Market Overview

eLong Reports Fourth Quarter and Full Year 2012 Unaudited Financial Results

Hotelroom nights increased 75% in 2012 to more than 16 million

BEIJING, Feb. 21, 2012 /PRNewswire / -- eLong, Inc. (Nasdaq: LONG), a leading online travel service provider in China, today reported unaudited financial results for the fourth quarter and full year ended December 31, 2012.

(Logo: http://photos.prnewswire.com/prnh/20041118/ELONGLOGO )

Highlights - Fourth Quarter 2012

  • Hotel room nights booked through eLong in the fourth quarter increased 94% to 5.0 million room nights compared to 2.6 million in the prior year period. This was in part due to technology system improvements by which groupbuy room nights can be tracked by date of customer stay, rather than date of groupbuy voucher expiration. Excluding this technology change, room nights in the fourth quarter increased 81% compared to the fourth quarter of 2011.
  • Online hotel bookings comprised more than three-fourths of total hotel bookings, compared to more than 60% in the fourth quarter of 2011.
  • Hotel commission revenue for the fourth quarter increased 38% to RMB175.0 million (US$28.1 million), compared to RMB126.6 million (US$20.1 million) in the fourth quarter of 2011. Excluding the groupbuy technology system change, hotel commission revenue increased 36% compared to the fourth quarter of 2011.
  • Net revenues for the fourth quarter increased 32% to RMB208.8 million (US$33.5 million), compared to RMB158.2 million (US$25.1 million) in the fourth quarter of 2011.
  • eLong's domestic hotel coverage expanded 53% year-on-year. Customers can book nearly 200,000 hotels through eLong, including international hotels available via direct connection to Expedia.

Highlights - Full Year 2012

  • Hotel room nights booked through eLong in 2012 increased 75% to 16.1 million room nights compared to 9.2 million in the prior year.
  • Hotel commission revenue in 2012 increased 36% to RMB608.3 million (US$97.6 million), compared to RMB447.9 million (US$71.2 million) in 2011.
  • Net revenues in 2012 increased 27% to RMB744.2 million (US$119.5 million), compared to RMB586.2 million (US$93.1 million) in 2011.
  • Launched marketing campaign, with the slogan "Book Hotel, Use eLong", that improved eLong brand awareness.

"In a dynamic and highly competitive marketplace, eLong performed well in 2012. More and more customers trust eLong to fulfill their hotel booking and travel needs, and we are also now increasingly seen as an innovator in the online travel market through our broad hotel coverage, market-leading hotel groupbuy business and outstanding mobile apps. Our online hotel strategy is bearing fruit and we will continue our focused execution with an increased emphasis on mobile in 2013," said Guangfu Cui, Chief Executive Officer of eLong.

Business Results

Revenues

Total revenues by product for the fourth quarter of 2012 as compared to the same period in 2011 were as follows (in RMB million):



Q4 2012


%


Q4 2011


%


Y/Y

Total

Total

Growth

Hotel reservations


175.0


78%


126.6


76%


38%

Air ticketing

31.4


14%


29.0


17%


8%

Other


18.0


8%


12.6


7%


43%

Total revenues


224.4


100%


168.2


100%


33%

Total revenues by product for the full year 2012 as compared to 2011 were as follows (in RMB million):



2012


%


2011


%


Y/Y

Total

Total

Growth

Hotel reservations


608.3


76%


447.9


72%


36%

Air ticketing

123.8


16%


125.1


20%


(1%)

Other


65.1


8%


52.0


8%


25%

Total revenues


797.2


100%


625.0


100%


28%

Hotel Reservations

Hotel commission revenue increased 38% in the fourth quarter of 2012 compared to the same period in 2011, primarily due to higher volume, partially offset by lower commission per room night. Room nights booked through eLong in the fourth quarter increased 94% year-on-year to 5.0 million. Commission per room night decreased 29% year-on-year, primarily due to the growth of groupbuy and budget hotels and lower average daily rates across other hotel segments, as well as the increase in the size of our coupon program. Hotel commission revenue grew to 78% of total revenues from 76% in the prior year quarter.

Hotel commission revenue increased 36% for full year 2012 compared to 2011, primarily due to higher room night volume, partially offset by a 22% decrease in commission per room night. Room nights booked through eLong in 2012 increased 75% year-on-year to 16.1 million. Commission per room night declined primarily due to the growth of groupbuy and budget hotels and lower average daily rates across other hotel segments, as well as an increase in the size of our coupon program. Hotel commission revenue grew to 76% of total revenues from 72% in the prior year.

Air Ticketing

Air ticketing commission revenue increased 8% in the fourth quarter of 2012 compared to the prior year quarter, driven by an 11% increase in air segments to 637,000, partially offset by a 3% decrease in commission per segment. Commission per segment decreased mainly due to a 4% decrease in average ticket price compared to the same quarter of 2011, as well as our air coupon program. Air ticketing commission revenue decreased to 14% of total revenues from 17% in the prior year quarter.

Air ticketing commission revenue for full year 2012 decreased 1% compared to 2011, driven by a 4% decrease in commission per segment, partially offset by a 3% increase in air segments to 2.4 million. Commission per segment decreased due to a lower air commission rate compared to 2011, as well as our air coupon program which we launched in June 2012. Air ticketing commission revenue decreased to 16% of total revenues from 20% in the prior year.

Other

Other revenue is primarily derived from advertising and travel insurance. Other revenue increased 43% year-on-year in the fourth quarter of 2012, mainly driven by increased advertising revenue. Other revenue increased to 8% of total revenues from 7% in the prior year quarter.

Other revenue for full year 2012 increased 25% compared to 2011, mainly driven by increased advertising revenue. Other revenue was 8% of total revenues, consistent with the prior year.

Profitability

Gross margin in the fourth quarter of 2012 decreased to 72%, compared to 74% in the fourth quarter of 2011. Gross margin for full year 2012 decreased to 73%, compared to 74% in 2011. Gross margin decline was primarily due to lower hotel commission revenue per room night as well as higher volume-driven fulfillment costs.

Operating expenses for the fourth quarter of 2012 as compared to the same period in 2011 were as follows (in RMB million):



Q4 2012


% of Net Revenue


Q4 2011


% of Net Revenue


Y/Y Growth

Service development


36.4


17%


27.5


17%


32%

Sales and marketing


110.1


53%


63.5


40%


74%

General and administrative


17.4


8%


14.6


9%


19%

Amortization of  intangible assets

0.2


-


0.1


-


  N/M

Charges related to intangible assets


1.9


1%


-


-


  N/M

Total operating expenses


166.0


79%


105.7


66%


57%

Operating expenses for full year 2012 as compared to 2011 were as follows (in RMB million):



2012


% of Net Revenue


2011


% of Net Revenue


Y/Y Growth

Service development


127.5


17%


97.1


17%


31%

Sales and marketing                         


412.3


55%


230.9


39%


79%

General and administrative


63.0


8%


53.2


9%


18%

Amortization of  intangible assets

1.1


-


0.5


-


 N/M

Charges related to property and equipment and intangible assets


2.2


1%


0.2


-


N/M

Total operating expenses


606.1


81%


381.9


65%


59%

Total operating expenses increased 57% for the fourth quarter of 2012 compared to the fourth quarter of 2011. Total operating expenses increased to 79% of net revenues in the fourth quarter of 2012 from 66% in the prior year quarter which led to an operating loss of RMB15.6 million compared to operating income of RMB12.0 million in the prior year quarter.

Total operating expenses increased 59% for full year 2012 compared to 2011. Total operating expenses increased to 81% of net revenues in 2012 from 65% in 2011 which led to an operating loss of RMB66.2 million compared to operating income of RMB49.3 million in the prior year.

Service development expenses consist of expenses related to technology and our product offering, including our websites, platforms and other system development, as well as our supplier relations function. Service development expenses increased 32% compared to the prior year quarter, mainly driven by higher personnel expenses. Service development expenses were 17% of net revenues, consistent with the same quarter of 2011.

Service development expenses for full year 2012 increased 31% compared to 2011, mainly driven by higher personnel expenses. Service development expenses were 17% of net revenues, consistent with 2011.

Sales and marketing expenses for the fourth quarter of 2012 increased 74% over the prior year quarter, mainly driven by increased spending on online marketing, advertising expenses from our brand marketing campaign, and hotel commission payments to affiliates. Sales and marketing expenses increased to 53% of net revenues in the fourth quarter of 2012 from 40% in the same quarter of 2011.

Sales and marketing expenses for full year 2012 increased 79% over 2011, mainly driven by increased spending on online marketing, advertising expenses from our brand marketing campaign, and hotel commission payments to affiliates. Sales and marketing expenses increased to 55% of net revenues in 2012 from 39% in 2011.

General and administrative expenses for the fourth quarter of 2012 increased 19% compared to the prior year quarter, mainly driven by higher personnel expenses. General and administrative expenses decreased to 8% of net revenues in the fourth quarter of 2012 from 9% in the same quarter of 2011.

General and administrative expenses for full year 2012 increased 18% compared to 2011, mainly driven by higher personnel expenses. General and administrative expenses decreased to 8% of net revenues in 2012 from 9% in 2011.

Other income/(expense) represents interest income, foreign exchange losses and other income/(expense). Other income was RMB13.8 million in the fourth quarter of 2012 compared to other income of RMB6.3 million in the fourth quarter of 2011, primarily driven by an increase in interest income and a decrease in foreign exchange losses.

Other income was RMB56.5 million for full year 2012 compared to other income of RMB1.3 million in 2011, primarily driven by an increase in interest income and a decrease in foreign exchange losses. Interest income in 2012 increased to RMB55.3 million, compared to RMB25.6 million in 2011, due to higher interest yield. Foreign exchange losses on our cash and cash equivalents and short-term investments decreased to RMB2.0 million in 2012, from RMB19.5 million in 2011 as we held a smaller percentage of our cash and cash equivalents, short-term investments and restricted cash in US dollars than in the prior year.

As of December 31, 2012, eLong held cash and cash equivalents, short-term investments and restricted cash of RMB2.0 billion (US$314 million), of which 98% was held in Renminbi and 2% in US dollars, compared to total cash and cash equivalents, short-term investments and restricted cash of RMB1.9 billion (US$303 million), of which 86% was held in Renminbi and 14% held in US dollars as of December 31, 2011.

Net income for the fourth quarter of 2012 was RMB5.7 million, compared to net income of RMB15.0 million during the prior year quarter.

Net income for full year 2012 was RMB0.5 million, compared to net income of RMB39.3 million in 2011.

Net income per ADS and diluted net income per ADS for the fourth quarter of 2012 were each RMB0.16 (US$0.02), compared to net income per ADS and diluted net income per ADS of RMB0.44 (US$0.08) in the prior year quarter.

Net income per ADS and diluted net income per ADS for full year 2012 were each RMB0.02 (US$0.002), compared to net income per ADS and diluted net income per ADS of RMB1.30 (US$0.20) and RMB1.26 (US$0.20) respectively in full year 2011.

Business Outlook

eLong currently expects net revenues for the first quarter of 2013 to increase by 20% to 30% compared to the first quarter of 2012. This outlook reflects eLong's current and preliminary view, which is subject to change.

Safe Harbor Statement

It is currently expected that the Business Outlook will not be updated until the release of eLong's next quarterly earnings announcement; however, eLong reserves the right to update its Business Outlook at any time for any reason.

Statements in this press release concerning eLong's future business, operating results and financial condition are "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995. Words such as "anticipate," "believe," "estimate," "expect," "forecast," "intend," "may," "plan," "project," "predict," "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 and/or maintain 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 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, H1N1 flu, SARS 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 and Baidu for our search engine marketing, the risk that eLong will not be able to increase our 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 investment in 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 but not limited to, risks relating to our affiliated Chinese operating entities and risks relating to the application of preferential tax policies, 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 fourth quarter 2012 unaudited financial results on February 22, 2013 at 8:30 am Beijing time (February 21, 2013, 7:30 pm ET). The management team will be on the call to discuss the quarterly results and to answer questions. The toll-free number for U.S. participants is +1-866-844-9413. The dial-in number for Hong Kong participants is +852-3001-3802. The toll-free numbers for China Mainland participants are 10800-712-1470 (China Unicom) and 10800-120-1470 (China Telecom) and the toll number for China Mainland participants is 86-400-810-4731. International participants can dial +1-210-795-0512. Pass code: eLong.

Additionally, an archived web cast of this call will be available on the Investor Relations section of the eLong web site at http://www.elong.net/AboutUs/conference.html.

About eLong, Inc.

eLong, Inc. (Nasdaq: LONG - News) is a leader in online hotel reservations in China offering consumers a leading hotel network of almost 200,000 bookable domestic and international properties in  200 countries worldwide. eLong uses innovative technology to enable travelers to make informed hotel and air ticket booking decisions through its convenient website and mobile (iPhone, iPad, Android, and Windows Phone) applications and easy to use tools such as destination guides, photos, virtual tours, maps and user reviews. eLong provides 24-hour customer support and the ability to fulfill domestic and international air ticket reservations across China. eLong's largest shareholders are Expedia, Inc. (Nasdaq: EXPE) and Tencent Holdings Ltd. (HKSE: 0700). eLong operates websites including www.elong.com and www.elong.net.


eLong, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS EXCEPT PER SHARE AND PER ADS AMOUNTS)













Three Months Ended


Year Ended



Dec. 31, 
2011

Sep. 30, 
2012

Dec. 31,
2012

Dec. 31, 
2012


Dec. 31, 
2011

Dec. 31,
2012

Dec. 31,
2012



RMB

RMB

RMB

USD(1)


RMB

RMB

USD(1)



(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)


(Audited)

(Unaudited)

(Unaudited)

Revenues:










Hotel reservations


126,631

156,598

174,983

28,087


447,877

608,319

97,642

Air ticketing


29,002

35,198

31,454

5,049


125,095

123,754

19,864

Other


12,556

20,053

17,987

2,887


52,028

65,136

10,455

Total revenues


168,189

211,849

224,424

36,023


625,000

797,209

127,961

Business tax and surcharges


(10,037)

(14,590)

(15,630)

(2,509)


(38,822)

(52,965)

(8,501)

Net revenues


158,152

197,259

208,794

33,514


586,178

744,244

119,460

    Cost of services


(40,449)

(58,514)

(58,386)

(9,372)


(154,864)

(204,323)

(32,796)

Gross profit


117,703

138,745

150,408

24,142


431,314

539,921

86,664











Operating expenses:










Service development


(27,502)

(33,381)

(36,358)

(5,836)


(97,097)

(127,467)

(20,460)

Sales and marketing


(63,449)

(144,722)

(110,144)

(17,679)


(230,946)

(412,344)

(66,186)

General and administrative


(14,598)

(16,194)

(17,409)

(2,794)


(53,239)

(62,968)

(10,107)

Amortization of intangible assets


(137)

(279)

(247)

(40)


(547)

(1,056)

(170)

Charges related to property and equipment and intangible assets


(4)

(378)

(1,860)

(299)


(152)

(2,238)

(359)

Total operating expenses


(105,690)

(194,954)

(166,018)

(26,648)


(381,981)

(606,073)

(97,282)

Income/(loss) from operations


12,013

(56,209)

(15,610)

(2,506)


49,333

(66,152)

(10,618)











Other income/(expenses):










Interest income


8,587

14,955

14,691

2,358


25,648

55,259

8,870

Foreign exchange losses


(2,314)

(83)

(1,237)

(199)


(19,503)

(1,967)

(316)

Other


24

1,339

340

55


(4,830)

3,168

509

Total other income/(expense), net


6,297

16,211

13,794

2,214


1,315

56,460

9,063

Income/(loss) before income tax benefit/(expense)


18,310

(39,998)

(1,816)

(292)


50,648

(9,692)

(1,555)

    Income tax benefit/(expense)


(2,790)

7,178

12,450

1,998


(10,746)

16,016

2,571

Impairment loss on equity method investment


-

-

(4,812)

(772)


-

(4,812)

(772)

     Equity in net loss of affiliates


(516)

(320)

(107)

(17)


(631)

(1,041)

(167)

Net income/(loss)


15,004

(33,140)

5,715

917


39,271

471

77











Net income/(loss) per share


0.22

(0.48)

0.08

0.01


0.65

0.01

0.001

Diluted net income/(loss) per share


0.22

(0.48)

0.08

0.01


0.63

0.01

0.001











Net income/(loss) per ADS(2)(3)


0.44

(0.96)

0.16

0.02


1.30

0.02

0.002

Diluted net income/(loss) per ADS(2)(3)

0.44

(0.96)

0.16

0.02


1.26

0.02

0.002











Shares used in computing net income per share:








      Basic


68,389

68,859

69,196

69,196


60,456

68,833

68,833

      Diluted


69,080

69,404

69,862

69,862


62,298

69,443

69,443











Share-based compensation charges included in:


5,620

6,979

7,853

1,260


21,922

29,948

4,807

        Cost of services


290

417

412

66


1,374

1,932

310

        Service development


2,112

2,660

2,807

450


7,626

11,459

1,839

        Sales and marketing


943

1,015

952

153


3,620

4,322

694

        General and administrative


2,275

2,887

3,682

591


9,302

12,235

1,964

 

Note 1: The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00=RMB6.2301 on December 31, 2012
in the City of New York for cable transfers of Renminbi as certified for customs purposes by the Federal Reserve. No representation is made that the RMB
amounts could have been, or could be, converted or settled into USD at the rates stated herein on the reporting dates, at any other rates or at all.

Note 2: 1 ADS = 2 shares










Note 3: Non-GAAP financial measures




























 

eLong, Inc.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)










Dec. 31, 2011


Dec. 31, 2012


Dec. 31, 2012



RMB


RMB


USD



(Audited)


(Unaudited)


(Unaudited)

ASSETS







Current assets:







Cash and cash equivalents


411,676


311,140


49,941

Short-term investments


1,433,425


1,581,502


253,849

Restricted cash


61,400


61,400


9,855

Accounts receivable, net


83,311


127,973


20,541

Amounts due from related parties


11,632


23,639


3,794

Prepaid expenses


18,223


21,240


3,409

Other current assets


33,761


68,666


11,023

Total current assets


2,053,428


2,195,560


352,412

Property and equipment, net


44,230


72,362


11,615

Investment in equity affiliates


15,549


42,031


6,746

Goodwill


61,061


77,782


12,485

Intangible assets, net


5,308


14,712


2,361

Other non-current assets


31,142


68,186


10,945

Total assets


2,210,718


2,470,633


396,564















LIABILITIES AND SHAREHOLDERS' EQUITY







Current liabilities:







Accounts payable


60,899


124,598


19,999

Income taxes payable


7,009


14,671


2,355

Amounts due to related parties


2,624


84,236


13,521

Deferred revenue


20,880


10,197


1,637

Accrued expenses and other current liabilities


111,787


198,970


31,937

Total current liabilities


203,199


432,672


69,449

Other liabilities


1,536


1,086


174

Total liabilities


204,735


433,758


69,623








Shareholders' equity







Ordinary shares


2,864


2,864


460

High-vote ordinary shares


2,691


2,691


432

Treasury stock


(75,494)


(70,105)


(11,253)

Additional paid-in capital


2,209,469


2,238,577


359,316

Accumulated deficit


(133,547)


(137,152)


(22,014)

Total shareholders' equity


2,005,983


2,036,875


326,941

Total liabilities and shareholders' equity


2,210,718


2,470,633


396,564








 

eLong, Inc.

TRENDED OPERATIONAL METRICS

(IN THOUSANDS)


The metrics below are intended as a supplement to the financial statements found in this press release and in our filings with the SEC.
In the event of discrepancies between amounts in these tables and our historical financial statements, readers should rely on our filings
with the SEC and financial statements in our most recent press release.

We intend to periodically review and refine the definition, methodology and appropriateness of each of our supplemental metrics. As a
result, metrics are subject to removal and/or change, and such changes could be material.


2011 (Unaudited)

2012 (Unaudited)


 Q1

Q2

Q3

Q4

2011

 Q1

 Q2

 Q3

Q4

2012












Hotel Reservations











Room Nights

1,700

2,217

2,702

2,583

9,202

2,843

3,666

4,601

5,014

16,124

Room Night Y/Y

41%

43%

42%

50%

44%

67%

65%

70%

94%

75%

Average Daily Rate Y/Y

(1%)

(9%)

(9%)

(8%)

(7%)

(12%)

(11%)

(9%)

(15%)

(12%)

Commission/Room Night Y/Y

(7%)

(15%)

(12%)

(7%)

(10%)

(19%)

(11%)

(27%)

(29%)

(22%)

Hotel Commissions Y/Y

31%

22%

25%

39%

29%

36%

47%

24%

38%

36%












Air Ticketing











Air Segments

587

568

591

571

2,317

554

525

662

637

2,378

Air Segments Y/Y

(10%)

(4%)

(6%)

1%

(5%)

(6%)

(8%)

12%

11%

3%

Average Ticket Value Y/Y

11%

7%

0%

4%

5%

1%

5%

0%

(4%)

1%

Commission/Segment Y/Y

14%

10%

8%

(4%)

7%

(5%)

1%

(7%)

(3%)

(4%)

Air Commissions Y/Y

2%

6%

2%

(4%)

2%

(10%)

(7%)

5%

8%

(1%)

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 net income per ADS, diluted net income per ADS, Adjusted Earnings Before Interests, Taxes, Depreciation and Amortization ("Adjusted EBITDA"), Adjusted Net Income ("ANI") and Adjusted Net Income 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 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 noncontrolling investment basis adjustments when we acquire controlling interests; and (8) 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 measure of net income, income 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.

eLong, Inc.

TABULAR RECONCILIATION FOR NON-GAAP MEASURE

Adjusted EBITDA

(IN THOUSANDS)


2011 (Unaudited)

2012 (Unaudited)


Q1

Q2

Q3

Q4

2011

Q1

Q2

Q3

Q4

2012


RMB

RMB

RMB

RMB

RMB

RMB

RMB

RMB

RMB

RMB












Net income/(loss)

7,712

7,119

9,436

15,004

39,271

11,883

16,013

(33,140)

5,715

471

Interest income

(4,591)

(5,304)

(7,166)

(8,587)

(25,648)

(11,607)

(14,006)

(14,955)

(14,691)

(55,259)

Income tax expense/(benefit)

2,786

2,250

2,921

2,790

10,747

2,649

963

(7,178)

(12,450)

(16,016)

Depreciation

4,987

5,206

5,512

5,593

21,298

5,985

6,435

7,096

7,420

26,936

Amortization of intangible assets

136

137

137

137

547

251

279

279

247

1,056

Share-based compensation charges

4,779

5,637

5,886

5,620

21,922

6,948

8,168

6,979

7,853

29,948

Foreign exchange losses

3,131

8,135

5,923

2,314

19,503

618

29

83

1,237

1,967

Impairment loss on equity method investment

-

-

-

-

-

-

-

-

4,812

4,812

Other

15

84

161

1,155

1,415

(873)

-

(641)

1,627

113

Adjusted EBITDA

18,955

23,264

22,810

24,026

89,055

15,854

17,881

(41,477)

1,770

(5,972)

Adjusted Net Income 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 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 noncontrolling investment basis adjustments when we acquire controlling interests; (3) foreign exchange losses; (4) certain other items, including restructuring charges; and (5) discontinued operations. We believe Adjusted Net Income 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 Per Share is defined as Adjusted Net Income divided by adjusted weighted average shares outstanding, which include dilution from options and warrants per the treasury stock method and include all shares relating to Performance Units in shares outstanding for Adjusted Net Income 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 Per Share purposes are therefore higher than shares outstanding for GAAP Net Income Per Share purposes. We believe Adjusted Net Income 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 and Adjusted Net Income Per Share have similar limitations as Adjusted EBITDA. In addition, Adjusted Net Income does not include all items that affect our net income and net income 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 and Adjusted Net Income 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.

eLong, Inc.

TABULAR RECONCILIATION FOR NON-GAAP MEASURE

Adjusted Net Income and Adjusted Net Income  Per Share

(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)


2011 (Unaudited)

2012 (Unaudited)


Q1

Q2

Q3

Q4

2011

Q1

Q2

Q3

Q4

2012


RMB

RMB

RMB

RMB

RMB

RMB

RMB

RMB

RMB

RMB












Net income/(loss)

7,712

7,119

9,436

15,004

39,271

11,882

16,014

(33,140)

5,715

471

Share-based compensation charges

4,779

5,637

5,886

5,620

21,922

6,948

8,168

6,979

7,853

29,948

Amortization of intangible assets

136

137

137

137

547

251

279

279

247

1,056

Foreign exchange losses

3,131

8,135

5,923

2,314

19,503

618

29

83

1,237

1,967

Other

3,432

386

263

524

4,605

(40)

(73)

317

1,711

1,915

Adjusted net income/(loss)

19,190

21,414

21,645

23,599

85,848

19,659

24,417

(25,482)

16,763

35,357












Shares used in computing adjusted net income per share:








GAAP diluted weighted average shares outstanding

52,105

57,920

69,547

69,080

62,298

69,342

69,225

69,404

69,862

69,443

Additional performance units

316

229

214

280

262

390

796

747

904

724

Adjusted weighted average shares outstanding

52,421

58,149

69,761

69,360

62,560

69,732

70,021

70,151

70,766

70,167












Adjusted net income/(loss) per share

0.37

0.37

0.31

0.34

1.37

0.28

0.35

(0.36)

0.24

0.50

 

SOURCE eLong, Inc.

 

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