Online travel company Expedia, Inc. (EXPE) reported Thursday a 23% year-over-year drop in profit for the third quarter, helped by a 9% growth in gross bookings as well as 27% increase in air tickets & room nights, offsetting continued pricing headwinds.
Adjusted earnings per share also grew 23%, and topped analysts' expectations by five cents. Quarterly revenues increased 2.3% and also beat consensus estimate.
Microsoft started Expedia in 1995, and later it was spun-off as a multi-billion dollar company. In 2002, IAC/InterActiveCorp., led by Barry Diller bought a controlling stake in Expedia. IAC purchased the remaining stake in 2003. In 2005, IAC and Expedia separated into two publicly traded companies.
Expedia owns and operates a diversified portfolio of brands, including Expedia.com, Hotels.com, Hotwire.com, TripAdvisor, Egencia, Classic Vacations, and a range of other U.S.-based and international businesses. With more than $17 billion in annual gross travel bookings, the company is one of the largest online travel agencies in the world.
The tough economy has been hurting both business and leisure travel for the past few quarters. In late May, Expedia.com eliminated online air booking fees, as well as change and cancel fees on all hotel, car rental and cruise reservations and on virtually all flight reservations. The move was aimed at increasing the business volume.
In a statement, president and chief executive officer, Dara Khosrowshahi said, "Travelers are clearly responding to our improving value proposition, as we broaden our fee cuts and increase the depth and breadth of our global supply. While we're pleased with our financial and operating results in the third quarter, we are busy planning for a 2010 that will prove every bit as competitive and challenging as 2009."
Third Quarter Results
The Bellevue, Washington-based company reported net income of $117.01 million or $0.40 per share for the third quarter, higher than $94.82 million or $0.33 per share in the prior-year quarter.
Excluding special items, Expedia's adjusted net income for the quarter rose to $144.90 million or $0.48 per share from $118.35 million or $0.39 per share in the year-ago quarter.
On average, eighteen analysts polled by Thomson Reuters expected the company to report earnings of $0.43 per share for the third quarter. Analysts' estimates typically exclude special items.
Revenues for the quarter increased 2.3% to $852.43 million from $833.34 million in the same quarter last year, and topped fourteen Wall Street analysts' consensus estimate of $828.88 million. The rise in revenues were attributed to increase in hotel and car rental revenues, partially offset by a reduction in air revenues.
Gross bookings for the third quarter increased 9.3% to $5.91 billion from $5.41 billion in the year-ago quarter, driven primarily by 26% growth in transactions, partially offset by lower prices for airline tickets and hotel room nights. Domestic bookings increased 8% and international bookings increased 11%.
Excluding the impact of foreign exchange, revenues would have increased 3%. Revenue as a percentage of gross bookings declined 98 basis points to 14.41% for the third quarter.
Among Expedia's peers, Norwalk, Connecticut-based Priceline.com, Inc. (PCLN) is scheduled to report financial results for the third quarter on November 9, 2009. The Street is looking for earnings of $2.89 per share on revenues of $690.89 million for the third quarter.
Segmental Details
Worldwide hotel revenue increased 3% year-over-year, primarily due to a 27% increase in room nights stayed, partially offset by a 19% decline in revenue per room night.
Worldwide air revenue decreased 8% from last year, hurt by a 28% drop in revenue per air ticket, partially offset by a 27% increase in ticket volumes.
Advertising and media revenue, including net revenue from TripAdvisor Media Network, increased 5%, driven by a 24% increase in advertising revenue generated by transaction sites.
Other Metrics
Operating income for the third quarter rose 12% to $222.97 million from $199.59 million in the prior-year quarter. Selling, and marketing expenses decreased 5% to $284.85 million from $299.92 million in the comparable quarter a year ago.
Amortization of intangible were $9.59 million, lower than $15.83 million in the prior-year quarter. The company reported restructuring charges of $13.78 million in the latest third quarter. The company ended the third quarter with cash and cash equivalents of $838.58 million, compared to $659.67 million at end of the year-ago quarter.
Nine-Month Highlights
For the nine-month period, Expedia reported net income of $197.30 million or $0.68 per share, lower than $242.22 million or $0.83 per share posted in the prior-year period.
Excluding special items, adjusted net income for the period grew to $321.44 million or $1.08 per share from $310.19 million or $1.03 per share in the year-ago period.
Revenue for the year-to-date period decreased to $2.26 billion from $2.32 billion in the same period last year.
Stock Quote
In Thursday's regular trading session, EXPE is trading at $24.45, up $0.11 or 0.45% on a volume of 13.27 million shares. In the past 52-week period, the stock has been trading in a broad range of $6.00 to $27.37.
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