Hello, and thank you for standing by for Tuniu’s 2018 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After management’s prepared remarks, there will be a question-and-answer session. 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 Chen.

Thank you, and welcome to our 2018 first quarter earnings conference call. Joining me on the call today are Donald Yu, Co-Founder, Chairman and Chief Executive Officer; and Maria Xin, Chief Financial Officer. For today’s agenda, management will discuss business updates, operational highlights and financial performance for the first quarter of 2018. Before we continue, I refer you to our safe harbor statements 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 Co-Founder, Chairman and Chief Executive Officer, Donald Yu.

Thank you, Mary. Good day, everyone. Welcome to our 2018 first quarter earnings conference call. During the first quarter of 2018, we continue to execute our cost strategy to lay the foundation for better Tuniu with stronger sales and service networks in both departure and destination ticket. Despite being negatively impacted by external factors in destinations such as Maldives, South Korea and Bali, our packaged tour revenues increased by 13% year-over-year. We continue to see strong recovery in Europe with revenues growing by more than 88% year-over-year during the quarter. Other regions also continue to grow organically, for example, revenues with Australia and New Zealand grew more than 30% year-over-year. We continue to narrow our losses through a number of key strategies. For our sales network, our offline retail stores continue to help Tuniu attract new users and efficiently and effectively lower user acquisition costs. Our stores utilizes the new retail model concept, allowing our offline customers to have an online experience with price transparency and full customer cost. During the first quarter of 2018, users acquired through our retail stores contributed more than 10% of our packaged tour GMV. For our service network, we also made strong progress. We’ve been taking our local tour operator model to more locations as we launched seven more local tour operators recently. We continue to make strides in the optimization of our expense structure. In the past, Tuniu primarily focused on branding promotions to the general public in order to establish our brand. Now that Tuniu is the household name among Chinese consumers, we have shifted our promotions to channel-based marketing, targeting specific demographics through to customize campaigns. This also contributed to the lowering of our user acquisition cost. We believe there is still room for additional expense optimization to be unlocked in…

Thank you, Donald. Hello, everyone. Now I will walk you through our first quarter 2018 financial results in greater detail. Please note that all the monetary amounts are in RMB, unless otherwise stated. You can find the U.S. dollar equivalent of the numbers in our earnings release. Starting from the first quarter of 2018, net revenues were RMB480.5 million, representing 5.4% year-over-year growth. Revenues from packaged tours, which are mainly recognized on a net basis were up 13% year-over-year to RMB402.7 million and accounted for 84% of our total net revenues for the quarter. The increase was primarily due to the growth of organized tours and self-guided tours. Other revenues were down 22% year-over-year to RMB77.9 million and accounted for 16% of our total net revenues for the quarter. 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 the service companies. Gross profit was up 4% year-over-year to RMB262.6 million for the quarter. The increase was primarily due to the increase in efficiency resulting from the economies of scale. Operating expenses for the first quarter of 2018 was RMB384 million, down 31% year-over-year, excluding share-based compensation and amortization of acquired intangible assets. Non-GAAP operating expenses were RMB336 million, representing a year-over-year decrease from 33%. Research and product development expenses for the quarter was RMB84 million, down 47% year-over-year. Research and the product development expenses as a percentage of net revenues were 17% in the first quarter of 2018, decreasing from the 35% in the corresponding period in 2017. The decrease was primarily due to the increase in efficiency resulting from the economies of scale and the refined management and optimization of research and product development personnel. Sales and marketing expenses for the quarter were…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Vicky Wu of ICBC International. Please go ahead.

Hi, hi management, thank you for taking my questions. My question is regarding the guidance first and could management give more color on the guidance of the package tour in the 2Q in 2018? And the next question is about the local operator strategy, can management give more color on this strategy this year such as the geographic preference, or the partnerships and of target members and do you consider M&A the strategies in the future? Thanks.

Thank you, Vicky. So let me give more color on the – our guidance in the second quarter. Despite the negative impact of external destinations, certain destinations such as Maldives, Bali, but our package tour revenues continue to grow. We see the recovering of the growth rates in the second quarter and we expect our package tour revenues may grow around the 30% in the second quarter. For other revenues, because of the impacts by the bundling policy, it will still impact our financial results and the negative growth in the second quarter. And overall, we believe this short-term and the temporary impacted our financials and the – as we continue to extending our sales services network, we are confident with our long-term goals.

[Foreign Language]

For our local tour operators, we aim to have around approximately 38% within China by the end of this year, and for international local tour operators we plan to have approximately 5%. So in terms of the future, from a domestic perspective, we believe that approximately 30 local tour operators is probably enough as this covers most of the important destinations throughout in China. So, given that we probably would not increase the number of local tour operators by a significant amount next year. As for international destination we believe we have still a lot of room to grow and we will push out new destinations throughout the next few years.

[Foreign Language]

So in 2017 our local tour operators, both domestically and internationally served 600,000 trips. We plan to turn that number into 1 million trips in 2018, and by 2019 just on our domestic sites, we plan to have 1 million in trips. So given the scale of our local tour operators, we are one of the largest local tour operators in China in terms of GMV and trips. So our service network, which is essentially our local tour operators, complement to our sales networks, because our sales networks has the traffic to directly send over to our service network, we are able to quickly and efficiently scale our operations at the destination. So this applies to direct to channel as well. We’re able to have our source services at destination and meets all of our connections in network and traffic from the departure cities and a click at all at the destination.

[Foreign Language]

So in terms of our service network, it doesn’t necessarily only serve as a local tour operator. It actually – we also encourage our users to share their experiences, their fixtures, their itineraries with their friends and families. So we want to promote users to use their own social circles to push our – to recommend our products. So this is a very important part, because it gives us additional promotions and gives Tuniu a stronger brand name. And this also spread toward on the high-quality service that we offer at the destination.

[Foreign Language]

Traditionally we acquire users through at the destinations. Most of our promotions are done at the local cities or through our sales network, but we are also going to try more promotions at the destination services. We believe there is still a large opportunity. Lot of users are bookings their products later in the trip and by promoting more of our products and services and even content at the destination, we believe it’s a positive step for us.

Thank you, thank you management. And can I have a follow-up, a quick follow-up question. It’s about the take rates in 1Q?

Yes, we continue to see the take rate, the take rates was increasing in the past quarter, because we are doing more and more direct procurement as we are set up in the service network in the destination, we feel we have room to improve our take rates in the future.

Thank you.

[Operator Instructions] Our next question comes from [Elaine Hee] [ph], a private investor. Please go ahead.

Hello. This is [Elaine Hee] [indiscernible] Tuniu’s offline sales compared with peer companies such as Dunde Yu and other companies?

[Foreign Language]

Most of our offline stores are directly operated by Tuniu. Only there are a few number of stores at the destination where we partner with our local partners. So from the departure cities, all our stores are directly operated by Tuniu. So no matter which channel, the key difference of our offline retail stores is our professional service, we offer a complete O2O service procedure, allowing customers have very professional customer service throughout their booking experience. And there is another difference of our stores compared to peers is, our stores are very centralized within the cities. We are building out different models to find other efficient ways to cover these cities and to reach out to larger cities as well. And in terms of efficiency, we are seeing that a number of smaller cities use the offline retail stores are even more efficient and are able to acquire one customer at a lower cost.

[Foreign Language]

We are also testing out a number of retail stores at the destination, however, this is still at its earlier stages. For these destination-based retail stores, we are primarily targeting people who have booked all their products and are already at the destination, so some of the people included are self-guided tourists. And at these destination stores, we offer a number of services, including hotel booking, car rental and other products and services. So we are seeing that once we service them at destination, a lot of them – a number of them actually comes back to our stores when they come back to their hometown. So this creates a very strong synergy between departure cities, retail stores and destination-based retail stores. So by having destination-based retail stores, we are able to maximize the lifetime value of customers on our platform.

Hello?

Hello? Yes, do you have follow-up questions?

Yes, I have another question. Hello? I noticed there’s a decrease in acquisition cost, especially the sales and marketing expenses. So may I know how you acquire more customers?

Yes, there are a number of factors that, of course, that we reduce our new customer acquisition costs. First, our offline stores continued to be in pressure with user. During the first quarter, the user acquired by offline retail stores footprint contributed more than 2% of our packaged tour GMVs. Another reason is that, we are continuing to diversify our channels. Currently, we have sales network consist of the online website, mobile app, offline stores, multi-programs, the B2B distribution and the TMC. As mentioned earlier, the channels – new channels are growing very fast during the past quarter, which also help us to lower the average user acquisition cost. And in the past, Tuniu’s marketing dollar more concentrated in the – to build up the trend. Currently, Tuniu’s brand is a home-held brand in China. So that we utilize our brand assets, and so this also help us continue to lowering our user acquisition costs.

We are now approaching the end of the conference call. I will turn – I will now turn the call over to Tuniu’s CFO, Maria Xin, for closing remarks.

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. Thank you.

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