BEIJING, March 8 /Xinhua-PRNewswire/ -- eLong, Inc. , a leading online travel service provider in China, today reported unaudited financial results for the fourth quarter and fiscal year ended December 31, 2006.
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Business Highlights
Highlights for the fourth quarter of 2006:
* Travel revenues increased 24% year-over-year and decreased 7%
sequentially to RMB67.1 million (US$8.6 million), and total revenues
grew 20% year-over-year and decreased 7% sequentially to RMB69.7 million
(US$8.9 million);
* Hotel commissions increased 23% year-over-year and decreased 2%
sequentially to RMB56.0 million (US$7.2 million);
* Air ticketing commissions increased 27% year-over-year and decreased 13%
sequentially to RMB9.6 million (US$1.2 million);
* The Company recorded operating loss of RMB1.3 million(US$165,000) for
the fourth quarter of 2006, which included non-cash related stock-based
compensation expense and amortization of intangibles of RMB3.5 million
(US$443,000), as compared to operating loss of RMB16.8 million
(US$2.1 million) in the same period one year ago and operating income of
RMB1.7 million (US$215,000) in the third quarter of 2006;
* The Company recorded net loss of RMB1.8 million (US$234,000) for the
fourth quarter of 2006, as compared to net loss of RMB8.7 million
(US$1.1 million) in the same period a year ago, and net income of RMB2.7
million (US$337,000) in the third quarter of 2006;
* The Company recorded adjusted income (a non-GAAP measure)of RMB13.5
million (US$1.7 million) for the fourth quarter of 2006, as compared to
adjusted loss of RMB1.9 million(US$237,000) in the same period a year
ago and adjusted income of RMB16.6 million (US$2.1 million) in the third
quarter of 2006; and
* As of December 31, 2006, the Company's cash and cash equivalents balance
was RMB1,199.3 million (US$153.7 million).
Highlights for fiscal 2006:
* Travel revenues increased 43% year-over-year to RMB256.0 million
(US$32.8 million), and total revenues increased 39% year-over-year to
RMB264.5 million (US$33.9 million);
* Hotel commissions increased 38% year-over-year to RMB209.3 million
(US$26.8 million);
* Air ticketing commissions increased 61% year-over-year to RMB38.3
million (US$4.9 million);
* The Company recorded operating loss of RMB16.2 million (US$2.1 million)
for fiscal 2006, which included non-cash related stock-based
compensation expense and amortization of intangibles of RMB13.1 million
(US$1.7 million), as compared to operating loss of RMB47.9 million
(US$5.9 million) in fiscal 2005;
* The Company recorded net loss of RMB1.1 million (US$142,000) for fiscal
2006, as compared to net loss of RMB62.2 million (US$7.7 million) in
fiscal 2005; and
* The Company recorded adjusted income (a non-GAAP measure)of
RMB42.1 million (US$5.4 million) for fiscal 2006, as compared to
adjusted loss of RMB82,000 (US$11,000) in fiscal 2005.
"While we faced a challenging fourth quarter, we are pleased with the improvements we have made to our infrastructure during the period. With the December launch of our new air search system complementing our innovative 360- degree virtual hotel tours, we believe we lead the industry in leveraging technology to provide Chinese travelers with enhanced selection and features. We made significant operational and financial progress in 2006, achieving 39% growth in total revenues with only a 10% increase in total operating expenses. Service development increased only 15% while we made demonstrable web improvements to homepage, hotel and community content, and to the domestic and international air booking platform. We are confident that eLong is fundamentally stronger than ever and well-positioned to capture the growth potential in the online travel market," said Tom SooHoo, Chief Executive Officer of eLong.
Separately eLong also announced today the election of Henrik Kjellberg as Chairman of the board of directors and the appointment of Chris Chan as Chief Financial Officer.
Business Results
Total revenues for the fourth quarter of 2006 were RMB69.7 million (US$8.9 million), an increase of 20% from RMB57.9 million (US$7.2 million) reported in the same period in 2005, and a decrease of 7% from RMB74.6 million (US$9.4 million) reported in the third quarter of 2006.
Total revenues for fiscal 2006 were RMB264.5 million (US$33.9 million), an increase of 39% from RMB190.3 million (US$23.6 million) in fiscal 2005.
Revenue from hotel commissions for the fourth quarter of 2006 totaled RMB56.0 million (US$7.2 million), an increase of 23% from RMB45.6 million (US$5.6 million) year-over-year, and a decrease of 2% from RMB57.4 million (US$7.3 million) sequentially.
The year-over-year increase in revenue from hotel commissions was primarily due to higher room volumes accompanied by higher hotel commissions per room night. Hotel room nights booked through eLong increased 19% to 860,000 in the fourth quarter from 724,000 room nights in the corresponding period a year ago and were down 4% sequentially from 893,000 in the third quarter of 2006. The sequential decrease in revenue from hotel commissions was due to lower room volumes. Hotel commissions per room night were RMB65 in the fourth quarter of 2006, up 3% from RMB63 in the corresponding period a year ago, and up 2% from RMB64 in the third quarter. Hotel commissions increased due to better override as a result of higher room volume.
Revenue from hotel commissions for fiscal 2006 totaled RMB209.3 million (US$26.8 million), an increase of 38% from RMB152.0 million (US$18.8 million) in fiscal 2005. The total number of hotel room nights booked through eLong in fiscal 2006 was 3.25 million compared to 2.54 million in fiscal 2005, an increase of 28%. Hotel commissions per room night were RMB64 in 2006, up 7% from RMB60 in fiscal 2005 mainly due to higher commissions associated with increased volume.
As of December 31, 2006, eLong offered discounted rates at a choice of 3,505 hotels in 294 cities across China as compared to slightly fewer than 3,100 hotels in 278 cities a year ago.
Revenue from air ticketing commissions during the fourth quarter of 2006 totaled RMB9.6 million (US$1.2 million), an increase of 27% from RMB7.6 million (US$936,000) year-over-year, and a decrease of 13% from RMB11.0 million (US$1.4 million) sequentially. Volume in air segment sales totaled 269,000 in the fourth quarter of 2006, an increase of 25% from 215,000 in the corresponding period a year ago and a decrease of 1% from 273,000 in the third quarter. Revenue per air ticket was RMB36 in the fourth quarter of 2006 as compared to RMB35 in the corresponding period a year ago and RMB41 in the third quarter. The sequential decrease of revenue per air ticket was primarily due to a decrease in the average air ticket price.
Revenues from air ticketing commissions for fiscal 2006 totaled RMB38.3 million (US$4.9 million), an increase of 61% from RMB23.8 million (US$2.9 million) in fiscal 2005. Air segment sales were 1.01 million in fiscal 2006, an increase of 55% from 651,000 air segments sold in fiscal 2005. Year- over-year growth in air ticketing revenues was primarily driven by the acquisition of new air customers, increased sales of air tickets to eLong's existing hotel customer base and better product offerings.
Other travel revenue in the fourth quarter of 2006 was RMB1.5 million (US$186,000), an increase of 79% from RMB813,000 (US$101,000) year-over-year, and a decrease of 62% from RMB3.9 million(US$488,000) sequentially. The sequential decrease was attributable to RMB2.6 million (US$325,000) in revenue recorded when the related contract was finalized in the third quarter of 2006 for inventory procurement services provided to Expedia by eLong for the period from January 2005 through September 2006.
Other travel revenue for fiscal 2006 was RMB8.4 million (US$1.1 million) as compared to RMB2.7 million (US$334,000) in fiscal 2005. The year-over-year increase was mainly due to the increased revenues of vacation packages and as well as services provided to Expedia as explained above.
Gross margin in the fourth quarter of 2006 was 76%, as compared to 80% in the corresponding period a year ago and 77% in the third quarter. The year- over-year reduction in gross margin was a result of reduction in higher-margin non-travel revenue, additional compensation and benefits for call center employees and a slightly increased proportion of revenue contributed by the air ticketing business.
Gross margin in fiscal 2006 was 76% as compared to 79% in fiscal 2005. The year-over-year reduction in gross margin was due to reasons similar to those explained above.
Service development, sales and marketing and general and administrative expenses for the fourth quarter of 2006 totaled RMB49.7 million (US$6.4 million), a decrease of 17% from RMB59.7 million (US$7.4 million) year-over-year, and a decrease of 3% from RMB51.4 million (US$6.5 million) sequentially. These expenses for fiscal 2006 were RMB202.4 million (US$25.9 million), an increase of 8% from RMB186.7 million (US$23.1 million) in fiscal 2005.
Service development expenses were RMB10.6 million (US$1.4 million) in the fourth quarter of 2006, a decrease of 14% from RMB12.4 million (US$1.5 million) year-over-year, and a decrease of 1% from RMB10.7 million (US$1.4 million) sequentially. The year-over-year decrease reflected improvements in operational efficiencies. Service development expenses in the fourth quarter of 2006 were 15% of revenues as compared to 21% in the corresponding period a year ago and 14% in the third quarter.
Service development expenses for fiscal 2006 were RMB41.9 million (US$5.4 million), an increase of 15% from RMB36.3 million (US$4.5 million) in fiscal 2005 due to ramped-up investments to support the eLong.com website and the Company's air, hotel and vacation package businesses. Service development expenses for fiscal 2006 were 16% of revenues as compared to 19% in fiscal 2005.
Sales and marketing expenses were RMB26.6 million (US$3.4 million) in the fourth quarter of 2006,a decrease of 8% from RMB28.8 million (US$3.6 million) year-over-year, and an increase of 5% from RMB25.3 million (US$3.2 million) in the third quarter. Sales and marketing expenses in the fourth quarter of 2006 were 38% of revenues as compared to 50% in the corresponding period a year ago and 34% in the third quarter.
Sales and marketing expenses for fiscal 2006 were RMB99.0 million (US$12.7 million),an increase of 6% from RMB93.2 million (US$11.5 million) in fiscal 2005. Sales and marketing expenses for fiscal 2006 were 37% of revenues as compared to 49% in fiscal 2005.
General and administrative expenses were RMB12.6 million (US$1.6 million) in the fourth quarter of 2006,a decrease of 32% from RMB18.6 million (US$2.3 million) year-over-year, and a decrease of 18% from RMB15.4 million (US$1.9 million) sequentially. The year-over-year and sequential decreases were due to lower professional fees in the fourth quarter. General and administrative expenses in the fourth quarter of 2006 were 18% of revenues as compared to 32% in the corresponding period a year ago and 21% in the third quarter.
General and administrative expenses for fiscal 2006 were RMB61.5 million (US$7.9 million), an increase of 8% from RMB57.2 million (US$7.1 million) in fiscal 2005. The rise was due to additional professional fees, headcount expenses and other expenditures associated with business expansion and public company expenses. General and administrative expenses for fiscal 2006 were 23% of revenues as compared to 30% in fiscal 2005.
Operating loss in the fourth quarter of 2006 was RMB1.3 million (US$165,000), as compared to an operating loss of RMB16.8 million (US$2.1 million) in the corresponding period of 2005 and an operating income of RMB1.7 million (US$215,000) in the third quarter. The fourth quarter operating loss included non-cash related stock-based compensation expense and amortization of intangibles of RMB3.5 million (US$443,000), and the comparable non-cash related stock-based compensation expense and amortization amount was RMB3.8 million (US$472,000) for the corresponding period of 2005 and RMB2.6 million (US$330,000) for the third quarter of 2006.
Operating loss for fiscal 2006 was RMB16.2 million (US$2.1 million), as compared to an operating loss of RMB47.9 million (US$5.9 million) in fiscal 2005.
Other income, which represents interest income, unrealized exchange gains/losses and other income/expenses, was RMB2.3 million (US$293,000) for the fourth quarter of 2006, as compared to other income of RMB6.5 million (US$805,000) in the corresponding period a year ago, and other income of RMB3.4 million (US$424,000) in the third quarter of 2006. The sequential decrease in other income was primarily due to a higher unrealized foreign exchange loss on the translation for financial reporting purposes of eLong's US dollar denominated cash deposits and interest income into Renminbi. The unrealized foreign exchange loss was RMB11.9 million (US$1.5 million) in the fourth quarter as compared to an unrealized exchange loss of RMB11.4 million (US$1.4 million) in the third quarter.
Other income for fiscal 2006 was RMB18.4 million (US$2.4 million) as compared to other income of RMB4.5 million (US$563,000) in fiscal 2005 due to higher interest income generated from higher cash balance and higher interest rate, partially offset by higher unrealized foreign exchange losses.
The Company recorded a net loss of RMB1.8 million (US$234,000) for the fourth quarter of 2006, as compared to a net loss of RMB8.7 million (US$1.1 million) in the corresponding period a year ago, and a net income of RMB2.7 million (US$337,000) in the third quarter. The US GAAP diluted loss per ADS for the fourth quarter of 2006 was RMB0.08 (US$0.011), as compared to US GAAP diluted loss per ADS of RMB0.34 (US$0.042) in the corresponding period a year ago and US GAAP diluted income per ADS of RMB0.10 (US$0.013) in the third quarter. Adjusted income for the fourth quarter of 2006 (a non-GAAP measure) was RMB13.5 million (US$1.7 million), as compared to adjusted loss of RMB1.9 million (US$237,000) in the corresponding period a year ago and adjusted income of RMB16.6 million (US$2.1 million) in the third quarter. Diluted adjusted income per ADS for the fourth quarter (also a non-GAAP measure) was RMB0.50 (US$0.064), as compared to diluted adjusted loss per ADS of RMB0.08 (US$0.010) in the corresponding period a year ago and diluted adjusted income per ADS of RMB0.62 (US$0.078) in the third quarter. Please refer to the attached table for a reconciliation of net income/loss and basic and diluted income/loss per ADS under US GAAP to adjusted income/loss and basic and diluted adjusted income/loss per ADS.
The Company recorded a net loss of RMB1.1 million (US$142,000) for fiscal 2006, as compared to a net loss of RMB62.2 million (US$7.7 million) in fiscal 2005. The US GAAP diluted loss per ADS for fiscal 2006 was RMB0.06 (US$0.008), as compared to US GAAP diluted loss per ADS of RMB2.5 (US$0.310) in fiscal 2005. Adjusted income for fiscal 2006 (a non-GAAP measure) was RMB42.1 million (US$5.4 million), as compared to adjusted loss of RMB82,000 (US$11,000) in fiscal 2005. Diluted adjusted income per ADS for fiscal 2006 (also a non-GAAP measure) was RMB1.56 (US$0.200), compared to diluted adjusted loss per ADS of RMB0.00 (US$0.000) in fiscal 2005. Please refer to the attached table for a reconciliation of net income/loss and income/loss per ADS under US GAAP to adjusted income/loss and basic and diluted adjusted income/loss per ADS.
As of December 31, 2006, the Company's cash and cash equivalents balance was RMB1,199.3 million (US$153.7 million).
"We are pleased with the year-over-year improvement in operating leverage. Building on the solid progress eLong has made in the past year, in 2007 we will continue to focus on our execution and investment in the business for long-term sustained profitability," said Tony Shen, interim Chief Financial Officer of eLong.
Business Outlook
eLong expects total revenues for the first quarter of 2007 within the range of RMB62.0 million (US$8.0 million) to RMB66.0 million (US$8.5 million), an increase of 16% to 23% from the first quarter of 2006.
Note to the Unaudited Interim Consolidated Financial Statements
The unaudited financial information disclosed above is preliminary. The audit of the financial statements and related notes to be included in our annual report on Form 20-F for the year ended December 31, 2006, is still in progress.
Adjustments to the financial statements may be identified when the audit work is completed, which could result in significant differences between our audited financial statements and this preliminary unaudited financial information.
In the fourth quarter, The Company recognized net proceeds of RMB94.2 million (US$12.1 million) in equity, which was related to a sale of a division operating an interactive online dating community to a related party purchaser. The transaction was disclosed in the third quarter earnings release.
As of December 31, 2006, the Company's additional paid-in capital was RMB1,301.3 million (US$166.7 million), the increase of which was mainly due to proceeds received as explained above.
Certain 2005 compensation amounts have been reclassified to conform to the current year's presentation.
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, and 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," "should" and "will" and similar expressions as they related to the Company 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. Furthermore, these statements are, by their nature, subject to a number of risks and uncertainties that could cause actual performance and results to differ materially from those discussed in the forward-looking statements as a result of a number of factors. Factors that could affect the Company's actual results and cause actual results to differ materially from those included in any forward-looking statement include, but are not limited to, eLong's historical operating losses, its limited operating history, declines or disruptions in the travel industry, the recurrence of SARS, an outbreak of bird flu, eLong's reliance on having good relationships with hotel suppliers and airline ticket suppliers, our reliance on the Travelsky GDS system for our air business, the possibility that eLong will be unable to timely comply with Section 404 of the Sarbanes-Oxley Act of 2002, the risk that eLong will not be successful in competing against new and existing competitors, risks associated with Expedia, Inc.'s majority ownership interest in eLong and the integration of eLong's business with that of Expedia's, subsequent revaluations of the Chinese currency, changes in eLong's management team and other key personnel and other risks outlined in eLong's filings with the U.S. Securities and Exchange Commission(or SEC), including eLong's Form 20-F filed with the SEC in connection with the Company's fiscal year 2005 results. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of their dates.
Conference Call
eLong will host a conference call to discuss its fourth quarter and fiscal 2006 earnings at 8:00 pm Eastern Time, March 8, 2007(Beijing/Hong Kong time: March 9, 2007 at 9:00 am). The management team will be on the call to discuss quarterly results and highlights and to answer questions. The toll-free number for U.S. participants is +1 800 365 8460. The dial-in number for Hong Kong participants is +85222584000. The toll number for international participants is +1 210 795 0492. The passcode for all participants is "eLong".
A replay of the call will be available for 1 day between 9:15 pm Eastern Time on March 8, 2007 and 9:15 pm Eastern Time on March 9, 2007. The toll-free number for U.S. callers is +1 8884852361. The dial-in number for international callers is +1 203 369 4583. The passcode for the replay is 789530.
Additionally, a live and archived web cast of this call will be available on the Investor Relations section of the eLong web site at http://ir.elong.net/ for three months.
About eLong, Inc.
eLong, Inc. is a leading online travel company in China. Headquartered in Beijing, eLong has a national presence across China. eLong uses web-based distribution technologies and a 24-hour call center to provide consumers with access to travel reservation services. Aiming to enrich people's lives through the freedom of independent travel, eLong empowers consumers to make informed choices by providing a one-stop travel solution and consolidated travel tools and information such as maps, virtual tours and user ratings. eLong has the capacity to fulfill air ticket reservations in over 57 major cities across China. In addition to choice of a wide hotel selection in the Greater China region, eLong offers Chinese consumers the ability to make bookings at international hotels in over 140 destinations worldwide. eLong operates the websites http://www.elong.com/ and http://www.elong.net/.
Investor Contact:
Raymond Huang
eLong, Inc.
Investor Relations Manager
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