Pegasus Solutions` Second Quarter 2002 Results Exceed Expectations.

Pegasus Solutions have announced total revenues of $44.9 million for the second quarter of 2002, compared to $49.8 million for the second quarter of 2001.
(Caption: John F. Davis III
, chairman & chief executive officer - Pegasus Solutions)

Excluding revenues from discontinued and divested operations, revenues were $44.9 million for the second quarter of 2002, compared to $46.2 million for the same period of the prior year. Non-cash items consisted of amortization expense for purchased intangible assets, while non-recurring items included $724,000 of one-time consulting fees in the second quarter of 2001.

John F. Davis III
, chairman and chief executive officer of Pegasus Solutions commented, “Although the business environment is more challenging than we anticipated, I am pleased to report we were still able to exceed our earnings expectations. The successful implementation of our restructuring plan in 2001 and our continued focus on other cost savings initiatives as well the capital investments we continue to make in our technology have positioned us well and should allow us to quickly take advantage of an economic recovery.”

Other Highlights

* Consolidated EBITDA, which excludes non-cash and non-recurring items, sequentially improved to $8.8 million, or a 20 percent margin, compared to $7.3 million, or a 17 percent margin, for the first quarter of 2002.

* EBITDA margin for Pegasus` hospitality division (Utell) improved to 23 percent, compared to an EBITDA margin of 17 percent in the second quarter of 2001.

* In May 2002, the Company completed and delivered early the first phase of new generation technology to Travelweb LLC (formerly HDS), enabling them to go live with bookings on Orbitz the first week in June.

* PegsPay, the travel industry`s first automated clearinghouse service with a complete payment solution for net rate merchants and tour operators, was launched in June.

* New CRS customers, including Ian Schrager and USFS, were signed or implemented during the quarter.

* Higher margin Internet hotel reservation transaction volumes increased 54 percent over the second quarter of 2001.

* Pegasus` balance sheet remained strong, including $28.6 million of cash, cash equivalents and short-term investments with no outstanding debt.

* Operating cash flow increased to $14.7 million, up two percent from the second quarter last year.


In May, ahead of schedule, the Company completed and delivered the first phase of reservation technology to Travelweb LLC, formerly known as Hotel Distribution System (HDS), LLC, the joint venture between Pegasus
and five of the world`s largest hotel chains. In June, Pegasus began processing the net rate bookings that were generated through Travelweb`s first affiliate, Orbitz. Revenues from the Travelweb
transactions are not yet a material amount of Reservation Services revenues, but the Company is seeing significant growth in average weekly transaction volumes experienced to date.

The Company`s Utell
subsidiary had revenues for the quarter totaling $17.8 million, up 23 percent from the first quarter of 2002. However, revenues have decreased $836,000 or five percent over the second quarter of 2001 due in large part to the planned strategic reduction in the number of Utell member hotels, which has resulted in an improved EBITDA margin of 23 percent for the quarter, compared to 17 percent for the second quarter 2001. Davis commented, “We will continue to focus our business strategy on activities that will increase Utell revenues and margins on a per-hotel basis.”


Related stories on ITN:
Online Hotel Distribution Travelweb Signs New Agreement with Pegasus

(05/04/2002) Pegasus Finalizes HDS Technology Agreement