Tuniu Q1 2024 Earnings Call Transcript

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June 4, 2024

There are 4 speakers on the call.

Operator

Hello and thank you for standing by for Tunyo's 2024 First Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. After management's prepared remarks, there will be a question and answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time.

Operator

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

Speaker 1

Thank you, and welcome to our 2024 Q1 earnings conference call. Joining me on the call today are Donald Yu, Tuniu's Founder, Chairman and Chief Executive Officer and An Tieng Chen, Tuniu's Financial Controller. For today's agenda, management will discuss business updates, operation highlights and financial performance for the Q1 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.

Speaker 1

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.

Speaker 2

Thank you, Mary. Good day, everyone. Welcome to our Q1 2024 earnings conference call. In 2024, China's travel industry continued its healthy development stream. The up bound travel market, in particular, is showing robust growth due to the resumption of life, the introduction of visa free policies and further enhanced the supply chain.

Speaker 2

During this year's spring festival and the Labor Day holiday, the up bound 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 Q1, the company's financial performance maintained strong growth. Net revenues increased by 71% year over year and revenues from packaged 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 RMB22 1,000,000.

Speaker 2

This marks the first time since our listing that we have achieved GAAP profitability in the Q1 and our 4th consecutive quarter of profitability on a non GAAP basis. During the Q1, 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 to our revenue and profit, we will look to increase the proportion of the in house products in our packaged 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.

Speaker 2

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 percent to our total transaction volume in the Q1. 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.

Speaker 2

We also added various themed tours such as family and honeymoon packages to attract niche customer segments. During the Q1, 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 packaged tour offerings and leveraging the flexibility and convenience of the individual bookings. We launched more packaged tours to various destinations with a particular focus on up bound tours for Asia Pacific regions during the spring festival travel season. In addition to improving our PAX tour products, we have also enhanced other travel related products.

Speaker 2

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 bundling policy for our flight tickets, streamlining the booking process for customers and eliminating unnecessary expenses. By providing customers an exceptional booking experience, we have become one of the travel suppliers for Alipay Transport. In terms of sales channels, we have further strengthened the development of various channels to attract new customers, while prioritizing reconnection and the engagement with our existing customer base.

Speaker 2

Since the beginning of this year, our live 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 Q1, our live streaming channel continued to achieve quarterly net income, making the 4th consecutive quarter of profitability. This improvement in profitability is mainly due to product optimization and enhanced competitiveness.

Speaker 2

For our products, we have increased the supply of organized tour products as destinations on our live streaming channels this year. These products offer further enhanced flexibility, 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 2 new brands. To strengthen our competitiveness, we also established our own live streaming network with over 60 in house live streaming accounts. By collaborating with over 1,000 influencers, Tuniu's MCN agency has gained advantages in selling Hotel Plus X products within Douyin's local lifestyle brewery.

Speaker 2

In the Q1, our offline 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 offline 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 utilized automation technology to offer customized support.

Speaker 2

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 cross category purchases. To prepare for the upcoming peak summer season, we extended our membership day promotions in April May to 3 days and introduced additional sales promotions to reward our customers. The transaction volume on our membership days in both April May exceeded RMB15 1,000,000. Looking to technology, we leverage automation systems to refine our management process and continuously improve operational efficiency.

Speaker 2

In the Q1, 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 demands, we are always looking to enhance our products and services, aiming to provide a wider range of competitively priced offerings.

Speaker 2

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.

Speaker 3

Thank you, Daniel. Hello, everyone. Now, I will walk you through our Q1 of 2024 financial results in greater detail. Please note that all the monthly amounts are in RMB unless otherwise stated. You can find the US dollar equivalents of the numbers in our earnings release For the Q1 of 2024, net revenues were RMB108 1,000,000, representing a year over year increase of 71% from the corresponding period in 2023.

Speaker 3

The increase was primarily due to the growth of package tours as the travel market recovers. Revenues from package tours were up 107% year over year to RMB83 1,000,000 and accounted for 77% of our total net revenues for the quarter. The increase was primarily due to the growth of online tours. Other revenues were up 8% year over year to RMB25 1,000,000 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.

Speaker 3

Gross profit for the Q1 of 2024 was RMB82 1,000,000, up 111% year over year. Operating expenses for the Q1 of 2024 were RMB69.7 million, up 25% year over year. Research and product development expenses for the Q1 of 2024 were RMB13 1,000,000, 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 Q1 of 2024 were RMB36.8 million, up 84% year over year.

Speaker 3

The increase was primarily due to the increase in promotion expenses and sales and marketing personnel related expenses. General and administrative expenses for the Q1 of 2024 were RMB20.5 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 RMB13.9 million in the Q1 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 RMB19.7 million in the Q1 of 2024.

Speaker 3

As of March 30, 2024, the Company had cash and cash equivalents, restricted cash and short term investments of RMB1.2 billion. Capital expenditures for the Q1 of 2024 were RMB1.2 million. For the Q2 of 2024, the company's expenses generated RMB114.9 million to RMB119.9 $119,900,000 of net revenues, which represents a 15% to 20% increase year over year. Please note that the forecast reflects the new current and the preliminary view on the industry and its operations, which is subject to change. Thank you for listening.

Speaker 3

We are now ready for your questions. Operator?

Operator

The question and answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions, The first question today comes from Arinda Chen, who is an individual investor. Please go ahead. Thank you, operator. Hi, management.

Operator

First of all, congratulations on this quarter's performance. For the Q1, how about your company's performance in outbound and domestic tourism respectively? And what are their proportions in revenues? Can you share your outlook for the upcoming summer vacation? And do you think you will achieve profitability in the Q2 of 2024?

Operator

Thank you.

Speaker 2

Thank you for the questions.

Operator

Thank you very much. We've reconnected with our speakers. Please go

Speaker 2

ahead. Thank you for the question. Both domestic and outbound tours continued to recover in the Q1. Thanks to the spring festival, domestic travel market demonstrated strong growth. Trips to the Northeast and Southern China were hot during the winter.

Speaker 2

Our domestic tours experienced double digit growth year over year in the Q1, while outbound travel increased by multi fold 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 Q1, encouraged by short distance and walk weather as well as visa free policies. For revenue breakdown, domestic tours accounted for about 70% of GMV and outbound towards 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 peak season, mainly because of holidays for children and students.

Speaker 2

In your travel is becoming the rigid demand for many people, especially families with children. Last summer vacation was dominated by domestic travels. Because outbound technicians were not fully 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 package tours to Japan in July August has already exceeded the same period last year.

Speaker 2

But as the booking window shrinks for domestic travel and also for some outbound travel due to more favorable visa policy, we have limited visibility towards the booking date for the whole summer vacation so far. For the Q2, net revenue growth rates slowed down compared to the Q1 due to the higher base in the Q2 last year. But revenues from our core business, packaged tours will 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 package to our products.

Speaker 2

Also by utilizing system and automation techniques, our cost of revenues is well controlled and we will continue to implement strict expense control measures and try our best to achieve continuous profitability. Thank you.

Speaker 1

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.

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Tuniu Q1 2024
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