The Priceline Group Reports Financial Results for 3rd Quarter 2015

NORWALK, CT, Nov. 9, 2015 /PRNewswire/ -- The Priceline Group Inc. (NASDAQ: PCLN) today reported its 3^rd quarter 2015 financial results.  Third quarter gross travel bookings for The Priceline Group (the "Group"), which refers to the total dollar value, generally inclusive of all taxes and fees, of all travel services purchased by its customers, were $14.8 billion, an increase of 7% over a year ago (approximately 22% on a constant currency basis).

The Group's gross profit for the 3^rd quarter was $2.9 billion, a 12% increase from the prior year (approximately 29% on a constant currency basis).  International operations contributed gross profit in the 3^rd quarter of $2.6 billion, an 11% increase versus a year ago (approximately 29% on a constant currency basis).  The Group had GAAP net income applicable to common shareholders for the 3^rd quarter of $1.2 billion, or $23.41 per diluted share, which compares to $1.1 billion or $20.03 per diluted share, in the same period a year ago.

Non-GAAP net income in the 3^rd quarter was $1.3 billion, a 10% increase versus the prior year.  Non-GAAP net income was $25.35 per diluted share, compared to $22.16 per diluted share a year ago.  FactSet consensus for the 3^rd quarter 2015 was $24.21 per diluted share.  Adjusted EBITDA for the 3^rd quarter 2015 was $1.6 billion, an increase of 12% versus a year ago.  The section below entitled "Non-GAAP Financial Measures" provides definitions and information about the use of non-GAAP financial measures in this press release, and the attached financial and statistical supplement reconciles non-GAAP financial information with the Group's financial results under GAAP.

"The Priceline Group delivered strong growth and operating results during its high travel season," said Darren Huston, President and CEO of The Priceline Group. "Globally, our accommodation business booked a record 116 million room nights in the 3^rd quarter, up 22% over the same period last year.  Gross profit grew 29% on a constant currency basis.  Booking.com showed continued positive momentum with over 820,000 properties on its platform, up 38% over last year.  This represents over 21 million potentially bookable rooms, the largest, and most diverse, selection of directly bookable accommodations in the world."

Looking forward, Mr. Huston said, "The Group's mission is to help people experience the world.  We continue to be the most valuable platform in the world exclusively dedicated to this pursuit.  We will continue to focus on making the right investments across our six brands - in people, systems, and demand - to continue to profitably grow our business."

The Priceline Group said it was targeting the following for 4^th quarter 2015:

• Year-over-year increase in total gross travel bookings of approximately 1% - 8% (an increase of approximately 13% - 20% on a constant currency basis).
• Year-over-year increase in international gross travel bookings of approximately 3% - 10% (an increase of approximately 17% - 24% on a constant currency basis).
• U.S. gross travel bookings are expected to decrease by 5% - 10% as compared to 4^th quarter 2014.
• Year-over-year increase in revenue of approximately 1% - 8%.
• Year-over-year increase in gross profit of approximately 3% - 10% (an increase of approximately 14% - 21% on a constant currency basis).
• Adjusted EBITDA of approximately $710 million to $760 million.
• Non-GAAP net income per diluted share between $11.10 and $11.90.

Non-GAAP guidance for the 4^th quarter 2015:

• excludes non-cash amortization expense of intangibles,
• excludes non-cash stock-based employee compensation expense,
• excludes non-cash interest expense related to the amortization of debt discount and gains or losses on early debt extinguishment, if any, related to cash-settled convertible debt,
• excludes the impact, if any, of significant charges or benefits associated with judgments, rulings and/or settlements related to travel transaction tax (e.g., hotel occupancy taxes, excise taxes, sales taxes, etc.) proceedings,
• excludes the impact, if any, of significant costs related to acquisitions,
• excludes non-cash income tax expense and reflects the impact on income taxes of certain of the non-GAAP adjustments, and
• includes the dilutive impact of unvested restricted stock units and performance share units because non-GAAP net income has been adjusted to exclude stock-based employee compensation.

The Priceline Group highlighted that its forecast assumes currency exchange rates of $1.07 per Euro and $1.51 per British Pound for the remainder of the quarter, which results in average exchange rates for the quarter that would be 13% weaker for the Euro and 4% weaker for the British Pound as compared to the prior year.  Therefore, currency exchange rates are expected to significantly reduce the Company's growth rates expressed in U.S. dollars.

In addition to the adjustments above, adjusted EBITDA excludes depreciation and amortization expense, interest income, interest expense and income taxes and includes the impact of foreign currency transactions and other expenses.

When aggregated, the non-GAAP adjustments are expected to increase adjusted EBITDA over GAAP net income by approximately $265 million in the 4^th quarter 2015.  In addition, the non-GAAP adjustments are expected to increase non-GAAP net income over GAAP net income by approximately $104 million in the 4^th quarter 2015.  The Group estimates GAAP net income per diluted share between $9.10 and $9.90 for the 4^th quarter 2015.

Information About Forward-Looking Statements

This press release contains forward-looking statements.  These forward-looking statements reflect the views of the Group's management regarding current expectations and projections about future events and are based on currently available information and current foreign currency exchange rates.  These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed, implied or forecasted in any such forward-looking statements.  Expressions of future goals and similar expressions including, "may," "will," "should," "could," "expects," "plans," "anticipates," "intends," "believes," "estimates," "predicts," "potential," "targets," or "continue," reflecting something other than historical fact are intended to identify forward-looking statements.

The following factors, among others, could cause the Group's actual results to differ materially from those described in the forward-looking statements:

-- adverse changes in general market conditions for leisure and other travel services;

-- the effects of increased competition;

-- fluctuations in foreign exchange rates and other risks associated with doing business in multiple currencies;

-- our ability to expand successfully in international markets;

-- our online advertising efficiency;

-- any change by a major search engine in how it presents travel search results or conducts its auction for search placement in a manner that is competitively disadvantageous to us;

-- adverse changes in the Group's relationships with travel service providers;

-- systems-related failures and/or security breaches;

-- the ability to attract and retain qualified personnel; and

-- tax, legal and regulatory risks.

For a detailed discussion of these and other factors that could cause the Group's actual results to differ materially from those described in the forward-looking statements, please refer to the Group's most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K filed with the Securities and Exchange Commission.  Unless required by law, the Group undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

The Unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and all normal and recurring adjustments that management of the Company considers necessary for a fair presentation of its financial position and operating results.  Adjusted EBITDA represents GAAP net income excluding depreciation and amortization expense, interest income, interest expense and is adjusted to exclude stock-based employee compensation expense, gains and losses on early debt extinguishment, significant charges or benefits associated with judgments, rulings and/or settlements related to travel transaction tax (e.g., hotel occupancy taxes, excise taxes, sales taxes, etc.) proceedings and significant acquisition costs.

Non-GAAP gross profit, adjusted EBITDA, non-GAAP operating income, non-GAAP net income and non-GAAP net income per share are "non-GAAP financial measures," as such term is defined by the Securities and Exchange Commission, and may differ from non-GAAP financial measures used by other companies.  The Group believes that non-GAAP gross profit, adjusted EBITDA, non-GAAP operating income, non-GAAP net income and non-GAAP net income per share that exclude certain non-cash or non-recurring income or expense items are useful for analysts and investors to evaluate the Group's on-going performance because they provide a useful comparison of the Group's projected cash earnings and performance with its historical results from prior periods and to those of its competitors (though competitors may calculate similar non-GAAP financial measures differently than those calculated by the Group).  These non-GAAP metrics, in particular adjusted EBITDA, non-GAAP operating income, and non-GAAP net income are not intended to represent funds available for the Group's discretionary use and are not intended to represent or to be used as a substitute for operating income, net income or cash flows from operations data as measured under GAAP.  The items excluded from these non-GAAP metrics, but included in the calculation of their closest GAAP equivalent, are significant components of consolidated statements of income and must be considered in performing a comprehensive assessment of overall financial performance.

Non-GAAP financial information for the three and nine months ended September 30, 2015 and 2014 are adjusted for the following items:

• Amortization expense of intangibles is excluded because it does not impact cash earnings.
• Stock-based employee compensation expense is excluded because it does not impact cash earnings and is reflected in earnings per share through increased share count.
• Interest expense related to the amortization of debt discount and gains or losses on early debt extinguishment related to convertible debt are excluded because they are non-cash in nature.
• Significant charges or credits associated with judgments, rulings and/or settlements related to travel transaction tax (e.g., hotel occupancy taxes, excise taxes, sales taxes, etc.) proceedings, including the net reversal of previously accrued travel transaction taxes (including estimated interest and penalties) of $13.7 million and $30.1 million, in the three and nine months ended September 30, 2015, respectively, principally related to a favorable ruling in the State of Hawaii, are excluded because the amount and timing of these items are unpredictable, are not driven by core operating results and render comparisons with prior periods less meaningful.  There were no such charges or credits in either the three or nine months ended September 30, 2014.
• Income tax expense is adjusted for the tax impact of certain of the non-GAAP adjustments described above and to exclude tax expense recorded where no actual tax payments are owed because of available net operating loss carryforwards.
• For calculating non-GAAP net income per share:
  • net income is adjusted for the impact of the non-GAAP adjustments described above; and
  • additional unvested restricted stock units and performance share units are included in the calculation of non-GAAP net income per share because non-GAAP net income has been adjusted to exclude stock-based employee compensation expense.

The presentation of this financial information should not be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles in the United States.  The attached financial and statistical supplement reconciles non-GAAP financial information with the Group's financial results under GAAP.

About The Priceline Group

The Priceline Group (NASDAQ: PCLN) is the world leader in online travel and related services, provided to customers and partners in over 200 countries through six primary brands - Booking.com, priceline.com , KAYAK, agoda.com, rentalcars.com, and OpenTable.  The Priceline Group's mission is to help people experience the world.  For more information, visit PricelineGroup.com.