01—Abstract
Summary
Summary of the 10-K filed February 10, 2017. Cited figures are marked; the original filing is the authoritative source.
Expedia Group, Inc. reported robust growth in its 2016 Form 10-K filing, showcasing a significant increase in revenue and gross bookings driven by strategic acquisitions and organic growth across its various brands.
The company highlighted its strong brand portfolio, including Expedia.com, Hotels.com, and the recently acquired HomeAway and Orbitz Worldwide, as key drivers of its market position. Expedia continues to invest in product innovation and global expansion, with a goal to generate a substantial portion of its revenue from international markets. The company also discussed its business model, which primarily relies on merchant and agency models, and its ongoing efforts to transition HomeAway to a more transactional platform.
Investors can take note of Expedia's strategic focus on technology and product innovation to enhance customer experience and drive bookings. The company's global expansion strategy, particularly in emerging markets, presents significant growth opportunities.
However, investors should also be aware of the competitive landscape, potential regulatory challenges, and risks associated with acquisitions and technological advancements. The company also highlighted its commitment to shareholder returns through dividends and share repurchases, demonstrating a balanced approach to capital allocation.
02—Key points
Key Highlights
- Expedia Group reported a 31% increase in total revenue to $8.77 billion in 2016, largely due to significant acquisitions like Orbitz Worldwide and HomeAway, as well as organic growth in its Core OTA segment and trivago.
- Gross bookings increased by 19% to $72.43 billion in 2016, indicating strong demand across Expedia's platforms, with acquisitions contributing significantly to this growth.
- The company continues its global expansion strategy, with international points of sale accounting for approximately 36% of worldwide gross bookings and 43% of worldwide revenue in 2016, aiming for over two-thirds of revenue from outside the US.
- Expedia is actively investing in product innovation and technology, including cloud computing and platform migrations, to improve customer experience and operational efficiency.
- The HomeAway segment, acquired in December 2015, is transitioning from a classified advertising model to a transactional model, aiming to increase monetization and drive growth in the alternative accommodations market.
- The company returned capital to shareholders through dividends ($1.00 per share in 2016) and share repurchases, demonstrating a commitment to shareholder value.
- Expedia faces significant competition from other online travel agencies, travel suppliers directly, search engines, and emerging players in the sharing economy, which necessitates continuous adaptation and investment.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Expedia Group, Inc. kept $0.03.
- Revenue$8.77B100.0%
- Cost of revenue−$1.60B18.2%
- Gross profit$7.18B81.8%
- Operating costs−$6.71B76.5%
- Operating income$462.0M5.3%
- Interest, other & tax−$180.0M2.1%
- Net income$282.0M3.2%
Where FY2016 revenue went
$8.77B- Operating costs: $6.71B, 77% of revenue
- Cost of revenue: $1.60B, 18% of revenue
- Net income: $282.0M, 3.2% of revenue
- Interest, other & tax: $180.0M, 2.1% of revenue
Kept 3.2% as net incomeNet income $282.0M · 3.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 10, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $8.77B$6.67B | +31.5% |
| Cost of Revenue | $1.60B$1.31B | +21.9% |
| Gross Profit | $7.18B$5.36B | +33.8% |
| Operating Income | $462.00M$413.57M | +11.7% |
| Interest Expense | $173.00M$126.19M | +37.1% |
| Net Income | $282.00M$764.47M | −63.1% |
| EPS (Basic) | $1.87$5.87 | −68.1% |
| EPS (Diluted) | $1.82$5.70 | −68.1% |
| Shares Outstanding (Basic) | 150.37M130.16M | +15.5% |
| Shares Outstanding (Diluted) | 154.52M134.02M | +15.3% |
05—Questions
Frequently Asked Questions
What were Expedia's key growth drivers in 2016?
Expedia's growth in 2016 was primarily driven by its aggressive acquisition strategy, including the integration of Orbitz Worldwide and HomeAway, which significantly expanded its market presence and offerings. Organic growth in its core online travel agency (OTA) segment, particularly from brands like Expedia.com and Hotels.com, along with strong performance from its metasearch platform trivago, also contributed significantly to revenue and gross booking increases.
How is Expedia addressing the competitive landscape?
Expedia is focusing on several strategies to maintain its competitive edge. These include continuous investment in product innovation and technology to enhance user experience, expanding its global reach by increasing its presence in international markets, and leveraging its broad portfolio of brands to target diverse customer segments. The company also actively manages its marketing and promotional efforts to optimize customer acquisition costs and brand awareness.
What are the main risks and challenges facing Expedia?
Expedia faces several risks and challenges, including intense competition from established players and new entrants in the online travel market, potential disruptions from search engines and technology shifts, regulatory scrutiny related to tax liabilities and business practices, and the successful integration of acquired companies. The company also highlighted risks related to currency fluctuations and broader economic downturns impacting travel demand.
How is Expedia managing its financial obligations and capital resources?
Expedia maintains a strong liquidity position supported by operating cash flows and a substantial revolving credit facility. The company has a significant amount of long-term debt and manages its capital resources by balancing investments in growth initiatives, such as technology and acquisitions, with shareholder returns through dividends and share repurchases. The company also closely monitors its compliance with debt covenants and its credit ratings.
06—Continue