Tuniu Announces Unaudited First Quarter 2018 Financial Results

Tuniu Corporation (NASDAQ:TOUR) (“Tuniu” or the “Company”), a leading online leisure travel company in China, today announced its unaudited financial results for the first quarter ended March 31, 2018.

Highlights for the First Quarter of 2018

Revenues from package tours in the first quarter of 2018 increased by 13.1% year-over-year to RMB402.7 million (US$64.2 million[3]).
Operating expenses in the first quarter of 2018 decreased by 31.4% year-over-year to RMB383.8 million (US$61.2 million).
Non-GAAP net loss was RMB23.8 million (US$3.8 million) in the first quarter of 2018, compared to a Non-GAAP net loss of RMB226.2 million in the first quarter of 2017.
As of April 30, 2018, Tuniu added 51 new offline retail stores during the year.

As of April 30, 2018, Tuniu had 21 local tour operators in total, including 7 newly launched local tour operators in China[4] during April.
Mr. Donald Dunde Yu, Tuniu’s co-founder, Chairman and Chief Executive Officer, said, “As the leading online leisure travel company in China, we have developed a comprehensive sales network that allows us to efficiently acquire customers through various channels at different departure cities. With a solid foundation established through our sales network, our next step is to replicate the expansion model to our service network at destinations. As China’s consumption power continues its upward trend, Chinese travelers are demanding better services and experiences. We believe that many of these demands are still unmet and there continues to be an opportunity for Tuniu to provide products and services consistent with current demands through its service network.”

Ms. Maria Yi Xin, Tuniu’s Chief Financial Officer, said, “During the first quarter, we were able to continue reducing our net loss. The development of our sales network served a vital role in the reduction of our sales and marketing expenses. Tuniu’s new retail model continues to gain traction as customers acquired through our offline retail stores contributed more than 10% of our packaged tour GMV for the first time during this quarter. With our blended user acquisition cost declining from the expansion of our sales network, and bargaining power increasing from the development of our service network, Tuniu’s operational efficiency will continue to scale in the future.”

1. The section below entitled “About Non-GAAP Financial Measures” provides information about the use of
Non-GAAP financial measures in this press release, and the table captioned “Reconciliations of GAAP and
Non-GAAP Results” set forth at the end of this press release reconciles Non-GAAP financial information with the
Company’s financial results under GAAP.

2. The section below entitled “Highlights for the First Quarter of 2018” provides additional information about
some key financial figures and operating data.

3. The conversion of Renminbi (“RMB”) into United States dollars (“US$”) is based on the exchange rate of
US$1.00=RMB6.2726 on March 30, 2018 as set forth in H.10 statistical release of the U.S. Federal Reserve Board
and available at https://www.federalreserve.gov/releases/h10/default.htm.

4. The 7 newly opened local tour operators are located in Huhehot, Taiyuan, Chengde, Hulunbuir, Harbin, Dalian
and Urumqi in China.

First Quarter 2018 Results

Net revenues were RMB480.5 million (US$76.6 million) in the first quarter of 2018, representing a year-over-year increase of 5.4% from the corresponding period in 2017.

Revenues from packaged tours, which are mainly recognized on a net basis, were RMB402.7 million (US$64.2 million) in the first quarter of 2018, representing a year-over-year increase of 13.1% from the corresponding period in 2017. The increase was primarily due to the growth of organized tours and self-guided tours.

Other revenues were RMB77.9 million (US$12.4 million) in the first quarter of 2018, representing a year-over-year decrease of 22.2% from the corresponding period in 2017. The decrease was primarily due to the decline in revenues generated from financial services, commission fees received from air ticketing and service fees received from insurance companies.

Cost of revenues was RMB217.9 million (US$34.7 million) in the first quarter of 2018, representing a year-over-year increase of 6.4% from the corresponding period in 2017. As a percentage of net revenues, cost of revenues was 45.3% in the first quarter of 2018 compared to 44.9% in the corresponding period in 2017.

Gross profit was RMB262.6 million (US$41.9 million) in the first quarter of 2018, representing a year-over-year increase of 4.5% from the corresponding period in 2017. The increase was primarily due to the increase in efficiency resulting from economies of scale.

Operating expenses were RMB383.8 million (US$61.2 million) in the first quarter of 2018, representing a year-over-year decrease of 31.4% from the corresponding period in 2017. Share-based compensation expenses and amortization of acquired intangible assets, which were allocated to operating expenses, were RMB47.5 million (US$7.6 million) in the first quarter of 2018. Non-GAAP operating expenses, which excluded share-based compensation expenses and amortization of acquired intangible assets, were RMB336.3 million (US$53.6 million) in the first quarter of 2018, representing a year-over-year decrease of 32.5%.

Research and product development expenses were RMB84.1 million (US$13.4 million) in the first quarter of 2018, representing a year-over-year decrease of 47.3%. Non-GAAP research and product development expenses, which excluded share-based compensation expenses and amortization of acquired intangible assets of RMB1.7 million (US$0.3 million), were RMB82.4 million (US$13.1 million) in the first quarter of 2018, representing a year-over-year decrease of 47.6% from the corresponding period in 2017. Research and product development expenses as a percentage of net revenues were 17.5% in the first quarter of 2018, decreasing from 35.0% 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 RMB185.8 million (US$29.6 million) in the first quarter of 2018, representing a year-over-year decrease of 26.8%. Non-GAAP sales and marketing expenses, which excluded share-based compensation expenses and amortization of acquired intangible assets of RMB34.3 million (US$5.5 million), were RMB151.5 million (US$24.1 million) in the first quarter of 2018, representing a year-over-year decrease of 30.9% from the corresponding period in 2017. Sales and marketing expenses as a percentage of net revenues were 38.7% in the first quarter of 2018, decreasing from 55.6% 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 RMB114.6 million (US$18.3 million) in the first quarter of 2018, representing a year-over-year decrease of 24.3%. Non-GAAP general and administrative expenses, which excluded share-based compensation expenses and amortization of acquired intangible assets of RMB11.5 million (US$1.8 million), were RMB103.1 million (US$16.4 million) in the first quarter of 2018, representing a year-over-year decrease of 19.0% from the corresponding period in 2017. General and administrative expenses as a percentage of net revenues were 23.9% in the first quarter of 2018, decreasing from 33.2% in the corresponding period in 2017. The decrease was primarily due to the increase in efficiency resulting from economies of scale and decline in personnel related fees.

Loss from operations was RMB121.1 million (US$19.3 million) in the first quarter of 2018, compared to a loss from operations of RMB308.0 million in the first quarter of 2017. Non-GAAP loss from operations, which excluded share-based compensation expenses and amortization of acquired intangible assets, was RMB73.4 million (US$11.7 million) in the first quarter of 2018.

Net loss was RMB71.6 million (US$11.4 million) in the first quarter of 2018, compared to a net loss of RMB287.4 million in the first quarter of 2017. Non-GAAP net loss, which excluded share-based compensation expenses and amortization of acquired intangible assets, was RMB23.8 million (US$3.8 million) in the first quarter of 2018.

Net loss attributable to ordinary shareholders was RMB74.7 million (US$11.9 million) in the first quarter of 2018, compared to a net loss attributable to ordinary shareholders of RMB288.2 million in the first quarter of 2017. Non-GAAP net loss attributable to ordinary shareholders, which excluded share-based compensation expenses and amortization of acquired intangible assets, was RMB26.9 million (US$4.3 million) in the first quarter of 2018.

As of March 31, 2018, the Company had cash and cash equivalents, restricted cash and short-term investments of RMB3.1 billion (US$500.3 million).

Business Outlook

For the second quarter of 2018, Tuniu expects to generate RMB519.9 million to RMB538.3 million of net revenues, which represents 13% to 17% growth year-over-year. This forecast reflects Tuniu’s current and preliminary view on the industry and its operations, which is subject to change.

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