Tuniu Corp (TOUR) 2021 Q3 法說會逐字稿

Hello, and thank you for standing by for Tuniu's 2021 Third Quarter Earnings Conference Call. (Operator Instructions) Today's conference is being recorded. If you have any objections, you may disconnect at this time. I will now turn the meeting over to your host for today's conference call, Director of Investor Relations, Mary. Please go ahead.

Thank you, Ray, and welcome to our 2021 Third 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 third quarter of 2021.

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 Founder, Chairman and Chief Executive Officer, Donald Yu.

Thank you, Mary. Good day, everyone. Welcome to our third quarter 2021 earnings conference call. While the recovery of the overall tourism industry experienced setbacks in the third quarter due to the resurgence of COVID-19 and natural disasters, our revenues from packaged tours continued to increase. Following the pandemic resurgence in August Tuniu's total travel GMV resumed growth during September and October.

Operating expenses decreased year-over-year -- year-on-year for the third consecutive quarter. And our net loss continued to narrow compared to the same period last year. During the pandemic era, Tuniu has steadfastly adhered to our customer-first principle, providing safe and comfortable travel experiences as well as refund and exchange guarantees. Our refund and exchange request rate reached the highest level of the year following the COVID-19 resurgence in July.

From July '20 to August '20, Tuniu refunded over 85,000 orders and total refunds for packaged tours was over RMB 120 million. In addition to new extended refund and exchange guarantees for mid- and high-risk areas and absorb some of the losses for customers who had to cancel trips due to pandemic control measures.

Since the outbreak of COVID-19 in 2020, we have provided coverage on the losses of our customers, totaling over RMB 100 million. Thanks to our timely and effective services. We have been rewarded with the long-term support and the trust of our many loyal customers.

In fact, the contribution of our repeated customers to our transaction volume has been stable at more than 75% every quarter since 2020. In October, our Member's Day single-day sales exceeded RMB 10 million with the transaction volume of packaged tour products increasing 30% quarter-on-quarter. And the high-quality and trustworthy corporate image where we established, has played a large role in attracting new customers. While ensuring that we maintain the highest standard of service quality, we will continue to focus our energies on product development. We consistently worked to upgrade our products based on customers' evolving demand amidst the trend towards smaller premium packaged tours.

Travelers have increasingly diversified demand for tourism such as adventurous, photography and health-related services alongside the traditional visits to scenic spots and their standards in terms of facilities and service is growing as well.

During the National Day holiday this year, more than half of our total organized tours or groups of 6 or less according to new tours booking data. Tuniu's years of experience in the industry have allowed us to build a mature product and service network covering points of departure for the development of destination-based products and services still has enormous room to develop.

The design and development of Tuniu's packaged tour products have always revolved around the destinations. Our new tour product designers all have more than 5 years of experience in destinations design. And we have dedicated staff responsible for resource procurement and destinations. Since the COVID-19 outbreak, we have further promoted innovation within existing destination roads and the development of new destinations. By deeply leveraging our resources in the domestic travel market, we have launched multiple diversified products such as countryside tours, climbing and organized tours and in addition to our mainstream products to provide more options for customers.

In the post COVID-19 era, self-guided tours has become increasingly profitable. To address this, our Hotel + X products model focuses on destinations hotels with special emphasis on location hotels. Our Hotel + X product model offers many options to meet diverse customer demand, such as scenic spot tickets for the mass market, helicopter tools for the premium market and family-friendly entertainment activities. The Hotel + X product model still has room for development and with our direct procurement advantages, we will continue to assess deeper levels of destination-based resources to provide travelers with more product choices and with value for money.

In terms of marketing, our approach combines popular online formats, including short reviews to better capture the attention of customers and large streaming shows to introduce destinations. Having to encourage increased users to place orders. These promotions are highly popular with current customers, especially the younger generation. We have developed several long-term and in-depth live streaming shows for popular destinations, some of which have achieved strong results, and we look forward to developing this channel further.

In terms of destination service, our self-operated local tour operators are on the frontline or directly serving customers and one of Tuniu's core advantages. We have been recognized for our continuous efforts to provide high-quality service and have been rewarded with the support and the gratitude of our customers.

Our satisfaction rate has reached 98% this quarter, since we launched our zero complaint initiative with our local tour operators this year. In the third quarter, GMV, our self-operated local tour products increased over 30% year-on-year. Within this, the proportion of GMV for self-operated local tour products increased by 10% within the GMV our packaged tour products compared with the third quarter last year.

In addition, our self-operated local tour operators effectively collaborated with our customer service teams in the headquarters to create a full-cycle service network for travelers. In the third quarter, when our tourist encountered the bad weather conditions and pandemic disruptions, our tour guys, destination staff and customer service teams immediately committed to active our emergency response plan and actively cooperated with the local prevention and control requirements to ensure tourism travel safety.

In terms of technology, Tuniu has made positive progress in our digital development, with significant gains in our operational efficiency, including other processing and inventory management. Going forward, our digital development will focus on destinations, including strengthening our R&D capabilities for supply chain system and improving customer travel experiences.

By leveraging our vertically integrated business model and from [predatory] technology, we are able to reduce the number of intermediate links in the industrial chain allowed us to provide more convenient services for tourists during travel, including airport shuttles, (inaudible) and tour guide options.

While the tourism industry has encountered temporary difficulties due to the recent COVID-19 outbreak, our priority has been to meet the pandemic control requirements of each region (inaudible) and minimize losses while ensuring a high level of customer satisfaction.

Moreover, we will continue to strengthening of our product services and technology to improve overall in destination customer experience. I'm confident that our continuous efforts will continue to deliver results. I will now turn the call to Anqiang, our Financial Controller for the financial highlights.

Thank you, Donald. Hello, everyone. Now I will walk you through our third quarter of 2021 financial results in greater detail. Please note that all the monetary amounts are in RMB unless otherwise stated. You can find the U.S. dollar equivalents of the numbers in our earnings release.

For the third quarter of 2021, net revenues were CNY 114.6 million, representing a year-over-year decrease of 7% from the corresponding period in 2020. The decrease was primarily due to the negative impact brought by the outbreak and spread of COVID-19. Revenues from packaged tours were up 5% year-over-year to CNY 90.7 million and accounted for 79% of our total net revenues for the quarter. The increase was primarily due to the growth in revenues from self-operated products.

Other revenues were down 36% year-over-year to CNY 23.9 million and accounted for 21% of our total net revenues. The decrease was primarily due to the decline in commissions received from other travel-related products impacted by the outbreak and spread of COVID-19.

Gross profit for the third quarter of 2021 was CNY 39.7 million, down 39% year-over-year. Operating expenses for the third quarter of 2021 were CNY 96.4 million, down 25% year-over-year. Excluding share-based compensation expenses and amortization of acquired intangible assets, non-GAAP operating expenses were CNY 19.9 million, representing a year-over-year decrease of 23%.

Research and product development expenses for the third quarter of 2021 were CNY 15.6 million, down CNY 0.03 year-over-year. The decrease was primarily due to the decrease in research and product development personnel-related expenses. Sales and marketing expenses for the third quarter of 2021 were CNY 41.7 million, down 16% year-over-year. The decrease was primarily due to the decrease in sales and marketing personnel-related expenses and the monetization of acquired intangible assets.

General and administrative expenses for the third quarter of 2021 were CNY 41.2 million, down 41% year-over-year. The decrease was primarily due to the decrease in general and administrative personnel-related expenses. Net loss attributable to ordinary shareholders was CNY 35.1 million in the third quarter of 2021. Non-GAAP net loss attributable to ordinary shareholders, which excluded share-based compensation expenses and amortization of acquired intangible assets was CNY 29.4 million in the third quarter of 2021.

As of September 30, 2021, the company had cash and cash equivalents, restricted cash and short-term investments of CNY 1 billion. Capital expenditures for the third quarter of 2021 were CNY 2.1 million. For the fourth quarter of 2021, the company expects to generate CNY 53.4 million to CNY 65.3 million of net revenues, which represents 45% to 55% decrease year-over-year.

Please note that this forecast reflects Tuniu's current and 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?

(Operator Instructions) Our first question comes from Lucy Wang, investor.

Okay. This is Lucy speaking. My question is about the impact of domestic pandemic resurgence on the industry and the company. Is the current call with outbreak continues till the spring festival or even longer? And what's your plan for the winter season? Okay, that's all.

Thank you for the questions. There have been outbreaks of COVID-19 from time to time since late July, which has setback the recovery of the industry. Given under such negative conditions, our revenues from packaged tours still have a positive growth year-on-year. The recent outbreaks have spread to many provinces and some of the provinces have suspended interprovince travel.

First, we expect our net revenue for the fourth quarter to decrease on a year-over-year basis. However, if we look at it in another light, the outbreak of the pandemic has also accelerated the upgrading of the travel industry. After the outbreak of the pandemic, demand for better resources and services from customers have brought up higher-quality products. Upon the demand, we launched the zero complaint initiative with our local tour operators and GMV, our local tour operator products doubled in the first 3 quarters this year compared to the same period last year.

In terms of the service, thanks to the mature efforts from all parties in the entire industry chain. Customer refund and exchange and processes are getting quicker and guarantees more complete. Although we and our partners may incur some losses, we all take the social responsibility and (inaudible) customer increase.

These improvements have reached the bar for the whole industry and will make better in the future. Under current circumstances where interprovince travel are suspended, we'll focus on the intra-province travels. With our advantages in the supply chain, we are providing customers with more high-quality local tours, including high-class leader hotels and local entertainment.

Moreover, with the diversified demand for tourism, we are exploring more options for travelers such as countryside tour and interactive activities between parent and children.

(inaudible) We are exploring these resources around cities package with nearby hotels to form excursion of self-drive products suitable for weekend outings. Also, we will continue our live streaming show destinations to share online with travelers at home. In general, we see the resolutions and efforts to overcome the pandemic throughout the nation in spite of the current resurgence of the pandemic with ongoing vaccine -- vaccination rollout and enhancement of prevention measures, the pandemic will be defeated and the travel industry will continue to recover in the near future.

(Operator Instructions) So we are now approaching the end of the conference call. I will now turn the call over to Tuniu's Director of Investor Relations, Mary, 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.

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