10-QPeriod: Q1 FY2008

Expedia Group, Inc. Quarterly Report for Q1 Ended Mar 31, 2008

Filed May 2, 2008For Securities:EXPE

Summary

Expedia Group, Inc. reported a strong first quarter for 2008, with total revenue increasing by 25% year-over-year to $687.8 million, driven by growth in merchant hotel, advertising, and air revenue. Net income also saw a significant jump of 47.7% to $51.3 million, translating to diluted EPS of $0.17. The company demonstrated robust operational performance with a 34% increase in operating income. Gross bookings grew by a healthy 20% to nearly $6 billion, indicating strong underlying demand across its various segments, particularly in Europe and Corporate & Other. Despite macroeconomic headwinds and industry challenges, Expedia has managed to improve its profitability and revenue growth. The company's strategic focus on diversifying its revenue streams beyond core air and hotel bookings, including expanding its advertising and media offerings, is showing positive results. Investments in technology and global expansion, alongside a solid liquidity position bolstered by operational cash flow and an available credit facility, position Expedia to navigate the evolving travel landscape. Investors should note the increase in selling and marketing expenses as a percentage of revenue, which is expected to continue as the company invests in growth initiatives.

Key Highlights

  • 1Total revenue grew 25% to $687.8 million in Q1 2008 compared to Q1 2007.
  • 2Net income increased by 47.7% to $51.3 million, with diluted EPS at $0.17.
  • 3Gross bookings saw a significant 20% increase, reaching $5.9 billion.
  • 4Operating income improved by 34% to $90.0 million, indicating strong operational efficiency.
  • 5Merchant hotel revenue increased 22% due to higher room nights, with ADR growth slowing.
  • 6Selling and marketing expenses increased 29% and are expected to remain a higher percentage of revenue due to strategic investments.
  • 7The company maintained a strong liquidity position with $698 million in cash and equivalents and an available credit facility.

Frequently Asked Questions

Expedia's revenue growth was primarily driven by increases in worldwide merchant hotel revenue (up 22%), advertising and media revenue, and air revenue (up 18%). Growth in room nights stayed and air tickets sold, along with a slight increase in revenue per air ticket, contributed to these improvements. The European segment also showed strong growth.

Expedia noted that while rising crude oil prices and carrier consolidation present challenges, they have signed long-term agreements with major domestic carriers, stabilizing non-booking fee air remuneration from 2008 onwards. The company's revenue mix is also shifting, with air revenue becoming less than 15% of total revenue, mitigating some of the impact of airline industry pressures.

Expedia is focusing on building the world's largest and most intelligent travel marketplace by securing superior supply and price competitiveness, intelligently matching supply and demand, inspiring travelers, expanding its global reach, and fostering excellence in its people, technology, and processes. Key strategies include leveraging its diverse portfolio of brands, continuous technological innovation, global expansion, and broadening its product and content offerings beyond core air and hotel bookings.

Expedia anticipates selling and marketing expenses to be higher as a percentage of revenue in 2008. This is due to continued investment in established brands and geographies, rising keyword costs, expansion of global advertising and media businesses, growth in international markets, and increased investment in corporate travel sales and destination services teams.