01—Abstract
Summary
Summary of the 10-Q filed August 1, 2014. Cited figures are marked; the original filing is the authoritative source.
Expedia Group, Inc. (EXPE) reported strong revenue growth for the second quarter and first half of 2014, with total revenue increasing by 24%a and 22% respectively compared to the prior year.
This growth was primarily driven by robust performance in the hotel segment, which saw a significant increase in room nights stayed, and a strong contribution from the advertising and media segment, largely due to the trivago acquisition. The company also experienced healthy growth in air ticket volumes and other revenue streams like travel insurance and car rentals. Operationally, the company saw a significant improvement in operating income, turning a loss in the first half of 2013 into a substantial profit in the same period of 2014.
This turnaround was aided by higher revenue growth outpacing operating expenses, coupled with reduced charges from litigation and acquisitions compared to the prior year. Expedia's balance sheet strengthened with an increase in cash and cash equivalents and short-term investments. However, the company continues to face ongoing legal challenges, particularly related to hotel occupancy taxes and Hawaii's general excise tax, which represent potential financial risks and require careful monitoring by investors.
02—Key points
Key Highlights
- Total revenue increased by 24% to $1.49 billion for Q2 2014 and by 22% to $2.70 billion for the first six months of 2014, year-over-year.
- Operating income improved significantly, showing $129 million for Q2 2014 versus $94 million in Q2 2013, and $126 million for the first half of 2014 compared to a loss of $11 million in the same period of 2013.
- Gross bookings saw a substantial 29% increase for both the second quarter and the first six months of 2014, reaching $13.0 billion and $25.7 billion respectively.
- Acquisitions, including Wotif Group and Auto Escape Group, are expanding Expedia's global footprint, particularly in Australia and Europe.
- The company repurchased approximately 4.7 million shares of common stock for $339 million in the first half of 2014 under its existing repurchase authorization.
- Expedia reported increased investment in technology and content, with spending up 20% for Q2 and 19% for the first six months of 2014.
- Despite overall positive financial performance, ongoing litigation regarding hotel occupancy taxes and other tax matters, particularly in Hawaii, remains a significant contingent liability and risk factor.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2014, Expedia Group, Inc. kept $0.06.
- Revenue$1.49B100.0%
- Cost of revenue−$300.5M20.1%
- Gross profit$1.19B79.9%
- Operating costs−$1.06B71.2%
- Operating income$129.2M8.6%
- Interest, other & tax−$39.8M2.7%
- Net income$89.4M6.0%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2014filed August 1, 2014Financial Statements
Q2 FY2014 against Q2 FY2013
| Line item | Q2 FY2014Q2 FY2013 | Change |
|---|---|---|
| Revenue | $1.49B$1.21B | +24.0% |
| Cost of Revenue | $300.50M$262.61M | +14.4% |
| Gross Profit | $1.19B$942.41M | +26.7% |
| Operating Income | $129.22M$94.29M | +37.1% |
| Interest Expense | $22.32M$21.63M | +3.2% |
| Net Income | $89.37M$71.50M | +25.0% |
| EPS (Basic) | $0.69$0.52 | +32.7% |
| EPS (Diluted) | $0.67$0.51 | +31.4% |
| Shares Outstanding (Basic) | 129.54M136.35M | −5.0% |
| Shares Outstanding (Diluted) | 133.67M141.11M | −5.3% |
05—Questions
Frequently Asked Questions
What is the primary driver of Expedia's revenue growth in this period?
The primary driver of Expedia's revenue growth was a significant increase in room nights stayed within its hotel segment, alongside strong performance in advertising and media revenue, boosted by the trivago acquisition. Growth in air ticket volumes and other services like travel insurance and car rentals also contributed positively.
How has Expedia's profitability changed compared to the previous year?
Expedia has shown a significant improvement in profitability. Operating income more than doubled in the second quarter of 2014 compared to the same period in 2013. For the first six months of the year, the company swung from a net loss in 2013 to a substantial net income in 2014, driven by increased revenue and a reduction in certain charges related to prior period litigation and acquisitions.
What are the main risks or challenges facing Expedia according to this filing?
Expedia faces ongoing legal and tax-related challenges, most notably numerous lawsuits concerning hotel occupancy taxes across various jurisdictions, including significant litigation in Hawaii regarding general excise taxes. The company has reserved substantial amounts for potential settlements but these remain contingent liabilities. Intense competition within the online travel industry and potential impacts of international economic conditions are also noted risks.
How is Expedia managing its capital and liquidity?
Expedia's liquidity is supported by strong cash flows from operations, a substantial balance of cash and short-term investments, and an undrawn $1 billion revolving credit facility. The company is actively engaged in share repurchases and continues to pay dividends to shareholders, while also investing in technology and global expansion through acquisitions.
06—Continue