Tuniu Corporation (NASDAQ:TOUR) Q3 2022 Earnings Call Transcript
Tuniu Corporation (NASDAQ:TOUR) Q3 2022 Earnings Call Transcript December 1, 2022
Operator: Hello, and thank you for standing by for Tuniu's 2022 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, please go ahead.
Mary Chen: Thank you and welcome to our 2022 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 2022. 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.
JCStudio/Shutterstock.com
Donald Yu: Thank you, Mary. Good day, everyone. Welcome to our third quarter 2022 earnings conference call. In the beginning of this quarter, Tuniu's business rebounded as China's travel industry showed a strong recovery with more effective control over COVID-19 and the arrival of the peak summer season. While more recent pandemic outbreak since August have impacted location and travel plans, Tuniu's net revenues increased over 100% and revenues from packaged tours increased over 300% in the third quarter, compared to the second quarter. Since 2020, both the overall tourism industry and the company have been impacted by uncertainties in the external environment. Despite these challenges, we have remained focused on customer demand and providing high quality products and service, as well as continuing to roll-out cost control measures to strengthen our in the .
Meanwhile, we have constantly upgraded our products design, customer service, and marketing tool to meet customer demand in the post pandemic time as we seek new growth opportunities. Turning now to our products Tuniu's integrated production, supply, and marketing model is the foundation of our ability to provide customers with high quality products. Firstly, we are stricter with our supply chain selection. Following the pandemic outbreak, our service quality might be particularly impacted by industry changes, including the withdrawal of some of our suppliers from the market. To counter this, we have reorganized our supply chain and strengthened our supplier evaluation and extraction process. And with direct procurement advantages from our self-operated local tour operators at destinations, we have reliable resources to continue providing products with industry leading satisfaction rates.
Secondly, we have streamlined our product SKUs and focused our production efforts on key technicians to leverage the advantages of and focus towards creating more popular travel products. During the summer peak season, our new tour products team and self-operated local tour operators will focus on popular destinations and roles such as Xinjiang, Yunnan, and Guangdong. In the third quarter, the transaction volume in Yunnan and Guangdong province both exceeded 100% compared to last year. For some of the long tail destinations and products, we collaborated with our partners on operations while strictly reviewing product quality. In terms of product innovation, we continued to seize the opportunities and the village tourism , so developing village tour products.
Village B&Bs and popular live streaming shows featuring agriculture products. In addition to attracting customers, this innovative product offering helped promote the development of local economies. In addition to new is, exploring new products for the post-pandemic era, including self-operated B&B products. Our products in has been operating for more than a year with gross operating profit exceeding 50% in the third quarter. We will continue to expand our self-operated B&B products to other regions. These asset light products are usually located near popular tourist cities, and mainly attract guests from for weekend locations and local tours. Live streaming shows, plus short videos have proven to be one of the most popular promotional models in the outdoor and tourism industry now.
Tuniu combines this new media with the company's existing membership and community channels and creates a new channel for customer acquisition. Our new media marketing covers a number of mainstream media platforms and we launched self-live streaming shows covering multiple regions and travel preferences, leveraging our different experience in the tourism industry. One of Tuniu's live streaming shows on Douyin in Eastern China has long been among the top 3 life style services live streaming shows in the region of terms of GMV. With several of our live streaming shows exceeding RMB10 million in sales in October. In addition, we are also co-operating with external clients such as local cultural and the tourism bureaus scenic spots, hotels, and restaurants to install new business models and directions.
Regarding our service, Tuniu's customer first principle has always guided our approach to providing high quality FICO services for customers. And especially during the post-pandemic era, guest safety has become more important than ever. During the peak season, our self-operated local tour operator staff will personally visit the scenic route before the arrival of our guests to eliminate any potential safety hazard caused by heavy tourist traffic in order to ensure our guests a comfortable and fun travel experience. In terms of product booking, we offer many products that allow online booking with options to confirm at a later date, providing greater peace of mind amidst pandemic uncertainties. For all customers who purchased our self-operated product, we provide a revision services on their behalf.
So, they do not need to self-operated they do not need to make reservations with hotels or scenic spots by themselves. For those customers who have purchased their products, but have not yet booked a trip Tuniu's customer service team will reach out to remind them to book in a timely manner in order to award the petition . Customer service will also notify customers about the latest special offer. In terms of technology, we leverage the technology efficiency and the flexibility of our manual labor to improve our internal operations and processing efficiency. By leveraging digitalization and AI technology, we are able to cover daily tasks with automated process flow, such as order processing and online confirmation option for departure dates at a later time.
This allow us to free-up capacity for more creative works like a complicated booking request and a key product R&D. With the end of this summer peak season and the impact of the recent recurring pandemic outbreak, the travel industry is temporarily facing pressure. As a company with deeper experience in tourism, Tuniu is resilient and able to weather the current challenges. Also, we are confident that our product and customer service capabilities will position us to benefit when the industry rebound. I will now turn the call over to Anqiang Chen, our Financial Controller for the financial highlights.
See also 25 Smartest Countries in the World and Jim Cramer's Dividend Stocks To Buy.
Anqiang Chen: Thank you, Donald. Hello, everyone. Now, I'll walk you through our third quarter of 2022 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 equivalent of the numbers in our earnings release. For the third quarter of 2022, net revenues were 77.9 million, representing a year-over-year decrease of 32% from the corresponding period in 2021. The decrease was primarily due to the negative impact brought by the resurgence and the spread of COVID-19. Revenues from packaged tours were down 54% year-over-year to 41.4 million and accounted for 53% of our total net revenues for the quarter. The decrease was primarily due to the of COVID-19 in certain regions in China.
Other revenues were up year-over-year to 36.4 million and accounted for 47% of total net revenues. The increase was primarily due to the increase in commission fees received from other travel related products. Gross margin was in the third quarter of 2022, compared to a gross margin of 35% in the third quarter of 2021. Operating expenses for the third quarter of 2022 were 59.3 down 38% year-over-year. Excluding share-based compensation expenses and amortization of acquired intangible assets, non-GAAP operating expenses were 57.4 million, representing a year-over-year decrease of 37%. Research and product development expenses for the third quarter of 2022 were 9.7 million down 38% 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 third quarter of 2022 were 26.5 million, down 36% year-over-year. The decrease was primarily due to the decrease in promotional expenses. General and administrative expenses for the third quarter of 2022 were 24.3 million, down 41% year-over-year. The decrease was primarily due to the decrease in general and administrative personnel related expenses. Net loss attributable to ordinary shareholders was RMB22 million in the third quarter of 2022. Non-GAAP net loss attributable to ordinary shareholders, which excluded share based compensation expenses and amortization of acquired intangible assets was 20.1 million in the third quarter of 2022. As of September 2022, the company had cash and cash equivalents, restricted cash, and short-term investments of 949.6 million.
Capital expenditures for the third quarter of 2022 were 1 million. For the fourth quarter of 2022, the company generated 26.5 million to 30.8 million of net revenues, which represents a 58% to 68% decrease year-over-year. Please note that the forecast will be flat to new current and preliminary view on the industry and its operations, which is subject to change, particularly as to the uncertainties brought about by the impact of COVID-19. Thank you for listening. We are now ready for your questions. Operator?
To continue reading the Q&A session, please click here
.
