LodgeNet Reports Higher Revenues, Lower Losses

Hospitality-industry interactive TV provider, LodgeNet, has released its second-quarter financial results:

• Revenues totaled $68.1 million, compared to $66.3 million for the year-ago quarter.
• Operating income totaled $6.1 million, compared to $3.2 million for the year-ago quarter.
• Net losses totaled $1.7 million, or $0.09 per share, compared to $5 million, or $0.38 per share, for the year-ago quarter.
• The company's operations generated $5.1 million in net free cash flow (defined as cash provided by operating activities, minus cash used for investing) in the first six months of 2005, compared to $2.2 million during the first six months of 2004. (Note: its operations generated a total of $33.2 million in cash in that same period, compared to a total of $28.3 million in the year-ago period.) The company says that the increase in net free cash flow has been a contributing factor in enabling it to pay down its long-term debt by $9.4 million.
• In the course of the quarter, the company added 9,500 net new Guest Pay rooms and 32,000 digital rooms. Its digital platform is now in 57.5% of its interactive rooms, and it says that the total cost of installing the platform is down 10% from the year-ago quarter.
• Revenue from Guest Pay interactive services increased $2.1 million, driven by a 5.3% increase in the average number of rooms in operation, and offset by a 2% decrease in revenue per average Guest Pay Room. Total monthly revenue per room was $22.38, compared to $22.84 for the year-ago quarter. Movie revenue per room was $16.89, compared to $17.28 for the year-ago quarter, while revenue per room from other interactive services was $5.49 per month, compared to $5.56 per month for the year-ago quarter. The company blamed the decline in interactive service revenues on a decline in revenues generated by its games and Internet-over-TV services. The decline was due in part to the company's decision to remove Internet-over-TV service from hotels where it had performed poorly: while this lowered revenue per average Guest Pay room by $0.16, it also reduced operating costs by $697,000 or $0.26 per average Guest Pay room, the company said.

The company also provided some guidance for the current quarter and for the year as a whole:

• It expects Q3 revenues to range between $75 million and $77 million.
• It expects Q3 operating income to range between $7.5 million and $8.5 million, and operating income, exclusive of depreciation and amortization, to range between $25 million and $26 million.
• It expects Q3 net income to range between break-even and $1 million (or $0.06 per share).
• It expects 2005 revenues to range between $278 million and $282 million.
• It expects 2005 operating income to range between $22 million and $24.5 million, and operating income, exclusive of depreciation and amortization, to range between $93 million and $95.5 million.
• It expects 2005 net losses to range between $8 million, or $0.45 per share, and $5.5 million, or $0.31 per share.

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