Trip.com Group Limited, a leading provider of online travel and related services, including accommodation reservation, transportation ticketing, packaged tours and in-destination services, corporate travel management, and other travel related services, today announced its unaudited financial results for the third quarter ended September 30, 2019.
Key Highlights for the Third Quarter of 2019
The Company officially changed its corporate name to "Trip.com Group Limited" on October 25, 2019 and its ticker to "TCOM" on November 5, 2019. Trip.com Group operates a family of travel brands, which mainly consists of Trip.com, Ctrip, Skyscanner and Qunar.
Trip.com Group reported strong financial results for the third quarter of 2019.
- Income from operations increased by 52% year-over-year to RMB2.2 billion (US$314 million). Excluding share-based compensation charges, non-GAAP income from operations increased by 40% year-over-year to RMB2.6 billion (US$369 million) in the third quarter of 2019.
- Operating margin was 21% for the third quarter of 2019, compared to 16% in the same period in 2018, and 15% in the previous quarter. Excluding share-based compensation charges, non-GAAP operating margin reached 25%, the highest margin over the past 6 years.
Trip.com Group's international businesses (excluding Greater China destinations) sustained robust growth momentum.
- The year-over-year revenue growth rate of international hotel business (excluding Greater China destinations) reached 50% in the third quarter of 2019.
- Trip.com brand's international air ticketing volume maintained triple-digit growth for the 12th consecutive quarter.
Third Quarter of 2019 Financial Results and Business Updates
For the third quarter of 2019, Trip.com Group reported net revenue of RMB10.5 billion (US$1.5 billion), representing a 12% increase from the same period in 2018. Net revenue for the third quarter of 2019 increased by 21% from the previous quarter.
Accommodation reservation revenue for the third quarter of 2019 was RMB4.1 billion (US$576 million), representing a 14% increase from the same period in 2018. Accommodation reservation revenue for the third quarter of 2019 increased by 21% from the previous quarter.
Transportation ticketing revenue for the third quarter of 2019 was RMB3.7 billion (US$521 million), representing a 3% increase from the same period in 2018. Transportation ticketing revenue for the third quarter of 2019 increased by 9% from the previous quarter, primarily due to seasonality.
Packaged-tour revenue for the third quarter of 2019 was RMB1.6 billion (US$229 million), representing a 19% increase from the same period in 2018.
Packaged-tour revenue for the third quarter of 2019 increased by 56% from the previous quarter.
Corporate travel revenue for the third quarter of 2019 was RMB335 million (US$47 million), representing a 26% increase from the same period in 2018, primarily driven by expansion in corporate customer base and an optimized product mix trend. Corporate travel revenue for the third quarter of 2019 increased by 9% from the previous quarter, primarily due to seasonality.
Gross margin was 79% for the third quarter of 2019, which remained consistent with that for the same period in 2018 and the previous quarter.
Product development expenses for the third quarter of 2019 increased by 12% to RMB2.8 billion (US$390 million) from the same period in 2018 and increased by 6% from the previous quarter, primarily due to an increase in expenses relating to product development personnel. Product development expenses for the third quarter of 2019 accounted for 27% of the net revenue for the same period. Excluding share-based compensation charges, non-GAAP product development expenses for the third quarter of 2019 accounted for 25% of the net revenue for the same period, which increased from 24% in the same period in 2018 and decreased from 28% in the previous quarter.
Sales and marketing expenses for the third quarter of 2019 decreased by 8% to RMB2.5 billion (US$347 million) from the same period in 2018, primarily due to a decrease in expenses relating to sales and marketing activities. Sales and marketing expenses increased by 18% from the previous quarter, primarily due to an increase in expenses relating to sales and marketing activities. Sales and marketing expenses for the third quarter of 2019 accounted for 24% of the net revenue for the same period.
Excluding share-based compensation charges, non-GAAP sales and marketing expenses for the third quarter of 2019 accounted for 23% of the net revenue for the same period, which decreased from 29% in the same period in 2018 and 24% in the previous quarter.
General and administrative expenses for the third quarter of 2019 increased by 18% to RMB809 million (US$113 million) from the same period in 2018, primarily due to an increase in general and administrative personnel related expenses. General and administrative expenses remained consistent with the previous quarter. General and administrative expenses for the third quarter of 2019 accounted for 8% of the net revenue for the same period. Excluding share-based compensation charges, non-GAAP general and administrative expenses accounted for 6% of the net revenue for the same period, which remained consistent with those for the same period in 2018 and decreased from 8% in the previous quarter.
Income from operations for the third quarter of 2019 was RMB2.2 billion (US$314 million), compared to RMB1.5 billion in the same period in 2018 and RMB1.3 billion in the previous quarter.
Income from operations increased by 52% year-over-year in the third quarter of 2019. Excluding share-based compensation charges, non-GAAP income from operations was RMB2.6 billion (US$369 million), compared to RMB1.9 billion in the same period in 2018 and RMB1.7 billion in the previous quarter.
Non-GAAP income from operations increased by 40% year-over-year in the third quarter of 2019.
Operating margin was 21% for the third quarter of 2019, compared to 16% in the same period in 2018, and 15% in the previous quarter. Excluding share-based compensation charges, non-GAAP operating margin was 25%, compared to 20% in the same period in 2018 and in the previous quarter.
Income tax expense for the third quarter of 2019 was RMB365 million (US$51 million), compared to RMB257 million in the same period of 2018 and RMB336 million in the previous quarter. The change in our effective tax rate was primarily due to changes in the profitability of our subsidiaries that have different tax rates, including certain non-deductible expenses of the fair value changes in equity securities investments.
Net income attributable to Trip.com Group's shareholders for the third quarter of 2019 was RMB793 million (US$112 million), compared to net loss attributable to Trip.com Group's shareholders of RMB1.1 billion in the same period in 2018 and RMB403 million in the previous quarter. Excluding share-based compensation charges and fair value changes of equity securities investments, non-GAAP net income attributable to Trip.com Group's shareholders was RMB2.3 billion (US$317 million), compared to RMB1.7 billion in the same period in 2018 and RMB1.3 billion in the previous quarter.
Diluted earnings per ADS were RMB1.35 (US$0.19) for the third quarter of 2019. Excluding share-based compensation charges and fair value changes of equity securities investments, non-GAAP diluted earnings per ADS were RMB3.70 (US$0.52) for the third quarter of 2019.
As of September 30, 2019, the balance of cash and cash equivalents, restricted cash, short-term investment, held to maturity time deposit and financial products was RMB61.0 billion (US$8.5 billion).
Business Outlook
For the fourth quarter of 2019, the Company expects the net revenue growth to continue at a year-over-year rate of approximately 8%-13%. This forecast reflects Trip.com Group's current and preliminary view, which is subject to change.
