Expedia, Inc. :EXPE-US: Earnings Analysis: Q2, 2017 By the Numbers : August 1, 2017

Expedia, Inc. reports financial results for the quarter ended June 30, 2017.

We analyze the earnings along side the following peers of Expedia, Inc. – Travelzoo (TZOO-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 2,586.05 million, Net Earnings of USD 56.69 million.
  • Gross margins widened from 73.65% to 76.25% compared to the same period last year, operating (EBITDA) margins now 12.88% from 10.93%.
  • Year-on-year change in operating cash flow of 10.43% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 2586.05 2188.74 2092.83 2580.91 2195.87
Revenue Growth (%YOY) 17.77 14.96 23.21 33.19 32.07
Earnings (mil) 56.69 -86.12 79.46 279.33 31.65
Earnings Growth (%YOY) 79.12 29.33 733.73 -1.37 -92.96
Net Margin (%) 2.19 -3.93 3.8 10.82 1.44
EPS 0.36 -0.57 0.51 1.81 0.21
Return on Equity (%) 0.99 -1.52 1.42 5.18 0.6
Return on Assets (%) 1.25 -2.06 1.99 6.8 0.76

Access our Ratings and Scores for Expedia, Inc.

Market Share Versus Profits

Revenues History
Earnings History

EXPE-US‘s change in revenue this period compared to the same period last year of 17.77% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that EXPE-US is holding onto its market share. Also, for comparison purposes, revenues changed by 18.15% and earnings by 165.82% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 73.65% to 76.25% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 10.93% to 12.88% compared to the same period last year. For comparison, gross margins were 72.98% and EBITDA margins were 7.23% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

EXPE-US‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently -95.17, compared to last year’s level of -133.54 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

EXPE-US‘s change in operating cash flow of 10.43% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 1.81% to 4.48% and (2) one-time items. The company’s pretax margins are now 2.19% compared to -0.56% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Expedia, Inc.

Company Profile

Expedia, Inc. is an online travel company. The company provides travel products and services to leisure and corporate travelers, including travel agencies, tour operators, travel supplier direct websites and call centers, consolidators and wholesalers of travel products and services, large online portals and search websites, certain travel meta-search websites, mobile travel applications, social media websites, as well as traditional consumer eCommerce and group buying websites. It also offers travel and non-travel advertisers access to a potential source of incremental traffic and transactions through its various media and advertising offerings on its transaction-based websites. The company operates through two business segments: Leisure and Egencia. The Leisure segment provides a full range of travel and advertising services to worldwide customers through a variety of brands including: Expedia.com and Hotels.com in the United States and localized Expedia and Hotels.com websites. The Egencia segment provides managed travel services to corporate customers in North America, Europe, and the Asia Pacific region. Expedia was founded on August 9, 2005 and is headquartered in Bellevue, WA.

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