Priceline has reported its Q4 2013 results, posting strong growth in bookings, gross profit, and net income.
During the call, Priceline CEO Darren Huston (who took over from Jeff Boyd in the summer of 2013) pointing to favorable tailwinds for the group's worldwide business:
The Group reported consolidated gross bookings for the fourth quarter of approximately $9.1 billion, up 39% year-over-year. Gross bookings growth accelerated sequentially due to a slight acceleration in the room night growth.
For the full-year, the Priceline Group reported gross bookings of $39 billion, up 38% and 271 million room night, up 37%. Our top line growth rates were remarkably steady through 2013, reflecting a relatively more stable economic backdrop and continued forward execution and innovation from our teams around the world.
One of the more interesting results of this quarter is the company's increased efficiency with advertising.
Priceline's online ad spending dropped 2% of gross profit, while still growing gross bookings by 38%. This is a positive sign, which not only gives the company more flexibility with capital allocations to re-invest or hold; it also shows the downward, positive impact of Kayak on this particular line item.
On the Booking.com front, the brand is beginning to see the impact of its marketing movements into North America, posting a 54% gain in room count over last year - this brings the total to 425,000 accommodations in 195 countries. Instantly bookable vacation rental inventory accounts for much of this growth.
Huston continues to highlight more of Booking.com's vitality:
"Booking.com’s growth in Europe held out well this year, but its newer markets continue to grow faster, largely comprising an ever larger percentage of the business.
"Although these markets are sometimes less possible than Booking.com’s core markets, we believe that these investments, position Booking.com to capitalize on what we believe to be an attractive, long-term opportunity.
"When you combine priceline.com strong results with Booking.com’s increasing success American bookers, we feel proud of the solid market share gains we’re making in the worlds most competitive online travel market. Also notable for the first time in 2013, the United States became Booking.com’s largest destination."
The enormous jump in mobile bookings was also mentioned in the call as a key area of collaboration across the Group's brands - especially given the growth in the Booking.com brand's mobile transactions.
"Mobile execution and innovation continued to be key areas of focus in investments for all our businesses.
"Mobile is a prime example of how the Group’s can successfully share knowledge, tools and lessons learned across our brand. To give you a sense of just how fast mobile is changing our business, we previously announced that Booking.com completed just over $1 billion in gross mobile transactions in 2011 increasing this three-fold to 3 billion in 2012.
"In 2013 that same number exceeded $8 billion. But mobile is not just about booking; it is also an increasingly important part of our customers' multi-screen lifestyles. We want to support our customers with the best pricing, best assortment and best connective online experience regardless of the screen they use to book with, travel with or stay with.
That means Booking.com's mobile booking growth clocks in at 160% from 2012 - from $3 billion to $8 billion in 2013. Mobile is massively important to the brand and especially revealing for the Group-wide trends.
Further comments from CFO and CAO Daniel Finnegan pulled out some specifics related to the Group's performance in the final quarter of 2013:
- ADRs were up 2% on a local currency basis YoY.
- Rental car days were up 32% year-over-year.
- Priceline.com grew gross bookings 27% over Q3.
- Non-GAAP gross profit for the quarter was $1.3 billion, which is up 39% as compared to prior year.
- GAAP gross profit for the quarter was $1.3 billion, up 42%.
- "KAYAK revenue amounts to $55 million in Q4 net of intercompany activity."
- "Our international operations generated gross profit of $1.15 billion which constituted an increase of 38% as compared to the prior year on both the U.S. dollar and local currency basis."
- "Non-GAAP gross profit for our U.S. business, including KAYAK but excluding the impact of the aforementioned travel transaction tax items, amounted to $172 million which represented 44% growth versus the prior year."
- "Adjusted EBITDA for Q4 amounted to $578 million which exceeded the top end of our guidance range of $540 million and represents 36% growth versus prior year."
- Cash flow is up 12% over 2012, with the company generating $554 million in cash from operations in the quarter.
- For the full year 2013, the company had a cash flow of $2.3 billion, at a healthy 23% increase YoY.
As far as guidance, Finnegan sees the first quarter of 2014 playing out quite nicely for the brand:
"We are forecasting total gross bookings to grow by 23% to 33% on both the U.S. dollar and local currency basis with U.S. gross bookings growing by 15% to 20%. We expect international gross bookings expressed in U.S. dollars to grow by 25% to 35% and to grow by 25% to 35% on a local currency basis as well.
"We expect Q1 revenue to grow year-over-year by approximately 15% to 25% and gross profit dollars to grow by 22% to 32%."
The company also plans to continue spending on offline advertising, as it boosts its traditional (mostly) TV marketing activities in the coming year, estimating "that the group will spend between $220 million and $240 million for offline advertising."