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ELong Reports Fourth Quarter and Full Year 2010 Unaudited Financial Results

BEIJING Feb. 17, 2011 eLong, Inc. ( Nasdaq : LONG) China December 31, 2010

http://photos.prnewswire.com/prnh/20041118/ELONGLOGO

Highlights – Fourth Quarter 2010

  • Net revenues for the fourth quarter RMB124.1 million US$18.8 million RMB100.9 million US$14.8 million
  • Income from operations for the fourth quarter RMB12.6 million US$1.9 million RMB2.4 million US$0.3 million RMB4.2 million US$0.6 million RMB1.0 million US$0.1 million
  • Hotel room nights booked through eLong in the fourth quarter increased 39 %
  • Domestic hotel coverage network expanded 76% to 17,200 domestic hotels December 31, 2010 December 31, 2009
  • December 2010 acquired a 20% stake of Zhuna.cn Beijing

Highlights F ull Yea r 2010

  • Net revenues in 2010 RMB481.9 million US$73.0 million RMB357.9 million US$52.4 million
  • Income from operations in 2010 RMB47.1 million US$7.1 million RMB11.2 million US$1.6 million RMB20.6 million US$3.1 million RMB19.9 million US$2.9 million
  • Hotel room nights booked through eLong in 2010 grew 49 %

Guangfu Cui

Business Results

Revenues

( in RMB million):

Q 4 2010

%

Q 4 20 09

%

Y/Y

Total

Total

Growth

Hotel reservations

91.2

69%

72.7

68%

25%

Air ticketing

30.1

23%

27.7

26%

8%

Other

10.5

8%

6.5

6%

62%

Total revenues

131.8

100%

106.9

100%

23%

( in RMB million):

2010

%

2009

%

Y/Y

Total

Total

Growth

Hotel reservations

346.4

68%

256.8

68%

35%

Air ticketing

123.1

24%

96.0

25%

28%

Other

42.5

8%

26.7

7%

59%

Total revenues

512.0

100%

379.5

100%

35%

Hotel

Hotel commission revenue increased 25% for the fourth quarter of 2010 compared to the prior year quarter, primarily due to higher volume, partially offset by lower commission per room night. Commission per room night decreased 10% year-on-year, primarily due to our eCoupon program and the more rapid growth of lower average daily rate budget hotels. Room nights booked through eLong in the fourth quarter increased 39% year-on-year to 1.7 million.

Hotel commission revenue for full year 2010 increased 35% compared to 2009, primarily due to higher volume, which was partially offset by lower commission per room night. Commission per room night decreased 9% year-on-year, primarily due to our eCoupon program and the more rapid growth of lower average daily rate budget hotels. Room nights booked through eLong in 2010 increased 49% year-on-year to 6.4 million.

Air

Air ticketing commission revenue increased 8% for the fourth quarter of 2010 compared to the prior year quarter, driven by a 12% increase in commission per segment, partially offset by a 3% decrease in air segments to 568,000. Commission per segment increased due to a 16% increase in average ticket price, which was partially offset by a decrease in air commission rates compared to the same quarter of the prior year.

Air ticketing commission revenue for full year 2010 increased 28% compared to 2009, driven by an 11% increase in air segments to 2.4 million and a 16% increase in commission per segment. Commission per segment increased due to a 17% increase in average ticket price, which was partially offset by a decrease in air commission rates compared to the prior year.

Other

Other revenue is primarily derived from website advertising, travel insurance and packages. Other revenue increased 62% year-on-year for the fourth quarter of 2010, mainly driven by an increase of website advertising revenue. Other revenue grew to 8% of total revenues from 6% in the prior year quarter.

Other revenue for full year 2010 increased 59% compared to 2009, primarily due to increased website advertising and travel insurance revenues. Other revenue grew to 8% of total revenues from 7% in the prior year.

Profitability

Gross margin in both the fourth quarter of 2010 and full year 2010 was 72%, compared to 70% in both the fourth quarter 2009 and full year 2009, mainly due to the faster rate of growth of our hotel business as compared to our air business, an increased proportion of online bookings and improved air commission per segment.

( in RMB million):

Q4 2010

% of Net Revenue

Q4 2009

% of Net Revenue

Y/Y
Growth

Service development

21.8

18%

16.7

17%

31%

Sales and marketing

40.7

33%

38.1

38%

7%

General and administrative

14.2

11%

13.3

13%

7%

Amortization of  intangible assets

(0.1)

0.2

N/M

Charges related to property and equipment and intangible assets

0.1

N/M

Total operating expenses

76.6

62%

68.4

68%

12%

( in RMB million):

2010

% Net Revenue

2009

% Net Revenue

Y/Y Growth

Service development

80.0

17%

58.1

16%

38%

Sales and marketing

167.3

35%

133.2

37%

26%

General and administrative

50.0

10%

47.6

14%

5%

Amortization of  intangible assets

0.6

0.7

(2%)

Charges related to property and equipment and intangible assets

0.1

N/M

Total operating expenses

297.9

62%

239.7

67%

24%

Total operating expenses increased 12% for the fourth quarter of 2010 compared to the fourth quarter of 2009. Total operating expenses were 62% of net revenues, a decrease of 6 percentage points compared to the prior year quarter.

Total operating expenses increased 24% for full year 2010 compared to 2009. Total operating expenses were 62% of net revenues, a decrease of 5 percentage points compared to 2009.

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 31% compared to the prior year quarter, mainly driven by an increase in headcount and higher employee wages. Service development expense increased to 18% of net revenues in the fourth quarter of 2010 from 17% in the same quarter of the prior year.

Service development expense for full year 2010 increased 38% over full year 2009, mainly driven by an increase in headcount and higher employee wages. Service development expense increased to 17% of net revenues in 2010 from 16% in 2009.

Sales and marketing expenses for the fourth quarter of 2010 increased 7% over the prior year quarter, mainly driven by increased hotel commission payments to third-party distribution partners and online marketing expenses, partially offset by reduced headcount. Sales and marketing expense decreased to 33% of net revenues in the fourth quarter of 2010 from 38% in the same quarter of the prior year.

Sales and marketing expenses for full year 2010 increased 26% over full year 2009, 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 decreased to 35% of net revenues in 2010 from 37% in 2009.

General and administrative expenses for the fourth quarter of 2010 increased 7% compared to the prior year quarter, mainly driven by higher employee wages. General and administrative expenses decreased to 11% of net revenues in the fourth quarter of 2010 from 13% in the same quarter of the prior year.

General and administrative expenses for full year 2010 increased 5% over full year 2009, mainly driven by higher employee wages, partially offset by a decrease in professional fees. General and administrative expenses decreased to 10% of net revenues in 2010 from 14% in 2009.

RMB10.2 million RMB1.2 million RMB12.4 million RMB0.1 million RMB2.8 million RMB1.2 million

RMB19.6 million RMB12.4 million RMB25.9 million RMB0.7 million RMB6.8 million RMB12.9 million

RMB1,022 million US$155 million December 31, 2009 US$53 million

RMB4.2 million RMB1.0 million

RMB20.6 million RMB19.9 million

RMB0.18 (US$0.02) RMB0.16 (US$0.02) RMB0.04 (US$0.01)

RMB0.86 (US$0.14) RMB0.80 (US$0.12) RMB0.84 (US$0.12) RMB0.80 (US$0.12)

Business Outlook

RMB111 million to RMB121 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," "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, 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 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

February 18, 2011 8:00 am Beijing February 17, 2011 7:00 pm ET Hong Kong

http://www.elong.net/AboutUs/conference.html

About eLong, Inc.

China Beijing China China

http://www.elong.com http://www.elong.net http://www.xici.net

For further information, please contact:

eLong, Inc.

Investor Relations

[email protected]

+86-10-6436-7570

eLong, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS EXCEPT PER SHARE AND PER ADS AMOUNTS)

Three Months Ended

Year Ended

Dec. 31,
2009

Sep. 30,
2010

Dec. 31,
2010

Dec. 31,

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