Expedia's eLong, Inc reported unaudited financial results for the fourth quarter and full year ended December 31, 2013 where net revenues surpassed RMB1 billion and hotel room nights exceeded 25 million.

Highlights – Fourth Quarter 2013

• Hotel room nights stayed in the fourth quarter increased 48% to 7.4 million room nights compared to 5.0 million in the prior year period. Excluding the fourth quarter 2012 technology change with respect to recording groupbuy room nights, room nights stayed in the fourth quarter increased 58% compared to the prior year period.
• Hotel commission revenue for the fourth quarter increased 28% to RMB224.4 million (US$37.1 million), compared to RMB175.0 million (US$28.1 million) in the fourth quarter of 2012.
• Net revenues for the fourth quarter increased 25% to RMB261.0 million (US$43.1 million), compared to RMB208.8 million (US$33.5 million) in the fourth quarter of 2012.
• Mobile hotel bookings comprised more than 30% of total hotel room nights stayed in the fourth quarter, compared to 25% in the third quarter. Cumulative downloads of eLong mobile apps now exceed 45 million.

Highlights – Full Year 2013

• Hotel room nights stayed in 2013 increased 60% to 25.8 million room nights compared to 16.1 million in the prior year.
• Hotel commission revenue in 2013 increased 41% to RMB858.2 million (US$141.8 million), compared to RMB608.3 million (US$97.6 million) in 2012.
• Net revenues in 2013 increased 36% to RMB1,009.7 million (US$166.8 million), compared to RMB744.2 million (US$119.5 million) in 2012.

"In 2013, our hotel room nights grew 60% setting an eLong record of 25.8 million room nights stayed. We also achieved two important company milestones with gross bookings* surpassing RMB10 billion and net revenues exceeding RMB1 billion for the first time in our history," said Guangfu Cui, Chief Executive Officer of eLong. "We continue to execute our mobile hotel strategy and upgrade our mobile user experience, including recently launching train ticket booking and WeChat payment on our mobile Apps."

* Gross bookings: Total retail value of transactions recorded at the time of stay for hotel room nights and issuance for air tickets. Gross bookings include the total price due for travel excluding taxes, fees and other charges, and are generally reduced for cancellations and refunds.

Business Results

Revenues

Total revenues by product for the fourth quarter of 2013 as compared to the same period in 2012 were as follows (in RMB million):

Hotel Reservations

Hotel commission revenue increased 28% in the fourth quarter of 2013 compared to the same period in 2012, primarily due to higher volume, partially offset by lower commission per room night. Room nights stayed in the fourth quarter increased 48% year-on-year to 7.4 million. Excluding the fourth quarter 2012 technology change with respect to recording groupbuy room nights, room nights stayed in the fourth quarter increased 58% compared to the prior year period. Commission per room night decreased 13% year-on-year, primarily due to the growth of our coupon program. Hotel commission revenue grew to 80% of total revenues from 78% in the prior year quarter.

Hotel commission revenue increased 41% for full year 2013 compared to 2012, due to higher room night volume, partially offset by a 12% decrease in commission per room night. Room nights stayed in 2013 increased 60% year-on-year to 25.8 million. Commission per room night declined, primarily due to the growth of our coupon program, as well as increased groupbuy and lower average daily rate hotel room nights. Hotel commission revenue grew to 80% of total revenues from 76% in the prior year.

Air Ticketing

Air ticketing commission revenue increased 3% in the fourth quarter of 2013, compared to the prior year quarter, driven by a 30% increase in air segments to approximately 828,000, partially offset by a 21% decrease in commission per segment. Commission per segment decrease was due to decline in commission rates, our air coupon program and a decrease in average ticket price. Air ticketing commission revenue decreased to 12% of total revenues from 14% in the prior year quarter.

Air ticketing commission revenue for full year 2013 increased 9% compared to 2012, driven by a 28% increase in air segments to 3.0 million, partially offset by a 15% decrease in commission per segment. Commission per segment decrease was mainly due to our air coupon program, as well as a decrease in average ticket price. Air ticketing commission revenue decreased to 12% of total revenues from 16% in the prior year.

Other

Other revenue is primarily derived from advertising and travel insurance. Other revenue increased 31% year-on-year in the fourth quarter of 2013, mainly driven by increased advertising and travel insurance revenue. Other revenue was 8% of total revenues, consistent with the prior year quarter.

Other revenue for full year 2013 increased 32% compared to 2012, mainly driven by increased advertising and travel insurance revenue. Other revenue was 8% of total revenues, consistent with the prior year.

Profitability

Gross margin in the fourth quarter of 2013 was 72%, consistent with the prior year quarter. Gross margin for full year 2013 increased to 74%, compared to 73% in 2012. The improvement in gross margin was driven by operational efficiencies and mix shift to mobile and online hotel bookings, partially offset by lower hotel commission revenue per room night.

Operating expenses for the fourth quarter of 2013 as compared to the same period in 2012 were as follows (in RMB million):

Total operating expenses increased 52% for the fourth quarter of 2013 compared to the fourth quarter of 2012. Total operating expenses increased to 96% of net revenues in the fourth quarter of 2013 from 79% in the prior year quarter. Operating loss was RMB63.2 million in the fourth quarter of 2013 compared to operating loss of RMB15.6 million in the prior year quarter.

Total operating expenses increased 53% for full year 2013 compared to 2012. Total operating expenses increased to 92% of net revenues in 2013 from 81% in 2012. Operating loss was RMB178.2 million compared to operating loss of RMB66.2 million in the prior year.

Service development expenses consist of expenses related to technology and our product offering, including our websites and other systems, as well as our supplier relations function. Service development expenses increased 46% compared to the prior year quarter, mainly driven by higher personnel expenses and share-based compensation charges. Service development expenses increased to 20% of net revenues in the fourth quarter of 2013, compared to 17% in the same quarter of 2012.

Service development expenses for full year 2013 increased 40% compared to 2012, mainly driven by higher personnel expenses and share-based compensation charges. Service development expenses increased to 18% of net revenues in 2013 from 17% in 2012.

Sales and marketing expenses for the fourth quarter of 2013 increased 48% over the prior year quarter, driven by increased marketing expenses and hotel commission payments to affiliates. Sales and marketing expenses increased to 62% of net revenues in the fourth quarter of 2013 from 53% in the same quarter of 2012.

Sales and marketing expenses for full year 2013 increased 58% over 2012, mainly driven by increased marketing expenses and hotel commission payments to affiliates. Sales and marketing expenses increased to 65% of net revenues in 2013 from 55% in 2012.

General and administrative expenses for the fourth quarter of 2013 increased 87% compared to the prior year quarter, mainly driven by higher share-based compensation charges. General and administrative expenses increased to 13% of net revenues in the fourth quarter of 2013 from 8% in the same quarter of 2012.

General and administrative expenses for full year 2013 increased 44% compared to 2012, mainly driven by higher share-based compensation charges. General and administrative expenses increased to 9% of net revenues in 2013 from 8% in 2012.

Other income was RMB20.7 million in the fourth quarter of 2013 compared to other income of RMB13.8 million in the fourth quarter of 2012, primarily due to increased government subsidies and interest income as well as decreased foreign exchange losses.

Other income was RMB65.2 million for full year 2013 compared to other income of RMB56.5 million in 2012, primarily due to increased government subsidies and interest income.

Income tax expense for the fourth quarter of 2013 was RMB3.5 million, compared to income tax benefit of RMB12.5 million during the prior year quarter, mainly due to the recording of a valuation allowance of RMB9.8 million on deferred tax assets.

Income tax expense for full year 2013 was RMB59.5 million, compared to income tax benefit of RMB16.0 million in 2012, mainly due to the recording of a valuation allowance of RMB91.9 million on deferred tax assets.

Net loss for the fourth quarter of 2013 was RMB44.0 million, compared to net income of RMB5.7 million during the prior year quarter.

Net loss for full year 2013 was RMB167.7 million, compared to net income of RMB0.5 million in 2012.

Basic net loss per ADS and diluted net loss per ADS for the fourth quarter of 2013 were each RMB1.26 (US$0.22), compared to basic net income per ADS and diluted net income per ADS of RMB0.16 (US$0.02) in the prior year quarter.

Net loss per ADS and diluted net loss per ADS for full year 2013 were each RMB4.82 (US$0.80), compared to net income per ADS and diluted net income per ADS of RMB0.02 (US$0.002) in full year 2012.

As of December 31, 2013, eLong held cash and cash equivalents, short-term investments and restricted cash of RMB2.0 billion (US$323 million), substantially all of which was held in Renminbi.

Business Outlook

eLong currently expects net revenues for the first quarter of 2014 to increase by 10% to 20% compared to the first quarter of 2013. This outlook reflects eLong's current and preliminary view, which is subject to change.