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Priceline turns a profit
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July 31, 2001: 6:07 p.m. ET
E-commerce specialist posts first-ever operating profit in 2Q
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NEW YORK (CNNfn) - Priceline.com reported its first-ever profit Tuesday, and it was much better than the company and Wall Street had been expecting.
Executives of Priceline, which offers an online "reverse auction" service through which customers can "name their own price" for products and services such as airline tickets and rental cars, also raised their forecasts for both revenue and earnings per share in the current quarter.
"Given our strong second-quarter performance, we are pleased to be able to significantly raise our revenue and EPS estimates for third quarter," Robert Mylod, the company's chief financial officer, told analysts during a teleconference.
He said Priceline now anticipates a third-quarter operating profit ranging between 5 cents and 7 cents per share on revenue exceeding the $341 million it reported during last year's third quarter.
Analysts generally had been expecting to see a profit of 3 cents per share on revenue nearer $322.5 million, according to a survey conducted by earnings tracker First Call.
The more optimistic outlook came on the heels of a quarterly earnings report in which the Norwalk, Conn.-based company reported its first-ever profit. After the close of trading, Priceline said it earned 5 cents per share in the second quarter.
That excludes one-time charges and compares with a loss of a penny per share during the same period last year. Accounting for restructuring charges and other one-time items, Priceline's net income for the quarter was $2.8 million, or a penny per share – the first black ink logged on its bottom line since going public in the first quarter of 1999 – compared with a net loss of $11.7 million, or 7 cents per share, a year earlier.
At $364.8 million, Priceline's second-quarter revenue rose 3.6 percent from $352.1 million a year ago and was 35 percent higher than the $269.7 million in the first quarter this year.
Shares of Priceline (PCLN: Research, Estimates) rose 38 cents to $8.87 on Nasdaq ahead of the earnings release, and rose another 61 cents to $9.48 in extended-hours trade.
When Priceline reported its first-quarter results in early May, executives had said they were aiming for a second-quarter operating profit of 1 or 2 cents per share, and expected sales to be 10 percent to 15 percent above the first quarter.
Priceline reiterated that guidance a week later when it ousted Daniel Schulman as its chief executive, replacing him with Chairman and former CEO Richard Braddock.
In addition to airline tickets and rental cars, Priceline offers items including home financing, hotel rooms, new cars, and long-distance telephone service. But the company generates the bulk of its revenue from travel-related products, which, at $362.5 million, represented more than 99 percent of total sales in the second quarter.
Priceline had ventured into online grocery and gasoline sales as well, but backed out of those businesses last year after they proved a drag on earnings.
During the quarter, Priceline said it sold a record 3 million units of travel products, including 1.4 million airline tickets, an increase of 11 percent over the year-ago quarter and 34 percent over the first quarter of this year.
"We are pleased that our airline ticket sales have substantially recovered, despite the difficult airline travel market and competition from heavy discounting by the major carriers," said Jeffery H. Boyd, Priceline's president and chief operating officer.
"It is also encouraging to see the continued rapid growth of our hotel and rental car products, which we believe have a substantial inventory advantage over the competition and broad consumer appeal," Boyd added.
As have many of its counterparts, Priceline has implemented a range of cost-cutting measures, including cutting 34 percent of its staff and postponing expansion plans. Executives have said those efforts have yielded annual savings of roughly $100 million and played a large part in the company's ability to reach operating profitability in the second quarter.
Executives also highlighted the company's growing cash reserves. They said Priceline ended the second quarter with $165.7 million in cash and cash equivalents, compared with $142.6 million at the end of the first quarter.
The company said it expects to finish the third quarter with cash ranging between $175 and $180 million. 
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