Ctrip International announced its unaudited financial results for Q1, net revenues were US$254 million, up 36% year-on-year.

Highlights for the First Quarter of 2014

• Net revenues were RMB1.6 billion (US$254 million) for the first quarter of 2014, up 36% year-on-year, exceeding our net revenue guidance for the first quarter 2014 of 25-30% increase year-on-year.
• Gross margin was 72% for the first quarter of 2014, compared to 74% in the same period in 2013.
• Income from operations was RMB71 million (US$11 million) for the first quarter of 2014, down 56% year-on-year. Excluding share-based compensation charges (non-GAAP), income from operations was RMB193 million (US$31 million), down 29% year-on-year.
• Operating margin was 4% for the first quarter of 2014, compared to 14% in the same period in 2013. Excluding share-based compensation charges (non-GAAP), operating margin was 12%, compared to 23% in the same period in 2013.
• Net income attributable to Ctrip's shareholders was RMB115 million (US$19 million) for the first quarter of 2014, down 25% year-on-year. Excluding share-based compensation charges (non-GAAP), net income attributable to Ctrip's shareholders was RMB237 million (US$38 million), down 11% year-on-year. 
• Diluted earnings per ADS were RMB0.75 (US$0.12) for the first quarter of 2014. Excluding share-based compensation charges (non-GAAP), diluted earnings per ADS were RMB1.52 (US$0.24) for the first quarter of 2014.
• Share-based compensation charges were RMB122 million (US$20 million), accounting for 8% of the net revenues, or RMB0.77 (US$0.12) per ADS for the first quarter of 2014.

"We are pleased to report the great performance in the first quarter of 2014," said James Liang, Chairman and Chief Executive Officer of Ctrip. "We recently expanded our traditional hotel reservation and ticketing services to accommodation reservation and transportation ticketing services. The growth of both businesses is on the accelerating track with volume increasing 67% and 71% year-on-year, respectively. Total mobile transaction value was over four times the level in the first quarter of 2013 with peak daily transaction value reaching about RMB150 million. Mobile has surpassed PC Internet to be the most important booking platform for our accommodation reservation business, contributing over 40% of our transactions during the quarter and over 60% on the peak day. We are also very proud to see our new businesses start to take leading positions. For example, Ctrip Travel Community Channel experienced over 300% year-on-year growth in daily unique visitors and became the top player among travel information and community websites in China.

"In addition, we recently became the second largest shareholder of LY.com and one of anchor investors for Tuniu.com in connection with its proposed IPO. As a leading player in the online and mobile travel market in China, we are seeing great potential in the industry. LY.com is a leading player in the local attraction ticket segment and Tuniu.com is strong in leisure package tour business. Ctrip is looking forward to working together with industry peers to create greater value for our customers and partners and to help develop a healthy and flourishing travel industry in China."

First Quarter 2014 Financial Results

For the first quarter of 2014, Ctrip reported total revenues of RMB1.7 billion (US$269 million), representing a 36% increase from the same period in 2013. Total revenues for the first quarter of 2014 increased by 10% from the previous quarter.

Accommodation reservation revenues amounted to RMB657 million (US$106 million) for the first quarter of 2014, representing a 46% increase year-on-year, primarily driven by an increase of 67% in accommodation reservation volume and partially offset by the decrease of commission per room night. Accommodation reservation revenues increased by 2% quarter-on-quarter.

Transportation ticketing revenues for the first quarter of 2014 were RMB651 million (US$105 million), representing a 43% increase year-on-year, driven by an increase of 71% in ticketing volume. Transportation ticketing revenues increased by 12% quarter-on-quarter.

Packaged-tour revenues for the first quarter of 2014 were RMB259 million (US$42 million), representing a 10% increase year-on-year due to the increase of leisure travel volume. Packaged-tour revenues increased by 34% quarter-on-quarter, primarily due to seasonality.

Corporate travel revenues for the first quarter of 2014 were RMB71 million (US$11 million), representing a 39% increase year-on-year, primarily driven by the increased corporate travel demand from business activities. Corporate travel revenue decreased by 9% quarter-on-quarter, primarily due to seasonality.

For the first quarter of 2014, net revenues were RMB1.6 billion (US$254 million), representing a 36% increase from the same period in 2013. Net revenues for the first quarter of 2014 increased by 10% from the previous quarter.

Gross margin was 72% for the first quarter of 2014, compared to 74% in the same period in 2013 and 73% in the previous quarter.

Product development expenses for the first quarter of 2014 increased by 65% to RMB441 million (US$71 million) from the same period in 2013 and 32% from the previous quarter, primarily due to an increase in product development personnel related expenses. Excluding share-based compensation charges (non-GAAP), product development expenses accounted for 25% of the net revenues, increased from 20% in the same period in 2013 and 21% in the previous quarter.

Sales and marketing expenses for the first quarter of 2014 increased by 61% to RMB430 million (US$69 million) from the same period in 2013, primarily due to an increase in sales and marketing related activities. Sales and marketing expenses for the first quarter of 2014 increased by 14% from the previous quarter, primarily due to an increase in sales and marketing related activities and personnel related expenses. Excluding share-based compensation charges (non-GAAP), sales and marketing expenses accounted for 26% of the net revenues, increased from 22% in the same period in 2013 and 25% in the previous quarter.

General and administrative expenses for the first quarter of 2014 increased by 19% to RMB191 million (US$31 million) from the same period in 2013 and 24% from the previous quarter primarily due to an increase in administrative related expenses and personnel related expenses. Excluding share-based compensation charges (non-GAAP), general and administrative expenses accounted for 8% of the net revenues, remained consistent with that in the same period in 2013 and increased from 6% in the previous quarter.

Income from operations for the first quarter of 2014 was RMB71million (US$11 million), representing a decrease of 56% from the same period in 2013 and 61% from the previous quarter. Excluding share-based compensation charges (non-GAAP), income from operations was RMB193 million (US$31 million), representing a decrease of 29% from the same period in 2013 and 33% from the previous quarter.

Operating margin was 4% for the first quarter of 2014, compared to 14% in the same period in 2013, and 13% in the previous quarter. Excluding share-based compensation charges (non-GAAP), operating margin was 12%, compared to 23% in the same period in 2013, and 20% in the previous quarter. 

The effective tax rate for the first quarter of 2014 was 40%, increased from 32% in the same period of 2013 and 26% in the previous quarter, primarily due to the increase in the amount of non-tax-deductible share-based compensation as a percentage to our income as a whole.

Net income attributable to Ctrip's shareholders for the first quarter of 2014 was RMB115 million (US$19 million), representing a decrease of 25% from the same period in 2013 and 56% from the previous quarter. Excluding share-based compensation charges (non-GAAP), net income attributable to Ctrip's shareholders was RMB237 million (US$38 million), representing a decrease of 11% from the same period in 2013 and 36% from the previous quarter.

Diluted earnings per ADS were RMB0.75 (US$0.12) for the first quarter of 2014. Excluding share-based compensation charges (non-GAAP), diluted earnings per ADS were RMB1.52 (US$0.24) for the first quarter of 2014.

As of March 31, 2014, the balance of cash and cash equivalents, restricted cash and short-term investment was RMB11.5 billion (US$1.9 billion).

Business Outlook

For the second quarter of 2014, the Company expects to continue the net revenue growth year-on-year at a rate of approximately 30-35%. This forecast reflects Ctrip's current and preliminary view, which is subject to change.

Recent Development

As of May 6, 2014, Ctrip had purchased approximately 18.6 million ADSs in aggregate with a total consideration of US$351 million.

Ctrip Announces Investment in LY.com

Ctrip.com International announced that the Company has entered into an investment agreement with Tongcheng Network Technology Share Co., Ltd., a local attraction ticket service provider that operates LY.com, to become the second largest shareholder of Tongcheng Network (second only to the management team) for consideration in cash equivalent to over US$200 million.

"We are very pleased to establish a strategic relationship with LY.com. We are increasingly positive about the potential of the travel industry in China. LY.com is the leading player in the local attraction ticket segment and  we will support the independent operation of LY.com. We are excited to work with LY.com's team to create greater value for travelers and help the healthy development of the industry," said James Liang, Chairman and Chief Executive Officer of Ctrip.

"We are thrilled to have Ctrip as our strategic investor. Ctrip is the clear leader in the online and mobile travel industry in China. This investment will enhance the strategic cooperation between the two companies and will ultimately benefit our customers and partners," said Zhi Xiang Wu, Chief Executive Officer of LY.com.