Form 8-K Expedia, Inc. For: Oct 29
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) October 29, 2015
EXPEDIA, INC.
(Exact name of registrant as specified in its charter)
Delaware | 001-37429 |
20-2705720 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
333 108th Avenue NE
Bellevue, Washington 98004
(Address of principal executive offices) (Zip code)
(425) 679-7200
Registrants telephone number, including area code
Not Applicable
(Former name or former address if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. | Results of Operations and Financial Condition. |
On October 29 2015, Expedia, Inc. announced its financial results for the quarter ended September 30, 2015. The full text of this earnings release is furnished as Exhibit 99.1 hereto.
Expedia makes reference to non-GAAP financial measures in the earnings release, and includes information regarding such measures in the earnings release.
Pursuant to General Instruction B.2. to Form 8-K, the information set forth in this Item 2.02 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that section, or incorporated by reference in any filing under the Securities Act of 1933, as amended (the Securities Act), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 7.01. | Regulation FD Disclosure. |
Expedia management intends to make presentations to various investors, analysts and others during October, November, December of 2015 and January of 2016, using the slides containing company information attached to this report as Exhibit 99.2.
Pursuant to General Instruction B.2. to Form 8-K, the information set forth in this Item 7.01 shall not be deemed filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, or incorporated by reference in any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 8.01. | Other Events. |
On October 29, 2015, Expedia announced that its Executive Committee, acting on behalf of its Board of Directors, has declared a quarterly cash dividend of $0.24 per share of outstanding common stock payable on December 10, 2015 to stockholders of record as of the close of business on November 19, 2015.
Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits
Exhibit |
Description | |
99.1 | Press Release of Expedia, Inc., dated October 29, 2015 | |
99.2 | Expedia, Inc. Third Quarter 2015 Company Overview |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
EXPEDIA, INC. | ||
By: | /s/ MARK D. OKERSTROM | |
Mark D. Okerstrom | ||
Chief Financial Officer |
Dated: October 29, 2015
EXHIBIT INDEX
Exhibit |
Description | |
99.1 | Press Release of Expedia, Inc., dated October 29, 2015 | |
99.2 | Expedia, Inc. Third Quarter 2015 Company Overview |
Exhibit 99.1
Expedia, Inc. Reports Third Quarter 2015 Results
BELLEVUE, WA October 29, 2015 Expedia, Inc. (NASDAQ: EXPE) today announced financial results for the third quarter ended September 30, 2015.
| Room night growth excluding eLong accelerated to 36% year-over-year, with domestic and international room nights growing 25% and 50% year-over-year, respectively. |
| Gross bookings excluding eLong increased 21% and revenue excluding eLong increased 16% year-over-year. Excluding the impact of foreign exchange, gross bookings increased 26% and revenue increased 27% year-over-year. |
| Solid performance in the Core OTA segment drove growth in Expedia® (excluding eLong) Adjusted EBITDA(1) of 13% year-over-year. |
| Advertising & Media revenue excluding eLong delivered over $538 million in net revenue on a trailing twelve months basis, an increase of 23% year-over-year, driven by growth in trivago and Expedia Media Solutions. |
| During the third quarter of 2015, Expedia added more than 14,000 properties to its global supply portfolio, which now stands at approximately 271,000 properties available on Expedia, Inc. sites, an increase of 29% compared to the third quarter of 2014. |
| On September 17, 2015, Expedia, Inc. completed its acquisition of Orbitz Worldwide, Inc., including all of its brands and assets, for an enterprise value of approximately $1.6 billion. Results include 14 days of Orbitz financials for the third quarter of 2015 unless otherwise noted. |
Financial Summary & Operating Metrics ($ millions except per share amounts)
Metric |
Expedia (excluding eLong) | eLong(2) | Expedia, Inc. | |||||||||||||||||||||||||||||||||
Third Quarter | Third Quarter | Third Quarter | ||||||||||||||||||||||||||||||||||
2015 | 2014 | Change | 2015 | 2014 | Change | 2015 | 2014 | Change | ||||||||||||||||||||||||||||
Room night growth |
36 | % | 24 | % | 1,223 bps | 0 | % | 22 | % | NM | 13 | % | 24 | % | (1,100 | ) bps | ||||||||||||||||||||
Gross bookings |
$ | 15,393.0 | $ | 12,738.2 | 21 | % | $ | | $ | 731.3 | NM | $ | 15,393.0 | $ | 13,469.6 | 14 | % | |||||||||||||||||||
Revenue |
1,937.8 | 1,663.6 | 16 | % | | 48.9 | NM | 1,937.8 | 1,712.5 | 13 | % | |||||||||||||||||||||||||
Adjusted EBITDA(1) |
469.1 | 415.1 | 13 | % | | (6.0 | ) | NM | 469.1 | 409.1 | 15 | % | ||||||||||||||||||||||||
Operating income (loss) |
345.0 | 309.7 | 11 | % | | (12.9 | ) | NM | 345.0 | 296.8 | 16 | % | ||||||||||||||||||||||||
Adjusted net income (loss)(1) |
276.3 | 259.8 | 6 | % | | (3.8 | ) | NM | 276.3 | 256.0 | 8 | % | ||||||||||||||||||||||||
Adjusted EPS (1) |
$ | 2.07 | $ | 1.96 | 6 | % | $ | | $ | (0.03 | ) | NM | $ | 2.07 | $ | 1.93 | 7 | % | ||||||||||||||||||
Net income (loss) attributable to the Company |
283.2 | 263.3 | 8 | % | | (6.2 | ) | NM | 283.2 | 257.1 | 10 | % | ||||||||||||||||||||||||
Diluted EPS |
$ | 2.12 | $ | 1.94 | 9 | % | ||||||||||||||||||||||||||||||
Free cash flow(1) |
(277.0 | ) | $ | 1.94 | NM |
(1) | Adjusted EBITDA (Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization), Adjusted net income, Adjusted EPS and Free cash flow are non-GAAP measures as defined by the Securities and Exchange Commission (the SEC). Please see Definitions of Non-GAAP Measures and Tabular Reconciliations for Non-GAAP Measures on pages 11-14 herein for an explanation and reconciliations of non-GAAP measures used throughout this release. The definition for adjusted net income was revised in the fourth quarters of 2010, 2011 and 2012 and the definition for Adjusted EBITDA was revised in the fourth quarter of 2012. |
(2) | The classification of certain revenue and expense items as well as foreign exchange rates used for reporting purposes may result in immaterial differences between the above reported amounts and eLongs standalone results. In addition, Expedia sold its ownership interest in eLong on May 22, 2015 and eLong is excluded from our results from that point forward. |
Please refer to the Glossary in the Quarterly Results section on Expedias investor relations website for definitions of the business and financial terms discussed within this release.
Discussion of Results
The results include Brand Expedia (Expedia.com®), Hotels.com®, Hotwire.com®, Expedia® Affiliate Network (EAN), Classic Vacations®, Expedia Local Expert®, Expedia® CruiseShipCenters®, Egencia®, eLong (through May 22, 2015), Venere® Net SpA, trivago GmbH (trivago®), Wotif.com Holdings Limited (Wotif Group), Travelocity®, Orbitz Worldwide, Inc. (Orbitz® Worldwide), AirAsia Expedia and CarRentals.com, in addition to the related international points of sale.
The results include the impact of the strategic marketing agreement with Travelocity launched during the fourth quarter of 2013 and the subsequent acquisition of Travelocity in January 2015, results of Wotif Group following the acquisition by Expedia in November 2014, results of AirAsia Expedia following Expedias purchase of an additional 25% equity interest in the joint venture in March 2015, as well as results of Orbitz Worldwide following the acquisition by Expedia in September 2015. The impact from acquisitions noted below excludes Travelocity due to the previously implemented commercial agreement. Unless otherwise noted, all comparisons below are versus the third quarter of 2014.
Due to Expedias sale of its eLong ownership stake in May 2015, all discussion below refers to results for Expedia, Inc. excluding eLong unless otherwise noted.
Gross Bookings & Revenue (excluding eLong)
Gross Bookings by Segment (In millions)
Third Quarter | ||||||||||||||||
2015 | 2014 | D$ | D% | |||||||||||||
Core OTA |
$ | 14,091 | $ | 11,453 | $ | 2,638 | 23 | % | ||||||||
Egencia |
1,302 | 1,285 | 17 | 1 | % | |||||||||||
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Expedia (excluding eLong) |
$ | 15,393 | $ | 12,738 | $ | 2,655 | 21 | % | ||||||||
eLong |
| 731 | (731 | ) | NM | |||||||||||
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Total |
$ | 15,393 | $ | 13,470 | $ | 1,923 | 14 | % |
Total gross bookings increased 21% (26% excluding foreign exchange) in the third quarter of 2015, driven by growth in the Core OTA business, including strong performance at Brand Expedia and Hotels.com. Robust room night and air ticket growth were partially offset by year-over-year declines in average daily room rates and airfares. Acquisitions added approximately 9 percentage points of inorganic bookings growth for the quarter. Domestic gross bookings increased 22% and international gross bookings increased 19% (37% excluding foreign exchange). International bookings totaled $5.8 billion and accounted for 38% of worldwide bookings, consistent with the third quarter of 2014.
Revenue by Segment (In millions)
Third Quarter | ||||||||||||||||
2015 | 2014 | D$ | D% | |||||||||||||
Core OTA |
$ | 1,739 | $ | 1,477 | $ | 262 | 18 | % | ||||||||
trivago |
176 | 139 | 37 | 27 | % | |||||||||||
Egencia |
94 | 97 | (2 | ) | (3 | %) | ||||||||||
Intercompany Eliminations |
(71 | ) | (49 | ) | (23 | ) | (47 | %) | ||||||||
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Expedia (excluding eLong) |
$ | 1,938 | $ | 1,664 | $ | 274 | 16 | % | ||||||||
eLong |
| 49 | (49 | ) | NM | |||||||||||
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Total |
$ | 1,938 | $ | 1,713 | $ | 225 | 13 | % |
Total revenue increased 16% (27% excluding foreign exchange) in the third quarter of 2015, driven primarily by the Core OTA business, including strong performance at Brand Expedia and Hotels.com, as well as at trivago. Acquisitions added approximately 6 percentage points of inorganic revenue growth for the quarter. Domestic revenue increased 18% and international revenue increased 15% (33% excluding foreign exchange). International revenue equaled $890 million, representing 46% of worldwide revenue, compared to 47% in the third quarter of 2014.
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Product & Services Detail (excluding eLong)
As a percentage of total worldwide revenue in the third quarter of 2015, hotel accounted for 72%, advertising and media accounted for 8%, air accounted for 7% and all other revenues accounted for the remaining 13%.
Hotel revenue increased 17% in the third quarter of 2015 on a 36% increase in room nights stayed driven by Brand Expedia and Hotels.com, partially offset by a 15% decrease in revenue per room night. Revenue per room night decreased primarily due to an unfavorable foreign exchange impact, both in translation and in book-to-stay, deliberate margin reductions aimed at expanding the size and availability of the global hotel supply portfolio, as well as increased promotional activities such as growing loyalty programs. Revenue per room night is expected to continue to decrease year-over-year in 2015. Average daily room rates (ADRs) decreased 6% year-over-year in the third quarter of 2015, as currency-neutral ADR growth was offset by an unfavorable foreign exchange translation impact. ADRs are expected to be negative year-over-year in 2015. Acquisitions added approximately 6 percentage points of inorganic hotel revenue growth and 8 percentage points of room night growth for the quarter.
Air revenue increased 19% in the third quarter of 2015 due to a 31% increase in air tickets sold, partially offset by a 9% decrease in revenue per ticket. Acquisitions added approximately 15 percentage points of inorganic air revenue growth and 12 percentage points of air ticket growth for the quarter.
Advertising and media revenue increased 17% in the third quarter of 2015 due to continued growth in trivago and Expedia® Media Solutions. All other revenue increased 15% in the third quarter of 2015 primarily on growth in car rental and travel insurance products.
Adjusted Expenses Expedia (excluding eLong)
Costs and Expenses | As a % of Revenue | |||||||||||||||||||||||
Three months ended September 30, | Three months ended September 30, | |||||||||||||||||||||||
2015 | 2014 | Growth | 2015 | 2014 | D in bps | |||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||
Adjusted cost of revenue * |
$ | 316 | $ | 276 | 14 | % | 16.3 | % | 16.6 | % | (29 | ) | ||||||||||||
Adjusted selling and marketing * |
930 | 776 | 20 | % | 48.0 | % | 46.6 | % | 136 | |||||||||||||||
Adjusted technology and content * |
125 | 107 | 18 | % | 6.5 | % | 6.4 | % | 6 | |||||||||||||||
Adjusted general and administrative * |
112 | 90 | 24 | % | 5.8 | % | 5.4 | % | 33 | |||||||||||||||
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Total adjusted costs and expenses |
$ | 1,483 | $ | 1,249 | 19 | % | 76.5 | % | 75.0 | % | 146 | |||||||||||||
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Total depreciation |
87 | 66 | 33 | % | 4.5 | % | 4.0 | % | 55 | |||||||||||||||
Total stock based compensation |
64 | 17 | 265 | % | 3.3 | % | 1.0 | % | 224 | |||||||||||||||
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Total costs and expenses |
$ | 1,633 | $ | 1,332 | 23 | % | 84.3 | % | 80.1 | % | 425 | |||||||||||||
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* | Adjusted Expenses are non-GAAP measures. See pages 11-14 below for a description and reconciliation to the corresponding GAAP measures. |
Adjusted Cost of Revenue
| Total adjusted cost of revenue increased 14% in the third quarter of 2015, compared to the third quarter of 2014, due to $14 million more in data center and other costs, $14 million more in credit card processing costs, primarily due to an increase in transaction volumes (offset by a decrease in fraud and chargeback expenses), as well as $12 million more in customer operations expenses. |
| Acquisitions contributed approximately 9 percentage points of inorganic growth to adjusted cost of revenue growth during the third quarter of 2015. |
Adjusted Selling and Marketing
| Total adjusted selling and marketing expense increased 20% in the third quarter of 2015, compared to the third quarter of 2014, due to a $128 million or 20% increase in direct costs, including online and offline marketing expenses. Brand Expedia, trivago, Hotels.com and Hotwire accounted for a majority of the total increase in direct selling and marketing expenses. |
| Indirect costs increased $26 million or 21% in the third quarter of 2015, primarily driven by additional personnel due to an accelerated pace of hiring in the lodging supply organization. As a percentage of total adjusted selling and marketing, indirect costs represented 17% in the third quarter of 2015, up from 16% in the third quarter of 2014. |
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| Acquisitions contributed approximately 6 percentage points of inorganic growth to adjusted selling and marketing growth during the third quarter of 2015. |
Adjusted Technology and Content
| Total adjusted technology and content expense increased 18% in the third quarter of 2015, compared to the third quarter of 2014, primarily due to $10 million more in personnel and overhead costs, net of capitalized salary costs, for additional personnel to support key technology projects primarily for Brand Expedia and the corporate technology function, as well as a $9 million increase in costs to support growing technology platforms. |
| Acquisitions contributed approximately 5 percentage points of inorganic growth to adjusted technology and content growth during the third quarter of 2015. |
Adjusted General and Administrative
| Total adjusted general and administrative expense increased 24% in the third quarter of 2015, compared to the third quarter of 2014, primarily due to a $12 million increase in consulting and legal fees, as well as a $9 million increase in personnel costs. |
| Acquisitions contributed approximately 4 percentage points of inorganic growth to adjusted general and administrative growth during the third quarter of 2015. |
Depreciation Expense
For the third quarter of 2015, depreciation expense of $87 million increased $21 million or 33%, primarily due to increased expenses related to previously capitalized software development costs for completed technology projects which have been placed into service. Depreciation expense is expected to continue to increase as additional projects are completed.
Adjusted EBITDA*
Adjusted EBITDA by Segment (In millions)
Third Quarter | ||||||||||||||||
2015 | 2014 | D$ | D% | |||||||||||||
Core OTA |
$ | 589 | $ | 501 | $ | 89 | 18 | % | ||||||||
trivago |
(9 | ) | 0 | (10 | ) | NM | ||||||||||
Egencia |
14 | 16 | (2 | ) | (12 | %) | ||||||||||
Unallocated Overhead Costs |
(125 | ) | (102 | ) | (23 | ) | (23 | %) | ||||||||
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Expedia (excluding eLong) |
$ | 469 | $ | 415 | $ | 54 | 13 | % | ||||||||
eLong |
| (6 | ) | 6 | NM | |||||||||||
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Total |
$ | 469 | $ | 409 | $ | 60 | 15 | % |
* | Adjusted EBITDA is a non-GAAP measure. See pages 11-14 below for a description and reconciliation to the corresponding GAAP measure. |
Adjusted EBITDA (excluding eLong) increased 13% in the third quarter of 2015 compared to the third quarter of 2014, driven by growth in the Core OTA business. Excluding the negative impact of consolidating the Orbitz Worldwide financial statements and the negative impacts of related deal and integration costs, Adjusted EBITDA would have increased 17% in the third quarter of 2015. Core OTA Adjusted EBITDA increased 18% in the third quarter of 2015, driven primarily by Brand Expedia, Hotels.com, Expedia Affiliate Network, Travelocity and Wotif Group, partially offset by Hotwire® and Orbitz Worldwide.
Legal reserves, occupancy tax and other
During the three months ended September 30 2015, we received a refund of prepaid pay-to-play payments of $132 million from the State of Hawaii in connection with the general excise tax litigation. This gain was partially offset by charges for changes in our reserve related to hotel occupancy and other taxes.
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Restructuring and Related Reorganization Charges
In connection with the migration of technology platforms and centralization of technology, supply and other operations, primarily related to acquisition integrations including Orbitz Worldwide and the Wotif Group, we recognized $72 million in restructuring and related reorganization charges during the three months ended September 30, 2015. The charges were primarily related to employee severance and benefits related to the Orbitz integration and represent estimated severance amounts under pre-existing written plans and contracts Orbitz had with its employees, as well as stock-compensation charges for acceleration of replacement awards pursuant to certain of these agreements. We expect to incur approximately $20 million to $30 million of restructuring charges for the fourth quarter of 2015 and approximately $40 million to $50 million in 2016 related to these integrations which includes $5 million for our estimate of accelerated stock-based compensation for each period.
Interest and Other
For the third quarter of 2015, consolidated interest income decreased $4 million, or 48%, compared to the third quarter of 2014, primarily due to the sale of eLong and lower rates of return. Consolidated interest expense increased $8 million, or 30%, primarily due to higher long-term debt balances.
For the third quarter of 2015, consolidated other, net was a gain of $26 million compared to a gain of $10 million in the third quarter of 2014. The gains for the third quarter of 2015 and the third quarter of 2014 were primarily related to foreign exchange hedging. Foreign currency rate fluctuations negatively impacted third quarter 2015 revenue growth rates reflecting depreciation in certain foreign currencies compared to the third quarter of 2014. Expedias revenue hedging program is designed to offset the book-to-stay impact on merchant hotel revenue. Expedia includes any realized gains or losses from the revenue hedging program in the calculation of Adjusted EBITDA.
Income Taxes
The consolidated effective tax rate on GAAP pre-tax income was 19.3% for the third quarter of 2015, compared with 13.4% in the prior year period. The effective tax rate on pre-tax adjusted net income (ANI) was 21.3% for the third quarter of 2015, compared with 20.4% in the prior year period. The year-over-year change in the GAAP and ANI effective tax rates was primarily due to expiration of the statute of limitations for the 2001 2005 federal income tax years and the associated release of liabilities related to uncertain tax positions in the third quarter of 2014.
Balance Sheet, Cash Flows and Capitalization
Cash, cash equivalents, restricted cash and short-term investments totaled $1.5 billion at September 30, 2015. For the nine months ended September 30, 2015, consolidated net cash provided by operating activities was $1.5 billion and consolidated free cash flow totaled $0.9 billion. Both measures include $0.9 billion from net changes in operating assets and liabilities, primarily driven by an increase in deferred merchant bookings. Consolidated free cash flow decreased $411 million for the nine months ended September 30, 2015, compared to the prior year period primarily due to the acquisition of Expedias future corporate headquarters for $229 million, combined with the reduced benefits from working capital changes and increased capital expenditures.
Long-term debt totaled $2.5 billion at September 30, 2015 consisting of $497 million, net of discount, in 4.5% senior notes due 2024; $728 million, net of discount, in 2.5% (650 million) senior notes due 2022; $750 million, net of discount, in 5.95% senior notes due 2020 and $500 million in 7.456% senior notes due 2018. In addition, Expedia has a $1 billion unsecured revolving credit facility which was essentially untapped as of September 30, 2015.
At September 30, 2015, Expedia, Inc. had stock-based awards outstanding representing approximately 17.7 million shares of Expedia common stock, consisting of options to purchase approximately 16.9 million common shares with a $70.37 weighted average exercise price and weighted average remaining life of 5.1 years, and approximately 0.7 million restricted stock units (RSUs).
During the first nine months of 2015, Expedia, Inc. repurchased 0.5 million shares of Expedia, Inc. common stock for an aggregate purchase price of $45 million excluding transaction costs (an average of $85.27 per share). As of September 30, 2015, there were approximately 11.2 million shares remaining under the April 2012 and the February 2015 repurchase authorizations.
On September 17, 2015, Expedia, Inc. paid a quarterly dividend of $31 million ($0.24 per common share). In addition, on October 29, 2015, the Executive Committee of Expedias Board of Directors declared a cash dividend of $0.24 per share of outstanding common stock to be paid to stockholders of record as of the close of business on November 19, 2015, with
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a payment date of December 10, 2015. Based on current shares outstanding, the total payment for this quarterly dividend is estimated to be approximately $31 million. Future declaration of dividends and the establishment of future record and payment dates are subject to the final determination of Expedias Board of Directors.
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Recent Highlights
| In September 2015, Expedia, Inc. completed its acquisition of Orbitz Worldwide, Inc., including all of its brands and assets, for US$12.00 per share in cash, representing an enterprise value of approximately $1.6 billion. |
Core OTA
| Expedia launched an app exclusively for Samsung Galaxy phones, which features special pricing and a dedicated customer support line. |
| Expedia announced new functionality that enables Expedia+ rewards members to redeem earned points towards merchant hotel purchases. Customers paying with points can also now combine them with other Expedia.com promotional coupons. Expedia+ rewards members also receive exclusive savings on standalone U.S. airport car rentals from Avis and Budget, saving anywhere from 10% to 30% off, through a partnership with Avis Budget Group. |
| Expedia completed the global migration of its cruise product, ensuring that cruise is well positioned for future growth benefits from the same technological capabilities as all other Expedia products. |
| The Hotels.com Rewards program welcomed its 20 millionth loyalty member in September. Since launch, more than 4 million free room nights have been redeemed by members. |
| The Hotels.com mobile booking app was recently recognized as the 2015 Travel Weekly Silver Magellan Award Winner in the Online Travel Services App category. The Hotels.com mobile booking apps have been downloaded more than 50 million times and 1 in 3 Hotels.com transactions are now made via mobile devices. |
| Hotels.com signed local marketing offers in partnership with SBI Card India. In addition, Hotels.com signed marketing partnerships with Industrial Bank in China, Citibank in Malaysia and BDO Bank in the Philippines. |
| The Hotwire mobile app was ranked as one of the Best Travel Apps of 2015 by PCMag. Additionally, Hotwire launched one-way car booking capabilities for its Android app. |
| EAN entered into agreements to power online hotel bookings for Merit Loyalty Services and to provide technology solutions and access to global hotel content for Majid Al Futtaim Finance. |
| Travelocity announced the launch of its Travel for Good program, a social media program supporting voluntourism efforts through cash and travel awards to charitably-minded travelers. |
| Wotif revealed its new brand campaign (the home of holidays) and kicked off its first TV campaign in 3 years. |
trivago
| According to a recent company survey, one in two Americans now recognizes trivago, up from roughly 5% three years ago. |
| trivago extended the range of tools available for hotelier support, allowing hoteliers to better market their properties directly on the site using the trivago Hotel Manager (tHM) platform. |
Egencia
| Egencia signed renewal agreements with Flowserve, a leading manufacturer and aftermarket service provider of comprehensive flow management products and services, and Decathlon, one of the worlds largest sporting goods retailers; and announced new customers, Gentherm, a global developer and marketer of innovative thermal management technologies, and Protein, an advertising and media company. |
| Egencia Germany signed 20 new customers in Q3 2015, contributing to its 31% euro-denominated growth in gross bookings for the quarter. |
| Traveldoo, a leading provider of web and mobile platforms for business travel and expense management, signed an agreement to provide travel and expense technology for the worlds 4th ranked international oil and gas company, Total S.A. |
Expedia, Inc.
| During the third quarter of 2015, Expedia added more than 14,000 properties to its global supply portfolio, which now stands at approximately 271,000 properties available on Expedia, Inc. sites. |
| Expedia, Inc. entered into a new agreement with Viva Aerobus and renewed agreements with a number of airlines, including Air Berlin, American Airlines, Avianca, British Airways, Iberia and South African Airways. |
| The Expedia PartnerCentral App for iPhone and Android was introduced. The app is a new way to help hoteliers manage their business on Expedia, allowing them to receive up-to-the-minute booking information and notifications, view and reply to real-time guest feedback and quickly promote last minute inventory via their mobile device. |
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EXPEDIA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data)
(Unaudited)
Three months ended September 30, |
Nine months ended September 30, |
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2015 | 2014 | 2015 | 2014 | |||||||||||||
Revenue |
$ | 1,937,753 | $ | 1,712,504 | $ | 4,973,750 | $ | 4,407,507 | ||||||||
Costs and expenses: |
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Cost of revenue (1) (2) |
328,066 | 299,708 | 971,066 | 894,828 | ||||||||||||
Selling and marketing (1) (2) |
943,289 | 815,800 | 2,592,150 | 2,184,115 | ||||||||||||
Technology and content (1) (2) |
202,703 | 172,754 | 579,674 | 504,804 | ||||||||||||
General and administrative (1) (2) |
130,168 | 104,999 | 387,959 | 306,584 | ||||||||||||
Amortization of intangible assets |
31,400 | 18,519 | 83,322 | 55,275 | ||||||||||||
Legal reserves, occupancy tax and other |
(114,550 | ) | 3,888 | (106,511 | ) | 38,843 | ||||||||||
Restructuring and related reorganization charges (1) |
71,679 | | 82,001 | | ||||||||||||
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Operating income |
344,998 | 296,836 | 384,089 | 423,058 | ||||||||||||
Other income (expense): |
||||||||||||||||
Interest income |
4,165 | 8,075 | 14,403 | 20,756 | ||||||||||||
Interest expense |
(33,259 | ) | (25,558 | ) | (89,768 | ) | (69,683 | ) | ||||||||
Gain on sale of business |
| | 508,810 | | ||||||||||||
Other, net |
26,283 | 10,172 | 114,361 | 2,514 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other income (expense), net |
(2,811 | ) | (7,311 | ) | 547,806 | (46,413 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Income before income taxes |
342,187 | 289,525 | 931,895 | 376,645 | ||||||||||||
Provision for income taxes |
(65,950 | ) | (38,904 | ) | (196,261 | ) | (59,974 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
276,237 | 250,621 | 735,634 | 316,671 | ||||||||||||
Net loss attributable to noncontrolling interests |
6,979 | 6,438 | 41,369 | 15,457 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income attributable to Expedia, Inc. |
$ | 283,216 | $ | 257,059 | $ | 777,003 | $ | 332,128 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings per share attributable to Expedia, Inc. available to common stockholders: |
||||||||||||||||
Basic |
$ | 2.18 | $ | 2.01 | $ | 6.03 | $ | 2.57 | ||||||||
Diluted |
2.12 | 1.94 | 5.86 | 2.48 | ||||||||||||
Shares used in computing earnings per share: |
||||||||||||||||
Basic |
129,989 | 127,911 | 128,822 | 129,326 | ||||||||||||
Diluted |
133,417 | 132,274 | 132,602 | 133,683 | ||||||||||||
Dividends declared per common share |
$ | 0.24 | $ | 0.18 | $ | 0.60 | $ | 0.48 | ||||||||
|
||||||||||||||||
(1) Includes stock-based compensation as follows: |
||||||||||||||||
Cost of revenue |
$ | 1,112 | $ | 1,045 | $ | 3,586 | $ | 3,190 | ||||||||
Selling and marketing |
10,558 | 3,643 | 23,890 | 13,798 | ||||||||||||
Technology and content |
7,062 | 7,374 | 19,405 | 17,892 | ||||||||||||
General and administrative |
15,694 | 10,242 | 57,925 | 33,259 | ||||||||||||
Restructuring and related reorganization charges |
29,230 | | 29,230 | | ||||||||||||
(2) Includes depreciation as follows: |
||||||||||||||||
Cost of revenue |
$ | 11,014 | $ | 9,217 | $ | 32,698 | $ | 25,554 | ||||||||
Selling and marketing |
2,914 | 2,086 | 7,419 | 5,757 | ||||||||||||
Technology and content |
70,255 | 54,129 | 191,780 | 157,890 | ||||||||||||
General and administrative |
2,973 | 2,037 | 8,981 | 5,960 |
Page 8 of 17
EXPEDIA, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
September 30, 2015 |
December 31, 2014 |
|||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 1,455,339 | $ | 1,402,700 | ||||
Restricted cash and cash equivalents |
10,015 | 34,888 | ||||||
Short-term investments |
35,478 | 355,780 | ||||||
Accounts receivable, net of allowance of $25,033 and $13,760 |
1,242,303 | 778,334 | ||||||
Deferred income taxes |
180,951 | 169,269 | ||||||
Income taxes receivable |
32,964 | 17,161 | ||||||
Prepaid expenses and other current assets |
216,422 | 166,357 | ||||||
|
|
|
|
|||||
Total current assets |
3,173,472 | 2,924,489 | ||||||
Property and equipment, net |
966,560 | 553,126 | ||||||
Long-term investments and other assets |
602,145 | 286,882 | ||||||
Deferred income taxes |
137,358 | 10,053 | ||||||
Intangible assets, net |
2,122,770 | 1,290,087 | ||||||
Goodwill |
5,400,968 | 3,955,901 | ||||||
|
|
|
|
|||||
TOTAL ASSETS |
$ | 12,403,273 | $ | 9,020,538 | ||||
|
|
|
|
|||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
Current liabilities: |
||||||||
Accounts payable, merchant |
$ | 1,442,350 | $ | 1,188,483 | ||||
Accounts payable, other |
549,735 | 361,382 | ||||||
Deferred merchant bookings |
2,804,413 | 1,761,258 | ||||||
Deferred revenue |
58,249 | 62,206 | ||||||
Income taxes payable |
131,411 | 59,661 | ||||||
Accrued expenses and other current liabilities |
940,198 | 753,625 | ||||||
Deferred income taxes |
14,890 | | ||||||
|
|
|
|
|||||
Total current liabilities |
5,941,246 | 4,186,615 | ||||||
Long-term debt |
2,475,425 | 1,746,787 | ||||||
Deferred income taxes |
628,019 | 452,958 | ||||||
Other long-term liabilities |
284,905 | 180,376 | ||||||
Commitments and contingencies |
||||||||
Redeemable noncontrolling interests |
567,480 | 560,073 | ||||||
Stockholders equity: |
||||||||
Common stock $.0001 par value |
20 | 20 | ||||||
Authorized shares: 1,600,000 |
||||||||
Shares issued: 199,842 and 196,802 |
||||||||
Shares outstanding: 117,011 and 114,267 |
||||||||
Class B common stock $.0001 par value |
1 | 1 | ||||||
Authorized shares: 400,000 |
||||||||
Shares issued and outstanding: 12,800 and 12,800 |
||||||||
Additional paid-in capital |
6,102,152 | 5,921,140 | ||||||
Treasury stock - Common stock, at cost |
(4,043,056 | ) | (3,998,120 | ) | ||||
Shares: 82,831 and 82,535 |
||||||||
Retained earnings |
666,177 | | ||||||
Accumulated other comprehensive loss |
(284,246 | ) | (138,774 | ) | ||||
|
|
|
|
|||||
Total Expedia, Inc. stockholders equity |
2,441,048 | 1,784,267 | ||||||
Non-redeemable noncontrolling interests |
65,150 | 109,462 | ||||||
|
|
|
|
|||||
Total stockholders equity |
2,506,198 | 1,893,729 | ||||||
|
|
|
|
|||||
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
$ | 12,403,273 | $ | 9,020,538 | ||||
|
|
|
|
Page 9 of 17
EXPEDIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine months ended September 30, |
||||||||
2015 | 2014 | |||||||
Operating activities: |
| |||||||
Net income |
$ | 735,634 | $ | 316,671 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation of property and equipment, including internal-use software and website development |
240,878 | 195,161 | ||||||
Amortization of stock-based compensation |
134,036 | 68,139 | ||||||
Amortization of intangible assets |
83,322 | 55,275 | ||||||
Deferred income taxes |
(42,628 | ) | (27,371 | ) | ||||
Foreign exchange (gain) loss on cash, cash equivalents and short-term investments, net |
75,289 | 44,484 | ||||||
Realized (gain) loss on foreign currency forwards |
(39,975 | ) | 11,267 | |||||
Gain on sale of business |
(508,810 | ) | | |||||
Noncontrolling investment basis adjustment |
(77,400 | ) | | |||||
Other |
15,237 | 4,919 | ||||||
Changes in operating assets and liabilities, net of effects from acquisitions and disposals: |
||||||||
Accounts receivable |
(381,618 | ) | (277,056 | ) | ||||
Prepaid expenses and other current assets |
27,183 | (55,810 | ) | |||||
Accounts payable, merchant |
202,883 | 226,362 | ||||||
Accounts payable, other, accrued expenses and other current liabilities |
233,350 | 289,525 | ||||||
Taxes payable/receivable, net |
64,897 | 3,704 | ||||||
Deferred merchant bookings |
772,787 | 694,830 | ||||||
Deferred revenue |
6,461 | 16,702 | ||||||
|
|
|
|
|||||
Net cash provided by operating activities |
1,541,526 | 1,566,802 | ||||||
|
|
|
|
|||||
Investing activities: |
||||||||
Capital expenditures, including internal-use software and website development |
(625,439 | ) | (239,678 | ) | ||||
Purchases of investments |
(512,329 | ) | (1,044,665 | ) | ||||
Sales and maturities of investments |
392,271 | 957,347 | ||||||
Acquisitions, net of cash acquired |
(1,933,821 | ) | (25,177 | ) | ||||
Proceeds from sale of business, net of cash divested and disposal costs |
523,882 | | ||||||
Net settlement of foreign currency forwards |
39,975 | (11,267 | ) | |||||
Other, net |
11,665 | 2,188 | ||||||
|
|
|
|
|||||
Net cash used in investing activities |
(2,103,796 | ) | (361,252 | ) | ||||
|
|
|
|
|||||
Financing activities: |
||||||||
Proceeds from issuance of long-term debt, net of issuance costs |
700,454 | 493,630 | ||||||
Purchases of treasury stock |
(48,694 | ) | (469,267 | ) | ||||
Proceeds from issuance of treasury stock |
22,575 | | ||||||
Payment of dividends to stockholders |
(77,173 | ) | (61,777 | ) | ||||
Proceeds from exercise of equity awards and employee stock purchase plan |
83,298 | 79,490 | ||||||
Excess tax benefit on equity awards |
85,463 | 38,352 | ||||||
Withholding taxes for stock option exercises |
(85,033 | ) | | |||||
Other, net |
43,918 | (1,591 | ) | |||||
|
|
|
|
|||||
Net cash provided by financing activities |
724,808 | 78,837 | ||||||
Effect of exchange rate changes on cash and cash equivalents |
(109,899 | ) | (52,672 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in cash and cash equivalents |
52,639 | 1,231,715 | ||||||
Cash and cash equivalents at beginning of period |
1,402,700 | 1,021,033 | ||||||
|
|
|
|
|||||
Cash and cash equivalents at end of period |
$ | 1,455,339 | $ | 2,252,748 | ||||
|
|
|
|
|||||
Supplemental cash flow information |
||||||||
Cash paid for interest |
106,444 | $ | 86,349 | |||||
Income tax payments, net |
87,708 | 42,428 |
Page 10 of 17
Expedia, Inc. (excluding eLong)
Trended Metrics
(All figures in millions)
| The following metrics are intended as a supplement to the financial statements found in this release and in our filings with the SEC. In the event of discrepancies between amounts in these tables and our historical financial statements, readers should rely on our filings with the SEC and financial statements in our most recent earnings release. |
| We intend to periodically review and refine the definition, methodology and appropriateness of each of our supplemental metrics. As a result, metrics are subject to removal and/or change, and such changes could be material. |
| These metrics do not include adjustments for one-time items, acquisitions, foreign exchange or other adjustments. |
| Some numbers may not add due to rounding. |
2013 | 2014 | 2015 | Y / Y | |||||||||||||||||||||||||||||||||||||
Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Growth | |||||||||||||||||||||||||||||||
Gross Bookings by Segment |
||||||||||||||||||||||||||||||||||||||||
Core OTA |
$ | 8,679 | $ | 7,493 | $ | 10,811 | $ | 11,174 | $ | 11,453 | $ | 9,431 | $ | 12,907 | $ | 13,692 | $ | 14,091 | 23 | % | ||||||||||||||||||||
Egencia |
1,125 | 1,104 | 1,310 | 1,328 | 1,285 | 1,226 | 1,366 | 1,371 | 1,302 | 1 | % | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total |
$ | 9,803 | $ | 8,597 | $ | 12,121 | $ | 12,502 | $ | 12,738 | $ | 10,657 | $ | 14,273 | $ | 15,063 | $ | 15,393 | 21 | % | ||||||||||||||||||||
Gross Bookings by Geography |
||||||||||||||||||||||||||||||||||||||||
Domestic |
$ | 5,828 | $ | 4,982 | $ | 7,427 | $ | 7,889 | $ | 7,861 | $ | 6,432 | $ | 8,887 | $ | 9,301 | $ | 9,584 | 22 | % | ||||||||||||||||||||
International |
3,976 | 3,615 | 4,693 | 4,613 | 4,877 | 4,226 | 5,386 | 5,762 | 5,809 | 19 | % | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total |
$ | 9,803 | $ | 8,597 | $ | 12,121 | $ | 12,502 | $ | 12,738 | $ | 10,657 | $ | 14,273 | $ | 15,063 | $ | 15,393 | 21 | % | ||||||||||||||||||||
Gross Bookings by Agency/Merchant |
||||||||||||||||||||||||||||||||||||||||
Agency |
$ | 5,090 | $ | 4,763 | $ | 6,848 | $ | 7,003 | $ | 6,894 | $ | 5,851 | $ | 7,737 | $ | 8,175 | $ | 8,206 | 19 | % | ||||||||||||||||||||
Merchant |
4,713 | 3,834 | 5,272 | 5,499 | 5,844 | 4,807 | 6,536 | 6,888 | 7,187 | 23 | % | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total |
$ | 9,803 | $ | 8,597 | $ | 12,121 | $ | 12,502 | $ | 12,738 | $ | 10,657 | $ | 14,273 | $ | 15,063 | $ | 15,393 | 21 | % | ||||||||||||||||||||
Revenue by Segment |
||||||||||||||||||||||||||||||||||||||||
Core OTA |
$ | 1,197 | $ | 970 | $ | 1,001 | $ | 1,268 | $ | 1,477 | $ | 1,159 | $ | 1,170 | $ | 1,463 | $ | 1,739 | 18 | % | ||||||||||||||||||||
trivago |
92 | 55 | 83 | 104 | 139 | 87 | 119 | 143 | 176 | 27 | % | |||||||||||||||||||||||||||||
Egencia |
85 | 96 | 100 | 103 | 97 | 100 | 98 | 101 | 94 | -3 | % | |||||||||||||||||||||||||||||
Intercompany Eliminations |
(21 | ) | (12 | ) | (24 | ) | (32 | ) | (49 | ) | (27 | ) | (47 | ) | (52 | ) | (71 | ) | -47 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total |
$ | 1,354 | $ | 1,109 | $ | 1,160 | $ | 1,443 | $ | 1,664 | $ | 1,318 | $ | 1,340 | $ | 1,654 | $ | 1,938 | 16 | % | ||||||||||||||||||||
Revenue by Geography |
||||||||||||||||||||||||||||||||||||||||
Domestic |
$ | 717 | $ | 585 | $ | 642 | $ | 789 | $ | 888 | $ | 728 | $ | 768 | $ | 910 | $ | 1,047 | 18 | % | ||||||||||||||||||||
International |
637 | 524 | 518 | 654 | 775 | 591 | 572 | 745 | 890 | 15 | % | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total |
$ | 1,354 | $ | 1,109 | $ | 1,160 | $ | 1,443 | $ | 1,664 | $ | 1,318 | $ | 1,340 | $ | 1,654 | $ | 1,938 | 16 | % | ||||||||||||||||||||
Revenue by Agency/Merchant/Advertising |
||||||||||||||||||||||||||||||||||||||||
Agency |
$ | 289 | $ | 258 | $ | 297 | $ | 357 | $ | 436 | $ | 346 | $ | 360 | $ | 452 | $ | 555 | 27 | % | ||||||||||||||||||||
Merchant |
958 | 769 | 766 | 965 | 1,090 | 858 | 858 | 1,060 | 1,222 | 12 | % | |||||||||||||||||||||||||||||
Advertising & Media |
107 | 82 | 97 | 120 | 138 | 114 | 121 | 143 | 161 | 17 | % | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total |
$ | 1,354 | $ | 1,109 | $ | 1,160 | $ | 1,443 | $ | 1,664 | $ | 1,318 | $ | 1,340 | $ | 1,654 | $ | 1,938 | 16 | % | ||||||||||||||||||||
Adjusted EBITDA by Segment |
||||||||||||||||||||||||||||||||||||||||
Core OTA |
$ | 419 | $ | 302 | $ | 183 | $ | 345 | $ | 501 | $ | 359 | $ | 219 | $ | 384 | $ | 589 | 18 | % | ||||||||||||||||||||
trivago |
6 | 18 | (1 | ) | (10 | ) | 0 | 14 | 5 | (9 | ) | (9 | ) | NM | ||||||||||||||||||||||||||
Egencia |
12 | 18 | 17 | 18 | 16 | 11 | 20 | 24 | 14 | -12 | % | |||||||||||||||||||||||||||||
Unallocated Overhead Costs |
(91 | ) | (92 | ) | (91 | ) | (101 | ) | (102 | ) | (107 | ) | (109 | ) | (118 | ) | (125 | ) | -23 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total |
$ | 345 | $ | 245 | $ | 108 | $ | 252 | $ | 415 | $ | 277 | $ | 135 | $ | 281 | $ | 469 | 13 | % | ||||||||||||||||||||
Worldwide Hotel (Merchant & Agency) |
||||||||||||||||||||||||||||||||||||||||
Room Nights |
36.4 | 29.7 | 28.9 | 37.6 | 45.1 | 37.9 | 38.3 | 50.6 | 61.5 | |||||||||||||||||||||||||||||||
Room Night Growth |
13 | % | 20 | % | 20 | % | 25 | % | 24 | % | 28 | % | 32 | % | 35 | % | 36 | % | ||||||||||||||||||||||
Domestic Room Night Growth |
12 | % | 18 | % | 20 | % | 24 | % | 24 | % | 25 | % | 23 | % | 24 | % | 25 | % | ||||||||||||||||||||||
International Room Night Growth |
14 | % | 22 | % | 19 | % | 25 | % | 25 | % | 32 | % | 46 | % | 50 | % | 50 | % | ||||||||||||||||||||||
ADR Growth |
4 | % | 3 | % | 3 | % | 4 | % | 4 | % | 0 | % | -3 | % | -6 | % | -6 | % | ||||||||||||||||||||||
Revenue per Night Growth |
-3 | % | -6 | % | -7 | % | -1 | % | -2 | % | -9 | % | -13 | % | -16 | % | -15 | % | ||||||||||||||||||||||
Revenue Growth |
10 | % | 13 | % | 12 | % | 23 | % | 22 | % | 16 | % | 15 | % | 14 | % | 17 | % | ||||||||||||||||||||||
Worldwide Air (Merchant & Agency) |
||||||||||||||||||||||||||||||||||||||||
Tickets Sold Growth |
5 | % | 11 | % | 32 | % | 30 | % | 34 | % | 26 | % | 17 | % | 26 | % | 31 | % | ||||||||||||||||||||||
Airfare Growth |
5 | % | 2 | % | 0 | % | 2 | % | -2 | % | -4 | % | -7 | % | -12 | % | -12 | % | ||||||||||||||||||||||
Revenue per Ticket Growth |
12 | % | 6 | % | -2 | % | -5 | % | -7 | % | -5 | % | -5 | % | -10 | % | -9 | % | ||||||||||||||||||||||
Revenue Growth |
17 | % | 17 | % | 29 | % | 23 | % | 24 | % | 20 | % | 12 | % | 14 | % | 19 | % |
Notes:
| The metrics above exclude eLong for all periods presented due to Expedias sale of its eLong stake on May 22, 2015. |
| The metrics above include trivago following the acquisition of a controlling interest on March 8, 2013, Travelocity following the strategic marketing agreement launched during the fourth quarter of 2013, as well as the subsequent acquisition of Travelocity on January 23, 2015, Wotif Group following the acquisition on November 13, 2014, AirAsia Expedia following Expedias purchase of an additional 25% equity interest in the former joint venture on March 10, 2015, and Orbitz Worldwide following the acquisition on September 17, 2015. |
| Advertising & Media Revenue includes revenue from trivago. All trivago revenue is classified as international. |
| Beginning in Q1 2014, Expedia moved to a new Enterprise Accounting System of Record, which caused immaterial changes to some of the metrics above due to remapping. |
Page 11 of 17
Notes & Definitions:
Gross Bookings Total retail value of transactions booked for both agency and merchant transactions, recorded at the time of booking. Bookings include the total price due for travel, including taxes, fees and other charges, and are generally reduced for cancellations and refunds.
Core OTA: Core Online Travel Agencies (Core OTA) segment provides a full range of travel and advertising services to our worldwide customers through a variety of brands including: Expedia.com and Hotels.com in the United States and localized Expedia.com and Hotels.com websites throughout the world, Expedia Affiliate Network, Hotwire.com, Travelocity, Venere, Wotif Group, AirAsia Expedia, CarRentals.com, and Classic Vacations. The results of Orbitz Worldwide, were included in their entirety within our Core OTA segment.
trivago: trivago segment generates advertising revenue primarily from sending referrals to online travel companies and travel service providers from its localized hotel metasearch websites.
Egencia: Egencia segment provides managed travel services to corporate customers worldwide.
eLong: eLong segment consists of Expedias majority ownership interest in eLong, Inc., prior to the sale by Expedia of its stake in eLong on May 22, 2015.
Corporate Includes unallocated corporate expenses.
Worldwide Hotel metrics Reported on a stayed basis and includes both merchant and agency model hotel stays.
Worldwide Air metrics Reported on a booked basis and includes both merchant and agency air bookings.
Definitions of Non-GAAP Measures
Expedia, Inc. reports Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, Free Cash Flow and Adjusted Expenses (non-GAAP cost of revenue, non-GAAP selling and marketing, non-GAAP technology and content and non-GAAP general and administrative), all of which are supplemental measures to GAAP and are defined by the SEC as non-GAAP financial measures. These measures are among the primary metrics by which management evaluates the performance of the business and on which internal budgets are based. Management believes that investors should have access to the same set of tools that management uses to analyze our results. These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP. Adjusted EBITDA, Adjusted Net Income, Adjusted EPS have certain limitations in that they do not take into account the impact of certain expenses to our consolidated statements of operations. We endeavor to compensate for the limitation of the non-GAAP measures presented by also providing the most directly comparable GAAP measures and descriptions of the reconciling items and adjustments to derive the non-GAAP measures. Adjusted EBITDA, Adjusted Net Income and Adjusted EPS also exclude certain items related to transactional tax matters, which may ultimately be settled in cash, and we urge investors to review the detailed disclosure regarding these matters in the Management Discussion and Analysis, Legal Proceedings sections, as well as the notes to the financial statements, included in the Companys annual and quarterly reports filed with the Securities and Exchange Commission. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The definition of Adjusted Net Income was revised in the fourth quarters of 2010, 2011 and 2012 and the definition for Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization was revised in the fourth quarter of 2012. The definition of Adjusted Expenses was revised in the first quarter of 2014 and in the second quarter 2015.
Adjusted EBITDA is defined as operating income / (loss) plus: (1) stock-based compensation expense, including compensation expense related to certain subsidiary equity plans; (2) acquisition-related impacts, including (i) amortization of intangible assets and goodwill and intangible asset impairment, (ii) gains (losses) recognized on changes in the value of contingent consideration arrangements; and (iii) upfront consideration paid to settle employee compensation plans of the acquiree; (3) certain infrequently occurring items, including restructuring; (4) items included in Legal reserves, occupancy tax and other, which includes reserves for potential settlement of issues related to transactional taxes (e.g. hotel and excise taxes), related to court decisions and final settlements, and charges incurred, if any, for monies that may be required to be paid in advance of litigation in certain transactional tax proceedings; (5) gains (losses) realized on revenue hedging activities that are included in other, net; and (6) depreciation.
The above items are excluded from our Adjusted EBITDA measure because these items are noncash in nature, or because the amount and timing of these items is unpredictable, not driven by core operating results and renders comparisons with prior periods and competitors less meaningful. We believe Adjusted EBITDA is a useful measure for analysts and investors to evaluate our future on-going performance as this measure allows a more meaningful comparison of our
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performance and projected cash earnings with our historical results from prior periods and to the results of our competitors. Moreover, our management uses this measure internally to evaluate the performance of our business as a whole and our individual business segments. In addition, we believe that by excluding certain items, such as stock-based compensation and acquisition-related impacts, Adjusted EBITDA corresponds more closely to the cash operating income generated from our business and allows investors to gain an understanding of the factors and trends affecting the ongoing cash earnings capabilities of our business, from which capital investments are made and debt is serviced.
Adjusted Net Income generally captures all items on the statements of operations that occur in normal course operations and have been, or ultimately will be, settled in cash and is defined as net income/(loss) attributable to Expedia, Inc. plus net of tax: (1) stock-based compensation expense, including compensation expense related to equity plans of certain subsidiaries and equity-method investments; (2) acquisition-related impacts, including (i) amortization of intangible assets, including as part of equity-method investments, and goodwill and intangible asset impairment, (ii) gains (losses) recognized on changes in the value of contingent consideration arrangements, and (iii) upfront consideration paid to settle employee compensation plans of the acquiree and (iv) gains (losses) recognized on noncontrolling investment basis adjustments when we acquire controlling interests; (3) currency gains or losses on U.S. dollar denominated cash or investments held by eLong; (4) certain other infrequently occurring items, including restructuring charges; (5) items included in Legal reserves, occupancy tax and other, which includes reserves for potential settlement of issues related to transactional taxes (e.g., hotel occupancy and excise taxes), related court decisions and final settlements, and charges incurred, if any, for monies that may be required to be paid in advance of litigation in certain transactional tax proceedings, including as part of equity method investments; (6) discontinued operations; (7) the noncontrolling interest impact of the aforementioned adjustment items and (8) unrealized gains (losses) on revenue hedging activities that are included in other, net. We believe Adjusted Net Income is useful to investors because it represents Expedia, Inc.s combined results, taking into account depreciation, which management believes is an ongoing cost of doing business, but excluding the impact of certain expenses, infrequently occurring items and items not directly tied to the core operations of our businesses.
Adjusted EPS is defined as Adjusted Net Income divided by adjusted weighted average shares outstanding, which include dilution from options per the treasury stock method and include all shares relating to RSUs in shares outstanding for Adjusted EPS. This differs from the GAAP method for including RSUs, which treats them on a treasury method basis. Shares outstanding for Adjusted EPS purposes are therefore higher than shares outstanding for GAAP EPS purposes. We believe Adjusted EPS is useful to investors because it represents, on a per share basis, Expedias consolidated results, taking into account depreciation, which we believe is an ongoing cost of doing business, as well as other items which are not allocated to the operating businesses such as interest expense, taxes, foreign exchange gains or losses, and minority interest, but excluding the effects of certain expenses not directly tied to the core operations of our businesses. Adjusted Net Income and Adjusted EPS have similar limitations as Adjusted EBITDA. In addition, Adjusted Net Income does not include all items that affect our net income / (loss) and net income / (loss) per share for the period. Therefore, we think it is important to evaluate these measures along with our consolidated statements of operations.
Free Cash Flow is defined as net cash flow provided by operating activities less capital expenditures. Management believes Free Cash Flow is useful to investors because it represents the operating cash flow that our operating businesses generate, less capital expenditures but before taking into account other cash movements that are not directly tied to the core operations of our businesses, such as financing activities, foreign exchange or certain investing activities. Free Cash Flow has certain limitations in that it does not represent the total increase or decrease in the cash balance for the period, nor does it represent the residual cash flow for discretionary expenditures. Therefore, it is important to evaluate Free Cash Flow along with the consolidated statements of cash flows.
Adjusted Expenses (cost of revenue, selling and marketing, technology and content and general and administrative expenses) exclude stock-based compensation related to expenses for stock options, restricted stock units and other equity compensation under applicable stock-based compensation accounting standards as well as depreciation expense. Expedia, Inc. excludes stock-based compensation and depreciation expenses from these measures primarily because they are non-cash expenses that we do not believe are necessarily reflective of our ongoing cash operating expenses and cash operating income. Moreover, because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use when adopting applicable stock-based compensation accounting standards, management believes that providing non-GAAP financial measures that exclude stock-based compensation allows investors to make meaningful comparisons between our recurring core business operating results and those of other
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companies, as well as providing management with an important tool for financial operational decision making and for evaluating our own recurring core business operating results over different periods of time. Exclusion of depreciation expense also allows the year-over-year comparison of expenses on a basis that is consistent with the year-over-year comparison of Adjusted EBITDA. There are certain limitations in using financial measures that do not take into account stock-based compensation and depreciation expense, including the fact that stock-based compensation is a recurring expense and a valued part of employees compensation and depreciation expense is also a recurring expense and is a direct result of previous capital investment decisions made by management. Therefore it is important to evaluate both our GAAP and non-GAAP measures. See the Notes to the Consolidated Statements of Operations for stock-based compensation and depreciation expense by line item. In addition, in the second quarter of 2015, we included an adjustment to remove operating expenses related to eLong due to our sale on May 22, 2015.
Tabular Reconciliations for Non-GAAP Measures
Adjusted EBITDA (Adjusted Earnings Before Interest, Taxes, Depreciation & Amortization)
Three months ended September 30, |
Nine months ended September 30, |
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2015 | 2014 | 2015 | 2014 | |||||||||||||
(In thousands) | ||||||||||||||||
Adjusted EBITDA |
$ | 469,054 | $ | 409,070 | $ | 823,166 | $ | 775,097 | ||||||||
Depreciation |
(87,156 | ) | (67,469 | ) | (240,878 | ) | (195,161 | ) | ||||||||
Amortization of intangible assets |
(31,400 | ) | (18,519 | ) | (83,322 | ) | (55,275 | ) | ||||||||
Stock-based compensation |
(63,656 | ) | (22,304 | ) | (134,036 | ) | (68,139 | ) | ||||||||
Legal reserves, occupancy tax and other |
114,550 | (3,888 | ) | 106,511 | (38,843 | ) | ||||||||||
Restructuring and related reorganization charges |
(42,449 | ) | | (52,771 | ) | | ||||||||||
Realized (gain) loss on revenue hedges |
(13,945 | ) | (54 | ) | (34,581 | ) | 5,379 | |||||||||
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Operating income |
344,998 | 296,836 | 384,089 | 423,058 | ||||||||||||
Interest expense, net |
(29,094 | ) | (17,483 | ) | (75,365 | ) | (48,927 | ) | ||||||||
Gain on sale of business |
| | 508,810 | | ||||||||||||
Other, net |
26,283 | 10,172 | 114,361 | 2,514 | ||||||||||||
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Income before income taxes |
342,187 | 289,525 | 931,895 | 376,645 | ||||||||||||
Provision for income taxes |
(65,950 | ) | (38,904 | ) | (196,261 | ) | (59,974 | ) | ||||||||
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Net income |
276,237 | 250,621 | 735,634 | 316,671 | ||||||||||||
Net loss attributable to noncontrolling interests |
6,979 | 6,438 | 41,369 | 15,457 | ||||||||||||
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Net income attributable to Expedia, Inc. |
$ | 283,216 | $ | 257,059 | $ | 777,003 | $ | 332,128 | ||||||||
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Adjusted Net Income (Loss) & Adjusted EPS
Three months ended September 30, |
Nine months ended September 30, |
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2015 | 2014 | 2015 | 2014 | |||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Net income attributable to Expedia, Inc. |
$ | 283,216 | $ | 257,059 | $ | 777,003 | $ | 332,128 | ||||||||
Amortization of intangible assets |
31,400 | 18,519 | 83,322 | 55,275 | ||||||||||||
Stock-based compensation |
63,656 | 22,304 | 134,036 | 68,139 | ||||||||||||
Legal reserves, occupancy tax and other |
(114,550 | ) | 3,888 | (106,511 | ) | 38,843 | ||||||||||
Restructuring and related reorganization charges |
42,449 | | 52,771 | | ||||||||||||
Foreign currency (gain) loss on U.S. dollar cash balances held by eLong |
| 272 | (13 | ) | (16 | ) | ||||||||||
Unrealized (gain) loss on revenue hedges |
(13,912 | ) | (14,914 | ) | (3,191 | ) | (9,835 | ) | ||||||||
Stock-based compensation as part of equity method investments |
| 74 | | 219 | ||||||||||||
Gain on sale of asset |
| | (11,501 | ) | | |||||||||||
Gain on sale of business |
| | (508,810 | ) | ||||||||||||
Noncontrolling interest basis adjustment |
| | (77,400 | ) | | |||||||||||
Provision for income taxes |
(8,721 | ) | (26,454 | ) | 72,399 | (55,612 | ) | |||||||||
Noncontrolling interests |
(7,211 | ) | (4,738 | ) | (21,388 | ) | (14,015 | ) | ||||||||
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Adjusted Net Income |
$ | 276,327 | $ | 256,010 | $ | 390,717 | $ | 415,126 | ||||||||
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GAAP diluted weighted average shares outstanding |
133,417 | 132,274 | 132,602 | 133,683 | ||||||||||||
Additional dilutive securities |
170 | 230 | 201 | 246 | ||||||||||||
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Adjusted weighted average shares outstanding |
133,587 | 132,504 | 132,803 | 133,929 | ||||||||||||
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Diluted earnings per share |
$ | 2.12 | $ | 1.94 | $ | 5.86 | $ | 2.48 | ||||||||
Adjusted earnings per share |
2.07 | 1.93 | 2.94 | 3.10 |
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Free Cash Flow
Three months ended September 30, |
Nine months ended September 30, |
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2015 | 2014 | 2015 | 2014 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Net cash provided by operating activities |
$ | (120,505 | ) | $ | 101,860 | $ | 1,541,526 | $ | 1,566,802 | |||||||
Less: capital expenditures |
(156,712 | ) | (82,465 | ) | (625,439 | ) | (239,678 | ) | ||||||||
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Free cash flow |
$ | (277,217 | ) | $ | 19,395 | $ | 916,087 | $ | 1,327,124 | |||||||
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Adjusted Expenses (cost of revenue, selling and marketing, technology and content and general and administrative expenses)
Three months ended September 30, |
Nine months ended September 30, |
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2015 | 2014 | 2015 | 2014 | |||||||||||||
(in thousands) | ||||||||||||||||
Cost of revenue |
$ | 328,066 | $ | 299,708 | $ | 971,066 | $ | 894,828 | ||||||||
Less: stock-based compensation |
(1,112 | ) | (1,045 | ) | (3,586 | ) | (3,190 | ) | ||||||||
Less: depreciation |
(11,014 | ) | (9,217 | ) | (32,698 | ) | (25,554 | ) | ||||||||
Less: eLong(1) |
| (13,322 | ) | (34,358 | ) | (33,204 | ) | |||||||||
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Adjusted cost of revenue |
$ | 315,940 | $ | 276,124 | $ | 900,424 | $ | 832,880 | ||||||||
Selling and marketing expense |
$ | 943,289 | $ | 815,800 | $ | 2,592,150 | $ | 2,184,115 | ||||||||
Less: stock-based compensation |
(10,558 | ) | (3,643 | ) | (23,890 | ) | (13,798 | ) | ||||||||
Less: depreciation |
(2,914 | ) | (2,086 | ) | (7,419 | ) | (5,757 | ) | ||||||||
Less: eLong(1) |
| (34,406 | ) | (54,080 | ) | (87,337 | ) | |||||||||
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Adjusted selling and marketing expense |
$ | 929,817 | $ | 775,665 | $ | 2,506,761 | $ | 2,077,223 | ||||||||
Technology and content expense |
$ | 202,703 | $ | 172,754 | $ | 579,674 | $ | 504,804 | ||||||||
Less: stock-based compensation |
(7,062 | ) | (7,374 | ) | (19,405 | ) | (17,892 | ) | ||||||||
Less: depreciation |
(70,255 | ) | (54,129 | ) | (191,780 | ) | (157,890 | ) | ||||||||
Less: eLong(1) |
| (4,672 | ) | (10,072 | ) | (12,391 | ) | |||||||||
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Adjusted technology and content expense |
$ | 125,386 | $ | 106,579 | $ | 358,417 | $ | 316,631 | ||||||||
General and administrative expense |
$ | 130,168 | $ | 104,999 | $ | 387,959 | $ | 306,584 | ||||||||
Less: stock-based compensation |
(15,694 | ) | (10,242 | ) | (57,925 | ) | (33,259 | ) | ||||||||
Less: depreciation |
(2,973 | ) | (2,037 | ) | (8,981 | ) | (5,960 | ) | ||||||||
Less: eLong(1) |
| (2,512 | ) | (5,399 | ) | (7,410 | ) | |||||||||
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Adjusted general and administrative expense |
$ | 111,501 | $ | 90,208 | $ | 315,654 | $ | 259,955 |
(1) | eLong amount presented without stock-based compensation and depreciation as those are included within the consoldiated totals above. |
Conference Call
Expedia, Inc. will webcast a conference call to discuss third quarter 2015 financial results and certain forward-looking information on Thursday, October 29, 2015 at 1:30 p.m. Pacific Time (PT). The webcast will be open to the public and available via http://ir.expediainc.com. Expedia, Inc. expects to maintain access to the webcast on the IR website for approximately three months subsequent to the initial broadcast.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance. These forward-looking statements are based on managements expectations as of October 29, 2015 and assumptions which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. The use of words such as intends and expects, among others, generally identify forward-looking statements. However, these words are not the exclusive means of identifying such statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements and may include statements relating to future revenues, expenses, margins, profitability, net income / (loss), earnings per share and other measures of results of operations and the prospects for future growth of Expedia, Inc.s business.
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Actual results and the timing and outcome of events may differ materially from those expressed or implied in the forward-looking statements for a variety of reasons, including, among others:
| an increasingly competitive global environment; |
| our failure to modify to our current business models and practices or adopt new business models or practices in order to compete in a dynamic industry; |
| changes in search engine algorithms and dynamics or other traffic-generating arrangements; |
| our failure to maintain and expand our relationships and contractual agreements with travel suppliers or travel distribution partners; |
| our failure to maintain and expand our brand awareness or increased costs to do so; |
| our failure to adapt to technological developments or industry trends; |
| risks related to our acquisitions, investments or significant commercial arrangements; |
| risks relating to our operations in international markets, including China; |
| our failure to comply with current laws, rules and regulations, or changes to such laws, rules and regulations; |
| adverse application of existing tax or unclaimed property laws, rules or regulations or implementation; |
| unfavorable amendment to existing tax laws, rules or regulations or enactment of new unfavorable laws, rules or regulations; |
| adverse outcomes in legal proceedings to which we are a party; |
| declines or disruptions in the travel industry; |
| risks related to payments and fraud; |
| fluctuations in foreign exchange rates; |
| volatility in our stock price; |
| liquidity constraints or our inability to access the capital markets when necessary; |
| interruption, security breached or lack of redundancy in our information systems; |
| our failure to comply with governmental regulation and other legal obligations related to our processing, storage, use and disclosure of personal information, payment card information and other consumer data; |
| our failure to retain or motivate key personnel or hire, retain and motivate qualified personnel, including senior management; |
| changes in control of the Company; |
| management and director conflicts of interest; |
| risks related to actions taken by our business partners and third party service providers, including failure to comply with our requirements or standards or the requirements or standards of governmental authorities, or any cessation of their operations; |
| risks related to the failure of counterparties to perform on financial obligations; |
| risks related to our long-term indebtedness; |
| our failure to effectively operate our businesses due to restrictive covenants in the agreements governing our indebtedness; |
| our failure to protect our intellectual property from copying or use by others, including competitors; as well as other risks detailed in our public filings with the SEC, including our quarterly report on Form 10-Q for the quarter ended September 30, 2015. Except as required by law, we undertake no obligation to update any forward-looking or other statements in this release, whether as a result of new information, future events or otherwise. |
About Expedia, Inc.
Expedia, Inc. (NASDAQ: EXPE) is one of the worlds leading travel companies, with an extensive brand portfolio that includes leading online travel brands, such as:
| Expedia.com®, a leading full service online travel agency with localized sites in 32 countries |
| Hotels.com®, the hotel specialist that offers Hotels.com® Rewards and Secret Prices through its mobile booking apps and localized websites in more than 65 countries |
| Hotwire®, a leading discount travel site that offers Hot Rate® Hotels, Hot Rate® Cars and Hot Rate® Airfares, as well as vacation packages |
| Orbitz Worldwide, a global travel portfolio including Orbitz, ebookers, HotelClub and CheapTickets, brands and business-to-business offerings, including Orbitz Partner Network and Orbitz for Business |
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| Travelocity®, a pioneer in online travel and a leading online travel agency in the US and Canada |
| Egencia®, a leading corporate travel management company |
| Venere.com, an online hotel reservation specialist in Europe |
| trivago®, a leading online hotel search with sites in 52 countries worldwide |
| Wotif Group, a leading portfolio of travel brands operating in the Australia/New Zealand region, including Wotif.com®, Wotif.co.nz, lastminute.com.au®, lastminute.com.nz and travel.com.au® |
| Expedia Local Expert®, a provider of online and in-market concierge services, activities, experiences and ground transportation in hundreds of destinations worldwide |
| Classic Vacations®, a top luxury travel specialist |
| Expedia® CruiseShipCenters®, a provider of exceptional value and expert advice for travelers booking cruises and vacations through its network of 200 retail travel agency franchises across North America |
| CarRentals.com, the premier car rental booking company on the web |
The company delivers consumers value in leisure and business travel, drives incremental demand and direct bookings to travel suppliers and provides advertisers the opportunity to reach a highly valuable audience of in-market consumers through Expedia® Media Solutions. Expedia also powers bookings for thousands of affiliates, including some of the worlds leading airlines, top consumer brands and high traffic websites through Expedia® Affiliate Network. For corporate and industry news and views, visit us at www.expediainc.com or follow us on Twitter @expediainc.
Trademarks and logos are the property of their respective owners. © 2015 Expedia, Inc. All rights reserved. CST: 2029030-50
Contacts | ||
Investor Relations | Communications | |
(425) 679-3759 | (425) 679-4317 | |
[email protected] | [email protected] |
Page 17 of 17
Investor PRESENTATION October 29, 2015 Exhibit 99.2
Safe Harbor Forward-Looking Statements. This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance. These forward-looking statements are based on management’s expectations as of October 29, 2015 and assumptions which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. The use of words such as "intends" and “expects,” among others, generally identifies forward-looking statements. However, these words are not the exclusive means of identifying such statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements and may include statements relating to future revenues, expenses, margins, profitability, net income / (loss), earnings per share and other measures of results of operations and the prospects for future growth of Expedia, Inc.’s business. Actual results and the timing and outcome of events may differ materially from those expressed or implied in the forward-looking statements for a variety of reasons, including, among others: an increasingly competitive global environment; modifications to our current business models and practices or our adoption of new business models or practices in order to compete; changes in search engine algorithms and dynamics or other traffic-generating arrangements; declines or disruptions in the travel industry; our failure to maintain and expand our relationships and contractual agreements with travel suppliers or travel distribution partners; our failure to maintain and expand our brand awareness or increased costs to do so; our failure to adapt to technological developments or industry trends; risks relating to our operations in international markets, including China; adverse application of existing tax or unclaimed property laws, rules or regulations or implementation of new unfavorable laws, rules or regulations; adverse outcomes in legal proceedings to which we are a party; our failure to comply with current laws, rules and regulations, or changes to such laws, rules and regulations; determinations by U.S. and foreign tax authorities regarding our worldwide tax provision for income taxes; payments related risks, including credit card fraud; volatility in our stock price; liquidity constraints or our inability to access the capital markets when necessary; interruption or lack of redundancy in our information systems; failure to retain or motivate key personnel or hire, retain and motivate qualified personnel, including senior management; changes in control of the Company; management and director conflicts of interest; risks related to actions taken by our business partners and third party service providers, including failure to comply with our requirements or standards or the requirements or standards of governmental authorities, or any cessation of their operations; risks related to the failure of counterparties to perform on financial obligations; fluctuations in foreign exchange rates; our failure to comply with governmental regulation and other legal obligations related to our processing, storage, use and disclosure of personal data, and liabilities related to security breaches; risks related to our acquisitions, investments or significant commercial arrangements; risks related to our long-term indebtedness; our failure to effectively operate our businesses due to restrictive covenants in the agreements governing our indebtedness; our failure to protect our intellectual property from copying or use by others, including competitors; and other risks detailed in Expedia, Inc.’s public filings with the SEC, including our quarterly report on Form 10-Q for the quarter ended September 30, 2015. Except as required by law, we undertake no obligation to update any forward-looking or other statements in this presentation, whether as a result of new information, future events or otherwise. Non-GAAP Measures. Reconciliations to GAAP measures of non-GAAP measures included in this presentation are included in the Appendix. These measures are intended to supplement, not substitute for, GAAP comparable measures. Investors are urged to consider carefully the comparable GAAP measures and reconciliations. Industry / Market Data. Industry and market data used in this presentation have been obtained from industry publications and sources as well as from research reports prepared for other purposes. We have not independently verified the data obtained from these sources and cannot assure you of the data’s accuracy or completeness. Trademarks & Logos. Trademarks and logos are the property of their respective owners. © 2015 Expedia, Inc. All rights reserved. CST: 2029030-50 July 2014
Important Note In May 2015, Expedia sold its 62.4% equity stake in eLong for approximately $671 million to several purchasers including Ctrip. Expedia and Ctrip also reached agreement on cooperation for certain travel products in specified geographic markets. Unless otherwise noted, due to Expedia’s sale of its eLong stake, all discussion in these slides refers to results for Expedia, Inc. excluding eLong. July 2014
Investment Highlights A Leading Global Player in ~$1.3 Trillion Travel Market Significant Growth Opportunities Across Geographies Consistently Strong Financial Execution Technology Platform Innovation Driving Higher Conversion Success in Growing Mobile Channels A Growth Company High Growth Advertising & Media Business Rapid Expansion in Highly Fragmented Hotel Industry Supported by Multi-Product Offering Solid Track Record of Disciplined Capital Allocation
One of the Largest Travel Companies in the World VOLUME AND GLOBAL REACH MULTI-CHANNEL, MULTI-PLATFORM GLOBAL MARKETPLACE Mutually Beneficial Supply Agreements Value to Travelers Scale Enables Virtuous Circle Diverse Demand: Geography AND Travel Type SUPPLY Depth and Breadth of ~271,000 Hotels in 200+ Countries 400+ Airlines 6.8 Million Packages Volume and Diversity of Global Travel DEMAND 7 Billion+ Flight Searches Travelers in ~75 Countries Corporate and Leisure Travel; Online and Offline
Established Brands With Global Reach Trusted Brands Brand Recognition in Every Established Market Solid Foothold in Emerging Markets 89 Sites in 68 Countries A Leading Hotel Specialist Globally 33 Sites in 32 Countries A Leading Full-Service Online Travel Agency Sites in 52 Countries A Leading Hotel Metasearch Company Presence in 65 Countries A Leader in Global Corporate Travel
Diversifying Revenue Mix Reduces Risk and Positions the Business for Growth 2005 Revenue1 Revenue TTM 2 9/30/15 PRODUCT Hotels 63% Hotels 69% Car, Cruise & Other 14% Air 8% Air 22% GEOGRAPHY International 21% Domestic 79% International 45% Domestic 55% Ad & Media 9% Ad & Media 2% Car, Cruise & Other 13% 1 2005 Geography excludes eLong; Product includes eLong 2 Trailing Twelve Months
Expedia 6% Other Expedia 6% Other Expedia 18% Other Expedia 5% Other Online Travel Segment 56% 23% 44% 32% 43% of Total Travel Market Global Leader and Significant Headroom for Further Growth Sources: Phocuswright estimates and Expedia data; travel market size estimates based on Phocuswright data for full year 2015. Note: Expedia’s share of travel market defined by TTM gross bookings as of September 30, 2015. Beginning in Q4 2014, total travel market definition was expanded to include Canada, Eastern Europe and Middle East. Expedia Share: United States + . Canada LATIN America EMEA Expedia 10% Other 2015 Total Travel Market Expedia 1% Expedia 2% Expedia 2% Other Other $374B $92B $476B $367B Total Travel Market ~$1.3T ASIA PACIFIC
Expedia, Inc. Has Scale in Hotels … Rapidly Expanding in Fragmented Hotel Segment of the Travel Industry 1Other includes Car, Advertising, Destination Services, Insurance, Cruise, Agency Packages, and Other 2Sources: Smith Travel Research and Expedia data 3Hotel data for TripAdvisor and Booking.com obtained from respective company websites. Booking.com number includes ~375,000 vacation rental properties. … And Significant Room for Additional Growth Hotels 70% $6.3B TTM 9/30/15 Revenues ~271k Hotels in 200+ Countries ~Only 8% Share of Rooms Booked in the US2 Number of Hotels3 Global Team Accelerating Pace of Hotel Acquisition
CENTRALIZED Customer Operations Technology CENTRALIZED Transactional Infrastructure: Financials / Order Management / Inventory Management Have Completed Significant Technology Investments That Fortify the Business CUSTOMIZED Front-End Technology for Rapid Innovation and Powerful Analytics … Improving Conversion
Opening Up Significant Opportunities in Travel Industry Leading Mobile Initiatives Drive Traffic and Revenue Expedia PartnerCentral App for Hoteliers Expedia, Inc. Leads the Way in Mobile Innovation The World Is Changing … PC-Connected Users 24 x 7 Mobile Users Exclusive Expedia App for Samsung More than 50% of Mobile Bookings2 Completed within Two Days of Travel / Stay More than One in Four Room Nights1 Booked on a Mobile Device The new Samsung app includes Galaxy-exclusive hotel pricing, a dedicated customer support line and a curated travel-discovery experience for users Helping hoteliers manage their Expedia business and solve everyday problems via Apple and Android mobile devices 1Based on global mobile bookings in Q3 2015. 2Based on Brand Expedia global bookings on a mobile phone and Hotels.com global bookings on a mobile device.
Significant Acceleration in the Advertising and Media Business Advertising & Media revenue $ Millions ’12-’14 CAGR : 94.6% 3Q15 TTM YOY Growth: 23.3% Note: Reported numbers are net of any intercompany revenue 1 Controlling interest in trivago GmbH (”trivago”) acquired in March 2013 #1 hotel metasearch in Europe
Consistent Financial Execution Adjusted ebitda1 ROOM NIGHTS $ Millions REVENUE $ Billions 1 Non-GAAP measure. See Appendix A for Non-GAAP to GAAP Reconciliation ’12-’14 CAGR: 19.5% 3Q15 TTM YOY Growth: 16.3% ’12-’14 CAGR: 14.3% 3Q15 TTM YOY Growth: 13.9% ’12-’14 CAGR: 20.3% 3Q15 TTM YOY Growth: 33.3% Millions GROSS BOOKINGS $ Billions
Solid Track Record of Disciplined Capital Allocation Free cash flow1 1 Non-GAAP measure, including eLong. See Appendix for Non-GAAP to GAAP Reconciliation. 2 Expedia acquired Orbitz Worldwide on September 17. 3 Expedia acquired an additional 25% equity interest in the former joint venture in March 2015. 4 On May 22, Expedia sold its 62.4% ownership in eLong to a group of purchasers based in China $ Millions ’09-’14 CAGR: 16% Share repurchases and Dividends Key Transactions 2011 | 2012 | 2013 | 2014 | 2015 $ in Millions 2 3 4
Orbitz Worldwide Impact to Adjusted EBITDA Q3 2015 $ millions Q3 2015 Y/Y Growth Expedia (excluding eLong) Adjusted EBITDA* 469 13% Orbitz Worldwide deal and integration costs (7) n/a Negative impact of consolidating the Orbitz Worldwide financial statements (10) n/a Total impact from Orbitz Worldwide (17) n/a Expedia (excluding eLong) Adjusted EBITDA excluding the impacts of Orbitz Worldwide* 486 17% Orbitz Worldwide had a negative impact on adjusted EBITDA in Q3 2015, primarily as a result of the purchase accounting impacts, which when taken with approximately $7 million of deal and integration costs, resulted in a negative impact of approximately $17 million in adjusted EBITDA for the quarter. 2015 Guidance: Full Year 2015 Expedia (excluding eLong) Adjusted EBITDA growth of 12%-15%. Excluding eLong and all impacts of the Orbitz transaction in Q3 and Q4, we are forecasting full year 2015 Adjusted EBITDA growth to come in near the high end of the 12%-15% guidance range. Excluding eLong and including all impacts of Orbitz for both Q3 and Q4, we expect full year adjusted EBITDA growth to be near the lower end of the 12%-15% guidance range. We expect a full year negative Adjusted EBITDA impact from Orbitz of over $32 million, with $15 million coming in the Q4 2015. * Non-GAAP measure. See Appendix A for Non-GAAP to GAAP Reconciliation.
Investment Highlights A Leading Global Player in ~$1.3 Trillion Travel Market Significant Growth Opportunities Across Geographies Consistently Strong Financial Execution Technology Platform Innovation Driving Higher Conversion Success in Growing Mobile Channels A Growth Company High Growth Advertising & Media Business Rapid Expansion in Highly Fragmented Hotel Industry Supported by Multi-Product Offering Solid Track Record of Disciplined Capital Allocation
APPENDICES
Non-GAAP Definitions Adjusted EBITDA is defined as operating income plus: (1) stock-based compensation expense, including compensation expense related to certain subsidiary equity plans; (2) acquisition-related impacts, including (i) amortization of intangible assets and goodwill and intangible asset impairment, (ii) gains (losses) recognized on changes in the value of contingent consideration arrangements; and (iii) upfront consideration paid to settle employee compensation plans of the acquiree; (3) certain infrequently occurring items, including restructuring; (4) items included in Legal reserves, occupancy tax and other, which includes reserves for potential settlement of issues related to transactional taxes (e.g. hotel and excise taxes), related to court decisions and final settlements, and charges incurred, if any, for monies that may be required to be paid in advance of litigation in certain transactional tax proceedings; (5) gains (losses) realized on revenue hedging activities that are included in other, net; and (6) depreciation. The above items are excluded from our Adjusted EBITDA measure because these items are noncash in nature, or because the amount and timing of these items is unpredictable, not driven by core operating results and renders comparisons with prior periods and competitors less meaningful. We believe Adjusted EBITDA is a useful measure for analysts and investors to evaluate our future on-going performance as this measure allows a more meaningful comparison of our performance and projected cash earnings with our historical results from prior periods and to the results of our competitors. Moreover, our management uses this measure internally to evaluate the performance of our business as a whole and our individual business segments. In addition, we believe that by excluding certain items, such as stock-based compensation and acquisition-related impacts, Adjusted EBITDA corresponds more closely to the cash operating income generated from our business and allows investors to gain an understanding of the factors and trends affecting the ongoing cash earnings capabilities of our business, from which capital investments are made and debt is serviced.
$ Millions 2012 2013 2014 TTM 3Q15 Adjusted EBITDA excluding eLong $804 $891 $1,051 $1,162 eLong Adjusted EBITDA (1) (12) (27) (89) Adjusted EBITDA $803 $879 $1,025 $1,073 Depreciation (164) (212) (266) (312) Amortization of Intangible Assets (32) (72) (80) (108) Legal Reserves , Occupancy Tax and Other (117) (78) (42) 104 Stock-Based Compensation (65) (130) (85) (151) Acquisition-related and Other - (10) - - Restructuring Charges - - (26) (78) Realized Loss (Gain) on Revenue Hedges 6 (11) (9) (49) Operating Income (Loss) $432 $366 $518 $479 Gain on Sale of Business - - - 509 Total Other Expense, Net (82) (65) (53) 32 Income (Loss) from Continuing Operations before Income Taxes 350 301 465 1,020 Provision for Income Taxes (47) (84) (92) (228) Income (Loss) from Continuing Operations 303 216 373 792 Discontinued Operations, Net of Taxes (23) - - - Net Income (Loss) 280 216 373 792 Net (Income) Loss Attributable to Noncontrolling Interests - 16 25 51 Net Income (Loss) Attributable to Expedia, Inc. $280 $233 $398 $843 Non-GAAP / GAAP Reconciliation: Adjusted EBITDA Note: Numbers may not sum due to rounding
Non-GAAP / GAAP Reconciliation: Free Cash Flow Note: Numbers may not sum due to rounding and include eLong $ Millions 2009 2010 2011 2012 2013 2014 TTM 3Q15 Cash provided by operations $574 $605 $826 $1,237 $763 $1,367 $1,342 Capital expenditures (79) (136) (208) (236) (309) (328) (714) Free cash flow $495 $469 $618 $1,001 $455 $1,039 $628
$ Millions 3Q15 Expedia (excluding eLong) Adjusted EBITDA excluding the Impacts of Orbitz Worldwide $486 Orbitz Worldwide Deal and Integration Costs (7) Negative Impact of Consolidating the Orbitz Worldwide Financial Statements (10) Expedia (excluding eLong) Adjusted EBITDA $469 eLong Adjusted EBITDA - Adjusted EBITDA $469 Depreciation (87) Amortization of Intangible Assets (31) Legal Reserves , Occupancy Tax and Other 115 Stock-Based Compensation (64) Restructuring Charges (42) Realized Loss (Gain) on Revenue Hedges (14) Operating Income (Loss) $345 Interest Expense, Net (29) Other Expense, Net 26 Income (Loss) from Continuing Operations before Income Taxes 342 Provision for Income Taxes (66) Income (Loss) from Continuing Operations 276 Net (Income) Loss Attributable to Noncontrolling Interests 7 Net Income (Loss) Attributable to Expedia, Inc. $283 Non-GAAP / GAAP Reconciliation: Adjusted EBITDA Note: Numbers may not sum due to rounding
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