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Expedia Group (EXPE) Incurs Loss in Q1, Revenues Fall Y/Y

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Expedia Group, Inc. (EXPE - Free Report) reported first-quarter 2020 adjusted loss of $1.83 per share, wider than the Zacks Consensus Estimate of a loss of $1.24.Further, the figure was wider than the year-ago quarter’s loss of 27 cents. The company reported earnings of $1.24 per share in the previous quarter.

Revenues of $2.21 billion surpassed the Zacks Consensus Estimate of $2.12 billion. However, the figure declined15% year over year and 19.6% sequentially to $2.21 billion.

The coronavirus pandemic affected Expedia’s first-quarter results owing to economic shutdowns.

Cancellation rate of bookings started impacting the company’s gross bookings negatively from February when Europe became the epicentre of the virus outbreak. Further, cancellations surged significantly in March when the virus started taking a toll on Expedia’s largest operating region -- North America.

Expedia witnessed gross bookings of $17.9 billion in the first quarter. The figure decreased 39% year over year and 23.1% sequentially. Further, the figure missed the Zacks Consensus Estimate of $23.43 billion.

Coming to the price performance, Expedia has lost 26.4% on a year-to-date basis against the industry's gain of 23.1%.



Headwinds in the global travel industry owing to coronavirus remain major concerns for the company.

Nevertheless, Expedia is optimistic about its cost-control initiatives which will help in combating the coronavirus-induced disruptions. The company has taken cost-saving measures by reducing its variable marketing and discretionary expenses.

Revenues by Segment

The company has re-classified its Core OTA, Egencia and Vrbo segments into two new ones – Retail and B2B.

Retail: The company generated $1.6 billion revenues (71.6% of total revenues) from this segment, which declined 17% year over year. Notably, the segment comprises Expedia.com, Hotels.com, Vrbo, Orbitz, Travelocity, Wotif Group, ebookers, CheapTickets, Hotwire.com, CarRentals.com, CruiseShipCenters, Classic Vacations and SilverRail Technologies, providing travel and advertising services worldwide.

B2B: This segment yielded $485 million revenues (21.9% of total revenues), which fell13% from the year-ago quarter. Notably, the segment comprises Expedia Partner Solutions and Egencia.

Corporate: The company generated $39-million revenues from this segment (0.01% of total revenues). The segment consists of Bodybuilding.com, which was acquired in the Liberty Expedia Holdings, Inc. transaction in third-quarter 2019. Notably, the top-line is up 14.7% sequentially.

trivago: Revenues from this segment came in $154 million (6.9% of revenues), down 35% year over year.

Expedia Group, Inc. Price, Consensus and EPS Surprise

 

Expedia Group, Inc. Price, Consensus and EPS Surprise

Expedia Group, Inc. price-consensus-eps-surprise-chart | Expedia Group, Inc. Quote

Revenues by Business Model

Merchant model generated revenues of $1.3 billion (60.7% of revenues), down7% year over year. Merchant gross bookings came in $8.1 billion, down 33% from the prior-year quarter

Agency division generated revenues of $562 million (25.4% of revenues), falling 33% from the prior-year quarter. Agency gross booking were $9.8 billion, down 43% year over year.

Advertising & Media and other yielded $307 million in revenues (13.9% of revenues), declining 7% from the year-ago quarter. This can primarily be attributed to sluggishness in Expedia Group Media Solutions and trivago.

Revenues by Geography

Expedia generated $1.3 billion revenues (59.6% of total revenues) from domestic regions, down 11% from the prior-year quarter.

Further, revenues generated from international regions totalled $892 million (40.4% of revenues), down 21% on a year-over-year basis.

Revenues by Product Line

Lodging revenues, which accounted for 69% of total revenues, declined 10% from the prior-year quarter. Although the company witnessed a 5% rise in revenues per room night, weak stayed room nights declined 14%.

Air revenues accounted for 5% of revenues, down 56% year over year due to COVID-19-affected travel trends. Notably, revenue per ticket and air tickets sold plunged 41% and 26% year over year, respectively.

Operating Details

Adjusted EBITDA was ($76) million in the reported quarter compared with $176 million in the previous quarter. Notably, Retail and B2B adjusted EBITDA were down 88% and 65% year over year, respectively. trivago EBITDA was ($1) million compared with $24 million in the prior-year quarter.

Further, adjusted selling and marketing expenses were $1.2 billion, down 21% year over year. As a percentage of revenues, these expenses contracted 370 basis points (bps) year over year to 54.2%.

Additionally, general and administrative expenses were $167 million, up 4% year over year. As a percentage of revenues, the figure expanded 140 bps from the year-ago quarter to 7.6%.

Technology and content expenses were $288 million, up 3% from the year-ago quarter. The figure expanded 230 bps year over year, as a percentage of revenues.

Operating loss came in $1.3 billion in the first quarter compared with $131 million in the year-ago quarter.

Balance Sheet & Cash Flow

As of Mar 31, 2020, cash and cash equivalents were $3.9 billion, up from $3.3 billion as of Dec 31, 2019. Short-term investments totaled $194 million, down from $526 million in the previous quarter.

Additionally, long-term debt was $4.18 billion at the end of the first quarter compared with $4.19 billion at the end of the fourth quarter.

Further, Expedia utilized $784 million of cash in operations during the reported quarter compared with $341 million of cash generated from operations in the last quarter. Further, free cash flow was ($1.1) billion in the first quarter.

The company paid out quarterly dividend worth $48 million (34 cents per share) during the reported quarter.

Outlook

As the ongoing quarter is facing the full impact of the pandemic, Expedia expects second-quarter 2020 revenues to be more adversely impacted as compared with first-quarter 2020 revenues.

Further, adjusted EBITDA loss in the second quarter is expected to be wider than that in the first quarter.

Zacks Rank & Stocks to Consider

Expedia currently carries a Zacks Rank #3 (Hold).

NVIDIA (NVDA - Free Report) , Workday (WDAY - Free Report) and Okta (OKTA - Free Report) are some better-ranked stocks worth considering in the broader computer and technology sector. All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NVIDIA, Workday and Okta are set to report quarterly results on May 21, 26 and 28, respectively.

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