Travel Technology Cos. Post Solid Quarterly Earnings

<B>Travel Technology Cos. Post Solid Quarterly Earnings</B>

By Jay Campbell

Despite corporate cutbacks that put a damper on travel demand, the corporate travel industry's publicly traded technology companies generally met or beat analysts' earnings estimates in the first quarter.

The results again validated for observers that travel is a natural for e-commerce. According to CIBC World Markets analyst Paul Keung, "These companies are benefiting from a fundamental shift in how consumers purchase travel--from traditional agents to online channels--and are experiencing momentum in a market diseased with limited earnings visibility."

Fort Worth, Texas-based Sabre Holdings said higher overall global distribution system bookings drove 17 percent year-over-year revenue growth and earnings of $85 million, up from $75 million in the year-earlier quarter. Total worldwide travel bookings processed through the Sabre GDS were 125.5 million for the quarter, an increase of 0.8 percent over the same period last year, "despite the slowdown in business travel seen in February and March," according to a news release.

"Sabre had an excellent first quarter," said William Hannigan, chairman, president and CEO. "We met our growth goals for both revenue and earnings in the first quarter, and are on track for full year revenue and earnings growth of greater than 20 percent."

Sabre also said GetThere revenues increased 650 percent year over year, to $11 million in the March period, and that Travelocity.com achieved profitable operating results for the first time thanks to its 108.7 percent year-over-year growth in gross travel bookings, to $833.6 million.

During a quarter in which Sabre announced the proposed sale of its airline infrastructure outsourcing business to EDS for $670 million, Sabre's core Travel Marketing and Distribution division achieved 11.8 percent revenue growth on 1 percent bookings growth and a Feb. 1 fee increase of about 9 percent.

Particularly helpful was a three percentage point increase in domestic market share, gained at the expense of Sabre's biggest rival--Rosemont, Ill.-based Galileo International.

CIBC's Keung raised his investment rating and earnings estimates on Sabre following the financial release, but referring to Galileo, he said, "Market share loss in traditional bookings appears to be stabilizing, although online bookings should continue to deteriorate. U.S. bookings were down 9 percent over the prior period, half of which management attributed to cutbacks in business travel. Incremental bookings from last year's customer wins should come online in the second half of the year. However, we estimate that Galileo lost at least 1.5 million online bookings in the quarter."

Galileo made no effort to hide the hole in its revenue stream, noting that booking volumes in the United States fell 8.7 percent during the quarter, "primarily due to the impact of a shift in bookings to Internet travel sites--where Galileo's market share is lower--and weaker travel demand resulting from the slowdown in the U.S. economy," the company wrote in a news release.

Galileo had its 6 percent Jan. 1 segment fee increase (BTN, Jan. 15) to thank for its revenue growth of 5.7 percent, to $465.8 million for the quarter. The GDS reported $50.6 million in earnings, down from $61.8 million the prior year--essentially meeting analysts' expectations.

Though global booking volumes fell 2.6 percent, to 93.4 million, compared with the prior year, solid booking growth in the Middle East, Africa and the Asia/Pacific regions helped to boost international volumes 1.7 percent.

"Toward the end of the quarter, we began to realize bookings from some of last year's significant customer wins," said Cheryl Ballenger, executive vice president and CFO of Galileo. "We expect to continue to grow our customer base through aggressive sales efforts, the delivery of industry-leading technology solutions and superior customer service, and will continue to aggressively pursue our points of presence strategy on the Web."

On the expense side, Redmond, Wash.-based Concur Technologies Inc. reported for the March quarter a loss of 44 cents per share, excluding one-time charges, a slight improvement over what the one analyst covering Concur expected. The result compared with a net loss of 83 cents per share for the same quarter in 2000. Concur reported net revenues of $9 million and a net loss of about $11 million.

"The second quarter of fiscal year 2001 also marks the second consecutive quarter that we are improving our forward-looking guidance for the remainder of the year," said Steve Singh, Concur chairman, president and CEO. "Our results continue to demonstrate our ability to grow our company in a slowing economy while delivering on our operating plan to achieve profitability by the fourth fiscal quarter of 2002."

During the quarter, Concur signed 97 customer contracts, including 66 for the application service provider model. Concur's worldwide customer base now totals more than 725 companies representing more than 2 million employees.

Emeryville, Calif.-based Extensity is getting more respect from Wall Street than Concur, priced at about $7 per share compared with less than $1, respectively. Extensity beat analysts' estimates by about four cents per share, with March quarter losses of $6.8 million versus $7.8 million in the same quarter of 2000. Extensity said revenues for the quarter were a record $9.8 million, a 163 percent increase over the same period of 2000 and a 12 percent increase over the fourth quarter of fiscal 2000. During the quarter, Extensity added more than 50 new accounts to grow its customer base to more than 350 companies worldwide.

Pegasus Solutions Inc. last week reported earnings before one-time items of about $1 million, slightly ahead of analyst expectations. Including the impact of such one-time items as the sale of Pegasus' Summit and Sterling branded hotel representation services, the company lost $6.5 million, compared with a $3 million profit in the first quarter of 2000. Total revenue for the three months ended March 31 was $46.1 million.

"Our ASP central reservations systems business was a key driver in this quarter's revenue growth," said John Davis, chairman and CEO of Pegasus Solutions. "This business grew by 24 percent compared with the first quarter of 2000, primarily as a result of the new Summit and Sterling CRS contracts that we gained through the sale of these two brands in January to Indecorp Corp."

Expedia Inc. last week announced its first ever operating profit for the quarter ended March 31, the company's fiscal third quarter. Revenues rose 88 percent year over year, to $110 million and earnings before one-time items of $4.4 million. On a net basis, Expedia lost $17.6 million, compared with $66.5 million a year earlier. Expedia's results were well above what analysts had anticipated before the company offered upward guidance to them about three weeks ago.

Expedia's gross travel bookings rose 68 percent year over year in the quarter; 25 percent of Expedia's bookings come from corporate travel, said president CEO Rich Barton.

"We have demonstrated not only that significant consumer demand exists for our services, but also that our business model is sound and profitable," said Barton. "Consumers and travel suppliers alike are embracing the Internet as the ideal medium for travel commerce and our financial results are a testament to the value we bring to both parties."

Pleasanton, Calif.-based business software vendor PeopleSoft Inc., whose products include travel and expense management applications, also beat analysts' estimates, with record financial results for the quarter of 34 percent higher revenue and earnings growth of 229 percent to $36 million.