01—Abstract
Summary
Summary of the 10-Q filed May 2, 2014. Cited figures are marked; the original filing is the authoritative source.
Expedia Group, Inc. reported a net loss of $14.3 milliona for the first quarter of 2014, a significant improvement from the $104.2 million net loss in the same period of 2013.
This improvement was primarily driven by a substantial reduction in "Acquisition-related and other" and "Legal reserves, occupancy tax and other" expenses, which were significant in the prior year. Revenue for the quarter increased by 19% year-over-year to $1.2 billionb, boosted by strong performance in the Leisure segment, particularly from hotel and advertising/media revenue, and continued growth in the Egencia corporate travel segment. Despite the revenue growth, the company's operating loss narrowed considerably due to the aforementioned expense reductions, though the top-line revenue growth was partially offset by a decrease in revenue margin.
The company also saw a substantial increase in cash flow from operations, largely due to favorable changes in working capital, and maintained a strong liquidity position with significant cash and short-term investments. Investors should note the ongoing legal battles concerning occupancy taxes, which represent a material contingent liability and potential risk.
02—Key points
Key Highlights
- Revenue increased by 19% year-over-year to $1.2 billion, driven by growth in hotel, advertising/media, and air ticket revenue.
- Net loss narrowed significantly to $14.3 million from $104.2 million in the prior year's quarter, primarily due to lower expenses, particularly acquisition-related costs and legal reserves.
- Operating loss decreased substantially from $105.6 million to $3.0 million, reflecting improved expense management and the absence of large prior-year charges.
- Gross bookings saw a strong 29% increase, indicating healthy underlying demand across the platform.
- Cash flow from operating activities significantly increased by $90 million year-over-year to $971 million, aided by favorable working capital changes, notably deferred merchant bookings.
- The company maintained a strong liquidity position with $1.48 billion in cash and cash equivalents and short-term investments as of March 31, 2014.
- Significant ongoing litigation related to hotel occupancy taxes remains a material risk, with a reserve of $50 million established for potential settlements.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q1 FY2014, Expedia Group, Inc. lost $0.01.
- Revenue$1.20B100.0%
- Cost of revenue−$294.6M24.5%
- Gross profit$905.8M75.5%
- Operating costs−$908.8M75.7%
- Operating income−$3.0M0.2%
- Interest, other & tax−$11.3M0.9%
- Net income−$14.3M1.2%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2014filed May 2, 2014Financial Statements
Q1 FY2014 against Q1 FY2013
| Line item | Q1 FY2014Q1 FY2013 | Change |
|---|---|---|
| Revenue | $1.20B$1.01B | +18.6% |
| Cost of Revenue | $294.62M$250.58M | +17.6% |
| Gross Profit | $905.75M$761.79M | +18.9% |
| Operating Income | -$3.00M-$105.63M | +97.2% |
| Interest Expense | $21.80M$21.75M | +0.3% |
| Net Income | -$14.30M-$104.23M | +86.3% |
| EPS (Basic) | $-0.11$-0.77 | +85.7% |
| EPS (Diluted) | $-0.11$-0.77 | +85.7% |
| Shares Outstanding (Basic) | 130.56M135.64M | −3.7% |
| Shares Outstanding (Diluted) | 130.56M135.64M | −3.7% |
05—Questions
Frequently Asked Questions
What was Expedia's net income/loss for the first quarter of 2014, and how does it compare to the previous year?
Expedia reported a net loss of $14.3 million for the three months ended March 31, 2014. This represents a significant improvement compared to the net loss of $104.2 million for the same period in 2013.
How did Expedia's revenue perform in Q1 2014, and what were the main drivers?
Total revenue increased by 19% year-over-year to $1.2 billion. Key drivers included growth in hotel revenue (up 12%, despite a 10% decrease in revenue per room night, due to a 24% increase in room nights stayed), a substantial increase in advertising and media revenue (up 116%, largely driven by the trivago acquisition), and a 28% increase in air revenue.
What is the company's stance on the ongoing hotel occupancy tax litigation, and what is the financial impact?
Expedia is actively defending against numerous lawsuits regarding hotel occupancy taxes. While the company believes these ordinances do not apply to its services, it has established a reserve of $50 million as of March 31, 2014, for potential settlements. The outcome of these litigations remains uncertain and poses a material contingent liability.
How is the company's liquidity and cash flow position?
Expedia reported a strong liquidity position with $1.48 billion in cash and cash equivalents and short-term investments as of March 31, 2014. Cash flow from operating activities increased significantly to $971 million for the quarter, primarily due to beneficial changes in working capital, such as deferred merchant bookings.
06—Continue