Quarterly room nights exceed 3 million for the first time in eLong?s history
eLong, Inc. (Nasdaq: LONG), a leading online travel service provider in China, today reported unaudited financial results for the second quarter ended June 30, 2012.
Highlights
Hotel room nights booked through eLong in the second quarter increased 65% to 3.7 million room nights compared to 2.2 million in the prior year period. Online hotel bookings comprised 72% of total hotel bookings, compared to 55% in the second quarter of 2011.
Hotel commission revenue for the second quarter increased 47% to RMB153.8 million (US$24.2 million), compared to RMB104.6 million (US$16.2 million) in the second quarter of 2011.
Net revenues for the second quarter increased 33% to RMB185.0 million (US$29.1 million), compared to RMB139.1 million (US$21.5 million) in the second quarter of 2011.
Net income for the second quarter increased to RMB16.0 million (US$2.5 million), compared to RMB7.1 million (US$1.1 million) in the prior year period.
Domestic hotel coverage network expanded 52% to over 32,000 domestic hotels as of June 30, 2012, compared to 21,000 as of June 30, 2011. In addition, eLong offers almost 155,000 international hotels through a direct connection to Expedia.
?In the second quarter, eLong delivered a record high number of hotel room nights, was the clear leader in hotel groupbuy, and continued to gain market share in the hotel booking segment,? said Guangfu Cui, Chief Executive Officer of eLong. ?In the third quarter, we have launched our largest-ever marketing campaign to drive awareness of our brand, innovative products and services.?
Business Results
Revenues
Total revenues by product for the second quarter of 2012 as compared to the same period in 2011 were as follows(in RMB million):
| % | % | Y/Y | |||
| Q1 2012 | Total | Q1 2011 | Total | Growth | |
| Hotel reservations | 153.8 | 78% | 104.6 | 70% | 47% |
| Air ticketing | 29.9 | 15% | 32.2 | 22% | (7%) |
| Other | 13.3 | 7% | 11.7 | 8% | 14% |
| Total revenues | 197.0 | 100% | 148.5 | 100% | 33% |
Hotel Reservations
Hotel commission revenue increased 47% in the second quarter of 2012 compared to the same period in 2011, primarily due to higher volume, partially offset by lower commission per room night. Room nights booked through eLong in the second quarter increased 65% year-on-year to 3.7 million. Commission per room night decreased 11% year-on-year, primarily due to the growth of groupbuy and lower average daily rate hotel room nights. Hotel commission revenue grew to 78% of total revenues from 70% in the prior year quarter.
Air Ticketing
Hotel commission revenue increased 47% in the second quarter of 2012 compared to the same period in 2011, primarily due to higher volume, partially offset by lower commission per room night. Room nights booked through eLong in the second quarter increased 65% year-on-year to 3.7 million. Commission per room night decreased 11% year-on-year, primarily due to the growth of groupbuy and lower average daily rate hotel room nights. Hotel commission revenue grew to 78% of total revenues from 70% in the prior year quarter.
Other
Other revenue is primarily derived from advertising and travel insurance. Other revenue increased 14% year-on-year in the second quarter of 2012. Other revenue decreased to 7% of total revenues from 8% in the prior year quarter.
Profitability
Gross margin in the second quarter of 2012 increased to 75%, compared to 74% in the second quarter of 2011. The improvement in gross margin was driven by mix shift to hotel and online bookings, partially offset by higher personnel expenses and lower hotel commission revenue per room night.
Operating expenses for the second quarter of 2012 as compared to the same period in 2011 were as follows (in RMB million):
| % Net | % Net | Y/Y | |||
| Q4 2012 | Revenue | Q4 2011 | Revenue | Growth | |
| Service development | 30.5 | 16% | 22.7 | 16% | 34% |
| Sales and marketing | 90.5 | 49% | 54.9 | 40% | 65% |
| General and administrative | 14.6 | 8% | 12.8 | 9% | ?14% |
| Amortization of? intangible assets | 0.3 | ?- | ?(0.1) | ?- | 104% |
| Total operating expenses | 135.9 | 73% | 90.6 | 65% | 50% |
Total operating expenses increased 50% for the second quarter of 2012 compared to the second quarter of 2011. Total operating expenses increased to 73% of net revenues in the second quarter of 2012 from 65% in the prior year quarter.
Service development expenses consist of expenses related to technology and our product offering, including our websites, platforms and other system development, as well as our supplier relations function. Service development expenses increased 34% compared to the prior year quarter, mainly driven by higher personnel expenses. Service development expenses were 16% of net revenues, consistent with the same quarter of 2011.
Sales and marketing expenses for the second quarter of 2012 increased 65% over the prior year quarter, mainly driven by increased online marketing expenses, hotel commission payments to affiliates, as well as advertising expenses. Sales and marketing expenses increased to 49% of net revenues in the second quarter of 2012 from 40% in the same quarter of 2011.
General and administrative expenses for the second quarter of 2012 increased 14% compared to the prior year quarter, mainly driven by higher personnel expenses. General and administrative expenses decreased to 8% of net revenues in the second quarter of 2012 from 9% in the same quarter of 2011.
Other income/(expense) represents interest income, foreign exchange losses and other income/(expense). Other income was RMB14.0 million in the second quarter of 2012 compared to other expense of RMB3.2 million in the second quarter of 2011, primarily driven by an increase in interest income and a decrease in foreign exchange losses. Interest income in the second quarter of 2012 increased to RMB14.0 million, compared to RMB5.3 million in the second quarter of 2011, due to higher interest yield and a larger cash balance than a year ago. Foreign exchange losses on our cash and cash equivalents and short-term investments decreased to RMB0.03 million in the second quarter of 2012, from RMB8.1 million in the second quarter of 2011 as we held a smaller percentage of our cash and cash equivalents, short-term investments and restricted cash in US dollars than in the prior year quarter.
As of June 30, 2012, eLong held cash and cash equivalents, short-term investments and restricted cash of RMB1.9 billion (US$300 million), of which 98% was held in Renminbi and 2% was held in US dollars, compared to total cash and cash equivalents, short-term investments and restricted cash of RMB1.8 billion (US$283 million), of which 41% was held in Renminbi and 59% held in US dollars as of June 30, 2011.
Net income for the second quarter of 2012 was RMB16.0 million, compared to net income of RMB7.1 million during the prior year quarter.
Net income per ADS and diluted net income per ADS for the second quarter of 2012 were each RMB0.46 (US$0.08), compared to net income per ADS and diluted net income per ADS of RMB0.26 (US$0.04) and RMB0.24 (US$0.04) respectively in the prior year quarter.
Business Outlook
eLong currently expects net revenues for the third quarter of 2012 to increase by 10% to 20% compared to the third quarter of 2011. This outlook reflects eLong?s current and preliminary view, which is subject to change.
Share Repurchase Program
From the commencement of eLong?s new share repurchase program through August 17, 2012, eLong purchased 158,233 ADSs (representing 316,466 ordinary shares) at a cost of US$2.0 million.
Safe Harbor Statement
It is currently expected that the Business Outlook will not be updated until the release of eLong?s next quarterly earnings announcement; however, eLong reserves the right to update its Business Outlook at any time for any reason.
Statements in this press release concerning eLong?s future business, operating results and financial condition are ?forward-looking? statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995. Words such as ?anticipate,? ?believe,? ?estimate,? ?expect,? ?forecast,? ?intend,? ?may,? ?plan,? ?project,? ?predict,? ?future,? ?is/are likely to,? ?should? and ?will? and similar expressions as they relate to eLong are intended to identify such forward-looking statements, but are not the exclusive means of doing so. These forward-looking statements are based upon management?s current views and expectations with respect to future events and are not a guarantee of future performance. Forward-looking statements include, but are not limited to, statements about our anticipated growth strategies, our future business development, results of operations and financial condition, our ability to control costs and maintain profitability, our ability to attract customers and leverage our brand, and trends and competition in the travel industry in China and globally. Furthermore, these statements are, by their nature, subject to a number of risks and uncertainties that could cause our actual performance and results to differ materially from those discussed in the forward-looking statements. Factors that could affect our actual results and cause our actual results to differ materially from those referred in any forward-looking statement include, but are not limited to, declines or disruptions in the travel industry, international financial, political or economic crises, a slowdown in the PRC economy, an outbreak of bird flu, H1N1 flu, SARS or other disease, eLong?s reliance on maintaining good relationships with, and stable air and hotel inventory from, hotel suppliers and airline ticket suppliers, and on establishing new relationships with suppliers on similar terms, our reliance on the TravelSky GDS system for our air business and Baidu for our search engine marketing, the risk that eLong will not be able to increase our brand recognition, the possibility that eLong will be unable to continue timely compliance with the Sarbanes-Oxley Act or other regulatory requirements, the risk that eLong will not be successful in competing against new and existing competitors, the risk that our infrastructure and technology are damaged, fail or become obsolete, risks associated with Expedia, Inc.?s (Nasdaq: EXPE) majority ownership interest and Tencent?s shareholding in eLong, risks relating to eLong?s investment in other businesses and assets, fluctuations in the value of the Renminbi, inflation in China, changes in eLong?s management team and other personnel, risks relating to uncertainties in the PRC legal system, including but not limited to, risks relating to our affiliated Chinese operating entities and risks relating to the application of preferential tax policies, and other risks mentioned in eLong?s filings with the U.S. Securities and Exchange Commission, including eLong?s Annual Report on Form 20-F.
If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward looking-statements. Investors should not rely upon forward-looking statements as predictions of future events. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements contained in this press release are qualified by reference to this cautionary statement.
Conference Call
eLong will host a conference call to discuss its second quarter 2012 unaudited financial results on August 21, 2012 at 8:00 am Beijing time (August 20, 2012, 8:00 pm ET). The management team will be on the call to discuss the quarterly results and to answer questions. The toll-free number for U.S. participants is +1-866-844-9413. The dial-in number for Hong Kong participants is +852-3001-3802. International participants can dial +1-210-795-0512. Pass code: eLong.
Additionally, an archived web cast of this call will be available on the Investor Relations section of the eLong web site at http://www.elong.net/AboutUs/conference.html for one year.
About eLong, Inc.
eLong, Inc. (Nasdaq: LONG – News) is a leading online travel service provider in China. Headquartered in Beijing, eLong empowers consumers to make informed travel decisions by providing convenient online, mobile (via iPhone, iPad, Android and Windows Phone applications) and 24-hour customer service center hotel and air ticket booking services as well as easy to use tools such as maps, destination guides, photographs, virtual tours and user reviews. eLong offers consumers the largest directly-bookable hotel product portfolio in China with a selection of over 30,000 hotels in China and over 150,000 international hotels in more than 100 countries worldwide, as well as the ability to fulfill domestic and international air ticket reservations in cities across China. eLong?s largest shareholders are Expedia, Inc. (Nasdaq: EXPE) and Tencent Holdings Ltd. (HKSE: 0700). eLong operates websites including www.elong.com, www.elong.net and www.xici.net.