BELLEVUE, Wash.—April 29, 2010—Expedia, Inc. (NASDAQ: EXPE) today announced financial results for its first quarter ended March 31, 2010.
“Whatever the peak and trough of quarterly earnings, dependent upon world economic and secular events, Expedia is a consistently delivering cash machine–this quarter returning over $200 million in excess cash to our shareholders,” said Barry Diller, Expedia, Inc.’s Chairman and Senior Executive.
“Expedia delivered solid first quarter results amidst a return to relatively normal economic and travel conditions,” said Dara Khosrowshahi, Expedia, Inc.’s CEO and President. “We saw broad based strength across our businesses, with 18% growth in transactions and 34% growth in advertising revenues. We remain confident that Expedia’s diversified portfolio of business models, brands and geographies will serve us well in 2010 and beyond.”
Discussion of Results
Gross Bookings, Revenue & Revenue Margins
Gross bookings increased 27% (23% excluding the estimated benefit from year on year changes in foreign exchange rates) for the first quarter of 2010 compared with the first quarter of 2009, driven primarily by 18% growth in transactions and a 9% increase in average airfares. Domestic bookings increased 20% and international bookings increased 43% (33% excluding foreign exchange).
Revenue increased 13% (10% excluding foreign exchange) for the first quarter, primarily driven by an increase in hotel and advertising & media revenues. Domestic revenue increased 5% while international revenue increased 31% (24% excluding foreign exchange). Domestic revenue growth trailed international growth primarily due to lower gross bookings growth and a greater impact from our various fee reductions and eliminations.
Revenue as a percentage of gross bookings (revenue margin) was 10.8% for the first quarter, a decrease of 134 basis points compared to the first quarter of 2009. The decrease in revenue margin was primarily due to lower consumer fees and a higher mix of air bookings, which have a lower revenue margin than our other products and services.
Products & Services Detail
Worldwide hotel revenue increased 12% for the first quarter primarily due to an 18% increase in room nights stayed, including rooms delivered as a component of packages, partially offset by a 5% decline in revenue per room night. Revenue per room night declined due in part to lower hotel service fees in first quarter 2010 compared with the prior year period.
Worldwide air revenue increased 6% for the first quarter, primarily due to a 22% increase in air tickets sold, partially offset by a 13% decrease in revenue per ticket due largely to our elimination of booking fees on Expedia.com® beginning in March 2009.
Advertising and media revenue (including net revenue from TripAdvisor® Media Network) increased 34% for the first quarter, driven by a 39% increase in third-party revenue for TripAdvisor Media Network and a 24% increase in advertising revenue generated by our transaction sites. All other revenue sources (primarily car rentals and destination services) increased 6% for the first quarter.
Hotel revenues accounted for 58% of worldwide revenues in the first quarter of 2010, while air, advertising & media and all other revenues each accounted for 14% of worldwide revenues in the first quarter.
Profitability
OIBA for the first quarter increased 10% to $143 million primarily due to increased revenues. OIBA decreased 56 basis points as a percentage of revenue to 19.9% due to growth in selling & marketing expense in excess of revenue, partially offset by lower rates of growth in general & administrative expense and cost of revenue than growth in revenue. Operating income increased 21% due to the same factors impacting OIBA, as well as $9 million in non-recurring restructuring charges in the first quarter of 2009.
Adjusted net income for the first quarter increased $15 million compared to the prior year period primarily due to higher OIBA, a foreign exchange gain compared with a prior period loss and a lower effective tax rate, partially offset by lower interest income. Net income increased $20 million compared to the prior year period primarily due to higher operating income and the same factors impacting adjusted net income. Adjusted EPS increased 24% to $0.26 and diluted EPS increased 43% to $0.20.
Recent Highlights
Global Presence
Gross bookings from Expedia, Inc.’s international businesses were a record $2.37 billion in the first quarter, accounting for 36% of worldwide bookings, up from 32% in the prior year period. International revenues were $250 million, representing 35% of worldwide revenue, up from 30% in the prior year period.
Expedia Travel Agent Affiliate Programs (TAAP) launched in Australia, Canada and New Zealand. TAAP provides travel agents in those countries direct access to Expedia’s global inventory, and the opportunity to earn commissions on a range of travel products and services.
The Egencia Global Alliance™ added partnerships with local travel management companies in Austria, Brazil, the Czech Republic, Japan, Malaysia, Mexico and Slovakia. These additions expand Egencia’s presence to over 30 countries worldwide.
Expedia sites in Australia (expedia.com.au) and New Zealand (expedia.co.nz) announced the elimination of all change and cancel fees for travel booked on those sites.
TripAdvisor continues to expand its global footprint, reaching 19 localized sites worldwide with the launch of sites in Australia (tripadvisor.com.au), Norway (no.tripadvisor.com) and Poland (pl.tripadvisor.com).
Brand Portfolio
Hotwire® was named ―“The Best Hotel Travel Web Site for 2009” by Market Metrix Hospitality Index, the largest and most in-depth measurement of hotel, airline and car rental performance available.
Expedia®’s CruiseShipCenters® was honored with Carnival Cruise Lines’ “Agency of Year”award for the second year in a row, besting 30,000 other cruise agencies throughout Canada and the United States.
TripAdvisor and ThomasCook have partnered to feature TripAdvisor user reviews, ratings and other syndicated content on ThomasCook sites in Ireland and the U.K.
Expedia® Affiliate Network (EAN) signed a number of new partners, including Palace Resorts, visitor bureaus in Indianapolis and Seattle, and Delta Airlines, agreeing to power the carrier’s hotel bookings via Expedia’s call transfer program and providing SkyMiles members an opportunity to earn 300 miles per qualifying hotel stay.
Content and Innovation
Expedia.com launched TripAssist™, a free iPhone and iPod Touch application, enabling travelers to book flights and manage itineraries from their mobile devices. TripAssist has been downloaded over 100,000 times, and Expedia has seen transactions completed on mobile phones increase 25%. In addition, TripAdvisor’s mobile website has launched in 18 countries and 12 different languages.
Expedia.com introduced a new suite of accessibility search tools, enabling travelers to search all of Expedia’s U.S.-based properties for lodging offering accommodations for disabled travelers.
Expedia.co.jp announced an agreement to provide enriched content and last-minute travel deals for Goo Travel, one of Japan’s largest portal sites with more than 4.5 million unique visitors per month.
TravelAds, Expedia Media Solutions’ cost-per-click advertising product for hotels, was extended to the U.K. in January, where during the first week participating hotels achieved an average 40% lift in transaction volumes.
Supply Portfolio
At quarter-end, Expedia’s global websites featured over 123,000 bookable properties, including direct relationships with 66,000 merchant and nearly 26,000 agency properties. Expedia sites offer over 59,000 EMEA region hotels and more than 12,000 properties in APAC countries.
Expedia has signed a number of global hotel partnership agreements, including Germany-based TOP International Hotels with 250 properties in Europe, leading Nordic hotel chain Scandic Hotels and China’s leading budget hotel brand, Motel 168.
Expedia signed a global agreement with Hyatt to offer its more than 400 properties on all Expedia and Hotels.com-branded sites worldwide.
Expedia’s global supply footprint continues to expand with a number of new partnerships in Sub-Saharan Africa, including the addition of hotel properties located in Cape Verde, Ethiopia, Gambia, Kenya, Malawi, Rwanda, Senegal, Tanzania and Uganda.
