Higher Gross Bookings And Lower Costs Drive Expedia’s 2Q’18 Results

by Trefis Team
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In line with market expectations, Expedia (NASDAQ: EXPE) delivered a strong financial performance for the second quarter backed by robust gross bookings from both HomeAway and Egencia. Further, the company’s lower operating expense and favorable tax rate caused its adjusted earnings to improve sharply. Going forward, Expedia targets to double its gross bookings by the end of this year by leveraging its data-driven approach to marketing optimization, while continuing to aggressively drive its global expansion plans.

View our interactive dashboard for Expedia which shows our forecasts for the company’s revenues. You can modify the different revenue drivers to see how changes impact the company’s expected revenues and stock price.

Key Highlights of 2Q’18 Results

  • Expedia’s gross bookings rose 13% compared to the same quarter of last year, causing its revenue to increase by 11% to $2.7 billion. The top-line growth was also driven by strong lodging revenue, and stayed room night growth.
  • HomeAway continued to deliver solid results, adding over 1.7 million online bookable listings during the quarter. Further, HomeAway posted remarkable growth in its adjusted EBITDA, almost doubling to $78 million on a year-on-year basis.
  • The gross bookings at Egencia surged by 18% in the quarter, marking its highest growth in nearly two years. Further, the sales team at Egencia signed over $460 million of new business, contributing to its top-line growth.
  • As expected, Trivago continued to struggle in the second quarter, pulling down Expedia’s overall results. Going forward, the team plans to take a more-balanced approach to trade-offs between top-line growth and profitability,  with more inclination towards the latter. Consequently, Trivago expects its adjusted EBITDA to improve in the second half of the year.
  • Lower depreciation and interest expense, coupled with a favorable tax rate, led to a 55% growth in Expedia’s adjusted earnings.
  • Expedia continued to repurchase its shares during the quarter, delivering strong returns to its shareholders. Further, the company raised its dividend for the seventh consecutive year, indicating its willingness to share its growth with its stakeholders.

Going Forward

  • Going forward, the shift to instant bookability is likely to contribute to customer conversion, thereby enhancing HomeAway’s value for Expedia.
  • Given the momentum in sales and a differentiated product offering, Egencia has a significant opportunity to continue to gain share in the managed corporate travel market, and drive Expedia’s value in the long term.
  • Expedia aims to optimize its direct marketing spend to deliver incremental top-line growth in the coming quarters. Also, the company expects its general and administrative expenses to moderate in the second half of 2018, despite being in line with the revenue growth for the full year. As a result, the company has raised its full year adjusted EBITDA growth to 7%-12%, which is 300-400 basis points higher than its previous guidance.
  • Moreover, the company will continue to deploy capital for expansion and strategic merger and acquisition (M&A), while returning value to its shareholders through its share repurchase program and consistent dividend payments.

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