10-QPeriod: Q2 FY2018

Expedia Group, Inc. Quarterly Report for Q2 Ended Jun 30, 2018

Filed July 27, 2018For Securities:EXPE

Summary

Expedia Group, Inc. (EXPE) reported its financial results for the second quarter and first half of 2018. For the three months ended June 30, 2018, the company reported a net loss of $9 million, or $0.01 per diluted share, a significant decrease from a net income of $54 million, or $0.36 per diluted share, in the prior year period. This loss was largely driven by a $61 million goodwill impairment charge and other operating expenses. For the six months ended June 30, 2018, Expedia incurred a net loss of $158 million, or $0.90 per diluted share, a substantial decline from a net loss of $30 million, or $0.19 per diluted share, in the same period of 2017. Revenue for the quarter grew 11% to $2.88 billion, and 13% to $5.39 billion for the first half, primarily driven by increases in lodging and air travel bookings. Despite revenue growth, increased operating expenses, including selling and marketing, technology, and administrative costs, along with the goodwill impairment, impacted profitability. The company also highlighted ongoing legal proceedings related to occupancy taxes and competition reviews concerning parity clauses.

Financial Highlights

52 data points
Beta

Revenue

$2.88B

82.7% Gross Margin

Net Income

$1.00M

0.0% Net Margin

EPS (Diluted)

$0.01

Total Assets

$20.55B

Cash & Equivalents

$3.07B

Free Cash Flow

$596.00M

Financial Statements
Beta
Revenue$2.88B
Cost of Revenue$498.00M
Gross Profit$2.38B
Operating Income$111.00M
Interest Expense$51.00M
Net Income$1.00M
EPS (Basic)$0.01
EPS (Diluted)$0.01
Shares Outstanding (Basic)150.08M
Shares Outstanding (Diluted)152.62M

Key Highlights

  • 1Revenue increased by 11% to $2.88 billion for the three months ended June 30, 2018, and by 13% to $5.39 billion for the six months ended June 30, 2018, driven by growth in Core OTA and HomeAway segments.
  • 2The company reported a net loss of $9 million for the second quarter of 2018, a significant decrease from a net income of $54 million in the prior year period.
  • 3For the six months ended June 30, 2018, Expedia recorded a net loss of $158 million, compared to a net loss of $30 million in the same period of 2017.
  • 4A goodwill impairment charge of $61 million was recognized in the second quarter of 2018 related to a reporting unit within the Core OTA segment.
  • 5Adjusted EBITDA increased by 18% to $463 million for the three months ended June 30, 2018, driven by strong performance in the Core OTA and HomeAway segments, though it decreased slightly by 2% to $587 million for the six-month period.
  • 6The company repurchased approximately $409 million of its common stock during the first six months of 2018.
  • 7Expedia maintains a $2 billion unsecured revolving credit facility, which was undrawn as of June 30, 2018, providing significant liquidity.

Frequently Asked Questions

The decrease in net income was primarily due to a $61 million goodwill impairment charge, increased operating expenses across selling and marketing, technology and content, and general and administrative functions, which outweighed the revenue growth achieved during the quarter.

Revenue growth was led by the Core OTA segment (up 12% for the quarter) and HomeAway (up 32% for the quarter). While Core OTA's Adjusted EBITDA grew significantly, trivago's Adjusted EBITDA declined due to increased expenses. HomeAway showed strong revenue growth and improved Adjusted EBITDA.

Expedia is involved in ongoing litigation regarding occupancy taxes, with some favorable rulings but also pending appeals and assessments. The company has established reserves for potential settlements, but acknowledges the uncertainty and potential material impact of these matters. They also noted ongoing investigations into competition and parity clauses.

Expedia has a strong liquidity position, supported by $4.6 billion in cash, cash equivalents, and short-term investments, as well as an undrawn $2 billion revolving credit facility. The company continues to return capital to shareholders through share repurchases and dividends.