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Press release from GlobeNewswire (a Nasdaq OMX company)

KAYAK Reports Record Results and Agrees to Acquisition by Priceline.com Incorporated

Thursday, November 08, 2012

KAYAK Reports Record Results and Agrees to Acquisition by Priceline.com Incorporated13:01 EST Thursday, November 08, 2012NORWALK, Conn., Nov. 8, 2012 (GLOBE NEWSWIRE) -- KAYAK Software Corporation (Nasdaq:KYAK) today announced financial results for the third quarter ended September 30, 2012. The company also announced that it signed a definitive agreement to be acquired by priceline.com Incorporated (Nasdaq:PCLN) for $40 per share in cash and stock.Priceline Group Acquisition of KAYAK "Paul English and I started KAYAK eight years ago to create the best place to plan and book travel," said Steve Hafner, KAYAK Chief Executive Officer and Cofounder. "We're excited to join the world's premier online travel company. The Priceline Group's global reach and expertise will accelerate our growth and help us further develop as a company." "KAYAK has built a strong brand in online travel research and their track record of profitable growth is demonstrative of their popularity with consumers and value to advertisers," said Priceline Group President and Chief Executive Officer Jeffery H. Boyd. "KAYAK also has world class technology and a tradition of innovation in building great user interfaces across multiple platforms and devices. We believe we can be helpful with KAYAK's plans to build a global online travel brand." The board of directors of both companies approved the transaction, which is subject to KAYAK shareholder approval, customary closing conditions and regulatory approval. Until the transaction is closed, both companies will continue to operate independently.Third Quarter 2012 Financial Results In light of today's announcement, the previously scheduled conference call to discuss third quarter 2012 financial results has been canceled. "We generated record revenue and profits," said Steve Hafner, KAYAK Chief Executive Officer and Cofounder. "Our investments in product development, marketing, geographic expansion and mobile applications are paying off."Revenue: $78.6 million, a 29% increase from $61.2 million in the third quarter of 2011.Adjusted EBITDA: $21.1 million, a 19% increase from $17.7 million in the third quarter of 2011.Net Income: $8.0 million, a 14% increase from $7.0 million in the third quarter of 2011.EPS: Both GAAP and non-GAAP EPS for the third quarter of 2012 include 5.0 million additional shares compared to same period in 2011. EPS is calculated based on GAAP and non-GAAP net income divided by 42.7 million weighted average diluted shares outstanding for the third quarter of 2012 and 37.7 million weighted average diluted shares outstanding for the same period in 2011.GAAP EPS: $0.19, as compared to $0.18 in the third quarter of 2011.Non-GAAP EPS: $0.26, as compared to $0.26 in the third quarter of 2011. Non-GAAP earnings-per-share excludes $4.1 million in stock based compensation and $1.4 million of amortization of intangibles.Third Quarter 2012 Operating MetricsQueries: User requests for travel information processed through our websites and mobile apps. Please note that we recently revised our methodology for counting a mobile user query to be consistent with our methodology for counting website queries. This change results in lower mobile queries and higher corresponding revenues per thousand queries (RPM). Additional information regarding this change is provided in the tables below. The change has no impact on website queries. We processed 302 million queries across our websites and mobile applications, a 31% increase from 231 million queries in the third quarter of 2011. We processed 246 million queries on our websites, a 23% increase from the third quarter of 2011. We processed 56 million queries through our mobile applications, an 87% increase from the third quarter of 2011. Our applications were downloaded 3.1 million times, a 95% increase compared to the third quarter of 2011.Estimated RPMs by platform: Revenue per thousand queries. Total RPM was $260 compared to $265 in the third quarter of 2011, due to increased mix of mobile queries. Website RPM was $305, a 2% increase from $299 in the third quarter of 2011. Mobile RPM was $62, a 63% increase from $38 in the third quarter of 2011. This increase reflects both improved monetization and the refined methodology for defining queries discussed above.International expansion: Revenue from non-US geographies was $17.3 million for the third quarter 2012, a 40% increase from $12.3 million in the third quarter of 2011.About KAYAK KAYAK strives to be the best place to plan and book travel. The company's websites and mobile apps allow people to easily compare hundreds of travel sites at once, and give travelers choices on where to book. KAYAK operates websites in 18 countries and offers free apps for leading mobile platforms.About the Priceline Group The Priceline Group (Nasdaq:PCLN) is a leader in global online hotel reservations, with over 270,000 participating hotels worldwide. The Group is composed of four primary brands - Booking.com, priceline.com, Agoda.com and Rentalcars.com - and several ancillary brands. The Group provides online travel services in over 180 countries in Europe, North America, South America, the Asia-Pacific region, the Middle East and Africa. Booking.com is the number one online hotel reservation service in the world, offering over 245,000 hotels (as of November 1, 2012), and is available in 41 languages. More recent hotel counts are available on the Booking.com website. Priceline.com gives leisure travelers multiple ways to save on their airline tickets, hotel rooms, rental cars, vacation packages and cruises. In addition to getting compelling published prices, travelers can take advantage of priceline.com's famous Name Your Own Price® service, which can deliver the lowest prices available, or the recently added Express DealsSM, where travelers can take advantage of hotel discounts without bidding. Agoda.com is an Asia-based online hotel reservation service that is available in 38 languages. Rentalcars.com is a multinational car hire service, offering its reservation services in over 6,000 locations. Customer support is provided in 40 languages.Cautionary Note Regarding Forward Looking Statements: Certain statements in this communication regarding the proposed transaction between priceline.com Incorporated ("Priceline") and KAYAK Software Corporation ("KAYAK), the expected timetable for completing the transaction, benefits of the transaction, future opportunities for the combined company and any other statements regarding Priceline's or KAYAK's future expectations, beliefs, goals, plans or prospects constitute forward-looking statements made within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (collectively, forward-looking statements).  Any statements that are not statements of historical fact (including statements containing the words "may," "can," "will," "should," "could," "expects," "plans," "anticipates," "intends," "believes," "estimates," "predicts," "potential," "targets," "goals," "projects," "outlook," "continue," "preliminary," "guidance," or variations of such words, similar expressions, or the negative of these terms or other comparable terminology) should also be considered forward-looking statements.   No assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on Priceline's or KAYAK's results of operations or financial condition.  Accordingly, actual results may differ materially from those expressed in any forward-looking statements.  A number of important factors could cause actual results or events to differ materially from those indicated by such forward-looking statements, many of which are beyond the parties' control, including the parties' ability to consummate the transaction; the conditions to the completion of the transaction, including the receipt of stockholder approval, the regulatory approvals required for the transaction may not be obtained on the terms expected or on the anticipated schedule; the parties' ability to meet expectations regarding the timing, completion and accounting and tax treatments of the transaction; the possibility that the parties may be unable to achieve expected synergies and operating efficiencies in the arrangement within the expected time-frames or at all and to successfully integrate KAYAK's operations into those of Priceline; such integration may be more difficult, time-consuming or costly than expected; operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers or clients) may be greater than expected following the transaction; the retention of certain key employees of KAYAK may be difficult; Priceline and KAYAK are subject to intense competition and increased competition is expected in the future; the volatility of the economy; and the other factors described in Priceline's Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and in its most recent Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 filed with the SEC, and KAYAK's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 filed with the SEC.  Priceline and KAYAK assume no obligation to update the information in this communication, except as otherwise required by law.  Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.Participants in Solicitation KAYAK, Priceline and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from KAYAK's stockholders with respect to the transactions contemplated by that certain Merger Agreement, dated as of November 8, 2012, by and between KAYAK, Priceline and Produce Merger Sub, Inc., a wholly owned subsidiary of Priceline. Information regarding the KAYAK's directors and executive officers is contained in KAYAK's final prospectus for its initial public offering (File No. 333-170640), which was filed with the Securities and Exchange Commission, or the SEC, on July 20, 2012. You can obtain a free copy of this document at the SEC's website at www.sec.gov or by accessing KAYAK's website at www.kayak.com and clicking on the "About" link and then clicking on the "Investor Relations" link and "SEC Filings". As of November 8, 2012, KAYAK's directors and officers, collectively, beneficially owned approximately 28,824,262 shares, or 70.4%, of the KAYAK's Class A and Class B common stock, which represents 77.9% voting power. Additional information regarding the interests of the participants in the solicitation of proxies in connection with the transaction will be included in the Proxy Statement/Prospectus described below. Information regarding Priceline's executive officers and directors is contained in Priceline's definitive proxy statement filed with the SEC on April 24, 2012. You can obtain a free copy of this document at the SEC's website at www.sec.gov or by accessing Priceline's website at www.priceline.com and clicking on the "Investor Relations" link and then clicking on the "Financial Information" link.Additional Information and Where to Find It This press release relates to a proposed transaction between KAYAK and Priceline, which will become the subject of a registration statement and joint proxy statement/prospectus forming a part thereof to be filed with the SEC by Priceline. This press release is not a substitute for the registration statement and joint proxy statement/prospectus that Priceline will file with the SEC or any other documents that KAYAK or Priceline may file with the SEC or send to stockholders in connection with the proposed transaction. Before making any voting decision, investors and security holders are urged to read the registration statement, joint proxy statement/prospectus and all other relevant documents filed or that will be filed with the SEC in connection with the proposed transaction as they become available because they will contain important information about the proposed transaction and related matters. Investors and security holders will be able to obtain free copies of the registration statement, joint proxy statement/prospectus and all other relevant documents filed or that will be filed with the SEC by KAYAK or Priceline through the website maintained by the SEC at www.sec.gov. In addition, investors and security holders will be able to obtain free copies of the Proxy Statement/Prospectus from KAYAK by contacting KAYAK Software Corporation, 55 North Water Street, Suite 1, Norwalk, CT 06854, Attn: Corporate Secretary or by calling (203) 899-3100.Use of Non-GAAP Financial Measures We exclude the following items from one or more of our non-GAAP measures: Stock-based compensation. We exclude stock-based compensation because it is non-cash in nature and because we believe that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance and liquidity. Due to varying available valuation methodologies, subjective assumptions and the variety of award types we can use under FASB ASC Topic 718, our management believes that providing non-GAAP financial measure that excludes stock-based compensation allows investors to make meaningful comparisons between our recurring core business operating results and those of other companies. We further believe this measure is useful to investors in that it allows for greater transparency to certain line items in our financial statements and facilitates comparisons to competitors' operating results. Amortization and impairment of acquired intangible assets and amortization and depreciation of tangible assets. We exclude (i) amortization and impairment of acquired intangible assets and (ii) amortization and depreciation of tangible assets because they are non-cash in nature and because we believe that the non-GAAP financial measures excluding these items provide meaningful supplemental information regarding operational performance and liquidity. In addition, excluding these items from various non-GAAP measures facilitates internal comparisons to historical operating results and comparisons to competitors' operating results. Income tax effect of non-GAAP adjustments. We adjust non-GAAP net income by including the income tax effects of excluding stock-based compensation and the amortization and impairment of acquired intangible assets. We believe that the inclusion of the income tax effect provides additional transparency to the overall or "after tax" effects of excluding these items from non-GAAP net income. Dilutive shares under the treasury stock method. For the nine months ended September 30, 2011, we excluded certain potential common shares from our GAAP diluted shares because their effect would have been anti-dilutive. On a non-GAAP basis, these shares would have been dilutive. As a result, we have included the impact of these shares in the calculation of our non-GAAP diluted net income per share under the treasury stock method. For more information on the non-GAAP financial measures, please see the "Schedule of Non-GAAP Reconciliations" and "Adjusted Net Income and Diluted Earnings Per Share (Non-GAAP)" tables in this press release. These accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.  KAYAK Software Corporation and Subsidiaries   Consolidated Statements of Operations (Unaudited, in thousands, except share and per share amounts)  Three Months Ended September 30,Nine Months Ended September 30,  2012201120122011 Revenues  $ 78,604  $ 61,160  $ 228,880  $ 170,587 Cost of revenues (excludes depreciation and amortization)  4,908  4,151  14,900  13,780 Selling, general and administrative expenses:         Marketing  40,042  28,935  120,700  87,417 Personnel, includes stock-based compensation of $3,450 and $3,121 for three months ended September 30, 2012 and 2011 respectively and $9,117 and $9,312 for the nine months ended September 30, 2012 and 2011 respectively  12,393  10,286  35,612  30,125 Other general and administrative expenses, includes stock-based compensation of $662 and $0 for three months ended September 30, 2012 and 2011 respectively and $835 and $0 for the nine months ended September 30, 2012 and 2011 respectively  4,256  3,196  12,703  11,577 Total selling, general and administrative expenses (excludes depreciation and amortization)  56,691  42,417  169,015  129,119 Depreciation and amortization  2,078  1,935  6,178  6,337 Impairment of intangible assets  —   —   —   14,980 Income from operations  14,927  12,657  38,787  6,371 Other income (expense)         Interest income  66  23  134  68 Other income (expense)  (831)  (449)  (1,640)  468 Total other income (expense)  (765)  (426)  (1,506)  536 Income before taxes  14,162  12,231  37,281  6,907 Income tax expense  6,208  5,263  17,894  3,077 Net income  7,954  6,968  19,387  3,830 Redeemable convertible preferred stock dividends  (772)  (2,937)  (6,644)  (8,809) Deemed dividend resulting from modification of redeemable convertible preferred stock  —   —   (2,929)  —  Net income (loss) attributed to common stockholders  $ 7,182  $ 4,031  $ 9,814  $ (4,979)Net income (loss) per common share         Basic $0.24 $0.55 $0.67 ($0.67) Diluted $0.19 $0.18 $0.48 ($0.67)Weighted average common shares         Basic  29,962,706  7,336,438  14,739,047  7,412,882 Diluted  42,746,507  37,669,803  40,289,192  7,412,882  KAYAK Software Corporation and Subsidiaries  Condensed Consolidated Balance Sheets (Unaudited, in thousands, except share and per share amounts)  September 30,December 31,  20122011Assets     Current assets     Cash and cash equivalents  $ 170,140  $ 35,127 Marketable securities  8,226  11,198 Accounts receivable, net of allowance for doubtful accounts  51,771  37,332 Deferred tax asset  2,212  2,212 Prepaid expenses and other current assets  5,387  5,425 Total current assets  237,736  91,294 Property and equipment, net  5,377  5,474 Intangible assets, net  13,446  17,684 Goodwill  155,572  155,677 Deferred tax asset  9,345  7,488 Other assets  1,323  331 Total assets  $ 422,799  $ 277,948Liabilities and stockholders' equity (deficit)     Current liabilities     Accounts payable  $ 17,833  $ 9,514 Accrued expenses and other current liabilities  21,160  16,220 Total current liabilities  38,993  25,734 Warrant liability  542  1,150 Deferred tax liability  3,286  4,202 Other long-term liabilities  2,545  1,092 Total liabilities  45,366  32,178 Redeemable convertible preferred stock  —   247,494 Commitments and contingencies     Stockholders' equity (deficit)     Preferred Stock  —   —  Common Stock  —   7 Class A common stock: 4,587,563 shares issued and outstanding as of September 30, 2012  5  —  Class B common stock: 33,949,749 shares issued and outstanding as of September 30, 2012  34  —  Additional paid-in capital  366,442  3,296 Cumulative translation adjustment  (1,456)  (977) Accumulated earnings (deficit)  12,408  (4,050) Total stockholders' equity (deficit)  377,433  (1,724) Total liabilities and stockholders' equity (deficit)  $ 422,799  $ 277,948  KAYAK Software Corporation and Subsidiaries   Consolidated Statements of Cash Flows (Unaudited, in thousands)  Nine Months Ended September 30,  20122011Cash flows from operating activities     Net income (loss)  $ 19,387  $ 3,830 Adjustments to reconcile net income to net cash from operating activities:     Depreciation and amortization  6,178  6,337 Stock-based compensation expense  9,952  9,312 Excess tax benefits from exercise of stock options  (154)  (579) Deferred taxes  (2,740)  (10,407) Mark to market adjustments  923  (468) Impairment of intangible assets  —   14,980 Other  —   122 Changes in assets and liabilities, net of effect of acquisitions:     Accounts receivable, net  (14,509)  (9,147) Prepaid expenses and other current assets  (1,967)  (8,089) Accounts payable  8,330  4,345 Accrued liabilities and other liabilities  6,280  16,779 Net cash from operating activities  31,680  27,015Cash flows from investing activities     Capital expenditures  (1,957)  (2,693) Proceeds from sale of property and equipment  —   42 Purchase of marketable securities  (8,472)  (21,289) Maturities of marketable securities  11,266  10,907 Exercise of put options  —   (13,221) Cash paid for business combinations, net of cash acquired  —   (9,160) Net cash from investing activities  837  (35,414)Cash flows from financing activities     Proceeds from exercise of stock options  892  1,546 Proceeds from initial public offering, net of offering costs  95,705  (1,234) Tax benefits realized from exercise of stock options  154  579 Private placement Class A common stock issuances  6,024  —   Net cash from financing activities  102,775  891 Effect of exchange rate changes on cash and cash equivalents  (279)  96 Increase (decrease) in cash and cash equivalents  135,013  (7,412) Cash and cash equivalents, beginning of period  35,127  34,966 Cash and cash equivalents, end of period  $ 170,140  $ 27,554Supplemental disclosures of cash flow information     Cash paid during the period for:     Interest  —   —  Income taxes  $ 16,875  $ 8,319  Key Operating Metrics (Unaudited, in thousands, except RPM)  Three months ended September 30,Nine months ended September 30,  2012201120122011 Estimated Mobile Queries   56,234  30,145  150,373  77,185 Estimated Website Queries  246,140  200,683  751,030  588,952 Total Queries 302,374 230,828 901,403 666,137                      Three months ended September 30,Nine months ended September 30,  2012201120122011 Estimated Mobile RPM  $ 62  $ 38  $ 52  $ 37 Estimated Website RPM   $ 305  $ 299  $ 294  $ 285 Total RPM  $ 260  $ 265  $ 254  $ 256                    Schedule of Non-GAAP Reconciliations (Unaudited, in thousands)  Three months ended September 30,Nine months ended September 30,  2012201120122011 Income from operations  $ 14,927  $ 12,657  $ 38,787  $ 6,371 Other income (expense), net  (831)  (449)  (1,640)  468 Depreciation and amortization  2,078  1,935  6,178  6,337 Impairment of intangible assets  —   —   —   14,980 EBITDA  16,174  14,143  43,325  28,156 Stock-based compensation  4,112  3,121  9,952  9,312 Other (income) expense, net  831  449  1,640  (468) Adjusted EBITDA  $ 21,117  $ 17,713  $ 54,917  $ 37,000                    Non-GAAP Net Income and Diluted Earnings Per Share (Unaudited, in thousands except Basic and Diluted Weighted Average Common Shares and Earnings Per Share)  Three months ended September 30,Nine months ended September 30,  2012201120122011 GAAP Net income  $ 7,954  $ 6,968  $ 19,387  $ 3,830 Amortization of intangibles  1,388  1,472  4,203  5,006 Impairment of intangibles  —   —   —   14,980 Stock-based compensation  4,112  3,121  9,952  9,312 Tax impact  (2,167)  (1,951)  (5,441)  (12,776) Non-GAAP Net income  11,287  9,610  28,101  20,352           Diluted weighted average common shares  42,746,507   37,669,803  40,289,192   37,229,282           Non-GAAP Diluted EPS  $ 0.26  $ 0.26  $ 0.70  $ 0.55   We recently revised our methodology for counting mobile queries to remove repetitive searches conducted during the same user session. By removing repetitive searches, our methodology is now consistent for both website queries and mobile. As a result, the number of reported mobile queries is lower, and the corresponding revenue per thousand queries (RPM) is higher for mobile. The table below presents the revised estimates for historical mobile queries and RPMs based on our revised methodology. These revised estimates will also be reflected in our future periodic reports, including our Form 10-Q for the quarter ending September 30, 2012.                  Q1Q2Q3Q4Q1Q2Q3  2011201120112011201220122012 Estimated Mobile Queries  21,849  25,190  30,145  32,110  45,030  49,108  56,234 Estimated Website Queries  188,813  199,456  200,683  182,663  257,954  246,936  246,140 Total Queries  210,662  224,646  230,828  214,773  302,984  296,044  302,374                 Estimated Mobile RPM  $ 35  $ 38  $ 38  $ 32  $ 38  $ 54  $ 62 Estimated Website RPM  $ 275  $ 280  $ 299  $ 290  $ 278  $ 301  $ 305 Total RPM  $ 250  $ 253  $ 265  $ 251  $ 242  $ 260  $ 260CONTACT: Investor Relations: Denise Garcia 203-682-8335 IR@kayak.com Media Relations: Jessica Casano-Antonellis prcontact@kayak.com