Booking Holdings Inc (BKNG) 2007 Q4 法說會逐字稿

Welcome to Priceline's fourth quarter 2007 conference call.

Priceline 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 risk, uncertainties, and assumptions that are difficult to predict.

Therefore, actual results may differ materially from those express, implied, or forecasted in any such forward-looking statements.

Expressions of future goals and similar expressions reflecting something other than historical fact are intended to identify forward-looking statements.

For a list of factors that could cause Priceline'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's earnings press release as well as Priceline's most recent filings with the Securities and Exchange Commission.

Unless required by law, Priceline 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's earnings press release together with an accompanying financial and statistical supplement is available in the Investor Relations section of Priceline's website located at www.priceline.com.

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

Go ahead, gentlemen.

Thank you very much and welcome to Priceline's fourth quarter conference call.

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

Priceline reported accelerating gross bookings growth in both our international and domestic operations for the fourth quarter.

Gross bookings of $1.2 billion were up 62% year-over-year., po forma gross profit of $161 million was up 61%, and pro forma net income was $46 million, or $0.96 per share, up 66%.

Fourth quarter results surpassed the high end of our guidance, and first call consensus estimates of $0.84 per share due to better than forecast results if Europe and the United States.

For the full year, Priceline reported gross bookings of $4.8 billion, up 46% versus 2006, and pro forma net income of $4.04 per share, a 99% increase over 2006.

Our international business had an excellent quarter with $680 million of gross bookings and a growth rate of 113%, representing the third consecutive quarter of accelerating growth.

International gross bookings benefited from robust demand, growth in new markets, increasing unit prices, favorable currency exchange rates, and the addition of Agoda, which added bookings of $13.4 million in the quarter.

Priceline's domestic growth rate accelerated to 24% in the fourth quarter from 19% in the third quarter.

Domestic merchant gross bookings were up 11% in the fourth quarter despite the difficult comparable with the Orbitz business in 2006.

Merchant growth was attributable to growth in Opaque and retail hotel merchant room night sales and growth in unit sales of Opaque rental cars.

Overall bookings growth was enhanced by a 34% increase in the sale of airline tickets, driven by retail ticket sales.

Our international business continues to show high growth rates in the large continental markets, but we are also pleased to see the results from new markets making a positive contribution to overall growth.

We also continue to build the means to share hotel inventory among our brands, and monetize demand across international markets.

We are also benefiting from growing repeat business to Booking.com and other booking branded sites, where we continue to focus our online brand building.

The international business is off to a good start in 2008, and our first quarter guidance calls for bookings growth of between 85% and 90%.

Priceline's domestic business had another good quarter based on a continued strategy of building our value brand and execution of initiatives to improve our services and distribution.

The result, we believe, is leading growth rates for the top and bottom lines.

Merchant results show our supplier partners continue to use our services to exploit revenue management opportunities, and to fill-in during periods of soft demand.

The domestic business is off to a good start in 2008 as well.

With new advertising and online and website marketing initiatives we are seeing continued acceleration of domestic growth rates.

Both the domestic and international business showed good earnings leverage in 2007, despite the negative impact of the airline ticket fee reductions on domestic gross margins.

While we do not plan operational changes that would have a negative impact on operating margins, I wanted to mention a few items.

First our advertising efficiency exceeded our expectations worldwide in 2007 creating a difficult comp in competitive markets.

We are not assuming that we can repeat that over performance.

Moreover, the aforementioned fee elimination, while driving growth and gross bookings, will negatively impact domestic gross margins.

There is significant concern over the impact of recessionary trends on the online travel category.

As you can see, our fourth quarter results do not reflect a significant slow down, quite the contrary.

We believe our brands and services are particularly attractive to customers and suppliers in times of economic stress, and results over the past few months bear out that thesis.

Accordingly, we have provided guidance based on current observed trends in the business and not on an assumption that these trends will deteriorate in future months due to continued economic woes.

The fact remains that it is possible that the category could suffer beyond effects observed to date if conditions worsen.

With a diverse global business, we believe we are well positioned to deliver sales and earnings growth at the top of market rates and to continue investing substantial resources and building on our leadership position in global hotel sales.

Our brands booked 27.8 million room nights in 2007, up 49% year-over-year.

We now operate in over 60 countries in North America, Europe, Asia, the Middle East and Africa, with content available in 22 languages.

Many of these markets continue to experience robust growth and economic activity, travel and internet use.

We are excited by the opportunity to use these assets to grow the business in 2008, and beyond.

I will now turn the call over to Bob for the detailed financial review.

Thanks, Jeff.

Fourth quarter of 2007 was another in an uninterrupted string of strong quarters that we have been experiencing for the past several years.

Internationally we turned in gross bookings growth that significantly exceeded our expectations, driven by continued strong unit sales, increasing unit prices, which were up approximately 6% year-over-year, continued strength of the euro and the pound relative to the dollar and the contribution of Agoda.com which added approximately $13.4 million to our international gross bookings for the quarter.

As Jeff just mentioned our international gross bookings of $680 million grew by 113% on a year-over-year basis.

Excluding Agoda, our international gross bookings grew by 109%, which for the third consecutive quarter represented a quarterly sequential increase in year-over-year gross bookings rate on both the dollar basis as well as on a local currency basis.

In the U.S., our gross bookings continued the accelerating growth trend that began in Q3.

What is particularly encouraging about our U.S.

gross bookings growth is that it is not only coming from increased retail airline tickets, driven by our no-fee initiative, the growth is also coming from our core merchant products which delivered double digit gross bookings growth for the second consecutive quarter.

As was the case in Q3, this continued growth in our merchant businesses drove increased gross profits and gross margins that more than offset the modest gross profit declines associated with the no-fee retail airline initiative.

From an expense perspective, we were able to keep our expenses, especially our variable expenses well under control and as a result we were able to deliver another strong quarter of operating leverage, in which EBITDA and net income expressed as a percentage of gross profit, improved by several hundred basis points on a year-over-year basis.

I won't go into each line item of the P&L, as I think they are very well covered in our press release and our stat supplement, but suffice it to say that we did substantially better than forecast with respect to gross bookings, revenue and gross profit and almost all of our operating expenses.

As has been the case for almost the entire year, we did have a few negative expense variances relative to our forecast but all the negative expense variances were driven by factors that drove our profits upward.

Specifically our personnel expenses came in higher than forecast, because we accrued higher than expected performance based employee bonuses due to the large upside in operating profit during the quarter.

Second, our pro forma income tax expense came in higher than our prior guidance, due to the strong pre-tax income performance in Europe where our NOLs do not apply and where we are a taxpayer.

Finally we incurred approximately $1.4 million of foreign exchange loses, primarily associated with FX hedging activities, due to the increase in the value of the euro and the pound, the two principle foreign currencies with which we transact in Europe relative to the dollar.

These losses were more than offset by favorable FX earnings translations for our European earnings translation which flowed through each line item of our income statement.

As I mentioned earlier, our European gross bookings metric was positively impacted by FX in the fourth quarter and our statistical supplement shows our European gross bookings growth on a local currency basis.

From an EPS perspective, the only other negative variance relative to forecast was in our share count.

Our pro forma diluted share count increased by 24% on a year-over-year basis, which was higher than expected, due almost entirely to the significant increases in our stock price, which we experienced during the quarter, and which resulted in an increasing amount of shares associated with our convertible debt to be counted in our diluted share count.

Despite this headwind, we reported pro forma net income of $0.96 per share, which represented 66% year-over-year growth, and as Jeff said, handily bested both our guidance of $0.77 to $0.85 per share and first call consensus estimates of $0.84 per share.

We reported GAAP net income of $0.68 per share, up 106% versus last year, which consistent with our pro forma net income over performance, came in substantially higher than our prior guidance.

All of the pro forma adjustments to the expenses in our P&L were generally consistent with our prior guidance.

We did recognize some unforecasted income from several million dollars of positive income tax benefits, and a lawsuit settlement both of which were backed out of our pro forma results because of their nonrecurring nature.

As for cash and cash flow, we generated approximately $66 million in operating cash flow during the quarter, up 108% year-over-year.

As for our cash balances, we began the quarter with $518 million of cash and marketable securities, and we closed the quarter with $512 million of cash and marketable securities, representing a $6 million decrease in our cash during the quarter.

Total capital expenditures in the forth quarter were approximately $5 million, bringing our full year CapEx to $16 million.

This amount includes all money spent on capital equipment and internally developed software.

Keep in mind that in the fourth quarter, we expended $60 million of cash to buy back a part of the minority interest in our principal international subsidiary that contains the Booking.com business and we also expended approximately $15 million of cash on acquisitions, including the acquisition of Agoda, which was completed during the quarter.

And now for a few comments on guidance.

I'll start with some fairly specific line item guidance for the first quarter of 2008 and then I'll finish with some broader guidance for full year 2008.

We are looking for first quarter gross bookings to grow by approximately 60% to 65% on a year-over-year basis.

With international gross bookings from booking .com and Agoda growing approximately 85% to 90% on a year-over-year basis and domestic gross bookings growing by approximately 35%.

As we have mentioned to investors many times in previous calls, the comparables are getting tougher for our international business, given the sheer size of the business, hence the forecasted quarterly sequential decline in the international growth rate from Q4 to Q1.

Nevertheless the projected growth rates in international gross bookings are certainly in excess of any forecast that we had several months ago and we believe they are reflective of one, the very strong tailwinds that the online hotel industry continues to have internationally.

Two, the superior business model that we believe we have operating within that industry, and three, the outstanding management execution that we are delivering internationally.

Domestically, our projected 35% growth rate implies a very material quarterly sequential increase from Q4 levels.

Jeff just mentioned that our growth rates are benefiting from the no-fee initiative in our airline ticket sales as is plainly evident in our airline ticket unit sale metrics, but we are also optimistic about our ability to deliver double digit growth in our higher margin merchant businesses during the quarter as well.

We expect pro forma revenue to grow by approximately 30% on a year-over-year basis.

We expect pro forma gross profit dollars to grow by approximately 55% to 60% on a year-over-year basis.

As for Q1 operating expenses, we are targeting consolidated advertising expenses of approximately $68 million to $71 million, with approximately 85% of that amount being spent on online advertising.

We expect sales and marketing expenses between $15 million and $16 million, we expect personnel costs, excluding stock-based compensation to come in between $27 million to $29 million.

We expect G&A expenses of approximately $11 million to $12 million; information technology costs of approximately $5.5 million to $6 million; and depreciation and amortization expenses, excluding acquisition amortization, of approximately $4.3 million.

We expect total below the line positive impact of approximately $800,000, which comprises net income, foreign exchange expense, equity and income of Priceline Mortgage and minority interest expense.

We are targeting pro forma EPS of approximately $0.50 to $0.60 per share and our pro forma EPS forecast includes an estimated cash income tax of approximately $5 million, comprised of alternative minimum tax in the United States, and income taxes primarily in Europe.

Our pro forma EPS guidance is based upon a pro forma diluted share count of approximately 49 million shares, which is based on last night's closing stock price of $104.96.

This share count represents a substantial increase on a year-over-year basis due primarily to the increase in treasury stock method shares associated with our convertible debt, caused by the substantial increase in our stock price.

As for expected GAAP results, we expect to report a GAAP EPS of between $0.16 to $0.26 per share.

The difference between our GAAP and pro forma results will be driven primarily by the inclusion of acquisition-related amortization, stock-based compensation, and certain income tax expenses, all of which are non-cash in nature.

And now for a few comments on full year 2008.

We are going to limit our detailed guidance mainly to gross bookings and earnings, but I will try to offer some additional qualitative thoughts along the way that will hopefully help those of you who are working on detailed quarterly financial forecasts for 2008 and beyond.

I'll start with gross bookings guidance.

We are forecasting total gross bookings of between $7 billion and $7.3 billion for the full year 2008.

The mid-point of this range represents an expected annual increase of 48%, which we expect will result in our gaining significant market share from all of our major competitors during 2008.

While we're not going to give out the international and domestic components of that guidance, I can tell that you it is our expectation that the forecasted annual growth rates that I just gave for the first quarter of 2008 are expected to be the high water marks for both our international businesses and our domestic business; and that we expect fairly steady declining gross booking growth rates for each of the remaining quarters of 2008 on both an international and domestic basis.

I'll also add that this forecast assumes that average unit selling prices and foreign exchange rates remain roughly at their current levels throughout 2008.

From a profit perspective, we are expecting to achieve approximately $300 million to $325 million of pro forma EBITDA excluding stock-based compensation for the year.

While we are not giving quarterly splits, I did want to say that we expect, as has been the case for several years now, that earnings expressed as a percentage of gross bookings and gross profit will be at its lowest in Q1 and at its highest in Q3 because of our expense in revenue recognition policies, which call for the expensing of advertising when incurred and the recognition of hotel commission revenue upon customer check out of the hotel.

I also want to point out, however, that we expect that this year's Q1 will represent a higher percentage of full year pro forma EBITDA in 2008, as compared to 2007, and Q2 will represent a lower percentage of full year pro forma EBITDA, due to an earlier Easter holiday this year as compared to last year.

We expect that our pro forma cash tax rate will be approximately 20% in 2008, up from 2007 levels due to our expectation that our international pre-tax profits, which are subject to cash income taxes, will grow at a faster rate than our U.S.

pre-tax profits, which are subject only to very minimal taxes, due to our ability to utilize substantial net operating loss carry forwards.

As for pro forma EPS, we are forecasting a range of between $4.80 and $5.10 per share, which would translate to GAAP EPS of between $3.25 and $3.55 per share.

The mid-point of our pro forma EPS range represents 23% year-over-year growth.

As you'll see, we are projecting that our pro forma EBITDA will grow at a faster rate than our pro forma EPS, primarily because our average diluted share count in 2008 is expected to be 10% higher than 2007 levels.

This has to do with a topic that we have discuss in great detail in many of our previous earnings calls, namely that our diluted share count has and will continue to be affected by the inclusion of additional shares associated with our convertible debts.

The amount of additional shares is in turn directly impacted by movements in our stock price.

Because our stock has increased so significantly on a year-over-year basis, our diluted share count has increased as well.

While this additional diluted share count makes our 2008 EPS comparables more challenging, especially for the first half of 2008, I am pleased to say that with our stock at its current levels, we do not expect to experience any further material increases in our share count in the event that our stock price were to increase from its current levels.

Specifically, it would take roughly a 50% upward move in our current stock price to cause only a 3% increase in our diluted share count from current levels.

And so, while as I said, the EPS comps will be difficult for us, especially in the first and second quarters of 2008, we expect that our annualized EPS growth rates will actually accelerate from that point forward and we expect to finish the year with a fourth quarter year-over-year pro forma EPS growth rate in excess of 30%.

Accordingly, because we expect to begin 2009 with a jumping off EPS growth rate well in excess of the average growth rate in 2008, we expect to be able to deliver continued strong pro forma EPS growth in 2009 and beyond.

We have updated the grid in our statistical supplement to help demonstrate this point.

It shows investors what our potential pro forma diluted share counts would be for both Q1 2008 and full year 2008 based upon various hypothetical stock prices.

As we have said in previous earnings calls, we are not going to get into the practice of predicting our stock price, but we hope that this detailed data gives investors who have their own price targets a guide post that they can use to forecast our pro forma EPS on an ongoing basis.

Finally, before I turn the call over for questions, I wanted to underscore a point that Jeff just made.

Up until this point, our businesses have performed fairly well in the current economic environments, both here in the United States and abroad.

All of the guidance that I just gave presumes that we will continue to operate in similar economic conditions as exist today.

There is obviously a lot of chatter out there about looming recessions and how the online travel industry may behave in such environments.

While we think our industry in general and Priceline in particular have reason to believe that we should fare better than many other industries and many other companies in such an environment, we want to stress that we don't believe that we are immune to or benefit from deteriorating economic factors.

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

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

Thank you.

(OPERATOR INSTRUCTIONS)

Our first question comes from Jennifer Watson at Goldman Sachs.

Your question, please.

Thank you.

Can you just talk a little bit about the opportunity for Priceline to get a little more involved in an advertising type model and why you would or would not pursue something along those lines?

Be happy to.

As many of you know, we currently do participate in advertising both on websites that we own, particularly here in the United States, that are transactional websites, as well as on My Travel Guide, which is a small advertising-based website.

So we are in that business and advertising revenue is include in other income for Priceline.

We have not been as aggressive as some of our competition in trying to roll-out advertising on our transactional paths.

And I think Priceline in particular is a little bit different, because customers, particularly hotel customers, who are coming to name their own price, are very much determined to name their price and complete their transaction, and we are a little bit more reluctant to interpose something that could distract them from that task.

Having said that, we are going to keep our eye very carefully on what is happening in the marketplace.

We believe we've got a lot of unmonetized customers, just as our competition does and we'll be opportunistic about trying to turn that traffic into revenue where we can, without hurting our brand and without hurting our transaction flows.

(OPERATOR INSTRUCTIONS)

Our next question comes from Aaron Kessler of Piper Jeffrey.

Your question, please.

Hi guys, great quarter.

One question and maybe a follow-up.

Which, or who do you think you are taking the most share from?

Is it still kind of traditional travel agencies in 2008, or online competitors or is it some other set that we are not thinking of?

I think for Priceline and for the competition as well, it is still principally share that's coming from off-line sources, the traditional bricks and mortar travel agencies and consolidators.

Thank you.

Our next question comes from Mark Mahaney at Citigroup.

Your line is open.

Thank you.

I think your strategy in the past has been to focus more on investing for growth in Europe, and more on investing for margins and profitability in the U.S.

The last two quarters with this acceleration that you are seeing in bookings, particularly in the air side, it seems like you--is there a greater opportunity, or maybe is there a rethink on the ability to get back to investing for growth again in the U.S.

market in '08?

Thank you.

Thanks, Mark.

I think we've spent some time talking in the last couple of calls about the thinking behind eliminating the processing fee on airline tickets, and we have said a couple of things.

The first is that the investment required for us to do that wasn't that big an investment, because the business, traditionally, has not been that big a business for us.

And secondly, we thought that it was something that we could use uniquely to strengthen our overall brand position as a value player, so I don't think it represents a see change in our thinking about trying to drive for profitability domestically, I think it just was an opportunity for us, unique to us, to build our brand and do it with an investment that we thought we could handle.

And as you can see, based on our P&L, we have been reporting earnings growth domestically that's at the top of the market, so I think that strategy has worked.

And I would just add numerically that as we talked about a lot on the last call, our domestic profits have been growing at a much faster rate in 2007 than the gross bookings growth rate, and that was due principally to a couple of big things.

First, the fact that we didn't have the Orbit private label business that generated quite a bit of bookings but did not generate much if any profit, as well as a very concerted change our approach to online advertising to manage to higher ROIs.

We were very successful in achieving those goals in 2007.

The guidance that we are giving for 2008, hopefully what happens is that we can maintain those goals.

But as you can see from the guidance that we just gave, we are also generating some pretty decent top line growth, hopefully domestically we can maintain the relationships that we were able to achieve in 2007 and not sacrifice any growth doing it.

Thank you.

Our next question comes from Justin Post at Merrill Lynch.

Your question, please.

Yes, a couple of questions.

Bob and Jeff, in the internet space there is a big temptation to invest in technology and marketing.

We have seen some your competitors do so.

Where are you with that as you look out the next two or three years?

How do you feel about your technology platform and where you're at on marketing spend right now?

I think Justin, if you look at our income statement, we have been spending very aggressively in marketing, and in fact, our marketing expenses have gone up very significantly in each year of the last three years.

So, in any particular place where we think there is a reasonable ROI on our spend, we've been willing to spend.

With respect to technology, I think if you look at what has happened across our properties, we have been able to expand our products and services and our functionality at what I think is an excellent rate.

We are offering new products and adding new hotels and geographies as fast as anybody in the space, so I think our technology spend has been sufficient to support very significant growth of our top line.

The one thing that we have not done is entered into an effort to try to build single monolithic technology platform to support the operations of all of our businesses.

The level of complexity in doing that is very, very high and as a result the cost is high and the amount of time it takes to do it is high and I think that is one of the principle reasons that our CapEx has been at levels that are very much lower than that of our competition.

Thank you.

Our next question comes from Imran Khan at JPMorgan.

Your question, please.

Hi, thank you for taking my questions.

Two questions.

One in drilling down about your international growth, clearly international is growing very significantly, some other internet companies talked about weakness in the U.K.

market primarily on the average pricing side.

Have you seen any weakness in the U.K.

market, and looking forward which are some of the countries that you are seeing the biggest growth opportunity in 2008?

Imran, we don't really talk too much about any of the specific countries.

It is true that some of the unit pricing has been maybe a little bit more challenged in the U.K.; but as we have also talked about extensively over the last couple of years, we have so much more exposure to continental Europe, that perhaps our business wasn't quite as impacted on an overall basis by changes in ADR in the United Kingdom.

As I said in my prepared remarks, the ADRs in Europe were up about 6% on a year-over-year basis.

So the market has remained fairly vibrant there.

I also said in my remarks that at this point, we are not expecting any increases from these levels.

There obviously is a lot of talk of potential economic challenges in Europe, so we are not forecasting any increases beyond the ones that we certainly achieved in 2007.

On the other hand, we are not forecasting any decreases, either.

In terms of where we are looking to grow, it's really everywhere; and by the way, including in some of the most mature markets, such as the United Kingdom and the United States, we are trying to add hotels in every single market, including the ones that are the so-called mature markets.

And then obviously we are moving eastward across continental Europe into Eastern Europe and really as we have said now for several quarters, the Booking.com business is not our European business anymore, it is really an international business.

So we are opening up offices and adding inventory again the United States is one place but also in the Middle East and South Africa and now into Asia the Pacific Rim through both Booking.com and Agoda.

So it's really-we're going everywhere we think that there are people that want to book hotels and where there are hotels that are looking to get online access, that's where we are going.

Thank you.

Our next question from Ryan Fitzgerald at Banc of America .

Your question,

Thanks, guys, a couple couple quick ones.

Would you argue that the European business is better hedged for down turns considering it is just hotels, no air exposure and in initial down turns you would assume consumers still travel but maybe less so via air?

And then what impact are you factoring into your guidance from the '08 Olympics?

On the second question first, I don't think there is any impact for the '08 Olympics inherent in any of our guidance.

We are not in business in China, so that's just not a factor for us.

With respect to the first question, I don't think that we necessarily view the European business as better hedged, all economic conditions being equal.

We think both of our businesses are well positioned to perform in times of economic softness, but for different reasons.

In the United States, the value brand drives consumers who are looking to save money to Priceline, and our Opaque product allows suppliers to discount when they need to, without cutting their published prices.

So I think our business is uniquely positioned to form well in times of recession in the United States.

In Europe, I think the business is also positioned well to perform during times of economic stress, because our extensive inventory and pricing and availability allows consumers to shop the largest possible hotel inventory for the lowest price and because we have the lowest distribution cost for our hotel suppliers, if they are starting to feel the pinch a little bit, they should be aggressive in giving us inventory and ultimately demand is elastic, and if hotels reduce their prices we are the best place for somebody to come to find those low prices.

The other thing I would that add is that I think the European economy is more complex and really potentially not necessarily as affected by disruptions in the financial markets and in the housing market, which have been so material here in the United States, and the signs of economic distress have not been as consistent across Europe as they seem to have been over the last couple of months here in the United States.

Thank you.

Our next question comes from Jake Fuller at Thomas Weisel Partners.

Your line is open.

Good afternoon, guys, a couple of things.

U.S.

agency revenue, can you give us that number?

Sure, I think it's in the press release.

It was $106 million, agency revenue.

Which as you know, is mainly Europe, Jake, and we don't break, beyond that, we don't break literally by product or by geographic region.

I thought historically you had given us a sense of what the international agency and U.S.

agency revenues were, separately.

I think, Jake, if you take the total agency number and subtract the international, which is almost all agency that gives you.

Yes, that is a close proxy.

The bookings number.

Can you also give the revenue number?

Again, Jake, other than to say that it is substantially mostly international, that's not something that we have broken out in these quarterly calls, and again, not that we are trying to hide anything here.

Just I don't have the number.

Got you.

In terms of consolidation in the airline business, how might that impact youp articularly on the Opaque air side, who's your biggest supplier?

Jake, I don't want to tell you who our biggest suppliers are, but I will say that the legacy carriers are all participating with Priceline to one degree or another; and in the Opaque business, airlines like American, Delta, Northwest and United have been excellent partners of ours over the years.

To the extent that they think it's in the best interest of their business to consolidate and I can understand why some of them would, we would be very supportive of those efforts.

And while it's, all things being equal, better to have more competition for distribution, especially for our Opaque system, we think that the overarching importance is to have a healthy airline business and profitable airlines, and so we stand ready to do whatever we can to help the airlines meet their revenue management needs, even if there is some consolidation.

Thank you.

Our next question comes from Justin Post at Merrill Lynch.

Your question, please.

Thanks for taking my follow-up question.

Bob, a couple of questions on the hotels.

Did you give the total partners you have now in Europe?

And the room nights, it really looked like it accelerated in total--it did 55% increase in room nights.

Can you break that down between U.S.

and Europe, and tell us what accelerated more in the quarter?

We don't break out room nights by region, but again, most of the growth is coming internationally; and in terms of the number of hotels, you are right, we didn't but that in our prepared remarks, but it is over 40,000 hotels at this point, Justin.

Thank you.

Our next question comes from Mark Mahaney at Citigroup.

Your line is open.

Great, thanks.

I don't think you'll specifically quantify the answer to these, but qualitatively you are bringing the Booking.com brand into the U.S.

We have seen it show up in search engines.

Has it become material at all, and the Agoda, after a quarter now of it being part of your solution set in Asia Pacific region, can you give us a sense of what kind of ramp you could expect for that, as maybe not as a percentage of revenue, but what kind of growth trajectory you could see there, or maybe compare it with what you initially saw out of Booking.com in Europe?

Thank you.

Maybe I'll hit the first one and Bob can hit the Agoda question.

With respect to the Booking.com brand showing up in search engines in the United States, I think you absolutely have seen that.

Bookings content is available in the English language and we participate with the search engines, so that is just a natural incident of that.

I don't--we are not going to quantify how big that business is, but we've been fairly up front about saying our principle goal, at least to date with Booking.com, is to sell U.S.

hotel rooms to European travelers.

That initiative is going well and it represents the larger part of our business, by far with U.S.

hotels at Booking.com.

As for Agoda, Mark, it's sort of hard to compare Agoda to either Booking.com or Active Hotels at the time that we bought the businesses because both Booking.com and Active Hotels were much more mature at the time that we bought them, they were in several hundred million dollar gross bookings and profitable.

Agoda's much more earlier stage and break even.

Now having said that, if you can see we announced a little over $13 million of gross bookings for the two month period that we owned Agoda which is up very substantially from the run rates they have been running at earlier in the year.

And so they are running at triple digit rates and we are very pleased so far with everything that's going on at Agoda, but as we also said, Agoda is very much in the investment mode.

We are hiring people, we're building infrastructure and we're starting to work on ways of integrating our products, ours being both Priceline's, as well as Booking.com's into the Agoda suite of products and that is going to be something that's going to take place , really, over a number of years, but so far we are very pleased with what we are seeing out of

Thank you.

Our final question comes from Aaron Kessler at Piper Jaffray.

Your question, please.

Yes, just a quick question on how you are thinking about the domestic business in terms of weighing on one hand the strong value proposition you offered to both consumers and suppliers in a softening travel market, combined with the fact that consumers may be cutting back on the traveling.

Also maybe you can talk a little about just maybe the demographics of your U.S.

consumer on Priceline.

Thank you.

I think traditionally, we have seen the demographic profile of Priceline's customers in the United States to be more consistent with broad demographic trends than our brand might indicate.

I think over the years, people came to the impression that Priceline was addressing a lower demographic, in terms of income and perhaps education and that's just not the case.

We are broadly representative of the internet using population, and I think that the thing that we hope to represent in tough economic times is an opportunity for a broader subset of customers to use the website, not just the most value conscious, but folks that are becoming value conscious because they are starting to feel a pinch in their pocketbook and that's one of the reasons over the last three or four years we have very dramatically expanded the offerings to try to have something for a much broader slice of the population.

And so no-fee on airline tickets is something that virtually anybody who buys an airline ticket on the internet would find attractive; and then for the more aggressive deal shoppers, you've got packages, name your own price, etc.

Thank you, gentlemen, and thank you, ladies and gentlemen for your participation.

That does conclude Priceline's fourth quarter 2007 conference call.

You may disconnect your lines and have a great day.

Thanks.

Thanks.