BELLEVUE, Wash.—October 25, 2012—Expedia, Inc. (NASDAQ: EXPE) today announced financial results for the third quarter ended September 30, 2012.
• Room nights grew 27% year-over-year driven by acceleration across Europe, Asia-Pacific and the Americas compared to second quarter 2012. Stayed room night growth at Brand Expedia® and Hotels.com® also accelerated versus the second quarter 2012.
• Expedia, Inc. international points of sale delivered over half of total room nights in the third quarter representing a significant milestone for the expansion of our international business.
• Driven by strong top line performance, Adjusted EBITDA increased 6% year-over-year as compared to third quarter 2011. Adjusted earnings per share increased 3% year-over-year as compared to third quarter 2011.
• Year-to-date, Expedia repurchased 10.7 million shares for a total of $397 million bringing the total capital allocated to share repurchases, acquisitions and dividends to over $635 million – nearly $250 million more than the amount allocated in 2011.
Financial Summary & Operating Metrics (figures in $MMs except per share amounts)
Metric |
Quarter Ended 9.30.12 |
Quarter Ended 9.30.11 |
Y / Y Growth |
Room night growth |
27% |
17% |
995 bps |
Gross bookings |
9,056.1 |
7,623.0 |
19% |
Revenue |
1,199.0 |
1,020.4 |
17% |
Adjusted EBITDA* |
293.6 |
277.7 |
6% |
Operating income |
227.1 |
209.1 |
9% |
Adjusted net income |
188.0 |
180.5 |
4% |
Income from continuing operations |
169.9 |
170.9 |
(1%) |
Adjusted EPS * |
$1.32 |
$1.28 |
3% |
Diluted EPS from continuing operations |
$1.20 |
$1.22 |
(2%) |
Free cash flow |
(6.5) |
(127.1) |
95% |
Discussion of Results
The information presented within treats the domestic and international operations previously associated with Expedia’s TripAdvisor® Media Group as discontinued operations and accounts for the reverse stock split that occurred on December 20, 2011. The results include Expedia.com®, Hotels.com, Hotwire.com®; Expedia® Affiliate Network, Classic Vacations®, Expedia Local Expert®, Expedia® CruiseShipCenters®, Egencia®, eLong™, and Venere® Net SpA; in addition to the related international points of sale.
The results for the third quarter of 2012 exclude the Brand Expedia websites contributed to the joint venture between Expedia and AirAsia™ formed on July 1, 2011, which is 50% owned by Expedia.
The results for the third quarter of 2012 include VIA Travel™ and Traveldoo®, which were acquired during the second quarter of 2012 and fourth quarter of 2011, respectively. The impact of the Traveldoo acquisition on third quarter 2012 results was not meaningful, and the impact from the VIA Travel acquisition is discussed in more detail below. Unless otherwise noted, all comparisons below are versus the third quarter of 2011.
Gross Bookings, Revenue & Revenue Margins
Gross bookings increased 19% (22% excluding foreign exchange) for the third quarter of 2012, primarily driven by a 27% increase in hotel room nights and an 11% increase in air tickets. The VIA Travel acquisition added approximately 3% to year-over-year gross bookings growth for the third quarter of 2012.
For the third quarter of 2012, average daily room rates declined 3%, and average airfares grew 1% year-over-year. Air tickets sold grew by 11% year-over-year primarily due to the VIA Travel acquisition. Domestic bookings increased 13% and international bookings increased 27% (34% excluding foreign exchange) for the third quarter of 2012. International bookings totaled $3.8 billion for the third quarter of 2012, accounting for 42% of worldwide bookings versus 40% in the prior year.
Revenue increased 17% (21% excluding foreign exchange) for the third quarter of 2012, primarily driven by an increase in hotel room nights stayed partially offset by a decrease in revenue per room night and revenue per ticket. The VIA Travel acquisition added approximately 3% to year-over-year revenue growth for the third quarter of 2012. Domestic revenue increased 14% and international revenue increased 22% (29% excluding foreign exchange) for the third quarter of 2012. International revenue equaled $545 million for the third quarter of 2012, representing 45% of worldwide revenue versus 44% in the prior year.
Revenue as a percentage of gross bookings (“revenue margin”) was 13.2% for the third quarter of 2012, a decrease of 15 basis points compared to the third quarter of 2011. The decrease primarily relates to hotel product mix, lower net air supplier economics combined with higher air ticket prices and book-to-stay timing partially offset by a favorable mix shift to our higher margin product.
Product & Services Detail
As a percentage of total worldwide revenue in the third quarter of 2012, hotel accounted for 77%, air accounted for 7% and all other revenue sources accounted for the remaining 16%.
Worldwide hotel revenue increased 20% for the third quarter of 2012 driven by a 27% increase in room nights stayed partially offset by a 6% decrease in revenue per room night. Revenue per room night decreased primarily due to changes in our hotel product mix, of which mix shift to regions with lower hotel economics is becoming a significant component, as well as impacts from foreign currency and accruals for loyalty programs.
Worldwide air revenue decreased 10% for the third quarter of 2012 due primarily to a 19% decrease in revenue per ticket partially offset by an 11% increase in air tickets sold. The increase in ticket volume primarily relates to the VIA Travel acquisition. Revenue per ticket declined due to lower net supplier economics and fewer consumer and interline booking fees as well as impacts from foreign exchange.
All other revenue (excluding hotel and air) increased 23% for the third quarter of 2012 through strong growth in corporate travel fees and advertising revenue.
Recent Highlights
Global Presence
• Expedia, Inc. and eLong, Inc. entered into an expanded agreement that improves consumers’ global hotel booking options and increases Expedia’s visibility to consumers in the Chinese market. The enhanced partnership also provides an increased level of strategic cooperation between the world’s largest online travel company and China’s second-largest online travel site.
• Expedia announced an arrangement making Malaysia Airlines’ full schedule of routes and fares, including that of its wholly-owned subsidiary MASwings, available to consumers booking flights on Expedia Malaysia, www.expedia.com.my, the country’s only full-service travel site.
• Brand Expedia launched a full service site in Brazil, enabling consumers in Brazil to book flights and dynamic packages on www.Expedia.com.br. Hotels.com launched its first-ever Hebrew language site, making it easier for consumers in Israel to search and book their stays in their local language on Hotels.com. Hotwire® rolled out localized sites in Denmark, www.hotwire.com/dk/, and Sweden, www.hotwire.com/se/.
• Expedia Affiliate Network (EAN) signed agreements to power travel bookings for a number of international online travel companies, including Daka90, one of Israel’s leading online travel booking portals; OZON.Travel, one of Russia’s leading online ticketing agencies; and Wego.com, the leading travel search engine in Asia-Pacific and the Middle East.
• Expedia, Inc. expanded its international operations with the opening of a new office in Gurgaon, India. Approximately 300 employees representing several Expedia, Inc. brands will be based at the 42,000-square foot space, which will serve as one of the company’s global centers of technology excellence.
• Expedia ranked amongst the Top 20 on LinkedIn’s Most InDemand Employers for 2012. The list surveyed LinkedIn’s 175 million professionals related to the following activities: connecting with employees, viewing employee profiles, visiting company and career Pages, and following companies to determine the rankings.
Technology Platform Investment and Innovation
• Expedia unveiled a comprehensive new rewards program for small businesses with unmanaged travel needs. Expedia® Business Rewards, exclusively for Ink from Chase small business credit cardholders, gives small businesses access to travel management tools and allows cardholders to earn rewards that can be applied toward future company travel on Expedia.com.
• Expedia® Media Solutions, the advertising sales division of Expedia, delivered strong results for the third quarter, with 26% year-over-year growth in advertising and media revenue.
• Find Your Understanding, the latest in a series of viral vignettes introduced by Brand Expedia as part of its FIND YOURS™ advertising campaign, achieved more than 2 million YouTube views within just over a week of launch.
Worldwide Hotel Portfolio
• At quarter end, Expedia global websites featured over 160,000 bookable properties, increasing its direct relationships with hotels by 14% year-over-year. Expedia sites offer over 105,000 hotels in EMEA and APAC countries. In addition through the expanded agreement, Expedia will begin offering over 32,000 hotels in China featured on eLong’s site.
• Expedia, Inc. issued preliminary test results for its Expedia Traveler Preference (ETP) program. Findings from the test reveal that participating hotels are apt to receive an increased number of bookings, as well as bookings with 5% longer lengths-of-stay, on average, when consumers are presented with both a pre-pay and post-pay option. To-date, more than 13,000 hotels in the U.S. and Europe have signed on to participate.
New Distribution Channels
• To build on the success of 20% of hotel transactions being booked through mobile devices, Hotwire released its first-ever mobile app for iOS devices, allowing iPhone and iPod Touch users in the US and Canada to access the deeply discounted inventory of hotels in more than 3,000 cities and over 60 countries available through Hotwire.
• Hotels.com released an updated version of its popular hotel booking app for Android and iPad tablets. Collectively, Hotels.com apps have achieved more than 10 million total downloads since launch.
• Expedia introduced exclusive mobile-only deals for the Expedia® Hotels mobile app, giving smartphone users access to discounts of up to 30% off on stays at more than 2,000 participating properties throughout the United States, Canada and Europe.
