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.

Expedia