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JPMorgan Technology and Telecom Conference May 4, 2004 Erik Blachford.

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Presentation on theme: "JPMorgan Technology and Telecom Conference May 4, 2004 Erik Blachford."— Presentation transcript:

1 JPMorgan Technology and Telecom Conference May 4, 2004 Erik Blachford

2 Important Investor Information Safe Harbor Statement Under The Private Securities Litigation Reform Act Of 1995 This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, particularly statements anticipating future growth in revenues and operating income before amortization. Words such as believes, could, expects, anticipates, estimates, intends, plans, projects, seeks, or similar expressions used in connection with any discussion of future operating or financial performance identify forward- looking statements. These forward-looking statements are necessarily estimates reflecting the best judgment of IACs senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These risks and uncertainties are described in IACs filings with the U.S. Securities and Exchange Commission (the SEC), including its Annual Report on Form 10-K for the fiscal year ended 2003, especially in the business and the Managements Discussion and Analysis sections, its Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K. Other unknown or unpredictable factors also could have material adverse effects on IACs future results, performance or achievements. In light of these risks and uncertainties, the forward-looking events discussed in this presentation may not occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date of this presentation. IAC is not under any obligation and does not intend to make publicly available any update or other revisions to any of the forward-looking statements contained in this presentation to reflect circumstances existing after the date of this presentation or to reflect the occurrence of future events even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized.

3 Agenda "Prepared 5/14/04 - Read Important Disclaimer." IAC Travel Brands and Strategy Growth Drivers International Packages Corporate Customer Retention IACTs Merchant Hotel Business Financials

4 Source: IACT estimates and company reports – 2003 In billions "Prepared 5/14/04 - Read Important Disclaimer." 1. American Express Rosenbluth 2. TUI 3. JTB 4. Carlson Wagonlit 5. IAC Travel 6. My Travel 7. Navigant Travel 8. World Travel BTI 9. Travelocity 10. First Choice 11. Orbitz 12. AAA Travel $20.1 $19 $13.5 $12.5 (est) $10.5 $7.1 $5.3 $5.3 (est) $3.9 $3.8 $3.4 $3.2 (est)

5 IAC Travel Brand Portfolio Air tickets Hotel rooms Rental cars Packages Complex itineraries Business travel $$$$ $ Simple Complex "Prepared 5/14/04 - Read Important Disclaimer."

6 IAC Travel Brand Portfolio Air tickets Hotel rooms Rental cars Packages Complex itineraries Business travel $$$$ $ Simple Complex "Prepared 5/14/04 - Read Important Disclaimer."

7 IACT Portfolio vs. Competitor Brands "Prepared 5/14/04 - Read Important Disclaimer."

8 IACT Long Term Revenue Mix Goal LeisureCorporate 25% International US "Prepared 5/14/04 - Read Important Disclaimer."

9 IACT Growth Drivers International Packages Corporate Customer retention "Prepared 5/14/04 - Read Important Disclaimer."

10 1.3 billion people 11 languages 50% of the non-US travel market IACT International Presence "Prepared 5/14/04 - Read Important Disclaimer."

11 European Opportunity Travel growth greater than GDP growth; more flexibility & leisure time, lower costs Rapid online growth driven by internet adoption and convenience Germany catches up to UK and France in online adoption 2004 and beyond numbers are projections "Prepared 5/14/04 - Read Important Disclaimer." Source: PhoCusWright ($bn) $70 $60 $50 $40 $30 $20 $10 $ % Other 65% DE 37% FR 27% UK European online travel market

12 Europe Tracking US Growth Trends "Prepared 5/14/04 - Read Important Disclaimer."

13 US Europe Hotel market $77B $137B Total rooms nights capacity 1.5B 1.7B Total room nights filled 0.9B 1.2B 2003 occupancy 60% 71% Average daily rate $85.38 $114 Number of hotels 50,000 73,000 Chain hotels and franchisees 22,000*.21,000* Booked online 13% 3% * Hotels with top 50 brands "Prepared 5/14/04 - Read Important Disclaimer." Source: IACT and industry estimates

14 IACT Growth Drivers International Packages Corporate Customer retention "Prepared 5/14/04 - Read Important Disclaimer."

15 Source: IACT estimates and company reports "Prepared 5/14/04 - Read Important Disclaimer." 1. American Express Rosenbluth 2. TUI 3. JTB 4. Carlson Wagonlit 5. IAC Travel 6. My Travel 7. Navigant Travel 8. World Travel BTI 9. Travelocity 10. First Choice 11. Orbitz 12. AAA Travel 13. IACT Packages $20.1 $19 $13.5 $12.5 (est) $10.5 $7.1 $5.3 $5.3 (est) $3.9 $3.8 $3.4 $3.2 (est) $2.0 In billions

16 U.S. Packages Market Total U.S. Travel Market $250 Billion "Prepared 5/14/04 - Read Important Disclaimer." U.S. Tour BusinessIACTs Package Business A La Carte 98% Packages 2%Packages 20% A La Carte 80% Source: PhoCusWright

17 ClassicVacations.com "Prepared 5/14/04 - Read Important Disclaimer."

18 European Train E-Packages "Prepared 5/14/04 - Read Important Disclaimer."

19 In-destination Activity Sales "Prepared 5/14/04 - Read Important Disclaimer."

20 IACT Growth Drivers International Packages Corporate Customer retention "Prepared 5/14/04 - Read Important Disclaimer."

21 Online Corporate Travel Opportunity "Prepared 5/14/04 - Read Important Disclaimer." U.S. Travel Market Managed Corporate Online Managed Corporate Percent online $250B $124B $8.7B 7% $280B $140B $17.3B 12% Source: Forrester and IACT estimates

22 Benefits in lower total cost of ownership Expedia Corporate Travels Approach Save an average of $113 per airline ticket Save up to 50% on hotel rates with ESR Save up to 80% on transaction fees No additional hidden fees No management fee No reporting fees Fares, Fees "Prepared 5/14/04 - Read Important Disclaimer." Agent Salaries Software Licensing Add-on Reporting Manual Policy Enforcement Training Costs Time-intensive Fare Search Fares, Fees Business the old way

23 Unused tickets for travelers Automated seat search and upgrades ECT – Innovations and upgrades "Prepared 5/14/04 - Read Important Disclaimer."

24 IACT Growth Drivers International Packages Corporate Customer retention "Prepared 5/14/04 - Read Important Disclaimer."

25 Expedia.com Customer Retention New Customer Revenue Repeat Customer Revenue "Prepared 5/14/04 - Read Important Disclaimer."

26 Repeat customers growing "Prepared 5/14/04 - Read Important Disclaimer." Expedia.com only Q1,02 Q2,02 Q3,02 Q4,02 Q1,03 Q2, 03 Q3,03 Q4,03 Q1, 04 10% 20% 30% 40% 50% 60% 39% 43% 50% Quarter averages of monthly percentages

27 Merchant Hotel Business "Prepared 5/14/04 - Read Important Disclaimer."

28 The IAC Merchant Hotel Business Travelers 50% of conversion books direct Hotels Potential New Customers Want Choice Hotels dont pay for listings, only for business generated Compares favorably to risking money on newspaper advertising Customer books via Expedia or Hotels.com, paying in advance Expedia & Hotels.com pay hotel for room post- checkout IAC keeps margin Loyal Customers Shop Direct Direct Bookings Hotel Direct Hotel 87% First Time Customers

29 Top Hotel Chains on IACT Top five hotel chains equal about 20% of merchant hotel revenue. Top 5 Chains "Prepared 5/14/04 - Read Important Disclaimer."

30 U.S. Hotel Occupancy Rates Source: Smith Travel Research "Prepared 5/14/04 - Read Important Disclaimer." 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% JanuaryFebruaryAprilMarch Peak times Low times: hotels need help

31 "Prepared 5/14/04 - Read Important Disclaimer." Source: PhoCusWright Supplier Share of Online Travel 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

32 New York / Las Vegas / Orlando Top 3 U.S. cities hotel revenue as % of IACT revenue "Prepared 5/14/04 - Read Important Disclaimer."

33 Same Store / Hotel Sales Increases 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Expedia room nights in thousands 660,000 room nights from hotels added since Q ,000 new room nights from hotels under contract in Q1-03 Q1,04 Q1,03

34 Financials "Prepared 5/14/04 - Read Important Disclaimer."

35 Gross Bookings "Prepared 5/14/04 - Read Important Disclaimer." $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Q1,02 Q2,02 Q3,02 Q4,02 Q1,03 Q2, 03 Q3,03 Q4,03 Q1, 04 $3.5B 1Q04 vs. $2.3B 1Q03 51% Y/Y In Millions Expedia $1,802 Expedia $2,672 Hotels $344 Hotels $494

36 Net Revenue "Prepared 5/14/04 - Read Important Disclaimer." $600 $500 $400 $300 $200 $100 $0 Q1,02 Q2,02 Q3,02 Q4,02 Q1,03 Q2, 03 Q3,03 Q4,03 Q1, 04 In Millions $494M 1Q04 vs. $351M 1Q03 41% Y/Y

37 "Prepared 5/14/04 - Read Important Disclaimer." 23% Y/Y Operating Income Before Amortization /Operating Income $160 $140 $120 $100 $80 $60 $40 $20 $0 Q1,02 Q2,02 Q3,02 Q4,02 Q1,03 Q2, 03 Q3,03 Q4,03 Q1, 04 $128M 1Q04 vs. $104M 1Q03 In Millions OIBAOperating Income See reconciliation at end of presentation

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39 Reconciliation of Operating Income Before Amortization to Operating Income Q102 Q202 Q302 Q402 Q103 Q203 Q303 Q403 Q104 Operating Income Before Amortization $ 56 $ 69 $ 84 $ 71 $104 $132 $137 $150 $128 Adjustments Operating Income Operating Income Before Amortization is defined as operating income plus: (1) amortization of non-cash distribution, marketing and compensation expense, (2) amortization of intangibles and goodwill impairment, if applicable, (3) pro forma adjustments for significant acquisitions and (4) one-time items. We believe this measure is useful to investors because it represents the consolidated operating results from IACs segments, taking into account depreciation, which we believe is an ongoing cost of doing business, but excluding the effects of any other non-cash expenses. Operating Income Before Amortization has certain limitations in that it does not take into account the impact to IACs income statement of certain expenses, including non-cash compensation associated with IACs employees, non-cash payments to partners, and acquisition related accounting.


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