--Adjusted EPS falls short of consensus but revenue comes in
better than expected
--Company predicts 2013 adjusted Ebitda up by a low double-digit
percentage
--CEO notes increasing competition in U.S. from rivals such as
Priceline
(Updates with comments from executives on conference call,
further details throughout)
By Joan E. Solsman
Expedia Inc. (EXPE) warned of rivals ratcheting up competition
at home as it projected a relatively modest increase in earnings
this year.
Shares in the online travel agent were up 5% at $70.90 in recent
after-hours trading, after it reported a solid fourth quarter
barring the effect of an extraordinary legal cost. That followed
another all-time high for the stock in regular-session trading.
Expedia, which operates its namesake travel-booking website as
well as brands like Hotels.com and Hotwire, has been the market's
darling in the online-travel sector. Its shares have nearly doubled
in value in the last year as exhaustive technology upgrades
accelerated growth, even as rivals such as Priceline.com Inc.
(PCLN) were tripped up by lumpy travel demand in areas like
Europe.
However, Expedia Chief Executive Dara Khosrowshahi said
Priceline was becoming a much better domestic competitor during a
conference call to discuss results. The rival plans to take over
the biggest online travel metasearch engine, Kayak Software Corp.
(KYAK), and it recently launched an aggressive ad campaign for
Booking.com, its biggest brand that thus far has thrived in
international markets but had little presence in the U.S.
Mr. Khosrowshahi added Expedia was watching Google Inc. (GOOG)
and TripAdvisor Inc. (TRIP) closely as they experiment and innovate
with travel products.
The executive also noted Expedia's strengths: share gains,
promising signs in its packages business, expansion of Hotwire and
its Chinese brand eLong and better conversion.
This year, it expects its adjusted earnings before interest,
taxes, depreciation and amortization to rise about as much as last
year. It projected adjusted Ebitda would increase by a low
double-digit percentage, with the possibility of hitting the low
teens. But that is shy of the 15% growth analysts surveyed by
Thomson Reuters were expecting.
Chief Financial Officer Mark D. Okerstrom said growth would be
most difficult early in the year and progressively improve.
Expedia's spending on sales and marketing will be much more
aggressive in the early part of 2013 than they were last year, when
the company pulled back on those expenses at its namesake brand as
it was moving the site on to its overhauled technology.
That transition stoked a turnaround in Expedia's brand, but Mr.
Khosrowshahi said the company must prove it can strengthen it over
a multiyear period.
In the fourth quarter, Expedia's room nights booked increased a
record 33%, and international bookings gained momentum, rising 32%
following a 27% rise in the third quarter. Overall gross bookings
increased 19%.
The growth helped the company post better-than-expected revenue,
but Expedia's ramping marketing costs as well as continuing
technology investments kept its adjusted earnings slightly below
the consensus expectation.
Unadjusted, the company's profit dropped 90% because of a $110
million legal reserve linked to an unfavorable ruling in a Hawaii
tax case. The company said it needed to bulk up the reserve even
though it plans to appeal the verdict, adding the excise tax matter
is unique to Hawaii and likely won't have bearing on occupancy-tax
matters raised in other jurisdictions.
Expedia reported earnings of $6.7 million, or five cents a
share, down from $70.3 million, or 51 cents a share, a year
earlier. Excluding litigation reserves, stock-based compensation
and other items, earnings from continuing operations rose to 63
cents from 58 cents a share.
Revenue rose 24% to $974.9 million.
Analysts surveyed by Thomson Reuters expected a per-share profit
of 65 cents, with revenue of $931 million.
--Debbie Cai contributed to this article.
Write to Joan E. Solsman at joan.solsman@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires