Expedia logs black ink

April 30, 2001: 5:03 p.m. ET

Online travel agency reports first-ever operating profit as sales rise 88%

NEW YORK (CNNfn) - Expedia Inc., an online travel service, reported its first-ever quarterly operating profit Monday and said it expects to continue to log black ink on its bottom line in the current quarter and the coming fiscal year.

The company said it earned $4.4 million, or 9 cents per share, during its fiscal third-quarter ended March 31. That profit, which excludes one-time charges, compares with a loss of 40 cents per share during the same quarter last year and was in line with what executives told Wall Street to expect when they pre-announced the quarter's results earlier this month.

Prior to the pre-announcement on April 16, the consensus estimate of analysts polled by earnings tracker First Call had been for Expedia, which is majority-owned by software leader Microsoft Corp., to post an operating loss of 13 cents per share.

Executives at Expedia in Bellevue, Wash., attributed the better-than-expected results to the success of its new technology platform, stronger performance in its merchant business and a continued shift in travel purchases to online agencies.

They said much of the upside represents a return on investments they made early last year to enhance their e-commerce infrastructure which enabled them to more effectively merchandise and cross-sell merchant inventory and offer low-cost deals to customers.

"At the beginning of the year, we introduced Expedia's Expert Searching and Pricing engine, which dramatically improves the choice and control available to our consumers," Richard Barton, Expedia's president and chief executive said in a statement. "In addition to the power that ESP puts in the hands of our consumers, it has enabled us to succeed in selling vacation packages and in merchandising a wide range of inventory types."

The company said revenue growth was strong in both its merchant and agency businesses, with merchant revenue nearly doubling from the year-ago quarter to $67.1 million, and agency revenue coming in about 88 percent higher at $33.5 million.

At $110.2 million, Expedia's total third-quarter revenue rose 88 percent from $58.8 million during the same quarter a year ago.

Including acquisition and other one-time charges, Expedia reported a net loss of $17.6 million, or 37 cents per share during the fiscal third-quarter. That compares with a net loss of $66.5 million, or $1.56 per share during the same quarter a year earlier.

Shares of Expedia (EXPE: Research, Estimates) rose $2.46 to $26.01 on Nasdaq ahead of the earnings news, which was released after the closing bell. They gained another $1.99 to $28 in extended-hours trade.

Looking ahead, Greg Stanger, Expedia's chief financial officer, said the company is expecting to record an operating profit ranging between 6 cents and 9 cents per share during the current quarter, and earnings ranging between 30 cents and 40 cents per share during the coming fiscal year, which ends in June 2002.

The consensus estimate of analysts polled by First Call had been for the company to report an operating loss of 3 cents per share during the current quarter and a profit of 13 cents per share in fiscal 2002.

During the fiscal third quarter, Expedia said its operating expenses, excluding non-cash amortization of goodwill and intangibles and stock option-based charges, decreased to $36.3 million from $39.4 million in the year-ago period.

The company said it ended the quarter with $151.7 million in cash and marketable securities, compared with $118 million at the end of the prior quarter.

Expedia executives have attributed their rising cash balance to the cash-flow nature of the company's merchant business, through which it collects payment from customers in advance of the time it pays suppliers.