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    Expedia Group Inc (EXPE)

    CFO Change

    Expedia Group, Inc. is a global leader in online travel and technology, providing a comprehensive range of travel products and services to both leisure and corporate travelers. The company operates through a diverse portfolio of consumer brands, including Brand Expedia, Hotels.com, Vrbo, trivago, Orbitz, Travelocity, Hotwire, Wotif, ebookers, CheapTickets, Expedia Group Media Solutions, CarRentals.com, and Expedia Cruises . Expedia's business activities are structured around three primary business models: the merchant model, the agency model, and the advertising model, with lodging being the largest revenue contributor . The company leverages its extensive supply portfolio and technology capabilities to empower travelers to efficiently research, plan, book, and experience travel .

    1. Merchant Model - Acts as the merchant of record for bookings, handling transactions and customer service for travel products.
    2. Agency Model - Facilitates bookings by acting as an agent, connecting travelers with travel service providers.
    3. Lodging - Offers a wide range of accommodation options, including hotels, vacation rentals, and other lodging services.
    4. Advertising Model - Provides media and advertising solutions, including targeted advertising and promotional opportunities.
    5. B2B Segment - Delivers business-to-business travel solutions, contributing significantly to overall revenue growth.
    6. Air Revenue - Includes sales and bookings of airline tickets and related services.
    Initial Price$126.23July 1, 2024
    Final Price$146.47October 1, 2024
    Price Change$20.24
    % Change+16.03%

    What went well

    • Strong Growth in B2B Business: Expedia's B2B segment reported a 19% increase in bookings this quarter, demonstrating robust performance across various partner segments and regions. The company believes this segment will continue to grow at healthy double-digit rates, tapping into a massive market opportunity with corporate travel agencies, offline and online travel agencies, and financial institutions.
    • Positive Momentum in Vrbo and Alternative Accommodations: After overcoming migration challenges, Vrbo has returned to growth, driven by product improvements, supply expansion—including adding 1 million units from Expedia to Vrbo—and effective marketing campaigns. The addition of urban inventory and focus on underpenetrated international markets position Vrbo to capture more market share in the growing alternative accommodations sector. ,
    • Advancements in Loyalty Program and Cross-Brand Synergies: The One Key loyalty program is yielding positive results, with tiered members (silver, gold, platinum) representing 30% of travelers but 50% of room nights. The program is effectively driving cross-brand engagement, with 30% of travelers redeeming One Key cash on Vrbo being new to the platform. These advancements enhance customer loyalty and can lead to increased direct bookings and marketing efficiencies.

    What went wrong

    • Vrbo had a slow start to the year due to migration issues, and despite efforts to improve product features and supply, it remains underpenetrated in international markets and is undergoing leadership changes with a new General Manager appointed.
    • The integration of 1 million units from Expedia to Vrbo is still in early stages, requiring the company to figure out the right UX and design, which could pose challenges and uncertainty in returns from this move.
    • The effectiveness of the One Key loyalty program is still being assessed, with the company interrogating the spend on loyalty to ensure it delivers desired returns, indicating potential issues with its impact on traveler behavior.

    Q&A Summary

    1. Marketing Leverage and Margins
      Q: When can you deliver aggregate marketing leverage?
      A: We expect to see marketing leverage going forward as Vrbo and international markets return to desired levels. Excluding investments in Vrbo and international markets, we have seen leverage in our B2C business. As these businesses improve, we anticipate more marketing efficiencies.

    2. Vrbo Growth Acceleration
      Q: What is required to accelerate Vrbo's growth?
      A: Vrbo's growth can be accelerated by continuing to improve the product, expanding supply, and effective marketing. This year, we've added new features, made the app faster, and launched a successful marketing campaign with Nick Saban that drove conversions. We're focusing on underpenetrated urban destinations and international markets. A new General Manager is developing long-term growth plans to capitalize on these opportunities.

    3. B2B Growth and Outlook
      Q: What drives strong B2B growth and how sustainable is it?
      A: Our B2B business grew by 19% this quarter, only 1 point down from last quarter, driven by a massive market including corporate travel agencies, offline and online travel agencies, and financial institutions with loyalty programs. While recent elevated growth was partly due to Asia's recovery, we believe the business will continue to grow at healthy double-digit rates, even if not at the elevated levels we've seen.

    4. Selling and Marketing Efficiencies
      Q: Can you improve selling and marketing efficiencies versus competitors?
      A: Yes, we see opportunities to improve efficiencies. Excluding investments in Vrbo and international markets, we are already seeing efficiencies, particularly in Brand Expedia. We're focused on optimizing our products and supply to deliver value to travelers, encouraging repeat and direct bookings, which will drive further marketing efficiencies. We're laser-focused on this going forward.

    5. One Key Loyalty Program Impact
      Q: How is the One Key program performing and how can it improve?
      A: Since launching in summer 2023, we've been pleased with One Key's results. Tiered member deals attract 30% of travelers but account for 50% of room nights. Cross-brand redemption is strong, with 30% of travelers redeeming One Key Cash on Vrbo being new to Vrbo. We're tuning the value proposition by brand and geography, and the technology allows us to adjust the program to optimize loyalty spend.

    6. October Trends and Hurricane Impact
      Q: How did hurricanes affect October trends?
      A: We saw an impact from Hurricane Milton in October, but it was less severe than initially expected. Excluding the hurricane and other events like elections, the underlying health of the business is strong as we enter the fourth quarter.

    7. Integration of Vrbo Supply with Expedia
      Q: Why did you add 1 million rooms from Expedia to Vrbo?
      A: We moved about 1 million units from Expedia to Vrbo to expand into more urban and shorter-stay markets. This supply differs from our traditional inventory, so we're refining the user experience. This move allows customers to find whole homes and apartments in a broader range of destinations, supporting our growth strategy.

    8. International Market Share Regain
      Q: How are you regaining share in international markets?
      A: We are being surgical, analyzing each market to determine which of our brands has strong recognition, and implementing full-funnel marketing plans to regain share. This focused approach allows us to be effective where it counts.

    9. Alternative Accommodation Regulations
      Q: Are regulatory updates in places like California affecting your alternative accommodations?
      A: We work closely with local governments to stay compliant with regulations. While acknowledging a balance between local economic contributions and regulations, we believe there's still a significant market for alternative accommodations. Recent regulatory changes haven't impacted our growth potential.

    10. Hotels.com Performance
      Q: How is Hotels.com performing post-loyalty program changes?
      A: Hotels.com performance in Q3 was stable but hasn't returned to growth. The brand was significantly impacted by our migration, loyalty program changes, and international pullback. As we re-enter international markets, Hotels.com is benefiting. A new General Manager is bringing fresh perspective, and we're excited about future developments.

    11. CEO's Positives and Challenges
      Q: What surprises and challenges have you found in your new role?
      A: Positively, I've seen immense passion and brand love for Expedia, Hotels.com, and Vrbo. A challenge has been connecting our technological advancements directly to brand value propositions, especially for Hotels.com and Vrbo. However, the organization is responding quickly, and we're seeing acceleration in the consumer business, giving me confidence in the future.

    NamePositionStart DateShort Bio
    Barry DillerChairman and Senior ExecutiveAugust 9, 2005Barry Diller has been the Chairman of the Board and Senior Executive of Expedia Group since the company's spin-off from IAC. He has extensive management experience and is a significant stockholder .
    Peter KernVice Chairman and Chief Executive Officer2020Peter Kern has been a director since 2005, Vice Chairman since 2018, and CEO since 2020. He has served on trivago's Supervisory Board and held leadership roles at Tribune Media and InterMedia Partners .
    Julie WhalenChief Financial OfficerSeptember 26, 2022Julie Whalen has been CFO since September 2022. She joined Expedia as a director in June 2019 and was previously EVP and CFO at Williams-Sonoma, Inc. She is a CPA with a B.S. in Accounting and a J.D. .
    Robert DzielakChief Legal Officer and SecretaryMarch 2018Robert Dzielak has served as Chief Legal Officer and Secretary since March 2018. He joined Expedia in 2006 and has held various legal roles, including EVP and General Counsel .
    Lance SolidaySenior Vice President and Chief Accounting OfficerApril 1, 2024Lance Soliday has been SVP and Chief Accounting Officer since April 2024. He previously held similar roles at Expedia and worked at Amazon and Microsoft. He is a CPA with a degree from Central Washington University .
    Ariane GorinChief Executive OfficerMay 13, 2024Ariane Gorin will become CEO on May 13, 2024. She has been with Expedia since 2013, holding leadership roles such as President of Expedia for Business. She previously worked at Microsoft .
    1. "Despite Vrbo returning to modest growth, what specific strategies are you implementing to accelerate its growth to match or surpass competitors in the alternative accommodations space, particularly in underpenetrated international markets?"
    2. "With the addition of approximately 1 million units from Expedia to Vrbo, predominantly in urban areas and shorter stays, how do you anticipate this shift will impact Vrbo's margins and returns, and are there differences in profitability compared to your traditional inventory?"
    3. "How are recent regulatory updates in markets like California and Hawaii affecting your outlook for the U.S. alternative accommodations market, and do you view these as isolated incidents or indicative of a broader trend that could pose challenges to your growth potential?"
    4. "Given the deleverage in sales and marketing expenses due to higher commissions in your B2B business and increased investments in Vrbo and international markets, how do you plan to balance these rising costs while aiming for EBITDA margin improvement, especially as you enter 2025?"
    5. "Considering Julie Whalen's announcement of her impending departure as CFO, what measures are you taking to ensure continuity in your financial leadership, and how might this transition impact your strategic focus and financial goals for the upcoming year?"
    Program DetailsProgram 1
    Approval DateOctober 2023
    End Date/DurationNo fixed expiration
    Total additional amount$5 billion
    Remaining authorization$3.4 billion
    DetailsProvides flexibility to repurchase shares in the open market or through privately negotiated transactions. The timing, manner, price, and amount of any repurchases are at the discretion of the company.

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: Q4 2024 and FY 2024
    • Guidance:
      • Q4 2024 Guidance:
        • Gross Bookings Growth: Expected to be in the range of 6% to 8% versus last year.
        • Revenue Growth: Expected to be about 1 point lower than gross bookings growth.
        • EBITDA and EBIT Margins: Expected to be relatively in line with last year as they continue to invest in marketing for Vrbo and international markets .
      • FY 2024 Guidance:
        • Gross Bookings Growth: Expected to be approximately 5% versus last year, which is up 1 point relative to their prior outlook.
        • EBITDA and EBIT Margins: Expected to be slightly up versus last year, an improvement from their prior outlook of flat levels.
        • Revenue Growth: Guidance remains at approximately 6% growth versus last year .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: Q3 2024 and FY 2024
    • Guidance:
      • Q3 2024 Guidance:
        • Gross Bookings and Revenue Growth: Expected to be in the range of 3% to 5% versus last year.
        • EBITDA and EBIT Margins: Expected to experience approximately 100 basis points of deleverage compared to last year due to marketing investments in Vrbo and international markets .
      • FY 2024 Guidance:
        • Revenue Growth: Expected to be approximately 6% for the full year, which is 2 points higher than the gross bookings growth.
        • Gross Bookings Growth: Expected to be at the low end of the previously communicated range of mid- to high single digits, at approximately 4% for the full year.
        • EBITDA and EBIT Margins: Expected to be relatively in line with last year .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      • Full Year Guidance:
        • Top Line Growth: Expected to be in the range of mid- to high single-digit growth.
        • EBITDA and EBIT Margins: Expected to be relatively in line with last year .
      • Q2 2024 Guidance:
        • Top Line Growth: Expected to deliver growth in the mid-single digits, reflecting a sequential acceleration in gross bookings from the first quarter.
        • Revenue Growth: Expected to be lower than the first quarter growth rate due to lower gross bookings in the first quarter, the pull forward of Easter stays into the first quarter, and contra revenue arising from pricing actions.
        • EBITDA and EBIT Margins: Expected to experience some pressure versus last year, but when combined with first quarter outperformance, margins are expected to be relatively in line with last year to slightly above in the first half .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024
    • Guidance:
      • Top Line Growth: Expected to be relatively in line with what was seen in 2023, which was about 9.5% to 10% in Gross Booking Value (GBV) and 10% on revenue.
      • Margin Expansion: Anticipated to be relatively in line with the 75 basis points expansion seen in 2023.
      • EBITDA: Expected to deliver another record year of EBITDA with EBITDA margin expansion at levels relatively similar to what was seen in 2023.
      • Leverage Ratio: Aim to achieve a target leverage ratio of approximately 2x this year, supported by EBITDA growth and potential early repayment of debt.
      • Free Cash Flow: Expected strong free cash flow growth, driven by EBITDA growth and CapEx efficiencies.
      • Q1 2024 Outlook: Expected gross bookings growth in the first quarter to be in the low to mid-single digits and revenue growth to be in the mid-single digits. Additionally, anticipate some EBITDA margin compression consistent with the levels seen in Q1 of the previous year.
      • Marketing Strategy: Plan to invest in global expansion efforts, which may cause short-term pressure on marketing efficiency for their B2C business, but still expect to drive overall B2C marketing leverage as a percentage of gross bookings .

    Competitors mentioned in the company's latest 10K filing.

    • Facebook, Instagram, and TikTok: Developing search functionality that may become alternative research and booking resources for travelers, increasing competition .
    • Amazon and Alibaba: Traditional consumer eCommerce platforms that may expand their local offerings into the travel market, creating additional competition .
    • Booking Holdings (Booking.com, Priceline.com, Agoda.com): Compete with Expedia in the OTA segment and provide alternative accommodations .
    • Airbnb: Competes with Expedia's Vrbo in the alternative accommodations market and may expand into other travel services .
    • Trip.com: Competes with Expedia in the OTA segment .
    • Google: Competes by potentially disintermediating OTAs through its own offerings and capabilities, and by increasing the cost of traffic directed to Expedia's websites .

    Recent developments and announcements about EXPE.

    Corporate Leadership

      Leadership Change

      ·
      Dec 19, 2024, 9:37 PM

      Departure and Appointment at Expedia Group: Julie Whalen is stepping down as Chief Financial Officer (CFO) of Expedia Group. Scott Schenkel has been appointed as the new CFO, effective after the company files its Annual Report for the fiscal year ending December 31, 2024, which is expected around February 7, 2025. Reason for Change: The transition is part of a planned succession to ensure a smooth handover of responsibilities .

      CFO Change

      ·
      Dec 19, 2024, 9:37 PM

      Scott Schenkel has been appointed as the Chief Financial Officer (CFO) of Expedia Group, effective the day after the company files its Annual Report on Form 10-K for the fiscal year ended December 31, 2024, which is expected to be on or about February 7, 2025. Julie Whalen will continue to serve as CFO until the transition is complete .

      CFO Change

      ·
      Nov 7, 2024, 12:00 AM

      Julie Whalen, the Chief Financial Officer of Expedia Group, Inc., will step down from her role effective upon the appointment of her successor, which is expected to occur before February 17, 2025. She has also resigned from the Board of Directors effective immediately .