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JPMorgan Technology and Telecom Conference

Erik Blachford. JPMorgan Technology and Telecom Conference. May 4, 2004. Safe Harbor Statement Under The Private Securities Litigation Reform Act Of 1995

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JPMorgan Technology and Telecom Conference

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  1. Erik Blachford JPMorgan Technology and Telecom Conference May 4, 2004

  2. Safe Harbor Statement Under The Private Securities Litigation Reform Act Of 1995 This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, particularly statements anticipating future growth in revenues and operating income before amortization. Words such as “believes,” “could,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “projects,” “seeks,” or similar expressions used in connection with any discussion of future operating or financial performance identify forward-looking statements. These forward-looking statements are necessarily estimates reflecting the best judgment of IAC’s senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These risks and uncertainties are described in IAC’s filings with the U.S. Securities and Exchange Commission (the “SEC”), including its Annual Report on Form 10-K for the fiscal year ended 2003, especially in the business and the Management’s Discussion and Analysis sections, its Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K. Other unknown or unpredictable factors also could have material adverse effects on IAC’s future results, performance or achievements. In light of these risks and uncertainties, the forward-looking events discussed in this presentation may not occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date of this presentation. IAC is not under any obligation and does not intend to make publicly available any update or other revisions to any of the forward-looking statements contained in this presentation to reflect circumstances existing after the date of this presentation or to reflect the occurrence of future events even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized. Important Investor Information

  3. Agenda IAC Travel Brands and Strategy Growth Drivers International Packages Corporate Customer Retention IACT’s Merchant Hotel Business Financials "Prepared 5/14/04 - Read Important Disclaimer."

  4. 1. American Express Rosenbluth 2. TUI 3. JTB 4. Carlson Wagonlit 5. IAC Travel 6. My Travel 7. Navigant Travel 8. World Travel BTI 9. Travelocity 10. First Choice 11. Orbitz 12. AAA Travel $20.1 $19 $13.5 $12.5 (est) $10.5 $7.1 $5.3 $5.3 (est) $3.9 $3.8 $3.4 $3.2 (est) Source: IACT estimates and company reports –2003 In billions "Prepared 5/14/04 - Read Important Disclaimer."

  5. IAC Travel Brand Portfolio $$$$ $ Air tickets Hotel rooms Rental cars Packages Complex itineraries Business travel Simple Complex "Prepared 5/14/04 - Read Important Disclaimer."

  6. IAC Travel Brand Portfolio $$$$ $ Air tickets Hotel rooms Rental cars Packages Complex itineraries Business travel Simple Complex "Prepared 5/14/04 - Read Important Disclaimer."

  7. IACT Portfolio vs. Competitor Brands "Prepared 5/14/04 - Read Important Disclaimer."

  8. IACT Long Term Revenue Mix Goal Leisure Corporate US 25% 25% 25% 25% International "Prepared 5/14/04 - Read Important Disclaimer."

  9. IACT Growth Drivers International Packages Corporate Customer retention "Prepared 5/14/04 - Read Important Disclaimer."

  10. IACT International Presence • 1.3 billion people • 11 languages • 50% of the non-US travel market "Prepared 5/14/04 - Read Important Disclaimer."

  11. 57% Other 65% DE 37% FR 27% UK European Opportunity • Travel growth greater than GDP growth; more flexibility & leisure time, lower costs • Rapid online growth driven by internet adoption and convenience • Germany catches up to UK and France in online adoption European online travel market ($bn) $70 $60 $50 $40 $30 $20 $10 $0 2002 2003 2004 2005 2006 2007 2008 2004 and beyond numbers are projections Source: PhoCusWright "Prepared 5/14/04 - Read Important Disclaimer."

  12. Europe Tracking US Growth Trends "Prepared 5/14/04 - Read Important Disclaimer."

  13. US Europe Hotel market $77B $137B Total rooms nights capacity 1.5B 1.7B Total room nights filled 0.9B 1.2B 2003 occupancy 60% 71% Average daily rate $85.38 $114 Number of hotels 50,000 73,000 Chain hotels and franchisees 22,000* .21,000* Booked online 13% 3% * Hotels with top 50 brands Source: IACT and industry estimates "Prepared 5/14/04 - Read Important Disclaimer."

  14. IACT Growth Drivers International Packages Corporate Customer retention "Prepared 5/14/04 - Read Important Disclaimer."

  15. 1. American Express Rosenbluth 2. TUI 3. JTB 4. Carlson Wagonlit 5. IAC Travel 6. My Travel 7. Navigant Travel 8. World Travel BTI 9. Travelocity 10. First Choice 11. Orbitz 12. AAA Travel 13. IACT Packages $20.1 $19 $13.5 $12.5 (est) $10.5 $7.1 $5.3 $5.3 (est) $3.9 $3.8 $3.4 $3.2 (est) $2.0 In billions Source: IACT estimates and company reports -2003 "Prepared 5/14/04 - Read Important Disclaimer."

  16. U.S. Packages Market U.S. Tour Business IACT’s Package Business Packages 2% Packages 20% A La Carte 98% A La Carte 80% Source: PhoCusWright Total U.S. Travel Market $250 Billion "Prepared 5/14/04 - Read Important Disclaimer."

  17. ClassicVacations.com "Prepared 5/14/04 - Read Important Disclaimer."

  18. European Train E-Packages "Prepared 5/14/04 - Read Important Disclaimer."

  19. In-destination Activity Sales "Prepared 5/14/04 - Read Important Disclaimer."

  20. IACT Growth Drivers International Packages Corporate Customer retention "Prepared 5/14/04 - Read Important Disclaimer."

  21. Online Corporate Travel Opportunity 2003 2007 U.S. Travel Market Managed Corporate Online Managed Corporate Percent online $250B $124B $8.7B 7% $280B $140B $17.3B 12% Source: Forrester and IACT estimates "Prepared 5/14/04 - Read Important Disclaimer."

  22. Benefits in lower total cost of ownership Business the old way Expedia Corporate Travel’s Approach Fares, Fees •Agent Salaries •Software Licensing •Add-on Reporting •Manual Policy Enforcement •Training Costs •Time-intensive Fare Search Fares, Fees • Save an average of $113 per airline ticket• Save up to 50% on hotel rates with ESR • Save up to 80% on transaction fees• No additional hidden fees• No management fee• No reporting fees "Prepared 5/14/04 - Read Important Disclaimer."

  23. ECT – Innovations and upgrades • Unused tickets for travelers • Automated seat search and upgrades "Prepared 5/14/04 - Read Important Disclaimer."

  24. IACT Growth Drivers International Packages Corporate Customer retention "Prepared 5/14/04 - Read Important Disclaimer."

  25. Expedia.com Customer Retention Repeat Customer Revenue New Customer Revenue "Prepared 5/14/04 - Read Important Disclaimer."

  26. 50% 43% 39% Repeat customers growing 60% 50% 40% 30% 20% 10% Q1,02 Q2,02 Q3,02 Q4,02 Q1,03 Q2, 03 Q3,03 Q4,03 Q1, 04 Expedia.com only Quarter averages of monthly percentages "Prepared 5/14/04 - Read Important Disclaimer."

  27. Merchant Hotel Business "Prepared 5/14/04 - Read Important Disclaimer."

  28. 87% First Time Customers The IAC Merchant Hotel Business • Hotels don’t pay for listings, only for business generated • Compares favorably to risking money on newspaper advertising • Customer books via Expedia or • Hotels.com, paying in advance • Expedia & Hotels.com pay hotel for room post-checkout • IAC keeps margin Hotel’s Potential New Customers Want Choice 50% of conversion books direct Travelers Hotel Hotel Direct Loyal Customers Shop Direct Direct Bookings

  29. Top Hotel Chains on IACT Top 5 Chains Top five hotel chains equal about 20% of merchant hotel revenue. "Prepared 5/14/04 - Read Important Disclaimer."

  30. Peak times Low times: hotels need help U.S. Hotel Occupancy Rates 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% January February March April Source: Smith Travel Research "Prepared 5/14/04 - Read Important Disclaimer."

  31. Supplier Share of Online Travel 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2000 2001 2002 2003 2004 2005 Source: PhoCusWright "Prepared 5/14/04 - Read Important Disclaimer."

  32. New York / Las Vegas / Orlando Top 3 U.S. cities hotel revenue as % of IACT revenue "Prepared 5/14/04 - Read Important Disclaimer."

  33. Same Store / Hotel Sales Increases Q1,04 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Q1,03 660,000 room nights from hotels added since Q1-03 800,000 new room nights from hotels under contract in Q1-03 Expedia room nights in thousands "Prepared 5/14/04 - Read Important Disclaimer."

  34. Financials "Prepared 5/14/04 - Read Important Disclaimer."

  35. Expedia $2,672 Expedia $1,802 Hotels $494 Hotels $344 Gross Bookings 51% Y/Y $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Q1,02 Q2,02 Q3,02 Q4,02 Q1,03 Q2, 03 Q3,03 Q4,03 Q1, 04 $3.5B 1Q04 vs. $2.3B 1Q03 In Millions "Prepared 5/14/04 - Read Important Disclaimer."

  36. Net Revenue $600 $500 $400 $300 $200 $100 $0 41% Y/Y Q1,02 Q2,02 Q3,02 Q4,02 Q1,03 Q2, 03 Q3,03 Q4,03 Q1, 04 $494M 1Q04 vs. $351M 1Q03 In Millions "Prepared 5/14/04 - Read Important Disclaimer."

  37. Operating Income Before Amortization /Operating Income $160 $140 $120 $100 $80 $60 $40 $20 $0 23% Y/Y In Millions Q1,02 Q2,02 Q3,02 Q4,02 Q1,03 Q2, 03 Q3,03 Q4,03 Q1, 04 OIBA Operating Income $128M 1Q04 vs. $104M 1Q03 See reconciliation at end of presentation "Prepared 5/14/04 - Read Important Disclaimer."

  38. Reconciliation of Operating Income Before Amortization to Operating Income Q102 Q202 Q302 Q402 Q103 Q203 Q303 Q403 Q104 Operating Income Before Amortization $ 56 $ 69 $ 84 $ 71 $104 $132 $137 $150 $128 Adjustments 24 25 31 22 34 43 57 42 43 Operating Income 32 44 53 49 70 89 80 108 85 Operating Income Before Amortization is defined as operating income plus: (1) amortization of non-cash distribution, marketing and compensation expense, (2) amortization of intangibles and goodwill impairment, if applicable, (3) pro forma adjustments for significant acquisitions and (4) one-time items.  We believe this measure is useful to investors because it represents the consolidated operating results from IAC’s segments, taking into account depreciation, which we believe is an ongoing cost of doing business, but excluding the effects of any other non-cash expenses.  Operating Income Before Amortization has certain limitations in that it does not take into account the impact to IAC’s income statement of certain expenses, including non-cash compensation associated with IAC’s employees, non-cash payments to partners, and acquisition related accounting.

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