GreenTree Hospitality Group Ltd. (NYSE: GHG) has experienced a challenging second quarter in 2024, with a significant drop in total revenues and net income as it navigates through economic difficulties. The China-based hotel operator reported a 20.5% decrease in total revenues, which amounted to RMB329.7 million. The company's hotel revenue declined by 14.8% to RMB264.6 million, and its RevPAR (Revenue per Available Room) saw a 10.8% year-over-year fall. Despite the downturn, GreenTree's restaurant business has shown signs of recovery, becoming profitable after previous losses.
Key Takeaways
- GreenTree's total revenues fell 20.5% to RMB329.7 million in Q2 2024.
- Net income decreased by 38.9% to RMB62.3 million.
- Adjusted EBITDA saw a 34.5% decline to RMB83.1 million.
- Hotel RevPAR for L.O. Hotels dropped by 7.3% to RMB177.
- Membership programs grew, with individual memberships reaching 96 million.
- The company is expanding its hotel portfolio, especially in mid to upscale segments and lower-tier cities.
- A repositioning strategy for the restaurant business includes closing unprofitable stores and expanding franchised and managed restaurants.
- Full-year hotel revenue is expected to remain flat compared to 2023.
- A dividend of US$0.10 per ADS has been declared.
Company Outlook
- GreenTree anticipates hotel revenue for the full year to be consistent with the previous year's figures.
- The company plans to open 480 new hotels.
- The dividend policy will continue, with a recent declaration of US$0.10 per ADS.
Bearish Highlights
- The economic recovery in China has led to cautious discretionary spending by consumers and businesses, impacting revenue negatively.
- There is a noticeable decline in RevPAR across different city tiers, with the most significant drops in first and second-tier cities.
Bullish Highlights
- The restaurant business has turned profitable after previous quarters of losses.
- Membership programs are expanding, indicating a potential for increased customer loyalty and future revenue streams.
Misses
- The company missed the mark with a significant decrease in total revenues and net income.
- RevPAR, a key indicator of hotel performance, has also declined.
Q&A Highlights
- Chairman and CEO Alex Xu emphasized the company's commitment to quality growth over merely increasing numbers.
- The core focus for GreenTree is on enhancing competitiveness.
- Xu expressed confidence in providing profitable sustainable growth and high-quality products and services, which he believes will deliver long-term value for shareholders.
GreenTree's second quarter reflects the company's resilience in the face of economic challenges, with a focus on strategic growth and cost management. The company's efforts to expand its hotel and restaurant businesses, particularly through franchising and targeting lower-tier cities, show a strategic adaptation to current market trends. Despite the downturn, GreenTree remains committed to delivering value to its shareholders through quality services and sustainable growth.
Full transcript - GreenTree Hospitality Group Ltd (GHG) Q2 2024:
Conference Operator: Hello, ladies and gentlemen.
Thank you for standing by for GreenTree's 2nd 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.
Rene Van Gershneyn of Christensen. Please proceed, Rene.
Rene Van Gershneyn, Investor Relations, Christensen: 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. Selena Yang, Chief Financial Officer and Mr. Jason Zhang, our new Financial Director. Jason replaces our former Financial Director, Ms. Allen Zhang, who officially retired earlier this month.
Mr. Xu will present the company's performance overview of the Q2 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 and 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 terminologies such as may, will, expects, anticipates, aims, future, intends, plans, believes, estimates, continue, target, is or are likely to, going forward, confident, outlook and similar statements. Any statements that are not historical facts, including statements about the company and its industry, are forward looking statements.
Such statements are based upon management's current 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, Mr. Alex Xu. Mr.
Xu, please go ahead.
Alex Xu, Chairman and Chief Executive Officer, GreenTree: Thanks, Renee, and hello, everyone, and thank you for joining us today. In the Q2, 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, 2nd 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 franchise 3 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 franchise, the street stores and the stores with a stable consumer traffic. Please turn to Slide 5. Compared with the Q2 of 2023, hotel RevPAR was RMB125, down 10.8 percent and the restaurant ADS, that's average daily sales per store was RMB4737, down 22.1%.
Total (EPA:TTEF) revenues were RMB329.7 million, down 20.5%. Hotel revenues were RMB264.6 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 RMB65,300,000 as we continued to execute on our strategy to reposition this business and closed a number of underperforming restaurants. Income from operations decreased to RMB84.4 1,000,000 with a margin of 25.6 percent. Net income was RMB62.3 million, down 38.9 percent with a margin of 18.9%.
Adjusted EBITDA non GAAP was RMB83.1 million, down 34.5 percent with a margin of 25.2%. Slide 6 shows detailed number for our total revenues, income from operations, net income and adjusted EBITDA. Slide 7 shows the trend in our quarterly operation performance. In the Q2 compared to a year ago, RevPAR for our L. O.
Hotels decreased by 7.3% to RMB177. RevPAR for our FM hotels decreased by 10.9% to RMB124. ADR for our LO Hotels decreased by 2.1% to RMB250 and ADR for our FM hotels decreased by 4.4% to RMB171. Occupancy at our L. O.
Hotels was down 3.9 percent to 70.7 percent 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 96,000,000, up from 84,000,000 a year ago and the corporate memberships growth to 2,100,000 up from 1,960,000 a year ago. Slide 9 shows the operating performance of restaurants with ADS down 22.1% year over year at RMB4737, 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 continue 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 3 pronged approach to reposition the business. First, closing unprofitable L and O stores, increasing the proportion of FM stores and expanding the number of street stores. Franchised and managed restaurant accounted for 86.9 percent at the end of the quarter compared to 72.3% a year ago, and street stores accounted for 45.4% compared to 37.9 percent a year ago.
Next (LON:NXT), Selena Young and Jason Zhang will review operating and financial highlights.
Selena Yang, Chief Financial Officer, GreenTree: Thank you, Alex. I will review our hotel business. Please turn to Slide 16. In the Q2, total hotel revenues decreased 14.8% to RMB264.6 million compared to the Q2 of 2023. Total revenues from LRO Hotels were RMB105.9 million, down 19.5% year over year.
The decrease was primarily attributable to a 7.3% year over year decrease in the 2nd quarter RevPAR of LO Hotels. 5 L. O. Hotels closed and the reduction of sublease revenues, mainly due to the disposal of property. Total revenues from F.
M. Hotels decreased 11.3% to RMB157.8 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 2.1% year over year to RMB217.7 million. Operating costs decreased 4.5 percent to RMB143.4 million year over year, which was mainly due to the lower personnel costs, lower hotel related material consumption and lower utilities gave a lower occupancy rate and the closure of LRO hotels, offset by increased rental costs and the D and A due to newly opened LRO hotels since the Q3 of last year.
Selling and marketing expenses were RMB13.2 million, a year over year decrease of RMB0.5 million, mainly due to lower advertising expenses. General and administrative expenses were RMB54.9 million, up 23.6% compared with 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 2nd quarter.
Income from hotel operations decreased from RMB108.5 million to RMB81.6 million year over year. Net income was RMB63.1 million compared to RMB114 1,000,000 in the Q2 of last year. Adjusted EBITDA of hotel business decreased 37 percent to RMB81.9 million and core net income decreased to 22.4 percent to RMB67.6 million year over year. Next, let me turn the call over to Jason for the review of our restaurant business.
Jason Zhang, Financial Director, GreenTree: Visiting to slide 19. In the Q2, we continued to repret our restaurant business and opened more franchised and managed stores. Total revenues were RMB35.3 million, down 37.8 percent year over year. And the total cost and expenses decreased 44% year over year to RMB34.3 million mainly due to lower ADS and the decrease in the number of R and D costs due to the closure of unprofitable R and D costs. And on Slide 20, this method is leading to improved profitability.
Income from operations was RMB2.9 million. Adjusted EBIT was RMB1.2 million. Net profit and core net income turned from loss to profit. Next, Selena will review the profitability of our group.
Selena Yang, Chief Financial Officer, GreenTree: Thank you. Please turn to Slide 21. Group net income per ADS, that's basic and diluted, decreased by 39.9 percent to RMB0.61 and core net income per ADS, that's basic and diluted non GAAP, increased by 3% to RMB0.69. 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 RMB1700 and 37.2 million compared to RMB1517.1 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 LRO 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. Airline's Board of Directors has approved the payment of cash dividend of US0.10 dollars per ordinary share or US0.10 dollars per American depository 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 and A session.
Conference Operator: Thank And today's first question comes from Bruce Mee with UBS. Please go ahead.
Bruce Mee, Analyst, UBS: Hi, Alex, Selena 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 August so far on a year over year change basis?
And also we still saw 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? 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 Chief Executive Officer, GreenTree: Thanks Bruce. Regarding the hotel RevPAR for July August, the Q3 in July, we saw a little bit steeper drop compared with the same period, the same July last year around 15%. Then in August, the first half in August, our RevPAR and its catching up recovered to about less than 10% of drop compared to last year. Last year, I think was especially in the summer, it's a stronger year than the previous years. And so there is a correction from the record.
I think we looking back, I think somewhat is more understandable. So that's the next 2 months. For the Q3, we anticipate we will operate probably the same levels of reduction at the Q2 comparing with the last year 2023. For the balance of the year and our projection is our total revenue side that will be flat, compared with the year of 2023 for several reasons. 1, we have reduction in terms of the RevPAR.
We also have an increase in terms of the new openings. We still anticipate and plan about 480 new openings even though we have a short dip in the Q2, but we're looking at the pipeline, the Q3, Q4 will catch up. And 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 1st year we're coming out of the pandemic and we have given our franchisees some breathing room 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 loss of we typically give 6 months to 1 year of the grace period if 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 various services. So combined and so we'll see revenue to remain flat compared with the 2023, okay. So that's on the hotel business. And on the shareholder dividend, even though the Q2 we see a drop compared with the same 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 disposal of 1 property and added another $120,000,000 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 declared this dividend. We had a continued dividend policy before, which was interrupted by the pandemic. And our plan is to continue this dividend practice and the borrowing from any 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 Mee, Analyst, UBS: Thanks, Alex, for the answers. It's super helpful. Thank you.
Conference Operator: And our next question today comes from Liwan Liu with China Securities. Please go ahead.
Liwan Liu, Analyst, China Securities: Okay. Thank you. Thank you for management team. And I have two questions. First is about the demand.
I wonder if there's a difference between the business and the leisure demand. Can you give some color 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 1st and second tier city and the low tier city? Thank you.
Alex Xu, Chairman and Chief Executive Officer, GreenTree: Okay. With regard to the operation issues, I'll take them, Selena then with the financial numbers, you'll take them. I'll take Wayne'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 3rd tier cities that typically we have the scenery on the resort area. And that also the cities where they have a a friendly climate temperatures attract a lot more leisure travelers in the summer, especially in the July or August. And 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. And the hotels in these areas are performing exceedingly well.
And 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, second, third cities, we did have a trend which we can share with you. We see this year, the 1st tier cities, the rural power drops, at least in our business, the most at 12.5% and the 2nd tier, a drop of 11.7%. Typically, the last year, with the finish of the pandemic, I think a lot more travels, business travels, generally businesses and also government for their business seminars and the business development activities are exceedingly very high. And we do see some reduction in that number.
So the 3rd tier, the most resilient in our model had a reduction has a lesser impact, about 9% reduction in VARPRAL. So that's the phenomenon trend that we have observed. And we do believe this trend may continue for a while. So thanks, Wayne.
Liwan Liu, Analyst, China Securities: Thank you very much.
Conference Operator: Thank you. And our next question today comes from Kelvin Wong with Micah Capital. Please go ahead.
Kelvin Wong, Analyst, Micah Capital: Thank you. Good evening, everyone. Thanks for taking my questions. I would like to have 3, if I may. I think that it's better for me to ask a question 1 by 1, so that I will make you easy to answer that.
The first one is more, we look at it more on the broader top down rates. 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 taken to deal with these difficulties?
And you will be glad if you could also give us a comparison of the company's performance in the Q2 compared with other peers. So that's my first question. I have another 2 after you answer this one.
Alex Xu, Chairman and Chief Executive Officer, GreenTree: Okay. All right. Thanks, Kevin. But regarding the trend in the I'll talk about the especially the hotel industry and then later we can touch about the restaurant. We have not seen industry wide statistics of the performance for the Q2.
So we cannot make a meaningful comparison to others, but I can share with you what we have observed. And we did get some feedback from the leading 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 compared with the same period of last year. And our company has built our strengths to face the challenges both up and down.
So when the industry is facing challenges, our main concern is the health and the profitability of our franchisees and also the stable 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. I think that the GreenTree in the past, especially after 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.
And so in other word, how we can help our franchisees 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 all the cost. So we have built a better supporting system in the improved, especially in 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 for instance, the same store or like kind of properties. We're not talking about the new sort of the different composition of the properties. And then we'll be I think we're performing one of the better ones in the industry. We're waiting for the other groups to report the 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 by reposition by improving our L. O. Hotels. You can see from the Page 7 to 8 in the hotel performance side, our L. O.
Hotels continue to lead the FM hotels in both the RevPAR and also the occupancy. So as a result that we will transfer, we'll replicate the business practice to the franchisees and leading the franchisees to face this downward pressure challenges. Okay. So Kevin, that's our focus for the time being. And we expect that we'll continue to be the most profitable value delivered to our franchisees, to our businesses.
Kelvin Wong, Analyst, Micah Capital: Okay. That's very helpful. I would like to have 2 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 to 490 hotels throughout the year.
But if we look at the second quarter, indeed, we 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 and A opportunities?
Alex Xu, Chairman and Chief Executive Officer, GreenTree: Okay. Thanks, Kevin. The second quarter, we did have slower number of openings. And for 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 there are regulation for opening hotels is a little bit more, 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 the pipeline, so we have a number of hotels that takes a little bit longer to obtain all the licenses, 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.
And we have looked at the pipeline in next quarter, I think we are in Q3, we are going to open 170 plus or minuses and then the Q4 will likely the same speed. So the year we will end of the year with between $480,000,000 plus or minus so or even maybe towards $500,000,000 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, Kevin, is that we want to maintain a quality higher growth instead of just for the numbers' sake. And 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 us to be a profitable one and can be sustainable for our franchisees. And so we are not going to be just for growth for the sake of growth by growing the numbers. So that's our internal focus and is absolutely strictly focused on the franchisees profitability.
So and that is our focus. And so even though there may be some 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 efficient ways and anticipating the future consumers' 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 and A, we have not done an aggressive searching in the M and A opportunities, partially because we had 2, 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. And so we are going to be more focused on and if we do an M and 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's. And at this moment, I think it's a little bit harder to find. We do not want to dilute on our efforts and the focus now and to reposition some of our older properties and also build new ones. And in a very short period of time, I think we'll be the leading, we hope, will become the most valued brand by our advisors and the customers in the industry.
Kelvin Wong, Analyst, Micah Capital: Great, great. Thanks. It's very clear. And one final small question about your restaurant business. So actually it's great to see that it has turned profitable in Q1 and now better in the Q2.
So I would like to know about the company's plan for this business in the future, especially in terms of like store openings like F and M store openings, low 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 Chief Executive Officer, GreenTree: Okay. Thanks, Kevin. Appreciate it for your praise. And it is a tougher business, and we have spent some time in repositioning our business. We have 2 of the famous, but the legendary also a legacy brand.
Both of them are over 20 years old. And I think in our economy, if you can survive and still grow and still be a little bit more 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 the consumer demand, the traffic pattern and also the products mix and the team efficiency. I think those are the 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 dining and dumplings and also, Logan Cafe relevant to our consumers. So we did quite a bit of reposition. I think our team has made a great effort. We have also been receiving many inquiries to see whether we want to 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 to figure out and what is the best format, what is the best product mix and value propositions for our customers and for our franchisees. And then we can speed up the restaurant development. The worst case scenario is we spend a bunch of our spend, the franchisees a bunch of CapEx end up selling $1,000,000 loss $500,000 and that's the area we do not want to get into that. So this year, we still want 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 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 grow that into a separate group, separate business either with a separate M and A with other groups, they can buy us out or we can have our team to lead a separate spend to be a separate independent business such as IPO. And at this moment, we are still not we still do not think that we are capable, we are able to do any kind of M and A in the restaurant business to actually to export our business models to other businesses. It's still a tough industry.
Service industries, 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 kind of joint ventures and the cooperation with other leading restaurant chains and with the leading restaurant group in order to enhance further enhance our competitiveness in the restaurant side.
Kelvin Wong, Analyst, Micah Capital: Okay, great, great. Very helpful. Thanks for answering my questions.
Conference Operator: Thank
Storm Xu, Analyst, ABC Capital: you.
Conference Operator: Our next question today comes from Storm Xu with ABC Capital. Please go ahead.
Storm Xu, Analyst, ABC Capital: Hello, management. Thank you for answering my question. And I have one question about the capital markets. Can you comment on how to improve the liquidity in the capital markets? Previously, the company considered several tax.
Is there any progress or timeline now? Thank you.
Alex Xu, Chairman and Chief Executive Officer, GreenTree: No, no, no, I understand. You know the storm that I didn't can you rephrase the second? I know the first question is increase the how do we plan to increase the liquidity? Liquidity. Yes,
Storm Xu, Analyst, ABC Capital: in the Capital Markets. The second question is What's the second question? Yes, because our company considered several paths for the improved liquidity, is there any progress or the timeline now? Timeline for? Improve the liquidity in the capital markets.
Alex Xu, Chairman and Chief Executive Officer, GreenTree: I see, okay.
Storm Xu, Analyst, ABC Capital: Thank you. Thank you.
Alex Xu, Chairman and Chief Executive Officer, GreenTree: Okay. Got it, Stone. 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 to we are also after that, we plan to in the phased stage and we discuss whether we can systematically do an offering to the outside investors to increase the liquidity state by state. And the detailed timeline depends on the restructuring, which we hope will be completed anytime 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 I think as long as we continue to deliver the profitable sustainable growth and continue to grow the product and services in the high quality standardized, then I think that the long term value is there for all of our shareholders.
Storm Xu, Analyst, ABC Capital: Okay, got it. Thank you.
Conference Operator: Thank you. And this concludes our question and answer session. I'd like to turn the conference back over to Selina Yang for any closing remarks.
Selena Yang, Chief Financial Officer, GreenTree: Thank you, Rachel. 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 passed away with us, please feel free to contact us. Thank you all.
Alex Xu, Chairman and Chief Executive Officer, GreenTree: Thank you.
Conference Operator: 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.
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