Tuniu Corp

NASDAQ:TOUR

Earnings Call Transcript 2024-Q1

[Operator]

Hello, and thank you for standing by for Tuniu's 2024 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 Chen, executive]

Thank you, and welcome to our 2024 First Quarter Earnings Conference Call. Joining me on the call today is: 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.

[Dunde Yu, executive]

Thank you, Mary. Good day, everyone. Welcome to our first quarter 2024 earnings conference call. In 2024, China leader -- China's travel industry continued its healthy development stream. The outbound travel market, in particular, is showing robust growth due to the resumption of life, the introduction of visa-free policy and further enhance the supply chain.

During this year, Spring Festival and Labor Day holiday, the outbound 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 a strong growth. Net revenues increased by 71% year-over-year, and revenues from packaging 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 RMB 22 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 continued to focus on enhancing our products and services as well as development of sales channels. Our in-house packaging tours are 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 packaging 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 contributing over 65% to our total transaction volume in the first quarter. We also continued to innovate to meet the needs of different customer growth. We upgraded our new tour products to 0 shopping itineraries for tourists seeking more time for travel experience.

Additionally, we introduced more private tours and small growth tours, which have been well received by families and young travelers. We also had various fees 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 packaging tour offerings and leveraging the flexibility and convenience of the individual bookings. We launched more packaging tours to various destinations with a particular focus on outbound tours for Asia Pacific regions during the Spring Festival travel season. In addition to improving our packaging 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-funding funding policy for our flight tickets, streamlining the booking process for customer and meeting and necessary expenses. By providing customers an exceptional booking experience, we have become one of the travel suppliers for Alipay transport.

In terms of our sales channels, we have further strengthened the development of various channels to attract new customers while prioritizing reconnection and engagement with our exceeding customer base.

Since the beginning of this year, our large streaming business has maintained strong growth momentum. Along with the increase in transaction volume, our verification and sales rate has 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 large 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 large streaming channels this year.

These products offer further enhanced flex splitting 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 two new brands.

To strengthen our competitiveness, we also established our own live streaming network with over 60 in-house large streaming accounts by collaborating with over 1,000 influencers, Tuniu's MCN agency has gained advantages in selling hotel plus x-products within the local lifestyle exploring.

In the first quarter, our off-line stores experienced a 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 off-line presence in the main cities of key provinces.

Our stores attract partners through diverse product selection, exceptional customer service systems and 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 across history purchases. To prepare for the upcoming pre-summer season, we extended our membership date promotions in April and May, to 3 days and introduced additional sales promotions to reward our customers. The transaction volume on our membership days in both April and May exceeded RMB 15 million.

Looking to technology, we leverage automation systems to refine our management process and continuously improved operational efficiency. In the first quarter, total operating expenses as a percentage of net revenues dropped 20 percentage points compared to the same period last year.

On the supply side, we established a 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 strategy.

In summary, Tuniu's business and the 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.

[Anqiang Chen, executive]

Thank you, Donald. Hello, everyone. Now, I'll 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 U.S. dollar equivalents of the numbers in our earnings release.

For the first quarter of 2024, net revenues were RMB 108 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 tour as the travel market recovers.

Revenues from packaged tours were up 107% year-over-year to $83 million and accounted for 77% of our total net revenues for the quarter. The increase was primarily due to the growth of organized tours.

Other revenues were up 8% year-over-year to RMB 25 million and accounted for 23% of our 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 RMB 82 million, up 111% year-over-year.

Operating expenses for the first quarter of 2024 were RMB 69.7 million, up 25% year-over-year. Research and product development expenses for the first quarter of 2024 were RMB 13 million, down 9% 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 first quarter of 2024 were RMB 36.8 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 RMB 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 RMB 13.9 million in the first quarter of 2024.

Non-GAAP net income attributable to ordinary shareholders of Tuniu Corporation which excluded share-based compensation expenses and amortization of acquired intangible assets was RMB 19.7 million in the first quarter of 2024. As of March 30, 2024, the company had a cash and cash equivalents, restricted cash and short-term investments of RMB 1.2 billion.

Capital expenditures for the first quarter of 2024 were RMB 1.2 million. For the second quarter of 2024, the company expands to generate RMB 114.9 million to RMB 119.9 million of net revenues, which represents a 15% to 20% increase 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. Thank you for listening. We are now ready for your questions. Operator?

[Operator]

[Operator Instructions]

The first question today comes from [ Arlinda Chen ], who's an individual investor.

[Unknown Attendee]

First of all, congratulations on this quarter's performance. For the first quarter, how about your company's performance up on the domestic tourism, respectively? And what are the proportions in revenues? Can you share your outlook for the upcoming summer vacation? And do you think you will achieve profitability in the second quarter of 2024?

[Dunde Yu, executive]

Thank you for the questions. Both domestic and outbound tours continued to recover in the first quarter, thanks to the Spring Festival, domestic travel marketing demonstrated strong growth. Trips to the Northeast and Southern China were hot during the winter.

Our domestic tour experienced double-digit growth year-over-year in the first quarter while outbound travel increased by a multiple. Due to the -- due to more supply of airlines, hotels and destination services, as well as more choice of destinations and the products.

APAC countries were popular in the first quarter, encouraged by short distance and warm weather, as well as visa-free policies. For revenue breakdown, domestic tours accounted for about 17% of GMV and outbound tours 30%, increasing from over 20% in the previous quarter.

For the coming summer vacation, the pent-up demand will continue to drive the growth of the market. Summer is the big season, mainly because of holidays for children and students. travel is becoming the rigid demand for many people especially families with children.

Last summer vacation was dominated by domestic travels, because upbound destinations were not for -- opened until early August. Therefore, we expect the outbound travel will remain significant growth momentum this summer. For example, up till now, we see the booking amount for packaging tours to Japan in July and August has already exceeded the same period last year.

But as the booking window shrinks for domestic travel and also for some outbound travel due to more favorable visa proceeds, we have limited visibility towards the booking date for the whole summer vacation so far. For the second quarter, net revenue growth rates slow down compared to the first quarter due to the higher base in the second quarter last year, but revenues from our core business, packaged tours, we all have a higher growth rate than total revenues.

This year, our gross margin further improved to over 70%. That's because we focus on more profitable products like our in-house packaged tour products. Also by utilizing system and automation techniques, our cost, our revenues is well controlled, and we will continue to implement strict expense control measures and try our best to achieve continuous profitability.

[Operator]

[Operator Instructions] This concludes our question-and-answer session. I'd like to turn the call back over to Mary for any closing remarks.

[Mary Chen, executive]

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.

[Operator]

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