Priceline.com Announces Acquisition Of Travelweb.com
NORWALK, Conn. | Priceline.com(R) (Nasdaq:PCLN) today reported 1st quarter 2004 operating and financial results and the acquisition of Travelweb.com, the online hotel service built by the nation's leading hotel brands.
Net income for the 1st quarter 2004 was $5.1 million, or $0.13 per share. Net income applicable to common stockholders was $0.11 per share inclusive of a non-cash preferred stock dividend of $772,000. Priceline.com's net income of $0.13 per share exceeded First Call analyst consensus estimates of $0.08 per share.
"Priceline.com's expanding travel product lineup, which gives consumers more choices than ever before, and a new TV ad campaign, were the catalysts that propelled the Company to higher levels of growth in the 1st quarter," said priceline.com President and CEO Jeffery H. Boyd. "With the new retail ticketing feature complementing our Name Your Own Price(R) option, we now have an airline ticketing service that can satisfy a much broader segment of the leisure travel market. Consequently, our tickets sold in the quarter rose 28% year-over-year."
Mr. Boyd continued, "Having a retail air option also gives us an increased ability to cross-sell other products, such as a rental car, hotel room or vacation package. In the 1st quarter, the growth of our packages business continued to accelerate, fueled by increased demand and product improvements launched in the 4th and 1st quarters. This helped our non-air products to continue their growth trajectories. We sold 1.7 million hotel room nights in the quarter, a 35% increase over the 1st quarter 2003. With the addition of retail sales from Rentalcars.com and Breezenet.com, rental car days sold for the quarter were 1.2 million, an 83% increase over a year ago."
Travelweb Acquisition. Priceline.com also announced that it had acquired 71.4% of the equity interests in Travelweb.com, bringing its total ownership to 85.7%. The purchase price for the interests acquired was $20.8 million; in addition, priceline.com will potentially pay an earn-out after 12 months of approximately 954,547 shares of priceline.com common stock to the selling hotel companies and Pegasus in the event certain performance goals are met. Priceline also stated it had entered into an agreement to purchase the remaining 14.3% outstanding equity interest held by InterContinental Hotels Group at a future date.
Travelweb has supply agreements with more than 11,000 participating properties in the Travelweb system, including the brands of its founder hotels, Hilton, Hyatt, InterContinental Hotels Group, Marriott, and Starwood, and has distribution agreements with a number of travel websites, including Orbitz.com. Priceline.com also said today that Travelweb has settled outstanding litigation with Orbitz and that Travelweb will continue supplying Orbitz with merchant hotel inventory through December 31, 2005 under the terms of a revised distribution agreement.
"The acquisition of Travelweb gives priceline.com a proprietary disclosed merchant hotel product to complement priceline.com's Name Your Own Price(R) hotel product, allowing us to quickly enhance a strategy that is working for us with airline tickets and car rentals," said Mr. Boyd. "We intend to strengthen Travelweb's product offerings, build retail choice in hotels on priceline.com, build Travelweb's third-party distribution and leverage our combined capabilities in technology, supplier relations and marketing to drive operating efficiencies."
Forward Guidance. Looking forward, Mr. Boyd commented, "Priceline.com intends to continue building retail choices into our travel products and building functionality to offer customers attractive additional products at the point of reservation. Further, we have successfully tested and will imminently launch a new vacation package service that will give customers a choice between opaque and retail itineraries depending on their travel requirements and savings preferences. With a growing topline and efficient cost structure, we are in a position to continue our investments in new products, distribution and marketing while delivering attractive growth in our bottom line earnings."
In terms of financial targets, Mr. Boyd said, "We expect gross bookings, gross profit and net income to all benefit from the solid momentum established in the first quarter and we also expect to continue to make significant investments in our advertising and marketing initiatives throughout the remainder of the year. Travelweb is expected to generate operating losses before acquisition related amortization expenses in the second quarter of approximately 2 cents per share as a result of transition related expenses. We expect Travelweb operating results to improve during the course of the second half of 2004. In 2005 and beyond, we expect Travelweb to be meaningfully accretive to our earnings per share. For the second quarter 2004, we are guiding investors to the following financial targets:
- Year-over-year increase in total gross bookings of 44% - 50%,
- Year-over-year increases of 42%- 50% in airline ticket unit bookings, approximately 25% in hotel room night unit bookings and 50% - 60% in rental car day unit bookings,
- Year-over-year increase in revenue of approximately 5%,
- Year-over-year increase in gross profit of 25% - 30%, and
- Net income per share of $0.25 to $0.30, not including the effects of non-cash acquisition-related amortization expense associated with the Travelweb acquisition and stock based compensation and option payroll tax expense.
For third quarter 2004, we expect total gross bookings, revenue, gross profit and net income per share to be roughly comparable to second quarter levels consistent with the normal seasonal pattern of our business and our intention to continue investment in product development and marketing. We are currently targeting 4th quarter net income per share of $0.13 - $0.17, not including the effects of non-cash, acquisition-related amortization expense associated with the Travelweb acquisition and stock based compensation and option payroll tax expense."
Priceline.com is a travel service that offers leisure airline tickets, hotel rooms, rental cars, vacation packages and cruises. Priceline.com also has a personal finance service that offers home mortgages, refinancing and home equity loans through an independent licensee. Priceline.com operates the retail travel Web sites Travelweb.com, Lowestfare.com, Rentalcars.com and Breezenet.com. Priceline.com licenses its business model to independent licensees, including pricelinemortgage and certain international licensees.
Information About Forward-Looking Statements - This press release may contain forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed, implied or forecasted in any such forward-looking statements. Expressions of future goals and similar expressions including, without limitation, "may," "will," "should," "could," "expects," "does not currently expect," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "targets," or "continue," reflecting something other than historical fact are intended to identify forward-looking statements. The following factors, among others, could cause the Company's actual results to differ materially from those described in the forward-looking statements: adverse changes in general market conditions for leisure and other travel products as the result of, among other things, terrorist attacks; adverse changes in the Company's relationships with airlines and other product and service providers including, without limitation, the withdrawal of suppliers from the priceline.com system; the bankruptcy or insolvency of another major domestic airline; risks associated with the acquisition and integration of Travelweb.com; the effects of increased competition; systems-related failures and/or security breaches; the Company's ability to protect its intellectual property rights; losses by the Company and its licensees; final adjustments made in closing the quarter; legal and regulatory risks and the ability to attract and retain qualified personnel. For a detailed discussion of these and other factors that could cause the Company's actual results to differ materially from those described in the forward-looking statements, please refer to the Company's most recent Form 10-Q, Form 10-K and Form 8-K filings with the Securities and Exchange Commission. Unless required by law, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
This supplement is unaudited and intended as a supplement to, and should be read in conjunction with, the Company's audited financial statements and the notes thereto filed with the SEC on Form 10-K and unaudited quarterly financial statements filed with the SEC on Form 10-Q. Certain data have been reclassified in order to conform historical information in a manner consistent with current presentation and has not been audited in this form. Certain presentations within this supplement are not consistent with Generally Accepted Accounting Principles.