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Expedia Group (EXPE) Q3 Earnings Beat, Revenues Surge Y/Y

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Expedia Group, Inc.EXPE delivered robust third-quarter 2018 adjusted earnings of $3.65 per share, surpassing the Zacks Consensus Estimate of 48 cents. The figure also surged 45.4% on a year-over-year basis and a whopping 164.5% sequentially.

Revenues increased 13.9% sequentially and 10.4% on a year-over-year basis to $3.28 billion. Top-line growth was driven by robust performance of HomeAway, Brand Expedia, Expedia Partner Solutions and Hotels.com. Further, improving stayed nights and expanding lodging portfolio drove the results.

The figure came slightly below the Zacks Consensus Estimate of $3.29 billion.

Expedia recorded gross bookings of $24.7 billion in the third quarter, which missed the Zacks Consensus Estimate of $24.9. However, the figure improved 11.3% year over year but declined 4.6% sequentially.

Nevertheless, shares of Expedia have lost 0.5% on a year-to-date basis, against the industry 's rally of 4.8%.

However, we note that shares of Expedia rose by 4.59% in the after-hours trading on Thursday. This can primarily be attributed to impressive growth in bottom-line and gross bookings.

Revenues by Segment

Core OTA segment revenues (77.1% of total revenues) increased 9.1% year over year to $2.53 billion. The segment witnessed gross bookings of $20.2 billion, reflecting year-over-year growth of 10%.

Egencia revenues (4.2% of revenues) increased 10.3% on year-over-year basis to $139 million. This can be attributed to strong performance in quarterly bookings which came in $1.9 billion, up 14% from the prior-year quarter. Additionally, Expedia's enhanced product offerings within this segment remained positive throughout the quarter under review.

HomeAway (12.5% of revenues) generated $410 million in the third quarter, surging 35% from the year-ago quarter. HomeAway witnessed year-over-year growth of 24% in its gross bookings, which came in at $2.5 billion. Further, the segment experienced growth of 28% in the stayed property nights on a year-over-year basis. Further, HomeAway's online bookable listings reached 1.8 million during the reported quarter.

Moreover, trivago revenues (9% of revenues) declined 12.7% year over year to $295 million.

Revenues by Business Model

Merchant model generated revenues of $1.69 billion (51.5% of revenues), up 8.3% year over year.

Agency division generated revenues of $876 million (26.7% of revenues), surging 9.1% from the prior-year quarter.

Advertising & Media yielded $302 million of revenues (9.3% of revenues), up1% from the year-ago quarter. Although Media Solutions business exhibited strong year-over-year growth of 20% in the third quarter, it was affected by decline in Trivago revenues.

Moreover, HomeAway (12.5% of revenues) generated $410 million in the reported quarter, surging 35% from the year-ago quarter.

Revenues by Geography

Expedia generated $1.79 billion revenues (54.7% of total revenues) from domestic regions, up 14% from the prior-year quarter. This was primarily driven by the company's strong initiatives toward expansion of its presence in the domestic regions and strong domestic room nights which grew 9% from the year-ago quarter.

Further, revenues generated by international regions were $1.48 billion (45.3% of revenues), up 7% on a year-over-year basis. Improved product offering in international regions contributed to the gross bookings in these regions, consequently driving the international revenues. Moreover, solid growth of 16% in room nights in international regions was a major positive.

Revenues by Product Line

Lodging revenues (71.6% of total revenues) came in $2.35 billion, surged 12% from the prior-year quarter. This can be primarily attributed to 13% year-over-year growth in stayed room nights. Further, strong momentum in HomeAway, Expedia Partner Solutions and Hotels.com drove lodging revenues.

Further, Expedia's global lodging portfolio exceeded 895K properties by acquiring 40K properties during the third quarter.

Air revenues were $209 million (6.4% of reveneus), up 11% year over year. This was driven by 4% increase in air tickets sold and 6% increase in revenues per ticket faring better than the airfare growth of 4%.

Expedia, Inc. Price, Consensus and EPS Surprise

Expedia, Inc. Price, Consensus and EPS Surprise | Expedia, Inc. Quote

Operating Details

Adjusted EBITDA improved massively 29% year over year to $912 million. This can be attributed to rise in Home Away and Core OTA EBITDA which exhibited year-over-year growth of 66% and 14%, respectively.

Per the company, operating margin came in at 20.5%, expanding 430 basis points (bps) from the year-ago quarter.

Moreover, adjusted selling and marketing expenses were $1.48 billion, up 3% year over year. As a percentage of revenues, the figure contracted 350 bps.

Balance Sheet & Cash Flow

As of Sep 30, 2018, cash and cash equivalents were $2.92 billion compared with $3.07 billion as of Jun 30, 2018. Short-term investments totaled $458 million, decreasing from $1.49 billion in the previous quarter.

Further, Expedia's free cash flow in the third quarter was negative of $594 million. The company paid quarterly dividend worth $47 million (32 cents per share) during the reported quarter.

Moreover, Expedia repurchased nearly 5.4 million shares for a total of $634 million on a year-to-date basis.

Guidance For 2018

Expedia raised guidance for adjusted EBITDA growth, which is currently expected in the range of 10-12%, up from the previous guidance of 7-12%.

Zacks Rank & Stocks to Consider

Expedia carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Upland Software UPLD , Ringcentral RNG and Twilio TWLO , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Long-term earnings growth rate for Upland Software, Ringcentral and Twilio is currently pegged at 20%, 28.83% and 9%, respectively.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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