Tuniu Corporation (TOUR) on Q2 2024 Results - Earnings Call Transcript
Operator: Hello, and thank you for standing by for Tuniu's 2024 Second Quarter Earnings Conference Call. [Operator Instructions] 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: Thank you, and welcome to our 2024 second 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 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 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: Thank you, Mary. Good day, everyone. Welcome to our second quarter 2024 earnings conference call. In the second quarter, our business continued to maintain healthy growth with revenue from package tours, Tuniu's core business, increasing by 29% year-over-year. We also saw further improvement in our profitability with net income reaching a quarterly record high since our listing, up to RMB 43 million. During this quarter, the domestic travel market maintained steady growth with the number of trips booked during the 3-holiday period increasing year-over-year. And with the full opening of overseas destinations and the availability of diverse product offerings, the outbound travel market continued to grow rapidly compared to last year with new popular destinations and roads emerging. It is clear that tourism has increasingly become an essential part of many people's lives. Tuniu continues to steadfastly adhere to our mission of making travel easier and focusing on customer needs. We will continue to enhance our products, services and sales to offer more travel options, ensuring customers have an exceptional trip experience. In the second quarter, we continued to strengthen our in-house product development. Our new tour products maintained their high-quality service, adding more destinations and new roads. In the second quarter, the transaction volume of new tour products increased by more than 40% year-over-year. The primary customer base for our new tour products are middle-to-upper class customers, many of whom are senior travelers who value experience over price. Focusing on this growth, we have continuously upgraded new tour offering small groups, higher standards for accommodation and dining and the more local sightseeing and restaurant options. For some of our outbound products, we employ local tour guides who speak Chinese, providing a more authentic cultural experience for our guests. By providing a constantly excellent customer experience, new tour products have built a large base of high-quality repeat customers with a repurchase rate twice that of our regular products. At the same time, we continue to partner with third-party suppliers who have made significant contributions to diverse our products and the destinations, especially for outbound travel market. In terms of sales, we focus on our own channels, while our maintaining open cooperation with various partners. As a customer-focused company, Tuniu has long had a membership program specifically designed to sell to our repeat customers. In addition to regular benefits, we hold a monthly membership day and occasional off-line events to interact with our customers and gather feedback on our products and services. Notably in the second quarter, repeat customers contributed over 65% of the company's transaction volume. Meanwhile, we continue to attract new customers through various channels, such as new media, off-line stores and partnerships with high-traffic online platforms. During the second quarter, our live streaming channels maintained triple-digit growth and the transaction volume of our off-line stores increased over [80%] year-over-year. Additionally, we collaborated with Jingdong travel, Alipay transport and others to boost the sales of other travel-related products. Regarding large streaming channels, as the Internet continues to develop and user demand evolve, information is increasingly consumed via video content as opposed to text and images with users now frequently watching large streaming shows and short videos. Adapting to these changes in behavior is essential to maintaining our competitive edge. In the second quarter, we expanded our live streaming channels on both Tuniu app and the mini program to adapt to changes in user habits. Also, we strengthened the expansion of new media channels such as more content placement on the Little Red Book. In terms of products, we broadened the variety and the destination coverage of our live streaming product offerings, such as organized tour products at destinations and theme park packaged tours. For technology, our products now use system-based verification, which significantly improves speed and -- a QR receipt, compared to manual verification and enhancing the customer experience, leveraging our optimized product selection process and improved verification capabilities. The verification and the sales rate of our live streaming products has increased significantly. During the quarter, both the total payment volume and verification volume from our large streaming channels increased over 200% year-over-year. The contribution of live streaming channels to the company continued to rise and achieve quarterly net income again. We have also been pleased to share our expertise and accumulated experience in new media operations with our partners and jointly promote the development of the travel industry. We have assisted some destinations in using new media tours for marketing. And we have also collaborated with schools to establish internship programs, providing practical opportunities for students and jointly cultivating talent with skills in both tourism and the new media, providing employment opportunities and benefiting the industry as a whole. In conclusion, with the arrival of the summer peak season, the travel industry is entering its busiest time. Tuniu is excited to meet the opportunities with more diverse products and higher quality services as we look forward to deliver strong value for our shareholders going forward. I will now turn the call to -- over to Anqiang, our Financial Controller, for the financial highlights. Anqiang Chen: Thank you, Donald. Hello, everyone. Now I'll walk you through our second quarter of 2024 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 equivalents of the numbers in our earnings release. For the second quarter of 2024, net revenues were CNY 116.9 million, representing a year-over-year increase of 17% from the corresponding period in 2023. Revenues from packaged tours were up 29% year-over-year to CNY 89.8 million and accounted for 77% of our total net revenues for the quarter. The increase was primarily due to the growth of organized tours. Other revenues were down 10% year-over-year to CNY 27.2 million and accounted for 23% of our 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 second quarter of 2024 was CNY 84.4 million, up 29% year-over-year. Operating expenses for the second quarter of 2024 were CNY 49.9 million, down 15% year-over-year. Net gain on disposals of subsidiaries, which was allocated to operating expenses was CNY 24.6 million in the second quarter of 2024. Research and product development expenses for the second quarter of 2024 were CNY 12.7 million, down 8% 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 second quarter of 2024 were CNY 40.2 million, up 61% year-over-year. The increase was primarily due to the increase in promotional expenses and sales and marketing personnel-related expenses. General and administrative expenses for the second quarter of 2024 was CNY 21.7 million, which was in line with general and administrative expenses in the second quarter of 2023. Net income attributable to ordinary shareholders of Tuniu Corporation was CNY 43 million in the second quarter of 2024. Non-GAAP net income attributable to ordinary shareholders of Tuniu Corporation which excluded share-based compensation expenses, amortization of acquired intangible assets and net gain on disposals of subsidiaries was CNY 20.8 million in the second quarter of 2024. As of June 30, 2024, the company had cash and cash equivalents, restricted cash and short-term investments of CNY 1.3 billion. Cash flow generated from operations for the second quarter of 2024 was CNY 105.3 million. Capital expenditures for the second quarter of 2024 were CNY 8.5 million. For the third quarter of 2024, the company expects to generate CNY 183.5 million to CNY 192.4 million of net revenues, which represents a 3% to 8% 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: [Operator Instructions] Our first question comes from [Gucu Lin]. Unidentified Analyst: First of all, congratulations on this quarter's performance. For the second quarter, what are the proportions of domestic and outbound tourism in revenues, respectively, and how about the recovery of outbound tourism. Are there any changes in top outbound destinations and for the third quarter, what are the primary reasons behind the slowdown in revenue growth? Can you share some trends of this summer towards the market? Donald Yu: Thank you for the questions. In the second quarter, domestic was comprised about 70% of the total GMV and outbound towards comprised a bit more than 30% compared to a bit less than 30% in the previous quarter. The proportion didn’t change much from last quarter because the second quarter is usually good for domestic tours due to the 3 national holidays. Domestic tours maintained steady growth this quarter as people’s enthusiasm for traveling remains high. But considering the lump of the holiday, self-drive tours and city walks were prevailing especially in Qingming and Duanwu holiday. For outbound travel, although the second quarter is not the peak season, it still increased at a high year-over-year rate, mainly due to more choices of destinations and products compared to last year. Breakdown to destinations, Southeast Asia has entered off-season since April due to hot and rainy weather. Japan was one of the star destinations in the second quarter due to mixed reasons such as pent-up demand, akura season and the favorable exchange rate. Long distance outbound decrease are usually not as popular as short distance, at least, in the second quarter, but Europe become – became our top outbound destination. In this quarter, we strengthened our supply capacity and launched more new tour products. Currently, our new tour products cover most of the popular countries throughout Europe. We also increased coverage of departing cities, providing more options for travelers from various parts of China. For the summer vacation, the market surges on a quarter-over-quarter basis due to seasonality, but compared to the strong growth last summer, the market growth moderately this summer. With the release of 3-year pent-up demand and the few choices of outbound destinations, domestic travel market was exceptionally thriving during last summer, which formed a hybrid. This year, we see trends towards more self-guided tours in domestic market. People tend to book more flexible products such as transportation or hotel plus X products. And the destination-based package tours may become one of the choices of that. People also have more choices of products this year with the recovery of supply chain, especially for outbound travel products. For example, overseas islands have entered off season in summer, which offers favorable prices and attracted many tourists. Outbound tours will have a higher increase rate than domestic tools. But considering that some of the demand have already been released last year. The outbound travel market will incur a step-by-step increase in that our domestic recovery. Under the influence of overseas flight, product price and exchange rate, generally we think, compared to the first half of the year, our top line will grow at a lower rate in the third quarter, but we are still confident with the bottom line to achieve another profitable quarter. Operator: [Operator Instructions] We are now approaching to the end of the conference call. I will now turn the conference over to Tuniu's Director of Investor Relations, Mary for closing remarks. Mary Chen : 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. Goodbye.
Tuniu Corporation's Financial Performance and Competitive Positioning
Tuniu Corporation (NASDAQ:TOUR) is a leading Chinese online leisure travel company, offering a comprehensive range of travel-related services through its robust online platform. As the travel industry in China continues to expand, Tuniu navigates a competitive landscape populated by other online travel agencies and service providers.
In assessing Tuniu's financial health, two critical metrics stand out: the Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC). Tuniu's ROIC is reported at 4.06%, juxtaposed with a WACC of 14.68%. This discrepancy signals that Tuniu is currently not generating returns above its cost of capital, a potential red flag for investors. The ROIC to WACC ratio, sitting at 0.28, further underscores the company's inefficiency in capital utilization.
When placed in comparison with its industry counterparts, such as Cheetah Mobile Inc. (CMCM), Leju Holdings Limited (LEJU), Xunlei Limited (XNET), and Phoenix New Media Limited (FENG), Tuniu's financial performance is somewhat more encouraging. Despite the industry-wide trend of negative ROICs, Tuniu's relatively better ROIC to WACC ratio suggests a more efficient use of capital, albeit still below its WACC. This comparative analysis highlights the broader challenges faced by companies in this sector in generating adequate returns to cover their capital costs.
For investors evaluating Tuniu's financial health and its potential for future improvement, the company's ability to enhance its capital efficiency could be a critical factor. Despite the current underperformance in generating returns above its cost of capital, Tuniu's position relative to its peers suggests there may be room for optimization and growth.
Tuniu Corporation's Financial Performance and Competitive Analysis
- Tuniu Corporation (NASDAQ:TOUR) is struggling to generate returns above its cost of capital with a ROIC of -4.36% and a WACC of 10.78%.
- Among its peers, Xunlei Limited (XNET) stands out with a positive ROIC to WACC ratio, indicating better capital efficiency and potential for growth.
- The majority of Tuniu's competitors, including Cheetah Mobile Inc. (CMCM) and Phoenix New Media Limited (FENG), also show negative ROIC to WACC ratios, highlighting industry-wide challenges in generating profitable returns.
Tuniu Corporation (NASDAQ:TOUR) is a Chinese online leisure travel company that offers a wide range of travel-related services, including packaged tours, accommodation reservations, and transportation ticketing. The company operates primarily through its online platform, catering to the growing demand for travel services in China. Tuniu faces competition from other travel service providers and online platforms in the region.
The analysis of Tuniu's financial performance, particularly its Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC), reveals some concerns. Tuniu's ROIC is -4.36%, while its WACC is 10.78%, resulting in a ROIC to WACC ratio of -0.40. This negative ratio indicates that Tuniu is not generating returns above its cost of capital, which can be a red flag for investors.
When comparing Tuniu to its peers, Cheetah Mobile Inc. (CMCM) has a ROIC of -13.34% and a WACC of 11.17%, leading to a ROIC to WACC ratio of -1.19. Leju Holdings Limited (LEJU) shows a ROIC of -0.07% and an exceptionally high WACC of 366.63%, resulting in a ROIC to WACC ratio of -0.00019. Both companies, like Tuniu, are struggling to generate returns above their cost of capital.
Xunlei Limited (XNET) stands out among the peers with a positive ROIC of 0.86% and a WACC of 8.95%, resulting in a ROIC to WACC ratio of 0.096. This indicates that Xunlei is the only company in the group generating returns above its cost of capital, suggesting better capital efficiency and potential for growth. Investors may find Xunlei more attractive based on this metric.
Phoenix New Media Limited (FENG) also shows a negative ROIC of -7.19% against a WACC of 6.70%, leading to a ROIC to WACC ratio of -1.07. This further highlights the challenges faced by Tuniu and its peers in achieving profitability above their respective costs of capital. The analysis suggests that Xunlei Limited is currently the most efficient in generating returns relative to its cost of capital.
Tuniu Corporation's Financial Performance and Competitive Analysis
- Tuniu Corporation (NASDAQ:TOUR) is struggling to generate returns above its cost of capital with a ROIC of -4.36% and a WACC of 10.78%.
- Among its peers, Xunlei Limited (XNET) stands out with a positive ROIC to WACC ratio, indicating better capital efficiency and potential for growth.
- The majority of Tuniu's competitors, including Cheetah Mobile Inc. (CMCM) and Phoenix New Media Limited (FENG), also show negative ROIC to WACC ratios, highlighting industry-wide challenges in generating profitable returns.
Tuniu Corporation (NASDAQ:TOUR) is a Chinese online leisure travel company that offers a wide range of travel-related services, including packaged tours, accommodation reservations, and transportation ticketing. The company operates primarily through its online platform, catering to the growing demand for travel services in China. Tuniu faces competition from other travel service providers and online platforms in the region.
The analysis of Tuniu's financial performance, particularly its Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC), reveals some concerns. Tuniu's ROIC is -4.36%, while its WACC is 10.78%, resulting in a ROIC to WACC ratio of -0.40. This negative ratio indicates that Tuniu is not generating returns above its cost of capital, which can be a red flag for investors.
When comparing Tuniu to its peers, Cheetah Mobile Inc. (CMCM) has a ROIC of -13.34% and a WACC of 11.17%, leading to a ROIC to WACC ratio of -1.19. Leju Holdings Limited (LEJU) shows a ROIC of -0.07% and an exceptionally high WACC of 366.63%, resulting in a ROIC to WACC ratio of -0.00019. Both companies, like Tuniu, are struggling to generate returns above their cost of capital.
Xunlei Limited (XNET) stands out among the peers with a positive ROIC of 0.86% and a WACC of 8.95%, resulting in a ROIC to WACC ratio of 0.096. This indicates that Xunlei is the only company in the group generating returns above its cost of capital, suggesting better capital efficiency and potential for growth. Investors may find Xunlei more attractive based on this metric.
Phoenix New Media Limited (FENG) also shows a negative ROIC of -7.19% against a WACC of 6.70%, leading to a ROIC to WACC ratio of -1.07. This further highlights the challenges faced by Tuniu and its peers in achieving profitability above their respective costs of capital. The analysis suggests that Xunlei Limited is currently the most efficient in generating returns relative to its cost of capital.
Tuniu Corporation's Financial Efficiency in the Competitive Online Travel Industry
- Tuniu Corporation (NASDAQ:TOUR) has a negative ROIC/WACC ratio, indicating inefficiency in generating returns above its cost of capital.
- Xunlei Limited (NASDAQ:XNET) stands out with a positive ROIC/WACC ratio, showcasing its efficiency in value creation for investors.
- Comparative analysis reveals Tuniu's need for strategic adjustments to improve its financial health and operational efficiency.
Tuniu Corporation (NASDAQ:TOUR) operates in the highly competitive online travel industry, offering a broad range of travel-related services. This sector is known for its tight margins and intense competition, not just from direct peers but also from larger, diversified companies with travel divisions. Understanding the financial health and efficiency of Tuniu Corporation requires a comparison with its closest peers, particularly through metrics like Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC). These metrics are vital as they provide insight into how well a company is using its capital to generate returns, a crucial aspect for investors.
Tuniu's ROIC stands at -4.33%, with a WACC of 9.48%, resulting in a ROIC/WACC ratio of -0.457. This negative ratio indicates that Tuniu is currently not generating returns above its cost of capital. In the competitive landscape of online travel agencies, where efficient capital utilization is key to sustaining operations and achieving growth, this places Tuniu at a disadvantage. It suggests that the company is struggling to use its invested capital efficiently to create value, a situation that requires strategic adjustments to improve its financial health.
When compared to its peers, Tuniu's position is somewhat in the middle of the pack. For instance, Xunlei Limited (NASDAQ:XNET) showcases a positive ROIC/WACC ratio of 0.045, the only company among the compared peers to generate a return above its cost of capital. This indicates that Xunlei Limited is more efficient at creating value for its investors, making it a potentially more attractive investment opportunity based on this metric alone. On the other hand, companies like Cheetah Mobile Inc. (NYSE:CMCM) and Phoenix New Media Limited (NYSE:FENG) have even lower ratios than Tuniu, highlighting greater challenges in generating value over their cost of capital.
The analysis of these companies, especially in the context of their ROIC and WACC ratios, is crucial for investors looking to understand which companies are efficiently managing and utilizing their capital to generate returns. While Tuniu Corporation is not at the bottom of the list, its negative ROIC/WACC ratio signals a need for improvement in its operations and financial strategies to enhance its value creation capabilities. This comparison sheds light on the competitive dynamics within the online travel industry and highlights the importance of financial efficiency in sustaining business growth and investor confidence.
Tuniu Corporation's Financial Efficiency in the Competitive Online Travel Industry
- Tuniu Corporation (NASDAQ:TOUR) has a negative ROIC/WACC ratio, indicating inefficiency in generating returns above its cost of capital.
- Xunlei Limited (NASDAQ:XNET) stands out with a positive ROIC/WACC ratio, showcasing its efficiency in value creation for investors.
- Comparative analysis reveals Tuniu's need for strategic adjustments to improve its financial health and operational efficiency.
Tuniu Corporation (NASDAQ:TOUR) operates in the highly competitive online travel industry, offering a broad range of travel-related services. This sector is known for its tight margins and intense competition, not just from direct peers but also from larger, diversified companies with travel divisions. Understanding the financial health and efficiency of Tuniu Corporation requires a comparison with its closest peers, particularly through metrics like Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC). These metrics are vital as they provide insight into how well a company is using its capital to generate returns, a crucial aspect for investors.
Tuniu's ROIC stands at -4.33%, with a WACC of 9.48%, resulting in a ROIC/WACC ratio of -0.457. This negative ratio indicates that Tuniu is currently not generating returns above its cost of capital. In the competitive landscape of online travel agencies, where efficient capital utilization is key to sustaining operations and achieving growth, this places Tuniu at a disadvantage. It suggests that the company is struggling to use its invested capital efficiently to create value, a situation that requires strategic adjustments to improve its financial health.
When compared to its peers, Tuniu's position is somewhat in the middle of the pack. For instance, Xunlei Limited (NASDAQ:XNET) showcases a positive ROIC/WACC ratio of 0.045, the only company among the compared peers to generate a return above its cost of capital. This indicates that Xunlei Limited is more efficient at creating value for its investors, making it a potentially more attractive investment opportunity based on this metric alone. On the other hand, companies like Cheetah Mobile Inc. (NYSE:CMCM) and Phoenix New Media Limited (NYSE:FENG) have even lower ratios than Tuniu, highlighting greater challenges in generating value over their cost of capital.
The analysis of these companies, especially in the context of their ROIC and WACC ratios, is crucial for investors looking to understand which companies are efficiently managing and utilizing their capital to generate returns. While Tuniu Corporation is not at the bottom of the list, its negative ROIC/WACC ratio signals a need for improvement in its operations and financial strategies to enhance its value creation capabilities. This comparison sheds light on the competitive dynamics within the online travel industry and highlights the importance of financial efficiency in sustaining business growth and investor confidence.
