Expedia's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Expedia (EXPE)

Q1 2012 Earnings Call

April 26, 2012 5:00 pm ET

Executives

Alan Pickerill -

Dara Khosrowshahi - Chief Executive Officer, President, Director, Member of Preferred Stock Subcommittee and Member of Executive Committee

Mark D. Okerstrom - Chief Financial Officer and Senior Vice President of Corporate Development

Analysts

Tom White - Macquarie Research

Rohit Kulkarni

Bo Nam - JP Morgan Chase & Co, Research Division

Herman Leung - Susquehanna Financial Group, LLLP, Research Division

Ross Sandler - RBC Capital Markets, LLC, Research Division

Michael Millman - Millman Research Associates

Paul Bieber

Michael J. Olson - Piper Jaffray Companies, Research Division

Kevin Kopelman - Cowen and Company, LLC, Research Division

Stephen Ju - Crédit Suisse AG, Research Division

Nishant Verma - Morgan Stanley, Research Division

Bill Lennan

Tracy B. Young - Evercore Partners Inc., Research Division

Michael Costantini - Nomura Securities Co. Ltd., Research Division

Presentation

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Expedia, Inc.'s First Quarter Earnings Conference Call. [Operator Instructions] This conference is being recorded today, April 26, 2012. I would now like to turn the conference over to Alan Pickerill, Vice President of Investor Relation. Please go ahead, sir.

Alan Pickerill

Thanks, Erin. Good afternoon, and welcome to Expedia, Inc.'s financial results conference call for the first quarter ended March 31, 2012. I'm pleased to be joined on the call today by Dara Khosrowshahi, Expedia's CEO and President; and Mark Okerstrom, our CFO.

The following discussion, including responses to your questions, reflects management's views as of today, April 26, 2012 only. We do not undertake any obligation to update or revise this information.

As always, some of the statements made on today's call are forward looking, typically preceded by words such as we expect, we believe, we anticipate or similar statements. Please refer to today's press release and the company's filings with the SEC for information about factors which could cause our actual results to differ materially from these forward-looking statements. You will find reconciliations of non-GAAP measures to the most comparable GAAP measures discussed today in our earnings release, which is posted on the company's IR website at expediainc.com/ir. I encourage you to periodically visit our Investor Relations site for important content, including today's earnings release.

Finally, unless otherwise stated, all references to cost of revenue, selling and marketing expense, general and administrative expense, and technology and content expense, excludes stock-based compensation. And all comparisons on this call will be against our results for the comparable period of 2011.

With that, let me turn the call over to Dara.

Dara Khosrowshahi

Thanks, Alan. Expedia is off to a solid start this year, with $102 million of adjusted EBITDA generated in the first quarter, exceeding our own expectations. On the top line, gross bookings and revenue growth were again driven by strength in our hotel business, with global room nights growing 24%, a nice acceleration from the 19% we saw for Q4. Including the room nights from Expedia's joint venture with AirAsia, room nights would have grown by 27%.

As we mentioned last quarter, all of our major brands, other than Expedia, continues to perform well, with combined revenue growth of 27%. Results for the Expedia brand are still not where we want them to be, but they did show improvement. Standalone room night growth has improved over the last few quarters from a slight decline year-over-year in the third quarter last year prior to the launch of the new platform, to mid-single-digit growth in the first quarter.

While it's clearly too soon to declare any type of victory, the Expedia brand team is starting to execute effectively, and we're beginning to see tangible evidence that our focused product led game plan is working. It's also important to note that the technology projects on the Expedia brand remain on track. We're pushing a significant percentage of U.S. traffic through the new air platform and testing its performance. Optimizations are being implemented, and we'll continue the rollout of the new platform in the second quarter.

The work on packages is ongoing, and we expect it to be substantially complete by year end. We continue to innovate on the new hotel platform, and those of you that visit the site regularly can undoubtedly see some of these improvements. Having the capability to test quickly and broadly deploy new features are keys to success, and we've already run more tests on our new platform so far in 2012 than we did all of last year. We expect the most pronounced overall benefits come and consumers can enjoy the best shopping experience in online travels seamlessly across all of our product lines.

International revenue growth accelerated in the quarter versus the prior quarter, and we continue to aggressively scale our international businesses, most notably with our recent acquisition or recent announcement that we intend to acquire VIA Travel acquire VIA Travel, a leading corporate travel company in the Nordic region of Europe. As of today, the deal hasn't closed, so our comments will be limited. But suffice it to say that this transaction is almost entirely complementary to our existing corporate travel business and gives us a strong position in that region. We're committed to driving scale for Egencia, and are pleased to be able to use our international cash for this purpose.

Also in regard to international travel, we've recently partnered with Brand USA, promoting travel to America by matching advertising dollars for any travel brands that promote their destination or products to an international audience. We're also featuring participating brand partners on the Discover America landing page. Brand USA is a terrific public-private marketing organization that works with the travel industry to promote travel to the U.S., creating jobs in our domestic travel sector.

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