Tuniu Corporation (NASDAQ:TOUR) Q1 2024 Earnings Call Transcript June 4, 2024

Operator: Hello, and thank you for standing by for Tuniu's 2024 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference call, Director of Investor Relations, Mary.

Mary Chen: Thank you, and welcome to our 2024 first quarter earnings conference call. Joining me on the call today are Donald Yu, Tuniu's Founder, Chairman and Chief Executive Officer; and Anqiang Chen, Tuniu's Financial Controller. For today's agenda, management will discuss business updates, operation highlights and financial performance for the first quarter of 2024. Before we continue, I refer you to our Safe Harbor statement in the earnings press release, which applies to this call as we will make forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to the most directly comparable GAAP measures. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. I would now like to turn the call over to our Founder, Chairman and Chief Executive Officer, Donald Yu.

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Donald Dunde Yu: Thank you, Mary. Good day, everyone. Welcome to our first quarter 2024 earnings conference call. In 2024, China's travel industry continued its healthy development trend. The upbound travel market, in particular, is showing robust growth due to the resumption of flights, the introduction of visa-free policies, and the further enhanced supply chain. During this year's Spring Festival and Labor Day holiday, the upbound travel market showed an encouraging rebound. In particular, over the Labor Day holiday, transaction volume for our outbound travel products increased by more than 200% year-over-year. In the first quarter, the company's financial performance maintained strong growth. Net revenues increased by 71% year-over-year, and revenues from package tours grew by 107%, while our profitability continued to improve.

Our gross profit increased by 111% and net income turned positive on a year-over-year basis, reaching RMB22 million. This marks the first time since our listing that we have achieved GAAP profitability in the first quarter, and our fourth consecutive quarter of profitability on a non-GAAP basis. During the first quarter, we see market development opportunities and continue to focus on enhancing our products and services, as well as development of sales channels. Our in-house [indiscernible] one of our core competitive advantages, reflecting the growing contribution of in-house products to our revenue and profit, we will look to increase the proportion of the in-house products in our packaged tours this year. During the quarter, the GMV of new tour products grew by more than 60% compared to the previous quarter.

We are pleased to see that our in-house products have been very well received due to their high quality service. This has contributed to increased repeat purchases by loyal customers and have enhanced Tuniu’s brand image. We were pleased to see loyal customers contributed over 65% to our total transaction volume in the first quarter. We also continued to innovate to meet the needs of different customer group. We upgraded our new tour products to zero shopping itineraries for tourists seeking more time for travel experience. Additionally, we introduced more private tours and small group tours, which have been well received by families and young travelers. We also had various field tours, such as family and honeymoon packages, to attract niche customer segments.

During the first quarter, with the recovery of China's outbound travel market and the arrival of the spring festival travel peak, we saw an increased customer demand for diverse products. We incorporated individual flight tickets and hotel accommodations into our packaged tour offerings and leveraging the flexibility and convenience of individual booking, we launched more packaged tours to various destinations, with a particular focus on upbound tours for East Pacific regions during the spring festival travel season. In addition to improving our packaged tour products, we have also enhanced other travel related products. We lowered resource costs through our centralized procurement strategy to enhance our product competitiveness. Also, we have focused on attracting and retaining customers by improving the service experience.

For example, we have implemented a non-bundling policy for our flight tickets, streamlining the booking process for customers and eliminating unnecessary expenses. By providing customers an exceptional booking experience. We have become one of the travel suppliers for Alipay transport. In terms of sales channels, we have further strengthened the development of various channels to attract new customers, while prioritizing reconnection and the engagement with our existing customer base. Since the beginning of this year, our live streaming business has maintained strong growth momentum. Along with the increase in transaction volume, our verification and sales rate had also been increasing. From January to May this year, the total payment volume from Tuniu’s live streaming channels increased by over 200% year-over-year, with verification volume growing by 400%.

In the first quarter, our live streaming channel continued to achieve quarterly net income, making the fourth consecutive quarter of profitability. This improvement in profitability is mainly due to product optimization and enhanced competitiveness. For our products, we have increased the supply of organized tour products at destinations on our live streaming channels this year. These products offer further enhanced flexibility, allowing guests to choose their preferred transportation and accommodations, while providing more options for FIT guests. Furthermore, we will continue to boost sales of our new tour products, providing exclusive product offerings to guests and further promoting the Tuniu brand. To strengthen our competitiveness, we also established our own live streaming network with over 60 in-house live streaming accounts.

By collaborating with over 1,000 influencers, Tuniu's MCN agency has gained advantages in selling [Hotel Plus X] (ph) products within Douyin’s lifestyle [indiscernible]. In the first quarter, our offline stores experienced significant growth, with transaction volume increasing by over 200% year-over-year. As of now, we operate approximately 200 offline stores. Our focus for this year is on expanding our offline presence in the main cities or key provinces. Our stores attract partners through diverse product selection, exceptional customer service systems, and a favorable policies, working together to provide exceptional comprehensive services for our customers. In terms of maintaining relationships with existing customers, we utilize automation technology to offer customized support.

This year we have strengthened our service for customers interested in individual travel products by providing targeted sales promotions and updates on new features. Our goal is to increase customer loyalty and encourage cross-category purchases. To prepare for the upcoming peak summer season, we extended our membership day promotions in April and May to three days, and introduced additional sales promotions to reward our customers. The transaction volume on our membership days in both April and May exceeded RMB50 million. Looking to technology, we leverage automation systems to refine our management process and continuously improve operational efficiency. In the first quarter, total operating expenses and the percentage of net revenues dropped 20 percentage points compared to the same period last year.

On the supply side, we established an unified resource network for resource acquisition and allocation to support for centralized procurement. On the sales side, we integrated diverse and fragmented information obtained from various channels to help formulate and execute our marketing and promotion strategies. In summary, Tuniu’s business and financial performance have been growing at a healthy pace this year. In response to evolving customer demand, we are always looking to enhance our products and services, aiming to provide a wider range of competitively-priced offerings. Furthermore, we will improve our revenue and profitability, demonstrating the company's value to both the market and the shareholders. I will now turn the call over to Anqiang, our Financial Controller, for the financial highlights.

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Anqiang Chen: Thank you, Donald. Hello, everyone. Now I will walk you through our first quarter of 2024 financial results in greater detail. Please note that all the monetary amounts are in RMB, unless otherwise stated. You can find the US dollar equivalents of the numbers in our earnings release. For the first quarter of 2024, net revenues were RMB108 million, representing a year-over-year increase of 71% from the corresponding period in 2023. The increase was primarily due to the growth of packaged tours as the travel market recovers. Revenues from packaged tours were up 107% year-over-year to RMB83 million and accounted for 77% of our total net revenue for the quarter. The increase was primarily due to the growth of organized tours.

Other revenues were up 8% year-over-year to RMB25 million and accounted for 23% of total net revenues. The increase was primarily due to the increase in commission fees received from other travel-related products. Gross profit for the first quarter of 2024 was RMB82 million, up 111% year-over-year. Operating expenses for the first quarter of 2024 were RMB69.7 million, up 25% year-over-year. Research and product development expenses for the first quarter of 2024 were RMB13 million, down 9% year-over-year. The decrease was primarily due to the decrease in research and product development personal related expenses. Sales and marketing expenses for the first quarter of 2024 were RMB36.8 million, up 84% year-over-year. The increase was primarily due to the increase in promotion expenses and sales and marketing personnel related expenses.

General and administrative expenses for the first quarter of 2024 were $20.5 million, down 8% year-over-year. The decrease was primarily due to the reversal of allowance for doubtful accounts. Net income attributable to ordinary shareholders of Tuniu Corporation was RMB13.9 million in the first quarter of 2024. Non-GAAP net income attributable to ordinary shareholders of Tuniu corporations, which excluded share-based compensation expenses and amortization of acquired intangible assets was RMB19.7 million in the first quarter of 2024. As of March 30th 2024 the company had cash and cash equivalents, restricted cash and short-term investments of RMB1.2 billion. Capital expenditures for the first quarter of 2024 were RMB1.2 million. For the second quarter of 2024, the company expects to generate RMB114.9 million to RMB119.9 million of net revenues, which represents a 15% to 20% increase year-over-year.

Please note that these forecast reflects Tuniu's current and preliminary view on the industry and its operations, which is subject to change. Thank you for listening. We are now ready for your questions. Operator?

Operator: The question-and-answer session of this conference call will start in a moment. [Operator Instructions] The first question today comes from [Aranda Chen] (ph), who is an individual investor. Please go ahead.

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