Form 8-K Expedia Group, Inc. For: May 02

May 2, 2019 4:14 PM


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): May 2, 2019
 
EXPEDIA GROUP, 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
Registrant’s 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))
 
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
 
 
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. ☐
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common stock, $0.0001 par value
EXPE
The Nasdaq Global Select Market
Expedia Group, Inc. 2.500% Senior Notes due 2022
EXPE22
New York Stock Exchange
 





Item 2.02.    Results of Operations and Financial Condition.
On May 2, 2019, Expedia Group, Inc. (“Expedia Group”) issued an earnings release and will hold a conference call regarding its financial results for the quarter ended March 31, 2019. A copy of the earnings release is furnished as Exhibit 99.1 hereto.
Expedia Group is making reference to non-GAAP financial measures in both the earnings release and the conference call. A reconciliation of these non-GAAP financial measures to the nearest comparable GAAP financial measures is contained in the attached Exhibit 99.1 earnings release.
Pursuant to General Instruction B.2. to Form 8-K, the information set forth in this Item 2.02 and in the accompanying Exhibit 99.1 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 8.01.    Other Events.
On May 2, 2019, Expedia Group announced that its Executive Committee, acting on behalf of its Board of Directors, has declared a quarterly cash dividend of $0.32 per share of outstanding common stock payable on June 13, 2019 to stockholders of record as of the close of business on May 23, 2019.
Item 9.01.    Financial Statements and Exhibits.
(d) Exhibits
Exhibit
Number
  
Description
  





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 GROUP, INC.
 
 
 
 
By:
/s/ ALAN PICKERILL
 
 
Alan Pickerill
 
 
Chief Financial Officer
Dated: May 2, 2019
 



Exhibit 99.1

eghorizontalwhiteonbluea05.jpg

Expedia Group Reports First Quarter 2019 Results
BELLEVUE, WA – May 2, 2019 – Expedia Group, Inc. (NASDAQ: EXPE) announced financial results today for the first quarter ended March 31, 2019.
Key Highlights
Gross bookings increased 8% and revenue increased 4% year-over-year. Excluding the impact of foreign exchange, gross bookings increased 11% and revenue increased 7% year-over-year.(1) 
Expedia Group's net loss improved 25% and Adjusted EBITDA grew 42% year-over-year.
Total stayed lodging room nights increased 9% year-over-year.
Expedia Group exceeded 1.1 million properties available on its core lodging platform as of March 31, 2019, including approximately 460,000 integrated Vrbo listings.
In April, Expedia Group agreed to acquire Liberty Expedia Holdings, Inc. in an all-stock transaction. As a result of the transaction Expedia Group expects to retire approximately 3.1 million shares.
Financial Summary & Operating Metrics ($ millions except per share amounts)
 
Expedia Group (excluding trivago)(2)
Expedia Group, Inc.
Metric
Q1 2019
Q1 2018
Δ Y/Y
Q1 2019
Q1 2018
Δ Y/Y
Room night growth
9%
15%
(605) bps
9%
15%
(605) bps
Gross bookings
$29,409
$27,196
8%
$29,409
$27,196
8%
Revenue
2,457
2,311
6%
2,609
2,508
4%
Operating loss
(146)
(129)
(14)%
(131)
(165)
21%
Net loss attributable to Expedia Group
 
 
 
(103)
(137)
25%
Diluted loss per share
 
 
 
$(0.69)
$(0.91)
23%
Adjusted EBITDA(1)
152
152
—%
176
124
42%
Adjusted net income (loss)(1)
(52)
(54)
4%
(40)
(69)
42%
Adjusted EPS(1)
$(0.35)
$(0.36)
1%
$(0.27)
$(0.46)
41%
Free cash flow(1)
 
 
 
1,875
1,484
26%

(1) "Adjusted EBITDA" (Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization), "Adjusted net income (loss)," "Adjusted EPS," "Free cash flow" and revenue excluding the impact of foreign exchange are non-GAAP measures as defined by the Securities and Exchange Commission (the "SEC"). See "Definitions of Non-GAAP Measures" and "Tabular Reconciliations for Non-GAAP Measures" on pages 12-17 herein for an explanation and reconciliations of non-GAAP measures used throughout this release. Expedia Group does not calculate or report net income by segment.
(2) 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.
Please refer to the "Glossary of Business Terms," located in the Quarterly Results section on Expedia Group’s investor relations website, for business and financial statement definitions used throughout this release.

Discussion of Results
The results for Expedia Group, Inc. ("Expedia Group" or "the Company") include Brand Expedia®, Hotels.com®, Expedia® Partner Solutions, Vrbo®, Egencia®, trivago®, HomeAway®, Orbitz®, Travelocity®, Hotwire®, Wotif®, ebookers®, CheapTickets®, Expedia Group™ Media Solutions, Expedia Local Expert®, CarRentals.com™, Expedia® CruiseShipCenters®, Classic Vacations®, Traveldoo®, VacationRentals.com and SilverRail™, including the related international points of sale for all brands. All amounts shown are in U.S. dollars.

In the first quarter of 2019, Expedia Group renamed the HomeAway segment Vrbo.

Page 1 of 18



Gross Bookings & Revenue
Gross Bookings and Revenue by Segment ($ millions)
 
Gross Bookings
 
 
Revenue
 
First Quarter
 
 
First Quarter
 
2019
 
2018
 
Δ%
 
 
2019
 
2018
 
Δ%
Core OTA
$
23,029

 
$
21,171

 
9%
 
 
$
2,037

 
$
1,926

 
6%
Vrbo
4,163

 
3,947

 
5%
 
 
267

 
234

 
14%
Egencia
2,217

 
2,078

 
7%
 
 
153

 
151

 
2%
Expedia Group (excluding trivago)
$
29,409

 
$
27,196

 
8%
 
 
$
2,457

 
$
2,311

 
6%
trivago

 

 
—%
 
 
237

 
319

 
(26)%
Intercompany eliminations

 

 
—%
 
 
(85
)
 
(122
)
 
30%
Total
$
29,409

 
$
27,196

 
8%
 
 
$
2,609

 
$
2,508

 
4%

Note: Some numbers may not add due to rounding.
For the first quarter of 2019, total gross bookings increased 8% (including 3 percentage points of negative foreign exchange impact), driven primarily by growth in Expedia Partner Solutions and Brand Expedia. Domestic gross bookings increased 11% and international gross bookings increased 4% (including 6 percentage points of negative foreign exchange impact).
For the first quarter of 2019, total revenue increased 4% (including 3 percentage points of negative foreign exchange impact). Excluding trivago, total revenue increased 6% (including 3 percentage points of negative foreign exchange impact), driven primarily by growth in Expedia Partner Solutions, Brand Expedia and Vrbo. Domestic revenue increased 9% and international revenue decreased 2% (including 6 percentage points of negative foreign exchange impact). Excluding trivago, international revenue increased 2% (including 6 percentage points of negative foreign exchange impact).

Product & Services Detail
As a percentage of total worldwide revenue in the first quarter of 2019, lodging accounted for 66%, advertising and media accounted for 10%, air accounted for 10% and all other revenues accounted for the remaining 14%.
Lodging revenue increased 7% in the first quarter of 2019 on a 9% increase in room nights stayed driven by growth at Expedia Partner Solutions, Hotels.com and Brand Expedia, partly offset by a 2% decrease in revenue per room night, due to the negative impact of foreign exchange.
Air revenue increased 3% in the first quarter of 2019 on an 11% increase in air tickets sold driven by growth at Expedia Partner Solutions and Brand Expedia, partly offset by a 7% decrease in revenue per ticket, which was driven by a shift in product mix and reclassification of certain partner fees to other revenue, as well as a negative impact from foreign exchange.
Advertising and media revenue decreased 6% (including 4 percentage points of negative foreign currency impact) due to declines at trivago which were partly offset by strong growth at Expedia Group Media Solutions. Other revenue in the first quarter of 2019 was flat compared to the prior year.

Page 2 of 18



Costs and Expenses ($ millions)
 
Costs and Expenses
 
 
As a % of Revenue
 
First Quarter
 
 
First Quarter
 
2019
 
2018
 
Δ%
 
 
2019
 
2018
 
Δ (bps)
Generally Accepted Accounting Principles (GAAP) Expenses - Expedia Group
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
513

 
$
487

 
5
 %
 
 
19.7
%
 
19.4
%
 
25

Selling and marketing
1,535

 
1,516

 
1
 %
 
 
58.8
%
 
60.4
%
 
(163
)
Technology and content
429

 
396

 
9
 %
 
 
16.5
%
 
15.8
%
 
68

General and administrative
191

 
199

 
(4
)%
 
 
7.3
%
 
7.9
%
 
(61
)
Total GAAP costs and expenses
$
2,668

 
$
2,598

 
3
 %
 
 
102.3
%
 
103.6
%
 
(130
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Expenses - Expedia Group
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue*
$
487

 
$
458

 
6
 %
 
 
18.7
%
 
18.2
%
 
43

Selling and marketing*
1,510

 
1,494

 
1
 %
 
 
57.9
%
 
59.6
%
 
(170
)
Technology and content
278

 
262

 
6
 %
 
 
10.7
%
 
10.4
%
 
22

General and administrative*
161

 
167

 
(4
)%
 
 
6.2
%
 
6.7
%
 
(51
)
Total adjusted costs and expenses
$
2,436

 
$
2,381

 
2
 %
 
 
93.4
%
 
94.9
%
 
(155
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Expenses - Expedia Group (excluding trivago)**
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue*
$
485

 
$
456

 
7
 %
 
 
19.7
%
 
19.7
%
 
5

Selling and marketing*
1,411

 
1,302

 
8
 %
 
 
57.4
%
 
56.4
%
 
108

Technology and content
261

 
245

 
7
 %
 
 
10.6
%
 
10.6
%
 
4

General and administrative*
151

 
153

 
(2
)%
 
 
6.1
%
 
6.6
%
 
(51
)
Total adjusted costs and expenses excluding trivago
$
2,308

 
$
2,156

 
7
 %
 
 
94.0
%
 
93.3
%
 
66

*Adjusted expenses are non-GAAP measures. See pages 12-17 herein for a description and reconciliation to the corresponding GAAP measures.
**Expedia Group (excluding trivago) figures exclude both trivago costs and expenses and trivago revenue when calculating 'As a % of Revenue.'
Note: Some numbers may not add due to rounding.
Cost of Revenue
For the first quarter of 2019, total GAAP and adjusted cost of revenue increased 5% and 6%, respectively, compared to the first quarter of 2018, primarily due to an increase in customer operations expenses, primarily at Expedia Partner Solutions and Egencia, as well as an increase in cloud expense. Cloud expense in cost of revenue was $32 million during the first quarter of 2019 compared to $23 million in the first quarter of 2018.
Selling and Marketing
For the first quarter of 2019, both total GAAP and adjusted selling and marketing expense increased 1% compared to the first quarter of 2018, primarily due to a $22 million increase in direct costs partly offset by a decrease in indirect costs. Indirect costs represented 18% of total GAAP selling and marketing costs and 16% of total adjusted selling and marketing expense in the first quarter of 2019 compared to 18% and 17%, respectively, in the first quarter of 2018.
Adjusted selling and marketing expense excluding trivago increased 8% in the first quarter of 2019 reflecting higher direct costs at Vrbo, Expedia Partner Solutions and Brand Expedia. The increase was partly offset by a decline in indirect selling and marketing costs.
Technology and Content
For the first quarter of 2019, total GAAP and adjusted technology and content expense increased 9% and 6%, respectively, compared to the first quarter of 2018, primarily due to investments in our ecommerce platform and products. The growth in GAAP technology and content expense includes an increase in depreciation and amortization of technology assets, which is excluded from adjusted expenses. Cloud

Page 3 of 18



expense in technology and content expense was $13 million during the first quarter of 2019, consistent with the first quarter of 2018.
General and Administrative
For the first quarter of 2019, both total GAAP and adjusted general and administrative expense decreased 4% compared to the first quarter of 2018, primarily driven by declines at trivago, as well as lower people costs.

Net Loss Attributable to Expedia Group and Adjusted EBITDA*
Adjusted EBITDA by Segment ($ millions)
 
 
First Quarter
 
2019
 
2018
 
Δ%
Core OTA
$
344

 
$
323

 
6%
Vrbo
(40
)
 
(21
)
 
(85)%
Egencia
29

 
27

 
9%
Unallocated overhead costs
(181
)
 
(177
)
 
(3)%
Expedia Group (excluding trivago)
$
152

 
$
152

 
—%
trivago(1)
24

 
(28
)
 
NM
Total Adjusted EBITDA
$
176

 
$
124

 
42%
 
 
 
 
 
 
Net loss attributable to Expedia Group(2)
$
(103
)
 
$
(137
)
 
25%
(1) trivago is a separately listed company on the Nasdaq Global Select Market and, therefore, is subject to its own reporting and filing requirements which could result in possible differences that are not expected to be material to Expedia Group (2) Expedia Group does not calculate or report net income (loss) by segment.
* Adjusted EBITDA is a non-GAAP measure. See pages 12-17 herein for a description and reconciliation to the corresponding GAAP measure.
Note: Some numbers may not add due to rounding.
Amortization of Intangible Assets
Consolidated amortization of intangible assets decreased $20 million to $52 million in the first quarter of 2019, due to the completion of amortization related to certain intangible assets.
Restructuring and Related Reorganization Charges
In connection with the centralization and migration of certain operational functions and systems, we recognized $10 million in restructuring and related reorganization charges related to severance and benefits during the three months ended March 31, 2019.
Interest and Other
Consolidated interest income in the first quarter of 2019 was consistent with the first quarter of 2018 at $11 million due to higher rates of return offsetting lower invested balances. Consolidated interest expense decreased $10 million in the first quarter of 2019, compared to the first quarter of 2018, due to the repayment of $500 million of senior unsecured notes in August 2018.
Consolidated other, net was a gain of $20 million in the first quarter of 2019, compared to a gain of $36 million in the first quarter of 2018. The gains in the first quarter of 2019 and the first quarter of 2018 were both primarily due to mark-to-market gains on minority equity investments. In addition, in the first quarter of 2019, other, net included a $12 million gain related to the release of a non-operating liability previously recorded in connection with an acquisition, which was deemed not probable of payment.
Income Taxes
The effective GAAP tax rate was 29% for the first quarter of 2019, compared to 12% in the first quarter of 2018. The increase in the effective tax rate is primarily due to a lower foreign rate differential and an increase in excess

Page 4 of 18



tax benefits related to stock-based compensation. The effective tax rate on pretax adjusted net loss was 7% for the first quarter of 2019, compared to 13% for the first quarter of 2018 as certain foreign losses, for which Expedia Group does not record a tax benefit, accounted for a larger portion of adjusted net loss.

Balance Sheet, Cash Flows and Capitalization
Cash, cash equivalents, restricted cash and short-term investments totaled $4.6 billion at March 31, 2019. For the three months ended March 31, 2019, consolidated net cash provided by operating activities was $2.1 billion and consolidated free cash flow totaled $1.9 billion. Both measures include $2.0 billion from net changes in operating assets and liabilities, primarily driven by an increase in deferred merchant bookings. Free cash flow increased $391 million in the first quarter of 2019 compared to the prior year period, primarily due to an increase in net cash provided by operating activities related to changes in working capital and higher adjusted EBITDA partly offset by increased capital expenditures related to our Seattle headquarters.

Long-term investments and other assets includes our minority investments in Despegar.com, Corp. ("Despegar"), which is recorded at a fair value of $143 million as of March 31, 2019, and our investment in Traveloka Holding Limited. We account for minority equity investments with readily determinable fair values, such as our investment in Despegar, at fair value with changes in fair value recorded through net income. Equity investments without readily determinable fair values are adjusted for impairments and observable price changes.
Long-term debt, net of applicable discounts, debt issuance costs and current maturities, totaled $3.7 billion at March 31, 2019. As of March 31, 2019, Expedia Group had a $2.0 billion unsecured revolving credit facility, which was essentially untapped.
At March 31, 2019, Expedia Group had stock-based awards outstanding representing approximately 21 million shares of Expedia Group common stock, consisting of options to purchase approximately 16 million common shares with a $101.79 weighted average exercise price and weighted average remaining life of 4.2 years, and approximately 5 million restricted stock units (“RSUs”). Beginning in 2019, RSUs became Expedia Group's primary form of stock-based compensation.
As of March 31, 2019, there were approximately 12.2 million shares remaining under an April 2018 repurchase authorization.
On March 27, 2019, Expedia Group paid a quarterly dividend of $47 million ($0.32 per common share). In addition, on May 1, 2019, the Executive Committee of Expedia Group’s Board of Directors declared a quarterly cash dividend of $0.32 per share of outstanding common stock to be paid to stockholders of record as of the close of business on May 23, 2019, with a payment date of June 13, 2019. Based on current shares outstanding, the total payment for this quarterly dividend is estimated to be approximately $48 million. Future declaration of dividends and the establishment of future record and payment dates are subject to the final determination of Expedia Group’s Board of Directors.



Page 5 of 18



Recent Highlights
Expedia Group, Inc.
In April, Expedia Group agreed to acquire Liberty Expedia Holdings, Inc. in an all-stock transaction. As a result of the transaction Expedia Group will simplify and improve its corporate and governance structure and expects to retire approximately 3.1 million shares.
Expedia Group exceeded 1.1 million properties available on its core lodging platform as of March 31, 2019, including approximately 460,000 integrated Vrbo listings. Vrbo now offers over 1.9 million online bookable listings.
Fitch Ratings upgraded Expedia Group’s credit to "BBB" from "BBB-" following Expedia Group's announcement of the agreement to acquire Liberty Expedia Holdings, Inc.

Core OTA
Expedia Group and Marriott International signed a new, expanded multi-year partnership with mutually beneficial economic terms. The agreement continues the companies’ long-standing distribution arrangement as well as expands Expedia Group’s role related to Vacations by Marriott, adds Marriott inventory to Hotwire and leverages Expedia Group’s technology capabilities for an innovative distribution arrangement expected to launch in the fourth quarter.
Brand Expedia recorded triple digit mobile app room night growth in the first quarter in Japan driven by locally relevant Golden Week initiatives.
Hotels.com agreed to a new partnership with CTBC Bank in Taiwan. CTBC Bank LINE Pay Co-Branded Card customers can earn LINE Points on Hotels.com stays through the end of 2019.
Expedia Partner Solutions released a new version of their versatile API, Rapid. Rapid Version 2.2 includes a Recommendations API allowing partners to offer real-time, hotel-based recommendations based on Expedia Partner Solutions machine learning, among other features.
Expedia Partner Solutions commenced an exclusive agreement with Air Europa. Air Europa has integrated with Expedia Partner Solutions’ template Hotels.com for Partners to offer competitive flight and hotel packages for their travelers.
CarRentals.com added cross-sell to display hotel choices from Brand Expedia, employing Brand Expedia attach technology to improve its offering to customers.
Expedia Group Media Solutions and Brand USA’s Sound Travels campaign won The Drum Marketing Award for Best Leisure and Travel Marketing campaign
Royal Caribbean International awarded Expedia Group its 2018 President’s Award for Overall Achievement.

Vrbo
In March, Vrbo introduced a new logo that is inspired by travel and changed the pronunciation to “ver-boh.” In celebration of the brand’s new look and pronunciation, Vrbo introduced a new integrated marketing campaign that includes both TV and digital advertising in the U.S. The HomeAway segment is now known as Vrbo.
Vrbo introduced Trip Boards and a refreshed Vrbo app. Trip Boards make it easier for families and friends to plan and travel together and the app now supports push notifications and a new virtual assistant that can answer commonly asked questions about a listing.
Vrbo now offers over 1.2 million instantly bookable listings and grew stayed property nights 8% in the first quarter.

trivago
trivago continued to grow its alternative accommodation inventory and now has more than 1.8 million alternative accommodation properties listed.
trivago is now live on Google Hotel Ads in over 50 markets.

Egencia
Egencia introduced Hotel Conversations, a business travel industry first, enabling direct two-way conversations between business travelers and hoteliers.
The newly released Egencia Air and Hotel packages offering helps companies leverage the capabilities of Expedia Group and its relationship with hoteliers to save money and give business travelers access to more top-rated hotels after they book their flight.

Page 6 of 18



EXPEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share and per share data)
(Unaudited)
 
Three months ended
March 31,
 
2019
 
2018
 
 
 
 
Revenue
$
2,609

 
$
2,508

Costs and expenses:
 
 
 
Cost of revenue (1) (2)
513

 
487

Selling and marketing (1) (2)
1,535

 
1,516

Technology and content (1) (2)
429

 
396

General and administrative (1) (2)
191

 
199

Amortization of intangible assets
52

 
72

Legal reserves, occupancy tax and other
10

 
3

Restructuring and related reorganization charges
10

 

Operating loss
(131
)
 
(165
)
Other income (expense):
 
 
 
Interest income
11

 
11

Interest expense
(41
)
 
(51
)
Other, net
20

 
36

Total other expense, net
(10
)
 
(4
)
Loss before income taxes
(141
)
 
(169
)
Provision for income taxes
41

 
20

Net loss
(100
)
 
(149
)
Net (income) loss attributable to non-controlling interests
(3
)
 
12

Net loss attributable to Expedia Group, Inc.
$
(103
)
 
$
(137
)
 
 
 
 
Loss per share attributable to Expedia Group, Inc. available to common stockholders:
 
 
 
Basic
$
(0.69
)
 
$
(0.91
)
Diluted
(0.69
)
 
(0.91
)
Shares used in computing loss per share (000's):
 
 
 
Basic
147,882

 
151,817

Diluted
147,882

 
151,817

_________
 
 
 
(1) Includes stock-based compensation as follows:
 
 
 
Cost of revenue
$
3

 
$
2

Selling and marketing
11

 
11

Technology and content
19

 
15

General and administrative
23

 
22

 
 
 
 
(2) Includes depreciation as follows:
 
 
 
Cost of revenue
$
23

 
$
27

Selling and marketing
14

 
11

Technology and content
132

 
119

General and administrative
7

 
10



Page 7 of 18




EXPEDIA GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except number of shares which are reflected in thousands and par value)
 
March 31, 2019
 
December 31, 2018
 
(unaudited)
 
 
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
3,708

 
$
2,443

Restricted cash and cash equivalents
447

 
259

Short-term investments
466

 
28

Accounts receivable, net of allowance of $40 and $34
2,617

 
2,151

Income taxes receivable
146

 
24

Prepaid expenses and other current assets
318

 
292

Total current assets
7,702

 
5,197

Property and equipment, net
1,828

 
1,877

Operating lease right-of-use assets
537

 

Long-term investments and other assets
804

 
778

Deferred income taxes
47

 
69

Intangible assets, net
1,936

 
1,992

Goodwill
8,109

 
8,120

TOTAL ASSETS
$
20,963

 
$
18,033

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
 
 
 
Accounts payable, merchant
$
1,736

 
$
1,699

Accounts payable, other
1,033

 
788

Deferred merchant bookings
6,612

 
4,327

Deferred revenue
533

 
364

Income taxes payable
25

 
74

Accrued expenses and other current liabilities
787

 
808

Total current liabilities
10,726

 
8,060

Long-term debt, excluding current maturities
3,704

 
3,717

Deferred income taxes
66

 
69

Operating lease liabilities
472

 

Other long-term liabilities
332

 
506

Commitments and contingencies
 
 
 
Redeemable non-controlling interests
29

 
30

Stockholders’ equity:
 
 
 
Common stock $.0001 par value

 

Authorized shares: 1,600,000
 
 
 
Shares issued: 233,294 and 231,493; Shares outstanding: 135,938 and 134,334
 
 
 
Class B common stock $.0001 par value

 

Authorized shares: 400,000
 
 
 
Shares issued and outstanding: 12,800 and 12,800
 
 
 
Additional paid-in capital
9,694

 
9,549

Treasury stock - Common stock, at cost
(5,767
)
 
(5,742
)
Shares: 97,356 and 97,159
 
 
 
Retained earnings
373

 
517

Accumulated other comprehensive income (loss)
(217
)
 
(220
)
Total Expedia Group, Inc. stockholders’ equity
4,083

 
4,104

Non-redeemable non-controlling interests
1,551

 
1,547

Total stockholders’ equity
5,634

 
5,651

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
20,963

 
$
18,033


Page 8 of 18



EXPEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
Three months ended March 31,
 
2019
 
2018
Operating activities:
 
 
 
Net loss
$
(100
)
 
$
(149
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation of property and equipment, including internal-use software and website development
176

 
167

Amortization of stock-based compensation
56

 
50

Amortization and impairment of intangible assets
52

 
72

Deferred income taxes
17

 
88

Foreign exchange (gain) loss on cash, restricted cash and short-term investments, net
5

 
(5
)
Realized gain on foreign currency forwards
(7
)
 
(8
)
Gain on minority equity investments, net
(22
)
 
(37
)
Other
(7
)
 
(3
)
Changes in operating assets and liabilities, net of effects from acquisitions:
 
 
 
Accounts receivable
(468
)
 
(345
)
Prepaid expenses and other assets
(23
)
 
(57
)
Accounts payable, merchant
39

 
(127
)
Accounts payable, other, accrued expenses and other liabilities
146

 
38

Tax payable/receivable, net
(169
)
 
(178
)
Deferred merchant bookings
2,285

 
2,027

Deferred revenue
169

 
143

Net cash provided by operating activities
2,149

 
1,676

Investing activities:
 
 
 
Capital expenditures, including internal-use software and website development
(274
)
 
(192
)
Purchases of investments
(438
)
 
(867
)
Sales and maturities of investments

 
317

Other, net
6

 
14

Net cash used in investing activities
(706
)
 
(728
)
Financing activities:
 
 
 
Purchases of treasury stock
(25
)
 
(202
)
Payment of dividends to stockholders
(47
)
 
(46
)
Proceeds from exercise of equity awards and employee stock purchase plan
91

 
20

Other, net
2

 
(8
)
Net cash provided by (used in) financing activities
21

 
(236
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents
(11
)
 
17

Net increase in cash, cash equivalents and restricted cash and cash equivalents
1,453

 
729

Cash, cash equivalents and restricted cash and cash equivalents at beginning of period
2,705

 
2,917

Cash, cash equivalents and restricted cash and cash equivalents at end of period
$
4,158

 
$
3,646

Supplemental cash flow information
 
 
 
Cash paid for interest
$
71

 
$
86

Income tax payments, net
105

 
67


Page 9 of 18



Expedia Group, Inc.
Trended Metrics
(All figures in millions)

The supplemental metrics below are intended to supplement the financial statements in this release and in our filings with the SEC, and do not include adjustments for one-time items, acquisitions, foreign exchange or other adjustments. The definition, methodology and appropriateness of any of our supplemental metrics are subject to removal and/or change, and such changes could be material. In the event of any discrepancy between any supplemental metric and our historical financial statements, you should rely on the information filed with the SEC and the financial statements in our most recent earnings release.

 
 
 
2017
 
 
 
2018
 
 
 
2019
 
 
 
Y / Y
 
 
 
 
 
Q2
Q3
Q4
 
 
 
Q1
Q2
Q3
Q4
 
 
 
Q1
 
 
 
Growth
 
 
Gross bookings by segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core OTA
 
 
$
18,954

$
18,456

$
16,182

 
 
 
$
21,171

$
21,011

$
20,217

$
17,921

 
 
 
$
23,029

 
 
 
9%
 
 
Vrbo
 
 
2,123

2,013

1,913

 
 
 
3,947

2,814

2,496

2,192

 
 
 
4,163

 
 
 
5%
 
 
Egencia
 
 
1,761

1,728

1,670

 
 
 
2,078

2,073

1,963

1,844

 
 
 
2,217

 
 
 
7%
 
 
Total
 
 
$
22,838

$
22,197

$
19,766

 
 
 
$
27,196

$
25,898

$
24,676

$
21,957

 
 
 
$
29,409

 
 
 
8%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross bookings by geography
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domestic
 
 
$
14,730

$
13,540

$
11,800

 
 
 
$
16,582

$
16,213

$
15,232

$
13,362

 
 
 
$
18,363

 
 
 
11%
 
 
International
 
 
8,108

8,657

7,966

 
 
 
10,614

9,685

9,444

8,595

 
 
 
11,046

 
 
 
4%
 
 
Total
 
 
$
22,838

$
22,197

$
19,766

 
 
 
$
27,196

$
25,898

$
24,676

$
21,957

 
 
 
$
29,409

 
 
 
8%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross bookings by business model
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency
 
 
$
11,168

$
10,392

$
9,493

 
 
 
$
12,445

$
12,290

$
11,442

$
10,688

 
 
 
$
13,727

 
 
 
10%
 
 
Merchant
 
 
9,546

9,792

8,360

 
 
 
10,803

10,794

10,739

9,077

 
 
 
11,519

 
 
 
7%
 
 
Vrbo
 
 
2,123

2,013

1,913

 
 
 
3,947

2,814

2,496

2,192

 
 
 
4,163

 
 
 
5%
 
 
Total
 
 
$
22,838

$
22,197

$
19,766

 
 
 
$
27,196

$
25,898

$
24,676

$
21,957

 
 
 
$
29,409

 
 
 
8%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue by segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core OTA
 
 
$
2,009

$
2,314

$
1,857

 
 
 
$
1,926

$
2,253

$
2,527

$
2,054

 
 
 
$
2,037

 
 
 
6%
 
 
Vrbo
 
 
224

305

193

 
 
 
234

297

410

230

 
 
 
267

 
 
 
14%
 
 
Egencia
 
 
135

126

137

 
 
 
151

156

139

155

 
 
 
153

 
 
 
2%
 
 
Expedia Group (excluding trivago)
 
 
$
2,368

$
2,745

$
2,187

 
 
 
$
2,311

$
2,706

$
3,076

$
2,439

 
 
 
$
2,457

 
 
 
6%
 
 
trivago
 
 
328

338

215

 
 
 
319

280

295

190

 
 
 
237

 
 
 
(26)%
 
 
Intercompany eliminations
 
 
(110
)
(117
)
(83
)
 
 
 
(122
)
(106
)
(95
)
(70
)
 
 
 
(85
)
 
 
 
30%
 
 
Total
 
 
$
2,586

$
2,966

$
2,319

 
 
 
$
2,508

$
2,880

$
3,276

$
2,559

 
 
 
$
2,609

 
 
 
4%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue by geography
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domestic
 
 
$
1,459

$
1,578

$
1,255

 
 
 
$
1,351

$
1,632

$
1,792

$
1,426

 
 
 
$
1,476

 
 
 
9%
 
 
International
 
 
1,127

1,388

1,065

 
 
 
1,157

1,248

1,484

1,133

 
 
 
1,133

 
 
 
(2)%
 
 
Total
 
 
$
2,586

$
2,966

$
2,319

 
 
 
$
2,508

$
2,880

$
3,276

$
2,559

 
 
 
$
2,609

 
 
 
4%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue by business model
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency
 
 
$
684

$
803

$
629

 
 
 
$
658

$
777

$
876

$
699

 
 
 
$
686

 
 
 
4%
 
 
Merchant
 
 
1,376

1,559

1,283

 
 
 
1,334

1,532

1,688

1,396

 
 
 
1,392

 
 
 
4%
 
 
Advertising & media
 
 
302

299

214

 
 
 
282

274

302

233

 
 
 
264

 
 
 
(6)%
 
 
Vrbo
 
 
224

305

193

 
 
 
234

297

410

230

 
 
 
267

 
 
 
14%
 
 
Total
 
 
$
2,586

$
2,966

$
2,319

 
 
 
$
2,508

$
2,880

$
3,276

$
2,559

 
 
 
$
2,609

 
 
 
4%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA by segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core OTA
 
 
$
486

$
734

$
534

 
 
 
$
323

$
561

$
837

$
584

 
 
 
$
344

 
 
 
6%
 
 
Vrbo
 
 
39

126

31

 
 
 
(21
)
78

209

22

 
 
 
(40
)
 
 
 
(85)%
 
 
Egencia
 
 
28

20

19

 
 
 
27

30

19

31

 
 
 
29

 
 
 
9%
 
 
Unallocated overhead costs
 
 
(162
)
(163
)
(173
)
 
 
 
(177
)
(186
)
(184
)
(199
)
 
 
 
(181
)
 
 
 
(3)%
 
 
Expedia Group (excluding trivago)
 
 
$
391

$
717

$
411

 
 
 
$
152

$
483

$
881

$
438

 
 
 
$
152

 
 
 
—%
 
 
trivago
 
 
2

(8
)
(9
)
 
 
 
(28
)
(20
)
31

33

 
 
 
24

 
 
 
NM
 
 
Total
 
 
$
393

$
709

$
402

 
 
 
$
124

$
463

$
912

$
471

 
 
 
$
176

 
 
 
42%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Expedia Group
 
 
$
57

$
352

$
55

 
 
 
$
(137
)
$
1

$
525

$
17

 
 
 
$
(103
)
 
 
 
25%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 10 of 18



Expedia Group, Inc.
Trended Metrics
(All figures in millions)

 
 
 
2017
 
 
 
2018
 
 
 
2019
 
 
 
 
 
Q2
Q3
Q4
 
 
 
Q1
Q2
Q3
Q4
 
 
 
Q1
 
 
Worldwide lodging (merchant, agency & Vrbo)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Room nights
 
 
79.9

93.5

74.8

 
 
 
73.9

89.6

105.3

82.8

 
 
 
80.8

 
 
Room night growth
 
 
21
 %
16
 %
15
 %
 
 
 
15
 %
12
%
13
 %
11
 %
 
 
 
9
 %
 
 
Domestic room night growth
 
 
17
 %
12
 %
10
 %
 
 
 
10
 %
8
%
9
 %
9
 %
 
 
 
8
 %
 
 
International room night growth
 
 
26
 %
22
 %
21
 %
 
 
 
21
 %
17
%
16
 %
12
 %
 
 
 
11
 %
 
 
ADR growth
 
 
2
 %
4
 %
4
 %
 
 
 
7
 %
6
%
4
 %
2
 %
 
 
 
(1
)%
 
 
Revenue per night growth
 
 
(4
)%
(1
)%
(4
)%
 
 
 
 %
2
%
(1
)%
(1
)%
 
 
 
(2
)%
 
 
Lodging revenue
 
 
$1,744
$2,102
$1,606
 
 
 
$1,612
$1,992
$2,347
$1,761
 
 
 
$1,725
 
 
Revenue growth
 
 
16
 %
15
 %
11
 %
 
 
 
15
 %
14
%
12
 %
10
 %
 
 
 
7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Worldwide air (merchant & agency)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tickets sold growth
 
 
2
 %
4
 %
3
 %
 
 
 
1
 %
6
%
4
 %
10
 %
 
 
 
11
 %
 
 
Airfare growth
 
 
1
 %
(2
)%
1
 %
 
 
 
3
 %
1
%
4
 %
2
 %
 
 
 
(1
)%
 
 
Revenue per ticket growth
 
 
4
 %
(10
)%
(3
)%
 
 
 
10
 %
4
%
6
 %
7
 %
 
 
 
(7
)%
 
 
Air revenue
 
 
$202
$189
$176
 
 
 
$242
$223
$209
$207
 
 
 
$248
 
 
Revenue growth
 
 
6
 %
(7
)%
—%

 
 
 
11
 %
10
%
11
 %
18
 %
 
 
 
3
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Notes:
Advertising & Media Revenue includes 3rd party revenue from trivago. All trivago revenue is classified as international.
During the first quarter of 2018, we updated our allocations methodology and recast the historical domestic and international revenue and Adjusted EBITDA by segment information presented to be on a comparable basis.
Some numbers may not add due to rounding. All percentages above and throughout this release are calculated on precise, unrounded numbers

Page 11 of 18



Notes & Definitions:
Gross Bookings: Gross bookings generally represent the total retail value of transactions booked, recorded at the time of booking reflecting the total price due for travel by travelers, including taxes, fees and other charges, adjusted for cancellations and refunds.
Core OTA: The 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: Brand Expedia, Hotels.com, Expedia Partner Solutions, Orbitz, Travelocity, Wotif, lastminute.com.au, ebookers, CheapTickets, Hotwire, Classic Vacations, Expedia Group Media Solutions, CarRentals.com, Expedia Local Expert, Expedia CruiseShipCenters, SilverRail and ALICE.
trivago: The trivago segment generates advertising revenue primarily from sending referrals to online travel companies and travel service providers from its localized hotel metasearch websites.
Vrbo: The Vrbo segment operates an online marketplace for the alternative accommodations industry and includes the Vrbo and HomeAway brands, among others.
Egencia: The Egencia segment provides managed travel services to corporate customers worldwide.
Corporate: Includes unallocated corporate expenses.
Lodging metrics: Reported on a stayed basis and includes both merchant and agency model hotel and alternative accommodation stays.
Room Nights: Room nights represent stayed hotel room nights for our Core OTA and Egencia reportable segments and property nights for our Vrbo reportable segment. Hotel room nights are reported on a stayed basis and include both merchant and agency hotel stays. Property nights are reported upon the first day of stay and check-in to a property and represent the total number of nights for which a property is rented.
Worldwide Air metrics: Reported on a booked basis and includes both merchant and agency air bookings.

Definitions of Non-GAAP Measures
Expedia Group reports Adjusted EBITDA, Adjusted Net Income (Loss), 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 (Loss) and 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 (Loss) and Adjusted EPS also exclude certain items related to transactional tax matters, which may ultimately be settled in cash. We urge investors to review the detailed disclosure regarding these matters in the Management Discussion and Analysis and Legal Proceedings sections, as well as the notes to the financial statements, included in the Company's 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 Earnings Before Interest, Taxes, Depreciation and Amortization was revised in the fourth quarter of 2012 and in the first quarter of 2016 and the definition for Adjusted Net Income (Loss) was revised in the fourth quarters of 2010, 2011, 2012 and 2017. The definition of Adjusted Expenses was revised in the first quarter of 2014 and in the second quarter 2015.

Adjusted EBITDA is defined as net income (loss) attributable to Expedia Group adjusted for:
(1) net income (loss) attributable to non-controlling interests;
(2) provision for income taxes;
(3) total other expenses, net;
(4) stock-based compensation expense, including compensation expense related to certain subsidiary equity plans;
(5) acquisition-related impacts, including
(i) amortization of intangible assets and goodwill and intangible asset impairment,

Page 12 of 18



(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;
(6) certain other items, including restructuring;
(7) 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;
(8) that portion of gains (losses) on revenue hedging activities that are included in other, net that relate to revenue recognized in the period; and
(9) depreciation.
The above items are excluded from our Adjusted EBITDA measure because these items are non-cash 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.

Adjusted Net Income (Loss) 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 Group plus the following items, net of tax (which excludes the impact of significant changes resulting from tax legislation such as the Tax Cuts and Jobs Act):
(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;
(iii) upfront consideration paid to settle employee compensation plans of the acquiree; and
(iv) gains (losses) recognized on non-controlling investment basis adjustments when we acquire or lose controlling interests;
(3) currency gains or losses on U.S. dollar denominated cash;
(4) Since adoption of new accounting guidance in the first quarter of 2018, the changes in fair value of equity investments (other than those accounted for under the equity method and those that are consolidated);
(5) certain other items, including restructuring charges;
(6) 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;
(7) discontinued operations;
(8) the non-controlling interest impact of the aforementioned adjustment items; and
(9) unrealized gains (losses) on revenue hedging activities that are included in other, net.
We believe Adjusted Net Income (Loss) is useful to investors because it represents Expedia Group's combined results, taking into account depreciation, which management believes is an ongoing cost of doing business, but excluding the impact of certain expenses and items not directly tied to the core operations of our businesses.

Adjusted EPS is defined as Adjusted Net Income (Loss) 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

Page 13 of 18



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, Expedia Group's 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 (Loss) and Adjusted EPS have similar limitations as Adjusted EBITDA. In addition, Adjusted Net Income (Loss) 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. We added additional detail for the capital expenditures associated with building our new headquarters facility in Seattle, Washington. We believe separating out capital expenditures for this discrete project is important to provide additional transparency to investors related to operating versus project-related capital expenditures. 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 Group 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 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.

Expedia Group, Inc. (excluding trivago) In order to provide increased transparency on the transaction-based component of the business, Expedia Group is reporting results both in total and excluding trivago.

In addition, we evaluate certain operating and financial measures, including revenue growth, on both an as-reported and excluding the impact of foreign exchange, FX neutral, basis. FX neutral results are among the primary metrics by which management evaluates the performance of the business and management believes that investors should have access to the same set of tools that management uses to analyze our results. We estimate FX neutral revenue growth by (i) excluding the FX impacts resulting from the time period between a transaction's booking date and revenue recognition date for both the current and prior year periods, and (ii) converting our current-year period results for transactions recorded in currencies other than U.S. Dollars using the corresponding prior-year period exchange rates rather than the current-year period exchange rates.


Page 14 of 18



Tabular Reconciliations for Non-GAAP Measures
Adjusted EBITDA (Adjusted Earnings Before Interest, Taxes, Depreciation & Amortization) by Segment(1) 
 
Three months ended March 31, 2019
 
Core OTA
 
trivago
 
Vrbo
 
Egencia
 
Corporate &
Eliminations
 
Total
 
(In millions)
Operating income (loss)
$
249

 
$
21

 
$
(63
)
 
$
16

 
$
(354
)
 
$
(131
)
Realized gain (loss) on revenue hedges
3

 

 

 

 

 
3

Restructuring and related reorganization charges

 

 

 

 
10

 
10

Legal reserves, occupancy tax and other

 

 

 

 
10

 
10

Stock-based compensation

 

 

 

 
56

 
56

Amortization of intangible assets

 

 

 

 
52

 
52

Depreciation
92

 
3

 
23

 
13

 
45

 
176

Adjusted EBITDA(1)
$
344

 
$
24

 
$
(40
)
 
$
29

 
$
(181
)
 
$
176

 
Three months ended March 31, 2018
 
Core OTA
 
trivago
 
Vrbo
 
Egencia
 
Corporate &
Eliminations
 
Total
 
(In millions)
Operating income (loss)
$
243

 
$
(31
)
 
$
(35
)
 
$
16

 
$
(358
)
 
$
(165
)
Realized gain (loss) on revenue hedges
(3
)
 

 

 

 

 
(3
)
Legal reserves, occupancy tax and other

 

 

 

 
3

 
3

Stock-based compensation

 

 

 

 
50

 
50

Amortization of intangible assets

 

 

 

 
72

 
72

Depreciation
83

 
3

 
14

 
11

 
56

 
167

Adjusted EBITDA(1)
$
323

 
$
(28
)
 
$
(21
)
 
$
27

 
$
(177
)
 
$
124

(1) Adjusted EBITDA for our Core OTA and Egencia segments includes allocations of certain expenses, primarily cost of revenue and facilities. Our Core OTA segment includes the total costs of our global supply organizations and Core OTA and Vrbo include 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, 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.

Operating Loss excluding trivago
 
 
Three months ended
March 31,
 
 
2019
 
2018
 
 
(In millions)
Operating loss
 
$
(131
)
 
$
(165
)
Less: trivago operating income (loss)(1)
 
15

 
(36
)
Operating loss excluding trivago
 
$
(146
)
 
$
(129
)
(1) Included within trivago's standalone operating income (loss) is trivago's stock-based compensation and intangible amortization, both of which are excluded from our segment performance measure, Adjusted EBITDA, and allocated to Corporate & Eliminations in the Adjusted EBITDA by Segment table above. For the three months ended March 31, 2019 and 2018, trivago's standalone stock-based compensation was $6 million for both periods. For the three months ended March 31, 2019 and 2018, trivago's standalone intangible amortization was less than $1 million for both periods.

Page 15 of 18



Adjusted EBITDA (Adjusted Earnings Before Interest, Taxes, Depreciation & Amortization)
 
 
 
Three months ended
March 31,
 
 
2019
 
2018
 
 
(In millions)
Net loss attributable to Expedia Group, Inc.
 
$
(103
)
 
$
(137
)
Net income (loss) attributable to non-controlling interests
 
3

 
(12
)
Provision for income taxes
 
(41
)
 
(20
)
Total other expense, net
 
10

 
4

Operating loss
 
(131
)
 
(165
)
Gain (loss) on revenue hedges related to revenue recognized
 
3

 
(3
)
Restructuring and related reorganization charges
 
10

 

Legal reserves, occupancy tax and other
 
10

 
3

Stock-based compensation
 
56

 
50

Amortization of intangible assets
 
52

 
72

Depreciation
 
176

 
167

Adjusted EBITDA
 
$
176

 
$
124


Adjusted Net Income & Adjusted EPS
 
 
Three months ended
March 31,
 
 
2019
 
2018
 
 
(In millions, except share and per share data)
Net loss attributable to Expedia Group, Inc.
 
$
(103
)
 
$
(137
)
Amortization of intangible assets
 
52

 
72

Stock-based compensation
 
56

 
50

Legal reserves, occupancy tax and other
 
10

 
3

Restructuring and related reorganization charges
 
10

 

Unrealized (gain) loss on revenue hedges
 
10

 
(7
)
Gain on minority equity investments, net
 
(22
)
 
(37
)
Release of a non-operating liability
 
(12
)
 

Provision for income taxes
 
(39
)
 
(9
)
Non-controlling interests
 
(2
)
 
(4
)
Adjusted net loss attributable to Expedia Group, Inc.
 
(40
)
 
(69
)
Less: Adjusted net income (loss) attributable to trivago
 
12

 
(15
)
Adjusted net loss excluding trivago
 
$
(52
)
 
$
(54
)
 
 
 
 
 
GAAP weighted average shares outstanding (000's)(1)
 
147,882

 
151,817

Additional dilutive securities (000's)
 

 

Adjusted weighted average shares outstanding (000's)
 
147,882

 
151,817