jpmorgan 2006 global internet conference dara khosrowshahi expedia, inc. ceo & president march...
TRANSCRIPT
JPMorgan2006 Global Internet
Conference
Dara KhosrowshahiExpedia, Inc. CEO & President
March 14, 2006
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JPMorgan 2006 Global Internet Conference
Forward-Looking StatementsT h is p re s e n ta tio n c o n ta in s "fo rw a rd -lo o k in g s ta te m e n ts " w ith in th e m e a n in g o f th e P riv a te S e c u ritie s L itig a tio n R e fo rm A c t o f 1 9 9 5 . T h e s e s ta te m e n ts a re n o t g u a ra n te e s o f fu tu re p e rfo rm a n c e . T h e s e fo rw a rd -lo o k in g s ta te m e n ts a re b a s e d o n a s s u m p tio n s w h ic h a re in h e re n tly s u b je c t to u n c e rta in tie s , ris k s a n d c h a n g e s in c irc u m s ta n c e s th a t a re d iff ic u lt to p re d ic t. T h e u s e o f w o rd s s u c h a s "a n tic ip a te s ," "e s tim a te s ," "e x p e c ts ," "in te n d s ," "p la n s " a n d "b e lie v e s ," a m o n g o th e rs , g e n e ra lly id e n tify fo rw a rd -lo o k in g s ta te m e n ts . H o w e v e r, th e s e w o rd s a re n o t th e e x c lu s iv e m e a n s o f id e n tify in g s u c h s ta te m e n ts . In a d d itio n , a n y s ta te m e n ts th a t re fe r to e x p e c ta tio n s , p ro je c tio n s o r o th e r c h a ra c te riz a tio n s o f fu tu re e v e n ts o r c irc u m s ta n c e s a re fo rw a rd -lo o k in g s ta te m e n ts a n d m a y in c lu d e s ta te m e n ts re la tin g to fu tu re re v e n u e s , e x p e n s e s , m a rg in s , p ro fi ta b ility , n e t in c o m e , e a rn in g s p e r s h a re a n d o th e r m e a s u re s o f re s u lts o f o p e ra tio n a n d th e p ro s p e c ts fo r fu tu re g ro w th o f E x p e d ia , In c .’s b u s in e s s . A c tu a l re s u lts a n d th e tim in g a n d o u tc o m e o f e v e n ts m a y d iff e r m a te ria lly fro m th o s e e x p re s s e d o r im p lie d in th e fo rw a rd -lo o k in g s ta te m e n ts fo r a v a rie ty o f re a s o n s , in c lu d in g , a m o n g o th e rs : E x p e d ia , In c .’s a b ility to e ff e c tiv e ly u p d a te , a u to m a te a n d in te g ra te d is p a ra te fi n a n c ia l a n d a c c o u n tin g s y s te m s a n d a p p ro a c h e s a m o n g its b ra n d s a n d b u s in e s s e s ; th e a c c u ra c y , in te g rity , s e c u rity a n d re d u n d a n c y o f s y s te m s , in c lu d in g fi n a n c ia l a n d a c c o u n tin g s y s te m s , a n d n e tw o rk s o f E x p e d ia , In c .; re lia n c e o n n e w ly im p le m e n te d s y s te m s s u p p o rtin g o u r fi n a n c ia l p la n n in g a n d p ro je c tio n s ; a d v e rs e c h a n g e s in s e n io r m a n a g e m e n t; th e ra te o f g ro w th o f th e In te rn e t a n d o n lin e tra v e l; c h a n g e s in g lo b a l e c o n o m ic c o n d itio n s ; c o n s u m e r s p e n d in g , th e c o m p e titiv e e n v iro n m e n t; th e e -c o m m e rc e in d u s try a n d b ro a d b a n d a c c e s s ; w o rld e v e n ts (in c lu d in g a d v e rs e w e a th e r, h e a lth ris k s a n d te rro ris m ); th e ra te o f o n lin e m ig ra tio n in th e v a rio u s g e o g ra p h ie s a n d m a rk e ts in w h ic h E x p e d ia , In c . o p e ra te s , in c lu d in g A s ia ; fl u c tu a tio n s in fo re ig n e x c h a n g e ra te s ; th e h e a lth o f th e tra v e l in d u s try , in c lu d in g c o n s u m e r a n d b u s in e s s s p e n d in g o n tra v e l; E x p e d ia , In c .’s a b ility to e x p a n d s u c c e s s fu lly in in te rn a tio n a l m a rk e ts ; p o s s ib le o n e -tim e c h a rg e s re s u ltin g fro m , a m o n g o th e r e v e n ts , in te g ra tio n a n d p ro c e s s re v ie w a c tiv itie s , p la tfo rm m ig ra tio n a n d s h a re d s e rv ic e s e ff o rts ; fa ilu re to re a liz e c o s t e ff ic ie n c ie s ; th e s u c c e s s fu l c o m p le tio n o f p e n d in g c o rp o ra te tra n s a c tio n s a n d th e in te g ra tio n o f c u rre n t a n d a c q u ire d b u s in e s s e s ; a n d o th e r ris k s d e ta ile d in E x p e d ia , In c .’s p u b lic fi lin g s w ith th e S E C , in c lu d in g E x p e d ia , In c .’s Q u a rte rly R e p o rt o n F o rm 1 0 -Q fo r th e q u a rte r e n d e d S e p te m b e r 3 0 , 2 0 0 5 . E x c e p t a s re q u ire d b y la w , E x p e d ia , In c . u n d e rta k e s n o o b lig a tio n to u p d a te a n y fo rw a rd -lo o k in g o r o th e r s ta te m e n ts in th is p re s s re le a s e , w h e th e r a s a re s u lt o f n e w in fo rm a tio n , fu tu re e v e n ts o r o th e rw is e .
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JPMorgan 2006 Global Internet Conference
International Mix
1.1 1.5 1.8 2.1 2.3 2.7 3.0 3.3 3.5
8.49.3 9.8 10.2 10.5 10.9
11.3 11.8 12.1
Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05
Expedia, Inc. U.S. & International gross bookings, trailing 12 months($B)
International now 22% of mix, up from 12% in 2003
INTL
‘03 to ‘05 77% avg growth
U.S.
‘03 to ‘05 20% avg. growth
Source:Company financial reports
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JPMorgan 2006 Global Internet Conference
Travel Industry - Global Opportunity
Worldwide
$875 Billion Total
10% ($90B) online
United States
$209 BillionTotal
25% ($52B) online
Europe
$265 Billion Total
9% ($24B) online
Source : 2004 estimates; Company estimates; IAC/Interactive S4/A filed June 17, 2005; PhoCusWright 2004 market estimates for leisure & unmanaged business travel.
Asia Pacific5% ($12B)
online
$264 Billion Total
Sizeable opportunity with long-term penetration upside
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JPMorgan 2006 Global Internet Conference
Brand Portfolio
PackagesComplex itinerariesBusiness travel
Air ticketsHotel roomsRental cars
$$$$
$
Simple Complex
Portfolio approach appeals to broadest range of traveler needs
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JPMorgan 2006 Global Internet Conference
Brand Portfolio –
Sources : Company estimates; Company financial reports; Hotels.com website.
Hotels.com Gross Bookings – Y/Y Growth Percent
38
13
6
-4 -2
69
16
Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05
~$1.9B 2005 Gross Bookings
#5 WW Online Travel Agency
WW presence in 29 countries
Complimentary to core Expedia
traveler
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JPMorgan 2006 Global Internet Conference
Brand Portfolio -
TripAdvisor.comCumulative Reviews & Opinions (by month)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Jan-05
Feb-05
Mar-05
Apr-05
May-05
Jun-05
Jul-05
Aug-05
Sep-05
Oct-05
Nov-05
Dec-05
Jan-06
Feb-06
Month & Year
Nu
mb
er o
f R
evie
ws
& O
pin
ion
s (i
n t
ho
usa
nd
s)
Sources : Company estimates; comscore media metrix; TripAdvisor website.
1MM
2MM
3MM
4MM
19MM Jan ‘06 unique visitors (41% Y/Y)
#3 worldwide travel website
4MM reviews & opinions
Expanded reach to U.K., Germany,
France, Italy & Spain
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JPMorgan 2006 Global Internet Conference
Brand Portfolio –
Sources : Company financial reports; Company estimates; Company website.
What will high online adoption mean for you?
$8.5M Total $7.2M Total
15%Lower Air
15%Lower Air
8%Lower Hotel
8%Lower Hotel
50%Lower Fees
50%Lower Fees
15%CombinedSavings
15%CombinedSavings
Savings chart based on fee comparison at ourHigher Select agent service plus the PhocusWright Study. The study shows the effects of high onlineadoption on lowering air and hotel costs. ExpediaCorporate Travel’s higher online usage, lowerfees, and additional inventory may offer you evengreater savings.
TraditionalLow Adoption
On DemandHigh Adoption
$7M Air
$1.15M Hotel
$379K Fees
$5.95M Air
$1.06M Hotel
$190K Fees
Example: A company currently spending $7 million in ARC with a traditional agency
Let us present a personalized ROI comparison for you
$700MM+ Gross Booking –
90% Y/Y growth
Top 10 Corporate Travel
Agency
Launched TripController –
leading technology solution
Operating in U.S., U.K.,
France, Canada, Belgium,
Netherlands & Lux.
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JPMorgan 2006 Global Internet Conference
Benefits of Brand Breadth & Scale
Expedia Travelocity Cendant (A)
Gross bookings $15,551 Gross booking $7,446 $8,776
Revenue 2,119 Revenue 830 587 Revenue % gross bookings 13.6% Revenue % GB 11.1% 6.7%
OIBA * 627 EBITDA 48 74 OIBA % revenue 29.6% EBITDA % Rev 5.8% 12.6%
Figures in $MM
Note A: Cendant revenue and EBITDA for Orbitz, Gullivers & eBookers.* “Operating income before amortization” is a non-GAAP measure as defined by the SEC. Please see “Definitions of non-GAAP Measures” and “Tabular Reconciliations for Non-GAAP Measures” elsewhere in this presentation for an explanation of Non-GAAP measures used throughout this presentation.
Expedia’s vision = become largest & most profitable retailer of travel products & services.
Sources : Company financial reports; Sabre Holdings & Cendant Corp. financial reports and earnings call transcripts.
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JPMorgan 2006 Global Internet Conference
Strong Free Cash Flow, Flow Through
FY 2005 Results
OIBA $627 MM+ Depreciation 50 MM+ Changes in working capital & other 173 MM- Capital expenditures (52 MM)= Free cash flow $798 MM
Flow Through:2005 FCF as % of :
EXPE Travel Average (A) Internet Average (B) Revenue 38% Revenue 8% Revenue 32% OIBA 127% EBITDA 79% EBITDA 84%
Note A: Travel Average consists of Cendant (NYSE : CD), Sabre Holdings (NYSE : TSG) and Priceline (NASDAQ : PCLN).
Note B: Internet Average consists of Yahoo (NASDAQ : YHOO), eBay (NASDAQ : EBAY) and Google (NASDAQ : GOOG).
Sources : Company financial reports; Cendant, Sabre Holdings, Priceline, Yahoo, eBay & Google financial reports and earnings call transcripts..
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JPMorgan 2006 Global Internet Conference
2005 Results
Source:Company Financial Reports.
Figures in $MM
2004 2005 Y / Y GrowthGross bookings 12,774$ 15,552$ 22%Revenue 1,843 2,119 15% Revenue Margin 14.4% 13.6% (80) basis pointsGross profit 1,453 1,649 13%Selling & Marketing 653 698 7% % of Revenue 35.4% 32.9% 252 basis pointsGeneral & Administrative 161 212 31% % of Revenue 8.7% 10.0% (125) basis pointsTechnology & Content 85 112 32% % of Revenue 4.6% 5.3% (68) basis pointsOIBA 554 627 13% OIBA Margin 30.0% 29.6% (44) basis points
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JPMorgan 2006 Global Internet Conference
Q4 2005 Results
Q404 Q405 Y / Y GrowthGross bookings 2,895$ 3,395$ 17%Revenue 439 495 13% Revenue Margin 15.2% 14.6% (59) basis pointsGross profit 343 385 12%Selling & Marketing 129 155 20% % of Revenue 29.4% 31.4% (201) basis pointsGeneral & Administrative 47 65 39% % of Revenue 10.7% 13.2% (250) basis pointsTechnology & Content 23 31 33% % of Revenue 5.3% 6.3% (94) basis pointsOIBA 143 133 -7% OIBA Margin 32.6% 26.9% (577) basis points
Figures in $MM
Source:Company Financial Reports.
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JPMorgan 2006 Global Internet Conference
Leverage Points
G&A – Public Company Costs/Apollo
Revenue Margin
Supply Relationships
Business Analytics
Volume
Long-Term Selling & Marketing Efficiency
Product
Improve end-to-end traveler experience
Short & medium-term investments for long-term results
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JPMorgan 2006 Global Internet Conference
Value to Suppliers –Lodging
We bring our partners business when they need
it
Solid weekday business, while also improving weekend
utilization
Higher ADRs than industry average
Our ADRs are nearly 50% higher than the
industry
Our customers stay longer than industry
customers
Average length of stay is nearly 40%
longer
AD
R (
ind
ex
)
Industry Expedia
%
Industry bookings
Expedia bookings
Le
ng
th o
f s
tay
(in
de
x)
Industry Expedia
Source: Proprietary consumer research; Smith Travel Research LTM August 2005; internal data
13
4938
10
63
28
0
20
40
60
80
Sunday Weekday Fri/Sat
1
1.48
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
11.38
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
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JPMorgan 2006 Global Internet Conference
0
1
2
3
4
5
2001 2002 2003 2004 2005
Ind
ex
%
Industry On EI
Average hub passengersof U.S. carriers
0
20
40
60
80
We bring carriers a different set of customers We can help with yields
Our packages help move distressed inventory
Most of the customers we
deliver are outside hub
markets
Our airfares are rising faster than
overall faresIndustry 2001 to 2005 CAGR is -
2.0% vs. our 3.5%
Package sales have quadrupled as a
portion of our total sales in the last 5
years
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
2001 2003 2005
Industry EI
%
YoY change in air yields
Value to Suppliers –Air
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JPMorgan 2006 Global Internet Conference
Why Retail?
TODAY
Industry-leading OLTATechnology leadership
Strong brand awarenessBroad selection
Competitive prices
Most travelers are one-time buyersVast majority buy a single item
<5% U.S. Leisure spend at Expedia.com
YET…
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JPMorgan 2006 Global Internet Conference
Fragmented Traveler Behavior
7%
29%
29%
35%
Traveler behavior Upside to Expedia
Source: Company estimates; Forrester; Jupiter; Merrill Lynch; comScore; Yankelovich
% T
ota
l 2005 t
rave
l sp
en
d b
y U
.S. h
ou
seh
old
s w
ith
on
lin
e a
ccess
Opportunity to convince our shoppers to buy with us
Opportunity to convince our shoppers to buy online with us
The next frontier!
Purchase on Expedia
Shop online but purchase from online competitor
Shop online but purchase from offline competitor
Shop and purchase with offline competitor
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JPMorgan 2006 Global Internet Conference
Move from Selling Inventory…to Selling an Experience
At the core of all travel is a story……
Segmentation
Wishlist
Recommender
Booking
TSF and itinerary planner
Travel experience
Memories and
storytelling
Expedia’s current view of the story and its
climax
The customer’s view of the story and its climax
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JPMorgan 2006 Global Internet Conference
Transformation: From ATM … to Merchant …
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JPMorgan 2006 Global Internet Conference
…From “One Site Fits All” … to Personal & Relevant
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JPMorgan 2006 Global Internet Conference
Personal & Relevant – Air Shopper E-mail Campaign
Site behavior
drives promotion
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JPMorgan 2006 Global Internet Conference
Experience – Personal Trip Guides
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JPMorgan 2006 Global Internet Conference
Experience – Expedia Best Price Guarantee
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JPMorgan 2006 Global Internet Conference
33%
37%26%
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0.10 0.15 0.20 0.25 0.30 0.35
AAA
Hilton
Southwest
*Percent preferring travel provider based on “lowest prices and fares available”**Percent preferring travel provider based on 9 Emotional/Relationship attributes (including “Values me as a customer,” “Cares about me and my travel,” “Understands me and how I feel about travel,” “Consistently Exceeds expectations”)
Preference based on relationship (9 attributes)**
Pre
fere
nce b
ase
d o
n p
rice*
16%
21%
27% 29%
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0.10 0.15 0.20 0.25 0.30 0.35
OTA2
Expedia
OTA1
OTA3
Customer View of Travel Market
Brand perception and loyaltySize of circle = Percent who would recommend to friends
Source: Expedia Brand Health Tracker
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JPMorgan 2006 Global Internet Conference
In Summary….
ATTRACTIVE INDUSTRY
• Sizeable global target market - $875B
• Low global online penetration of 10% with significant upside
EXPEDIA STRENGTHS
• #1 in most WW points of sale
• Industry-leading brand recognition, traffic, travelers
• Brand portfolio offers broadest customer & supplier appeal
• WW, centralized supply relationships - drive increased value for suppliers given traveler & geography breadth
• Large fixed investment can be levered across existing & future businesses
• Significant base & leadership position as we transition to world-class retailer of travel experiences
• Efficient flow through: ~$800MM in free cash flow on $2.1B in revenue
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JPMorgan 2006 Global Internet Conference
Q & A
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JPMorgan 2006 Global Internet Conference
Appendix
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JPMorgan 2006 Global Internet Conference
Definitions of Non-GAAP MeasuresThe following are defined as non-GAAP measures by the SEC:
Operating Income Before Amortization is defined as operating income plus: (1) amortization of non-cash distribution and marketing expense, (2) stock-based compensation expense, (3) amortization of intangible assets and goodwill impairment, if applicable and (4) certain one-time items, if applicable. Management believes this measure is useful to investors because it represents the combined operating results of Expedia, Inc.’s businesses, taking into account depreciation, which we believe is an ongoing cost of doing business, but excluding the effects of other non-cash expenses that may not be indicative of our core business operations. Operating Income Before Amortization has certain limitations in that it does not take into account the impact to Expedia, Inc.’s statements of income of certain expenses, including non-cash compensation, non-cash payments to partners, and acquisition-related accounting. Due to the high variability and difficulty in predicting certain items that affect net income, such as interest rates and tax rates, Expedia, Inc. is unable to provide reconciliation to net income on a forward-looking basis without unreasonable efforts.
Adjusted Net Income generally captures all items on the statements of income that have been, or ultimately will be, settled in cash and is defined as net income available to stockholders plus (1) amortization of non-cash distribution and marketing expense, (2) stock-based compensation expense, (3) amortization of intangible assets and goodwill impairment, if applicable, (4) one-time items, net of related tax, and minority interest, (5) mark to market gains and losses on derivative liabilities and (6) discontinued operations, net of tax. We believe Adjusted Net Income is useful to investors because it represents Expedia, Inc.’s combined results, taking into account depreciation, which management believes is an ongoing cost of doing business, but excluding the impact of other non-cash expenses and items not directly tied to the recurring core operations of our businesses.
Adjusted EPS is defined as Adjusted Net Income divided by weighted fully diluted shares outstanding for Adjusted EPS purposes. We include dilution from options and warrants per the treasury stock method and include all shares relating to restricted stock units (“RSU”) in shares outstanding for Adjusted EPS. This differs from the GAAP method for including RSUs, which treats them on a treasury method basis. Shares outstanding for Adjusted EPS purposes are therefore higher than shares outstanding for GAAP EPS purposes. We believe Adjusted EPS is useful to investors because it represents, on a per share basis, Expedia’s consolidated results, taking into account depreciation, which we believe is an ongoing cost of doing business, as well as other charges which are not allocated to the operating businesses such as interest expense, taxes and minority interest, but excluding the effects of other non-cash expenses not directly tied to the core operations of our businesses. Adjusted Net Income and Adjusted EPS have the same limitations as Operating Income Before Amortization. In addition, Adjusted Net Income does not include all items that affect our net income and net income per share for the period. Therefore, we think it is important to evaluate these measures along with our consolidated statements of income.
Free Cash Flow is defined as net cash flow provided by operating activities less capital expenditures. Management believes Free Cash Flow is useful to investors because it represents the operating cash flow that our operating businesses generate, less capital expenditures but before taking into account other cash movements that are not directly tied to the core operations of our businesses, such as financing activities or certain investing activities. Free Cash Flow has certain limitations in that it does not represent the total increase or decrease in the cash balance for the period, nor does it represent the residual cash flow for discretionary expenditures. Therefore, it is important to evaluate Free Cash Flow along with the consolidated statements of cash flows.
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JPMorgan 2006 Global Internet Conference
Reconciliation of Non-GAAP Measures
Operating Income Before Amortization
2005 2004 2005 2004
OIBA 132,940$ 143,291$ 627,441$ 553,692$ Amortization of intangibles (31,863) (32,571) (126,067) (125,091) Stock-based compensation (11,826) (37,006) (91,725) (171,400) Amortization of non-cash distribution and marketing (3,542) (3,701) (12,597) (16,728) Operating Income 85,709 70,013 397,052 240,473
Net interest income 1,194 14,745 48,673 38,356 Write-off of long-term investment - - (23,426) - Other (20,317) (12,192) (8,428) (9,286) Provision for income taxes (42,082) (28,634) (185,977) (106,371) Minority interest in loss of consolidated subsidiaries 730 188 836 301 Net Income 25,234$ 44,120$ 228,730$ 163,473$
Year endedDecember 31,
Three months endedDecember 31,
(in thousands)(Unaudited)
Adjusted Net Income & Adjusted EPS
2005 2004 2005 2004
Net income 25,234$ 44,120$ 228,730$ 163,473$ Amortization of intangibles 31,863 32,571 126,067 125,091 Stock-based compensation 11,826 37,006 91,725 171,400 Amortization of non-cash distribution and marketing 3,542 3,701 12,597 16,728 Write-off of long-term investment - - 23,426 - Unrealized loss on derivative instruments 18,042 - 6,042 - Minority interest (382) (191) (1,827) (523) Provision for income taxes (17,378) (25,328) (70,982) (109,251) Adjusted net income 72,747$ 91,879$ 415,778$ 366,918$
GAAP diluted weighted average shares outstanding 363,632 340,549 349,530 340,549 Additional restricted stock units 4,648 - 2,366 - Adjusted weighted average shares outstanding 368,280 340,549 351,896 340,549
Diluted earnings per share 0.07$ 0.13$ 0.65$ 0.48$ Adjusted earnings per share 0.20$ 0.27$ 1.18$ 1.08$
Three months ended December 31,
Year ended December 31,
(in thousands, except per share data)
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JPMorgan 2006 Global Internet Conference
Reconciliation of Non-GAAP Measures
Free Cash Flow
2005 2004 2003
Net cash provided by operating activities 849,895$ 802,853$ 644,023$ Less: capital expenditures (52,315) (53,407) (46,183) Free cash flow 797,580$ 749,446$ 597,840$
Year endedDecember 31,
(in thousands)
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JPMorgan 2006 Global Internet Conference
Business Model – Operating Income
FY 2005 Results ($MM)
Gross bookings $15,552
Revenue 2,119
Cost of revenue 470
Gross profit 1,649
Gross margin 78%
Selling and marketing 698
General and administrative 212
Technology and content 112
OIBA 627
OIBA margin 30%
Non-cash marketing & dist. 13
Stock-based compensation 92
Amortization of intangibles 126
Operating income (GAAP) 397
Operating margin 19%
• Credit Card & Bad Debt• “Fulfillment” Costs, incl. paper tickets• Call Centers (Traveler Service) • Data Center• Costs to destination services suppliers
$1 of every $3 in revenue, consisting of advertising and distribution expense, as well as personnel-related costs, including PSG market manager staffing. Our distribution channels include portals, search engines and our affiliate programs.
30% of Revenue flows to operating profit (4% of Gross Bookings)
Significant acquisition activity being amortized
Annual equity awards in February. Shifted to RSUs w/ ‘03 grant cycle, reducing expense & dilution
(1) Personnel costs for support functions that include our executive leadership, finance, legal, tax and human resources functions. (2) Fees for professional services that include legal, tax and accounting.
Customer books a travel product or service; total retail value (incl taxes and fees) constitutes “Gross Bookings”
Expedia’s portion of the gross booking gets recorded as revenue (fees, commissions, etc.) Revenue = 13.6% of bookings in 2005.
Includes product development expenses such as payroll and related expenses, and depreciation of website development costs.
Source:Company financial reports
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JPMorgan 2006 Global Internet Conference
Business Model - Free Cash Flow Build
Free Cash Flow$ Millions
Depre-ciation
IntangiblesNon-CashMarketing
Non-Cash Charges
50
126 13
Stock-Based Comp.
Accounts Payable, Merchant
Deferred Merchant Bookings
Working Capital Changes
86
45
Inc. Tax Payable
(A)
Cap Ex 2005 Free Cash Flow
798
2005 Net Income
229
92
(52)
Decr. in Taxes
Payable (A)
43
114
Other W.C.
844
Other
Note A: Cash taxes paid in 2005 were $11 million. $114 million reduction in taxes payable was due primarily to stock-based compensation deductions and transfer of Payables to IAC.