Priceline 2011 Annual Report Download - page 50

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49
Cost of Revenues and Gross Profit
Cost of Revenues
% of Merchant Revenues
Year Ended
December 31,
($000)
2010
$ 1,175,934
69.5%
2009
$ 1,077,449
74.4%
Change
9.1%
Cost of Revenues
For the year ended December 31, 2010, cost of revenues consisted primarily of charges from suppliers for: (1) the cost
of Name Your Own Price® hotel room reservations, net of applicable taxes, (2) the cost of Name Your Own Price® rental cars,
net of applicable taxes; and (3) the cost of Name Your Own Price® airline tickets, net of the federal air transportation tax,
segment fees and passenger facility charges imposed in connection with the sale of airline tickets. Cost of revenues for the year
ended December 31, 2010 increased by 9.1%, compared to the same period in 2009, primarily due to the increase in merchant
revenue discussed above. Merchant price-disclosed hotel revenues in the U.S. and for Agoda and merchant semi-opaque rental
car reservations for TravelJigsaw are recorded in merchant revenues net of the amounts paid to suppliers and therefore, there is
no associated cost of revenues for merchant price-disclosed hotel revenues. Cost of revenues as a percentage of their
associated merchant revenues decreased primarily due to the increase in merchant price-disclosed hotel revenues and the
addition of TravelJigsaw merchant revenues, all of which are recorded on a "net" basis.
Agency revenues are recorded at their net amount, which are amounts received less amounts paid to suppliers, if any,
and therefore, there are no costs of agency revenues.
Gross Profit
Gross Profit
Gross Margin
Year Ended
December 31,
($000)
2010
$ 1,908,971
61.9%
2009
$ 1,260,763
53.9%
Change
51.4%
Total gross profit for the year ended December 31, 2010 increased by 51.4% compared to the same period in 2009,
primarily as a result of increased revenue discussed above. Total gross margin (gross profit expressed as a percentage of total
revenue) increased during the year ended December 31, 2010, compared to the same period in 2009, because Name Your Own
Price® revenues, which are recorded "gross" with a corresponding cost of revenue, represented a smaller percentage of total
revenues compared to retail, price-disclosed agency and merchant revenues which are primarily recorded "net" with no
corresponding cost of revenues. Because Name Your Own Price® transactions are reported "gross" and retail transactions are
primarily recorded on a "net" basis, we believe that gross profit has become an increasingly important measure of evaluating
growth in our business. Our international operations accounted for approximately $1.4 billion of our gross profit for the year
ended December 31, 2010, which compares to approximately $848.6 million for the same period in 2009. Gross profit
attributable to our international operations increased, on a local currency basis, by approximately 77% in the year ended
December 31, 2010, compared to the same period in 2009.