eLong CEO Discusses Q4 2010 Results - Earnings Call Transcript

| About: eLong, Inc. (LONG)

eLong, Inc. (NASDAQ: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, eLong.com offers customers more than 130,000 hotels worldwide through our interface with Expedia. eLong.com 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.

In full year 2010, strong online hotel performance also drove our year-on-year revenue growth to 35% and drove improvement in gross margin and operating margin. Income from operations was RMB47.1 million, an increase of RMB35.9 million from our income from operations in full year 2009 and net income was RMB20.6 million, an increase of RMB0.7 million from our net income in full year 2009.

Our Q4 hotel booking business benefitted from improved online hotel conversion, due to our broader hotel inventory portfolio, our eCoupon program and leisure travel demand during the October National Day holiday and the last month of Shanghai World Expo.

In the fourth quarter, hotel commission revenue increased 25% compared to the prior year quarter, primarily due to higher volume, partially offset by lower commission per room night. Room nights booked through eLong increased 39% year-on-year to 1.7 million. Commission per room night decreased 10% year-on-year primarily due to the impact of our eCoupon program and mix shift to budget hotels. Hotel revenue now represents 69% of our total revenues, which is an increase from 68% in the prior year quarter.

Hotel commission revenue for full year 2010 increased 35% compared to 2009, primarily due to higher volume, which was partially offset by lower commission per room night. Room nights booked through eLong increased 49% year-on-year to 6.4 million. Commission per room night decreased 9% year-on-year primarily due to the impact of our eCoupon program and mix shift to lower average daily rate budget hotels.

Air ticketing commission revenue increased 8% for the fourth quarter of 2010 compared to the prior year quarter, driven by an increase in commission per segment, which was partially offset by a 3% year-on-year decrease in air segments to 568,000. Commission per segment increased 12%, due to a 16% increase in average ticket price and was offset by a decrease in air commission rates compared to the same quarter of the prior year.

Air ticketing commission revenue increased 28% for full year 2010 compared to 2009, driven by an 11% increase in air segments to 2.4 million and an increase in commission per segment. Commission per segment increased 16%, due to a 17% increase in average ticket price compared to the prior year offset by a decrease in air commission rates compared to the prior year.

Other revenue is primarily derived from advertising on our websites, travel insurance and packages. Other revenue increased 62% year-on-year for the fourth quarter of 2010, mainly driven by an increase of advertising revenue. Other revenue grew to 8% of total revenues from 6% in the prior year quarter.

Other revenue increased 59% year-on-year for full year 2010, mainly driven by an increase of advertising and travel insurance revenues. Other revenue grew to 8% of total revenues from 7% in 2009.

Gross margin in both the fourth quarter of 2010 and full year 2010 was 72% compared to 70% in both the fourth quarter of 2009 and full year 2009, mainly due to the faster rate of growth of our hotel business as compared to our air business, an increased proportion of online bookings and improved air revenue per segment.

Total operating expenses increased 12% or RMB8.2 million for the fourth quarter of 2010 compared to the fourth quarter of 2009. Total operating expenses were 62% of net revenues, a decrease of 6 percentage points compared to the prior year quarter.

Total operating expenses increased 24% or RMB58.2 million for full year 2010 compared to 2009. Total operating expenses were 62% of net revenues, a decrease of 5 percentage points compared to 2009.

Service development expense consists of expenses related to technology and our product offerings, including our websites, platforms, other system development, as well as our supplier relations team. Service development expense increased 31% in the fourth quarter of 2010 compared to the prior year quarter, mainly driven by an increase in headcount and higher employee wages. New service development hires were deployed to continue improving our online user experience and technology systems, as well as to expand our hotel coverage. Service development expense increased to 18% of net revenues in the fourth quarter of 2010 from 17% in the same quarter of the prior year.

Service development expense for full year 2010 increased 38% over full year 2009, mainly driven by an increase in headcount and higher employee wages. Service development expense increased to 17% of net revenues in 2010 from 16% in 2009.

Sales and marketing expenses for the fourth quarter of 2010 increased 7% or RMB2.6 million over the prior year quarter, mainly driven by increased hotel commission payments to third-party distribution partners and online marketing expenses, partially offset by reduced headcount. Sales and marketing expense decreased to 33% of net revenues in the fourth quarter of 2010 from 38% in the same quarter of the prior year.

Sales and marketing expenses for full year 2010 increased 26% over full year 2009, mainly driven by increased online marketing expenses, hotel commission payments to third-parties, loyalty point program expenses, and partially offset by reduced headcount. Sales and marketing expense decreased to 35% of net revenues in 2010 from 37% in 2009.

General and administrative expenses for the fourth quarter 2010 increased 7% compared to the prior year quarter, mainly driven by higher employee wages. General and administrative expenses decreased to 11% of net revenues in the fourth quarter of 2010 from 13% in the same quarter of the prior year.

General and administrative expenses for full year 2010 increased 5% over full year 2009, mainly driven by higher employee wages, partially offset by a decrease in professional fees. General and administrative expenses decreased to 10% of net revenues in 2010 from 14% in 2009.

OIBA or Operating Income Before Amortization in Q4 2010 was RMB17.4 million up 149% from RMB7.0 million in Q4 2009. OIBA margin was 14.0%, up from 6.9% in Q4 2009. OIBA for full year 2010 was RMB64.7 million up 172% from RMB23.8 million in 2009.

Other Income or Expenses, which represents interest income, foreign exchange losses and others, was Other Expense of RMB10.2 million in the fourth quarter of 2010, compared to Other Income of RMB1.2 million in the prior year quarter. The increased Other Expense was comprised primarily of RMB12.4 million foreign exchange losses, partially offset by interest income of RMB2.8 million. Due to the appreciation of the Renminbi against the US dollar, our Q4 foreign exchange losses were significantly higher than the RMB0.1 million foreign exchange losses in the prior year quarter.

Other Expenses were RMB19.6 million in full year 2010 compared to Other Income of RMB12.4 million in 2009, driven primarily by an increase in foreign exchange losses and a decrease in interest income. Due to the appreciation of the Renminbi against the US dollar, foreign exchange losses on our cash and cash equivalents and short-term investments increased to RMB25.9 million in 2010, from foreign exchange losses of RMB0.7 million in 2009. Interest income in 2010 decreased to RMB6.8 million, compared to RMB12.9 million in 2009.

Income tax benefit in the fourth quarter of 2010 was RMB1.7 million, compared to income tax expense of RMB2.6 million in the prior year quarter. The income tax benefit in the fourth quarter of 2010 was mainly driven by the reversal of a RMB3.7 million deferred tax assets valuation allowance due to the accumulated profitable position of one of our major entities.

Net income for the fourth quarter was RMB4.2 million, compared to net income of RMB1.0 million in the prior year quarter.

Net income for full year 2010 was RMB20.6 million, compared to net income of RMB19.9 million in 2009.

Adjusted EBITDA in Q4 2010 was RMB22.4 million up 84% from RMB12.2 million in Q4 2009. Adjusted EBITDA for full year 2010 was RMB84.1 million up 92% from RMB43.9 million in 2009.

Adjusted Net Income in Q4 2010 was RMB22.1 million up 309% from RMB5.4 million in Q4 2009. Adjusted Net Income for full year 2010 was RMB65.4 million up 100% from RMB32.7 million in 2009.

Moving to our Balance Sheet, I’d like to mention that as of the end of 2010, eLong held cash and cash equivalents, short-term investments and restricted cash of RMB1.0 billion or US$155 million. Of this balance, 32% or US$50 million was held in US dollars. In the fourth quarter of 2010, we converted US$53 million from US dollars to RMB to decrease our potential future foreign exchange loss in the event of additional appreciation of the RMB against the US dollar.

And finally, let me share with you our Business Outlook for the first quarter of 2011. We expect Q1 net revenues, net of business tax and surcharges, to be within the range of RMB111 to RMB121 million, an increase of 10% to 20% compared to the first quarter of 2010.

This concludes my remarks; and, Guangfu and I look forward to any questions you may have.

Moderator, if you would now open the call for questions.

Question-and-Answer Session


Thank you, sir. (Operator Instructions) Our first question is coming from the line of Ming Zhao from SIG. Please go ahead.

Ming Zhao – SIG

Thank you very much. Good morning, Guangfu and Mike. I have two questions here. The first question is on the hotel mix shift towards more budget hotel. Do you think your fourth quarter mix is already at the balanced structure meaning percentage-wise the budget hotel in the whole mix is stabilized going forward or do we still see this percentage of budget hotel going up in 2011?

Mike Doyle

Hi Ming, this is Mike. It’s difficult to say exactly where the budget hotel mix will settle. We’ve seen an increase each quarter now on six quarters running. We have stabilized a bit versus last quarter and about 35% of our room nights in the budget segment and this is up considerably from Q4 ‘09. We think that as the China consumer purchases travel for the first time and is purchasing travel online for the first time. Budget hotels represents an attractive product to them and we feel there is a lot of growth still in that segment.

Ming Zhao – SIG

Yeah I guess the reason I asked the question is I see your room night growth in the fourth quarter was very good, almost 40% year-over-year, but the revenue is up by 25% which is partly because of this shift. So going forward would you say that this gap between your volume growth and revenue growth will be narrower and narrower?

Mike Doyle

Yeah it’s difficult to say. We can comment on is the revenue per room nights decline of 10% in the quarter was driven by couple of factors. The coupon program and mix shift to budget slightly, budget hotels slightly offset by an increase in ADR. The coupon program is the bigger of the two impacts and so as the coupon program has expanded in popularity and customers have responded well to it, the percentage of room nights from that promotion has increased.

Guangfu Cui

Let me just add a couple of points here Ming. If you look at the expansion plans from the hoteliers here in China, and you are seeing that more new hotels are being build in the budget sectors and if you look at the demand side, you can still see that the online customers which is our primary focus customer and are primary products, the buy out of the our own website transaction are the budget hotels. So, demand for the budget hotels are quite high and the supply is also growing very robust here in China. So, it’s hard, as Mike said, it’s hard to see it but from the demand and supply, we can comfortably kind of project that budget hotel we will have another good year in China in 2011. So, we want to capture that demand online and we want to capture this segment of growth. Thank you, Ming.

Ming Zhao – SIG

Okay, thank you. And my second question is regarding your Q1 guidance, the year-over-year growth in the revenue I assume that most of the growth is coming from hotel and you are still de-emphasizing the air ticketing business. But if we look at the growth of the hotel, there is a deceleration from what you in the fourth quarter, which is already post the Expo. So, could you give us some assumptions you have behind your guidance?

Mike Doyle

Hi, this is Mike. We’re not going to break the guidance into product forecast but you’re right in your assumption that the growth is being driven by our hotel business, which is our primary focus. We had a year-on-year decline in air segment in Q4 as we announced minus 3% and we’re still seeing a continued deceleration of air segment volumes in Q1. So, it’s the slowdown in the air ticketing business which is reducing the overall business growth. But the hotel business where we’re focused is still seeing accelerated growth.

Ming Zhao – SIG

Okay. Thank you.


Thank you, sir. Moving over to the next question, it’s coming from the line of Fawne Jiang from Brean Murray. Please go ahead.

Fawne Jiang – Brean Murray

Good morning, Guangfu and Mike. First question is actually regarding your 2011 growth. Can you comment on the trend given we had World Expo for 2010 and what’s the general outlook for 2011 you see?

Mike Doyle

We’re only going to provide a guidance, top line guidance for our Q1 but we can’t speak to the macro environment which we feel optimistic about. Some of the same drivers that were in place in 2010 leading to our full year performance are still in place and we feel like the leisure customer again will fuel growth in 2011. As many players in the travel industry have stated, it’s difficult to think about the year-on-year growth comparables overlapping the actual period in Q2 and 3. So, we’re cautious there but believe that the macro trends are still very strong in 2011.

Fawne Jiang – Brean Murray

Yeah, thank you, Mike. The second question is actually regarding the competitive landscape for the online travel industry. It seems like quite a few new players have entered the space. Can you just comment on your view regarding the competition in 2011 and how would that potentially impact eLong?

Guangfu Cui

Yeah, I think you – this is Guangfu. eLong’s position is always to welcome competition and believe I think what you’re mentioning the new entrants, most of them are from the Internet giant. Their entrance of online travel, we will educate the market because they have a gigantic customer base and they will bring more users to the online market. Of course there is no doubt that intensified competition will put more pressure on eLong and especially in our ticketing business will cause more the entry, first we will emphasize on our business. So I think that we will see a lot of pressure on that and also put pressure on the hotel business too. However, we’re also clear about our competitive advantage. Number one, when we see competitive advantage, we specifically emphasize our advantage in the hotel business. As you know, we have established close cooperation with 17,200 domestic hotels and we can serve 130,000 international hotels offer to Expedia which means that eLong is largest online distributor of the hotel business here in China in terms of hotel offered.

Our second advantage is that we have the best-in-class service in both call center and websites and most of the newcomers, they don’t have operation capability and they don’t have the payment capability. However, eLong does have the best-in-class order of payment capability on both hotels and online tickets.

Number three, we are also the best-in-class user experience with guaranteed allotments from hotels and using this confirmation ability for majority of our hotel orders. So if you look at this, you would say that although some of our competitors have the traffic and users, however, we do have significant competitive advantage in the operation side. So we think we have our own advantage. We want to kind of be very clear about that and we are confident to address the challenges that the new entrance, newcomers play over the online travel industry and this is not the first time that this team has encountered significant serious challenges and we think we have been always impressed with the mindset of it can be done and we have confident that we will address this competent well. Thank you.

Fawne Jiang – Brean Murray

Thanks, Guangfu, and that’s very helpful. My next question is regarding your margin profile. It seems like for 2010 you have made solid improvement both on your gross margin as well as on your operating margin. Just wonder what’s your outlook on the margin front going forward?

Mike Doyle

We can’t provide exact dialogue on the margins but what I can tell you is the trends in 2010 drove and leveraged that both the gross margin and operating margin are still in place today. So, our gross margin improvement in 2010 was on the back of mix shift to hotel and mix shift to online transactions. Both hotel transactions and online transactions have a higher margin profile and we expect continued mix shift in 2011. On the operating margin side most of the leverage we saw within the G&A line where we improved from 14% of revenue to 10% of revenue in the full year, a little bit of leverage on the marketing side. But I wouldn’t expect additional leverage in any service development or sales and marketing. We have a lot of technology initiative that we plan to launch in the year and also feel like this is the right time to need to be aggressive on sales and marketing.

Fawne Jiang – Brean Murray

Got you. And congrats on a very good quarter. I’ll jump back to queue.

Mike Doyle

Thank you, Fawne.


Thank you. Our next question is coming from the line of Adam Krejcik from Roth Capital Partners.

Adam Krejcik – Roth Capital Partners

Hi. Thanks for taking my question. My first one has to do again just with the current environment in Chinese travel industry. I appreciate the fact that you guys are optimistic about 2011 and I think your competitors share that view. But I guess on the flip side, what are kind of the risks out there or what would cause you to be somewhat cautious, what are kind of the red flags, is it inflationary pressure, is it overall events that could potentially cause people to travel less or is it something that people aren’t talking about yet? Thanks.

Guangfu Cui

Thank you for your question, this is Guangfu. I would take that question and Mike can comment on that too. So, there are unique challengers to eLong business. I would say that given that we are online travel focus, our online mix is already 45% and we do see online travelers right now at the current demand is still on the broader sectors. So, that put pressures on our margin and then you have seen the inflation going up which put pressures on our overall human resources related cost. And so, we are actually at risk, so that’s why eLong is trying to care but take dramatic actions to reduce the pressures and deal with this type of challenges and as you know that we have cut the cash related transactions. When we say cash which normally also mean that you have to hand-deliver the all express deals, deliver the itineraries and collect cash from the customers which is really kind of a complex operation and put a lot of pressures. It has a leaner type of relationship with volume growth meaning that the air ticket volume growth on the catering section you need to add more people feeding with the printing tickets, deliver tickets, collecting cash, et cetera, et cetera. So, we have the term kind of made decisions to cut that business and to get rid of that business. That also put pressure in terms of growth. So, there is a risk that in China most of the customers are still the first by maybe still in the cash business. So, we may see the challenges of acquiring new customer into our business.

And then the cost of online marketing is going up significantly, especially on the cost per click from the from the search engine marketing because our primary marketing is spent on online marketing and then all of the online marketing programs, the initiatives we focus on the search engine marketing. The cost per click increase put a lot of pressure in our online marketing efficiency. So, what we are seeing is again a raise of conversion rates which is we’re trying to convert better versus the increase of the cost per click. So that puts unique challenges to our business. So that’s what I can see from our perspective, the overall market, as Mike mentioned, the demand is good and we still have confidence that the demand for leisure travel and business travel is going to be optimistic there. However, we are facing related to our competition some unique challenges to our business and so Mike do you have anything to comment? Nothing from Mike so, does that answer your question?

Adam Krejcik – Roth Capital Partners

Yeah. Actually can I, kind of follow-up on a different angle. I guess as we stand here at the beginning of 2011, as you kind of assess the environment, are you more confident about the next 12 months versus where you were a year ago at the beginning of 2010 and granted there was the World Expo but just without providing specifics, just trying to get your sense as you look out here over the next year?

Guangfu Cui

I wouldn’t say that more confident than our last conferences, we’re always confident about our basis to attract the challenges because the challenges, it’s a way of life and anybody in this online travel business or the Internet related business, you have seen past challenges, challenge is just a way of life here. So, we are taking that as advantage kind of challenges. However I do see the challenges are new, in the past the competition is quite simple, it’s just between our major competitor CTrip and eLong, now we’re seeing competition from different ankles, different business models, new challenges. However, we always remain clear minded about where is our focus, our focus is hotel, our focus is online hotel and we’re always clear about our advantages, I’ve just mentioned that. We have corporation with, we have most hotels than anybody else here in China, we have payment capability most of competitors don’t have and we have the capability of better service and some of the competitors they don’t have that. So, that’s our new competitiveness. And in the 2010, 2011 we do want to have continue the route of strengthening our advantages in the area of the hotel offering. We will offer more hotels and we’ll expand further in the hotel coverage network.

And another ongoing we need to deal with is pricing meaning that we want to, we really work harder to putout consumer values by offering competitively priced products to consumers. So, that’s a new, I would say, the element to our strategies in the past. We have been using coupon as the way to incent and motivate customer transacting online, buying from us and in the New Year we think that we need to provide additional incentive, additional value and additional feeding to customers. That means we need to work creatively with our partners, work intermediately in terms of business models, transaction models and that is what we need to add the new angle of competition in terms of price competitiveness. Thank you.

Adam Krejcik – Roth Capital Partners

Okay, that – I appreciate the answer. Just switching gears, if I could maybe ask one more question just on, you mentioned earlier about the budget hotel customer typically being new to the travel industry. I was just wondering could you share with us, it seems like a lot of the large budget economy hotel operators also have the large membership network. And so I understand you’re also partnering with them. But do you feel like a lot of these customers are recurring or do they perhaps are not as sticky or as loyal as some of the mid-level or higher-end customers because perhaps they join the individual economy hotels membership network, just trying to understand that portion of the business little more. Thank you.

Guangfu Cui

Yeah, thank you. I think you’re right in terms of that our relationship with the budget hotel is cooperation at the same time we have competition but I aside the cooperation is overweight the competition because the budget hotel expanding very fast, we need new customers, we need to make sure that there strategy is expanding. If you ask any budget hotels here in China, the primary goal will be expanding and other networks to add more hotels to become number one because most of the hotels in budget sector we believe the scale. So if they want to expand faster and reach small status and make all the new openings successful they need eLong as OTA to bring customer to them. Of course there is competition there they are also doing direct selling however we both emphasize we both realize the value of that eLong can bringing to the hoteliers. So when we sit down together discussing 2011 and we have seen that the budget hotel recognize the value eLong bring to them and we are seeing them to have put a lot of disciplines in terms of working with the eLong and we don’t see that relationship kind of I’ll say that relationship actually improve and are going to improve in 2011. Thank you.

Adam Krejcik – Roth Capital Partners

Thanks very much.


Thank you sir for your questions. (Operator instructions) Thank you. We have a follow up question from Fawne Jiang. Please go ahead.

Fawne Jiang – Brean Murry, Carret & Co

Guangfu and Mike, could you comment on the trend you have seen so far for first quarter and how does that early Chinese New Year impact you so far?

Mike Doyle

I think all required to say on Q1 trends is that we have seen a continued deceleration of our segment volumes. The calendar shift in Chinese New Year does make forecast in Q1 a bit more challenging. We haven’t yet left the holiday period from last year and so that’s resulting us being cautious in planning for the full year numbers. But we haven’t seen any other material differences in our business that are required to share right now.

Fawne Jiang – Brean Murry, Carret & Co

Got you. Any comments on the air commission rate?

Mike Doyle

Sure. On air commissions, as I mentioned earlier in the call, our revenue per segment was up pretty considerably in the quarter, I think 12% revenue increase on a 16% average ticket value increase. So, it does imply a slight reduction in air commission rates both for the quarter and for the full year but we’re still seeing a healthy rate of growth in revenue per segment. We don’t have an outlook for 2011 on air revenue commission rate.

Fawne Jiang – Brean Murry, Carret & Co

Got you. What’s the acquisition plan for 2011, could you comment on is there any potential target you’re looking at?

Mike Doyle

Yeah, so we always take a pretty aggressive stance on looking at new acquisition opportunities. We obviously have a lot of cash. We’ve invested a fair amount of energy and financial resources and building out our hotel network and improving our website booking platform. Both of those assets are very scalable and so our primary motivation has been on aggregating demand. So, we announced this quarter we’ve made an investment in an online hotel booking site called Zhuna.cn and this is definitely within the same investment pieces which is to aggregate demand and bring more users to our site. We will continue to look for acquisitions like that in 2011 as well.

Fawne Jiang – Brean Murry, Carret & Co

Thanks, Mike. Last question, what’s your total employee number right now approximately?

Mike Doyle

We’re just shy of 1900.

Fawne Jiang – Brean Murry, Carret & Co

Okay. What’s the call center employee number?

Mike Doyle

We don’t have that breakout to share with you today but it will, it’s unchanged relating from last time we shared. It’s just over 1100 maybe.

Fawne Jiang – Brean Murry, Carret & Co

Okay, got you. Thank you.


(Operator Instructions) There appears to be no further questions at this point in time and I would like to hand the call over to the eLong management team for their closing remarks. Thank you.

Guangfu Cui

Thank you all for being on the call. As we had closed the 2010, we did have a great year in 2010 and the result was one of the best in eLong history. We are profitable in the second consecutive year and we accelerate our growth and we are very happy about the results in 2010. Yes, we are facing new and serious challenges and but this is not the first time. This team has faced these new challenges in tough time. As Einstein once said, in the middle of difficulties lies opportunity. And we have in this team always increased the mindset of it can be done and we are confident to address the new challenges. And the team looks forward to another quarter and we look forward to talking to you in next quarter’s earning release call. Thank you. Bye. Moderator, you can now end the call. Thank you.


Thank you. And that concludes today’s conference call. On behalf of eLong, we would like to thank everyone for participating in today’s conference. All lines may now disconnect and good day to you all. Thank you.

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