Tuniu Corporation (TOUR) CEO Donald Dunde Yu On Q4 2021 Results - Earnings Call
Tuniu Corporation (NASDAQ:TOUR) Q4 2021 Results Earnings Conference Call March 17, 2022 8:00 AM ET
Company Participants
Mary Chen - Investor Relations Director
Donald Dunde Yu - Founder, Chairman and Chief Executive Officer
Anqiang Chen - Financial Controller
Conference Call Participants
Grace Lu - Private Investor
Operator
Hello. And thank you for standing by for Tuniu's 2021 Fourth Quarter and Full-Year 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 Chen
Thank you. And welcome to our 2021 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, operational highlights and financial performance for the fourth quarter and fiscal year 2021. 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 fourth quarter and full-year 2021 earnings conference call. 2021 was the year for challenges and opportunities, while Tuniu new experienced rapid business rebound since COVID-19 was brought under control in China. We've also been tested by its repeated recurrences.
In 2021, our revenues from packaged tours for the full year of 2021 maintained the same level as in 2021. Despite adverse external environment with transaction volume of our self-operated local tour operators achieving double-digit growth.
Our operating expenses have decreased year-on-year for four consecutive quarters and the net loss for the year has also narrowed significantly compared with last year. COVID-19 has [indiscernible] the abilities of tourism enterprises to manage risks on a sustained basis. It has required enterprises to continue to innovate, meet key customer demands and upgrade products and services. It also required a highly efficient internal management systems to adapt to the changing business environment, using limited resources.
Tuniu's development path has been differentiated by our focus on the creation of a vertically integrated supply chain, allowing us to become the industry's sole integrated digital tourism service provider.
By bringing together production, supply and the sales and building our capabilities in direct procurement, as well as product design and packaging, self-operated local tour operators and multiple sales channels, Tuniu has realized significant advantages compared to our peers.
Recognizing the market changes and upgraded customer expectations in the post COVID-19 era, Tuniu has focused on new directions for product development that leverage our advantages. In addition, we have upgraded our digitalization capabilities across the entire industry chain to improve our operational efficiency and customer experience.
Our integration has shortened the industrial chain and improved the gross profit, while digitalization has improved efficiency and reduced the costs. With the synergies created by those two strategies, Tuniu is well positioned to provide high quality products and services to drive our long-term development.
In the post COVID-19 era, tourist demand for better products and services has driven the upgrading of the entire tourism industry. High quality innovative products and the overall service experience before, during and after travel are the core concerns of tourists and represent the key to transforming the tourism industry.
In terms of products, we worked on our integrated product development, or IPD model, brought together all of our departments as well as customers to participate in developing products based on market demand with high customer satisfaction rates as the standard for launching new product offerings. Due to our strict development process, the satisfaction rate of our overall new product offerings has reached 90% with new tour products reaching 97%.
In terms of product types, due to increased customer focus on travel experience [indiscernible], small and medium-size booked [ph] tours and customized tours have seen rapid development in the post COVID-19 era.
In 2021, growth in demand for customized tours during our members days sales exceeded our expectations, with single-day booking volume for customized tour hitting a record 30% of total booking volume, the same as for organizing tours.
In the second half of 2021, with the resurgence of COVID-19, we saw strong performance from local tour products as well as the establishment of the mini kitchen concept.
According to Newstate [ph], bookings of luxury and theme park hotels increased by more than 50% year-over-year during this year's spring festival. Our hotel plus X product model has become increasingly popular by offering more flexible and diverse options across the [indiscernible] key aspects of tourism, including food, accommodation, transportation, shopping and entertainment.
In terms of service, we are committed to creating a full cycle service network for travelers, which covers before, during and after travel, as well as departure and the destination cities.
Prior to establishing our self-operated local tour operators, it was challenging for us to bring pro tourist experience during trips and to enhance their itineraries. The development of our self-operated local tour operators completed the missing link in our service, forming a simulated service network with our customer service team.
Today, Tuniu has over 30 self-operated local tour operators covering most of China's hot scenic spots, providing direct tour guide services for our guests and providing our other tour products as well as a destination spot for all Tuniu customers.
In 2021, the transaction volume for our self-operated local tour operators achieved over 15% growth year-on-year, even as tourists encountered frequent bad weather conditions and pandemic disruptions.
Our customer service departments provide assistance services for guests on the 24/7 basis, especially in case of emergencies, and we are seeing the number of customer service requests increase rapidly.
Under continuously high pressure, Tuniu's customer service team has steadfastly adhered our customer-first principle, providing around-the-clock refund and exchange services and communicating with multiple parties in order to minimize the customer losses.
During the pandemic era with its restrictions on travel, our membership team has continued to keep in touch with customers through texting and constantly sharing to build strong relationships and keep up the travel enthusiasm.
As part of this, on the 16th of every month, we hold special Tuniu members day promotion, which in 2021 generated cumulative single-day sales exceeding RMB 150 million.
In addition, live streaming shows have become one of the key sales channels due to the impact of the pandemic. Our members day promotion has also leveraged online formats, including live streaming shows for product sales and to introduce destinations and analyze customer demand.
Tuniu's live streaming show team uses every show as an opportunity to promote product upgrades. Their interests, preferences and suggestions from guests, joining our shows is also a valuable asset to help us improve our product offerings.
COVID-19 has accelerated the digital upgrade of various industries. Tourism enterprises have not only the digital tools to replace labor, reducing costs and improving efficiency as an area in which we made achievements during 2021.
As digital products have become a necessary part of people's lives during the pandemic, improving customer experience through digitalization has become essential for the long-term development and it's one of our main focuses in this year.
As part of this, in January, we upgraded our official website to provide more elder-friendly features and content. In the future, we will continue to improve digital asset utilization for our travel confirmation, online seat selection and tour guide systems to offer more convenient travel experiences for our customers.
In 2022, Tuniu will continue to focus on integration and digitalization as well as improving our product and service quality to meet customer demands. We will also work to provide an easier booking process of pre-travel, more options during trips and enhanced after travel guarantees.
With the improvement of the external environment and the passing of the COVID-19 impact, Tuniu will be better prepared for the recovery of the industry as we continue to introduce more high quality products and services.
I will now turn the call over to Anqiang, our Financial Controller, for the financial highlights.
Anqiang Chen
Thank you, Donald. Hello, everyone. Now I walk you through our fourth quarter and the fiscal year 2021 financial results in greater detail. Please note that all the monetary amounts are in RMB unless otherwise stated. You can find the US dollar equivalents of the numbers in our earnings release.
Starting from the fourth quarter of 2021. Net revenues were RMB 73.4 million in the fourth quarter of 2021, representing a year-over-year decrease of 38% 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 49% year-over-year to RMB 42.8 million and accounted for 58% 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 14% year-over-year to RMB 30.6 million and accounted for 42% of our total net revenues. The decrease was primarily due to the decline in commissions received from other travel-related products impacted by the resurgence of COVID-19.
Gross margin was 47% in the fourth quarter of 2021 compared to a gross margin of 40% in the fourth quarter of 2020.
Operating expenses for the fourth quarter of 2021 were RMB 78 million, down 92% year-over-year. Excluding share-based compensation expenses, amortization of acquired intangible assets and the impairment of acquired intangible assets, non-GAAP operating expenses RMB 74.8 million, representing a year-over-year decrease of 22%.
Research and product development expenses for the fourth quarter of 2021 were RMB 13.5 million, up 5% year-over-year. The increase was primarily due to the increase in research and product development personnel-related expenses.
Sales and marketing expenses for the fourth quarter of 2021 were RMB 28.6 million, down 75% year-over-year. The decrease was primarily due to the decrease in promotion expenses and amortization of acquired intangible assets.
General and administrative expenses for the fourth quarter of 2021 were RMB 46.5 million, down 94% year-over-year. The decrease was primarily due to the decrease in allowance for doubtful accounts.
Net loss attributable to ordinary shareholders was RMB 33.9 million in the first quarter of 2021. Non-GAAP net loss attributable to ordinary shareholders, which included share-based compensation expenses, amortization of acquired intangible assets, and the impairment of acquired intangible assets were RMB 30.5 million in the fourth quarter of 2021.
As of December 31, 2021, the company had cash and cash equivalents, restricted cash and short-term investments of RMB 1 billion. Capital expenditures for the fourth quarter of 2021 were RMB 1.2 million.
Now moving to full-year 2021 results. In 2021, net revenues were RMB 426.3 million, representing 5% year-over-year decrease. The decrease was primarily due to the negative impact brought by the outbreak and spread of COVID-19.
Revenue from packaged tours were up 1% year-over-year to RMB 305.3 million and accounted for 72% of our total net revenues in 2022. The increase was primarily due to the growth in revenues from self-operated products, offset by the negative impact brought by the resurgence of COVID-19.
Other revenues were down 18% year-over-year to RMB 121 million and accounted for 28% of our total net revenues in 2021. The decrease was primarily due to the decline in brand names generated from financial services.
Gross margin was 40% in 2021 compared to a gross margin of 47% in 2020. Operating expenses were RMB 353.1 million in 2021, down 77% year-over-year. Excluding share-based compensation expenses, amortization of acquired intangible assets and the impairment of acquired intangible assets, non-GAAP operating expenses were RMB 334.7 million, representing a year-over-year increase of 77%.
Research and product development expenses were RMB 54.6 million in 2021, down 46% year-over-year. The decrease was primarily due to the decrease in research and product development personnel-related expenses.
Sales and marketing expenses were RMB 150.5 million in 2021, down 60% year-over-year. The decrease was primarily due to the decrease in sales and marketing personnel-related expenses and amortization of acquired intangible assets.
General and administrative expenses were RMB 174 million in 2021, down 84% 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 ordinary shareholders was RMB 121.5 million in 2021. Non-GAAP net loss attributable to ordinary shareholders, which excluded share-based compensation expenses, amortization of acquired intangible assets, and the impairment of acquired intangible assets was RMB 102.8 million in 2021.
Capital expenditures were RMB 13.9 million in 2021.
Tuniu's business has been significantly and negatively impacted by the outbreak and spread of COVID-19 since January 2020. As a result of the continued influence by COVID-19, for the first quarter of 2022, the company expects to generate RMB 34.8 million to RMB 42.5 million of net revenues, which represents 45% to 55% 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?
Question-and-Answer Session
Operator
[Operator Instructions]. We will take our first question today from Grace Lu [ph], a private investor.
Grace Lu
My name is Grace Lu. I have several questions for you. Firstly, what's your view on the recovery of the travel industry in 2022 compared with the previous year? And based on your perspective, could you please share the company's strategies and priorities for this year and any guidance on the financial components of 2022?
Donald Dunde Yu
The travel market experienced both rebound and recurrences last year. In general, our packages tour revenues kept in line with 2020. On a quarterly basis, the second quarter was the best, which contributed over 40% of the annual packages tour revenues. As the pandemic was under control, the pent up demand was released. So, in the second quarter, our packages tour revenues increased more than 9 times year-over-year.
The rest of the three quarters were disrupted by reemergence of COVID-19. Travel restrictions impacted regions, restricting demand for travel products, which adversely affected our revenues.
Coming to 2022, the continuous resurgence of the epidemic since the beginning of the year has limited the recovery of the travel industry. Therefore, our net revenues for the first quarter will have a negative growth.
However, based on past experience, the recovery of travel largely depends on the control of the pandemic. The ongoing vaccine rollouts and enhancement of treatment methods will pay more effective ROI in pandemic control this year.
Amid such a dynamic external environment, we will continue to insist on product innovation and service improvement this year. And our integration model, we are producing more products of our own, such as new tour and hotel plus X products. Also, we'll increase the use of our [indiscernible] local tour operators in our own products. We have also developed more travel themes, such as spring outings, wellness tour and night tour to attract various customers.
In terms of services, we have enhanced the user experience through our digitalization strategy. We will use technical means to facilitate the whole process from booking, traveling to returning to follow the new consuming and entertainment habits of the mass market. We have also encouraged live streaming shows and the sort of videos as one of our marketing methods.
In terms of financials, it's hard to give specific top line guidance due to the changing external environment at present. However, the adoption of integration and digitalization [indiscernible] will help us improve the profit margin and better control the costs. We will continue to execute the strict cost control measures as we did last year. If the market turns better, we'll be on the right track to deliver better results.
Operator
[Operator Instructions]. We are now approaching the end of the conference call. I would now hand the call over to Tuniu's Director of Investor Relations, Mary, for closing remarks.
Mary Chen
Thank you. 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.
