Expedia, Inc. Reports First Quarter Financial Results.

Expedia, Inc. has released itå‘s financial results, including its third consecutive quarter of profit before non-cash and non-recurring items, for the first quarter ended September 30, 2001.

.September quarter earnings of $15.1 million or 24 cents per diluted share before non-cash items and expenses related to USA Networks transaction

á Transaction volumes for first half of October at 80% to 85% of pre-September 11 levels

á Merchant revenue for the quarter up 32% sequentially and 176% year-over-year to $34.1 million

The Company reported first-quarter earnings before non-cash items and certain USA Networks transaction-related expenses for the quarter were $15.1 million, or 24 cents per diluted share, on 62.6 million diluted shares. In the year-ago quarter, the loss before non-cash items was $1.6 million, or 4 cents per share. On a GAAP basis, the Company reported a net loss of $4.8 million, or 9 cents per share, compared with a year-ago loss on a GAAP basis of $30.8 million, or 69 cents per share.

Revenue, net of cancellations, rose 89% year-over-year and 1% sequentially to $79.5 million for the September quarter. Gross profit rose 106% year-over-year to $53.2 million, but declined 4% sequentially due in part to increased call-center costs associated with the September 11 event and the processing of subsequent cancellations of travel plans by customers. Cash operating expenses declined by about 3% sequentially.

Gross travel bookings, net of cancellations, for the quarter rose 55% year-over-year to $723 million. This was a sequential decline of 10% due to a significant decline in bookings and a related rise in cancellations immediately following the terrorist attacks of September 11.


“The strengths of our product and of our business model, particularly the expansion of our hotel and package-focused merchant business, have helped us weather the storm experienced by the travel industry since the terrible events of September 11,” Said James Vaile, Managing Director of Expedia UK and Vice President of Expedia Europe, “While we expect these events to continue to affect our results, the steadily recovering travel business and our strong balance sheet will allow us to continue to build on our past successes.”

Erik Blachford, senior vice president of marketing and programming, added that the travel disruptions showed the essential role the Internet plays in disseminating last-minute information in times of crisis. “Our focus on informing our customers about airport closures, flight schedule changes, and airline policies helped make Expedia® the only major travel site to actually register an increase in unique visitors from August to September to 9.4 million,” he said, citing Media Metrix data.

For the September quarter, merchant revenue grew 176% year-over-year and 32% over the June quarter to $34.1 million due to increased sales of Expedia® Bargain Fare airline tickets, Expedia® Vacation packages and Expedia® Special Rate hotels. Agency revenue grew 81% year-over-year but declined 11% sequentially to $39.3 million. The sequential decline can be attributed to a decrease in numbers of published air tickets sold and cancellations principally relating to the September 11 events.

Expedia ended the quarter with $198 million in cash, compared with $182 million as of June 30. Cash flow from operations in the quarter was $20.9 million before $6.3 million in expenses associated with the pending transaction with USA Networks, Inc.

In commenting on the most recent quarter, Gregory S. Stanger, senior vice president and CFO, said, “Our results reflect a combination of a very successful partial quarter and a difficult final three weeks. While the environment for the travel business took a dramatic turn for the worse on September 11, during the first half of October our transaction volumes recovered to between 80 to 85% of their pre-event levels and were up 50% from the same period a year earlier.”

For Expedia`s fiscal year, which ends in June 2002, the Company anticipates revenue of about $310 million and earnings before non-cash items and merger-related expenses of about $40 million. For calendar-year 2002, the Company anticipates revenue in the range of $360 million and earnings before non-cash items of about $55 million.

Additional terrorist activities, actions by U.S. military forces, capacity adjustments by airlines, changes in commission rates or fares by airlines or hotels, actions of existing and new competitors, changes in strategy resulting from the USA Networks acquisition of a majority interest in Expedia, trends in the overall economy, changes in the demand for online and offline travel, and the inherent difficulty of making projections could cause results to vary materially from these projections.

Key technology and operating highlights for the quarter:

á In September, Expedia, Inc. further expanded its international offering with the launch of sites in the Netherlands and Italy via www.expedia.nl and www.expedia.it, respectively, and a joint venture in France with SNCF at www.voyages-sncf.com. The new sites give Expedia a presence in a total of five European countries, adding to existing Expedia services in the UK and Germany. In addition, Expedia has a site in Canada, Expedia.ca.

á After the close of the quarter, the company announced Expedia® Vacations and Expedia® Ski Vacations - offering travelers greater convenience, flexibility and savings. Expedia Vacations enable travelers to create their own custom vacations by adding flights, rental cars or airport transfers, sightseeing activities, and even ski lift tickets to their hotel or condo accommodations.

á Late this summer, Expedia also launched the comprehensive Las Vegas Store , a one-stop shop for all Las Vegas travel needs. The new store on Expedia.com provides consumers with tremendous savings such as travel package discounts and the guaranteed lowest rates at popular hotels, plus planning resources including event listings and restaurant descriptions.

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