Tuniu Corp Q3 FY2024 Earnings Call

Thank you, and welcome to our 2024 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 the financial performance for the third 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 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 third quarter 2024 earnings conference call. In the third quarter, our revenues and profit continued to grow, with GAAP net income reaching a record high since our listing, up to RMB43.9 million, and our net income for the first three quarters of this year exceeded RMB100 million. On a non-GAAP basis, we have achieved profitability for six consecutive quarters. During the seasonally strong third quarter, the market demonstrated robust demand with more new products introduced compared to last summer, particularly for outbound travel. Our product range was significantly enriched for customers. The transaction volume of our outbound travel products achieved a double-digit year-over-year growth in the quarter. As travel increasingly becomes essential for more people, we have noticed a growing diversification in customer demand, ranging from destination choices to products and services. Additionally, as methods and channels for reaching customers evolved, more advanced and diverse needs emerged, such as in-depth single destination tools, private tours, live streaming, and short videos. Recognizing this trend, we aim to create differentiated products and services to meet the rising demand from customers. In terms of products, we are further strengthening our in-house product development, optimizing our product lines and offering tailored solutions for various customer segments to meet the broad demand for location travel. Meanwhile, we continue to collaborate with third-party suppliers to introduce a wider range of diverse products to meet customer demand, such as niche products and destinations. During the third quarter, we further optimized our in-house product line, and our new tour products continue to follow a high-quality approach, aiming to deliver industry-leading travel experiences. In addition to our zero shopping policy for new tour itineraries, we are offering more growth and private tours covering a broader range of destinations, such as South America and the polar regions, which are often considered advanced in lifetime definitions. Our new tour products are customized for travel enthusiasts, families, and repeat customers who prioritize unique travel experiences and are open to exploring new products and definitions. In the first three quarters of this year, the transaction volume of new tour products decreased by over 30% year-over-year. However, new tour products maintained a remarkable 98% customer satisfaction rate, with some recently launched in-depth outbound travel products, such as those to Thailand and Bali, achieving a perfect 100% satisfaction rate. During the third quarter, responding to the surge in travel enthusiasm from customers in lower-tier cities and the rise of checklist-style travel among young people, we launched our in-house new select products, representing the core of Tuniu's organized tour product line. The new selection of products includes classic road trips at highly competitive prices. New select products further diversify the price range of Tuniu's in-house offerings and are an excellent choice for those visiting destinations for the first time. For product promotion, we embraced popular live streaming channels to attract more new customers. We are pleased to see that the new selection of products we launched for popular domestic and outbound destinations received very positive responses during the summer vacation. During the quarter, we further explored travel live streaming shows. The total payment volume from our live streaming shows increased by nearly 100% year-over-year, while verification volume increased by over 100%, with the verification rate further improving. Additionally, we once again achieved profitability through a singles channel. During the summer, our product offerings became more diverse and better selected. We capitalized on the demand for family tours by increasing sales of in-park related travel products. We also expanded coverage of outbound destinations such as the Maldives and Europe to meet demand and introduced cost-effective products like new selections for a diverse consumer base. Additionally, we offered more flexible organized level options such as one-day tours to attract more self-guided tour customers. Our team has also become more experienced. We strengthened the setup of our in-house live streaming studios staffed entirely by our employees who are more familiar with our products and systems, resulting in higher efficiency. Furthermore, we have a dedicated verification team to help customers complete verification more quickly. In the third quarter, leveraging our deep understanding of package tour products and the demands of our target customers, we enhanced our live streaming models. Our influencers left their studios and conducted live streaming shows directly from destinations, offering customers a more immersive experience. During the in-house live streaming shows, we adopted an encyclopedic approach to introduce destinations, showcasing our professionalism and helping us gain customer trust, leading to a rise in bookings. Moreover, we remain committed to diversifying into new sales channels that will deliver sustainable growth. In the third quarter, we continued to expand the range of products in our offline stores, helping us provide enhanced services to customers during the peak season. Through our partnerships with traffic platforms such as our collaboration with Alipay transport, we attracted more customers to streamline the booking process and enhance their service experience, which resulted in monthly growth in air ticket bookings during the quarter. We also collaborated with the tourism bureau of several countries, including Thailand, Saudi Arabia, and Australia, leveraging Tuniu's strengths in the outbound travel market to boost their local tourism rhythm and enhance travel experiences for Chinese tourists visiting these destinations. In terms of services, during the peak season, in addition to ensuring a high-quality travel experience for our customers, we also focused on maintaining ongoing customer engagements. We maintained regular customer follow-ups, inviting guests to provide feedback on our product services and tour guides, allowing us to identify and resolve potential issues promptly. We also promoted a non-volume policy for our flight tickets, enhancing the booking experience on Tuniu and demonstrating our commitment to integration and transparency. We have constantly displayed our product satisfaction rating on our website, which currently stands at 94%. Our repeat customers have consistently contributed over 65% of our transaction volume. In November, a new holiday policy was introduced, adding two more public holidays starting next year. This is a positive signal for the tourism industry, especially for the leisure travel sector, reinforcing our confidence in the long-term development of the sector. The spring festival holiday will be extended to eight days, which will further boost the public's enthusiasm for travel. We look forward to broadening and enhancing our products and services to meet the needs of our customers. High-quality products and services have always been our core competitive advantages and an inevitable trend for industry development. Tuniu remains committed to achieving high-quality development while upholding our service quality and closely monitoring the ever-changing needs of our customers to ensure that our product services and promotion channels remain at the forefront of the industry. At the same time, we continue to prioritize efficiency improvements, strict cost control, and optimizing the performance of our sales channels to support the company's long-term healthy growth and profitability. I will now turn the call over to Anqiang, our Financial Controller, for the financial highlights.

Thank you, Donald. Hello, everyone. Now I'll walk you through our third quarter of 2024 financial results in greater detail. Please note that our inventory 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 2024, net revenues were RMB186 million, representing a year-over-year increase of 4% from the corresponding period in 2023. Revenues from packaged tours were up 6% year-over-year to RMB159.3 million and accounted for 86% of our total net revenue for the quarter. The increase was primarily due to the growth of organized tours. Other revenues were down 5% year-over-year to RMB26.7 million and accounted for 14% of our total net revenues. The decrease was primarily due to the decline in fees for advertising services provided to tourism boards and bureaus. Gross profit for the third quarter of 2024 was RMB121.8 million, up 6% year-over-year. Operating expenses for the third quarter of 2024 were RMB92.6 million, up 11% year-over-year. Research and product development expenses for the third quarter of 2024 were RMB13.6 million, down 26% year-over-year. The decrease was primarily due to a reduction in research and product development personnel related expenses. Sales and marketing expenses for the third quarter of 2024 were RMB60.6 million, up 53% year-over-year. The increase was primarily due to the rise in promotion expenses. General and administrative expenses for the third quarter of 2024 were RMB18.6 million, down 31% 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 RMB44.4 million in the third 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 RMB46.6 million in the third quarter of 2024. As of September 30, 2024, the company had cash and cash equivalents, restricted cash, and short-term investments of RMB1.3 billion. Cash flow generated from operations for the third quarter of 2024 was RMB13 million. Capital expenditures for the third quarter of 2024 were RMB1.1 million. For the fourth quarter of 2024, the company expects to generate RMB100 million to RMB105 million of net revenues, which represents a 0% to 5% increase 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. Thank you for listening. We are now ready for your questions.

The fourth quarter is the off-season for tourism. Revenues will drop compared to last quarter due to seasonality. On a year-over-year basis, we expect low single-digit growth for our total revenues. For the domestic market, the two main themes for winter travel are ice and snow tourism and heading for the storm. In the North, the ice and snow period tourism was very popular last year and continues to be this year. However, to avoid adverse weather conditions, people have more choices this winter. With definitions fully opened since the fourth quarter of 2023, there are more products launched for popular destinations such as Southeast Asia and Australia. Together with favorable visa policies in some Southeast Asian countries, traveling abroad can be as convenient as domestic tours. Generally speaking, last year was a comparatively high base for both domestic and outbound tours due to the release of pent-up demand. For the bottom line, we don't provide any specific guidance, as revenues decline due to seasonality in the fourth quarter, and limitations in scale effects will lead to lower profit for the period. However, since we have already achieved non-GAAP profitability for six consecutive quarters, we will try our best to maintain that momentum. For next year, the tourism industry will maintain steady growth. The launch of a new holiday policy in November will further encourage travel, especially air travel during certain holidays. From the demand side, we see continued growth after the pandemic. Traveling is becoming a more integral part of life for consumers regardless of age and location. For example, we have many silver generation VIP guests who have immense disposable income and are eager to travel. Additionally, with the widespread popularity of live streaming shows and short videos, travelers from lower-tier cities have increased their bookings through the Internet. Many of them are broadening their experiences for the first time, presenting a promising growth opportunity for outbound travel. With the emergence of more transportation hubs, we may attract more travelers from lower-tier cities to overseas destinations. For the domestic market, customer needs are becoming more diversified, and we need to provide products tailored to specific destinations, itinerary activities, group sizes, and prices to meet different customer segments. This trend may continue in the coming year, and we are always prepared to launch new products and services. For outbound travel, we anticipate continued growth momentum. However, the recovery will vary by region, depending on the resumption of airlines and supply chains. For example, Southeast Asia is recovering faster this year, while North America is lagging behind. Therefore, we see opportunities for growth in long-distance outbound travel next year.

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.