Expedia moves to 4th-quarter profit as gross bookings increase, initiates quarterly dividend

Expedia moves to 4Q profit, bookings rise

BELLEVUE, Wash. — Online travel company Expedia Inc. moved to a fourth-quarter profit Thursday, helped by increased gross bookings.

The bookings results are an encouraging sign for the travel sector, which has struggled during the economic downturn as business and leisure travelers tightened their spending.

Expedia also declared its first-ever quarterly dividend. But the earnings results, which surpassed Wall Street’s expectations, did little to cheer investors. The company’s stock dropped $1.24, or 5.6 percent, to $21 in afternoon trading. The shares have traded in a range of $6.31 to $27.51 over the past year.

Michael Millman of Millman Research Associates said investors may have been reacting to their first take on Expedia’s revenue margin, which is how much revenue Expedia took in as a percentage of bookings. The figure shrank 1.6 percentage points in the quarter.

The market may also have been a little disappointed that the earnings performance beat expectations only mildly, he added.

Expedia earned $102.2 million, or 35 cents per share, for the period ended Dec. 31. That compares with a loss of $2.76 billion, or $9.62 per share, a year earlier.

Taking out restructuring charges and other items, profit was 30 cents per share.

The performance beat the 29 cents-per-share estimate of analysts polled by Thomson Reuters. These estimates typically exclude one-time items.

Revenue improved to $697.5 million from $620.8 billion on strength overseas as gross bookings grew to $5.05 billion from $4.02 billion.

Wall Street predicted revenue of $689.7 million.

Expedia said its domestic bookings climbed 19 percent in the quarter, with international booking surging 38 percent.

President and CEO Dara Khosrowshahi said during Expedia’s conference call that its booking window is lengthening slightly but has yet to return to 2008 levels.

There are also indications of rising business travel, with Khosrowshahi pointing toward strength in the company’s business travel group, Egencia.

“I wouldn’t say that things are super, but it is a heck of a lot better than last year, and I think everyone is feeling more stable and it is back to kind of managing the business,” the CEO said.

For the year, Expedia reported a profit of $299.5 million, or $1.03 per share. That compares with a loss of $2.52 billion, or $8.80 per share, in 2008.

Adjusted earnings were $1.03 per share.

Annual revenue rose to $21.81 billion from $21.27 billion.

Chief Financial Officer Michael Adler said during the company’s call that Expedia plans to ramp up marketing spending in 2010 after reducing those costs last year to help contend with recessionary pressures.

Expedia, based in Bellevue, Wash., initiated a quarterly dividend of 7 cents. The company will pay the dividend on March 31 to shareholders of record March 11. Based on current shares outstanding, the company estimates the payout will amount to $20 million.