eLong Reports First Quarter 2015 Unaudited Financial Results

BEIJING, May 1, 2015 /PRNewswire/ -- eLong, Inc. (Nasdaq: LONG), a leading mobile and online travel service provider in China, today reported unaudited financial results for the first quarter ended March 31, 2015.

Highlights

• Accommodation reservation* room nights stayed in the first quarter increased 34% to 9.3 million room nights compared to 7.0 million in the prior year period.
• Mobile bookings comprised more than 65% of eLong brand room nights** in the first quarter, and cumulative downloads of eLong mobile apps reached approximately 200 million.
• Domestic hotel coverage network expanded 180% to over 280,000 domestic hotels as of March 31, 2015, compared to 100,000 as of March 31, 2014.
• More than 35,000 properties have contracted to use the free, cloud-based, multi-device hotel property management systems, Yunzhanggui and Zhuzhe, produced by our investee companies.

"Our lodging network has grown to more than 280,000 properties in China and approximately 510,000 properties worldwide. Facing fierce competition, we are innovating more quickly and investing more in our products, technology and marketing than at any time in our history. We will continue to invest in order to continue to accelerate our room night growth in the remainder of 2015," said Guangfu Cui, Chief Executive Officer of eLong.

Business Results

Total Revenues

Total revenues by product for the first quarter of 2015 as compared to the same period in 2014 were as follows (in RMB million):

Net Revenues

Net revenues for the first quarter decreased 14% to RMB211.9 million (US$34.2 million), compared to RMB246.1 million (US$39.6 million) in the first quarter of 2014.

Accommodation Reservation

Accommodation reservation revenues decreased 7% in the first quarter of 2015 compared to the same period in 2014, primarily due to lower revenue per room night, partially offset by higher volume. Room nights stayed in the first quarter increased 34% year-on-year to 9.3 million, and revenue per room night decreased due to the lower commission rate room nights for which we recognize revenues on a net basis, the growth of our aggressive coupon program, and significant direct discounts in our merchant hotel business, partially offset by the growth of hotel room night transactions for which we take inventory risk and recognize revenues on a gross basis. Accommodation reservation revenues comprised 84% of total revenues, compared to 78% in the prior year quarter.

Transportation Ticketing

Transportation tickets increased to 1.6 million in the first quarter, an increase of 95% compared to the prior year period, primarily due to the growth of train tickets. Transportation ticketing revenues decreased 37% in the first quarter, primarily due to a decrease in air commission revenue per ticket. The decline in air commission revenue per ticket was primarily due to the lowering by major Chinese airlines of the base air commission rate from 3% to 2% in July 2014 and subsequently from 2% to 1% in February 2015. Transportation ticketing revenue decreased to 11% of our total revenues from 15% in the prior year quarter.

Other

Other revenues are primarily derived from advertising business. Other revenue decreased 42% year-on-year in the first quarter of 2015, mainly driven by decreased advertising revenue as a result of our disposition of Nanjing Xici Information Technology Share Co., Ltd. ("Nanjing Xici") in the first quarter of 2015. Other revenue decreased to 5% of total revenues in the first quarter from 7% in the prior year quarter.

Gross Margin

Gross margin in the first quarter of 2015 decreased to 29% from 73% in the prior year quarter.The decline in gross margin in the first quarter of 2015 was primarily due to lower revenue per room night and the growth of hotel room night transactions for which we take inventory risk and recognize revenue on a gross basis.

Operating Expenses

Operating expenses for the first quarter of 2015 as compared to the same period in 2014 were as follows (in RMB million):

Total operating expenses increased 39% for the first quarter of 2015, compared to the prior year period. Operating expenses were 149% of net revenues in the first quarter of 2015, compared to 92% in the prior year quarter. Operating loss was RMB252.3 million in the first quarter of 2015, compared to operating loss of RMB46.9 million in the prior year quarter.

Service development expenses are expenses related to technology and our product offerings, including our mobile applications and websites, as well as our supplier relations function. In the first quarter of 2015, service development expenses increased 68%, primarily due to increased headcount. Service development expenses increased to 44% of net revenues in the first quarter of 2015, compared to 22% in the first quarter of 2014.

Sales and marketing expenses for the first quarter of 2015 increased 23% over the prior year quarter, driven by increased mobile and online marketing expenses. Sales and marketing expenses increased to 79% of net revenues in the first quarter of 2015 from 55% in the first quarter of 2014.

General and administrative expenses for the first quarter of 2015 increased 45% compared to the prior year quarter, driven by higher share-based compensation charges and increased professional fees. General and administrative expenses increased to 23% of net revenues in the first quarter of 2015 from 14% in the first quarter of 2014.

Other income was RMB86.3 million in the first quarter of 2015 compared to other income of RMB18.3 million in the first quarter of 2014, primarily due to a gain of RMB71.8 million from our disposition of Nanjing Xici in the first quarter of 2015.

Income tax expense for the first quarter of 2015 was RMB16.9 million, compared to income tax expense of RMB7.7 million during the prior year quarter, mainly due to income tax expense of RMB17.9 million on the gain from our disposition of Nanjing Xici in the first quarter of 2015.

Net loss for the first quarter of 2015 was RMB180.7 million, compared to net loss of RMB35.4 million during the prior year quarter.

Basic net loss per ADS and diluted net loss per ADS for the first quarter of 2015 were each RMB5.02 (US$0.82), compared to basic net loss per ADS and diluted net loss per ADS of RMB1.00 (US$0.16) in the prior year quarter.

As of March 31, 2015, eLong held cash and cash equivalents, short-term investments and restricted cash of RMB1.7 billion (US$279 million), of which 90% was held in Renminbi and 10% was held in US dollars.

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," "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, limit losses and/or return to 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 to 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 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, Baidu (and its subsidiary Qunar) and Qihoo for our search engine marketing, our reliance on maintaining commercial cooperation with hotel distribution partners, the risk that eLong will not be able to increase its 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 investments in, and acquisitions of, 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 risks relating to our affiliated Chinese operating entities, risks and uncertainties relating to litigation and arbitration in China, risks relating to the application of preferential tax policies, the risk that eLong will continue to incur substantial losses, 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 first quarter 2015 unaudited financial results on May 1, 2015 at 9:00 am Beijing time (April 30, 2015, 9:00 pm ET). The dial-in number is +1-866-297-1588 for U.S. participants; +852-3001-3842 for Hong Kong participants; and 86-400-810-4761 for participants in mainland China. International participants can dial +1-210-795-1143. Participant pass code: 5050672. An archived web cast of this call will be available for one year on the Investor Relations section of the eLong web site at http://elong.investorroom.com/.

About eLong, Inc.

eLong, Inc. (Nasdaq: LONG - News) is a leader in mobile and online accomodations reservations in China offering consumers a network of approximately 510,000 properties worldwide. eLong technology enables travelers to book hotels, guesthouses, apartments and other accommodations, as well as air and train tickets, through convenient mobile and tablet applications (m.eLong.com), websites (www.eLong.com), 24 hour customer service, and easy to use tools such as destination guides, maps and user reviews. eLong's largest shareholders are Expedia, Inc. (Nasdaq: EXPE) and Tencent Holdings Ltd. (HKSE: 0700).

For further information, please contact:

eLong, Inc.
Investor Relations
ir@corp.elong.com
+86-10-6436-7570

Non-GAAP Financial Measures

To supplement the financial measures calculated in accordance with generally accepted accounting principles in the United States, or GAAP, this press release includes certain non-GAAP financial measures including basic net income/(loss) per ADS, diluted net income/(loss) per ADS, Adjusted Earnings Before Interests, Taxes, Depreciation and Amortization ("Adjusted EBITDA"), Adjusted Net Income/(Loss) ("ANI") and Adjusted Net Income/(Loss) Per Share. We believe these non-GAAP financial measures may help investors understand eLong's current financial performance and compare business trends among different reporting periods. These non-GAAP financial measures should be considered in addition to financial measures presented in accordance with GAAP, but should not be considered as a substitute for, or superior to, financial measures presented in accordance with GAAP. We seek to compensate for the limitations of the non-GAAP measures presented by also providing the comparable GAAP measures, GAAP financial statements, and descriptions of the reconciling items and adjustments, to derive the non-GAAP measures.

Adjusted EBITDA is defined as net income/(loss) plus (1) interest expense (income); (2) income tax expense (benefit); (3) depreciation; (4) amortization of intangible assets; (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 non-controlling investment basis adjustments when we acquire controlling interests; (8) losses (gains) from disposition of subsidiary; and (9) certain other items, including restructuring charges, impairment loss on equity method investment and equity in net loss/(income) of affiliates. 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 (benefit). 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 charges, other income/(expenses), and income tax expense (benefit) 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 a measure of net income/(loss), income/(loss) 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 EBITDA should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP measures. We present a reconciliation of this non-GAAP financial measure to GAAP below.

Adjusted Net Income/(Loss) 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/(loss) 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 non-controlling investment basis adjustments when we acquire controlling interests; (3) foreign exchange losses; (4) losses (gains) from disposition of subsidiary; and (5) certain other items, including restructuring charges. We believe Adjusted Net Income/(Loss) 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.

Adjusted Net Income/(Loss) Per Share is defined as Adjusted Net Income/(Loss) divided by adjusted weighted average shares outstanding, which includes dilution from options and warrants per the treasury stock method and includes all shares relating to Performance Units in shares outstanding for Adjusted Net Income/(Loss) Per Share. This differs from the GAAP method for including Performance Units, which treats them on a treasury stock method basis. Shares outstanding for Adjusted Net Income/(Loss) Per Share purposes are therefore higher than shares outstanding for GAAP Net Income/(Loss) Per Share purposes. We believe Adjusted Net Income/(Loss) Per Share is useful to investors because it represents, on a per share basis, eLong's consolidated results, taking into account depreciation, which we believe is an ongoing cost of doing business, as well as other items which are not allocated to the operating businesses such as interest income and income tax expense/(benefit), but excluding the effects of non-cash expenses not directly tied to the core operations of our businesses. Adjusted Net Income/(Loss) and Adjusted Net Income/(Loss) Per Share have similar limitations as Adjusted EBITDA. In addition, Adjusted Net Income/(Loss) does not include all items that affect our net income/(loss) and net income/(loss) per share for the period. Therefore, we think it is important to evaluate these measures along with our consolidated statements of operations.

Adjusted Net Income/(Loss) and Adjusted Net Income/(Loss) Per Share should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP measures. We present a reconciliation of these non-GAAP financial measures to GAAP below.

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