omniture

eLong, Inc. Reports Fourth Quarter and Fiscal Year 2007 Unaudited Financial Results

2008-02-27 03:43 956

eLong, Inc. Announces Intention to Repurchase up to USD $20 Million of its Stock

BEIJING, Feb. 26 /Xinhua-PRNewswire/ -- eLong, Inc. (Nasdaq: LONG), a leading online travel service provider in China, today reported unaudited financial results for the fourth quarter and fiscal year ended December 31, 2007.

Highlights - Fourth Quarter 2007

-- Total net revenues (net of business tax and surcharges) increased 27%

year-on-year to RMB82.9 million.

-- Travel revenues before business tax and surcharges comprised of hotel,

air and other travel product and service revenues, increased 26% year-

on-year to RMB84.6 million.

-- Travel revenues before business tax and surcharges by product were as

follows (figures in RMB 000's):

Q4 % Q4 % Y/Y

2007 Total 2006(1) Total Growth

Hotel commissions 67,345 80% 56,026 84% 20%

Air ticketing

commissions 15,971 19% 9,593 14% 66%

Other travel revenues 1,242 1% 1,452 2% -14%

Total travel revenues 84,558 100% 67,071 100% 26%

-- Operating income improved year-on-year by RMB3.9 million to RMB2.7

million, driven primarily by increased revenue offset by greater sales

and marketing, service development expenses, and decrease in shared-

based compensation.

-- Net loss from continuing operations worsened year-on-year by RMB11.7

million to RMB12.1 million driven primarily by a RMB15.3 million

increase in unrealized foreign exchange losses compared to the year-

ago quarter caused by the appreciation of the Renminbi.

-- Cash and cash equivalents as of December 31, 2007 were RMB1.2 billion

(USD$159 million).

Highlights - Fiscal Year 2007:

-- Travel revenues before business tax and surcharges, comprised of hotel,

air and other travel product and service revenues, increased 19% year-

on-year to RMB303.8 million.

-- Travel revenues before business tax and surcharges by product were as

follows (figures in RMB 000's):

% % Y/Y

2007 Total 2006(1) Total Growth

Hotel commissions 240,803 79% 209,275 82% 15%

Air ticketing

commissions 57,456 19% 38,288 15% 50%

Other travel revenues 5,588 2% 8,398 3% -33%

Total travel revenues 303,847 100% 255,961 100% 19%

-- Operating loss decreased year-on-year by RMB2.4 million to RMB14.0

million, driven primarily by revenue increases offset by greater sales

and marketing, service development expenses, and decrease in share-

based compensation.

-- Net loss from continuing operations increased year-on-year by RMB19.7

million to RMB22.2 million, driven primarily by a RMB33.1 million year-

on-year increase in unrealized foreign exchange losses caused by the

appreciation of the Renminbi, and partially offset by a year-on-year

increase in net interest income of RMB4 million.

"The improvement in eLong's top line performance in Q4 2007 was driven in large by improved call center service levels, the introduction of ‘24 by 7' air ticketing service and introduction of a triple loyalty points offer to reward customers," said Guangfu Cui, Chief Executive Officer of eLong. "We recognize however that we have significant work ahead of us going forward. In the coming six months we will continue our efforts to improve customer experience by investing in back office systems, streamlining order fulfilment and launching a major website upgrade."

"I am pleased to announce that the eLong board has approved a share buy back of up to $20 million USD," continued Guangfu Cui, Chief Executive Officer of eLong. "In doing so, the board of directors and management team is expressing its confidence in the value of eLong and in its long term future."

"We are pleased with the 27% year-on-year top line growth that we achieved in the fourth quarter, an acceleration over prior periods in 2007," said Chris Chan, Chief Financial Officer of eLong. "However we remain unsatisfied with our ongoing operating loss and are focused on improving the company's financial results over time."

Business Results

Hotel

Hotel commissions for the fourth quarter of 2007 increased 20% year-on-year primarily due to higher room volume. Room nights booked through eLong increased 19% to 1,023,000, while commission per room night was RMB0.7 higher than the prior year quarter, at RMB66. eLong increased the number of hotels offered by 37% in 2007, bringing the total to more than 4,800 hotels in over 300 cities across China as of December 2007, compared with 3,500 as of December 2006.

Hotel commissions for fiscal 2007 increased 15% year-on-year primarily due to higher room volume. Room nights booked through eLong increased 14% to 3,711,000 for fiscal 2007, while commission per room night was RMB65, up RMB0.5 compared with the prior year.

Air

Air ticketing commissions for the fourth quarter of 2007 increased 66% year-on-year, driven by a 39% increase in air segments to 373,000, and a 73 basis point increase in the average percent commission to 5.6% or RMB43 per air ticket. The quarter also benefited from higher average ticket price, which went up by 4.5% year-on-year, to RMB769.

Air ticketing commissions for fiscal 2007 increased 50% compared to the prior year period primarily driven by a 41% increase in air segments to 1,416,000, and average percent air commission per ticket increased to 5.1% or RMB41.

Profitability

Gross margin in the fourth quarter was 72%, compared with 75% in the prior year period. The primary driver of gross margin reduction was the mix shift from higher margin hotel revenues to lower margin air revenues. The remaining margin reduction was mainly driven by increased call center expenditures associated with improved customer service levels.

Gross margin for fiscal 2007 was 72%, compared with 75% in fiscal 2006. Gross margin decreased primarily due to the same factors impacting the fourth quarter year-on-year margin decline.

Operating expenses for the fourth quarter of 2007 and 2006 were as follows (figures in RMB 000's):

Q4 % Net Q4 % Net Y/Y

2007(2) Revenues 2006(1) Revenues Growth

Service development 13,554 16% 10,569 16% 28%

Sales and marketing 33,782 41% 26,555 41% 27%

General and

administrative 8,731 11% 12,468 19% -30%

Amortization of

intangibles 265 -- 265 -- --

Write-down of property

and equipment and

intangibles 513 1% -- -- N/A

Total operating

expenses 56,845 69% 49,857 76% 14%

Operating expenses for fiscal of 2007 and 2006 were as follows (figures in RMB 000's):

% Net % Net Y/Y

2007(2) Revenues 2006(1) Revenues Growth

Service development 48,603 16% 41,921 17% 16%

Sales and marketing 126,970 43% 99,091 40% 28%

General and

administrative 51,736 17% 61,536 25% -16%

Amortization of

intangibles 1,060 -- 1,060 -- --

Write-down of property

and equipment and

intangibles 1,039 0% -- -- N/A

Total operating

expenses 229,408 76% 203,608 82% 13%

The total of service development, sales and marketing, general and administrative expenses for the fourth quarter 2007 increased 13% year-on-year; total operating expenses increased 14% year-on-year.

The total of service development, sales and marketing, general and administrative expenses for fiscal 2007 increased 12% compared to fiscal 2006; total operating expenses increased 13% over the prior year.

Service development expense is composed of expenses related to technology and product offering, including our website, platforms and other related system development. The fourth quarter 2007 service development expense increased 28% over the prior year period, and basically unchanged at 16% of net revenues. We increased our technology investment in the fourth quarter, in order to accelerate our booking platform improvements and online payment capabilities.

The fiscal 2007 service development expense increased 16% over fiscal 2006 and service development expense as a percentage of net revenues decreased 49 basis points to 16%.

Sales and marketing expense for the fourth quarter 2007 increased 27% over the prior year period, and was basically unchanged at 41% of net revenues. The increased expense was due to increased sales commissions in line with revenue growth.

Sales and marketing expense for fiscal 2007 increased 28% over fiscal 2006, and was 43% of net revenues, compared to 40% in 2006. The increased expense was primarily driven by increased sales commissions in line with revenue growth, and increased online marketing effort.

General and administrative expense for the fourth quarter 2007 decreased 30% over the prior year period mainly due to decrease in incentive and share-based compensation. General and administrative expense as a percentage of net revenues decreased 8% points to 11% in the fourth quarter.

General and administrative expense for fiscal 2007 decreased 16% over fiscal 2006, primarily due to the same factors impacting the fourth quarter. General and administrative expense as a percentage of net revenues decreased 8% points to 17% in the 2007.

Other expense, which represents interest income, unrealized exchange gains/losses and other income/expense, was RMB14.5 million in the fourth quarter of 2007, primarily due to an unrealized foreign exchange loss of RMB27.2 million resulting from the appreciation of the Renminbi during the quarter. This exchange loss was partially offset by interest income of RMB13.2 million in the fourth quarter of 2007.

Other expense for the fiscal 2007 was RMB10.2 million, primarily due to an unrealized foreign exchange loss of RMB65.9 million resulting from the appreciation of the Renminbi during the year. This exchange loss was partially offset by interest income of RMB55.5 million for fiscal 2007.

Net loss for the fourth quarter 2007 increased by RMB10.4 million over the prior year quarter to RMB12.1 million.

Net loss for 2007 increased by RMB21.1 million to RMB22.1 million.

Our diluted loss per ADS for the fourth quarter of 2007 was RMB0.48 compared to a diluted loss per ADS of RMB0.08 in the prior year period.

Our diluted loss per ADS for fiscal 2007 was RMB0.88 compared to a diluted loss per ADS of RMB0.04 in fiscal 2006.

Business Outlook

eLong expects net revenues, that is net of business tax and surcharges, for the first quarter of 2008 to be within the range of RMB68.0 million to RMB75.0 million, an increase of 10% to 22% from the first quarter of 2007.

Notes to the Unaudited Interim Consolidated Financial Statements

Financial information in this press release from eLong's unaudited financial statements was prepared in accordance with generally accepted accounting principles in the United States. The accompanying consolidated financial information of the Company as of and for the year ended December 31, 2006 have been revised from previously issued financial statements to correct an error in the accounting for share-based compensation. The effect of this revision is to decrease general and administrative expenses by RMB0.14 million, increase accrued expenses and other current liabilities by RMB1.99 million, and decrease shareholders' equity by RMB2.13 million as compared to our previously issued financial statements. All references in the accompanying consolidated financial information of this press release have been adjusted to reflect this revision.

Note 1

Fiscal 2006 revenue and expenses have been reclassified to exclude expenses related to discontinued operations. In May 2006, eLong disposed of Raytime, an operator of hotel loyalty programs. In October 2006, eLong sold the assets and business of one of its divisions operating an interactive online dating community (the "Division"). In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", the results of operations of Raytime and the Division have been reflected in the consolidated financial statements as a discontinued operation for all periods presented.

Note 2

From third quarter 2007, business tax expense and related surcharges have been presented on a net basis (excluded from revenues). Prior to July 1, 2007, these charges were included in operating expenses. The Company believes the net presentation is the appropriate treatment because the revenue amount after deduction of business tax expense and related surcharges represents the benefit to be retained by the Company. Amounts for all prior periods presented have been restated for comparative purposes. For the impact of this change on prior periods, please refer to Exhibits 1 and 2.

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 (Nasdaq: EXPE) 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 2006 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 2007 earnings on February 26, 2008, at 7:00 p.m. Eastern (Beijing/Hong Kong time: February 27, 2008 at 8:00 a.m.). The management team will be on the call to discuss the quarterly and fiscal year results 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 +852-2258-4000. International participants can dial +1-210-795-0492. Pass code: ELONG.

A replay of conference call will be available for one day starting from 8:30 p.m. Eastern Time on February 26, 2008 and 8:30 a.m. Eastern Time on February 27, 2008. U.S. toll-free dial-in number: +1-888-485-2367, Hong Kong dial-in number: +852-2802-5151, international dial-in number: +1-203-369-4588. The pass code for the replay is 732560.

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. (Nasdaq: LONG) 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 70 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 .

eLong, Inc. CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

IN LOCAL CURRENCY

Three Months Ended Year Ended

Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,

2007 2007 2006 2007 2006

RMB RMB RMB RMB RMB

Revenues

Hotel commissions 67,345 64,417 56,026 240,803 209,275

Air ticketing

commissions 15,971 15,585 9,593 57,456 38,288

Other travel

revenue 1,242 869 1,452 5,588 8,398

Travel 84,558 80,871 67,071 303,847 255,961

Other 3,264 2,991 2,647 11,550 8,583

Gross revenues 87,822 83,862 69,718 315,397 264,544

Business tax and

surcharges (4,969) (4,776) (4,347) (17,446) (15,067)

Net revenues 82,853 79,086 65,371 297,951 249,477

Cost of services (23,288) (20,807) (16,651) (82,498) (62,246)

Gross profit 59,565 58,279 48,720 215,453 187,231

Operating expenses

Service development (13,554) (12,196) (10,569) (48,603) (41,921)

Sales and marketing (33,782) (36,858) (26,555) (126,970) (99,091)

General and

administrative (8,731) (18,277) (12,468) (51,736) (61,536)

Amortization of

intangibles (265) (265) (265) (1,060) (1,060)

Write-down of

property and

equipment and

intangibles (513) -- -- (1,039) --

Total operating

expenses (56,845) (67,596) (49,857) (229,408) (203,608)

Income/(loss) from

operations 2,720 (9,317) (1,137) (13,955) (16,377)

Other

income/(loss) (14,548) 1,055 2,289 (10,218) 18,403

Income/(loss) from

continuing

operations before

income tax expense (11,828) (8,262) 1,152 (24,173) 2,026

Income tax

benefit/(expense) (243) 861 (1,490) 1,999 (4,475)

Income/(loss) from

continuing

operations (12,071) (7,401) (338) (22,174) (2,449)

Discontinued

operations

Income from

discontinued

operations -- -- (1,332) 112 (1,423)

Income tax

benefit/(expense)

of discontinued

operations -- -- 2 (8) (24)

Gain on sale of

discontinued

operations -- -- -- -- 2,650

Total discontinued

operations -- -- (1,330) 104 1,203

Net income/(loss)

before cumulative

effect of change in

accounting

principles (12,071) (7,401) (1,668) (22,070) (1,246)

Cumulative effect of

change in accounting

principles -- -- -- -- 282

Net income/(loss) (12,071) (7,401) (1,668) (22,070) (964)

Basic income/(loss)

per share

Continuing

operations (0.24) (0.15) (0.01) (0.44) (0.05)

Discontinued

operations 0.00 0.00 (0.03) 0.00 0.02

Cumulative effect of

change in accounting

principles 0.00 0.00 0.00 0.00 0.01

Basic income/(loss)

per share (0.24) (0.15) (0.04) (0.44) (0.02)

Diluted income/(loss)

per share

Continuing

operations (0.24) (0.15) (0.01) (0.44) (0.05)

Discontinued

operations 0.00 0.00 (0.03) 0.00 0.02

Cumulative effect of

change in accounting

principles 0.00 0.00 0.00 0.00 0.01

Diluted income/(loss)

per share (0.24) (0.15) (0.04) (0.44) (0.02)

Basic income/(loss)

per ADS

Continuing

operations (0.48) (0.30) (0.02) (0.88) (0.10)

Discontinued

operations 0.00 0.00 (0.06) 0.00 0.04

Cumulative effect of

change in accounting

principles 0.00 0.00 0.00 0.00 0.02

Basic income/(loss)

per ADS (0.48) (0.30) (0.08) (0.88) (0.04)

Diluted income/(loss)

per ADS

Continuing

operations (0.48) (0.30) (0.02) (0.88) (0.10)

Discontinued

operations 0.00 0.00 (0.06) 0.00 0.04

Cumulative effect of

change in accounting

principles 0.00 0.00 0.00 0.00 0.02

Diluted income/(loss)

per ADS (0.48) (0.30) (0.08) (0.88) (0.04)

Shares used in

computing basic net

income/(loss) per

share 50,846 50,766 50,464 50,758 50,392

Shares used in

computing diluted

net income/(loss)

per share 50,846 50,766 50,464 50,758 50,392

Note that 1ADS = 2

shares

Share-based

compensation charges

included are as

follows: (1,539) 3,012 3,051 6,002 12,221

Cost of services 72 89 (3) 211 135

Service development 838 901 717 2,984 2,760

Sales and marketing 42 354 126 680 573

General and

administrative (2,491) 1,668 2,211 2,127 8,753

Un-realized foreign

exchange losses 27,188 13,696 11,899 65,918 32,803

eLong, Inc. CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

IN U.S. DOLLARS

Three Months Ended Year Ended

Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,

2007 2007 2006 2007 2006

US$ US$ US$ US$ US$

Revenues

Hotel commissions 9,232 8,597 7,179 33,011 26,816

Air ticketing

commissions 2,189 2,080 1,229 7,877 4,906

Other travel revenue 170 116 186 766 1,076

Total travel revenue 11,591 10,793 8,594 41,654 32,798

Other 448 399 339 1,583 1,100

Gross revenues 12,039 11,192 8,933 43,237 33,898

Business tax and

surcharges (681) (637) (557) (2,392) (1,931)

Net revenues 11,358 10,555 8,376 40,845 31,967

Cost of services (3,192) (2,777) (2,134) (11,309) (7,976)

Gross profit 8,166 7,778 6,242 29,536 23,991

Operating expenses

Service development (1,858) (1,628) (1,354) (6,663) (5,372)

Sales and marketing (4,631) (4,919) (3,403) (17,406) (12,697)

General and

administrative (1,199) (2,440) (1,598) (7,093) (7,885)

Amortization of

intangibles (36) (35) (34) (145) (136)

Write-down of property

and equipment and

intangibles (70) -- -- (142) --

Total operating

expenses (7,794) (9,022) (6,389) (31,449) (26,090)

Income/(loss) from

operations 373 (1,244) (147) (1,913) (2,099)

Other income/(loss) (1,994) 141 293 (1,400) 2,358

Income/(loss) from

continuing operations

before income tax

expense (1,621) (1,103) 147 (3,314) 260

Income tax

benefit/(expense ) (33) 115 (191) 274 (573)

Income/(loss) from

continuing operations (1,655) (988) (44) (3,040) (313)

Discontinued operations

Income from

discontinued operations -- -- (171) 15 (183)

Income tax

benefit/(expense) of

discontinued operations -- -- -- (1) (3)

Gain on sale of

discontinued operations -- -- -- -- 340

Total discontinued

operations -- -- (171) 14 154

Net income/(loss)

before cumulative

effect of change in

accounting principles (1,655) (988) (215) (3,026) (159)

-- -- -- -- --

Cumulative effect of

change in accounting

principles -- -- -- -- 36

Net income/(loss) (1,655) (988) (215) (3,026) (123)

Basic income/(loss)

per share

Continuing operations (0.033) (0.020) (0.001) (0.060) (0.006)

Discontinued operations 0.000 0.000 (0.004) 0.000 0.003

Cumulative effect of

change in accounting

principles 0.000 0.000 0.000 0.000 0.001

Basic income/(loss) per

share (0.033) (0.020) (0.005) (0.060) (0.002)

Diluted income/(loss)

per share

Continuing operations (0.033) (0.020) (0.001) (0.060) (0.006)

Discontinued operations 0.000 0.000 (0.004) 0.000 0.003

Cumulative effect of

change in accounting

principles 0.000 0.000 0.000 0.000 0.001

Diluted income/(loss)

per share (0.033) (0.020) (0.005) (0.060) (0.002)

Basic income/(loss) per

ADS

Continuing operations (0.066) (0.040) (0.002) (0.120) (0.012)

Discontinued operations 0.000 0.000 (0.008) 0.000 0.006

Cumulative effect of

change in accounting

principles 0.000 0.000 0.000 0.000 0.002

Basic income/(loss) per

ADS (0.066) (0.040) (0.010) (0.120) (0.004)

Diluted income/(loss)

per ADS

Continuing operations (0.066) (0.040) (0.002) (0.120) (0.012)

Discontinued operations 0.000 0.000 (0.008) 0.000 0.006

Cumulative effect of

change in accounting

principles 0.000 0.000 0.000 0.000 0.002

Diluted income/(loss)

per ADS (0.066) (0.040) (0.010) (0.120) (0.004)

Shares used in computing

basic net income/(loss)

per share 50,846 50,766 50,464 50,758 50,392

Shares used in computing

diluted net income/

(loss) per share 50,846 50,766 50,464 50,758 50,392

Note that 1ADS = 2

shares

Share-based

compensation charges

included are as

follows: (211) 402 391 823 1,566

Cost of services 10 12 (0) 29 17

Service development 115 120 92 409 354

Sales and marketing 6 47 16 93 73

General and

administrative (342) 223 283 292 1,122

Un-realized foreign

exchange losses 3,727 1,828 1,525 9,037 4,203

Note 1: The conversions of Renminbi (RMB) into United States dollars (USD)

as at the reporting dates are based on the noon buying rate of

USD1.00 = RMB7.2946 on December 31, 2007, USD1.00 = RMB7.4928 on

September 30, 2007 and USD1.00 = RMB7.8041 on December 31, 2006 in

the City of New York for cable transfers of Renminbi as certified

for customs purposes by the Federal Reserve. No representation is

intended to imply that the RMB amounts could have been, or could

be, converted, realized or settled into U.S. dollars at that rate

on the reporting dates.

eLong, Inc.

CONSOLIDATED SUMMARY BALANCE SHEET DATA

(UNAUDITED, IN THOUSANDS)

Dec. 31, Dec. 31, Dec. 31, Dec. 31,

2007 2006 2007 2006

RMB RMB US$ US$

ASSETS

Current assets:

Cash and cash equivalents 1,157,567 1,199,323 158,688 153,679

Restricted assets 11,274 -- 1,546 --

Accounts receivable, net 41,138 28,237 5,640 3,618

Due from related parties 924 2,099 127 269

Deferred income taxes, net 4,247 708 582 91

Prepaid expenses and other

current assets 14,572 10,384 1,997 1,330

Total current assets 1,229,722 1,240,751 168,580 158,987

Property and equipment, net 43,962 37,809 6,027 4,845

Goodwill 30,000 30,000 4,113 3,844

Intangible assets, net 2,192 3,746 301 480

Deferred income taxes, net 237 982 32 126

Other non-current assets 28,730 22,029 3,938 2,823

Total assets 1,334,843 1,335,317 182,991 171,105

LIABILITIES AND SHAREHOLDERS'

EQUITY

Current liabilities:

Accounts payable 57,688 32,753 7,908 4,197

Income taxes payable 3,169 16,757 434 2,147

Due to related parties 4,529 3,374 621 432

Accrued expenses and other

current liabilities 83,224 83,526 11,409 10,703

Total current liabilities 148,610 136,410 20,372 17,479

Other long-term liabilities -- 980 -- 126

Deferred income taxes 100 132 14 17

Total liabilities 148,710 137,522 20,386 17,622

Shareholders' equity

Ordinary shares 4,208 4,192 577 537

Additional paid-in

capital 1,308,469 1,298,106 179,375 166,337

Accumulated other

comprehensive

income(loss) -- (29) -- (4)

Accumulated deficit (126,544) (104,474) (17,347) (13,387)

Total shareholders' equity 1,186,133 1,197,795 162,605 153,483

Total liabilities and

shareholders' equity 1,334,843 1,335,317 182,991 171,105

Exhibit 1

Proforma Business Tax Presentation Change Effect for 2007 (Unaudited)

Year 2007 As Originally Reported

Three months ended

Mar. 31, Jun. 30, Sept. 30, Dec. 31,

2007 2007 2007 2007

RMB('000) RMB('000) RMB('000) RMB('000)

Gross revenues 65,281 78,431 83,862 87,822

Business tax and

surcharges -- -- -- --

Net revenues 65,281 78,431 83,862 87,822

Cost of services (17,701) (20,701) (20,807) (23,288)

Gross profit 47,580 57,730 63,055 64,534

Operating expenses

Service development (10,594) (12,257) (12,196) (13,554)

Sales and marketing (27,020) (29,313) (36,858) (33,782)

General and

administrative (11,188) (13,540) (18,277) (8,731)

Amortization of

intangibles (265) (265) (265) (265)

Write-down of property

and equipment and

intangibles -- (526) -- (513)

Business tax and

surcharges (3,675) (4,026) (4,776) (4,969)

Total operating

expenses (52,742) (59,927) (72,372) (61,814)

Income/(loss) from

operations (5,162) (2,197) (9,317) 2,720

Year 2007 As Adjusted *

Three months ended

Mar. 31, Jun. 30, Sept. 30, Dec. 31,

2007 2007 2007 2007

RMB('000) RMB('000) RMB('000) RMB('000)

Gross revenues 65,281 78,431 83,862 87,822

Business tax and

surcharges (3,675) (4,026) (4,776) (4,969)

Net revenues 61,606 74,405 79,086 82,853

Cost of services (17,701) (20,701) (20,807) (23,288)

Gross profit 43,905 53,704 58,279 59,565

Operating expenses

Service development (10,594) (12,257) (12,196) (13,554)

Sales and marketing (27,020) (29,313) (36,858) (33,782)

General and

administrative (11,188) (13,540) (18,277) (8,731)

Amortization of

intangibles (265) (265) (265) (265)

Write-down of property

and equipment and

intangibles -- (526) -- (513)

Business tax and

surcharges -- -- -- --

Total operating

expenses (49,067) (55,901) (67,596) (56,845)

Income/(loss) from

operations (5,162) (2,197) (9,317) 2,720

Year 2007 Effect of Change

Three months ended

Mar. 31, Jun. 30, Sept. 30, Dec. 31,

2007 2007 2007 2007

RMB('000) RMB('000) RMB('000) RMB('000)

Gross revenues -- -- -- --

Business tax and

surcharges (3,675) (4,026) (4,776) (4,969)

Net revenues (3,675) (4,026) (4,776) (4,969)

Cost of services -- -- -- --

Gross profit (3,675) (4,026) (4,776) (4,969)

Operating expenses

Service development -- -- -- --

Sales and marketing -- -- -- --

General and

administrative -- -- -- --

Amortization of

intangibles -- -- -- --

Write-down of property

and equipment and

intangibles -- -- -- --

Business tax and

surcharges 3,675 4,026 4,776 4,969

Total operating

expenses 3,675 4,026 4,776 4,969

Income/(loss) from

operations -- -- -- --

Note: Effective from third quarter 2007, business tax expense and related

surcharges have been presented on a net basis (excluded from

revenues). The Company believes the net presentation is preferable

accounting principle because the revenue amount after deduction of

business tax expense and related surcharges represents the benefit

to be retained by the Company. Amounts for all prior periods

presented have been reclassified for comparative purpose.

Exhibit 2

Proforma Business Tax Presentation Change Effect for 2006 (Unaudited)

Year 2006 As Originally Reported

Three months ended

Mar. 31, Jun. 30, Sept. 30, Dec. 31,

2006 2006 2006 2006

RMB('000) RMB('000) RMB('000) RMB('000)

Gross revenues 53,453 66,793 74,580 69,718

Business tax and

surcharges -- -- -- --

Net revenues 53,453 66,793 74,580 69,718

Cost of services (13,173) (15,285) (17,124) (16,651)

Gross profit 40,280 51,508 57,456 53,067

Operating expenses

Service

development (10,475) (10,094) (10,718) (10,569)

Sales and

marketing (21,849) (25,302) (25,331) (26,555)

General and

administrative (20,185) (13,355) (15,376) (12,468)

Amortization of

intangibles (265) (265) (265) (265)

Business tax and

surcharges (3,013) (3,643) (4,064) (4,347)

Total operating

expenses (55,787) (52,659) (55,754) (54,204)

Income/(loss) from

operations (15,507) (1,151) 1,702 (1,137)

Year 2006 As Adjusted *

Three months ended

Mar. 31, Jun. 30, Sept. 30, Dec. 31,

2006 2006 2006 2006

RMB('000) RMB('000) RMB('000) RMB('000)

Gross revenues 53,453 66,793 74,580 69,718

Business tax and

surcharges (3,013) (3,643) (4,064) (4,347)

Net revenues 50,440 63,150 70,516 65,371

Cost of services (13,173) (15,285) (17,124) (16,651)

Gross profit 37,267 47,865 53,392 48,720

Operating expenses

Service development (10,475) (10,094) (10,718) (10,569)

Sales and marketing (21,849) (25,302) (25,331) (26,555)

General and

administrative (20,185) (13,355) (15,376) (12,468)

Amortization of

intangibles (265) (265) (265) (265)

Business tax and

surcharges -- -- -- --

Total operating

expenses (52,774) (49,016) (51,690) (49,857)

Income/(loss) from

operations (15,507) (1,151) 1,702 (1,137)

Year 2006 Effect of Change

Three months ended

Mar. 31, Jun. 30, Sept. 30, Dec. 31,

2006 2006 2006 2006

RMB('000) RMB('000) RMB('000) RMB('000)

Gross revenues -- -- -- --

Business tax and

surcharges (3,013) (3,643) (4,064) (4,347)

Net revenues (3,013) (3,643) (4,064) (4,347)

Cost of services -- -- -- --

Gross profit (3,013) (3,643) (4,064) (4,347)

Operating expenses

Service development -- -- -- --

Sales and marketing -- -- -- --

General and

administrative -- -- -- --

Amortization of

intangibles -- -- -- --

Business tax and

surcharges 3,013 3,643 4,064 4,347

Total operating

expenses 3,013 3,643 4,064 4,347

Income/(loss) from

operations -- -- -- --

Note: Effective from third quarter 2007, business tax expense and related

surcharges have been presented on a net basis (excluded from

revenues). The Company believes the net presentation is preferable

accounting principle because the revenue amount after deduction of

business tax expense and related surcharges represents the benefit

to be retained by the Company. Amounts for all prior periods

presented have been reclassified for comparative purpose.

Source: eLong, Inc.
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