Tuniu Corporation

Good morning, and welcome to Tuneo first quarter 2021 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there'll be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Mary Chen, investor relations director. Please go ahead.

Thank you, Kate. And welcome to our 2021 first quarter earnings conference call. Joining me on the call today are Donald Yu, 2NEWS founder, chairman, and chief executive officer, and Anqiang Chen, 2NEWS financial controller. For today's agenda, management will discuss business updates, operation highlights, and financial performance for the first quarter of 2021. Before we continue, I refer you to our safe harbor statement in the 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 note 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.

Thank you, Mary. Good day, everyone. Welcome to our first quarter 2021 earnings conference call. This spring, the domestic tourism industry has been experiencing a rapid recovery. Tunisia also experienced a strong recovery during the April and May holidays. The number of people traveling during the Qingming Festival was nearly three times that of the same period last year. And our total travel GMV during the Labor Day holiday was more than four times that of the same period last year. Also, for the first quarter, our operating expenses decreased over 70% year over year, and the net loss was narrowed significantly. Based on these encouraging trends, for the second quarter, we anticipate net revenues will grow more than 300% year-over-year, delivering the first period of growth since the COVID-19 outbreak. We see great potential for growth in the travel industry with the release of pent-up tourist travel demands. However, we continue to face new challenges under the ever-changing market environment. Despite the strong demand for travel after enduring the pandemic restrictions, customers have become more demanding when selecting products with higher expectations for travel experiences and security. and increased interest in new destinations and activities. This drives us to constantly develop innovative new products and enhance our service quality. We always commit to develop high-quality products that satisfy customers' demands. Our focus is to maximize customer satisfaction so as to refer to these rates for each product instead of creating the highest number of SKUs. Currently, all of 2NEW's new products are required to reach a 90% satisfaction rate for product launch, and we are expecting to increase this threshold in the future. We are fully leveraging the advantages of our integrated business model to accelerate the development of our own products. By vertically integrating across the industry, we have been able to accumulate rich resources and experience on both the supply and demand sides, which has benefited us in the development of our own products. Working under our integrated product development or IPD model, Our product committee composed our colleagues from procurement, product, marketing and other departments has been responsible for accessing, developing and launching our new product offerings. We continue to upgrade products as mature destinations by customizing itineraries based on customer preferences and upgrading features to optimize the travel experience. Moreover, we utilize the knowledge gained from mature products to developed products based in new destinations, such as high potential niche destinations in central and western China. The proportion of new product offerings in our inventory is constantly increasing. Great destination services are one of the key components of a good travel product. With the domestic travel market growth rapidly, our established network of more than 30 self-operated local tour operators in China are playing an increasingly important role. This year, our self-operated local tour operators also began to conduct customized tours and we are seeing this business volume continue to increase. Many of our new products are served by our self-operated local tour operators. In the first quarter, the proportion of our local tour operator transaction volume as a percentage of total package tour GMV increased to nearly one-third compared to approximately one-fourth in the previous quarter. In the future, 2NEW will continue to expand the volume of our local tour operators to sell more tourists at their destinations. In terms of customer service, we will continue to leverage the expertise of our professional service team to continually optimize customer experience. We can connect with potential customers through our 2NEW classes and online wishlists to promote destinations and roast customer inquiries before booking. Also, 2NEW provides customers with assistance for product selection and travel planning during the reservation process, as well as timely post-trip follow-up to collect feedback and strengthen the customer relationship. Technology is the foundation of our products, customer service, and management. In today's tourism industry, the level of digital consumer interaction is relatively high. However, digitalization is relatively low at the supply level when arranging transportation and tour guides, much of which is still done manually. In terms of our digitalization of the supply chain, 2NEWS started to promote the digitalization of internal operations since last year and has automated our business working processes. Our existing systems are providing our suppliers with such functions as inventory and account management. We will further explore the digitalization of the supply chain in the future, such as resource allocation and supporting product development by leveraging our technology. After more than a decade in operations, Tuning has become a comprehensive tourism service provider with closed-loop capabilities, from R&D to production in destination services, operations, and reservations by vertically integrating across the supply chain. We have achieved lower cost, improved efficiency, and meaningful differentiation from our peers. Our integrated service capability and digitalized technology are among our core competencies and the foundation for further improving our revenue and profitability. Although there are still uncertainties in the overseas market due to the pandemic situation, the domestic travel market is growing rapidly. We will continue to develop the domestic travel market, fully tap into domestic tourism resources, and improve our product development model. The domestic travel market will remain our top priority and we look forward to the eventual restoration of outbound travel. In the post-pandemic era, China's entire tourism industry, including 2NEW, is actively exploring how to meet the demands of customers in today's new environment. This will be our main focus for now and for the future. I will now turn the call to Anqiang Chen, our financial controller, for the financial highlights.