Business Context and Reporting Period
Company: Ctrip.com International, Ltd. (Nasdaq: CTRP)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Third Quarter ended September 30, 2008
Filing Date: November 18, 2008
Business Overview: A leading travel service provider in China offering hotel accommodations, airline tickets, and packaged tours to business and leisure travelers.
Key Financial Metrics
| Metric | Q3 2008 (RMB) | Q3 2008 (USD) | YoY Change |
|---|---|---|---|
| Net Revenues | 370 million | 55 million | +15% |
| Gross Margin | 77% | - | -3% (vs 80% in Q3 2007) |
| Income from Operations (GAAP) | 107 million | 16 million | -4% |
| Income from Operations (Non-GAAP) | 138 million | 20 million | +3% |
| Net Income (GAAP) | 104 million | 15 million | -5% |
| Net Income (Non-GAAP) | 136 million | 20 million | +2% |
| Diluted EPS per ADS (GAAP) | RMB 1.52 | US$ 0.22 | - |
| Diluted EPS per ADS (Non-GAAP) | RMB 1.97 | US$ 0.29 | - |
| Cash and Short-term Investments | 1.4 billion | 207 million | - |
Note: Non-GAAP figures exclude share-based compensation charges of RMB 31 million (US$ 5 million).
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 15% year-over-year to RMB 397 million. Net revenues also rose 15% to RMB 370 million.
- Segment Performance:
- Hotel Reservations: Revenue up 6% YoY (RMB 186 million) due to increased booking volume, though down 5% sequentially.
- Air-ticketing: Revenue up 21% YoY (RMB 166 million) driven by a 37% increase in sales volume, partially offset by a 12% decrease in commission per ticket due to lower ticket prices.
- Packaged Tours: Revenue up 37% YoY (RMB 28 million) due to increased leisure travel volume.
- Expense Increases:
- Product development expenses rose 28% YoY to RMB 61 million.
- Sales and marketing expenses increased 12% YoY to RMB 71 million.
- General and administrative expenses increased 24% YoY to RMB 45 million, largely due to personnel resources and share-based compensation.
- Profitability: GAAP operating margin declined to 29% from 34% in Q3 2007. Non-GAAP operating margin was 37% compared to 41% in the prior year.
- Tax Rate: The effective tax rate increased to 17% from 15% in Q3 2007 due to the application of the new PRC Enterprise Income Tax Law (25% statutory rate).
Guidance, Outlook, and Risks
- Management Commentary: CEO Min Fan noted that despite a tough environment for the travel industry in China, Ctrip outperformed peers with healthy revenue growth. The company is focusing on gaining market share and strengthening leadership.
- Outlook: For the fourth quarter of 2008, Ctrip expects year-on-year net revenue growth to be in the range of 5-15%.
- Risks and Uncertainties:
- Slowdown of economic growth or economic downturn in China.
- Inflation and disruptions in financial markets affecting the global economy.
- Declines or disruptions in the travel industry.
- Volatility in the trading price of Ctrip's ADSs.
- Reliance on relationships with travel suppliers and strategic alliances.
- Risks associated with PRC laws and regulations governing internet content providers.
Investor Verification Checklist
- Verify the impact of the new PRC Enterprise Income Tax Law on future effective tax rates.
- Monitor the trend in air-ticketing commission rates versus sales volume to assess margin sustainability.
- Review the reconciliation of GAAP to Non-GAAP results to understand the recurring nature of share-based compensation charges.
- Assess the company's ability to maintain the 5-15% revenue growth guidance amidst global economic volatility.
- Confirm the liquidity position given the cash balance of RMB 1.4 billion against operating expenses.