Universal Travel Group Announces Third Quarter 2010 Results

SHENZHEN, China, Nov. 16, 2010 /PRNewswire-Asia-FirstCall/ -- Universal Travel Group (NYSE: UTA) ("Universal Travel Group" or the "Company"), a leading travel services provider in China offering package tours, air ticketing, and hotel reservation services online and via customer service representatives, today announced financial results for the three and nine months ended September 30, 2010.

Third Quarter 2010 Highlights

• Revenue increased 55.4% year-over-year to $46.3 million
• Excluding contribution of newly acquired businesses, revenue increased 16.6% year-over-year to $34.7 million  
• Gross profit increased 37.4% year-over-year to $13.5 million
• Gross margin was 29.1%, compared to 32.9% in the prior year period and improved from 28.7% in the prior quarter period
• Income from operations increased 27.8% to $9.5 million
• Net income from continuing operations was $7.3 million or $0.36 per diluted share, compared to $4.7 million or $0.31 per diluted share in the prior year period, a year over year increase of 55.3%

"We are pleased with our third quarter results," said Ms. Jiangping Jiang, Chairwoman and Chief Executive Officer. "Our packaged tour segment continued to grow and remains our largest business segment as a result of our five recent acquisitions and the efficacy of our various marketing programs.  Our air ticketing revenues benefited from increased sales volume as we sold approximately 250,000 more tickets in the third quarter of 2010 compared to same period last year.  Our hotel business was flat year-over-year due to the temporary disruption in the supply of hotel room inventory available for advance purchase from the Shanghai World Expo.  We expect the growth of our hotel business to resume when market conditions return to normal."

Third Quarter 2010 Financial Results

Revenue for the three months ended September 30, 2010, was $46.3 million compared to $29.8 million for the same period in 2009, an increase of 55.4%.  In March 2010, the Company completed the acquisitions of Huangshan Holiday Travel Service Co., Ltd., Hebei Tianyuan International Travel Agency Co., Ltd., and Zhengzhou Yulongkang Travel Agency Co., Ltd.  In June 2010, the Company completed the acquisitions of Shanxi Jinyang Travel Agency Co., Ltd. and Kunming Business Travel Agency Co., Ltd.  The revenue contribution from these five newly acquired businesses in the third quarter of 2010 was $11.6 million or 25.0% of the Company's total revenues for the quarter.  Excluding the contribution of these newly acquired businesses, revenue for the third quarter of 2010 was $34.7 million, an increase of 16.6% from $29.8 million in the same period last year.  

Revenue from air-ticketing was $6.7 million, compared to $4.9 million for the same period last year, an increase of 37.4%. This increase was mainly driven by the increase in air-ticket sales volume and growth from our Chongqing Travel World E-Business Co., Ltd. subsidiary.

Revenue generated by the Company's hotel reservation segment was $3.8 million, unchanged from the same period in 2009. The stagnant growth in this segment was due to the low available hotel inventory during the Shanghai World Expo, as the Company decided not to take the risk of purchasing hotel inventory in advance. Sales from the hotel reservation segment are expected to resume its normal growth after this one-time event.    

Revenue generated by the Company's packaged tour segment was $35.8 million compared to $21.1 million for the same period in 2009, an increase of 69.7% from the same period last year.  This increase was a result of the growth of the Chinese economy, increased sales from our Shenzhen Universal Travel Agency Co., Ltd subsidiary, and efforts in carrying out various marketing programs in this segment.

Gross profit was $13.5 million compared to $9.8 million for the same period last year, an increase of 37.4%.  Gross profit margin was 29.1% compared to 32.9% for the same period last year, and 28.7% from the prior quarter in 2010.  The decrease in gross profit margin was due to the increasing sales from the packaged tour business as a result of five new acquisitions of packaged tour companies, which have a lower profit margin due to the way revenues are recognized.

Selling, general and administrative ("SG&A") expenses totaled $4.0 million compared to $2.4 million for the same period last year, an increase of 70.3%.  The SG&A expenses were 8.7% of revenue compared to 7.9% for the same period last year.  The increase in SG&A expenses is in connection with the growth in business operations during the three months ended September 30, 2010, as compared to the same period of last year.

Income from operations was $9.5 million compared to $7.4 million in the same period last year, an increase of 27.8%.      

Net income from continuing operations was $7.3 million, or $0.36 per diluted share, compared to $4.7 million, or $0.31 per diluted share, for the same period last year.  

Nine Months Results

Revenue for the nine months ended September 30, 2010, was $109.2 million compared to $63.7 million for the same period in 2009, an increase of 71.4%.  The revenue contribution from the Company's five newly acquired businesses in the first nine months of 2010 was $28.5 million, or 26.1% of the Company's total revenues.  Excluding the contribution of these newly acquired businesses, revenue for the first nine months of 2010 was $80.7 million, an increase of 26.7% from $63.7 million in the same period last year.  

Revenue from air-ticketing segment was $17.1 million, compared to $10.9 million for the same period last year, an increase of 57.0%.  Revenue generated by the Company's hotel reservation segment was $10.0 million compared to $9.1 million for the same period in 2009, an increase of 10.4%.  Revenue generated by package tours was $82.0 million compared to $43.7 million for the same period in 2009, an increase of 87.6% from the same period last year.  

Gross profit was $32.5 million compared to $21.8 million for the same period last year, an increase of 49.0%.  Gross profit margin was 29.8% compared to 34.3% for the same period last year.  

Selling, general and administrative ("SG&A") expenses totaled $10.6 million compared to $5.2 million for the same period last year, an increase of 103.7%.  The SG&A expenses were 9.7% of revenue compared to 8.1% for the same period last year.  

Income from operations was $22.0 million compared to $16.6 million in the same period last year, an increase of 32.4%.      

Net income from continuing operations was $17.4 million, or $0.93 per diluted share, compared to $5.5 million, or $0.37 per diluted share, for the same period last year.  Excluding the effect of the non-cash gain on change in fair value of derivative liabilities of $1.3 million, the non-cash charge related to stock-based compensation of $1.0 million and the $0.07 million one-time, non-cash gain on disposal of fixed assets, the Company's adjusted net income from continuing operations was $17.1 million, or $0.91 per diluted share, compared to $12.9 million, or $0.86 per diluted share, in the first nine months of 2009, a year-over-year growth of 34.9%. *

* See table at the end of this press release for a reconciliation of operating income, net income and EPS to exclude the non-cash gain on change in fair value of derivative liabilities, non-cash charges related to stock-based compensation and the one-time, non-cash gain related to the disposal of fixed assets.

Financial Condition

Cash and cash equivalents were $56.7 million as of September 30, 2010. Current assets and current liabilities as of September 30, 2010, were $101.6 million and $12.0 million, respectively, yielding working capital of $89.7 million. The Company has no long-term debt.  For the nine months ended September 30, 2010, net cash provided by operating activities was $17.1 million.

Business Outlook

Ms. Jiang commented, “We continue to focus on improving our sales and profitability by encouraging cross selling across our three businesses and implementing operating efficiencies as we move forward with the integration process for our newly acquired businesses.  We remain optimistic about our business prospects given the strength of the travel market in China, our expanded geographic reach, and the comprehensive travel platform we offer our customers.”  

As previously announced, for full year 2010, the Company expects to achieve between $145.0 million and $155.0 million in revenue, $27.0 million and $28.0 million in net income, and $1.35 and $1.40 in diluted EPS, excluding the effect of non-cash charges related to the change in fair value of derivative liabilities and stock-based compensation and assuming no further dilutive effect from financings or acquisitions.

Use of Adjusted Financial Measures

GAAP results for the nine months ended September 30, 2010 and 2009 include non-cash gains and losses related to the change in fair value of derivative liabilities, non-cash charges related to stock-based compensation and a one-time non-cash gain associated with the disposal of fixed assets.  To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company has provided adjusted financial information excluding the impact of these items in this release. It is a departure of U.S. GAAP; however, the Company's management believes that this adjusted measure provides investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of the adjustments to GAAP results appears in the table accompanying this press release. This additional adjusted information is not meant to be considered in isolation or as a substitute for GAAP financials. The adjusted financial information that the Company provides also may differ from the adjusted information provided by other companies.

Conference Call Information

The Company will host a conference call at 9:00 a.m. ET on Tuesday, November 16, 2010, to discuss the Company's financial results for the third quarter of 2010. To participate in the call, please dial (877) 779-7834 five minutes prior to the start time and reference conference ID number 24164128. International callers should dial +1 (706) 902-2087.

A replay of the call will be available for 14 days beginning Tuesday, November 16, 2010, at 11:00 a.m. Eastern Time. To listen to the replay, dial (800) 642-1687 and enter the conference ID number 24164128. International callers should dial +1 (706) 645-9291.  An audio recording will also be available on the company's website at http://us.cnutg.com.

About Universal Travel Group

Universal Travel Group, founded in 1998, is a leading travel services provider in China.  The Company primarily focuses on the leisure travel market and offers its customers package tours, air ticketing, and hotel reservation services.  The Company has multiple sales channels including two 24-hour call centers; an online sales portal at www.cnutg.com; Company-owned and franchised sales offices, and wholesaler relationships. The Company's headquarters and main base of operations is in Shenzhen in the Pearl River Delta region of China.  More recently, Universal Travel Group has expanded its business into Western China, opening a second home base in the Chongqing Delta region, and other attractive, under-penetrated tier-two travel markets throughout the country.  For more information on the Company, please visit http://us.cnutg.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This press release contains certain statements that may include "forward-looking statements" within the meaning of federal securities laws. All statements, other than statements of historical facts, included herein are "forward-looking statements". Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including the Company's ability to successfully expand its market presence and those discussed in the Company's periodic reports that are filed with and available from the Securities and Exchange Commission. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

Financial tables to follow