Hotel Reservations Network Reports Record Results for the Third Quarter of 2000
PRNewswire
              Over 1,700,000 Hotel Rooms Sold Year-to-Date;
    HRN Generates over $75 Million in Operating Cash Flow Year-to-Date

  KEY QUARTERLY RESULTS  (3rd Quarter of 2000 compared to 3rd Quarter of
  1999)
  - Revenues increase 99% to $94.6 million
  - EBITDA increases 117% to $13.9 million
  - Adjusted Earnings Per Share (diluted) increases 157% to $0.18
  - Hotel Room Nights Sold increases 92% to 716,600

DALLAS, Oct. 24 /PRNewswire/ -- Hotel Reservations Network (HRN) , http://www.hoteldiscount.com, the Internet's number one provider of discount hotel accommodations worldwide, announced today record financial results for all key financial and operating metrics for the 3rd quarter of 2000.

HRN posted a 99% year-over-year increase in 3rd quarter revenues, driven by continued strong demand across the company's multiple distribution channels including HRN's websites, more than 3,400 affiliate websites, premier search engine alliances and HRN's 24-hour call center. During the quarter, HRN significantly expanded its business by adding over 900 new Web affiliates, nearly 300 new hotel supplier relationships, and 23 new cities. Leveraging its profitable business model, HRN reported 3rd quarter EBITDA of $13.9 million, a 117% year-over-year increase. In addition, the company reported adjusted net income, which excludes the effect of certain non-cash expenses, of $10.0 million for the 3rd quarter of 2000, an increase of 138% over adjusted pro forma net income of $4.2 million for the 3rd quarter of 1999.

The unaudited financial highlights for 2000 and pro forma financial highlights for 1999 are set forth below (amounts are in thousands, except adjusted earnings per share data):

                            Three months ended       Nine months ended
                                 September 30,            September 30,
                            2000          1999         2000          1999
                                   (Pro forma)                (Pro forma)
  Net revenue            $94,618       $47,652     $227,963      $108,371
  Gross profit(1)         28,895        13,502       69,687        31,668
  EBITDA(2)               13,908         6,399       35,004        15,616
  Adjusted Net Income(3)  10,037         4,214       24,638        10,435
  Adjusted Earnings per
   share, diluted(3)       $0.18         $0.07        $0.47         $0.20
  Weighted average shares
   outstanding,
   diluted(4)             56,487        56,487       52,660        52,660

  (1)  Reflects reclassification of performance-based affiliate fees from
  cost of sales to selling, general and administrative expenses, resulting
  in an increase to gross profit of $0.8 million for the 3rd quarter of 1999
  and $1.6 million for the 9 months ended September 30, 1999.
  (2)  EBITDA is defined as earnings before interest, taxes, depreciation
  and amortization of goodwill, and non-cash marketing expense (warrant
  costs related to affiliation arrangements). For the 9 months ended
  September 30, 1999, it also excludes non-recurring acquisition related
  costs of $20,257.
  (3)  Adjusted Net Income and Adjusted EPS exclude acquisition related
  goodwill amortization and warrant amortization and non-recurring
  acquisition related costs of $20,257 incurred in the second quarter of
  1999.
  (4)  Weighted average shares outstanding for the calculation of earnings
  per share for the 9 months ended September 30, 2000 assumed the 38,999
  shares of the Class B Common Stock were outstanding for the entire period
  and the 16,235 shares of Class A Common Stock and the diluted effects of
  options and warrants issued at the time of the initial public offering are
  weighted for the period from February 25, 2000 to September 30, 2000.
  1999 shares outstanding is shown on a pro-forma basis for the same number
  of shares as 2000 for comparison purposes.

Commenting on the results, Bob Diener, President of Hotel Reservations Network, said, "HRN continued its exceptional growth on both the top and bottom line during the 3rd quarter. Our momentum reflects our success in capitalizing on the dramatic, yet early-stage growth of the online lodging market. We continue to strengthen our leadership position by expanding our affiliate base, destinations served and discounted hotel offerings, all of which contribute to our compounding business engine. By creating consumer demand through our broad distribution network we generate revenue for our hotel suppliers, affiliate partners and HRN. This is one of the most effective and efficient business models utilizing the Internet.

"Fundamentally HRN is exceptionally strong. We operate a scalable business that is generating substantial cash via multiple growth channels. Our overall market is expected to continue to grow dramatically well into the decade. Also, we have a growing cash position and debt-free balance sheet. We are not reliant on external capital or costly advertising campaigns to fuel our growth. All of these factors, combined with continued robust organic growth, support a very positive outlook for HRN.

"For the 4th quarter of 2000 we expect to report revenue of at least $88 million, and adjusted earnings, fully diluted, of at least $0.18 per share. For the full year 2001 we expect to report revenue and EBITDA growth of at least 40% over 2000. We continue to focus on the execution of our profitable business plan and remain in a strong position to capitalize on all of our growth drivers."

3rd Quarter Highlights:

-- The growth of HRN's city and affiliate base coupled with strong organic growth in online hotel bookings drove hotel room nights sold during the quarter to 716,600, a 92% increase over the 3rd quarter of 1999.

-- The company's base of web affiliates reached 3,400 during the 3rd quarter, an increase of over 900 affiliates from the 2nd quarter and an increase of 1,800 from December 31, 1999. The affiliates consist of a diversified group of sites covering such industries as travel, local interest, convention and visitor bureaus, general entertainment, news and information, community and e-commerce. In addition, on October 10, 2000 HRN announced that it now serves over 3,500 affiliates, an increase of over 119 percent since the end of 1999.

-- During the 3rd quarter, HRN increased its cities served to 83, representing a 118% increase over the 1999 3rd quarter and a 108% increase over the 1999 year-end total. Twenty-three new markets were added during the 3rd quarter including Birmingham, Alabama; the Caribbean; Charleston, South Carolina; Cincinnati, Ohio; Columbus, Ohio; Detroit, Michigan; Flagstaff/Grand Canyon, Arizona; Gatlinburg, Tennessee; the Hawaiian Islands; Hilton Head, South Carolina; Indianapolis, Indiana; Montreal, Canada; Myrtle Beach, South Carolina; Niagara Falls, New York; Norfolk, Virginia; Palm Springs, California; Panama City, Florida; Raleigh/Durham, North Carolina; Savannah, Georgia; Space Coast, Florida; St. Louis, Missouri; Tallahassee, Florida and Yellowstone, Wyoming.

-- Internet generated revenues represented 94% of total 3rd quarter revenues, as compared to 85% in the 3rd quarter of 1999 and 81% for all of 1999.

-- Affiliate generated revenues represented 53% of total 3rd quarter revenues, as compared to 44% for the 3rd quarter of 1999 and 41% for all of 1999.

-- In the 3rd quarter HRN completed the previously announced integration of its offering of discount hotel rooms into Travelocity.com, the world's largest online travel website. Travelocity customers now have direct access to all of HRN's markets and hotel accommodations. Through its exclusive agreement with Travelocity, HRN's hotel accommodations are also offered over Travelocity's network of website affiliates including America On Line, AOL.com, Yahoo!, Excite, Digitalcity, @Home, Netscape, and Go.com.

-- The company generated $19.7 million of cash flow from operations in the 3rd quarter, and $75.3 million of cash flow from operations year-to-date.

-- At the close of the 3rd quarter, the company's cash and investment position stood at $170.9 million, with no debt.

-- HRN will host a conference call to discuss its 3rd quarter earnings results today October 24, 2000 at 9:00 am Eastern. To access the conference call dial 212-896-6003. The call will be web cast live and archived for replay at http://www.hoteldiscount.com/ under the investor relations section of the site.

Hotel Reservations Network, Inc. is the Internet's number one provider of discount hotel accommodations worldwide and supplier of room availability during sold out periods. HRN supplies travelers with an easy-to- use, one-stop source for the guaranteed lowest hotel rates through its Websites, http://www.hoteldiscount.com and http://www.180096hotel.com, over 3,500 affiliate Websites and HRN's 24x7 toll-free call center (1-800-96- HOTEL). HRN provides accommodations at over 2,000 hotels in 83 major markets in North America and Western Europe. For more information about HRN, visit the company's websites at http://www.hoteldiscount.com and http://www.180096hotel.com. Located in Dallas, Texas, HRN is a majority-owned subsidiary of USA Networks, Inc.'s Information and Services unit.

This news release contains "forward-looking statements" within the meaning of section 21E of the Securities Exchange Act of 1934, as amended. The company has based these forward-looking statements on its current expectations and projections about future events, based on the information currently available to it. The forward-looking statements include among other things, statements relating to the company's anticipated financial performance, business prospects, new developments, new strategies and similar matters. These forward-looking statements, are subject to risks, uncertainties and assumptions that may affect the operations, performance, development and results of the company's business and include, but are not limited to, the risk factors described under the section "Risk Factors" in the company's prospectus filed with the SEC on February 25, 2000 (which is available upon request from the company or on the company's websites, http://www.hoteldiscount.com/ and http://www.180096hotel.com/, under the heading "Investor Relations.") and the following: 1) material adverse changes in the economic conditions in the company's markets; 2) future regulatory actions and conditions in the company's operating areas; 3) competition from others; 4) product demand and market acceptance; 5) the ability to protect proprietary information and technology or to obtain necessary licenses on commercially reasonable terms; and 6) the ability to obtain and retain key executives and employees. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or any other reason. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this press release may not prove correct.

                     Hotel Reservation Network, Inc.
                    Condensed Statement of Operations
                               (Unaudited)
               (In thousands, except for per share amounts)

                          Three Months Ended           Nine Months Ended
                             September 30,                September 30,
                          2000          1999           2000         1999
                              Pro Forma(1)                  Pro Forma(1)
  Revenues               $94,618       $47,652     $227,963      $108,371
  Cost of revenues(2)     65,723        34,150      158,276        76,703
  Gross profit            28,895        13,502       69,687        31,668
  Operating expenses:
  Selling general &
   administrative(2)&(3)  15,169         7,233       35,210        16,356
  Amortization of non-cash
   marketing and
   distribution expenses   1,235            --        2,956            --
  Amortization of
   goodwill               10,591        10,591       27,871        27,871

  Total operating
   expenses               26,995        17,824       66,037        44,227

  Income (loss)
   from operations         1,900       (4,321)        3,650      (12,558)
  Interest & other
   income, net             2,594           582        5,584         1,654
  Income (loss) before
   income tax              4,494       (3,739)        9,234      (10,904)

  Provision for
   income tax              1,730            --        3,555            --
  Net Income (loss)       $2,764      ($3,739)       $5,679     ($10,904)

  Net income (loss) per share
   (basic & diluted)       $0.05       ($0.07)        $0.11       ($0.21)

  Weighted average shares
   outstanding
   (basic)(4)             55,214        55,214       51,957        51,957
  Weighted average shares
   outstanding
   (diluted) (4)          56,487        55,214       52,660        51,957

  EBITDA(5)              $13,908        $6,399      $35,004       $15,616

  Adjusted income excluding
   certain Non-Cash
   charges(6):

  Income before
   income tax             $4,494      ($3,739)       $9,234     ($10,904)
  Adjustment for non-cash
   and non-recurring
   expenses:
  Amortization of
   goodwill               10,591        10,591       27,871        27,871
  Amortization of non-cash
   marketing and
   distribution expenses   1,235            --        2,956            --
  Total non-cash
   expenses               11,826        10,591       30,827        27,871

  Adjusted pre-tax income before
   non-cash expense       16,320         6,852       40,061        16,967

  Provision for
   income tax              6,283         2,638       15,423         6,532

  Adjusted net income    $10,037        $4,214      $24,638       $10,435

  Adjusted EPS Excluding
  Certain Non-Cash
   Changes (basic)(6)      $0.18         $0.08        $0.47         $0.20
  Adjusted EPS Excluding
  Certain Non-Cash
   Charges (diluted)(6)    $0.18         $0.07        $0.47         $0.20

  Weighted average shares
   outstanding (basic)(4) 55,214        55,214       51,957        51,957
  Weighted average shares
   outstanding
   (diluted)(4)           56,487        56,487       52,660        52,660

  Notes:
  (1)The pro forma operating statement for the quarter and nine months ended
  September 30, 1999 gives effect to the acquisition of ourpredecessor
  business as if it had occurred on January 1, 1999.
  (2)Reflects reclassification of performance based affiliate fees from cost
  of sales to selling, general and administrative (SG&A) expenses resulting
  in a reduction of cost of sales and increase of SG&A expenses of
  $0.8 million for the third quarter of 1999 and $1.6 million for the nine
  months ended September 30, 1999.
  (3)Selling, general & administration costs for the nine month ended
  September 30, 1999 exclude non-recurring acquisition related costs of
  $20,257.
  (4)Weighted average shares outstanding for the calculation of earnings per
  share for the nine months ended September 30, 2000 assumed the 38,999
  shares of the Class B Common Stock was outstanding for the entire period
  and the 16,235 shares ofClass A Common Stock and the dilutive effect of
  options and warrants issued at the time of the initial public offering are
  weighted for the period from February 25, 2000 to September 30, 2000.1999
  shares outstanding is shown for the same number of shares as 2000 for
  comparison purposes.
  (5)EBITDA is defined as earnings before interest, taxes, depreciation and
  amortization.  For the nine months ended September 30, 1999, it also
  excludes non-recurring acquisition related costs of $20,257.
  (6)Adjusted Net Income and Adjusted EPS information is presented for
  informational purposes only and should not be considered as a substitute
  for the historical financial information presented in accordance with
  generally accepted accounting principles.


                     Hotel Reservations Network, Inc.
                       Selected Balance Sheet Data
                               (Unaudited)
                              (in thousands)

                                                September 30,   December 31,
                                                   2000            1999

  Cash and cash equivalents                       $115,669         $6,257
  Short-term investments held for sale              55,184          4,906
  Fixed assets, net                                  2,831          1,988
  Accounts payable                                  29,608         16,252
  Deferred Revenue                                  43,496         16,447

SOURCE: Hotel Reservations Network

Contact: Investors - Mel Robinson of Hotel Reservations Network,
214-361-7311 ext 1034, mrobinson@hoteldiscount.com; or Michael Smargiassi of
Brainerd Communicators, 212-986-6667, smarg@braincomm.com