Priceline.com Reports Financial Results for 2nd Quarter 2006
Priceline.com Incorporated (Nasdaq: PCLN) today reported its financial results for the 2nd quarter 2006. Gross travel bookings for the quarter, which refers to the total dollar value, inclusive of all taxes and fees, of all travel services purchased by consumers, rose 62.8% year-over-year to $927 million. Revenues in the 2nd quarter were $307.7 million, a 15.4% increase over a year ago. 2006 results include the operating results of Bookings B.V., which was acquired in July 2005.
Priceline.com's GAAP gross profit for the 2nd quarter 2006 was $105.8 million, up 62.2% from the prior year. Pro forma gross profit for the 2nd quarter 2006 was $106.1 million, up 61.9% from the same period in the prior year. Priceline.com had 2nd quarter 2006 GAAP net income of $12.5 million, or $0.28 per diluted share, compared to $0.29 in the prior year. GAAP results include the effects of increased non-cash expenses related to stock based compensation and amortization of intangibles. Stock based compensation increased by $2.7 million, due mainly to FAS 123R, which requires companies to record non-cash compensation expense related to stock options granted to employees. Amortization of intangibles increased by $2.7 million, primarily due to intangible assets recorded in connection with the acquisition of Bookings B.V. in July 2005.
Pro forma net income for the quarter, excluding these non-cash items and other pro forma adjustments discussed below, was $23.0 million, or $0.55 per diluted share, which exceeds First Call analyst consensus of $0.51 per diluted share. The section below entitled "Non-GAAP Financial Measures" provides a definition and information about the use of pro forma financial measures used in this press release and the attached financial and statistical supplement reconciles historical pro forma financial information with priceline.com's financial results under GAAP.
Priceline.com said that organic growth in gross travel bookings accelerated in the 2nd quarter in both the U.S. and in Europe. "In the 2nd quarter 2006, priceline.com experienced domestic organic bookings growth of 17.2%, compared to 10.2% growth the previous quarter, and 5.0% growth in the fourth quarter of 2005," said priceline.com President and Chief Executive Officer Jeffery H. Boyd. "We had accelerating year-over-year growth trends in all our domestic unit metrics, with airline tickets growing 4.1% in the quarter, compared to a decrease of 2.6% in Q1, and rental car days up 30.3%, compared to an increase of 26.8% in Q1. Hotel room night sales increased 82.5%, versus 62.5% in Q1, on the strength of growing sales from Priceline Europe. As in the first quarter, we believe improving domestic top line performance resulted from the More Ways to Save website upgrade and associated advertising campaign and investments in online marketing, including our partnership with Orbitz.com." Organic gross travel bookings growth rates assume that acquired businesses were owned during all of 2005 and exclude the sale of Travelweb hotel rooms through Orbitz.
In Europe, priceline.com's 2nd quarter year-over-year growth was even more pronounced. Priceline Europe, comprised of Bookings, B.V., Active Hotels Ltd., and priceline.co.uk, had gross travel bookings of $356.6 million in the 2nd quarter 2006, which represents an organic growth rate of 116.9%. "Priceline Europe has shown strong growth in the last few quarters as the fast growing markets in Western Europe become a larger part of the overall business," said Mr. Boyd. "Over 24,000 participating hotels, solid pan-European distribution and early success in our integration efforts are all contributing to this momentum. Worldwide, priceline.com customers booked 5 million room nights in the 2nd quarter. We believe priceline.com is now number one in Europe and number two globally in online hotel room night sales."
Looking toward the 3rd quarter, Mr. Boyd said, "Priceline.com is in a unique position to help leisure travelers squeezed this year by record energy prices, rising interest rates and increasing air fares. Our Name Your Own Price(R) hotel and rental car services deliver some of the best deals available on or off the Web. Priceline.com's vacation packages service routinely offers pricing meaningfully below our major online competitors. Our new comprehensive assortment of published prices for airline tickets, hotel rooms and rental cars provides customers with an easy, one-stop way to quickly find the best available retail deals. And overseas, Priceline Europe enables customers to book hotels and deals they simply cannot find through any other major online hotel reservation service. As economic conditions continue to put a focus on budget travel through the summer and into the holiday season, we believe priceline.com is well positioned to serve our customers and build on our solid growth trends."
Forward Guidance
Priceline.com issued the following guidance for 3rd quarter 2006:
-- Year-over-year increases in overall gross travel bookings of approximately 44% to 48%.
-- Gross travel bookings from Priceline Europe of approximately $360 to $390 million.
-- Year-over-year increase in revenue of approximately 13% to 17%.
-- Year-over-year increase in pro forma gross profit of approximately 44% to 48%.
-- Pro forma net income of between $0.60 and $0.65 per diluted share.
As a result of the stronger than expected gross travel bookings growth in the 2nd quarter 2006, priceline.com revised its full-year guidance as follows:
-- Total gross travel bookings of approximately $3.2 to $3.3 billion.
-- Gross travel bookings from Priceline Europe of approximately $1.3 billion.
-- Pro forma net income of between $1.66 and $1.74 per diluted share.
A reconciliation of pro forma financial results to GAAP results is included in the attached financial and statistical supplement. Pro forma gross profit guidance for the 3rd quarter 2006 and full year 2006 excludes non-cash amortization expense of acquisition-related intangibles associated with the acquisition of Travelweb LLC.
Pro forma net income per diluted share guidance for the 3rd quarter 2006 and full-year 2006 excludes non-cash amortization expense of acquisition-related intangibles, stock-based compensation expense (including compensation expense related to stock options upon the adoption of SFAS 123(R)), option payroll tax expense, non-cash income tax expense and non-cash preferred stock dividends. Pro forma net income is also adjusted for the impact on minority interests of the pro forma adjustments described above. When aggregated, the foregoing expenses are expected to total approximately $11 million for the 3rd quarter 2006 and $40 million for full-year 2006. In addition, pro forma net income per diluted share guidance for 2006 excludes the impact of EITF 04-08 ("Effect of Contingently Convertible Debt on Diluted Earnings per Share"), which revises the method for calculating diluted shares outstanding for purposes of computing GAAP net income per diluted share.
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