This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk04: Hello and thank you for standing by for TUNU'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.
spk03: Thank you, and welcome to our 2021 fourth quarter and full year 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, approaching 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 plus 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.
spk02: Thank you, Mary. Good day, everyone. Welcome to our fourth quarter and four-year 2021 earnings conference call. 2021 was a year full of challenges and opportunities. While 2NEW experienced a 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 package tours for the full year of 2021 maintained the same level as in 2020, despite the adverse external environment with the 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 tested 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 highly efficient internal management systems to adapt to the changing business environment using limited resources. 2NEWS 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 sales, and building our capabilities in direct procurement, as well as product design and packaging, self-operated local tour operators, and multiple sales channels, 2NEW has realized significant advantages compared to our peers. Recognizing the market changes and upgraded customer expectations in the post-COVID-19 era, 2NEO 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 The addition has improved efficiency and reduced costs. With the synergies created by those two strategies, 2NEW is well positioned to provide high-quality products and services to drive our long-term development. In the post-COVID-19 era, tourism demand for better products and services has driven the upgrading of the entire tourism industry. High-quality, innovative, products, and 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 work under our integrated product development or RPG 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 tool products reaching 97%. In terms of product types, due to increased Customer focus on travel experience and safety. Small and medium-sized growth 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' day sales exceeded our expectations, with single-day booking volume for customized tour hitting a record 30% of total booking volume. the same as for organized 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-workstation concept. According to two news states, bookings of luxury and theme park hotels increased by more than 50% year-over-year during this year's Spring Festival. Our HotelPlusX program model has become increasingly popular by offering more flexible and diverse options across the six 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 destination cities. Prior to establishing our self-operated local tour operators, it was challenging for us to improve tourists' 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 seamless service network with our customer service team. Today, 2NEW 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 supervision of other tour products, as well as a destination spot for all 2NEW customers. In 2021, the transaction volume for our self-operated local tour operators achieved over 50% growth year-on-year. even as tourists encountered frequent bad weather conditions and pandemic disruptions. Our customer service development provides assistance services for guests on the 24-7 basis, especially in care of emergencies, and we have seen the number of customer service requests increased rapidly. Under continuously high pressure, 2NEWS customer service team has steadfastly adhered to our customer-first principle, providing around-the-clock refunds and exchange services, and communicating with multiple parties in order to minimize 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 content sharing to build strong relationships and keep up the travel. As part of this, on the 16th of every month, we hold a special Two New Members Day promotion, which in 2021 generated a cumulative single-day sales exceeding RMB1. In addition, live streaming shows have become one of the key sales channels due to the impact of the pandemic. Our Member's Day promotion has also leveraged online formats, including live streaming shows for product sales, and to introduce destinations and analyze customer demands. The News Live streaming show team uses every show as an opportunity to promote product upgrades. The interests, preferences, and suggestions from guests joining our shows are also valuable assets to help us improve our product offerings. COVID-19 has accelerated the digital upgrade of various industries. Tourism enterprises have leveraged 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 digital decisions has become essential for the long-term development and is 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 digitalization for travel confirmation, online seat selection, and tour guide systems to offer more convenient travel experience this for our customers. In 2021, Tuneo 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 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, TuneIn 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 for our financial controller for the financial highlights.
spk01: Thank you, Donald. Hello, everyone. Now I will walk you through our fourth quarter and 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 equivalent of the numbers in our earnings release. Starting from the fourth quarter of 2021, net revenues were 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 package tours were down 49% year-over-year to 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 $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 78 million, down 92% year-over-year. Excluding shell-based composition expenses, amortization of acquired intangible assets, and the acquirement of acquired intangible assets, non-GAAP operating expenses were 74.8 million, representing a year-over-year decrease of 22%. Research and product development expenses for the fourth quarter of 2021 were 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 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 $46.5 million, down 94% year-over-year. The decrease was primarily due to the decrease in allowance for DOFLA accounts, Net loss attributable to ordinary shareholders was $33.9 million in the first quarter of 2021. Non-GAAP net loss attributable to ordinary shareholders, which excluded share-based compensation expenses, amortization of acquired intangible assets, and imprimand of acquired intangible assets, were $30.5 million in the first quarter of 2021. As of December 31st, 2021, the company had cash and cash equivalents, restricted cash, and short-term investments of $1 billion.
spk00: Capital expenditures for the first quarter of 2021 were $1.2 million. Now moving to full-year 2021 results. In 2021, net revenues were
spk01: 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 package stores were up 1% year-over-year to 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 caused by the resurgence of COVID-19. Other revenues were down 18% year-over-year to $121 million and accounted for 28% of our total net revenues in 2021. The decrease was primarily due to the decline in revenues generated from financial services. Gross margin was 40% in 2021, compared to a gross margin of 47% in 2020. Operating expenses were $353.1 million in 2021, down 77% year-over-year. Excluding shell-based composition expenses, amortization of acquired intangible assets, and the employment of acquired intangible assets, non-GAAP operating expenses were $334.7 million, representing a year-over-year decrease of 77%. Research and product development expenses were $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 $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 $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 allowances for doubtful accounts. Net loss attributable to ordinary shareholders was 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 employment of acquired intangible assets, was 102.8 million in 2021. Capital expenditures. were 13.9 million in 2021. Tuneo'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 is set to generate 34.8 million to 42.5 million of net revenues, which represents 45% to 55% decrease year-over-year. Please note that this forecast refers to new current and preliminary view on the industry and its operations, which is subject to change, particularly as to the uncertainties brought about by the impact of COVID-19.
spk00: Thank you for listening. We are now ready for your questions.
spk01: Operator?
spk04: The question and answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions, we will take one question at a time from each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed. If you would like to queue for a question, please signal by pressing star 1 on your telephone keypad. That is the star or asterisk key followed by the number 1. Please ensure your mute function is turned off to allow your signal to reach our equipment. We will take our first question today from Grace Liu, a private investor. Please go ahead.
spk05: Thank you, operator. Hi, manager. My name is Grace Liu. 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 performance of 2022. Thank you.
spk00: Thank you for the question.
spk02: The travel market experienced both rebound and recoveries last year. In general, our package tour revenues kept in line with 2020. On a quarterly basis, the second quarter was the best. which contributed over 40% of the annual package tour revenues. As the pandemic was under control, the pent-up demand was released. So in the second quarter, our package tour revenues increased more than nine times year-over-year. The rest of three quarters were disrupted by the emergence of COVID-19. Travel restrictions in infected regions 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 rollout and enhancement of treatment methods will play a more effective role in pandemic control this year. Amid such dynamic external environment, we will continue to insist on product innovation and service improvement this year, and our integration model will produce more products of our own such as new tour and hotel plus X products. Also, we increase the use of our self-operated local tour operators in our own products. We also develop more travel themes such as spring outing, wellness tour and night tour to attract various customers. In terms of services, we enhance user experience through our digitalization strategy. We 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 also encourage live streaming shows and short 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 an integration and digitalization model will help us improve the profit margin and better control the cost. We'll 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.
spk06: Thank you.
spk04: Thank you. As a reminder, if you wish to ask a telephone question, please signal by pressing star 1 on your telephone keypad. We are now approaching the end of the conference call. I would now hand the call over to 2 News Director of Investor Relations, Mary, for closing remarks.
spk03: 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.
spk07: Thank you for your participation in today's conference. This concludes the presentation.
spk04: You may now disconnect.
Disclaimer