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Expedia Group Reports Third Quarter 2021 Results

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SEATTLE, November 04, 2021--(BUSINESS WIRE)--Expedia Group, Inc. (NASDAQ: EXPE) announced financial results today for the third quarter ended September 30, 2021.

"Despite continued volatility in the travel recovery, Expedia Group’s net income and adjusted EBITDA for the quarter nearly matched our Q3 2019 levels driven by the superior performance from Vrbo and domestic travel along with improvements across virtually all lines of business. With early positive signs in Q4 and many countries announcing new openings to international travelers, we are feeling increasingly confident about a continued recovery," said Peter Kern, Vice Chairman and CEO, Expedia Group. "We recently celebrated our 25th anniversary of forever changing travel. And as we come out of Covid, we are committed to once again charting an exciting new path for our customers, partners, and the entire travel ecosystem."

Key Highlights

  • Expedia Group recently announced plans to unify its loyalty programs, consisting of more than 145 million members, into a single program spanning all global brands and products.

  • Expedia Group completed the sale of Egencia to American Express Global Business Travel ("GBT") on November 1. Expedia Group is a minority shareholder in the combined entity, which has a 10-year lodging supply agreement with Expedia Partner Solutions.

  • On October 15, Expedia Group completed the redemption of 100% of the outstanding shares of the Company’s Series A preferred stock issued in 2020.

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

Expedia Group, Inc.

Metric

Q3 2021

Q3 2020

Δ Y/Y

Stayed room night growth

59%

(58)%

NM

Gross bookings

$18,725

$8,631

117%

Revenue

2,962

1,504

97%

Operating income (loss)

524

(113)

NM

Net income (loss) attributable to Expedia Group common stockholders

362

(221)

NM

Diluted earnings (loss) per share

$2.26

$(1.56)

NM

Adjusted EBITDA(2)

855

304

181%

Adjusted net income (loss)(2)

553

(31)

NM

Adjusted EPS(2)

$3.53

$(0.22)

NM

Free cash flow(2)

(1,400)

(995)

41%

(1)All comparisons are against comparable period of 2020 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 11-19 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.

Please refer to the "Glossary of Business Terms," located in the Quarterly Results section on Expedia Group’s investor relations website, for business and financial statement definitions used throughout this release

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™, Traveldoo® and VacationRentals.com. Results include the related international points of sale for all brands and the immaterial impact of Bodybuilding.com since the Liberty Expedia Holdings, Inc. transaction in July 2019. In May 2020, Expedia Group completed the sale of Bodybuilding.com. In October 2020, we completed the sale of SilverRail™, in April 2021, we completed the sale of Classic Vacations®, and in November 2021 we completed the sale of Egencia®. All amounts shown are in U.S. dollars.

Gross Bookings & Revenue

Revenue by Segment ($ millions)

Revenue

Third Quarter

2021

2020

Δ%

Retail

$

2,351

$

1,246

89

%

B2B

490

203

142

%

Expedia Group (excluding trivago)

$

2,841

$

1,449

96

%

trivago

163

70

132

%

Intercompany eliminations

(42

)

(15

)

179

%

Total

$

2,962

$

1,504

97

%

For the third quarter of 2021, total gross bookings and total revenue both increased significantly compared to the third quarter of 2020. Booking trends for lodging, air, and other travel products all declined sequentially from the second quarter of 2021 largely due to the impact of the Covid Delta variant.

Both Retail and B2B segment revenue increased compared to the third quarter of 2020. Gross bookings and revenue growth reflect improvement in travel trends compared to the third quarter of 2020.

Product & Services Detail

Revenue by Service Type ($ millions)

Revenue

Third Quarter

2021

2020

Δ%

Lodging

$

2,300

$

1,229

87%

Air

61

27

128%

Advertising and media

202

94

116%

Other

399

154

159%

Total

$

2,962

$

1,504

97%

As a percentage of total revenue in the third quarter of 2021, lodging accounted for 78%, advertising and media accounted for 7%, air accounted for 2% and all other revenues accounted for the remaining 13%.

Lodging revenue increased in the third quarter of 2021 driven by a significant increase in room nights stayed across hotels and alternative accommodations. Revenue per room night benefited from higher average daily rates ("ADRs") primarily driven by an increase in regional rates and a favorable mix towards U.S. hotels compared to the third quarter of 2020.

Air revenue increased in the third quarter of 2021 driven largely by an increase in tickets sold as air travel demand improved compared to the third quarter of 2020.

Advertising and media revenue increased in the third quarter of 2021 due to increases at both trivago and Expedia Group Media Solutions. Other revenue increased in the third quarter of 2021 driven by growth from both car and travel insurance products.

Costs and Expenses ($ millions)

Costs and Expenses

As a % of Revenue

Third Quarter

Third Quarter

2021

2020

Δ%

2021

2020

Δ (bps)

Generally Accepted Accounting Principles (GAAP) Expenses - Expedia Group

Cost of revenue

$

442

$

363

22

%

14.9

%

24.1

%

(920

)

Selling and marketing - direct

1,132

337

236

%

38.2

%

22.4

%

1,578

Selling and marketing - indirect

182

188

(3

)%

6.1

%

12.5

%

(638

)

Selling and marketing

1,314

525

150

%

44.3

%

35.0

%

940

Technology and content

277

242

15

%

9.4

%

16.1

%

(668

)

General and administrative

182

132

38

%

6.2

%

8.8

%

(262

)

Total GAAP costs and expenses

$

2,215

$

1,262

76

%

74.8

%

83.9

%

(910

)

Adjusted Expenses - Expedia Group

Cost of revenue*

$

436

$

360

21

%

14.7

%

23.9

%

(919

)

Selling and marketing - direct

1,132

337

236

%

38.2

%

22.4

%

1,578

Selling and marketing - indirect*

153

176

(13

)%

5.2

%

11.7

%

(653

)

Selling and marketing*

1,285

513

150

%

43.4

%

34.1

%

925

Technology and content*

245

227

8

%

8.3

%

15.1

%

(681

)

General and administrative*

133

115

16

%

4.5

%

7.6

%

(315

)

Total adjusted costs and expenses

$

2,099

$

1,215

73

%

70.9

%

80.8

%

(991

)

Adjusted Expenses - Expedia Group (excluding trivago)**

Cost of revenue*

$

430

$

357

21

%

15.2

%

24.6

%

(942

)

Selling and marketing*

1,205

486

148

%

42.4

%

33.6

%

884

Technology and content*

233

215

9

%

8.2

%

14.8

%

(658

)

General and administrative*

127

109

16

%

4.4

%

7.5

%

(308

)

Total adjusted costs and expenses excluding trivago

$

1,995

$

1,167

71

%

70.3

%

80.5

%

(1,024

)

Note: Expedia Group reclassified certain prior period information to conform to the current period presentation primarily related to the classification of licensing and maintenance costs within operating expenses. Some numbers may not add due to rounding. *Adjusted expenses are non-GAAP measures. See pages 11-19 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 third quarter of 2021, total GAAP and adjusted cost of revenue increased 22% and 21%, respectively, compared to the third quarter of 2020, primarily due to increased expenses from significantly higher transaction volumes including merchant fees.

Selling and Marketing

  • For the third quarter of 2021, total GAAP and adjusted selling and marketing expense increased 150% compared to the third quarter of 2020, primarily due to a $795 million increase in direct costs as marketing spend increased in response to improved demand compared to the third quarter of 2020. Indirect costs, which represented 14% of total GAAP selling and marketing costs in the third quarter of 2021, compared to 36% in the third quarter of 2020, and 12% of total adjusted selling and marketing expense in the third quarter of 2021, compared to 34% in the third quarter of 2020, decreased 3% and 13%, respectively, due to lower personnel costs in connection with previously announced cost savings. The year-over-year benefit for GAAP indirect costs was offset by higher stock-based compensation.

Technology and Content

  • For the third quarter of 2021, total GAAP and adjusted technology and content expense increased 15% and 8%, respectively, compared to the third quarter of 2020, largely due to an increase in personnel and related costs from the previously announced compensation change, which shifted discretionary bonus to salary in the current year. The year-over-year increase in GAAP technology and content expense was primarily driven by higher stock-based compensation.

General and Administrative

  • For the third quarter of 2021, total GAAP and adjusted general and administrative expense increased 38% and 16%, respectively, compared to the third quarter of 2020, primarily due to an increase in personnel costs from the previously announced compensation change. The year-over-year increase in GAAP general and administrative expense was primarily driven by higher stock-based compensation.

Net Loss Attributable to Expedia Group and Adjusted EBITDA*

Adjusted EBITDA by Segment ($ millions)

Third Quarter

2021

2020

Δ%

Retail

$

867

$

429

102

%

B2B

68

(52

)

NM

Unallocated overhead costs

(98

)

(80

)

23

%

Expedia Group (excluding trivago)

$

837

$

297

181

%

trivago(1)

18

7

170

%

Total Adjusted EBITDA

$

855

$

304

181

%

Net income (loss) attributable to Expedia Group common stockholders(2)

$

362

$

(221

)

NM

(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 9% in the third quarter of 2021, compared to the third quarter of 2020, primarily due to the completion of amortization related to certain intangible assets as well as the impact of definite-lived intangible impairments in the prior year.

Impairment of Goodwill & Intangible Assets

There was no impairment of goodwill or intangible assets recorded in the third quarter of 2021. Intangible asset and goodwill charges of $41 million and $14 million, respectively, in the third quarter of 2020 were related to the impairment of indefinite-lived trade names and trivago respectively.

Restructuring and Related Reorganization Charges

In connection with the restructuring actions announced in February 2020 to simplify our businesses and improve operational efficiencies, as well as the acceleration of further actions to adapt our business to the current environment, we recognized $12 million in restructuring and related reorganization charges in the third quarter of 2021. Restructuring and related reorganization charges were $78 million in the third quarter of 2020.

Interest and Other

Consolidated interest income decreased $1 million in the third quarter of 2021, compared to the third quarter of 2020. Consolidated interest expense decreased $27 million in the third quarter of 2021, compared to the third quarter of 2020, primarily as a result of interest related to high-cost senior notes outstanding in the prior year but extinguished in March 2021, as well as interest related to our prior year draw on our revolving credit facility, which we fully repaid in December 2020.

Consolidated other, net was a gain of $25 million in the third quarter of 2021, compared to a loss of $1 million in the third quarter of 2020. The gain in the third quarter of 2021 was primarily related to the sale of the Alice business, partially offset by foreign exchange losses. The loss in the third quarter of 2020 was primarily due to mark-to-market losses on minority equity investments, largely offset by foreign exchange gains.

Income Taxes

The GAAP effective tax rate was 19%, compared to 11% in the third quarter of 2020.

The effective tax rate on pretax adjusted net income was 2% in the third quarter of 2021. The effective tax rate on pretax adjusted net income was not meaningful in the third quarter of 2020 due to the impact of discrete tax items on smaller adjusted pretax income.

Preferred Stock

The preferred stock dividend related to the preferred equity issued in May of 2020 was $14 million in the third quarter of 2021.

In October 2021, Expedia Group redeemed the remaining 50% of the outstanding Series A Preferred Stock at a price equal to 103% of the Preference Amount, plus accrued and unpaid distributions as to the redemption date using cash on-hand.

Balance Sheet, Cash Flows and Capitalization

For the three months ended September 30, 2021, consolidated net cash used in operating activities was negative $1.2 billion. Consolidated free cash flow totaled negative $1.4 billion, a decrease of $0.4 billion, compared to the prior year, primarily due to an increase in cash used in operating activities related to changes in working capital partially offset by an improvement in Adjusted EBITDA.

Cash, cash equivalents and short-term investments totaled $5.0 billion at September 30, 2021 compared to $5.5 billion at June 30, 2021. The decrease was primarily driven by seasonally lower free cash flow. Restricted cash and cash equivalents, which primarily relates to traveler deposits for bookings made through Vrbo, was $1.6 billion at September 30, 2021 compared to $2.5 billion at June 30, 2021. Prepaid expenses and other current assets was $0.8 billion at September 30, 2021 compared to $1.3 billion at June 30, 2021. Deferred merchant bookings totaled approximately $5.8 billion at September 30, 2021, including approximately $790 million in deferred loyalty rewards compared to $8.2 billion at June 30, 2021, including approximately $760 million in deferred loyalty rewards. The decline in deferred merchant bookings primarily reflects the typical seasonality of our business with higher stayed room nights occurring during the summer months.

At September 30, 2021, Expedia Group had stock-based awards outstanding representing approximately 14 million shares of Expedia Group common stock, consisting of options to purchase approximately 7 million common shares with a $123.81 weighted average exercise price and weighted average remaining life of 3.7 years, and approximately 7 million restricted stock units ("RSUs").

EXPEDIA GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share and per share data)

(Unaudited)

Three months ended

September 30,

Nine months ended

September 30,

2021

2020

2021

2020

Revenue

$

2,962

$

1,504

$

6,319

$

4,279

Costs and expenses:

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

442

363

1,127

1,373

Selling and marketing (1)

1,314

525

3,177

2,021

Technology and content (1)

277

242

800

828

General and administrative (1)

182

132

522

466

Depreciation and amortization

201

220

615

681

Impairment of goodwill

14

799

Impairment of intangible assets

41

172

Legal reserves, occupancy tax and other

10

2

1

(11

)

Restructuring and related reorganization charges

12

78

54

206

Operating income (loss)

524

(113

)

23

(2,256

)

Other income (expense):

Interest income

2

3

5

16

Interest expense

(86

)

(113

)

(267

)

(258

)

Loss on debt extinguishment

(280

)

Other, net

25

(1

)

10

(158

)

Total other expense, net

(59

)

(111

)

(532

)

(400

)

Income (loss) before income taxes

465

(224

)

(509

)

(2,656

)

Provision for income taxes

(87

)

24

129

319

Net income (loss)

378

(200

)

(380

)

(2,337

)

Net (income) loss attributable to non-controlling interests

(2

)

8

6

108

Net income (loss) attributable to Expedia Group, Inc.

376

(192

)

(374

)

(2,229

)

Preferred stock dividend

(14

)

(29

)

(64

)

(46

)

Loss on redemption of preferred stock

(107

)

Net income (loss) attributable to Expedia Group, Inc. common stockholders

$

362

$

(221

)

$

(545

)

$

(2,275

)

Earnings (loss) per share attributable to Expedia Group, Inc. available to common stockholders:

Basic

$

2.40

$

(1.56

)

$

(3.67

)

$

(16.13

)

Diluted

2.26

(1.56

)

(3.67

)

(16.13

)

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

Basic

151,019

141,306

148,453

141,068

Diluted

160,460

141,306

148,453

141,068

(1) Includes stock-based compensation as follows:

Cost of revenue

$

6

3

$

17

$

9

Selling and marketing

29

12

78

37

Technology and content

32

15

91

53

...