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eLong Reports Second Quarter 2010 Unaudited Financial Results
Aug 16, 2010 (06:08 PM EDT)


BEIJING, Aug. 16 /PRNewswire-Asia/ -- eLong, Inc. (Nasdaq: LONG), a leading online travel service provider in China, today reported unaudited financial results for the second quarter ended June 30, 2010.

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    Highlights -- Second Quarter 2010
    -- Net revenues increased 45% to RMB118.9 million, compared to
       RMB81.9 million in the second quarter of 2009.
    -- Income from operations increased 152% to RMB16.1 million, compared to
       RMB6.4 million in the second quarter of 2009. Operating margin was
       13.6% compared to 7.8% in the second quarter of 2009.
    -- Operating Income Before Amortization ("OIBA")(Non-GAAP)(*) increased
       136% to RMB20.8 million, compared to RMB8.8 million in the second
       quarter of 2009.
    -- Domestic hotel coverage network expanded by 40% to 12,200 domestic
       hotels compared to 8,700 a year ago. More than 10,000 of these hotels
       participate in our eCoupon program. In addition, we offer more than
       120,000 international hotels.
    -- In August 2010, received the "2010 Best Call Center in China" award
       from the China Federation of IT Promotion.

"eLong is the largest online travel marketplace in China in terms of hotels available for direct booking. With our rich selection of hotels and highly competitive eCoupon program, eLong.com is becoming a preferred hotel booking choice for more and more consumers in China," said Guangfu Cui, Chief Executive Officer of eLong.

"In the second quarter, strong online hotel growth, increasing average selling prices and improving operating efficiencies allowed us to deliver record net revenues and record income from operations," said Mike Doyle, Chief Financial Officer of eLong.


    (*) Operating income before amortization ("OIBA") is a non-GAAP measure as
        defined by the Securities and Exchange Commission. Please see
        "Non-GAAP Financial Measures" and "Tabular Reconciliation for Non-GAAP
        Measure" on page 7 for an explanation of this non-GAAP measure.

    Business Results

    Revenue
    Total revenues by product were as follows (figures in RMB million):


                                             Q2     %      Q2     %     Y/Y
                                            2010  Total   2009  Total Growth

    Hotel reservations                      85.6    68%   59.3    68%    44%
    Air ticketing                           30.5    24%   21.8    25%    40%
    Other                                   10.3     8%    5.8     7%    78%
    Total revenues                         126.4   100%   86.9   100%    45%

Hotel

Hotel commission revenue increased 44% for the second quarter of 2010 compared to the prior year quarter, primarily due to higher volume, which was partially offset by lower commission per room night. Commission per room night decreased 9% year-on-year primarily due to our eCoupon program and the more rapid growth of lower average daily rate hotels. Room nights booked through eLong in the second quarter increased 58% year-on-year to 1.5 million.

Air

Air ticketing commission revenue increased 40% for the second quarter of 2010 compared to the prior year quarter, driven by a 16% increase in air segments to 591,000 and an increase in commission per segment. Commission per segment increased 21%, due to a 25% increase in average ticket price, partially offset by a decrease in air commission rates compared to the same quarter of the prior year.

Other

Other revenue increased 78% year-on-year for the second quarter of 2010. Other revenue is primarily online advertising on our websites. Other revenue grew to 8% of total revenues from 7% in the prior year quarter.

Profitability

Gross margin in the second quarter of 2010 was 72% compared to 71% in the prior year quarter of 2009.

Operating expenses for the second quarter of 2010 and same period in 2009 were as follows (figures in RMB million):


                                             Q2   % Net    Q2   % Net    Y/Y
                                            2010 Revenues 2009 Revenues Growth
    Service development                     18.9    16%   13.2    16%    43%
    Sales and marketing                     38.6    33%   27.4    33%    41%
    General and administrative              11.9    10%   11.1    14%     7%
    Amortization of intangible assets        0.2     --    0.2     --     --
    Total operating expenses                69.6    59%   51.9    63%    34%

Total operating expenses increased 34% for the second quarter of 2010 compared to the second quarter of 2009. Total operating expenses were 59% of net revenues, a decrease of 4 percentage points compared to the prior year quarter.

Service development expense consists of expenses related to technology and our product offering, including our websites, platforms, other system development and our supplier relations function. Service development expense increased 43% compared to the prior year quarter, mainly driven by an increase in headcount and higher employee compensation. Service development expense was 16% of net revenues, unchanged compared to the same quarter of 2009.

Sales and marketing expenses for the second quarter of 2010 increased 41% over the prior year quarter, mainly driven by increased online marketing expenses and hotel commission payments to our third-party distribution partners, partially offset by reduced headcount. Sales and marketing expense was 33% of net revenues, unchanged compared to the same quarter of 2009.

General and administrative expenses for the second quarter of 2010 increased 7% compared to the prior year quarter, mainly driven by higher employee compensation. General and administrative expenses decreased to 10% of net revenues in the second quarter of 2010 from 14% in the same quarter of the prior year.

Other income/(expenses), which represents interest income, foreign exchange losses and other income/expense, was RMB2.9 million other expense in the second quarter of 2010 compared to RMB3.5 million other income in the second quarter of 2009, driven primarily by an increase in foreign exchange losses and a decrease in interest income. In the second quarter of 2010, our foreign exchange losses on our cash and cash equivalents, short-term and long-term investments increased to RMB3.9 million, from RMB0.4 million in the second quarter of 2009.

Net income for the second quarter of 2010 was RMB9.4 million, compared to net income of RMB9.5 million during the prior year quarter.

Net income per ADS and diluted net income per ADS for the second quarter of 2010 were RMB0.40 and RMB0.36, respectively, compared to net income per ADS and diluted net income per ADS for the prior year quarter of RMB0.40 and RMB0.38, respectively.

Business Outlook

eLong currently expects net revenues for the third quarter of 2010 to be within the range of RMB126 million to RMB136 million, equal to an increase of 30% to 40% compared to the third quarter of 2009.

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," "should" and "will" and similar expressions as they relate to our company 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. 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, eLong's losses sustained in prior years, declines or disruptions in the travel industry, the international financial crisis, slowdown in the PRC economy, an outbreak of bird flu, H1N1 flu, SARS or other disease, eLong's reliance on having good relationships with airlines, hotel suppliers and airline ticket suppliers, our reliance on the TravelSky GDS system for our air business, the possibility that eLong will be unable to continue timely compliance with Section 404 or other requirements of the Sarbanes-Oxley Act, the risk that eLong will not be successful in competing against new and existing competitors, risks associated with Expedia, Inc.'s (Nasdaq: EXPE) majority ownership interest in eLong, fluctuations in the value of the Renminbi, changes in eLong's management team and other key personnel, changes in third-party distribution partner relationships and other risks mentioned in eLong's filings with the U.S. Securities and Exchange Commission (or SEC), including eLong's Annual Report on Form 20-F.

You 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 second quarter 2010 unaudited financial results on August 17, 2010 at 8:00 am Beijing time (August 16, 2010, 8:00 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. 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 for one year.

About eLong, Inc.

eLong, Inc. (NASDAQ: LONG) is a leading online travel service provider in China. Headquartered in Beijing, eLong has a national presence across China, and offers a bilingual website and 24-hour call center to provide both business and leisure travelers with accurate travel information, real savings and a worry-free travel booking experience. eLong empowers consumers to make informed decisions by providing convenient online and offline hotel, air ticket and vacation package booking services as well as easy to use tools such as maps, destination guides, photographs, virtual tours and user reviews. In addition to a selection of more than 12,200 hotels in over 500 cities across China, eLong also offers consumers the ability to make bookings at over 120,000 international hotels in more than 100 countries worldwide, and can fulfill domestic and international air ticket reservations in over 80 major cities across China. eLong is a subsidiary of Expedia, Inc. (NASDAQ:EXPE).

eLong operates websites including http://www.elong.com, http://www.elong.net and http://www.xici.net .

    For further information, please contact:

    eLong, Inc.
     Investor Relations
     Email: ir@corp.elong.com
     Tel:   +86-10-6436-7570



    eLong, Inc.
    CONSOLIDATED STATEMENTS OF OPERATIONS
    (IN THOUSANDS EXCEPT PER SHARE AND PER ADS AMOUNTS)

                                                  Three Months Ended
                                          Jun. 30,  Mar. 31, Jun. 30, Jun. 30,
                                           2009      2010     2010     2010
                                            RMB       RMB      RMB    USD(1)
                                         (Unaudi-  (Unaudi- (Unaudi- (Unaudi-
                                            ted)      ted)     ted)     ted)
    Revenues:
      Hotel reservations                   59,276    69,167   85,606   12,623
      Air ticketing                        21,764    29,430   30,515    4,500
      Other                                 5,886     8,915   10,311    1,520
    Total revenues                         86,926   107,512  126,432   18,643
      Business tax and surcharges          (4,982)   (6,408)  (7,529)  (1,110)
    Net revenues                           81,944   101,104  118,903   17,533
      Cost of services                    (23,666)  (31,827) (33,186)  (4,894)
    Gross profit                           58,278    69,277   85,717   12,639

    Operating expenses:
      Service development                 (13,195)  (18,159) (18,854)  (2,780)
      Sales and marketing                 (27,422)  (33,530) (38,616)  (5,694)
      General and administrative          (11,147)  (11,146) (11,864)  (1,749)
      Amortization of intangible assets      (157)     (185)    (237)     (35)
     Total operating expenses             (51,921)  (63,020) (69,571) (10,258)

    Income from operations                  6,357     6,257   16,146    2,381
    Other income/(expenses):
      Interest income                       3,882     1,067    1,248      184
      Foreign exchange losses                (424)     (220)  (3,942)    (581)
      Other                                    --       910     (163)     (24)
    Total other income, net                 3,458     1,757   (2,857)    (421)

    Income before income tax expense        9,815     8,014   13,289    1,960
      Income tax expense                     (357)   (2,079)  (3,934)    (581)
    Net income                              9,458     5,935    9,355    1,379


    Net income per share                     0.20      0.13     0.20     0.03
    Diluted net income per share             0.19      0.12     0.18     0.03

    Net income per ADS(2)(3)                 0.40      0.26     0.40     0.06
    Diluted net income per ADS(2)(3)         0.38      0.24     0.36     0.05

    Shares used in computing net income
     per share:
      Basic                                47,158    47,388   47,919   47,919
      Diluted                              50,077    50,870   51,013   51,013

    Share-based compensation charges
     included in:                           2,249     4,130    4,549      671
      Cost of services                        162       303      336       50
      Service development                     418     1,470    1,601      236
      Sales and marketing                     296       825      976      144
      General and administrative            1,373     1,532    1,636      241



                                              Six Months Ended
                                         Jun. 30,  Jun. 30,  Jun. 30,
                                           2009      2010      2010
                                            RMB       RMB     USD(1)
                                         (Unaudi-  (Unaudi- (Unaudi-
                                            ted)      ted)     ted)
    Revenues:
      Hotel reservations                  115,498   154,773   22,823
      Air ticketing                        43,012    59,945    8,840
      Other                                10,889    19,226    2,834
    Total revenues                        169,399   233,944   34,497
      Business tax and surcharges          (9,650)  (13,937)  (2,055)
    Net revenues                          159,749   220,007   32,442
      Cost of services                    (47,630)  (65,013)  (9,587)
    Gross profit                          112,119   154,994   22,855

    Operating expenses:
      Service development                 (26,225)  (37,013)  (5,458)
      Sales and marketing                 (59,029)  (72,146) (10,638)
      General and administrative          (23,571)  (23,010)  (3,393)
      Amortization of intangible assets      (314)     (422)     (62)
     Total operating expenses            (109,139) (132,591) (19,551)

    Income from operations                  2,980    22,403    3,304
    Other income/(expenses):
      Interest income                       9,265     2,315      341
      Foreign exchange losses                (139)   (4,162)    (613)
      Other                                    --       747      110
    Total other income, net                 9,126    (1,100)    (162)

    Income before income tax expense       12,106    21,303    3,142
      Income tax expense                     (647)   (6,013)    (887)
    Net income                             11,459    15,290    2,255


    Net income per share                     0.24      0.32     0.05
    Diluted net income per share             0.23      0.30     0.04

    Net income per ADS(2)(3)                 0.48      0.64     0.09
    Diluted net income per ADS(2)(3)         0.46      0.60     0.09

    Shares used in computing net income
     per share:
      Basic                                47,119    47,655   47,655
      Diluted                              50,033    50,899   50,899

    Share-based compensation charges
     included in:                           4,648     8,679    1,280
      Cost of services                        302       639       94
      Service development                   1,086     3,071      453
      Sales and marketing                   1,000     1,801      266
      General and administrative            2,260     3,168      467


    Note 1: The conversions of Renminbi (RMB) into United States dollars (USD)
            as at the reporting dates are based on the noon buying rate of
            USD1.00=RMB6.7815 on June 30, 2010, USD1.00=RMB6.8258 on March 31,
            2010 and USD1.00=RMB6.8302 on June 30, 2009 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 U.S. dollars 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,    Jun. 30,    Jun. 30,
                                              2009        2010        2010
                                               RMB         RMB         USD
                                                        (Unaudited)(Unaudited)
    ASSETS
    Current assets:
      Cash and cash equivalents               639,468      727,275    107,244
      Short-term investments                  313,467      135,818     20,028
      Restricted cash                          60,000       60,600      8,936
      Accounts receivable, net                 45,353       67,065      9,889
      Due from related parties                    321        1,777        262
      Prepaid expenses                          7,871       13,808      2,036
      Other current assets                     10,961        9,882      1,458
        Total current assets                1,077,441    1,016,225    149,853
    Property and equipment, net                44,005       40,253      5,936
    Long-term investments                          --       94,886     13,992
    Goodwill                                   31,950       49,705      7,329
    Intangible assets, net                        750        4,972        733
    Other non-current assets                   29,804       29,830      4,398
        Total assets                        1,183,950    1,235,871    182,241


    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities:
      Accounts payable                         41,905       62,067      9,152
      Income taxes payable                      2,908        4,037        595
      Due to related parties                    1,099          755        111
      Accrued expenses and other current
       liabilities                             92,694       92,385     13,624
        Total current liabilities             138,606      159,244     23,482
    Other liabilities                           1,844        1,393        205
        Total liabilities                     140,450      160,637     23,687

    Shareholders' equity
      Ordinary shares                           1,879        1,991        294
      High-vote ordinary shares                 2,363        2,363        348
      Treasury stock                         (103,393)    (103,393)   (15,246)
      Additional paid-in capital            1,326,985    1,343,317    198,085
      Accumulated deficit                    (184,334)    (169,044)   (24,927)
        Total shareholders' equity          1,043,500    1,075,234    158,554
        Total liabilities and
         shareholders' equity               1,183,950    1,235,871    182,241


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 and Operating Income Before Amortization ("OIBA"). We believe these non-GAAP financial measures are important to 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.

OIBA is defined as income from operations plus: (1) stock-based compensation charges; (2) acquisition-related impacts, including (i) amortization of intangible assets and impairment of goodwill and intangible assets, and (ii) gains or losses recognized on changes in the fair value of contingent consideration arrangements; and (3) certain items, including restructuring charges and charges related to property and equipment. We exclude the items listed above from OIBA because we believe doing so may provide investors greater insight into management decision making at eLong. We believe OIBA is useful to investors because it is one of the primary internal metrics by which management evaluates the performance of our business as a whole and our individual business segments, on which internal budgets are based, and by which management and employees, including our Chief Executive Officer, are compensated. We believe that investors should have access to the same set of tools that management uses to analyze our performance. In addition, we believe that by excluding certain items, such as stock-based compensation charges and acquisition-related impacts, OIBA corresponds more closely to the cash operating income generated from our business and allows investors to gain additional understanding of factors and trends affecting the ongoing cash earning capabilities of our business, from which capital investments are made. Although depreciation is also a non-cash expense, it is included in OIBA because it is driven directly by the capital expenditure decisions made by management. OIBA also has certain limitations in that it does not take into account the impact of certain expenses to our consolidated statements of operations. We seek to compensate for the limitation of the non-GAAP measure presented by also providing the comparable GAAP measure, GAAP financial statements, and descriptions of the reconciling items and adjustments, to derive the non-GAAP measure.

OIBA 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
    Operating Income Before Amortization
    (IN THOUSANDS)

                                                          2009
                                              Q1      Q2       Q3       Q4
                                             RMB      RMB      RMB      RMB

    OIBA                                     (822)   8,763    8,811    7,077
    Stock-based compensation charges       (2,398)  (2,249)  (2,747)  (3,845)
    Amortization of intangible assets        (157)    (157)    (157)    (182)
    Fair value changes of contingent
     consideration                             --       --       --       12
    Restructuring charges                      --       --       --     (630)
    Charges related to property and
     equipment                                 --       --       --      (72)
    Income/(loss) from operations          (3,377)   6,357    5,907    2,360


                                                    2010
                                              Q1       Q2       Q2
                                             RMB      RMB      USD

    OIBA                                   10,319   20,769    3,063
    Stock-based compensation charges       (4,130)  (4,549)    (671)
    Amortization of intangible assets        (185)    (237)     (35)
    Fair value changes of contingent
     consideration                            253      163       24
    Restructuring charges                      --       --       --
    Charges related to property and
     equipment                                 --       --       --
    Income/(loss) from operations           6,257   16,146       --



    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.

                                                         2009
                                               Q1      Q2      Q3      Q4
                                              RMB     RMB     RMB     RMB

    OIBA                                     (822)   8,763   8,811   7,077

    Hotel Reservations
    Room Nights                               912      980   1,183   1,241
    Room Night Y/Y Growth                      4%       1%     13%     18%
    Average Daily Rate Y/Y Growth            (11%)    (13%)   (11%)    (9%)
    Commission/Room Night Y/Y Growth          (6%)     (7%)    (7%)    (9%)
    Hotel Commissions Y/Y Growth              (2%)     (6%)     5%      7%

    Air Ticketing
    Air Segments                              506      510     604     586
    Air Segments Y/Y Growth                   18%      24%     25%     26%
    Average Ticket Value Y/Y Growth           (8%)     (3%)    13%      4%
    Commission/Segment Y/Y Growth             (8%)     (4%)     2%     14%
    Air Commissions Y/Y Growth                 8%      19%     27%     44%


                                                  2010
                                               Q1       Q2
                                              RMB      RMB

    OIBA                                   10,319   20,769

    Hotel Reservations
    Room Nights                             1,206    1,549
    Room Night Y/Y Growth                     32%      58%
    Average Daily Rate Y/Y Growth             (2%)      5%
    Commission/Room Night Y/Y Growth          (7%)     (9%)
    Hotel Commissions Y/Y Growth              23%      44%

    Air Ticketing
    Air Segments                              653      591
    Air Segments Y/Y Growth                   29%      16%
    Average Ticket Value Y/Y Growth            8%      25%
    Commission/Segment Y/Y Growth              7%      21%
    Air Commissions Y/Y Growth                38%      40%

SOURCE eLong, Inc.