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Qunar Reports Third Quarter 2014 Financial Results

12/02/2014| 10:45:41 AM|

Year on Year Revenue Growth Again Exceeds 100%.

BEIJING, Dec. 1, 2014 (GLOBE NEWSWIRE) -- Qunar Cayman Islands Limited (Nasdaq:QUNR) ("Qunar" or the "Company"), China's leading search-based travel commerce platform, today announced its unaudited financial results for the third quarter ended September 30, 2014.

Highlights for the Third Quarter of 2014

Total revenues for the third quarter of 2014 were RMB501.1 million (US$81.6 million), an increase of 107.8% year-on-year.
Mobile revenues for the third quarter of 2014 were RMB202.7 million (US$33.0 million), an increase of 445.1% year-on-year, representing 40.4% of total revenues, compared to 15.4% in the corresponding period of 2013.
Total Estimated Flight Ticket volume (TEFT) and Total Estimated Hotel Room-night volume (TEHR) for the third quarter of 2014 were 22.7 million and 10.0 million, respectively, an increase of 57.0% and 84.6% year-on-year.

"Momentum for revenue growth remained robust in the third quarter," said Chenchao (CC) Zhuang, chief executive officer and co-founder of Qunar. "Our focus on execution led to revenue growth of 108% year-on-year from a very strong base a year ago, driven by volume gains and healthy increases in both revenue per ticket and revenue per room night.

"I'm particularly encouraged by the progress we have made in our hotel direct business," Mr. Zhuang added. "Thanks to the rapid expansion of our directly-signed hotel network and continued development of technology infrastructure, direct sales contributed 51% of our total hotel volume for the quarter. Mobile continued to be a key driver of our growth, accounting for 40% of total revenue, 55% of TEHR, and 43% of TEFT."

"Our focused investments in technology and product sourcing continued to drive solid results," said Sam Sun, chief financial officer of Qunar. "In these areas and across all our business lines, we are committed to an aggressive but disciplined investment approach to drive long-term growth."

Third quarter 2014 Financial Results

Total revenues for the third quarter of 2014 were RMB501.1 million (US$81.6 million), an increase of 107.8% year-on-year and 25.2% quarter-on-quarter. Mobile revenues for the third quarter of 2014 were RMB202.7 million (US$33.0 million), an increase of 445.1% year-on-year, representing 40.4% of total revenues. Pay-for-performance ("P4P") revenues for the third quarter of 2014 were RMB476.4 million (US$77.6 million), an increase of 119.3% year-on-year and 25.8% quarter-on-quarter.

Among the P4P revenues, flight and flight related revenues for the third quarter of 2014 were RMB312.1 million (US$50.8 million), an increase of 104.1% year-on-year. Year-on-year P4P flight revenue growth was primarily due to a 57.0% increase in TEFT and a 30.0% increase in revenue per ticket.

P4P hotel revenues were RMB111.7 million (US$18.2 million), an increase of 98.1% year-on-year. Year-on-year P4P hotel revenue growth was primarily due to an 84.6% increase in TEHR and a 7.3% increase in revenue per room night.

Gross profit for the third quarter of 2014 was RMB362.9 million (US$59.1 million), an increase of 89.6% year-on-year. Gross margin for the third quarter of 2014 was 72.4%, compared to 79.4% for the corresponding period of 2013 and 73.6% for the second quarter of 2014. The year-on-year increase in gross profit during the quarter was primarily due to the significant increase in total revenues, and was partially offset by an increase in online payment processing fees, recorded in cost of revenues, which the Company began to incur in the first quarter of 2014.

Product development expenses for the third quarter of 2014 were RMB229.5 million (US$37.4 million), an increase of 153.1% year-on-year, primarily due to an increase in salary, welfare and other expenses associated with headcount increases. Excluding share-based compensation expenses, product development expenses were RMB215.7 million (US$35.1 million), and accounted for 43.1% of total revenues, compared to 35.5% for the corresponding period of 2013 and 41.8% for the second quarter of 2014.

Product sourcing expenses for the third quarter of 2014 were RMB99.8 million (US$16.3 million), an increase of 519.9% year-on-year, primarily due to an increase in product sourcing headcount. Excluding share-based compensation expenses, product sourcing expenses were RMB99.2 million (US$16.2 million), an increase of 529.3% year-on-year, and accounted for 19.8% of total revenues, compared to 6.5% for the corresponding period of 2013 and 16.9% for the second quarter of 2014.

Sales and marketing expenses for the third quarter of 2014 were RMB266.2 million (US$43.4 million), an increase of 189.6% year-on-year, primarily due to an increase in salary and welfare expenses as a result of increased headcount, as well as an increase in online marketing expenses and advertising and other promotion expenses. The headcount expenses under sales and marketing were primarily expenses related to staff with operational functions, including the Company's small call center staff, photographers, editors, and staff for data analysis. Excluding share-based compensation expenses, sales and marketing expenses were RMB263.0 million (US$42.9 million), an increase of 189.9% year-on-year, and accounted for 52.5% of total revenues, compared to 37.6% for the corresponding period of 2013 and 52.9% for the second quarter of 2014.

Online marketing expenses for the Company's Baidu Zhixin Cooperation for the third quarter of 2014 were RMB235.6 million (US$38.4 million), an increase of 59.6% quarter-on-quarter. The increase was primarily due to a significant increase in Zhixin-related page views acquired during the period. Online marketing expenses from the Zhixin Cooperation Agreement were non-cash expenses and recognized ratably over the period of service required to earn each tranche of warrants based upon the estimated exercisable number of the Baidu warrants and the fair value of the warrants at each reporting date.

General and administrative expenses for the third quarter of 2014 were RMB106.9 million (US$17.4 million), an increase of 267.1% year-on-year, primarily due to an increase in share-based compensation, salary and welfare expenses associated with headcount increases. Excluding share-based compensation expenses, general and administrative expenses were RMB58.8 million (US$9.6 million), an increase of 117.2% year-on-year, and accounted for 11.7% of total revenues, compared to 11.2% for the corresponding period of 2013 and 13.3% for the second quarter of 2014.

Operating loss for the third quarter of 2014 was RMB575.1 million (US$93.7 million), compared to RMB36.4 million in the corresponding period of 2013 and RMB429.0 million in the second quarter of 2014.

Operating loss for the third quarter of 2014 on a non-GAAP basis, which excludes online marketing expenses from the Zhixin Cooperation Agreement of RMB235.6 million, share-based compensation expenses of RMB65.6 million, and non-cash expenses relating to free user traffic contributed by Baidu of RMB0.3 million, was RMB273.6 million (US$44.6 million). Operating margin (non-GAAP) for the third quarter of 2014 was negative 54.6%, compared to negative 10.9% in the corresponding period of 2013 and negative 50.9% in the second quarter of 2014. The increase in operating loss was mainly attributable to continued investment in product development and product sourcing to drive business growth. The sequential increase in negative non-GAAP operating margin in the third quarter was primarily due to substantial headcount additions during the first half of 2014 and the full-quarter impact of headcount related expenses in the third quarter versus partial-quarter impact in the second quarter.

Net loss attributable to Qunar's shareholders for the third quarter of 2014 was RMB566.2 million (US$92.3 million), compared to RMB48.8 million in the corresponding period of 2013 and RMB421.6 million in the second quarter of 2014. The increase in net loss attributable to Qunar's shareholders was primarily due to reasons mentioned above.  Basic and diluted net loss per ADS for the third quarter of 2014 was RMB4.77 (US$0.78).

Adjusted net loss (non-GAAP), defined as net loss excluding online marketing expenses from the Zhixin Cooperation Agreement of RMB235.6 million, share-based compensation expenses of RMB65.6 million and non-cash expenses relating to free user traffic contributed by Baidu of RMB0.3 million, for the third quarter of 2014 was RMB264.7 million (US$43.1 million), compared to adjusted net loss of RMB38.7 million in the corresponding period of 2013 and adjusted net loss of RMB196.5 million in the second quarter of 2014.

Adjusted EBITDA (non-GAAP), defined as net loss before income taxes, interest expenses, depreciation and amortization, further adjusted to exclude online marketing expenses from the Zhixin Cooperation Agreement of RMB235.6 million, share-based compensation expenses of RMB65.6 million and non-cash expenses relating to free user traffic contributed by Baidu of RMB0.3 million, for the third quarter of 2014 was negative RMB245.4 million (US$40.0 million), compared to negative RMB18.8 million in the corresponding period of 2013 and negative RMB183.2 million in the second quarter of 2014.

As of September 30, 2014, Qunar had cash, cash equivalents, restricted cash, funds receivable and short-term investments of RMB1.6 billion (US$267.9 million). Qunar entered into a US$300 million revolving credit facility agreement with Baidu on February 27, 2014. The agreement has a term of three years and any drawdown bears an annual interest rate of 90% of the benchmark lending rate published by the People's Bank of China and shall be repaid within three years from the drawdown date. We may repay our outstanding debt obligation at maturity either by cash or by our shares. The applicable share conversion price will be determined by the prevailing share price at the maturity date. As of September 30, 2014, Qunar had yet to draw down on this credit facility. As of October 31, 2014, Qunar had 245,120,505 Class A ordinary shares and 111,622,758 Class B ordinary shares outstanding.

Business Outlook

For the fourth quarter of 2014, the Company expects year-on-year revenue growth in the range of 90% to 95%. This forecast reflects Qunar's current and preliminary view, which is subject to change.

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