Maria Xin - Investor Relations and Strategic Investment Senior Director Donald Yu - Co-Founder, Chairman and Chief Executive Officer Conor Chia-hung Yang - Chief Financial Officer.

Evan Zhou - Credit Suisse Alvin Jiang - Deutsche Bank Amanda Chen - Morgan Stanley Natalie Wu - CICC David Jin - Goldman Sachs Juan Lin - 86Research Tian Hou - T.H. Capital Research.

Welcome to Tuniu Corporation First Quarter 2016 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this conference is being recorded. I’d now like to turn the conference over to Maria Xin. Ms.

Xin, please go ahead..

Thank you and welcome to our 2016 first quarter earnings conference call. Joining me on the call today are Donald Yu, Co-founder, Chairman and Chief Executive Officer; Alex Yan, Co-founder, President and Chief Operating Officer; and Conor Yang, Chief Financial Officer.

For today’s agenda, management will discuss business updates, operation highlights and financial performance for the first quarter of 2016. Before we continue, I refer you to our Safe Harbor statements in the 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 the figures mentioned during this conference call are in renminbi.

I’d now like to turn the call over to our Co-Founder and CEO, Donald Yu..

Thanks, Maria. Good day, everyone. Welcome to our 2016 first quarter earnings conference call. We had a solid first quarter performance with net revenues and packaged tour gross bookings growing 62.8% and 62.5% year-over-year, respectively.

According to third-party reports, Tuniu has maintained the number one player in China’s online leisure travel sector starting from the second-half of 2016. Despite the impact from slowing demand of Europe, which remained nearly flat year-over-year, our number of trips continues to grow strongly.

Our total number of trips continues to rapidly grow at 80.2% year-over-year. During this period, where many travelers are Tuniu´s destinations closed our destinations instead of going abroad, we observed that customers who are choosing to travel to nearby destinations instead of farther destinations continue to look – book with Tuniu platform.

The shifting demand has positively impacted our domestic and the local tour business, which grow 83% and 112% a year in terms of gross bookings during the first quarter.

This reflects our customers´ loyalty and the preference for Tuniu as a comprehensive provider for all of their online leisure travel services, as our returning customer contributed to 43.6% of our gross booking during the first quarter. Growth in Maldives was limited due to our already large market share in the region and the slowing demand.

If we take a closer look at our performance in the other – in other regions, excluding Europe and Maldives, Tuniu’s gross bookings increased 86% year-over-year. For our first quarter, we noticed that self-guided tour was the significant driver of growth for Tuniu.

Total number of trips from self-guided tours increased by 104% year-over-year in the first quarter. While Tuniu has historically been the clear leader in organized tours in China during the past few years in terms of market share, we will also put increased focus in self-guided tours.

Self-guided tours in China has the potential of becoming a driver for online leisure travel, because many of the younger generation or travelers and the most seasoned travelers often prefer to explore destinations within a flexible schedule.

Going forward, as we increased our procurement capabilities for diversified products, expand our offerings in hotels and air tickets, and strengthen our supply chain management capabilities, we will have increased capabilities to efficiently provide products to meet travelers´ demand for self-guided tours.

We believe that our ability to dynamically bundle air ticket and hotel together with localized resources such as destination-based services and tours is our key competitive advantage in self-guided tours. One of the key capabilities –in improving our capabilities in self-guided tours, the self-guided tour is typically expansions.

Tuniu is becoming increasingly diversified through category expansion as our other revenue grew more than 500% year-over-year during the first quarter..

During the first quarter, GMV from air ticketing grew more than 30 times year-over-year, but our hotel grew more than 7 times year-over-year. As our coverage of more air ticket growth and hotel resources continue to expand for leisure travel, we will be able to maintain our growth momentum in both air ticketing and hotel booking.

In addition, as our additional product categories expand, operational synergy between our core online leisure travel business and the additional product categories is developing into our long-term competitive advantage.

For example, as we diversified our transportation solution beyond air ticketing to bus ticketing and the car rental and further expand our destination service, we have the ability to package these resources into our self-guided tour. Tuniu can now fulfill most of our customers travel demand through the transportation plus hotel plus X model.

Individually, these products also provide value to our customers, as they’re able to book travel services for everyday use in addition to air travel. This has increased due to the technique to our platform and reported our breadth and the go-to-platform for online leisure travel. Now, I would like to give an update on our distribution channels.

Our website and mobile platform continues to grow strongly in terms of CapEx. Combining both website and mobile CAO increased more than 19% during the first quarter. In addition to growing our CapEx, we continue to expand our product coverage in more the parking cities.

These service centers allows us to better attract potential customers and to provide support of our customers on a localized basis. Gross bookings from the regions, where we opened regional service centers in 2014 and 2015, contributed to 19% of our total gross bookings during the first quarter.

Through regional service centers, Tuniu, we are continued to increase its coverage at lower tier cities, where consumption power is growing rapidly. In late 2015, Tuniu has launched its procure rate online B2B wholesaling channel to further diversify its distribution capabilities.

Since its launch, the business has rapidly grown and made benefits to our overall business. First, by wholesaling, we are able to increase the effective coverage of our products to more customers in lower tier cities.

By increasing our presence in the online leisure travel supply chain, we are able to infer that, our products can more efficiently reach customers.

For example, in the piece of region customers in fifth or sixth tier cities, instead of pushing for localized presence in those areas, we can now distribute our product to the local travel agencies and provide products and services to them.

Secondly, by increasing our transaction volume with our suppliers, we are better positioned to negotiate favorable pricings for products and reach our pricings power. Lastly, our wholesaling business serves as an additional channel that allows us to mitigate events regularly [ph] as we continue to increase our direct procurement.

Overall, our wholesaling distribution channels provides additional growth driver for both our top line and profitability long-term. Lastly, I want to touch on technology. So continuously – continuous investments in R&D during the past quarters, we were able to launch a notable upgrade in our overall business system.

Improvements have been implemented in our new business system and manage the functions, functions such as inventory management, direct procurement, and product pricing have all been upgraded in terms of capacity and efficiency as we are now connecting more resources to more customers.

We expect the new system to reach the efficiency of our employees and the overall company. We are confident that the long-term demand for leisure travel in China remained strong. In the past, for example, in 2014, we were met with slowing demand for leisure travel in China.

However, the growing consumption power and general positive trend for outbound travel were the key, I believe for the increase in demand for leisure travel in 2015. As the market leader in the online leisure travel in China now, we believe that we are well-positioned to capture the opportunities of the online leisure travel industry in the future.

I’ll now turn the call to – over to Conor Yang, our CFO, for the financial highlights..

Thank you, Donald. Hello, everyone. I will now walk you through our first quarter 2016 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 your earnings release.

Starting from the first quarter of 2016, packaged tour, gross bookings for the first quarter increased by 62.5% year-over-year to RMB3.1 billion, including 67.5% from outbound tours. For the first quarter, net revenues were RMB2 billion, representing 62.8% year-over-year growth.

Revenues from organized tours, substantially all of which are recognized on a gross basis, were up 59.4% year-over-year to RMB1.9 billion, and accounted for 94.3% of our total net revenues for the quarter.

The increase was primarily due to the rapid growth in demand for travel to certain international destinations, such as Australia, New Zealand, North America, Japan, South Korea, and Southeast Asia, and for domestic tours.

The number of trips for organized tours, excluding local tours increased by 67.9% year-over-year to 459,000, and the number of trips for local tours increased by 60.5% year-over-year to over 321,000.

Revenues from self-guided tours, which are recognized on a net basis, were up 54.2% year-over-year to RMB62.3 million The increase was primarily due to the growth in travel to domestic destinations and self-driving tours. The number of trips for self-guided tours increased by 104.3% year-over-year to 406,000 in the first quarter of 2016.

Other revenues, which are recognized on a net basis were up 506.9% year-over-year to RMB67.9 million, primarily due to a rise in service fees received from insurance companies, service fees for financial services, commission fees for hotel reservation and air-ticketing, and revenues from tourist attraction tickets.

Gross margin for the first quarter of 2016 was 4.3% compared to 4.1% in the same period in 2015. The increase in gross margin was primarily due to the increased contribution from other revenue as a result of category expansion.

Operating expenses for the first quarter of 2016 was RMB648.1 million, up 120.6% year-over-year, excluding share-based compensation and amortization of acquired intangible assets. Non-GAAP operating expenses were RMB590.9, representing a year-over-year increase of 110%.

Research and product development expenses for the first quarter of 2016 were RMB122 million, up 180.4% year-over-year.

The increase was primarily due to investments for the implementation of additional product categories such as financial services, accommodation reservation, and transportation ticketing, an increase in personnel expenses related to direct procurement, technology, and new regional service centers.

Sales and marketing expenses for the first quarter of 2016 were RMB384.4 million, up 102.7% year-over-year.

The increase was primarily due to promotion of – for category expansion, branding campaigns, advertisements for our mobile business development, expansion of our VIP customer service center, and amortization of acquired intangible assets from previously announced transaction with JD.com.

General and administrative expenses were RMB143.8 million in the first quarter of 2016, up 131.9% year-over-year. The increase was primarily due to an increase in the headcount of our administrative personnel as a result of our business expansion, such as regional service center expansion and product category expansion.

Net loss attributable to ordinary shareholders was RMB539.5 million in the first quarter of 2016. Non-GAAP net loss attributable to ordinary shareholders, which excluded share-based compensation expenses and amortization of acquired intangible assets, was RMB482.4 million in the first quarter of 2016.

As of March 31, 2016, the company had cash and cash equivalents, restricted cash and short-term investments of RMB5.7 billion. In the first quarter, cash conversion cycle was negative 22 days compared to negative 28 days in the corresponding period last year. Capital expenditures for the first quarter of this year were RMB21.9 million.

Second quarter of 2016 outlook. Now, let me provide the top line guidance for the second quarter of 2016. Tuniu currently expects to generate revenues in the range of RMB2.338 billion to RMB2.414 billion of net revenues, which represents 54% to 59% growth year-over-year.

Please note that this forecast reflects Tuniu´s current and preliminary view on the industry and its operations, which is subject to change. Thank you for listening. We are now ready for the questions.

Operator?.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Evan Zhou of Credit Suisse. Please go ahead..

Hi, good evening, Donald, Conor and Maria, thanks for taking my question. Two questions for me. First one is on cash flow. I think we actually completed around financing for our HNA Group this quarter, so that’s roughly US$500 million of cash.

And if I simply look our balance sheet movements, I think, it looks like we have maybe roughly, I don’t know, maybe a RMB1 billion of cash flow out, like this quarter, it looks like pretty significant compared to previous seasonality.

I was wondering like, is there any specific items that you want to highlight in this quarter? And also maybe more color around kind of the quarterly cash burn rate that we will be heading into the following quarter, it would be very helpful? Thank you..

Yes. This – when we received like Hainan money in the first quarter in January. But if you recall that in our agreement with Hainan Airlines Tourism Group that our – we will prepay US$100 million equivalent of like money with – to them for the future purchase of their airline tickets or their any hotel resources or tourism-related resources.

So if you subtract that US$100 million – if you subtract that amount of money actually in cooperation of our US$500 million plus loss in the first quarter, you can match the cash flow..

I see.

So any outlook, say, how shall we expect the quarterly cash flow trend down the road?.

And in terms of the fair Maldives, net-net cash cycle days, the first quarter is always on the lowest amount – during the yearly quarter. And first quarter, you see our cash cycle conversion days shortened from a year ago.

There are few factors, I think more important factors is our like prepayment days actually has not as long as, sorry, our – like the events from customers is not as much as in the past, due to the structure like difference. As we mentioned that our European business has been impacted during this – for this currency event.

Therefore, the GMV contribution from the long haul trip actually are decreasing as a percentage of our total GMV. And these are typically for our customers going to like take long haul place, especially like Europe, they need to apply this longtime in events.

Therefore, in the typical days that events from customer days is 30 something days certainly past days, and this quarter that has shortened. And also on the other factors that we have developed our supply chain financing. So as a result, our account payable days has also shortened compared to the past.

I think in the second quarter, the cash conversion cycle days will improve from the first quarter..

Got it. Understood. So just one quick follow-up on the financing part. So, I think there are other Internet companies also disclosing or talking about their cash flow impact from developing Internet finance business like.

Do we have any like ballpark number that we can share like what’s the size of the Internet finance, both on the consumer side, on the supplier side that we have right now, and that’s maybe impact our cash flow pattern this quarter? Thank you..

[Interpreted] I know we – on the consumer financing right now still not big, it’s only outstanding balance of the RMB20 million something and supplier financing about RMB50 plus million. And as we continue to grow this business inside of business, we’ll have more numbers to disclose going forward..

All right. Cool, great. Understood. Thanks, Conor. Here you go..

The next question comes from Alvin Jiang of Deutsche Bank. Please go ahead..

Hi, management, thank you for taking my question. I have two questions. First question is on Europe and Maldives. I guess, you’ve already mentioned in the first quarter, if excluding Europe and Maldives, the other destinations growth is actually quite good over 8 – 80% year-over-year growth.

So I’m not sure how does the recovery progress? And in your second quarter guidance, how you project the revenue growth for these two destinations? And my second one is – yes please..

Yes, we haven’t checked our European business this quarter to-date. As we’ll know that’s end of March there’s another terror attack event in Dongcheng. [ph] And we were not very sure what the impact at time. But we now – we will do the number actually our European business on the prime contract prospective has actually decreasing year-over-year.

So that’s also part of reason our guidance for the second quarter is not really improving. And Maldives business is probably quite similar to first quarter that, Maldives right now we have a total big of the market shift, so we were more focused on like improving margins rather than the GMV from Maldives..

So the total of gross booking we’ll notice we are not expecting to grow on the second quarter on a year-over-year basis..

Okay, got it. Got it.

My second question is on the other revenues, despite growing quite strong, and so how is your long-term view in terms of the total percentage of the revenue the hotels, airlines, and financial services, and what’s the margin level of this business?.

Right. The other revenue is growing very strong. And this quarter is the first time if you see the net, our net contribution from other revenue has surpassed self-guided tours. And we are happy to see the development.

Going forward that will continue to expect that the other revenue portion were increasing the percentage of overall contribution to our margins. And we have build this like air ticketing and hotel channel.

But these are – we’re actually more focused on the – like, but leisure travel destination is on the fly and as well on the hotel side to do our hedge. And the amount in contribution of these two are pretty similar to the industry norms.

The – on the financial side that the other contributor is the like it was – like a yield enhancement products we see from customers that we have customer – customer actually purchase our like yield enhancement product that is also increasing contribution of our overall other revenue.

We’re expecting, as the combination of this sector certainly will become a very, very important contributor of our margin. And it might soon cover the non-travel related part of the cost in the future..

Okay, got it. Thank you..

The next question comes from Amanda Chen of Morgan Stanley. Please go ahead..

Hi. Good evening, management. Thank you for taking my question. I have maybe three questions here. So first one is regarding a follow-up on your other revenue business. Can you give us some breakdown of the top one or top two segments contributed to the other revenue and the specific GMV number if available? Thank you..

Right. The top contributor from other revenue in the first – number one is, insurance fees, we received from the insurance company. As we continue now grow our like air ticketing and hotel, sorry, especially air ticketing and trend ticketing. So the contribution of insurance fee now need from our packaged tour.

That also coming out from people buying our air ticket, buying our transportation ticket like train tickets as well. And number two, contribution from other revenue as the interest income we earned from customers that paying – buying our yield enhancement product, say, and then followed by the hotel bookings commission.

So overall, this other revenue contribution also increased like tour attraction tickets and others. So the GMV from this sector actually is around RMB900 million..

Thank you, Conor. So, I think, Donald, you – in the prepared remarks, you quite highlighted that our air ticketing and our hotel booking as such actually is increasing very, very fast. So we know that’s now basically is air ticketing and hotel booking area, we only have one dominant player here.

And from the supplier standpoint the – actually maybe once more diversified China. So do you think, we’re going to increase the investments in the hotel and air ticketing standalone business, or it’s just a supplementary to our packaged tour area – packaged tour business? Thank you..

[Interpreted] Yes, the important reason for the air ticketing and hotel booking high growth rate is also we have seen that, as we continue to expand our regional center to, I guess, third tier, fourth tier, even fifth tier cities around China, we saw lot of demand coming from this area for the air ticketing and hotel booking, especially in our core leisure travel destinations that the demand is very high.

We have – going forward, we’ll increase more direct procurement aside hotel directly on the selective core destination. I think that, our customers are all leisure travel purpose and to fulfill the – to met with the current trend, as we see that more and more tourists that they want to pick, there are a combination of hotel and air ticketing.

And for their leisure travel purpose that even now we’re number one in organized tours. But in terms of self-guided tours, we’ll increasing our focus and resources to invest in this area. Thank you..

Got it. Just a quick follow-up. So, I think, my question is in future, well we put more on the – maybe, let’s put this way.

So will we shift more focus or attention to the standalone air ticketing and hotel business in future, or it’s just work with still is very important segment of our packaged tour business? So how should we look at the standalone air ticketing and hotel business in future?.

Definitely, that’s – we provide these services to make it flexible also for our like the parking space for our product that is for our organized tour as well.

But to – as I said to cope with the increasing trend of self-guided tours that our air-ticketing channel and hotel channel we will be focusing on the leisure travel destinations, leisure travel route, flying route, other than like comprehensive coverage of China.

So that’s – we’ll focus on more like leisure travel places to differentiate from our peers..

Got it. Thank you, Conor. And I think the final one is regarding your B2B business.

I just want to clarify that this business GMV is booked in the gross booking we reported in the press release, right?.

Currently, that the wholesale business – we wholesale actually a lot of like our air ticketing, resource as well, self-guided tour resources to our, like buyers in this B2B business. So it really depends. If we are – similar, if we – B2B self-guided tour then, so far it is our own product, we’ll book growth.

It was like a self-guided tours and it’s net booking..

Okay.

So if available, can you tell us what’s the rough can we from the B2B business?.

Overall, contribution to our net revenue is still kind of low single-digit..

Got it. Thank you. Very helpful. Thank you very much..

Thank you..

The next question comes from Natalie Wu of CICC. Please go ahead..

Hi, good evening, management. Thanks for taking my questions. I have two questions here.

First is, regarding your rate as RMB384 million sales and marketing expense, how much of that is related with spending and how much is related with direct use of decision? Is there any difference you can observe from the consumption pattern that’s old and new customers say every expanding size? And what’s the average purchase frequency for an older customer maybe, any idea, so that’s the first question..

Conor Chia-hung Yang:.

But considering that we – these expenses on advertising also part of those – for our like a traffic, booking channel, and also hotel booking channel in other like financing-related products, so to speedup the growth rate of other revenues.

So in terms of the trend in spending percentage actually has not – it’s not – overall, it’s not higher than last year about 20%, 30% something of that – of the overall advertising expenses.

So we – going forward, we will cope with the current like a macro economy in China, we were gradually decreasing the percentage of brand and advertising for the rest of the year.

Hello?.

Yes, thank you.

And about the consumption pattern, say, the average spending…?.

Right. Yes, we talk about the, like in our product category, especially the packaged tour, it’s not as frequent as like a typical e-commerce players. So probably we use for the loyal customer or our existing customers. We use the KPI as Conor mentioned in his script, as the percentage contribution from old customers.

And this quarter is 43.6% compared to about 30% something one year ago. So we’re happy to see that more and more contribution coming out from our existing customers. In terms of the frequency of purchase a year, if you – excluding like a air ticketing channel for hotel booking, these are more frequent for hotels.

These – on the package side as like close to 2 times a year..

I see.

So can you give us a rough feeling about the – maybe the churn rate of the like older customers?.

I know this term is quite popular for like typical e-commerce, a company very frequently purchase typically four, six times, six, seven times a year.

In our industry in – overall throughout many years, we really look around that’s really that contribution of GMV coming out from old customers, because some of the customers they, let’s say, our customer in 2014 buying our package, they might not purchase in 2015, but they’ll purchase again it on 2016.

Yes, so the churn rate is not really our – in our – into KPI that we’re more focused on the how the old customers come back to contribute GMV on a quarterly basis..

So, in terms of like a customer that hasn’t purchased like two or three years in your catalogue, where you still give out the coupons or subsidy to that customer as he or she is a new customer?.

We actually for the last year or so we have built out a team to maintain well to activate to really third sector of our existing customer, we divided by like 5% less. So for our VIP customers, we have been dedicated to serve them to give them more incentive or more informative information for them to come back. Yes, but we now use coupon that much.

So if a customer that spend purchase our package two or three years ago, and if we have the data, our customer service people will call them to try to reactivate the purchase behavior..

And so my second question is more like housekeeping question. Can you update us GMV contribution from a top destination this quarter. Also the take rate of self-guided tour and packaged tour.

And what’s your expectation on the take rate of both like self-guided tour and packaged tour later this year, and maybe in three years to come?.

Right. The first quarter in the past, Europe has been like largest, but this quarter because of the terrorist attack, Europe had dropped to about 6% of our overall GMV.

Number one, right now is that, Southeast Asia, especially from Thailand, which is about – altogether is about 17%, one seven of our GMV, and then followed by Japan and Korea combined currently about 11% of the GMV, and then followed by revenue.

Right now we’re currently like Australia, New Zealand, Middle East, and Africa, all these together right now is about 10% of our GMV. So for this quarter, Europe is only 6% and Maldives is about 6%, yes.

And in terms of the take rate, right now is about 6% for self-guided tours and for our organized tour it’s about like about 5%, roughly 5% of the – of our organized tour.

The reason being lowest again that’s on Europe – on our European business, we have certain inventory due to a terrorist attack we were actually low down the price and in certain extent, we incur certain inventory loss. So that is the manufacture that track down our take rate for this quarter..

So we do expect them to coming back in the late half this year, right? And so we still maintain the longer-term target of like 10% take rate in both self-guided tour and packaged tour, right?.

If I remember correctly..

[Interpreted] Yes, as we – so we saw that going forward for the rest of the year, we have seen the overall competitive environment is more rationale compared to last year.

So we’re expecting the take rate sequentially recover as we do more and more direct procurement and more integrated into the whole supply chain, we’re expecting the longer-term take rate to about 10%..

Great. Thank you..

Yes, thank you..

The next question comes from Movida Heung [ph] of Goldman Sachs. Please go ahead..

Can you hear me? Hello?.

Hi yes. Yes, yes..

Hi, thank you. This is David Jin from Goldman Sachs. Thanks for taking my questions..

This is the operator. Mr. Heung [ph], if you could please move the voice chip closer to your mouth..

Can you hear me?.

Hello, it’s better enough..

Thank you..

Yes, yes, better..

Thank you. [indiscernible] guys David Jin from Goldman Sachs. I just have a – two very quick questions. First one is, regarding your gross margin.

Conor, I think you mentioned in the opening remarks that gross margin year-over-year on Hainan is partly due to the current mix moving toward other revenues, I’m just wondering if you truly look at a travel business, I will talk about take rate, I will think of the margin lines on unit basis, do we see improvement and how do we think of the margin profile throughout the year?.

Yes, this quarter as I mentioned that’s 4.3% compared to 41% a year ago, it’s more like contribution from other revenues.

In terms of take rate, on the core leisure travel product, packaged tour, as we mentioned earlier that this first quarter of this year due to like terror attack in Europe, we have a low down the price or incur certain inventory loss overall.

Therefore, we see that organized tour take rate is not slightly below a year ago, self-guided tour is very similar. So going forward that we do see – we do expect the overall margin should improve.

But and as our reported revenue, we’re very happy to see the other revenue has been increased very rapidly, and we’re expecting, we’ll continue to go at a very high growth rate. And overall that our category expansion will contribute more and more of our overall reported gross margin..

Sure. Thank you very much, Conor. My second question is really a kind of big picture question regarding the competitive landscape is. If we think of the leisure package you’re building in China now are eventually we and its high number seems to be aligned. And also we obviously have a big competitor, which is UTour and also invest about future.

So if we think of the two, I would say big two alliances, and how are we going differentiate ourselves from them? And also if you think of on package, I know, it’s definitely one to one. But if we compare cost how – what kind of cost advantage do we have or disadvantage what we have for this then? Thank you very much.

Hello?.

Excuse me, I need a help.

[Interpreted] So actually, yes, how we differentiate from our competitors, first of all that, we throughout the last few years we have really built out our network self network to many, many cities in China from like first tier, second tier to even fifth tier cities throughout China that we have a very – diversify our customer base, that has contributed the – our tours in all the sectors.

And secondly, that Tuniu is the only one that’s 100% focused on leisure travel. As we continue to focus on leisure travel, we have gained number one position on the online leisure travel first. And now we’re expanding to even the flight booking, hotel booking, but it’s all more focused on the leisure travel destinations, the leisure travel by route.

So we will form like recombinant scale with leisure travel sector overall that and also do more and more direct by procurement to fulfill the climbing on the regional purpose. And we also have the largest SKU amount of peers.

And then the other one, the third point is the, so we – our investment in technology we have to cope with the trend of – this growing trend our customer want to have more flexibility. The system we feel right now it allow us to our customer to dynamically packaging their choices.

So with this dynamic packaging and enables customer to pick freely flexibly on the air ticketing, plus hotel, plus destination services, plus many other services as a package. This system we believe would be important for our future growth, as we have seen that demand growing strongly on the self-guided tour side. Thank you..

Thank you..

Excuse me, this is the conference operator. [Operator Instructions] We have a question from Juan Lin of 86Research. Please go ahead..

Hi, good evening, Conor, Alex, and Maria, this is Juan from 86Research. My question is related to self-guided tour. Now the self-guided tour business is growing much faster than organized tour.

I’m wondering, compared to the bigger competitors, what is our competitive advantage in terms of procurement pricing and product offering? And also just to clarify, are we expecting self-guided tour to enjoy the same take rate with organized tour? Thank you..

[Interpreted] I think our largest competitive advantage really we are heading purely focused on leisure travel. We have built up a large base, especially from our organized tour customer base. So we – whenever they have more need on the self-guided tour that we are there.

And through our, like a supply chain management, our whole supply chain system that we have been working with many suppliers for long time and we speak volume.

So as we continue to expand our direct procurement system that many of this supplier in terms of direct procurement whether it’s on airline, air ticketing or hotel or local tour operators, they could – they are the same provider for self-guided tours.

So through our client base of purchase size for self-guided – for organized tour then applied to self-guided tour, we have advantage on the procurement side.

And important thing is that on the organized tour, we typically, we purchase that group ticket from airline companies, as well as our hotel we have a purchase like a group rate versus individual rate.

So these two rates are different, right, when airline, for example that when they sell to individual tickets to OTA as high price versus they sell a group ticket back to the travel agencies like us.

So and we have – at this system, for example, with Capital Airlines, which is part of the Hainan Airlines Group, we already started using their group ticket airfare to supply our self-guided tours customers.

So that they can use that ticket to combine as the package with hotel making like packaged for self-guided tours, because it’s a package, therefore, we will not expose the group ticket the airfare towards their channel price. So we have seen that this is the close advantage for our procurement.

And we also have expanded our sales network in third-tier, fourth-tier, and fifth-tier cities. So these are large client based when they need our self-guided tour package then we are ready to supply them..

Thank you.

And for the take rate, self-guided tour and organized over the long-term, are we expecting them to enjoy the same take rate, or how should we expect that landing take rate to expand going forward?.

In the current status, actually self-guided package, the take rate this quarter, for example, is even higher than organized tours. Going forward that as we enlarge our procurement size as we package more and more direct procurement as we view up many procurement team overseas. We are expecting the self-guided tour take rate also to increase..

Thank you, Conor..

Thank you..

The next question comes from Tian Hou of T.H. Cap. Please go ahead..

Hi, Conor, Maria, and management. The question related to your Internet finance. And so I wonder the Internet finance, the revenue you gained and where do you – how do you finance this, with your own balance sheet, or with external money? So that’s the number one question. I have a follow-up..

Yes, for our Internet finance that for the suppliers – the supply chain manage – the financing that are using our own capital. But overall that’s – we have, for example, we sell like yield enhancement product to our customers. So that’s a source of funding.

On the other side, we purchase assets for a longer-term tenure to other charge of these interest rate on different tenure with our client purchase, for example, three months more or less. And on the other side the capital we have obtained, we invest in, like a one year between six to 12 months of tenure.

So this capital actually is now our own capital. As we – our original thinking is really our overall cash coverage in cycle is very advantageous for us to conduct this part of the business. So we used our internal cash, and on the other side that, as I mentioned on that part of the business, the capital is from – obtained from customer side..

I see. On your balance sheet I saw a huge chunk in the short-term investment.

Can you give us some color on the short-term investment, what’s from – what kind of short-term investment is US$500 million are in?.

Yes, these are notable than most corporations when they – to the yield enhancement product or their excess cash. It’s like a three months to six months kind of an investment for many available products that’s totally from the commercial banks for the most part.

We were not conducting any risky product, so the mentor versus really capital preservation for us higher yield is possible..

Okay. Thank you. That’s all my questions..

So that’s below our own cash right there..

This year, okay. Yes..

Okay..

Thank you, Conor..

Thank you..

This concludes our question-and-answer session. I would like to turn the conference back over to Conor Yang, CFO, for any 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. Bye-bye..

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect..