Expedia Group, Inc. (EXPE)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 landed at the low end of top-line guidance amid softer U.S. demand, but bottom-line outperformed with Adjusted EPS $0.40 (+90% y/y) and Adjusted EBITDA +16% y/y with ~105 bps margin expansion .
• Versus Street: EPS beat ($0.40 vs $0.36 est) while revenue modestly missed ($2.99B vs $3.01B est); results were driven by B2B (+14% revenue) and Advertising (+20%) offset by U.S.-heavy B2C (-2%) and FX headwinds .
• Guidance reset: Q2 gross bookings growth 2–4%, revenue growth 3–5%, and EBITDA margin expansion +75–100 bps; full-year top-line growth trimmed to 2–4%, but EBITDA margin expansion raised to +75–100 bps (from +50 bps) .
• Capital returns: $330M buybacks (1.7M shares) in Q1; quarterly dividend maintained at $0.40 (payable Jun 18, 2025), supporting shareholder yield and sentiment catalysts alongside AI-driven product initiatives .

What Went Well and What Went Wrong

• What Went Well

  • B2B revenue +14% y/y and margin +219 bps to 22.8%, buoyed by stronger international exposure (APAC room nights +30%) and partner-driven growth; Advertising revenue +20% y/y, with product innovation (video ads, AI bid optimization) .
  • Management delivered bottom-line ahead of guidance via disciplined cost control; overhead -1% y/y with ~90 bps leverage and restructuring benefits expected to add ~$75M EBITDA over the next 3 quarters .
  • Strategic supply/product wins: Southwest (1/3 of travelers new to Expedia), Ryanair (≈75% new to Expedia), and AI enhancements (review summarization, property Q&A, Instagram trip matching) underpin attach and customer acquisition .

• What Went Wrong

  • U.S. demand softened (domestic and inbound), pressuring consumer bookings (B2C +1% bookings; revenue -2% y/y) and Hotels.com performance; inbound to U.S. down ~7%, Canada inbound down nearly 30% .
  • FX was a ~3-point headwind to revenue (≈1 point worse than expected) and ADR declined ~1% (FX-neutral +1%); timing (Easter shift) also cut 1 point from Q1 revenue growth .
  • Top-line outlook trimmed: Q2 and FY 2025 gross bookings/revenue now guided to 2–4% growth, reflecting macro caution and pricing mix shifts (move to non-refundable plans, more discounting) .

Financial Results

Segment revenue and bookings mix

Revenue by product

KPIs

Notes: FX/timing headwinds impacted revenue growth; Easter shift -1 pt, FX ~-3 pts; ADR -1% reported (FX-neutral +1%) .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We posted first quarter bookings and revenue within our guidance range despite weaker than expected demand in the US… Looking ahead, we are committed to continuing to deliver margin expansion while growing our top-line” — CEO Ariane Gorin .
• “In February, we became the first online travel agency to list Southwest Airlines inventory… 1/3 of travelers booking Southwest tickets on Expedia are new customers to us… In Europe, we launched Ryanair… ~75% of travelers booking Ryanair on Expedia are new to us” — CEO Ariane Gorin .
• “Given our performance… we expect Q2 to deliver gross bookings growth of 2%–4% and revenue growth of 3%–5% with ~75–100 bps of EBITDA margin expansion… we are revising our guidance… updated [FY] guidance is 2%–4%… raising our bottom line guide to ~75–100 bps of EBITDA margin expansion, up from 50 bps” — CFO Scott Schenkel .
• “We eliminated roles and removed layers… expect ~$75 million [EBITDA benefit] over the next 3 quarters” — CFO Scott Schenkel .

Q&A Highlights

• Marketing and ROI: Direct sales/marketing spend ~$$1.8B (+6% y/y) with slight deleverage from B2B mix; focus remains on profitable growth and flexibility to reduce/increase spend by opportunity .
• Hotels.com turnaround: Brand relaunch (new identity, mascot); management remains optimistic despite Q1 contraction; plan continues into back half .
• Macro sensitivity: B2B diversified across geographies/segments and tuned levers; packaging and targeted rates help partners manage softer demand; loyalty program ROI optimization underway (Vrbo Blue earn removed) .
• Demand and pricing mix: April softer in U.S.; shift to lower ADR rate plans (refundable → non-refundable) and more hotel discounting; inbound to U.S. down with rebalancing to LatAm .
• Restructuring/efficiency: ~4% employee restructuring, ~7% contractor reduction; ~$75M EBITDA benefit over next 3 quarters; reinvestment to lower-cost locations and strategic initiatives .

Estimates Context

Values retrieved from S&P Global.*
Notes: Company Adjusted EPS aligns with S&P “Primary EPS” actuals displayed; see GAAP diluted loss per share (-$1.56) for Q1 2025 in company release .

Key Takeaways for Investors

• Mix matters: B2B (+14% revenue; margin +219 bps) and Advertising (+20%) offset U.S.-heavy B2C (-2% y/y revenue); expect B2B/Ads to remain the ballast if U.S. consumer/inbound remains soft .
• Guidance recalibration: Near-term top-line trimmed (Q2/FY: 2–4%) while margin targets raised (75–100 bps); positioning favors names executing cost discipline and product attach to defend EBITDA per unit .
• AI/product catalysts: Southwest/Ryanair onboarding, Instagram trip matching, AI agent, and OpenAI/Microsoft integrations should support customer acquisition and attach; watch adoption metrics and ad monetization run-rate .
• Pricing/mix watch: ADR pressure and rate-plan shift to non-refundable indicate value-seeking behavior; monitor ADR/discounting trends, insurance attach, and package path performance for margin resilience .
• Capital returns: $330M buybacks and $0.40 quarterly dividend underpin shareholder yield; leverage ratio ~2.1x maintained, offering flexibility to opportunistically repurchase .
• Regional diversification: APAC strength (+30% room nights in B2B) and Middle East expansion de-risk U.S. softness; track non-U.S. POS revenue progression .
• Near-term trading setup: Expect shares to react to margin execution vs tempered top-line; beats likely driven by B2B/Ads/efficiency and disciplined S&M leverage, while sustained U.S. softness/FX represent ongoing headwinds .