01—Abstract
Summary
Summary of the 10-Q filed July 30, 2010. Cited figures are marked; the original filing is the authoritative source.
Expedia Group, Inc. reported a strong performance for the second quarter and first half of 2010, demonstrating significant year-over-year growth across key financial metrics.
Revenue increased by 8% in the second quarter and 10% in the first half, driven by growth in both the Leisure and TripAdvisor Media Network segments, with substantial increases in advertising and media revenue. This revenue growth translated into a significant improvement in operating income, which rose 69% in the second quarter and 47% in the first half, benefiting from the absence of large one-time charges recorded in the prior year, such as occupancy tax assessments and restructuring costs. Financially, the company showed robust cash flow generation, with net cash provided by operating activities increasing by $88 milliona in the first half of 2010.
While investing activities used more cash due to increased investment purchases, the company managed its financing activities, including share repurchases and dividend payments, effectively. Expedia's balance sheet remained solid, with cash and cash equivalents increasing to $795.8 millionb. The company also made progress in resolving legal matters, notably reducing its reserve for occupancy tax litigation and achieving settlements in principle for several cases, indicating a potential reduction in future legal costs and uncertainties.
02—Key points
Key Highlights
- Total revenue increased by 8% for the three months ended June 30, 2010, and 10% for the six months ended June 30, 2010, compared to the same periods in 2009.
- Operating income saw substantial growth, increasing by 69% in the second quarter and 47% in the first half, largely due to the absence of significant one-time charges from the prior year.
- Net cash provided by operating activities increased by $88 million for the six months ended June 30, 2010, reaching $933.3 million.
- The company's cash and cash equivalents balance grew to $795.8 million as of June 30, 2010.
- Legal proceedings related to hotel occupancy taxes showed progress, with several settlements in principle reached and a reduction in the reserve for potential settlements.
- Expedia announced and paid quarterly cash dividends of $0.07 per share in the first and second quarters of 2010.
- Share repurchases continued, with 8.4 million shares bought back for $188 million in the first half of 2010.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2010, Expedia Group, Inc. kept $0.15.
- Revenue$751.5M100.0%
- Cost of revenue−$168.6M22.4%
- Gross profit$583.0M77.6%
- Operating costs−$456.4M60.7%
- Operating income$126.5M16.8%
- Interest, other & tax−$12.3M1.6%
- Net income$114.3M15.2%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2010filed July 30, 2010Financial Statements
Q2 FY2010 against Q2 FY2009
| Line item | Q2 FY2010Q2 FY2009 | Change |
|---|---|---|
| Revenue | $751.54M$769.77M | −2.4% |
| Cost of Revenue | $168.57M$148.76M | +13.3% |
| Gross Profit | $582.97M$621.01M | −6.1% |
| Operating Income | $126.54M$114.64M | +10.4% |
| Interest Expense | $20.21M$20.80M | −2.9% |
| Net Income | $114.26M$40.90M | +179.4% |
| EPS (Basic) | $0.80$0.28 | +185.7% |
| EPS (Diluted) | $0.79$0.28 | +182.1% |
| Shares Outstanding (Basic) | 142.04M144.09M | −1.4% |
| Shares Outstanding (Diluted) | 144.49M145.44M | −0.7% |
05—Questions
Frequently Asked Questions
What was the primary driver of Expedia's revenue growth in Q2 2010?
Expedia's revenue growth was primarily driven by an increase in worldwide hotel revenue within its Leisure segment, coupled with significant growth in advertising and media revenue from its TripAdvisor Media Network. Additionally, an increase in air ticket prices contributed to revenue growth in the air segment.
How did the company's operating income improve so significantly compared to the previous year?
The significant improvement in operating income was largely due to the absence of substantial one-time expenses recorded in the second quarter of 2009, specifically occupancy tax assessments and legal reserves ($74 million) and restructuring charges ($6 million). Revenue growth also contributed to the improved profitability.
What is the company's current financial health and liquidity situation?
Expedia maintains a strong financial position. Cash and cash equivalents stood at $795.8 million as of June 30, 2010. Net cash provided by operating activities increased, indicating healthy cash generation. The company also has access to a $750 million revolving credit facility, with $721 million available as of June 30, 2010, providing ample liquidity.
Are there any significant legal or regulatory issues that investors should be aware of?
The most significant ongoing legal issue pertains to hotel occupancy taxes, with numerous lawsuits filed by cities and counties. While the company continues to defend these vigorously, progress has been made with settlements in principle reached for several cases. The company has established a reserve of $27 million as of June 30, 2010, for potential settlements, and management believes the ultimate resolution will not have a material adverse impact, though significant pay-to-play payments or litigation losses could impact liquidity.
06—Continue