Expedia Q3 2014 Earnings Review

• Expedia reported strong numbers, beating analyst consensus on both topline as well as bottom line.
• Strong growth in room nights, advertising and media and air ticket bookings drove Expedia’s revenue growth.
• Strong growth in air travel and room nights to drive Expedia’s fourth quarter growth


Expedia Inc (NASDAQ:EXPE) released its earnings result for Q3 2014 on 30th October after market close. The company reported an earnings of $1.93, a 35% increase from same quarter last year. Revenues rose by 22% on YoY basis to $1.71 billion. It trumped analyst estimates of $1.74 earnings on a revenue of $1.68 billion. Expedia is expected to deliver strong performance in the next quarter, driven primarily by increase in room nights and air travel. Expedia’s stock was up 1.5% in after hour’s trade.

Expedia’s gross booking grew by 29% YoY while its revenue grew by 22% YoY during the quarter, aided strongly by 24% YoY growth in room nights. Domestic gross bookings increased by 35% while international gross booking registered a growth of 22% during the quarter.


Third quarter revenues grew to $1.71 billion primarily driven by growth in room nights stayed and advertising and media. Revenue margin (revenue as a percentage of gross bookings) declined by 72 basis points to 12.7% in the third quarter. Decline was due to lower revenue per room. Revenue per room declined largely due to promotional expenditure like loyalty programs and expenditure on increasing hotel supply portfolio. These expenditures will help Expedia to retain customers and drive future revenue growth. Decline in revenue per room was partially offset by a 5% increase in average daily rates.


In the third quarter hotels generated 73% advertising and media 8% and air travel 7% of Expedia’s revenue. Revenue from air travel increased by 21% during the quarter on the back of 30% growth in air tickets sold. However, revenue per ticket decreased by 7%. Revenues from advertising and media solutions increased by29%.

The company continued to generate strong cash flows. For nine months ended September 30th 2014, cash flow from operations was $1.6 billion and free cash flow stood at $1.3 billion. Free cash flow increased by $587 million over same period last year. The company returned a large amount of cash to shareholders. Expedia has purchased 6.50 million shares at an approximate cost of $450 million in the preceding nine months of which 1.5 million shares were purchased in third quarter for $130 million. Share buyback will also improve company’s future EPS figures. The company has announced a dividend of $0.18 per share to be paid in December. The company has already paid quarterly dividend of $0.18 per common share in September.

Strong demand for room nights and air travel are going to drive Expedia’s fourth quarter earnings. Airline industry reported a strong performance in Q3 2014 and expect air travel to improve further in next quarter. Expedia’s partnership with Travelocity will continue to generate revenues for Expedia. Travelocity contributed around 4% of Expedia’s room night growth in the third quarter. Expedia has also announced broadening of its partnership with HomeAway (NASDAQ:AWAY), allowing its customer to browse through more than 115,000 listing of HomeAway. This partnership is likely to boost Expedia’s revenues.

European market is likely to be drag on company’s revenues in next quarter. Strengthening of dollar against euro and slower economic growth in Europe will serve as a major head wind for the company.


Expedia delivered an earnings surprise for the fifth quarter in a row. Increase in room nights and air ticket bookings contributed to increase in revenues. Continued strong demand in air travel and room nights coupled with broadening of partnership with HomeAway will boost Q4 2014 reveneus for Expedia. However slow economic growth in Europe may have negative impact on revenues.

Kumar Abhishek Kumar Abhishek   on Amigobulls :

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