Q4 2016 Real-Time Call Brief

Highlights

Net revenues were up 76% year-over-year in the fourth quarter, driven by solid organic growth and the inclusion of an invested company.

Non-GAAP operating margin for the quarter was 16%, meaningfully higher than the 10% in the same period a year ago.

The domestic travel market grew to 4.4 billion trips in 2016.

According to the government's 13th Five-Year Plan, the number of domestic trips is expected to reach 6.7 billion by 2020, implying an 11% CAGR.

Last year, Ctrip users in the second, third tier cities grew 80% year-over-year.

Chinese passport holders account for less than 10% of the population compared with 39% in United States.

On Ctrip's platform, healthcare-related trips grew over 500% year-over-year.

Total hotel revenue grew by 56% compared to the same period last year, driven by both volume growth and the inclusion of an invested company.

This quarter's growth rate reflected the negative impact after adoption of the VAT tax of approximately 5% to 10%.

At the end of 2016, Ctrip's hotel network covered over 1.2 million hotels around the world.

Today, over 90% of Ctrip's hotel orders can be confirmed almost immediately after booking.

Total transportation revenue grew by 97% year-over-year in the fourth quarter, benefiting from the faster growing new business units and a strong execution.

In the fourth quarter, train ticketing volume grew approximately 70% year-over-year, driven by a strong execution.

The business grew about 250% in the fourth quarter year-over-year.

Our international air ticketing revenue grew by over 50% year-over-year, mainly driven by strong volume growth.

By the end of 2016, our air plus train packages connected China's 225 airports and 93 cities without airports.

During the spring festival, sales of air plus train package grew over 80% year-over-year.

Packaged-tour revenue increased steadily, up 33% year-over-year due to healthy volume growth.

Our customized group tour has enjoyed 300% year-over-year growth.

Visual tour groups and app program where individual travelers are pooled together and provided help by Ctrip customer representatives and local experts at their destination; have been so popular that more than 10 million individual travelers signed up for this service in 2016.

Our corporate travel business delivered solid year-over-year growth of 32% in spite of the challenging operating environment.

Now, our corporate travel business serves over 8 million users from more than 6,000 large enterprises and 16 small and medium-sized enterprises.

For the first quarter of 2016, Ctrip reported net revenues of RMB5.1 billion or $730 million, representing a 76% increase from the same period in 2015, primarily due to the consolidation of Qunar starting from the end of last year.

Net revenues for the fourth quarter of 2016 decreased 9% from the previous quarter, primarily due to seasonality.

For the full year ended December 31, 2016, net revenues were RMB19.2 billion or $2.8 billion, representing a 76% increase from 2015.

Accommodation reservation revenues for the fourth quarter of 2016 were RMB1.8 billion or $266 million, representing a 56% increase from the same period in 2015, primarily driven by increase in accommodation reservation volume and consolidation of Qunar.

Accommodation reservation revenues for the fourth quarter of 2016 decreased 11% from the previous quarter, primarily due to seasonality.

For the full year ended December 31, 2016, accommodation reservation revenues were RMB7.3 billion or $1.1 billion, representing a 58% increase from 2015.

The hotel reservation revenues accounted for 37% of the total revenues in 2016 and 40% of total revenues in 2015.

Transportation ticketing revenues for the fourth quarter of 2016 were RMB2.4 billion or $352 million representing a 97% increase from the same period in 2015, primarily driven by increase in ticketing volume and consolidation of Qunar.

Transportation ticketing revenues increased to 1% from the previous quarter.

For the full year ended December 31, 2016, transportation ticketing revenue were RMB8.8 billion or $1.3 billion, representing a 98% increase from 2015.

The transportation ticketing revenues accounted for 45% of the total revenues in 2016 and 39% of the total revenues in 2015.

Packaged-tour revenues for the fourth quarter of 2016 were RMB467 million or $67 million, representing a 33% increase from the same period in 2015, primarily driven by increase in volume growth of organized tours and self-guided tours.

Packaged-tour revenues for the fourth quarter of 2016 decreased 43% from the previous quarter, primarily due to seasonality.

For the full year ended December 31, 2016, packaged-tour revenues were RMB2.3 billion or $333 million, representing a 39% increase from 2015.

The packaged-tour revenues accounted for 12% of the total revenue in 2016 and 15% of the total revenue in 2015.

Gross margin was 78% for the fourth quarter of 2016, compared to 73% in the same period in 2015 and remained consistent with the previous quarter.

For the full year ended December 31, 2016, gross margin was 75% compared to 72% in 2015.

Product development expenses for the fourth quarter of 2016 increased by 100% to RMB1.7 billion or $248 million from the same period in 2015, primarily due to the consolidation of Qunar.

Product development expenses for the fourth quarter of 2016 decreased 7% from the previous quarter, primarily due to decrease in product development personnel related expenses.

Product development expenses for the fourth quarter of 2016 accounted for 34% of the net revenues.

Excluding share-based compensation charges, non-GAAP product development expenses for the fourth quarter of 2016 accounted for 27% of the net revenues, which remained consistent with the same period in 2015 and the previous quarter.

For the full year ended December 31, 2016, product development expenses increased by 133% to RMB7.7 billion or $1.1 billion from 2015 and accounted for 40% of the net revenue.

Excluding share-based compensation charges, non-GAAP product development expenses accounted for 29% of the net revenues, compared to 28% in 2015.

Sales and marketing expenses for the fourth quarter of 2016 increased by 73% to RMB1.5 billion or $212 million from the same period in 2015, primarily due to consolidation of Qunar.

Sales and marketing expenses for the fourth quarter of 2016 decreased 2% from the previous quarter.

Sales and marketing expenses for the fourth quarter of 2016 accounted for 29% of the net revenues.

Excluding share-based compensation charges, non-GAAP sales and marketing expenses for the fourth quarter of 2016 accounted for 28% of the net revenues, which decreased from 29% in the same period in 2015 and increased from 26% in the previous quarter.

For the full year ended December 31, 2016, sales and marketing expenses increased by 90% to RMB5.9 billion or $844 million from 2015 and accounted for 30% of the net revenue.

Excluding share-based compensation charges, non-GAAP sales and marketing expenses accounted for 28% of the net revenues, which remained consistent with last year.

General and administrative expenses for the fourth quarter of 2016, increased by 76% to RMB540 million or $78 million from the same period in 2015, primarily due to the consolidation of Tuna.

G&A expenses for the fourth quarter of 2016 increased 0.2% from the previous quarter.

G&A expenses for the fourth quarter of 2016 accounted for 11% of the net revenues, excluding share-based compensation charges, non-GAAP G&A expenses accounted for 7% of the net revenues, which remained consistent with the same period in 2015 and the previous quarter.

For the full year ended December 31, 2016, G&A expenses increased by 131% to RMB2.5 billion or $363 million from 2015 and accounted for 13% of the net revenue.

Excluding share-based compensation charges, non-GAAP G&A expenses accounted for 7% of the net revenues, which remained consistent with 2015.

Income for operations for the fourth quarter of 2016 was RMB207 million or $13 million, compared to RMB95 million in the same period in 2015 and RMB447 million in the previous quarter.

Excluding share-based compensation charges, non-GAAP income from operations was RMB797 million or $115 million compared to RMB292 million in the same period in 2015 and RMB1 billion in the previous quarter.

For the full year ended December 31, 2016, loss from operations was RMB1.6 billion or $226 million compared to income from operations of RMB381 million in 2015.

Excluding share-based compensation charges, non-GAAP income from operations was RMB2 billion or $287 million compared to RMB1 billion in 2015.

Operating margin was 4% in the fourth quarter of 2016 compared to 3% in the same period in 2015 and 8% in the previous quarter.

Excluding share-based compensation charges, non-GAAP operating margin was 16% compared to 10% in the same period in 2015 and 18% in the previous quarter.

For the full year ended December 31, 2016, operating margin was negative 8% compared to 3% in 2015.

Excluding share-based compensation charges, non-GAAP operating margin was 10% compared to 9% in 2015.

Net income attributable to Ctrip's shareholders for the fourth quarter of 2016 was RMB645 million or $93 million compared to RMB76 million in the same period in 2015 and RMB24 million in the previous quarter.

Excluding share-based compensation charges, non-GAAP net income attributable to Ctrip's shareholder was RMB1.2 billion or $178 million, compared to RMB272 million in the same period in 2015 and RMB581 million in the previous quarter, primarily due to the net gain recognized from investing activities, including replacement and equity pick-ups from equity investments.

For the full year ended December 31, 2016, net loss attributable to Ctrip's shareholder was RMB1.4 billion or $206 million, compared to net income of RMB2.5 billion in 2015.

Excluding share-based compensation charges, non-GAAP net income attributable to Ctrip's shareholder was RMB2.1 billion or $307 million compared to RMB3.2 billion in 2015.

Diluted earnings per ADS were RMB1.18 or $0.17 for the fourth quarter of 2016.

Excluding share-based compensation charges, non-GAAP diluted earnings per ADS were RMB2.24 or $0.32 for the fourth quarter of 2016.

For the full year ended December 31, 2016, diluted earnings per ADS were negative RMB3.02 or negative $0.44.

Excluding share-based compensation charges, non-GAAP diluted earnings per ADS were RMB4.05 or $0.58.

As of December 31 of 2016, the balance of cash and cash equivalents, restricted cash and short-term investments was RMB34 billion or $5 billion.