Tuniu Corporation — FY2015 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2015. This is an annual filing, not a standalone fourth-quarter report; the filing text does not provide a clear Q4-only financial result. Financial statements are prepared under U.S. GAAP. Unless otherwise noted, amounts below are RMB millions; USD figures are filing translations.
Business context and operating performance
Tuniu operates an online leisure-travel platform in China, selling organized and self-guided tours and related services. Organized tours generated 96.3% of net revenue in 2015. Overseas leisure travel products represented more than 65% of gross bookings. Trips sold increased to approximately 4.449 million from 2.182 million in 2014.
Key financial metrics
| Metric | FY2015 | FY2014 |
|---|---|---|
| Total revenue | 7,680.8 | 3,554.7 |
| Net revenue | 7,645.3 (US$1,180.2) | 3,534.9 |
| Gross profit / gross margin | 370.6 / 4.8% | 226.1 / 6.4% |
| Operating loss | (1,455.0) | (473.0) |
| Net loss | (1,462.4) (US$225.8) | (447.9) |
| Net loss per ordinary share, basic and diluted | RMB(5.88) | RMB(4.38) |
| Net cash used in operating activities | (514.7) (US$79.5) | (271.1) |
| Net cash used in investing activities | (1,915.2) | (227.9) |
| Net cash provided by financing activities | 3,005.8 | 1,540.4 |
Revenue rose 116.3% year over year, while net loss widened materially. Cost of revenue increased to 95.2% of net revenue from 93.6%, and operating expenses rose to 23.9% from 19.8% of net revenue. Sales and marketing expense was RMB1,154.2 million, up from RMB434.2 million; research and product development expense was RMB298.2 million, up from RMB104.9 million.
Foreign-exchange losses were RMB83.1 million, compared with a RMB5.3 million loss in 2014. Interest income was RMB76.5 million. Share-based compensation expense was RMB65.1 million. Intangible-asset amortization reached RMB57.8 million, substantially reflecting acquired assets. The filing reports RMB17.8 million of losses on committed tour reservations in 2015, versus RMB4.1 million in 2014.
Balance sheet, debt and liquidity
At December 31, 2015, cash and cash equivalents were RMB2,101.2 million, restricted cash RMB339.0 million, and short-term investments RMB1,226.4 million. Total assets were RMB7,186.1 million; total liabilities were RMB3,848.4 million; and total shareholders’ equity was RMB3,337.7 million. Current assets were RMB5,539.4 million and current liabilities RMB3,790.6 million. Tuniu reported no short- or long-term bank borrowings outstanding at year-end.
Operating cash use reflected rapid growth, increased supplier prepayments and spending on marketing and personnel. Prepayments and other current assets rose to RMB1,699.5 million, including RMB1,095.9 million of supplier prepayments and RMB407.5 million of yield-enhancement products. Financing cash flow was supported by private placements; investing cash use included purchases of investments and financial products, acquisitions, capital expenditures and increased restricted cash.
Material changes and unusual items
- Net revenue more than doubled, but gross margin declined by 1.6 percentage points and net loss more than tripled.
- FY2015 financing included net private-placement proceeds of RMB2,430.2 million. A further US$500 million HNA investment closed in January 2016 and is a subsequent-period event, not FY2015 cash proceeds.
- Tuniu acquired four offline travel agencies during 2015, with disclosed purchase consideration of approximately RMB118.0 million, including contingent consideration. It also acquired a technology company for air-ticketing platform development.
- The JD.com agreement contributed intangible assets valued at RMB660.2 million, including rights and traffic and marketing support over five years. HNA-related supplier prepayments and deposits each included approximately RMB649.4 million; Tuniu undertook to source at least US$100 million of HNA products and services over two years.
Outlook, management commentary and principal risks
Management expects continued investment in marketing, product development, technology and expansion, and anticipates operating expenses and share-based compensation to continue rising in absolute terms. It said cash, cash equivalents, short-term investments and expected operating cash flows should cover anticipated needs for at least 12 months. The company had incurred successive annual losses and negative operating cash flow in both 2014 and 2015; management did not provide a specific revenue, margin or profitability forecast.
- Profitability depends on improving the very thin gross margin while controlling marketing, regional-expansion and development costs. Leisure travel demand is exposed to economic weakness, seasonality, health and safety events, political disruptions and visa-policy changes.
- Tuniu relies on suppliers for product quality and availability, and commits in advance to some nonrefundable travel inventory. Customer claims, supplier failures or demand shortfalls could cause losses.
- The company conducts restricted activities through a PRC variable-interest-entity structure. PRC regulatory interpretation, enforcement or proposed foreign-investment rules could affect operations, consolidation and access to assets.
- Financial services launched in 2015 introduce credit and asset-quality risks. Tuniu purchased yield-enhancement products and carried associated investor obligations; the filing describes its credit-risk assessment but does not eliminate the risk of loss.
- Foreign-exchange volatility affected results, and Tuniu reported that it had not hedged currency exposure. PRC rules can also constrain transfers of funds and dividends.
- The company disclosed no material pending legal or administrative proceeding. Its auditor issued an unqualified opinion on the financial statements and concluded internal control over financial reporting was effective as of year-end; acquired travel agencies representing 2.7% of assets and 6.8% of revenue were excluded from the internal-control assessment and audit.
Most important facts for investors to verify
- Confirm the annual period and obtain the separate quarterly release if Q4-specific revenue, loss or cash flow is required.
- Assess whether trip growth and revenue growth can translate into margin improvement, given declining gross margin and sharply higher operating expenses.
- Review the composition, maturity, restrictions and credit quality of short-term investments and yield-enhancement products, as well as the corresponding investor liabilities.
- Track supplier prepayments, committed-tour inventory exposure, HNA purchasing commitments and the cash conversion cycle.
- Evaluate the VIE structure and PRC regulatory developments, alongside foreign-exchange and dividend-transfer restrictions.
- Check dilution from equity financing, share-based awards and the dual-class voting structure; the filing reports 17,373,500 Class B shares outstanding at year-end, with ten votes per share versus one vote for Class A.