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.
