Booking Holdings Inc (BKNG) 2004 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Priceline.com third-quarter 2004 conference call. (OPERATOR INSTRUCTIONS).

Priceline.com would like to remind everyone that this call may contain forward-looking statements, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements are not guarantees of future performance and are subject to certain 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 reflecting something other than historical facts are intended to identify forward-looking statements.

For a list of factors that could cause Priceline.com's actual results to differ materially from those described in the forward-looking statements, please refer to the Safe Harbor statement at the end of Priceline.com's earnings press release, as well as Priceline.com's most recent filings with the Securities and Exchange Commission.

Unless required by law, Priceline.com undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise.

A copy of Priceline.com's earnings press release together with an accompanying financial and statistical supplement is available in the Investor Relations section of Priceline.com's Web site located at www.Priceline.com.

And now I would like to introduce Priceline's speakers for this afternoon Mr. Jeff Boyd and Mr. Bob Mylod.

Gentlemen, you may begin.

Thank you and thank you everybody for joining our third-quarter conference call.

I'm here with Bob Mylod, Priceline's CFO.

Priceline's third-quarter results were boosted by continuing momentum from sales of new retail products and good expense controls.

Gross travel bookings of $432 million were up 44 percent versus the same period last year, and pro forma gross profit grew 27 percent over the same period last year to $51.7 million.

We believe these growth rates continue to place us among the fastest-growing online travel businesses in our peer universe.

We were also delighted to complete during the quarter the acquisition of Active Hotels, a leading European hotel reservation service.

The Active transaction is another step in the repositioning and diversification of our business to encompass a wider choice of attractive travel products and markets.

Strong topline performance again translated into strong bottom-line results.

Priceline's pro forma net income was $11.3 million or 28 cents per diluted share, up 15 percent over the third quarter of 2003.

It is worth noting that third quarter 2003 benefited from approximately 3 cents per share of other income from Priceline Mortgage.

Excluding mortgage results, pro forma earnings for the travel businesses are up over 30 percent compared to last year.

All in all we think these results underscore a growing resilience in Priceline's expanded business as we were able to deliver solid growth and profits despite industry challenges including competitive pressures, high hotel occupancy rates and the negative impact of the hurricanes on bookings and cancellations in the Southeast during the quarter.

Priceline's retail choice product for airline tickets where customers can now choose from a list of flights, times and low fares or name their own price for greater savings continues to perform well.

Airline tickets sold increased 65 percent over last year, making a positive contribution to growing bookings and earnings and driving customers for other Priceline products.

Having said that, keep in mind that the financial outlook for airlines has deteriorated further with high fuel prices, raising the risks of additional bankruptcies, carrier liquidation and distribution cost pressure, any of which could negatively impact this business.

Priceline's hotel business had a solid quarter with over 2 million room nights sold, a 27 percent increase over third quarter 2003.

Sales include a full quarter of merchant and agency room nights sold through Travelweb.com and 10 days results from Active Hotels.

The mix of Travelweb room nights was slightly higher than expected as Travelweb has performed above our expectations and has gained some volume from early placements on Priceline and Lowestfare.com.

Packaging of travel products remains an important growth area and an important point of competitive differentiation for Priceline.

Third-quarter growth in packages continued at high levels aided by the addition of retail choice for vacations where customers can now select an opaque or disclosed flight itinerary depending on their needs.

We continue to be encouraged by consumer acceptance of this new feature.

Retail choice has made a significant contribution to both our air and package businesses, and we remain confident it will be additive to our hotel and rental car businesses in the coming months.

We also launched Destination Activities on our packages path during the third quarter, giving customers the ability to conveniently add ground transfers, tickets, tours and the like to their trip at the time of purchase.

Rentalcars delivered 1.36 million Rentalcars days sold, representing 12 percent growth versus third quarter last year.

As we stated back in August, the sequential decrees in rental car unit sales growth rates is the result of a more difficult comparable in the third quarter of 2003, which for the first time includes a full quarter of results from Rentalcars.com.

However, we expect fourth-quarter growth rates to be in line with our August guidance and are working on traffic building, initiatives for the retail sites and better rental car packaging interfaces for Priceline which we believe should help future results.

We announced in September the acquisition of Active Hotels.

Active is a leading seller of hotel reservations in Europe with bookings of approximately $160 million and revenues of approximately $22 million for the 12 months ended September 30, 2004.

We believe Active is well positioned to continue its participation in the growing European online travel market with services now available in English, French, Spanish, German and Italian.

The acquisition not only gives us significant share in an important geographic market, but an additional growing point of diversification into hotels which in our opinion is one of the most attractive online market segments.

As we stated at announcement, we expect the transaction to be accretive to results in the fourth quarter and beyond.

During the balance of 2004, Priceline intends to continue working on initiatives to improve the Travelweb platform and make retail hotel products available to Priceline customers.

Phase I of the Travelweb project, involving initial front-end conversion and customer service improvements and simple points of integration on Lowestfare.com and Priceline.com, is complete.

Phase II, which involves the testing of retail choice applications on Priceline.com, is currently underway and will continue into the first quarter of 2005.

Phase III involves migration to a new search, sort and payment platform, as well as customer facing improvements which should improve overall conversion and reduce costs and is scheduled for launch in the second quarter of 2005.

In Rentalcars we've recently rolled out retail choice functionality.

It is working well, and we will continue reviewing placement and copy to optimize results.

We are also building packaging enhancements in our single product paths and rolling out destination commerce now available in our vacations product to other product paths.

Integration of Priceline and Active Hotels hotel offerings is also underway.

Based on the experience we have gained in expanding our airline ticket and vacation products, which greatly benefited from the introduction of retail choices, we believe these current initiatives will contribute significantly to future results.

Equally important they are a part of a long-term product strategy that allows Priceline to continue building on its brand and the consumer message of choice and savings.

Our consumer research and business results show that customers value the savings available in our opaque products, but also value the ability to shop and choose.

While our advertising campaign has worked well to drive new customers as evidenced by our airline ticket results, the research tells us that most consumers have yet to understand the range of products we now offer.

We look forward to addressing this marketing challenge in the coming months with advertising that stresses the choices available across our product lines.

In a time of increasing concerns about commoditization, Priceline still has a unique product lineup, a unique message that resonates with consumers and a unique opportunity to connect through advertising with the millions of consumers who today think of Priceline as purely a bidding site.

This opportunity is what excites us most.

I now turn the call over to Bob.

Thanks, Jeff.

I want to give a brief review of our Q3 results, and then I will finish with some forward guidance.

As most of you know, we preannounced our Q3 results in mid-September when we announced the acquisition of Active Hotels.

At that time, we forecasted Q3 gross bookings of between $427.5 million to $432.5 million and pro forma earnings per share between 26 and 28 cents.

Actual results came in at the high end of both ranges.

Third-quarter operating metrics were all generally consistent with our guidance, although we got there with a slightly different mix of business than we had previously anticipated.

Specifically our unit sales of retail products all came in at levels at or higher than our original forecast, driven in large part by continuing strong year-over-year increases in retail airline ticket sales.

On the other hand, opaque unit sales came in slightly below our internal expectations, driven almost entirely by a shortfall in airline opaque ticket sales which continued to decline by large double-digit rates on a year-over-year basis.

Yet despite this decline, we still grew total airline ticket unit bookings by 65 percent on a year-over-year basis, which was slightly higher than the guidance that we provided on our last earnings call.

And as most of you know, sales of our opaque services are reported on a gross basis, and sales of our retail services are reported on a net basis.

And because of our mix of business was more heavily skewed toward retail than anticipated, our reported revenues of $235.9 million came in slightly below our earlier guidance.

Our pro forma gross profit dollars, which excludes $600,000 of non-cash amortization expense associated with our acquisitions of Travelweb and Active Hotels, grew by 27 percent year-over-year, which also came in slightly below our earlier guidance.

The shortfall is driven by three principal factors.

First, we estimate that the third-quarter hurricanes resulted in foregone gross profit of approximately $500,000 due to lower unit demand for travel in the Southeast and the added impact of lower selling prices.

Second, gross profit was additionally impacted by approximately $500,000 as a result of refunds and cancellations, which have a disproportionately negative impact on gross profit.

Finally, as I just mentioned, our mix of opaque versus retail services was more heavily skewed towards retail services which produce lower gross profit dollars per booking than do our opaque services.

As you will hear when we get to the guidance portion of my remarks, we expect our pro forma gross profit dollars, excluding gross profit dollars from Active, to grow by approximately 35 percent in Q4, which is generally consistent with our prior guidance and is demonstrative of some of the anomalies in our Q3 results.

As Jeff mentioned, despite some of the challenges that we faced in the quarter, we managed the business to come in comfortably within our pro forma EPS guidance because our operating expenses came in well below our earlier guidance.

I will go over these positive variances in a moment, but before I do, I wanted to alert you to an enhancement to the line-item detail of our income statement.

You'll see that we have added two new operating expense line items titled Online Advertising and Off-line Advertising.

The Online Advertising line item encompasses all online-related customer acquisition activity, including banners, pop-ups, keyword search and affiliates.

The Off-line Advertising line item consists of customer acquisition activity associated with traditional off-line mediums such as TV, radio, newspaper, magazine, outdoor, direct-mail and promotions.

These two line items replace the advertising expense line item that we have reported historically.

We made this move because Travelweb and Active Hotels, which relied primarily on online advertising to drive their respective businesses, have resulted in a large increase in our consolidated online advertising spending.

By breaking out advertising expense into two components, we think this will add significantly to the transparency of our financial results and allow investors to more easily forecast advertising expense on a go-forward basis.

And with that little proviso, let me quickly go over our operating expenses.

Our original guidance for total advertising for the quarter was between $14.5 and $15.5 million.

We came in at the very low end of that range as a result of our decision to cut back on advertising expense during the latter half of the quarter as it became clear that the return on investment would be negatively affected by the demand challenges that we face, including the weather conditions in the Southeast.

Our other fixed expenses, which are comprised of personnel costs, G&A, information technology and depreciation and amortization collectively came in more than $2 million less than our previous guidance.

The biggest favorable variance came in our personnel line item.

You may recall that in our last earnings call we told you that we expected to engage in significant new hiring activity in the quarter in anticipation of the building and launch of our Retail Hotel program next year.

As Jeff mentioned over the course of the quarter, we refined our Retail Hotel development strategy so that we could take earlier advantage of some of the opportunities presented by Travelweb, while moving the wholesale relaunch of the Travelweb technology platform towards the second quarter of 2005.

As a result, our hiring activity slowed which aided in our compensation expense coming in lower than originally planned.

Our personnel costs also benefited from lower than forecasted employee bonus expenses.

Before I get to EPS, I also wanted to highlight the income tax expense line item as this is the first quarter in our Company's history in which we have recorded an income tax expense.

Specifically our pro forma net income included an income tax expense of approximately $200,000 during the quarter.

As most of you know, Priceline has a substantial tax NOL that has substantially shielded our income from the payment of taxes in the past.

We expect to continue to benefit from this dynamic going forward.

However, our pro forma income in the quarter was at a high enough level that we became subject to alternative minimum taxes.

The AMP tax rate was approximately 1.5 percent.

In addition, we incurred taxes related to income earned by Active Hotels during the 10-day period that we owned Active.

All of Active's earnings are generated outside of the United States, and therefore, they are and will continue to be subject to local income tax.

We reported pro forma net income of 28 cents per share and GAAP net income of 23 cents per share, which was affected by a total of $2.1 million or 5 cents per share of net expenses primarily related to non-cash acquisition-related amortization expense and the non-cash dividend on our preferred stock.

As for cash and cash flow, we began the quarter with $386.2 million of cash and marketable securities, and we closed the quarter with $247.6 million of cash and marketable securities, representing a net decrease in cash of approximately $138.5 million, driven primarily by our acquisition of Active Hotels during the quarter.

Excluding net cash expenditures related to the acquisition of Active, our cash balance grew by approximately $8.5 million during the quarter.

I should also point out that we closed the quarter with approximately $5 million of post-closing payables and accrued expenses associated with the Active acquisition.

These amounts will be paid in cash during the fourth quarter.

Total capital expenditures in the third quarter were approximately $2.5 million.

And now for a couple of quick comments on guidance.

We actually have very little news here because we are essentially reconfirming substantially all of the previous guidance that we issued for Priceline prior to the acquisition of Active, as well as for Active.

Specifically we expect that the year-over-year growth rates in the fourth quarter for airline ticket sales, hotel room nights, rental car days, gross bookings, revenue and gross profit dollars will be consistent with the growth rates outlined on our last earnings call, all excluding the results from Active.

We also expect to continue to benefit from some of the operating expense savings that we achieved in Q3 specifically as it relates to personnel expense.

As for Active, we remain comfortable that Active will contribute an additional $40 to $50 million of gross bookings in the fourth quarter.

All this rolls up to consolidated year-over-year gross bookings growth of approximately 60 to 65 percent, airline ticket unit sales growth of approximately 60 to 65 percent, hotel room night growth of approximately 55 to 60 percent, rental car day growth of approximately 18 to 22 percent, revenue growth of approximately 5 to 10 percent, and pro forma gross profit growth of approximately 50 to 55 percent.

As for Q4 operating expenses, we are targeting consolidated advertising expenses of approximately $14 to $15 million, approximately 60 percent of which will be spent Online and 40 percent Off-line.

The year-over-year increase in consolidated advertising expenditures is driven almost entirely by the online spending of Active and Travelweb.

We expect sales and marketing expenses of between $7.5 and $8 million.

We expect personnel costs to come in between $10.3 and $10.5 million.

We expect G&A expenses of approximately $4.5 to $4.7 million, information technology costs of between $2.7 and $3 million, and depreciation and amortization expense excluding acquisition-related amortization of approximately $2.4 million.

Again consistent with the updated guidance that we gave when we announced our Active Hotels acquisition, we are targeting pro forma EPS of approximately 14 to 18 cents per share.

The midpoint of this range represents a 166 percent year-over-year growth in our pro forma EPS.

This EPS forecast includes an estimated cash income tax expense of approximately $750,000, most of which relates to Active Hotels.

Net pro forma adjustments including the effect of cash income taxes are expected to total approximately $3.5 million in the fourth quarter.

Almost all of the pro forma adjustments relate to items associated with our acquisitions of Travelweb and Active Hotels.

At this point, we are not providing 2005 earnings guidance, but we plan to provide Q1 guidance for 2005 when we announce our fourth quarter of 2004.

Finally, I want to point out as I have done now on previous calls that all of our aforementioned forecasts are based upon assumption that we will continue operating in a consumer travel market that is roughly similar to the current one, and any geopolitical instability or terrorist event, particularly within the United States, would in all likelihood have a negative impact on the travel market in general and our operating results in particular.

And with that, we would be happy to answer your questions.

(OPERATOR INSTRUCTIONS).

Tom Underwood.

Legg Mason.

Bob, I am sorry.

I'm just actually going to ask for a clarification on some of the numbers.

In terms of what this implies in aggregate for revenue guidance for the fourth quarter in terms of both the merchant and the agency side, if Active is running 40 to 50 million, would that imply roughly 4 to 5 million added to agency revenue plus whatever the Travelweb plus Priceline.com URL agency is?

Yes, Tom, I'm not going to give specific line item guidance for each of the various business units.

What we did say -- if you're looking for sort of a net revenue rate for Travelweb relative to gross bookings of 40 to 50 million, it is higher than the 10 percent that your 4 to 5 million implies.

Okay.

What about for Active?

I'm sorry.

I apologize.

I mean for Active.

Okay.

When we announced the acquisition of Active, we announced that the LTM gross bookings were approximately $160 million, and the LTM revenues were approximately $22 million, which gives you an approximate net revenue rate which you should be able to apply to the $40 to $50 million of gross bookings guidance that we just gave.

We are not necessarily saying that's going to be the specific net revenue rate, but at least it will give you a guidepost.

Could you just help sum all of it up for me?

If you do all that, roughly what do you think you will do in gross profit in the fourth quarter?

Well again, look at last year's gross profit and we are saying that we expect gross profit to grow on a consolidated basis by approximately 50 to 55 percent.

Okay and then next I was just wondering if you would comment in terms of the supply situation and hotel markets.

Have you seen any change versus a year ago either in the third quarter, or do you expect any change looking at numbers for the fourth quarter?

And does it appear to be isolated to any particular markets?

And then also can you quantify or have you attempted to quantify what the effect of the hurricane was on the quarter?

Bob, why don't I do the hotel supply and then you can do the hurricane?

Yes.

In terms of the supply market, we have not seen any significant departure in the way suppliers are using Priceline.

I think that our major partners continue to view the Priceline opaque product as a very attractive brand shielding discount channel, and the only thing that really has changed between last year and this year is that occupancy rates in general are higher.

And so from time to time you will run into a situation, for example, during the weeks of the political conventions and graduation weeks and things of that nature, that you will have hotels that are full on the weekends.

But apart from that distinction I think the market conditions for our products are still very, very similar to what they were last year.

I think, in fact, given higher demand from business customers that the hotels are now seeing, they view our channel as a much more attractive way of discounting versus other alternatives.

Yes, and just quickly to add to what Jeff said, I think as Jeff said in the closing part of his remarks we think our challenge continues to be creating demand and getting the message out of the full-service platform.

The fact is our supply dynamics for hotel feel pretty similar to what they were last year.

Our buying rates are generally within the same ballpark as where they were last year.

As for the hurricane, as I mentioned, we estimate that we lost approximately $500,000 related to what I will call foregone revenue associated with a) foregone unit bookings, as well as lower ADRs, lower selling prices than we had originally forecast.

And then secondly an additional 500 -- approximately $500,000 -- related to refund activity for customers where we basically took some reserves associated with refund activity around the hurricane.

That is our best estimate.

I think it's generally consistent with some of the estimates that we have seen from some of the other travel companies with whom we compete.

Anthony Noto.

Goldman Sachs.

Actually I have a couple of questions.

I will just ask one at a time.

The first question is, Bob, if I back out the $40 to $50 million of gross bookings from the Active acquisition and just look at your core business growth and assuming a nominal benefit in September from Active in gross bookings, it looks like you are calling for a lower sequential decline sequentially in the December quarter this year than a year ago.

Last year it declined almost 15 percent sequentially, and now it is slightly less than that.

I was just wondering if you could comment on what you're seeing differently in your business to see less of a negative seasonal trend?

Sure, and Jeff may want to echo what I'm going to say.

One of the big, big benefits of the transition from sort of the niche opaque platform to a full-service platform is that we are now allowed to participate in what is in some ways a very vibrant market in the fourth quarter related to holiday activity.

As you know, Anthony, our buying rates historically for opaque air, opaque hotel in some specific markets have been very challenged around some of the holiday periods.

And so we certainly have a high expectation that now participating as a retail player that our gross bookings again -- sequentially they should still be down, but they should not be as volatile as they were on the opaque platform.

Jeff, I don't know if you have anything to add.

Yes, I think that I would focus that thought right in on the airline ticket product in particular.

The supply dynamics in the hotel space are fine in the fourth quarter, but the demand for travel around the holidays is more focused on airline tickets than it is on hotels because people tend to be staying with their families.

But a very significant part of our holiday fourth-quarter airline demand is into Thanksgiving and Christmas, and as Bob mentioned, we now have a good product to sell to those customers, and I think the sequential rates of the business are reflecting that.

The next question is, if I look at the airline tickets sold in the quarter on a year-over-year growth basis of 65 percent, correct me if that is wrong -- which is faster than the second quarter which was 60 percent year-over-year growth, I was wondering if you could just breakout for us what is causing that 5 percent year-over-year acceleration, and how would it relate to binding rates vis-a-vis other factors?

I think the way I would answer that is to say that it really is more about the opaque business being in relatively better shape in the year ago second quarter versus sort of any other single factor.

And that as you know the business has been tailing down and the move downward that the opaque business took last year from the second quarter to the third quarter was significant.

So the comparable is just a little bit easier.

I understand.

And then last, is there some indication that you could give us on how much opportunity still remains in capturing the consumer that otherwise would not have binded through the opaque product through your retail offering?

I know the last time that you guys had reported bind rate on just the opaque product it was in the low 20s.

Is there comparable type of bind rate you can give us today that is a combination of both retail and opaque?

I know that at the peak you were binding 50 percent of opaque.

Is the kind of combined retail and opaque bind rate back at that 50 percent, or is there still head room?

We keep track of conversion and satisfaction rates.

But the problem is it is really not a useful comparison to look at years ago bind rates versus our satisfaction rates today because we have got a different customer base, and it would make the situation probably appear rosier than it actually is.

I mean when people come to buy a retail ticket you bind almost 100 percent of them.

So it just hurts the calculation.

But certainly our customer conversion which means when you take a person coming into the Web site to buy any airline ticket and how many of those customers are we satisfying with either opaque or retail, those numbers have improved significantly.

As well we have brought in a lot of new customers.

And I think going forward that continues to be where our greatest opportunity is.

We're converting traffic on the Web site I think well now with a good product.

But our research tells us that the majority of customers still don't know we have both a retail and a "Name Your Own Price" product on Priceline, and if we can continue to get that message out effectively, I think we will drive more new customers and that is where the opportunity lies.

And then just one last question, on the hotel rooms booked 27 percent year-over-year growth, could you give us a relative sense on whether merchant rooms there are growing faster than that rate, or are you getting a benefit from any agency hotel rooms at this point and so merchant would be growing slower than that rate?

I think the hotel bookings growth is principally a merchant story.

As we said in the prepared remarks, the mix is a little bit different.

Our business in Travelweb is principally merchant business, and we have seen a little bit more Travelweb business in the quarter relative to the amount of Priceline merchant business than we originally expected.

But it really is -- it is still a merchant story.

Thank you.

Just to add to that, however, going forward, Active, which is an agency player, that is going to start to contribute significantly to sort of the growth, year-over-year growth in agency bookings, as well on the hotel side.

Imran Khan.

J.P. Morgan.

A couple of questions.

First, I was wondering if you could give us some update like what kind of integration is necessary with the Active Hotels in the international market, and if you can see any opportunity to roll out your opaque product there as well in the international market?

And secondly, there are a lot of conversations that travel business is very strong in Q4.

We are almost the second month into the quarter, and I was wondering if that is true, how are your bookings going this quarter and why are you speaking with guidance that you gave in the mid-September?

I will start with the question concerning Active.

There are opportunities for integration between Priceline and Active.

I will mention a couple of them.

The first is that we -- a significant part of the demand that we get at Priceline and Lowestfare and on our other properties in the United States is for people who are traveling to Europe.

In the past, we have given those folks access to rooms through affiliate deals with other players, and now we will be in a position to direct that business to Active Hotels so that represents a nice opportunity.

Similarly Active has a number of customers across its distribution channels that are traveling to the United States, and there is an opportunity for Active to make U.S. inventory available to those customers.

And really the inventory can be either Travelweb's disclosed inventory or Priceline's "Name Your Own Price" inventory.

I think as most of you know, we have been operating Priceline.co.uk for a number of years in the UK, and it has inventory for "Name Your Own Price" hotels product across Europe.

That product is just distributed by Priceline.co.uk.

There is also an opportunity to try to expand that distribution through Active and through some of Active's partners.

So there's a lot of opportunities there.

As to the second question, we think that the travel market does look reasonably strong in terms of holiday travel, and as I mentioned, our original guidance contemplated a greater participation by Priceline in that holiday travel.

We expect the quarter to come in as we mentioned in our guidance.

We think that showing levels of growth like that versus last year represents participation in that market, probably significantly in excess of our original share if you just look at the share numbers for our competition.

Thank you.

Paul King.

CIBC. (technical difficulty)--.

Apar Vasho (ph).

CIBC.

Good afternoon, guys.

Just a few questions.

I was wondering if you could talk a little bit about rental car pricing and whether you are seeing a higher mix of opaque versus retail than in the past?

Rental car pricing has not changed that dramatically -- dramatically enough to really change the mix of the business that we're writing.

We write retail business on Rentalcars.com and Breezenet and through integration on Priceline, but Priceline's core business on Priceline.com continues to be the "Name Your Own Price" product.

Our conversion across those channels continues to be good and good relevant to historical patterns.

The changes that we have seen in that business really are more demand related than anything else and as well I mentioned the fact that we have got a different difficult comparable in the prior year period because it is a full quarter of Rentalcars.com.

Now with regard to personnel costs, just a clarification.

When do you expect that to ramp up as you go through the various phases of your retail/hotel implementation?

When we gave guidance at the end of Q2, we sort of talked about a $10 plus million personnel expense for Priceline prior to the Active Hotels acquisition.

You can see that our Q4 guidance for personnel is a little over 10 million, and that is inclusive of Active.

So again, as I mentioned in my remarks, we still do expect the benefit from the lower personnel costs in Q4 that we got in Q3.

Now ultimately, as Jeff mentioned, we are still heading towards this full rollout of a new customer interface pricing payment platform, which will ultimately result in the type of personnel expenses that I outlined in Q2.

It's just that you will not start to see them appear until we get towards the end of Q1, beginning of Q2.

And one final question.

Can you talk a little bit about Asia and your potential -- any potential initiatives there, especially relating to your Hong Kong site?

Sure.

As I think many of you know, we have got a venture in Hong Kong with our partner and shareholder, Hutchison Whampoa.

Hutch owns 85 percent of that venture at this point in time, and it is operating in Hong Kong, Singapore and eventually Taiwan.

I think that the market there is still very much in its infancy, and while there has been a lot of capital markets interest in travel businesses in China in particular, many of those businesses are off-line businesses that are really just in the process of trying to develop a strong online product distribution and ultimately business flows.

Our business in the Asian market will be through the Hutchison Priceline venture.

They have license to our business model and to our intellectual property and so forth.

I think the business is very, very small right now, but it is positioned to engage in that market as the market conditions improve.

Great.

Thanks.

I'm showing no further questions at this time.

I would like to turn the call back over to Mr. Boyd and Mr. Mylod.

Gentlemen?

Thank you very much everybody for joining our call.

Ladies and gentlemen, this concludes today's conference.

Thank you for your participation and have a wonderful day.

You may disconnect your lines.