Expedia.com Expedia, Inc. Reports Record Fourth Quarter and Fiscal Year Financial Results
BELLEVUE, WA, July 31, 2000 – Expedia, Inc. (Nasdaq: EXPE) today announced record financial results for the 2000 fiscal year and fiscal fourth quarter ending June 30, 2000. Including the results of the two companies Expedia® acquired in March, Travelscape.com, Inc. and VacationSpot.com, Inc., pro forma fourth quarter revenues increased by 164% as Expedia made significant progress releasing new technology, growing its merchant business and increasing marketing efficiency.
“The strong revenue growth we've seen this quarter is a testament to our continued focus on delivering the most powerful shopping tools and the best prices to our customers,” said Richard Barton, president and CEO of Expedia. “During the June quarter we introduced two major innovations that help our customers find better prices and that have contributed to a steady increase in purchase conversion. Specifically, we launched our Best Fare Search technology, an industry first that allows Expedia to show customers more than one hundred times the number of priced itineraries than any other travel service provider. We also launched an enhanced hotel booking service that gives Expedia customers access to discounted 'Expedia® Special Rate' merchant hotel inventory at more than 1,500 hotels worldwide.”
Key Quarterly Pro Forma Financial Highlights
Revenues increased to $70 million, up 164% year-over-year and 19% sequentially.
Agency revenues, which represent transaction commissions and fees from the agency component of the business, increased to $21 million, up 137% year-over-year and 17% sequentially.
Merchant revenues, which represent the full value of the gross bookings for merchant-of-record transactions, increased to $42 million, up 237% year-over-year and 25% sequentially.
Gross travel bookings increased to $450 million, up 124% year-over-year.
Gross profit increased to $22 million, up 98% year-over-year.
Operating expenses net of non-cash amortization and recognition of stock option based charges declined by 7% sequentially to $36 million as Expedia rationalized its acquired operations.
Net loss before non-cash stock-based compensation costs and M&A-related amortization of intangibles was $13 million, or $0.30 per share, compared with a pro forma loss of $17 million, or $0.40 per share, in the March 2000 quarter.
Cash and marketable securities totaled $61 million at June 30, 2000, prior to the investment of $60 million by Technology Crossover Ventures and Microsoft which is expected to be completed during August.
Key Fiscal Year Pro Forma Financial Highlights
For the fiscal year ended June 30, 2000, Expedia recorded revenues of $208 million with gross bookings of $1.325 billion, reinforcing its position as one of the world's largest travel agencies, either online or offline. Expedia's gross profit for the fiscal year was $68 million and its net loss was $56 million before non-cash stock-based compensation costs and M&A-related amortization of intangibles.
Consolidated Highlights
The fourth quarter net loss of $42 million compares to a net loss of $48 million in the third quarter and $6 million in the fourth quarter of fiscal 1999.
Net loss for the full year was $118 compared to $20 million for fiscal 1999.
Key Fourth Quarter Achievements
Reinforced technology leadership of online travel industry with launch of Best Fare Search technology
The launch in April of the “Build Your Own Trip” feature—the first implementation of Expedia's Best Fare Search (BFS) technology—reinforced Expedia's clear technology leadership of the online travel industry. BFS is a “next generation” fare searching and pricing engine that moves CRS functionality onto the more scalable and cost effective Windows platform, and allows Expedia to show customers more than one hundred times the number of priced itineraries than any other travel service provider. BFS allows customers on Expedia.com to make price and schedule tradeoffs on a leg-by-leg basis, rather than having to guess which legs will have the best available fares.
The dramatic increase in choice and flexibility provided by the Build Your Own Trip feature has been a significant driver of the sequential growth in conversion of lookers into bookers on the Expedia.com® site from 3.8% in the March 2000 quarter to 4.1% this quarter.
Grew merchant business revenue and launched “Expedia Special Rate” hotels
Expedia's merchant business revenue for the fourth quarter grew 237% year-over-year and 25% sequentially to $42 million. Commissions and fees from the sale of airline tickets continue to represent less than 30% of Expedia's revenues and less than 40% of gross profit. The merchant business model, in which Expedia acts as a wholesaler and negotiates net prices on inventory directly with suppliers, allows Expedia to offer better prices to its customers while also generating a higher level of gross profit per transaction.
One week before the close of the June quarter, Expedia completed the integration of Expedia Special Rate merchant hotel room inventory onto the Expedia.com site as part of a major Web site redesign. Expedia Special Rate inventory is managed through the operations of its Travelscape.com subsidiary.
Achieved record levels of new customer acquisition despite reduced sales and marketing spending
The June 2000 quarter was the second quarter of Expedia's integrated branding campaign, in which TV, radio, print and outdoor executions have focused on building direct, branded relationships with customers. Reach grew 15% sequentially to a monthly average of 6.8 million unique users, while the number of new customers purchasing on the Expedia branded sites increased 26% sequentially to 447,000 despite a sequential reduction in the overall level of sales and marketing expenditure. Expedia closed the fiscal year as the most popular online travel planning service, according to Media Metrix. With 8.1 million unique visitors in the month of June, Expedia reached 10.6% of U.S. Internet users during the month of June.
Other highlights
Achieved an unprecedented sweep of major reviews and awards including the prestigious “Editors' Choice” award for online travel sites from PC Magazine; “Best Overall Travel Site” from Yahoo! Internet Life; “Number One Travel Site for Spring 2000” from Gomez Advisors; the “Lowell Thomas Award” from the Society of American Travel Writers; and the “2000 World Class Award for Best Travel Site” from PC World.
Recognized as 10th largest travel agency in the U.S. in 1999 by Travel Weekly on the basis of gross bookings. Gross travel bookings for the March and June 2000 quarters have already exceeded total gross bookings for the full calendar year 1999.
Entered into agreements to receive private investments of $50 million from Technology Crossover Ventures (TCV), a leading Silicon Valley venture capital firm, and $10 million from Microsoft Corporation. As part of the agreement Jay Hoag, a founding general partner of TCV, will join the Expedia board of directors as its seventh member.
Launched the Adventure Travel section of Expedia.com in partnership with Away.com, increasing the number and quality of sponsored specialty travel sections on the site. The Adventure Travel section features a full suite of adventure travel planning services including content, advice, and over 10,000 tour products from nearly 1,000 tour operators worldwide.
Launched ExpediaPartners.com, a tool to help suppliers manage and track their sales performance made through the Expedia sites. ExpediaPartners.com provides a real-time view of suppliers' performance metrics, allowing them to maximize their sales and respond to customer demand with promotions and discounts.
Notes on Attached Pro Forma Operating Statements
Exhibit 1 outlines the June 2000 quarter pro forma Statements of Operations for the combined Expedia, Inc., Travelscape.com, Inc. and VacationSpot.com, Inc. businesses, as compared with the March 2000 quarter and June 1999 quarter. The pro forma financials assume that the acquisitions of Travelscape.com, Inc. and VacationSpot.com, Inc. occurred on the first day of the period presented.
Exhibit 2 outlines the actual Statements of Operations for Expedia, Inc. reflecting the acquisition 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. 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.
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