eLong, Inc. (LONG)

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eLong, Inc. (LONG)

Q1 2011 Earnings Conference Call

May 16, 2011 8:00 p.m. EDT

Executives

Mike Doyle – CFO

Guangfu Cui – CEO

Philip Yang - Investor Relations

Analysts

Eddie Leung – Merrill Lynch

Ming Zhao – SIG

Fawne Jiang – Brean Murray

Wendy Huang – Royal Bank of Scotland

Presentation

Operator

Good day to everyone and welcome to eLong's First Quarter 2011 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 first quarter 2011 conference call.

Today, Guangfu Cui, our CEO, will make some remarks about the company’s performance in the first quarter 2011 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.

Guangfu Cui

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

The highlights for the first quarter of 2011 were 41% year over year accelerated growth in hotel room nights to 1.7 million compared to 1.2 million in the prior year quarter, and the further penetration online with approximately half of our hotel bookings coming from our websites. We increased net revenue by 23% year over year to RMB125 million, and income from operations grew 111% year over year to RMB13 million.

Our domestic hotel coverage network expanded 71% to 19,200 domestic hotels as of March 31, 2011, compared to 11,200 as of March 31, 2010. In addition, eLong.com offers customers more than 135,000 hotels worldwide through our interface with Expedia. eLong.com continues to be the largest online distributor of hotels in China. During this quarter, eLong launched group buy hotel products, and continued our coupon program. To compete and win, we must provide customers with a broad variety of hotel products at competitive price and with an outstanding user experience.

We have been improving our customer experience both online and offline. In the first quarter, we continued to upgrade our website providing customers with faster page loading times, better website availability, and better usability. We are happy to see our conversion rate has been improved continuously over the past two years. Our call center has continued its high quality service. In the first quarter, we also launched our second generation iPhone application, which we believe features the fastest page download time among our competitors in China. Our iPhone application is currently in the Top 10 travel downloads in the iTunes App Store in China.

Due to the elimination of our air ticket cash transaction business, we are continuing to see a flat or slight decrease in our air ticket business, and this may continue a few more quarters. We believe this action 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.

Our initiatives remain the same as shared with you in February earnings release call:

Offer more competitively priced products for our customers;

Offer more domestic hotel choices;

Improve online marketing effectiveness and efficiency; and

Improve online booking experience and overall customer service quality.

Our objective is to win online hotel booking, which includes acquiring customers online, serving customers online, and retaining our customers online. We are executing well against our strategy so far.

To further accelerate our growth online and to realize our goal of becoming the leader of online hotel booking in China, I am very excited to report a strategic partnership formed between eLong and Tencent Holdings Limited, the largest provider of internet, mobile and telecommunications value-added services in China. On May 16, 2011, eLong issued approximately 11 million new shares, or 16.4% of total outstanding shares, to Tencent, which makes Tencent the second largest shareholder of eLong after Expedia, who also purchased an additional 5.4 million shares and remaining as our controlling shareholder. Tencent will appoint one member of our Board of Directors. In addition, eLong and Tencent will deepen our cooperation in future, including forming further business partnerships to develop online travel products and distribute eLong’s hotel supply to Tencent’s huge number of users in China.

Read the rest of this transcript for free on seekingalpha.com