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Expedia Group Reports Third Quarter 2023 Results

November 2, 2023 4:01 PM

Posts record revenue and profitability

Reiterates full year guidance of double-digit topline growth with margin expansion

Announces new $5 billion share repurchase authorization

SEATTLE--(BUSINESS WIRE)-- Expedia Group, Inc. (NASDAQ: EXPE) announced financial results today for the third quarter ended September 30, 2023.

"Our strong third quarter results with record revenue and profitability came in ahead of our guidance and reflect the resilience of travel demand and continued improvements stemming from the execution of our strategy. Our B2B business continues to demonstrate strong year-over-year revenue growth, while more importantly, our B2C revenue growth accelerated over 400 basis points sequentially. Our new unified loyalty program, One Key, is showing good early results following its July launch in the US. In addition, we have just completed the final leg of the Vrbo migration to our single front-end stack,” said Peter Kern, Vice Chairman and CEO, Expedia Group. “With the last of our major migrations behind us, we are now well positioned to further accelerate our business and drive stronger shareholder returns. To that end, we have completed a record $1.8 billion in share repurchases year-to-date and have a new $5 billion share repurchase authorization from our Board.”

Third Quarter Highlights

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

Expedia Group, Inc.

Metric

Q3 2023

Q3 2022

Δ Y/Y

Booked room nights

89.3

81.6

9%

Gross bookings

$25,685

$23,987

7%

Revenue

$3,929

$3,619

9%

Operating income

$607

$747

(19)%

Net income attributable to Expedia Group, Inc.

$425

$482

(12)%

Diluted earnings per share

$2.87

$2.98

(3)%

Adjusted EBITDA

$1,216

$1,079

13%

Adjusted net income

$778

$640

21%

Adjusted EPS

$5.41

$4.05

33%

Net cash used in operating activities

$(1,375)

$(997)

38%

Free cash flow

$(1,588)

$(1,167)

36%

* A reconciliation of non-GAAP financial measures to the most comparable GAAP measures is provided at the end of this release.

Conference Call

Expedia Group, Inc. will webcast a conference call to discuss third quarter 2023 financial results and certain forward-looking information on Thursday, November 2, 2023 at 1:30 p.m. Pacific Time (PT). The webcast will be open to the public and available via ir.expediagroup.com. Expedia Group expects to maintain access to the webcast on the IR website for approximately twelve months subsequent to the initial broadcast.

About Expedia Group

Expedia Group, Inc. (NASDAQ: EXPE) companies power travel for everyone, everywhere through our global platform. Driven by the core belief that travel is a force for good, we help people experience the world in new ways and build lasting connections. Our organization is made up of three pillars: Expedia Product and Technology, focused on the group’s product and technical strategy and offerings; Expedia Brands, housing all our consumer brands; and Expedia for Business, consisting of business-to-business solutions and relationships throughout the travel ecosystem. The Expedia Group family of brands includes: Expedia®, Hotels.com®, Expedia® Partner Solutions, Vrbo®, trivago®, Orbitz®, Travelocity®, Hotwire®, Wotif®, ebookers®, CheapTickets®, Expedia Group™ Media Solutions, CarRentals.com™, and Expedia Cruises™.

© 2023 Expedia, Inc., an Expedia Group company. All rights reserved. Trademarks and logos are the property of their respective owners. CST: 2029030-50

Expedia Group, Inc.
Trended Metrics
(All figures in millions)
The 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 or methodology of any of our supplemental metrics are subject to change, and such changes could be material. We may also discontinue certain supplemental metrics as our business evolves over time. In the event of any discrepancy between any supplemental metric and our historical financial statements, you should rely on the information included in the financial statements filed with or furnished to the SEC.

2021

2022

2023

Full Year

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

2021

2022

Units sold

Booked room nights

54.0

68.4

65.4

59.7

77.0

82.5

81.6

70.8

94.5

89.7

89.3

247.5

312.0

Booked air tickets

8.9

13.4

12.7

11.3

13.1

13.5

12.2

11.1

14.0

13.6

12.8

46.3

49.9

Gross bookings by business model

Agency

$6,737

$10,362

$8,855

$8,325

$11,346

$12,773

$10,904

$9,469

$13,425

$12,370

$10,927

$34,279

$44,492

Merchant

8,685

10,453

9,870

9,138

13,066

13,366

13,083

11,042

15,976

14,951

14,758

38,146

50,557

Total

$15,422

$20,815

$18,725

$17,463

$24,412

$26,139

$23,987

$20,511

$29,401

$27,321

$25,685

$72,425

$95,049

Lodging gross bookings

$12,002

$14,431

$13,046

$12,000

$17,756

$17,867

$17,099

$14,117

$21,055

$19,167

$18,513

$51,479

$66,839

Revenue by segment

B2C

$1,025

$1,715

$2,351

$1,730

$1,740

$2,420

$2,707

$1,874

$1,921

$2,415

$2,819

$6,821

$8,741

B2B

184

305

490

481

432

650

788

676

668

861

995

1,460

2,546

trivago (third-party revenue)

37

91

121

68

77

111

124

68

76

82

115

317

380

Total

$1,246

$2,111

$2,962

$2,279

$2,249

$3,181

$3,619

$2,618

$2,665

$3,358

$3,929

$8,598

$11,667

Revenue by product

Lodging

$903

$1,533

$2,300

$1,713

$1,610

$2,400

$2,881

$2,014

$2,029

$2,698

$3,233

$6,449

$8,905

Air

50

78

61

65

74

95

100

93

113

111

100

254

362

Advertising and media(1)

88

161

202

152

166

213

222

176

175

201

240

603

777

Other(2)

205

339

399

349

399

473

416

335

348

348

356

1,292

1,623

Total

$1,246

$2,111

$2,962

$2,279

$2,249

$3,181

$3,619

$2,618

$2,665

$3,358

$3,929

$8,598

$11,667

Revenue by geography

U.S. points of sale

$1,001

$1,736

$2,177

$1,655

$1,656

$2,208

$2,358

$1,717

$1,748

$2,172

$2,440

$6,569

$7,939

Non-U.S. points of sale

245

375

785

624

593

973

1,261

901

917

1,186

1,489

2,029

3,728

Total

$1,246

$2,111

$2,962

$2,279

$2,249

$3,181

$3,619

$2,618

$2,665

$3,358

$3,929

$8,598

$11,667

Adjusted EBITDA by segment(3)

B2C

$106

$316

$879

$481

$188

$582

$943

$411

$148

$653

$1,056

$1,782

$2,124

B2B

(57)

(4)

74

97

80

156

221

142

133

206

266

110

599

Other(4)

(107)

(111)

(98)

(99)

(95)

(90)

(85)

(104)

(96)

(112)

(106)

(415)

(374)

Total

$(58)

$201

$855

$479

$173

$648

$1,079

$449

$185

$747

$1,216

$1,477

$2,349

Net income (loss) attributable to Expedia Group common stockholders(5)

$(606)

$(301)

$362

$276

$(122)

$(185)

$482

$177

$(145)

$385

$425

$(269)

$352

(1) Our advertising and media business consists of Expedia Group Media Solutions, which is responsible for generating advertising revenue on our global online travel brands, and trivago, a leading hotel metasearch site.
(2) Other revenue primarily includes insurance, car rental, destination services and cruise revenue.
(3) See the section below titled "Tabular Reconciliations for Non-GAAP Measures — Adjusted EBITDA by segment" for additional details.
(4) Other is comprised of trivago, corporate and intercompany eliminations.
(5) Expedia Group does not calculate or report net income (loss) by segment.

Notes:

  • All trivago revenue is classified as Non-U.S. point of sale.
  • B2B includes Egencia, our former full-service travel management company, through its sale in November 2021.
  • Some numbers may not add due to rounding. All percentages throughout this release are calculated on precise, unrounded numbers.

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,

2023

2022

2023

2022

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 amortization

208

199

599

593

Impairment of goodwill

297

297

Impairment of intangible assets

15

52

15

81

Legal reserves, occupancy tax and other

6

23

Operating income

607

747

929

957

Other income (expense):

Interest income

56

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 taxes

444

690

847

355

Provision for income taxes

(139

)

(214

)

(295

)

(187

)

Net income

305

476

552

168

Net loss attributable to non-controlling interests

120

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

Diluted

2.87

2.98

4.37

1.08

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

Basic

142,228

157,628

147,253

157,100

Diluted

147,748

161,829

152,172

162,495

(1) Includes stock-based compensation as follows:

Cost of revenue

$

3

$

4

$

10

$

10

Selling and marketing

20

18

60

50

Technology and content

35

28

105

82

General and administrative

47

47

139

138

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

September 30,
2022

(Unaudited)

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

5,056

$

4,096

$

4,588

Restricted cash and cash equivalents

1,436

1,755

1,778

Short-term investments

48

49

Accounts receivable, net of allowance of $52, $40 and $61

2,753

2,078

1,991

Income taxes receivable

84

40

65

Prepaid expenses and other current assets

765

774

799

Total current assets

10,094

8,791

9,270

Property and equipment, net

2,354

2,210

2,169

Operating lease right-of-use assets

330

363

360

Long-term investments and other assets

1,155

1,184

1,122

Deferred income taxes

595

661

626

Intangible assets, net

1,149

1,209

1,223

Goodwill

6,845

7,143

7,109

TOTAL ASSETS

$

22,522

$

21,561

$

21,879

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable, merchant

$

1,887

$

1,709

$

1,535

Accounts payable, other

1,130

947

1,132

Deferred merchant bookings

8,394

7,151

7,457

Deferred revenue

167

163

160

Income taxes payable

108

21

46

Accrued expenses and other current liabilities

874

787

789

Total current liabilities

12,560

10,778

11,119

Long-term debt

6,250

6,240

6,237

Deferred income taxes

34

52

50

Operating lease liabilities

288

312

315

Other long-term liabilities

464

451

445

Commitments and contingencies

Stockholders’ equity:

Common stock: $.0001 par value; Authorized shares: 1,600,000

Shares issued: 280,957, 278,264 and 277,607; Shares outstanding: 134,331, 147,757 and 150,966

Class B common stock: $.0001 par value; Authorized shares: 400,000

Shares issued: 12,800; Shares outstanding: 5,523

Additional paid-in capital

15,227

14,795

14,674

Treasury stock - Common stock and Class B, at cost; Shares 153,903, 137,783 and 133,917

(12,550

)

(10,869

)

(10,503

)

Retained earnings (deficit)

(764

)

(1,409

)

(1,586

)

Accumulated other comprehensive income (loss)

(240

)

(234

)

(317

)

Total Expedia Group, Inc. stockholders’ equity

1,673

2,283

2,268

Non-redeemable non-controlling interests

1,253

1,445

1,445

Total stockholders’ equity

2,926

3,728

3,713

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

22,522

$

21,561

$

21,879

EXPEDIA GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

Nine months ended
September 30,

2023

2022

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 development

555

527

Amortization of intangible assets

44

66

Impairment of goodwill and intangible assets

312

81

Amortization of stock-based compensation

314

280

Deferred income taxes

49

106

Foreign exchange loss on cash, restricted cash and short-term investments, net

32

193

Realized loss on foreign currency forwards, net

35

170

Loss on minority equity investments, net

73

423

Gain on debt extinguishment, net

(49

)

Other, net

34

(26

)

Changes in operating assets and liabilities:

Accounts receivable

(704

)

(748

)

Prepaid expenses and other assets

43

31

Accounts payable, merchant

178

202

Accounts payable, other, accrued expenses and other liabilities

223

422

Tax payable/receivable, net

(55

)

6

Deferred merchant bookings

1,243

1,770

Net cash provided by operating activities

2,928

3,622

Investing activities:

Capital expenditures, including internal-use software and website development

(669

)

(485

)

Purchases of investments

(60

)

Sales and maturities of investments

49

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 plan

53

125

Other, net

17

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 equivalents

641

561

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

5,851

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, net

228

71

Notes & Definitions:

Booked Room Nights: Represents booked hotel room nights and property nights for our B2C reportable segment and booked hotel room nights for our B2B reportable segment. Booked hotel room nights include both merchant and agency hotel room nights. Property nights are related to our alternative accommodation business.

Booked Air Tickets: Includes both merchant and agency air 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.

Lodging Metrics: Reported on a booked basis except for revenue, which is on a stayed basis. Lodging consists of both merchant and agency model hotel and alternative accommodations.

B2C: The B2C segment (formerly referred to as Retail) provides a full range of travel and advertising services to our worldwide customers through a variety of consumer brands including: Expedia, Hotels.com, Vrbo, Orbitz, Travelocity, Wotif Group, ebookers, Hotwire.com, and CarRentals.com.

B2B: The B2B segment is comprised primarily of Expedia Partner Solutions, which operates private label and co-branded programs to make travel services available through third-party company branded websites and Egencia through its sale on November 1, 2021. The B2B segment also includes Expedia Cruises and Traveldoo.

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.

Corporate: Includes unallocated corporate expenses.

Non-GAAP Measures

Expedia Group reports Adjusted EBITDA, Adjusted EBITDA Margin, Leverage Ratio, 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.

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,
(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.

Trailing Twelve Month Financial Information

Expedia Group includes certain unaudited financial information for the trailing twelve months ("TTM") ended September 30, 2023, which is calculated as the nine months ended September 30, 2023 plus the year ended December 31, 2022 less the nine months ended September 30, 2022. This presentation is not in accordance with GAAP. However, we believe that this presentation provides useful information to investors regarding its recent financial performance, and it views this presentation of the four most recently completed fiscal quarters as a key measurement period for investors to assess its historical results.

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(a):

(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) the changes in fair value of equity investments;
(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.
Adjusted Net Income (Loss) includes preferred share dividends. 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.

(a)Effective January 1, 2023, we changed our methodology for the computation of the effective tax rate on pretax adjusted net income to a long-term projected tax rate as our management believes this tax rate provides better consistency across reporting periods and produces results that are reflective of Expedia Group’s long-term effective tax rate. This projected effective tax rate excludes the income tax effects of Adjusted Net Income items described above and eliminates the effects of non-recurring and period specific items which can vary in size and frequency. Based on our current long-term projections, we are using an effective tax rate on pretax adjusted net income of 21.5% for 2023.

Adjusted EPS is defined as Adjusted Net Income (Loss) divided by adjusted weighted average shares outstanding, which, when applicable, include dilution from our convertible debt instruments per the treasury stock method for Adjusted EPS. The treasury stock method assumes we would elect to settle the principal amount of the debt for cash and the conversion premium for shares. If the conversion prices for such instruments exceed our average stock price for the period, the instruments generally would have no impact to adjusted weighted average shares outstanding. This differs from the GAAP method for dilution from our convertible debt instruments, which include them on an if-converted method. 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. 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, direct and indirect 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. Expedia Group excludes stock-based compensation 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. There are certain limitations in using financial measures that do not take into account stock-based compensation, including the fact that stock-based compensation is a recurring expense and a valued part of employees' compensation. 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 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.

Tabular Reconciliations for Non-GAAP Measures

Adjusted EBITDA (Adjusted Earnings Before Interest, Taxes, Depreciation & Amortization) by Segment(1)

Three months ended September 30, 2023

B2C

B2B

trivago

Corporate &
Eliminations

Total

(In millions)

Operating income

$

935

$

237

$

16

$

(581

)

$

607

Realized gain (loss) on revenue hedges

(16

)

(16

)

Stock-based compensation

105

105

Amortization of intangible assets

14

14

Depreciation

137

29

2

26

194

Impairment of goodwill

297

297

Impairment of intangible assets

15

15

Adjusted EBITDA(1)

$

1,056

$

266

$

18

$

(124

)

$

1,216

Three months ended September 30, 2022

B2C

B2B

trivago

Corporate &

Eliminations

Total

(In millions)

Operating income

$

827

$

205

$

32

$

(317

)

$

747

Realized gain (loss) on revenue hedges

(10

)

(6

)

(16

)

Stock-based compensation

97

97

Amortization of intangible assets

23

23

Depreciation

126

22

2

26

176

Impairment of intangible assets

52

52

Adjusted EBITDA(1)

$

943

$

221

$

34

$

(119

)

$

1,079

(1) Adjusted EBITDA for our B2C and B2B segments includes allocations of certain expenses, primarily cost of revenue and facilities, the total costs of our global travel supply organizations, the majority of platform and marketplace technology 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.

Adjusted EBITDA (Adjusted Earnings Before Interest, Taxes, Depreciation & Amortization)

Three months ended
September 30,

Nine months ended
September 30,

Year Ended
December 31,

TTM
September 30,

2023

2022

2023

2022

2022

2023

($ in millions)

Net income attributable to Expedia Group, Inc.

$

425

$

482

$

665

$

175

$

352

$

842

Net loss attributable to non-controlling interests

(120

)

(6

)

(113

)

(7

)

(9

)

(115

)

Provision for income taxes

139

214

295

187

195

303

Total other expense, net

163

57

82

602

547

27

Operating income

607

747

929

957

1,085

1,057

Gain (loss) on revenue hedges related to revenue recognized

(16

)

(16

)

(12

)

(34

)

(6

)

16

Legal reserves, occupancy tax and other

6

23

23

6

Stock-based compensation

105

97

314

280

374

408

Depreciation and amortization

208

199

599

593

792

798

Impairment of goodwill

297

297

297

Impairment of intangible assets

15

52

15

81

81

15

Adjusted EBITDA

$

1,216

$

1,079

$

2,148

$

1,900

$

2,349

$

2,597

Net income margin(1)

10.8

%

13.3

%

6.7

%

1.9

%

3.0

%

6.7

%

Adjusted EBITDA margin(1)

30.9

%

29.8

%

21.6

%

21.0

%

20.1

%

20.7

%

Long-term debt

$

6,250

Long-term debt to net income ratio

7.4

Long-term debt

$

6,250

Unamortized discounts and debt issuance costs

44

Adjusted debt

$

6,294

Leverage ratio(2)

2.4

(1) Net income and Adjusted EBITDA margins represent net income (loss) attributable to Expedia Group, Inc. or Adjusted EBITDA divided by revenue.

(2) Leverage ratio represents adjusted debt divided by TTM Adjusted EBITDA.

Adjusted Net Income (Loss) & Adjusted EPS

Three months ended
September 30,

Nine months ended
September 30,

2023

2022

2023

2022

(In millions, except share and per share data)

Net income attributable to Expedia Group, Inc.

$

425

$

482

$

665

$

175

Less: Net loss attributable to non-controlling interests

120

6

113

7

Less: Provision for income taxes

(139

)

(214

)

(295

)

(187

)

Income before income taxes

444

690

847

355

Amortization of intangible assets

14

23

44

66

Stock-based compensation

105

97

314

280

Legal reserves, occupancy tax and other

6

23

Impairment of goodwill

297

297

Impairment of intangible assets

15

52

15

81

Unrealized (gain) loss on revenue hedges

(4

)

(9

)

11

(15

)

Loss on minority equity investments, net

127

71

73

423

Gain on debt extinguishment, net

(73

)

(49

)

TripAdvisor tax indemnification adjustment

(67

)

Gain on sale of business

(24

)

(2

)

Adjusted income before income taxes

998

851

1,516

1,162

GAAP Provision for income taxes

(139

)

(214

)

(295

)

(187

)

Provision for income taxes for adjustments

(76

)

12

(31

)

(74

)

Total Adjusted provision for income taxes

(215

)

(202

)

(326

)

(261

)

Total Adjusted income tax rate

21.5

%

23.7

%

21.5

%

22.5

%

Non-controlling interests

(5

)

(9

)

(14

)

(25

)

Adjusted net income attributable to Expedia Group, Inc.

$

778

$

640

$

1,176

$

876

GAAP diluted weighted average shares outstanding (000's)

147,748

161,829

152,172

162,495

Adjustment to dilutive securities (000's)

(3,921

)

(3,921

)

(3,921

)

(3,921

)

Adjusted weighted average shares outstanding (000's)

143,827

157,908

148,251

158,574

GAAP diluted earnings per share

$

2.87

$

2.98

$

4.37

$

1.08

Adjusted earnings per share attributable to Expedia Group, Inc.

$

5.41

$

4.05

$

7.93

$

5.53

Ex-trivago Adjusted Net Income and Adjusted EPS

Adjusted net income attributable to Expedia Group, Inc.

$

778

$

640

$

1,176

$

876

Less: Adjusted net income attributable to trivago

9

17

25

46

Adjusted net income excluding trivago

$

769

$

623

$

1,151

$

830

Adjusted earnings per share attributable to Expedia Group, Inc.

$

5.41

$

4.05

$

7.93

$

5.53

Less: Adjusted earnings per share attributable to trivago

0.06

0.11

0.17

0.29

Adjusted earnings per share excluding trivago

$

5.35

$

3.94

$

7.76

$

5.23

Free Cash Flow

Three months ended
September 30,

Nine months ended
September 30,

2023

2022

2023

2022

(In millions)

Net cash provided by operating activities

$

(1,375

)

$

(997

)

$

2,928

$

3,622

Less: Total capital expenditures

(213

)

(170

)

(669

)

(485

)

Free cash flow

$

(1,588

)

$

(1,167

)

$

2,259

$

3,137

Adjusted Expenses (Cost of revenue, direct and indirect selling and marketing, technology and content and general and administrative expenses)

Three months ended

September 30,

Nine months ended

September 30,

2023

2022

2023

2022

(In millions)

Cost of revenue

$

412

$

455

$

1,233

$

1,245

Less: stock-based compensation

3

4

10

10

Adjusted cost of revenue

$

409

$

451

$

1,223

$

1,235

Less: trivago cost of revenue(1)

5

5

14

13

Adjusted cost of revenue excluding trivago

$

404

$

446

$

1,209

$

1,222

Selling and marketing expense - direct

$

1,671

$

1,504

$

4,737

$

4,229

Selling and marketing expense - indirect

185

165

563

495

Selling and marketing expense

1,856

1,669

5,300

4,724

Less: stock-based compensation

20

18

60

50

Adjusted selling and marketing expense

$

1,836

$

1,651

$

5,240

$

4,674

Less: trivago selling and marketing expense(1)(2)

74

68

149

148

Adjusted selling and marketing expense excluding trivago

$

1,762

$

1,583

$

5,091

$

4,526

Technology and content expense

$

340

$

310

$

1,001

$

864

Less: stock-based compensation

35

28

105

82

Adjusted technology and content expense

$

305

$

282

$

896

$

782

Less: trivago technology and content expense(1)

11

11

34

36

Adjusted technology and content expense excluding trivago

$

294

$

271

$

862

$

746

General and administrative expense

$

194

$

187

$

572

$

562

Less: stock-based compensation

47

47

139

138

Adjusted general and administrative expense

$

147

$

140

$

433

$

424

Less: trivago general and administrative expense(1)

7

7

24

23

Adjusted general and administrative expense excluding trivago

$

140

$

133

$

409

$

401

Total adjusted overhead expenses(3)

$

617

$

569

$

1,832

$

1,651

Note: Some numbers may not add due to rounding.

(1) trivago amount presented without stock-based compensation as those are included with the consolidated totals above.

(2) Selling and marketing expense adjusted to add back B2C direct marketing spend on trivago eliminated in consolidation.

(3) Total adjusted overhead expenses is the sum of adjusted expenses for Selling and marketing - indirect, Technology and content, and General and administrative.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

This release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These forward-looking statements are based on assumptions that are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. The use of words such as “believe,” “estimate,” “expect” and “will,” or the negative of these terms or other similar expressions, among others, generally identify forward-looking statements. However, these words are not the exclusive means of identifying such statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements and may include statements relating to future revenues, expenses, margins, profitability, net income (loss), earnings per share and other measures of results of operations and the prospects for future growth of Expedia Group, Inc.’s business. Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, those described in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our most recently filed periodic reports on Form 10-K and Form 10-Q, which are available on our investor relations website at ir.expediagroup.com and on the SEC website at www.sec.gov. All information provided in this release is as of November 2, 2023. Undue reliance should not be placed on forward-looking statements in this release, which are based on information available to us on the date hereof. We undertake no duty to update this information unless required by law.

Investor Relations

[email protected]

Communications

[email protected]

Source: Expedia Group, Inc.

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