Traveling is an important part of a human’s life, but organizing a traveling schedule is a tough task. If the organizing part becomes hassle free, then traveling becomes more pleasurable.
Expedia Inc. (EXPE, Financial) is one of the largest travel companies in the world. The company provides exclusive travel solutions to its valued customers. Expedia’s portfolio of travel brands features a supply portfolio including more than 260,000 hotels in 200 countries, 400 airlines, packages, rental cars, cruises as well as destination services and activities.
Its portfolio of brands includes Expedia.com, a service online travel agency; Hotels.com, a hotel-only booking service; Hotwire.com, a discount travel provider; CarRentals.com, the premiere car rental booking company on the web; Expedia Affiliate Network, which powers travel for travel and nontravel brands; luxury travel specialist Classic Vacations and destination services and concierge services provider Expedia Local Expert.
It has 200-plus travel booking sites in more than 70 countries. It has 150-plus mobile websites in nearly 70 countries and 35 languages. With 18,000-plus employees in more than 30 countries, it derives around 45% of its revenue from the international segment.
Expedia reported strong fourth-quarter results. It is the global leader in this market with strong offline-to-online trends. It has significant growth opportunities across geographies. The company’s diversifying revenue mix reduces risk and positions the business for growth. Expedia is the global leader and has significant room for further growth. It is rapidly expanding in the fragmented hotel segment of the travel industry and has completed significant technology investments that fortify the business.
Fourth quarter results
Room night growth accelerated to 39% year over year in the fourth quarter of 2015, with domestic and International room nights growing 33% and 47% year over year.
Gross bookings increased by 40%. For the full-year 2015, total gross bookings increased 24%.
Revenue increased by 29% year over year in the fourth quarter of 2015, driven primarily by eight percentage points of inorganic impact from acquisitions, growth in the Core OTA business, including strong performance at Brand Expedia, Hotels.com and EAN, as well as at trivago.
Domestic revenue increased 22%, and international revenue increased 15%.
Hotel revenue increased 17% in 2015 on a 36% increase in room nights stayed.
Air revenue increased 25% in 2015 on a 35% increase in air tickets sold.
Advertising and media revenue increased 20% in 2015 due to continued growth in Expedia Media Solutions and trivago.
All other revenue increased 21% in 2015 primarily on growth in car rental and travel insurance products.
For the fourth quarter of 2015, total adjusted cost of revenue increased by 27%, from the prior-year quarter, due to $35 million more in customer operations expenses, $18 million more in data center and other costs as well as $16 million more in credit card processing costs, primarily due to an increase in transaction volumes.
For the full-year 2015, total adjusted cost of revenue increased 13%, compared to the prior year, due to $54 million more in customer operations expenses, $46 million more in data center and other costs as well as $36 million more in credit card processing costs, primarily due to an increase in transaction volumes (offset by a decrease in fraud and chargeback expenses).
Acquisitions contributed approximately 19 and nine percentage points of inorganic growth to adjusted cost of revenue growth during the fourth quarter and full-year 2015.
During the fourth quarter of 2015, total selling and marketing expenses increased by 33% from the prior-year quarter.
Depreciation expense increased $27 million or 39% to $96 million in the fourth quarter of 2015.
During the fourth quarter of 2015, Adjusted EBITDA (excluding eLong) increased by 1% from the prior-year quarter. Core OTA Adjusted EBITDA increased 13% in the fourth quarter of 2015.
The consolidated effective tax rate on GAAP pretax income was (117%) and 22% for the fourth quarter and full-year 2015.
Cash equivalents, restricted cash and short-term investments totaled $1.7 billion at Dec. 31, 2015. For the year ended Dec. 31, 2015, consolidated net cash provided by operating activities was $1.4 billion and consolidated free cash flow totaled $581 million.
During 2015, the company repurchased 500,000 shares of Expedia Inc. common stock for an aggregate purchase price of $45 million.
On Dec 10, 2015, Expedia paid a quarterly dividend of $31 million (24 cents per common share). In addition, on Feb. 8, the Executive Committee of Expedia’s board of directors declared a cash dividend of 24 cents per share of outstanding common stock to be paid to stockholders of record as of the close of business on March 10, with a payment date of March 30. Based on current shares outstanding, the total payment for this quarterly dividend is estimated to be approximately $6 million.
(Source: Company’s Website)
Focus
The company is currently focusing on the following:
- Innovation.
- Brand building.
- Marketplace execution.
- Pricing actions.
- Optimizing global sourcing.
- Focus on emerging markets.
On a concluding note
The company delivers consumers value in leisure and business travel, drives incremental demand and direct bookings to travel suppliers and provides advertisers the opportunity to reach a highly valuable audience of in-market consumers through Expedia Media Solutions. Expedia was listed on Fortune magazine’s list of Most Admired Companies in 2014, ranking No. 7 in the Internet Services & Retailing industry and topped the 2014 Travel Weekly Power List, an annual ranking of the leading travel companies.
On Dec. 15, 2015, the company completed acquisition of HomeAway Inc. (AWAY, Financial), including all of its brands, capping off a year in which Expedia completed a total of more than $6 billion in strategic transactions.
Overall the travel market is healthy, and Expedia has significant growth opportunities. Further, the company has a powerful free cash flow generation and a solid track record of disciplined capital allocation. Expedia has a solid stock price performance with a notable return on equity. Its valuation levels are also reasonable, and profit margins are also expanding. Expedia will continue its trend and won’t let its valued investors as well as customers down in the long run.
Disclosure: I do not hold a position in the company.
