It's all going to be OK at
. Really. Believe us.
That was the message from the company's management Thursday as it reported
third-quarter results that were in line with investors' lowered expectations. priceline's pro forma net loss was a penny a share, narrower than the 8 cents a share in the third quarter of 1999, and revenue was $341 million, more than double that of the same quarter a year ago but below the $352 million in sales during the second quarter.
On a conference call with investors and analysts, priceline President and CEO Dan Schulman and Chairman Rich Braddock defended the company's business model, which has faced what might politely be called scrutiny in the last month following a warning about slower airline ticket sales revenue growth and the news that its
licensee would shut down. Its shares have since dropped more than 66%. (Not present on the call was CFO Heidi Miller, who quit after less than a year on the job.)
"We have significant growth prospects in our core growth business that will put us in a position to prosper in line with Internet commerce," said Schulman on a conference call with investors.
After hours, priceline shares were trading at $5.20 on
, about 25% below their Thursday closing price of $6.84 and some 95% off their 52-week high.
Problems in the last few weeks "have, and will continue to, slow our business trajectory," said Braddock. "But we continue our efforts to achieve profitability." The travel business still looks great, he said, and priceline is also continuing to expand into other areas, with nonairline businesses bringing in 19% of third-quarter sales. The company is ready for competition with newer online travel sites like
. priceline is boosting its customer service efforts to woo back customers turned off by recent bad publicity, and 51% of all bids in the third quarter were from repeat customers, up from 39% last quarter. Gross margins are getting better. And the company has $131 million in cash and short-term investments. It will all work out.
But investors might have a tough time taking on faith alone priceline's promises that good news will find its way to the top and bottom lines. The company said October ticket sales revenue is expected to be about 20% below September's, and that revenue will likely decrease sequentially in the fourth quarter. The company gave no guidance about 2001, since it's now in a "transitional phase," and won't do so until it releases fourth-quarter figures.
Meantime, the departure of Miller, a star recruit from
, isn't positive. She's been replaced by Bob Mylod, who in a previous stint with priceline was the senior vice president of finance. And laying off 87 employees -- 16% of its workforce -- and setting a new compensation program will mean charges in the fourth quarter.
Here's how it shapes up: The third quarter was bad. The fourth quarter doesn't look much better. And next year is unknown. Investors will have to balance how strongly they believe priceline's promises that things will get better -- and then figure out how much they're willing to pay for them.