Key Take-Aways From Priceline’s Q3 2016 Earnings Results

by Trefis Team
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Priceline’s growth story continued in Q3 2016. While the company’s accommodation platform, booking.com, continued expanding in the quarter, the platform is also making investments on newer products to improve its services and offerings. Priceline.com continued with its improvement plans and announced Brett Keller as its new CEO. Kayak’s healthy growth continued and currently it is expanding to crucial regions such as Asia and Latin America. However, the only glitch in Priceline’s performance came from OpenTable which incurred a $941 million non-cash impairment charge against its goodwill and subsequently dampened Priceline’s net income.

pcln q32016 results

Booking.com Continues Growing And Investing In New Products

Booking.com continued its strong performance in the third quarter as well, with a rise of both room nights and gross bookings. Its total property count stood at around 1,065,000 reflecting a 29% y-o-y growth. Its vacation rental properties stood at 529,000 depicting a 39% y-o-y growth. Its combined booking properties stood at around 24.4 million bookable rooms. The platform is also making investments for future growth such as the development of products like Booking for Business.

Priceline.com Gets A New CEO And Continues With Its Improvement Plans

Priceline.com’s improvement plans involving performance and marketing, product, front-end, and mobile offering are going on track. The brand announced Brett Keller as its new CEO. Keller had been acting as an interim CEO since Paul Hennessey resigned from the role in June.

Kayak Expands Into Important Markets

Priceline’s metasearch engine, Kayak’s strong growth continued in the third quarter, along with its investment initiatives. The brand announced its expansion in important regions such as Asia Pacific and Latin America. Currently, Priceline’s advertising and media revenue is growing at a CAGR of 60% over the three-year period ending 2016, while its overall revenue is growing at a CAGR of 16%. Kayak is one of the major drivers of this advertising and media revenue growth.

OpenTable Incurs Non-Cash Impairment Charges

Priceline’s 2014 acquisition of the online restaurant reservation platform, OpenTable, seems to be in a troubled state right now. The company’s Q3 2016 net income was adversely impacted by the $941 million non-cash impairment charges against the OpenTable’s goodwill. The company announced that OpenTable will pursue its growth opportunities at a slower pace than before. It will continue with the building of inventories, cloud-based services for restaurants, and even a new product catering to casual dining. Priceline’s Q3 2016 net income declined by 58% year-on-year to $506 million because of the impairment charges. However, the company’s non-GAAP EPS stood at $31.18 reflecting a 23% y-o-y growth. There might be a possibility that OpenTable is facing tough competition from entities such as TheFork, TripAdvisor’s online restaurant reservation platform. TripAdvisor keeps acquiring restaurant reservation companies and expanding TheFork’s reach. It is the leading platform in Europe, however, OpenTable also enjoys over 50% of North America’s market share. The company’s international expansion plans might not have worked out well so far. However, this is expected be a temporary setback for OpenTable which might be overcome in the long run.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Priceline

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