(NASDAQ: EXPE) today reported record gross bookings of $1.33 billion, an increase of more than $530 million over the year-ago quarter.
The company also reported record quarterly revenue of $145 million, up 85%.
Pre-tax adjusted earnings were $43.2 million, or 67 cents per diluted share, and after-tax adjusted earnings were $29.2 million, or 45 cents per diluted share, for the second quarter ended June 30, 2002. For the year-ago period, adjusted earnings on both a pre-tax and post-tax basis were $15.0 million, or 25 cents per diluted share. The company reported net income for the quarter on a GAAP basis of $19.1 million, or 29 cents per diluted share, on 65 million diluted shares. This compares with a net loss of $4.4 million, or 9 cents per share, for the quarter ended June 30, 2001.
“Expedia® is reporting another quarter of phenomenal growth and excellent execution against our strategy,” said Richard N. Barton
, president and CEO of Expedia, Inc. “Key to our success this quarter has been anticipating and satisfying our customers summer vacation needs. We have grown the number of merchant hotels we work with from 2,200 to nearly 6,000 since last year, we offered new vacation activities to make our packages more flexible and complete, and we opened specific destination stores to help travelers see all they can do in any particular vacation spot.
“We can provide better value and more choice for our customers because of our cutting-edge technology platform, quality customer service and the aggressiveness with which we pursue new solutions to old travel industry challenges,” Barton continued. “The recent announcement of our entry into the corporate travel market and the acquisition of Metropolitan Travel continues our expansion of the addressable market for our technology-based travel services.”
Merchant revenue more than tripled over year-ago levels to $85.7 million on the strength of revenue from Expedia® Special Rate hotels and the addition in March of the Classic Custom Vacations® business. Agency revenue of $54.8 million rose 25% year-over-year.
In addition, the company reported that conversion, or the average monthly percentage of visitors who purchased travel on Expedia.com®, increased sequentially to 6.3% from 5.8%, following recent improvements in and additions to our websites. The company reported 2.6 million total hotel room nights stayed in the quarter, including 2.1 million merchant room nights, up from 1.1 million total room nights and 0.7 million merchant room nights in the year-ago quarter.
The company’s reported results included the first full quarter of bookings, revenue and earnings from Classic Custom Vacations, which Expedia acquired on March 9, 2002. The company also reported a non-cash provision for income taxes of $14 million in the quarter, an increase of $10 million over the March quarter. Cash flow from operations in the quarter was $86 million, in part due to an increase in deferred merchant bookings, including those of Classic. Expedia ended the June quarter with $452 million in cash and short-term investments, compared with $238 million at the end of 2001.
Gross profit rose to $97.5 million, up 76% year-over-year. Gross margin was 67.3%, as improvements in costs at customer call centers partially offset falling revenue per agency air ticket and the effect of consolidating Classic.
“Our success in merchant lodging, including Classic Custom Vacations, validates our strategy to diversify our business model over the past couple of years,” said Greg Stanger, senior vice president and CFO. “We believe our hotel, packages and tours businesses - with their higher net-revenue and gross-profit characteristics - will continue to increase their contributions to Expedia’s financial results.”
For the six months ended June 30, Expedia reported net revenue of $261 million, compared with $136 million in year-earlier period. Pre-tax adjusted earnings were $76.2 million, or $1.20 per diluted share, and after-tax adjusted earnings were $57.5 million, or 91 cents per diluted share. Net income on a GAAP basis was $24.8 million, or 39 cents a diluted share. In the six-month period ended June 30, 2001, pre-tax and after-tax adjusted earnings were $19.4 million, or 34 cents per diluted share, and net loss on a GAAP basis was $22 million, or 45 cents a share.
An outlook relating to the company’s previously published summary operating budget for 2002 are included in Exhibit 5 to this press release.
Recent operating highlights:
 Earlier this month, Expedia announced plans to provide corporate travel services, thus becoming the first technology-based travel agency to offer a full array of travel services for corporations. As part of the business travel initiative, on July 13, 2002, the company purchased substantially all of the assets of Metropolitan Travel, Inc., a closely held Seattle-based corporate travel agency.
 In May, Expedia added new functionality to Expedia.com with the Build Your Own Trip tool allowing customers to book together and save on the combination of air, hotel and/or car - straight from the home page.
 Expedia became the first full-service online travel agency to allow customers to add destination services and activities - ranging from theme park tickets and tours to ground transportation - before completing a flight or hotel purchase. As an example of the kinds of trips now possible with this feature, Expedia became the first online travel service to offer create-your-own wedding trips, allowing couples to arrange their travel, accommodations and wedding ceremony in one complete itinerary.
 Ticketmaster and Expedia announced a strategic alliance to create Citysearch`s new Getaways Channel—a content area that enables site visitors to plan and book trips using an Expedia.com booking tool; the addition of Citysearch local content to Expedia.com; and the availability of some Ticketmaster event tickets within Expedia`s customer-built trips.
 For the second year in a row, Expedia also won the 2002 Brand Keys Customer Loyalty Awards in the online travel category. The annual Brand Keys Customer Loyalty Awards honor the companies that are most single-mindedly devoted to creating loyal customers.
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