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  1. Case      Summary:

In a brief succinct manner, summarize the case’s key issues. Identify only the most critical issues that someone not familiar with the parties involved would be able to have a basic idea of what the case was about.

  1. Problem      / Opportunity Identification

Part of your analysis is to define the problem or problems (often there are multiple, interacting problems). Look to any case guide line questions (if provided) for some conceptual direction, but do not seek merely to address these provided questions.

· Define the major problem or problems (not the symptoms in the case). Symptoms are the results of problems, not the problems.

· Problems cause symptoms (e.g., stress causes the symptom of high blood pressure).

· Often, the symptoms are directly described in the case, whereas the problem(s) usually are not.

· If necessary, indicate how the problems are related to one another.

  1. Conclusions      and Comments:

This section is for any final thoughts that you have on points you have already discussed. Do not bring up any new issues here. 

GUIDELINES FOR CASE ANALYSIS For KAYAK

Prepared by Dr. Michael Faulkner

Many students initially find case analysis of management problems to be difficult and uncomfortable. This is due to the relative lack of structure of most problems found in management. No correctly answered list of pre-questions or mechanical process will lead to the “right” answer. In fact, there usually is no single, definitively “right” solution to most managerial problems or possible hidden opportunities. When analyzing a case, remember that there are often many possible solutions and alternative approaches and solutions. The goal is not to find the one and only solution, but to examine the case and practice analyzing and solving real world problems from a Management/Organizational Behavior perspective.

Please use the following format to guide your thinking and to frame your written case analysis (if required).

A. Case Summary:

In a brief succinct manner, summarize the case’s key issues. Identify only the most critical issues that someone not familiar with the parties involved would be able to have a basic idea of what the case was about.

B. Problem / Opportunity Identification:

Part of your analysis is to define the problem or problems (often there are multiple, interacting problems). Look to any case guide line questions (if provided) for some conceptual direction, but do not seek merely to address these provided questions.

· Define the major problem or problems (not the symptoms in the case). Symptoms are the results of problems, not the problems.

· Problems cause symptoms (e.g., stress causes the symptom of high blood pressure).

· Often, the symptoms are directly described in the case, whereas the problem(s) usually are not.

· If necessary, indicate how the problems are related to one another.

C. Conclusions and Comments:

This section is for any final thoughts that you have on points you have already discussed. Do not bring up any new issues here.

Some other helpful hints for Case Study Preparation:

1. I care about student writing. The case analysis needs to be clear, crisp, and concise. Facts from the case are stated only to make a point, not to retell the story. Do not rehash the minutia or details in the case. The case analysis needs to be organized, spelling, grammar, and word usage must be correct.

2. Make sure your paper has a logical flow. Make clear links between the identified problems, the analysis of these problems, and the solutions proposed.

3. Provide analysis, not description. Demonstrate your ability to use and apply theories and concepts from the course material; integrate course material where it is useful. Mine the text for nuggets of theory that help explain the issues. For example, it’s not enough to say that ERG theory applies here… you must show HOW it applies. You can’t simply say situational leadership theory applies; you have to show how Mrs. X used a delegating style when a directive style would have been appropriate because…….

4. Be thorough. It is better to give a through, explicit analysis focused on one or two primary problems than it is to barely touch upon 50 problems.

5. Sometimes students come up with amazing recommendations (for better and worse) that have no relationship to their analysis. I want to see that it’s the analysis that frames decisions made about the case. A poor analysis that results in good decisions means that somewhere or other, you have intuitively understood the case, but you need to backtrack and figure out what you nderstood. A great analysis that results in decisions that come from left field signals that are not USING your analysis.

Some helpful hints for participating in Case Study Discussions:

1. Keep in mind that there is usually more than one right answer. A case is a problem-solving situation, and managerial effectiveness often depends upon seeing different possible solutions.

2. Offer your ideas, substantiating them with facts from the case and course material. Don’t fall into the trap of being told, “That’s an interesting idea, but you have no data or case facts to support your conclusions.”

3. Be assertive, yet professional and respectful in questioning or disagreeing with a classmate. Case discussions are an important opportunity to refine interpersonal skills. “I see some drawbacks to your proposal” or “I’m wondering if you considered the effects of X on Y” creates a much different climate than “You’re wrong” or “That’s not a good idea.” Adopt an open-minded stance. Entertain new ideas from others and consider how your recommendations might change in light of these new insights.

4. Write down new ideas that occur to you and make note of any theories or course concepts brought to bear that you did not apply in your initial analysis.

5. Evaluate the discussion and your participation in it. What could you do to improve in the next case study discussion?

6. Enjoy yourself! If you let them, cases studies can be an exciting way to learn.

1

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


NASDAQ OMX’s News Release Distribution Channel

; New York [New York]08 Nov 2012.

NORWALK, 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 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 Deals SM , 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,

 

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 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

 $ 27,554

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.

 

 

 

 

 

 

 

 

 

Q1

Q2

Q3

Q4

Q1

Q2

Q3

 

2011

2011

2011

2011

2012

2012

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

CONTACT: Investor Relations: Denise Garcia 203-682-8335 [email protected] Media Relations: Jessica Casano-Antonellis [email protected]

KAYAK reports record results and agrees to acquisition by priceline.com incorporated. (2012, Nov 08). NASDAQ OMX’s News Release Distribution Channel Retrieved from
https://search-proquest-com.proxy.devry.edu:5443/docview/1144971220?accountid=44759

Nasdaq Files of all Kayak filings with SEC:


https://www.nasdaq.com/markets/ipos/company/kayak-software-corp-659492-65680?tab=financials

The IPO Prospectus:


https://www.nasdaq.com/markets/ipos/filing.ashx?filingid=8724233

Registration Statement:


https://www.nasdaq.com/markets/ipos/filing.ashx?filingid=8717685

Kayak 10K Filing:


https://www.sec.gov/Archives/edgar/data/1312928/000131292813000005/kayakq4201210-k.htm

KAYAK Prices Initial Public Offering


NASDAQ OMX’s News Release Distribution Channel

; New York [New York] 19 July 2012.

NORWALK, Conn., July 19, 2012 (GLOBE NEWSWIRE) — KAYAK Software Corporation (Nasdaq:KYAK) announced today the pricing of its initial public offering of 3,500,000 shares of its Class A common stock at a price to the public of $26.00 per share. The shares are expected to begin trading on NASDAQ under the ticker symbol “KYAK” on Friday, July 20, 2012. All of the shares were offered directly by KAYAK. In addition, KAYAK has granted the underwriters a 30-day option to purchase up to 525,000 additional shares of Class A common stock to cover over-allotments, if any.

Morgan Stanley and Deutsche Bank Securities are acting as joint book-running managers for the offering. Piper Jaffray, Stifel Nicolaus Weisel and Pacific Crest Securities are co-managers for the offering.

The offering of these securities is being made only by means of a prospectus. A copy of the prospectus may be obtained from the offices of Morgan Stanley & Co. LLC, Attention: Prospectus Department, 180 Varick Street, 2nd Floor, New York, New York 10014, or by email at [email protected] or by phone at (866) 718- 1649; or Deutsche Bank Securities Inc., Attention: Prospectus Group, 60 Wall Street, New York, New York 10005-2836, by email at [email protected], or by phone at (800) 503-4611.

A registration statement relating to these securities was declared effective by the U.S. Securities and Exchange Commission on July 19, 2012.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

About KAYAK

KAYAK is a technology company providing free travel tools through its global websites and mobile applications. KAYAK allows users to easily research and compare accurate and relevant information when searching for flights, hotels, car rentals, and vacations from hundreds of other travel websites in one comprehensive, fast and intuitive display. KAYAK’s travel management service (kayak.com/trips) allows users to easily consolidate their booking information into one simple itinerary. KAYAK operates websites in 15 countries outside of the U.S., including Germany, the United Kingdom, France, Spain, and Italy, and offers leading travel apps available on iPhone, iPad, Android, Windows Mobile 7 and Nokia devices.

CONTACT: Media Relations: Jessica Casano-Antonellis [email protected] Investor Relations: Denise Garcia 203-682-8335 I[email protected]

KAYAK prices initial public offering. (2012, Jul 19). NASDAQ OMX’s News Release Distribution Channel Retrieved from https://search-proquest-com.proxy.devry.edu:5443/docview/1034413281?accountid=44759

Kayak.com Secures $196M Financing Round: Announces Merger with SideStep, Inc. to Become the World’s Fifth Largest Travel Site

Anonymous
PR Newswire

; New York [New York]21 Dec 2007.

Abstract

Other participants in the financing round include existing Kayak.com investors General Catalyst Partners and Accel Partners, SideStep investors Norwest Venture Partners and Trident Capital, new investors Oak Investment Partners and Lehman Brothers Venture Partners, and debt lenders Silicon Valley Bank and Gold Hill Capital. Launched in 2005 by co-founders of Orbitz, Travelocity and Expedia, Kayak.com’s investors include General Catalyst Partners, Sequoia Capital, Accel Partners, Oak Investment Partners, Lehman Brothers Venture Partners and America Online, Inc. Kayak.com has sites in the UK, France, Germany and Spain.

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NORWALK, Conn., Dec. 21 /PRNewswire/ — Kayak.com, the world’s largest travel search engine, today announced the completion of a $196 million financing round. Kayak.com will use this investment to complete a merger with SideStep, Inc. and to pursue a more aggressive worldwide expansion. As part of this transaction, Michael Moritz of Sequoia Capital will join Kayak.com’s Board of Directors.

“Kayak.com has become the Internet’s best destination for clear and objective travel information,” said Michael Moritz, Partner at Sequoia Capital. “Kayak.com’s merger with SideStep.com reshapes the largest sector in online commerce.”

Other participants in the financing round include existing Kayak.com investors General Catalyst Partners and Accel Partners, SideStep investors Norwest Venture Partners and Trident Capital, new investors Oak Investment Partners and Lehman Brothers Venture Partners, and debt lenders Silicon Valley Bank and Gold Hill Capital.

In parallel with the new financing, a subsidiary of Kayak.com will merge with SideStep.com, the Internet’s first travel search company. This transaction combines the two biggest brands in travel search, which would make Kayak.com and its affiliate sites the fifth largest travel brand, with more monthly unique visitors than Priceline, every airline except Southwest, and every hotel and rental car brand(1). Consumers will conduct more than 33 million searches on Kayak.com and its affiliates in January 2008, up from 16 million in January 2007.

Kayak.com intends to maintain both the SideStep.com and Kayak.com brands and will develop and promote each site independently, with key SideStep.com personnel joining Kayak.com’s team. The merger will combine best practices of each company, and users of Kayak.com and SideStep.com will benefit from access to more comprehensive rates and availability data, a larger portfolio of products and services and an overall improved customer experience.

“The commercial logic of this deal is obvious,” said Steve Hafner, Kayak.com CEO and co-founder. “Kayak.com is a technology company focused on perfecting travel search, and SideStep.com is a media company with in-house sales expertise and user-generated content. By merging, each brand can improve its offering while continuing to focus on its individual strengths. With less than 10 percent overlap between existing Kayak.com and SideStep.com users, each site stands to gain millions of new users(2).”

“Kayak.com’s focus on customer service and rapid innovation has led to the best air and hotel search technology on the web,” said Paul English, CTO and co-founder of Kayak.com. “Combined with SideStep.com’s travel guides and hotel reviews, both sites have a more complete offering for travellers than ever before. As a native Bostonian, I am also personally gratified to finally see an East Coast technology firm purchasing a West Coast counterpart.”

One of the fastest growing sites on the Internet, Kayak.com exploded onto the North American market in 2005 and emerged as a top tier travel site in less than two years. Kayak.com won more awards in 2007 than any other travel site, including several from leading US media such as TIME, Travel + Leisure and Kiplinger’s Personal Finance Magazine, as well as UK publications including Sunday Times, The Telegraph and The Observer.

The new financing and the SideStep.com merger will accelerate Kayak.com’s international expansion plans. Kayak.com currently has websites in the UK, France, Germany and Spain, and will soon launch in Italy. SideStep.com’s website in Ireland and its European affiliates will add to Kayak.com’s global business. Kayak.com will also announce several anchor affiliate deals in Europe in the coming months and is currently evaluating opportunities throughout Europe and Asia.

“From its inception as the first travel search engine, SideStep.com believed that consumers would prefer an objective and comprehensive travel shopping experience,” said Rob Solomon, CEO of SideStep.com. “Joining forces with Kayak.com will help make this vision a reality for mass market consumers.”

About Kayak.com

Kayak.com, the world’s largest travel search engine, displays results from more than 400 travel sites, providing prices and itineraries for hundreds of airlines, more than 90,000 hotels, all leading rental car companies and 18 cruise lines. Kayak.com was named “100 Best Products of 2007” by PC World; “25 Sites We Can’t Live Without” by TIME Magazine; “Best Search Engine” by the Associated Press; and “Best of the Web” by BusinessWeek, Forbes.com and US News & World Report. Launched in 2005 by co-founders of Orbitz, Travelocity and Expedia, Kayak.com’s investors include General Catalyst Partners, Sequoia Capital, Accel Partners, Oak Investment Partners, Lehman Brothers Venture Partners and America Online, Inc. Kayak.com has sites in the UK, France, Germany and Spain. For more information, visit www.Kayak.com.

About SideStep.com

SideStep.com, the Internet’s first travel search company, delivers a comprehensive selection of travel choices at the best prices. SideStep.com has been named one of TIME Magazine’s “50 Coolest Web Sites,” a PC World “World Class Site” and one of its “Best Products of 2006,” and declared “Best of the Web” by both Forbes and BusinessWeek Online. Headquartered in Santa Clara, California, SideStep.com is privately held and has raised more than $30 million in funding from Trident Capital, Norwest Venture Partners, PAR Capital, Saints Capital and Leader Ventures. For more information, visit www.sidestep.com.

(1) Based on comScore Media Metrix Digital Calculator Report for unique

visitors during the month of November 2007. Digital calculation

includes Kayak.com and SideStep.com visits as well as visits from

Kayak.com affiliate partners including About.com, Comcast, LonelyPlanet,

Rand McNally and USA Today.

(2) Overlap percentage based on an internal comparison of internet protocol

addresses in combination with browser versions of Kayak.com users versus

SideStep.com users.

SOURCE Kayak.com

Kayak Merges With SideStep

Everson, Darren
Wall Street Journal

, Eastern edition; New York, N.Y. [New York, N.Y]21 Dec 2007: B.4.

Abstract

Consumers won’t notice a difference by looking at the sites, Kayak Chief Executive Steve Hafner says, but by combining content and technology, the company will be able to make SideStep’s interface work faster, and Kayak, which has been focused on perfecting the search process, will have access to SideStep travel guides, hotel reviews and downloadable tool bar.

Full Text

Kayak.com and SideStep.com, two popular travel-search Web sites, plan to merge, a deal that promises to give consumers access to more- comprehensive rates and availability data.

The merger of the closely held companies will close today, according to Kayak officials. Financial terms of the deal weren’t disclosed. Kayak says the merger will make it the fifth-largest travel site in search volume.

Kayak and SideStep are “meta” travel sites that search hundreds of travel Web sites, including airlines, hotels and sites like Orbitz.com. Kayak says there is less than 10% overlap among Kayak and SideStep users. SideStep will become a subsidiary of Kayak, but Kayak will maintain and develop each site separately.

Consumers won’t notice a difference by looking at the sites, Kayak Chief Executive Steve Hafner says, but by combining content and technology, the company will be able to make SideStep’s interface work faster, and Kayak, which has been focused on perfecting the search process, will have access to SideStep travel guides, hotel reviews and downloadable tool bar.

Users will be able to make broader searches internationally because the sites will combine travel partners. Although Kayak and SideStep have much the same roster of airlines and hotels domestically, Mr. Hafner says, there is significant variance internationally. Analysts aren’t convinced the deal will greatly benefit consumers — or Kayak. The market appears to have plateaued, says Henry Harteveldt, an analyst with Forrester Research Inc., noting that 12% to 15% of online leisure travelers use meta sites, roughly the same share as in 2006.

Everson, D. (2007, Dec 21). Kayak merges with SideStep. Wall Street JournalRetrieved from https://search-proquest-com.proxy.devry.edu:5443/docview/398995622?accountid=44759

Sheet1

KAYAK Funding Rounds
DATE Funding Round # of Investors Funds Raised Lead Funder Pre Money Evaluation
14-Jan-04 Early Stage Venture Series A 2 $ 8,500,000.00
1-Dec-04 Series B 3 $ 7,000,000.00 Sequoia Capital
1-May-06 Series C 1 $ 11,500,000.00 Accel
1-Dec-07 Late Stage Series D 9 $ 196,000,000.00 Trident Capital $ 600,000,000.00
1-Mar-10 Venture Round Series Unknown 1 VC Institution Venture Partners
31-Jan-12 Secondary Market
17-Aug-12 IPO 3,500,000 shares offered $ 91,000,000.00 Prospectus: https://www.nasdaq.com/markets/ipos/filing.ashx?filingid=8724233
22-Nov-12 Kayak Sells to Price line $40 per share, $500 million cash, 1 Billion in Price line equity and $300 million in stock options Kayack.com got 29% premium. At closing Kayak.com stock closed at 31.

“Kayak.com will become the savvy travelers’ most useful resource for making informed decisions during their travel planning,” said [Steve Hafner], Co-founder and CEO. “We created the site to meet the needs of today’s consumers who are frustrated by having to search multiple sites to find the best deal. With just one click, visitors to Kayak.com will be able to see prices and services in real-time from over 60 leading travel sites. Kayak.com’s reach is so comprehensive that consumers will often find an itinerary on Kayak.comthat they may not have found on their own. Not only does Kayak.com provide consumers with more travel options than any other site, but it also gives consumers the freedom to choose where to buy their trip through our innovative MultiBook(TM) technology.”

“Kayak.com is the first travel aggregator to use Rich Internet Architecture (RIA) to ensure quick, real-time filtering and sorting of hundreds of results,” said [Paul English], Co-founder and Chief Technical Officer. “RIA allows Kayak.com to filter duplicate fares, displaying a clean, easy-to-read results screen. Consumers can easily change search parameters, such as time of departure, airport preference, or airlines and see the reorganized results instantaneously. No other site does that.”

To help further make travel planning easy, Kayak.com allows travelers to post and view ratings and reviews and access information from other respected travel sources like Frommer’s and Fodor’s. In addition, the site remembers most recent searches and airport preferences. Over time, Kayak.com will let consumers specify their preferences for airlines, stops, fares, hotel star rating, and hotel locations so options will automatically be filtered and displayed based on those preferences.

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Kayak Software Corp. Dana Galin, 203-899-3106 Cell: 917-679-2162 [email protected] or Weber Shandwick Anna Stancioff, 212-445-8138 [email protected] Kellie Pelletier, 212-445-8153 [email protected]

Former Executives from Travelocity, Orbitz, Expedia, and Intuit Create Online Travel Search Site that Offers Comprehensiveness, the Option to Choose Where to Book and User-Created Ratings and Reviews

Imagine the possibilities when key executives behind Travelocity, Orbitz, Expedia, and Intuit join together to create the next generation of online travel. The new Internet travel “Dream Team,” the people behind Kayak Software Corp., has launched the public beta, or preview version of Kayak.com.

Only the people who invented online travel could develop a site powerful enough to meet the needs of today’s online travelers. Kayak’s “Dream Team” includes:

–From Orbitz: Steve Hafner, Co-Founder and CEO. Steve was Executive Vice President of Consumer Travel at Orbitz, Inc., which he helped found in November 1999.

–From Intuit: Paul English, Co-Founder and Chief Technical Officer. Paul was the Vice President of Technology at Intuit, Inc. following its acquisition of Boston Light Software, an e-commerce company which he founded in 1999. Also from Intuit are Bill O’Donnell, Chief Architect; Paul Schwenk, VP of Engineering; and Jim Giza, VP Operations.

–From Travelocity: Terry Jones, Chairman of the Board. Terry was President and CEO of Travelocity.com which he helped found in 1996.

–From Expedia: Greg Slyngstad, Director. Greg was Senior Vice President of Destinations and Lodging at Expedia.com, which he helped found while at Microsoft.

–Other notables include: Keith Melnick, formerly a manager at the Boston Consulting Group, where he served on the launch team of Orbitz, Inc.; Matt Mancuso, formerly the Corporate Controller at Hotwire, which he helped found in 2000; and Drew Patterson, formerly the Director of Pricing, Distribution, and E-commerce for Starwood Hotels and Resorts, where he oversaw the formation of Travelweb, a hotel industry consortium to distribute net rate inventory.

“Kayak.com will become the savvy travelers’ most useful resource for making informed decisions during their travel planning,” said Steve Hafner, Co-founder and CEO. “We created the site to meet the needs of today’s consumers who are frustrated by having to search multiple sites to find the best deal. With just one click, visitors to Kayak.com will be able to see prices and services in real-time from over 60 leading travel sites. Kayak.com’s reach is so comprehensive that consumers will often find an itinerary on Kayak.com that they may not have found on their own. Not only does Kayak.com provide consumers with more travel options than any other site, but it also gives consumers the freedom to choose where to buy their trip through our innovative MultiBook(TM) technology.”

As a travel aggregator and a technology company, Kayak.com does not sell a product, but instead offers a comprehensive search engine that scours over 60 online travel sites, providing prices and itineraries for more than 550 airlines and 85,000 hotels. Kayak.com’s results page displays more choice of available itinerary/ price combinations than any other online travel site and is the only travel search engine that lets the consumer choose where to purchase the preferred itinerary–making comparison shopping across the Web easier than ever.

“Kayak.com is the first travel aggregator to use Rich Internet Architecture (RIA) to ensure quick, real-time filtering and sorting of hundreds of results,” said Paul English, Co-founder and Chief Technical Officer. “RIA allows Kayak.com to filter duplicate fares, displaying a clean, easy-to-read results screen. Consumers can easily change search parameters, such as time of departure, airport preference, or airlines and see the reorganized results instantaneously. No other site does that.”

To help further make travel planning easy, Kayak.com allows travelers to post and view ratings and reviews and access information from other respected travel sources like Frommer’s and Fodor’s. In addition, the site remembers most recent searches and airport preferences. Over time, Kayak.com will let consumers specify their preferences for airlines, stops, fares, hotel star rating, and hotel locations so options will automatically be filtered and displayed based on those preferences.

“Think of Kayak.com as the ‘Google meets Amazon’ of travel search. Kayak.com finds the most options, allows you to share tips and information with travelers like you and remembers what you like – all to put the purchasing power back in the consumer’s hands,” added Hafner.

In anticipation of its consumer launch early next year, Kayak will continue to add features and functionality, such as multi- city, one-way, passenger-type and cabin-type search as well as building proprietary content and personalization components, including member pages, among other enhancements and partnerships. Kayak.com is free to consumers.

To speak to a member of the “Dream Team” or learn more about Kayak.com, contact: Dana GalinAnna Stancioff/Kellie Pelletier Vice President Communications Weber Shandwick Kayak Software Corp.212-445-8138/212-445-8153 o/203-899-3106 or c/[email protected]/ [email protected]@webershandwick.com

Partners interested in distributing via Kayak.com should contact Keith Melnick, Vice President, Business Development at 203-899-3105 or via e-mail [email protected]

Kayak.com navigates course to IPO

Soule, Alexander
Fairfield County Business Journal

; Stamford
 Vol. 48, Iss. 20,  (May 14, 2012): 6.

Abstract

Dead ahead, of course, is the pool representing its “liquid event” – an initial public offering of stock.

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On one side of the straits, Kayak.com is eyeing Google. On the other side it’s Groupon and gaggles of other new-media companies.

Dead ahead, of course, is the pool representing its “liquid event” – an initial public offering of stock.

As Kayak Software Corp. paddles toward an IPO – one that promises riches for founders Steve Hafner and Paul English and the venture capital companies that backed them – it is coming under renewed pressure from Internet-era icons and upstarts alike.

It was not so long ago that Kayak was the fresh face in a still-evolving online travel industry dominated by Norwalk-based Priceline.com, Expedia and Orbitz, where Hafner previously worked.

Since then, the company has only cemented its industry status, for the second straight year winning Webby award accolades as the best travel website, beating out TripAdvisor, Hipmunk, Jetsetter.com and Trippy.com.

The Webby awards drew more than 10,000 submissions this year – Kayak was one of just 10 organizations to win multiple Webby awards, with other notable names including Skype and Sesame Street Muppets.

Kayak’s search engine combs other sites for travel deals, ranking among the 200 most-frequented U.S. websites and the fourth of those run by Connecticut-based companies, after Bristol-based ESPN (20th), Stamford-based Indeed.com (75th), and Priceline.com (158th).

Kayak earned $9.7 million last year as revenue climbed by a third to nearly $225 million. At the end of March, Kayak reported having 170 employees, with Hafner leading its Norwalk headquarters and English its technology center in Concord, Mass.

Even as Kayak readies for an IPO, it finds itself in a battle with Google, which a year ago acquired the Cambridge, Mass.-based travel software engine ITA and has since launched flight and hotel search tools that compete directly with Kayak.

In SEC filings, Kayak concedes Google’s flight search engine offers “significantly increased speed” due to its links with ITA, an issue Hafner took up at a conference sponsored last November by Sherman-based PhoCusWright.

At deadline, Hafner had yet to respond to a request for an interview made through a PR company.

“It seems to me – I don’t know for sure – that Google must be using a different version of ITA software than perhaps someone like Kayak or Orbitz,” Hafner said to a Google executive sharing his panel. “It just seems faster. I’m curious – is that just an innovation or a capability that you intend to make commercially available to all your longstanding, loyal customers?”

Kayak cites hotel bookings as the fastest growing online travel category, with growth currently on an annual 11 percent rate of increase. In March 2011, Kayak added the capability for travelers to make hotel reservations through its U.S. website. As first reported by the Boston Business Journal, however, after Orbitz initiated litigation Kayak removed language touting its hotel booking capabilities from an updated IPO filing, without stating whether it was in response to legal pressure.

If the established titans are feeling pressure from Kayak, they remain mindful of the new generation of social media plays in the travel space. For its part, Kayak has more than 75,000 “likes” on Facebook.

“The Groupon audience is a very engaged audience,” said Dara Khosrowshahi, CEO of Expedia, speaking at the same PhoCusWright conference. “What we have to work on is to train the Expedia audience to buy a product in a different way than they are accustomed to. And I think that’s the bigger challenge.”

Kayak.com Secures $7 Million in Series B Financing; Sequoia Capital Joins Existing Investors General Catalyst Partners and America Online; Total Funding Increases to $15.5 Million


Business Wire

; New York [New York] 21 Dec 2004: 1.

Abstract

Created by the co-founders of Orbitz, Travelocity and Expedia, Kayak.com helps consumers get comprehensive and objective travel information in their trip planning. Kayak.com is not an online travel agency, but instead searches over 60 other online travel sites, providing prices and itineraries for more than 550 airlines and 85,000 hotels. Kayak.com displays more choice of available itinerary/price combinations than any other online travel agency and is the only travel search engine with MultiBook(TM), a breakthrough technology that lets the consumer choose where to purchase the preferred itinerary. Kayak.com is also the first online travel tool to offer consumers the ability to access user-created reviews and ratings as well as other relevant travel information. For additional background, please visit www.kayak.com.

“We are delighted to welcome Sequoia Capital as an investor in Kayak.com,” said Steve Hafner, Kayak.com CEO and co-founder. “This financing is a strong validation of our vision, business direction, and management team. Kayak.com now has a far greater financial foundation from which to grow.”

Full Text

Kayak.com Dana Galin, 203-899-3106 [email protected] or Weber Shandwick Kellie Pelletier, 212-445-8153 [email protected] or Anna Stancioff, 212-445-8138 [email protected]

Kayak.com, a website that helps consumers get comprehensive and objective travel information, today announced the completion of a $7 million Series B financing round led by Sequoia Capital, a California-based venture capital firm. Kayak.com is only the third East Coast company Sequoia Capital has funded in the last two years.

The company has now raised a total of $15.5 million to create the next generation of online travel. The additional funding will be used to further product development and expand marketing.

Kayak.com was founded by the creators of Expedia, Orbitz, and Travelocity in January 2004 to satisfy the demand of internet users for a clear, objective and comprehensive source of online travel information. Web-based services are the foundation of the $55 billion spent on online travel in the U.S today. Yet online travel consumers exhibit limited loyalty, using an average of 2.5 sites and offline agents in their research (1). Kayak.com addresses consumer frustration by providing comprehensive rates and relevant objective information as well as giving users choice of where to book.

“Beyond the fact that the company has five letters in its name (like Cisco, Apple, Atari and Yahoo!), we chose to invest in Kayak.com because of its founders’ deep and genuine desire to provide a better, fairer and impartial travel service for the growing community of internet users,” said Michael Moritz, a Partner with Sequoia Capital.

“We are delighted to welcome Sequoia Capital as an investor in Kayak.com,” said Steve Hafner, Kayak.com CEO and co-founder. “This financing is a strong validation of our vision, business direction, and management team. Kayak.com now has a far greater financial foundation from which to grow.”

About Sequoia Capital:

Founded in 1972 Sequoia Capital is one of the leading venture capital firms. In the last three decades Sequoia has funded hundreds of companies, including: Apple, 3COM, Cisco, LSI Logic, Yahoo!, Google and Flextronics. Sequoia Capital targets its investments in early stage companies in the areas of Components, Systems, Software and Services. Sequoia Capital is based in Menlo Park, California.

About General Catalyst Partners

General Catalyst Partners is a private equity firm that invests in exceptional entrepreneurs and technical founders who are building the software solution and technology platform companies that will lead innovation and transform industries. Founded in 2000, General Catalyst Partners is headquartered in Cambridge, Mass. For more information, please visit: www.generalcatalyst.com.

About Kayak.com

Created by the co-founders of Orbitz, Travelocity and Expedia, Kayak.com helps consumers get comprehensive and objective travel information in their trip planning. Kayak.com is not an online travel agency, but instead searches over 60 other online travel sites, providing prices and itineraries for more than 550 airlines and 85,000 hotels. Kayak.com displays more choice of available itinerary/price combinations than any other online travel agency and is the only travel search engine with MultiBook(TM), a breakthrough technology that lets the consumer choose where to purchase the preferred itinerary. Kayak.com is also the first online travel tool to offer consumers the ability to access user-created reviews and ratings as well as other relevant travel information. For additional background, please visit www.kayak.com.

(1) Jupiter Research Market Forecast Report 2004

1

KAYAK.COM UNDERGOES EXTREME MAKEOVER


Online Product News

; Boynton Beach
 Vol. 26, Iss. 10,  (Oct 1, 2007): N.A.

Abstract

Kayak.com, the world’s largest travel site, displays results from 404 travel sites, providing prices and itineraries for hundreds of airlines, more than 158,000 hotels, all leading rental car companies and 17 cruise lines. Kayak.c

om has been named “100 Best Products of 2007” by PC World; “25 Sites We Can’t Live Without” by TIME Magazine; “Best Search Engine” by the Associated Press; and “Best of the Web” by BusinessWeek, Forbes.com, and US News & World Report. Launched in 2005 by co-founders of Orbitz, Travelocity and Expedia, Kayak.com’s investors include General Catalyst Partners, Sequoia Capital, America Online, Inc and Accel Partners.

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Kayak.com, Norwalk, Conn., the world’s largest travel search site, is taking a sip from the fountain of youth with a series of design enhancements and functionality launches based on user feedback. Kayak.com reinforces its position as the top travel site for airfare with a new “Weekend Search” that allows users to compare prices for upcoming weekends or all weekends within a specified month.

“Several recent studies show travelers all over the world are taking shorter vacations, typically opting for long weekend trips,” said Steve Hafner, Kayak.com co-founder and CEO. “Yet, no travel site has effectively offered a search specifically for the flexible weekend warrior until now. Only Kayak.com’s Weekend Search allows the user to specify days of the week and preferred times in the search parameters, resulting in relevant search results.”

To compare fares for weekend travel, users simply select “Weekends” on the flight homepage and specify destination, month of departure or upcoming weekends, day of the week and time. Core results are organized by price while an interactive Weekend Snapshot box offers an overview of dates and prices for all five weekends. Check boxes allow users to compare prices for two or more weekends. Only Kayak.com allows consumers to save favorite itineraries to the top of the search results for easier comparison by clicking on the heart icon within the itinerary details box.

Design Nip and Tuck

Kayak.com launched a new display for flights and hotels after testing more than 300 mocks for Travel 2.0 functionality. The result is Kayak 2.0, approved by several focus groups and loyal Kayakers.

“Kayak.com has a reputation for innovation,” said Hafner. “That’s why we continually enhance our site each month and why after only two years, we’ve completely redesigned the user experience to unveil Kayak 2.0. We are the only site to offer personalized search results for different types of users- from our Google Loyalists who wanted a bigger map to people begging for more photos and those who love our signature clean, clutter-free look and feel.”

Flights results are now displayed in the following views: — Traditional List View displays itinerary information and offers users a choice of where to book, supplier direct or from an online travel agency. — For those preferring an overview of results from all airlines, Matrix View has been added. Users can filter results by clicking content in the Matrix or by interacting with the filtering and sorting tools. — Chart View is the new home of Kayak’s Best Fare Trend Graph, which charts pricing for city/date pairs found by Kayak.com users over the past 90 days. Travelers will benefit from two charts, one that displays pricing for the selected departure date and another graph that presents pricing for all dates within the specified month for flexible travelers on a budget. Travelers needing more pricing information can click on the link to browse Best Fare History, which lists the best prices found by other Kayak.com users searching the same route over the past 36 hours.

Kayakers can now compare hotel results from the following views: – – Traditional List View displays more hotels above the fold than any other travel site. A checkbox has been added to include or hide hotel thumbnails. — For travelers crying “location, location, location,” Map View integrates search results on a Google Map. Users can compare a hotel’s distance from a landmark or enter a “custom location” such as the address of a friend’s home or business meeting. Kayak.com will then display up to 15 hotels near the selected landmark or address. Hover over a pushpin to see a hotel’s price and star rating, or click on the pushpin to see full details. Users can also check the satellite image to see exactly how close they really are to the beach or airport, or to a custom address. — Photo View offers slideshows of properties using Ajax navigation, allowing for quick scrolls through hotel pictures for those who won’t buy sight unseen.

About Kayak.com

Kayak.com, the world’s largest travel site, displays results from 404 travel sites, providing prices and itineraries for hundreds of airlines, more than 158,000 hotels, all leading rental car companies and 17 cruise lines. Kayak.com has been named “100 Best Products of 2007” by PC World; “25 Sites We Can’t Live Without” by TIME Magazine; “Best Search Engine” by the Associated Press; and “Best of the Web” by BusinessWeek, Forbes.com, and US News & World Report. Launched in 2005 by co-founders of Orbitz, Travelocity and Expedia, Kayak.com’s investors include General Catalyst Partners, Sequoia Capital, America Online, Inc and Accel Partners.

For more information, visit http://www.kayak.com or call 203/899- 3111

Case Study

Kayak.com Valuations over Several Rounds of Public Financing: Did Anyone Leave Money on the Table?

Write your case analysis using the headings:

I Case Summary – one page maximum

II Problem or Opportunity Identification – One page maximum

III Situation Analysis – Four pages maximum

IV Recommendations and Suggestions for options and alternative actions – Three pages maximum

V Conclusion and Comments – One page maximum

Total case analysis – Ten pages maximum

A. BACKGROUND:

The issue of the valuation of private companies, particularly newly formed ones in their early stages, has been, and continues to be, difficult and complicated. The reason is valuations are often based on human subjective measures. Even though there quantitative models, IRS regulations, industry trade association guidelines, and SEC standards available to use as benchmarks both parties the founders and investors still frequently rely heavily on subjective measures.

Founding businesses in their early stages typically (whether they forecast it or not) operate in a negative cash flow position. This can last for up to two years. Furthermore, their future cash flows from sales can be uncertain but temptingly exciting. This uncertainty with regard to cash and margins adds ambiguity and uncertainty to valuations.

As the e-text author states in Chapter 4 “the capital structures of companies evolve over time. Early stage companies raise money at various times throughout their lives to fund their growth and minimize their investor’s exposure, These challenges can lead to very different valuations of the same firm, particularly during periods where market conditions are changing rapidly”. Lerner,Leamon & Hardymon, (2012).

An important concept in Valuation is pre-money value and post-money value

The terms ”pre-money value” and ”post-money value” arise regularly throughout the course of a venture investment, whether drafted into a term sheet, included in a capitalization table or brought up during discussions with company founders or investors.

Because these terms are so fundamental and ubiquitous, one should think carefully about what they mean, what they represent and how they impact financing.

A company’s pre-money value is simply the amount that an investor and the company agree to deem the company to be worth immediately prior to the investor’s investment, for the purpose of determining how much the investor will pay per share for the stock it is purchasing.


Example:
Big VC is going to invest $2 million into XYZ Co based on an $8 million pre-money valuation. The pre-money value is $8 million. This represents what Big VC and XYZ Co have agreed XYZ Co is worth at the moment immediately prior to Big VC’s new investment. it is important to note that the number is often not derived from accounting measures such as revenue, free cash flow or EBITDA (especially in the case of early-stage companies that are pre-revenue, where this would be impossible). Rather, it is often highly negotiated, driven by market forces and inherently speculative.

A company’s post-money value is simply the amount that a given pre-money value infers the company to be worth at the moment immediately following an investment. Thus, the post-money value is the sum of the pre-money value and the new.

Some common valuation methods that are used include, but are not limited to; Comparables, Net Present Value, Adjusted Present Value, Venture Capital Method, and Asset Options.

As in all founding ventures and early capitalization and later VC funding, there is not one cookie cutter approach or set of variables that follows a menu or a do list. Each party obviously will attempt to calculate the valuation amount to suit their own financial and personal agendas.

Carver (2011) describes a typical Valuation Pattern:

1. Founder who starts company and divides initial shares among partner and key start up employees.

2. Founder creates shares of Common Stock, par value of $0.0001 (1 cent).

3. Founder issues A Series stock typically for 100 times to 1000 times normal price for other investors, i.e., partners, employees, suppliers, vendors, family members, other insiders.

4. Typically, founder(s) execute “Restricted Stock Purchase” agreement that provides for reverse vesting (repurchase) of the shares they were issued. This keeps a founding partner form quitting early with stock a relatively high value.

5. Founder is allowed by IRS regulations to pay IRS taxes immediately before stocks increase in value. Paying thousands of dollars early rather than later is an advantage. In the future, the stock value could be worth hundreds of thousands of dollars more or even millions more and the tax burden would be significantly higher.

6. Valuations have to comply with Section 409A of the IRS code. The 409A code was added to the Internal Revenue Code, effective January 1, 2005 and the final regulations were issues in April 2007. Section 409A generally provides that “non-qualified deferred compensation” must comply with various rules regarding the timing of deferrals and distributions. Under regulations issued by the IRS, Section 409A applies whenever there is a “deferral of compensation,” which occurs whenever an employee has a legally binding right during a taxable year to compensation that is or may be payable in a later taxable year. There are various exceptions, excluding from the Section 409A rules compensation that would otherwise fall within this definition, including: qualified plans like the pension and 401(k) plans, and welfare benefits including vacation leave, sick leave, disability pay, or death benefit plan. What all this means is venture funded firms need to have third party appraisals done in order to get safe harbor form potential penalties associates with mispriced options.

Nearly all 409A valuations undervalue the company and at the same time overvalues the common stock, a mistake that isn’t that uncommon and many investors make this mistake, Carver (2011).

7. In valuation reports the “Standard of value” is used to arrive at a conclusion. The standard of value is defined by the IRS, which has a very different view than the price a “strategic investor” or a “financial” or “individual investor” at a VC fund would be willing to pay.

The IRS Standard of Value is based on the ruling 59-60. The price at which the property (business) would change hands between a willing buyer and willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties have reasonable knowledge of relevant facts. Court decisions frequently state in addition that the hypothetical buyer and seller are assumed to be able, as willing to trade and to be well informed about property and concerning the market for such property, Ibid.

8. Two conditions create situations in which the price of stocks and securities are discounted. The first is a discount for lack of marketability (DLOM). There are a number of surveys that put the DLOM at amount from 20% to 35%. For the purposes of this case we will use a standard of 25%. So if an employee were given a non-marketable security (these have no management or operational power) as part of his or her employment agreement valued at $10 per share it would mean to sell this security, the employee would have to find a market (it could not be sold on any exchange or the public market). Thus, the difficulty in being able to resell these securities means they would have to be discounted by 25%. Therefore, the shares would be worth $7.50 each (1 – $7.50/10) = $7.50.

The second situation is a discount for lack of control (DLOC) and is calculated and handled exactly the same as (DLOM).


B. SITUATION AND FACTS:

The original founder Paul English has been interviewed many times. Here is a summary of the answers he gives for the most often asked questions:

When asked “Why do you start companies”, Paul has one of the best answers: Paul. I start companies because it gives me an opportunity to create teams”. 

 “Our priorities are always team first, customer second and profit third”.


“The difference between an A team and an A+ team is the difference between a million in revenue and a billion in revenue”.

Sometimes people Paul is being interviewing by say “I’ve heard a lot of great things about you.” 
Paul’s response:  “Trust me, after a few months, you’ll learn that the reason you’re here is not me, but the people around you”.

Paul English on recruiting “When someone mentions the name of a person that they’ve worked with that they think is exceptional, a little clock starts ticking in my head.  My world goes to black and white, and this clock is in color.   From when the clock starts, I give myself seven days to track them down, back channel, get them in for two series of interviews that are intense and focused, and make an offer and have them accept it. That’s seven days from when I hear the person’s name”.


“At least one of the co-founders needs to be passionate about recruiting because that absolutely makes all the difference in the world.”

10. When Paul started Kayak, one thing that was very important to him was building something that his friends could use.   Before Kaya, when people asked “What do you do?” Paul’s response was,
“I work in an operations research group at data general, and we’re studying advanced processes for doing disc drive manufacturing.”
  Clearly, unlikely to be fascinating to most people.  With Kayak he wanted it to be different. 
“I have had almost precisely this experience.”
 
“For my current startup, I wanted to work on something that when random strangers asked me what I did, I wanted a decent chance that the answer would be relevant to them.
 


Paul,

“I had sold two companies. I didn’t want to sell a company again. So my venture guys would sometimes say, “You know, explore it.” And I’d have the meeting knowing in my mind that there is no way I am going to sell this company.”

When Paul was hiring his early team, he refused to hire people from the travel industry.  He didn’t want travel people, he wanted consumer product people. 


The following is a transcript of an interview Paul did a conference:

My co-founder’s name is Steve Hafner. He is one of the founders of Orbitz, and he left Orbitz in December of ’03, which is when I met him. [11:10] I was introduced to Steve – I was actually working with Bill Kaiser as an EI over at Greylock. But I was over at General Catalyst one day looking at a mobile company for John Simon, I believe. And then on my way out,

Larry and Joel Cutler introduced me to this guy Steve Hafner and said he is starting a travel company. He’s leaving Orbitz, would I give him some advice?

[11:32] So Steve and I went downstairs to Legal Sea Foods in Harvard Square, had a couple drinks. And I think within 45 minutes we agreed to do it as co-founders. We each were going to throw a bunch of money in. And I think part of that was both of us, my co-founder and I, are risk takers, and both of us, I think, have a very good read on other people.

[11:53] And Steve and I are similar in many ways, but we are also very different in actual technical skill set. But we both detected a level of aggression or commitment in the other one, and we both felt that, “Wow, if you put two co-founders together that are this aggressive…”

[12:11] I might not sound aggressive now, because I just arrived on a redeye from San Francisco, so I am a little bit tired. But, we thought that starting with a team that our job was just to state a plan and say, “We’re going to get there. We’re going to build the biggest travel company in the world,” when we just had six slides of PowerPoint. And then somehow getting people to believe us that we were going to do that, and recruiting people to help execute that plan.

[12:37] So I think it starts with belief.

Larry: [12:38] Yep. So, one of the things I remember that I think was tremendous was when we first talked about you coming into KAYAK, you were thrilled at the idea of building software that your friends could use. Because up to then, I think most of the stuff you built, even though, at Intuit, people were…

Paul: [12:58] Intuit was really eye-opening for me. Before then, when I would tell people – “What do you do?” “I work in an operations research group at data general, and we’re studying advanced processes for doing disc drive manufacturing.” [laughter 0:13:12]

Paul: [13:13] It didn’t go over well.

Larry: [13:15] Right. So I remember you being, like, thrilled, like, “I’m going to build something fabulous that my friends can use, and it’s going to be really exciting.” And I think that was a big motivation when you were recruiting some of the members of the team.

Paul: [13:24] It was.

Larry: [13:25] Talk a little bit about how the company was founded. Certain journalists in Boston reported that you stole the idea. Talk a little bit about the beginning and then how it developed, the acquisition and things like that. I think that’s a great story about a Boston company.

Paul:[13:45] So, we were not the first to do travel as a search engine. If you think about the creation of online travel industry with the formation of companies like Travelocity and Expedia, and then followed by Orbitz, and Priceline, etc, those guys are all merchants, where they show you a limited set of inventory. [14:04] If you look for a hotel in New York tonight, Expedia won’t show you every hotel in New York. They only show you the ones that they rep. KAYAK will show you ever hotel because we are a search engine. We weren’t the first guys out there to be a pure search engine. Saying, “Gee, this Google thing seems to be working. Can we build one of those but just for travel?” There were FairChase, SideStep; a couple companies before us that did different approaches to what we ended up taking.

[14:30] SideStep was interesting. They had a downloadable toolbar that if you searched Expedia, they would pop up a window in the side showing you other rates if you could search other sites. They were a couple years ahead of us. They were much bigger than us in revenue on our second or third year, but we ended up acquiring them. They tried to acquire us a couple times.

[14:52] I had sold two companies. I didn’t want to sell a company again. So my venture guys would sometimes say, “You know, explore it.” And I’d have the meeting knowing in my mind that there is no way I am going to sell this company.

[laughter 0:15:01]

[15:01] But each time, we would negotiate and valuations would come up, and there would be always a mis-set expectation about what the other company was worth, because if you do a stock deal, it’s more percentage, but then it’s this game of what you are each worth.

[15:16] And in each of these meetings over the years when there were bigger companies than us who were interested in what we had built and our team, et cetera, if we had disagreements, I would just say, “That’s all right. Let’s just talk again in a year.” And I just had this belief that our valuation grew quicker than the other party.

[15:33] In the case of SideStep, it did. In December of ’07, we had 39 employees and we raised $230 million at a very high valuation to acquire what was our biggest competitor, SideStep, in California. And that was a very good deal for us for getting their customer base. And it’s just one important milestone. It’s fun to take out your big competitor.

Larry: [15:57] Paul is a very competitive person, and I remember, at the beginning, when SideStep was a couple years ahead, it was a West Coast company funded by good venture people. How did you win? You ended up blowing by SideStep, and you ended up buying them and really taking advantage of them. How did you do it?

Paul: [16:18] And I did love the East Coast acquires West? [applause 0:16:23]

Paul:[16:25] We could spend an hour just on that topic. And I know there’s some powerful people in the room here. I hope all you guys are encouraging all your companies to say, “Don’t give up. At least don’t give up early. Push something bigger.” [16:38] I really want to create extraordinary East Coast companies and change the culture here, and there’s a lot of work to be done with that. I think if you compare us to SideStep, they were good guys, but, I don’t know.

[16:53] Not to be harsh, but the simplest way to say this to compare the two companies, it had nothing to do with strategy. It had to do with the team. We had one project manager. They had seven. And we just recruited a different level of talent than they did.

[17:11] And you go down the line, finance, sales, marketing, whatever, I think people would say, when they would go to a KAYAK meeting, or they go to a SideStep meeting and then they go visit KAYAK, they’d leave. We usually get good feedback when people leave meeting with our team. Everything from people saying things like, I’m vibrating from that meeting, or there’s some electricity, or whatever. And I think we out-executed so many people, because we out-hired, is the simplest thing.

[17:37] Second of that, the way our team organizes around customers is different than what I’ve seen in other tech companies.

Larry Bohn: [17:41] Yeah, talk about that, and talk about – because I really do, I started as you build a much better product. And talk about how you build a great product, and how you got feedback about that product, and how you still do.

Paul:[17:55] Yeah, so travel is something that I love. I’ve never worked in the travel industry. In fact, when hiring the tech team at KAYAK, when we were mostly the first five years – we’re six years old now – the first five years, it’s a bit of an oversimplification, but I would say there were only two types who worked at KAYAK. You were either a programmer, or you were a business development manager, and two-thirds of them were programmers. [18:16] We’re growing now on the marketing side and the finance side, but, in general, when I hired the tech team, one of my requirements was I refused to hire someone who has ever worked in travel before. And my board didn’t like this. We recruited a good board. Part of this, is the aggression we had in recruiting, but we recruited Terry Jones, the original founder of Travelocity, was, became, our Chairman. Greg Slyngstad, the original creator of Microsoft Expedia, became a Director and investor. So this amazing travel portfolio on our board, but I refused to hire travel people.

And what would happen is, at our board meetings, I would present, this is the product plan. The board would sit back, you seem like a really nice guy, you seem really smart, but I can’t believe you don’t know what a passenger type code is [Larry laughs 0: [18:46] 18:54] . It’s not possible to fly a plane, from here to here, without doing this. And they kept saying that I would be proposing stupid things, and they kept begging me to hire someone who had actually worked in travel before. And I would do what – are we allowed to swear here?

Larry: [19:09] Yeah, absolutely. You’re among friends.

Paul: [laughs 0:19:11] [19:11] I would do what later became know as a grin fuck, where… [laughter 0:19:14]

Larry: [19:14] Which he does a lot to his investors.

Paul: [19:17] Yeah.

Larry: [19:17] Totally.

Paul: [19:18] The most famous one is when our board told us – we incorporated as Travel Search Company as a placeholder and we told the board we were going to call the company KAYAK – one of the investors said, “You’ll name this company KAYAK over my dead body.” And I said, thanks for the input.

Larry: Right. [laughter 0:19:33]

Paul: But we tend to, you know, on the hiring thing, I didn’t want travel people. I wanted consumer people. And I wanted people that were committed to the best team ever. I wanted people committed to intense focus on customer. [19:48] We don’t have enough time here now, but there’s eight key processes that we use at KAYAK right now, for how customers get engaged with engineers. I’m about to add the ninth, which is going to be live web chat over Skype. If you just randomly hit our feedback page, you’ll connect live in our engineering team.

But another one, that is we’ve become a little bit known for, is we have this red phone in our office. And I took some time to try to find the most obnoxious phone I could, with a really loud ringer, and it’s directly wired into our engineering office.


Nasdaq News Release

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


NASDAQ OMX’s News Release Distribution Channel

; New York [New York] 08 Nov 2012.

NORWALK, 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 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.

Nasdaq News Release

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


NASDAQ OMX’s News Release Distribution Channel

; New York [New York]08 Nov 2012.

NORWALK, 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 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 Deals SM , 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,

 

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 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

 $ 27,554

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.

 

 

 

 

 

 

 

 

 

Q1

Q2

Q3

Q4

Q1

Q2

Q3

 

2011

2011

2011

2011

2012

2012

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

CONTACT: Investor Relations: Denise Garcia 203-682-8335 [email protected] Media Relations: Jessica Casano-Antonellis [email protected]

KAYAK reports record results and agrees to acquisition by priceline.com incorporated. (2012, Nov 08). NASDAQ OMX’s News Release Distribution Channel Retrieved from
https://search-proquest-com.proxy.devry.edu:5443/docview/1144971220?accountid=44759

Nasdaq Files of all Kayak filings with SEC:


https://www.nasdaq.com/markets/ipos/company/kayak-software-corp-659492-65680?tab=financials

The IPO Prospectus:


https://www.nasdaq.com/markets/ipos/filing.ashx?filingid=8724233

Registration Statement:


https://www.nasdaq.com/markets/ipos/filing.ashx?filingid=8717685

Kayak 10K Filing:


https://www.sec.gov/Archives/edgar/data/1312928/000131292813000005/kayakq4201210-k.htm

Forbes Article

He Cofounded Kayak, Sold It For $2 Billion, And Is Back With Lola, Which Uses Human Travel Agents





Susan Adams Forbes Staff

HYPERLINK “http://www.forbes.com/sites/forbestreptalks/” Forbes Trep Talks
i

Jul 5, 2016, 12:07pm

Lola founder Paul English.

Paul M. English, 52, cofounded Kayak in 2004 and served as the travel search engine’s chief technology officer. The company went public in July 2012 and four months later sold to Priceline for $2.1 billion. English says he made $100 million on the deal. Last year he founded
Lola
, which does the opposite of what Kayak offered travelers: Instead of spewing out hundreds of airfare or hotel choices, Lola connects users with travel agents who book flights and lodgings and create itineraries. Of Lola’s 20 employees, 15 are travel consultants. Based in Boston, the service launched last month in beta and already has a waiting list of more than 5,000. At the moment it’s free, but in the early fall it will add a paid option for a yearly subscription fee that will likely be several hundred dollars. In this condensed and edited interview he retraces his career and explains why he thinks travelers are ready for Lola.

Susan Adams: Were you entrepreneurial at a young age?

Paul English: When I was in high school, I sold a game I made, called Cupid, for $25,000, to a company called Games By Apollo.

Adams: Did you do well in high school?

English: I was hyperactive, distracted and very bored in high school. I never did my homework. Today you’d say I had ADHD. I went to Boston Latin. I got in because I tested at the top of the class on the admissions test. But I graduated at the bottom of my class.

Adams: What was the first company you started?

English: It was called Xiangqi League. Xiangqi is the most popular board game in the world. It’s Asian chess. I built software that hosted an online community where you could chat with people from other countries and play Xiangqi.
Yahoo

YHOO +0%
tried to acquire us but I turned them down because I couldn’t move to California for family reasons. This is going to sound crazy but I turned it into an ecommerce company called Boston Light Software and I sold that to
Intuit

INTU +0.19%
for $33.5 million in 1999.

Adams: It sounds like you didn’t need to keep working.

English: No, I didn’t. But I have a brother who’s also a serial entrepreneur, Ed English. He built the video game Frogger. I started a securities software company with him called InterMute, that we sold to Trend Micro for $25 million.

Adams: It sounds like you definitely didn’t need to keep working.

English: Right. I worked at a venture capital firm briefly as an entrepreneur in residence, at Greylock Partners.

Adams: What led you to start Kayak?

English: I was visiting a venture capital firm called General Catalyst because they had asked me to assess a company for them. I had a chance meeting there with Steve Hafner, one of the founders of the early travel search engine Orbitz. Within an hour of our meeting we had decided to each put $1 million into a new company as equal partners. At the time, in 2004, there was not one single website that showed you all the travel options.
Expedia

EXPE -1.7%
and Travelocity would only show you listings that paid them a commission. We wanted to be more like
Google

GOOGL +0.66%
, where we’d show you every hotel on earth regardless of commissions.

Adams: Did you raise capital beyond the $2 million you and Hafner put into the company?

English: We raised $5 million from
Joel Cutler
at General Catalyst.

Adams: Greylock must not have been very happy.

English: They were not happy.

Adams: How did Kayak make money?

English: Referral fees. It was a cost-per-click model. Our business model evolved over the years. We started selling hotels and flights directly on Kayak. We got paid a 10% commission on hotel rates.

Adams: At Kayak, what did you learn about running a company?

English: If you hire people who are really smart and who are really fun, who you want to hang out with, you can make for a pretty self-directed workplace.

Adams: How did you feel about the Priceline sale?

English: I had sold my last two companies and I didn’t want to sell again. I was a little heartbroken.

Adams: Why did you leave?

English: I had a fear that innovation would be slow at a big company. Within a month of the deal closing, I told Jeff Boyd, the CEO of Priceline, that I was leaving. He was not happy.

Adams: What came next?

English: We raised $20 million from Catalyst and Accel to start an incubator called Blade. I loved it. I thrived on the energy and meeting all these young entrepreneurs.

Adams: Why did you start Lola?

English: After a year and a half I decided I had the bug to create something again on my own.

Adams: The idea for Lola seems like the opposite of what Kayak does.

English: I have always been about human contact. At Kayak I bought a phone with a mechanical ringer and put it on my desk. I published the number on Kayak’s website. I loved talking to customers. It’s an incredible way to learn about what’s working and what’s not working with your product. Also I loved recruiting. At Lola I’m focusing on talking to customers.

Adams: But Lola communicates through text messages, not talk.

English: It’s actually both text and voice. But we’re finding that people don’t want to talk on the phone. Last month I asked my 15 travel consultants to ask people, do you want me to call you. It was shocking to me but everyone wanted to text. If you’re talking to someone on the phone, you can’t do two things at once. Our customers love that they can send us a request and while we’re doing the research, they can do something else.

Adams: How does Lola make money?

English: There will be a commission on the products we sell, particularly on hotels.

Adams: Will you raise money for Lola?

English: We raised a total of $28 million for Blade. We spent $8 million on the companies we invested in and on Blade’s core platform. We put $20 million into Lola. Now Blade is just a holding company for the investments we made.

Adams: What role will artificial intelligence play in Lola?

English: I have an artificial intelligence team. They’re trying to make sure that when you’re chatting with one of our agents, the AI is looking at your past travel and making recommendations to the agent about what hotels you should stay in. It can also handle simple requests on its own like what’s the weather in San Francisco tomorrow or what time is the flight. But for now and for the next few years, we want humans to do most of the work.

Adams: Is Lola payback for all those travel agents that Kayak put out of work?

English: That’s an amusing thought but it wasn’t my explicit goal.

Adams: Is Kayak’s time over?

English: No. I think that a number of people still enjoy pressing buttons and looking at long lists of results. But other people don’t want to look at 300 results or 100 hotels. They just want someone who understands their personal preferences and can make a recommendation they trust.

Adams: How will users know you are making recommendations based on their preferences rather than your commission?

English: We don’t even tell our agents our commission levels on one property vs. another. We pay our agents based on customer ratings from 1-5 and on “close rate” — how long it takes them to help you book your trip.

Adams: Do you anticipate that you’ll have a lot of competition?

English: Absolutely. There’s a lot of venture capital going into this concept of using messaging to conduct commerce.

Adams: Why is it a big deal that you’re using messaging instead of, say, email?

English: We use email as well, but our customers have enjoyed having everything travel related in one app.

Adams: Do you like to travel?

English: I’ve done seven trips so far with Lola and I have five trips coming up. I just got back from Nicaragua and I’m going to Haiti for a couple of weeks and then my next trips are San Francisco, London, Miami, Los Angeles and Las Vegas. That’s between now and November. It’s a mix of business and pleasure.

Adams: Will you only use Lola to book your travel?

English: Definitely. Lola is fun the first or second time you use it. Once you’ve used it a couple of times, it’s magical. All of your frequent flyer stuff is in there and you get the best seat on the airplane and the best room in the hotel. It’s very liberating.

Adams: How can you promise the best seat on the plane or the best room in the hotel?

English: We strive for the best available. We have human agents actually make phone calls on your behalf to try to negotiate a better room for you, at no extra cost.

Adams: What’s your favorite airline?

English: I love British Air for international and Virgin for domestic. At Virgin I love the planes and I love that you push a button on the screen in front of you and your food gets delivered. I love the people and the attitude. They have great customer service.


C. PROBLEM OR OPPORTUNTIY IDENTIFICATION

The Kayak.com case allows you to apply the information and knowledge you have and are acquiring in this course in addition to your prior experience, background, knowledge, intuition and insights.

It is very important that you read the case carefully, then reread the case, and then reread the case.

Only then are you read for you analysis. The 12 questions that follow will guide you through your analysis. Answer these and include them in your story.

1. Using the data and information provided in this case, data and information in Sharepoint in the file Kayak Case, and data from public records, (i.e., DeVry’s library database, Crunchbase, SecondMarket, Nasdaq, Sharepost, and other sites) research and collect information on valuation of the company from the founders and investors perspective when Kayak was initially formed.

2. What valuation method did the founders use? Was it Pre Money method? Why do may people refer to the Pre Money method and “the Pre Money Myth”?

3. What drives equity value?

4. You want to identify the players who had monetary and financial interest in Kayak.com

succeeding. What were their roles and how much money did they have at stake in the success of Kayak? Did the individual who received the earliest options receive grants that were over or undervalued? If so by how much (what percentage?)

5. At each funding stage, what valuation models / approaches were employed by the founders? and the investors?

6. Were these models / approaches a problem or an opportunity to either party given the circumstances?

7. Based upon you analysis of the above answer, explain why, especially if either or both parties appeared, in your opinion, to have left money on the table. In other words, they did not make the best deal possible.

8. It appears that Kayak.com delayed the IPO longer than expected according to the media. Do you agree? Defend you answer and explain whether this was a problem or an opportunity in terms of valuation issues and market share price.

9. In November 2012, Priceline.com acquired Kayak.com for 1.8 Billion in Cash, stock options, and equity. This was 4 months after Kayak’s IPO and Paul English saying he would “never sell his company. Was this a problem or opportunity? Who gained? Did Kayak’s investors gain or lose on this deal? Did anyone leave money on the table? What were the specific terms of the deal and how was Kayak valued? Why did Priceline want Kayak?

10. What is the financial status of Kayak.com today? Would it be any different if it had not been acquired by Priceline (Booking)?

11. What was Paul English’s motivation to leave Kayak.com and start a travel agency with human travel agents? Even with his buyout, did he leave money on the table?

12. Would you invest in Bookings Holdings today? Why?

D. RECOMMENDATIONS

From the data and information you have gathered, researched, interpreted, and formed an opinion on write a brief set of recommendations for each party – founder and investors – on how to avoid leaving money on the table. Your recommendations should be no longer than three pages.

Works Cited

Carver, Lorenzo, Venture Capital Valuation, John Wiley & Sons, Inc, New York, NY, 2011, p102

Lerner, Josh, Leamon, & Felda Hardy Haedymon, Venture Capital, Private Equity, and the Financing of Entrepreneurship, John Wiley & Sons, Inc., New York, NY 2012

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