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spk02: Hello, and thank you for standing by for 2NEWS 2022 Second Quarter 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.
spk00: Thank you, Operator. and welcome to our 2022 Second Quarter Earnings Conference Call. Joining me on the call today are Donald Yu, CUNY's founder, chairman, and chief executive officer, and Anqiang Chen, CUNY's financial controller. For today's agenda, management will discuss business updates, operation highlights, and financial performance for the second quarter of 2022. 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.
spk03: Thank you, Mary. Good day, everyone. Welcome to our second quarter 2022 earnings conference call. During the second quarter, while in April and May tourism was impacted by most severe resurgence of COVID-19 since the initial breakout in 2020. In June, we saw a rapid recovery as outbreaks were better controlled. The industry also benefited from favorable policies such as more relaxed travel restrictions. The enthusiasm for travel among the public remains high with demand increasing since the first half of the year. To news, total travel GMV growth exceeded 100% month-over-month during June and July despite the setback in the second quarter. With peak travel season starting in July, booking volume for several popular destinations increased significantly. with two new booking volumes doubling in July compared to the previous month. By keeping our focus on providing high-quality products and services during times of external challenges, we are able to weather industry downturns and recover quickly during the rebounds. In terms of our product new tool, our self-operated product, continues to offer a high level of standard services to meet diverse customer demands. Since it was first launched over a decade ago, New Tools' production ecosystem has developed its own operating process and standards for product design, resource selection, customer service, and evaluation. New Tools' high-quality products are the key to our high customer retention rate, with the contribution of our repeat customers to overall GMV remaining at over 70% since the pandemic broke out. Leveraging 2NEWS high-quality products and reputation, we aim to develop more popular products to meet the high market demand during the peak seasons. Taking one of our new tool products designed for Xinjiang as an example, we increased the number of the tool groups to meet the high demand in July, with the sales of the product exceeding RMB 3 million in a single month. In terms of product innovation, during the second quarter, we continued to explore village tool products as customer demand continues to become more diversified. In addition to traditional tools, The experiential tours have become more popular and help to provide opportunities for the high-quality development of village tourism and boutique B&Bs. SUNY also collaborates with several village tourism projects on operation and management in addition to their product development and promotion by leveraging our advantages and strengths in the industrial chain. To news, self-operated B&B in Tianjin has been experiencing an increase in occupancy since it was opened in May last year, with revenue growth of over 200% year-on-year in both June and July of this year. We will continue to explore rural tourism and B&Bs with an asset-like model in order to support the revitalization and development of the local tourism industry and enrich 2NEWS product offerings for our guests. Live streaming shows are becoming more and more prevalent in customers' daily lives and are now a key channel for 2NEWS sales, promotions, and customer acquisitions. 2NEW features different types of live streaming shows focused on product sales and the introduction of various destinations, as well as recommendations for destination-based activities and products such as camping equipment. As a company with deep experience in tourism, 2NEW has clear advantages in producing tourism-related live streaming shows. In April, we launched a live streaming show on Douyin, and the show ranked as the top hotel and travel live streaming show in eastern China in May and June, with the total GMV of the live streaming show exceeding RMB 8 million in June. As one of our core competencies to new, is committed to focusing on customer demand and providing high-quality service despite changes to the external environment. Under the current COVID-19 control measures, Tuneo launched additional services including free refunds up to 24 hours before departure day and nucleic aid testing in some of our organized tool products. Our guests can get a full refund for local tour operator services up to 24 hours before their departure date, which provides a worry-free guarantee. Nuclear aid testing services are offered to the guests throughout the tour at their destination, with assistance from our staff to provide a better travel experience for the guests. Our customer service team and local staff at destinations aim to provide a full-cycle service network to ensure that our guests enjoy their trip. In terms of technology, we continue to improve efficiency and quality through digitalization as we optimize our internal operations and external customer experience. For internal operations, we have further automated our inventory management and product launching processes, as well as display and maintenance to reduce labor costs. In terms of enhancing customer experience, we are leveraging AI technology to replace some of the simple manual customer service tasks such as the reception of guests on their first visit, as well as recommendations for products and live streaming shows, further reducing the burden on manual customer service and improving the response speed for customer service requests. Guests who purchase our advanced booking products can complete their order confirmation online which is both faster and more convenient. 2NEW will continue to provide technical support to internal departments including our product and customer service teams to further improve their efficiency and quality of their daily work. In conclusion, despite recent pandemic outbreak, domestic tourism is set to continue to benefit from positive policies and increasing travel demand. and we remain optimistic for the long-term development of the industry. In order to consolidate and expand our customer base and create greater value for our customers, we will remain committed to developing high-quality products and services while we see the momentum of the industry rebound to sell more gas. I will now turn the call over to Anqiang Chen, our financial controller, for the financial highlights.
spk04: Thank you, Donna. Hello, everyone. Now I walk you through our second quarter of 2022 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. For the second quarter of 2022, net revenues were $37 million. representing a year-over-year decrease of 77% from the corresponding period in 2021. The decrease was primarily due to the negative impact brought by the resurgence and spread of COVID-19. Revenues from package tours were down 92% year-over-year to $9.5 million and accounted for 26% 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 20% year-over-year to $27.4 million and accounted for 74% in our total net revenues. The decrease was primarily due to the decrease in the fees and for advertising services provided to Toys and Boots and bureaus and commission fees received from other travel-related products. Gross margin was 45% in the second quarter of 2022 compared to a gross margin of 43% in the second quarter of 2021. Operating expenses for the second quarter of 2022 were $139.4 million, up 46% year-over-year. Among it, gain-on-disposals of subsidiaries which was recorded in other operating income, were 32.8 million. Empowerment of goodwill, which was recorded due to the severe adverse impact of COVID-19 on the company's business in this quarter, with potential continuous impact in subsequent periods, was 112.1 million. Excluding shell-based compensation expenses, amounted issue of acquired intangible assets gain on disposals of subsidiaries, and the empowerment of goodwill. Non-GAAP operating expenses were $55.7 million, down 38% year-over-year. Research and product development expenses for the second quarter of 2022 were $14 million, up 1% 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 second quarter of 2022 were $24.5 million, down 45% year-over-year. The decrease was primarily due to the decrease in promotion expenses and sales and marketing personnel-related expenses. General and administrative expenses for the second quarter of 2022 were $23.9 million, down 43% year-over-year. The decrease was primarily due to the decrease in general and administrative personnel-related expenses and the reversal of allowance for doubtful accounts. Net loss attributable to ordinary shareholders was 126.5 million in the second quarter of 2022. Non-GAAP net loss attributable to ordinary shareholders, which included shell-based composition expenses, amortization of acquired intangible assets, gain-on-disposals of subsidiaries, and the employment of goodwill, was 42.6 million in the second quarter of 2022. As of June 30, 2022, the company had cash and cash equivalents, restricted cash and short-term investments of $1 billion. Capital expenditures for the second quarter of 2022 were $0.4 million. For the third quarter of 2022, the company is about to generate $74.5 million to $80.2 million of net revenues, which represents a 30% to 35% decrease year-over-year. Please note that this forecast refers to new currents and a 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. Thank you for listening. We are now ready for your questions. Operator,
spk02: 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 re-enter the question queue after your second question has been addressed. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw from the question queue, please press star, then 2. We will pause momentarily to assemble our roster. The first question is from Sulu Wong, a private investor. Please go ahead.
spk01: Sulu Wong Thank you, operator. Hi, management. As we can see, the second quarter saw a significant increase in loss. Could you specify the causes? And in the context of the recent recovery of tourism industry, how has your business recovered in recent months, especially during the summer vacation? Thank you.
spk03: Thank you for the question. In the past quarter, the travel industry has experienced the hardest time ever since the outbreak of COVID-19 in 2020. The resurgence of pandemic has prohibited many trips, especially later travels. This greatly harmed our net revenues and the revenues from package tours in particular for the second quarter. In terms of expenses, considering the continual Inference of COVID-19 and uncertainty of the future market, company did goodwill impairment assessment and determined to record over RMB 100 million of goodwill impairment this quarter. Apart from this impairment, our non-GAAP operating expenses decreased over 30% year-over-year. As summer vacation comes, the travel market is boosted by incentives such as relaxed restriction policies, increasing demand and peak season. Deferred from previous quarter, long-distance tours are preferred compared to local tours during summer vacation. According to our data, the average travel duration exceeded three days in July, which were longer than those during Spring Festival and May Day holidays. Products for families with children are always popular during summer vacations. Apart from traditional theme parks and seaside trips, we launched the edutainment travel products, which promote children's participation and experience during the trips. Besides, due to the hot weather this year, travelers had increase the demands for enjoying the cool and health-related services. In terms of destinations, Yunnan, Hainan and Xinjiang were top three destinations in July, which showed a positive GMV growth compared to the same month last year. But Eastern China, which used to be one of the most popular departure and destination districts, was still on the way to recover due to the outbreak of COVID-19 in the previous quarter. In August, there were outbreaks in some popular destinations, which brought negative impact on the travel industry in the short term. However, since the travel restriction scope was further narrowed to counties, the pressure on travel markets was more moderate than before. From our data, we see destinations without severe pandemic outbreak were still growing. For example, the order amount from Guangdong province remained increased in August compared to July. To ensure good customer experience and the current circumstances, we increased the flexibility of our travel products. customers may book in advance and later confirm departure date in online or get a full refund upon cancellation. For certain products, even though the trip is confirmed, our customers can cancel it and get a full refund for local tour operator services up to 24 hours before their departure date. Despite the current resurgence of the pandemic, Looking ahead with the implementation of the precise and differentiated strategies in the prevention and the control of COVID-19, domestic trips will be smoother and the industry will continue to recover. Thank you.
spk02: Again, if you have a question, please press star, then 1. There are no other questions. We are now approaching the end of the conference call. I will now turn the call over to 2NEWS Director of Investor Relations, Mary, for closing remarks.
spk00: 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.
spk02: Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.
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