Expedia Results, Outlook Beat Estimates
By Reshma Kapadia
Tue Apr 23, 7:15 PM ET
NEW YORK (Reuters) - Online travel firm Expedia Inc. said on Tuesday it posted a first-quarter profit compared to a year-earlier loss, beating Wall Street estimates on strong sales of vacation and hotel packages.
The company, in which USA Networks Inc. bought a controlling stake, also raised its outlook for the rest of the year based on the quarter's strong results.
"They exceeded everyone's expectations for the quarter," said CIBC analyst Paul Keung. They also raised full-year guidance more than anyone expected."
The Bellevue, Washington-based company said net income, including $9.9 million in nonrecurring expenses related to the USA Networks deal, totaled $5.7 million, or 9 cents a share, compared with a loss of $17.6 million, or 37 cents a share. "We sold a lot more room nights that we had anticipated," Chief Financial Officer Gregory Stanger said in an interview. "In addition, we had longer stays that was partially a function of our packages business and in fact more revenue per room,"
Expedia reported adjusted income of $28.4 million, or 46 cents a share, compared to an adjusted earnings of $4.4 million, or 8 cents a share, a year-earlier. It switched to a calendar year in February after the USA Networks deal closed.
Revenues more than doubled to $116 million, exceeding Wall Street forecasts and Expedia's prediction of revenues of about $87 million. Gross bookings totaled $1.1 billion, up more than $425 million from a year-earlier.
Wall Street analysts, on average, had expected the company to post earnings of 26 cents a share and revenue of $87.63 million, according to Thomson Financial/First Call.
The move by airlines to eliminate published commissions has contributed to the decline in Expedia's revenue per ticket and Stanger said he expects the decline to continue. Rival Orbitz -- the Web site run by the airlines -- has gained significant market share, causing Expedia's growth to be slower than it otherwise would have been, Stanger added.
Wall Street was still happy with Expedia's growth.
"I thought the relevant take-aways from the call were that Expedia has maintained its market leading position and even gained share versus Travelocity and Hotel Reservations ," said Thomas Weisel analyst Jake Fuller.
In the wake of the USA Networks deal, Hotel Reservations is a sister company, but Chief Executive Richard Burton said it would remain a competitor.
"We have not had substantive talks to date with Hotel Reservations," Burton said. "We may explore a further relationship but until then we view it as competition."
REVENUE SEEN GROWING FURTHER
"In each of the next three quarters we expect revenue will be about 20 percent greater than the budget we communicated to the Street. In retrospect, we can say we were too conservative and we did create that budget at a time when things weren't as strong as they are today," Stanger said in the interview.
In January, the company said it expected revenue for 2002 to total $450 million, but it now expects to beat that guidance by about 22 percent, or $100 million. Wall Street analysts had expected revenue of $408.9 million, according to First Call.
The online travel firm said its agency revenue growth is now expected to rise 39 percent for the year, up from its previous target of 15 percent growth, as more people shop online for airfares. Merchant revenue is expected to grow 184 percent to $310 million, up from previous targets for 125 percent growth.
It also expects pre-tax adjusted earnings to beat its guidance of $80 million by about $59 million for the full year and by $40 million in the next three quarters in total.
Expedia also expects to beat its budgeted 2002 EBITDA guidance of $91 million by $57 million and by $38 million, or about 51 percent, in the final three quarters in total.
The company also said it is encouraged by its UK business and sees "near-term visibility to profitability" there.
Shares of Expedia, which closed down $3.73 at $70.75 before the news, are up nearly 75 percent from the beginning of the year and outperforming relative to rivals such as Priceline.com Inc. Shares were up in after-hours trade at $72.82.
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