Exhibit 99.1
FOR IMMEDIATE RELEASE
Expedia, Inc. Reports Fourth Quarter Financial Results
and Announces Stock Repurchase Plan and Stock Split
| • | 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, Washington – February 5, 2003 – Expedia, Inc. (NASDAQ: EXPE) 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.
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.
Expedia reports revenue and earnings for December quarter – 2
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.
Expedia reports revenue and earnings for December quarter – 3
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 $327 million for the year.
2003 Operating Budget
The following table reflects Expedia’s expectations as of February 5, 2003. Results may be materially affected by many factors, such as changes in global economic conditions and the health of the travel industry, consumer spending, fluctuations in foreign-currency rates, the emerging nature and rate of growth of the Internet and online commerce, and other factors, including those identified in our SEC filings. The 2003 budget does not reflect an assumption of war or any other dramatic shock to the travel industry.
Expedia reports revenue and earnings for December quarter – 4
Expedia, Inc. 2003 Operating Budget
($ in millions except per share amounts; reconciliation of adjusted to GAAP in Exhibit 6)
Q1 | Q2 | Q3 | Q4 | Total | |||||||||||
Gross Bookings | $ | 1,790 | $ | 1,925 | $ | 1,924 | $ | 1,819 | $ | 7,458 | |||||
Revenues |
| 186 |
| 212 |
| 228 |
| 219 |
| 845 | |||||
PreTax 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.
Expedia reports revenue and earnings for December quarter – 5
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.”
Relationship with Hotels.com
As Expedia and Hotels.com have a common controlling shareholder, Expedia previously has said that it would explore areas where it might work together with Hotels.com in a way that would benefit all Expedia customers and stockholders. Although there continue to be many areas of our business where Expedia has decided that it can best achieve its goals through separate strategies and practices, there have been instances where, fully consistent with its existing contractual agreements, it has worked cooperatively with Hotels.com, and it anticipates that it will continue to explore such possibilities in the future.
Recent Operating Highlights:
| · | On November 17, 2002, Expedia launched Expedia® Corporate Travel, aimed at providing travelers and travel managers with more choice and control, while reducing the costs associated with managing business travel. With Expedia’s new corporate product, companies are able to save as much as 80 percent on business travel transaction costs, while benefiting from a unique combination of Expedia’s technology expertise and high-touch service in a single, complete solution. |
Expedia reports revenue and earnings for December quarter – 6
| · | Expedia’s technology enhancements in the quarter included enabling customers to book trips to multiple destinations, such as an island-hopping vacation to Hawaii or a multi-country European adventure. Expedia’s new multi-destination package feature is available for worldwide destinations and addresses the needs of travelers who want the flexibility to book flights, hotel, and car rentals in a single, convenient itinerary. |
| · | PC Magazine named Expedia its “Editors’ Choice” in a head-to-head review of online hotel booking sites, taking top honors for its “know-before-you-go” features, including virtual property tours and area-specific maps. In the October 15 issue, PC Magazine tested the hotel offerings of six travel sites and chose Expedia as the site that stands out among its peers. PC Magazine considered criteria such as search functionality, available hotels, room prices, and ease-of-use. |
About Expedia, Inc.
Expedia, Inc. (NASDAQ: EXPE) is the world’s leading online travel service and the eighth largest travel agency in the U.S. Expedia’s award-winning Expert Searching and Pricing (ESP) technology delivers the most comprehensive flight options available online. ESP also allows customers to dynamically build complete trips that combine flights, Expedia Special Rate hotels and other lodging, ground transportation, and destination activities. Expedia operates Classic Custom Vacations, a leading wholesaler of premiere vacation packages to destinations such as Hawaii, Mexico, Europe and the Caribbean; and Metropolitan Travel, a corporate travel agency. Travelscape, Inc., wholly owned by Expedia, also operates as WWTE, a private-label online travel business that supplies car and hotel inventory to third parties. Expedia is a majority-owned subsidiary of USA Interactive (NASDAQ: USAI).
Notes on Attached Exhibits
| • | Exhibit 1 outlines the three months ended December 31, 2002, consolidated Statements of Operations for Expedia, as compared with the prior-year numbers, including a reconciliation of non-GAAP financial measures to the comparable GAAP measures. |
| • | Exhibit 2 outlines the twelve-month consolidated Statements of Operations for Expedia, as compared with the prior-year numbers, including a reconciliation of non-GAAP financial measures to the comparable GAAP measures. |
| • | Exhibit 3 presents a consolidated balance sheet for Expedia. |
| • | Exhibit 4 presents a consolidated cash flow statement for Expedia. |
| • | Exhibit 5 outlines key operating metrics for Expedia and its subsidiaries. |
| • | Exhibit 6 presents a reconciliation of 2002 actual earnings and 2003 operating budget on a GAAP basis to adjusted earnings and includes an explanation of changes Expedia is making in the presentation of adjusted earnings going forward. |
Expedia reports revenue and earnings for December quarter – 7
Expedia management believes that the presentation of the non-GAAP pre-tax and after-tax “adjusted earnings” in this press release and the exhibits to this press release are meaningful to investors because they provide a measure of the cash-generating nature of the on-going business by removing non-cash items that do not reflect actual cash expenditures, or by removing items that are non-recurring in nature and therefore don’t represent the on-going costs of doing business. Expedia management uses the adjusted earnings measures for the same purpose. Expedia believes that the presentation of EBITA in the exhibits to this press release is meaningful because it provides investors with a widely-accepted measure of performance that allows investors to make comparisons across companies and industries. A reconciliation of adjusted earnings and EBITA to GAAP net income is provided in Exhibits 1 and 2.
###
This press release contains forward-looking statements relating to future events or future financial performance that involve risks and uncertainties. Such statements can be identified by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms or comparable terms. These statements are only predictions and actual results could differ materially from those anticipated in these statements based upon a number of factors including final adjustments made in closing the quarter and those identified in the company’s filings with the SEC.
Expedia, the airplane logo and Classic Custom Vacations are either registered trademarks or trademarks of Expedia, Inc. in the U.S., Canada and other countries. The names of actual companies and products mentioned herein may be trademarks of their respective owners.
For investor information about Expedia, Inc.:
Marj Charlier, Director of Investor Relations, (425) 564-7666
or call our Investor Relations team at (425) 564-7233
For more information, press only:
Darcy Bretz, Edelman Public Relations, (312) 240-2619
darcy.bretz@edelman.com or visithttp://expedia.com/daily/press
Exhibit 1
Statements of Operations
Expedia, Inc.
(in thousands, except per share amounts)
(unaudited)
Three Months Ended December 31, 2002 (A) | Three Months Ended December 31, 2001 | |||||||||||||||||||||||
GAAP | Adjustments | Adjusted | GAAP | Adjustments | Adjusted | |||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Agency | $ | 62,781 |
| $ | 62,781 |
| $ | 42,266 |
| $ | 42,266 |
| ||||||||||||
Merchant (B) |
| 97,307 |
|
| 97,307 |
|
| 34,321 |
|
| 34,321 |
| ||||||||||||
Advertising and other |
| 3,824 |
|
| 3,824 |
|
| 5,175 |
|
| 5,175 |
| ||||||||||||
Total revenues |
| 163,912 |
|
| 163,912 |
|
| 81,762 |
|
| 81,762 |
| ||||||||||||
Cost of revenues: | ||||||||||||||||||||||||
Agency |
| 23,237 |
|
| 23,237 |
|
| 15,310 |
|
| 15,310 |
| ||||||||||||
Merchant (B) |
| 28,082 |
|
| 28,082 |
|
| 9,816 |
|
| 9,816 |
| ||||||||||||
Advertising and other |
| 696 |
|
| 696 |
|
| 754 |
|
| 754 |
| ||||||||||||
Total cost of revenues |
| 52,015 |
|
| 52,015 |
|
| 25,880 |
|
| 25,880 |
| ||||||||||||
Gross profit |
| 111,897 |
|
| 111,897 |
|
| 55,882 |
|
| 55,882 |
| ||||||||||||
Gross profit % |
| 68.3 | % |
| 68.3 | % |
| 68.3 | % |
| 68.3 | % | ||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Product development |
| 10,343 |
|
| 10,343 |
|
| 6,443 |
|
| 6,443 |
| ||||||||||||
Sales and marketing |
| 47,503 |
|
| (3,342 | )(C) |
| 44,161 |
|
| 22,287 |
|
| 22,287 |
| |||||||||
General and administrative |
| 14,269 |
|
| 14,269 |
|
| 8,696 |
|
| 8,696 |
| ||||||||||||
Amortization of goodwill and intangibles |
| 4,538 |
|
| (4,538 | )(D) |
| — |
|
| 9,905 |
|
| (9,905 | )(D) |
| — |
| ||||||
Recognition of stock-based compensation |
| 1,152 |
|
| (1,152 | )(E) |
| — |
|
| 2,424 |
|
| (2,424 | )(E) |
| — |
| ||||||
Total operating expenses |
| 77,805 |
|
| (9,032 | ) |
| 68,773 |
|
| 49,755 |
|
| (12,329 | ) |
| 37,426 |
| ||||||
Income from operations |
| 34,092 |
|
| 9,032 |
|
| 43,124 |
|
| 6,127 |
|
| 12,329 |
|
| 18,456 |
| ||||||
Net interest income and other |
| 3,701 |
|
| 3,701 |
|
| 1,214 |
|
| 1,214 |
| ||||||||||||
Share of joint venture net loss |
| (193 | ) |
| (193 | ) |
| (769 | ) |
| (769 | ) | ||||||||||||
USAI merger-related expense |
| (729 | ) |
| 729 |
|
| — |
|
| (1,350 | ) |
| 1,350 |
|
| — |
| ||||||
Pretax income |
| 36,871 |
|
| 9,761 |
|
| 46,632 |
|
| 5,222 |
|
| 13,679 |
|
| 18,901 |
| ||||||
Provision for income taxes |
| (15,436 | ) |
| (15,436 | ) | ||||||||||||||||||
NET INCOME | $ | 21,435 |
| $ | 9,761 |
|
| 31,196 |
| $ | 5,222 |
| $ | 13,679 |
|
| 18,901 |
| ||||||
Net interest income and other |
| (3,701 | ) |
| (1,214 | ) | ||||||||||||||||||
Provision for income taxes |
| 15,436 |
|
| — |
| ||||||||||||||||||
Share of joint venture net loss |
| 193 |
|
| 769 |
| ||||||||||||||||||
EBITA (F) | $ | 43,124 |
| $ | 18,456 |
| ||||||||||||||||||
Pre-tax income per share: | ||||||||||||||||||||||||
Basic | $ | 0.80 |
| $ | 0.36 |
| ||||||||||||||||||
Diluted | $ | 0.72 |
| $ | 0.31 |
| ||||||||||||||||||
NET INCOME per share: | ||||||||||||||||||||||||
Basic | $ | 0.37 |
| $ | 0.54 |
| $ | 0.10 |
| $ | 0.36 |
| ||||||||||||
Diluted | $ | 0.33 |
| $ | 0.48 |
| $ | 0.08 |
| $ | 0.31 |
| ||||||||||||
Weighted average # of shares outstanding: | ||||||||||||||||||||||||
Basic |
| 58,207 |
|
| 58,207 |
|
| 52,010 |
|
| 52,010 |
| ||||||||||||
Diluted |
| 64,806 |
|
| 64,806 |
|
| 61,945 |
|
| 61,945 |
| ||||||||||||
| (A) | The financial results presented for the period ended December 31, 2002 includes the operations of Classic Custom Vacations, acquired March 9, 2002, Metropolitan Travel Inc., acquired July 13, 2002 and Newtrade Technologies Inc. acquired October 28, 2002. |
| (B) | Merchant amounts are reported on a net basis. |
| (C) | Non-cash marketing expense resulting from contribution by USA Interactive, Inc. |
| (D) | Amortization of acquired goodwill and intangibles. |
| (E) | Non-cash stock-based compensation expense. |
| (F) | Adjusted EBITA is defined as adjusted net income minus net interest income and other; and plus, |
(1) provision for income taxes and (2) share of joint venture net losses.
| Expedia has changed its presentation from EBITDA to EBITA to be consistent with USA Interactive. |
Exhibit 2
Statements of Operations
Expedia, Inc.
(in thousands, except per share amounts)
(unaudited)
Year Ended December 31, 2002 (A) | Year Ended December 31, 2001 | |||||||||||||||||||||
GAAP | Adjustments | Adjusted | GAAP | Adjustments | Adjusted | |||||||||||||||||
(B) | (B) | |||||||||||||||||||||
Revenues: | ||||||||||||||||||||||
Agency | $ | 231,817 |
| $ | 231,817 |
| $ | 158,794 |
| $ | 158,794 |
| ||||||||||
Merchant (B) |
| 339,137 |
|
| 339,137 |
|
| 108,603 |
|
| 108,603 |
| ||||||||||
Advertising and other |
| 19,644 |
|
| 19,644 |
|
| 29,539 |
|
| 29,539 |
| ||||||||||
Total revenues |
| 590,598 |
|
| 590,598 |
|
| 296,936 |
|
| 296,936 |
| ||||||||||
Cost of revenues: | ||||||||||||||||||||||
Agency |
| 87,771 |
|
| 87,771 |
|
| 61,357 |
|
| 61,357 |
| ||||||||||
Merchant (B) |
| 98,770 |
|
| 98,770 |
|
| 28,813 |
|
| 28,813 |
| ||||||||||
Advertising and other |
| 2,726 |
|
| 2,726 |
|
| 3,245 |
|
| 3,245 |
| ||||||||||
Total cost of revenues |
| 189,267 |
|
| 189,267 |
|
| 93,415 |
|
| 93,415 |
| ||||||||||
Gross profit |
| 401,331 |
|
| 401,331 |
|
| 203,521 |
|
| 203,521 |
| ||||||||||
Gross profit % |
| 68.0 | % |
| 68.0 | % |
| 68.5 | % |
| 68.5 | % | ||||||||||
Operating expenses: | ||||||||||||||||||||||
Product development |
| 36,532 |
|
| 36,532 |
|
| 27,202 |
|
| 27,202 |
| ||||||||||
Sales and marketing |
| 172,758 |
| (13,062 | ) (C) |
| 159,696 |
|
| 99,740 |
|
| 99,740 |
| ||||||||
General and administrative |
| 46,603 |
|
| 46,603 |
|
| 26,764 |
|
| 26,764 |
| ||||||||||
Amortization of goodwill and intangibles |
| 22,017 |
| (22,017 | ) (D) |
| — |
|
| 50,771 |
| (50,771 | ) |
| — |
| ||||||
Recognition of stock-based compensation |
| 6,562 |
| (6,562 | ) (E) |
| — |
|
| 16,404 |
| (16,404 | ) |
| — |
| ||||||
Total operating expenses |
| 284,472 |
| (41,641 | ) |
| 242,831 |
|
| 220,881 |
| (67,175 | ) |
| 153,706 |
| ||||||
Income (loss) from operations |
| 116,859 |
| 41,641 |
|
| 158,500 |
|
| (17,360 | ) | 67,175 |
|
| 49,815 |
| ||||||
Net interest income and other |
| 11,276 |
|
| 11,276 |
|
| 4,325 |
|
| 4,325 |
| ||||||||||
Share of joint venture net loss |
| (711 | ) |
| (711 | ) |
| (769 | ) |
| (769 | ) | ||||||||||
USAI merger-related expense |
| (11,566 | ) | 11,566 |
|
| — |
|
| (7,691 | ) | 7,691 |
|
| — |
| ||||||
Pretax income (loss) |
| 115,858 |
| 53,207 |
|
| 169,065 |
|
| (21,495 | ) | 74,866 |
|
| 53,371 |
| ||||||
Provision for income taxes |
| (49,543 | ) |
| (49,543 | ) | ||||||||||||||||
NET INCOME (LOSS) | $ | 66,315 |
| 53,207 |
|
| 119,522 |
| $ | (21,495 | ) | 74,866 |
|
| 53,371 |
| ||||||
Net interest income and other |
| (11,276 | ) |
| (4,325 | ) | ||||||||||||||||
Provision for income taxes |
| 49,543 |
|
| — |
| ||||||||||||||||
Share of joint venture net loss |
| 711 |
|
| 769 |
| ||||||||||||||||
EBITA (F) | $ | 158,500 |
| $ | 49,815 |
| ||||||||||||||||
Pre-tax Income (Loss) per share: | ||||||||||||||||||||||
Basic | $ | 2.99 |
| $ | 1.07 |
| ||||||||||||||||
Diluted | $ | 2.64 |
| $ | 0.89 |
| ||||||||||||||||
NET INCOME (LOSS) per share: | ||||||||||||||||||||||
Basic | $ | 1.17 |
| $ | 2.11 |
| $ | (0.43 | ) | $ | 1.07 |
| ||||||||||
Diluted | $ | 1.04 |
| $ | 1.87 |
| $ | (0.43 | ) | $ | 0.89 |
| ||||||||||
Weighted average # of shares outstanding: | ||||||||||||||||||||||
Basic |
| 56,536 |
|
| 56,536 |
|
| 49,821 |
|
| 49,821 |
| ||||||||||
Diluted |
| 63,986 |
|
| 63,986 |
|
| 49,821 |
|
| 60,215 |
| ||||||||||
| (A) | The financial results presented for the period ended December 31, 2002 includes the operations of Classic Custom Vacations, acquired March 9, 2002, Metropolitan Travel Inc., acquired July 13, 2002 and Newtrade Technologies Inc. acquired October 28, 2002. |
| (B) | Merchant amounts are reported on a net basis. |
| (C) | Non-cash marketing expense resulting from contribution by USA Interactive, Inc. |
| (D) | Amortization of acquired goodwill and intangibles. |
| (E) | Non-cash stock-based compensation expense. |
| (F) | Adjusted EBITA is defined as adjusted net income minus net interest income and other; and plus, |
(1) provision for income taxes and (2) share of joint venture net losses.
| Expedia | has changed its presentation from EBITDA to EBITA to be consistent with USA Interactive. |
Exhibit 3
Condensed Consolidated Balance Sheets
Expedia, Inc.
(in thousands)
(unaudited)
December 31, 2002 | December 31, 2001 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 218,219 |
| $ | 238,374 |
| ||
Marketable securities |
| 365,790 |
|
| 0 |
| ||
Accounts receivable, net |
| 35,741 |
|
| 17,649 |
| ||
Prepaid merchant bookings |
| 12,435 |
|
| 8,726 |
| ||
Prepaid expenses and other current assets |
| 12,667 |
|
| 7,192 |
| ||
Total current assets |
| 644,852 |
|
| 271,941 |
| ||
Property and equipment, net |
| 30,368 |
|
| 21,447 |
| ||
Investment and restricted deposits |
| 15,739 |
|
| 12,897 |
| ||
Intangible assets, net |
| 44,668 |
|
| 19,380 |
| ||
Goodwill, net |
| 130,545 |
|
| 78,890 |
| ||
Total assets | $ | 866,172 |
| $ | 404,555 |
| ||
LIABILITIES | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 39,159 |
| $ | 34,097 |
| ||
Accrued expenses |
| 180,628 |
|
| 66,818 |
| ||
Deferred merchant bookings |
| 149,348 |
|
| 52,965 |
| ||
Unearned revenue |
| 4,772 |
|
| 1,574 |
| ||
Total current liabilities |
| 373,907 |
|
| 155,454 |
| ||
STOCKHOLDERS’ EQUITY | ||||||||
Common stock |
| 244 |
|
| 529 |
| ||
Class B common stock |
| 345 |
|
| 0 |
| ||
Stockholder warrants |
| 77,839 |
|
| 0 |
| ||
Additional paid-in-capital |
| 505,647 |
|
| 448,998 |
| ||
Contribution from parent |
| 95,443 |
|
| 0 |
| ||
Contribution receivable from parent |
| (62,234 | ) |
| 0 |
| ||
Unearned stock-based compensation |
| (4,672 | ) |
| (9,681 | ) | ||
Retained deficit |
| (124,631 | ) |
| (190,946 | ) | ||
Accumulated other comprehensive income |
| 4,284 |
|
| 201 |
| ||
Total stockholders’ equity |
| 492,265 |
|
| 249,101 |
| ||
Total liabilities and stockholders’ equity | $ | 866,172 |
| $ | 404,555 |
| ||
Exhibit 4
Condensed Consolidated Cash Flow Statements
Expedia, Inc.
(in thousands)
(unaudited)
Year Ended | ||||||||
December 31, 2002 | December 31, 2001 | |||||||
Operating activities: | ||||||||
Net income (loss) | $ | 66,315 |
| $ | (21,495 | ) | ||
Adjustments to reconcile net income to net cash provided by operating activities |
| 120,431 |
|
| 86,683 |
| ||
Cash provided by changes in operating assets and liabilities, net of acquisitions |
| 140,578 |
|
| 74,420 |
| ||
Net cash provided by operating activities |
| 327,324 |
|
| 139,608 |
| ||
Investing activities: | ||||||||
Purchase of marketable securities, net |
| (362,127 | ) |
| — |
| ||
Additions to property and equipment, net |
| (21,963 | ) |
| (21,546 | ) | ||
Acquisition of companies |
| (59,574 | ) |
| 509 |
| ||
Funding of investments and restricted deposits, net |
| (539 | ) |
| (9,140 | ) | ||
Net cash used in investing activities |
| (444,203 | ) |
| (30,177 | ) | ||
Financing activities: | ||||||||
USAI transaction related costs |
| (11,566 | ) |
| (7,691 | ) | ||
Net proceeds from issuance of common stock and common stock warrants |
| 51,166 |
|
| 1,609 |
| ||
Net proceeds from exercise of options |
| 36,984 |
|
| 18,504 |
| ||
Net contribution from parent |
| 20,147 |
|
| — |
| ||
Repayment of notes payable |
| — |
|
| (1,764 | ) | ||
Net cash provided by financing activities |
| 96,731 |
|
| 10,658 |
| ||
Effect of foreign exchange rate changes on cash and cash equivalents |
| (7 | ) |
| 35 |
| ||
Net increase (decrease) in cash and cash equivalents |
| (20,155 | ) |
| 120,124 |
| ||
Cash and cash equivalents at beginning of period |
| 238,374 |
|
| 118,250 |
| ||
Cash and cash equivalents at end of period | $ | 218,219 |
| $ | 238,374 |
| ||
Exhibit 5
Key Operating Metrics
(In Thousands, except ADR)
(unaudited)
Three months ended | |||||||||||||||||||||||
Dec. 31, 2001 | Mar. 31, 2002 | Jun. 30, 2002 | Sep. 30, 2002 | Dec. 31, 2002 | Year-over- year | ||||||||||||||||||
Gross Bookings | |||||||||||||||||||||||
Total gross bookings (A) | $ | 704,000 |
| $ | 1,107,000 |
| $ | 1,335,000 |
| $ | 1,466,000 |
| $ | 1,380,000 |
| 96 | % | ||||||
Agency gross bookings |
| 540,000 |
|
| 797,000 |
|
| 937,000 |
|
| 1,042,000 |
|
| 1,002,000 |
| 86 | % | ||||||
Merchant gross bookings (includes CCV) |
| 164,000 |
|
| 310,000 |
|
| 398,000 |
|
| 424,000 |
|
| 378,000 |
| 130 | % | ||||||
CCV gross bookings |
| 18,000 |
|
| 82,000 |
|
| 67,000 |
|
| 42,000 |
| n/a |
| |||||||||
International gross bookings |
| 48,000 |
|
| 85,000 |
|
| 94,000 |
|
| 138,000 |
|
| 123,000 |
| 156 | % | ||||||
US gross bookings |
| 656,000 |
|
| 1,022,000 |
|
| 1,241,000 |
|
| 1,328,000 |
|
| 1,257,000 |
| 92 | % | ||||||
Additional metrics | |||||||||||||||||||||||
Revenue from packages | $ | 11,573 |
| $ | 25,456 |
| $ | 41,527 |
| $ | 49,881 |
| $ | 46,912 |
| 305 | % | ||||||
Total room nights stayed |
| 1,522 |
|
| 2,042 |
|
| 2,627 |
|
| 3,207 |
|
| 3,168 |
| 108 | % | ||||||
Merchant room nights stayed |
| 1,178 |
|
| 1,644 |
|
| 2,077 |
|
| 2,602 |
|
| 2,522 |
| 114 | % | ||||||
Merchant hotel average daily rate (excludes CCV) | $ | 109 |
| $ | 118 |
| $ | 120 |
| $ | 114 |
| $ | 119 |
| 9 | % | ||||||
Customers | |||||||||||||||||||||||
Average monthly Media Metrix reach (B) |
| 9,238 |
|
| 11,242 |
|
| 12,161 |
|
| 12,615 |
|
| 11,392 |
| 23 | % | ||||||
Expedia.com conversion (C) |
| 5.2 | % |
| 5.8 | % |
| 6.3 | % |
| 6.7 | % |
| 6.8 | % | 31 | % | ||||||
Expedia new purchasing customers (D) |
| 870 |
|
| 1,316 |
|
| 1,529 |
|
| 1,693 |
|
| 1,528 |
| 76 | % | ||||||
Expedia cumulative purchasing customers (E) |
| 6,294 |
|
| 7,610 |
|
| 9,139 |
|
| 10,832 |
|
| 12,360 |
| n/a |
| ||||||
Expedia quarterly unique purchasing customers (F) |
| 1,383 |
|
| 1,874 |
|
| 2,217 |
|
| 2,492 |
|
| 2,225 |
| 61 | % | ||||||
| (A) | Gross bookings represents the total value of travel booked through the Expedia and WWTE sites, Classic Custom Vacations and Metropolitan Travel since acquisition. |
| (B) | Average monthly Media Metrix reach represents the unduplicated reach for the Expedia sites. |
| (C) | Conversion represents the monthly average Expedia.com unique monthly purchasers divided by the monthly average Media Metrix reach for the Expedia.com site. |
| (D) | Expedia new purchasing customers represents the number of new customers transacting through the Expedia sites in a quarter. |
| (E) | Expedia cumulative purchasing customers represents the cumulative number of customers that have ever transacted through the Expedia sites as of the end of a quarter. |
| (F) | Expedia quarterly unique purchasing customers represents the number of unique customers transacting through the Expedia sites over the course of a quarter. |
Exhibit 6
Reconciliation of GAAP to Adjusted Earnings
and of Adjusted Earnings to 2003 Method of Calculating Adjusted Earnings (A)
Expedia, Inc.
(in millions, except per share amounts)
(unaudited)
2002 Actual Results | 2003 Operating Budget | |||||||||||||||||||||||||||||||||||||||
Q102 | Q202 | Q302 | Q402 | 2002 | Q103 | Q203 | Q303 | Q403 | 2003 | |||||||||||||||||||||||||||||||
Per 2002 Methodology | ||||||||||||||||||||||||||||||||||||||||
Net income – GAAP | $ | 5.7 |
| $ | 19.1 |
| $ | 20.1 |
| $ | 21.4 |
| $ | 66.3 |
| $ | 16.1 |
| $ | 31.5 |
| $ | 36.0 |
| $ | 34.5 |
| $ | 118.1 |
| ||||||||||
Provision for income tax |
| 4.6 |
|
| 14.1 |
|
| 15.4 |
|
| 15.4 |
|
| 49.5 |
|
| 9.6 |
|
| 18.6 |
|
| 21.2 |
|
| 20.4 |
|
| 69.8 |
| ||||||||||
Pre-tax GAAP income |
| 10.3 |
|
| 33.2 |
|
| 35.5 |
|
| 36.8 |
|
| 115.8 |
|
| 25.7 |
|
| 50.1 |
|
| 57.2 |
|
| 54.9 |
|
| 187.9 |
| ||||||||||
Pre-tax adjustments: | ||||||||||||||||||||||||||||||||||||||||
Amortization of non-cash marketing expense |
| 1.5 |
|
| 4.3 |
|
| 3.9 |
|
| 3.3 |
|
| 13.0 |
|
| 3.7 |
|
| 3.8 |
|
| 3.7 |
|
| 3.8 |
|
| 15.0 |
| ||||||||||
Non-recurring items |
| 9.9 |
|
| .0 |
|
| 1.0 |
|
| .7 |
|
| 11.6 |
|
| .0 |
|
| .0 |
|
| .0 |
|
| .0 |
|
| .0 |
| ||||||||||
Amortization of intangibles |
| 8.8 |
|
| 4.2 |
|
| 4.5 |
|
| 4.5 |
|
| 22.0 |
|
| 5.3 |
|
| 3.6 |
|
| 3.6 |
|
| 3.6 |
|
| 16.1 |
| ||||||||||
Recognition of stock-based compensation |
| 2.5 |
|
| 1.5 |
|
| 1.3 |
|
| 1.3 |
|
| 6.6 |
|
| 9.5 |
|
| 3.8 |
|
| 3.8 |
|
| 3.6 |
|
| 20.7 |
| ||||||||||
Total |
| 22.7 |
|
| 10.0 |
|
| 10.7 |
|
| 9.8 |
|
| 53.2 |
|
| 18.5 |
|
| 11.2 |
|
| 11.1 |
|
| 11.0 |
|
| 51.8 |
| ||||||||||
Pre-tax adjusted earnings |
| 33.0 |
|
| 43.2 |
|
| 46.2 |
|
| 46.6 |
|
| 169.0 |
|
| 44.2 |
|
| 61.3 |
|
| 68.3 |
|
| 65.9 |
|
| 239.7 |
| ||||||||||
Provision for income tax |
| 4.6 |
|
| 14.1 |
|
| 15.4 |
|
| 15.4 |
|
| 49.5 |
|
| 9.6 |
|
| 18.6 |
|
| 21.2 |
|
| 20.4 |
|
| 69.8 |
| ||||||||||
Adjusted earnings (before tax effect of adjustments) | $ | 28.4 |
| $ | 29.1 |
| $ | 30.8 |
| $ | 31.2 |
| $ | 119.5 |
| $ | 34.6 |
| $ | 42.7 |
| $ | 47.1 |
| $ | 45.5 |
| $ | 169.9 |
| ||||||||||
Diluted EPS | ||||||||||||||||||||||||||||||||||||||||
GAAP | $ | 0.09 |
| $ | 0.29 |
| $ | 0.32 |
| $ | 0.33 |
| $ | 1.04 |
| $ | 0.24 |
| $ | 0.47 |
| $ | 0.53 |
| $ | 0.51 |
| $ | 1.76 |
| ||||||||||
Adjusted | $ | 0.46 |
| $ | 0.45 |
| $ | 0.49 |
| $ | 0.48 |
| $ | 1.87 |
| $ | 0.52 |
| $ | 0.64 |
| $ | 0.70 |
| $ | 0.67 |
| $ | 2.53 |
| ||||||||||
Effective tax rates | ||||||||||||||||||||||||||||||||||||||||
GAAP |
| 45 | % |
| 42 | % |
| 43 | % |
| 42 | % |
| 43 | % |
| 37 | % |
| 37 | % |
| 37 | % |
| 37 | % |
| 37 | % | ||||||||||
Adjusted |
| 14 | % |
| 33 | % |
| 33 | % |
| 33 | % |
| 29 | % |
| 22 | % |
| 30 | % |
| 31 | % |
| 31 | % |
| 29 | % | ||||||||||
Per 2003 Methodology | ||||||||||||||||||||||||||||||||||||||||
Adjusted earnings – per 2002 methodology |
| 28.4 |
|
| 29.1 |
|
| 30.8 |
|
| 31.2 |
|
| 119.5 |
|
| 34.6 |
|
| 42.7 |
|
| 47.1 |
|
| 45.5 |
|
| 169.9 |
| ||||||||||
Tax effect of adjustments (B) |
| 4.1 |
|
| 2.3 |
|
| 2.6 |
|
| 2.3 |
|
| 11.3 |
|
| 5.2 |
|
| 3.4 |
|
| 3.4 |
|
| 3.4 |
|
| 15.4 |
| ||||||||||
Adjusted earnings (C) |
| 24.3 |
|
| 26.8 |
|
| 28.2 |
|
| 28.9 |
|
| 108.2 |
|
| 29.4 |
|
| 39.3 |
|
| 43.7 |
|
| 42.1 |
|
| 154.5 |
| ||||||||||
Diluted EPS – adjusted | $ | 0.40 |
| $ | 0.42 |
| $ | 0.45 |
| $ | 0.45 |
| $ | 1.69 |
| $ | 0.44 |
| $ | 0.59 |
| $ | 0.65 |
| $ | 0.62 |
| $ | 2.30 |
| ||||||||||
Effective adjusted tax rate |
| 26 | % |
| 38 | % |
| 39 | % |
| 38 | % |
| 36 | % |
| 34 | % |
| 36 | % |
| 36 | % |
| 36 | % |
| 35 | % | ||||||||||
| (A) | Expedia believes that the presentation of the non-GAAP “Adjusted earnings” is meaningful to investors because it provides a measure of the cash-generating nature of the on-going business by removing non-cash items and non-recurring items that don't represent the on-going costs of doing business. Expedia management uses the adjusted earnings measures for the same purpose. |
| (B) | The tax effect is computed by using Expedia’s effective statutory rate of 35.5% and applying it to the portion of the adjustments that are deductible for Federal income tax purposes. As a result, the amortization of intangibles associated with the Travelscape and VacationSpot acquisitions, along with the stock-based compensation associated with the Microsoft options that converted to Expedia options upon our initial public offering, are not included in the calculation of the tax effect. |
| (C) | Expedia has historically presented “Adjusted Earnings” and “Adjusted EPS” before the tax effect of the adjusted items. Going forward, management intends to utilize the “Adjusted Earnings” and “Adjusted EPS” numbers after an effect has been given to the tax impact of these adjustments on the tax provision. The 2002 Actual Results have been recomputed under this new “2003 methodology” in order to provide comparability to the 2003 Operating Budget. In addition, management has also recomputed the 2003 Operating Budget numbers in order to provide comparability to the preliminary budget numbers presented in our October 23, 2002 press release. |