Tuniu Corporation (TOUR) on Q3 2021 Results - Earnings Call Transcript
Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear. The machine-assisted output provided is partly edited and is designed as a guide.: Operator: 0:04 Hello. And thank you for standing by for Tuniu's Twenty Twenty One Third Quarter Earnings Conference Call. At t 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. . 0:24 I would now turn the meeting over to your host for today's conference call, Director of Investor Relations, Mary. Please go ahead. Mary Chen: 00:31 Thank you. And welcome to our twenty twenty one 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 twenty twenty one. 0:57 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 the most directly comparable GAAP measures. Finally, please note that, unless otherwise stated, all figures mentioned during this conference call are in RMB. 01:29 I would now like to turn the call over to our Founder, Chairman and Chief Executive Officer, Donald Yu. Donald Dunde Yu: 01:39 Thank you, Mary. Good day, everyone. Welcome to our third quarter twenty twenty-one earnings conference call. While the recovery of the overall tourism industry experienced setbacks in the third quarter due to their resurgence of COVID-19 and natural disasters. Our revenues from packaged tours continue to increase. Following the pandemic resurgence in August, Tuniu’s during in September and October. Operating expenses decreased year-over-year – year-on-year for the third consecutive quarter. 02:26 And our net loss continue to narrow compared to the same period of last year. During the pandemic era, Tuniu has started possibly adhere to our customer first principle. Providing safe and comfortable travel experiences as well as refund and the exchange guarantees. Our refund and exchange class rate reached the highest level of the year following the COVID-19 resurgence in July. 02:59 From July twenty to August twenty to a new refunded over eighty five thousand orders and total refunds for packaged towards was over RMB one hundred and twenty million. In addition to new extended reform and exchange guarantees for meat and high risk areas and of those some of the losses for customers who had no – who had to cancer trips due to pandemic control matters. 03:31 This outbreak of COVID-19 in twenty twenty, we have provided the coverage on the losses of our customers, totalling over RMB one hundred million. Thanks to our timely and effective services. We have been rewarded that we have the long-term support and trust of our many loyal customers. In fact, the contribution of our reviewed customers to our transaction volume has been stable at more than seventy five percent every quarter since twenty twenty. 04:08 In October, our members day single day sales exceeded RMB ten million with the transaction volume, our packaged tour products increasing thirty percent quarter-on-quarter. And the high quality and trustworthy corporate image where we established has placed a large role in attracting new customers. 04:34 While ensuring that, we maintain the highest standard of service quality. We will continue to focus our energies on product development. We consistently worked upgrade our products based on customers involving demand and the main trend was smaller premium packing tours. Travelers have increasingly satisfied the demand towards things such as adventures for the work and health related services alongside the traditional tours, Tuniu’s spot and their status in tons of facilities and so it's growing as well. During the national day – holidays that year more than half all our total COVID-19 six or less. According to new to our booking data. 05:37 Tuniu’s years of experience in the industry have allowed us to build mature products and service network covering points of departure. But the development of definition based products and services, it still has enormous room to you have. The design and development of Tuniu’s packaging tour products has always revolved around the destinations. Our new tour product designers, all have more than five years’ experience in destination design. And we have dedicated staff, responsible for results, equipment and destinations. Since the COVID-19 outbreak, we have other promoted innovation within existing destination and development our new definitions. 06:32 By privilege our resources in the domestic travel market we have launched the multiple that was implied products such as countryside tours, lamping and urban light tours and addition – in addition to our midstream products to provide a more options for customers. In the post COVID-19 era, self-guided to all has become increasingly popular. To address this our hotel products model, focuses on vaccination hotels with special accesses around location hotels. 07:10 Our hotel prospects and products model offers, mainly options to meet direct customer demand. Such as phoenix, spot tickets for the market helicopter tools for the premium marketing and family, friendly enhancement activities. The Hotel plus act product model, they all have grown for development and with our direct document advantages, we are new to affected people allow us our destination based, the resources is to provide travelers with more products choices and way to value for money. 07:49 In terms of marketing, our approach combined popular online format including to better capture, the attention of customers and livestreaming shows to introduce destinations. Having to encourage increases users to place orders. These promotions are highly popular recurrent customers speculate younger generation. 08:15 We have developed several long-term and in-depth large premium shows for popular destinations, some of which have achieved a strong results and we look forward to developing this channel further. In terms of vaccination survey, our self-operated local tour operators on the frontline actively serving customers and advantages. We have been recognized for our continuous efforts to provide high quality service and have been rewarded with spot and gratitude of our customers. 09:01 Our satisfaction rate has reached ninety eighty percent this quarter. Since we launched our direct compliance initiative with our local tour operators this year. In the third quarter, our self-operated local tour products increased over thirty percent year-on-year. Within this, proportion of January for self-operated local tour products increased by ten percent within the GMV of packaged tour products compared with the third quarter last year. 09:40 In addition our self-operated local tour operators effectively a collaborated with our customer service teams in the cycle service network for travelers. In the culture, our tourist comes to the bad weather conditions and pandemic disruptions. Our tour guides definition staff and the customers service came immediately active our emergency response plan and actively corporated with the local prevention and control requirements to issue authorities to travel safety. 10:27 In terms of technology, Tuniu has made positive progress in our digital development with significant gains in our operational efficiency including other product and inventory management. Going forward, our digital development, we have focused on definitions including strengthening our R&D capabilities for supply chains and stuff and improving customer travel experiences. 10:57 By leveraging our business model and from transitory technology. We are able to reduce the number of intermediate links in the industrial chain allowed us to provide a more convenient services for authorities during travel including airport shuttles, distractions and total guide options. While the tourism industry has encountered temporary deposits due to the recent COVID-19 outbreak. Our priority has been meet the pandemic control requirements of each region. Ensure there is a safety and minimizing losses, while ensuring our high level customer satisfaction. 11:54 Moreover, we will continue to strengthen us and flatten all our product services and technologies to improve overall in destination customer experience. I'm confident that our continuous efforts will continue to deliver results. 12:12 I will now turn the call to Anqiang Chen, our financial controller for the financial highlights. Anqiang Chen: 12:22 Thank you, Donald. Hello, everyone. Now, I walk you through our third quarter of twenty twenty one financial results in greater detail. Please note that all the monetary amounts are RMB, unless otherwise stated. You can find the U. S. Dollar equivalents of the numbers in our earnings release. For the third quarter of twenty twenty one, net revenues were one hundred and fourteen point six million RMB representing a year-over-year decrease of seven percent from the corresponding period in twenty twenty. The decrease was primarily due to the negative impact blocked by the outbreak and spread of COVID-19. 13:04 Revenues from packaged tours were up five percent year-over-year to ninety point seven million RMB and accounted for seventy nine percent of our total net revenues for the quarter. The increase was primarily due to the growth in revenues from self-operated products. Other revenues were down thirty six percent year-over-year to twenty three point nine million RMB and accounted for twenty one percent of our total net revenues. The decrease was primarily due to the decline in commissions received from other travel related products impact by the outbreak and spread of COVID-19. 13:47 Gross profit for the third quarter of twenty twenty one was thirty point seven million RMB down thirty nine percent year-over-year. Operating expenses for the third quarter of twenty twenty one were ninety six point four million RMB down twenty five percent year-over-year excluding share-based composition expenses and the amortization of our acquired intangible assets. Non-GAAP operating expenses were ninety point nine million RMB representing a year-over-year decrease of twenty three percent. Research and product development expenses for third quarter of twenty twenty-one were fifteen point six million RMB, down three percent year-over-year. The decrease was primarily due to the decrease in research and product development personnel related expenses. 14:44 Sales and marketing expenses for the third quarter of twenty twenty-one were forty one point seven million RMB down sixteen percent year-over-year. The decrease was primarily due to the decrease in sales and marketing personnel related expenses and the amortization of acquired intangible assets. 15:05 General and administrative expenses for the third quarter of twenty twenty one were forty one point two million RMB down forty one percent 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 thirty five point one million RMB in the third quarter of twenty twenty one. 15:34 Non-GAAP net loss attributable to ordinary shareholders, which excluded share-based to composition expenses and amortization of acquired intangible assets was twenty nine point four million RMB in the third quarter of twenty twenty one. As of September thirty twenty twenty one, the company had a cash and the cash equivalents, restricted cash and short-term investments of one billion RMB. Capital expenditures for the third quarter of twenty twenty one were two point one million RMB. For the fourth quarter of twenty twenty one, the company expects to generate fifty three point four million RMB to sixty five point three million RMB in net revenues, which represents forty five percent to fifty five percent decreased year-over-year. 16:28 Please note that the forecast reflects Tuniu's current and preliminary view on the industry and its operations, which is subject to change, particularly as tourist uncertainties brought by the impact of COVID-19. 16:44 Thank you for listening. We are now ready for your questions. Operator? Operator: 16:51 Thank you. The question-and-answer session of this conference call we will start in a moment. . Our first question comes from Unidentified Analyst: 17:24 Our first question comes from Lucy . Please go ahead. Unidentified Analyst: 17:43 Okay. This Lucy speaking. Thank you, operator. Hi management. My question is about the impact of domestic pandemic resurgence on the industry and the company. For the eighth, the current COVID outbreak continues, I would say to you that’s during festival or even longer and what’s your plan for the winter season. Okay. That’s all. Thanks. Donald Dunde Yu: 18:12 Thank you for the question. They have been outbreak so COVID-19 from time to time since late July, which has setback recovery of the industry. Even and the large conditions, our revenues from packaged tours still have positive growth year-on-year. The reason outbreaks have spread to many policies and some of the provinces have suspended into province travel. Because we add our net revenue for the fourth quarter to decrease on a year-over-year basis. 18:56 However, if we look at another like, the outbreak of the pandemic has also accelerated the upgrading of the travel industry. After the outbreak of the pandemic demand for better resources and the services from customers have brought up higher quality products. Upon the demand, we launched the zero complaints initiative with our local-tour operators and the GMV of our outlook to local tour operator products doubling the first three quarters this year compared to the same period of the last year. 19:38 In terms of the service, thanks to the mutual efforts from our parties in the entire industry chain. Customer refund and exchange processes are getting quicker and guarantees more complete. Although we and our partners may incur some losses, we will take the social responsibility and customer increase. 20:07 This improvement have reached us the path for whole industry, and we will make better in the future. And the current circumstances, the intraprovince travel are suspended. We have focused on the intraprovince travels. We saw our advantages in the supply chain. We are providing customers with more high quality loyal or local costs including high cost in hotels and local entertainment. Moreover, we have the direct supply demand for towards teams, we are exploring more options for travelers such as countryside tours and interactivities between parents and children. 21:04 seems in winter, we are exploring these resources around cities. Targeted with nearby hotels discussion of the trial products . Although, we will continue our livestreaming shows as definitions to share Tuniu’s online with travelers at home. In general, we see the resolution and efforts to overcome the pandemic throughout of the nation in spite of the current resurgence of the pandemic, with ongoing vaccine – vaccination rollout and enhancements of prevention matter. The pandemic, we are defeated and the travel industry, we will continue to recovery in the near future. Thank you. Operator: 22:11 So we are now approaching the end of the conference call. I will now turn the call over to News Director Of Investor Relations, Mary for closing remarks. Mary Chen: 22:39 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: 22:53 Thank you for your participation in today's conference. This concludes presentation. You may now disconnect. 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.
