OpenTable’s International Growth Driven by Toptable

OpenTable (NASDAQ:OPEN) is a leading provider of free and real-time online restaurant reservations for users looking to book reservations online as well as a reservation and guest management solution for restaurants. It also sells third-party restaurants coupons through its website. Its competitors include Urbanspoon, owned by IAC/InterActiveCorp (NASDAQ:IACI), and UK-based companies liveRES Ltd and Livebookings Ltd.

We have a price estimate for OpenTable of $94.90, which is roughly in line with market price.

OpenTable continues to beat expectations

OpenTable recently reported its Q4 and full year 2010 results posting revenues of almost $99 million in 2010. This represents a more than 40% increase in revenues over the $68 million reported for 2009, and the company nearly tripled its net income from $5 million in 2009 to $14 million in 2010.

Toptable.com improves OpenTable’s revenue figures…

OpenTable completed the acquisition of toptable.com on October 1, 2010 at the cost of $55 million. ^[1]

Considering a per customer reservation fee of £2 on toptable.com, and with 774,000 customers seated since the acquisition, toptable’s contribution to OpenTable’s revenue in Q4 2010 was more than £1.5 million, or almost $2.3 million. This is just about two-thirds the revenue generated in the entire year by OpenTable through reservations at international restaurants.

In addition to restaurant reservations, advertisements are a major source of revenue for the toptable.com website. We estimate that these advertisements contributed at least $800,000 to OpenTable’s revenues for the last quarter. This suggests that toptable.com generated about $3.1 million in revenues for OpenTable in Q4 2010 – more than 10% of the company’s total revenue of $30.7 million for the quarter.

… but it does more for OpenTable’s growth strategy

The biggest advantage for OpenTable from the acquisition is the immediate access to 3,680 restaurant customers across Europe. With more than 5,500 restaurants in the UK and Germany, OpenTable’s customer base now rivals that of its biggest competitor in this region – LiveBookings.com.

OpenTable had extended its operations selectively to UK, Germany and Japan from North America as all these countries have large numbers of online consumer transactions and reservation-taking restaurants. And the acquisition of toptable.com appears to be the first step to expanding in these markets through inorganic growth. With the online restaurant reservation industry still in the nascent stage, there is still room for OpenTable to grow.

See our full estimates for OpenTable.

1. OpenTable to buy toptable.com for $55 million, Bloomberg Businessweek, Sept 15 2010 [↩]