Expedia, Inc. Reports Fourth Quarter Financial Results and Announces Stock Repurchase Plan and Stock Split
Wednesday February 5, 4:06 pm ET
- Quarterly gross bookings of $1.38 billion, up 96% year over year - Net revenue of $164 million, up 100% - Net income of $21 million, 33 cents a share versus 8 cents per share a year-ago - Adjusted earnings of $31 million or 48 cents a share - Budgeted 2003 revenue growth of 43%, pre-tax income growth of 62% and adjusted pre-tax income growth of 42% - Board authorizes stock repurchase program of up to $200 million - Board authorizes two-for-one stock split
BELLEVUE, Wash., Feb. 5 /PRNewswire-FirstCall/ -- Expedia, Inc. (Nasdaq: EXPE - News) today announced financial results for its fourth quarter and fiscal year ended December 31, 2002. Gross bookings of $1.38 billion for the fourth quarter were almost twice the bookings of the year-ago quarter. Quarterly net revenue also doubled to $164 million.
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The company reported net income for the quarter of $21 million, or 33 cents a diluted share, on 64.8 million shares, up from net income of $5 million or 8 cents a diluted share for the year-ago period. Adjusted earnings were $31 million, or 48 cents a diluted share, and pre-tax adjusted earnings were $47 million, or 72 cents a diluted share. In the year-ago period, Expedia® reported pre-tax and after-tax adjusted earnings of $19 million, or 31 cents a diluted share.
Adjusted earnings exclude non-cash marketing expenses resulting from in-kind marketing contributions by USA Interactive, USAI merger related expenses and non-cash charges for amortization of intangibles and equity compensation expense. Exhibits 1 and 2 to this release provide a reconciliation of adjusted earnings to GAAP net income.
In addition, the company announced the authorization of the repurchase of up to $200 million of its common stock and the approval of a two-for-one split of its common stock.
"Results for the full year and for the fourth quarter are strong evidence that our strategy of focusing on the whole trip, rather than a single component, is bearing fruit," said Richard Barton, President and CEO of Expedia. "Today, thanks to the breadth of our offerings coupled with our industry-leading dynamic packaging technology, our customers are enjoying a flexibility and control in planning their trips that they've never had before."
Fourth Quarter Financial and Operating Highlights
"Expedia's results reflect strong progress across all of our significant lines of business. Merchant lodging, agency air, international and vacation packages all had significant year-over-year growth," said Greg Stanger, Senior Vice President and CFO. "This success has continued into 2003 as we have seen strong bookings momentum through the month of January. This start suggests a strong first quarter. In addition, our corporate travel business, which launched in November, is off to a good start, with more company registrations than we had anticipated."
In the fourth quarter, merchant revenue rose 184% year-over-year to $97 million on increased revenue from Expedia® Special Rate hotels, the addition of the Classic Custom Vacations® (CCV) business in March of 2002 and growth in our packages business. Excluding CCV, merchant hotel revenue in the quarter increased 156% year-over-year, and the company reported 3.2 million total hotel room-nights stayed in the quarter, including 2.5 million merchant room-nights. Average daily room rates increased slightly sequentially, and rose 9% year-over-year excluding CCV, due to an increase in the percentage of rooms sold in higher-cost venues, such as Hawaii, Mexico, the Caribbean and Europe.
Agency revenue, which is primarily derived from the sale of airline tickets, rose 49% year-over-year to $63 million, while gross bookings grew 86%. The difference in growth rates is primarily attributable to a year-over- year decline in revenue per airline ticket.
International revenue rose 224% year-over-year, with particularly strong growth in Canada and the United Kingdom. Vacation packages revenue quadrupled year-over-year, or 170% excluding CCV.
Gross profit doubled year-over-year to $112 million while gross margin remained steady at 68%. Adjusted operating expenses declined to 42% of revenue from 46% of revenue the year earlier, largely as a result of lower relative G&A and product development expenses.
2002 Results
For the year ended December 31, Expedia reported gross bookings of $5.3 billion, an increase of 82% over calendar year 2001. Net revenue nearly doubled year-over-year to $591 million from $297 million. Net income was $66 million, or $1.04 a diluted share, compared with a loss of $21 million, or 43 cents a share for 2001. Adjusted earnings were $120 million, or $1.87 a diluted share. Pre-tax adjusted earnings were $169 million, or $2.64 a diluted share, compared with $53 million, or 89 cents a diluted share in calendar 2001.
Expedia finished the year with $584 million in cash and short-term investments, compared with $238 million at the end of 2001, and cash flow from operations was $327 million for the year.
2003 Operating Budget
The following table reflects Expedia's expectations as of February 5, 2003. Results may be materially affected by many factors, such as changes in global economic conditions and the health of the travel industry, consumer spending, fluctuations in foreign-currency rates, the emerging nature and rate of growth of the Internet and online commerce, and other factors, including those identified in our SEC filings. The 2003 budget does not reflect an assumption of war or any other dramatic shock to the travel industry.
Expedia, Inc. 2003 Operating Budget
($ in millions except per share amounts; reconciliation of adjustments to
GAAP in Exhibit 6)
Q1 Q2 Q3 Q4 Total
Revenues 186 212 228 219 845
Pre-Tax Adjusted
Income 44 61 69 66 240
Adjusted Income* 29 40 44 42 155
Net Income 16 32 36 34 118
EPS (Adjusted)* $0.44 $0.58 $0.65 $0.62 $2.30
EPS (GAAP) $0.24 $0.47 $0.53 $0.51 $1.76
* Not comparable to prior periods
The 2003 operating budget reflects a change in the way Expedia presents adjusted earnings to be consistent with majority shareholder USA Interactive's presentation. Going forward, Expedia will tax-affect the adjustments to earnings in calculating its adjusted earnings numbers. The $2.30 per share adjusted earnings for 2003 in the operating budget, which reflects the new calculation, would correspond to $2.53 per share under the prior calculation. See Exhibit 6 for a reconciliation of the two methods. Beginning with the first quarter of 2003, equity compensation to employees at all levels will include a combination of restricted stock and stock options. Also beginning in 2003, Expedia will adopt Statement of Financial Accounting Standards No. 123 and expense all equity compensation. This treatment is reflected in Expedia's 2003 operating budget.
CEO Succession Plan
As reported in a separate release today, Erik Blachford, President, Expedia-North America, will succeed Mr. Barton as President, CEO and a director of Expedia effective March 31, 2003. Mr. Barton is leaving to travel with his family and is joining the board of USA Interactive.
Stock Repurchase and Stock Split
Expedia also announced that its board of directors has authorized the repurchase of up to $200 million of Expedia common stock. The company may purchase shares from time to time on the open market or through private transactions, depending on market conditions, share price and other factors.
In addition, the board approved a two-for-one stock split. Shareholders will receive one additional common share for every share held on the record date of February 24, 2003. The additional shares will be delivered on or about March 10, 2003, by the company's transfer agent, Mellon Investor Services. The company currently has approximately 59 million shares outstanding.
"With cash and short-term investments of more than $580 million and strong free cash flow, we are able to implement this repurchase program without adversely affecting our internal investment plans," said Mr. Stanger. "In addition, we believe that the split broadens the appeal and appropriateness of Expedia's common stock for a larger base of investors."
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