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8-K - FORM 8-K - KAYAK Software Corpd436223d8k.htm
EX-2.1 - AGREEMENT AND PLAN OF MERGER - KAYAK Software Corpd436223dex21.htm

Exhibit 99.1

KAYAK REPORTS RECORD RESULTS AND AGREES

TO ACQUISITION BY PRICELINE.COM INCORPORATED

Norwalk, CT - November 8, 2012 - 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 Metrics

 

 

Queries: 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.

###

Contacts:

Investor Relations:

Denise Garcia

203-682-8335

IR@kayak.com

Media Relations:

Jessica Casano-Antonellis

prcontact@kayak.com


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,  
    2012     2011     2012     2011  

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,  
     2012     2011  

Assets

    

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      $ 277,948   
  

 

 

   

 

 

 

Liabilities 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,  
     2012     2011  

Cash 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        27,015   
  

 

 

   

 

 

 

Cash 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 expenses

     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      $ 27,554   
  

 

 

   

 

 

 

Supplemental 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,
 
     2012      2011      2012      2011  

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,
 
     2012      2011      2012      2011  

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,
 
     2012     2011     2012     2011  

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,
 
     2012     2011     2012     2011  

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.

Queries and RPM

(Unaudited, in thousands, except RPM)

 

     Q1
2011
     Q2
2011
     Q3
2011
     Q4
2011
     Q1
2012
     Q2
2012
     Q3
2012
 

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       $ 260