01—Abstract
Summary
Summary of the 10-Q filed May 21, 2020. Cited figures are marked; the original filing is the authoritative source.
Expedia Group, Inc. (EXPE) reported a significant downturn in its first quarter of 2020 results, primarily driven by the unprecedented impact of the COVID-19 pandemic on the global travel industry.
Revenue declined 15% year-over-year to $2.21 billiona, and the company swung to a net loss of $1.30 billion, or $(9.24) per diluted share, compared to a net loss of $100 million in the prior year period. This substantial loss was exacerbated by significant non-cash charges, including $765 million for goodwill impairment and $121 million for intangible asset impairment, both directly attributed to the pandemic's severe impact on travel demand and future revenue expectations. Operationally, gross bookings plummeted by 39% to $17.89 billion, with March 2020 experiencing a net negative in bookings as cancellations outpaced new reservations.
The company took proactive measures to strengthen its liquidity position, including drawing down $1.9 billionb on its revolving credit facility and securing approximately $1.2 billion in gross proceeds from a private placement of preferred stock and warrants. Expedia Group also suspended share repurchases and quarterly dividends to conserve cash. Despite the severe challenges, management is implementing cost-saving initiatives and adapting cancellation policies to navigate the crisis and position for recovery.
02—Key points
Key Highlights
- COVID-19 pandemic caused a severe decline in travel demand, leading to a 15% year-over-year revenue decrease to $2.21 billion for Q1 2020.
- Expedia reported a substantial net loss of $1.30 billion ($9.24 per share) in Q1 2020, a significant deterioration from a $100 million net loss in Q1 2019.
- Significant goodwill ($765 million) and intangible asset ($121 million) impairments were recognized in Q1 2020, directly linked to the pandemic's impact on future earnings potential.
- Gross bookings fell sharply by 39% year-over-year to $17.89 billion, with March 2020 bookings turning negative due to high cancellation rates.
- The company took decisive actions to bolster liquidity, including drawing $1.9 billion on its credit facility and completing a $1.2 billion private placement of preferred stock and warrants.
- Share repurchases and quarterly dividends have been suspended to preserve cash during the uncertain economic environment.
- Selling and marketing expenses decreased by 20% primarily due to reduced marketing spend in response to declining travel demand caused by COVID-19.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2020filed May 21, 2020Financial Statements
Q1 FY2020 against Q1 FY2019
| Line item | Q1 FY2020Q1 FY2019 | Change |
|---|---|---|
| Revenue | $2.21B$2.61B | −15.3% |
| Operating Income | -$1.29B-$131.00M | −887.8% |
| Interest Expense | $50.00M$41.00M | +22.0% |
| Net Income | -$1.30B-$103.00M | −1163.1% |
| EPS (Basic) | $-9.24$-0.69 | −1239.1% |
| EPS (Diluted) | $-9.24$-0.69 | −1239.1% |
| Shares Outstanding (Basic) | 140.82M147.88M | −4.8% |
| Shares Outstanding (Diluted) | 140.82M147.88M | −4.8% |
05—Questions
Frequently Asked Questions
What was the primary driver of the significant net loss in the first quarter of 2020?
The primary driver of the significant net loss was the unprecedented negative impact of the COVID-19 pandemic on the global travel industry, which led to a sharp decline in revenue and travel bookings. Additionally, substantial non-cash charges for goodwill ($765 million) and intangible asset ($121 million) impairments, directly related to the pandemic's impact on future revenue expectations, significantly contributed to the net loss.
How has Expedia Group addressed its liquidity concerns amidst the pandemic?
Expedia Group has taken several proactive steps to strengthen its liquidity. This includes drawing down $1.9 billion from its revolving credit facility, completing a $1.2 billion private placement of preferred stock and warrants, suspending share repurchases, and suspending quarterly dividends. These measures are aimed at preserving financial flexibility during the uncertain operating environment.
What is the outlook for revenue and bookings in the near term?
The company anticipates that the COVID-19 pandemic will continue to have a significant negative impact on its second quarter of 2020 results. The duration and severity of the pandemic remain uncertain, making it difficult to predict the timing and nature of a recovery in travel demand. Cancellations are expected to remain elevated until travel demand begins to recover.
What is the impact of COVID-19 on Expedia's different revenue segments?
The COVID-19 pandemic has negatively impacted all segments. Lodging revenue decreased 10% due to a 14% decline in room nights stayed. Air revenue saw a significant 56% decrease due to a 26% decline in air tickets sold and reduced travel. Advertising and media revenue, primarily from trivago, decreased 23% as travel companies reduced marketing spend. The company's merchant revenue decreased 7% and agency revenue decreased 33%.
06—Continue