10-QPeriod: Q1 FY2013

Expedia Group, Inc. Quarterly Report for Q1 Ended Mar 31, 2013

Filed April 26, 2013For Securities:EXPE

Summary

Expedia Group, Inc. reported a significant revenue increase of 24% year-over-year for the first quarter of 2013, reaching $1,012,367,000. This growth was primarily driven by a strong performance in the Leisure segment, which saw a 21% revenue increase, and a substantial 68% surge in the Egencia segment. Despite the revenue growth, the company posted a net loss attributable to Expedia, Inc. of $104,226,000 for the quarter, a notable decline from a net loss of $3,281,000 in the prior year period. This loss was largely impacted by acquisition-related expenses, particularly from the trivago acquisition, and increased legal reserves related to tax litigation. Key financial highlights include a considerable increase in selling and marketing expenses, up 32%, reflecting investments in brand growth and the trivago acquisition. Amortization of intangible assets also rose significantly due to recent acquisitions. The company's balance sheet shows robust growth in goodwill and intangible assets, largely attributable to acquisitions. Despite a net loss, operating cash flow remained strong at $881,089,000, though cash used in investing activities increased substantially due to acquisitions. Investors should closely monitor the ongoing legal proceedings, especially regarding tax liabilities, and the integration and performance of recent acquisitions like trivago.

Financial Highlights

53 data points
Beta

Revenue

$1.01B

75.2% Gross Margin

Net Income

-$104.23M

-10.3% Net Margin

EPS (Diluted)

$-0.77

Total Assets

$8.43B

Cash & Equivalents

$1.08B

Free Cash Flow

$793.93M

Financial Statements
Beta
Revenue$1.01B
Cost of Revenue$250.58M
Gross Profit$761.79M
Operating Income-$105.63M
Interest Expense$21.75M
Net Income-$104.23M
EPS (Basic)$-0.77
EPS (Diluted)$-0.77
Shares Outstanding (Basic)135.64M
Shares Outstanding (Diluted)135.64M

Key Highlights

  • 1Revenue increased by 24% to $1,012,367,000 in Q1 2013 compared to Q1 2012, driven by strong performance in both Leisure and Egencia segments.
  • 2Net loss attributable to Expedia, Inc. widened significantly to $104,226,000 from a loss of $3,281,000 in the prior year quarter.
  • 3Acquisition-related expenses, particularly from the trivago acquisition, and increased legal reserves for tax litigation significantly impacted profitability.
  • 4Selling and marketing expenses rose by 32% to $496,155,000, reflecting increased investment in growth and acquisition costs.
  • 5Operating cash flow remained strong at $881,089,000, but cash used in investing activities surged to $974,720,000, primarily due to acquisitions.
  • 6Goodwill and intangible assets increased significantly on the balance sheet due to acquisitions, indicating strategic expansion.
  • 7The company continues to face significant legal challenges, particularly concerning hotel occupancy and Hawaii general excise taxes, with ongoing litigation that could have material financial impacts.

Frequently Asked Questions

Expedia's revenue increased by 24% year-over-year to $1,012,367,000 in the first quarter of 2013. This growth was primarily driven by a substantial increase in hotel revenue within the Leisure segment, fueled by a 28% rise in room nights stayed. The Egencia segment also contributed significantly with a 68% revenue increase. The acquisition of trivago also added to revenue, particularly in the advertising and media category.

The company reported a significantly wider net loss of $104,226,000 in Q1 2013 compared to a loss of $3,281,000 in Q1 2012. This widening loss was primarily due to substantial acquisition-related expenses, notably from the March 2013 acquisition of trivago, which included significant stock-based compensation and settlement costs. Additionally, increased legal reserves for tax litigation, particularly the Hawaii general excise tax case, contributed to the unfavorable net result.

The primary risks highlighted include ongoing and significant legal proceedings related to hotel occupancy taxes and Hawaii's general excise tax. These litigations could result in substantial financial liabilities, including taxes, penalties, and interest. Additionally, the integration and performance of recent acquisitions, such as trivago, are critical. Increased competition in the online travel market and potential negative impacts on working capital from changes in business models (e.g., merchant vs. agency) also pose risks.

Expedia's total assets grew significantly to $8,432,420,000 as of March 31, 2013, up from $7,085,195,000 at the end of 2012. This increase is largely due to a substantial rise in goodwill and intangible assets, reflecting acquisitions like trivago. Liabilities also increased, with total current liabilities rising to $3,984,307,000 from $2,982,311,000, driven by higher deferred merchant bookings and accounts payable. The company reported a working capital deficit of $1.0 billion as of March 31, 2013, an increase from $368 million at the end of 2012, primarily due to financing and investing activities, including acquisitions and share repurchases.