BELLEVUE, WA, January 29, 2000-Expedia, Inc. (Nasdaq: EXPE) today announced record financial results for the second quarter of fiscal 2001 ending December 31, 2000. Second quarter revenues increased by 81% year-over-year (on a pro forma basis adjusted for acquisitions) to $80 million as Expedia continued its progress in demonstrating the success of its business model and laid the foundations for the launch of its new Expert Searching and Pricing- (ESP-) platform.

“The strong progress we've made this quarter in increasing conversion from 4.8% to 6.0% is the result of our continued focus on delivering the most powerful shopping tools to our customers,” said Richard Barton, president and CEO of Expedia, Inc. “Ongoing product enhancements to flights, lodging and cruises have driven a significant improvement in conversion this quarter. Earlier this month we introduced Expedia Expert Searching and Pricing, a revolutionary technology platform that demonstrates our clear technological leadership of the online travel industry. And building on the ESP platform, we recently launched Expedia Packages, a new service that allows customers to build their own air and lodging packages at highly discounted rates.”

“We are very pleased with our financial performance this quarter,” said Greg Stanger, senior vice president and CFO of Expedia, Inc. “Gross profit grew 76% year-over-year while operating expenses excluding non-cash charges increased only 21%, providing a clear illustration of the strength of our business model. Going forward, we expect the Expedia Expert Searching and Pricing platform to make a significant contribution to the growth of our business through improvements in conversion and cross-sell.”

Key pro forma financial highlights

Revenues increased to $80 million, up 81% year-over-year from $44 million
Gross profit increased to $28 million, up 76% year-over-year from $16 million
Net loss before non-cash stock-based compensation costs and amortization of goodwill and intangibles was $2.6 million, or $0.06 per share, down from a net loss of $10.3 million, or $0.26 per share in the December 1999 quarter
Gross travel bookings increased to $475 million, up 90% year-over-year from $250 million
Agency revenues, which represent transaction commissions and fees from the agency component of the business, increased to $24 million, up 95% year-over-year from $12 million
Merchant revenues, which represent the full retail value of merchant-of-record transactions, increased to $47 million, up 81% year-over-year from $26 million
Operating expenses excluding non-cash amortization of goodwill and intangibles and recognition of stock option-based charges increased to $32 million, up 21% year-over-year from $27 million
Cash and marketable securities totaled $118 million at December 31, 2000

Key operating highlights

Expedia.com: The performance of the core Expedia.com point of sale was particularly strong. Revenue from Expedia.com increased 17% sequentially. This was driven primarily by strong growth from the sale of merchant products on Expedia.com. Expedia has made significant progress in merchandising more profitable merchant inventory. The introduction of delivery fees on paper tickets in December also helped to increase revenues.
International: Revenue from Expedia's international businesses grew 9% sequentially, in a traditionally slow travel-purchasing season. Expedia.co.uk continues to be the leading site in the UK, and Expedia.de and Expedia.ca continue to be amongst the top rated sites in Germany and Canada. Expedia is able to deliver international sites of extremely high quality by leveraging the technology development effort in the US, providing Expedia's international businesses with a significant cost advantage versus their local competitors.
Awards: Expedia continues to win all of the primary awards in the online travel industry. Neilsen//Netratings named Expedia as one of the top three sites on the Internet for customer satisfaction, Brand Keys cited Expedia as the best online travel site for customer loyalty, readers of PC Magazine recognized Expedia by naming it Reader's Choice for 2000, and the Hospitality Sales and Marketing Association International (HSMAI) awarded Expedia the Platinum Award as the most outstanding entry in the travel service category.

Key technology enhancements

Cruises: In November Expedia introduced a new cruise section, providing customers with the most cruise choices and cruise information available anywhere on the Internet. Customers can now shop and book 18 cruise lines and 118 ships and can search by criteria including departure date, location, cruise line, port of call, duration and more.
ESP: In January Expedia introduced the revolutionary Expert Searching and Pricing (ESP) platform, bringing more choices and greater control to our customers. ESP is a highly extensible platform that is designed to accommodate any type of travel product or service. The ESP platform is built on Windows NT, can scale to handle massive transaction volumes and can integrate merchant and agency inventory from a broad range of sources.
Packages: An important aspect of the ESP platform is its ability to integrate a broad range of inventory offerings into packages. Expedia Packages is a new service that launched in January, allowing customers to build their own air and lodging packages at highly discounted rates. Packaging hides the pricing of individual components, making it easier for suppliers to offer us discounted rates while protecting their rate integrity. The merchant business model, in which Expedia acts as a wholesaler and negotiates net prices on inventory directly with suppliers, creates value for customers, suppliers and Expedia. It helps customers by giving them access to compelling deals they could not get elsewhere. It helps the suppliers who choose to work with Expedia through the merchant model to achieve their marketing goals. And it helps Expedia through improved conversion and increased gross profit per transaction. Merchant inventory for the package business is managed through the operations of Expedia's Travelscape.com- subsidiary.

Notes on Attached Pro Forma Operating Statements

Exhibit 1 outlines the December 2000 quarterly Statements of Operations for Expedia, Inc. after consolidation of our subsidiaries as compared with the December 1999 pro forma Statements of Operations for the combined Expedia, Inc., Travelscape.com, Inc. and VacationSpot.com, Inc. businesses as if the acquisitions occurred on the first day of the period presented.
Exhibit 2 outlines the Statements of Operations for Expedia, Inc. reflecting the acquisitions of Travelscape.com, Inc. and VacationSpot.com, Inc. from March 17, 2000 (the acquisition date) forward.
The pro forma Statements of Operations in Exhibit 1, which management believes to be meaningful in presenting the impact of the trend of the two acquisitions, are presented for informational purposes. The consolidated Statements of Operations in Exhibit 2 are presented in accordance with generally accepted accounting principles.
Exhibit 3 sets forth selected balance sheet items.
Exhibit 4 outlines key operating metrics for Expedia, Inc. and its subsidiaries.

About Expedia, Inc.
Expedia, Inc. (Nasdaq: EXPE) operates the Expedia.com online travel service in the United States with localized versions for travelers in Canada, Germany and the United Kingdom. Expedia also operates the Travelscape.com- and VacationSpot.com- travel sites in the United States. To help customers Travel Right, Expedia provides the best combination of air, car, and hotel booking, vacation package and cruise offers, destination information, and point-to-point mapping.
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 statement 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.

The Expedia logo, Travelscape, Travelscape.com, VacationSpot.com, Expert Searching and Pricing, and ESP are either registered trademarks or trademarks of Expedia, Inc. in the U.S. and Canada. The names of actual companies and products mentioned herein may be trademarks of their respective owners.
For investor information about Expedia, Inc.:
http://investor.expedia.com, or call our Investor Relations team at (425) 564-7233

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