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Qunar Reports Second Quarter 2016 Financial Results

BEIJING, Sept. 01, 2016 (GLOBE NEWSWIRE) -- Qunar Cayman Islands Limited (NASDAQ:QUNR) (“Qunar” or the “Company”), China’s leading mobile and online travel platform, today announced its unaudited financial results for the second quarter ended June 30, 2016.

Highlights for the Second Quarter of 2016

  • Total revenues for the second quarter of 2016 were RMB1,030.8 million (US$155.1 million), an increase of 17.0% year-on-year.
     
  • Gross profit for the second quarter of 2016 was RMB765.4 million (US$115.2 million), an increase of 20.7% year-on-year.
     
  • Mobile revenues for the second quarter of 2016 were RMB774.0 million (US$116.5 million), an increase of 29.0% year-on-year, representing 75.1% of total revenues, compared to 68.1% in the corresponding period of 2015.

Second Quarter 2016 Financial Results

Total revenues for the second quarter of 2016 were RMB1,030.8 million (US$155.1 million), an increase of 17.0% year-on-year.

Mobile revenues for the second quarter of 2016 were RMB774.0 million (US$116.5 million), an increase of 29.0% year-on-year, representing 75.1% of total revenues.

Flight and flight related revenues for the second quarter of 2016 were RMB478.3 million (US$72.0 million), a decrease of 7.5% year-on-year and a decrease of 14.3% quarter-on-quarter. The year-on-year flight and flight related revenue decrease was primarily due to a decrease in Total Estimated Flight Ticket volume (TEFT) and slightly offset by an increase in revenue per ticket. The quarter-on-quarter flight and flight related revenue decrease was primarily due to decreases in TEFT.

Accommodation reservation revenues were RMB392.3 million (US$59.0 million), an increase of 51.6% year-on-year and an increase of 30.9% quarter-on-quarter. The year-on-year and quarter-on-quarter accommodation reservation revenue growth were primarily due to increases in revenue per room night and in Total Estimated Hotel Room-night volume (TEHR).

Gross profit for the second quarter of 2016 was RMB765.4 million (US$115.2 million), an increase of 20.7% year-on-year. Gross margin for the second quarter of 2016 was 74.2%, compared to 72.0% for the corresponding period of 2015 and 75.2% for the first quarter of 2016. The year-on-year increase in profit margin was driven by operational efficiencies. The year-on-year increase in gross profit was primarily due to increase in total revenues and the change in gross profit margin.

Product development expenses for the second quarter of 2016 were RMB516.6 million (US$77.7 million), an increase of 47.3% year-on-year, primarily due to a significant increase in non-cash share-based compensation expenses resulting from new options granted under our new 2015 share incentive plan (the “2015 Incentive Program”) in the fourth quarter of 2015, which have higher fair values compared with the outstanding options under our past incentive programs. The increase was partially offset by decreases in salary and welfare expenses associated with headcount decreases. Excluding share-based compensation expenses, product development expenses were RMB309.6 million (US$46.6 million), a decrease of 6.3% year-on-year, and accounted for 30.0% of total revenues, compared to 37.5% for the corresponding period in 2015 and 28.5% for the first quarter of 2016.

Product sourcing expenses for the second quarter of 2016 were RMB118.2 million (US$17.8 million), a decrease of 12.2% year-on-year, primarily due to decreases in salary, welfare and other expenses associated with headcount decreases, which were partially offset by a significant increase in share-based compensation expenses resulting from new options granted under our 2015 Incentive Program. Excluding share-based compensation expenses, product sourcing expenses were RMB105.7 million (US$15.9 million), a decrease of 20.1% year-on-year, and accounted for 10.3% of total revenues, compared to 15.0% for the corresponding period in 2015 and 12.3% for the first quarter of 2016.

Sales and marketing expenses for the second quarter of 2016 were RMB580.6 million (US$87.4 million), a decrease of 17.4% year-on-year, primarily due to a decrease in online marketing expenses as a result of controlled expenditure and improvement in operational efficiencies, which was partially offset by an increase in salary and welfare expenses as a result of increased headcount and, to a lesser degree, by an increase in share-based compensation expenses resulting from new options granted under our 2015 Incentive Program. Excluding share-based compensation expenses, sales and marketing expenses were RMB534.0 million (US$80.4 million), a decrease of 23.1% year-on-year, and accounted for 51.8% of total revenues, compared to 78.9% for the corresponding period in 2015 and 51.0% for the first quarter of 2016.

General and administrative expenses for the second quarter of 2016 were RMB149.1 million (US$22.4 million), an increase of 10.9% year-on-year. Excluding share-based compensation expenses, general and administrative expenses were RMB89.1 million (US$13.4 million), an increase of 1.2% year-on-year, and accounted for 8.6% of total revenues, compared to 10.0% for the corresponding period in 2015 and 7.3% for the first quarter of 2016.

Operating loss for the second quarter of 2016 was RMB599.0 million (US$90.1 million), compared to RMB695.2 million for the corresponding period in 2015 and RMB1,039.4 million for the first quarter of 2016.

Operating loss on a non-GAAP basis, which excludes share-based compensation expenses of RMB326.0 million (US$49.1 million), was RMB273.0 million (US$41.1 million) for the second quarter of 2016, compared to RMB611.5 million for the corresponding period in 2015 and RMB237.0 million for the first quarter of 2016.

Operating margin (non-GAAP) for the second quarter of 2016 was negative 26.5%, compared to negative 69.4% for the corresponding period in 2015 and negative 23.9% for the first quarter of 2016. The year-on-year decrease in operating loss was primarily due to strong revenue and controlled operating expenditures.

Net loss attributable to Qunar’s shareholders for the second quarter of 2016 was RMB698.8 million (US$105.1 million), compared to RMB815.7 million for the corresponding period in 2015 and RMB1,076.5 million for the first quarter of 2016. The quarter-on-quarter decrease in net loss was primarily due to a decrease in one-time charges of share-based compensation expenses resulting from our previously announced employee share exchange program that became effective starting on December 14, 2015 (“Employee Share Exchange Program”).  Basic and diluted net loss per ADS for the second quarter of 2016 was RMB4.80 (US$0.72).

Adjusted net loss (non-GAAP), defined as net loss excluding share-based compensation expenses of RMB326.0 million (US$49.1 million), was RMB373.3 million (US$56.2 million) for the second quarter of 2016, compared to adjusted net loss of RMB623.8 million for the corresponding period in 2015 and adjusted net loss of RMB274.5 million for the first quarter of 2016.

Adjusted EBITDA (non-GAAP), defined as net loss before income tax expense, depreciation and amortization, interest expense, further adjusted to exclude share-based compensation expenses of RMB326.0 million (US$49.1 million), was negative RMB279.3 million (US$42.0 million) for the second quarter of 2016, compared to negative RMB575.3 million for the corresponding period in 2015 and negative RMB174.8 million for the first quarter of 2016. 

As of June 30, 2016, Qunar had total cash and cash equivalents, restricted cash and funds receivable of RMB4,554.1 million (US$685.3 million). The restricted cash decreased by RMB1,037.4 million from December 31, 2015 since a portion of the restricted cash was no longer considered as restricted.

As of June 30, 2016, Qunar had 6 Class A ordinary shares and 437,150,861 Class B ordinary shares outstanding.

Recent Developments

On June 23, 2016, the Company announced that its board of directors (the “Board”) had received a preliminary non-binding "going-private" proposal (the “Proposal”) from Ocean Management Limited (“Ocean”).

On June 23, 2016, the Company's board of directors formed a special committee (the “Special Committee”) comprised of three independent, disinterested directors, Mr. Jimmy Lai, Mr. Jianmin Zhu and Ms. Ying Shi, to consider the Proposal, with Mr. Jimmy Lai as the special committee chair.  The special committee has retained Duff & Phelps (Duff & Phelps Securities, LLC and Duff & Phelps, LLC) as its financial advisor and Kirkland & Ellis as its U.S. legal counsel in connection with its review and evaluation of the Proposal.

The Board cautions the Company's shareholders and others considering trading the Company's securities that the Special Committee is continuing its evaluation of the Proposal and that, at this time, no decisions have been made by the Special Committee with respect to the Company's response to the Proposal. There can be no assurance that any definitive offer will be made by Ocean, that any agreement will be executed with Ocean or that the Proposal or any comparable transaction will be approved or consummated. The Company does not undertake any obligation to provide any updates with respect to the Proposal or any other transaction, except as required under applicable law.

Forward-looking Statements

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Among other things, quotations from management in this press release, as well as Qunar's strategic and operational plans, contain forward-looking statements. Qunar may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Qunar's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the Company's goals and strategies; its future business development, financial condition and results of operations; the expected growth of the online travel markets in China; the Company's expectations regarding demand for and market acceptance of its products and services; its expectations regarding relationships with users and travel service providers; its plans to invest in the technology platform; competition in the industry; fluctuations in general economic and business conditions in China; and relevant government policies and regulations relating to the industry. Further information regarding these and other risks is included in the documents filed with the U.S. Securities and Exchange Commission. All information provided in this press release and in the attachments is as of the date of the press release, and Qunar undertakes no duty to update such information, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement Qunar's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Qunar also uses adjusted net income (loss), adjusted EBITDA and adjusted operating income (loss) as additional non-GAAP financial measures. These non-GAAP financial measures enable management to assess the Company's operating results without considering the impact of noncash charges, including share-based compensation expenses, depreciation and amortization, online marketing expenses from Zhixin Cooperation Agreement, fair value change in warrant liability and impairment loss of the long-term investments. Furthermore, these non-GAAP financial measures eliminate the impact of items that Qunar does not consider indicative of the performance of its business.

Qunar presents these non-GAAP financial measures because they are used by management to evaluate its operating performance, formulate business plans, and make strategic decisions on capital allocation. Qunar also believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating its operating performance and consolidated results of operations in the same manner as management and in comparing financial results across accounting periods and to those of its peer companies. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. A limitation of using these non-GAAP financial measures is that these non-GAAP measures do not include all items that impact the Company's results of operations for the period. The table captioned "Reconciliations of GAAP and non-GAAP Measures" has more details on the reconciliations between GAAP financial measures that are most directly comparable to the non-GAAP financial measures.

Currency Convenience Translation

The United States dollar (US$) amounts disclosed in this press release are presented solely for the convenience of the reader. The conversion of Renminbi (RMB) into U.S. dollars is based on the exchange rate set forth in the H.10 statistical release of the Federal Reserve Bank of New York on June 30, 2016, which was RMB6.6459 to US$1.00. The Company makes no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, or at all. The percentages stated are calculated based on the RMB amounts.

About Qunar

Qunar is China’s leading mobile and online travel platform. With a commitment to building a travel ecosystem serving the entire travel industry value chain, Qunar is evolving the way people travel in a world increasingly enabled by technology. Qunar addresses the needs of Chinese travelers and travel service providers by efficiently matching industry supply and demand through its proprietary technologies. By providing technology infrastructure for travel service providers on mobile and online platforms, Qunar integrates and offers the most comprehensive selection of travel products and the most convenient means to complete desired transactions for Chinese travelers.

Qunar means “where to go” in Mandarin Chinese.

For more information, please visit http://ir.qunar.com.

             
Qunar Cayman Islands Limited            
Condensed Consolidated Balance Sheets             
    December 31,    June 30,     June 30, 
      2015       2016       2016  
(In thousands except for number of shares and per share data)   RMB   RMB   USD
    Audited   Unaudited   Unaudited
ASSETS            
Current assets:            
Cash and cash equivalents     4,115,650       3,323,497       500,082  
Restricted cash     1,747,603       710,156       106,856  
Funds receivable     715,365       520,482       78,316  
Short-term investments     351,189       -       -  
Accounts receivable, net     278,382       256,700       38,625  
Due from related parties     813,123       548,525       82,536  
Prepayments and other current assets     1,320,492       647,809       97,476  
Total current assets     9,341,804       6,007,169         903,891  
             
Non-current assets:            
Due from related parties, non-current     -       2,357,142       354,676  
Property and equipment, net     232,085       242,566       36,499  
Intangible assets,net     12,689       12,132       1,825  
Goodwill     10,755       10,755       1,618  
Long-term investments,net     712,967       758,614       114,148  
Deferred tax assets, non-current(*)     80,624       87,430       13,155  
Other non-current assets     114,621       125,731       18,919  
Total non-current assets     1,163,741       3,594,370       540,840  
             
Total assets     10,505,545       9,601,539       1,444,731  
             
             
LIABILITIES AND EQUITY            
             
Current liabilities:            
Short-term loans     643,500       643,500       96,827  
Customer advances and deposits     280,962       288,494       43,409  
Due to related parties     1,961,500       607,861       91,464  
Accounts payable     31,720       38,777       5,835  
Salaries and welfare payable     418,431       169,715       25,537  
Income tax payable     79,736       75,760       11,400  
Accrued expenses and other current liabilities     3,134,951       2,044,152       307,580  
Total current liabilities       6,550,800         3,868,259         582,052  
             
Non-current liabilities:            
Due to related parties, non-current     -       4,793,615       721,289  
Deferred tax liability, non-current(*)     1,318       1,228       185  
Long-term Debt     2,658,357       -       -  
Non-current liabilities     91,702       97,787       14,714  
Total non-current liabilities       2,751,377         4,892,630         736,188  
             
Total liabilities       9,302,177         8,760,889         1,318,240  
             
Equity:            
Class A ordinary shares     87       -       -  
Class B ordinary shares     2,638       2,754       414  
Additional paid-in capital     10,647,579       12,001,501       1,805,850  
Accumulated other comprehensive income     136,810       199,595       30,033  
Statutory reserves     3,011       3,011       453  
Accumulated deficit     (9,592,039 )     (11,367,256 )     (1,710,416 )
Total Qunar Cayman Islands Limited's shareholders' equity       1,198,086         839,605         126,334  
             
Noncontrolling Interests     5,282       1,045       157  
             
Total equity       1,203,368         840,650         126,491  
             
Total liabilities and equity       10,505,545         9,601,539         1,444,731  
             
*On November 20, 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. This accounting standard requires deferred tax assets and liabilities, along with related valuation allowances, to be classified as noncurrent on the balance sheet. As a result, each tax jurisdiction will now only have one net noncurrent deferred tax asset or liability. This guidance has been adopted from 2016 and applied retrospectively by the Company to the prior period presented herein.

 

                     
Qunar Cayman Islands Limited                    
Condensed Consolidated Statements of Operations                    
       Three Months Ended   
      June 30,   March 31,   June 30,   June 30,  
        2015       2016       2016       2016    
(In thousands except for number of shares and per share(ADS) data)   RMB   RMB   RMB   USD  
      Unaudited   Unaudited   Unaudited   Unaudited  
Revenues                    
Flight and flight related       516,974       558,217       478,292       71,968    
Accommodation reservation       258,865       299,715       392,330       59,033    
Display advertising services       25,931       24,045       21,377       3,217    
Other services       79,192       111,143       138,841       20,891    
Total revenues       880,962       993,120       1,030,840       155,109    
Cost of Revenues       (246,909 )     (245,831 )     (265,462 )     (39,944 )  
Gross profit       634,053       747,289       765,378       115,165    
Operating expenses:                    
Product developments (Note 1)       (350,790 )     (812,185 )     (516,557 )     (77,726 )  
Product sourcing (Note 1)       (134,527 )     (172,198 )     (118,167 )     (17,780 )  
Sales and marketing (Note 1)       (702,675 )     (620,900 )     (580,639 )     (87,368 )  
General and administrative  (Note 1)       (134,391 )     (181,388 )     (149,051 )     (22,428 )  
Online marketing expense for Baidu Zhixin Cooperation       (6,883 )     -       -       -    
Operating loss       (695,213 )     (1,039,382 )     (599,036 )     (90,137 )  
Interest expenses, net       (11,948 )     (49,465 )     (52,481 )     (7,897 )  
Foreign exchange (loss) gain, net       (1,289 )     20,724       (57,554 )     (8,660 )  
Other income, net       4,895       2,052       3,684       554    
Fair value change in warrant liability       (109,761 )     -       -       -    
Loss before income taxes       (813,316 )     (1,066,071 )     (705,387 )     (106,140 )  
Income tax (expense) benefit       (3,194 )     (7,774 )     5,754       866    
Equity in loss (income) of affiliated companies,net of tax       (693 )     (3,018 )     331       50    
Net loss       (817,203 )     (1,076,863 )     (699,302 )     (105,224 )  
                     
Net loss attributable to noncontrolling interests       1,516       400       548       82    
                     
Net loss attributable to Qunar Cayman Islands Limited       (815,687 )     (1,076,463 )     (698,754 )     (105,142 )  
                     
                     
                     
                     
 Loss per share for ordinary shares:                     
Net loss per ordinary share—basic       (2.22 )     (2.48 )     (1.60 )     (0.24 )  
Net loss per ordinary share—diluted       (2.22 )     (2.48 )     (1.60 )     (0.24 )  
                     
 Loss per ADS(each ADS represents three class B ordinary shares):                   
Net loss per ADS—basic       (6.66 )     (7.44 )     (4.80 )     (0.72 )  
Net loss per ADS—diluted       (6.66 )     (7.44 )     (4.80 )     (0.72 )  
                     
Weighted average number of ordinary shares:                     
Class A ordinary shares                    
Basic       224,299,179       8,159,782       7,280,854       7,280,854    
Diluted       224,299,179       8,159,782       7,280,854       7,280,854    
                     
Class B ordinary shares                    
Basic       143,459,651       425,742,428       428,256,657       428,256,657    
Diluted       367,758,830       433,902,210       435,537,511       435,537,511    
                     
Note 1: Includes share-based compensation expenses as follows:                  
Product developments       20,339       528,974       206,967       31,143    
Product sourcing       2,128       49,861       12,437       1,871    
Sales and marketing       7,974       114,647       46,637       7,017    
General and administrative       46,363       108,853       59,968       9,023    
Total share-based compensation expenses       76,804       802,335         326,009         49,054    
                     


                   
Reconciliations of GAAP and non-GAAP measures (in thousands)                  
     Three Months Ended   
    June 30,   March 31,   June 30,   June 30,  
      2015       2016       2016       2016    
    RMB   RMB   RMB   USD  
    Unaudited   Unaudited   Unaudited   Unaudited  
Net loss     (817,203 )     (1,076,863 )     (699,302 )     (105,224 )  
Add:                  
Share-based compensation expenses     76,804       802,335       326,009       49,054    
Online marketing expense for Baidu Zhixin Cooperation     6,883       -       -       -    
Fair Value change in warrant liability     109,761       -       -       -    
Adjusted net loss (non-GAAP)(*)      (623,755 )     (274,528 )     (373,293 )     (56,170 )  
Add:                  
Income tax expense (benefit)     3,194       7,774       (5,754 )     (866 )  
Depreciation and amortization     28,336       32,329       34,455       5,184    
Interest expenses     16,888       59,660       65,312       9,827    
Adjusted EBITDA (non-GAAP)  (**)     (575,337 )     (174,765 )     (279,280 )     (42,025 )  
                   
Operating loss     (695,213 )     (1,039,382 )     (599,036 )     (90,137 )  
Add:                  
Share-based compensation expenses     76,804       802,335       326,009       49,054    
Online marketing expense for Baidu Zhixin Cooperation     6,883       -       -       -    
Adjusted operating loss(non-GAAP)(***)     (611,526 )     (237,047 )     (273,027 )     (41,083 )  
                   
*Adjusted net loss (non-GAAP), defined as net loss excluding share-based compensation expenses, online marketing expenses for Baidu Zhixin Cooperation and fair value change in warrant liability.
 
** Adjusted EBITDA (non-GAAP), defined as net loss before income taxes, interest expenses, depreciation and amortization, further adjusted to exclude share-based compensation expenses, online marketing expenses for Baidu Zhixin Cooperation and fair value change in warrant liability.
 
*** Adjusted operating loss(non-GAAP), defined as operating loss excluding share-based compensation expenses and online marketing expenses for Baidu Zhixin Cooperation .


For investor inquiries, please contact:

Investor Relations
Qunar Cayman Islands Limited
Tel: +86-10-8967-6966
Email: ir@qunar.com

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