Tuniu Q3 2023 Earnings Report

Tuniu EPS Results

• Actual EPS: $0.70
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Tuniu Revenue Results

• Actual Revenue: $24.42 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Tuniu Announcement Details

• Quarter: Q3 2023
• Date: 11/21/2023
• Time: N/A
• Conference Call Date: Tuesday, November 21, 2023
• Conference Call Time: 8:00AM ET

Tuniu (NASDAQ:TOUR) International Limited is a China-based online leisure travel company that operates a comprehensive travel services platform under the brand name Tuniu (NASDAQ: TOUR). Headquartered in Nanjing, the company was founded in 2006 and was incorporated in the Cayman Islands in May 2010. Tuniu completed its initial public offering on the Nasdaq Stock Market in December 2014, positioning itself to expand its suite of digital travel offerings and strengthen its strategic partnerships with suppliers and local agencies.

The company’s flagship platform, tuniu.com, provides a broad array of travel products and services, including packaged group tours, customized private tours, independent travel solutions, corporate travel management, hotel and resort bookings, air ticketing, cruise vacations and car rentals. Tuniu leverages technology—such as data analytics and artificial intelligence—to enhance personalized travel recommendations, streamline booking processes and optimize pricing. Its platform integrates inventory sourced from first-party operators as well as third-party suppliers, enabling a wide selection of travel options for consumers.

Tuniu primarily serves the domestic Chinese leisure travel market, catering to both individual and group travelers. The company also facilitates outbound travel experiences to popular destinations across Asia, Europe and the Americas. Supporting its online platform is a network of regional offices and customer service centers throughout China, as well as mobile applications that allow users to plan, book and manage trips on the go. Tuniu continues to focus on expanding its product portfolio and deepening supplier relationships to capture growth opportunities in China’s evolving travel sector.

Tuniu Q3 2023 Earnings Call Transcript

Key Takeaways

• Achieved 129% year-over-year net revenue growth (RMB178.2 million) with a 64% gross margin and GAAP net income of RMB39.4 million—the highest quarterly profit since listing—while generating positive operating cash flow for the third straight quarter.
• Domestic tours accounted for around 80% of Q3 GMV during China’s peak travel season, while outbound recovery rose to 20% of GMV, with destinations like New Zealand, Spain and Portugal exceeding pre-pandemic levels.
• Enhanced service quality by centralizing procurement, eliminating forced shopping stops and deploying dedicated on-site staff, driving a 98% customer satisfaction rate on new tours and 100% on classic routes.
• Implemented system automation across marketing, booking and order processing, reducing operating expenses to 47% of net revenue (down from 76% last year) and planning to extend automation into supply chain and partner systems.
• Guided Q4 net revenues of RMB87.4 million–92.9 million (up 220%–240% YoY) and reiterated commitment to full-year profitability through stringent cost controls and ongoing efficiency gains.

Presentation

[Operator]

Hello, and thank you for standing by for Tuniu's 2023 third quarter earnings conference call. At this time, all participants are in 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. I would now like to turn the meeting over to your host for today's conference call, Director of Investor Relations, Mary.

[Mary Chen, Director of Investor Relations at Tuniu]

Thank you, and welcome to our 2023 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 financial performance for the third quarter of 2023. 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 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 at Tuniu]

Thank you, Mary. Good day, everyone. Welcome to our third quarter 2023 earnings conference call. Tuniu delivered a stronger performance in the third quarter as compared to the second quarter. Our top line results continued to recover rapidly, with net revenues growing year-over-year by 129%, including 262% increase in revenues from package tours. Our profitability also improved, with gross margin increasing to 64%, up from 58% during the same period last year. Our net income continued to increase to over RMB 39 million, marking the highest quarterly GAAP net income since our listing. We also maintained a positive operating cash flow for the third quarter. For the third consecutive quarter.

[Donald Yu, Founder, Chairman and CEO at Tuniu]

This indicates that as external challenges gradually diminish, the inherent strengths of the company are being apparent, bringing us closer to achieving our long-term profitability goals. The third quarter is China's peak travel season. We have seen a surge in domestic tourism. Additionally, in August, the third batch of countries opened up for outbound tourism, heightened the public interest and enthusiasm for travel, and further accelerated the recovery of outbound travel market. Seizing the opportunity presented by the rapid market recovery, we leveraged Tuniu's strengths to achieve rapid business development and further consolidate our market position. Influenced by External Factors, Domestic Travel continued to dominate the vacation trip market during the summer. By leveraging our strengths in the upstream segments of our industry chain, we were able to secure a plentiful supply of products for the peak season.

[Donald Yu, Founder, Chairman and CEO at Tuniu]

For Tuniu's core travel destinations, we leveraged the advantages of centralized procurement to ensure the availability of our in-house products and enhance our price competitiveness. In addition, we deepened our collaborations with suppliers to offer products covering a wider range of destinations and themes for customers. Tuniu remains committed to achieving high-quality development while upholding our service quality during both low and peak seasons. For instance, we have proactively incorporated additional routes within our in-house Niu Tour products, eliminating planned shopping activities that may affect the customer experience. This strategic move has substantially elevated the overall travel experience for our customers. And to ensure service quality during the peak season, we place special emphasis on refining the detail of the travel experience that can significantly impact customer satisfaction.

[Donald Yu, Founder, Chairman and CEO at Tuniu]

For example, we have been deploying dedicated service personnel to popular and more complex destinations to help confirm hotel reservations, verify information about the attractions and the dining options, and assist the customers with any unforeseen issues. As a result, our Niu Tour products achieved an impressive 98% customer satisfaction rate during the summer, with several classic travel routes achieving a perfect 100% satisfaction rate. For our suppliers' products, we strictly, strictly implement our strategy of eliminating or improving low satisfaction products. Furthermore, Tuniu is committed to compensating customers directly when disputes occur, rather than leaving it to guests and the supplier to solve the problem on their own. The outbound travel market also continued to recover in the third quarter.

[Donald Yu, Founder, Chairman and CEO at Tuniu]

As more outbound destinations gradually open up, we are further expanding our supply chain and product offerings to meet the growing demand from customers. We actively cooperated with the destination suppliers and leveraged our procurement advantages to access high-quality resources and provide an improved selection of options for our customers. We have also introduced the Niu Tour products featuring long-haul international destinations, such as New Zealand, Spain, and Portugal, which have gained popularity among our customers. For example, the transaction volume of New Zealand as a standalone destination in the third quarter has recovered and exceeded the levels we saw in 2019. Moreover, as air travel resources are not yet fully restored, international flight departure spots are relatively concentrated in certain cities.

[Donald Yu, Founder, Chairman and CEO at Tuniu]

Leveraging the advantages of domestic connecting flights, we not only secured more favorable airfare prices, but also expanded the number of departure cities, enabling customers from a broader range of cities across the country, especially those in lower-tier cities, to access a wider array of outbound travel products. Tuniu's sales growth could not have been achieved without the dedicated efforts of our Customer Service Team. During the year's peak season, we achieved an increase of 129% in net revenues, despite minimal increases in our sales personnel. The success can be attributed to our strategic implementation of System Automation throughout the sales process to save on manpower and time on tasks such as product management and order processing. This strategic approach has allowed our customer service team to focus more on communication with customers, and as a result, secure more orders.

[Donald Yu, Founder, Chairman and CEO at Tuniu]

Tuniu's repeat customer continued to make a strong contribution to overall transaction volume. With the reopening of outbound travel, many loyal customers have opted for single destination in-depth travel experiences or products featuring niche destinations. These offerings typically come with a higher average selling price. Some Senior Travelers prefer to choose high-end products, such as round-the-world cruises. These decisions are largely influenced by their positive past experiences with Tuniu's products and services, as well as the ongoing efforts of customer service in maintaining positive customer relationships. During the quarter, our live streaming business maintained its leading position within Douyin's Hotel and Travel Services category. Alongside our ongoing collaboration with over 10,000 experienced external influencers, Tuniu's MCN Agency has taken a proactive approach by initiating the training and development of our own emerging influencers.

[Donald Yu, Founder, Chairman and CEO at Tuniu]

In conjunction with the agency to strengthen the travel products, supply chain, and optional capabilities, operational capabilities, we will further promote our travel products. As of now, our MCN agency has successfully incubated over 100 emerging influencers. This has significantly enhanced our capabilities in live streaming shows, allowing our products to reach more customers. We continued to deepen cooperation with our distribution partners during the quarter. The B2B distribution channel has helped us with the sale of inventory products while enhancing the advantage of our centralized procurement strategy. Our offline partner stores contributed to product sales, showcasing Tuniu's and expanding the influence of our product brands, brands such as Niu Tour. We will continue to provide our partners with support in terms of products, systems, and management, fostering mutually beneficial and cooperation relationship.

[Donald Yu, Founder, Chairman and CEO at Tuniu]

Looking to technology, we successfully implemented the system automation across our sales operation, including marketing, booking, and order processing help, helping us to reduce internal labor costs. In the third quarter, our operating expenses amounted to 47% as a percentage of net revenue, down from 76% during the same period last year. As a next step, we plan to further extend our automation capabilities into Supply Chain management and provide more accessibility to system functions for our suppliers and offline stores. This will empower our partners to be more efficient in managing products, orders, and marketing campaigns online. We will also leverage technical tools and further improve customer experience, creating a more convenient booking experience for our customers. In the third quarter, while we achieved rapid sales growth, our bottom line also improved significantly compared to both the same period last year and the previous quarter.

[Donald Yu, Founder, Chairman and CEO at Tuniu]

We will continue to execute our strategies for business development and internal management. We remain committed to providing high quality products and service while controlling costs. I'm confident that our efforts to enhance overall efficiency and competitiveness will continue to position Tuniu for long-term sustainable growth. I'll now turn the call over to Anqiang, our Financial Controller, for the financial highlights.

[Anqiang Chen, Financial Controller at Tuniu]

Thank you, Donald. Hello, everyone. Now, I will walk you through our third quarter of 2023 financial results in greater detail. Please note that all the monetary amounts are RMB, unless otherwise stated. You can find the U.S. dollar equivalence of the numbers in our earnings release. For the third quarter of 2023, net revenues were RMB 178.2 million, representing a year-over-year increase of 129% from the corresponding period in 2022. The increase was primarily due to the growth of package tours as the travel market recovers. Revenues from package tours were up 262% year-over-year to RMB 150.1 million, and accounted for 84% of our total net revenues for the quarter. The increase was primarily due to the growth of organized tours.

[Anqiang Chen, Financial Controller at Tuniu]

Other revenues were down 23% year-over-year to CNY 28.1 million, and accounted for 16% of total net revenues. The decrease was primarily due to the decrease in commission fees received from other travel-related products and revenues generated from financial services. Gross profit for the third quarter of 2023 was CNY 114.8 million, up 155% year-over-year. Operating expenses for the third quarter of 2023 were CNY 83.1 million, up 40% year-over-year. Research and product development expenses for the third quarter of 2023 were CNY 18.4 million, up 89% year-over-year. The increase was primarily due to the increase in research and product development personnel-related expenses.

[Anqiang Chen, Financial Controller at Tuniu]

Research and product development expenses as a percentage of net revenue were 10%, down from 12% during the same period last year. Sales and marketing expenses for the third quarter of 2023 were CNY 39.6 million, up 49% year-over-year. The increase was primarily due to the increase in promotion expenses. Sales and marketing expenses as a percentage of net revenues were 22%, down from 34% during the same period last year. General and administrative expenses for the third quarter of 2023 were CNY 27.1 million, up 12% year-over-year. The increase was primarily due to the increase in share-based compensation expenses. General and administrative expenses as a percentage of net revenues were 15%, down from 31% during the same period last year.

[Anqiang Chen, Financial Controller at Tuniu]

Net income attributable to ordinary shareholders of Tuniu Corporation was RMB 39.4 million in the third quarter of 2023. Non-GAAP net income attributable to ordinary shareholders of Tuniu Corporation, which included share-based compensation expenses and amortization of acquired intangible assets, was RMB 45.8 million in the third quarter of 2023.

[Anqiang Chen, Financial Controller at Tuniu]

As of September 30, 2023, the company had cash and cash equivalents, restricted cash and short-term investments of CNY 1.2 billion. Cash flow generated from operations for the third quarter of 2023 was CNY 55.1 million. Capital expenditures for the third quarter of 2023 were CNY 1.7 million. For the fourth quarter of 2023, the company is bound to generate CNY 87.4 million-CNY 92.9 million of net revenues, which represents 220%-240% increase year-over-year. Please note that this forecast reflects our current and preliminary review 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 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, we will take one question at a time from each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. Once again, if you would like to ask a question, please press star, then one. At this time, we will pause momentarily to assemble our roster. The first question comes from Alice Lee, a private investor. Please go ahead.

[Alice Lee, Shareholder at Private Investor]

Thank you, operator. Hi, Mary and Donald. First of all, congratulations on this quarter's performance. For the third quarter, what are the proportions of domestic and outbound tourism in revenues, respectively? Could you specify several top destinations? Another question is about the fourth quarter's outlook. How is the business situation in the fourth quarter so far? For the fourth quarter and full year, 2023, do you think you will continue to achieve profitability? Thanks.

[Donald Yu, Founder, Chairman and CEO at Tuniu]

Thank you for the questions. Firstly, we saw outbound travel continued to recover at a quick pace during the third quarter. In terms of GMV, domestic tours contributed to around 80% of our total GMV in this quarter. Outbound tours contributed to another 20% of our total GMV, up from over 10% in the previous quarter. For domestic tours, Yunnan and Hainan provinces were traditional hot destinations during summer vacation. Also, historic cities such as Beijing, Nanjing and Chengdu, as well as cities with famous theme parks, such as Shanghai and Guangzhou, were popular among families with children. For outbound destinations, Europe ranked number one in the third quarter in terms of GMV, followed by the Maldives and Southeast Asia. Singapore, Spain, New Zealand and the United Arab Emirates, were popular countries among Chinese travelers.

[Donald Yu, Founder, Chairman and CEO at Tuniu]

For the second question, in the fourth quarter, our GMV generated during the National Day holiday has more than tripled compared to last year's holiday. Due to the boost of leisure, leisure travel, travels. However, as the fourth quarter is an off-season for tourism, travels usually fall back after the National Day holiday. Senior citizens are one of our major customer groups during the fourth quarter, usually traveling by organized tours. They have time to avoid peak season and are encouraged by favorable price during the low season. Besides personal travels, corporate customized tours will also increase when it's near year-end, in the forms of annual meeting, incentive travel, and team-building activities. In terms of destinations, Northeast China has already gained popularity this year for its rich resources in ice and snow tourism. Booking for products including ice exhibition and skiing are rising.

[Donald Yu, Founder, Chairman and CEO at Tuniu]

For outbound travel, warm destinations such as Australia and New Zealand in the Southern Hemisphere, as well as South, Southeast Asian countries, are usually among the wish list of Chinese travelers. Also, Northern Europe itineraries attract mid to high-end travelers due to its unique seasonal scenarios. However, despite the increased numbers of open up destinations, we still face headwinds at some destinations, such as environmental issues in Japan and the security problems in Thailand, which could prolong the recovery process of these destinations. For cost control, although the absolute number of some expenses would increase as our business recovers, we continue to adopt stringent cost control measures in the fourth quarter and will strictly watch the expenses changes as a percentage of our revenues. In all, we'll make continued efforts to improve our margin and try to achieve profitable yearly results for 2023. Thank you.

[Operator]

Again, if you have a question, please press star, then one. We are now approaching the end of the conference call. I will now turn the call over to Tuniu's Director of Investor Relations, Mary, for closing remarks.

[Mary Chen, Director of Investor Relations at Tuniu]

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 dis-

Participants

Executives

• Donald Yu, Founder, Chairman and CEO
• Mary Chen, Director of Investor Relations

Analysts

• Alice Lee, Shareholder at Private Investor
• Anqiang Chen, Financial Controller at Tuniu