Tuniu Corp (TOUR) 2022 Q1 法說會逐字稿

Hello, and thank you for standing by for Tuniu 2022 First Quarter Earnings Conference Call. (Operator Instructions) Today's conference is being recorded. (Operator Instructions)

I would now like to turn the meeting over to your host for today's conference call, Director of Investor Relations, Mary. Mary, please go ahead.

Thank you, and welcome to our 2022 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 2022.

Before we continue, I refer you to our safe harbor statements in 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 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.

Thank you, Mary. Good day, everyone. Welcome to our first quarter 2022 earnings conference call. From the beginning of this year, we have seen the most severe resurgence of COVID-19 since the initial breakout in 2020. As a company with this experience in tourism, Tuniu has building resilience for coping with short-term industry (inaudible) patients, and we are confident that the industry will resume its recovery in the near future.

During the past quarter, we continue to focus on product innovation, service quality, all of which will help us to remain competitive as we take on new opportunities and challenges. Even as the pandemic resurgence has temporarily halted most travel, we feel to see a return among the public remains high. According to a recent study by domestic mainstream media outlet, travel back at the top of the consumption wished list for consumers aged between 18 to 35 and rank in the top 3 categories for consumers, about age of 60.

In order to satisfy our customers' demand for travel while complying with pandemic prevention regulations, we are constantly upgrading and innovating our products and sales models.

In terms of our products, we have upsized the development of local tour products for travel within cities and nearby destinations.

Leveraging our leader hotel resources, we initiated seasonal product offerings and our hotel product model, such as winter hot springs and spring fruits picking in order to provide more diverse selections of local tour products for customers.

Leveraging our resources in the city travel market, we also launched a series of city work educational in the tour products, which cover museums, zoos and the public gardens. Our product innovations are designed to mirror market trends. Among this, camping has become more popular. We have recently begun offering high-quality camping of lamping and RV camping for young customers and families with children.

During the May holiday this year, sells of camping related to travel products saw significant growth. In line with our motto of safe booking fixed travel, most of Tuniu's products, especially interprovincial tours, have adopted the advanced booking and travel confirmation sales model. Customers are able to make discounts bookings and they took from their departure dates with the option to receive a full refund increase of cancellation, which also will help drive strong (inaudible) among customers for traveling in the future.

Tuniu has fully leveraged live streaming shows (inaudible) channel through the COVID-19 outbreak. We have hosted theme shows for our members' day as well as shows centered around specific regional travel products, as well as multichannel live screening shows featuring outdoor travel and destination reconditions in addition to our regular daily product promotions. Tuniu's live streaming shows are also an important channel for collecting customer feedback and to help us improve our product offerings.

Tuniu's has (inaudible) adheres to our customers first principle in providing full cycle services for customers during the COVID-19 pandemic. Our customer service team has been monitoring the pandemic situation and they work closely with our local tour operators to ensure guest safety during travel, providing timely response or exchange services during spike in resurgence. Our customer service teams communicates with our regular customers on a constant basis and provide tour recommendations, especially for discounting products that are available for advanced booking.

Tuniu has gained a quick number of loyal customers over the years through our reputation of providing high-quality products and services, and the contribution of our repeat customers to our overall GMV has been increasing since the pandemic broke out.

We will continue to work hard to provide high-quality service for our customers and help them with future travel plans.

Next, I would like to talk about our ESG development. In terms of products, we adhered to our strategy of supporting agriculture through travel. We collaborated with destinations in remote areas for product development and launch customized travel products, especially for them. We also launched sales channels for local specialty products, allowing guests to have authentic local experience while supporting the development of the local tourism economy.

Throughout the pandemic, we have faced a great focus on our employees safety and health. In order to better take care of our local employees who work in different regions in China, we made proper work arrangements in accordance with regional pandemic prevention and control guidelines, such as working remotely from home and enjoying flexible work shift. We also implemented regular nucleic-based testing for local staff, especially reception staff at our destinations to ensure the safety and health of the staffs and our guests.

We continue to organize team building activities during the recent pandemic resurgence and carried out the internal trainings and competitions for our core staff and teams to keep them engaged and then motivated. We also carried out several recreational activities such as short video contest and outdoor running contest to encourage our employees to stay healthy physically and mentally. In addition Tuniu sent volunteers to support the community pandemic prevention work and services.

We remain confident about the future of China's travel industry. Even though we are still facing many challenges on the road to full recovery. We are encouraged to see that the COVID-19 inter-province travel guidance were adjusted recently, which narrowed the restrictions from provinces to cities. While the overall travel demand in China continues to rise despite the resurgence of the pandemic, we believe that with the patience and support of our guests and customers, the days of traveling freely will return soon.

I will now turn the call over to Anqiang Chen, our financial controller, for the financial highlights.

Thank you, Donald. Hello, everyone. Now I'll walk you through our first quarter of 2022 financial results in greater detail. Please note that on the monetary (inaudible) RMB, unless otherwise stated. You can find the U.S. dollar equivalents of the numbers on the earnings release.

For the first quarter of 2022, net revenues were RMB 41.5 million, representing a year-over-year decrease of 46% from the corresponding period in 2021. The decrease is primarily due to the negative impact brought by the outbreak and the spread of COVID-19.

Revenues from package tours were down 68% year-over-year to RMB 14.4 million and accounted to -- and accounted for 35% of our total net revenues for the quarter. The decrease was primarily due to the resurgence of COVID-19 in certain regions in China.

Other revenues were down 15% year-over-year to RMB 27.1 million and accounted for 65% of our total net revenues. The decrease was primarily due to the decrease in the fees for advertising services provided to tourism board and bureaus.

Gross profit for the first quarter of 2022 was RMB 15.8 million, down 45% year-over-year. Operating expenses for the first quarter of 2022 were RMB 68.6 million, down 18% year-over-year. Excluding share-based compensation expenses and amortization of acquired intangible assets, non-GAAP operating expenses were RMB 65.5 million, representing a year-on-year decrease of 18%.

Research and product development expenses for the first quarter of 2022 were RMB 16.2 million, up 37% year-over-year. The increase was primarily due to the increase in research and product development for personnel-related expenses.

Sales and marketing expenses for the first quarter of 2022 were RMB 29.8 million, down 16% year-over-year. The decrease was primarily due to the decrease in promotion expenses.

General and administrative expenses for the first quarter of 2022 were RMB 27.7 million, down 38% year-over-year. The decrease was primarily due to the decrease in general and administrative personnel-related expenses and allowance for doubtful accounts.

Net loss attributable to ordinary shareholders was RMB 40.4 million in the first quarter of 2022. Non-GAAP net loss attributable to ordinary shareholders, which excluded share-based compensation expenses and amortization of acquired intangible assets were RMB 37.2 million in the first quarter of 2022.

As of March 31, 2022, the company has cash and cash equivalents, restricted cash and short-term investments of RMB 929.5 million. Capital expenditures for the first quarter of 2022 were RMB 2.1 million.

For the second quarter of 2022, the company expects to generate RMB 32.2 million to RMB 40.2 million of net revenue, which represents a 75% to 80% decrease year-over-year. Please note that the forecast reflects Tuniu's current view and the preliminary view on the industry and its operations, which is subject to change, particularly as to the uncertainties brought about by the impact of COVID-19.

Thank you for listening. We are now ready for your questions. Operator?

We will now begin the question-and-answer session. (Operator Instructions) The first question today comes from Grace (inaudible) with Retail.

Hello, my name is Grace. I have a question for management. As we know, the tourism industry is currently faced with challenges because of the severe resurgence of COVID-19 in the past few months. And on such circumstances, how do you view the future development of the tourism industry and what strategic measures will the company take in the second half of the year to deal with the risks for the pandemic? Will there be any changes compared to the past?

Thank you for the question. We are facing the most severe rebound of the pandemic since the first quarter of 2020. The current outbreak has negatively affected the domestic travel market as well as our revenues in the first half of the year. However, we are glad to see that with the number of infections gradually going down recently, domestic travel restrictions tend to be eased.

In the past Dragon Boat Festival, our number of trips doubled compared with the (inaudible) festival. The market may remain the momentum of recovery in the coming summer vacations and National Day holiday provided that the pandemic is under control.

In the long run, we believe the industry will continue to grow despite the impact of the pandemic tourism demand has not decreased but has been temporarily pent-up. And it will eventually be releasing something. This demonstrated by the increasing popular retail campaign since the spring. To capture the pent-up demand and the uncertainties of the pandemic we seek to provide products which are innovative and flexible.

On one side, we -- our product design follows the concept of [prearranged of] tourism adding more personalized interactive activities for people to enjoy the heavy needs during (inaudible). On the other side, our product sales adopts advanced booking and travel confirmation model. People are free to book any products at any time. If their trips are delayed or canceled that they can choose later departure date or just took a refund.

In terms of service, so we always insist with the customer first principle and provide full cycle service to our customers. Good services help us to retain customers. It's important to care about customers, especially when the market is depressed. Our customer service return to keep close contact with regular customer during the pandemic to reinforce the customer sick needs providing them with the travel-related messages. Therefore, Tuniu is likely to be their first of choice when our customers plan to travel.

In addition, the pandemic brings changes to the travel industry, and we are also trying something new. For example, we further developed the rural tourism because it captures both the concept of (inaudible) and tourism and the momentum of local tour. Our local team travel across the country to find suitable destinations, which should include a characteristic accommodation, food, as well as local activities. We deeply cooperate with the technicians and design special products for them.

Based on our experience in the travel industry and the knowledge of our customers, we have this definition to attract more customers and develop local tourism economy. Moreover, we also run (inaudible) by ourselves, exploring new business scope.

In general, we stayed with Tuniu's core competitiveness under the changing environment while trying to find the potential growth potential. Thank you.

(Operator Instructions) Since there appears to be no further questions. I will now turn the conference over to Tuniu's Director of Investor Relations, Mary, for any 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.

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