Tuniu Corp (TOUR) 2015 Q3 法說會逐字稿

Hello, and thank you for (technical difficulty) quarter 2015 earnings conference call. (Operator Instructions). Today's conference is being recorded. If you have any objection you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference call, Senior Director of Investor Relations and Strategic Investment, Maria. Please go ahead.

Thank you, and welcome to our third quarter 2015 earnings conference call. Joining me on the call today are Donald Yu, Co-Founder, Chairman and Chief Executive Officer, Alex Yan, Co-Founder, President and Chief Operating Officer, and Conor Yang, Chief Financial Officer.

For today's agenda management will discuss business updates, operational highlights and financial performance for the third quarter of 2015.

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. P please refer to our earnings release, which contains a reconciliation of non-GAAP measures to the most directly comparable GAAP measures. (Technical difficulty) all the figures mentioned during this call, during this conference call are in renminbi.

I would now like to turn the call over to our Co-Founder and Chief Executive Officer, Donald Yu.

Thanks, Maria. Good day everyone. Welcome to our third quarter 2015 earnings conference call. I'm pleased to report that we delivered excellent growth during the third quarter of 2015, with packaged tour GMV and the net revenues increasing by 122%, 128% year-over-year, respectively. Our growth rate continues to significantly outpace our industry peers and the overall growth of the travel industry.

We are also thrilled to announce the strategic investment by Hainan Airlines Group, that's Hainan Airline Tourism, a leading tourism company in China with a rich collection of travel-related resources throughout the travel supply chain in China. Following the $500m cash investment priced at [$16.5] per Tuniu ADS, Hainan Airline Tourism will become our largest shareholders with over 24% ownership.

Our strategic cooperation with Hainan Airlines Group, we are benefited in a number of ways. Following the partnership, we will be able to directly procure a number of Hainan Airlines Group airline and hotel resources at a preferential price. Some of the resources that will now be directly available to Tuniu include Hainan Air, Capital Airlines, Deer Jet and various hotel resources under Hainan Airlines Group.

This is a significant step in improving our direct procurement capability, and this allows Tuniu to directly procure competitively-priced air tickets and to assemble it in our packaged tours. Tuniu will now have the resource to better connect our 200 departure cities to our 140 destination countries, and to better provide high-quality travel products to meet the demands of our customers.

Our business partnership with Hainan Airlines Group marks the beginning of a new era for Tuniu. We will have improved access to resources throughout the travel industry and, notably, the ability to better connect our own resources. Going forward, the new alliance between Tuniu and Hainan Airlines Group will unlock additional catalysts that will support our continuous, rapid growth.

Now I will walk through some of the -- some of our key strategic focuses that are central to the ongoing development of Tuniu. These include growing our financial services, capturing market opportunities, continuing our regional expansion, enhancing our direct procurement capabilities, and improving our technology.

First I would like to talk about one of our largest initiatives, financial services. Our financial services offering closely complements our core leisure travel business. We currently offer a range of financial products and services to both our customers and our suppliers. These financial services are designed to dramatically support the overall development of the leisure travel market in China by promoting users to travel and supporting suppliers to grow.

I'm pleased to announce that our program in financial services continues to gain traction in both our customers and our suppliers.

On the customer end, our travel-financing product has made travel more accessible for many, by enabling customers to travel with an initial down payment. This product has been especially popular among the younger generation of travelers, who are more price sensitive. In addition to offering financial products, Tuniu also offers a range of wealth management products and insurance products to our customers.

On the supplier side, we aim to provide our close supplier partners with the working capital to provide high-quality travel products at an increased [scope].

Combining both our customer and supplier-related financial services, total transaction volume maintained at over 200% quarter-on-quarter growth rate during the last three quarters with monthly transaction volume reaching over RMB1b in October. Additionally, because of our large collection of data on our suppliers and customers, there have been no default for any of our loan-related products.

In addition to the offerings of financial services ,Tuniu has been implementing a wide range of complementary travel-related services and products such as railway, rail ticketing, air ticketing and hotel booking for our customers.

As our packaged tour business continues to rapidly grow, we continue to make long-term investments in additional business categories, in order to create an ecosystem that will complement our core leisure travel business. We strongly believe that these investments will grow into our competitive advantage and make positive contributions to our profitability in the long run.

In terms of the leisure travel market, there continues to be many opportunities within the supply chain. In the future, as our packaged tour business continues to rapidly scale and, at the same time, as Tuniu becomes increasingly integrated into the supply chain, we will unlock additional profitability potentials. Once our long-term investments become fully integrated into our leisure travel ecosystem, we expect our margins to begin an upward trend.

Now I would like to transition to our progress in regional expansion, which continues to be on pace with our plans. As of the end of October, Tuniu had 140 regional centers across China, that serve as hubs for customer acquisition and product localization. The positive impact of our regional-center strategy is increasingly clear, as we continue to expand our coverage and increase their efficiency.

During the third quarter GMV contribution from the lower-tier cities surpassed the contribution from first-tier cities for the first time. Similarly, the regions covered by the 58 new regional centers, that we opened in 2014, contributed to 17% of our total GMV. This is up from 6% during the third quarter of 2014.

We are excited about the results of our regional expansion plan. Going forward, increasing the coverage of our regional centers, and increasing the efficiency of our established centers will strengthen Tuniu's core competitive advantage.

As our regional expansion continues, our direct procurement capability is also improving. Last Monday, Tuniu had its annual global procurement conference and invited our procurement suppliers from all over the world. The conference was very successful, as we were able to sign a number of new suppliers to our direct procurement program, and to expand business relationships with existing suppliers.

Tuniu's direct procurement products have always been structured based on the extensive data we have of travelers' demand characteristics, and assembled by leveraging our extensive relationship with travel-service suppliers. During October and November Tuniu's overall direct procurement reached one-third of our total GMV, up from 25% during the second quarter of 2015.

We continue to receive benefits from our increased direct procurement capabilities in terms of pricing competiveness, and as well as the ability to more closely and quickly match the demands of our customers.

An example of our direct procurement product is the air ticket plus local tour package, which was initially introduced in 2012. This product bundles air ticketing with destination-based local tours, in order to allow organized tours to efficiently gather travelers from various departure cities and form tour groups locally. While traditional organized tours require a minimum number of sign-ups, our direct procured package has removed this constraint. During the third quarter of 2015, direct procurement product contributed to approximately 60% of our domestic packaged tour GMV.

Lastly, I want to touch on mobile and technology. In the third quarter of 2015, mobile's contribution remained strong, while mobile convergence rate continues to be an uptrend. We remain committed to staying ahead of the mobile trend by continuously improving our mobile technology platform, so that our customers have a seamless booking experience, and have access to crucial travel information on the go.

In addition to improving our mobile application for our customers, we have also upgraded the back-end system for our suppliers. We introduced the latest version of our [in-booking] system, which is the Internet and mobile supply-management system for our suppliers. The new version of the in-booking system features interface improvements, infrastructure upgrades, as well as English language, for our global flyers. Additionally, we introduced our own API for the in-booking system. Now our suppliers can have Tuniu integrated into their systems.

We are excited about the progress that Tuniu has made over the year. While the leisure travel market continues to grow, we will work hard to strengthen our long-term core competitiveness. Our progress in brand development, regional expansion, direct procurement, complementary travel-related services and mobile technology all play important roles in our development, with our own customer-contribution rate reaching more than 37% of our GMV during the third quarter, up from 30% during the same period last year. We are confident that Tuniu will be able to continue providing high-quality leisure travel products to our customers.

I'll now turn the call over to Conor Yang, our CFO, for the financial highlights.

Thank you, Donald, and hello everyone. Before I go over the financial highlights, I would like to give a general update on the progress of our long-term investments. As Donald mentioned above, leisure business continued to grow rapidly. GMVs from our accommodation booking is up more than 300% quarter-on-quarter in the third quarter, while transportation ticket GMV is up more than 200% quarter-on-quarter. Our new strategic partnership with Hainan Airlines Tourism will also enhance our capabilities in this business category.

I will now walk you through our third quarter 2015 financial results in greater detail. Please note that all the monetary amounts are in RMB, unless otherwise stated. You can find the US dollar equivalent of these numbers in our earnings release.

Starting from the third quarter 2015, packaged tours gross booking for the quarter increased by [122.2%] year-over-year to RMB4b, including 60.8% from outbound tours. Organized tours accounted for 74.9% of the overall gross booking in this quarter.

For the third quarter, net revenues were RMB3b, representing 127.5% year-over-year growth.

Revenues from organized tours, substantially all of which are recognized on a gross basis, were up 124.5% year-over-year, to RMB2.9b, and accounted for 96.7% of our total net revenues for the quarter. The increase was primarily due to the rapid growth in demand for travel to certain international destinations, such as North America, Japan, Australia, Middle East, Africa and Europe, and for the domestic tours. The number of trips for organized tours, excluding local tours, increased by 142.1% year-over-year to over 635,000.

Revenues from self-guided tours, which are recognized on a net basis, were up 165.8% year-over-year, to RMB67m, and accounted for 2.2% of our total net revenue. The increase was primarily due to the growth in travel to certain islands and domestic destinations. The number of trips for self-guided tours increased by 181.8% year-over-year to 369,000 (sic - see press release "369,719") in the third quarter of 2015.

Other revenues, which are recognized on a net basis, were up 485.1% year-over-year, to RMB44.6m, primarily due to the rise in service fees received from insurance companies, fees for advertising service and revenues from other travel-related products and services.

Gross margin for third quarter of 2015 was 5.6%, compared to 6.1% in the same period of 2014. The decline in gross margin was primarily due to Tuniu's competitive pricing strategy, and higher costs associated with new regional service centers, and in the newly-added tour advisors.

Operating expenses for the third quarter of 2015 were RMB526.9m, up 172.8% year-over-year. Excluding share based compensation and amortization of acquired intangible assets, non-GAAP operating expenses were R490.2m, representing a year-over-year increase of 166.5%.

Research and product development expenses for the third quarter 2015 were RMB87.1m, up 214.5% year-over-year. The increase was primarily due to investment for the implementation of additional product categories, such as online finance services, accommodation reservations and transportation ticketing, increase in direct procurement related personnel at regional service centers, improvement of online technology and a rise in technology and product development personnel-related expenses.

Sales and marketing expenses for third quarter 2015 were RMB338m, up 180% year-over-year. The increase was primarily due to branding campaigns advertisement for our mobile business development, expansion of our VIP customer services center, and amortization of acquired intangible assets from previously-announced transaction with JD.com.

General and administrative expenses was RMB103.9m in the third quarter of 2015, up 125.3% year-over-year. The increase was primarily due to an increase in the headcount of our administrative personnel as a result of our regional business expansion.

Net loss attributable to ordinary shareholders was RMB433.3m in the third quarter of 2015. Non-GAAP net loss attributable to ordinary shareholders, which excluded share based compensation expenses and amortization of acquired intangible assets was RMB396.5m (sic - see press release "RMB396.9m") in the third quarter of 2015.

As of September 30, 2015 the Company has cash and cash equivalent, restricted cash and short-term investments of RMB4.6b. Cash flow generated from operations for the third quarter of 2015 was RMB111.4m. Capital expenditure for the third quarter of this year was RMB54.6m.

Now, let me provide topline guidance for the fourth quarter of 2015. As Donald mentioned earlier in this call, we are confident about our outlook for the fourth quarter of 2015, and expect the trend, accelerated growth in our topline, to continue as our investments in regional expansion, partner offerings and marketing initiatives started to pay off.

Tuniu currently is expected to generate revenues in the range of RMB1.81b to RMB1.86b in the fourth quarter of 2015, representing a 95% to 100% year-over-year increase. Please note that this forecast reflects Tuniu's current and preliminary view on the industry and its operations, which is subject to change.

Thank you for listening, and we are now ready for your questions. Operator?

(Operator Instructions). David Jin, Goldman Sachs.

Hi, good morning. This is George calling on behalf of David. Thank you very much for taking our questions. So the question is regarding your cooperation, also investment from the Hainan Airlines Tourism Group. With them being your, or becoming your largest shareholder, and they also have the travel-related Asia asset in, for example, Caissa and also [Nine Dragon], would there be any further capital market cooperation with more domestic market, capital market exposure going forward? And that's on the capital level.

And also, regarding on the cooperation on the operational level, because you mentioned that you will enjoy preferential rates from Hainan Airlines Tourism Group. I wonder if you could potentially get some preferential treatment also from the larger Hainan Airlines Group, meaning outside just the tourism entity? And what kind of margin improvement, if any, we can expect from that kind of preferential treatment. And also, will this investment and cooperation entail any issue for your cooperation with other suppliers, in general? Thank you very much.

Yes, first of all, we're very excited about this investment from Hainan Airlines Tourism. And in fact they're 100% owned by the Hainan Group, and so -- and yes, they have several listed entities in the domestic market. And right, for the time being we'll just continue to build out our business and we're open for any possible opportunity in the future.

In terms of the preferential pricing from air ticket, actually, that will include all the Hainan Airlines Group, including Hainan Airlines, Capital Airlines, Hong Kong Airlines, and many, many other airlines they have. And it will -- as the benefit from that will eventually translate to more competitive pricing for our customers. Yes, certainly we think that they have rich resources in many travel-related resources, including airlines, hotels and other like tour attractions areas' asset. We are excited that we should be -- can benefit from leveraging that relationship, or the relationship with the Hainan Airlines Group.

Got it. Thanks. But is there going to be any issue for your cooperation with other suppliers going forward, after this cooperation and investment from Hainan?

(Interpreted) Yes, we don't think there will be any impact from our cooperation with other airlines.

The other big three airlines in China are state-owned enterprise. Hainan is more non state-owned. So we'll continue to work with the other airlines, but definitely, with the strategic investment from Hainan Airlines Group will definitely help us in our --overall in the air transportation resources. Thank you.

Got it. So you will transfer -- thanks. So you will translate the preferential price to your -- to a better offer to your customers. That means your gross margin, probably we won't see any significant improvement in terms of gross margins, right? Just want to confirm that.

We'll continue to grow our market share. And in terms of the margin improvement will come from our other new [product-related] expansions, as Donald mentioned earlier, on the online financial services, on the transportation ticketing, hotel booking and other new product categories. Thank you.

Got it. Thank you very much. That's very helpful.

Evan Zhou, Credit Suisse.

Hi, good morning, Alex, Donald, Conor. Thanks for taking my questions. The first question, regarding that you mentioned in your prepared remarks, that we do expect the overall gross margin level to improve down the road, I think with more direct contribution from the direct procurement, and also from Internet finance product. I think up to this point, I think we are yet to see a meaningful impact to our gross margin trajectory yet.

So I was wondering, can you maybe quantify a little bit, let's say, how much within the gross margin that we are benefiting from the direct procurement and how much we are giving back to the consumer with good pricing? And also, how much we are having gross margin enhancement from our Internet finance products? That'll be very helpful, thank you.

Evan, you see that on a year-over-year basis, gross margins are slightly below same quarter last year. But if you look at this year, the first quarter, second quarter and third quarter, our gross margin continue to improve.

And from the direct procurement, we do definitely that -- or short term, that whole value chain, that will translate into better pricing actually, give back to the customers. And this quarter, the -- if you look at our other revenue, actually grow at more than 480% year over year. And these the most contribution come from the new product category that we are building our long-term investment.

Currently we do not disclose separately on the financial services and other -- transportation tickets, but these are all put in to the other revenues. We can see the other revenue has grown very, very strongly. And we're expecting that portion from the other revenue will continue to grow at a rapid pace going forward, as we have more long-term investment to monetizing our overall traffic.

Got it. Thanks, Conor. Second quick question is regarding the guidance. I think if you look at the [implied] quarter-on-quarter seasonality, I think it's probably a little bit weaker than the previous years. So I was wondering if you have any color on 4Q guidance. Is it possibly due to the recent events in Europe, or any other specific reason? Thank you.

Yes. Our guidance is the same as our guidance in the first quarter and second quarter this year. The recent terror attack in Paris we do see, definitely, there's certain impact in very short term. But, over and over, time has proved that, we have covered 140 countries worldwide, and there will be certain things happen from time to time in like Thailand, even [Maldives], a few weeks ago and also Europe, but these are proved to be short term; even we have experienced that. So, currently, yes, there are certain terror events in Europe. And so we try to be conservative in our guidance. So, 95% to 100% we think still provide a very robust growth.

Got it. Thanks for the color, Conor. Very helpful, thank you.

Yes. Thank you.

Amanda Chen, Morgan Stanley.

Hi. Good morning, Donald, Alex, Conor and Maria. Thank you for taking my question, and congrats on the strong quarter. So my question is still regarding our deal with HNA. I think they too will supply us some air ticketing and hotel resources, but recently our major competitor, they also [will] increase their investment in the packaged tour area. So I'm just wondering, how this deal will impact the overall competitive landscape of the packaged tour area? And should we expect more aggressive pricing strategy or more aggressive pricing war in this area? That's the first point.

And the second point is, can you give us some updates regarding your strategy of the hotel and air ticketing business? We know it's increasing and growing very fast, but in future, are you going to expand this business aggressively? Will you sign more suppliers and increase your offline sales people to do the hotel business, and compete with other online travel agents? That's my two questions. Thank you.

(Inaudible).

(Interpreted). Yes, to answer your first question about, you know, we don't think pricing is the most important thing for our packaged tour package. More importantly it's the overall service; the branding, the trust and the supply chain management. Even though we are very competitive on the pricing, we'll continue to differentiate ourselves in terms of service to our customers, in terms of our branding, trust and supply chain management. And we think that the challenge is really how continually to provide better service for Chinese customers when they travel. That's the first question. The second question?

(Interpreted). Yes, for our air ticketing and hotel booking, it's more, first of all, that it will serve the purpose of our leisure travel package. And as we do more direct procurement, that air ticketing, we will do more directly with the airline companies and also hotels. So these two channels that will enhance our capability for direct procurement.

And also that, in this, as we continue to build out traffic, that we want to further monetize our traffic. And so we'll use the open platform for air ticketing and hotel booking as quite similar to JD.com's [top] open platform. So, currently, supplier, including Ctrip and a few others, we'll continue to connect with other suppliers for air ticketing and hotel booking. Thank you.

Got it. Thank you, Donald and Alex. Sorry, I have a quick follow-up though. After the deal, how is our relationship with our existing strategic shareholders, like Ctrip and Jingdong, so, how we will continue collaborate with these two shareholders?

You mean after Hainan investment? Hainan Airlines investment?

Yes.

We still -- we'll continue to have a good relationship with Ctrip, continue definitely good relationship with JD.com. They have been helpful and very helpful to our business and continue to be supportive. With this investment from Hainan Airlines Group, they, from the beginning, the Hainan Group, Airlines Group, want to do this transaction by itself. And it has paid a premium to our current share price, as well as the more than 11% premium of our overall last 20 days trading prices. So, therefore, they just want to do this whole transaction by themselves, without other shareholders to do the follow-on. That's why it's only investment by Hainan Airlines Group, not the other partners. But we still have a very good relationship with JD.com and Ctrip. Thank you.

Got it. Thank you. Very helpful. Thank you.

Eddie Leung, Merrill Lynch.

Hi. Good morning guys. Just a couple of housekeeping questions. I guess most of them could be directed to Conor.

My first question is about your financing business. I'm just curious, how and when you (inaudible) for your, perhaps like recall loans, to your customers and suppliers. So that's my first question.`

And then secondly, could you remind us the number of headcounts and what's your plan, because I think you mentioned a couple of times in your opening remarks that you will be growing your headcounts for your (inaudible) regional expansions.

And then finally, we understand it's just a near-term temporary issue, but could you remind us how big is Europe for your business perhaps at the moment? Thanks.

I missed your third question. What's -- can you say that again?

Conor, just how big is Europe for your current business. Thanks.

Okay. Yes. Okay.

Yes, we have financing to our suppliers as well as financing to our customers, and also our customers buying our wealth and management products. So we've -- for the supplier financing, actually, it would be a deduction of our cost of revenues, because these are our suppliers, when we charge them interest. And that would be during a period, for example, during the third quarter, how much interest we have generated from suppliers. So that's why we book the deduction of the cost of revenues.

Also for our customers buying our wealth management products, again we book the revenue that -- which is the interest generated during that period of time that's by our customers purchasing these products. And, in the meantime, we have a cost associated to these funds that would be also a part of the cost of revenues item. So, in general, that's these are for both suppliers and our customers that we book these during -- when this [period] happens, the interest generated during that period.

And in terms of headcount, yes, right now, in terms of -- we have continued to invest in many long-term areas, such as new product categories and air ticketing, hotel booking, online, e-financial services, and we have seen this -- also direct procurement. And that has generated pretty fruitful return, we have seen so far, and we expect that will generate more in the future. So even though we see the headcount has increased, but we think that these are the investments worthwhile to invest.

And currently we have 5,600 people in our Company. And for these more mature business, we definitely the headcount increase is a lot slower than our topline growth. For the new initiatives, we need to do the long-term investments.

In terms of Europe, Europe [has become] the [largest] area of our business. In this quarter, the GMV coming out from Europe is about 17% of our total GMV.

Thank you very much.

Thank you.

Yes, thanks, Eddie.

Juan Lin, 86Research.

Hi, good morning, Donald, Conor, Alex and Maria. Thank you for taking my questions. Congratulations on another very strong quarter. My question, first question, is related to your take rate. Now that direct procurement has accounted for 30% of total GMV, take rate has improved sequentially. How much do you think your take rate and the gross margin will reach next year? And then more importantly, could you please remind us the long-term target for your take rate and whether there's any change in your long-term target for gross margin?

And my second question is related to the Hainan Airlines Group investment. In addition to procurement, are there going to be more synergies with the Hainan Airlines Group in terms of product sales and marketing, and whether there will be operational synergy with Caissa going forward? Thank you.

Yes, the take rate, yes, as we do more and more direct procurement, the short term we'll have a small improvement due to the size of each of our packaged tours. As we continue to grow very fast, that will be increasing size for each of the product lines that we're doing our direct procurement.

Even though we don't give guidance on the margin in the near term, but in the longer term, we think our take rate, from GMV, should increase to 10% as we do more direct procurement as we continue to scale up. Yes.

In terms of the Hainan Airlines, I will let Alex to answer this.

(Interpreted). As we do more and more direct procurement, that's important; is from departing city transportation to destination. In terms of departing city, we have 140-plus regional service centers, and we have spent a lot of effort on building this. In terms -- next year we will focus a lot on the destination area, and what we need really is connecting these two, which is the airline tickets. So we'll have a lot of cooperation with China Airlines Group in terms of air ticketing. And areas such as Maldives, Mauritius, Europe, and also domestic, like Hainan, Sanya, and Leijiang, they will provide very useful and important resources for air ticketing for us.

And as most of you probably know, Hainan also a majority shareholder of the Caissa Tourism group. Caissa has a pretty -- very good products. And through this investment relationship with Hainan Airlines Group, we hope -- I think we're also in talk with them to sell Caissa's product. So we can act as online channel for Caissa to providing, you know, selling more of their products to our customers.

Thank you, Conor, Alex.

Thank you.

That's very helpful.

Tian Hou, T.H. Capital.

Good morning, management. Congratulations on a good quarter. I have several questions. One is -- the first part of the question is really related to your direct procurement. So as the direct procurement increase, I wonder, what's your plan for this part of business as a total percentage of the business; such as by the end of the 2016, what do you expect in direct procurement as a percentage of total GMV? That's number one.

And also, related to that, as you direct procure the resources, the inventory, is there a potential risk of inventory risk? That's number two.

Number three, as you have more direct procurement product, will there be a potential conflict of interest with the other services provider? That is the question related to direct procurement.

And another question, related to your cooperation with JD, and I wonder if you could give us some color on your cooperation with JD. What's the progress have you been making and what's next? That's all my questions.

(Interpreted). In terms of (inaudible) for direct procurement, by end of 2016, we should increase to, from currently about 30% of our GMV from direct procurement, to about 40% to 50%, and probably we'll just keep about 50% from this direct procurement.

Yes, there will be more inventory risk associated with the direct procurement. Therefore, to mitigate this inventory risk, we have the following measures. Firstly, that, from third quarter this year, we have established our wholesale channel, that we are also providing B2B to sell our direct procurement product. And also we have built up VIP team [simply] to service our existing customers. So whenever we have our own products, we sell through our 2C channel, we sell through the 2B channel, and as well as we have the VIP that we can sell to our own customers.

And this year we have also strengthened our IT systems, in terms of the inventory system, that were enhanced to that we can real-time check the inventory numbers and that there's automatic pricing system. And also as we continue to invest in our branding, as we build more trust for our brands, that whenever we have our own products that we can easily digest this product line into our customers.

(Interpreted). In terms of the relationship with existing suppliers, this year we have -- a few weeks ago we just held the suppliers' annual meeting. As we demonstrated, that there are a lot more suppliers that, in terms of numbers, that can -- the annual transaction with us, more than RMB100m, and also that more than RMB50m, many categories that the number of suppliers has increased. That means, even though we have more direct procurement by ourselves, but as we grow rapidly, the amount of business we've given to our suppliers actually has continued to increase. So we will still definitely keep a good relationship with our suppliers, and we'll maintain, probably, 50% of our GMV also from our wholesale suppliers.

In terms of JD, the development has continued to -- goes well. And we not only -- starting from offering just the packaged tours product, and now we'll to start to open more and more product categories in JD's channel. We're offering tour-attraction tickets, we're offering our high-speed railway tickets, as well as air ticketing and hotel booking. And we're happy to see that development. Okay. Thanks.

Thank you very much.

Thank you, Hou. Yes.

(Operator Instructions). There are no more questions at this time. We are now approaching the end of the conference call, so I would like to turn the call back over to Tuniu's CFO, Conor Yang, for closing remarks.

Once again, thank you for joining us today. Please don't hesitate to contact us if you have any further questions. Thank you for your continued support. And we look forward to speaking with you in the coming months. Bye-bye.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a pleasant day.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.