10-QPeriod: Q2 FY2013

Expedia Group, Inc. Quarterly Report for Q2 Ended Jun 30, 2013

Filed July 26, 2013For Securities:EXPE

Summary

Expedia Group, Inc. (EXPE) reported its second-quarter 2013 financial results, showing a notable increase in revenue, driven primarily by strong performance in its Leisure segment, particularly in hotel bookings. The company saw a 16% year-over-year increase in total revenue to $1.2 billion for the quarter and a 19% increase for the six months ended June 30, 2013, reaching $2.2 billion. This growth was supported by an 11% increase in total gross bookings for the quarter to $10.1 billion, and a 15% increase for the six months to $19.9 billion. However, profitability was impacted by significant legal reserves and other expenses, particularly related to ongoing occupancy tax litigation and the Hawaii general excise tax case, which resulted in a net loss of $44.3 million for the six-month period, compared to a net income of $103.8 million in the prior year. Despite this, the company's balance sheet remains robust with substantial cash and equivalents. The acquisition of a majority stake in trivago in the first quarter of 2013 is also beginning to contribute to revenue growth, particularly in the advertising and media segment.

Financial Highlights

53 data points
Beta

Revenue

$1.21B

78.2% Gross Margin

Net Income

$71.50M

5.9% Net Margin

EPS (Diluted)

$0.51

Total Assets

$8.74B

Cash & Equivalents

$1.31B

Free Cash Flow

$247.84M

Financial Statements
Beta
Revenue$1.21B
Cost of Revenue$262.61M
Gross Profit$942.41M
Operating Income$94.29M
Interest Expense$21.63M
Net Income$71.50M
EPS (Basic)$0.52
EPS (Diluted)$0.51
Shares Outstanding (Basic)136.35M
Shares Outstanding (Diluted)141.11M

Key Highlights

  • 1Total revenue increased by 16% year-over-year to $1.205 billion for the three months ended June 30, 2013, and by 19% to $2.217 billion for the six months ended June 30, 2013.
  • 2Total gross bookings increased by 13% to $10.121 billion for the three months and by 15% to $19.902 billion for the six months ended June 30, 2013.
  • 3The company incurred a net loss of $32.7 million attributable to Expedia, Inc. for the six months ended June 30, 2013, a significant shift from a net income of $101.9 million in the prior year, primarily due to substantial legal reserves related to occupancy tax and Hawaii tax litigation.
  • 4Operating income for the three months ended June 30, 2013, declined 39% year-over-year to $94.3 million, impacted by increased operating expenses.
  • 5The acquisition of trivago in March 2013 contributed to a 147% increase in Advertising and Media revenue for the quarter and a 98% increase for the six-month period.
  • 6Selling and marketing expenses increased significantly by 33% year-over-year for the quarter and 32% for the six months, largely due to increased offline, online, and mobile marketing spend, including trivago's contribution.
  • 7The company's cash and cash equivalents and short-term investments totaled $2.3 billion as of June 30, 2013, providing a strong liquidity position.

Frequently Asked Questions

Revenue growth was primarily driven by increases in worldwide hotel revenue, stemming from higher room nights stayed, particularly at brands like Expedia.com and eLong. The acquisition of trivago also contributed significantly to the growth in advertising and media revenue. Total revenue rose 16% to $1.205 billion for the quarter and 19% to $2.217 billion for the six months.

The net loss for the first six months of 2013 was largely due to significant increases in 'Legal reserves, occupancy tax and other' expenses. These included approximately $60 million related to amounts paid in advance for Hawaii's general excise tax litigation, and other provisions for ongoing occupancy tax lawsuits, which impacted profitability despite revenue growth.

The acquisition of trivago, completed in March 2013, is contributing to revenue growth, particularly in the 'Advertising and media' category, which saw a 147% increase for the quarter. It also led to higher selling and marketing expenses due to increased marketing spend, and contributed to higher amortization of intangible assets.

Expedia maintained a strong liquidity position with $2.3 billion in cash and cash equivalents and short-term investments as of June 30, 2013. The company also has a $1 billion revolving credit facility. The company's working capital showed a deficit of $947 million, an increase from the prior year-end, attributed to financing and investing activities like acquisitions and share repurchases. Management believes current resources are sufficient for foreseeable needs.