01—Abstract
Summary
Summary of the 10-K filed February 7, 2014. Cited figures are marked; the original filing is the authoritative source.
Expedia Group, Inc.'s 2013 Form 10-K details a dynamic online travel landscape with significant growth and increasing competition.
The company highlights its multi-brand strategy, including Expedia.com, Hotels.com, Hotwire.com, and Egencia (corporate travel), alongside international investments in eLong (China) and trivago (metasearch). Financially, Expedia is navigating pressures on revenue per room night due to expanded inventory and program rollouts like the Expedia Traveler Preference (ETP) program. While gross bookings showed a healthy increase, the company's revenue margin saw a slight improvement driven by a favorable mix shift towards higher-margin products like advertising and media, partially offset by the aforementioned pressures.
The company is actively managing its long-term debt and cash flow, with a notable portion of its cash reserves held internationally. Key risks identified include intense competition from online travel agencies, suppliers, and search engines, as well as regulatory challenges, particularly around hotel occupancy taxes, and ongoing legal proceedings. The company's growth strategy hinges on product innovation, global expansion, and new channel penetration, with a specific focus on mobile adoption.
02—Key points
Key Highlights
- Expedia operates a diverse portfolio of travel brands targeting various customer segments, including Expedia.com, Hotels.com, Hotwire.com, and Egencia (corporate travel).
- Significant international presence and investment, notably with a majority stake in China's eLong and majority ownership of European hotel metasearch company trivago.
- Revenue growth driven primarily by increased hotel room nights and air ticket volumes, though revenue per room night faced pressure due to expanded inventory and program changes like ETP.
- Increased competition from OTAs, direct suppliers, metasearch engines, and search giants like Google is a key factor impacting the business.
- The company is actively involved in numerous legal proceedings, particularly concerning hotel occupancy taxes levied by various states and municipalities.
- Expedia's growth strategy focuses on product innovation, global expansion (aiming for over half of revenue from international sales), and new channel penetration, especially mobile.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, Expedia Group, Inc. kept $0.05.
- Revenue$4.77B100.0%
- Cost of revenue−$1.04B21.8%
- Gross profit$3.73B78.2%
- Operating costs−$3.37B70.6%
- Operating income$366.1M7.7%
- Interest, other & tax−$133.2M2.8%
- Net income$232.8M4.9%
Where FY2013 revenue went
$4.77B- Operating costs: $3.37B, 71% of revenue
- Cost of revenue: $1.04B, 22% of revenue
- Net income: $232.8M, 4.9% of revenue
- Interest, other & tax: $133.2M, 2.8% of revenue
Kept 4.9% as net incomeNet income $232.8M · 4.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 7, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $4.77B$4.03B | +18.4% |
| Cost of Revenue | $1.04B$898.60M | +15.5% |
| Gross Profit | $3.73B$3.13B | +19.2% |
| Operating Income | $366.06M$431.72M | −15.2% |
| Interest Expense | $87.36M$87.79M | −0.5% |
| Net Income | $232.85M$280.17M | −16.9% |
| EPS (Basic) | $1.73$2.09 | −17.2% |
| EPS (Diluted) | $1.67$2.00 | −16.5% |
| Shares Outstanding (Basic) | 134.91M134.20M | +0.5% |
| Shares Outstanding (Diluted) | 139.59M139.93M | −0.2% |
05—Questions
Frequently Asked Questions
What is Expedia's primary business model and how does it generate revenue?
Expedia operates as an online travel company, facilitating bookings for leisure and corporate travelers through various brands. Revenue is generated through both a merchant model (where Expedia is the merchant of record) and an agency model (where the travel supplier is the merchant of record). This includes commissions and fees from hotel bookings, air tickets, car rentals, destination services, advertising, and corporate travel management.
What are the main competitive threats facing Expedia?
Expedia faces significant competition from a wide range of players, including other online travel agencies (OTAs) like Priceline, direct suppliers (airlines, hotels) who increasingly market on their own platforms, large search engines (Google, Bing) that are expanding travel capabilities, travel metasearch engines (Kayak, trivago itself), and traditional travel agencies. The intense competition can lead to increased marketing costs and pressure on margins.
What are the key financial challenges or risks discussed in the filing?
Key financial challenges include pressure on revenue per room night due to expanded inventory and pricing strategies like the ETP program. The company also faces risks related to significant ongoing litigation, particularly concerning hotel occupancy taxes, which could result in substantial financial liabilities. Additionally, managing foreign exchange risk due to a growing international presence and potential impacts on liquidity from working capital fluctuations are also notable concerns.
How is Expedia addressing the shift towards mobile travel bookings?
Expedia recognizes the growing importance of mobile devices for travel bookings. The company has made significant progress in developing mobile websites and applications across its brands. Expedia has a stated goal of booking 20% of its transactions through mobile devices by the end of 2014, viewing mobile as an opportunity for incremental growth and efficient marketing due to direct traffic acquisition and repeat customers.
06—Continue