FOR IMMEDIATE RELEASE Expedia, Inc. Reports Record Revenue and Earnings for Third Quarter Gross bookings rose to $1.47 billion, up 103% year-over-year Net revenue rose to $166 million, up 109% Adjusted earnings rose to $30.8 million, or 49 cents a share GAAP earnings rose to 32 cents per share versus a year-ago loss of 9 cents per share Merchant hotel room nights stayed rose 168% year-over-year, and 26% sequentially to 2.6 million room nights Cash and investments grew to $525 million from $238 million at Dec. 31, 2001 BELLEVUE, Washington – October 23, 2002 – Expedia, Inc. (NASDAQ: EXPE) today reported record gross bookings of $1.47 billion for the third quarter ended Sept. 30, 2002, more than twice the bookings of the year-ago quarter. The company also reported record quarterly net revenue of $166 million, up 109% year-over-year. After-tax adjusted earnings were $30.8 million, or 49 cents per diluted share, compared with $15.1 million, or 24 cents per share for the year-ago quarter. The company reported net income for the quarter on a GAAP basis of $20.1 million, or 32 cents per diluted share, on 63 million shares. This compares with a net loss of $4.8 million, or 9 cents per share, for the quarter ended Sept. 30, 2001. “Expedia® had an excellent quarter as our investments over the years in advanced technology, business diversification, and international expansion continue to bear fruit,” said Richard N. Barton, president and CEO of Expedia, Inc. “Of particular interest this quarter is the growth in revenues from our non-US businesses, which more than tripled from a year ago. Additionally, our merchant revenue nearly tripled year-over-year, driven by continued success of our merchant hotels and packages businesses.” Another investment the company expects will drive growth is the company’s expansion into corporate travel services. Expedia plans to launch its first online offering Expedia reports record revenue and earnings for September quarter - 2 for corporate travelers in the fourth quarter, which will include negotiated airfare management and reporting tools for corporations along with Expedia’s cutting-edge ESP technology. “Launching this new corporate product will give travelers from small- and medium-sized businesses the convenience, cost savings and efficiency of online travel planning and booking, plus customer services tailored to the demanding needs of the corporations and their travelers," said Byron Bishop, senior vice president for corporate travel. For the third quarter, merchant revenue rose 189% over the year-ago level to $98.5 million on increased revenue from Expedia® Special Rate hotels and the addition of the Classic Custom Vacations® business. Merchant hotel bookings in the quarter increased 18% sequentially, not including Classic. Agency revenue, which is primarily derived from the sale of airline tickets, rose 59% year-over-year to $62.5 million despite a decline in revenue per ticket. For the quarter, the company reported conversion, or the average monthly percentage of visitors who purchased travel on Expedia.com®, increased to 6.7% from 5.5% year-over-year. The company reported 3.2 million total hotel room-nights stayed in the quarter, including 2.6 million merchant room-nights, up from 1.3 million total room- nights and 1 million merchant room-nights in the year-ago quarter. Expedia ended the September quarter with $525 million in cash and short-term investments, compared with $238 million at the end of 2001, and cash flow from operations in the quarter was $70 million. Gross profit rose to $111 million, up 109% year-over-year and gross margin was 67%. The company reported a non-cash provision for income taxes of $15.4 million in the quarter. Nine months results For the nine months ended Sept. 30, Expedia reported net revenue of $427 million, compared with $215 million in year-earlier period. Adjusted earnings were $88.3 million, or $1.40 per diluted share, and net income on a GAAP basis was $44.9 million, or 71 cents a diluted share. In the nine-month period ended Sept. 30, 2001, adjusted earnings were $34.5 million, or 58 cents per diluted share, and net loss on a Expedia reports record revenue and earnings for September quarter - 3 GAAP basis was $26.7 million, or 54 cents a share. In the year-ago nine-month period, the company did not report a tax provision. USA Interactive On Oct. 10, 2002, USA Interactive announced that it was ending the ongoing processes to acquire all of the publicly held shares of Expedia that it does not now own. The Company continues to believe that its prospects within the USA Interactive family are excellent. USA Interactive will continue to own a controlling stake in Expedia and will also continue to own a controlling stake in Hotels.com. As Expedia and Hotels.com have a common controlling shareholder, Expedia previously has said that it would explore areas where it might work together with Hotels.com in a way that would benefit all Expedia customers and stockholders. Although there continue to be many areas of our business where Expedia has decided that it can best achieve its goals through separate strategies and practices, there have been instances where, fully consistent with its existing contractual agreements, it has worked cooperatively with Hotels.com, and it anticipates that it will continue to explore such possibilities in the future. Financial Outlook On Jan. 28, 2002, Expedia publicly released its 2002 budget for revenue and adjusted earnings. Based upon actual results achieved in the first, second and third quarters, and also based upon current business trends and the company's current plans for the remainder of 2002, Expedia expects to exceed its budgeted 2002 revenue of $450 million by approximately 30%, and to exceed its budgeted fourth quarter revenue of $120 million by 30% to 33%. Expedia also expects to exceed its budgeted 2002 pre-tax adjusted earnings of $80 million by 98% and to exceed its budgeted fourth quarter pre- tax adjusted earnings of $21 million by about 75% and by about 20% on an after-tax basis. The company’s preliminary budget for 2003 calls for revenue of $820 million, pre-tax adjusted earnings of $213 million, adjusted earnings of $147 million and adjusted EPS of $2.25. Expedia reports record revenue and earnings for September quarter - 4 This outlook is based upon our analysis of current trends and a variety of other factors, but does not assume a further dramatic shock to the travel industry. Recent operating highlights: Earlier this month, Expedia announced the acquisition of Newtrade Technologies Inc. to provide enhanced connectivity to hotels and improve Expedia’s efficiency and reliability as a merchant of hotel rooms. Expedia.com introduced an expanded ski section in time for the winter season that lets travelers combine the components they want, such as flights, hotels, condos, lift tickets and mountain tours. The section includes 30 resorts, 300 hotels, trail maps and après ski activities. Enhanced content, including 360-degree videos of rooms and grounds, was added to Expedia’s hotel displays, giving consumers more information by which to choose from the more than 6,000 merchant hotels on our sites. About Expedia, Inc. Expedia, Inc. (NASDAQ: EXPE) is the world's leading online travel service and was the eighth largest travel agency in the United States in 2001. To meet the needs of travelers around the globe, it operates Expedia.com in the United States and localized versions throughout Europe and Canada. Expedia.com helps travelers travel right with a wide variety of travel products and services, such as Expedia® Special Rate hotels and vacation rentals with the guaranteed lowest prices. Expedia operates Classic Custom Vacations, Inc., a leading wholesaler of premiere vacation packages to destinations such as Hawaii, Mexico, Europe and the Caribbean; and Metropolitan Travel, a corporate travel agency. Travelscape, Inc., wholly owned by Expedia, also operates as WWTE, a private-label online travel business that supplies car and hotel inventory to third parties. Expedia is a majority-owned subsidiary of USA Interactive (NASDAQ: USAI). Notes on Attached Exhibits Exhibit 1 outlines the Sept. 30, 2002, consolidated Statements of Operations for Expedia, Inc. as compared with the prior-year numbers. Exhibit 2 outlines the nine-month consolidated Statements of Operations for Expedia, Inc. as compared with the prior-year numbers. Exhibit 3 outlines key operating metrics for Expedia, Inc. and its subsidiaries. Exhibit 4 presents a consolidated condensed balance sheet for Expedia, Inc. #### This press release contains forward-looking statements relating to future events or future financial performance that involve risks and uncertainties. Such statements can be identified by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms or comparable terms. These statements are Expedia reports record revenue and earnings for September quarter - 5 only predictions and actual results could differ materially from those anticipated in these statements based upon a number of factors including final adjustments made in closing the quarter and those identified in the company’s filings with the SEC. Expedia, Expedia.com and the Expedia logo are either registered trademarks or trademarks of Expedia, Inc. in the U.S., Canada and/or other countries. The names of actual companies and products mentioned herein may be trademarks of their respective owners. For investor information about Expedia, Inc.: Marj Charlier, Director of Investor Relations, (425) 564-7666 or call our Investor Relations team at (425) 564-7233 For more information, press only: Darcy Bretz, Edelman Public Relations, (312) 240-2619 firstname.lastname@example.org or visit http://expedia.com/daily/press Expedia reports record revenue and earnings for September quarter - 6 Exhibit 1 Statements of Operations Expedia, Inc. (in thousands, except per share amounts) (unaudited) Three Months Ended September 30, 2002 (A) Three Months Ended September 30, 2001 GAAP Adjustments Adjusted GAAP Adjustments Adjusted Revenues: Agency $62,495 $62,495 $39,279 $39,279 Merchant (B) 98,453 98,453 34,102 34,102 Advertising and other 4,854 4,854 6,097 6,097 Total revenues 165,802 - 165,802 79,478 79,478 Cost of revenues: Agency 24,574 24,574 15,977 15,977 Merchant (B) 29,561 29,561 9,509 9,509 Advertising and other 585 585 801 801 Total cost of revenues 54,720 - 54,720 26,287 26,287 Gross profit 111,082 - 111,082 53,191 53,191 Gross profit % 67.0% 67.0% 66.9% 66.9% Operating expenses: Product development 9,310 9,310 7,209 7,209 Sales and marketing 49,206 (3,915) (C) 45,291 26,071 26,071 General and administrative 12,548 12,548 6,181 6,181 Amortization of goodwill and intangibles 4,493 (4,493) (D) - 9,904 (9,904) - Recognition of stock-based compensation 1,332 (1,332) (E) - 3,564 (3,564) - Total operating expenses 76,889 (9,740) 67,149 52,929 (13,468) 39,461 Income (loss) from operations 34,193 9,740 43,933 262 13,468 13,730 Net interest income and other 2,407 2,407 1,329 1,329 Share of joint venture net loss (120) (120) - - Non-recurring charge - USAI merger-related expense (977) 977 (G) - (6,341) 6,341 - Pretax income (loss) 35,503 10,717 46,220 (4,750) 19,809 15,059 Provision for income taxes (15,434) (15,434) NET INCOME (LOSS) $20,069 $10,717 $30,786 $ (4,750) $19,809 $ 15,059 Net interest income and other (2,407) (1,329) Provision for income taxes 15,434 - Depreciation and amortization 4,103 2,644 Share of joint venture net loss 120 - EBITDA (F) $48,036 $16,374 Pre-tax income per share: Basic $ 0.81 $ 0.30 Diluted $ 0.74 $ 0.24 NET INCOME (LOSS) per share: Basic $ 0.35 $ 0.54 $ (0.09) $ 0.30 Diluted $ 0.32 $ 0.49 $ (0.09) $ 0.24 Weighted average # of shares outstanding: Basic 57,203 57,203 50,319 50,319 Diluted 62,761 62,761 50,319 62,592 (A) The financial results presented for the period ended September 30, 2002 includes the operations of Classic Custom Vacations, acquired March 9, 2002 and Metropolitan Travel, acquired July 14, 2002. (B) Merchant amounts are reported on a net basis. (C) Non-cash marketing expense resulting from contribution by USA Interactive, Inc. (D) Amortization of acquired goodwill and intangibles. (E) Non-cash stock-based compensation expense. (F) Adjusted EBITDA is defined as adjusted net income minus net interest income and other; and plus, (1) provision for income taxes (2) depreciation and amortization of capitalized operating expenses, and (3) share of joint venture net losses. (G) Costs associated with the USA Interactive, Inc. proposed exchange offer. Expedia reports record revenue and earnings for September quarter - 7 Exhibit 2 Statements of Operations Expedia, Inc. (in thousands, except per share amounts) (unaudited) Nine Months Ended September 30, 2002 (A) Nine Months Ended September 30, 2001 GAAP Adjustments Adjusted GAAP Adjustments Adjusted (A) Revenues: Agency $169,036 $169,036 $116,528 $116,528 Merchant (B) 241,830 241,830 74,282 74,282 Advertising and other 15,820 15,820 24,364 24,364 Total revenues 426,686 - 426,686 215,174 215,174 Cost of revenues: Agency 64,534 64,534 46,047 46,047 Merchant (B) 70,688 70,688 18,997 18,997 Advertising and other 2,030 2,030 2,491 2,491 Total cost of revenues 137,252 - 137,252 67,535 67,535 Gross profit 289,434 - 289,434 147,639 147,639 Gross profit % 67.8% 67.8% 68.6% 68.6% Operating expenses: Product development 26,189 26,189 20,759 20,759 Sales and marketing 125,255 (9,720) (C) 115,535 77,453 77,453 General and administrative 32,334 32,334 18,068 18,068 Amortization of goodwill and intangibles 17,479 (17,479) (D) - 40,866 (40,866) - Recognition of stock-based compensation 5,410 (5,410) (E) - 13,980 (13,980) - Total operating expenses 206,667 (32,609) 174,058 171,126 (54,846) 116,280 Income (loss) from operations 82,767 32,609 115,376 (23,487) 54,846 31,359 Net interest income and other 7,575 7,575 3,110 3,110 Share of joint venture net loss (518) (518) - - Non-recurring charge - USAI merger-related expense (10,837) 10,837 (G) - (6,341) 6,341 - Pretax income (loss) 78,987 43,446 122,433 (26,718) 61,187 34,469 Provision for income taxes (34,107) (34,107) - NET INCOME (LOSS) $ 44,880 $ 43,446 $ 88,326 $ (26,718) 61,187 $ 34,469 Net interest income and other (7,575) (3,110) Provision for income taxes 34,107 - Depreciation and amortization 12,644 7,300 Share of joint venture net loss 518 - EBITDA (F) $128,020 $38,659 Pre-tax Income (Loss) per share: Basic $ 2.19 $ 0.70 Diluted $ 1.94 $ 0.58 NET INCOME (LOSS) per share: Basic $ 0.80 $ 1.58 $ (0.54) $ 0.70 Diluted $ 0.71 $ 1.40 $ (0.54) $ 0.58 Weighted average # of shares outstanding: Basic 55,973 55,973 49,041 49,041 Diluted 63,232 63,232 49,041 59,301 (A) The financial results presented for the period ended September 30, 2002 includes the operations of Classic Custom Vacations, acquired March 9, 2002 and Metropolitan Travel, acquired July 14, 2002. (B) Merchant amounts are reported on a net basis. (C) Non-cash marketing expense resulting from contribution by USA Interactive, Inc. (D) Amortization of acquired goodwill and intangibles. (E) Non-cash stock-based compensation expense. (F) Adjusted EBITDA is defined as adjusted net income minus net interest income and other; and plus, (1) provision for income taxes (2) depreciation and amortization of capitalized operating expenses, and (3) share of joint venture net losses (G) Costs associated with the USA Interactive, Inc. proposed exchange offer. Expedia reports record revenue and earnings for September quarter - 8 Exhibit 3 Key Operating Metrics (In Thousands, except for Gross Bookings & percentage) (unaudited) Growth through Sep. 30, 2002 Sep. 30, 2001 Dec. 31, 2001 Mar. 31, 2002 Jun. 30, 2002 Sept. 30, 2002 Year-over-year Sequential Total gross bookings (in millions) (A) $ 720 $ 700 $ 1,110 $ 1,330 $ 1,470 104% 11% Total Transactions (B) 2,222 2,229 3,045 3,681 4,238 91% 15% Average monthly Media Metrix reach (C) 9,410 9,238 11,242 12,161 12,615 34% 4% Expedia.com conversion (D) 5.5% 5.2% 5.8% 6.3% 6.7% 22% 6% Expedia new purchasing customers (E) 918 870 1,316 1,529 1,693 84% 11% Expedia cumulative purchasing customers (F) 5,424 6,294 7,610 9,139 10,832 n/a n/a Expedia quarterly unique purchasing customers (G) 1,393 1,383 1,874 2,217 2,492 79% 12% (A) Gross bookings represents the total value of travel booked through the Expedia, VacationSpot, and WWTE sites, Classic Custom Vacations and Metropolitan Travel since acquisition. (B) Transactions represents the number of reservations and purchases transacted through the Expedia, VacationSpot, and WWTE sites, Classic Custom Vacations and Metropolitan Travel since acquisition. (C) Average monthly Media Metrix reach represents the unduplicated reach for the Expedia and VacationSpot sites. (D) Conversion represents the monthly average Expedia.com unique monthly purchasers divided by the monthly average Media Metrix reach for the Expedia.com site. (E) Expedia new purchasing customers represents the number of new customers transacting through the Expedia sites in a quarter. (F) Expedia cumulative purchasing customers represents the cumulative number of customers that have ever transacted through the Expedia sites as of the end of a quarter. (G) Expedia quarterly unique purchasing customers represents the number of unique customers transacting through the Expedia sites over the course of a quarter. Expedia reports record revenue and earnings for September quarter - 9 Exhibit 4 Condensed Balance Sheets Expedia, Inc. (in thousands) (unaudited) Sep. 30, Dec. 31, 2002 2001 (C) Cash and short-term investments $ 525,232 $ 238,374 Prepaid merchant bookings (A) 15,440 8,726 Other current assets 50,683 24,841 Total current assets 591,355 271,941 Property and equipment, net 27,625 21,447 Investments and restricted deposits 30,387 12,897 Deferred tax asset 9,300 - Goodwill and intangible assets, net 158,290 98,270 Total assets $ 816,957 $ 404,555 Accounts payable and accrued expenses $ 201,783 $ 100,915 Deferred merchant bookings (B) 170,738 52,965 Other current liabilities 4,730 1,574 Total liabilities 377,251 155,454 Stockholders' equity 439,706 249,101 Total liabilities and stockholders' equity $ 816,957 $ 404,555 (A) Represents prepayment of merchant ticket costs to the airlines. (B) Represents receipt of payments from customers prior to the travel date. (C) Includes the Classic and Metropolitan purchase price which was allocated to the assets acquired and liabilities assumed based on their estimated fair values. The estimated fair values are preliminary in nature and may not be indicative of the final purchase price allocation.