Traveling is an important part of a human’s life. Organization of a traveling schedule is also a tough task. Therefore, if the organizing part becomes hassle free then traveling becomes more pleasurable. Expedia Inc. (EXPE, Financial) is one of the largest travel companies in the world. The company provides exclusive travel solutions to its valued customers. Expedia’s portfolio of travel brands features a supply portfolio including more than 260,000 hotels in 200 countries, 400 airlines, packages, rental cars, cruises, as well as destination services and activities.
Its portfolio of brands includes Expedia.com, a service online travel agency; Hotels.com, a hotel-only booking service; Hotwire.com, a discount travel provider; CarRentals.com, the premier car rental booking company on the web; Expedia Affiliate Network, which powers travel for travel and nontravel brands; luxury travel specialist Classic Vacations and destination services and concierge services provider Expedia Local Expert.
It has 200-plus travel booking sites in more than 70 countries. It has 150-plus mobile websites in nearly 70 countries and 35 languages. With 18,000-plus employees in more than 30 countries, it derives around 45% of its revenue from the international segment.
Expedia reported strong third-quarter results. It is the global leader in this market with strong offline-to-online trends. It has significant growth opportunities across geographies. The company’s diversifying revenue mix reduces risk and positions the business for growth. Expedia is the global leader and has significant room for further growth. It is rapidly expanding in the fragmented hotel segment of the travel industry and has completed significant technology investments that fortify the business.
Strong third quarter
Room night growth excluding eLong accelerated to 36% year over year, with domestic and international room nights growing 25% and 50% year over year.
Gross bookings excluding eLong increased 21%, and revenue excluding eLong increased 16% year over year. Excluding the impact of foreign exchange, gross bookings increased 26%, and revenue increased 27% year over year.
Solid performance in the Core OTA segment drove growth in Expedia (excluding eLong) Adjusted EBITDA of 13% year over year.
Advertising and Media revenue excluding eLong delivered more than $538 million in net revenue on a trailing 12 months basis, an increase of 23% year over year, driven by growth in trivago and Expedia Media Solutions.
During the third quarter, Expedia added more than 14,000 properties to its global supply portfolio, which now stands at approximately 271,000 properties available on Expedia sites, an increase of 29% compared to the third quarter of 2014.
On Sept. 17 Expedia completed its acquisition of Orbitz Worldwide Inc., including all of its brands and assets, for an enterprise value of approximately $1.6 billion. Results include 14 days of Orbitz financials for the third quarter unless otherwise noted.
Total gross bookings increased by 21% (26% excluding foreign exchange) in the third quarter. Domestic gross bookings increased by 22%, and international gross bookings increased 19% (37% excluding foreign exchange). International bookings totaled $5.8 billion and accounted for 38% of worldwide bookings, consistent with the third quarter of 2014.
Total revenue increased by 16% (27% excluding foreign exchange) in the third quarter. Acquisitions added approximately six percentage points of inorganic revenue growth for the quarter. Domestic revenue increased by18%, and international revenue increased 15%. International revenue equaled $890 million, representing 46% of worldwide revenue, which was 47% in the prior year quarter.
As a percentage of total worldwide revenue in the third quarter, hotel accounted for 72%, advertising and media accounted for 8%, air accounted for 7% and all other revenues accounted for the remaining 13%.
Hotel revenue increased 17% in the third quarter on a 36% increase in room nights stayed driven by Brand Expedia and Hotels.com.
Air revenue increased 19% in the third quarter due to a 31% increase in air tickets sold, partially offset by a 9% decrease in revenue per ticket.
Advertising and media revenue increased by 17% in the third quarter.
Total adjusted cost of revenue increased by 14% in the third quarter compared to the third quarter of 2014, due to $14 million more in data center and other costs, $14 million more in credit card processing costs, primarily due to an increase in transaction volumes (offset by a decrease in fraud and chargeback expenses) as well as $12 million more in customer operations expenses.
Total adjusted selling and marketing expense increased by 20% in the third quarter. Brand Expedia, trivago, Hotels.com and Hotwire accounted for a majority of the total increase in direct selling and marketing expenses.
Indirect costs increased $26 million or 21% in the third quarter.
Total adjusted technology and content expense increased 18% in the third quarter.
Total adjusted general and administrative expense increased 24% in the third quarter.
For the third quarter, depreciation expense of $87 million increased $21 million or 33%.
The consolidated effective tax rate was 19.3%.
Cash, cash equivalents, restricted cash and short-term investments totaled $1.5 billion as of Sept. 30.
Long-term debt totaled $2.5 billion as of Sept. 30.
During the first nine months, Expedia repurchased 0.5 million shares of Expedia common stock for an aggregate purchase price of $45 million excluding transaction costs (an average of $85.27 per share). As of Sept. 30, there were approximately 11.2 million shares remaining under the April 2012 and the February repurchase authorizations.
On Sept. 17, Expedia paid a quarterly dividend of $31 million (24 cents per common share). In addition, on Oct. 29, the executive committee of Expedia’s board of directors declared a cash dividend of 24 cents per share of outstanding common stock to be paid to stockholders of record as of the close of business on Nov. 19 with a payment date of Dec. 10.
(Source: Company’s Website)
Focus
The company is currently focusing on the following:
- Innovation.
- Brand building.
- Marketplace execution.
- Pricing actions.
- Optimizing global sourcing.
- Focus on emerging markets.
On a concluding note
The company delivers consumers value in leisure and business travel, drives incremental demand and direct bookings to travel suppliers and provides advertisers the opportunity to reach a highly valuable audience of in-market consumers through Expedia Media Solutions. Expedia was listed on Fortune magazine’s list of Most Admired Companies in 2014, ranking #7 in the Internet Services & Retailing industry and topped the 2014 Travel Weekly Power List, an annual ranking of the leading travel companies.
Overall the travel market is healthy, and Expedia has significant growth opportunities. Further, the company has a powerful free cash flow generation and a solid track record of disciplined capital allocation. Expedia has a solid stock price performance with a notable return on equity. Its valuation levels are also reasonable, and profit margins are also expanding. Expedia will continue its trend and won’t let its valued investors as well as customers down in the long run.
Disclosure: I do not hold any position in the company.
