Expedia, Inc. Reports First Quarter 2007 Results

Expedia, Inc. Reports First Quarter 2007 Results

Expedia, Inc. (NASDAQ: EXPE) today announced financial results for its first quarter ended March 31, 2007.

“From the very difficult prior year, and a first quarter this year reflecting growth, we begin 2007 with renewed confidence in Expedia’s operations and business model,” said Barry Diller, Expedia, Inc.’s Chairman and Senior Executive. “With accelerating transaction growth, a 32% increase in European bookings, 11% revenue growth and the very beginning echoes of resurgence at Expedia.com we are seeing the early results of the reinvestments and reorganizations that made last year so challenging. We can’t yet say what the next quarter or year may bring, but clear progress is being made both under the hood of daily work and structurally, with reduced share counts and a focus on managing for free cash flow over the long term.”

“Recent signings of Frontier Airlines, Omni Hotels, Shangri-La Hotels and Hertz by our Partner Services Group demonstrate Expedia’s ongoing progress in assembling the world’s most compelling marketplace of travel products and services,” said Dara Khosrowshahi, Expedia, Inc.’s CEO and President. “Combined with the first quarter’s 18% OIBA growth and Expedia.com’s Summer Sale featuring 30% discounts on hotels, cars and activities at over 200 destinations, we begin 2007 with renewed energy to address the challenges before us.”

Discussion of Results

Note: Commencing this quarter, we will report selected results on a segment basis: “North America,” “Europe,” and “Other” (comprised of Expedia Corporate Travel (”ECT”), Asia Pacific and unallocated corporate functions and expenses).

Gross Bookings & Revenue

Gross bookings increased 8% for the first quarter of 2007 compared with the first quarter of 2006. North America bookings increased 1%, Europe bookings increased 32% (22% excluding the impact of foreign exchange), and Other bookings increased 23%.

Revenue increased 11% for the first quarter, primarily driven by increased worldwide merchant hotel revenue and advertising revenue (net of intercompany transactions), partially offset by a decline in North America air revenue. North America revenue increased 6%, Europe revenue increased 29% (20% excluding the impact of foreign exchange), and Other revenue increased 28%.

Worldwide merchant hotel revenue increased 17% for the first quarter due to a 13% increase in revenue per room night and a 3% increase in room nights stayed, including rooms delivered as a component of vacation packages. Revenue per room night increased due to a 9% increase in worldwide average daily rates (”ADRs”) and an increase in hotel raw margin compared to first quarter 2006.

Worldwide air revenue decreased 16% for the first quarter due to a 20% decrease in revenue per air ticket, partially offset by a 5% increase in air tickets sold. The decrease in revenue per air ticket reflects decreased compensation from air carriers and global distribution system (”GDS”) providers. Packages revenue decreased 2% compared with the prior year period due to lower North American package volumes and lower worldwide revenue per air ticket.

Worldwide revenue from products and services other than merchant hotel and air (including net advertising, car rentals, destination services and cruises), increased 35% for the first quarter due primarily to increases in net advertising and car rental revenues.

Revenue as a percentage of gross bookings (”revenue margin”) was 10.98% for the first quarter, an increase of 35 basis points. North America revenue margin increased 57 basis points to 11.42%, Europe revenue margin decreased 27 basis points to 10.66%, and Other revenue margin increased 32 basis points to 8.02%. The first quarter increase in worldwide and North America revenue margin was primarily due to higher merchant hotel raw margin as compared to first quarter 2006, and an increased mix of net advertising revenue, partially offset by the decline in revenue per air ticket. Europe revenue margin decreased in part due to a 12% increase in airfares compared with a 1% decrease in North America airfares, as our remuneration generally does not vary with the price of air tickets.