Tuniu Announces Unaudited Third Quarter 2018 Financial Results

Non-GAAP^[1] Net Income in Q3 2018 Increased by 109.2% Year-Over-Year to RMB83.0 million
Added 251 Offline Retail Stores During 2018^[2]

NANJING, China, Nov. 27, 2018 /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 third quarter ended September 30, 2018.

Highlights for the Third Quarter of 2018

• Non-GAAP income from operations was RMB51.4 million (US$7.5 million^[3]) in the third quarter of 2018, compared to a Non-GAAP income from operations of RMB0.6 million in the third quarter of 2017.
• Net income was RMB28.0 million (US$4.1 million) in the third quarter of 2018, compared to a net loss of RMB27.0 million in the third quarter of 2017. Non-GAAP net income was RMB83.0 million (US$12.1 million) in the third quarter of 2018, representing a year-over-year increase of 109.2%.
• Operating expenses in the third quarter of 2018 decreased by 22.1% year-over-year to RMB395.1 million (US$57.5 million).  
• As of October 31, 2018, Tuniu had 415 offline retail stores in total, of which 251 were newly added since January 1, 2018.  
• As of November 27, 2018, Tuniu had 26 local tour operators in total, including 1 newly launched local tour operator overseas^[4] since July 31, 2018.

Mr. Donald Dunde Yu, Tuniu's founder, Chairman and Chief Executive Officer, said, "During the third quarter, we have continued to improve our sales and service networks in order to maximize the customer's experience. We have refined our sales network to further simplify our customers' booking experience across each channel and further integrated our service network with our platform to insure our customers are served with higher quality products and services. Our direct procurement as a percentage of packaged tour GMV reached 60% in the third quarter. Going forward, we believe our dedication to improving the user experience will differentiate Tuniu from our peers and will serve as the driver of our growth in the future."

Ms. Maria Yi Xin, Tuniu's Chief Financial Officer, said, "We are excited to announce that Tuniu achieved profitability during the third quarter of 2018 both on a GAAP and non-GAAP basis. Additionally, we were able to generate positive cash flow during the first three quarters this year. We believe our ability to achieve profitability and maintain positive operating cash flow this quarter is a reflection of how our long-term strategies have positively reshaped our company's financials. Our achievement this quarter is a significant step towards unlocking greater long-term value for our shareholders."

Third Quarter 2018 Results

Net revenues were RMB763.1 million (US$111.1 million) in the third quarter of 2018, representing a year-over-year decrease of 5.3% from the corresponding period in 2017.

• Revenues from packaged tours were RMB632.7 million (US$92.1 million) in the third quarter of 2018, representing a year-over-year increase of 4.7% from the corresponding period in 2017. The increase was primarily due to the growth of organized tours.
• Other revenues were RMB130.4 million (US$19.0 million) in the third quarter of 2018, representing a year-over-year decrease of 35.5% 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 RMB371.6 million (US$54.1 million) in the third quarter of 2018, representing a year-over-year increase of 1.8% from the corresponding period in 2017. As a percentage of net revenues, cost of revenues was 48.7% in the third quarter of 2018 compared to 45.3% in the corresponding period in 2017.

Gross profit was RMB391.5 million (US$57.0 million) in the third quarter of 2018, representing a year-over-year decrease of 11.2% from the corresponding period in 2017. The decrease was primarily due to the decrease in other revenues.

Operating expenses were RMB395.1 million (US$57.5 million) in the third quarter of 2018, representing a year-over-year decrease of 22.1% from the corresponding period in 2017. Share-based compensation expenses and amortization of acquired intangible assets, which were allocated to operating expenses, were RMB54.4 million (US$7.9 million) in the third quarter of 2018. Non-GAAP operating expenses, which excluded share-based compensation expenses and amortization of acquired intangible assets, were RMB340.7 million (US$49.6 million) in the third quarter of 2018, representing a year-over-year decrease of 22.7%.

• Research and product development expenses were RMB78.3 million (US$11.4 million) in the third quarter of 2018, representing a year-over-year decrease of 36.9%. Non-GAAP research and product development expenses, which excluded share-based compensation expenses and amortization of acquired intangible assets of RMB4.2 million (US$0.6 million), were RMB74.1 million (US$10.8 million) in the third quarter of 2018, representing a year-over-year decrease of 39.1% from the corresponding period in 2017. Research and product development expenses as a percentage of net revenues were 10.3% in the third quarter of 2018, decreasing from 15.4% 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 RMB209.6 million (US$30.5 million) in the third quarter of 2018, representing a year-over-year decrease of 6.8%. Non-GAAP sales and marketing expenses, which excluded share-based compensation expenses and amortization of acquired intangible assets of RMB34.7 million (US$5.1 million), were RMB174.8 million (US$25.5 million) in the third quarter of 2018, representing a year-over-year decrease of 8.0% from the corresponding period in 2017. Sales and marketing expenses as a percentage of net revenues were 27.5% in the third quarter of 2018, decreasing from 27.9% in the corresponding period 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 RMB122.9 million (US$17.9 million) in the third quarter of 2018, representing a year-over-year decrease of 25.9%. Non-GAAP general and administrative expenses, which excluded share-based compensation expenses and amortization of acquired intangible assets of RMB15.5 million (US$2.3 million), were RMB107.4 million (US$15.6 million) in the third quarter of 2018, representing a year-over-year decrease of 21.3% from the corresponding period in 2017. General and administrative expenses as a percentage of net revenues were 16.1% in the third quarter of 2018, decreasing from 20.6% 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 RMB3.6 million (US$0.5 million) in the third quarter of 2018, compared to a loss from operations of RMB66.0 million in the third quarter of 2017. Non-GAAP income from operations, which excluded share-based compensation expenses and amortization of acquired intangible assets, was RMB51.4 million (US$7.5 million) in the third quarter of 2018.

Net income was RMB28.0 million (US$4.1 million) in the third quarter of 2018, compared to a net loss of RMB27.0 million in the third quarter of 2017. Non-GAAP net income, which excluded share-based compensation expenses and amortization of acquired intangible assets, was RMB83.0 million (US$12.1 million) in the third quarter of 2018.

Net income attributable to ordinary shareholders was RMB31.0 million (US$4.5 million) in the third quarter of 2018, compared to a net loss attributable to ordinary shareholders of RMB29.3 million in the third quarter of 2017. Non-GAAP net income attributable to ordinary shareholders, which excluded share-based compensation expenses and amortization of acquired intangible assets, was RMB86.1 million (US$12.5 million) in the third quarter of 2018.

As of September 30, 2018, the Company had cash and cash equivalents, restricted cash and short-term investments of RMB1.9 billion (US$271.0 million).

Business Outlook

For the fourth quarter of 2018, Tuniu expects to generate RMB422.9 million to RMB446.4 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 November 27, 2018, (9:00 pm, Beijing/Hong Kong Time, on November 27, 2018) to discuss the third quarter 2018 financial results.

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

Conference ID: Tuniu 3Q 2018 Earnings Call

A telephone replay will be available one hour after the end of the conference through December 4, 2018. The dial-in details are as follows:

  Replay Access Code: 10126389

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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