eLong Reports Third Quarter 2010 Unaudited Financial Results
BEIJING, China - November 11, 2010 - eLong, Inc. (Nasdaq: LONG), a leading online travel service provider in China, today reported unaudited financial results for the third quarter ended September 30, 2010.Highlights - Third Quarter 2010
"eLong continues to be the largest online travel marketplace in China with over 15,000 domestic hotels and 130,000 international hotels available for direct booking. We are seeing over 40% of our customers choosing to book online, which is up considerably from a year ago. More and more consumers are making eLong their trusted choice for online hotel booking," said Guangfu Cui, Chief Executive Officer of eLong.
Operating expenses for the third quarter of 2010 and same period in 2009 were as follows (figures in RMB million):
Total operating expenses increased 43% for the third quarter of 2010 compared to the third quarter of 2009. Total operating expenses were 64% of net revenues, which was the same as the prior year quarter.
Service development expense consists of expenses related to technology and our product offering, including our websites, platforms, other system development, as well as our supplier relations function. Service development expense increased 39% compared to the prior year quarter, mainly driven by an increase in headcount and higher employee compensation. Service development expense decreased to 15% of net revenues in the third quarter of 2010 from 16% in the same quarter of the prior year.
Sales and marketing expenses for the third quarter of 2010 increased 51% over the prior year quarter, mainly driven by increased online marketing expenses, hotel commission payments to third-party distribution partners and loyalty point promotion expenses, partially offset by reduced headcount. Sales and marketing expense increased to 40% of net revenues in the third quarter of 2010 from 37% in the same quarter of the prior year.
General and administrative expenses for the third quarter of 2010 increased 19% compared to the prior year quarter, mainly driven by higher employee compensation. General and administrative expenses decreased to 9% of net revenues in the third quarter of 2010 from 11% in the same quarter of the prior year.
Other income/(expenses) represents interest income, foreign exchange losses and other income/expense. Other expenses were RMB8.3 million in the third quarter of 2010 compared to other income of RMB2.1 million in the third quarter of 2009, driven primarily by an increase in foreign exchange losses and a decrease in interest income. Due to the appreciation of the Renminbi against the U.S. dollar, foreign exchange losses on our cash and cash equivalents and short-term investments increased to RMB9.4 million in the third quarter of 2010, from RMB0.3 million in the third quarter of 2009. Interest income in the third quarter of 2010 decreased to RMB1.7 million, compared to RMB2.4 million in the third quarter of 2009.
As of the end of the third quarter of 2010, eLong held cash and cash equivalents, short-term investments and restricted cash of RMB1,016 million (US$152 million), of which 68% or US$103 million was held in US dollars.
Net income for the third quarter of 2010 was RMB1.2 million, compared to net income of RMB7.5 million during the prior year quarter.
Net income per ADS and diluted net income per ADS for the third quarter of 2010 were RMB0.04, compared to net income per ADS and diluted net income per ADS for the prior year quarter of RMB0.32 and RMB0.30, respectively.
Safe Harbor Statement
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," "should" and "will" and similar expressions as they relate to our 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 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, eLong's losses sustained in prior years, declines or disruptions in the travel industry, the international financial crisis, slowdown in the PRC economy, an outbreak of bird flu, H1N1 flu, SARS or other disease, eLong's reliance on having good relationships with airlines, 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 continue timely compliance with Section 404 or other requirements of the Sarbanes-Oxley Act, the risk that eLong will not be successful in competing against new and existing competitors, risks associated with Expedia, Inc.'s (Nasdaq: EXPE) majority ownership interest in eLong, fluctuations in the value of the Renminbi, changes in eLong's management team and other key personnel, changes in third-party distribution partner relationships 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.
You 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.
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.
Non-GAAP Financial Measures
Adjusted EBITDA is defined as net income plus (1) interest expense (income); (2) income tax expense; (3) depreciation; (4) amortization of intangible assets, including as part of equity-method investments; (5) share-based compensation charges; (6) foreign exchange losses (gains); (7) acquisition-related impacts, including (i) goodwill and intangible asset impairment, and (ii) losses (gains) recognized on noncontrolling investment basis adjustments when we acquire controlling interests; and (8) certain other items, including restructuring charges. We believe Adjusted EBITDA is a useful financial metric to assess our operating and financial performance before the impact of investing and financing transactions, if any, and income tax expense. Since share-based compensation charges are non-cash expenses, we believe excluding them from our calculation of Adjusted EBITDA allows us to provide investors with a more useful tool for assessing our operating and financial performance. In addition, we believe that Adjusted EBITDA is used by other companies and may be used by investors as a measure of our financial performance. The presentation of Adjusted EBITDA should not be construed as an indication that eLong's future results will be unaffected by other charges and gains we consider to be outside the ordinary course of our business. The use of Adjusted EBITDA has certain limitations. Amortization and depreciation expenses for various non-current assets, share-based compensation, other income/(expenses), and income tax expense have been and will be incurred and are not reflected in the presentation of Adjusted EBITDA. Each of these items should also be considered in the overall evaluation of our results. Additionally, Adjusted EBITDA does not consider capital expenditures and other investing activities and should not be considered as a measure of eLong's liquidity. We seek to compensate for these limitations by providing the relevant disclosure of our amortization and depreciation expenses, and share-based compensation charges in the reconciliations to the GAAP financial measure. The term Adjusted EBITDA is not defined under GAAP, and Adjusted EBITDA is not measure of net income, income from operations, operating performance or liquidity presented in accordance with GAAP. In addition, eLong's Adjusted EBITDA may not be comparable to Adjusted EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate Adjusted EBITDA in the same manner as we do.
Adjusted Net Income generally captures all items on the statements of operations that occur in normal course operations and have been, or ultimately will be, settled in cash and is defined as net income plus net of tax: (1) share-based compensation charges; (2) acquisition-related impacts, including (i) amortization of intangible assets, including as part of equity-method investments, and goodwill and intangible asset impairment, (ii) losses (gains) recognized on changes in the value of contingent consideration arrangements, and (iii) losses (gains) recognized on noncontrolling investment basis adjustments when we acquire controlling interests; (3) foreign exchange losses; (4) certain other items, including restructuring charges; and (5) discontinued operations. We believe Adjusted Net Income is useful to investors because it represents eLong's results, taking into account depreciation, which management believes is an ongoing cost of doing business, but excluding the impact of other non-cash expenses, infrequently occurring items and items not directly tied to the core operations of our businesses.