Tuniu Announces Unaudited Fourth Quarter and Fiscal Year 2018 Financial Results

Non-GAAP^[1] Net Income in 2018 Reached RMB10.9 million
Added 345 Offline Retail Stores During 2018^[2]

NANJING, China, Feb. 28, 2019 /PRNewswire/ -- Tuniu Corporation (NASDAQ: TOUR) ("Tuniu" or the "Company"), a leading online leisure travel company in China, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2018.

Highlights for the Fourth Quarter of 2018

• Revenues from packaged tours in the fourth quarter of 2018 increased by 23.3% year-over-year to RMB357.6 million (US$52.0^[3] million).
• Gross margin in the fourth quarter of 2018 was 57.3%, compared to a gross margin of 50.0% in the fourth quarter of 2017.
• As of December 31, 2018, Tuniu had 29 local tour operators in total, including 3 newly launched local tour operators in China^[4] since November 27, 2018.

Highlights for the Fiscal Year 2018

• Non-GAAP net income was RMB10.9 million (US$1.6 million) in 2018, compared to a Non-GAAP net loss of RMB531.1 million in 2017.
• Revenues from packaged tours in 2018 increased by 15.2% year-over-year to RMB1.8 billion (US$266.3 million).
• Operating expenses in 2018 decreased by 25.7% year-over-year to RMB1.5 billion (US$221.7 million).
• As of December 31, 2018, Tuniu had 509 offline retail stores in total, of which 345 were newly added since January 1, 2018.

Mr. Donald Dunde Yu, Tuniu's founder, Chairman and Chief Executive Officer, said, "2018 has been a year filled with achievements and milestones. We perfected our sales and service networks, opened offline retail stores to improve our user acquisition ability and launched local tour operators to strengthen our service capability. Going forward in 2019, we will focus on the customer experience, because our customers are our greatest asset. We will continue to leverage Tuniu's core competitive advantage in packaged tour products to differentiate ourselves from our peers and to provide the best experience to our customers."

Ms. Maria Yi Xin, Tuniu's Chief Financial Officer, said, "We are pleased to announce Tuniu achieved non-GAAP profitability and positive operating cash flow for the full year 2018 for the first time since our listing, reflecting positive changes in Tuniu as a result of the implementation of our core strategies. In 2019, we will continue to leverage our leading position and our competitive advantage in China's online leisure travel market to unlock additional value for our customers and shareholders."

Fourth Quarter 2018 Results

Net revenues were RMB471.2 million (US$68.5 million) in the fourth quarter of 2018, representing a year-over-year increase of 0.3% from the corresponding period in 2017.

• Revenues from packaged tours were RMB357.6 million (US$52.0 million) in the fourth quarter of 2018, representing a year-over-year increase of 23.3% from the corresponding period in 2017. The increase was primarily due to the growth of organized tours.
• Other revenues were RMB113.6 million (US$16.5 million) in the fourth quarter of 2018, representing a year-over-year decrease of 36.8% from the corresponding period in 2017. The decrease was primarily due to the decline in revenues generated from financial services and service fees received from insurance companies.

Cost of revenues was RMB201.0 million (US$29.2 million) in the fourth quarter of 2018, representing a year-over-year decrease of 14.4% from the corresponding period in 2017. As a percentage of net revenues, cost of revenues was 42.7% in the fourth quarter of 2018 compared to 50.0% in the corresponding period in 2017.

Gross profit was RMB270.2 million (US$39.3 million) in the fourth quarter of 2018, representing a year-over-year increase of 14.9% from the corresponding period in 2017. The increase was primarily due to the increase in efficiency resulting from economies of scale.

Operating expenses were RMB373.3 million (US$54.3 million) in the fourth quarter of 2018, representing a year-over-year decrease of 18.1% from the corresponding period in 2017. Share-based compensation expenses and amortization of acquired intangible assets, which were allocated to operating expenses, were RMB46.9 million (US$6.8 million) in the fourth quarter of 2018. Non-GAAP operating expenses, which excluded share-based compensation expenses and amortization of acquired intangible assets, were RMB326.4 million (US$47.5 million) in the fourth quarter of 2018, representing a year-over-year decrease of 18.8%.

• Research and product development expenses were RMB75.9 million (US$11.0 million) in the fourth quarter of 2018, representing a year-over-year decrease of 31.8%. Non-GAAP research and product development expenses, which excluded share-based compensation expenses and amortization of acquired intangible assets of RMB2.8 million (US$0.4 million), were RMB73.1 million (US$10.6 million) in the fourth quarter of 2018, representing a year-over-year decrease of 33.2% from the corresponding period in 2017. Research and product development expenses as a percentage of net revenues were 16.1% in the fourth quarter of 2018, decreasing from 23.7% in the corresponding period in 2017. The decrease was primarily due to the increase in efficiency resulting from economies of scale and refined management, and optimization of research and product development personnel.
• Sales and marketing expenses were RMB209.1 million (US$30.4 million) in the fourth quarter of 2018, representing a year-over-year increase of 7.9%. Non-GAAP sales and marketing expenses, which excluded share-based compensation expenses and amortization of acquired intangible assets of RMB34.5 million (US$5.0 million), were RMB174.6 million (US$25.4 million) in the fourth quarter of 2018, representing a year-over-year increase of 9.6% from the corresponding period in 2017. Sales and marketing expenses as a percentage of net revenues were 44.4% in the fourth quarter of 2018, increasing from 41.2% in the corresponding period in 2017. The increase was primarily due to the expansion of customer loyalty program team and increased promotional campaigns on certain channels.
• General and administrative expenses were RMB120.5 million (US$17.5 million) in the fourth quarter of 2018, representing a year-over-year decrease of 22.0%. Non-GAAP general and administrative expenses, which excluded share-based compensation expenses and amortization of acquired intangible assets of RMB9.7 million (US$1.4 million), were RMB110.8 million (US$16.1 million) in the fourth quarter of 2018, representing a year-over-year decrease of 18.9% from the corresponding period in 2017. General and administrative expenses as a percentage of net revenues were 25.6% in the fourth quarter of 2018, decreasing from 32.9% in the corresponding period in 2017. The decrease was primarily due to the increase in operating efficiency resulting from economies of scale and refined management.

Loss from operations was RMB103.1 million (US$15.0 million) in the fourth quarter of 2018, compared to a loss from operations of RMB220.8 million in the fourth quarter of 2017. Non-GAAP loss from operations, which excluded share-based compensation expenses and amortization of acquired intangible assets, was RMB55.8 million (US$8.1 million) in the fourth quarter of 2018.

Net loss was RMB72.9 million (US$10.6 million) in the fourth quarter of 2018, compared to a net loss of RMB186.1 million in the fourth quarter of 2017. Non-GAAP net loss, which excluded share-based compensation expenses and amortization of acquired intangible assets, was RMB25.6 million (US$3.7 million) in the fourth quarter of 2018.

Net loss attributable to ordinary shareholders was RMB64.7 million (US$9.4 million) in the fourth quarter of 2018, compared to a net loss attributable to ordinary shareholders of RMB184.9 million in the fourth quarter of 2017. Non-GAAP net loss attributable to ordinary shareholders, which excluded share-based compensation expenses and amortization of acquired intangible assets, was RMB17.3 million (US$2.5 million) in the fourth quarter of 2018.

As of December 31, 2018, the Company had cash and cash equivalents, restricted cash and short-term investments of RMB1.7 billion (US$245.8 million). 

Fiscal Year 2018 Results

Net revenues were RMB2.2 billion (US$325.8 million) in 2018, representing a year-over-year increase of 2.2% from 2017.

• Revenues from packaged tours were RMB1.8 billion (US$266.3 million) in 2018, representing a year-over-year increase of 15.2% from 2017. The increase was primarily due to the growth of organized tours.
• Other revenues were RMB409.5 million (US$59.6 million) in 2018, representing a year-over-year decrease of 32.1% from 2017. The decrease was primarily due to the decline in revenues generated from financial services and service fees received from insurance companies.

Cost of revenues was RMB1.1 billion (US$154.9 million) in 2018, representing a year-over-year increase of 4.0% from 2017. As a percentage of net revenues, cost of revenues was 47.5% in 2018 compared to 46.7% in 2017.

Gross profit was RMB1.2 billion (US$170.9 million) in 2018, representing a year-over-year increase of 0.6% from 2017. The increase was primarily due to the increase in efficiency resulting from economies of scale, which was partially offset by the decrease in other revenues.

Operating expenses were RMB1.5 billion (US$221.7 million) in 2018, representing a year-over-year decrease of 25.7% from 2017. Share-based compensation expenses and amortization of acquired intangible assets, which were allocated to operating expenses, were RMB208.8 million (US$30.4 million) in 2018. Non-GAAP operating expenses, which excluded share-based compensation expenses and amortization of acquired intangible assets, were RMB1.3 billion (US$191.3 million) in 2018, representing a year-over-year decrease of 27.4%.

• Research and product development expenses were RMB315.2 million (US$45.8 million) in 2018, representing a year-over-year decrease of 41.7%. Non-GAAP research and product development expenses, which excluded share-based compensation expenses and amortization of acquired intangible assets of RMB10.9 million (US$1.6 million), were RMB304.3 million (US$44.3 million) in 2018, representing a year-over-year decrease of 42.9% from 2017. Research and product development expenses as a percentage of net revenues were 14.1% in 2018, decreasing from 24.7% in 2017. The decrease was primarily due to the increase in efficiency resulting from economies of scale and refined management, and optimization of research and product development personnel.
• Sales and marketing expenses were RMB778.1 million (US$113.2 million) in 2018, representing a year-over-year decrease of 13.0%. Non-GAAP sales and marketing expenses, which excluded share-based compensation expenses and amortization of acquired intangible assets of RMB138.0 million (US$20.1 million), were RMB640.2 million (US$93.1 million) in 2018, representing a year-over-year decrease of 15.3% from 2017. Sales and marketing expenses as a percentage of net revenues were 34.7% in 2018, decreasing from 40.8% in 2017. The decrease was primarily due to the optimization of promotional expense structure and preference for marketing channels with higher ROI.
• General and administrative expenses were RMB487.4 million (US$70.9 million) in 2018, representing a year-over-year decrease of 23.6%. Non-GAAP general and administrative expenses, which excluded share-based compensation expenses and amortization of acquired intangible assets of RMB60.0 million (US$8.7 million), were RMB427.4 million (US$62.2 million) in 2018, representing a year-over-year decrease of 21.6% from 2017. General and administrative expenses as a percentage of net revenues were 21.8% in 2018, decreasing from 29.1% in 2017. The decrease was primarily due to the increase in operating efficiency resulting from economies of scale and refined management.

Loss from operations was RMB349.0 million (US$50.8 million) in 2018, compared to a loss from operations of RMB883.4 million in 2017. Non-GAAP loss from operations, which excluded share-based compensation expenses and amortization of acquired intangible assets, was RMB138.7 million (US$20.2 million) in 2018.

Net loss was RMB199.4 million (US$29.0 million) in 2018, compared to a net loss of RMB771.3 million in 2017. Non-GAAP net income, which excluded share-based compensation expenses and amortization of acquired intangible assets, was RMB10.9 million (US$1.6 million) in 2018.

Net loss attributable to ordinary shareholders was RMB187.9 million (US$27.3 million) in 2018, compared to a net loss attributable to ordinary shareholders of RMB773.0 million in 2017. Non-GAAP net income attributable to ordinary shareholders, which excluded share-based compensation expenses and amortization of acquired intangible assets, was RMB22.4 million (US$3.3 million) in 2018.

Business Outlook

For the first quarter of 2019, Tuniu expects to generate RMB432.5 million to RMB456.5 million of net revenues, which represents 5% to 10% decrease year-over-year. This forecast reflects Tuniu's current and preliminary view on the industry and its operations, which is subject to change.

Conference Call Information

Tuniu's management will hold an earnings conference call at 8:00 am U.S. Eastern Time, on February 28, 2019, (9:00 pm, Beijing/Hong Kong Time, on February 28, 2019) to discuss the fourth quarter and fiscal year 2018 financial results.

To participate in the conference call, please dial the following numbers:

Conference ID: Tuniu 4Q 2018 Earnings Call

A telephone replay will be available one hour after the end of the conference through March 7, 2019. The dial-in details are as follows:

Replay Access Code: 10129007

Additionally, a live and archived webcast of the conference call will also be available on the Company's investor relations website at http://ir.tuniu.com.

About Tuniu

Tuniu (Nasdaq: TOUR) is a leading online leisure travel company in China that offers a large selection of packaged tours, including organized and self-guided tours, as well as travel-related services for leisure travelers through its website tuniu.com and mobile platform. Tuniu has over 2,200,000 stock keeping units (SKUs) of packaged tours, covering over 420 departing cities throughout China and all popular destinations worldwide. Tuniu provides one-stop leisure travel solutions and a compelling customer experience through its online platform and offline service network. For more information, please visit http://ir.tuniu.com.

Safe Harbor Statement

This press release contains forward-looking statements made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Tuniu may also make written or oral forward-looking statements in its reports filed with or furnished to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Any statements that are not historical facts, including statements about Tuniu's beliefs and expectations, are forward-looking statements that involve factors, risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors and risks include, but are not limited to the following: Tuniu's goals and strategies; the growth of the online leisure travel market in China; the demand for Tuniu's products and services; its relationships with customers and travel suppliers; the Company's ability to offer competitive travel products and services; Tuniu's future business development, results of operations and financial condition; competition in the online travel industry in China; relevant government policies and regulations relating to the Company's structure, business and industry; and the general economic and business condition in China and elsewhere. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the U.S. Securities and Exchange Commission. All information provided in this press release is current as of the date of the press release, and Tuniu does not undertake any obligation to update such information, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement the Company's unaudited consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), the Company has provided non-GAAP information related to cost of revenues, research and product development expenses, sales and marketing expenses, general and administrative expenses, operating expenses, loss from operations, net loss, net loss attributable to ordinary shareholders, net loss per ordinary share attributable to ordinary shareholders-basic and diluted and net loss per ADS, which excludes share-based compensation expenses and amortization of acquired intangible assets. We believe that the non-GAAP financial measures used in this press release are useful for understanding and assessing underlying business performance and operating trends, and management and investors benefit from referring to these non-GAAP financial measures in assessing our financial performance and when planning and forecasting future periods. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of GAAP and non-GAAP Results" set forth at the end of this press release.

A limitation of using non-GAAP financial measures excluding share-based compensation expenses and amortization of acquired intangible assets is that share-based compensation expenses and amortization of acquired intangible assets have been – and will continue to be – significant recurring expenses in the Company's business. You should not view non-GAAP results on a stand-alone basis or as a substitute for results under GAAP, or as being comparable to results reported or forecasted by other companies.

For investor and media inquiries, please contact:

China
Mary Chen
Investor Relations Director
Tuniu Corporation
Phone: +86-25-6960-9988
E-mail: ir@tuniu.com

(Financial Tables Follow)

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