Tuniu Corporation (TOUR) on Q1 2022 Results - Earnings Call Transcript
Operator: Hello. And thank you for standing by for Tuniu's 2022 First Quarter Earnings Conference Call. At this time, all participants are in a 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 first 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 first quarter of 2022. Before we continue, I refer you to our Safe Harbor statement in 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 most directly comparable GAAP measures. Finally, please know 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 Dunde Yu: Thank you, Mary. Good day, everyone. Welcome to our first quarter 2022 earnings conference call. From the beginning of this year, we have seen the most severe resurgence of COVID-19 since the initial breakout in 2020. As a company with this experience in , Tuniu has building resilience for coping with short-term industry patients, and we are confident that the industry will resume it's recovery in the near future. During the past quarter, we continue to focus on product innovation, service quality, all of which will cost us to remain competitive as we take on new opportunities and challenges. Even as the dynamic resurgence has temporary played part most travel, the feel that among the public remains high. According to a recent study by domestic midstream media outlet, Shareholder Bank at the top of the consumption, which list for consumers aged between 18 to 35 and rank in the top 3 categories for consumers, about 8 out of 60. In order to satisfy our customers' demand for travel while complying with pandemic prevention regulations, we are constantly late up working and innovating our products and sales models. In terms of our products, we have aside the development of local tour products for travel within cities and nearby destinations. Leveraging our leader hotel resources, we initiated seasonal product offerings and our hotel plus ex-product model, such as winter off screen and teen growth picking in order to provide more diverse selections of local tour products for customers. Elaborating our resources in the city travel market, we also launched a series of city work educational state tour products, which cover museums, zoos and the public gardens. Our product innovations are designed to mirror market trends. Among this, camping has become more popular. We have recently begun offering high-quality camping of landing and campaign for young customers and families with children. During the May holiday this year, sell camping related to travel products saw significant growth. In line with our moto of this booking fixed travel, most of Tuniu's products, especially interprovincial tours, have adopted the advanced booking and travel confirmation sales model. Customers are able to make discounts bookings and later from their departure date with the option to receive a full refund increase of cancellation, which also will help drive strong infusive sales term among customers for traveling in the future. Tuniu has fully leveraged live streaming shows that the key sales channel through the COVID-19 outbreak. We have posted sales shows for our members gate, as well as centers around specifically regional travel products, as well as multichannel live streaming shows featuring outdoor, travel and destination reconditions in addition to our regular daily product promotions. Tuniu's live streaming shows are also an important channel for collecting customer feedback and to help us improve our product offerings. Tuniu has -- partly adheres to our customers first trend in providing both cycle services for customers during the COVID-19 pandemic. Our customer service team has been monitoring the pandemic situation and they work closely with our local tour operators to ensure guest safety during travel, providing timely response or exchange services during spike in resurgence. Our customer service teams communicate our regular customers on a constant basis and provide tour recommendations, especially for discounting products that are available for advanced booking. Tuniu has gained a quick number of loyal customers over the years through our reputation of providing high-quality products and services, and the contribution of our repeat customers to our overall GMV has been increasing since the pandemic broke out. We will continue to work hard to provide high-quality service for our customers and help them with future travel plans. Next, I would like to talk about our ESG development. In terms of products, we are here to our strategy of putting agriculture through travel. We collaborated with destinations in remote areas for product development and launched customized travel products, especially for the -- we also launched sales channels for local state specialty products, allowing guests to have authentic local experience while supporting the development of the local tourism economy. Throughout the pandemic, we have faced a great focus on our employees safety and health. In order to better take care of our local employees who work in different regions in China, we made proper work arrangements in accordance with regional pandemic prevention and control guidelines, such as working remotely from home and enjoying flexible work shifts. We also implemented regular new click based testing for local staff, especially reception staff at our destinations to ensure the safety and health of the sales and our guests. We continue to ignite team building activities during the recent pandemic resurgence and carried out the internal trainings and competitions for our core staff and teams to keep them engaged and then motivated. We also carried out several recreational activities such as short video, contest and outdoor running tests to encourage our employees to stay healthy physically and mentally. In addition to volunteers to support the community and emit prevention health and services. We remain confident about the future of China's travel industry. Even though we are still facing many challenges on the road to full recovery, we are encouraged to see that the COVID-19 inter-province travel guidance were adjusted recently, which narrowed the restrictions from provinces to cities. While the overall travel demand in China continues to rise despite the resurgence of the pandemic, we believe that with the patients and support of our guests and customers, the days of traveling will return soon. I will now turn the call over to Anqiang Chen, our Financial Controller, for the financial highlights. Anqiang Chen: Thank you, Donald. Hello, everyone. Now I'll walk you through our first quarter of 2022 financial results in greater detail. Please note that on monitoring onetime RMB, unless otherwise stated you can find the U.S. dollar equivalents of the numbers on the earnings release. For the first quarter of 2022, net revenues were RMB41.5 million, representing a year-over-year decrease of 46% from the corresponding period in 2021. The decrease is primarily due to the negative impact brought by the operate and the spread of COVID-19. Revenues from package tours were down 68% year-over-year to RMB14.4 million and accounted to -- and accounted for 35% of our total net revenues for the quarter. The decrease was primarily due to the resurgence of COVID-19 in certain regions in China. Other revenues were down 15% year-over-year to RMB27.1 million and accounted for 65% of our total net revenues. The decrease was primarily due to the decrease in the fees for advertising services provided to tourism boards and bureaus. Gross profit for the first quarter of 2022 was RMB15.8 million, down 45% year-over-year. Operating expenses for the first quarter of 2022 were RMB68.6 million, down 18% year-over-year. Excluding share-based compensation expenses and amortization of our client intangible assets, non-GAAP operating expenses was RMB65.5 million, representing a year-over-year decrease of 18%. The research and product development expenses for the first quarter of 2022 were RMB16.2 million, up 37% year-over-year. The increase was primarily due to the increase in research and product development for personnel-related expenses. Sales and marketing expenses for the first quarter of 2022 were RMB29.8 million, down 16% year-over-year. The decrease was primarily due to the decrease in promotion expenses. General and administrative expenses for the first quarter of 2022 were RMB27.7 million, down 38% year-over-year. The decrease was primarily due to the decrease in general and administrative personnel-related expenses and allowance for doubtful accounts. Net loss attributable to online shareholders was RMB40.4 million in the first quarter of 2022. Non-GAAP net loss attributable to online shareholders, which excluded share-based compensation expenses and amortization of acquired intangible assets were RMB37.2 million in the first quarter of 2022. As of March 31, 2022, the company has cash and cash equivalents, restricted cash and short-term investments of RMB929.5 million. Capital expenditures for the first quarter of 2022 were RMB2.1 million. For the second quarter of 2022, the company expects to generate RMB32.2 million to RMB40.2 million of net revenue, which represents a 75% to 80% decrease year-over-year. Please note that these forecasts reflect Tuniu's current and preliminary review 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? Operator: Thank you. We will now begin the question-and-answer session. The first question today comes from with Retail. Please go ahead. Unidentified Analyst: Thank you. Hello, my name is Grace. I have a question for management. As we know, the tourism industry is currently pleased with challenges because of the severe resurgence of COVID-19 in the past few months. And on the first circumstances, how do you view the future development of the tourism industry and what strategic measures will the company take in the second half of the year to deal with the risks for pandemic. Will there be any changes compared to the past? Thank you. Donald Dunde Yu: Thank you for the question. We are facing the most severe rebound of the pandemic since the first quarter of 2020. The current has negatively affected the domestic travel market, as well as our revenues in the first half of the year. However, we are glad to see that with the number of infections gradually going down recently, domestic travel restrictions tend to be eased. In the past our number of reps doubled compared with spring festival. The market may remain the momentum of recovery in the coming summer location and national day holiday provided the pandemic phase under control. In the long month, we believe the industry will continue to grow despite the impact of the pandemic, tourism demand has not decreased but has been temporarily pent-up. And it will eventually be releasing something. This demonstrated by the increasing popular retail campaign since the spring. To capture the pent-up demand and the reset uncertainties of the pandemic we insist to provide products, which are innovative and flexible. On one side, we -- our product design follows the concept of parental tourism adding more personalized interactive activities for people to enjoy the avenues during the feed. On the other side, our product sales adopts advanced booking and travel congestion model. People are free to book any products at any time if their trips are delayed or canceled or they can choose later departure date or just get a refund. In terms of service, so we always insist with the customer first principle and provide full cycle service to our customers. Group services help us to retain customers. It's important to care about customers, especially when the market is fresh. Our customer service returned to close contact with regular customer during the pandemic to reinforce the customer stickiness providing them with travel related messages. Therefore, Tuniu is likely to be their first of choice when our customers plan to travel. In addition, the pandemic brings changes to the travel industry, and we are also trying something new. For example, we further developed rural tourism because it captures both the concept tourism and the momentum of local tour. Our local team travelled across the country to find fit for destinations, which should include a characteristic commendation for as well as local activities. We deeply cooperate with big technicians and design special products for them. Based on our experience in the travel industry and the knowledge of our customers, we have this definition to attract more customers and develop local tourism economy. More, we also run by ourselves, a strong new business scope. In general, we will stay with Tuniu's core competitiveness under the challenging environment while trying to find the potential growth post. Thank you. Operator: And there appears to be no further questions. I will now turn the conference over to Tuniu's Director of Investor Relations, Mary, for any 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. Have a good day.
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.
