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Expedia Group Reports Second Quarter 2022 Results

·13 min read

SEATTLE, August 04, 2022--(BUSINESS WIRE)--Expedia Group, Inc. (NASDAQ: EXPE) announced financial results today for the second quarter ended June 30, 2022.

"We are very pleased with our financial performance this quarter. Lodging bookings reached a record high, and we posted our highest ever second quarter revenue and adjusted EBITDA. These were even more noteworthy given the simplification efforts we undertook two years ago including the sale of our Egencia corporate travel business." said Peter Kern, Vice Chairman and CEO, Expedia Group. "Despite the disruptions during the summer travel season and an uncertain macroeconomic backdrop, travel demand has remained strong. We continue to focus our energy on improving our technology for our travelers and partners and attracting more valuable customers through direct relationships. These actions, along with prior actions to drive efficiency, put us in a better position to withstand any further macroeconomic headwinds should they arise."

Key Highlights

  • Lodging bookings were the highest in the company's history, while revenue and adjusted EBITDA were the highest for any second quarter.

  • Lodging gross bookings were up 8% versus the second quarter 2019.

  • Revenue was $3.2 billion, up 51% versus the second quarter 2021 and up 1% versus the second quarter 2019.

  • Net loss was $185 million and adjusted net income was $310 million. Adjusted EBITDA was $648 million, up 14% versus the second quarter 2019.

  • On May 30th, the Company completed the early redemption of its $500 million Senior Notes due December 2023. On June 13th, the Company completed the early redemption of its $500 million Senior Notes due August 2024. Since May 2021, the Company has repaid over $2.9 billion of net debt and preferred equity.

Financial Summary & Operating Metrics ($ millions except per share amounts)(1)

Expedia Group, Inc.

Metric

Q2 2022

Q2 2021

Δ Y/Y

Booked room nights

82.5

68.4

21%

Stayed room nights

79.1

56.6

40%

Gross bookings

$26,139

$20,815

26%

Revenue

3,181

2,111

51%

Operating income (loss)

345

(132)

NM

Net income (loss) attributable to Expedia Group common stockholders

(185)

(301)

(39)%

Diluted earnings (loss) per share

$(1.17)

$(2.02)

(42)%

Adjusted EBITDA(2)

648

201

223%

Adjusted net income (loss)(2)

310

(169)

NM

Adjusted EPS(2)

$1.96

$(1.13)

NM

Free cash flow(2)

1,469

2,331

(37)%

(1)All comparisons are against comparable period of 2021 unless otherwise noted.
(2)"Adjusted EBITDA" (Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization), "Adjusted net income (loss)," "Adjusted EPS" and "Free cash flow" are non-GAAP measures as defined by the Securities and Exchange Commission (the "SEC"). See "Definitions of Non-GAAP Measures" and "Tabular Reconciliations for Non-GAAP Measures" on pages 11-18 herein for an explanation and reconciliation of non-GAAP measures used throughout this release. Expedia Group does not calculate or report net income by segment.

Discussion of Results

The results for Expedia Group, Inc. ("Expedia Group" or "the Company") include Brand Expedia®, Hotels.com®, Expedia® Partner Solutions, Vrbo®, Egencia®, trivago®, HomeAway®, Orbitz®, Travelocity®, Hotwire®, Wotif®, ebookers®, CheapTickets®, Expedia Group™ Media Solutions, CarRentals.com™, Expedia® Cruises™, and Traveldoo®. Results include the related international points of sale for all brands. In April 2021, we completed the sale of Classic Vacations®, and in November 2021 we completed the sale of Egencia®, which is included in results through the date of its sale. All amounts shown are in U.S. dollars.

Gross Bookings & Revenue

Gross Bookings & Revenue by Segment ($ millions)

Gross Bookings

Second Quarter

2022

2021

Δ%

Gross Bookings

$

26,139

$

20,815

26

%

Revenue

Second Quarter

2022

2021

Δ%

Retail

$

2,420

$

1,715

41

%

B2B

650

305

113

%

Expedia Group (excluding trivago)

$

3,070

$

2,020

52

%

trivago

154

115

34

%

Intercompany eliminations

(43

)

(24

)

76

%

Total

$

3,181

$

2,111

51

%

For the second quarter of 2022, total gross bookings increased 26%, compared to the second quarter of 2021, as travel demand further improved and gross bookings improved for lodging, air and other travel products. Gross bookings for lodging, air, and other travel products improved sequentially from the first quarter of 2022.

Total revenue increased 51%, compared to the second quarter of 2021. Retail, B2B, and trivago segment revenue all increased compared to the second quarter of 2021.

Product & Services Detail

Revenue by Service Type ($ millions)

Revenue

Second Quarter

2022

2021

Δ%

Lodging

$

2,400

$

1,533

57

%

Air

95

78

22

%

Advertising and media

213

161

33

%

Other

473

339

39

%

Total

$

3,181

$

2,111

51

%

As a percentage of total revenue in the second quarter of 2022, lodging accounted for 75%, advertising and media accounted for 7%, air accounted for 3%, and all other revenues accounted for the remaining 15%.

Lodging revenue increased 57% in the second quarter of 2022, compared to the second quarter of 2021, driven by a 40% increase in room nights stayed across hotels and alternative accommodations, as well as a 9% increase in stayed average daily rates ("ADRs").

Air revenue increased 22% in the second quarter of 2022, compared to the second quarter of 2021, primarily driven by a 21% growth in revenue per ticket, as air travel demand remained stable despite higher airfares.

Advertising and media revenue increased 33% in the second quarter of 2022, compared to the second quarter of 2021, driven by increases from both Expedia Group Media Solutions and trivago. Other revenue increased 39% in the second quarter of 2022, driven by growth from both travel insurance and car products.

Costs and Expenses ($ millions)

Costs and Expenses

As a % of Revenue

Second Quarter

Second Quarter

2022

2021

Δ%

2022

2021

Δ (bps)

Generally Accepted Accounting Principles (GAAP) Expenses - Expedia Group

Cost of revenue

$

419

$

374

12

%

13.2

%

17.7

%

(456

)

Selling and marketing - direct

1,549

1,002

55

%

48.7

%

47.5

%

122

Selling and marketing - indirect

167

197

(15

)%

5.3

%

9.4

%

(409

)

Selling and marketing

1,716

1,199

43

%

53.9

%

56.8

%

(287

)

Technology and content

284

276

3

%

8.9

%

13.1

%

(417

)

General and administrative

189

184

3

%

6.0

%

8.7

%

(275

)

Total GAAP costs and expenses

$

2,608

$

2,033

28

%

82.0

%

96.3

%

(1,434

)

Adjusted Expenses - Expedia Group

Cost of revenue*

$

416

$

368

13

%

13.1

%

17.4

%

(437

)

Selling and marketing - direct

1,549

1,002

55

%

48.7

%

47.5

%

122

Selling and marketing - indirect*

150

165

(9

)%

4.7

%

7.8

%

(310

)

Selling and marketing*

1,699

1,167

46

%

53.4

%

55.3

%

(187

)

Technology and content*

257

244

5

%

8.1

%

11.6

%

(351

)

General and administrative*

143

134

7

%

4.5

%

6.4

%

(185

)

Total adjusted costs and expenses

$

2,515

$

1,913

31

%

79.1

%

90.7

%

(1,161

)

Adjusted Expenses - Expedia Group (excluding trivago)**

Cost of revenue*

$

412

$

364

13

%

13.4

%

18.0

%

(461

)

Selling and marketing*

1,646

1,107

49

%

53.6

%

54.8

%

(119

)

Technology and content*

245

231

6

%

8.0

%

11.4

%

(347

)

General and administrative*

135

126

7

%

4.4

%

6.3

%

(186

)

Total adjusted costs and expenses excluding trivago

$

2,438

$

1,828

33

%

79.4

%

90.5

%

(1,113

)

Note: Some numbers may not add due to rounding.
*Adjusted expenses are non-GAAP measures. See pages 11-18 herein for a description and reconciliation to the corresponding GAAP measures.
**Expedia Group (excluding trivago) figures exclude both trivago costs and expenses and trivago revenue when calculating 'As a % of Revenue.'

Cost of Revenue

  • For the second quarter of 2022, total GAAP and adjusted cost of revenue increased 12% and 13%, respectively, compared to the second quarter of 2021, driven by higher merchant processing fees, customer service costs, and cloud costs as a result of increased transaction volume which offset lower personnel costs related to the sale of Egencia in November 2021.

Selling and Marketing

  • For the second quarter of 2022, total GAAP and adjusted selling and marketing expense increased 43% and 46%, respectively, compared to the second quarter of 2021, primarily due to a $547 million increase in direct costs driven by an increase in spend across all main marketing channels as well as an increase in B2B partner commissions. Total GAAP and adjusted indirect selling and marketing expenses, decreased 15% and 9%, respectively compared to the second quarter of 2021. The decrease in indirect marketing expense was driven by lower personnel costs related to the sale of Egencia in November 2021.

Technology and Content

  • For the second quarter of 2022, total GAAP and adjusted technology and content expense increased 3% and 5%, respectively, compared to the second quarter of 2021, due to an increase in personnel costs. The year-over-year increase in GAAP technology and content expense was offset by lower stock-based compensation.

General and Administrative

  • For the second quarter of 2022, total GAAP and adjusted general and administrative expense increased 3% and 7%, respectively, compared to the second quarter of 2021, due to an increase in personnel costs. The year-over-year increase in GAAP general and administrative expense was offset by lower stock-based compensation.

Net Income (Loss) Attributable to Expedia Group and Adjusted EBITDA*

Adjusted EBITDA by Segment ($ millions)

Second Quarter

2022

2021

Δ%

Retail

$

582

$

316

84

%

B2B

156

(4

)

NM

Unallocated overhead costs

(123

)

(116

)

6

%

Expedia Group (excluding trivago)

$

615

$

196

215

%

trivago(1)

33

5

534

%

Total Adjusted EBITDA

$

648

$

201

223

%

Net loss attributable to Expedia Group common stockholders(2)

$

(185

)

$

(301

)

(39

)%

(1) trivago is a separately listed company on the Nasdaq Global Select Market and, therefore, is subject to its own reporting and filing requirements which could result in possible differences that are not expected to be material to Expedia Group.
(2) Expedia Group does not calculate or report net income (loss) by segment.
* Adjusted EBITDA is a non-GAAP measure. See pages 11-19 herein for a description and reconciliation to the corresponding GAAP measures.
Note: Some numbers may not add due to rounding.

Depreciation and Amortization

Depreciation and amortization decreased 4% in the second quarter of 2022, compared to the second quarter of 2021, driven by lower amortization of certain intangibles.

Interest and Other

Consolidated interest income increased $9 million in the second quarter of 2022 compared to the second quarter of 2021, as a result of higher rates of return. Consolidated interest expense decreased $10 million in the second quarter of 2022, as a result of interest expense related to senior notes outstanding in the prior year that were redeemed in the first half of 2022.

Consolidated other, net was a loss of $385 million in the second quarter of 2022, compared to a loss of $10 million in the second quarter of 2021, primarily driven by mark-to-market losses on minority equity investments in American Express Global Business Travel ("GBT") and Despegar.

Income Taxes

The GAAP effective tax rate was a 46% expense on a pre-tax loss in the second quarter of 2022, compared to a 21% benefit on a pre-tax loss in the second quarter of 2021. The change in the effective tax rate was primarily due to nondeductible mark-to-market adjustments as well as other discrete items.

The effective tax rate on pretax adjusted net income was 21% in the second quarter of 2022, compared to (114)% in the second quarter of 2021. The change in effective tax rate was primarily due to the increase in pretax adjusted net income and discrete items.

Balance Sheet, Cash Flows and Capitalization

For the three months ended June 30, 2022, consolidated net cash provided by operating activities was approximately $1.6 billion. Consolidated free cash flow totaled $1.5 billion, a decrease of $0.9 billion, compared to the prior year, primarily due to a decrease in cash provided by operating activities related to changes in working capital, which was partially offset by an improvement in Adjusted EBITDA.

Cash, cash equivalents and short-term investments totaled $5.6 billion at June 30, 2022 compared to $4.3 billion at December 31, 2021. The increase was primarily driven by cash provided by operating activities. Restricted cash and cash equivalents, which primarily consist of traveler deposits for Vrbo bookings, was $2.8 billion at June 30, 2022 compared to $1.7 billion at December 31, 2021. Prepaid expenses and other current assets was $1.2 billion at June 30, 2022 compared to $827 million at December 31, 2021.

Deferred merchant bookings totaled approximately $10.0 billion at June 30, 2022, including approximately $855 million in deferred loyalty rewards compared to $5.7 billion at December 31, 2021, including approximately $800 million in deferred loyalty rewards. The trends in deferred merchant bookings reflect the seasonality of our business, deferred merchant bookings increase in the lead-up to the peak travel season and decrease as stays occur during the summer months.

As of June 30, 2022, Expedia Group had stock-based awards outstanding representing approximately 11 million shares of Expedia Group common stock, consisting of approximately 7 million restricted stock units, ("RSUs") and performance share units, ("PSUs") in addition to stock options to purchase approximately 4 million shares of common stock with a weighted average exercise price of $134.89 and weighted average remaining life of 3.9 years.

On May 30, 2022, Expedia Group redeemed all of the $500 million of outstanding aggregate principal amount of the Company’s 3.6% Notes due December 2023. On June 13, 2022, Expedia Group redeemed all of the $500 million of outstanding aggregate principal amount of the Company’s 4.5% Notes due August 2024. As a result of these redemptions, we recognized a loss on debt extinguishment of $24 million, which primarily included the payment of early payment premiums as well as the write-off of unamortized discount and debt issuance costs.

EXPEDIA GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share and per share data)

(Unaudited)

Three months ended

June 30,

Six months ended

June 30,

2022

2021

2022

2021

Revenue

$

3,181

$

2,111

$

5,430

$

3,357

Costs and expenses:

Cost of revenue (exclusive of depreciation and amortization shown separately below) (1)

419

374

790

685

Selling and marketing (1)

1,716

1,199

3,055

1,863

Technology and content (1)

284

276

554

523

General and administrative (1)

189

184

375

340

Depreciation and amortization

197

205

394

414

Impairment of intangible assets

29

29

Legal reserves, occupancy tax and other

2

(8

)

23

(9

)

Restructuring and related reorganization charges

13

42

Operating income (loss)

345

(132

)

210

(501

)

Other income (expense):

Interest income

10

1

13

3

Interest expense

(73

)

(83

)

(154

)

(181

)

Loss on debt extinguishment

(24

)

(24

)

(280

)

Other, net

(385

)

(10

)

(380

)

(15

)

Total other expense, net

(472

)

(92

)

(545

)

(473

)

Loss before income taxes

(127

)

(224

)

(335

)

(974

)

Provision for income taxes

(58

)

47

27

216

Net loss

(185

)

(177

)

(308

)

(758

)

Net loss attributable to non-controlling interests

5

1

8

Net loss attributable to Expedia Group, Inc.

(185

)

(172

)

(307

)

(750

)

Preferred stock dividend

(22

)

(50

)

Loss on redemption of preferred stock

(107

)

(107

)

Net loss attributable to Expedia Group, Inc. common stockholders

$

(185

)

$

(301

)

$

(307

)

$

(907

)

Loss per share attributable to Expedia Group, Inc. available to common stockholders

Basic

$

(1.17

)

$

(2.02

)

$

(1.96

)

$

(6.16

)

Diluted

(1.17

)

(2.02

)

(1.96

)

(6.16

)

Shares used in computing earnings (loss) per share (000's):

Basic

157,290

149,093

156,831

147,148

Diluted

157,290

149,093

156,831

147,148

(1) Includes stock-based compensation as follows:

Cost of revenue

$

3

$

6

$

6

$

11

Selling and marketing

17

32

32

49

Technology and content

27

32

54

59

General and administrative

46

50

91

84

EXPEDIA GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except number of shares which are reflected in thousands and par value)

June 30, 2022

December 31, 2021

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

5,568

$

4,111

Restricted cash and cash equivalents

2,756

1,694

Short-term investments

26

200

Accounts receivable, net of allowance of $62 and $65

2,173

1,264

Income taxes receivable

105

85

Prepaid expenses and other current assets

1,158

827

Total current assets

11,786

8,181

Property and equipment, net

2,163

2,180

Operating lease right-of-use assets

378

407

Long-term investments and other assets

1,151

1,450

Deferred income taxes

825

766

Intangible assets, net

1,306

1,393

Goodwill

7,135

7,171

TOTAL ASSETS

$

24,744

$

21,548

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable, merchant

$

1,548

$

1,333

Accounts payable, other

1,178