01—Abstract
Summary
Summary of the 10-K/A filed April 29, 2019. Cited figures are marked; the original filing is the authoritative source.
Expedia Group, Inc.'s 2019 10-K filing highlights significant corporate governance and executive compensation information for investors.
A key point is the company's status as a "controlled company" due to Barry Diller and Liberty Expedia Holdings collectively holding approximately 55%a of the voting power. This status exempts Expedia from certain Nasdaq listing rules, such as requiring a majority of independent directors. Additionally, the filing details a proposed merger with Liberty Expedia Holdings, which, if completed, is expected to result in Expedia no longer being a controlled company, necessitating compliance with full Nasdaq listing rules.
The compensation section focuses on named executive officers, outlining their 2018 salaries, bonuses, and equity awards. A significant portion of executive compensation, particularly for the CEO, is tied to long-term equity incentives, including stock options and restricted stock units, with some performance-based awards contingent on achieving specific stock price targets. The filing also details executive severance packages and change-in-control provisions, offering insights into potential benefits under various termination scenarios.
02—Key points
Key Highlights
- Expedia Group operates as a "controlled company" under Nasdaq listing rules, with Barry Diller and Liberty Expedia Holdings holding approximately 55% of the voting power, exempting the company from certain independent director and board composition requirements.
- A proposed merger with Liberty Expedia Holdings, announced shortly before the filing, is expected to declassify Expedia as a controlled company, requiring future adherence to full Nasdaq governance standards.
- Executive compensation in 2018 was heavily weighted towards long-term equity incentives, including stock options and restricted stock units, designed to align executive and shareholder interests and retain talent.
- Significant equity awards were granted to named executive officers, with some performance-based options tied to achieving specific stock price targets (e.g., $180 and $200), indicating a focus on driving shareholder value.
- The filing details robust severance packages and change-in-control provisions for named executive officers, providing a safety net and incentive to remain with the company during uncertain periods or transactions.
- The Board of Directors is composed of 14 individuals, including Chairman Barry Diller, CEO Mark D. Okerstrom, and several independent directors with diverse backgrounds in business, technology, and public policy.
- The company's Audit Committee comprises two independent directors, with a notice received from Nasdaq indicating non-compliance with the rule requiring at least three independent directors for audit committees, though a cure period was granted.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Expedia Group, Inc. kept $0.04.
- Revenue$11.22B100.0%
- Cost of revenue−$1.97B17.5%
- Gross profit$9.26B82.5%
- Operating costs−$8.54B76.1%
- Operating income$714.0M6.4%
- Interest, other & tax−$308.0M2.7%
- Net income$406.0M3.6%
Where FY2018 revenue went
$11.22B- Operating costs: $8.54B, 76% of revenue
- Cost of revenue: $1.97B, 18% of revenue
- Net income: $406.0M, 3.6% of revenue
- Interest, other & tax: $308.0M, 2.7% of revenue
Kept 3.6% as net incomeNet income $406.0M · 3.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-K/AFY2018filed April 29, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $11.22B$10.06B | +11.6% |
| Cost of Revenue | $1.97B$1.76B | +11.8% |
| Gross Profit | $9.26B$8.30B | +11.5% |
| Operating Income | $714.00M$625.00M | +14.2% |
| Interest Expense | $190.00M$182.00M | +4.4% |
| Net Income | $406.00M$378.00M | +7.4% |
| EPS (Basic) | $2.71$2.49 | +8.8% |
| EPS (Diluted) | $2.65$2.42 | +9.5% |
| Shares Outstanding (Basic) | 149.96M151.62M | −1.1% |
| Shares Outstanding (Diluted) | 152.89M156.38M | −2.2% |
05—Questions
Frequently Asked Questions
What is Expedia Group's 'controlled company' status and what are its implications?
Expedia Group is considered a 'controlled company' because Barry Diller and Liberty Expedia Holdings collectively own approximately 55% of the company's voting power. This status allows Expedia to rely on exemptions from certain Nasdaq listing rules, such as the requirement for a majority of independent directors on the Board of Directors and independence on its Compensation Committee. This means that a significant portion of the Board and key committees may not meet the full independence criteria.
How is executive compensation structured at Expedia Group, and what is the role of equity?
Expedia Group's executive compensation program emphasizes a pay-for-performance culture, aiming to attract, motivate, and retain executives. For 2018, compensation for named executive officers included base salary, cash bonuses, and a significant component of long-term equity awards (stock options and restricted stock units). These equity awards are designed to align executive interests with those of shareholders and often vest over multiple years, with some performance-based awards contingent on achieving specific stock price targets, reflecting a focus on long-term value creation.
What is the significance of the proposed merger with Liberty Expedia Holdings?
The proposed merger with Liberty Expedia Holdings, announced just prior to this filing, is significant because upon its completion, Expedia Group is expected to no longer be a 'controlled company.' This transition will require Expedia to comply fully with Nasdaq's listing rules regarding board independence, committee composition, and director nominations, which could lead to changes in its corporate governance structure.
What are the potential severance benefits for named executive officers?
The filing details severance provisions for certain named executive officers, including continued base salary payments for a specified period (e.g., 12-36 months, depending on the executive and circumstances), payment of COBRA health insurance premiums, and accelerated vesting of certain equity awards upon a qualifying termination (without cause or for good reason). These provisions are intended to provide financial security and retain executives during periods of potential uncertainty or transition.
06—Continue