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eLong, Inc. (NASDAQ:LONG)

Q4 2006 Earnings Call

March 8, 2007 8:00 pm ET

Executives

Raymond Huang - IR Manager

Tom SooHoo - CEO

Tony Shen - Interim CFO

Analysts

Ming Zhao - SIG

Michael Millman - Soleil Securities

Chang Qiu - Forun Technology

Eddy Lang - Deutsche Bank

Ryan Li - Goldman Sachs

Bruce Becket - Bruce Asset Management

Presentation

Operator

Good morning, good afternoon, and good evening to all participants, and welcome to eLong’s Fourth Quarter 2006 Earnings Report.

For the duration of the presentation, all lines will be placed on a listen-only mode. There will be an opportunity to ask questions after the presentation. At that time, I'll provide you with the instructions on how to register for your questions.

This call is being recorded at the request of the hosting company for replay purposes. If you have any objections, you may disconnect at this time.

I would now like to hand the call over to our moderator today, Mr. Raymond Huang, and I'll be standing by for the Q&A session. Please go ahead, sir.

Raymond Huang

Hello, everyone. Thank you for joining eLong’s fourth quarter 2006 conference call. Today, Tom SooHoo, our CEO, will make some remarks about the quarter followed by Tony Shen, our Interim CFO, who will provide greater details on our financial results. We are also joined by Chris Chan, our incoming CFO. Following their prepared remarks, Tom and Tony will be available to take your questions.

Before the management’s presentations, please allow me to read our Safe Harbor statement. During this conference call, representatives of the company will make forward-looking statements. 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 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 number 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 eLong’s filings with the SEC, including its Form 20-F, as well as the risk factors described in our Form 6-K, which will be filed with the SEC in connection with our press release and this conference call, for a discussion of important factors that could affect future results.

Our press release and this call include discussion of unaudited GAAP financial information, as well as some unaudited non-GAAP financial measures. Our release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures, and is available on the Investor Relations section of the eLong website at www.elong.net.

I will now turn the call over to our CEO, Tom SooHoo.

TRANSCRIPT SPONSOR

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China Direct (ticker: CHND.OB) is a diversified management and consulting company. Our mission is to create a platform to empower medium sized Chinese entities to effectively compete in the global economy. As your direct link to China, our organization serves as a vehicle to allow investors to participate directly in the rapid growth of the Chinese economy.

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Tom SooHoo

Thank you, Raymond. Hello everyone and thank you all for being on this call. The fourth quarter was a challenging quarter with regards to delivering on our sales and expectations.

I am disappointed that we fell short of the revenue guidance we gave in the fourth quarter. I would like to elaborate on some of the causes and actions that we are taking to address this.

In the third quarter release, I announced some management changes in both sales and marketing. It has taken some time for this organization to integrate. Through the transition, we have encountered some executional issues in the area of direct sales channel management as well as online marketing.

As the new organization assesses the current sales mix, we’ve rationalized some channels. We’ve cut some high costs, as well as adding some other channels. This has impacted our short-term new customer acquisition that we expect will result in improved results in due course.

We have also organized internally to improve our discipline and our execution, ensuring the best practices across all departments in sales. We are also facing a competitive environment, chasing the troubled dollar. This has resulted in loss of several business development deals that have affected our room night revenues in the short-term.

Furthermore, competitive marketing activity and spend in our space has also increased through the quarter, which has affected our brand presence and the ability to drive top-line new customer acquisition. At the same time, the marketing activities that we did conduct through the quarter, did not reach our expectations.

This has prompted us to take a more rigorous view of our ROI returns on marketing spend and we will continue to do so, as we improve our internal analysis and prepare for an upcoming marketing campaign.

Sales and marketing will continue to be an area of focus for us going forward through 2007. And with the organizational and channel changes we are making, I am confident that we will be able to create more balanced, broad-based channels that we hope to result in more sustained new customer acquisition going forward.

Despite the top-line challenges we faced in the fourth quarter, we have made significant operational and financial progress in 2006. We achieved 39% growth in total revenues with only a 10% increase in total operating expenses. Service development increased only 15%, while we made significant web improvements to the homepage, hotel and community content, as well as to the domestic and international air booking platform.

I would like to provide further detail on our new international search platform. For the first time, customers are able to search actual prices and availability for international routes on the website. With this new functionality, customers can quickly view a complete range of products to the destination of choice, sorted by lowest prices.

This system currently provides fares to over 300 international destinations departing from 13 Chinese cities. Concurrently, we upgraded our user expense for domestic air booking platform. The new site includes a variety of tools that give customers speed and flexibility to search results either by price or by time of departure, another first in the industry function.

We are excited about the improvements to the air platform and although our objective of creating a robust scale of own efficient air fulfillment platform has not been completed, we are well on track.

During the quarter, we also re-launched our destination guide function using open editing wiki technology, which allows editors to edit and to pen pages with updated information. The new destination guide will improve our interaction with travelers and our customers and hopefully increase traffic to our website.

We also added a quick-to-call functionality on our website, which gives customers searching on the web the flexibility to speak and book directly with our call center agents going forward.

We believe these enhancements along with the other innovations we launched throughout 2006, deliver a superior shopping and booking experience for our travelers and position us well for future ramp-up in growth.

Let me now review with you the financial progress we made in our business in the fourth quarter.

On the top-line, our travel revenues grew 24% year-over-year, and decreased 7% sequentially to RMB67.1 million. On the bottom-line, we had an operating loss of RMB1.3 million. Excluding the impact of non-cash stock compensation amortization, we would have recorded operating income of RMB2.2 million. We had a US GAAP net loss of RMB1.8 million and adjusted income of RMB13.5 million.

On the hotel side, solid 23% year-over-year hotel growth to RMB56 million confirmed the strength of our hotel products. At the end of the fourth quarter, we offered discounted rates at a choice of 3,505 hotels in 294 cities across China, which was up over 13% from the slightly fewer than 3,100 hotels in 278 cities in the corresponding period a year ago. This is an evidence of our continuing efforts to provide better products and service to our customers.

In December 2006, approximately 73% of our bookings were done through guaranteed allotment as you compare to 78% in September 2006 and 75% in December 2005. So, through the guaranteed allotment, we can give our customers early conformation of the availability of the rooms, which contributes to a better customer experience. We intend to continue expanding this service.

With respect to the air business, our air ticketing revenues totaled RMB9.6 million, up 27% year-over-year and down 13% sequentially during the fourth quarter of 2006. As of the end of the fourth quarter, our users were able to book air tickets in 57 cities across China. We will continue to invest in our air infrastructure, and hopefully continue to diversify our revenue base.

During the fourth quarter, we were able to continue to expand our customer base by adding 88,000 new customers, as compared to 84,000 in the corresponding period a year ago, and 90,000 in the previous quarter. At the end of December, we had 1,072,000 cumulative customers, an increase of 280,000 compared to the end of 2005.

Finally, a few comments on the organization. eLong's Board of Directors has elected, Henrik Kjellberg to be its Chairman, effective March 10, 2007. Mr. Kjellberg is one of Expedia Inc.'s representatives on eLong's Board. Barney Harford will remain a member of the eLong's Board of Directors. Mr. Kjellberg is familiar with our company's operations and management, since he has been on the Board since October 2005.

I am also happy to announce, the appointment of Chris Chan as CFO, effective March 10, 2007. Chris comes to eLong with an extensive finance experience and accounting experience in both technology and FMCG organizations, including General Electric, Sun Microsystems, and Pepsi International. I would also like to take this opportunity to thank Tony Shen for his contribution during his time with eLong.

In closing, we remain encouraged about the long-term growth of the business and believe that we are making fundamental improvements to our product and service offerings that will help us achieve our mission of enriching people's lives through the freedom of independent travel.

Let me now turn the call over to Tony Shen, our Interim CFO, who will review the financial results in greater detail.

Tony Shen

Thank you, Tom. Let me give you an overview of our fourth quarter results, starting with our statement of operations, followed by our balance sheet. Our fourth quarter travel revenues, which were RMB67.1 million and comprises 96% of total revenue, grew 24% year-over-year and decreased 7% sequentially.

Revenue from hotel commissions for the fourth quarter totaled RMB56 million, a year-over-year increase of 23% from RMB45.6 million in the prior year quarter, and a sequential decrease of 2% from RMB57.4 million in the previous quarter. The 23% year-over-year increase was primarily due to higher room volume accompanied by higher hotel commission per room night.

Hotel room nights booked through eLong totaled 860,000 in the fourth quarter, up 19% from 724,000 in the corresponding period a year ago, and down 4% sequentially from 893,000 in the third quarter due to the lower demand in the fourth quarter.

Hotel commissions per room night were RMB65 in the fourth quarter of 2006, up 3% from RMB63 in the corresponding period a year ago, and up 2% from RMB64 in the previous quarter.

Our hotel commission rate of 14.9% was up 50 basis points year-over-year from 14.4% in the corresponding period a year ago and down 48 basis points sequentially from 15.3% in the previous quarter.

Our fourth quarter 2006 average daily rate of RMB437 was higher than RMB421 in the previous quarter. This sequential ADR increase was primarily because the previous quarter included the summer and the holiday periods, which are characterized by more leisure travel that typically consists of a higher percentage of bookings at more moderately priced hotels.

Revenue from air ticketing during the fourth quarter totaled RMB9.6 million. A year-over-year increase of 27% from RMB7.6 million in the prior year quarter and a sequential decrease of 13% from RMB11 million in the previous quarter.

Volume in air segment sales totaled 269,000 in the fourth quarter, an increase of 25% from 215,000 in the corresponding period a year ago and a decrease of 1% from 273,000 in the previous quarter.

Commissions earned per air ticket in the fourth quarter were RMB36, which is RMB5 lower than the previous quarter, due to a decrease in the average ticket price caused by competitive airline pricing.

The average ticket price in the fourth quarter of 2006 was RMB736 as compared to RMB867 in the third quarter. The commission rate in the fourth quarter was 4.8% as compared to 4.6% in the corresponding period a year ago, and 4.7% in the previous quarter.

Our other travel revenue in the fourth quarter of 2006 was RMB1.5 million, a year-over-year increase of 79% from RMB813,000 in the prior year quarter and a sequential decrease of 62% from RMB3.9 million in the previous quarter. The sequential decrease was attributable to RMB2.6 million in revenue recorded when the related contract was finalized in the third quarter of 2006 for inventory procurement services provided to Expedia by eLong for the period from January 2005 through September 2006.

Our non-travel revenue, which was 4% of our total revenue in the fourth quarter, consisted mainly of non-travel related short messaging revenue and all online advertising on our website. The non-travel business is not the core focus for eLong going forward.

Gross margin in the fourth quarter was 76%, down 4% from 80% in the corresponding period a year ago and down 1% from 77% in the previous quarter. The year-over-year reduction in gross margin was a result of reduction in higher margin non-travel revenue, additional compensation and benefits for our call centers employees, and a slightly increased proportion of revenue contributed by the air ticketing business.

Service developments, sales and marketing, and general and administrative expenses for the fourth quarter of 2006 were RMB49.7 million, a year-over-year decrease of 17% from RMB59.7 million in the prior year quarter, and a sequential decrease of 3% from RMB51.4 million in the previous quarter. The year-over-year and sequential decreases indicated our continuing efforts in improving operating leverage.

Our adjusted income was RMB13.5 million in the fourth quarter as compared to an adjusted loss of RMB1.9 million in the prior year quarter, and an adjusted income of RMB16.6 million in the previous quarter.

Let me now make a few comments on our balance sheet. As of December 31, 2006, the company's cash and cash equivalents balance was US$153.7 million. We intend to continue to use our cash balance to enhance our organic growth and consider strategic acquisitions.

During the fourth quarter, we had capital expenditure of RMB5.1 million and our depreciation expense was RMB3.3 million. Also as of December 31, 2006, the company's additional paid-in capital surplus was RMB1301.3 million, which increased due to the proceeds received from a related party purchaser in the fourth quarter for the sale of one of our division operating an interactive online dating community.

And finally our business outlook for the first quarter of 2007. eLong expects total revenues for the first quarter of 2007 within the range of RMB62 million, which is US$8 million to RMB66 million, which is US$8.5 million, an increase of 16% to 23% from the first quarter of 2006.

After the disposal of most non-travel business, our non-travel revenue will be very small, so going forward we will only give total revenue guidance.

This concludes the financial review. Tom and I look forward to any questions you may have. Moderator, you could now open the call for questions.

Question-and-Answer Session

Operator

Yes, thank you sir. (Operator Instructions). Our first question comes from the line of Ming Zhao calling from SIG. Please go ahead sir.

Ming Zhao - SIG

Thank you. Good morning Tom, Tony and Chris. I have a couple of questions. First question, on the air ticket pricing. You mentioned that there is a fierce competition, so your ASP from that has come down. But it seems like from your competitor's number, it's not the case. Can you comment on that please, and do you think in the Q1 or in the first half of '07 we are still going to see this trend?

Tom SooHoo

Ming, hi, this is Tom. There have been two effects in Q4 in terms of reduction, in terms of average rate on tickets. One of them is that we did make some changes to our product offering in international. And we focused our product group more on selected routes that brought down the average ticket price. But that wasn't the biggest effect, the biggest effect is indeed from our numbers that indicate that the average ticket price has come down and. I can't comment on the other competitors, but as from our research and indications in the market is that there is a significant supply increase starting in Q4 and recede through Q1, which has brought down average ticket prices.

Ming Zhao - SIG

Okay. The second question is, I heard this but I didn't get this. Tony, you mentioned the online dating website you sold to a related party. Did it happen in Q4 or Q1?

Tony Shen

Actually that happened in Q4 and then the accounting treatment is also included in our Q4 financial statements.

Ming Zhao - SIG

So is that the discontinued operation, you booked at a loss?

Tony Shen

Yes. The majority of the gain is actually recorded in the equity section, because of the common (inaudible) by the buyer and by the same ultimate owner. So the discontinued operation is only a portion of the loss and related onetime items, booked in that division.

Ming Zhao - SIG

Okay. So, let me understand it, so part of the change of course is reflecting on the balance sheet. And part of that on the P&L is in the total discontinued operations? Is that correct?

Tony Shen

Yes.

Ming Zhao - SIG

So actually you sold this for a loss in other words?

Tony Shen

No. The gain is recorded in the equity pool. But for the loss on the P&L, that's correct. But for the company and for our shareholders, we actually got a very reasonable price. And it's just that it's accounted for in an increase of additional paid-in capital.

Ming Zhao - SIG

Okay. And last question, maybe a more general the question; because since eLong went public, there have been quite a few management changes. And now you guys are talking about some mid-management changes in the sales department that has caused some poor performance in the Q4.

My question is, could investors expect the current management structure that has already stabilized? And also, is there any plan that you guys want to come to the States to meet the investors? Thanks.

Tom SooHoo

To reference with the question regarding the sales team is that, yes, when you make a change at the top particularly in lieu of the other changes that we have made, about the CAO, the sales and marketing organization has been going through a pretty big transition in terms of people. We are pretty excited about the changes though. We think that the team is stronger, stronger than it has ever been, particularly in relation to sales and marketing. The integration amongst that function is also well underway.

Now be also aware that China market is a very competitive market for labor. So it's very difficult to anticipate the stability issues. But we are making strong efforts in all of the functions to provide that stability.

I am very happy with the management team that we have in place. We believe that over the last year the changes we’ve made have been very positive for the business. In terms of coming to the US, we certainly considered us to have a chance to come and visit some of the folks over there.

Ming Zhao - SIG

Okay. Thank you very much.

Tom SooHoo

Thank you.

Operator

Thank you, sir.

Tom SooHoo

Next caller please.

Operator

Our next question comes from the line of Michael Millman calling in from Soleil Securities.

Michael Millman - Soleil Securities

Thank you. Could you talk about what Expedia's goals are for the company and how much time do you have to reach those goals?

Tom SooHoo

Hi, Michael. This is Tom. The Expedia's goals and the eLong's goals are aligned from our constant and frequent discussions with the company. Clearly, our objective in this market is to be the leading online travel company. And that is the expressed intent and purpose for which Expedia purchased it.

In terms of timeline, Expedia has also aligned with us as we are in this business to make a sustained long-term growth to get to that position. We, as the management, have the fiduciary responsibility to achieve that as quickly as we can. And the positions, the projects, and the infrastructure we’re putting in place, we feel is going to get us there in due course.

Michael Millman - Soleil Securities

Regarding the goal to be the leading OTA, I guess we need a little more handholding maybe on that, because what we are saying is that Ctrip is three times as large, and they continue to grow faster. So, it's a little difficult to know if you expect to increase your growth rate very, very significantly. Or you expect to make some acquisitions to bulk up the company? Or you expect their growth rate to significantly decline? Or maybe there is something like Plan B that I didn't mention?

Tom SooHoo

The focus of the company, as I had mentioned in several previous calls is really to strengthen the team and prove our level of operations and connect with consumers. Through the last year or so, being in the position, I feel pretty good about the team. I think we've got a strong team that's getting better.

Some of the campaigns and the initiatives we put in the place in '06 are continuing to plan. We've strengthened the sales and marketing organization. We've continued to make progress on the air platform. That will be coming through as we continue with those projects through 2007.

From our view, the market for China continues to be on a very rapid growth pace and still in early ages. So, we still think there is lot of opportunity to take the position of leadership going forward in the future.

Michael Millman - Soleil Securities

And finally, could you comment on, if you're seeing particular competition from Mango City?

Tom SooHoo

I'm sorry, can you repeat the question?

Michael Millman - Soleil Securities

Can you talk about what kind of competition you're seeing if any from Mango City?

Tom SooHoo

Absolutely, Mango has made a significant investment in marketing and brand. 2006 was particularly peak investment in marketing and brand. 2006 was a particular peak season of Q2 and Q3. They are changing some of the dynamics of the industry, clearly creating more choices for consumers, which puts more impetus on us to make sure that we execute well on all aspects of the business, including service, including sales, including products. And so, it only heightens our need to focus on those three initiatives that we talked about.

So, this is again consistent with what we talked about in the past, which is our ability to serve customers more effectively and get the brand extended as fast as we can. It’s also very important.

Michael Millman - Soleil Securities

Can you just comment on their pricing strategy?

Tom SooHoo

I can’t really comment on Mango’s pricing strategy. I am not that familiar with it.

Michael Millman - Soleil Securities

You find them pricing below your prices?

Tom SooHoo

Like I said I am really not that familiar with Mango’s pricing strategy. So, my apologies, I will not be able to answer that.

Michael Millman - Soleil Securities

Thank you very much.

Tom SooHoo

Thank you.

Operator

Thank you, sir. Our next question comes from the line of Chang Qiu calling in from Forun Technology. Please go ahead.

Chang Qiu - Forun Technology

Great. Good morning, Tom and Tony.

Tony Shen

Hi.

Chang Qiu - Forun Technology

I guess alongside, I maybe asking a follow-up with [Michael's] question. Now with a stronger team in place, are you confident or do you have confidence that your growth will pick up sometime in '07 or later?

Tom SooHoo

Yes. Actually, we are seeing pick-up in some of our areas of the business based on the initiatives we set up in Q4, even as soon as January and February. And so, again, the opportunity for the organization to integrate and create impactful campaigns in the market is going to take a bit of time. And then, we will continue to work through those. And we are actually ramping up and preparing to put a campaign together for a lot of sometime in Q2.

Chang Qiu - Forun Technology

Okay. I guess I understood Q4 maybe in a way, at least, even Ctrip in their annualized accounts for the quarter, mentioned Q4 sometimes is a slower quarter. I mean in your case maybe in addition to that, you have, as you mentioned, management change. So in a sense, we should treat Q4 as separate in the history of eLong's reporting?

Tony Shen

Actually in seasonality, Q4 and Q1 usually are slower, and Q2 and Q3 are stronger. As you can see in '06, we had Q2 and Q3 stronger with some profitability showing. So, we are investing our resources to prepare for the Q2 and Q3 pickup in '07.

Chang Qiu - Forun Technology

Okay, all right. Thank you.

Operator

Thank you, sir. Our next question comes from the line of [Eddy Lang] calling in from Deutsche Bank. Please go ahead, sir.

Eddy Lang - Deutsche Bank

Good morning, guys. Could you talk a little bit about the trends in your hotel partners? We see there is a slight decrease sequentially. Should we expect growth in the number of hotel partners going forward, or will it be stable at this level?

Tom SooHoo

We you should expect an increase. The slight reduction you saw in some of the hotel partners from Q4 to Q3 was less to do with any change in strategy, more to do with more refinement of improving optimization of which partners we choose to go with and ones we don't. So we stopped some relationship with some hotel partners due to the low scores in terms of hotel rating system. This again is a function of our continued opportunity to improve partnership with the hotels that are important to us.

Eddy Lang - Deutsche Bank

Another follow up on the hotel side is that, you mentioned that on the air side competition is popping up. So, how about on the hotel side? You see the leaders are in a better position, or you also see competition is coming?

Tom SooHoo

Hotel is also another challenging business. It is very fragmented, as you know from a supply point of view. So, our view is that that our position as a national supplier reservation center is still a little fungible one. But as you know some of the hotels are going direct in terms of acting with customers. There are also local regional players that have presence. So, there is continued competition in this area as well.

Eddy Lang - Deutsche Bank

Okay, thank you.

Operator

Thank you, sir. Our next question comes from the line of Ryan [Li] calling in from Goldman Sachs. Please go ahead, sir.

Ryan Li - Goldman Sachs

Yes, I have two questions. The first is about the air ticketing. I am just wondering like what is the percentage of e-ticket as a percentage of the total air ticket sold within the quarter?

Tony Shen

In Q4, it's 86%.

Ryan Li - Goldman Sachs

It's 86%. Okay. The second question is about sales and marketing expenses. Because I observe that there is a significant increase in the percentage of sales and marketing expenditure as a percentage of the total revenue. So, you explain what is the case?

Tom SooHoo

Yeah, there is a naturally a very significant change here. If you look at our Q1, Q2, it's around 40% of revenue. And because our Q3 was seasonally strong and that the revenue number there was higher, so Q4 with lower revenue you would see that percentage of spending is slightly higher. But our strategy has not changed through the quarters.

Ryan Li - Goldman Sachs

All right. That is it. Thank you.

Operator

Thank you, sir. (Operator Instructions).

Tony Shen

Okay moderator, if no more questions, we would like to conclude the call.

Operator

Actually, sir, we've a follow-up question, sorry, coming from the line of Chang Qiu calling in from Forun Technology.

Tom SooHoo

Okay.

Chang Qiu - Forun Technology

Right. I just have one follow up question. Regarding guidance we have the total revenue for Q1, maybe I am just a little bit of more specific, I think on the air ticket side, I think you can do over 20% year-over-year growth. So my question for you is, on the hotel side, can you do over 20% in year-over-year growth?

Tony Shen

It's hard to answer that question right now. We usually just give the guidance for the whole business instead of specific line. But as Tom mentioned before, the competition remains to be very fierce. And also, the pressure on our, as mentioned before, commission for ticket. So, all the reasons combined, we put out such a Q1 revenue guidance.

Chang Qiu - Forun Technology

I see. Okay. All right. Thank you.

Operator

Thank you, sir. (Operator Instructions). We have question coming from the line of [Bruce Becket] calling in from [Bruce Asset Management]. Please go ahead sir.

Bruce Becket - Bruce Asset Management

Earlier in your presentation, I thought you may have said that without some compensation expenses, you would have been profitable in the quarter. Did I misunderstand that?

Tony Shen

Actually, you did not. Some stock compensation, some non-cash compensation numbers were usually being fast. And also some non-cash charges like amortization of goodwill. If you put those back, we would have been slightly profitable.

Bruce Becket - Bruce Asset Management

In the fourth quarter?

Tony Shen

In the fourth quarter.

Bruce Becket - Bruce Asset Management

When is there a chance that you might regain that profitability? Would it be the fourth quarter of this year?

Tony Shen

Well, as we mentioned before, we are continuing investing in our business, in preparation for Q2 and Q3, which are the traditionally strong seasons.

Bruce Becket - Bruce Asset Management

Yeah, I heard that. But you already were profitable in the fourth quarter. Could you be profitable in the fourth quarter again?

Tom SooHoo

Hi, this is Tom. As you are aware, we were profitable in Q2 and Q3 of '06, right. And the main reasons for our miss in terms of our top-line revenues for Q4, is actually in the demand creation in the sales side.

As I mentioned, we have made a lot of changes in the area. We are going to continue to make some continued investments in that area. It's difficult at this stage to predict, the effect that we'll have. We are optimistic that as we continue to put those plans together that's going to grow..

But as I mentioned you earlier, we are continuing to stay committed to building the right platform, in a consistent way. So that we have a good delivery of service and that may require investment for us going through in '07.

Bruce Becket - Bruce Asset Management

Okay. So you may have to invest more than you earlier thought you would to continue your revenue growth. Thank you.

Tom SooHoo

We are continuing to invest against the opportunity, which has been our objective ever since.

Bruce Becket - Bruce Asset Management

Yes. I recall that. Thank you.

Operator

Thank you, sir. (Operator Instructions). Mr. SooHoo and Mr. Shen, we have no more questions at this point of time.

Tony Shen

Okay. Please conclude. And I would like to thank everybody for joining us.

Tom SooHoo

Thank you.

Operator

Thank you. That concludes today's conference call. On behalf of eLong, I would like to thank you all for your participation in this conference. All lines may now disconnect and have a good day. Thank you.

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China Direct (ticker: CHND.OB) is a diversified management and consulting company. Our mission is to create a platform to empower medium sized Chinese entities to effectively compete in the global economy. As your direct link to China, our organization serves as a vehicle to allow investors to participate directly in the rapid growth of the Chinese economy.

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