Tuniu Corporation

Hello, and thank you for standing by for TUNEW'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.

Thank you, Andrew. And welcome to our 2020 Fourth Quarter and the Full Year Earnings Conference Call. Joining me on the call today are Donald Yu, Juneau's Thunder Chairman and Chief Executive Officer, and Anqiang Chen, Juneau'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. 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 our 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 R&B. I would now like to turn the call over to our founder, chairman, and chief executive officer, Donald Yu.

Thank you, Mary. Good day, everyone. Welcome to our 2020 fourth quarter and four-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 epidemic. While the travel industry has begun to gradually recover, and we are optimistic about the future. We did experience a period of stagnation last year. Fortunately, two new years of experience in the industry have allowed us to accumulate a large number of high-quality business partners and loyal customers. Along with the device, 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 through 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 refunding or adjusting previously purchased packages for customers who hadn't started their trips yet. During the epidemic, our direct loss related to customer refunds totaled more than RMB 100 million. Thanks to our timely response, however, we've been rewarded with the long-term support and trust of many loyal customers who have greatly contributed to the recovery of 2NEWS business. I am 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 corporate structure, including optimizing all our teams and repositioning our key staff. We've also adopted tighter cost control measures since the outbreak of the pandemic, resulting in a 20% year-over-year decrease in total operating expenses for 2020. Excluding the previsions for receivables recorded in the fourth quarter, our yearly operating expenses declined over 50% year-over-year. When the provincial travel market reopened in April, we leveraged our flexible transportation plus destination-based tour model to launch a number of tour products for traveling to destinations or nearby cities. Since then, we have seen the progressive recovery of our business starting from local tools and self-driving tools. With the gradual recovery of business, we have found that customer demand for safer and more personalized products is increasing. In particular, our customized tour GMV in the third quarter increased by eight times compared with the second quarter. When inter-province tours were resumed in July, the release of pent-up demand greatly accelerated the recovery of the domestic travel market. Under the strong recovery momentum of the industry, our business continued to improve. According to our data, package tour GMV was up over 200% in the second half of July compared to the first half of the month. In addition, our operating cash flow turned positive in the third quarter of 2020. With the resumption in nationwide travel, we have seen customer requirements for product quality also increase. In response, we upgraded the data to new tour our own branded product launched in 2009 with the goal of providing high-quality packaged tools that meet the ever-right standards of China's travelers. Our upgraded new tool products feature more strict resource selection and have higher standards for clean and safe travel conditions, such as enhanced safety protocols and individually served meal options. We also launched small and medium-sized package tours, as well as private family tours, which have proven to be quite popular. Looking to 2021, we'll continue to invest in our product innovation, quality improvement, and technology and our integrated business model. First, we continue to be guided by our customer-first principle and our commitment to develop domestic travel products. We will continue to increase our investment in product upgrades to ensure we always have compelling and differentiated product offerings for customers. To design more targeted products for different customer groups, We design in-depth content and analysis of our customer needs, which provide us with insight to create a more accurate product strategy. We found that even in the target groups, customers can be further narrowed down based on their needs into more distinct customer groups. Based on this insight, we will focus on developing tailored products for specific groups in order to capture more overall market share. Secondly, we will continue to improve the quality of both our products and services. Higher quality means higher customer satisfaction, which drives a higher repurchase rate and additional value to the company. We reached the standards of product launch again after the outbreak of the pandemic. In 2019, A product with a satisfaction rate of 80% could be launched on our website and app. And last year, we reached the standard to 85%. We'll apply a stricter product selection process and further reach this standard to 90% this year. In addition, 2NEW has, to date, established more than 30 self-operated local tour operators in China to provide high-quality destination service for our customers. Currently, over 97% of customers are satisfied with our self-operated local tool products, and we are trying to achieve zero complaints this year. In the fourth quarter, GMV of self-operated local tool products accounted for nearly a quarter of the GMV of packaged tool products. with a higher tick rate than products purchased by third parties. In 2021, we will further expand our self-operated local tour products and develop the role of self-operated local tour operators to support tour news, organized tours, as well as customized tours, private family tours, and other travelers at destinations. In terms of customer services, we will work to provide more personalized customer service and targeted products to improve overall customer experience. We will increasingly look at the full customer lifecycle and use the most suitable marketing tools for specific customer growth. Thirdly, 2NEW has built a strong IT support system to improve our internal operational efficiency and reduce operation costs. Today we are looking to introduce more advanced technologies so as to support each section of our business from supply chain management, product design, to customer service. For example, we have leveraged new technologies to establish a more accurate customer portfolio and tool guide information database to support our product design, customer services, and marketing efforts. Also, by developing more intelligent product recommendations and customer response systems, we will offer our employees more opportunities to create value through their work. Tuning has been making great efforts for over 10 years to develop a vertically integrated business model. We have focused on the integration of supply chain, production, and sales channels and implemented a direct procurement strategy in order to directly acquire destination resources at a favorable price. We've also established our own local tour operators to directly serve our customers at destinations. Owing to our direct procurement and local tour operators, we are able to produce our own products and help upgrade many of them to the mass premium level. On the sales side, we developed our sales network, including both online and offline channels, loyalty programs, B2B distribution, as well as popular channels such as social marketing and live streaming shows. With the development of our own supply chain, production system, and sales network, we are able to penetrate to every part of the supply chain and provide full services to both our customers and suppliers. By shortening the supply chain, we are able to have better control over product and service quality, higher internal efficiency, and better profit margins. Moreover, we are flexible to collaborate with business partners in each part of the supply chain to provide better products and services to our customers. Overall, 2020 was full of instabilities and challenges, but we have always remained optimistic about the prospects of China and the global travel industry. At present, the development and rollout of COVID-19 vaccines has made significant progress which brings us more confidence in the recovery of the industry. We look forward to developing more high-quality products to better serve our customers and position 2NEW to take advantage of the emerging opportunities in China's vast tourism market. I will now turn the call over to Anqiang Chen, our financial controller, for the financial highlights.