Tuniu Corporation

Hello, and thank you for standing by for 2NEWS 2023 Third 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.

Thank you, and welcome to our 2023 Third 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 third quarter of 2023. 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 the most directly comparable GAAP measures. Finally, please note that, unless otherwise stated, all figures mentioned during this conference call are IRMB. 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 third quarter 2023 earnings conference call. CNU delivered a stronger performance in the third quarter as compared to the second quarter. Our top line results continue to recover rapidly with net revenues growing year-over-year by 129%, including a 262% increase in revenues from package tours. Our profitability also improved with gross margin increasing to 64% up from 58% during the same period last year. Our net income continued to increase to over 39 million RMB, marking the highest quarterly gap net income since our listing. we also maintained positive operating cash flow for the third consecutive quarter. This indicates that as external challenges gradually diminish, the inherent strengths of the company are being apparent, bringing us closer to achieving our long-term profitability goals. The third quarter is China's peak travel season. We have seen a surge in domestic tourism. Additionally, in August, a third batch of countries opened up for outbound tourism, heightened public interest and enthusiasm for travel, and further accelerated the recovery of the outbound travel market. Seizing the opportunity presented by the rapid market recovery, we leveraged two new strengths to achieve rapid business development and further consolidate our market position. Influenced by external factors, domestic travel continued to dominate the vacation trip market during the summer. By leveraging our strengths in the upstream segments of our industry chain, we were able to secure a plentiful supply of products for the peak season. For 2NEWS core travel destinations, we leveraged the advantages of centralized procurement to ensure the availability of our in-house products and enhance our price competitiveness. In addition, we deepen our collaborations with suppliers to offer products covering a wider range of destinations and themes for customers. 2NEW remains committed to achieving high-quality development while upholding our service quality during both low and peak seasons. For instance, we have proactively incorporated additional roles within our in-house new tool products, eliminating planned shopping activities that may affect the customer experience. This strategic move has substantially elevated the overall travel experience for our customers. And to ensure service quality during the peak season, we place special emphasis of refining the detail of the travel experience that can significantly impact customer satisfaction. For example, we have been deploying dedicated service personnel to popular and more complex destinations to help confirm hotel reservations, verify information about attractions and dining options, and assist the customers with any unforeseen issues. As a result, our new tool products achieved an impressive 98% customer satisfaction rate during the summer, with several classic travel routes achieving a perfect 100% satisfaction rate. For our suppliers' products, we strictly implement our strategy of eliminating or improving low satisfaction products. Furthermore, Sunil is committed to compensating customers directly when disputes occur, rather than leaving it to guests and suppliers to solve the problem on their own. The outbound travel market also continues to recover in the third quarter, as more outbound destinations gradually open up, We are further expanding our supply chain and product offerings to meet the growing demand from customers. We actively cooperated with the destination suppliers and leveraged our procurement advantages to access high-quality resources and provide an improved selection of options for our customers. We have also introduced new tool products featuring long-haul international destinations such as New Zealand, Spain, and Portugal, which have gained popularity among our customers. For example, the transaction volume of New Zealand as a standalone destination in the third quarter has recovered and exceeded the levels we saw in 2019. Moreover, as air travel resources are not yet fully restored. International flight departure spots are relatively concentrated in certain cities. Leveraging the advantages of domestic connecting flights, we not only secured more favorable airfare prices, but also expanded the number of departure cities, enabling customers from a broader range of cities across the country, especially those in lower-tier cities, to access a wider array of upfront travel products. 2 News Sales growth could not have been achieved without the dedicated efforts of our customer service team. During the year's peak season, we achieved an increase of 129% in net revenues, despite minimal increases in our sales personnel. The success can be attributed to our strategic implementation of system automation throughout the sales process to save on manpower and time on tasks such as product management and order processing. This strategic approach has allowed our customer service team to focus more on communication with customers, and as a result, secure more orders. Sunil's repeat customers continue to make a strong contribution to overall transaction volume. With the reopening of outbound travel, many loyal customers have opted for single-destination in-depth travel experiences or products featuring niche destinations. These offerings typically come with a higher average selling price. Some senior travelers prefer to choose high-end products such as round-the-world cruises. These decisions are largely influenced by their positive past experiences with 2NEWS products and services. as well as the ongoing efforts of customer service in maintaining positive customer relationships. During the quarter, our live streaming business maintained its leading position within Douyin's hotel and travel services category. Alongside our ongoing collaboration with over 10,000 experienced external influencers, 2NEWS MCN agency has taken proactive approach by initiating the training and development of our own emerging influencers. In conjunction with the agency's strengthened travel products, supply chain, and operational capabilities, we will further promote our travel products. As of now, our MCN agency has successfully incubated over 100 emerging influencers. This has significantly enhanced our capabilities in live streaming shows, allowing our products to reach more customers. We continue to deepen cooperation with our distribution partners during the quarter. The B2B distribution channel has helped us with the sale of inventory products while enhancing the advantage of our centralized procurement strategy. Our offline partner stores contributed to product sales, showcasing 2NEW and expanding the influence of our product brands such as New Tool. We will continue to provide our partners with support in terms of products, systems, and management, fostering a mutually beneficial and cooperation relationship. Looking to technology, we successfully implemented system automation across our sales operations, including marketing, booking, and order processing helping us to reduce internal labor costs. In the third quarter, our operating expenses amounted to 47% as a percentage of net revenue, down from 76% during the same period last year. As the next step, we plan to further extend our automation capabilities into supply chain management and provide more accessibility to system functions for our suppliers and offline stores. This will empower our partners to be more efficient in managing products, orders, and marketing campaigns online. We will also leverage technical tools to further improve customer experience, creating a more convenient booking experience for our customers. In the third quarter, while we achieved rapid sales growth, our bottom line also improved significantly compared to both the same period last year and the previous quarter. We will continue to execute our strategies for business development and internal management. We remain committed to providing high-quality products and services while controlling costs. I'm confident that our efforts to enhance overall efficiency and competitiveness will continue to position 2NEW for long-term sustainable growth. I will now turn the call over to Etienne, our financial controller, for the financial highlights.