Tuniu Corp (TOUR) 2021 Q4 法說會逐字稿

Hello, and thank you for standing by for Tuniu's 2021 Fourth Quarter and Full Year Earnings Conference. (Operator Instructions) 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.

Thank you. And welcome to our 2021 Fourth Quarter and Full Year 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 fourth quarter and fiscal year 2021.

Before we continue, I refer you to our safe harbor statement 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 fourth quarter and full year 2021 earnings conference call. 2021 was a year full of challenges and opportunities. While Tuniu experienced a rapid business rebound since COVID-19 was brought under control in China. We have also been tested by its repeated recurrences. In 2021, our revenues from packaged tours for the full year of 2021 maintained the same level as in 202, despite the adverse external environment with the transaction volume of our self-operated local tour operators achieving double-digit growth. Our operating expenses have increases year-on-year for 4 consecutive quarters and the net loss for the year has also narrowed significantly compared with last year.

COVID-19 has tested the abilities of tourism enterprises to manage risks on a sustained basis. It has required interfaces to continue to innovate, meet key customer demands and upgrade products and services. It also required a highly efficient internal management systems to adapt the changing business environment using limited resources.

Tuniu's development path has been differentiated by our focus on the creation of a vertically integrated supply chain, allowing us to become the industry's sole integrated digital tourism service provider. By bringing together production, the supply and sales and building our capabilities in direct procurement as well as product design and packaging, self-operated local tour operators and multiple sales channels, Tuniu has realized significant advantages compared to our peers. Recognizing the market changes and upgraded customer expectations in the post-COVID-19 era, Tuniu has focused on new directions for product development that leverage our advantages.

In addition, we have upgraded our digitalization capabilities across the entire industry chain to improve our operational efficiency and customer experience. Our integration has shortened the industrial chain and improved gross profit, while the (inaudible) has improved efficiency and reduced the costs. With the synergies created by those 2 strategies to is well positioned to provide high-quality products and services to drive our long-term development.

In post-COVID-19 era, tourists demand for better products and services has driven the upgrading of the entire tourism industry. High-quality, innovative products and overall service experience before, during and after travel are the core concerns of tourists and represent the key to transforming the tourism industry.

In terms of products, we work under our integrated product development or IPD model, brought together all of our developments as well as customers to participate in developing products based on market demand with high customer satisfaction rates as the standard for launching new product offerings. Due to our strict development process, the satisfaction rate of our overall new product offerings has reached 90% with new tool products reaching 97%.

In terms of product types due to increased customer focus on travel, experience and safety, small- and medium-sized tours and customized tours have seen rapid development in the post-COVID-19 era. In 2021, growth in demand for customized tours during our Member's Day sales exceeded our expectations with single-day booking volume for customized tour hitting a record of 30% of our total booking volume, the same as for organized tours. In the second half of 2021, with the resurgence of COVID-19, we saw strong performance from local tour products as well as the establishment of the mini location concept. According to Tuniu, bookings of luxury and the theme park hotels increased by more than 50% year-over-year during this year's spring festival. Our Hotel + X product model had become increasingly popular by offering more flexible and diverse options across the 6 key aspects tourism, including both accommodation, transportation, shopping and entertainment.

In terms of service, we are committed to creating a full-cycle service network for travelers, which covers before, during and after travel as well as departure and destination cities. Prior to establishing our self-operated local tour operators, it was challenging for us to improve tourists experience during trips and to enhance their itineraries. The development of our self-operated local tour operators completed the missing link in our service, forming seamless service network with our customer service team. Today, Tuniu has over 30 self-operated local tour operators covering most of China's hot-scenic spots, providing direct tour guide services for our guests and supervision of other tour products as well as a destination spot for all Tuniu customers. In 2021, the transaction volume for our self-operated local tour operators achieved over 50% growth year-on-year, even as tourists encountered frequent bad weather conditions and pandemic disruptions.

Our customer service development provides assistance services for guests on the 24/7 basis, especially in care of emergencies, and we have seen the number of customer service requests increase rapidly. Under continuously high pressure, Tuniu's customer service team has steadfastly adhered to our customer-first principle, providing around the clock refunds and exchange services and communicating with multiple parties in order to minimize the customer losses. During the pandemic era with its restrictions on travel, our membership team has continued to keep in touch with customers through texting and content sharing to build strong relationships and keep up the travel if you (inaudible). As part of this on the 16th of every month, we hold a special Tuniu Member's Day promotion, which in 2021 generated cumulative single-day sales exceeding RMB 150 million.

In addition, live streaming shows have become one of the key sales channels due to the impact of the pandemic. Our Member's Day promotion has also leveraged online formats, including live streaming shows for product sales and to introduce definitions and analyze customer demand. Tuniu's live streaming show team uses every show as an opportunity to promote product upgrade. The interest, preferences and the suggestions from guests joining our shows is also a valuable asset to help us improve our product offerings.

COVID-19 has accelerated the digital upgrade from various industries. Tourism enterprises have allowed digital tours to replace labor, reducing costs and improving efficiency as a area in which we made achievements during 2021. As digital products have become a necessary part of people's lives during the pandemic improving customer experience through digitalization had become essential for the long-term development, and it's one of our main focuses in this year. As part of this, in January, we upgraded our official website to provide a more user friendly features and content. In the future, we will continue to improve digitalization for our travel confirmation, online seat selection and tour guide systems to offer more convenience to travel experiences for our customers.

In 2021, Tuniu will -- 2022, Tuniu continue to focus on integration and digitalization as well as improving our products and service quality to meet customer demands. We will also work to provide an easier booking process pretravel, more options during trips and enhanced after-travel guarantees. With the improvement of the external environment and the passing of the COVID-19 impact, Tuniu will be better prepared for the recovery of the industry as we continue to introduce more high-quality products and services.

I will now turn the call over to Anqiang, our Financial Controller, for the financial highlights.

Thank you, Donald. Hello, everyone. Now I will walk you through our fourth quarter and fiscal year 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.

Starting from the fourth quarter of 2021. Net revenues were CNY 73.4 million in the fourth quarter of 2021, representing a year-over-year decrease of 38% 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 down 49% year-over-year to CNY 42.8 million and accounted for 58% 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 14% year-over-year to CNY 30.6 million and accounted for 42% of our total net revenues. The decrease was primarily due to the decline in commissions received from other travel-related products impacted by the resurgence of COVID-19.

Gross margin was 47% in the fourth quarter of 2021 compared to a gross margin of 40% in the fourth quarter of 2022 -- of 2020, sorry. Operating expenses for the fourth quarter of 2021 were CNY 78 million, down 92% year-over-year. Excluding share-based compensation expenses, amortization of acquired intangible assets and impairment of acquired intangible assets, non-GAAP operating expenses were CNY 74.8 million, representing a year-over-year decrease of 22%.

Research and product development expenses for the fourth quarter of 2021 were CNY 13.5 million, up 5% year-over-year. The increase was primarily due to the increase in research and product development personnel-related expenses. Sales and marketing expenses for the fourth quarter of 2021 were CNY 28.6 million, down 75% year-over-year. The decrease was primarily due to the decrease in promotion expenses and amortization of acquired intangible assets.

General and administrative expenses for the fourth quarter of 2021 were CNY 46.5 million, down 94% year-over-year. The decrease was primarily due to the decrease in allowance for doubtful accounts.

Net loss attributable to ordinary shareholders with CNY 33.9 million in the first quarter of 2021. Non-GAAP net loss attributable to ordinary shareholders, which excluded share-based compensation expenses, amortization of acquired intangible assets and impairment of acquired intangible assets were CNY 30.5 million in the fourth quarter of 2021.

As of December 31, 2021, the company had cash and cash equivalents, restricted cash and short-term investments of CNY 1 billion. Capital expenditures for the first quarter of 2021 were CNY 1.2 million.

Now moving to full year 2021 results. In 2021, net revenues were CNY 426.3 million, representing 5% year-over-year decrease. The decrease was primarily due to the negative impact brought by the outbreak and spread of COVID-19. Revenues from packaged tours were up 1% year-over-year to CNY 305.3 million and accounted for 72% of our total net revenues in 2022. The increase was primarily due to the growth in revenues from self-operated products offset by the negative impact brought by the resurgence of COVID-19. Other revenues were down 18% year-over-year to CNY 121 million and accounted for 28% of our total net revenues in 2021. The decrease was primarily due to the decline in revenues generated from financial services.

Gross margin was 40% in 2021 compared to a gross margin of 47% in 2020. Operating expenses were CNY 353.1 million in 2021, down 77% year-over-year. Excluding share-based compensation expenses, amortization of acquired intangible assets and impairments of acquired intangible assets, non-GAAP operating expenses was CNY 334.7 million, representing a year-over-year decrease of 77%.

Research and product development expenses were CNY 54.6 million in 2021, down 46% year-over-year. The decrease was primarily due to the decrease in research and product development personnel-related expenses. Sales and marketing expenses were CNY 150.5 million in 2021, down 60% year-over-year. The decrease was primarily due to the decrease in sales and marketing personnel-related expenses and amortization of acquired intangible assets.

General and administrative expenses were CNY 174 million in 2021, down 84% 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 CNY 121.5 million in 2021. Non-GAAP net loss attributable to ordinary shareholders which excluded share-based compensation expenses, amortization of acquired intangible assets and the impairment of acquired intangible assets, was CNY 102.8 million in 2021. Capital expenditures were CNY 13.9 million in 2021.

Tuniu's business has been significantly and negatively impacted by the outbreak and spread of COVID-19 since January 2020. As a result of the continued influence by COVID-19, for the first quarter of 2022, the company is set to generate CNY 34.8 million to CNY 42.5 million of net revenues, which represents 45% to 55% decrease year-over-year. Please note that this forecast reflects our 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) We will take our first question today from [Grace Lou], a Private Investor. Please go ahead.

Thank you, operator. Manager, my name is [Grace Lou]. I have several questions for you. Firstly, what's your view on the recovery of the travel industry in 2022 compared with the previous year? And based on your perspective, could you please share the company's strategies and priorities for this year and any guidance on the financial performance of 2022?

Thank you for the question. The travel market experienced both rebound and recurrences last year. In general, our packaged tour revenues kept in line with 2020. On a quarterly basis, the second quarter was the best, which contributed over 40% of the annual packages to revenues. As the pandemic was under control, the pent-up demand was released. So in the second quarter, our packaged tour revenues increased more than 9x year-over-year. The rest 3 quarters were disrupted by reemergence of COVID-19. Travel restrictions in impacted regions, we've seen demand for travel products, which adversely affected our revenues.

Coming to 2022, the continuously resurgence of the epidemic since the beginning of the year has limited the recovery of the travel industry. Therefore, our net revenues for the first quarter will have a negative growth. However, based on past experience, the recovery of travel largely depends on the control of the pandemic. The ongoing vaccines rollout and the enhancement of treatment method will play a more effective role in pandemic control this year. Amid such dynamic external environment, we will continue to invest on product innovation and service improvement this year. Under our integration model, we are producing more products of our own such as new tour and Hotel + X products.

Also, we have increased the use of our self-operated local tour operators in our own products. We will also develop more travel themes such as spring outing, wellness tour and night tour to attract various customers. In terms of services, we will enhance user experience through our digitalization strategy, will use technical means to facilitate the whole process from booking, traveling to returning to follow the new consuming and entertainment habits of the mass market. We also encouraged live streaming shows and short videos as one of our marketing methods.

In terms of financials, it's hard to give specific top line guidance due to the changing external environment at present. However, the adoption of integration and digitalization will help us improve the profit margin and better control the cost. We will continue to execute the strict cost control measures as we did last year. If the market turns better, we'll be on the right track to deliver better results.

(Operator Instructions) We are now approaching the end of the conference call. I would now hand the call over to Tuniu's Director of Investor Relations, Mary, for closing remarks.

Thank you. 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.