10-QPeriod: Q3 FY2010

Expedia Group, Inc. Quarterly Report for Q3 Ended Sep 30, 2010

Filed October 29, 2010For Securities:EXPE

Summary

Expedia Group, Inc. (EXPE) reported strong financial performance for the nine months ended September 30, 2010, demonstrating significant revenue growth and improved profitability. Total revenue increased by 12% year-over-year to $2.54 billion, driven by robust performance in the Leisure segment and a substantial increase in advertising and media revenue from TripAdvisor Media Network. The company also saw a significant increase in operating income, which rose by 35% to $583 million, reflecting effective cost management and the absence of significant one-time charges incurred in the prior year, such as restructuring charges and occupancy tax assessments. Financially, Expedia strengthened its balance sheet, ending the period with $1.6 billion in cash and short-term investments. The company successfully raised $750 million in senior unsecured notes, enhancing its liquidity. While long-term debt increased, primarily due to this issuance, the company maintains a healthy cash position and sufficient borrowing capacity. Shareholder returns were supported by share repurchases and the initiation of quarterly dividends, indicating management's confidence in the company's financial health and future prospects.

Financial Highlights

57 data points
Beta

Revenue

$898.10M

78.8% Gross Margin

Net Income

$176.55M

19.7% Net Margin

EPS (Diluted)

$1.23

Total Assets

$7.13B

Cash & Equivalents

$950.87M

Free Cash Flow

-$35.81M

Financial Statements
Beta
Revenue$898.10M
Cost of Revenue$190.03M
Gross Profit$708.07M
Operating Income$209.15M
Interest Expense$26.99M
Net Income$176.55M
EPS (Basic)$1.26
EPS (Diluted)$1.23
Shares Outstanding (Basic)140.61M
Shares Outstanding (Diluted)143.14M

Key Highlights

  • 1Total revenue increased by 12% to $2.54 billion for the nine months ended September 30, 2010, compared to $2.26 billion in the prior year period.
  • 2Operating income saw a substantial increase of 35% to $583 million, up from $431 million in the comparable period of 2009.
  • 3Net income attributable to Expedia, Inc. grew significantly to $350.2 million from $197.3 million in the first nine months of 2010.
  • 4Cash and cash equivalents and short-term investments totaled $1.6 billion as of September 30, 2010, indicating strong liquidity.
  • 5The company issued $750 million in senior unsecured notes in August 2010, strengthening its financial position.
  • 6Diluted earnings per share increased to $1.21 for the nine-month period, up from $0.68 in the prior year.
  • 7Expedia initiated quarterly cash dividends and continued its share repurchase program, returning capital to shareholders.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in worldwide hotel revenue within the Leisure segment, largely due to a 14% increase in room nights stayed. Additionally, advertising and media revenue from the TripAdvisor Media Network saw a significant increase of 51%.

Expedia demonstrated effective expense management. While revenue increased, operating expenses also grew, but at a slower pace, especially considering the absence of significant one-time charges like restructuring and occupancy tax assessments that impacted the prior year. This, combined with revenue growth, led to a substantial 35% increase in operating income.

Expedia maintained a strong liquidity position with $1.6 billion in cash and short-term investments as of September 30, 2010. The company financed its operations and investments through operating cash flows and by issuing $750 million in senior unsecured notes in August 2010, which enhanced its overall financial flexibility.

Expedia is involved in ongoing litigation primarily related to hotel occupancy taxes, with 51 lawsuits filed by or against various municipalities. While the company believes these claims lack merit, it has established a reserve of $28 million for potential settlements. Several cases have seen dismissals in favor of Expedia, but some litigation remains active, and new tax legislation impacting online travel companies has been enacted in New York and North Carolina.