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) October 30, 2014
EXPEDIA, INC.
(Exact name of registrant as specified in its charter)
Delaware | 000-51447 | 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
Registrants 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)) |
Item 2.02. | Results of Operations and Financial Condition. |
On October 30, 2014, Expedia, Inc. announced its financial results for the quarter ended September 30, 2014. The full text of this earnings release is furnished as Exhibit 99.1 hereto.
Expedia makes reference to non-GAAP financial measures in the earnings release, which also includes a reconciliation of such non-GAAP financial measures to the comparable GAAP financial measures.
Pursuant to General Instruction B.2. to Form 8-K, the information set forth in this Item 2.02 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 7.01. | Regulation FD Disclosure. |
Expedia management intends to make presentations to various investors, analysts and others during October, November and December of 2014 and January of 2015, using the slides containing company information attached to this report as Exhibit 99.2.
Pursuant to General Instruction B.2. to Form 8-K, the information set forth in this Item 7.01 shall not be deemed filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, or incorporated by reference in any filing under 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 October 30, 2014, Expedia announced that its Executive Committee, acting on behalf of its Board of Directors, has declared a quarterly cash dividend of $0.18 per share of outstanding common stock, payable on December 11, 2014 to stockholders of record as of the close of business on November 20, 2014.
Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits
Exhibit Number |
Description | |
99.1 | Press Release of Expedia, Inc., dated October 30, 2014 | |
99.2 | Expedia, Inc. Third Quarter 2014 Company Overview |
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, INC. | ||
By: | /s/ MARK D. OKERSTROM | |
Mark D. Okerstrom | ||
Chief Financial Officer |
Dated: October 30, 2014
EXHIBIT INDEX
Exhibit Number |
Description | |
99.1 | Press Release of Expedia, Inc., dated October 30, 2014 | |
99.2 | Expedia, Inc. Third Quarter 2014 Company Overview |
Exhibit 99.1
Expedia, Inc. Reports Third Quarter 2014 Results
BELLEVUE, WA October 30, 2014 Expedia, Inc. (NASDAQ: EXPE) today announced financial results for the third quarter ended September 30, 2014.
| Gross bookings growth of 29% and revenue growth of 22% were primarily driven by strong hotel room night and air ticket growth. Revenue growth was also driven by strength in advertising and media revenue which grew 29% to $141 million for the quarter. |
| Room nights grew 24% year-over-year, driven by continued strong performance at Brand Expedia® and Hotels.com®, with both domestic and international room nights increasing 24% year-over-year. |
| The combination of healthy top-line growth and leverage on fixed costs led to Adjusted EBITDA* improving 20% and Adjusted EPS* improving 35% compared to the third quarter of 2013. |
| Year to date, Expedia, Inc. repurchased 6.5 million shares of its common stock for approximately $492 million excluding transaction costs. |
Financial Summary & Operating Metrics (financial figures in $MMs except per share amounts)
Metric |
Quarter Ended 9.30.14 |
Quarter Ended 9.30.13 |
Y / Y Growth |
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Room night growth |
24 | % | 20 | % | 357 | bps | ||||||
Gross bookings |
13,469.6 | 10,436.7 | 29 | % | ||||||||
Revenue |
1,712.5 | 1,401.9 | 22 | % | ||||||||
Adjusted EBITDA* |
409.1 | 339.9 | 20 | % | ||||||||
Operating income |
296.8 | 238.7 | 24 | % | ||||||||
Adjusted net income* |
256.0 | 200.9 | 27 | % | ||||||||
Net income attributable to Expedia, Inc. |
257.1 | 170.9 | 50 | % | ||||||||
Adjusted EPS* |
$ | 1.93 | $ | 1.43 | 35 | % | ||||||
Diluted EPS |
$ | 1.94 | $ | 1.22 | 59 | % | ||||||
Free cash flow * |
19.4 | (301.8 | ) | NM |
* | Adjusted EBITDA (Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization), Adjusted net income, Adjusted EPS and Free cash flow are non-GAAP measures as defined by the Securities and Exchange Commission (the SEC). Please see Definitions of Non-GAAP Measures and Tabular Reconciliations for Non-GAAP Measures on pages 10-13 herein for an explanation of non-GAAP measures used throughout this release. The definition for adjusted net income was revised in the fourth quarters of 2010, 2011 and 2012 and the definition for Adjusted EBITDA was revised in the fourth quarter of 2012. |
Please refer to the Glossary in the Quarterly Results section on Expedias investor relations website for definitions of the business and financial terms discussed within this release.
Page 1 of 15
Discussion of Results
The results include Expedia.com®, Hotels.com, Hotwire.com®, Expedia® Affiliate Network, Classic Vacations®, Expedia Local Expert®, Expedia® CruiseShipCenters®, Egencia®, eLong, Venere® Net SpA, trivago GmbH, and CarRentals.com, in addition to the related international points of sale.
Expedia and AirAsia formed a joint venture on July 1, 2011, which is 50% owned by Expedia; therefore, results do not include the Brand Expedia websites contributed to the joint venture.
The results include trivago GmbH (trivago) following acquisition of a controlling interest during March 2013 as well as results from the strategic marketing agreement with Travelocity launched during the fourth quarter of 2013. Unless otherwise noted, all comparisons below are versus the third quarter of 2013.
Gross Bookings, Revenue & Revenue Margins
For the third quarter of 2014, gross bookings increased 29% (29% excluding foreign exchange) primarily driven by room night and air ticket growth. Room night growth was driven by Brand Expedia including the Travelocity-branded websites and Hotels.com. Air ticket growth was driven by Brand Expedia including the Travelocity-branded websites.
For the third quarter of 2014, domestic gross bookings increased 35% and international gross bookings increased 22% (22% excluding foreign exchange). International bookings totaled $5.6 billion, accounting for 42% of worldwide bookings versus 44% in the third quarter of 2013. The decrease in international gross bookings mix was primarily due to the inclusion of the Travelocity-branded websites, which bolstered domestic gross bookings.
For the third quarter of 2014, revenue increased 22% (21% excluding foreign exchange) primarily driven by growth in hotel and advertising and media revenue. Domestic revenue increased 20% and international revenue increased 25% (24% excluding foreign exchange). International revenue equaled $824 million, representing 48% of worldwide revenue versus 47% in the third quarter of 2013.
Revenue as a percentage of gross bookings (revenue margin) was 12.7% for the third quarter of 2014, a decrease of 72 basis points compared to the third quarter of 2013. The decrease primarily relates to lower revenue per room night and the inclusion of the Travelocity-branded websites.
Product & Services Detail
As a percentage of total worldwide revenue in the third quarter of 2014, hotel accounted for 73%, advertising and media accounted for 8%, air accounted for 7% and all other revenues accounted for the remaining 12%.
Hotel revenue increased 21% in the third quarter of 2014 on a 24% increase in room nights stayed driven by Brand Expedia including the Travelocity-branded websites and Hotels.com, partially offset by a 2% decrease in revenue per room night. Revenue per room night decreased primarily due to promotional activities such as growing loyalty programs and couponing as well as efforts to expand the size and availability of the global hotel supply portfolio, including contracts signed as part of the Expedia® Traveler Preference (ETP) program. This decline was partially offset by a 5% increase in average daily rates.
Air revenue increased 21% in the third quarter of 2014 due to a 30% increase in air tickets sold, partially offset by a 7% decrease in revenue per ticket. Advertising and media revenue increased 29% in the third quarter of 2014 due to continued strong growth in trivago® and Expedia® Media Solutions. All other revenue increased 24% in the third quarter of 2014 primarily on growth in our car rental and travel insurance products.
Page 2 of 15
Adjusted Expenses
Costs and Expenses | As a % of Revenue | |||||||||||||||||||||||
Three months ended September 30, | Three months ended September 30, | |||||||||||||||||||||||
2014 | 2013 | Growth | 2014 | 2013 | D in bps | |||||||||||||||||||
Adjusted cost of revenue * |
$ | 289 | $ | 267 | 8 | % | 16.9 | % | 19.0 | % | (214 | ) | ||||||||||||
Adjusted selling and marketing * |
810 | 620 | 31 | % | 47.3 | % | 44.2 | % | 310 | |||||||||||||||
Adjusted technology and content * |
111 | 98 | 14 | % | 6.5 | % | 7.0 | % | (46 | ) | ||||||||||||||
Adjusted general and administrative * |
93 | 83 | 12 | % | 5.4 | % | 5.9 | % | (48 | ) | ||||||||||||||
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Total adjusted costs and expenses |
$ | 1,303 | $ | 1,067 | 22 | % | 76.1 | % | 76.1 | % | 2 | |||||||||||||
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Total depreciation |
67 | 53 | 27 | % | 3.9 | % | 3.8 | % | 16 | |||||||||||||||
Total stock based compensation |
22 | 18 | 24 | % | 1.3 | % | 1.3 | % | 2 | |||||||||||||||
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Total costs and expenses - GAAP |
$ | 1,393 | $ | 1,138 | 22 | % | 81.4 | % | 81.2 | % | 20 | |||||||||||||
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* | Non-GAAP measures as defined by the SEC. Please see Definitions of Non-GAAP Measures and Tabular Reconciliations for Non-GAAP Measures on pages 10-13 herein for an explanation of the use of these non-GAAP measures. |
Adjusted Cost of Revenue
| For the third quarter of 2014, adjusted cost of revenue increased 8% primarily due to a $14 million increase in customer operations expenses primarily due to an increase in transaction costs and volumes period over period as well as a $6 million increase in net credit card processing costs, including fraud and chargebacks. |
Adjusted Selling and Marketing
| For the third quarter of 2014, adjusted selling and marketing expense increased 31% due to a $172 million increase in direct costs, including online and offline marketing expenses. Brand Expedia including commissions related to the Travelocity agreement, trivago and Hotels.com accounted for a majority of the total increase in direct selling and marketing expenses. |
| Indirect costs increased $19 million for the third quarter of 2014 primarily driven by additional personnel, including accelerated pace of hiring in our lodging supply organization as well as higher incentive compensation accrual. As a percentage of total selling and marketing, indirect costs represented 17% in the third quarter of 2014 compared to 19% in the third quarter of 2013. |
Adjusted Technology and Content
| For the third quarter of 2014, adjusted technology and content expense increased 14% primarily due to a $13 million increase in personnel and overhead costs, net of capitalized salary costs, for additional personnel to support key technology projects for our corporate technology function, supply organization and Brand Expedia as well as higher incentive compensation accrual. |
Adjusted General and Administrative
| For the third quarter of 2014, adjusted general and administrative expense increased 12% primarily due to higher personnel costs totaling $7 million including higher incentive compensation accrual as well as higher professional and legal fees. |
Depreciation Expense
For the third quarter of 2014, depreciation expense increased 27% primarily due to increased expenses related to previously capitalized software development costs for completed technology which has been placed into service. We expect depreciation expense to continue to increase as additional projects are completed.
Interest and Other
For the third quarter of 2014, interest income increased 22% primarily due to higher cash and short-term investment balances. Interest expense increased 16% primarily due to higher long-term debt balances.
For the third quarter of 2014, other, net was a gain of $10 million compared to a loss of $11 million in the third quarter of 2013. The gain for the third quarter of 2014 and loss for the third quarter of 2013 were primarily related to foreign exchange. Foreign currency rate fluctuations positively impacted third quarter 2014 revenue growth rates reflecting
Page 3 of 15
appreciation in certain foreign currencies compared to the third quarter of 2013. Our revenue hedging program is designed to offset the book-to-stay impact on merchant hotel revenue. We include any realized gains or losses from our revenue hedging program in our calculation of Adjusted EBITDA.
Income Taxes
The effective tax rate on GAAP pre-tax income was 13.4% for the third quarter of 2014, compared with 21.4% in the prior year period. The effective tax rate on pre-tax adjusted net income (ANI) was 20.4% for the third quarter of 2014 compared with 25.4% in the prior year period. The year-over-year changes in the GAAP and ANI effective tax rates were primarily due to expiration of the statute of limitations for the 2001 2005 federal tax years and the associated release of liabilities related to uncertain tax positions.
Balance Sheet, Cash Flows and Capitalization
Cash, cash equivalents, restricted cash and short-term investments totaled $2.7 billion at September 30, 2014. For the nine months ended September 30, 2014, net cash provided by operating activities was $1.6 billion and free cash flow totaled $1.3 billion. Both measures include $898 million from net changes in operating assets and liabilities, primarily driven by an increase in deferred merchant bookings, which includes amounts related to the Travelocity agreement. Free cash flow increased $587 million for the nine months ended September 30, 2014, compared to the prior year period primarily due to lower pay-to-play tax assessment payments in the current period, higher operating income after adjusting for the impacts of depreciation and amortization as well as increased benefits from working capital changes.
In August 2014, we registered $500 million of senior unsecured notes that are due in August 2024 and bear interest at 4.5% (the 4.5% Notes). The 4.5% Notes were issued at 99.444% of par resulting in a discount, which is being amortized over their life. Interest is payable semi-annually in February and August of each year, beginning February 15, 2015.
Long-term debt totaled $1.75 billion at September 30, 2014 consisting of $497 million, net of discount, in 4.5% senior notes due 2024, $749 million, net of discount, in 5.95% senior notes due 2020 and $500 million in 7.456% senior notes due 2018. In addition, we have a $1 billion unsecured revolving credit facility which was essentially untapped as of September 30, 2014.
At September 30, 2014, we had stock-based awards outstanding representing approximately 16.0 million shares of our common stock, consisting of options to purchase approximately 15.7 million common shares with a $47.45 weighted average exercise price and weighted average remaining life of 4.5 years, and approximately 0.3 million restricted stock units (RSUs).
During the third quarter of 2014, we repurchased 1.5 million shares of common stock for an aggregate purchase price of $130 million excluding transaction costs (an average of $84.63 per share). As of September 30, 2014, we had approximately 2.5 million shares remaining under our April 2012 repurchase authorization.
Pursuant to the Amended and Restated Governance Agreement with Liberty Interactive Corporation (Liberty), we issued 264,608 shares of common stock to Liberty at a price of $77.11 per share for an aggregate value of approximately $20 million. The shares were issued from treasury stock during the fourth quarter of 2014.
On September 17, 2014, we paid a quarterly dividend of $23 million ($0.18 per common share). In addition, on October 27, 2014, the Executive Committee of Expedias Board of Directors declared a cash dividend of $0.18 per share of outstanding common stock to be paid to stockholders of record as of the close of business on November 20, 2014, with a payment date of December 11, 2014. Based on our current shares outstanding, we estimate the total payment for this quarterly dividend will be approximately $23 million. Future declaration of dividends and the establishment of future record and payment dates are subject to the final determination of Expedias Board of Directors.
Page 4 of 15
Recent Highlights
Global Presence and Supply Portfolio
| At quarter-end, Expedia, Inc. global websites featured over 365,000 properties, including approximately 155,000 in China through eLong. |
| HomeAway and Expedia.com broadened their existing vacation rental listing partnership. Expedia.com customers in the U.S. will now have the opportunity to browse more than 115,000 vacation rental listings, providing more choice and variety in their trip planning. |
| Expedia Inc. renewed distribution agreements with American Airlines, who merged with US Airways last year to become the worlds largest airline, and Seattle-based Alaska Airlines, which flies to over 100 destinations in the contiguous United States, Alaska, Hawaii and Mexico. |
| Expedia Lodging Partner Services enabled new provisions that allow for distribution under the Expedia Traveler Preference (ETP) program with a number of noteworthy hotel brands, including a leading global hospitality company Choice Hotels International. |
| Expedia® Affiliate Network (EAN) signed agreements to power online hotel bookings for several international companies, including The Travel Network Group (formerly known as TTA / Worldchoice), one of the largest independent travel networks in Europe. |
| Egencia signed nearly 300 new customers, including ActionTarget, a US-based leading global manufacturer of shooting ranges, equipment, and services, and SNCF, the French national rail company. |
| As part of the joint venture between Brand Expedia and AirAsia, AirAsiaGo launched their new site in China, enabling Alipay payments for standalone hotels. |
Technology Innovation
| Continued advancements in mobile apps and on the mobile web including: |
| Brand Expedia launched a new tablet app for iOS and Android, featuring federated search, making it the first app to allow a search for a flight and a hotel at the same time. |
| AirAsiaGo launched a mobile Hotels and Flights app on iOS and Android. |
| Hotwires mobile apps won several awards including a W3 Award for excellence in mobile travel for iPhone and a Travel Weekly Magellan Award for excellence in mobile travel for the iPad app. |
| Corporate travel mobile transactions increased by 200% since the launch of the mobile app Egencia® TripNavigator, now available on iPhone and Android operating systems. |
| Brand Expedia, Hotels.com and Hotwire entered the wearable device space: |
| Brand Expedia app is now available for the Samsung Gear 2 around the globe. |
| Hotels.com Android app for wearables (e.g. watches) launched during the quarter. It sends helpful reminders to travelers before checking into their hotel, which means not having to pull out travel wallets, phones or itineraries. |
| Hotwire launched an add-on to its Android app, making it one of the first travel apps on Android to sync automatically with the Google Watch for a fully integrated approach to trip planning. |
| Brand Expedia successfully completed the global platform migration of the car rental business. Similar investments at Hotwire mean its car offering is now available across all native app platforms. |
| Hotels.com launched hotel gift cards in North America, redeemable on over 100,000 hotels worldwide (including chain hotels, bed & breakfast, resort, vacation rentals and boutique properties). |
Distribution Channels
| Brand Expedia launched two new travel cobranded credit cards via a partnership with Citi: the Expedia+ Credit Card and the Expedia+ Voyager Credit Card allow travelers to earn Expedia+ rewards bonus points faster and redeem for travel rewards from Expedia.com. |
| Brand Expedia brand campaign received accolades this quarter. #ThrowMeBack contest won the 2014 Skifties Award for Best Integrated Campaign and social media program was recognized on Skift.com as one of the 5 Travel Brands Winning on Social Media for the Week Ending September 19, 2014. |
Page 5 of 15
EXPEDIA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data)
(Unaudited)
Three months ended September 30, |
Nine months ended September 30, |
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2014 | 2013 | 2014 | 2013 | |||||||||||||
Revenue |
$ | 1,712,504 | $ | 1,401,860 | $ | 4,407,507 | $ | 3,619,244 | ||||||||
Costs and expenses: |
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Cost of revenue (1)(2) |
299,708 | 276,318 | 894,828 | 789,506 | ||||||||||||
Selling and marketing (1)(2) |
815,800 | 625,296 | 2,184,115 | 1,711,919 | ||||||||||||
Technology and content (1)(2) |
172,754 | 143,816 | 504,804 | 422,781 | ||||||||||||
General and administrative (1)(2) |
104,999 | 92,351 | 306,584 | 276,618 | ||||||||||||
Amortization of intangible assets |
18,519 | 18,514 | 55,275 | 49,921 | ||||||||||||
Legal reserves, occupancy tax and other |
3,888 | 6,874 | 38,843 | 74,678 | ||||||||||||
Acquisition-related and other (1) |
| | | 66,472 | ||||||||||||
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Operating income |
296,836 | 238,691 | 423,058 | 227,349 | ||||||||||||
Other income (expense): |
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Interest income |
8,075 | 6,642 | 20,756 | 19,837 | ||||||||||||
Interest expense |
(25,558 | ) | (21,966 | ) | (69,683 | ) | (65,343 | ) | ||||||||
Other, net |
10,172 | (11,287 | ) | 2,514 | (1,611 | ) | ||||||||||
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Total other expense, net |
(7,311 | ) | (26,611 | ) | (46,413 | ) | (47,117 | ) | ||||||||
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Income before income taxes |
289,525 | 212,080 | 376,645 | 180,232 | ||||||||||||
Provision for income taxes |
(38,904 | ) | (45,356 | ) | (59,974 | ) | (57,861 | ) | ||||||||
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Net income |
250,621 | 166,724 | 316,671 | 122,371 | ||||||||||||
Net loss attributable to noncontrolling interests |
6,438 | 4,135 | 15,457 | 15,762 | ||||||||||||
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Net income attributable to Expedia, Inc. |
$ | 257,059 | $ | 170,859 | $ | 332,128 | $ | 138,133 | ||||||||
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Earnings per share attributable to Expedia, Inc. available to common stockholders: |
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Basic |
$ | 2.01 | $ | 1.25 | $ | 2.57 | $ | 1.01 | ||||||||
Diluted |
1.94 | 1.22 | 2.48 | 0.98 | ||||||||||||
Shares used in computing earnings per share: |
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Basic |
127,911 | 136,380 | 129,326 | 136,381 | ||||||||||||
Diluted |
132,274 | 140,451 | 133,683 | 141,202 | ||||||||||||
Dividends declared per common share |
$ | 0.18 | $ | 0.15 | $ | 0.48 | $ | 0.41 | ||||||||
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(1) Includes stock-based compensation as follows: |
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Cost of revenue |
$ | 1,045 | $ | 887 | $ | 3,190 | $ | 2,712 | ||||||||
Selling and marketing |
3,643 | 3,943 | 13,798 | 11,857 | ||||||||||||
Technology and content |
7,374 | 5,372 | 17,892 | 15,459 | ||||||||||||
General and administrative |
10,242 | 7,837 | 33,259 | 22,532 | ||||||||||||
Acquisition-related and other |
| | | 56,643 | ||||||||||||
(2) Includes depreciation as follows: |
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Cost of revenue |
$ | 9,217 | $ | 8,519 | $ | 25,554 | $ | 25,629 | ||||||||
Selling and marketing |
2,086 | 1,676 | 5,757 | 4,665 | ||||||||||||
Technology and content |
54,129 | 40,942 | 157,890 | 117,312 | ||||||||||||
General and administrative |
2,037 | 1,828 | 5,960 | 5,364 |
Page 6 of 15
EXPEDIA, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
September 30, 2014 |
December 31, 2013 |
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(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: |
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Cash and cash equivalents |
$ | 2,252,748 | $ | 1,021,033 | ||||
Restricted cash and cash equivalents |
31,794 | 26,042 | ||||||
Short-term investments |
396,041 | 325,510 | ||||||
Accounts receivable, net of allowance of $13,430 and $11,555 |
887,436 | 614,735 | ||||||
Deferred income taxes |
97,541 | 66,130 | ||||||
Income taxes receivable |
19,545 | 64,296 | ||||||
Prepaid expenses and other current assets |
151,713 | 101,541 | ||||||
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Total current assets |
3,836,818 | 2,219,287 | ||||||
Property and equipment, net |
525,053 | 480,702 | ||||||
Long-term investments and other assets |
298,396 | 250,626 | ||||||
Deferred income taxes |
18,196 | 14,151 | ||||||
Intangible assets, net |
1,076,780 | 1,111,041 | ||||||
Goodwill |
3,669,745 | 3,663,674 | ||||||
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TOTAL ASSETS |
$ | 9,424,988 | $ | 7,739,481 | ||||
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LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
Current liabilities: |
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Accounts payable, merchant |
$ | 1,272,709 | $ | 1,044,259 | ||||
Accounts payable, other |
425,310 | 261,288 | ||||||
Deferred merchant bookings |
2,086,886 | 1,350,319 | ||||||
Deferred revenue |
56,234 | 39,746 | ||||||
Income taxes payable |
31,037 | 61,874 | ||||||
Accrued expenses and other current liabilities |
669,531 | 536,895 | ||||||
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Total current liabilities |
4,541,707 | 3,294,381 | ||||||
Long-term debt |
1,746,712 | 1,249,412 | ||||||
Deferred income taxes |
446,922 | 433,532 | ||||||
Other long-term liabilities |
167,325 | 138,300 | ||||||
Commitments and contingencies |
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Redeemable noncontrolling interests |
520,443 | 364,871 | ||||||
Stockholders equity: |
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Common stock $.0001 par value |
20 | 19 | ||||||
Authorized shares: 1,600,000 |
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Shares issued: 195,674 and 192,562 |
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Shares outstanding: 113,729 and 116,886 |
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Class B common stock $.0001 par value |
1 | 1 | ||||||
Authorized shares: 400,000 |
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Shares issued and outstanding: 12,800 and 12,800 |
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Additional paid-in capital |
5,818,942 | 5,802,140 | ||||||
Treasury stock - Common stock, at cost |
(3,934,942 | ) | (3,465,675 | ) | ||||
Shares: 81,945 and 75,676 |
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Retained earnings (deficit) |
31,802 | (209,218 | ) | |||||
Accumulated other comprehensive income (loss) |
(31,035 | ) | 18,197 | |||||
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Total Expedia, Inc. stockholders equity |
1,884,788 | 2,145,464 | ||||||
Non-redeemable noncontrolling interest |
117,091 | 113,521 | ||||||
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|
|
|
|||||
Total stockholders equity |
2,001,879 | 2,258,985 | ||||||
|
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|
|||||
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
$ | 9,424,988 | $ | 7,739,481 | ||||
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Page 7 of 15
EXPEDIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine months ended September 30, |
||||||||
2014 | 2013 | |||||||
Operating activities: |
||||||||
Net income |
$ | 316,671 | $ | 122,371 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation of property and equipment, including internal-use software and website development |
195,161 | 152,970 | ||||||
Amortization of stock-based compensation |
68,139 | 109,203 | ||||||
Amortization of intangible assets |
55,275 | 49,921 | ||||||
Deferred income taxes |
(27,371 | ) | 2,863 | |||||
Foreign exchange (gain) loss on cash, cash equivalents and short-term investments, net |
44,484 | 53,199 | ||||||
Realized (gain) loss on foreign currency forwards |
11,267 | (40,228 | ) | |||||
Other |
4,919 | 8,772 | ||||||
Changes in operating assets and liabilities, net of effects from acquisitions: |
||||||||
Accounts receivable |
(277,056 | ) | (210,118 | ) | ||||
Prepaid expenses and other current assets |
(55,810 | ) | (14,226 | ) | ||||
Accounts payable, merchant |
226,362 | 257,016 | ||||||
Accounts payable, other, accrued expenses and other current liabilities |
289,525 | (49,299 | ) | |||||
Taxes payable/receivable, net |
3,704 | (31,745 | ) | |||||
Deferred merchant bookings |
694,830 | 547,988 | ||||||
Deferred revenue |
16,702 | 16,728 | ||||||
|
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|
|
|||||
Net cash provided by operating activities from continuing operations |
1,566,802 | 975,415 | ||||||
|
|
|
|
|||||
Investing activities: |
||||||||
Capital expenditures, including internal-use software and website development |
(239,678 | ) | (235,416 | ) | ||||
Purchases of investments |
(1,044,665 | ) | (1,139,157 | ) | ||||
Sales and maturities of investments |
957,347 | 1,338,062 | ||||||
Acquisitions, net of cash acquired |
(25,177 | ) | (540,489 | ) | ||||
Net settlement of foreign currency forwards |
(11,267 | ) | 40,228 | |||||
Other, net |
2,188 | (177 | ) | |||||
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|
|
|||||
Net cash used in investing activities from continuing operations |
(361,252 | ) | (536,949 | ) | ||||
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|
|
|
|||||
Financing activities: |
||||||||
Proceeds from issuance of long-term debt, net of issuance costs |
493,630 | | ||||||
Purchases of treasury stock |
(469,267 | ) | (355,689 | ) | ||||
Proceeds from issuance of treasury stock |
| 25,273 | ||||||
Payment of dividends to stockholders |
(61,777 | ) | (56,080 | ) | ||||
Proceeds from exercise of equity awards and employee stock purchase plan |
79,490 | 42,693 | ||||||
Excess tax benefit on equity awards |
38,352 | 33,368 | ||||||
Other, net |
(1,591 | ) | (9,920 | ) | ||||
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|
|
|
|||||
Net cash provided by (used in) financing activities from continuing operations |
78,837 | (320,355 | ) | |||||
|
|
|
|
|||||
Net cash provided by continuing operations |
1,284,387 | 118,111 | ||||||
Net cash provided by discontinued operations |
| 13,637 | ||||||
Effect of exchange rate changes on cash and cash equivalents |
(52,672 | ) | (30,411 | ) | ||||
|
|
|
|
|||||
Net increase in cash and cash equivalents |
1,231,715 | 101,337 | ||||||
Cash and cash equivalents at beginning of period |
1,021,033 | 1,293,161 | ||||||
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|
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Cash and cash equivalents at end of period |
$ | 2,252,748 | $ | 1,394,498 | ||||
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Supplemental cash flow information |
||||||||
Cash paid for interest from continuing operations |
$ | 86,349 | $ | 83,659 | ||||
Income tax payments, net from continuing operations |
42,428 | 52,550 |
Page 8 of 15
Expedia, Inc.
Trended Metrics
(All figures in millions)
| The following metrics are intended as a supplement to the financial statements found in this release and in our filings with the SEC. In the event of discrepancies between amounts in these tables and our historical financial statements, readers should rely on our filings with the SEC and financial statements in our most recent earnings release. |
| We intend to periodically review and refine the definition, methodology and appropriateness of each of our supplemental metrics. As a result, metrics are subject to removal and/or change, and such changes could be material. |
| These metrics do not include adjustments for one-time items, acquisitions, foreign exchange or other adjustments. |
| Some numbers may not add due to rounding. |
2012 | 2013 | 2014 | Y / Y | |||||||||||||||||||||||||||||||||||||
Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Growth | |||||||||||||||||||||||||||||||
Gross Bookings by Segment |
||||||||||||||||||||||||||||||||||||||||
Leisure |
$ | 8,120 | $ | 6,571 | $ | 8,664 | $ | 8,933 | $ | 9,312 | $ | 8,000 | $ | 11,315 | $ | 11,718 | $ | 12,185 | 31 | % | ||||||||||||||||||||
Egencia |
936 | 955 | 1,117 | 1,188 | 1,125 | 1,104 | 1,310 | 1,328 | 1,285 | 14 | % | |||||||||||||||||||||||||||||
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Total |
$ | 9,056 | $ | 7,526 | $ | 9,781 | $ | 10,121 | $ | 10,437 | $ | 9,104 | $ | 12,624 | $ | 13,046 | $ | 13,470 | 29 | % | ||||||||||||||||||||
Gross Bookings by Geography |
||||||||||||||||||||||||||||||||||||||||
Domestic |
$ | 5,155 | $ | 4,201 | $ | 5,484 | $ | 5,848 | $ | 5,828 | $ | 4,982 | $ | 7,427 | $ | 7,889 | $ | 7,861 | 35 | % | ||||||||||||||||||||
International |
3,902 | 3,324 | 4,297 | 4,273 | 4,609 | 4,122 | 5,197 | 5,157 | 5,609 | 22 | % | |||||||||||||||||||||||||||||
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Total |
$ | 9,056 | $ | 7,526 | $ | 9,781 | $ | 10,121 | $ | 10,437 | $ | 9,104 | $ | 12,624 | $ | 13,046 | $ | 13,470 | 29 | % | ||||||||||||||||||||
Gross Bookings by Agency/Merchant |
||||||||||||||||||||||||||||||||||||||||
Agency |
$ | 4,706 | $ | 4,165 | $ | 5,270 | $ | 5,466 | $ | 5,701 | $ | 5,248 | $ | 7,326 | $ | 7,525 | $ | 7,596 | 33 | % | ||||||||||||||||||||
Merchant |
4,350 | 3,361 | 4,511 | 4,655 | 4,736 | 3,856 | 5,299 | 5,520 | 5,874 | 24 | % | |||||||||||||||||||||||||||||
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Total |
$ | 9,056 | $ | 7,526 | $ | 9,781 | $ | 10,121 | $ | 10,437 | $ | 9,104 | $ | 12,624 | $ | 13,046 | $ | 13,470 | 29 | % | ||||||||||||||||||||
Revenue |
||||||||||||||||||||||||||||||||||||||||
Leisure |
$ | 1,121 | $ | 890 | $ | 924 | $ | 1,110 | $ | 1,316 | $ | 1,056 | $ | 1,100 | $ | 1,392 | $ | 1,616 | 23 | % | ||||||||||||||||||||
Egencia |
78 | 85 | 89 | 95 | 85 | 96 | 100 | 103 | 97 | 13 | % | |||||||||||||||||||||||||||||
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|||||||||||||||||||||
Total |
$ | 1,199 | $ | 975 | $ | 1,012 | $ | 1,205 | $ | 1,402 | $ | 1,152 | $ | 1,200 | $ | 1,495 | $ | 1,713 | 22 | % | ||||||||||||||||||||
Revenue by Geography |
||||||||||||||||||||||||||||||||||||||||
Domestic |
$ | 642 | $ | 511 | $ | 558 | $ | 664 | $ | 742 | $ | 583 | $ | 642 | $ | 789 | $ | 888 | 20 | % | ||||||||||||||||||||
International |
557 | 464 | 454 | 541 | 660 | 569 | 559 | 706 | 824 | 25 | % | |||||||||||||||||||||||||||||
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Total |
$ | 1,199 | $ | 975 | $ | 1,012 | $ | 1,205 | $ | 1,402 | $ | 1,152 | $ | 1,200 | $ | 1,495 | $ | 1,713 | 22 | % | ||||||||||||||||||||
Revenue by Agency/ Merchant/Advertising |
||||||||||||||||||||||||||||||||||||||||
Agency |
$ | 235 | $ | 212 | $ | 234 | $ | 270 | $ | 330 | $ | 293 | $ | 329 | $ | 397 | $ | 477 | 45 | % | ||||||||||||||||||||
Merchant |
930 | 730 | 733 | 855 | 963 | 774 | 772 | 975 | 1,095 | 14 | % | |||||||||||||||||||||||||||||
Advertising & Media |
35 | 33 | 46 | 80 | 109 | 84 | 99 | 123 | 141 | 29 | % | |||||||||||||||||||||||||||||
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Total |
$ | 1,199 | $ | 975 | $ | 1,012 | $ | 1,205 | $ | 1,402 | $ | 1,152 | $ | 1,200 | $ | 1,495 | $ | 1,713 | 22 | % | ||||||||||||||||||||
Adjusted EBITDA |
||||||||||||||||||||||||||||||||||||||||
Leisure |
$ | 357 | $ | 262 | $ | 178 | $ | 265 | $ | 419 | $ | 315 | $ | 181 | $ | 342 | $ | 495 | 18 | % | ||||||||||||||||||||
Unallocated Overhead Costs |
(76 | ) | (90 | ) | (85 | ) | (91 | ) | (91 | ) | (91 | ) | (91 | ) | (100 | ) | (101 | ) | 12 | % | ||||||||||||||||||||
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Subtotal |
$ | 281 | $ | 172 | $ | 93 | $ | 174 | $ | 328 | $ | 224 | $ | 90 | $ | 242 | $ | 393 | 20 | % | ||||||||||||||||||||
Egencia |
12 | 13 | 12 | 18 | 11 | 18 | 16 | 17 | 16 | 37 | % | |||||||||||||||||||||||||||||
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Total |
$ | 294 | $ | 185 | $ | 105 | $ | 192 | $ | 340 | $ | 242 | $ | 107 | $ | 259 | $ | 409 | 20 | % | ||||||||||||||||||||
Worldwide Hotel (Merchant & Agency) |
||||||||||||||||||||||||||||||||||||||||
Room Nights |
36.7 | 29.7 | 29.0 | 35.9 | 44.1 | 37.1 | 35.9 | 45.9 | 54.5 | |||||||||||||||||||||||||||||||
Room Night Growth |
27 | % | 33 | % | 28 | % | 19 | % | 20 | % | 25 | % | 24 | % | 28 | % | 24 | % | ||||||||||||||||||||||
Domestic Room Night Growth |
18 | % | 19 | % | 15 | % | 11 | % | 12 | % | 18 | % | 20 | % | 24 | % | 24 | % | ||||||||||||||||||||||
International Room Night Growth |
37 | % | 49 | % | 43 | % | 29 | % | 28 | % | 31 | % | 27 | % | 31 | % | 24 | % | ||||||||||||||||||||||
ADR Growth |
-3 | % | -3 | % | 0 | % | 0 | % | 0 | % | 0 | % | 1 | % | 2 | % | 5 | % | ||||||||||||||||||||||
Revenue per Night Growth |
-6 | % | -6 | % | -3 | % | -6 | % | -7 | % | -9 | % | -10 | % | -4 | % | -2 | % | ||||||||||||||||||||||
Revenue Growth |
20 | % | 25 | % | 24 | % | 12 | % | 11 | % | 13 | % | 12 | % | 23 | % | 21 | % | ||||||||||||||||||||||
Worldwide Air (Merchant & Agency) |
||||||||||||||||||||||||||||||||||||||||
Tickets Sold Growth |
11 | % | 12 | % | 9 | % | 7 | % | 7 | % | 13 | % | 30 | % | 28 | % | 30 | % | ||||||||||||||||||||||
Airfare Growth |
1 | % | 2 | % | 0 | % | 0 | % | 3 | % | 1 | % | 1 | % | 3 | % | 0 | % | ||||||||||||||||||||||
Revenue per Ticket Growth |
-19 | % | -2 | % | 5 | % | 1 | % | 9 | % | 3 | % | -2 | % | -5 | % | -7 | % | ||||||||||||||||||||||
Revenue Growth |
-10 | % | 10 | % | 14 | % | 8 | % | 16 | % | 17 | % | 28 | % | 22 | % | 21 | % |
Notes:
The metrics above exclude results from the joint venture between Brand Expedia and AirAsia.
The metrics above include VIA Travel following our acquisition on April 27, 2012 and trivago GmbH following our acquisition of a controlling interest on March 8, 2013. VIA Travel and trivago GmbH are recorded within the Egencia and Leisure segments, respectively.
Advertising & Media Revenue includes revenue from trivago GmbH. All trivago GmbH revenue is classified as international.
Beginning in Q1 2014, Expedia moved to a new Enterprise Accounting System of Record, which caused immaterial changes to some of the metrics above due to remapping.
Page 9 of 15
Notes & Definitions:
Gross Bookings Total retail value of transactions booked for both agency and merchant transactions, recorded at the time of booking. Bookings include the total price due for travel, including taxes, fees and other charges, and are generally reduced for cancellations and refunds.
Leisure Reflects results for travel products and services provided to customers of our leisure travel sites including Expedia branded sites, Hotels.com branded sites, Hotwire.com, the Expedia Affiliate Network, trivago, eLong and other leisure brands.
Egencia Reflects worldwide results for our managed corporate travel business.
Corporate Includes unallocated corporate expenses.
Worldwide Hotel metrics Reported on a stayed basis, and include both merchant and agency model hotel stays.
Worldwide Air metrics Reported on a booked basis and includes both merchant and agency air bookings.
Definitions of Non-GAAP Measures
Expedia, Inc. reports Adjusted EBITDA, Adjusted Net Income, 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, 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 and Adjusted EPS also exclude certain items related to transactional tax matters, which may ultimately be settled in cash, and we urge investors to review the detailed disclosure regarding these matters in the Management Discussion and Analysis, Legal Proceedings sections, as well as the notes to the financial statements, included in the Companys 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 Net Income was revised in the fourth quarters of 2010, 2011 and 2012 and the definition for Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization was revised in the fourth quarter of 2012. The definition of Adjusted Expenses was revised in the first quarter of 2014.
Adjusted EBITDA is defined as operating income / (loss) plus: (1) stock-based compensation expense, including compensation expense related to certain subsidiary equity plans; (2) 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; (3) certain infrequently occurring items, including restructuring; (4) 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; (5) gains (losses) realized on revenue hedging activities that are included in other, net; and (6) depreciation.
The above items are excluded from our Adjusted EBITDA measure because these items are noncash 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.
Page 10 of 15
Adjusted Net Income 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, Inc. plus net of tax: (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, and (iii) upfront consideration paid to settle employee compensation plans of the acquiree and (iv) gains (losses) recognized on noncontrolling investment basis adjustments when we acquire controlling interests; (3) currency gains or losses on U.S. dollar denominated cash or investments held by eLong; (4) certain other infrequently occurring items, including restructuring charges; (5) 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; (6) discontinued operations; (7) the noncontrolling interest impact of the aforementioned adjustment items and (8) unrealized gains (losses) on revenue hedging activities that are included in other, net. We believe Adjusted Net Income is useful to investors because it represents Expedia, Inc.s combined results, taking into account depreciation, which management believes is an ongoing cost of doing business, but excluding the impact of certain expenses, infrequently occurring items and items not directly tied to the core operations of our businesses.
Adjusted EPS is defined as Adjusted Net Income 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 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, Expedias 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 and Adjusted EPS have similar limitations as Adjusted EBITDA. In addition, Adjusted Net Income 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, 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, Inc. 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.
Page 11 of 15
Tabular Reconciliations for Non-GAAP Measures
Adjusted EBITDA (Adjusted Earnings Before Interest, Taxes, Depreciation & Amortization)
Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(In thousands) | ||||||||||||||||
Adjusted EBITDA |
$ | 409,070 | $ | 339,897 | $ | 775,097 | $ | 636,727 | ||||||||
Depreciation |
(67,469 | ) | (52,965 | ) | (195,161 | ) | (152,970 | ) | ||||||||
Amortization of intangible assets |
(18,519 | ) | (18,514 | ) | (55,275 | ) | (49,921 | ) | ||||||||
Stock-based compensation |
(22,304 | ) | (18,039 | ) | (68,139 | ) | (109,203 | ) | ||||||||
Legal reserves, occupancy tax and other |
(3,888 | ) | (6,874 | ) | (38,843 | ) | (74,678 | ) | ||||||||
Acquisition-related and other |
| | | (9,829 | ) | |||||||||||
Realized (gain) loss on revenue hedges |
(54 | ) | (4,814 | ) | 5,379 | (12,777 | ) | |||||||||
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Operating income |
296,836 | 238,691 | 423,058 | 227,349 | ||||||||||||
Interest expense, net |
(17,483 | ) | (15,324 | ) | (48,927 | ) | (45,506 | ) | ||||||||
Other, net |
10,172 | (11,287 | ) | 2,514 | (1,611 | ) | ||||||||||
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Income before income taxes |
289,525 | 212,080 | 376,645 | 180,232 | ||||||||||||
Provision for income taxes |
(38,904 | ) | (45,356 | ) | (59,974 | ) | (57,861 | ) | ||||||||
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|||||||||
Net income |
250,621 | 166,724 | 316,671 | 122,371 | ||||||||||||
Net loss attributable to noncontrolling interests |
6,438 | 4,135 | 15,457 | 15,762 | ||||||||||||
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Net income attributable to Expedia, Inc. |
$ | 257,059 | $ | 170,859 | $ | 332,128 | $ | 138,133 | ||||||||
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Adjusted Net Income & Adjusted EPS
Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(In thousands) | ||||||||||||||||
Net income attributable to Expedia, Inc. |
$ | 257,059 | $ | 170,859 | $ | 332,128 | $ | 138,133 | ||||||||
Amortization of intangible assets |
18,519 | 18,514 | 55,275 | 49,921 | ||||||||||||
Stock-based compensation |
22,304 | 18,039 | 68,139 | 109,203 | ||||||||||||
Legal reserves, occupancy tax and other |
3,888 | 6,874 | 38,843 | 74,678 | ||||||||||||
Acquisition-related and other |
| | | 9,829 | ||||||||||||
Foreign currency (gain) loss on U.S. dollar cash balances held by eLong |
272 | 49 | (16 | ) | (126 | ) | ||||||||||
Unrealized (gain) loss on revenue hedges |
(14,914 | ) | 13,555 | (9,835 | ) | 1,637 | ||||||||||
Stock-based compensation as part of equity method investments |
74 | 33 | 219 | 99 | ||||||||||||
Provision for income taxes |
(26,454 | ) | (23,088 | ) | (55,612 | ) | (45,656 | ) | ||||||||
Noncontrolling interests |
(4,738 | ) | (3,890 | ) | (14,015 | ) | (11,258 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted Net Income |
$ | 256,010 | $ | 200,945 | $ | 415,126 | $ | 326,460 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
GAAP diluted weighted average shares outstanding |
132,274 | 140,451 | 133,683 | 141,202 | ||||||||||||
Additional dilutive securities |
230 | 461 | 246 | 644 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted weighted average shares outstanding |
132,504 | 140,912 | 133,929 | 141,846 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted earnings per share |
$ | 1.94 | $ | 1.22 | $ | 2.48 | $ | 0.98 | ||||||||
Adjusted earnings per share |
1.93 | 1.43 | 3.10 | 2.30 |
Page 12 of 15
Free Cash Flow
Three months ended September 30, |
Nine months ended September 30, |
Trailing twelve months ended, September 30, |
||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Net cash provided by operating activities |
$ | 101,860 | $ | (224,193 | ) | $ | 1,566,802 | $ | 975,415 | $ | 1,354,587 | $ | 758,689 | |||||||||||
Less: capital expenditures |
(82,465 | ) | (77,576 | ) | (239,678 | ) | (235,416 | ) | (312,843 | ) | (294,133 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Free cash flow |
$ | 19,395 | $ | (301,769 | ) | $ | 1,327,124 | $ | 739,999 | $ | 1,041,744 | $ | 464,556 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Expenses (cost of revenue, selling and marketing, technology and content and general and administrative expenses)
Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(in thousands) | ||||||||||||||||
Cost of revenue |
$ | 299,708 | $ | 276,318 | $ | 894,828 | $ | 789,506 | ||||||||
Less: stock-based compensation |
(1,045 | ) | (887 | ) | (3,190 | ) | (2,712 | ) | ||||||||
Less: depreciation |
(9,217 | ) | (8,519 | ) | (25,554 | ) | (25,629 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted cost of revenue |
$ | 289,446 | $ | 266,912 | $ | 866,084 | $ | 761,165 | ||||||||
Selling and marketing expense |
$ | 815,800 | $ | 625,296 | $ | 2,184,115 | $ | 1,711,919 | ||||||||
Less: stock-based compensation |
(3,643 | ) | (3,943 | ) | (13,798 | ) | (11,857 | ) | ||||||||
Less: depreciation |
(2,086 | ) | (1,676 | ) | (5,757 | ) | (4,665 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted selling and marketing expense |
$ | 810,071 | $ | 619,677 | $ | 2,164,560 | $ | 1,695,397 | ||||||||
Technology and content expense |
$ | 172,754 | $ | 143,816 | $ | 504,804 | $ | 422,781 | ||||||||
Less: stock-based compensation |
(7,374 | ) | (5,372 | ) | (17,892 | ) | (15,459 | ) | ||||||||
Less: depreciation |
(54,129 | ) | (40,942 | ) | (157,890 | ) | (117,312 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted technology and content expense |
$ | 111,251 | $ | 97,502 | $ | 329,022 | $ | 290,010 | ||||||||
General and administrative expense |
$ | 104,999 | $ | 92,351 | $ | 306,584 | $ | 276,618 | ||||||||
Less: stock-based compensation |
(10,242 | ) | (7,837 | ) | (33,259 | ) | (22,532 | ) | ||||||||
Less: depreciation |
(2,037 | ) | (1,828 | ) | (5,960 | ) | (5,364 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted general and administrative expense |
$ | 92,720 | $ | 82,686 | $ | 267,365 | $ | 248,722 |
Conference Call
Expedia, Inc. will webcast a conference call to discuss third quarter 2014 financial results and certain forward-looking information on Thursday, October 30, 2014 at 1:30 p.m. Pacific Time (PT). The webcast will be open to the public and available via http://ir.expediainc.com. Expedia, Inc. expects to maintain access to the webcast on the IR website for approximately three months subsequent to the initial broadcast.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance. These forward-looking statements are based on managements expectations as of October 30, 2014 and assumptions which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. The use of words such as intends and expects, 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, Inc.s business.
Page 13 of 15
Actual results and the timing and outcome of events may differ materially from those expressed or implied in the forward-looking statements for a variety of reasons, including, among others:
| an increasingly competitive global environment; |
| modifications to our current business models and practices or our adoption of new business models or practices in order to compete; |
| changes in search engine algorithms and dynamics or other traffic-generating arrangements; |
| declines or disruptions in the travel industry; |
| our failure to maintain and expand our relationships and contractual agreements with travel suppliers or travel distribution partners; |
| our failure to maintain and expand our brand awareness or increased costs to do so; |
| our failure to adapt to technological developments or industry trends; |
| risks relating to our operations in international markets, including China; |
| adverse application of existing tax or unclaimed property laws, rules or regulations or implementation of new unfavorable laws, rules or regulations; |
| adverse outcomes in legal proceedings to which we are a party; |
| our failure to comply with current laws, rules and regulations, or changes to such laws, rules and regulations; |
| determinations by U.S. and foreign tax authorities regarding our worldwide tax provision for income taxes; |
| payments related risks, including credit card fraud; |
| volatility in our stock price; |
| liquidity constraints or our inability to access the capital markets when necessary; |
| interruption or lack of redundancy in our information systems; |
| failure to retain or motivate key personnel or hire, retain and motivate qualified personnel, including senior management; |
| changes in control of the Company; |
| management and director conflicts of interest; |
| risks related to actions taken by our business partners and third party service providers, including failure to comply with our requirements or standards or the requirements or standards of governmental authorities, or any cessation of their operations; |
| risks related to the failure of counterparties to perform on financial obligations; |
| fluctuations in foreign exchange rates; |
| our failure to comply with governmental regulation and other legal obligations related to our processing, storage, use and disclosure of personal data, and liabilities related to security breaches; |
| risks related to our acquisitions, investments or significant commercial arrangements; |
| risks related to our long-term indebtedness; |
| our failure to effectively operate our businesses due to restrictive covenants in the agreements governing our indebtedness; |
| our failure to protect our intellectual property from copying or use by others, including competitors; |
as well as other risks detailed in our public filings with the SEC, including our quarterly report on Form 10-Q for the quarter ended September 30, 2014. Except as required by law, we undertake no obligation to update any forward-looking or other statements in this release, whether as a result of new information, future events or otherwise.
About Expedia, Inc.
Expedia, Inc. (NASDAQ: EXPE) is one of the worlds largest travel companies, with an extensive brand portfolio that includes leading online travel brands, such as:
| Expedia.com®, the worlds largest full service online travel agency with localized sites in 31 countries |
| Hotels.com®, the hotel specialist with localized sites in more than 60 countries |
| Hotwire®, a leading discount travel site that offers opaque deals in 12 countries throughout North America, Europe and Asia |
| Egencia®, the worlds fifth largest corporate travel management company |
| eLong, a leading mobile and online travel service provider in China |
| Venere.com, the online hotel reservation specialist in Europe |
Page 14 of 15
| trivago®, a leading online hotel metasearch company with sites in 49 countries |
| Expedia Local Expert®, a provider of online and in-market concierge services, activities, experiences and ground transportation in hundreds of destinations worldwide |
| Classic Vacations®, a top luxury travel specialist |
| Expedia® CruiseShipCenters®, a provider of exceptional value and expert advice for travelers booking cruises and vacations through its network of 180 franchise locations across North America |
| CarRentals.com, the premier car rental booking company on the web. |
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 also powers bookings for some of the worlds leading airlines and hotels, top consumer brands, high traffic websites, and thousands of active affiliates through Expedia® Affiliate Network. For corporate and industry news and views, visit us at www.expediainc.com or follow us on Twitter @expediainc.
Trademarks and logos are the property of their respective owners. © 2014 Expedia, Inc. All rights reserved. CST: 2029030-50
Contacts
Investor Relations | Communications | |
(425) 679-3759 | (425) 679-4317 | |
ir@expedia.com | press@expedia.com |
Page 15 of 15
Exhibit 99.2
Exhibit 99.2
INVESTOR PRESENTATION
October 30, 2014
Safe Harbor
Forward-Looking Statements. This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance. These forward-looking statements are based on managements expectations as of October 30, 2014 and assumptions which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. The use of words such as intends and expects, among others, generally identifies 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, Inc.s business. Actual results and the timing and outcome of events may differ materially from those expressed or implied in the forward-looking statements for a variety of reasons, including, among others: an increasingly competitive global environment; modifications to our current business models and practices or our adoption of new business models or practices in order to compete; changes in search engine algorithms and dynamics or other traffic-generating arrangements; declines or disruptions in the travel industry; our failure to maintain and expand our relationships and contractual agreements with travel suppliers or travel distribution partners; our failure to maintain and expand our brand awareness or increased costs to do so; our failure to adapt to technological developments or industry trends; risks relating to our operations in international markets, including China; adverse application of existing tax or unclaimed property laws, rules or regulations or implementation of new unfavorable laws, rules or regulations; adverse outcomes in legal proceedings to which we are a party; our failure to comply with current laws, rules and regulations, or changes to such laws, rules and regulations; determinations by U.S. and foreign tax authorities regarding our worldwide tax provision for income taxes; payments related risks, including credit card fraud; volatility in our stock price; liquidity constraints or our inability to access the capital markets when necessary; interruption or lack of redundancy in our information systems; failure to retain or motivate key personnel or hire, retain and motivate qualified personnel, including senior management; changes in control of the Company; management and director conflicts of interest; risks related to actions taken by our business partners and third party service providers, including failure to comply with our requirements or standards or the requirements or standards of governmental authorities, or any cessation of their operations; risks related to the failure of counterparties to perform on financial obligations; fluctuations in foreign exchange rates; our failure to comply with governmental regulation and other legal obligations related to our processing, storage, use and disclosure of personal data, and liabilities related to security breaches; risks related to our acquisitions, investments or significant commercial arrangements; risks related to our long-term indebtedness; our failure to effectively operate our businesses due to restrictive covenants in the agreements governing our indebtedness; our failure to protect our intellectual property from copying or use by others, including competitors; and other risks detailed in Expedia, Inc.s public filings with the SEC, including our quarterly report on Form 10-Q for the quarter ended September 30, 2014. Except as required by law, we undertake no obligation to update any forward-looking or other statements in this presentation, whether as a result of new information, future events or otherwise.
Non-GAAP Measures. Reconciliations to GAAP measures of non-GAAP measures included in this presentation are included in the Appendix. These measures are intended to supplement, not substitute for, GAAP comparable measures. Investors are urged to consider carefully the comparable GAAP measures and reconciliations.
Industry / Market Data. Industry and market data used in this presentation have been obtained from industry publications and sources as well as from research reports prepared for other purposes. We have not independently verified the data obtained from these sources and cannot assure you of the datas accuracy or completeness.
Trademarks & Logos. Trademarks and logos are the property of their respective owners.
© 2014 Expedia, Inc. All rights reserved. CST: 2029030-50
2 |
|
Investment Highlights
Global Leader in ~$1.1 Trillion Market with Strong Offline-to-Online Trends
Significant Growth Opportunities Across Geographies
Rapid Expansion in Highly Fragmented Hotel Industry Supported by Multi-Product Offering Technology Platform Innovation Driving Higher Conversion
Success in Growing Mobile Channels
High Growth Advertising & Media Business Powerful Free Cash Flow (FCF) Generation Solid Track Record of Disciplined Capital Allocation
A Growth Company
3 |
|
One of the Largest Travel Companies in the World
Depth and Breadth of
SUPPLY
~365,000 Hotels1 in
200+ Countries
400+ Airlines
4.6 Million
Packages
Diverse Demand:
Geography AND Travel Type
Mutually
Beneficial Value to
Supply Travelers
Agreements
Scale Enables
Virtuous Circle
Volume and Diversity of Global Travel
DEMAND
~62 Million
Unique Visitors2
Travelers in
~70 Countries
Corporate and Leisure Travel; Online and Offline
In roperties
1 Includes eLong bookable properties
2 comScore Worldwide Average Monthly UV data, TTM 3Q14
4 |
|
Established Brands With Global Reach
Trusted Brands
#1 Full-Service A Leading Hotel A Leading Hotel A Leader in Global
Online Travel Agency Specialist Globally Metasearch Company Corporate Travel
31 Sites in 85 Sites in Sites in Presence in
31 Countries1 67 Countries 49 Countries 64 Countries
Brand Strength in
EVERY Established Market
Solid Foothold in Emerging Markets
1Includes AirAsia JV 5
Diversifying Revenue Mix Reduces Risk and Positions the Business for Growth
Revenue Revenue
12/31/2005 TTM1 9/30/2014
GEOGRAPHY
PRODUCT
International
22%
Domestic
78%
International
48%
Domestic
52%
Car, Cruise &
Other
Ad & Media 13%
2%
Air
22%
Hotels
63%
Car, Cruise &
Other
13%
Ad & Media
8%
Air
8% Hotels
71%
1 Trailing twelve months
6 |
|
Global Leader and Significant Headroom for Further Growth
UNITED EUROPE ASIA LATIN STATES PACIFIC AMERICA
Expedia Share:
ONLINE Expedia Expedia Expedia Expedia
TRAVEL 15% 6% 5% 5%
SEGMENT
Other Other Other Other
45% of Total
Travel Market 60% 53% 27% 21%
Expedia Expedia Expedia Expedia
2014 TOTAL 9% 3% 1% 1%
TRAVEL
MARKET Other
Other Other Other
Total Travel
Market ~$1.1T $318B $358B $342B $73B
Sources: PhoCusWright estimates and Expedia data; travel market size estimates based on PhoCusWright data for full year 2014; Latin America total travel market sizing data based on PhoCusWright data for full year 2012 and World Economic and Financial Surveys.
Note: Expedias share of travel market defined by TTM gross bookings as of September 30, 2014.
7 |
|
Rapidly Expanding in Fragmented Hotel Segment of the Travel Industry
Expedia, Inc. Has Scale in Hotels
$5.6B
TTM 9/30/14
Revenues
Other¹
~365k Hotels2 in
Hotels 200+ Countries
Air 71% Single Largest
Booker of
Rooms in US
But Still Only
~6% Share3
And Significant Room for
Additional Growth
Number of Hotels4
850,000
700,000
538,000
Global Team
365,000 Accelerating Pace
of Hotel Acquisition
100,000
1Other includes Car, Advertising, Destination Services, Insurance, Cruise, Agency Packages, and Other 2Includes eLong bookable properties 3Sources: Smith Travel Research and Expedia data
4Hotel data for TripAdvisor, trivago, Booking.com and Orbitz obtained from respective company websites. Booking.com number includes ~199,000 vacation rental properties.
8 |
|
Have Completed Significant Technology Investments That Fortify the Business
CUSTOMIZED Front-End Technology for Rapid Innovation and Powerful Analytics Improving Conversion
CENTRALIZED Customer Operations Technology
CENTRALIZED Transactional Infrastructure:
Financials / Order Management / Inventory Management
9
Industry Leading Mobile Initiatives Drive Traffic and Revenue
The World Is Changing
Opening Up Significant Opportunities in Travel
More than
One in Five
Room Nights
Booked on a
Mobile Device
Unique Supply Deal and
Value Proposition to Customers:
Up to 40% Off
Just for Mobile
Expedia, Inc. Leads the Way
in App Development
Expedia Hotels & Flights named Peoples Voice Travel App at the Webby Awards in 2013; is among Top 5 Free Travel Apps in the iTunes Store
Hotels.com is among Top 10 Free Travel Apps in the iTunes Store
Hotwire won a W3 Award for its iPhone app and a Travel Weekly Magellan Award for its iPad app
in Mobile Innovation
Expedia launched new tablet app for iOS and Android
Expedia,
Hotels.com and Hotwire launched apps for wearables
10
Significant Acceleration in the Advertising and Media Business
ADVERTISING & MEDIA REVENUE
$ Millions
$447
$3191
$99 $109 $113 $131
2009 2010 2011 2012 2013 TTM 3Q14
09-11 CAGR : 6.8% 11-13 CAGR : 68.0%
Note: Reported numbers are net of any intercompany revenue
1 |
|
Controlling interest in trivago GmbH (trivago) acquired in March 2013 |
11
Expedia Has Multiple Competitive Moats
TECHNOLOGY PLATFORM
Investment in Technology to Drive Conversion and Bookings
SUPPLY
Global Travel Supply Footprint and Deep Supplier Relationships
Leisure
DIVERSE DEMAND Corporate
Call Centers
Multiple Sources Traditional Travel Agency
Online
SCALE and BREADTH
Global Scale Across Multiple Travel Brands and Product Offerings
12
Financial Results
GROSS BOOKINGS
$ Billions
$48
$34 $39
$26 $29
$21 $22
2008 2009 2010 2011 2012 2013 TTM
3Q14
REVENUE
$ Billions
$5.6
$4.8
$4.0
$3.4
$2.7 $2.7 $3.0
2008 2009 2010 2011 2012 2013 TTM
3Q14
ADJUSTED EBITDA1
$ Millions
$1,017
$879
$803
$711
$662 $700
$621
2008 2009 2010 2011 2012 2013 TTM
3Q14
1 |
|
Non-GAAP measure. See Appendix A for Non-GAAP to GAAP Reconciliation |
ADJUSTED EPS2,3
$4.04
$3.10 $3.22
$2.53 $2.75
$1.97 $2.10
2008 2009 2010 2011 2012 2013 TTM
2 |
|
Non-GAAP measure. See Appendix B for Non-GAAP to GAAP Reconciliation 3Q14 |
3 |
|
Adj. EPS is EPS for Expedia, Inc. considering TripAdvisor on a discontinued operations basis |
13
Investment Highlights
Global Leader in ~$1.1 Trillion Market with Strong Offline-to-Online Trends
Significant Growth Opportunities Across Geographies
Rapid Expansion in Highly Fragmented Hotel Industry Supported by Multi-Product Offering Technology Platform Innovation Driving Higher Conversion
Success in Growing Mobile Channels
High Growth Advertising & Media Business Powerful Free Cash Flow (FCF) Generation Solid Track Record of Disciplined Capital Allocation
A Growth Company
14
APPENDICES
15
Non-GAAP Definitions
Adjusted EBITDA is defined as operating income plus: (1) stock-based compensation expense, including compensation expense related to certain subsidiary equity plans; (2) 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; (3) certain infrequently occurring items, including restructuring; (4) 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; (5) gains (losses) realized on revenue hedging activities that are included in other, net; and (6) depreciation.
The above items are excluded from our Adjusted EBITDA measure because these items are noncash 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 ongoing 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 EPS is defined as Adjusted Net Income divided by adjusted weighted average shares outstanding, which include dilution from options and warrants 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 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, Expedias 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 and Adjusted EPS have similar limitations as Adjusted EBITDA. In addition, Adjusted Net Income 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.
16
Non-GAAP / GAAP Reconciliation:
Adjusted EBITDA
$ Millions 2008 2009 2010 2011 2012 2013 TTM 3Q14
Adjusted EBITDA $621 $662 $700 $711 $803 $879 $1,017
Depreciation (72) (93) (106) (133) (164) (212) (254)
Amortization of Intangible Assets (58) (24) (23) (22) (32) (72) (77)
Impairment of Goodwill (2,480) -
Impairment of Intangible and Other Long-Lived Assets (234) -
Legal Reserves , Occupancy Tax and Other (1) (68) (23) (21) (117) (78) (42)
Stock-Based Compensation (56) (56) (53) (64) (65) (130) (89)
Acquisition-related and other (10) -
Restructuring Charges (34) -
Realized Loss (Gain) on Revenue Hedges 11 4 8 6 (11) 7
Operating Income (Loss) $(2,281) $398 $501 $480 $432 $366 $562
Total Other Expense, Net (66) (78) (75) (78) (82) (65) (65)
Income (Loss) from Continuing Operations before Income
Taxes (2,347) 320 426 402 350 301 497
Provision for Income Taxes 3 (102) (120) (76) (47) (84) (86)
Income (Loss) from Continuing Operations (2,343) 218 306 326 303 216 411
Discontinued Operations, Net of Taxes (177) 85 120 148 (23) -
Net Income (Loss) (2,521) 304 426 475 280 216 411
Net (Income) Loss Attributable to Noncontrolling Interests 3 (4) (4) (2) 16 16
Net Income (Loss) Attributable to Expedia, Inc. $(2,518) $300 $422 $473 $280 $233 $427
Note: Numbers may not sum due to rounding
17
Non-GAAP / GAAP Reconciliation:
Adjusted EPS
$ Thousands 2008 2009 2010 2011 2012 2013 TTM 3Q14
Net Income / (Loss) attributable to Expedia, Inc. (2,517,763) $299,526 $421,500 $472,294 $280,171 $232,850 $426,845
Discontinued operations, net of taxes 177,366 (85,349) (119,885) (148,148) 22,539 -
Stock-Based Compensation 55,731 55,756 52,507 63,847 64,596 130,173 89,109
Amortization of Intangibles 58,275 23,875 22,514 21,925 31,705 71,731 77,085
Restructuring Charges 34,168 -
Noncontrolling Investment Basis Adjustment 5,158 -
Legal Reserves, Occupancy Tax and Other 1.051 67,999 22,692 20,855 117,025 77,919 42,084
Acquisition-related and other 9,829 -
Foreign Currency Loss on U.S. Dollar Cash Balances Held by
eLong 8,586 128 2,711 2,690 16 (165) (55)
Impairment of Goodwill / Other-than-temporary investment
impairment 2,480,470 4,247
Impairment of Intangible and Other Long-Lived Assets 233,900 -
Stock-based compensation as part of equity method 352
investments
(Gain) / Loss on Derivative Instruments Assumed at Spin-Off (4,600) 38 -
Amort. of Intangible Assets as Part of Equity Method
Investments 2,593 458 -
Unrealized (Gain) / Loss on Revenue Hedges (1,033) 4,898 (4,479) 3,199 (1,072) (12,544)
Noncontrolling Interests (3,837) (1,343) (2,877) (3,135) (2,263) (15,278) (18,035)
Provision for Income Taxes (195,678) (86,395) (34,449) (41,362) (78,485) (58,493) (68,449)
Adjusted Net Income $296,094 $312,774 $369,611 $384,487 $438,503 $451,973 $540,639
GAAP Diluted Weighted Average Shares Outstanding 143,084 146,071 144,014 138,702 139,929 139,593 133,306
Additional Restricted Stock Units 6,886 3,183 1,889 1,331 1,323 565 516
Adjusted Weighted Average Shares Outstanding 149,970 149,254 145,903 140,033 141,252 140,158 133,821
Adjusted Earnings from Continued Operations Per Share $1.97 $2.10 $2.53 $2.75 $3.10 $3.22 $4.04
Note: Numbers may not sum due to rounding 18
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