 Guangfu Cui - CEO Before talking about first quarter results, let me express my appreciation for the outstanding work Mike has done for the past 4 years as CFO. One of his accomplishments was building a strong finance organization, so we are well positioned for the future. As disclosed in our 20-F, Mike's contract will expire on May 31, 2013. After 4 years of service, Mike decided not to extend his contract with elong. He will pursue career interest outside of China. I and my team really enjoy working with Mike, and I wish Mike all the best for his future endeavors. Now let's get back to the first quarter results. Hotel room nights grew 71% year over year to 4.9 million in the first quarter and our net revenues increased by 42%. eLong domestic hotel coverage expanded 54%. Including China and globally, customers can now book over 205,000 hotels as of March 31, 2013. Mobile and online hotel bookings now represent over 80% of total hotel bookings. In Q1, we continued our marketing campaign featuring the "Book Hotel, Use eLong" branding message. At the same time, we continued to be aggressive in mobile and online marketing. Our goal is to become China's largest mobile and online hotel booking service provider. Given the great opportunity ahead of us as well as the strong competition, we are willing to bear the costs of increased marketing efforts, and we will continue our aggressive marketing approach in the remainder of 2013. We continue to see high growth from our mobile booking channels, and now provide a full range of mobile options for our customers to book hotels and air tickets, including iPhone, iPad, Android and Winphone apps as well as our HTML5-enabled mobile website. Mobile apps in the first quarter reached approximately 10 million cumulative downloads, and mobile bookings, through our apps and mobile optimized websites, comprised more than 15% of our total hotel room nights. We will continue to invest to strengthen our position in this growing channel. With our aggressive coupon promotion, the air tickets business delivered 21% Y/Y growth in Q1, the highest growth rate in the past three years. As long as our key competitor applies an unfair competition approach in the hotel business, eLong will keep aggressively couponing in our air tickets business. In the remainder of 2013, we will execute on our Mobile & Online Hotel strategy. Our 2013 initiatives are 1) Offer more competitively priced hotel products; 2) Offer more domestic hotels; 3) Aggressively market to and attract mobile and online hotel customers; 4) Improve the mobile and online booking experience and overall customer service quality; and finally 5) Continue to build IT and operation infrastructure. We are excited about the great opportunity in front of us. Now, I would like to hand the call over to Mike for a review of our financial results. Mike Doyle - CFO Thank you, Guangfu. In the first quarter, strong mobile and online hotel volume performance drove our year-on-year net revenue growth to 42% compared with the first quarter of 2012. Our hotel business benefitted from our continued product investment and innovation in our mobile products. New and existing customers are rapidly adopting our new booking platforms with mobile now contributing more than 15% of our room nights. Together mobile and PC online bookings are now more than 80% of our total room nights. Groupbuy room night growth remains very strong, though growth is becoming more similar to that of our overall business as that product becomes a more meaningful portion of room nights. International or outbound hotel continued its rapid pace delivering another quarter of triple digit growth. Q1 total room nights increased 71% year-on-year to 4.9 million. In the first quarter, hotel revenue grew by 47% year-on-year due to increased room night volume, partially offset by lower average commission per room night. Commission per room night decreased 15% year-on-year primarily due to three factors: increased customer interest in our hotel coupon program, higher available coupon rebates versus a year ago and lower average daily rates due to faster rates of room night growth outside of Tier I cities where average daily rates are typically lower. This commission per room night metric has improved from prior periods due to an accelerated rate of growth in our high-star and international hotel segments relative to our budget and groupbuy hotels which also continue to grow. Hotel revenue now represents 78% of our total revenues, which is an increase from 75% in the first quarter of 2012. We are also seeing improvement in our air business. Air ticketing commission revenue increased 17% for the first quarter of 2013 compared to a year ago quarter, our fastest rate of growth in over 3 years. This was driven by a 21% increase in air segment volumes to 672,000, which was partially offset by the costs of our expanded air coupon program, as well as a 1% decrease in average ticket price compared to the same quarter of 2012. Air revenue decreased to 14% of total revenues from 17% in the prior year quarter. Other revenue, primarily derived from advertising on our websites and travel insurance, increased 39% year-on-year for the first quarter of 2013, mainly driven by increased advertising revenue. Other revenue was 8% of total revenues, consistent with the prior year quarter. Gross margin in the first quarter of 2013 increased to 75%, compared to 73% in the first quarter of 2012. The improvement in gross margin was driven by mix shift to hotel and online bookings and operating efficiencies in our customer service centers. These benefits were partially offset by lower hotel commission revenue per room night. Total operating expenses increased 57% or RMB62.6 million for the first quarter of 2013 compared to the first quarter of 2012 and increased to 79% of net revenues from 71% a year ago. Service development expenses increased 34% in the first quarter of 2013, mainly driven by an increase in headcount and compensation expenses. We continue to invest in improving our mobile and online user experience and technology systems, as well as expanding our hotel coverage. Service development expenses decreased to 17% of net revenues in the first quarter of 2013 from 18% in the same quarter of 2012. Sales and marketing expenses for the first quarter of 2013 increased 68% or RMB45.7 million over the first quarter of last year, driven primarily by investment in online marketing channels, increased hotel commission payments to affiliates and advertising expenses from our ongoing brand marketing campaign. Sales and marketing expenses increased to 52% of net revenues in the first quarter of 2013 from 43% in the same quarter of the prior year. First quarter general and administrative expenses increased 46% compared to the first quarter of 2012, mainly driven by higher share-based compensation charges, personnel expenses and professional fees. General and administrative expenses were 10% of net revenues, consistent with the same quarter of 2012. Other income in the first quarter of 2013 increased year-on-year primarily due to a higher cash yield. Net income for the first quarter was RMB2.8 million, compared to net income of RMB11.9 million in the first quarter of 2012. Turning to the Balance Sheet, I'd like to mention that as of March 31, 2013, eLong held cash and cash equivalents, short-term investments and restricted cash of RMB1.9 billion or approximately $311 million US dollars. Of this balance as of March 31, 99% was held in Renminbi and 1% in US dollars. Looking ahead to Q2 2013, we expect year on year net revenue growth of 15% to 25%. This guidance takes into account a number of headwinds and uncertainties as of the current date. As Guangfu noted, given the momentum in our online hotel business as well as the current competitive environment, we will continue our aggressive investment in marketing, technology and people in order to strengthen our position in the hotel sector. We were pleased with the results of our first brand campaign in the third quarter last year and plan to step-up the level of sales and marketing investment considerably in Q2 and Q3. We expect to see the benefits from this increased level of investment in future quarters, and as a result we are likely to face losses in Q2 and Q3 and these losses could be greater than those experienced in Q3 of 2012 during our initial brand marketing campaign. Lastly, as this will be my last call as part of the eLong management team, I'd like to thank you for your support and interest in eLong over the past 4 years. I am proud of the progress we have made in turning around eLong's business and in building a strong finance organization. I remain confident in eLong's future and the ability of the team to achieve our objective to become China's largest online hotel booking service provider. I have enjoyed working with all of you. Source: Seeking Alpha from China Travel & Tourism News http://www.chinatraveltourismnews.com/ | |||
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