01—Abstract
Summary
Summary of the 10-Q filed October 29, 2010. Cited figures are marked; the original filing is the authoritative source.
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 billiona, 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 millionb 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.
02—Key points
Key Highlights
- Total 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.
- Operating income saw a substantial increase of 35% to $583 million, up from $431 million in the comparable period of 2009.
- Net income attributable to Expedia, Inc. grew significantly to $350.2 million from $197.3 million in the first nine months of 2010.
- Cash and cash equivalents and short-term investments totaled $1.6 billion as of September 30, 2010, indicating strong liquidity.
- The company issued $750 million in senior unsecured notes in August 2010, strengthening its financial position.
- Diluted earnings per share increased to $1.21 for the nine-month period, up from $0.68 in the prior year.
- Expedia initiated quarterly cash dividends and continued its share repurchase program, returning capital to shareholders.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2010, Expedia Group, Inc. kept $0.20.
- Revenue$898.1M100.0%
- Cost of revenue−$190.0M21.2%
- Gross profit$708.1M78.8%
- Operating costs−$498.9M55.6%
- Operating income$209.2M23.3%
- Interest, other & tax−$32.6M3.6%
- Net income$176.6M19.7%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2010filed October 29, 2010Financial Statements
Q3 FY2010 against Q3 FY2009
| Line item | Q3 FY2010Q3 FY2009 | Change |
|---|---|---|
| Revenue | $898.10M$852.43M | +5.4% |
| Cost of Revenue | $190.03M$169.44M | +12.2% |
| Gross Profit | $708.07M$682.99M | +3.7% |
| Operating Income | $209.15M$222.97M | −6.2% |
| Interest Expense | $26.99M$21.18M | +27.4% |
| Net Income | $176.55M$117.01M | +50.9% |
| EPS (Basic) | $1.26$0.82 | +53.7% |
| EPS (Diluted) | $1.23$0.80 | +53.7% |
| Shares Outstanding (Basic) | 140.61M144.21M | −2.5% |
| Shares Outstanding (Diluted) | 143.14M146.86M | −2.5% |
05—Questions
Frequently Asked Questions
What were the primary drivers of revenue growth in the first nine months of 2010?
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%.
How did Expedia manage its expenses, and what impact did this have on profitability?
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.
What is the company's liquidity position and how has it been financed?
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.
Are there any significant legal or regulatory issues that investors should be aware of?
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.
06—Continue