BELLEVUE, Wash., April 30 /PRNewswire-FirstCall/ -- Expedia, Inc. today announced financial results for its first quarter ended March 31, 2009.
"Despite the economic environment we all must cope with these days, Expedia is engaged in more forward looking initiatives than ever," said Barry Diller, Expedia, Inc.´s Chairman and Senior Executive. "The test for us will be not in maximizing profitability at the cost of improving our services, but instead in the ground we gain competitively over the next years, both in extending our leadership and making true gains in the customer experience. This will be what differentiates us from others and is the key mission of the company."
"Our results for the first quarter, especially the improved momentum in transaction and hotel room night volumes, prove that Expedia can successfully drive unit growth despite an undeniably difficult environment," said Dara Khosrowshahi, Expedia Inc.´s CEO and President. "We effectively managed our cost base, reducing marketing spend significantly even while taking unit share. Our global realignment of resources is well in motion, which we believe will only improve our operational effectiveness and efficiency over time."
Discussion of Results
Gross Bookings & Revenue
Gross bookings decreased 11% (down 7% excluding the estimated impact from foreign exchange) for the first quarter of 2009 compared with the first quarter of 2008, driven by a decrease in the leisure segment. Domestic bookings decreased 11% and international bookings decreased 13% (down 1% excluding the estimated impact from foreign exchange).
Revenue decreased 8% (down 3% excluding the estimated impact from foreign exchange) for the first quarter, primarily driven by lower package, hotel and air revenues in our leisure segment, partially offset by increases in advertising and media and car revenues. Domestic revenue decreased 5% while international revenue decreased 14% (flat year over year excluding the estimated impact from foreign exchange).
Worldwide hotel revenue decreased 10% for the first quarter due to a 20% decrease in revenue per room night, partially offset by a 13% increase in room nights stayed, including rooms delivered as a component of packages and nights booked through Venere™. Revenue per room night decreased primarily due to an 18% decrease in worldwide average daily rates ("ADRs").
Worldwide air revenue decreased 17% for the first quarter, primarily due to a 14% decrease in revenue per ticket, driven by lower commissions and overrides (in part due to timing of receipts), a lower mix of merchant air tickets, the negative impact of foreign exchange and lower consumer booking fees. Ticket volumes declined 4% reflecting lower passenger volumes due to carrier capacity cuts and softening traveler demand, partially offset by ticket volume share gains driven in part by our booking fee promotion beginning in March.
Worldwide revenue from products and services other than hotel and air (primarily revenue from advertising and media, car rentals and destination services) increased 5% for the first quarter due primarily to increased advertising and media revenue and increased car revenue.
Advertising and media revenue, including revenue from our TripAdvisor segment, increased 15% for the first quarter, accounting for over 11% of worldwide revenue. Package revenue decreased 18% compared with the prior year period primarily due to lower ADRs.
Revenue as a percentage of gross bookings ("revenue margin") was 12.17% for the first quarter, an increase of 51 basis points. Domestic revenue margin increased 81 basis points to 12.51% while international revenue margin decreased 13 basis points to 11.42%. The increase in worldwide and domestic revenue margins was primarily due to an increased mix of advertising and media revenues as compared to first quarter 2008. The decline in international revenue margin was primarily due to lower hotel margins, in part as a result of the negative impact of foreign exchange.
Gross profit for the first quarter of 2009 was $492 million, a decrease of 8% compared with the first quarter of 2008 primarily due to decreased revenue. OIBA for the first quarter increased 3% to $130 million and increased 212 basis points as a percentage of revenue to 20.4%, driven primarily by a decrease in sales and marketing expenses at a faster rate than the decrease in revenue. Operating income increased 3% for the same reasons OIBA increased, in addition to lower amortization of intangible assets, partially offset by a $9 million restructuring charge taken in the first quarter of 2009.
Adjusted net income for the first quarter decreased $8 million compared to the prior year period primarily due to a decrease in interest income and an increase in interest expense partially offset by higher OIBA. Net income decreased primarily due to the same factors impacting adjusted net income as well as the restructuring charge taken in the first quarter of 2009 partially offset by lower amortization of intangible assets. First quarter adjusted EPS and diluted EPS were $0.21 and $0.14, respectively. Adjusted EPS decreased 13% and diluted EPS decreased 18%, primarily as a result of lower adjusted income and net income, partially offset by lower net share counts.
Cash Flows & Working Capital
For the three months ended March 31, 2009, net cash provided by operating activities was $502 million and free cash flow was $479 million. Both measures include $398 million from net changes in operating assets and liabilities, primarily driven by a working capital benefit from our merchant hotel business. Free cash flow for the first quarter decreased $52 million due primarily to a lower benefit from our merchant businesses and an increase in cash paid for income taxes and interest, partially offset by a decrease in cash used by other working capital accounts and lower capital expenditures.
· Gross bookings from Expedia, Inc.´s international businesses were $1.66 billion in the first quarter, accounting for 32% of worldwide bookings, consistent with the prior year period. Revenue from international businesses was $190 million in the first quarter, or 30% of worldwide revenue, down from 32% in the prior year period.
· hotels.com launched new localized sites in Thailand and Malaysia bringing the total number of hotels.com sites in the APAC region to thirteen.
· Expedia Affiliate Network signed a number of private label distribution deals in Europe to power travel bookings for partners, including Pegasus Airlines, click4carbon and Tiscali.
· TripAdvisor announced the official launch of its Chinese domain, www.daodao.com, providing localized travel research for Chinese travelers. In addition, TripAdvisor expanded its global footprint for travelers speaking Portuguese, Dutch and Swedish.
· As a part of its "Free Nights and No-Fee Flights" promotion, Expedia.com® waived booking fees on all flights booked on or before May 31 and offered travelers their last night free on stays of three, four or five nights at more than 700 hotels worldwide.
· Expedia.com was named "Best Website" by Zagat in their 2009 U.S. Hotels, Resorts and Spas Survey.
· Egencia announced expansion of its open travel and entertainment management platform in North America, designed to help organizations better manage expenses and prevent fraud and supported by integrations with IBM´s Global Expense Reporting Solutions (GERS), Databasics, ExpenseWatch.com, ExpenseWire and SutiSoft.
· Hotwire launched a new carbon offset program with TerraPass through which Hotwire pays for half the cost of carbon offsets purchased by its travelers.
Content & Innovation
· TripAdvisor launched its new flight meta-search service, which includes its proprietary Fees Estimator tool, the first product of its kind to help travelers better understand the true cost of a flight in a single display.
· Expedia Media Solutions introduced PassportAds™, the first behavioral marketing product to connect advertisers with in-market travel consumers across the Internet and throughout the trip purchasing lifecycle.
· hotels.com® reached the one million mark for qualified user reviews. A recent hotels.com survey showed that U.S. travelers are increasingly relying on online reviews prior to booking a hotel.
· TripAdvisor announced its enhanced restaurant product featuring nearly 500,000 restaurants in 24,000 cities and more than 2 million ratings and reviews, allowing visitors to identify, locate and book eateries around the world.
· SeatGuru® now includes over 590 seat maps from 84 airlines, and has been integrated on Expedia sites in the U.S., Canada and Australia, as well as on Egencia.
· BookingBuddy™ introduced its new BookingBuddy Deals network, delivering targeted travel deal ads to more than 23 million travelers throughout the TripAdvisor network.
· Expedia.com enhanced its hotel search results display, with additional geographic intelligence to deliver a larger selection of properties in an expanded geographic radius for searches in smaller cities and neighborhoods.
· Egencia expanded its mobile "Egencia on the Go" platform to Europe, offering clients SMS travel alerts and flight information.