01—Abstract
Summary
Summary of the 10-K/A filed April 29, 2016. Cited figures are marked; the original filing is the authoritative source.
Expedia Group, Inc. (EXPE) filed this 10-K/A on April 29, 2016, primarily updating Part III and Part IV of its annual report for the fiscal year ended December 31, 2015.
A key takeaway is Expedia's status as a 'controlled company' under NASDAQ listing rules, due to Liberty Interactive and Barry Diller collectively holding approximately 55%a of the voting power. This controlled status exempts Expedia from certain NASDAQ requirements, including having a majority of independent directors and an independent compensation committee. Significant focus is placed on executive compensation, detailing base salaries, bonuses, and equity awards for named executive officers.
Notably, CEO Dara Khosrowshahi received substantial stock option awards in 2015 as part of a new employment agreement. The filing also outlines director compensation, highlighting that while Liberty Interactive nominees historically did not receive compensation, this changed effective January 1, 2016, for some nominees. Related party transactions are also detailed, primarily involving arrangements with IAC and Liberty Interactive, including cost-sharing for Mr. Diller's resources and aircraft usage.
02—Key points
Key Highlights
- Expedia operates as a 'controlled company' due to Liberty Interactive and Barry Diller's combined voting power (approx. 55%), leading to exemptions from certain NASDAQ governance rules.
- The filing details executive compensation, with CEO Dara Khosrowshahi receiving significant equity awards in 2015 under a new long-term employment agreement, including performance-based stock options.
- Board composition is influenced by Liberty Interactive's right to nominate directors proportional to its stake.
- Director compensation structure shifted, with Liberty Interactive nominees becoming eligible for compensation starting January 1, 2016.
- Significant related-party transactions and agreements are disclosed, primarily with IAC and Liberty Interactive, concerning cost-sharing, aircraft usage, and corporate governance.
- The company utilizes a compensation committee and a Section 16 committee overseeing executive pay, with a focus on aligning executive interests with shareholder value through equity compensation.
- Expedia's stock ownership policy requires executives to hold a certain number of shares, with compliance noted for most named executive officers.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Expedia Group, Inc. kept $0.11.
- Revenue$6.67B100.0%
- Cost of revenue−$1.31B19.6%
- Gross profit$5.36B80.4%
- Operating costs−$4.95B74.2%
- Operating income$413.6M6.2%
- Interest, other & tax$350.9M5.3%
- Net income$764.5M11.5%
Where FY2015 revenue went
$6.67B- Operating costs: $4.95B, 74% of revenue
- Cost of revenue: $1.31B, 20% of revenue
- Operating income: $413.6M, 6.2% of revenue
Kept 6.2% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-K/AFY2015filed April 29, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $6.67B$5.76B | +15.8% |
| Cost of Revenue | $1.31B$1.18B | +11.1% |
| Gross Profit | $5.36B$4.58B | +17.0% |
| Operating Income | $413.57M$517.76M | −20.1% |
| Interest Expense | $126.19M$98.09M | +28.7% |
| Net Income | $764.47M$398.10M | +92.0% |
| EPS (Basic) | $5.87$3.09 | +90.0% |
| EPS (Diluted) | $5.70$2.99 | +90.6% |
| Shares Outstanding (Basic) | 130.16M128.91M | +1.0% |
| Shares Outstanding (Diluted) | 134.02M133.17M | +0.6% |
05—Questions
Frequently Asked Questions
What does Expedia's 'controlled company' status mean for investors?
As a 'controlled company,' Expedia is exempt from certain NASDAQ listing requirements regarding board independence and committee composition. This means a majority of the board may not be independent directors, and the compensation committee may not be composed solely of independent directors. Investors should be aware that governance oversight may differ from non-controlled companies.
What were the key components of executive compensation in 2015?
The primary elements of executive compensation included base salary, cash bonuses, and equity compensation (stock options and restricted stock units). For 2015, CEO Dara Khosrowshahi received substantial stock option awards as part of a new employment agreement, and significant bonuses were awarded to executives involved in key acquisitions like Orbitz and HomeAway.
Are there any significant related-party transactions that investors should be aware of?
Yes, Expedia has ongoing commercial and cost-sharing arrangements with IAC, stemming from their historical relationship under common control. Additionally, there are arrangements with Liberty Interactive and its related entities, including cost-sharing for resources used by Barry Diller and equity issuance related to Liberty Interactive's preemptive rights. These transactions are overseen by the Audit Committee.
How is director compensation structured, and have there been recent changes?
Non-employee directors received annual retainers, stock unit grants, and committee-specific retainers in 2015. Notably, directors nominated by Liberty Interactive historically did not receive compensation for their board service. However, effective January 1, 2016, some Liberty Interactive nominees, along with Mr. Kaufman, became eligible to receive director compensation.
06—Continue