10-QPeriod: Q2 FY2012

Expedia Group, Inc. Quarterly Report for Q2 Ended Jun 30, 2012

Filed July 27, 2012For Securities:EXPE

Summary

Expedia Group, Inc. (EXPE) reported a mixed financial performance for the second quarter and first half of 2012. Revenue showed solid growth, up 14% year-over-year to $1.04 billion for the quarter and 13% to $1.86 billion for the six-month period. This growth was primarily driven by a significant increase in hotel room nights. However, profitability metrics showed a more complex picture. While operating income saw a modest increase of 7% to $154 million for the quarter, net income attributable to Expedia, Inc. declined significantly by 25% to $105 million for the quarter compared to the prior year. This decline was impacted by the classification of TripAdvisor results as discontinued operations in the prior year, as well as increased operating expenses in technology and content, and other costs. The company continues to focus on product innovation and global expansion. Significant investments in technology platforms, particularly for the Expedia brand, are underway to enhance conversion rates and user experience. Mobile bookings and social media engagement are identified as key growth areas. Despite challenges such as intense competition and evolving business models within the online travel industry, Expedia maintains a strong liquidity position, supported by substantial cash reserves and an undrawn credit facility.

Financial Highlights

54 data points
Beta

Revenue

$1.04B

77.9% Gross Margin

Net Income

$105.24M

10.1% Net Margin

EPS (Diluted)

$0.76

Total Assets

$7.51B

Cash & Equivalents

$1.34B

Free Cash Flow

$486.38M

Financial Statements
Beta
Revenue$1.04B
Cost of Revenue$229.74M
Gross Profit$810.24M
Operating Income$154.44M
Interest Expense$21.99M
Net Income$105.24M
EPS (Basic)$0.79
EPS (Diluted)$0.76
Shares Outstanding (Basic)132.56M
Shares Outstanding (Diluted)138.19M

Key Highlights

  • 1Revenue increased by 14% to $1.04 billion for Q2 2012 and 13% to $1.86 billion for the first six months of 2012, driven by strong growth in hotel room nights.
  • 2Operating income increased by 7% to $154 million for Q2 2012, reflecting revenue growth partially offset by increased operating expenses.
  • 3Net income attributable to Expedia, Inc. decreased by 25% to $105 million for Q2 2012, impacted by the prior year's discontinued operations from the TripAdvisor spin-off and increased operational costs.
  • 4The company is actively investing in technology and platform upgrades, particularly for the Expedia brand, to improve customer experience and conversion rates.
  • 5Expedia continues its share repurchase program, authorizing an additional 20 million shares in April 2012 and repurchasing 8.8 million shares in the first half of 2012.
  • 6The company has a strong liquidity position with $2.4 billion in cash and cash equivalents and short-term investments as of June 30, 2012.
  • 7Expedia faces ongoing legal proceedings, particularly concerning hotel occupancy taxes, with reserves established for potential settlements.

Frequently Asked Questions

Expedia's revenue grew by 14% to $1.04 billion in the second quarter of 2012. The primary driver was a significant increase in hotel room nights stayed, which grew by 22% year-over-year. Growth in the Egencia segment, including acquisitions like VIA Travel, also contributed positively.

Net income attributable to Expedia, Inc. decreased by 25% to $105 million in Q2 2012. This was largely due to the prior year's comparable period including a significant contribution from TripAdvisor before its spin-off (presented as discontinued operations in the prior year's net income), alongside increased operating expenses in areas like technology and content, and other operational costs which outpaced revenue growth for the quarter.

Expedia's growth strategy focuses on product innovation, particularly through investments in technology platforms for its core brands like Expedia, to enhance customer experience and booking conversion. Global expansion is also a key priority. Additionally, the company is investing in emerging channels such as mobile bookings and leveraging social media to reach customers.

Expedia is involved in numerous lawsuits related to hotel occupancy taxes, where various cities, counties, and states are claiming Expedia owes these taxes on the services they provide. While Expedia believes these ordinances do not apply to their business model of facilitating reservations, they have established a reserve of $34 million as of June 30, 2012, for potential settlements of these issues.