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Form 10-Q Expedia Group, Inc. For: Sep 30

November 3, 2023 6:02 AM EDT
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
OR 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-37429
EXPEDIA GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 20-2705720
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer Identification No.)
1111 Expedia Group Way W.
Seattle, WA 98119
(Address of principal executive office) (Zip Code)
(206) 481-7200
(Registrant’s telephone number, including area code)
__________________________________ 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes         No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer   Accelerated filer 
Non-accelerated filer   Smaller reporting company 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
    Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ☐    No  
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common stock, $0.0001 par valueEXPEThe Nasdaq Global Select Market
The number of shares outstanding of each of the registrant’s classes of common stock as of October 20, 2023 was:
Common stock, $0.0001 par value per share 133,324,780 shares
Class B common stock, $0.0001 par value per share 5,523,452 shares


Expedia Group, Inc.
Form 10-Q
For the Quarter Ended September 30, 2023
Contents
 
Part I
Item 1
Item 2
Item 3
Item 4
Part II
Item 1
Item 1A
Item 2
Item 5
Item 6



Part I. Item 1. Consolidated Financial Statements
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,
 2023202220232022
Revenue$3,929 $3,619 $9,952 $9,049 
Costs and expenses:
        Cost of revenue (exclusive of depreciation and amortization shown separately below) (1)
412 455 1,233 1,245 
        Selling and marketing (1)
1,856 1,669 5,300 4,724 
        Technology and content (1)
340 310 1,001 864 
        General and administrative (1)
194 187 572 562 
Depreciation and amortization208 199 599 593 
Impairment of goodwill297  297  
Impairment of intangible assets15 52 15 81 
Legal reserves, occupancy tax and other  6 23 
Operating income607 747 929 957 
Other income (expense):
Interest income56 20 162 33 
Interest expense(62)(63)(184)(217)
Gain on debt extinguishment, net 73  49 
Other, net(157)(87)(60)(467)
Total other expense, net(163)(57)(82)(602)
Income before income taxes444 690 847 355 
Provision for income taxes(139)(214)(295)(187)
Net income305 476 552 168 
Net loss attributable to non-controlling interests120 6 113 7 
Net income attributable to Expedia Group, Inc.$425 $482 $665 $175 
Earnings per share attributable to Expedia Group, Inc. available to common stockholders:
Basic$2.98 $3.05 $4.51 $1.11 
Diluted2.87 2.98 4.37 1.08 
Shares used in computing earnings per share (000's):
Basic142,228 157,628 147,253 157,100 
Diluted147,748 161,829 152,172 162,495 
_______
(1) Includes stock-based compensation as follows:
Cost of revenue$3 $4 $10 $10 
Selling and marketing20 18 60 50 
Technology and content35 28 105 82 
General and administrative47 47 139 138 

See accompanying notes.
2

EXPEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)
(Unaudited)
 
 Three months ended
September 30,
Nine months ended
September 30,
 2023202220232022
Net income$305 $476 $552 $168 
Currency translation adjustments, net of tax(1)
(39)(96)(8)(212)
Comprehensive income (loss)266 380 544 (44)
Less: Comprehensive loss attributable to non-controlling interests(126)(25)(115)(51)
Comprehensive income attributable to Expedia Group, Inc.$392 $405 $659 $7 
 
(1)Currency translation adjustments include tax expense of $1 million and tax benefit $1 million for the three and nine months ended September 30, 2023 and tax expense of $4 million and $13 million for the three and nine months ended September 30, 2022 associated with net investment hedges.


See accompanying notes.
3

EXPEDIA GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except number of shares, which are reflected in thousands, and par value)
September 30,
2023
December 31,
2022
 (Unaudited) 
ASSETS
Current assets:
Cash and cash equivalents$5,056 $4,096 
Restricted cash and cash equivalents1,436 1,755 
Short-term investments 48 
Accounts receivable, net of allowance of $52 and $40
2,753 2,078 
Income taxes receivable84 40 
Prepaid expenses and other current assets765 774 
Total current assets10,094 8,791 
Property and equipment, net2,354 2,210 
Operating lease right-of-use assets330 363 
Long-term investments and other assets1,155 1,184 
Deferred income taxes595 661 
Intangible assets, net1,149 1,209 
Goodwill6,845 7,143 
TOTAL ASSETS$22,522 $21,561 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, merchant$1,887 $1,709 
Accounts payable, other1,130 947 
Deferred merchant bookings8,394 7,151 
Deferred revenue167 163 
Income taxes payable108 21 
Accrued expenses and other current liabilities874 787 
Total current liabilities12,560 10,778 
Long-term debt6,250 6,240 
Deferred income taxes34 52 
Operating lease liabilities288 312 
Other long-term liabilities464 451 
Commitments and contingencies
Stockholders’ equity:
Common stock: $.0001 par value; Authorized shares: 1,600,000
  
Shares issued: 280,957 and 278,264; Shares outstanding: 134,331 and 147,757
Class B common stock: $.0001 par value; Authorized shares: 400,000
  
Shares issued: 12,800 and 12,800; Shares outstanding: 5,523 and 5,523
Additional paid-in capital15,227 14,795 
Treasury stock - Common stock and Class B, at cost; Shares 153,903 and 137,783
(12,550)(10,869)
Retained earnings (deficit)(764)(1,409)
Accumulated other comprehensive income (loss)(240)(234)
Total Expedia Group, Inc. stockholders’ equity1,673 2,283 
Non-redeemable non-controlling interests1,253 1,445 
Total stockholders’ equity2,926 3,728 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$22,522 $21,561 

See accompanying notes.
4

EXPEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In millions, except share and per share data)
(Unaudited)
Three months ended September 30, 2022Common stockClass B
common stock
Additional
paid-in
capital
Treasury stock - Common and Class BRetained
earnings
(deficit)
Accumulated
other
comprehensive
income (loss)
Non-redeemable
non-controlling
interest
Total
 SharesAmountSharesAmountSharesAmount
Balance as of June 30, 2022276,967,093 $ 12,799,999 $ $14,549 132,219,690 $(10,331)$(2,068)$(240)$1,471 $3,381 
Net income (loss)482 (6)476 
Other comprehensive loss, net of taxes(77)(19)(96)
Proceeds from exercise of equity instruments and employee stock purchase plans639,564 — 11 11 
Treasury stock activity related to vesting of equity instruments172,498 (19)(19)
Common stock repurchases1,524,580 (153)(153)
Other changes in ownership of non-controlling interests8 (1)7 
Stock-based compensation expense106 106 
Balance as of September 30, 2022277,606,657 $ 12,799,999 $ $14,674 133,916,768 $(10,503)$(1,586)$(317)$1,445 $3,713 
Nine months ended September 30, 2022Common stockClass B
common stock
Additional
paid-in
capital
Treasury stock - Common and Class BRetained
earnings
(deficit)
Accumulated
other
comprehensive
income (loss)
Non-redeemable
non-controlling
interest
Total
 SharesAmountSharesAmountSharesAmount
Balance as of December 31, 2021274,660,725 $ 12,799,999 $ $14,229 131,812,764 $(10,262)$(1,761)$(149)$1,495 $3,552 
Net income (loss)175 (7)168 
Other comprehensive loss, net of taxes(168)(44)(212)
Proceeds from exercise of equity instruments and employee stock purchase plans2,945,932 — 125 125 
Treasury stock activity related to vesting of equity instruments579,424 (88)(88)
Common stock repurchases1,524,580 (153)(153)
Other changes in ownership of non-controlling interests13 1 14 
Stock-based compensation expense307 307 
Balance as of September 30, 2022277,606,657 $ 12,799,999 $ $14,674 133,916,768 $(10,503)$(1,586)$(317)$1,445 $3,713 














5


EXPEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In millions, except share and per share data)
(Unaudited)

Three months ended September 30, 2023Common stockClass B
common stock
Additional
paid-in
capital
Treasury stock - Common and Class BRetained
earnings
(deficit)
Accumulated
other
comprehensive
income (loss)
Non-redeemable
non-controlling
interest
Total
 SharesAmountSharesAmountSharesAmount
Balance as of June 30, 2023280,006,237 $ 12,799,999 $ $15,072 148,398,159 $(11,937)$(1,169)$(207)$1,457 $3,216 
Net income (loss)425 (120)305 
Other comprehensive loss, net of taxes(33)(6)(39)
Proceeds from exercise of equity instruments and employee stock purchase plans951,044 — 13 13 
Withholding taxes for stock options(1)(1)
Treasury stock activity related to vesting of equity instruments275,050 (30)(30)
Common stock repurchases5,229,924 (577)(577)
Other changes in ownership of non-controlling interests2 — (78)(76)
Stock-based compensation expense121 121 
Other20 (6)(20)(6)
Balance as of September 30, 2023280,957,281 $ 12,799,999 $ $15,227 153,903,133 $(12,550)$(764)$(240)$1,253 $2,926 

Nine months ended September 30, 2023Common stockClass B
common stock
Additional
paid-in
capital
Treasury stock - Common and Class BRetained
earnings
(deficit)
Accumulated
other
comprehensive
income (loss)
Non-redeemable
non-controlling
interest
Total
 SharesAmountSharesAmountSharesAmount
Balance as of December 31, 2022278,264,235 $ 12,799,999 $ $14,795 137,783,429 $(10,869)$(1,409)$(234)$1,445 $3,728 
Net income (loss)665 (113)552 
Other comprehensive loss, net of taxes(6)(2)(8)
Proceeds from exercise of equity instruments and employee stock purchase plans2,693,046 — 53 53 
Withholding taxes for stock options(5)(5)
Treasury stock activity related to vesting of equity instruments722,302 (75)(75)
Common stock repurchases15,397,402 (1,594)(1,594)
Other changes in ownership of non-controlling interests7 — (77)(70)
Stock-based compensation expense357 357 
Other20 (12)(20)(12)
Balance as of September 30, 2023280,957,281 $ 12,799,999 $ $15,227 153,903,133 $(12,550)$(764)$(240)$1,253 $2,926 


See accompanying notes.
6

EXPEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 Nine months ended
September 30,
 20232022
Operating activities:
Net income$552 $168 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment, including internal-use software and website development555 527 
Amortization of intangible assets44 66 
Impairment of goodwill and intangible assets312 81 
Amortization of stock-based compensation314 280 
Deferred income taxes49 106 
Foreign exchange loss on cash, restricted cash and short-term investments, net32 193 
Realized loss on foreign currency forwards, net35 170 
Loss on minority equity investments, net73 423 
Gain on debt extinguishment, net (49)
Other, net34 (26)
Changes in operating assets and liabilities:
Accounts receivable(704)(748)
Prepaid expenses and other assets43 31 
Accounts payable, merchant178 202 
Accounts payable, other, accrued expenses and other liabilities223 422 
Tax payable/receivable, net(55)6 
Deferred merchant bookings1,243 1,770 
Net cash provided by operating activities2,928 3,622 
Investing activities:
Capital expenditures, including internal-use software and website development(669)(485)
Purchases of investments (60)
Sales and maturities of investments49 200 
Proceeds from initial exchange of cross-currency interest rate swaps 337 
Payments for initial exchange of cross-currency interest rate swaps (337)
Other, net(15)(169)
Net cash used in investing activities(635)(514)
Financing activities:
Payment of long-term debt (2,141)
Debt extinguishment costs (22)
Purchases of treasury stock(1,669)(241)
Proceeds from exercise of equity awards and employee stock purchase plan53 125 
Other, net17 34 
Net cash used in financing activities(1,599)(2,245)
Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents(53)(302)
Net increase in cash, cash equivalents and restricted cash and cash equivalents641 561 
Cash, cash equivalents and restricted cash and cash equivalents at beginning of period5,851 5,805 
Cash, cash equivalents and restricted cash and cash equivalents at end of period$6,492 $6,366 
Supplemental cash flow information
Cash paid for interest$197 $254 
Income tax payments, net228 71 
See accompanying notes.
7

Notes to Consolidated Financial Statements
September 30, 2023
(Unaudited)
Note 1 – Basis of Presentation
Description of Business
Expedia Group, Inc. and its subsidiaries provide travel products and services to leisure and corporate travelers in the United States and abroad as well as various media and advertising offerings to travel and non-travel advertisers. These travel products and services are offered through a diversified portfolio of brands including: Brand Expedia®, Hotels.com®, Expedia® Partner Solutions, Vrbo®, trivago®, Orbitz®, Travelocity®, Hotwire®, Wotif®, ebookers®, CheapTickets®, Expedia Group™ Media Solutions, CarRentals.com™ and Expedia CruisesTM. In addition, many of these brands have related international points of sale. We refer to Expedia Group, Inc. and its subsidiaries collectively as “Expedia Group,” the “Company,” “us,” “we” and “our” in these consolidated financial statements.
Basis of Presentation
These accompanying financial statements present our results of operations, financial position and cash flows on a consolidated basis. The unaudited consolidated financial statements include Expedia Group, Inc., our wholly-owned subsidiaries, and entities we control, or in which we have a variable interest and are the primary beneficiary of expected cash profits or losses. We record our investments in entities that we do not control, but over which we have the ability to exercise significant influence, using the equity method or at fair value. We have eliminated significant intercompany transactions and accounts.
We have prepared the accompanying unaudited consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting. We have included all adjustments necessary for a fair presentation of the results of the interim period. These adjustments consist of normal recurring items. Our interim unaudited consolidated financial statements are not necessarily indicative of results that may be expected for any other interim period or for the full year. These interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2022 (“2022 Form 10-K”), previously filed with the Securities and Exchange Commission (“SEC”). 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.
Accounting Estimates
We use estimates and assumptions in the preparation of our interim unaudited consolidated financial statements in accordance with GAAP. Our estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of our interim unaudited consolidated financial statements. These estimates and assumptions also affect the reported amount of net income or loss during any period. Our actual financial results could differ significantly from these estimates. The significant estimates underlying our interim unaudited consolidated financial statements include revenue recognition; recoverability of current and long-lived assets, intangible assets and goodwill; income and transactional taxes, such as potential settlements related to occupancy and excise taxes; loss contingencies; deferred loyalty rewards; stock-based compensation; accounting for derivative instruments and provisions for credit losses, customer refunds and chargebacks.
Reclassifications
We have reclassified prior period financial statements to conform to the current period presentation.
Seasonality
We generally experience seasonal fluctuations in the demand for our travel services. For example, traditional leisure travel bookings are generally the highest in the first three quarters as travelers plan and book their spring, summer and winter holiday travel. The number of bookings typically decreases in the fourth quarter. Since revenue for most of our travel services, including merchant and agency hotel, is recognized as the travel takes place rather than when it is booked, revenue typically lags bookings by several weeks for our hotel business and can be several months or more for our alternative accommodations business. Historically, Vrbo has seen seasonally stronger bookings in the first quarter of the year, with the relevant stays occurring during the peak summer travel months. The seasonal revenue impact is exacerbated with respect to income by the nature of our variable cost of revenue and direct sales and marketing costs, which we typically realize in closer alignment to
8

Notes to Consolidated Financial Statements – (Continued)
 

booking volumes, and the more stable nature of our fixed costs. As a result on a consolidated basis, revenue and income are typically the lowest in the first quarter and highest in the third quarter.
Note 2 – Summary of Significant Accounting Policies
Recent Adopted Accounting Policies
As of January 1, 2023, we adopted the new guidance related to recognizing and measuring contract assets and contract liabilities from contracts with customers acquired in a business combination. The new guidance requires acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination as compared to current GAAP where an acquirer generally recognizes such items at fair value on the acquisition date. The adoption of this new guidance had no impact on our consolidated financial statements.
Significant Accounting Policies
Below are the significant accounting policies with interim disclosure requirements. For a comprehensive description of our accounting policies, refer to our 2022 Form 10-K.
Revenue
Prepaid Merchant Bookings. We classify payments made to suppliers in advance of Vrbo performance obligations as prepaid merchant bookings included within prepaid and other current assets. Prepaid merchant bookings was $396 million as of September 30, 2023 and $480 million as of December 31, 2022.
Deferred Merchant Bookings. We classify cash payments received in advance of our performance obligations as deferred merchant bookings. At December 31, 2022, $6.2 billion of advance cash payments was reported within deferred merchant bookings, $5.2 billion of which was recognized resulting in $856 million of revenue during the nine months ended September 30, 2023. At September 30, 2023, the related balance was $7.5 billion.
At December 31, 2022, $961 million of deferred loyalty rewards was reported within deferred merchant bookings, $775 million of which was recognized within revenue during the nine months ended September 30, 2023. At September 30, 2023, the related balance was $897 million.
Deferred Revenue. At December 31, 2022, $163 million was recorded as deferred revenue, $114 million of which was recognized as revenue during the nine months ended September 30, 2023. At September 30, 2023, the related balance was $167 million.
Practical Expedients and Exemptions. We have used the portfolio approach to account for our loyalty points as the rewards programs share similar characteristics within each program in relation to the value provided to the traveler and their breakage patterns. Using this portfolio approach is not expected to differ materially from applying the guidance to individual contracts. However, we will continue to assess and refine, if necessary, how a portfolio within each rewards program is defined.
We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.
Cash, Restricted Cash, and Cash Equivalents
Our cash and cash equivalents include cash and liquid financial instruments, including money market funds and term deposit investments, with maturities of three months or less when purchased. Restricted cash includes cash and cash equivalents that is restricted through legal contracts, regulations or our intention to use the cash for a specific purpose. Our restricted cash primarily relates to certain traveler deposits and to a lesser extent collateral for office leases. The following table reconciles cash, cash equivalents and restricted cash reported in our consolidated balance sheets to the total amount presented in our consolidated statements of cash flows:
September 30,
2023
December 31,
2022
(in millions)
Cash and cash equivalents$5,056 $4,096 
Restricted cash and cash equivalents1,436 1,755 
Total cash, cash equivalents and restricted cash and cash equivalents in the consolidated statements of cash flows$6,492 $5,851 
9

Notes to Consolidated Financial Statements – (Continued)
 

Accounts Receivable and Allowances
Accounts receivable are generally due within thirty days and are recorded net of an allowance for expected uncollectible amounts. We consider accounts outstanding longer than the contractual payment terms as past due. The risk characteristics we generally review when analyzing our accounts receivable pools primarily include the type of receivable (for example, credit card vs hotel collect), collection terms and historical or expected credit loss patterns. For each pool, we make estimates of expected credit losses for our allowance by considering a number of factors, including the length of time trade accounts receivable are past due, previous loss history continually updated for new collections data, the credit quality of our customers, current economic conditions, reasonable and supportable forecasts of future economic conditions and other factors that may affect our ability to collect from customers. The provision for estimated credit losses is recorded as cost of revenue in our consolidated statements of operations. During the nine months ended September 30, 2023, we recorded approximately $30 million of incremental allowance for expected uncollectible accounts, offset by $18 million of write-offs.
Note 3 – Fair Value Measurements
Financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2023 are classified using the fair value hierarchy in the table below:
TotalLevel 1Level 2
 (In millions)
Assets
Cash equivalents:
Money market funds$135 $135 $ 
Term deposits221  221 
Foreign treasury securities32 32  
Derivatives:
Cross-currency interest rate swaps20  20 
Investments:
Equity investments495 495  
Total assets$903 $662 $241 
Liabilities
Derivatives:
Foreign currency forward contracts$8 $ $8 
Financial assets measured at fair value on a recurring basis as of December 31, 2022 are classified using the fair value hierarchy in the table below:
TotalLevel 1Level 2
 (In millions)
Assets
Cash equivalents:
Money market funds$3 $3 $ 
Term deposits188  188 
Derivatives:
Foreign currency forward contracts15  15 
Cross-currency interest rate swaps21  21 
Investments:
Term deposits48  48 
Equity investments564 49 515 
Total assets$839 $52 $787 
We classify our cash equivalents and investments within Level 1 and Level 2 as we value our cash equivalents and investments using quoted market prices or alternative pricing sources and models utilizing market observable inputs. Valuation of the foreign currency forward contracts is based on foreign currency exchange rates in active markets, a Level 2 input.
10

Notes to Consolidated Financial Statements – (Continued)
 

Valuation of the cross-currency interest rate swaps is based on foreign currency exchange rates and the current interest rate curve, Level 2 inputs.
We hold term deposit investments with financial institutions. Term deposits with original maturities of less than three months are classified as cash equivalents. Those with remaining maturities of less than one year are classified within short-term investments and those with remaining maturities of greater than one year are classified within long-term investments and other assets.
As of September 30, 2023 and December 31, 2022, our cash and cash equivalents consisted primarily of term deposits and money market funds with maturities of three months or less and bank account balances.
We use foreign currency forward contracts to economically hedge certain merchant revenue exposures, foreign denominated liabilities related to certain of our loyalty programs and our other foreign currency-denominated operating liabilities. As of September 30, 2023, we were party to outstanding forward contracts hedging our liability exposures with a total net notional value of $4.1 billion. We had a net forward liability of $8 million ($27 million gross forward liability) as of September 30, 2023 recorded in accrued expenses and other current liabilities and a net forward asset of $15 million ($29 million gross forward asset) as of December 31, 2022 recorded in prepaid expenses and other current assets. We recorded $43 million and $60 million in net losses from foreign currency forward contracts during the three months ended September 30, 2023 and 2022, as well as $58 million and $144 million during the nine months ended September 30, 2023 and 2022.
On March 2, 2022, we entered into two fixed-to-fixed cross-currency interest rate swaps with an aggregate notional amount of €300 million and maturity dates of February 2026. The swaps were designated as net investment hedges of Euro assets with the objective to protect the U.S. dollar value of our net investments in the Euro foreign operations due to movements in foreign currency. The fair value of the cross-currency interest rate swaps was a $20 million asset as of September 30, 2023 and a $21 million asset as of December 31, 2022, recorded in long-term investments and other assets. The gain recognized in interest expense was $4 million during the nine months ended September 30, 2023 and 2022.
Our equity investments include our marketable equity investment in Despegar, a publicly traded company, which is included in long-term investments and other assets in our consolidated balance sheets. During the nine months ended September 30, 2023 and 2022, we recognized a gain of approximately $20 million and a loss of approximately $39 million within other, net in our consolidated statements of operations related to the fair value changes of this equity investment.
In addition, as of September 30, 2023, we have an equity investment related to our approximately 16% ownership interest in Global Business Travel Group, Inc. (“GBTG”), a publicly traded company. During the nine months ended September 30, 2023 and 2022, we recognized a loss of approximately $93 million and approximately $384 million within other, net in our consolidated statements of operations related to the fair value changes of this equity investment. In July 2023, GBTG simplified its organizational structure, and we exchanged our previously held GBT JerseyCo Ltd (“GBT”) shares for an equal number of GBTG shares with no change to our ownership interest. Our previous GBT shares were exchangeable on a 1:1 basis for GBTG shares, and as such, we valued our investment based on the GBTG’s share price. As a result of this exchange, as of the third quarter of 2023, we reclassified our investment from Level 2 to a Level 1 asset.
Assets Measured at Fair Value on a Non-recurring Basis
Our non-financial assets, such as goodwill, intangible assets and property and equipment, as well as equity method investments for which we have not elected the fair value option, are adjusted to fair value when an impairment charge is recognized or the underlying investment is sold. Such fair value measurements are based predominately on Level 3 inputs. We measure our minority investments that do not have readily determinable fair values at cost less impairment, adjusted by observable price changes with changes recorded within other, net on our consolidated statements of operations.
Goodwill. During the third quarter of 2023, we recognized a goodwill impairment charge of $297 million related to our trivago segment. This impairment charge resulted from trivago’s recent strategic shift which included intensifying its brand marketing investments with an anticipated decrease in profitability. As a result, we concluded that sufficient indicators existed to require us to perform an interim quantitative assessment of goodwill for our trivago segment as of September 30, 2023, in which we compared the fair value of the reporting unit to its carrying value. The fair value estimate for the reporting unit was based on a blended analysis of the present value of future discounted cash flows and market value approach, Level 3 inputs. The significant estimates used in the discounted cash flows model included our weighted average cost of capital, projected cash flows and the long-term rate of growth. Our assumptions were based on the actual historical performance of the reporting unit and considered the weakening of operating results, and implied risk premiums based on market prices of our equity and debt as of the assessment date. Our significant estimates in the market approach model included identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment and assessing comparable revenue and earnings multiples in estimating the fair value of the reporting unit. The excess of the reporting unit's carrying value over our estimate of the fair value was recorded as the goodwill impairment charge in the third quarter of 2023. As of September 30, 2023, our trivago segment had no goodwill remaining.
11

Notes to Consolidated Financial Statements – (Continued)
 

Intangible Assets. During the three and nine months ended September 30, 2023, we recognized intangible impairment charges of $15 million related to an indefinite-lived trade name within our trivago segment that resulted from a decrease in the estimated royalty rate. During the three and nine months ended September 30, 2022, we recognized intangible impairment charges of $52 million and $81 million related to an indefinite-lived trade name within our trivago segment that resulted from changes in the weighted average cost of capital. The indefinite-lived trade name asset, classified as Level 3 measurements, was valued using the relief-from-royalty method, which includes unobservable inputs, including projected revenues, royalty rates and weighted average cost of capital. As noted above, trivago is subject to its own reporting and filing requirements and, therefore, assesses goodwill at a lower level, which could result in possible differences in the ultimate amount or timing of impairments recognized.
Minority Investments without Readily Determinable Fair Values. As of both September 30, 2023 and December 31, 2022, the carrying values of our minority investments without readily determinable fair values totaled $330 million. During the three and nine months ended September 30, 2023 and 2022, we had no material gains or losses recognized related to these minority investments. As of September 30, 2023, total cumulative adjustments made to the initial cost basis of these investments included $2 million in unrealized upward adjustments and $105 million in unrealized downward adjustments (including impairments).
Note 4 – Debt
The following table sets forth our outstanding debt:
September 30,
2023
December 31,
2022
 (In millions)
6.25% senior notes due 2025
$1,039 $1,036 
5.0% senior notes due 2026
747 746 
0% convertible senior notes due 2026
992 989 
4.625% senior notes due 2027
746 745 
3.8% senior notes due 2028
995 995 
3.25% senior notes due 2030
1,238 1,237 
2.95% senior notes due 2031
493 492 
Long-term debt(1)
$6,250 $6,240 
_______________
(1)Net of applicable discounts and debt issuance costs.
Long-term Debt
Additional information about our $1 billion aggregate principal amount of unsecured 0% convertible senior notes due 2026 (the “Convertible Notes”) and our other outstanding senior notes (collectively the “Senior Notes”), see Note 7 Debt of the Notes to Consolidated Financial Statements in our 2022 Form 10-K.
All of our outstanding Senior Notes are senior unsecured obligations issued by Expedia Group and guaranteed by certain domestic Expedia Group subsidiaries. The Senior Notes rank equally in right of payment with all of our existing and future unsecured and unsubordinated obligations of Expedia Group and the guarantor subsidiaries. In addition, the Senior Notes include covenants that limit our ability to (i) create certain liens, (ii) enter into sale/leaseback transactions and (iii) merge or consolidate with or into another entity or transfer substantially all of our assets. The Senior Notes are redeemable in whole or in part, at the option of the holders thereof, upon the occurrence of certain change of control triggering events at a purchase price in cash equal to 101% of the principal plus accrued and unpaid interest. Accrued interest related to the Senior Notes was $48 million and $73 million as of September 30, 2023 and December 31, 2022.
Estimated Fair Value. The total estimated fair value of our Senior Notes was approximately $4.9 billion as of both September 30, 2023 and December 31, 2022. Additionally, the estimated fair value of the Convertible Notes was $873 million and $871 million as of September 30, 2023 and December 31, 2022. The fair value was determined based on quoted market prices in less active markets and is categorized according as Level 2 in the fair value hierarchy.
Credit Facility
As of September 30, 2023, Expedia Group maintained a $2.5 billion revolving credit facility that matures in April 2027. As of September 30, 2023 and December 31, 2022, we had no revolving credit facility borrowings outstanding. Loans under the revolving credit facility bear interest at a rate equal to an index rate plus a margin (a) in the case of term benchmark loans, ranging from 1.00% to 1.75% per annum, depending on Expedia Group’s credit ratings, and (b) in the case of base rate loans, ranging from 0.00% to 0.75% per annum, depending on Expedia Group’s credit ratings. A fee is payable quarterly in respect of
12

Notes to Consolidated Financial Statements – (Continued)
 

undrawn commitments under the revolving credit facility at a rate ranging from 0.10% to 0.25% per annum, depending on Expedia Group’s credit ratings. The terms of the revolving credit facility require Expedia Group to not exceed a specified maximum consolidated leverage ratio as of the end of each fiscal quarter.
The revolving credit facility has a $120 million letter of credit (“LOC”) sublimit, and the amount of LOCs issued under the facility reduced the credit amount available. Outstanding stand-by LOCs issued under the facility were $40 million and $38 million as of September 30, 2023 and December 31, 2022, respectively.
Note 5 – Stockholders’ Equity
Treasury Stock
As of September 30, 2023, the Company’s treasury stock was comprised of approximately 146.6 million common stock and 7.3 million Class B shares. As of December 31, 2022, the Company’s treasury stock was comprised of approximately 130.5 million shares of common stock and 7.3 million Class B shares.
Share Repurchase Programs. In December 2019, the Board of Directors and the Executive Committee of the Board, pursuant to a delegation of authority from the Board, authorized a program to repurchase up to 20 million shares of our common stock (the “2019 Share Repurchase Program”). During the nine months ended September 30, 2023, we repurchased, through open market transactions, 15.4 million shares under the 2019 Share Repurchase Program for a total cost of $1.6 billion, excluding transaction costs and excise tax due under the Inflation Reduction Act of 2022, representing an average repurchase price of $103.48 per share. As of September 30, 2023, 2.7 million shares remain authorized for repurchase under the 2019 Share Repurchase Program. Subsequent to the end of the third quarter of 2023, we repurchased an additional 1.7 million shares for a total cost of $173 million, excluding transaction costs, representing an average purchase price of $98.85 per share. In October 2023, the Executive Committee of the Board of Directors, pursuant to a delegation of authority from the Board, authorized an additional program to repurchase up to $5 billion of our common stock (“2023 Share Repurchase Program”). Our 2019 and 2023 Share Repurchase Programs do not have fixed expiration dates and do not obligate the Company to acquire any specific number of shares. Under the programs, shares may be repurchased in the open market or in privately negotiated transactions. The timing, manner, price and amount of any repurchases will be subject to the discretion of the Company and depend on a variety of factors, including the market price of Expedia Group’s common stock, general market and economic conditions, regulatory requirements and other business considerations.
Accumulated Other Comprehensive Income (Loss)
The balance of AOCI as of September 30, 2023 and December 31, 2022 was comprised of foreign currency translation adjustments. These translation adjustments include foreign currency transaction gains as of September 30, 2023 of $15 million ($20 million before tax) and $16 million ($21 million before tax) as of December 31, 2022 associated with our cross-currency interest rate swaps as described in Note 3 – Fair Value Measurements. Additionally, translation adjustments include foreign currency transaction losses of $7 million ($10 million before tax) as of both September 30, 2023 and December 31, 2022 associated with previously settled Euro-denominated notes that were designated as net investment hedges.
trivago Special Dividend
During September 2023, trivago announced the distribution of a one-time extraordinary dividend totaling approximately EUR 184 million (or approximately EUR 0.53 per share) later this year, including intercompany amounts to Expedia Group. Part of this extraordinary dividend in the amount of approximately EUR 168 million is subject to trivago shareholder approval and trivago’s shareholders approved this part of the extraordinary dividend on November 1, 2023. The payment date for the distribution on the common shares is anticipated to be on November 6, 2023, with a record date of November 3, 2023. As of September 30, 2023, we have accrued approximately $78 million related to the payment of dividends to third-parties during the fourth quarter.
13

Notes to Consolidated Financial Statements – (Continued)
 

Note 6 – Earnings Per Share
The following table presents our basic and diluted earnings per share:
 Three months ended
September 30,
Nine months ended
September 30,
 2023202220232022
 (In millions, except share and per share data)
Net income attributable to Expedia Group, Inc.$425 $482 $665 $175 
Earnings per share attributable to Expedia Group, Inc. available to common stockholders:
Basic$2.98 $3.05 $4.51 $1.11 
Diluted2.87 2.98 4.37 1.08 
Weighted average number of shares outstanding (000's):
Basic142,228 157,628 147,253 157,100 
Dilutive effect of:
    Convertible Notes3,921 3,921 3,921 3,921 
    Stock-based awards1,592 274 991 1,469 
    Other dilutive securities7 6 7 5 
Diluted147,748 161,829 152,172 162,495 
Basic earnings per share is calculated using our weighted-average outstanding common shares. The earnings per share amounts are the same for common stock and Class B common stock because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.
Diluted earnings per share is calculated using our weighted-average outstanding common shares including the dilutive effect of stock awards and common stock warrants as determined under the treasury stock method and of our Convertible Notes using the if-converted method. In periods when we recognize a net loss, we exclude the impact of outstanding stock awards and the potential share settlement impact related to our Convertible Notes from the diluted loss per share calculation as their inclusion would have an antidilutive effect. For the three and nine months ended September 30, 2023, approximately 5 million shares from outstanding stock awards have been excluded from the calculations of diluted earnings per share attributable to common stockholders because their effect would have been antidilutive. For the three and nine months ended September 30, 2022, approximately 9 million shares from outstanding stock awards were excluded.
Note 7 – Income Taxes
Our tax provision for interim periods is determined using an estimate of our annual effective tax rate. We record any changes affecting the estimated annual effective tax rate in the interim period in which the change occurs, including discrete items.
For the three months ended September 30, 2023, the effective tax rate was 31.2%, compared to 31.0% for the three months ended September 30, 2022. The increase in the effective tax rate quarter over quarter was due to a nondeductible goodwill impairment and nondeductible mark-to-market adjustments offset by foreign tax credits and discrete adjustments recorded in the third quarter of 2023.
For the nine months ended September 30, 2023, the effective tax rate was 34.8%, compared to 52.6% for the nine months ended September 30, 2022. The decrease in the effective tax rate was primarily due to nondeductible mark-to-market adjustments recorded in the prior year period.
We are subject to taxation in the United States and foreign jurisdictions. Our income tax filings are regularly examined by federal, state and foreign tax authorities. During the fourth quarter of 2019, the Internal Revenue Service (“IRS”) issued final adjustments related to transfer pricing with our foreign subsidiaries for our 2011 to 2013 tax years. The adjustments would increase our U.S. taxable income by $696 million, which would result in federal tax of approximately $244 million, subject to interest. We do not agree with the position of the IRS. We have formally filed a protest for our 2011 to 2013 tax years and the case is currently in Appeals. During the third quarter of 2023, the IRS issued final adjustments related to transfer pricing with our foreign subsidiaries for our 2014 to 2016 tax years. The adjustments would increase our U.S. taxable income by $1.232 billion, which would result in federal tax of approximately $431 million, subject to interest. We do not agree with the position of the IRS and intend to formally file a protest. We are also under examination by the IRS for our 2017 to 2020 tax years. We believe it is reasonably possible that the audit of the 2011 to 2013 tax years will conclude within the next 12 months.
14

Notes to Consolidated Financial Statements – (Continued)
 

On December 20, 2011, we completed a spin-off of TripAdvisor into a separate publicly-traded corporation. Pursuant to the tax sharing agreement between Expedia Group and TripAdvisor, TripAdvisor is responsible for its potential tax liabilities in connection with any consolidated income tax returns filed as a part of Expedia Group’s consolidated income tax return prior to or in connection with the spin-off. TripAdvisor is required to indemnify Expedia Group for any such taxes, including interest, penalties, legal, and professional fees.
In the first nine months of 2023, TripAdvisor agreed in principle with the IRS to an assessed amount of $120 million, inclusive of interest and state tax effects, for transfer pricing adjustments with its foreign subsidiaries for the 2009 through 2011 tax years. The assessment is a tax liability for tax years when TripAdvisor was part of Expedia Group's consolidated income tax return and is covered by the indemnification pursuant to the tax sharing agreement. In May 2023, Expedia Group received from the IRS the final assessment for the 2009 through 2011 tax years related to the TripAdvisor matter. Expedia Group remitted $113 million in settlement payments to the IRS, as the primary obligor for this assessment, and received the reimbursement required from TripAdvisor in settlement of the indemnification receivable for this matter. To date, we have recorded $67 million of additional income tax expense and a corresponding tax indemnification adjustment in other, net in our consolidated statements of operations representing the estimate of the incremental assessed payment to the IRS, including state tax effects.
Note 8 – Commitments and Contingencies
Legal Proceedings
In the ordinary course of business, we are a party to various lawsuits. Management does not expect these lawsuits to have a material impact on the liquidity, results of operations, or financial condition of Expedia Group. We also evaluate other potential contingent matters, including value-added tax, excise tax, sales tax, transient occupancy or accommodation tax and similar matters. We do not believe that the aggregate amount of liability that could be reasonably possible with respect to these matters would have a material adverse effect on our financial results; however, litigation is inherently uncertain and the actual losses incurred in the event that our legal proceedings were to result in unfavorable outcomes could have a material adverse effect on our business and financial performance.
Litigation Relating to Occupancy Taxes. One hundred three lawsuits have been filed by or against cities, counties and states involving hotel occupancy and other taxes. Eight lawsuits are currently active. These lawsuits are in various stages and we continue to defend against the claims made in them vigorously. With respect to the principal claims in these matters, we believe that the statutes or ordinances at issue do not apply to us or the services we provide and, therefore, that we do not owe the taxes that are claimed to be owed. We believe that the statutes or ordinances at issue generally impose occupancy and other taxes on entities that own, operate or control hotels (or similar businesses) or furnish or provide hotel rooms or similar accommodations. To date, forty-nine of these lawsuits have been dismissed. Some of these dismissals have been without prejudice and, generally, allow the governmental entity or entities to seek administrative remedies prior to pursuing further litigation. Thirty-four dismissals were based on a finding that we and the other defendants were not subject to the local tax ordinance or that the local government lacked standing to pursue its claims. As a result of this litigation and other attempts by certain jurisdictions to levy such taxes, we have established a reserve for the potential settlement of issues related to hotel occupancy and other taxes, consistent with applicable accounting principles and in light of all current facts and circumstances, in the amount of $46 million and $44 million as of September 30, 2023 and December 31, 2022, respectively. Our settlement reserve is based on our best estimate of probable losses and the ultimate resolution of these contingencies may be greater or less than the liabilities recorded. An estimate for a reasonably possible loss or range of loss in excess of the amount reserved cannot be made. Changes to the settlement reserve are included within legal reserves, occupancy tax and other in the consolidated statements of operations.
Pay-to-Play. Certain jurisdictions may assert that we are required to pay any assessed taxes prior to being allowed to contest or litigate the applicability of the ordinances. This prepayment of contested taxes is referred to as “pay-to-play.” Payment of these amounts is not an admission that we believe we are subject to such taxes and, even when such payments are made, we continue to defend our position vigorously. If we prevail in the litigation, for which a pay-to-play payment was made, the jurisdiction collecting the payment will be required to repay such amounts and also may be required to pay interest.
We are in various stages of inquiry or audit with various tax authorities, some of which, including in the City of Los Angeles regarding hotel occupancy taxes, may impose a pay-to-play requirement to challenge an adverse inquiry or audit result in court.
Matters Relating to International VAT. We are in various stages of inquiry or audit in multiple European Union jurisdictions regarding the application of VAT to our European Union related transactions. While we believe we comply with applicable VAT laws, rules and regulations in the relevant jurisdictions, the tax authorities may determine that we owe additional taxes. In certain jurisdictions, including the United Kingdom, we may be required to “pay-to-play” any VAT
15

Notes to Consolidated Financial Statements – (Continued)
 

assessment prior to contesting its validity. While we believe that we will be successful based on the merits of our positions with regard to audits in pay-to-play jurisdictions, it is nevertheless reasonably possible that we could be required to pay any assessed amounts in order to contest or litigate the applicability of any assessments and an estimate for a reasonably possible amount of any such payments cannot be made.
Note 9 – Segment Information
We have the following reportable segments: B2C (formerly referred to as Retail), B2B, and trivago. Our B2C segment provides a full range of travel and advertising services to our worldwide customers through a variety of consumer brands including: Expedia.com, Hotels.com, Vrbo, Orbitz, Travelocity, Wotif Group, ebookers, CheapTickets, Hotwire.com and CarRentals.com. Our B2B segment is primarily comprised of Expedia Partner Solutions, which offers private label and co-branded products to make travel services available to travelers through third-party company branded websites. Our trivago segment generates advertising revenue primarily from sending referrals to online travel companies and travel service providers from its hotel metasearch websites.
We determined our operating segments based on how our chief operating decision makers manage our business, make operating decisions and evaluate operating performance. Our primary operating metric is Adjusted EBITDA. Adjusted EBITDA for our B2C and B2B segments includes allocations of certain expenses, primarily related to our global travel supply organization and the majority of costs from our product and technology platform, as well as facility costs and the realized foreign currency gains or losses related to the forward contracts hedging a component of our net merchant lodging revenue. We base the allocations primarily on transaction volumes and other usage metrics. We do not allocate certain shared expenses such as accounting, human resources, certain information technology and legal to our reportable segments. We include these expenses in Corporate and Eliminations. Our allocation methodology is periodically evaluated and may change.
Our segment disclosure includes intersegment revenues, which primarily consist of advertising and media services provided by our trivago segment to our B2C segment. These intersegment transactions are recorded by each segment at amounts that approximate fair value as if the transactions were between third parties, and therefore, impact segment performance. However, the revenue and corresponding expense are eliminated in consolidation. The elimination of such intersegment transactions is included within Corporate and Eliminations in the table below.
Corporate and Eliminations also includes unallocated corporate functions and expenses. In addition, we record amortization of intangible assets and any related impairment, as well as stock-based compensation expense, restructuring and related reorganization charges, legal reserves, occupancy tax and other, and other items excluded from segment operating performance in Corporate and Eliminations. Such amounts are detailed in our segment reconciliation below.
The following tables present our segment information for the three and nine months ended September 30, 2023 and 2022. As a significant portion of our property and equipment is not allocated to our operating segments and depreciation is not included in our segment measure, we do not report the assets by segment as it would not be meaningful. We do not regularly provide such information to our chief operating decision makers.
16

Notes to Consolidated Financial Statements – (Continued)
 

 Three months ended September 30, 2023
 B2CB2BtrivagoCorporate &
Eliminations
Total
 (In millions)
Third-party revenue$2,819 $995 $115 $ $3,929 
Intersegment revenue  57 (57)— 
Revenue$2,819 $995 $172 $(57)$3,929 
Adjusted EBITDA$1,056 $266 $18 $(124)$1,216 
Depreciation(137)(29)(2)(26)(194)
Amortization of intangible assets   (14)(14)
Impairment of goodwill   (297)(297)
Impairment of intangible assets   (15)(15)
Stock-based compensation   (105)(105)
Realized (gain) loss on revenue hedges16    16 
Operating income (loss)$935 $237 $16 $(581)607 
Other expense, net(163)
Income before income taxes444 
Provision for income taxes(139)
Net income305 
Net loss attributable to non-controlling interests120 
Net income attributable to Expedia Group, Inc.$425 

 Three months ended September 30, 2022
 B2CB2BtrivagoCorporate &
Eliminations
Total
 (In millions)
Third-party revenue$2,707 $788 $124 $ $3,619 
Intersegment revenue  61 (61)— 
Revenue$2,707 $788 $185 $(61)$3,619 
Adjusted EBITDA$943 $221 $34 $(119)$1,079 
Depreciation(126)(22)(2)(26)(176)
Amortization of intangible assets   (23)(23)
Impairment of intangible assets   (52)(52)
Stock-based compensation   (97)(97)
Realized (gain) loss on revenue hedges10 6   16 
Operating income (loss)$827 $205 $32 $(317)747 
Other expense, net(57)
Income before income taxes690 
Provision for income taxes(214)
Net income476 
Net loss attributable to non-controlling interests6 
Net income attributable to Expedia Group, Inc.$482 

17

Notes to Consolidated Financial Statements – (Continued)
 

 Nine months ended September 30, 2023
 B2CB2BtrivagoCorporate &
Eliminations
Total
 (In millions)
Third-party revenue$7,155 $2,524 $273 $ $9,952 
Intersegment revenue  154 (154)— 
Revenue$7,155 $2,524 $427 $(154)$9,952 
Adjusted EBITDA$1,857 $605 $51 $(365)$2,148 
Depreciation(393)(81)(4)(77)(555)
Amortization of intangible assets   (44)(44)
Impairment of goodwill   (297)(297)
Impairment of intangible assets   (15)(15)
Stock-based compensation   (314)(314)
Legal reserves, occupancy tax and other   (6)(6)
Realized (gain) loss on revenue hedges18 (6)  12 
Operating income (loss)$1,482 $518 $47 $(1,118)929 
Other expense, net(82)
Income before income taxes847 
Provision for income taxes(295)
Net income552 
Net loss attributable to non-controlling interests113 
Net income attributable to Expedia Group, Inc.$665