BELLEVUE, Wash., Feb. 7 /PRNewswire-FirstCall/ -- Expedia, Inc. (Nasdaq: EXPE) today announced financial results for its fourth quarter and year ended December 31, 2007.
"2007 was a very good year for Expedia, with acceleration in nearly every key financial metric," said Barry Diller, Expedia, Inc.´s Chairman and Senior Executive. "We ended the year on higher ground with a stabilized supplier outlook, expanded global reach, established media businesses and sharpened marketing prowess. At the same time, we continued to make strides in capital efficiency by leveraging our balance sheet to meaningfully reduce our share base with an eye toward further repurchases."
"Through significant investment, innovation and execution, Expedia delivered four consecutive quarters of top-line growth acceleration in 2007," said Dara Khosrowshahi, Expedia Inc.´s CEO and President. "While we´re pleased by our return to OIBA growth in 2007 and mindful of potential challenges from near-term economic conditions, we will continue to invest in further growth opportunities in 2008 and beyond to drive long-term shareholder value."
Gross bookings increased 25% for the fourth quarter of 2007 compared with the fourth quarter of 2006. North America bookings increased 18%, Europe bookings increased 47% (35% excluding the net benefit from foreign exchange) and Other bookings (primarily Expedia(R) Corporate Travel and our Asia Pacific operations) increased 36%.
Revenue increased 25% for the fourth quarter, primarily driven by increased worldwide merchant hotel revenue and advertising and media revenue. North America revenue increased 19%, Europe revenue increased 39% (29% excluding foreign exchange) and Other revenue increased 42%.
Worldwide merchant hotel revenue increased 23% for the fourth quarter due to an 18% increase in room nights stayed, including rooms delivered as a component of vacation packages, and a 4% increase in revenue per room night. Revenue per room night increased due to a 6% increase in worldwide average daily rates ("ADRs"), partially offset by a 61 basis point decline in hotel raw margin.
Worldwide air revenue increased 13% for the fourth quarter due to a 14% increase in air tickets sold, partially offset by a 2% decrease in revenue per air ticket. The decrease in revenue per air ticket primarily reflects reduced consumer air fees versus the prior year period.
Worldwide revenue from products and services other than merchant hotel and air (including advertising and media, car rentals, destination services, agency hotel and cruises), increased 42% for the fourth quarter due primarily to increased advertising and media revenues and car rental revenues.
Package revenue increased 20% compared with the prior year period primarily due to higher worldwide package bookings as well as increased revenue margin compared with the prior year period.
Revenue as a percentage of gross bookings ("revenue margin") was 14.47% for the fourth quarter, an increase of 6 basis points. North America revenue margin increased 20 basis points to 14.40%, Europe revenue margin decreased 89 basis points to 16.97%, and Other revenue margin increased 40 basis points to 9.62%. The fourth quarter increase in North America revenue margin was primarily due to an increased mix of advertising and media revenues as compared to fourth quarter 2006. Europe revenue margin decreased primarily due to lower revenue from more competitive hotel pricing, the impact of foreign exchange, and lower consumer air fees.
Profitability
Gross profit for the fourth quarter of 2007 was $519 million, an increase of 27% compared with the fourth quarter of 2006 primarily due to increased revenue and a 92 basis point improvement in gross margin to 77.99%. The gross margin increase was primarily due to an increased mix of advertising and media revenue and cost reductions from our various efficiency initiatives.
OIBA for the fourth quarter increased 13% to $165 million, driven primarily by higher revenue. OIBA as a percentage of revenue decreased 270 basis points to 24.83%, primarily reflecting higher growth in sales and marketing expenses excluding stock-based compensation as a percentage of revenue. Operating income increased 29% to $128 million primarily due to the same factors driving OIBA growth as well as lower intangible amortization and stock-based compensation expense.
Adjusted net income for the fourth quarter decreased $4 million compared to the prior year period as higher OIBA was offset by a net increase in foreign exchange losses and an increase in net interest expense. Net income decreased $2 million due to the same factors impacting adjusted net income as well as a higher effective tax rate. Fourth quarter adjusted EPS and diluted EPS were $0.31 and $0.22, respectively. These measures increased 11% and 10% due to lower net share counts resulting from share repurchase activity during 2007.
Discussion of Results - Full Year 2007
Gross Bookings & Revenue
Gross bookings increased 16% in 2007 compared with 2006. North America bookings increased 9%, Europe bookings increased 41% (32% excluding the net benefit from foreign exchange) and Other bookings increased 28%.
Revenue increased 19% for the year, primarily driven by increased worldwide merchant hotel revenue and advertising and media revenue. North America revenue increased 14%, Europe revenue increased 34% (26% excluding foreign exchange) and Other revenue increased 35%.
Worldwide merchant hotel revenue increased 19% in 2007 due to a 12% increase in room nights stayed, including rooms delivered as a component of vacation packages, and a 6% increase in revenue per room night. Revenue per room night increased due to a 6% increase in worldwide ADRs, partially offset by a 13 basis point decline in hotel raw margin.
Worldwide air revenue decreased 2% in 2007 due to a 12% decrease in revenue per air ticket, partially offset by a 12% increase in air tickets sold. The decrease in revenue per air ticket primarily reflects decreased compensation from air carriers and global distribution system ("GDS") providers, and to a lesser extent, reduced consumer air fees.
Worldwide revenue from products and services other than merchant hotel and air (including advertising and media, car rentals, destination services, agency hotel and cruises), increased 38% in 2007 due primarily to increased advertising and media revenues and car rental revenues.
Package revenue increased 7% compared with the prior year period primarily due to higher European package bookings compared with the prior year period.
Revenue margin was 13.34% in 2007, an increase of 30 basis points. North America revenue margin increased 53 basis points to 13.62%, Europe revenue margin decreased 69 basis points to 14.37%, and Other revenue margin increased 45 basis points to 8.80%. The increase in 2007 worldwide revenue margin was primarily due to an increased mix of advertising revenue, partially offset by lower air revenue per ticket. The increase in North America revenue margin was primarily due to an increased mix of advertising and media revenues. Europe revenue margin decreased primarily due to lower air commissions and consumer fees as well as lower revenue from more competitive hotel pricing.
Profitability
Gross profit for 2007 was $2.10 billion, an increase of 21% compared with 2006 primarily due to increased revenue and a 136 basis point improvement in gross margin to 78.90%. The gross margin increase was primarily due to an increased mix of advertising and media revenue and cost reductions from our various efficiency initiatives.
OIBA increased 12% to $669 million, driven primarily by higher revenue. OIBA as a percentage of revenue decreased 165 basis points to 25.12%, primarily reflecting higher growth in sales and marketing expenses excluding stock-based compensation as a percentage of revenue, partially offset by a higher gross margin. Operating income increased 51% to $529 million primarily due to the same factors driving OIBA growth and lower expenses related to intangible assets and an intangible asset impairment charge in 2006.
Adjusted net income for the year increased $1 million compared with 2006 due to higher OIBA, largely offset by net losses from foreign currency and increases in net interest expense. Net income increased $51 million due to the same factors impacting adjusted net income as well as lower amortization of intangible assets compared to 2006 and an impairment charge in the prior year. 2007 adjusted EPS and diluted EPS were $1.22 and $0.94, respectively. These measures increased 12% and 34% due to the same factors impacting adjusted net income and net income, as well as lower net share counts from share repurchase activity.
Recent Highlights
Global Presence
-- Gross bookings from Expedia, Inc.´s international points of sale were
$1.54 billion and $6.19 billion in the fourth quarter and year ended
December 31, 2007, accounting for 34% and 31% of worldwide bookings, up
from 29% and 26% in the prior year periods. International revenue,
including the TripAdvisor international websites beginning in 2007, was
$238 million and $853 million in the fourth quarter and year ended
December 31, 2007, or 36% and 32% of worldwide revenue, up from 31% and
28% in the prior year periods.
-- Expedia Corporate Travel ("ECT") celebrated its fifth anniversary and
announced its Asia Pacific launch through a strategic partnership with
eLong(TM), Inc., providing access to fully localized service, global
reporting and in-country call support to ECT clients doing business in
China.
-- Expedia, Inc. launched six new European points of sale including
http://www.expedia.ie in Ireland, its 16th Expedia(R)-branded site, and
five new Hotels.com(R)-branded local language sites in the Czech
Republic, Greece, Hungary, Iceland, and Turkey.
-- TripAdvisor(R) Media Network expanded its global presence with launches
of UK sites http://www.CruiseCritic.co.uk and
http://www.BookingBuddy.co.uk.
Brand Portfolio
-- Expedia.com(R) teamed up with the National Football League in a multi-
year sponsorship agreement. As the Official Travel Sponsor of the NFL,
Expedia.com offers year-round travel incentives to nearly 170 million
NFL fans as well as unique packages and sweepstakes for marquee events
like the Super Bowl and the Pro Bowl.
-- For the second year in a row, Hotwire.com(TM) was recognized for
providing the "Highest Customer Satisfaction for Independent Travel Web
Sites" according to J.D. Power and Associates´ 2007 Independent Travel
Web Site Satisfaction Study(SM) (For J.D. Power and Associates award
information including information about the study see
http://www.jdpower.com).
-- In less than three months since its launch, the Citi
PremierPass(R)/Expedia.com Card was named the "Best Card for Travel
Rewards," by SmartMoney magazine for its combination of value and
flexibility.
-- Expedia.co.uk was honored as "Europe´s Leading Travel Agency" at the
annual World Travel Awards, and also won the UK Travel Weekly Globe
Award for "Best Online Booking Website" based on votes by readers of
Associated Newspapers publications.
-- Expedia, Inc. and CruiseShipCenters International, Inc. ("CSC")
unveiled their combined brand, Expedia CruiseShipCenters(R), and began
offering travel products through home-based agents in the US and
through their first co-branded store in Bellevue, WA.
-- TripAdvisor has launched several leading travel applications on
Facebook, including Cities I´ve Visited, Traveler IQ Challenge and
Local Picks, which combined have exceeded 6 million cumulative
installations.
Content & Innovation
-- ECT launched a "Specials" page on its US site highlighting exclusive
offers, including deeply discounted hotels, specific flights, and
upgrades.
-- Expedia.ca integrated CSC´s cruise content and rates in a "Cruise" tab
which was recently added to the site.
-- Hotels.com created a customized version of its site for the Apple
iPhone and iPod touch as well as a "Hotels Near Friends" application on
Facebook, which allows users to locate the 30 hotels closest to each
friend and book stays at those properties.
-- Expedia.de launched a "beach inspiration" tool to help travelers plan
trips to over 300 beaches in the Mediterranean and Canary Islands. The
tool features panoramic views, detailed area information and package
deals, and enables search by sand quality, crowd demographic, location,
and palm tree incidence.
Partner Services Group ("PSG")
-- Expedia signed multi-year agreements with InterContinental Hotels
Group, Starwood Hotels and Resorts and Kimpton Hotel & Restaurant
Group, ensuring availability of these hotel chains´ rooms and pricing
across the Company´s worldwide points of sale.
About Expedia, Inc.
Expedia, Inc. is the world´s leading online travel company, empowering business and leisure travelers with the tools and information they need to easily research, plan, book and experience travel. Expedia, Inc. also provides wholesale travel to offline retail travel agents and in-destination concierge service and activity desks for travelers. The Expedia, Inc. portfolio of brands includes: Expedia.com(R), hotels.com(R), Hotwire(R), Expedia(R) Corporate Travel, TripAdvisor(R), Expedia Local Expert(TM), Classic Vacations(R) and eLong(TM). Expedia, Inc.´s companies operate more than 50 global points of sale with sites in North America, South America, Latin America, Europe, Middle East, Africa and Asia Pacific. Expedia, Inc. is a component of the S&P 500 index. For more information, visit http://www.expediainc.com/ (NASDAQ: EXPE).
Expedia, Expedia.com, Expedia Corporate Travel and Expedia Local Expert are either registered trademarks or trademarks of Expedia, Inc. in the U.S. and/or other countries. Classic Vacations is either a trademark or registered trademark of Classic Vacations, LLC in the U.S. and/or other countries. hotels.com is either a trademark or registered trademark of hotels.com, L.P., a subsidiary of hotels.com in the U.S. and/or other countries. Hotwire is either a trademark or registered trademark of Hotwire, Inc. in the U.S. and/or other countries. TripAdvisor is either a trademark or registered trademark of TripAdvisor, LLC in the U.S. and/or other countries. Other logos or product and company names mentioned herein may be the property of their respective owners.
