Earnings Call Transcript - TOUR Q2 2025

Operator, Operator

Hello, and thank you for standing by for Tuniu's 2025 Second Quarter Earnings Conference Call. Today's conference call 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, Ms. Mary Chen. Please go ahead.

Mary Chen, Director of Investor Relations

Thank you, and welcome to our 2025 2nd 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, operational highlights, and financial performance for the second quarter of 2025. 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.

Donald Yu, Founder, Chairman, and CEO

Thank you, Mary. Good day, everyone. Welcome to our second quarter 2025 earnings conference call. In the second quarter, we saw a robust performance across the travel sector as the holiday period helped sustain strong consumer demand. During this holiday, Tuniu recorded year-over-year growth in both transaction volume and the number of trips. During the quarter, the company continued to maintain consistent growth momentum with net revenues increasing by 15% year-over-year and revenues from packaged tours growing by 26%. Tuniu's robust supply chain has allowed us to execute our product strategy effectively with positive results. By expanding our range of offerings, we are meeting the needs of diverse customer segments while attracting more customers through competitive pricing. Together, these efforts are driving sustained growth across the business. In addition, our diversified sales channels have enabled us to reach a broader customer base. We are seeing more and more of our sales coming from new channels like live streaming and offline stores. At the same time, we are closely monitoring the ROI of each channel and maintaining strict cost control over internal operations. In the second quarter, we once again achieved moderate profitability on both a GAAP and non-GAAP basis. Let me walk you through some of our key initiatives in more detail. In the second quarter, we continued to strengthen our supply chain, which remains critical to delivering high-quality products at competitive pricing. First, we further enhanced our direct and centralized procurement strategies in order to lower purchasing costs. Second, we focused on resource integration. For example, by leveraging our nationwide sales network with consolidated international flight resources, we introduced connecting flights for certain outbound travel products. This approach allows us to consolidate customers from across the country to depart from key hub cities, expanding our departure city coverage and making travel more convenient for customers in different regions. It also enabled us to take advantage of airline discounts available in those hubs, allowing us to offer even more competitive pricing to our customers. In addition, we support our suppliers by offering more favorable payment terms as well as providing systems and technical support. This initiative helped us attract high-quality suppliers to collaborate closely with us in delivering better products and services to our customers. On the product side, our various product lines continue to provide more targeted solutions for different types of customers. Niu Tour targets mid- to high-end customers and maintains a high repurchase rate by focusing on quality. Over half of the customers booking Niu Tour products are Tuniu's loyal customers. Niu Select products have gained popularity among customers due to their cost-effective value proposition, especially on live streaming channels. We continue to expand the offering of Niu Select products, covering more destinations and itineraries. In the second quarter, transaction volume for Niu Tours and Niu Select products grew by more than 25% year-over-year. In terms of product innovation, we continue to explore new definitions for offerings. For example, Niu Tour launched its first tour in the emerging destination of the Caucasus region, which received a 100% satisfaction rate. In response to strong demand, we expanded beyond the premium organized tours and introduced more price-competitive Caucasus products under our Niu Select line. As the summer peak season approaches, we conducted a live streaming show in the region in July. As a result, transaction volume for Caucasus products in the second quarter grew by over 150% year-over-year. We also continue to diversify our sales network during the quarter, with emerging channels contributing an increasing share of total transaction volume. During the second quarter, both payment and verification volumes through our live streaming channels achieved double-digit year-over-year growth. Backed by our leading position in travel live streaming, as well as strong brand recognition and product reputation, we expanded our live stream offerings to include higher-priced items such as luxury hotels, upscale island destinations, and long-haul outbound tours. With over a decade of deep experience in the outbound travel segment, we successfully brought our expertise into the live streaming channels. Operating products tailored to live stream viewers are supported by professional presentations and comprehensive services such as visa assistance. As a result, we quickly emerged as a leading outbound travel supplier through live streaming. For example, one of our in-house products for Dubai has already surpassed 10,000 paying customers since its launch earlier this year. For live streaming leader travel products, we've been encouraging more influencers to step out of their studios and conduct live streaming shows directly from the destination, offering customers a more immersive experience. At the same time, we partnered with a number of top and mid-tier influencers to host dedicated live streaming shows and jointly promote our offerings. In the second quarter, live streaming contribution to the company's total transaction volume continued to grow, rising from over 15% in the previous quarter to nearly 20%. In the second quarter, we continued to strengthen our offline store network. We expanded coverage in key cities, particularly popular departure cities, tourist destinations, and transportation hubs to build local scale and drive down operating costs. As a result, transaction volume from offline stores grew by over 20% year-over-year during the quarter. On the technology front, we continue to explore the application of AI agents across various scenarios, focusing on enhancing customer experience and improving internal operational efficiency. We are pleased to see that more and more customers and employees are actually using our AI tools to help book trips and complete tasks. We will continue to enhance and update our technology tools in response to user feedback. In concurrence with the arrival of the summer season, the travel industry is entering its peak period. While managing the surge in travel demand, we are also closely observing shifts in customer behavior, including booking habits, travel preferences, and product choices, and are continuously refining our products and services in response. Our goal is to ensure that more new and regular customers think of Tuniu first when it comes to planning their trips. I'll now turn the call over to Anqiang, our Financial Controller, for the financial highlights.

Anqiang Chen, Financial Controller

Thank you, Donald. Hello, everyone. Now I will walk you through our second quarter of 2025 financial results in greater detail. Please note that all monetary amounts are in RMB unless otherwise stated. You can find the U.S. dollar equivalent of the numbers in our earnings release. For the second quarter of 2025, net revenues were CNY 134.9 million, representing a year-over-year increase of 15% from the corresponding period in 2024. Revenues from packaged tours were up 26% year-over-year to CNY 113.4 million and accounted for 84% of our total net revenues for the quarter. The increase was primarily due to the growth of organized tours and self-drive tours. Other revenues were down 21% year-over-year to CNY 21.5 million and accounted for 16% of our total net revenues. The decrease was primarily due to the drop in fees for advertising services provided to tourism boards and bureaus. Gross profit for the second quarter of 2025 was CNY 86 million, up 2% year-over-year. Operating expenses for the second quarter of 2025 were CNY 78.9 million, up 58% year-over-year. Research and product development expenses for the second quarter of 2025 were CNY 16.4 million, up 29% year-over-year. The increase was primarily due to the rise in research and product development personnel-related expenses. Sales and marketing expenses for the second quarter of 2025 were CNY 45 million, up 12% year-over-year. The increase was primarily attributed to the rise in sales and marketing personnel-related expenses and promotion expenses. General and administrative expenses for the second quarter of 2025 were CNY 17.8 million, down 18% year-over-year. The decrease was mainly due to the reversal of current expected credit losses allowance. Net income attributable to ordinary shareholders of Tuniu Corporation was CNY 14.5 million in the second quarter of 2025. Non-GAAP net income attributable to ordinary shareholders of Tuniu Corporation, which excluded share-based compensation expenses and amortization of acquired intangible assets, was CNY 16.5 million in the second quarter of 2025. As of June 30, 2025, the company had cash and cash equivalents, restricted cash, short-term investments, and long-term deposits of CNY 1.2 billion. Cash flow generated from operations for the second quarter of 2025 was CNY 46 million. Capital expenditures for the second quarter of 2025 were CNY 1 million. For the third quarter of 2025, the company expects to generate CNY 199 million to CNY 208.3 million of net revenues, which represents a 7% to 12% 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

The first question is from Ms. Lisa Lu, Investor.

Unidentified Analyst, Analyst

I've got two questions. First, can management share the revenue breakdown by destinations for this quarter? And which destinations drove the growth of packaged tour revenues? Second, can you give more details about the bookings in the summer vacation?

Donald Yu, Founder, Chairman, and CEO

Thank you for your questions. As you know, our packaged tour revenue increased by 26% year-over-year, showing solid growth. In terms of key drivers for the growth, domestic destinations achieved double-digit growth during the quarter, while outbound tours grew faster than domestic tours in terms of GMV. Europe, Japan, and the Maldives all posted double-digit year-over-year growth. Some emerging destinations had higher growth rates; for example, South America increased over 50%. Sri Lanka and the Caucasus both more than doubled. However, headwinds from certain Southeast Asian countries have slowed down and reduced demand for these destinations. Southeast Asia declined roughly 30% during the quarter. In terms of destination breakdown, domestic tours contributed about two-thirds of our total GMV and outbound tours about one-third during the third quarter. Within outbound destinations, Europe is the top destination, contributing about one-third of our outbound tour GMV. Japan and the Maldives each contributed over 10%, while the Middle East and Africa, as well as America, contributed less than 10%, respectively. For other outbound destinations, each contributed less than 5%. Regarding summer vacation bookings, demand has increased significantly during the peak season. Families with children are one of the main customer groups this summer. Domestic city tours are particularly popular, especially in cities with museums like Xi'an and Nanjing, as well as cities with theme parks like Shanghai and Guangzhou. For long-haul tours, Huizhou has emerged as a popular destination due to its cool weather. Following shifts in customer habits, this summer, we launched more small group tours with competitive pricing and are promoting our offerings through live streaming shows in scenic spots in Guizhou. For outbound travel, although we don't have the complete picture yet, we have seen double-digit year-on-year growth in Japan, Europe, and certain islands, including the Maldives, in July. Despite headwinds in Thailand and Cambodia for Southeast Asia, Singapore and Malaysia are gaining popularity; our Niu Select itinerary covering both Singapore and Malaysia launched this summer has already seen over 10,000 paying customers through live streaming shows. In general, the market continues its growth momentum in the peak season. As a result, we expect 7% to 12% net revenue growth in the third quarter, and we will strive for profitability again.

Operator, Operator

We are now approaching the end of our conference call. I would like to turn the call over to Tuniu's Director of Investor Relations, Ms. Mary Chen. Please go ahead.

Mary Chen, Director of Investor Relations

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, Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.