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eLong, Inc. (LONG)

Q4 2010 Earnings Call

February 17, 2011 7:00 PM ET


Mike Doyle – CFO

Guangfu Cui – CEO

Philip Yang - Investor Relations


Ming Zhao – SIG

Fawne Jiang – Brean Murry, Carret & Co

Adam Krejcik – Roth Capital Partners



Good day to everyone and welcome to eLong's Forth Quarter and Full Year 2010 earnings report conference call. (Operator Instructions) I will now hand over the line to Philip Yang and I will be standing by for the Q&A session. Please go ahead, thank you.

Philip Yang

Hello everyone, thank you for joining eLong’s fourth quarter 2010 conference call.

Today, Guangfu Cui, our CEO, will make some remarks about the company’s performance in the fourth quarter 2010 and full year 2010 followed by Mike Doyle, our CFO, who will provide additional detail on our financial results. Following their prepared remarks, Guangfu and Mike will be available to take your questions.

Before the management presentations, please allow me to read our Safe Harbor Statement. During this call representatives of the company will make certain forward-looking statements within the meaning of the U.S. Securities Act and the Securities Exchange Act. These 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 large 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 wide variety of factors. eLong undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise. Please refer to the risk factors described in our Annual Report on Form 20-F, as well as the full text of the Safe Harbor Statement in our Form 6-K, which will be furnished to the SEC in connection with our press release and this call, for discussion of some of the important factors that could affect future results.

I will now turn the call over to our CEO, Guangfu Cui.

Guang Fu

Thank you, Philip. Hello everyone, thank you for being on this call.

In the fourth quarter, net revenues increased 23% year over year, which was slower than the more than 40% growth rates in the second and third quarter, due to the end of the Shanghai World Expo, as well as a slowdown in our air ticketing business. Despite the slower growth rate in the fourth quarter, we are pleased to report solid full year results in 2010 with net revenues growing 35% year-on-year to RMB482 million; and income from operations growing 321% year-on-year to RMB47 million. We also achieved our second consecutive year of profitability.

The highlight for 2010 was that hotel room nights booked through eLong grew 49% to 6.4 million room nights compared to 4.3 million in the prior year. Among the factors which contributed to our strong performance in 2010 were: strong travel demand fueled by Shanghai World Expo, expanded hotel coverage, effective online marketing initiatives, better online booking experience and improved customer service.

Domestic hotel coverage network expanded 76% to 17,200 domestic hotels as of December 31, 2010, compared to 9,800 as of December 31, 2009. In addition, offers customers more than 130,000 hotels worldwide through our interface with Expedia. continues to be the largest online distributor of hotels in China.

Via effective online marketing, especially Search Engine Marketing and eCoupon initiatives, we are happy to see the continuing growth of our online hotel bookings over the past few quarters, and online transactions now comprise over 45% of our total hotel transactions. We will keep driving our business online going forward as we believe this represents the best opportunity for long term growth.

We have been improving our customer experience both online and offline. In the fourth quarter, we continued to upgrade our website providing customers with faster page loading time and better website availability, and our call center continued its high quality service.

In the fourth quarter, we took steps to further increase the efficiency of our air business. We eliminated our air ticket cash transaction business. This move will negatively impact revenue from the air ticketing business for a few quarters; however, we believe this will improve our competitiveness in our air ticketing operations in the long run as we focus on providing outstanding service to the growing number of credit card and other non-cash transaction customers.

Looking forward to 2011, in order to keep pace with increasing competition, we will create consumer value by executing the following initiatives:

Offer more domestic hotel choices;

Offer more competitively priced products for our customers;

Improve online booking experience and overall customer service quality; and

Improve online marketing effectiveness and efficiency.

Successful execution of our priorities and plans remains critical, and we are confident in the long-term growth of our business.

Now, I would like to hand the call over to Mike for a review of our financial results.

Mike Doyle

Thank you, Guangfu. In the fourth quarter, strong online hotel performance drove our year-on-year revenue growth to 23% as well as improvement in gross margin and operating margin. Income from operations was RMB12.6 million, an increase of RMB10.2 million from our income from operations of a year ago and net income was RMB4.2 million, an increase of RMB3.2 million from our net income of a year ago.

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