Tuniu Corporation ($TOUR)

Hello, and thank you for standing by for Tuniu's 2026 First Quarter Earnings Conference Call. [Operator Instructions] 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, Drew, and welcome to our 2026 first quarter earnings conference call. Joining me on the call today are Dunde Yu, Tuniu's Founder, Chairman and Chief Executive Officer; and Anqiang Chen, Tuniu's Financial Controller. . For today's agenda, management will discuss business updates, operation highlights and financial performance for the first quarter of 2026. 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 in RMB. I would now like to turn the call over to our Founder, Chairman and Chief Executive Officer, Dunde Yu.

Thank you, Mary. Good day, everyone. Welcome to our first quarter 2026 earnings conference call. The travel industry maintained solid growth momentum in the first quarter of 2026, supported in part by the longest Chinese New Year holiday on record with both domestic and outbound travel market, seeing stable growth. In the first quarter, our net revenues increased by 13% year-over-year. At the same time, we achieved non-GAAP profitability for the fifth consecutive quarter. This year, we will continue to strengthen both our supply chain capabilities and the sales channel development. Supported by the company's strength in products and industry insights, we aim to further enhance our travel resource base and business partnerships. We will also continue to leverage technology tools to improve operational efficiency and deliver high-quality products and services to a broader customer base. Next, I will go through our core strategic initiatives in more detail. On the supply side, we will continue to expand our supplier network across areas such as car rentals, overseas, hotels and the definition experiences. With the aim of further broadening our product offering, also we will integrate demand for both Tuniu and our partners to further strengthen the advantages of our centralized procurement while maintaining product quality and price competitiveness. Last year, we added a connecting flight solutions to our outbound travel products. Expanding departure coverage and serving more travelers from lower-tier cities. This year, we are extending our connecting flight solutions to domestic travel products, offering customers more flexible travel arrangements. For certain new tour products, we provide travelers departing from different cities across China with integrated flight solutions. In the event of delays to connecting flights, we will assist customers in completing the remaining segments of their journeys at no additional cost. High-quality products continue to play an important role in attracting our customers and partners. In line with this, new tool has been one of our core high-quality offline tour products, supported by a relatively loyal customer base. To meet evolving customer demand, new tour products have expanded into long haul and more complex destinations, including Africa and South America. This year, we continued to introduce new premium outbound new tool products for experienced travelers, such as North America multi-destination itinerary covering the U.S., Canada and Mexico as well as South America and tactical tours, which have been well received with many repeat customers. In terms of the domestic travel market, we see that customer demand is gradually shifting from traditional sightseeing towards more culture and experienced oriented travel. In response, we have upgraded our [indiscernible] products through introducing more in-depth itineraries, focused on single destinations. These products reduced the number of stops within an itinerary focus on core destinations and selected sightseeing attractions and provide travelers with more time for exploration and local experiences. To further enhance the travel experience, many of these in-depth products are offered in small growth and private growth tour for [indiscernible]. Certain new tool products also feature experience [indiscernible] tour guides to provide in-depth commentary for travelers. We have seen that the number of self-guided travelers has continued to increase. To address the changing needs of this segment, we expanded our Hotel + X offerings with hotels at the core component. To support this, we have strengthened direct sourcing our resort hotels and increased procurement of other travel-related products to broaden our offering. In addition, supported by AI and dynamic packaging technologies, many self-guided travel products are now content-driven for potential bookings. After customers input relevant information, the system can automatically generate destination recommendations and the travel itineraries. Customers can then select their preferred elements to customize their good self-guided travel packages, which offers [indiscernible] depleted and personalization in the booking process. We have continued to expand our channel presence. Also, together with our partners, we work to better identify customer needs across different channels and have accordingly, adopted our products and services to support product sales. In the first quarter, live streaming contribution to our total transaction volume further increased to over 20%. Both payments and the verification volume continued to record double-digit year-over-year growth as we continue to gain experience in live streaming and better understand the customer preferences. We have introduced more targeted products for different customer segments. For example, for senior travelers, we introduced European tour products with itineraries longer than 15 days. While for family-oriented customers, we promoted customized Singapore tours and the private growth products. These targeted initiatives improve customer acquisition efficiency and contributing to higher verification rates. In addition, we continue to expand live streaming to destination-based scenarios. For example, we conducted onboard live stream sessions from cruise ships providing customers with a more direct understanding of destinations and helping drive both bookings and verifications. In the first quarter, our off-line store business continued to grow with transaction volume increasing by nearly 30% year-over-year. Off-line stores continued to play an important role in the sales of organizer tour products and the promotion of 2 new brands. We fully opened our systems and the product offerings to off-line stores, enabling them to expand our reach into lower-tier markets and provide customers in lower-tier cities the access to a broader range of travel products, particularly outbound travel products. This year, we plan to continue expanding our off-line store network. In addition, we are further broadening our channel partnerships, backed by our solid supply chain, quality products and advanced technology tools. Our S2B2C model enables us to efficiently provide business partners with a broad range of products and services to meet the needs of their end customers. This collaborative approach creates value for both sides. Tuniu is able to connect the supply and demand more efficiently, lower customer acquisition costs and expand sales scale, while partners can offer high-quality travel products and services to better sell and retain their customers. Going forward, we will continue to expand our partner network and [indiscernible] a broader customer base. In terms of technology, we will continue to explore the application of AI technologies across various business scenarios this year, further integrating automation tools into more operational processes. Through ongoing tour upgrades and improvements to our regular operations, AI tools can assist employees in handling more repetitive tasks, allowing them to focus on more contacts and innovative work. On the customer side, technology tools, such as itinerary recommendations, stand-alone product booking and dynamic packaging provide customers with more intelligent, convenient and efficient booking experience. In particular, self-guided travelers can leverage AI-assisted tools to customize travel products based on their own preferences and the needs. This year, the travel market has seen a growing number of peak travel periods. Following the spring break and the recent holidays in the second quarter, the summer travel season is approaching. This presents both opportunities and challenges. We will continue to strengthen the supply, sales and service capabilities of our seasonal travel products and work closely with sales channel partners to provide more customers with simple [indiscernible] and high-quality travel experiences. I will now turn the call over to Anqiang, our financial controller, for the financial highlights.

Thank you, Dunde. Hello, everyone. Now I'll walk you through our first quarter of 2026 financial results in greater detail. Please note that all the material amounts are in RMB unless otherwise stated. You can find the U.S. dollar equivalent of the numbers in our earnings release. For the first quarter of 2026, net revenues were CNY 132.6 million, representing a year-on-year increase of 13% from the corresponding period in 2025. Revenues from packaged tour were 11% up year-over-year to CNY 109.7 million and accounted for 83% of our total net revenues for the quarter. The increase was primarily due to the growth of t[indiscernible] and the self-guided tours. Other revenues were up 24% year-over-year to CNY 22.9 million and accounted for 17% of our total net revenues. The increase was primarily due to the increase in the fees for advertising services provided to Tuniu's board and bureaus. Gross profit for the first quarter of 2026, was CNY 73.6 million, up 6% year-over-year. Operating expenses for the first quarter of 2026 were CNY 77.3 million down 4% year-over-year. Research and product development expenses for the first quarter of 2026 were CNY 13.6 million, down 7% 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 first quarter of 2026 were CNY 50.5 million, up 17% year-over-year. The increase was primarily due to the increase in promotion expenses. General and administrative expenses for the first quarter of 2026 were CNY 13.5 million, down 41% year-over-year. The decrease was primarily due to the empirement of property and equipment net recorded in the first quarter of 2025. Net income attributable to ordinary shareholders of 2 new corporation was CNY 0.7 million in the first quarter of 2026. Non-GAAP net income attributable to ordinary shareholders up to new cooperation, which excluded share-based compensation expenses and amortization of acquired intangible assets was CNY 2.6 million in the first quarter of 2026. As of March 31, 2026, the company had cash and cash equivalents, restricted cash, certain investments and long-term deposits of CNY 1 billion. Capital expenditures for the first quarter of 2026 was CNY 0.5 million. For the second quarter of 2026, the company expects to generate CNY 134.9 million to CNY 141.6 million of net revenues, which represents a 0% to 5% increase year-over-year. Please note that this forecast reflects Tuniu's current and preliminary view on the industry and its operations, which is subject to change. Thank you for listening. We are now ready for your questions. Operator?

[Operator Instructions] The first question comes from Kathy Lu of Private Investor.

2 questions here. First, we were seeing market conditions for the second quarter look relatively mixed. With the rollout of spring break policy as a positive driver and the surging as a headwind how will these factors impact our business? And my second one is about the upcoming summer vacation. Could you kindly share some color on Q1 booking trends. That's all .

Thank you for the questions. Firstly, we are glad to see a lot of cities implemented spring break this year, many of them arranged the break before timing or Labor Day holiday, forming a longer vacation. It stimulates the growth of travel, especially leisure travels in the domestic market. For example, we recorded over 50% year-over-year growth in the number of trips from April 1 until 6 this year. Moreover during April 1 to the 3, the number of trips for family tours [indiscernible] compared to the same period last year. Products featuring natural experiences, theme parks and study tools were most favored by families with children. We've launched several spring breaks oriented products in Eastern China, which were [indiscernible] by the parents. We plan to expand the destination coverage and alternate products in the second half of the year. For the increase of airfare prices, the impact is limited on long-haul packaged tools that packaged towards often contain many travel resources after than airfare. So the risk can be mitigated by integrating other resources in the package. Through our coordinating with the suppliers, many long-haul outbound tool products maintain the same price despite the higher airfares. For domestic tours, we provide attentive travel solutions such as connecting flights, train tickets and car rental. But considering headwinds as certain outbound definitions as well as air fare price impact on short-haul travels and air ticketing alone, we expect the revenues to increase up to 5% year-over-year in the second quarter. For your second question about the summer vacation, it's still too early to tell. We have limited visibility towards the booking data due to short booking window, especially for domestic tours and the short-haul outbound tours. Based on our insight, decisions with cooler weather, such as Guizhou and Niman will be on the hot plate. Also, as we see the shift from traditional say to culture experience is undergoing cities such as Beijing and at will be popular. The long-haul outbound call to the bookings are on the track. For example, so far, we see the booking amount for package tours to America in July and August has already exceeded the same period last year, thank you.

[Operator Instructions] We are now approaching the end of the conference call. I will now turn the call over Tuniu's Director of Investor Relations, Mary, for closing remarks.

Once again, thank you for joining us today. Please do not 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. .

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.