kevin, that's our focus for the time being. And we're confident-

Kelvin Wong (Senior Analyst)

Very, very-

Alex Xu (Chairman and CEO)

that we'll continue to be the most profitable value deliverer to our franchisees, to our businesses.

Kelvin Wong (Senior Analyst)

Okay. That's very helpful. I would like to have two more questions. The second one, again, a follow-up on the hotel industry. I heard that you're going to maintain the plan of opening 480-490 hotels throughout the year. But if we look at the second quarter, indeed, is there any special reason for the particularly low number of hotel openings during the quarter? Is it because of competition or franchisee? So, and at the same time, apart from organic growth, are you also looking for any M&A opportunities?

Alex Xu (Chairman and CEO)

Okay. Thanks, Kelvin. The second quarter, we did have a slower, you know, lower number of openings. And I think it just happened that some of the scheduled openings getting a little delayed, a little bit, I think, is partially because now I think the regulation for opening hotels is a little bit more, you know, I would say restrictive, and all the required licenses are a little bit harder and to obtain than before. So we have a. We looked at them in the pipeline, so we have a number of hotels that takes a little bit longer to obtain all the licenses. Okay? And we have a plan to do a better job in terms of educating our franchisees and to give them a better support in doing so.

We have looked at the pipeline. In next quarter, I think we are in the third quarter, we are going to open 170±, and then the first quarter, we're likely the same speed. So the year we will end up the year with between 480±, so, or even maybe towards 500 level. Okay? And so we have the hotel numbers in the pipeline, so we're pretty confident in that. With regard to whether we have other competition in the marketplace, our experience, Kelvin, is that we want to maintain a quality higher growth instead of just for the numbers' sake.

I think standardization, higher quality of the hotels and the products and services, and that is more important to our franchisees, to the long term growth and the profitability of the company. So we want to take a more disciplined approach, and every hotels we open, we want to be a profitable one, and can be sustainable for our franchisees. And so we are not going to be just, you know, for growth, for the sake of a growth by growing the numbers. So that's our you know, internal focus, and it's absolutely strictly focused on the franchisees' profitability. So, and that is our focus. And so even though there may be some, you know, competitions, but our core customer space are there.

And so we're helping them to evaluate the site and do a better design and, build the products at the most, most efficient ways, and anticipating the future, consumer's behavior and the requirement. And that's what we're doing. And, then, with that, we think we can earn the confidence and the respect from our customers, that, we still are proud of our loyalty of our GreenTree, franchisees, and that feeling is mutual. Okay. With regard to M&A, we have not, done an aggressive searching in the M&A opportunities, partially because we had two, which was not so successful, and part of the reason is also because of the pandemic and also the performance, guarantee. So it didn't lead to a good result.

So we'll be, we are going to be more focused on, if we do an M&A, and we have to find the group with the same culture, with the same focus on the profitability of the franchisees and the team growth and efficient system and operations, and most importantly, their value proposition has to be, and the brand proposition has to be complementary to GreenTree. At this moment, I think it's a little bit harder to find. We do not want to dilute our efforts and focus now, and to reposition some of our older properties and also build up new ones. In a very short period of time, I think we'll be the leading, we hope, will become the most valued brand by our franchisees and the customers in the industry. Okay.

Kelvin Wong (Senior Analyst)

Great. Great. Thanks. Thanks. It's very clear. And one final small question about your restaurant business. Actually, it's great to see that it has turned profitable in Q1 and now better in, you know, in the second quarter. So I'd like to know about the company's plan for this business in the future, especially in terms of like store openings, like FM store openings, LO stores. What's your plan on that? Any potential difficulties you may face? And actually, is there any plan for you to lease or separately lease this restaurant business because it's doing so good?

Alex Xu (Chairman and CEO)

... Okay. Thanks, Kelvin. Appreciate it for your, you know, praise, and it is a tougher business, and we have spent some time in reposition our business. We have two of the famous, but the legendary are also a legacy brand. Both of them are over 20 years old. And in, I think in our economy, if you can survive and still grow and still be a little bit more, you know, profitable after 20 years, it's almost a miracle to our team. And the one of the reason we're able to turn the business around, I think is really to understand that the consumer demand, the traffic pattern, and also the products next, and the team efficiency. I think those are the a few factors we've been focusing on.

And we're especially focusing on the value creation for the restaurant business. So which part of the area that we can create the most value, so to make both Da Niang Dumpling and also Lugang Cafe relevant to our consumers. So we did quite a bit of reposition. I think our team has made a great effort. And we have also been receiving many inquiries to see whether we want to, you know, buy or invest in other restaurant brand. At this moment, I think, with our transition is still not completely solidified. So we'll take some time and to figure out and what is the best format, what is the best product mix and value propositions for our customers and for our, you know, the franchisees. And then we can speed up the restaurant development.

The worst case scenario is, we spend a bunch of, or spend the franchisees a bunch of CapEx and end up, you know, selling RMB 1 million, loss RMB 500,000. And that's the area we do not want to get into that. So this year, we still wants to be conservative. We planned for about 60 in the beginning of the year, 60 new stores, new restaurants, and we're still trying to target to open that. It's more in the community, street store, street stores with the right format. And our ADS reduction, partially, was also due to, we shrink, we reduced the footprint, the square footage of those restaurants.

And, in the long run, we hope that we can have growth that into separate group, separate business, either with a separate M&A with other groups, they can buy us out, or we can have our team to lead a separate spin out team to be a separate independent business, such as IPO. And, at this moment, we are still not... We, we still do not think we are capable, we are able to do any kind of M&A in the restaurant business to, you know, to actually to export our business models to other businesses. It's still a tough industry. Service industry, even though it's growing, but it's a tough competition. And, we have to be really careful in making those kind of decisions.

So those are the areas we welcome, and any recommendations, and we respect the great operators in the industry. So we wouldn't mind doing multiple different kinds of joint ventures and cooperation with other leading restaurant chains and with the leading restaurant group, in order to further enhance our competitiveness in the restaurant side.

Kelvin Wong (Senior Analyst)

Okay, great. Great. Very helpful. Thanks, thanks for answering my questions.

Operator (participant)

Thank you. As a reminder, if you'd like to ask a question, please press star then one. We'll pause for just a moment to assemble our roster. Once again, ladies and gentlemen, press star then one, if you have a question. Our next question today comes from Storm Shu with ABC Capital. Please go ahead.

Storm Shu (Executive Director and Senior Equity Analyst)

Hello, hello, management. Thank you for answering my question. I have one question about the capital markets. Can you comment on how to improve the liquidity in the capital market? Previously, the company considered several paths. Is there any progress or timeline now? Thank you.

Alex Xu (Chairman and CEO)

No, no, no, I understand. You know, Storm, that I didn't... Can you rephrase the second? I know the first question is increase the liquidity, how we plan to increase the liquidity.

Storm Shu (Executive Director and Senior Equity Analyst)

Liquidity.

Alex Xu (Chairman and CEO)

The second part-

Storm Shu (Executive Director and Senior Equity Analyst)

Yes, in the capital market... the second question is-

Alex Xu (Chairman and CEO)

What's the second?

Storm Shu (Executive Director and Senior Equity Analyst)

Yes. Because our company considered several paths to improve the liquidity. Is there any progress on the timeline now?

Alex Xu (Chairman and CEO)

Timeline for?

Storm Shu (Executive Director and Senior Equity Analyst)

The liquidity, improve the liquidity in the capital market.

Alex Xu (Chairman and CEO)

I see. Okay, got it.

Storm Shu (Executive Director and Senior Equity Analyst)

Thank you. Thank you.

Alex Xu (Chairman and CEO)

Okay, got it, Storm. Appreciate it. Yes, our shares are pretty concentrated by some of the largest institutional investors, and our corporate company owns about 90%, which is, we are in the process of doing a reverse merger, and then we are also, after that, we plan to, in the phased stage, and we discuss whether we can systematically do an offering to, you know, the outside investors to increase the liquidity stage by stage. And the detailed timeline depends on the restructuring, which we hope will be completed any time soon, in the next quarter or so.

So that's the market liquidity, and which is a major concern for ourselves as well, Storm. So we're taking the active, we're taking the concrete plan to do that. Meanwhile, we'll continue to focus on, again, our core competition, strength building. And as I think as long as we continue to deliver the profitable, profitable, sustainable growth and continue to grow the product and services in this, in a high quality standardized, then I think that the long-term value is there for all of our shareholders.

Storm Shu (Executive Director and Senior Equity Analyst)

Okay, got it. Thank you.

Operator (participant)

Thank you. This concludes our question-and-answer session. I'd like to turn the conference back over to Selina Yang for any closing remarks.

Selina Yang (CFO)

Thank you, Rocco. In closing, on behalf of the entire GreenTree management team, we thank you for your interest in GreenTree and your participation in today's call. If you require any further information or have plans to reach us, please feel free to contact us. Thank you all.

Alex Xu (Chairman and CEO)

Thank you.

Operator (participant)

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.