Expedia
Online travel booking platform, Expedia, released first quarter results. Gross bookings tumbled 39% to $17.9 billion. Revenue fell 15% to $2.21 billion, and the adjusted net loss increased 545% to $285 million, translating to a loss of $1.83 per share. Gross margins fell 8.1% to 71.5% and the operating margin is thin at 6.13%.
Lodging revenue was 10% lower, as room nights stayed fell 14% in the quarter. This was partially offset by a 5% increase in revenue per room night.
Air-ticket revenue dropped 56%, as revenue per ticket and number of air tickets sold fell 41% and 26% respectively.
Advertising and media revenue dropped 23% too.
As a percentage of total revenue, lodging accounted for 69%, advertising and media accounted for 9%, air accounted for 5% and all other revenues accounted for the remaining 17%.
The cost of revenue increased 28% y-o-y due to an increase in bad debt expenses related to future collection risk, as well as higher cloud expenses.
The company also impaired intangible assets and goodwill to the tune of $886 million.
The company had cash, cash equivalents and short-term investments totalling $4.1 billion at the end of March. However consolidated free cash flow totalled a negative $1.1 billion, decreasing $2.9 billion in the first quarter compared to the prior year due to working capital requirements. This means the company is likely to burn through its cash holdings relatively quickly should business not improve. Debt levels increased by 5.01% due to a revolving credit facility.
Covid-19 effects only moderately impacted gross bookings in January as it was largely limited to the Asia Pacific region. In February, gross bookings declined year-on-year as the virus spread in Europe over that month. North America, the largest region for Expedia, was hit with negative gross bookings (ie: cancellations exceeded bookings) in March only.
Also mentioned on the earnings call, was that due to a change in Google’s search algorithm, Expedia is less visible on search results. This means it has to fork out more for paid advertising (to Google) going forward. CEO Peter Kern (no relation) said they’ve chased unhealthy growth over the years, and Google and other performance marketing channels have tried to disintermediate them.
The company also raised nearly $4 billion in capital in April. $1.2 billion came from private equity firms Silver Lake and Apollo Global and another $2.75 billion came from unsecured senior notes that were issued.
During the quarter the Group repurchased 3.4 million shares of Expedia for $370 million (ex-transaction costs) at an average of $109.88 per share. The have since suspended buybacks and dividends, and the company has also cancelled its guidance.
