Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): July 25, 2019
 
EXPEDIA GROUP, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
001-37429
 
20-2705720
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)
333 108th Avenue NE
Bellevue, Washington 98004
(Address of principal executive offices) (Zip code)
(425) 679-7200
Registrant’s telephone number, including area code
Not Applicable
(Former name or former address if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
 
 
Emerging growth company ☐
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common stock, $0.0001 par value
EXPE
The Nasdaq Global Select Market
Expedia Group, Inc. 2.500% Senior Notes due 2022
EXPE22
New York Stock Exchange
 





Item 2.02.    Results of Operations and Financial Condition.
On July 25, 2019, Expedia Group, Inc. (“Expedia Group”) issued an earnings release and will hold a conference call regarding its financial results for the quarter ended June 30, 2019. A copy of the earnings release is furnished as Exhibit 99.1 hereto.
Expedia Group is making reference to non-GAAP financial measures in both the earnings release and the conference call. A reconciliation of these non-GAAP financial measures to the nearest comparable GAAP financial measures is contained in the attached Exhibit 99.1 earnings release.
Pursuant to General Instruction B.2. to Form 8-K, the information set forth in this Item 2.02 and in the accompanying Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, or incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 8.01.    Other Events.
On July 25, 2019, Expedia Group announced that its Executive Committee, acting on behalf of its Board of Directors, has declared a quarterly cash dividend of $0.34 per share of outstanding common stock payable on September 12, 2019 to stockholders of record as of the close of business on August 22, 2019.
Item 9.01.    Financial Statements and Exhibits.
(d) Exhibits
Exhibit
Number
  
Description
  





SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
EXPEDIA GROUP, INC.
 
 
 
 
By:
/s/ ALAN PICKERILL
 
 
Alan Pickerill
 
 
Chief Financial Officer
Dated: July 25, 2019
 



Exhibit
Exhibit 99.1

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13022923&doc=3

Expedia Group Reports Second Quarter 2019 Results
BELLEVUE, WA – July 25, 2019 – Expedia Group, Inc. (NASDAQ: EXPE) announced financial results today for the second quarter ended June 30, 2019.
Key Highlights(1) 
Gross bookings increased $2.4 billion or 9% to $28.3 billion. Revenue increased 9% to $3.2 billion. Core OTA gross bookings increased 11% and revenue increased 10%.
Net income increased $182 million(2) and Adjusted EBITDA grew $105 million or 23%. Diluted EPS increased $1.20(2) and Adjusted EPS grew $0.39 or 29%.
Total stayed lodging room nights increased 12% and Vrbo stayed property nights grew 8%.
Expedia Group's core lodging platform included nearly 1.3 million properties available as of June 30, 2019, including approximately 570,000 integrated Vrbo listings.
Year-to-date net cash provided by operating activities and free cash flow grew 32% and 31%, respectively.

Financial Summary & Operating Metrics ($ millions except per share amounts)
 
Expedia Group (excluding trivago)(4)
Expedia Group, Inc.
Metric
Q2 2019
Q2 2018
Δ Y/Y
Q2 2019
Q2 2018
Δ Y/Y
Room night growth
12%
12%
(54) bps
12%
12%
(54) bps
Gross bookings
$28,292
$25,898
9%
$28,292
$25,898
9%
Revenue
2,990
2,706
10%
3,153
2,880
9%
Operating income
254
142
79%
265
111
138%
Net income attributable to Expedia Group
 
 
 
183
1
NM
Diluted earnings per share
 
 
 
$1.21
$0.01
NM
Adjusted EBITDA(3)
548
483
14%
568
463
23%
Adjusted net income(3)
274
224
22%
276
213
29%
Adjusted EPS(3)
$1.76
$1.45
22%
$1.77
$1.38
29%
Free cash flow(3)
 
 
 
839
596
41%

(1)All comparisons are against comparable period of 2018 unless otherwise noted.
(2)Net income grew 14,135% and Diluted EPS grew 14,234%, which we believe to be non-meaningful growth rates.
(3)"Adjusted EBITDA" (Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization), "Adjusted net income (loss)," "Adjusted EPS" and "Free cash flow" are non-GAAP measures as defined by the Securities and Exchange Commission (the "SEC"). See "Definitions of Non-GAAP Measures" and "Tabular Reconciliations for Non-GAAP Measures" on pages 12-17 herein for an explanation and reconciliations of non-GAAP measures used throughout this release. Expedia Group does not calculate or report net income by segment.
(4)trivago is a separately listed company on the Nasdaq Global Select Market and, therefore, is subject to its own reporting and filing requirements which could result in possible differences that are not expected to be material to Expedia Group.
Please refer to the "Glossary of Business Terms," located in the Quarterly Results section on Expedia Group’s investor relations website, for business and financial statement definitions used throughout this release.

Discussion of Results
The results for Expedia Group, Inc. ("Expedia Group" or "the Company") include Brand Expedia®, Hotels.com®, Expedia® Partner Solutions, Vrbo®, Egencia®, trivago®, HomeAway®, Orbitz®, Travelocity®, Hotwire®, Wotif®, ebookers®, CheapTickets®, Expedia Group™ Media Solutions, Expedia Local Expert®, CarRentals.com™, Expedia® CruiseShipCenters®, Classic Vacations®, Traveldoo®, VacationRentals.com and SilverRail™, including the related international points of sale for all brands. All amounts shown are in U.S. dollars.


Page 1 of 18



Gross Bookings & Revenue
Gross Bookings and Revenue by Segment ($ millions)
 
Gross Bookings
 
 
Revenue
 
Second Quarter
 
 
Second Quarter
 
2019
 
2018
 
Δ%
 
 
2019
 
2018
 
Δ%
Core OTA
$
23,305

 
$
21,011

 
11%
 
 
$
2,480

 
$
2,253

 
10%
Vrbo
2,862

 
2,814

 
2%
 
 
347

 
297

 
17%
Egencia
2,125

 
2,073

 
3%
 
 
163

 
156

 
4%
Expedia Group (excluding trivago)
$
28,292

 
$
25,898

 
9%
 
 
$
2,990

 
$
2,706

 
10%
trivago

 

 
—%
 
 
251

 
280

 
(10)%
Intercompany eliminations

 

 
—%
 
 
(88
)
 
(106
)
 
17%
Total
$
28,292

 
$
25,898

 
9%
 
 
$
3,153

 
$
2,880

 
9%

Note: Some numbers may not add due to rounding.
For the second quarter of 2019, total gross bookings increased 9% (including 2 percentage points of negative foreign exchange impact), driven by growth in Expedia Partner Solutions, which includes the benefit from enterprise deals launched in late 2018, as well as increases at Brand Expedia and Hotels.com. Domestic gross bookings increased 11% and international gross bookings increased 7% (including 4 percentage points of negative foreign exchange impact).
For the second quarter of 2019, total revenue increased 9% (including 3 percentage points of negative foreign exchange impact), driven primarily by growth in Expedia Partner Solutions, Brand Expedia and Vrbo. Domestic revenue increased 13% and international revenue increased 5% (including 6 percentage points of negative foreign exchange impact).

Product & Services Detail
As a percentage of total worldwide revenue in the second quarter of 2019, lodging accounted for 71%, advertising and media accounted for 9%, air accounted for 7% and all other revenues accounted for the remaining 13%.
Lodging revenue increased 12% in the second quarter of 2019 on a 12% increase in room nights stayed driven by growth at Expedia Partner Solutions, Hotels.com and Brand Expedia.
Air revenue increased 2% in the second quarter of 2019 on a 10% increase in air tickets sold driven by growth at Expedia Partner Solutions, largely related to enterprise deals launched in late 2018, and Brand Expedia, partly offset by a 7% decrease in revenue per ticket, due to the reclassification of certain partner fees to other revenue, as well as negative impact from foreign exchange and a shift in product mix.
Advertising and media revenue increased 4% (including 4 percentage points of negative foreign currency impact) due to growth at Expedia Group Media Solutions, partly offset by a decline at trivago. Other revenue increased 5% in the second quarter of 2019 benefiting from the reclassification of certain partner fees from air revenue as well as growth in the travel insurance and car products.

Page 2 of 18



Costs and Expenses ($ millions)
 
Costs and Expenses
 
 
As a % of Revenue
 
Second Quarter
 
 
Second Quarter
 
2019
 
2018
 
Δ%
 
 
2019
 
2018
 
Δ (bps)
Generally Accepted Accounting Principles (GAAP) Expenses - Expedia Group
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
522

 
$
498

 
5
%
 
 
16.6
%
 
17.3
%
 
(72
)
Selling and marketing
1,657

 
1,541

 
8
%
 
 
52.6
%
 
53.5
%
 
(96
)
Technology and content
435

 
400

 
9
%
 
 
13.8
%
 
13.9
%
 
(9
)
General and administrative
214

 
196

 
9
%
 
 
6.8
%
 
6.8
%
 
(2
)
Total GAAP costs and expenses
$
2,828

 
$
2,635

 
7
%
 
 
89.7
%
 
91.5
%
 
(179
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Expenses - Expedia Group
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue*
$
497

 
$
469

 
6
%
 
 
15.8
%
 
16.3
%
 
(53
)
Selling and marketing*
1,631

 
1,518

 
7
%
 
 
51.7
%
 
52.7
%
 
(98
)
Technology and content
285

 
260

 
9
%
 
 
9.0
%
 
9.0
%
 
(2
)
General and administrative*
180

 
169

 
7
%
 
 
5.7
%
 
5.9
%
 
(15
)
Total adjusted costs and expenses
$
2,593

 
$
2,416

 
7
%
 
 
82.2
%
 
83.9
%
 
(167
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Expenses - Expedia Group (excluding trivago)**
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue*
$
495

 
$
468

 
6
%
 
 
16.5
%
 
17.3
%
 
(77
)
Selling and marketing*
1,517

 
1,354

 
12
%
 
 
50.7
%
 
50.0
%
 
70

Technology and content
269

 
244

 
10
%
 
 
8.9
%
 
9.0
%
 
(6
)
General and administrative*
170

 
156

 
9
%
 
 
5.7
%
 
5.8
%
 
(8
)
Total adjusted costs and expenses excluding trivago
$
2,451

 
$
2,222

 
10
%
 
 
81.9
%
 
82.1
%
 
(20
)
*Adjusted expenses are non-GAAP measures. See pages 12-17 herein for a description and reconciliation to the corresponding GAAP measures.
**Expedia Group (excluding trivago) figures exclude both trivago costs and expenses and trivago revenue when calculating 'As a % of Revenue.'
Note: Some numbers may not add due to rounding.
Cost of Revenue
For the second quarter of 2019, total GAAP and adjusted cost of revenue increased 5% and 6%, respectively, compared to the second quarter of 2018, primarily due to an increase in cloud expense. Cloud expense in cost of revenue was $37 million during the second quarter of 2019 compared to $22 million in the second quarter of 2018.
Selling and Marketing
For the second quarter of 2019, total GAAP and adjusted selling and marketing expense increased 8% and 7%, respectively, compared to the second quarter of 2018, primarily due to a $118 million increase in direct costs partly offset by a decrease in indirect costs. Indirect costs represented 17% of total GAAP selling and marketing costs and 15% of total adjusted selling and marketing expense in the second quarter of 2019 compared to 18% and 17%, respectively, in the second quarter of 2018.
Adjusted selling and marketing expense excluding trivago increased 12% in the second quarter of 2019 reflecting higher direct costs at Brand Expedia, Expedia Partner Solutions and Vrbo.
Technology and Content
For the second quarter of 2019, both total GAAP and adjusted technology and content expense increased 9% compared to the second quarter of 2018, primarily due to investments in product and technology initiatives. Cloud expense in technology and content expense was $15 million during the second quarter of 2019, compared to $12 million during the second quarter of 2018.


Page 3 of 18



General and Administrative
For the second quarter of 2019, total GAAP and adjusted general and administrative expense increased 9% and 7%, respectively, compared to the second quarter of 2018, primarily due to increases in personnel and overhead costs and professional fees. The increase in total GAAP general and administrative expense in the second quarter of 2019 also included higher stock-based compensation compared to the second quarter of 2018.

Net Income Attributable to Expedia Group and Adjusted EBITDA*
Adjusted EBITDA by Segment ($ millions)
 
 
Second Quarter
 
2019
 
2018
 
Δ%
Core OTA
$
623

 
$
561

 
11%
Vrbo
84

 
78

 
8%
Egencia
37

 
30

 
24%
Unallocated overhead costs
(196
)
 
(186
)
 
(5)%
Expedia Group (excluding trivago)
$
548

 
$
483

 
14%
trivago(1)
20

 
(20
)
 
NM
Total Adjusted EBITDA
$
568

 
$
463

 
23%
 
 
 
 
 
 
Net income attributable to Expedia Group(2)
$
183

 
$
1

 
NM
(1) trivago is a separately listed company on the Nasdaq Global Select Market and, therefore, is subject to its own reporting and filing requirements which could result in possible differences that are not expected to be material to Expedia Group (2) Expedia Group does not calculate or report net income (loss) by segment.
* Adjusted EBITDA is a non-GAAP measure. See pages 12-17 herein for a description and reconciliation to the corresponding GAAP measure.
Note: Some numbers may not add due to rounding.
Amortization of Intangible Assets
Consolidated amortization of intangible assets decreased $20 million to $52 million in the second quarter of 2019, compared to the second quarter of 2018, due to the completion of amortization related to certain intangible assets.
Restructuring and Related Reorganization Charges
In connection with the centralization and migration of certain operational functions and systems, we recognized $4 million in restructuring and related reorganization charges related to severance and benefits during the three months ended June 30, 2019.
Interest and Other
Consolidated interest income increased $1 million in the second quarter of 2019, compared to the second quarter of 2018, primarily due to higher invested balances. Consolidated interest expense decreased $12 million in the second quarter of 2019, compared to the second quarter of 2018, due to the repayment of $500 million of senior unsecured notes in August 2018.
Consolidated other, net was a loss of $8 million in the second quarter of 2019, compared to a loss of $90 million in the second quarter of 2018. The losses in the second quarter of 2019 and the second quarter of 2018 were both primarily due to mark-to-market losses on minority equity investments.
Income Taxes
The effective GAAP tax rate was 20% for the second quarter of 2019, compared to 34% in the second quarter of 2018. The decrease in the effective rate was primarily due to the impact from a non-deductible goodwill impairment in the prior year quarter and current year discrete tax benefits, partly offset by an increase in U.S. taxable income. The effective tax rate on pretax adjusted net income was 22% for the second quarter of 2019, compared to 16% for the second quarter of 2018 due to an increase in U.S. taxable income.

Page 4 of 18




Balance Sheet, Cash Flows and Capitalization
Cash, cash equivalents, restricted cash and short-term investments totaled $5.5 billion at June 30, 2019. For the six months ended June 30, 2019, consolidated net cash provided by operating activities was $3.3 billion and consolidated free cash flow totaled $2.7 billion. Both measures include $2.7 billion from net changes in operating assets and liabilities, primarily driven by growth in deferred merchant bookings. For the six months ended June 30, 2019, consolidated free cash flow increased $634 million compared to the prior year period, primarily due to an increase in net cash provided by operating activities related to changes in working capital and higher adjusted EBITDA partly offset by increased capital expenditures related to our Seattle headquarters.

Long-term investments and other assets includes our minority investments in Despegar.com, Corp. ("Despegar"), which is recorded at a fair value of $133 million as of June 30, 2019, and our investment in Traveloka Holding Limited. We account for minority equity investments with readily determinable fair values, such as our investment in Despegar, at fair value with changes in fair value recorded through net income. Equity investments without readily determinable fair values are adjusted for impairments and observable price changes.
Long-term debt, net of applicable discounts, debt issuance costs and current maturities, totaled $3.7 billion at June 30, 2019. As of June 30, 2019, Expedia Group had a $2.0 billion unsecured revolving credit facility, which was essentially untapped.
At June 30, 2019, Expedia Group had stock-based awards outstanding representing approximately 20 million shares of Expedia Group common stock, consisting of options to purchase approximately 15 million common shares with a $102.21 weighted average exercise price and weighted average remaining life of 4 years, and approximately 4 million restricted stock units (“RSUs”). Beginning in 2019, RSUs became Expedia Group's primary form of stock-based compensation.
As of June 30, 2019, there were approximately 12.2 million shares remaining under an April 2018 repurchase authorization.
On June 13, 2019, Expedia Group paid a quarterly dividend of $48 million ($0.32 per common share). In addition, in July 2019, the Executive Committee of Expedia Group’s Board of Directors approved an increase to the dividend for an eighth consecutive year. The Committee declared a quarterly cash dividend of $0.34 per share of outstanding common stock to be paid to stockholders of record as of the close of business on August 22, 2019, with a payment date of September 12, 2019. Based on current shares outstanding and the expected impact of the proposed Liberty Expedia Holdings transaction, the total payment for this quarterly dividend is estimated to be approximately $50 million. Future declaration of dividends and the establishment of future record and payment dates are subject to the final determination of Expedia Group’s Board of Directors.



Page 5 of 18



Recent Highlights
Expedia Group, Inc.
Expedia Group's core lodging platform included nearly 1.3 million properties available as of June 30, 2019, including approximately 570,000 integrated Vrbo listings. Vrbo now offers over 2 million online bookable listings.
The Lufthansa Group airlines and Expedia Group announced a new multi-year cooperation to help more travelers access the best possible air travel options with Lufthansa, SWISS and Austrian Airlines on Expedia Group sites including Brand Expedia, ebookers and Egencia. The companies committed to greater technological collaboration using an industry-leading New Distribution Capability (NDC) direct API connection.
In May, Expedia Group and the Fédération Nationale des Gîtes de France, a leading holiday rentals company and tourism association, announced a joint national agreement to boost exposure of Gîtes de France’s thousands of properties in the short-term rentals sector. It was the first agreement of its kind in the company’s 60+ year history.

Core OTA
Expedia Group was the official travel partner of the UEFA Champions League, which held its final in Madrid on June 1st, with the partnership rights shared between Brand Expedia and Hotels.com. Additionally, Hotwire sponsored FOX Sports’ coverage of the FIFA Women’s World Cup France 2019™, showcasing new brand creative airing during FOX Soccer Tonight as well as branded show integrations and digital features across social media.
Expedia Local Expert migrated 100% of mobile shopping to the progressive web app (PWA) experience resulting in better site speed for customers.
Brand Expedia is partnering with Malaysia Airlines to launch a fully digitalized student travel program. Under the program students will be able to enjoy 8% off domestic hotels and 10% off international hotels.
Hotels.com launched a new brand campaign in 11 countries. The “Be there. Do that. Get Rewarded” creative campaign highlights consumers envying the trips of others, while stuck in their day-to-day lives.
Expedia Partner Solutions became the accommodations provider for Virgin Australia and Virgin Australia Holidays through its ecommerce template solution Expedia.com for Partners. As a result of this launch, Virgin Australia will be able to offer better flight and hotel deals to their travelers and improve their hotel booking experience.
Expedia TAAP (Travel Agent Affiliate Program), a booking engine which connects travel agents to Expedia’s global portfolio of accommodations, flights, packages, car rentals and in-destination activities, exceeded a milestone of 15 million cumulative trips booked. Over the years, more than 100,000 agents helped travelers find their perfect trip in over 200 countries and territories.
Expedia Group Media Solutions won three Internet Advertising Competition Awards and five Hermes Creative Awards for its campaigns with marketing partners.
Expedia CruiseShipCenters sold a record number of cruises during its Princess Cruises 3 Day Sale in June.

Vrbo
Vrbo introduced Boost, a program designed to help improve listings’ search position for select days, to all Premier Partner listings. Owners and property managers can earn power-ups on a listing both when they accept bookings on Vrbo sites and after a traveler completes a stay, which can then be used to boost a listing’s search position for select dates.
Vrbo's newly refreshed app was featured as a "Best New Update" in the travel section of the Apple App store.
Vrbo now offers over 1.3 million instantly bookable listings.

trivago
trivago increased the flexibility for advertisers to participate in the marketplace by introducing bid modifiers in selected markets. Advertisers can now adjust their bids for ‘time to travel’ and ‘length of stay.’

Egencia
Egencia completed its global roll out of Savings Finder for Air, which saves customers money by automatically re-shopping and re-booking air tickets when the price for the same flight drops within the first seven days of booking.
Egencia's recently launched Smart Mix for Air saves travelers and travel arrangers time by using machine learning to sort flights according to a traveler’s preference on duration, number of stops and price, to ensure the most relevant flight options are shown first. 13% more customers find the flight they book in the top 10 options using Smart Mix.

Page 6 of 18



EXPEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share and per share data)
(Unaudited)
 
Three months ended
June 30,
 
Six months ended
June 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Revenue
$
3,153

 
$
2,880

 
$
5,762

 
$
5,388

Costs and expenses:
 
 
 
 
 
 
 
Cost of revenue (1) (2)
522

 
498

 
1,035

 
985

Selling and marketing (1) (2)
1,657

 
1,541

 
3,192

 
3,057

Technology and content (1) (2)
435

 
400

 
864

 
796

General and administrative (1) (2)
214

 
196

 
405

 
395

Amortization of intangible assets
52

 
72

 
104

 
144

Impairment of goodwill

 
61

 

 
61

Legal reserves, occupancy tax and other
4

 
1

 
14

 
4

Restructuring and related reorganization charges
4

 

 
14

 

Operating income (loss)
265

 
111

 
134

 
(54
)
Other income (expense):
 
 
 
 
 
 
 
Interest income
17

 
16

 
28

 
27

Interest expense
(39
)
 
(51
)
 
(80
)
 
(102
)
Other, net
(8
)
 
(90
)
 
12

 
(54
)
Total other expense, net
(30
)
 
(125
)
 
(40
)
 
(129
)
Income (loss) before income taxes
235

 
(14
)
 
94

 
(183
)
Provision for income taxes
(48
)
 
5

 
(7
)
 
25

Net income (loss)
187

 
(9
)
 
87

 
(158
)
Net (income) loss attributable to non-controlling interests
(4
)
 
10

 
(7
)
 
22

Net income (loss) attributable to Expedia Group, Inc.
$
183

 
$
1

 
$
80

 
$
(136
)
 
 
 
 
 
 
 
 
Earnings (loss) per share attributable to Expedia Group, Inc. available to common stockholders:
 
 
 
 
 
 
 
Basic
$
1.23

 
$
0.01

 
$
0.54

 
$
(0.90
)
Diluted
1.21

 
0.01

 
0.53

 
(0.90
)
Shares used in computing earnings (loss) per share (000's):
 
 
 
 
 
 
 
Basic
149,049

 
150,076

 
148,468

 
150,942

Diluted
151,561

 
152,617

 
151,057

 
150,942

 
 
 
 
 
 
 
 
(1) Includes stock-based compensation as follows:
 
 
 
 
 
 
 
Cost of revenue
$
3

 
$
3

 
$
6

 
$
5

Selling and marketing
12

 
12

 
23

 
23

Technology and content
19

 
16

 
38

 
31

General and administrative
25

 
19

 
48

 
41

 
 
 
 
 
 
 
 
(2) Includes depreciation as follows:
 
 
 
 
 
 
 
Cost of revenue
$
22

 
$
26

 
$
45

 
$
53

Selling and marketing
14

 
11

 
28

 
22

Technology and content
131

 
124

 
263

 
243

General and administrative
9

 
8

 
16

 
18



Page 7 of 18




EXPEDIA GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except number of shares which are reflected in thousands and par value)
 
June 30, 2019
 
December 31, 2018
 
(unaudited)
 
 
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
4,258

 
$
2,443

Restricted cash and cash equivalents
619

 
259

Short-term investments
631

 
28

Accounts receivable, net of allowance of $41 and $34
2,893

 
2,151

Income taxes receivable
128

 
24

Prepaid expenses and other current assets
295

 
292

Total current assets
8,824

 
5,197

Property and equipment, net
1,953

 
1,877

Operating lease right-of-use assets
524

 

Long-term investments and other assets
815

 
778

Deferred income taxes
80

 
69

Intangible assets, net
1,887

 
1,992

Goodwill
8,118

 
8,120

TOTAL ASSETS
$
22,201

 
$
18,033

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
 
 
 
Accounts payable, merchant
$
1,970

 
$
1,699

Accounts payable, other
1,153

 
788

Deferred merchant bookings
7,053

 
4,327

Deferred revenue
522

 
364

Income taxes payable
28

 
74

Accrued expenses and other current liabilities
950

 
808

Total current liabilities
11,676

 
8,060

Long-term debt, excluding current maturities
3,715

 
3,717

Deferred income taxes
65

 
69

Operating lease liabilities
466

 

Other long-term liabilities
343

 
506

Redeemable non-controlling interests
29

 
30

Commitments and contingencies
 
 
 
Stockholders’ equity:
 
 
 
Common stock $.0001 par value

 

Authorized shares: 1,600,000
 
 
 
Shares issued: 234,102 and 231,493; Shares outstanding: 136,718 and 134,334
 
 
 
Class B common stock $.0001 par value

 

Authorized shares: 400,000
 
 
 
Shares issued and outstanding: 12,800 and 12,800
 
 
 
Additional paid-in capital
9,821

 
9,549

Treasury stock - Common stock, at cost
(5,771
)
 
(5,742
)
Shares: 97,384 and 97,159
 
 
 
Retained earnings
508

 
517

Accumulated other comprehensive income (loss)
(216
)
 
(220
)
Total Expedia Group, Inc. stockholders’ equity
4,342

 
4,104

Non-redeemable non-controlling interests
1,565

 
1,547

Total stockholders’ equity
5,907

 
5,651

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
22,201

 
$
18,033


Page 8 of 18



EXPEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
Six months ended
June 30,
 
2019
 
2018
Operating activities:
 
 
 
Net income (loss)
$
87

 
$
(158
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation of property and equipment, including internal-use software and website development
352

 
336

Amortization of stock-based compensation
115

 
100

Amortization of intangible assets
104

 
144

Impairment of goodwill

 
61

Deferred income taxes
(15
)
 
(6
)
Foreign exchange (gain) loss on cash, restricted cash and short-term investments, net
(13
)
 
85

Realized gain on foreign currency forwards
(16
)
 
(16
)
(Gain) loss on minority equity investments, net
(12
)
 
61

Other
(13
)
 
21

Changes in operating assets and liabilities, net of effects from acquisitions:
 
 
 
Accounts receivable
(742
)
 
(476
)
Prepaid expenses and other assets
(7
)
 
(96
)
Accounts payable, merchant
271

 
(25
)
Accounts payable, other, accrued expenses and other liabilities
436

 
216

Tax payable/receivable, net
(143
)
 
(159
)
Deferred merchant bookings
2,726

 
2,268

Deferred revenue
157

 
135

Net cash provided by operating activities
3,287

 
2,491

Investing activities:
 
 
 
Capital expenditures, including internal-use software and website development
(573
)
 
(411
)
Purchases of investments
(636
)
 
(1,669
)
Sales and maturities of investments
27

 
624

Other, net
16

 
22

Net cash used in investing activities
(1,166
)
 
(1,434
)
Financing activities:
 
 
 
Purchases of treasury stock
(29
)
 
(426
)
Payment of dividends to stockholders
(95
)
 
(91
)
Proceeds from exercise of equity awards and employee stock purchase plan
156

 
67

Other, net
2

 
(6
)
Net cash provided by (used in) financing activities
34

 
(456
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents
20

 
(106
)
Net increase in cash, cash equivalents and restricted cash and cash equivalents
2,175

 
495

Cash, cash equivalents and restricted cash and cash equivalents at beginning of period
2,705

 
2,917

Cash, cash equivalents and restricted cash and cash equivalents at end of period
$
4,880

 
$
3,412

Supplemental cash flow information
 
 
 
Cash paid for interest
$
87

 
$
106

Income tax payments, net
157

 
136


Page 9 of 18



Expedia Group, Inc.
Trended Metrics
(All figures in millions)

The supplemental metrics below are intended to supplement the financial statements in this release and in our filings with the SEC, and do not include adjustments for one-time items, acquisitions, foreign exchange or other adjustments. The definition, methodology and appropriateness of any of our supplemental metrics are subject to removal and/or change, and such changes could be material. In the event of any discrepancy between any supplemental metric and our historical financial statements, you should rely on the information filed with the SEC and the financial statements in our most recent earnings release.

 
 
 
2017
 
 
 
2018
 
 
 
2019
 
 
 
Y / Y
 
 
 
 
 
Q3
Q4
 
 
 
Q1
Q2
Q3
Q4
 
 
 
Q1
Q2
 
 
 
Growth
 
 
Gross bookings by segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core OTA
 
 
$
18,456

$
16,182

 
 
 
$
21,171

$
21,011

$
20,217

$
17,921

 
 
 
$
23,029

$
23,305

 
 
 
11%
 
 
Vrbo
 
 
2,013

1,913

 
 
 
3,947

2,814

2,496

2,192

 
 
 
4,163

2,862

 
 
 
2%
 
 
Egencia
 
 
1,728

1,670

 
 
 
2,078

2,073

1,963

1,844

 
 
 
2,217

2,125

 
 
 
3%
 
 
Total
 
 
$
22,197

$
19,766

 
 
 
$
27,196

$
25,898

$
24,676

$
21,957

 
 
 
$
29,409

$
28,292

 
 
 
9%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross bookings by geography
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domestic
 
 
$
13,540

$
11,800

 
 
 
$
16,582

$
16,213

$
15,232

$
13,362

 
 
 
$
18,363

$
17,962

 
 
 
11%
 
 
International
 
 
8,657

7,966

 
 
 
10,614

9,685

9,444

8,595

 
 
 
11,046

10,330

 
 
 
7%
 
 
Total
 
 
$
22,197

$
19,766

 
 
 
$
27,196

$
25,898

$
24,676

$
21,957

 
 
 
$
29,409

$
28,292

 
 
 
9%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross bookings by business model
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency
 
 
$
10,392

$
9,493

 
 
 
$
12,445

$
12,290

$
11,442

$
10,688

 
 
 
$
13,727

$
13,680

 
 
 
11%
 
 
Merchant
 
 
9,792

8,360

 
 
 
10,803

10,794

10,739

9,077

 
 
 
11,519

11,750

 
 
 
9%
 
 
Vrbo
 
 
2,013

1,913

 
 
 
3,947

2,814

2,496

2,192

 
 
 
4,163

2,862

 
 
 
2%
 
 
Total
 
 
$
22,197

$
19,766

 
 
 
$
27,196

$
25,898

$
24,676

$
21,957

 
 
 
$
29,409

$
28,292

 
 
 
9%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue by segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core OTA
 
 
$
2,314

$
1,857

 
 
 
$
1,926

$
2,253

$
2,527

$
2,054

 
 
 
$
2,037

$
2,480

 
 
 
10%
 
 
Vrbo
 
 
305

193

 
 
 
234

297

410

230

 
 
 
267

347

 
 
 
17%
 
 
Egencia
 
 
126

137

 
 
 
151

156

139

155

 
 
 
153

163

 
 
 
4%
 
 
Expedia Group (excluding trivago)
 
 
$
2,745

$
2,187

 
 
 
$
2,311

$
2,706

$
3,076

$
2,439

 
 
 
$
2,457

$
2,990

 
 
 
10%
 
 
trivago
 
 
338

215

 
 
 
319

280

295

190

 
 
 
237

251

 
 
 
(10)%
 
 
Intercompany eliminations
 
 
(117
)
(83
)
 
 
 
(122
)
(106
)
(95
)
(70
)
 
 
 
(85
)
(88
)
 
 
 
17%
 
 
Total
 
 
$
2,966

$
2,319

 
 
 
$
2,508

$
2,880

$
3,276

$
2,559

 
 
 
$
2,609

$
3,153

 
 
 
9%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue by geography
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domestic
 
 
$
1,578

$
1,255

 
 
 
$
1,351

$
1,632

$
1,792

$
1,426

 
 
 
$
1,476

$
1,838

 
 
 
13%
 
 
International
 
 
1,388

1,065

 
 
 
1,157

1,248

1,484

1,133

 
 
 
1,133

1,315

 
 
 
5%
 
 
Total
 
 
$
2,966

$
2,319

 
 
 
$
2,508

$
2,880

$
3,276

$
2,559

 
 
 
$
2,609

$
3,153

 
 
 
9%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue by business model
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency
 
 
$
803

$
629

 
 
 
$
658

$
777

$
876

$
699

 
 
 
$
686

$
841

 
 
 
8%
 
 
Merchant
 
 
1,559

1,283

 
 
 
1,334

1,532

1,688

1,396

 
 
 
1,392

1,680

 
 
 
10%
 
 
Advertising & media
 
 
299

214

 
 
 
282

274

302

233

 
 
 
264

285

 
 
 
4%
 
 
Vrbo
 
 
305

193

 
 
 
234

297

410

230

 
 
 
267

347

 
 
 
17%
 
 
Total
 
 
$
2,966

$
2,319

 
 
 
$
2,508

$
2,880

$
3,276

$
2,559

 
 
 
$
2,609

$
3,153

 
 
 
9%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA by segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core OTA
 
 
$
734

$
534

 
 
 
$
323

$
561

$
837

$
584

 
 
 
$
344

$
623

 
 
 
11%
 
 
Vrbo
 
 
126

31

 
 
 
(21
)
78

209

22

 
 
 
(40
)
84

 
 
 
8%
 
 
Egencia
 
 
20

19

 
 
 
27

30

19

31

 
 
 
29

37

 
 
 
24%
 
 
Unallocated overhead costs
 
 
(163
)
(173
)
 
 
 
(177
)
(186
)
(184
)
(199
)
 
 
 
(181
)
(196
)
 
 
 
(5)%
 
 
Expedia Group (excluding trivago)
 
 
$
717

$
411

 
 
 
$
152

$
483

$
881

$
438

 
 
 
$
152

$
548

 
 
 
14%
 
 
trivago
 
 
(8
)
(9
)
 
 
 
(28
)
(20
)
31

33

 
 
 
24

20

 
 
 
NM
 
 
Total
 
 
$
709

$
402

 
 
 
$
124

$
463

$
912

$
471

 
 
 
$
176

$
568

 
 
 
23%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Expedia Group
 
 
$
352

$
55

 
 
 
$
(137
)
$
1

$
525

$
17

 
 
 
$
(103
)
$
183

 
 
 
NM
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 10 of 18



Expedia Group, Inc.
Trended Metrics
(All figures in millions)

 
 
 
2017
 
 
 
2018
 
 
 
2019
 
 
 
 
 
Q3
Q4
 
 
 
Q1
Q2
Q3
Q4
 
 
 
Q1
Q2
 
 
Worldwide lodging (merchant, agency & Vrbo)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Room nights
 
 
93.5

74.8

 
 
 
73.9

89.6

105.3

82.8

 
 
 
80.8

100.1

 
 
Room night growth
 
 
16
 %
15
 %
 
 
 
15
 %
12
%
13
 %
11
 %
 
 
 
9
 %
12
 %
 
 
Domestic room night growth
 
 
12
 %
10
 %
 
 
 
10
 %
8
%
9
 %
9
 %
 
 
 
8
 %
8
 %
 
 
International room night growth
 
 
22
 %
21
 %
 
 
 
21
 %
17
%
16
 %
12
 %
 
 
 
11
 %
15
 %
 
 
ADR growth
 
 
4
 %
4
 %
 
 
 
7
 %
6
%
4
 %
2
 %
 
 
 
(1
)%
 %
 
 
Revenue per night growth
 
 
(1
)%
(4
)%
 
 
 
 %
2
%
(1
)%
(1
)%
 
 
 
(2
)%
 %
 
 
Lodging revenue
 
 
$2,102
$1,606
 
 
 
$1,612
$1,992
$2,347
$1,761
 
 
 
$1,725
$2,231
 
 
Lodging revenue growth
 
 
15
 %
11
 %
 
 
 
15
 %
14
%
12
 %
10
 %
 
 
 
7
 %
12
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Worldwide air (merchant & agency)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tickets sold growth
 
 
4
 %
3
 %
 
 
 
1
 %
6
%
4
 %
10
 %
 
 
 
11
 %
10
 %
 
 
Airfare growth
 
 
(2
)%
1
 %
 
 
 
3
 %
1
%
4
 %
2
 %
 
 
 
(1
)%
1
 %
 
 
Revenue per ticket growth
 
 
(10
)%
(3
)%
 
 
 
10
 %
4
%
6
 %
7
 %
 
 
 
(7
)%
(7
)%
 
 
Air revenue
 
 
$189
$176
 
 
 
$242
$223
$209
$207
 
 
 
$248
$228
 
 
Air revenue growth
 
 
(7
)%
—%

 
 
 
11
 %
10
%
11
 %
18
 %
 
 
 
3
 %
2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Notes:
Advertising & Media Revenue includes 3rd party revenue from trivago. All trivago revenue is classified as international.
During the first quarter of 2018, we updated our allocations methodology and recast the historical domestic and international revenue and Adjusted EBITDA by segment information presented to be on a comparable basis.
Some numbers may not add due to rounding. All percentages above and throughout this release are calculated on precise, unrounded numbers

Page 11 of 18



Notes & Definitions:
Gross Bookings: Gross bookings generally represent the total retail value of transactions booked, recorded at the time of booking reflecting the total price due for travel by travelers, including taxes, fees and other charges, adjusted for cancellations and refunds.
Core OTA: The Core Online Travel Agencies ("Core OTA") segment provides a full range of travel and advertising services to our worldwide customers through a variety of brands including: Brand Expedia, Hotels.com, Expedia Partner Solutions, Orbitz, Travelocity, Wotif, lastminute.com.au, ebookers, CheapTickets, Hotwire, Classic Vacations, Expedia Group Media Solutions, CarRentals.com, Expedia Local Expert, Expedia CruiseShipCenters, SilverRail and ALICE.
trivago: The trivago segment generates advertising revenue primarily from sending referrals to online travel companies and travel service providers from its localized hotel metasearch websites.
Vrbo: The Vrbo segment operates an online marketplace for the alternative accommodations industry and includes the Vrbo and HomeAway brands, among others.
Egencia: The Egencia segment provides managed travel services to corporate customers worldwide.
Corporate: Includes unallocated corporate expenses.
Lodging metrics: Reported on a stayed basis and includes both merchant and agency model hotel and alternative accommodation stays.
Room Nights: Room nights represent stayed hotel room nights for our Core OTA and Egencia reportable segments and property nights for our Vrbo reportable segment. Hotel room nights are reported on a stayed basis and include both merchant and agency hotel stays. Property nights are reported upon the first day of stay and check-in to a property and represent the total number of nights for which a property is rented.
Worldwide Air metrics: Reported on a booked basis and includes both merchant and agency air bookings.

Definitions of Non-GAAP Measures
Expedia Group reports Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted EPS, Free Cash Flow and Adjusted Expenses (non-GAAP cost of revenue, non-GAAP selling and marketing, non-GAAP technology and content and non-GAAP general and administrative), all of which are supplemental measures to GAAP and are defined by the SEC as non-GAAP financial measures. These measures are among the primary metrics by which management evaluates the performance of the business and on which internal budgets are based. Management believes that investors should have access to the same set of tools that management uses to analyze our results. These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP. Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted EPS have certain limitations in that they do not take into account the impact of certain expenses to our consolidated statements of operations. We endeavor to compensate for the limitation of the non-GAAP measures presented by also providing the most directly comparable GAAP measures and descriptions of the reconciling items and adjustments to derive the non-GAAP measures. Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted EPS also exclude certain items related to transactional tax matters, which may ultimately be settled in cash. We urge investors to review the detailed disclosure regarding these matters in the Management Discussion and Analysis and Legal Proceedings sections, as well as the notes to the financial statements, included in the Company's annual and quarterly reports filed with the Securities and Exchange Commission. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The definition of Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization was revised in the fourth quarter of 2012 and in the first quarter of 2016 and the definition for Adjusted Net Income (Loss) was revised in the fourth quarters of 2010, 2011, 2012 and 2017. The definition of Adjusted Expenses was revised in the first quarter of 2014 and in the second quarter 2015.

Adjusted EBITDA is defined as net income (loss) attributable to Expedia Group adjusted for:
(1) net income (loss) attributable to non-controlling interests;
(2) provision for income taxes;
(3) total other expenses, net;
(4) stock-based compensation expense, including compensation expense related to certain subsidiary equity plans;
(5) acquisition-related impacts, including
(i) amortization of intangible assets and goodwill and intangible asset impairment,

Page 12 of 18



(ii) gains (losses) recognized on changes in the value of contingent consideration arrangements; and
(iii) upfront consideration paid to settle employee compensation plans of the acquiree;
(6) certain other items, including restructuring;
(7) items included in legal reserves, occupancy tax and other, which includes reserves for potential settlement of issues related to transactional taxes (e.g. hotel and excise taxes), related to court decisions and final settlements, and charges incurred, if any, for monies that may be required to be paid in advance of litigation in certain transactional tax proceedings;
(8) that portion of gains (losses) on revenue hedging activities that are included in other, net that relate to revenue recognized in the period; and
(9) depreciation.
The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, or because the amount and timing of these items is unpredictable, not driven by core operating results and renders comparisons with prior periods and competitors less meaningful. We believe Adjusted EBITDA is a useful measure for analysts and investors to evaluate our future on-going performance as this measure allows a more meaningful comparison of our performance and projected cash earnings with our historical results from prior periods and to the results of our competitors. Moreover, our management uses this measure internally to evaluate the performance of our business as a whole and our individual business segments. In addition, we believe that by excluding certain items, such as stock-based compensation and acquisition-related impacts, Adjusted EBITDA corresponds more closely to the cash operating income generated from our business and allows investors to gain an understanding of the factors and trends affecting the ongoing cash earnings capabilities of our business, from which capital investments are made and debt is serviced.

Adjusted Net Income (Loss) generally captures all items on the statements of operations that occur in normal course operations and have been, or ultimately will be, settled in cash and is defined as net income (loss) attributable to Expedia Group plus the following items, net of tax (which excludes the impact of significant changes resulting from tax legislation such as the Tax Cuts and Jobs Act):
(1) stock-based compensation expense, including compensation expense related to equity plans of certain subsidiaries and equity-method investments;
(2) acquisition-related impacts, including;
(i) amortization of intangible assets, including as part of equity-method investments, and goodwill and intangible asset impairment;
(ii) gains (losses) recognized on changes in the value of contingent consideration arrangements;
(iii) upfront consideration paid to settle employee compensation plans of the acquiree; and
(iv) gains (losses) recognized on non-controlling investment basis adjustments when we acquire or lose controlling interests;
(3) currency gains or losses on U.S. dollar denominated cash;
(4) Since adoption of new accounting guidance in the first quarter of 2018, the changes in fair value of equity investments (other than those accounted for under the equity method and those that are consolidated);
(5) certain other items, including restructuring charges;
(6) items included in Legal reserves, occupancy tax and other, which includes reserves for potential settlement of issues related to transactional taxes (e.g., hotel occupancy and excise taxes), related court decisions and final settlements, and charges incurred, if any, for monies that may be required to be paid in advance of litigation in certain transactional tax proceedings, including as part of equity method investments;
(7) discontinued operations;
(8) the non-controlling interest impact of the aforementioned adjustment items; and
(9) unrealized gains (losses) on revenue hedging activities that are included in other, net.
We believe Adjusted Net Income (Loss) is useful to investors because it represents Expedia Group's combined results, taking into account depreciation, which management believes is an ongoing cost of doing business, but excluding the impact of certain expenses and items not directly tied to the core operations of our businesses.

Adjusted EPS is defined as Adjusted Net Income (Loss) divided by adjusted weighted average shares outstanding, which include dilution from options per the treasury stock method and include all shares relating to RSUs in shares outstanding for Adjusted EPS. This differs from the GAAP method for including RSUs, which treats them on a

Page 13 of 18



treasury method basis. Shares outstanding for Adjusted EPS purposes are therefore higher than shares outstanding for GAAP EPS purposes. We believe Adjusted EPS is useful to investors because it represents, on a per share basis, Expedia Group's consolidated results, taking into account depreciation, which we believe is an ongoing cost of doing business, as well as other items which are not allocated to the operating businesses such as interest expense, taxes, foreign exchange gains or losses, and minority interest, but excluding the effects of certain expenses not directly tied to the core operations of our businesses. Adjusted Net Income (Loss) and Adjusted EPS have similar limitations as Adjusted EBITDA. In addition, Adjusted Net Income (Loss) does not include all items that affect our net income (loss) and net income (loss) per share for the period. Therefore, we think it is important to evaluate these measures along with our consolidated statements of operations.

Free Cash Flow is defined as net cash flow provided by operating activities less capital expenditures. Management believes Free Cash Flow is useful to investors because it represents the operating cash flow that our operating businesses generate, less capital expenditures but before taking into account other cash movements that are not directly tied to the core operations of our businesses, such as financing activities, foreign exchange or certain investing activities. We added additional detail for the capital expenditures associated with building our new headquarters facility in Seattle, Washington. We believe separating out capital expenditures for this discrete project is important to provide additional transparency to investors related to operating versus project-related capital expenditures. Free Cash Flow has certain limitations in that it does not represent the total increase or decrease in the cash balance for the period, nor does it represent the residual cash flow for discretionary expenditures. Therefore, it is important to evaluate Free Cash Flow along with the consolidated statements of cash flows.

Adjusted Expenses (cost of revenue, selling and marketing, technology and content and general and administrative expenses) exclude stock-based compensation related to expenses for stock options, restricted stock units and other equity compensation under applicable stock-based compensation accounting standards as well as depreciation expense. Expedia Group excludes stock-based compensation and depreciation expenses from these measures primarily because they are non-cash expenses that we do not believe are necessarily reflective of our ongoing cash operating expenses and cash operating income. Moreover, because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use when adopting applicable stock-based compensation accounting standards, management believes that providing non-GAAP financial measures that exclude stock-based compensation allows investors to make meaningful comparisons between our recurring core business operating results and those of other companies, as well as providing management with an important tool for financial operational decision making and for evaluating our own recurring core business operating results over different periods of time. Exclusion of depreciation expense also allows the year-over-year comparison of expenses on a basis that is consistent with the year-over-year comparison of Adjusted EBITDA. There are certain limitations in using financial measures that do not take into account stock-based compensation and depreciation expense, including the fact that stock-based compensation is a recurring expense and a valued part of employees' compensation and depreciation expense is also a recurring expense and is a direct result of previous capital investment decisions made by management. Therefore, it is important to evaluate both our GAAP and non-GAAP measures. See the Notes to the Consolidated Statements of Operations for stock-based compensation and depreciation expense by line item.

Expedia Group, Inc. (excluding trivago) In order to provide increased transparency on the transaction-based component of the business, Expedia Group is reporting results both in total and excluding trivago.

In addition, we evaluate certain operating and financial measures, including revenue growth, on both an as-reported and excluding the impact of foreign exchange, FX neutral, basis. FX neutral results are among the primary metrics by which management evaluates the performance of the business and management believes that investors should have access to the same set of tools that management uses to analyze our results. We estimate FX neutral revenue growth by (i) excluding the FX impacts resulting from the time period between a transaction's booking date and revenue recognition date for both the current and prior year periods, and (ii) converting our current-year period results for transactions recorded in currencies other than U.S. Dollars using the corresponding prior-year period exchange rates rather than the current-year period exchange rates.


Page 14 of 18



Tabular Reconciliations for Non-GAAP Measures
Adjusted EBITDA (Adjusted Earnings Before Interest, Taxes, Depreciation & Amortization) by Segment(1) 
 
Three months ended June 30, 2019
 
Core OTA
 
trivago
 
Vrbo
 
Egencia
 
Corporate &
Eliminations
 
Total
 
(In millions)
Operating income (loss)
$
521

 
$
17

 
$
60

 
$
24

 
$
(357
)
 
$
265

Realized gain (loss) on revenue hedges
8

 

 

 

 

 
8

Restructuring and related reorganization charges

 

 

 

 
4

 
4

Legal reserves, occupancy tax and other

 

 

 

 
4

 
4

Stock-based compensation

 

 

 

 
59

 
59

Amortization of intangible assets

 

 

 

 
52

 
52

Depreciation
94

 
3

 
24

 
13

 
42

 
176

Adjusted EBITDA(1)
$
623

 
$
20

 
$
84

 
$
37

 
$
(196
)
 
$
568

 
Three months ended June 30, 2018
 
Core OTA
 
trivago
 
Vrbo
 
Egencia
 
Corporate &
Eliminations
 
Total
 
(In millions)
Operating income (loss)
$
477

 
$
(24
)
 
$
63

 
$
18

 
$
(423
)
 
$
111

Realized gain (loss) on revenue hedges
(1
)
 

 

 

 

 
(1
)
Legal reserves, occupancy tax and other

 

 

 

 
1

 
1

Stock-based compensation

 

 

 

 
50

 
50

Amortization of intangible assets

 

 

 

 
72

 
72

Impairment of goodwill

 

 

 

 
61

 
61

Depreciation
85

 
4

 
15

 
12

 
53

 
169

Adjusted EBITDA(1)
$
561

 
$
(20
)
 
$
78