Expedia (EXPE, Financial), the world's largest online travel company, offers travel products and services to a wide base of customers.
Consumers are more interested in booking their dream trips at lower prices these days. With an extensive brand portfolio, Expedia intends to grow its business through the addition of a dynamic portfolio of travel brands. It includes online travel brands like Expedia.com, Hotels.com, trivago, HomeAway, etc.
The company’s third quarter was marked by increases in gross bookings and revenues. The company benefited from the acquisitions of Orbitz Worldwide (FRA:32O, Financial) and HomeAway (AWAY, Financial). There was growth in Brand Expedia and Hotels.com as well as in Egencia. There was an increase of 15% in hotel revenue during the third quarter.
Third quarter results
Gross bookings during the third quarter increased by 21%. Domestic increased by 23%, and international increased by 17%.
Total Expedia revenue during the quarter was $2.581 billion (which was an increase of 33% from $1.938 billion in the prior-year quarter). International revenue during the quarter was $1.1 billion.
Segmentwise revenues
- Domestic revenue increased 39%.
- International revenue increased 27%.
- Air revenue increased 52%.
- Advertising and media revenue increased 50%.
GAAP cost of revenues during the quarter increased by 27% from the prior-year quarter due to increase in customer operations expenses and net credit card processing costs. Total GAAP costs and expenses during the quarter were $2.089 billion.
GAAP selling and marketing expenses increased 28% during the quarter.
GAAP net income during the quarter was $283 million.
Operating income during the quarter was $386 million (which was $345 million during the prior-year quarter).
Basic EPS was $1.86 and diluted EPS was $1.81.
Adjusted EBITDA during the third quarter was $667 million (which marked an increase of 42% from $469 million in the prior-year quarter). Core OTA adjusted EBITDA increased by 21% in the third quarter of 2016.
Consolidated interest expense in the third quarter of 2016 increased by $10 million or 30% from the prior-year quarter.
The company had $1.9 billion as cash and cash equivalents as of Sept. 30, 2016.
Consolidated free cash flow increased by $61 million for the nine months ended Sept. 30, 2016.
During the third quarter it added over 14,000 properties to its existing global lodging portfolio, totaling 321,000 properties.
Debts
Total debts stood at $3.2 billion.
Share repurchases
During the first nine months of 2016, Expedia repurchased 3.2 million shares of common stock for an aggregate purchase price of $349 million excluding transaction costs (an average of $107.55 per share). As of Sept. 30, 2016, there were approximately 8.0 million shares remaining under the February 2015 repurchase authorization. (Source: company’s website)
Focus
- Improving its site.
- Expanding internationally.
- Drawing more people to its smartphone app.
- Enhancing its product offerings.
- Reaching consumers in markets beyond their reach.
Conclusion
This full-service online travel company has its presence felt almost all over the world. It boasts of a strong brand portfolio with global reach and targets a broad range of travelers. It has a huge global audience of travelers. It is growing the business by new channel penetration and innovation. All its leading brands have carved a niche in the market by having faster growth rates. All its brands have been able to attract new customers through mobile websites and mobile applications.
Consumers will never stop to book for online travel and so this company has a lot of opportunities. Expedia has been buying its competitors during the past some years. It aims to become the first $100 billion travel agency in the world. It plans to expand in Asia and Europe. In India it holds a lot of opportunities. The international market also holds great opportunities.
Everyone is going techno-savvy these days, and Expedia is looking to cash in on this trend. The app is of much use to the customers this way. It is on track to deliver good cashflows in the future. It is trying to reduce their overall marketing transaction and customer service costs while generating customer demand and revenue. The travel industry is characterized by stiff competition and is highly dynamic, but with disciplined capital allocation and fresh cashflow generation, the company is poised to grow.
Disclosure: I do not hold any position in the company.
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