Expedia to Report First Ever Operating Profit

Online travel service Expedia Inc. said on Monday it made its first ever quarterly operating profit in the quarter just ended, more than a year ahead of schedule, as the Internet travel industry continues to grow at a healthy clip.
“I think this signifies that online travel is still growing very rapidly for Expedia and all the (Internet travel) sites,” said Tom Underwood, an analyst with Legg Mason. Expedia, which is 70 percent owned by software giant Microsoft Corp., said it would report earnings before non-cash items of about $4 million, or 9 cents per basic share, for its fiscal third quarter, which ended on March 31. That compared with analyst forecasts for a loss of between 10 cents and 15 cents per share, with a consensus expectation of a 13 cent loss, according to research firm Thomson Financial/First Call.
“Analysts had expected the first profit in operating terms about five quarters out,” said Steve Weinstein of Pacific Crest Securities. “They recognized the importance of being profitable these days and accelerated their path.”
Including one-time items, its third-quarter net loss would be about 37 cents per share, the company, based in Bellevue, Washington, said in a statement. The company is scheduled to report its fiscal third quarter earnings on April 30. Analysts said the company kept costs under control, and used more effective marketing spending, to achieve the early profitability. Shares of Expedia, which resells airline tickets and hotel bookings to consumers at a mark-up, rose 5.3 percent or $0.93 to close at $18.60 on the Nasdaq.
Expedia`s better-than-expected earnings forecast was in contrast to a wave of dot-com failures and downsizing as investors demand that Internet-based companies shift their focus to achieving profits. Yet analysts said the online travel industry has outshone other Internet-based services.
“I think the market for online travel has definitely been growing more quickly than analysts expected,” Underwood said. “The technology behind fare searching engines allows travelers to get benefits relative to travel agents.”
He said quarterly results from competitor Travelocity.com, scheduled for later this week, would provide more information on whether Expedia was gaining market share or whether its earnings were just growing in line with an expanding market.
“Consumers are logging on and buying travel online today more than ever,” said Marj Charlier, Expedia spokeswoman. “They`ve achieved a comfort level with it and are recognizing the benefits of buying online, being able to track price changes.”
The company also said it expected to report revenue for the quarter of about $110 million, up about 88 percent on the year. Expedia also said it expects to post positive net income before noncash items for the first time and to report positive cash flow.
Advertising and other revenue rose about 35 percent from the year-earlier quarter to about $9.6 million, which included $6.1 million of licensing revenue.
Expedia said it expects cash and cash equivalents as of March 31 to rise to about $152 million from $118 million on Dec 31.
Strong sales in March in particular boosted Expedia`s quarterly results, the company said.