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eLong Reports Fourth Quarter and Full Year 2011 Unaudited Financial Results

BEIJING, Feb 23, 2012 /PRNewswire-Asia/ -- eLong, Inc. (Nasdaq: LONG), a leading online travel service provider in China, today reported unaudited financial results for the fourth quarter and full year ended December 31, 2011.

eLong's management team will be on the call to discuss results and highlights 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. The toll number for international participants is +1 210 795 0512. The pass code for all participants is ELONG.


Highlights - Fourth Quarter 2011

  • Hotel room nights booked through eLong in the fourth quarter increased 50% to 2.6 million room nights compared to 1.7 million in the prior year period.

  • Net revenues for the fourth quarter increased 27% to RMB158.2 million (US$25.1 million), compared to RMB124.1 million (US$18.8 million) in the fourth quarter of 2010.

  • Net income for the fourth quarter increased to RMB15.0 million (US$2.4 million), compared to RMB4.2 million (US$0.6 million) in the fourth quarter of 2010.

  • Domestic hotel coverage network expanded 48% to over 25,500 domestic hotels as of December 31, 2011, compared to 17,200 as of December 31, 2010. In addition, eLong offers almost 149,000 international hotels through a direct connection to Expedia.

  • Online hotel bookings in the fourth quarter were approximately 63% of total hotel bookings, compared to 45% in the same period in 2010.

  • In December 2011, monthly room nights booked through eLong’s group buy channel exceeded 100,000 for the first time.

  • Received China’s 2011 Best Online Travel Service Provider awardas selected through an online poll organized by Sohu and Ipsos.


Highlights – Full Year 2011

  • Net revenues in 2011 increased 22% year-on-year to RMB586.2 million (US$93.1 million), compared to RMB481.9 million (US$73.0 million).

  • Net income in 2011increased 90% year-on-year to RMB39.3 million (US$6.2 million), compared to RMB20.6 million (US$3.1 million).

  • Hotel room nights booked through eLong in 2011 increased 44% to 9.2 million room nights compared to 6.4 million in the prior year.


“We continue to execute on our hotel online hotel-focused strategy and customers are enthusiastically responding. During the quarter, we launched customer enhancements to both our award-winning online and developing mobile channels driving additional customers to our rapidly increasing supply of hotels, including over 25,500 domestically and almost 149,000 internationally” said Guangfu Cui, Chief Executive Officer of eLong.

Business Results
Revenues
Total revenues by product for the fourth quarter of 2011 as compared to the same period in 2010 were as follows (in RMB million):

    %   % Y/Y
  Q4 2011 Total Q4 2010 Total Growth
Hotel reservations 126.6 76% 91.2 69% 39%
Air ticketing 29.0 17%  30.1 23% (4%)
Other 12.6 7% 10.5  8% 20%
Total revenues 168.2 100% 131.8 100% 28%

Total revenues by product for the full year 2011 as compared to 2010 were as follows (in RMB million):

    %   % Y/Y
  2011 Total 2010 Total Growth
Hotel reservations  447.9 72% 346.4 68% 29%
Air ticketing 125.1 20%  123.1 24% 2%
Other 52.0 8% 42.5  8% 22%
Total revenues 625.0 100% 512.0 100% 22%

Hotel Reservations

Hotel commission revenue increased 39% for the fourth quarter of 2011 compared to 2010, primarily due to higher volume, partially offset by lower commission per room night. Room nights booked through eLong in the fourth quarter increased 50% year-on-year to 2.6 million. Commission per room night decreased 7% year-on-year, primarily due to the growth of lower average daily rate hotels and group buy room nights, an increase in the number of room nights booked using our coupon program and the prior year higher average daily rates during the 2010 Shanghai World Expo. Hotel commission revenue grew to 76% of total revenues from 69% in the prior year quarter.

Hotel commission revenue benefitted from the release of RMB5.9 million of deferred revenue due to the elimination of the minimum threshold formerly required for customers to redeem cash rebates under our coupon program. Without this accounting impact, hotel revenue grew by 32% in the fourth quarter of 2011 compared to the same period in the prior year.

Hotel commission revenue for full year 2011 increased 29% compared to 2010, primarily due to higher volume, which was partially offset by lower commission per room night. Room nights booked through eLong in 2011 increased 44% year-on-year to 9.2 million. Commission per room night decreased 10% year-on-year, primarily due to the growth of lower average daily rate hotels and group buy room nights, an increase in the number of room nights booked using our coupon program and the higher average daily rates during the 2010 Shanghai World Expo. Hotel commission revenue grew to 72% of total revenues from 68% in the prior year.


Air Ticketing

Air ticketing commission revenue decreased 4% for the fourth quarter of 2011 compared to the prior year quarter, driven by a 4% decrease in commission per segment, partially offset by a 1% increase in air segments to 571,000. Commission per segment decreased due to a lower air commission rate, which was partially offset by a 4% increase in average ticket price compared to the same quarter of the prior year.

Air ticketing commission revenue for full year 2011 increased 2% compared to 2010, driven by a 7% increase in commission per segment, partially offset by a 5% decrease in air segments to 2.3 million. Commission per segment increased due to a 5% increase in average ticket price and an increase in air commission rates compared to 2010.


Other

Other revenue is primarily derived from advertising and travel insurance. Other revenue increased 20% year-on-year for the fourth quarter of

2011. Other revenue decreased to 7% of total revenues from 8% in the prior year quarter.

Other revenue for full year 2011 increased 22% compared to 2010, mainly driven by increased advertising and travel insurance revenues. Other revenue was 8% of total revenues, which was flat compared to the prior year.


Profitability

Gross margin in both the fourth quarter of 2011 and full year 2011 was 74%, compared to 72% in both the fourth quarter of 2010 and full year 2010. Gross margin improvements from mix shift to hotel and online bookings were partially offset by higher personnel expenses and lower hotel commission revenue per room night.

Operating expenses for the fourth quarter of 2011 as compared to the same period in 2010 were as follows (in RMB million):

    % Net   % Net Y/Y
  Q4 2011 Revenue Q4 2010 Revenue Growth
Service development 27.5 17%  21.8 18% 26%
Sales and marketing 63.5 40% 40.7 33% 56%
General and administrative 14.6 9% 14.2 11% 3%
Amortization of  intangible assets 0.1  -  (0.1)  - N/M
Total operating expenses 105.7 66%  76.6 62% 38%

Operating expenses for full year 2011 as compared to 2010 were as follows (in RMB million):

    % Net   % Net Y/Y
  2011 Revenue 2010 Revenue Growth
Service development 97.1 17% 80.0 17% 21%
Sales and marketing 230.9 39% 167.3 35% 38%
General and administrative 53.2 9% 50.0 10% 7%
Amortization of  intangible assets 0.5  - 0.6  - (15%)
Charges related to property and equipment 0.2  - (0.1)  - N/M
Total operating expenses 381.9 65%  297.9 62% 28%

Total operating expenses increased 38% for the fourth quarter of 2011 compared to the fourth quarter of 2010. Total operating expenses increased to 66% of net revenues in the fourth quarter of 2011 from 62% in the prior year quarter.

Total operating expenses increased 28% for full year 2011 compared to 2010. Total operating expenses increased to 65% of net revenues in 2011 from 62% in the prior year.

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 26% compared to the prior year quarter, mainly driven by higher personnel expenses. Service development expenses decreased to 17% of net revenues in the fourth quarter of 2011 from 18% in the prior year quarter.

Service development expenses for full year 2011 increased 21% over full year 2010, mainly driven by higher personnel expenses. Service development expenses were 17% of net revenues, consistent with 2010.

Sales and marketing expenses for the fourth quarter of 2011 increased 56% over the prior year quarter, mainly driven by increased hotel commission payments to third-party online affiliates and distribution partners, and increased search engine and other online marketing expenses. Sales and marketing expenses increased to 40% of net revenues in the fourth quarter of 2011 from 33% in the same quarter of 2010.

Sales and marketing expenses for full year 2011 increased 38% over 2010, mainly driven by increased hotel commission payments to third-party online affiliates and distribution partners, and increased search engine and other online marketing expenses. Sales and marketing expenses increased to 39% of net revenues in 2011 from 35% in 2010.

General and administrative expenses for the fourth quarter of 2011 increased 3% compared to the prior year quarter, mainly driven by higher personnel expenses. General and administrative expenses decreased to 9% of net revenues in the fourth quarter of 2011 from 11% in the prior year quarter.

General and administrative expenses for full year 2011 increased 7% over full year 2010, mainly driven by higher share-based compensation charges. General and administrative expenses decreased to 9% of net revenues in 2011 from 10% in 2010.

Other income/(expense) represents interest income, foreign exchange losses and other income/(expense). Other income was RMB6.3 million in the fourth quarter of 2011 compared to other expense of RMB10.2 million in the fourth quarter of 2010, primarily driven by an increase in interest income and a decrease in foreign exchange losses. Interest income in the fourth quarter of 2011 increased to RMB8.6 million, compared to RMB2.8 million in the fourth quarter of 2010, due to higher interest rates and interest on the proceeds from the May 2011 issuance and sale of shares to Tencent and Expedia. Foreign exchange losses on our cash and cash equivalents and short-term investments decreased to RMB2.3 million in the fourth quarter of 2011, from RMB12.4 million in the fourth quarter of 2010 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.

Other income was RMB1.3 million in full year 2011 compared to other expense of RMB19.6 million in 2010, driven primarily by an increase in interest income and a decrease in foreign exchange losses, which were partially offset by increased other expense recognized on changes in the fair value of contingent consideration arrangements. Interest income in 2011 increased to RMB25.6 million compared to RMB6.8 million in 2010 and foreign exchange losses decreased to RMB19.5 million in 2011 from RMB25.9 million in 2010 for the same reasons as in the fourth quarter of 2011. Other expense recognized on changes in the fair value of contingent consideration arrangements increased to RMB4.8 million in 2011, from RMB1.6 million in 2010.

As of December 31, 2011, eLong held cash and cash equivalents, short-term investments and restricted cash of RMB1,907 million (US$303 million), of which 86% was held in Renminbi and 14% was held in US dollars, compared to total cash and cash equivalents, short-term investments and restricted cash of RMB1,022 million (US$155 million), of which 68% was held in Renminbi and 32% held in US dollars as of December 31, 2010. In February 2012, eLong converted US$37 million from US dollars to Renminbi, and accordingly, as of February 15, 2012, 98% of cash and cash equivalents, short-term investments and restricted cash held by eLong was held in Renminbi and 2% was held in US dollars.

Net income for the fourth quarter of 2011 was RMB15.0 million, compared to net income of RMB4.2 million during the prior year quarter.

Net income for full year 2011 was RMB39.3 million, compared to net income of RMB20.6 million in 2010.

Net income per ADS and diluted net income per ADS for the fourth quarter of 2011 were each RMB0.44 (US$0.08), compared to net income per ADS and diluted net income per ADS of RMB0.18 (US$0.02) and RMB0.16 (US$0.02) respectively in the prior year quarter.

Net income per ADS and diluted net income per ADS for full year 2011 were RMB1.30 (US$0.20) and RMB1.26 (US$0.20) respectively, compared to net income per ADS and diluted net income per ADS of RMB0.86 (US$0.14) and RMB0.80 (US$0.12) respectively in full year 2010.


Business Outlook

eLong currently expects net revenues for the first quarter of 2012 to increase by 15% to 25% compared to the first quarter of 2011.


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,” “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 crises, slowdown in the PRC economy, damage or interruption to our systems or service due to natural disasters or man-made causes, an outbreak of bird flu, H1N1 flu, SARS or other disease, eLong’s reliance on having good relationships with, and stable hotel and air inventory from, hotel suppliers and airline ticket suppliers, our reliance on the TravelSky GDS system for our air business and Baidu for our search engine marketing, the possibility that eLong will be unable to continue timely compliance the 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 and Tencent’s strategic investment in eLong, fluctuations in the value of the Renminbi, 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 variable-interest operating entities and risks relating to the application of preferential tax policies, and other risks mentioned in eLong’s filings with the US Securities and Exchange Commission, including eLong’s Annual Report on Form 20-F.

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 fourth quarter 2011 unaudited financial results on February 24, 2012 at 8:00 am Beijing time (February 23, 2012, 7:00 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 and Android applications and m.eLong.com) and 24-hour call 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 more than 25,500 hotels in China and almost 149,000 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.

For further information, please contact:
eLong, Inc.
Investor Relations
ir@corp.elong.com
+86-10-6436-7570














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