Priceline.com Reports Financial Results for 2nd Quarter 2007

Gross travel bookings increase 33% year over year; International gross travel bookings grow 93% versus 2006

NORWALK, Conn.--(BUSINESS WIRE)--Aug. 7, 2007--Priceline.com Incorporated (Nasdaq: PCLN) today reported its financial results for the 2nd quarter 2007. Gross travel bookings for the 2nd quarter, which refers to the total dollar value, inclusive of all taxes and fees, of all travel services purchased by consumers, rose 33% year-over-year to $1.2 billion.

Priceline.com had GAAP revenues in the 2nd quarter of $355.9 million, a 15.7% increase over a year ago. Priceline.com's GAAP gross profit for the 2nd quarter was $157.2 million, up 48.6% from the prior year. Priceline.com had GAAP net income for the 2nd quarter 2007 of $34.6 million or $0.79 per diluted share, which compares to a $12.5 million or $0.28 per diluted share in the same period a year ago.

Priceline.com reported pro forma revenues in the 2nd quarter of $353.6 million, a 14.9% increase over a year ago. Pro forma gross profit for the 2nd quarter 2007 was $154.9 million, an increase of 45.9% over the same period in the prior year. Pro forma net income for the quarter was $47.3 million or $1.11 per diluted share, which compares to $23.0 million, or $0.55 per diluted share in the same period a year ago. First Call analyst consensus for the 2nd quarter 2007 was $0.89 per diluted share. The section below entitled "Non-GAAP Financial Measures" provides a definition and information about the use of pro forma financial measures in this press release and the attached financial and statistical supplement reconciles pro forma financial information with priceline.com's financial results under GAAP.

"Priceline.com's earnings performance in the second quarter exceeded our previous expectations for both the international and domestic businesses," said priceline.com President and Chief Executive Officer Jeffery H. Boyd. "Internationally, Booking.com's results were driven by 93% growth in gross bookings, which continues to outperform market growth rates. Domestic gross bookings fell within the range of our guidance, but earnings growth exceeded our expectations due to strong organic growth in merchant hotel and rental cars and more efficient marketing."

"Based on the strength we have seen in our international and domestic businesses as the summer unfolds, we are increasing our guidance for the balance of the year," Mr. Boyd said. "In particular, we believe the scale we have achieved in worldwide hotel sales and our low-cost leadership has provided us with opportunities to grow organically and geographically which are reflected in our recent reported results. We intend to continue our vigorous pursuit of those opportunities going forward."

Forward Guidance

Priceline.com said it was targeting the following for 3rd quarter 2007:

Year-over-year increases in overall gross travel bookings of approximately 43% to 46%.
Year-over-year increases in gross travel bookings from Booking.com of approximately 85% to 90%.
Year-over-year increase in pro forma revenue of approximately 20% to 25%.
Year-over-year increase in pro forma gross profit of approximately 50% to 54%.
Pro forma net income of between $1.21 and $1.31 per diluted share.

In view of the company's stronger than expected performance in the 2nd quarter 2007, priceline.com revised its full year guidance as follows:

Consolidated gross travel bookings of $4.50 to $4.65 billion
International gross travel bookings of $2.45 to $2.55 billion
Pro forma net income of between $3.50 and $3.65 per diluted share

Pro forma guidance for the 3rd quarter and full year 2007:

excludes cash expenses associated with the settlement of the 2000 securities litigation,
excludes the cash benefit associated with the refund of excise taxes (and related accrued interest) paid on merchant airline tickets,
excludes non-cash amortization expense of acquisition-related intangibles,
excludes non-cash stock-based compensation expense,
excludes option payroll tax expense,
excludes non-cash income tax expense and reflects the impact on income taxes of the pro forma adjustments,
excludes non-cash preferred stock dividends,
includes the additional impact on minority interest expense of the pro forma adjustments described above,
includes the anti-dilutive impact of the "Conversion Spread Hedges" (see below) on outstanding diluted common shares outstanding, and
includes the dilutive impact of additional shares of unvested restricted stock and restricted stock units because pro forma net income has been adjusted to exclude preferred stock dividend and stock-based compensation.

When aggregated, the foregoing adjustments are expected to increase pro forma net income over GAAP net income by approximately $13 million for the 3rd quarter 2007 and $70 million for full-year 2007. On a per share basis, the Company estimates GAAP net income of approximately $0.90 to $1.00 per diluted share for the 3rd quarter 2007 and GAAP net income of approximately $1.82 to $1.97 per diluted share for the full-year 2007.

The Financial Accounting Standards Board ("FASB") is expected to propose a FASB Staff Position ("FSP") that would significantly impact the accounting for convertible debt. The proposal would require cash settled convertible debt to be separated into debt and equity components at issuance and a value to be assigned to each. The value assigned to the debt component would be the estimated fair value, as of the issuance date, of a similar bond without the conversion feature. The difference between the bond cash proceeds and this estimated fair value would be recorded as a debt discount and amortized to interest expense over the life of the bond. Although the FSP would have no impact on priceline.com's actual past or future cash flows, it would require priceline.com to record a significant amount of non-cash interest expense as the debt discount is amortized. As a result, there would be a material adverse impact on priceline's reported GAAP results of operations and earnings per share. The expected proposal, if approved, is likely to become effective January 1, 2008 for priceline and require retrospective application.