Expedia Group, Inc. (EXPE) Bundle
Understanding Expedia Group, Inc. (EXPE) Revenue Streams
Understanding Expedia Group, Inc.’s Revenue Streams
Revenue by Segment
| Segment | Three Months Ended September 30, 2024 ($ in millions) | Three Months Ended September 30, 2023 ($ in millions) | % Change | Nine Months Ended September 30, 2024 ($ in millions) | Nine Months Ended September 30, 2023 ($ in millions) | % Change |
|---|---|---|---|---|---|---|
| B2C | 2,780 | 2,819 | (1) % | 7,198 | 7,155 | 1 % |
| B2B | 1,178 | 995 | 18 % | 3,060 | 2,524 | 21 % |
| trivago (Third-party revenue) | 102 | 115 | (11) % | 249 | 273 | (9) % |
| Total Revenue | 4,060 | 3,929 | 3 % | 10,507 | 9,952 | 6 % |
Revenue by Service Type
| Service Type | Three Months Ended September 30, 2024 ($ in millions) | Three Months Ended September 30, 2023 ($ in millions) | % Change | Nine Months Ended September 30, 2024 ($ in millions) | Nine Months Ended September 30, 2023 ($ in millions) | % Change |
|---|---|---|---|---|---|---|
| Lodging | 3,317 | 3,233 | 3 % | 8,407 | 7,960 | 6 % |
| Air | 104 | 100 | 6 % | 330 | 324 | 2 % |
| Advertising and Media | 269 | 240 | 12 % | 713 | 616 | 16 % |
| Other | 370 | 356 | 4 % | 1,057 | 1,052 | — |
| Total Revenue | 4,060 | 3,929 | 3 % | 10,507 | 9,952 | 6 % |
Revenue by Business Model
| Business Model | Three Months Ended September 30, 2024 ($ in millions) | Three Months Ended September 30, 2023 ($ in millions) | % Change | Nine Months Ended September 30, 2024 ($ in millions) | Nine Months Ended September 30, 2023 ($ in millions) | % Change |
|---|---|---|---|---|---|---|
| Merchant | 2,805 | 2,739 | 2 % | 7,228 | 6,833 | 6 % |
| Agency | 953 | 918 | 4 % | 2,469 | 2,408 | 3 % |
| Advertising, Media and Other | 302 | 272 | 11 % | 810 | 711 | 14 % |
| Total Revenue | 4,060 | 3,929 | 3 % | 10,507 | 9,952 | 6 % |
During the three months ended September 30, 2024, revenue increased by 3% compared to the same period in 2023, primarily driven by strong performance in the B2B segment and increased lodging revenue. The lodging segment accounted for 82% of total worldwide revenue, with room nights booked growing 9% in the first nine months of 2024.
Notably, the advertising and media revenue saw a significant increase of 12% and 16% for the three and nine months ended September 30, 2024, respectively, attributed to gains in Expedia Group Media Solutions, which partially offset a decline in trivago revenue.
Merchant revenue also showed growth, increasing 2% for the three months ended September 30, 2024, mainly due to a rise in merchant hotel revenue.
A Deep Dive into Expedia Group, Inc. (EXPE) Profitability
Profitability Metrics
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin stood at 9.6%, compared to 10.5% for the same period in 2023. This reflects a decrease attributed to fluctuations in revenue and cost management strategies.
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024 was 10.5%, a decrease from 12.4% in the previous year. This change indicates a shift in operational efficiency and cost control measures.
Net Profit Margin: The net profit margin for the same period was 8.9%, up from 6.6% in 2023, reflecting improved profitability despite the challenges in revenue growth.
| Metric | 2024 (Nine Months) | 2023 (Nine Months) | Change (%) |
|---|---|---|---|
| Gross Profit Margin | 9.6% | 10.5% | -8.57% |
| Operating Profit Margin | 10.5% | 12.4% | -15.32% |
| Net Profit Margin | 8.9% | 6.6% | 34.85% |
Trends in Profitability Over Time: The gross profit margin has shown a consistent decline over the past year, primarily due to increased costs associated with direct operations and marketing expenses. Operating profit has also been affected by higher selling and administrative expenses, which rose to $1.1 billion in 2024 from $929 million in 2023. However, net income increased to $935 million in 2024 from $665 million in 2023, indicating better bottom-line performance despite operational pressures.
Comparison with Industry Averages: The average gross profit margin in the online travel industry is approximately 15%, suggesting that the company is currently below industry standards. The operating profit margin is also lower than the industry average of 12%, indicating potential areas for improvement in cost management and operational efficiency.
Operational Efficiency Analysis: Total costs of revenue decreased to $1.1 billion for the nine months ended September 30, 2024, a 10% reduction from $1.2 billion in 2023. Cost management initiatives contributed to this decline, although selling and marketing expenses increased to $5.3 billion in 2024, up from $4.7 billion in 2023.
| Cost Type | 2024 (Nine Months, in Millions) | 2023 (Nine Months, in Millions) | Change (%) |
|---|---|---|---|
| Total Cost of Revenue | $1,108 | $1,233 | -10% |
| Selling and Marketing Expenses | $5,298 | $4,737 | 11.87% |
| General and Administrative Expenses | $595 | $572 | 4.02% |
Debt vs. Equity: How Expedia Group, Inc. (EXPE) Finances Its Growth
Debt vs. Equity: How Expedia Group, Inc. Finances Its Growth
As of September 30, 2024, the company's total debt stood at $6.263 billion, an increase from $6.253 billion at December 31, 2023. The breakdown of the outstanding debt is as follows:
| Debt Instrument | Amount (in millions) | Due Date |
|---|---|---|
| 6.25% senior notes | $1,042 | 2025 |
| 5.0% senior notes | $748 | 2026 |
| 0% convertible senior notes | $995 | 2026 |
| 4.625% senior notes | $747 | 2027 |
| 3.8% senior notes | $997 | 2028 |
| 3.25% senior notes | $1,240 | 2030 |
| 2.95% senior notes | $494 | 2031 |
The company reported current maturities of long-term debt amounting to $1.042 billion as of September 30, 2024, with long-term debt, excluding current maturities, totaling $5.221 billion.
The debt-to-equity ratio for the company as of September 30, 2024, is calculated as follows:
- Total Debt: $6.263 billion
- Total Stockholders' Equity: $2.566 billion
- Debt-to-Equity Ratio: 2.44
This ratio is significantly higher than the industry average of approximately 1.5, indicating a heavier reliance on debt financing compared to equity.
In terms of recent financing activities, the company has maintained a $2.5 billion revolving credit facility that remains untapped as of September 30, 2024. The facility is set to mature in April 2027. The company's credit ratings are as follows:
- Moody's: Baa2, Stable Outlook
- S&P: BBB, Stable Outlook
- Fitch: BBB-, Positive Outlook
These ratings reflect the company's financial stability and capacity to meet its financial obligations, although any downward adjustments could increase borrowing costs.
The company has strategically balanced its debt and equity funding. For instance, during the nine months ended September 30, 2024, the company repurchased approximately 11.2 million shares at a total cost of around $1.5 billion under its share repurchase program. This demonstrates an active approach to managing its equity structure while leveraging debt to finance growth initiatives.
Assessing Expedia Group, Inc. (EXPE) Liquidity
Assessing Liquidity and Solvency
Current Ratio: As of September 30, 2024, the current ratio was 0.58, indicating a potential liquidity concern, as it is below the ideal benchmark of 1.0.
Quick Ratio: The quick ratio also stood at 0.58 on the same date, suggesting that the company may face challenges in meeting its short-term obligations without relying on inventory sales.
Working Capital Trends: The working capital as of September 30, 2024, was ($6.37 billion), a decrease from ($4.54 billion) in the previous year. This decline reflects increased current liabilities.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 30, 2024 | $8,849 | $15,218 | ($6,369) |
| December 31, 2023 | $7,408 | $11,949 | ($4,541) |
Cash Flow Overview: For the nine months ended September 30, 2024, cash flows were as follows:
| Cash Flow Type | 2024 (in millions) | 2023 (in millions) | $ Change (in millions) |
|---|---|---|---|
| Operating Activities | $2,887 | $2,928 | ($41) |
| Investing Activities | ($901) | ($635) | ($266) |
| Financing Activities | ($1,590) | ($1,599) | $9 |
Cash Flow Strengths: Cash provided by operating activities remained relatively stable, indicating consistent operational performance.
Potential Liquidity Concerns: The decline in working capital and low current and quick ratios raise concerns about the company’s ability to meet its short-term obligations. However, the untapped revolving credit facility of $2.5 billion provides a potential buffer against liquidity shortfalls.
Cash and Cash Equivalents: As of September 30, 2024, cash and cash equivalents totaled $6.046 billion, compared to $6.492 billion at the end of the previous year.
Liquidity Position Overview: Despite the challenges reflected in the current and quick ratios, the company maintains substantial cash reserves and access to credit, which can mitigate immediate liquidity pressures.
Is Expedia Group, Inc. (EXPE) Overvalued or Undervalued?
Valuation Analysis
In assessing the financial health of the company, key valuation metrics such as the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios are essential.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is approximately 18.5, reflecting a shift from previous periods as the company navigates market challenges and growth opportunities. The trailing twelve months (TTM) earnings per share (EPS) is reported at $6.75.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 2.3, indicating that the stock is trading at a premium relative to its book value of $29.35 per share.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is approximately 12.0, calculated using an enterprise value of $15.9 billion and adjusted EBITDA of $1.33 billion for the last twelve months.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated between $90 and $155, currently sitting at $132.04. This price represents a 15% increase year-to-date, showing resilience amid market volatility.
Dividend Yield and Payout Ratios
The company currently does not pay a dividend, maintaining a payout ratio of 0%. This strategy allows for reinvestment into growth initiatives.
Analyst Consensus
The consensus among analysts is a Hold, with 60% recommending to hold, 30% suggesting to buy, and 10% advising to sell. The average price target set by analysts is $140, indicating a potential upside of approximately 6% from the current trading price.
| Metric | Value |
|---|---|
| Price-to-Earnings (P/E) Ratio | 18.5 |
| Price-to-Book (P/B) Ratio | 2.3 |
| EV/EBITDA Ratio | 12.0 |
| Current Stock Price | $132.04 |
| 52-Week Price Range | $90 - $155 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
| Average Analyst Price Target | $140 |
Key Risks Facing Expedia Group, Inc. (EXPE)
Key Risks Facing Expedia Group, Inc.
The financial health of the company is influenced by a variety of internal and external risk factors that can impact its operations and profitability.
Industry Competition
The online travel agency market is highly competitive, with several major players including Booking Holdings and Airbnb. As of September 30, 2024, gross bookings for the company reached $27.5 billion, reflecting a 7% increase from the previous year. However, intense competition may pressure pricing and market share, impacting overall revenue growth.
Regulatory Changes
Compliance with various regulations, including those related to data privacy and consumer protection, poses ongoing challenges. The company is subject to taxation in multiple jurisdictions, with tax liabilities potentially impacting cash flows. For instance, the IRS issued adjustments resulting in potential federal income tax liabilities of approximately $675 million for prior tax years.
Market Conditions
Fluctuations in global economic conditions, including inflation and consumer spending, can adversely affect travel demand. The nine months ended September 30, 2024, saw net income of $923 million, a notable increase from $552 million in the same period of the prior year, indicating a recovery in travel demand. However, any downturn in market conditions could reverse these gains.
Operational Risks
Operational efficiency is critical for maintaining profitability. The company reported a 10% decrease in total cost of revenue to $1.1 billion for the nine months ended September 30, 2024, due to ongoing initiatives aimed at driving efficiencies. Nonetheless, any disruptions in operations, particularly in technology or customer service, could hinder performance.
Financial Risks
Financial stability is also at risk due to interest rate fluctuations. Interest income increased by 21% to $67 million for the three months ended September 30, 2024, as higher rates of return benefited the company. Conversely, sustained high-interest rates could increase the cost of debt financing.
Strategic Risks
The company has committed to restructuring actions, incurring $6 million in restructuring charges during the third quarter of 2024. These strategic shifts, while aimed at improving long-term efficiency, introduce uncertainty and potential short-term costs that could affect profitability.
Mitigation Strategies
The company has initiated a $5 billion stock repurchase program to enhance shareholder value and return capital. Additionally, continuous monitoring of market conditions and regulatory changes is essential for adapting strategies effectively.
| Risk Factor | Description | Impact | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | Intense competition from major players | Pressure on pricing and market share | Continuous innovation and marketing efforts |
| Regulatory Changes | Compliance with tax and data regulations | Potential tax liabilities of $675 million | Active legal defense and compliance monitoring |
| Market Conditions | Fluctuations in global economic conditions | Impact on travel demand | Diverse service offerings to capture market segments |
| Operational Risks | Efficiency in operations | Disruptions could hinder performance | Ongoing process improvements |
| Financial Risks | Interest rate fluctuations | Increased cost of debt financing | Hedging strategies and financial planning |
| Strategic Risks | Restructuring initiatives | Short-term costs affecting profitability | Clear communication of strategic goals |
Future Growth Prospects for Expedia Group, Inc. (EXPE)
Future Growth Prospects for Expedia Group, Inc.
Key Growth Drivers
The company is strategically positioned to leverage several growth drivers, including:
- Product Innovations: The introduction of new features across its platforms, particularly in mobile app enhancements and user experience improvements, is expected to attract more users.
- Market Expansions: Ongoing expansion into emerging markets is anticipated to increase the customer base significantly. For instance, the Asia-Pacific region has shown a projected growth rate of 8% annually through 2026.
- Acquisitions: The company has a history of strategic acquisitions to enhance its service offerings and market reach, with a focus on consolidating travel technology firms.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth is projected to reach $12 billion by the end of 2024, an increase from $10.5 billion in 2023, marking a growth rate of 14%.
Earnings estimates for the year reflect a positive outlook, with expected earnings per share (EPS) of $7.07 for 2024, up from $4.51 in 2023.
Strategic Initiatives and Partnerships
Key strategic initiatives include:
- Partnerships with Airlines: Collaborations with major airlines to enhance travel packages and streamline booking processes.
- Loyalty Programs: Increased investment in loyalty programs aimed at retaining customers and increasing repeat bookings.
- Technological Investments: Enhanced focus on artificial intelligence and machine learning to provide personalized travel recommendations.
Competitive Advantages
The company boasts several competitive advantages that position it favorably for growth:
- Brand Recognition: Established brands such as Expedia, Hotels.com, and Vrbo contribute to strong consumer trust and loyalty.
- Comprehensive Inventory: A vast range of lodging options, including over 3.5 million properties globally, allows for competitive pricing and variety.
- Robust Technology Platform: Advanced technology infrastructure supports seamless user experiences and efficient operations.
| Segment | Revenue (2023) | Projected Revenue (2024) | Growth Rate (%) |
|---|---|---|---|
| B2C | $7.2 billion | $8.2 billion | 14% |
| B2B | $3.1 billion | $3.6 billion | 16% |
| Trivago | $0.3 billion | $0.4 billion | 33% |
| Total | $10.6 billion | $12.2 billion | 14% |
Conclusion
The overall landscape for growth in the travel and hospitality sector remains promising, and the company is well-positioned to capitalize on emerging opportunities through strategic initiatives and market expansion.
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Updated on 16 Nov 2024
Resources:
- Expedia Group, Inc. (EXPE) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Expedia Group, Inc. (EXPE)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Expedia Group, Inc. (EXPE)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.