10-KPeriod: FY2010

Expedia Group, Inc. Annual Report, Year Ended Dec 31, 2010

Filed February 11, 2011For Securities:EXPE

Summary

Expedia Group, Inc.'s 2010 10-K filing reveals a company firmly established in the online travel market, leveraging a diverse portfolio of brands to cater to various traveler segments. The company's strategy centers on technology and content innovation, global expansion, and a broad product offering. Despite facing intense competition and economic uncertainties, Expedia demonstrated revenue growth in 2010, driven by improvements in the hotel and advertising sectors. Key financial highlights include a significant increase in revenue and operating income compared to the prior year, alongside a substantial increase in long-term debt to fund strategic initiatives and operations. The company also continued its share repurchase program and initiated dividend payments. Investors should note the ongoing legal proceedings, particularly those related to hotel occupancy taxes, which represent a material contingent liability. The company's future success hinges on its ability to navigate a competitive landscape, adapt to technological shifts, and effectively manage its diverse brand portfolio and international operations.

Financial Highlights

57 data points
Beta

Revenue

$3.03B

77.4% Gross Margin

Net Income

$421.50M

13.9% Net Margin

EPS (Diluted)

$2.93

Total Assets

$6.66B

Cash & Equivalents

$621.20M

Free Cash Flow

$469.01M

Financial Statements
Beta
Revenue$3.03B
Cost of Revenue$685.49M
Gross Profit$2.35B
Operating Income$500.79M
Interest Expense$66.43M
Net Income$421.50M
EPS (Basic)$2.98
EPS (Diluted)$2.93
Shares Outstanding (Basic)141.23M
Shares Outstanding (Diluted)144.01M

Key Highlights

  • 1Expedia reported revenue growth of 13% in 2010, reaching $3.35 billion, an improvement from the modest 1% growth in 2009. This growth was primarily driven by increases in hotel revenue and advertising/media revenue.
  • 2Operating income saw a significant increase of 28% to $732 million in 2010, up from $571 million in 2009, indicating improved profitability and operational efficiency.
  • 3The company's international revenue accounted for approximately 38% of total revenue in 2010, highlighting its expanding global footprint and diversification beyond the U.S. market.
  • 4Expedia's advertising and media revenue, largely from the TripAdvisor Media Network, grew by 48% in 2010, contributing a significant 13% of total revenue and showcasing the increasing importance of this segment.
  • 5Long-term debt increased substantially to $1.64 billion in 2010, primarily due to the issuance of $750 million in senior unsecured notes, supporting strategic investments and operations.
  • 6The company initiated quarterly dividend payments in 2010 and continued its share repurchase program, returning capital to shareholders.
  • 7Expedia is involved in numerous ongoing legal proceedings, particularly concerning hotel occupancy taxes, which represent a material contingent liability with potential financial implications.

Frequently Asked Questions

Expedia operates as an online travel company, acting as a global travel marketplace. It generates revenue through two main business models: the merchant model, where Expedia is the merchant of record for bookings (primarily hotels, car rentals, and packages), and the agency model, where it acts as an agent for transactions (primarily airline tickets). Additionally, significant revenue is generated from advertising and media offerings, particularly through the TripAdvisor Media Network. In 2010, over 60% of revenue came from hotel bookings, with less than 15% from airline tickets.

Expedia faces several key risks including intense and increasing competition from online travel agencies, travel suppliers directly, and search engines. Other significant risks include potential declines or disruptions in the global travel industry due to economic conditions, global events, or health crises. The company is also heavily reliant on its relationships with travel suppliers, faces increasing costs for brand maintenance, and is exposed to risks related to changes in search engine algorithms and dynamics. Furthermore, legal uncertainties, particularly around hotel occupancy tax litigation, and the potential for system interruptions are notable concerns.

Expedia has a significant and growing international presence, with approximately 36% of worldwide gross bookings and 38% of worldwide revenue generated internationally in 2010. Brands like Expedia.com, Hotels.com, and TripAdvisor operate globally. The company's strategy includes continued investment in expanding its international points of sale in large and rapidly growing online commerce markets. While international operations present opportunities, they also carry additional risks such as political instability, differing regulatory environments, and currency exchange rate fluctuations.

As of December 31, 2010, Expedia had $1.64 billion in long-term debt, an increase from $895 million in 2009, largely due to the issuance of $750 million in senior unsecured notes. The company reported a working capital deficit of $188 million. Despite this, Expedia stated that its available cash, cash flows from operations, and revolving credit facility provided sufficient liquidity for foreseeable needs. The company also initiated dividend payments and continued share repurchases.