Tuniu Corporation
Q4 2020 Earnings Call Transcript

Published: 16 Mar 2021

[Operator:]

Hello. And thank you for standing by for Tuniu’s 2020 Fourth Quarter and Full Year 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:]

Thank you, Andrew. And welcome to our 2020 fourth quarter and full year 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 fourth quarter and fiscal year 2020.

[Donald Yu:]

Thank you, Mary. Good day, everyone. Welcome to our 2020 fourth quarter and full year earnings conference call. First, I would like to provide a brief review of the China travel market in 2020. 2020 was a challenging year for the tourism industry both in China and globally due to the impact of the COVID-19 pandemic. While the travel industry has began to gradually recover, and we are optimistic about the future, we did experience a period of stagnation last year. Fortunately, Tuniu’s years of experience in the industry have allowed us to accumulate a large number of high-quality business partners and loyal customers, along with diverse product portfolio, and strong customer service team. All of which help us to get through the most challenging times. Also, our flexible operating model allows us to efficiently - effectively respond to changes in customer demand during and after the COVID-19 outbreak to adjustment to our business focus, product strategy and staffing. Upon the outbreak of COVID-19 in January last year, our first priority was to guarantee the safety and the interest of our customers. We quickly assisted traveling customers with their return logistics, while responding or adjusting previously purchased packages for customers who hadn't started their trips yet. During the pandemic, our direct loss related to customer refunds totaled more than RMB100 million. Thanks to our timely response, however, we'll be rewarded with the long term support and trust of many loyal customers who have greatly contributed to the recovery of Tuniu’s business. I'm pleased to see that our GMV contribution from repeat customers reached a new high last year. In response to the changing external environment, we've also made various adjustments to our business operations and the corporate structure, including optimizing our teams and repositioning our key staff. We've also adopted tighter cost control measures since the outbreak of the pandemic, resulting in 20% year-over-year decrease in total operating expenses for 2020. Excluding the provision for receivable recorded in the fourth quarter, our yearly operating expenses declined over 50% year-over-year.

[Anqiang Chen:]

Thank you, Donald. Hello, everyone. Now I will walk you through our fourth quarter and fiscal year 2020 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. Starting from the fourth quarter of 2020, net revenues were RMB118.7 million, representing a year-over-year decrease of 74% from the corresponding period in 2020. The decrease was primarily due to the negative impact brought by the outbreak and spread of COVID-19. Revenues from packaged tours were down 76% year-over-year to RMB83.1 million and accounted for 70% of our total net revenue for the quarter. The decrease was primarily due to the decline in travel to international destinations impact by the outbreak and spread of COVID-19. Other revenues were down 67% year-over-year to RMB35.6 million and accounted for 30% of our net revenues. The decrease was primarily due to the decline in service fees received from insurance companies and revenues generated from financial services.

[Operator:]

The question-and-answer session of this conference call will start in a moment. The first question comes from Amy Jo, a private investor. Please go ahead.

[Amy Jo:]

Thank you, operator. Hi, management. I've got two questions. The first is regarding your 2020 financial result. What's the reason for the increased loss in the fourth quarter? How does it impact your cash flow? My second question is about your 2021 outlook. What is your view on recovery of the industry in 2021? And how do you plan to expand your business in the post-epidemic era? Thank you.

[Donald Yu:]

Thank you for the question. First, let me explain the increased losses. We revealed our accounts throughout - solely in the year and in the year end, and recorded approximately RMB800 million impairment charges in the G&A expenses, including refunds to customers that we paid on behalf of our travel suppliers, and the increased credit risk, as we – result of the COVID-19, as well as impairment on some financial products. Excluding these non-cash expenses, our G&A expenses for the fourth quarter and full year 2020 both declined a lot. And our net loss also narrowed down on a year-over-year basis. As of December 31, our cache balance was RMB1.6 billion, which is in line with the last quarter and will be sufficient to support our future business operations. Secondly, although there were industry headwinds such as small outbreaks in the winter, and tightened travel restrictions during the spring festival, we always see pent-up demand for traveling and expect a strong momentum or recovery for domestic tours. In fact, the bookings after the spring festival keeps increasing according to our data. Also, recently, it was announced that the Labor Day holiday for 2021 will be a five-day holiday, which may further stimulate the domestic travel market. For outbound travel, although it doesn't recover so far, we are optimistic about its long term growth. We won’t miss the opportunities of this recovery in the future. Currently, our focus is still on domestic tours. This year, we will continue to focus on product innovation, quality improvement and technology under our integrated business model. We continue to increase our investment in product - develop product upgrades to ensure we always have a compelling and differentiated product offers - offerings for customers. Recently, we did an in-depth research on our customer needs in order to guide our production. Based on the insights we got from research, apart from mass market products, we are able to develop more tailored products for more distinct customer groups. Moreover, we have been working in China's domestic travel market for over 10 years and have rich experience and a large customer base in many popular destinations such as Hainan and Yunnan. We will further expand our advantages in these destinations, featuring them as the basis of our star tour products. Secondly, we will further improve the quality of both our products and services. We continue to reach the standards of product launch since 2019. And this year we took the satisfaction rate of 90% for product launch. So far we have over three self-operated local tour operators in China and plan to open more this year. This local tour operators not only help us better serve our customers but also help with promotions and acquisition of customers they add to destinations. Our local tour operators also - always have a high set test section with among our customers. However, we are pursuing zero complaints regarding our local tour operator services. Currently we have got seven destinations in China as a trial where we are trying to achieve zero complaints of our local tour operators services. In terms of customer service, we are focused on developing long-term relations with our customer through our customer service teams. Repeat customers contributions, we reached our new high last year. We'll continue to provide high quality service to our customers in order to capture the recovery momentum of domestic travel at present and outbound travel in the future. Thirdly, about technology, is the basis of our production, service and internal management. This year, we will adopt a digitalized management systems so as to raise the internal efficiency and zero menu costs. Lastly, I want to talk about our vertical play integrated business model, which differentiated Tuniu from our peers. We always focus on integration with supply chain, we established our own local tour operators, direct procurement product design team, as well as customer service team. By shortening the supply chain, we are able to have better control over product and service quality, higher internal efficiency and better profit margins. In addition, we are open to cooperate with our business partners, such as suppliers, as a destination B2B and B2C distributors. Together, we could provide differentiated products and compelling services to our customers. Thank you.

[Amy Jo:]

Thanks.

[Operator:]

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:]

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. Good day.