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spk00: Hello and thank you for standing by for 2NEWS2024 second quarter earnings conference call. At this time, all participants are released anonymously. After management's prepared remarks, there will be a question and answer session. Today's conference has been 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.
spk04: Thank you, and welcome to our 2024 Second 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 second quarter of 2024. 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 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 in RMB. I would now like to turn the call over to our founder, chairman, and chief executive officer, Donald Wu.
spk01: Thank you, Mary. Good day, everyone. Welcome to our second quarter 2024 earnings conference call. In the second quarter, our business continued to maintain healthy growth, with revenue from package tours to new school business increasing by 29% year-over-year. We also saw further improvement in our profitability with net income reaching a quarterly record high since our listing, up to 43 million RMB. During this quarter, the domestic travel market maintained steady growth, with the number of trips booked during the three holiday periods increasing year-over-year. And with the full opening of overseas destinations and availability of diverse product offerings, the outbound travel market continued to grow rapidly compared to last year, with new popular destinations and roads emerging. It is clear that tourism has increasingly become an essential part of many people's lives. CUNY continues to steadfastly adhere to our mission of making travel easier and focusing on customer needs. We will continue to enhance our products, services and sales to offer more travel options, ensuring customers have an exceptional trip experience. In the second quarter, we continued to strengthen our in-house product development. Our new tour products maintained their high-quality service adding more destinations and new roads. In the second quarter, the transaction volume of new tour products increased by more than 40% year-over-year. The primary customer base for our new tour products are middle to upper-class customers, many of whom are senior travelers who value experience over price. Focusing on this group, we have continuously upgraded new tools, offering small groups, higher standards for accommodation and dining, and more local sightseeing and restaurant options. For some of our outbound products, we employ local tour guides who speak Chinese, providing a more authentic cultural experience for our guests. By providing a constantly excellent customer experience, new tour products help build a large base of high-quality repeat customers with a repurchase rate twice that of regular products. At the same time, we continue to partner with third-party suppliers who have made significant contributions to diverse our products and destinations, especially for outbound travel markets. In terms of sales, we focus on our own channels while maintaining open cooperation with various partners. As a customer-focused company, Tuning has long had a membership program specifically designed to serve our repeat customers. In addition to regular benefits, we hold a monthly membership day and occasional offline events to interact with our customers and gather feedback on our products and services. In the second quarter, repeat customers contributed over 65% of the company's transaction volume. Meanwhile, we continued to attract new customers through various channels. such as new media, offline stores, and partnerships with high-traffic online platforms. During the second quarter, our live streaming channels maintained triple-digit growth, and the transaction volume of our offline stores increased over 80% year-over-year. Additionally, we collaborated with Jingdong Travel Alipay transport, and others to boost the sales of other travel-related products. Regarding live streaming channels, as the Internet continues to develop and user demands evolve, information is increasingly consumed via video content as opposed to text and images. With users now frequently watching live streaming shows and short videos, adapting to these changes in behavior is essential to maintaining our competitive edge. In the second quarter, we expanded our live streaming channels on both 2 new apps and mini programs. to adapt to changes in user habits. Also, we strengthened the expansion of new media channels, such as more content placement on the Little Red Book. In terms of products, we broadened the variety and the destination coverage of our live streaming product offerings. such as organized tour products at destinations and theme park package tours For technology, our products now use system-based verification which significantly improves speed and accuracy compared to manual verification and enhancing the customer experience. Leveraging our optimized product selection process and improved verification capabilities, the verification and sales rate of our live streaming products has increased significantly. During the quarter, Both the total payment volume and verification volume from our live streaming channels increased over 200% year over year. The contribution of live streaming channels to the company continued to rise and achieve quarterly net income again. We have also been pleased to share our expertise and accumulated experience in new media operations with our partners and jointly promote the development of the travel industry. We have assisted some destinations in using new media tools for marketing. And we have also collaborated with schools to establish internship programs providing practical opportunities for students and jointly cultivating talent with skills in both tourism and new media, providing employment opportunities and benefiting the industry as a whole. In conclusion, with the arrival of the summer peak season, the travel industry is entering its busiest time. 2NEW is excited to meet the opportunity with more diverse products and higher quality services as we look forward to deliver strong value for our shareholders going forward. I'll now turn the call over to Anqiang, our financial controller, for the financial highlights.
spk02: Thank you, Donald. Hello, everyone. Now I will walk you through our second quarter of 2024 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 2024, net revenues were 116.9 million, representing a year-over-year increase of 17% from the corresponding period in 2023. Revenues from package tours were up 29% year-over-year to 89.8 million and accounted for 77% of alternate revenues for the quarter. The increase was primarily due to the growth of organized tours. Other revenues were down 10% year-over-year to 27.2 million and accounted for 23% of our total net revenues. The decrease was primarily due to the decrease in commission fees received from other travel-related products and revenues generated from financial services. Gross profit for the second quarter of 2024 was $84.4 million, up 29% year over year. Operating expenses for the second quarter of 2024 were 49.9 million, down 15% year-over-year. Net gain on disposals of subsidiaries which was allocated to operating expenses was 24.6 million in the second quarter of 2024. Research and product development expenses for the second quarter of 2024 were 12.7 million, down 8% year-over-year. The decrease was primarily due to the decrease in research and product development personnel-related expenses. Sales and marketing expenses for the second quarter of 2024 were 40.2 million, up 61% year-over-year. The increase was primarily due to the increase in promotion expenses and sales and marketing personnel-related expenses. General and administrative expenses for the second quarter of 2024 was $21.7 million, which was in line with general and administrative expenses in the second quarter of 2023. Net income attributable to new shareholders of two new corporations was $43 million in the second quarter of 2024. Non-GAAP net income attributable to ordinary shareholders of two new corporations, which includes its share-based compensation expenses, amortization of acquired intangible assets, and net gain on disposals of subsidiaries worth $20.8 million in the second quarter of 2024. As of June 30, 2024, the company had cash and cash equivalents restricted cash, and short-term investments of 1.3 billion. Cash flow generated from operations for the second quarter of 2024 was 105.3 million. Capital expenditures for the second quarter of 2024 were 8.5 million. For the third quarter of 2024, the company is there to generate $183.5 million to $192.4 million of net revenues, which represents a 3% to 8% increase 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. Thank you all for listening. We are now ready for your questions. Operator?
spk00: 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 second question has been addressed. To ask a question, you may press star and 1. Our first question comes from Coco Lin. Please go ahead, sir.
spk03: Thank you. First of all, congratulations on this quarter's performance. For the second quarter, What are the proportions of domestic and outbound tourism in revenues respectively, and how about the recovery of outbound tourism? Are there any changes in top outbound destinations? And for the third quarter, what are the primary reasons behind the slowdown in revenue growth? Can you share some trends of this summer's tourism market? Thank you.
spk01: Thank you for the questions. In the second quarter, domestic tours comprised about 70% of the total GMV, and outbound tours comprised a bit more than 30%, compared to a bit less than 30% in the previous quarter. The proportion didn't change much from last quarter because The second quarter is usually good for domestic tours due to the three national holidays. Domestic tours maintain steady growth this quarter, as people's enthusiasm for traveling remains high. But considering the length of the holidays, self-drive tours and city walks especially in Qingming and Duanwu holiday. For outbound travel, although the second quarter is not a peak season, it still increased at a high year-over-year rate, mainly due to more choices of destinations and products compared to last year. Break down to definitions. Southeast Asia has entered off-season since April due to hot and rainy weather. Japan was one of the star destinations in the second quarter due to mixed reasons such as pent-up demand, the cooler season, and the favorable exchange rate. Long-distance outbound trips are usually not as popular as short-distance trips in the second quarter. But Europe became our top outbound destination. In this quarter, we strengthened our supply capacity and launched more new tour products. Currently, our new tour products cover most of the popular countries throughout Europe We also increased coverage of departing cities providing more options for travelers from various parts of China For the summer vacation the market surges on a quarter-over-quarter basis due to seasonality But compared to the strong growth last summer the market grows moderately this summer. With the release of three-year pent-up demand and the few choices of outbound destinations, domestic travel market was exceptionally thriving during last summer, which formed a high base. This year, we see trends towards more self-guided tours in domestic markets. People tend to book more flexible products, such as transportation or hotel, plus X products. And destination-based package tours may become one of the choices of X. People also have more choices of products this year with the recovery of supply chain, especially for outbound travel products. For example, overseas islands have entered off-season in summer, which offers favorable prices and attracted many tourists. Outbound tours will have a higher increase rate than domestic tours. But considering that some of the demands have already been released last year, the outbound travel market will incur a step-by-step increase instead of a drastic recovery. Under the influence of overseas flight, product price, and exchange rate, generally speaking, compared to the first half of the year, our top line will grow at a lower rate in the third quarter. But we are still confident with the bottom line to achieve another profitable quarter. Thank you.
spk00: As a reminder, if you wish to register for a question, you may press star N1. We are now approaching to the end of the conference call. I will now turn the conference over to 2 News Director of Investor Relations, Mary, for closing remarks.
spk04: 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.
spk00: Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Goodbye.
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