filings.toolsItem 1. Consolidated Financial Statements
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Item 1. Consolidated Financial Statements
EXPEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share and per share data)
(Unaudited)
| Three months ended March 31, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| Revenue | $ | 2,249 | $ | 1,246 | |||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization shown separately below) (1) | 371 | 311 | |||||||||||||||||||||
| Selling and marketing (1) | 1,339 | 664 | |||||||||||||||||||||
| Technology and content (1) | 270 | 247 | |||||||||||||||||||||
| General and administrative (1) | 186 | 156 | |||||||||||||||||||||
| Depreciation and amortization | 197 | 209 | |||||||||||||||||||||
| Legal reserves, occupancy tax and other | 21 | (1) | |||||||||||||||||||||
| Restructuring and related reorganization charges | — | 29 | |||||||||||||||||||||
| Operating loss | (135) | (369) | |||||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest income | 3 | 2 | |||||||||||||||||||||
| Interest expense | (81) | (98) | |||||||||||||||||||||
| Loss on debt extinguishment | — | (280) | |||||||||||||||||||||
| Other, net | 5 | (5) | |||||||||||||||||||||
| Total other expense, net | (73) | (381) | |||||||||||||||||||||
| Loss before income taxes | (208) | (750) | |||||||||||||||||||||
| Provision for income taxes | 85 | 169 | |||||||||||||||||||||
| Net loss | (123) | (581) | |||||||||||||||||||||
| Net loss attributable to non-controlling interests | 1 | 3 | |||||||||||||||||||||
| Net loss attributable to Expedia Group, Inc. | (122) | (578) | |||||||||||||||||||||
| Preferred stock dividend | — | (28) | |||||||||||||||||||||
| Net loss attributable to Expedia Group, Inc. common stockholders | $ | (122) | $ | (606) | |||||||||||||||||||
| Loss per share attributable to Expedia Group, Inc. available to common stockholders | |||||||||||||||||||||||
| Basic | $ | (0.78) | $ | (4.17) | |||||||||||||||||||
| Diluted | (0.78) | (4.17) | |||||||||||||||||||||
| Shares used in computing earnings (loss) per share (000's): | |||||||||||||||||||||||
| Basic | 156,336 | 145,181 | |||||||||||||||||||||
| Diluted | 156,366 | 145,181 |
| (1) Includes stock-based compensation as follows: | |||||||||||||||||||||||
| Cost of revenue | $ | 3 | $ | 5 | |||||||||||||||||||
| Selling and marketing | 15 | 17 | |||||||||||||||||||||
| Technology and content | 27 | 27 | |||||||||||||||||||||
| General and administrative | 45 | 34 |
See accompanying notes.
EXPEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)
(Unaudited)
| Three months ended March 31, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| Net loss | $ | (123) | $ | (581) | |||||||||||||||||||
| Currency translation adjustments, net of tax(1) | (17) | (37) | |||||||||||||||||||||
| Comprehensive loss | (140) | (618) | |||||||||||||||||||||
| Less: Comprehensive loss attributable to non-controlling interests | (6) | (19) | |||||||||||||||||||||
| Less: Preferred stock dividend | — | 28 | |||||||||||||||||||||
| Comprehensive loss attributable to Expedia Group, Inc. common stockholders | $ | (134) | $ | (627) |
(1)Currency translation adjustments include tax expense of $3 million and $9 million associated with net investment hedges for the three months ended March 31, 2022 and 2021.
See accompanying notes.
EXPEDIA GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except number of shares, which are reflected in thousands, and par value)
| March 31, 2022 | December 31, 2021 | ||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 5,552 | $ | 4,111 | |||||||
| Restricted cash and cash equivalents | 2,583 | 1,694 | |||||||||
| Short-term investments | — | 200 | |||||||||
| Accounts receivable, net of allowance of $66 and $65 | 1,736 | 1,264 | |||||||||
| Income taxes receivable | 93 | 85 | |||||||||
| Prepaid expenses and other current assets | 1,183 | 827 | |||||||||
| Total current assets | 11,147 | 8,181 | |||||||||
| Property and equipment, net | 2,169 | 2,180 | |||||||||
| Operating lease right-of-use assets | 395 | 407 | |||||||||
| Long-term investments and other assets | 1,468 | 1,450 | |||||||||
| Deferred income taxes | 864 | 766 | |||||||||
| Intangible assets, net | 1,368 | 1,393 | |||||||||
| Goodwill | 7,166 | 7,171 | |||||||||
| TOTAL ASSETS | $ | 24,577 | $ | 21,548 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable, merchant | $ | 1,292 | $ | 1,333 | |||||||
| Accounts payable, other | 934 | 688 | |||||||||
| Deferred merchant bookings | 9,203 | 5,688 | |||||||||
| Deferred revenue | 178 | 166 | |||||||||
| Income taxes payable | 19 | 16 | |||||||||
| Accrued expenses and other current liabilities | 843 | 824 | |||||||||
| Current maturities of long-term debt | — | 735 | |||||||||
| Total current liabilities | 12,469 | 9,450 | |||||||||
| Long-term debt, excluding current maturities | 7,719 | 7,715 | |||||||||
| Deferred income taxes | 58 | 58 | |||||||||
| Operating lease liabilities | 350 | 360 | |||||||||
| Other long-term liabilities | 414 | 413 | |||||||||
| Commitments and contingencies | |||||||||||
| Stockholders’ equity: | |||||||||||
| Common stock: $.0001 par value; Authorized shares: 1,600,000 | — | — | |||||||||
| Shares issued: 276,329 and 274,661; Shares outstanding: 151,554 and 150,125 | |||||||||||
| Class B common stock: $.0001 par value; Authorized shares: 400,000 | — | — | |||||||||
| Shares issued: 12,800 and 12,800; Shares outstanding: 5,523 and 5,523 | |||||||||||
| Additional paid-in capital | 14,431 | 14,229 | |||||||||
| Treasury stock - Common stock and Class B, at cost; Shares 132,051 and 131,813 | (10,309) | (10,262) | |||||||||
| Retained earnings (deficit) | (1,883) | (1,761) | |||||||||
| Accumulated other comprehensive income (loss) | (161) | (149) | |||||||||
| Total Expedia Group, Inc. stockholders’ equity | 2,078 | 2,057 | |||||||||
| Non-redeemable non-controlling interests | 1,489 | 1,495 | |||||||||
| Total stockholders’ equity | 3,567 | 3,552 | |||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 24,577 | $ | 21,548 |
See accompanying notes.
EXPEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In millions, except share and per share data)
(Unaudited)
| Three months ended March 31, 2021 | Common stock | Class B common stock | Additional paid-in capital | Treasury stock - Common and Class B | Retained earnings (deficit) | Accumulated other comprehensive income (loss) | Non-redeemable non-controlling interest | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2020 | 261,563,912 | $ | — | 12,799,999 | $ | — | $ | 13,566 | 130,766,537 | $ | (10,097) | $ | (1,781) | $ | (178) | $ | 1,494 | $ | 3,004 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | (578) | (3) | (581) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of taxes | (21) | (16) | (37) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Proceeds from exercise of equity instruments and employee stock purchase plans | 3,643,100 | — | 269 | 269 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Withholding taxes for stock options | (7) | (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Treasury stock activity related to vesting of equity instruments | 374,806 | (55) | (55) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other changes in ownership of non-controlling interests | — | 4 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 91 | 91 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2021 | 265,207,012 | $ | — | 12,799,999 | $ | — | $ | 13,919 | 131,141,343 | $ | (10,152) | $ | (2,359) | $ | (199) | $ | 1,479 | $ | 2,688 |
| Three months ended March 31, 2022 | Common stock | Class B common stock | Additional paid-in capital | Treasury stock - Common and Class B | Retained earnings (deficit) | Accumulated other comprehensive income (loss) | Non-redeemable non-controlling interest | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2021 | 274,660,725 | $ | — | 12,799,999 | $ | — | $ | 14,229 | 131,812,764 | $ | (10,262) | $ | (1,761) | $ | (149) | $ | 1,495 | $ | 3,552 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | (122) | (1) | (123) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of taxes | (12) | (5) | (17) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Proceeds from exercise of equity instruments and employee stock purchase plans | 1,668,445 | — | 101 | 101 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Treasury stock activity related to vesting of equity instruments | 238,675 | (47) | (47) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other changes in ownership of non-controlling interests | 4 | — | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 97 | 97 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2022 | 276,329,170 | $ | — | 12,799,999 | $ | — | $ | 14,431 | 132,051,439 | $ | (10,309) | $ | (1,883) | $ | (161) | $ | 1,489 | $ | 3,567 |
See accompanying notes.
EXPEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
| Three months ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Operating activities: | |||||||||||
| Net loss | $ | (123) | $ | (581) | |||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
| Depreciation of property and equipment, including internal-use software and website development | 175 | 182 | |||||||||
| Amortization of intangible assets | 22 | 27 | |||||||||
| Amortization of stock-based compensation | 90 | 83 | |||||||||
| Deferred income taxes | (101) | (175) | |||||||||
| Foreign exchange loss on cash, restricted cash and short-term investments, net | 6 | 26 | |||||||||
| Realized loss on foreign currency forwards | 32 | 7 | |||||||||
| Gain on minority equity investments, net | (21) | (8) | |||||||||
| Loss on debt extinguishment | — | 280 | |||||||||
| Other, net | 2 | 24 | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | (476) | (300) | |||||||||
| Prepaid expenses and other assets | (356) | (495) | |||||||||
| Accounts payable, merchant | (41) | 126 | |||||||||
| Accounts payable, other, accrued expenses and other liabilities | 267 | 34 | |||||||||
| Tax payable/receivable, net | (13) | (2) | |||||||||
| Deferred merchant bookings | 3,515 | 2,940 | |||||||||
| Deferred revenue | 13 | 2 | |||||||||
| Net cash provided by operating activities | 2,991 | 2,170 | |||||||||
| Investing activities: | |||||||||||
| Capital expenditures, including internal-use software and website development | (156) | (168) | |||||||||
| Sales and maturities of investments | 200 | — | |||||||||
| Proceeds from initial exchange of cross-currency interest rate swaps | 337 | — | |||||||||
| Payments for initial exchange of cross-currency interest rate swaps | (337) | — | |||||||||
| Other, net | (31) | (12) | |||||||||
| Net cash provided by (used in) investing activities | 13 | (180) | |||||||||
| Financing activities: | |||||||||||
| Proceeds from issuance of long-term debt, net of issuance costs | — | 1,967 | |||||||||
| Payment of long-term debt | (724) | (1,706) | |||||||||
| Debt extinguishment costs | — | (256) | |||||||||
| Purchases of treasury stock | (47) | (55) | |||||||||
| Proceeds from exercise of equity awards and employee stock purchase plan | 101 | 269 | |||||||||
| Other, net | 7 | (9) | |||||||||
| Net cash provided by (used in) financing activities | (663) | 210 | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents | (11) | (73) | |||||||||
| Net increase in cash, cash equivalents and restricted cash and cash equivalents | 2,330 | 2,127 | |||||||||
| Cash, cash equivalents and restricted cash and cash equivalents at beginning of period | 5,805 | 4,138 | |||||||||
| Cash, cash equivalents and restricted cash and cash equivalents at end of period | $ | 8,135 | $ | 6,265 | |||||||
| Supplemental cash flow information | |||||||||||
| Cash paid for interest | $ | 117 | $ | 129 | |||||||
| Income tax payments, net | 26 | 11 |
See accompanying notes.
Notes to Consolidated Financial Statements
March 31, 2022
(Unaudited)
Note 1 – Basis of Presentation
Description of Business
Expedia Group, Inc. and its subsidiaries provide travel products and services to leisure and corporate travelers in the United States and abroad as well as various media and advertising offerings to travel and non-travel advertisers. These travel products and services are offered through a diversified portfolio of brands including: Brand Expedia®, Hotels.com®, Expedia® Partner Solutions, Vrbo®, trivago®, Orbitz®, Travelocity®, Hotwire®, Wotif®, ebookers®, CheapTickets®, Expedia Group™ Media Solutions, CarRentals.com™, Expedia CruisesTM and Traveldoo®. In addition, many of these brands have related international points of sale. We refer to Expedia Group, Inc. and its subsidiaries collectively as “Expedia Group,” the “Company,” “us,” “we” and “our” in these consolidated financial statements.
COVID-19
The COVID-19 pandemic, and measures to contain the virus, including government travel restrictions and quarantine orders, have had a significant negative impact on the global travel industry and materially and negatively impacted our business, financial results and financial condition. Since the first quarter of 2020, COVID-19 has negatively impacted consumer sentiment and consumer’s ability to travel, and many of our supply partners, particularly airlines and hotels, continue to operate at reduced but improving service levels in 2022. As the spread of the virus has been contained to varying degrees in certain countries during different times, travel restrictions have been lifted and consumers have become more comfortable traveling, particularly to domestic locations. This has led to a moderation of the more severe declines in travel bookings and in elevated cancellation rates experienced at certain points since the pandemic began. More recently, such trends have continued to improve following the impact from the Omicron variant. Overall, the full duration and total impact of COVID-19 remains uncertain and it is difficult to predict how the recovery will unfold for the travel industry and, in particular, our business, going forward.
Basis of Presentation
These accompanying financial statements present our results of operations, financial position and cash flows on a consolidated basis. The unaudited consolidated financial statements include Expedia Group, Inc., our wholly-owned subsidiaries, and entities we control, or in which we have a variable interest and are the primary beneficiary of expected cash profits or losses. We record our investments in entities that we do not control, but over which we have the ability to exercise significant influence, using the equity method or at fair value. We have eliminated significant intercompany transactions and accounts.
We have prepared the accompanying unaudited consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting. We have included all adjustments necessary for a fair presentation of the results of the interim period. These adjustments consist of normal recurring items. Our interim unaudited consolidated financial statements are not necessarily indicative of results that may be expected for any other interim period or for the full year. These interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2021, previously filed with the Securities and Exchange Commission (“SEC”). trivago is a separately listed company on the Nasdaq Global Select Market and, therefore is subject to its own reporting and filing requirements, which could result in possible differences that are not expected to be material to Expedia Group.
Accounting Estimates
We use estimates and assumptions in the preparation of our interim unaudited consolidated financial statements in accordance with GAAP. Our estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of our interim unaudited consolidated financial statements. These estimates and assumptions also affect the reported amount of net income or loss during any period. Our actual financial results could differ significantly from these estimates. The significant estimates underlying our interim unaudited consolidated financial statements include revenue recognition; recoverability of current and long-lived assets, intangible assets and goodwill; income and transactional taxes, such as potential settlements related to occupancy and excise taxes; loss contingencies; deferred loyalty rewards; stock-based compensation; accounting for derivative instruments and provisions for credit losses, customer refunds and chargebacks.
The COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further business disruptions and adversely impact our results of operations. As a result, many of our estimates
Notes to Consolidated Financial Statements – (Continued)
and assumptions required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, our estimates may change materially in future periods.
Reclassifications
We have reclassified prior period financial statements to conform to the current period presentation.
Seasonality
We generally experience seasonal fluctuations in the demand for our travel services. For example, traditional leisure travel bookings are generally the highest in the first three quarters as travelers plan and book their spring, summer and winter holiday travel. The number of bookings typically decreases in the fourth quarter. Since revenue for most of our travel services, including merchant and agency hotel, is recognized as the travel takes place rather than when it is booked, revenue typically lags bookings by several weeks for our hotel business and can be several months or more for our alternative accommodations business. Historically, Vrbo has seen seasonally stronger bookings in the first quarter of the year, with the relevant stays occurring during the peak summer travel months. The seasonal revenue impact is exacerbated with respect to income by the nature of our variable cost of revenue and direct sales and marketing costs, which we typically realize in closer alignment to booking volumes, and the more stable nature of our fixed costs. Furthermore, operating profits for our primary advertising business, trivago, have typically been experienced in the second half of the year, particularly the fourth quarter, as selling and marketing costs offset revenue in the first half of the year as we typically increase marketing during the busy booking period for spring, summer and winter holiday travel. As a result on a consolidated basis, revenue and income are typically the lowest in the first quarter and highest in the third quarter. The growth of our international operations, advertising business or a change in our product mix, including the growth of Vrbo, may influence the typical trend of the seasonality in the future.
Impacts from COVID-19 disrupted our typical seasonal pattern for bookings, revenue, profit and cash flows during 2020 and 2021. Significantly higher cancellations and reduced booking volumes, particularly in the first half of 2020, resulted in material operating losses and negative cash flow. Booking and travel trends improved in the second half of 2020, in 2021, and in the first three months of 2022. This has resulted in working capital benefits and positive cash flow more akin to typical historical trends. It remains difficult to forecast the seasonality for the upcoming quarters, given the uncertainty related to the duration of the impact from COVID-19 and the shape and timing of any sustained recovery.
Note 2 – Summary of Significant Accounting Policies
Recent Accounting Policies Not Yet Adopted
In October 2021, the Financial Accounting Standards Board issued new guidance relate to recognizing and measuring contract assets and contract liabilities from contracts with customers acquired in a business combination. The new guidance will require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination as compared to current GAAP where an acquirer generally recognizes such items at fair value on the acquisition date. The new guidance is effective on a prospective basis for fiscal years beginning after December 15, 2022, with early adoption permitted. While we are continuing to assess the timing and the potential impacts of adoption, we do not expect it will have a material impact, if any, on our consolidated financial statements.
Significant Accounting Policies
Below are the significant accounting policies with interim disclosure requirements. For a comprehensive description of our accounting policies, refer to our Annual Report on Form 10-K for the year ended December 31, 2021.
Revenue
Prepaid Merchant Bookings. We classify payments made to suppliers in advance of Vrbo performance obligations as prepaid merchant bookings included within prepaid and other current assets. Prepaid merchant bookings was $846 million as of March 31, 2022 and $581 million as of December 31, 2021.
Deferred Merchant Bookings. We classify cash payments received in advance of our performance obligations as deferred merchant bookings. At December 31, 2021, $4.9 billion of advance cash payments was reported within deferred merchant bookings, $2.5 billion of which was recognized resulting in $393 million of revenue during the three months ended March 31, 2022. At March 31, 2022, the related balance was $8.4 billion.
At December 31, 2021, $798 million of deferred loyalty rewards was reported within deferred merchant bookings, $144 million of which was recognized within revenue during the three months ended March 31, 2022. At March 31, 2022, the related
Notes to Consolidated Financial Statements – (Continued)
balance was $831 million.
Deferred Revenue. At December 31, 2021, $166 million was recorded as deferred revenue, $70 million of which was recognized as revenue during the three months ended March 31, 2022. At March 31, 2022, the related balance was $178 million.
Practical Expedients and Exemptions. We have used the portfolio approach to account for our loyalty points as the rewards programs share similar characteristics within each program in relation to the value provided to the traveler and their breakage patterns. Using this portfolio approach is not expected to differ materially from applying the guidance to individual contracts. However, we will continue to assess and refine, if necessary, how a portfolio within each rewards program is defined.
We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.
Cash, Restricted Cash, and Cash Equivalents
Our cash and cash equivalents include cash and liquid financial instruments, including U.S. treasury securities, money market funds and term deposit investments, with maturities of three months or less when purchased. Restricted cash includes cash and cash equivalents that is restricted through legal contracts, regulations or our intention to use the cash for a specific purpose. Our restricted cash primarily relates to certain traveler deposits and to a lesser extent collateral for office leases. The following table reconciles cash, cash equivalents and restricted cash reported in our consolidated balance sheets to the total amount presented in our consolidated statements of cash flows:
| March 31, 2022 | December 31, 2021 | ||||||||||
| (in millions) | |||||||||||
| Cash and cash equivalents | $ | 5,552 | $ | 4,111 | |||||||
| Restricted cash and cash equivalents | 2,583 | 1,694 | |||||||||
| Total cash, cash equivalents and restricted cash and cash equivalents in the consolidated statements of cash flows | $ | 8,135 | $ | 5,805 |
Accounts Receivable and Allowances
Accounts receivable are generally due within thirty days and are recorded net of an allowance for expected uncollectible amounts. We consider accounts outstanding longer than the contractual payment terms as past due. The risk characteristics we generally review when analyzing our accounts receivable pools primarily include the type of receivable (for example, credit card vs hotel collect), collection terms and historical or expected credit loss patterns. For each pool, we make estimates of expected credit losses for our allowance by considering a number of factors, including the length of time trade accounts receivable are past due, previous loss history continually updated for new collections data, the credit quality of our customers, current economic conditions, reasonable and supportable forecasts of future economic conditions and other factors that may affect our ability to collect from customers. The provision for estimated credit losses is recorded as cost of revenue in our consolidated statements of operations. During the three months ended March 31, 2022, we recorded approximately $3 million of incremental allowance for expected uncollectible accounts, partially offset by $2 million of write-offs. Actual future bad debt could differ materially from this estimate resulting from changes in our assumptions of the duration and severity of the impact of the COVID-19 pandemic.
Notes to Consolidated Financial Statements – (Continued)
Note 3 – Fair Value Measurements
Financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 are classified using the fair value hierarchy in the table below:
| Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | 3 | $ | 3 | $ | — | $ | — | |||||||||||||||
| Mutual funds | 22 | 22 | — | — | |||||||||||||||||||
| Term deposits | 950 | — | 950 | — | |||||||||||||||||||
| Investments: | |||||||||||||||||||||||
| Equity investments | 930 | 117 | — | 813 | |||||||||||||||||||
| Total assets | $ | 1,905 | $ | 142 | $ | 950 | $ | 813 | |||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Derivatives: | |||||||||||||||||||||||
| Cross-currency interest rate swaps | $ | 3 | $ | — | $ | 3 | $ | — |
Financial assets measured at fair value on a recurring basis as of December 31, 2021 are classified using the fair value hierarchy in the table below:
| Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | 47 | $ | 47 | $ | — | $ | — | |||||||||||||||
| Mutual funds | 23 | 23 | — | — | |||||||||||||||||||
| Term deposits | 153 | — | 153 | — | |||||||||||||||||||
| Derivatives: | |||||||||||||||||||||||
| Foreign currency forward contracts | 3 | — | 3 | — | |||||||||||||||||||
| Investments: | |||||||||||||||||||||||
| Term deposits | 200 | — | 200 | — | |||||||||||||||||||
| Equity investments | 909 | 94 | — | 815 | |||||||||||||||||||
| Total assets | $ | 1,335 | $ | 164 | $ | 356 | $ | 815 | |||||||||||||||
We classify our cash equivalents and investments, other than our investment in American Express Global Business Travel (“GBT”) discussed below, within Level 1 and Level 2 as we value our cash equivalents and investments using quoted market prices or alternative pricing sources and models utilizing market observable inputs. Valuation of the foreign currency forward contracts is based on foreign currency exchange rates in active markets, a Level 2 input. Valuation of the cross-currency interest rate swaps is based on foreign currency exchange rates and the current interest rate curve, Level 2 inputs.
We hold term deposit investments with financial institutions. Term deposits with original maturities of less than three months are classified as cash equivalents and those with remaining maturities of less than one year are classified within short-term investments.
As of March 31, 2022 and December 31, 2021, our cash and cash equivalents consisted primarily of term deposits, money market funds and mutual funds with maturities of three months or less and bank account balances.
We use foreign currency forward contracts to economically hedge certain merchant revenue exposures, foreign denominated liabilities related to certain of our loyalty programs and our other foreign currency-denominated operating liabilities. As of March 31, 2022, we were party to outstanding forward contracts hedging our liability exposures with a total net notional value of $1.9 billion. We had a nominal net forward asset ($12 million gross asset) as of March 31, 2022 and a net forward asset of $3 million ($12 million gross asset) as of December 31, 2021 recorded in prepaid expenses and other current assets. We recorded $(34) million and $19 million in net gains (losses) from foreign currency forward contracts during the three months ended March 31, 2022 and 2021.
Notes to Consolidated Financial Statements – (Continued)
On March 2, 2022, we entered into two fixed-to-fixed cross-currency interest rate swaps with an aggregate notional amount of €300 million. The swaps were designated as net investment hedges of Euro assets with the objective to protect the U.S. dollar value of our net investments in the Euro foreign operations due to movements in foreign currency. Hedge effectiveness is assessed each quarter based on the net investment in the foreign subsidiaries designated as the hedged item and the changes in the fair value of designated interest rate swaps based on spot rates. For hedges that meet the effectiveness requirements, changes in fair value are recorded as accumulated other comprehensive income (loss) (“AOCI”) within the foreign currency translation adjustment. Amounts excluded from hedge effectiveness at inception are recognized as interest accrues within interest expense. The maturity date of both swaps is February 2026, whereby, we will receive U.S. dollars from and pay Euros to the contract counterparties. During the term of each contract, we receive interest payments in U.S. dollars at a fixed rate of 5% and make interest payments in Euros at an average fixed rate of 3.38% based on a notional amount and fixed interest rates determined at contract inception. The fair value of the cross-currency interest rate swaps was a $3 million liability as of March 31, 2022 recorded in accrued expenses and other current liabilities, and the gain recognized in interest expense during the three months ended March 31, 2022 was nominal.
Our equity investments include our marketable equity investment in Despegar, a publicly traded company, which is included in long-term investments and other assets in our consolidated balance sheets. During the three months ended March 31, 2022 and 2021, we recognized gains of approximately $23 million and $8 million within other, net in our consolidated statements of operations related to the fair value changes of this equity investment.
The following table reconciles, in millions, the beginning and ending balances of our Level 3 equity investment in GBT for which we have elected the fair value option. There were no internal movements to or from Level 3 from Level 1 or 2 during the three months ended March 31, 2022.
| Balance as of December 31, 2021 | $ | 815 | |||
| Upward (downward) adjustment to valuation | (2) | ||||
| Balance as of March 31, 2022 | $ | 813 |
In connection with our disposition of Egencia (our former corporate travel arm) in November 2021, we became an indirect holder of an approximately 19% interest in GBT with an initial fair value of $815 million. As of March 31, 2022, we updated the valuation of our investment based on a blended analysis of the present value of future discounted cash flows and market value approach, Level 3 inputs, which resulted in a downward adjustment to our investment of approximately $2 million. The unobservable inputs used in the discounted cash flows model included projected EBITDA margin growth rates of approximately 25%, a long-term growth rate of 2.5%, and a weighted average cost of capital of 9.5%. Our significant estimates in the market approach model included identifying similar companies with comparable business factors that could be reasonably considered investment alternatives and assessing comparable valuation multiples while applying a control premium in estimating the fair value of the investment. The unobservable inputs to the market approach included a revenue multiple of 2.5x and a control premium of 20%. Significant increases or decreases in the inputs to the discounted cash flow or market value approach would result in a significant higher or lower fair value measurements.
Assets Measured at Fair Value on a Non-recurring Basis
Our non-financial assets, such as goodwill, intangible assets and property and equipment, as well as equity method investments for which we have not elected the fair value option, are adjusted to fair value when an impairment charge is recognized or the underlying investment is sold. Such fair value measurements are based predominately on Level 3 inputs. We measure our minority investments that do not have readily determinable fair values at cost less impairment, adjusted by observable price changes with changes recorded within other, net on our consolidated statements of operations.
Minority Investments without Readily Determinable Fair Values. As of both March 31, 2022 and December 31, 2021, the carrying values of our minority investments without readily determinable fair values totaled $330 million. During the three months ended March 31, 2022 and 2021, we had no material gains or losses recognized related to these minority investments. As of March 31, 2022, total cumulative adjustments made to the initial cost basis of these investments included $2 million in unrealized upward adjustments and $105 million in unrealized downward adjustments (including impairments).
Notes to Consolidated Financial Statements – (Continued)
Note 4 – Debt
The following table sets forth our outstanding debt:
| March 31, 2022 | December 31, 2021 | ||||||||||
| (In millions) | |||||||||||
| 2.5% (€650 million) senior notes due 2022 | $ | — | $ | 735 | |||||||
| 3.6% senior notes due 2023 | 497 | 497 | |||||||||
| 4.5% senior notes due 2024 | 498 | 498 | |||||||||
| 6.25% senior notes due 2025 | 1,034 | 1,033 | |||||||||
| 5.0% senior notes due 2026 | 746 | 745 | |||||||||
| 0% convertible senior notes due 2026 | 986 | 986 | |||||||||
| 4.625% senior notes due 2027 | 744 | 744 | |||||||||
| 3.8% senior notes due 2028 | 994 | 994 | |||||||||
| 3.25% senior notes due 2030 | 1,236 | 1,235 | |||||||||
| 2.95% senior notes due 2031 | 984 | 983 | |||||||||
| Long-term debt(1) | 7,719 | 8,450 | |||||||||
| Current maturities of long-term debt | — | (735) | |||||||||
| Long-term debt, excluding current maturities | $ | 7,719 | $ | 7,715 |
(1)Net of applicable discounts and debt issuance costs.
Redemption of 2.5% Notes
On March 3, 2022, we early redeemed all of our €650 million registered senior unsecured notes that were due June 2022 and bore interest at 2.5% (the “2.5% Notes”). The redemption price for the 2.5% Notes was 100% of the aggregate principal amount thereof plus accrued and unpaid interest thereon through the redemption date of €12 million.
Long-term Debt
Additional information about our $1 billion aggregate principal amount of unsecured 0% convertible senior notes due 2026 (the “Convertible Notes”) and our other outstanding senior notes (collectively the “Senior Notes”), see Note 8 – Debt of the Notes to Consolidated Financial Statements in our 2021 Form 10-K.
All of our outstanding Senior Notes are senior unsecured obligations issued by Expedia Group and guaranteed by certain domestic Expedia Group subsidiaries. The Senior Notes rank equally in right of payment with all of our existing and future unsecured and unsubordinated obligations of Expedia Group and the guarantor subsidiaries. In addition, the Senior Notes include covenants that limit our ability to (i) create certain liens, (ii) enter into sale/leaseback transactions and (iii) merge or consolidate with or into another entity or transfer substantially all of our assets. The Senior Notes are redeemable in whole or in part, at the option of the holders thereof, upon the occurrence of certain change of control triggering events at a purchase price in cash equal to 101% of the principal plus accrued and unpaid interest. Accrued interest related to the Senior Notes was $57 million and $98 million as of March 31, 2022 and December 31, 2021.
Estimated Fair Value. The total estimated fair value of our Senior Notes was approximately $6.8 billion and $8.0 billion as of March 31, 2022 and December 31, 2021. Additionally, the estimated fair value of the Convertible Notes was $1.2 billion as of both March 31, 2022 and December 31, 2021. The fair value was determined based on quoted market prices in less active markets and is categorized according as Level 2 in the fair value hierarchy.
Credit Facilities
Revolving Credit Facility. As of March 31, 2022, Expedia Group maintained a $1.145 billion revolving credit facility with a group of lenders that was to expire on May 31, 2023 (the “Revolving Credit Facility”). Obligations under the Revolving Credit Facility were secured by substantially all of the assets of the Company and its subsidiaries that guarantee the facility (subject to certain exceptions, including for our headquarters located in Seattle, WA) up to the maximum amount permitted under the indentures governing the Senior Notes without securing such Senior Notes. Loans under the Revolving Credit Facility bore interest at a per annum rate equal to an index rate plus margin depending on the Company’s credit ratings (A) in the case of eurocurrency loans ranging from 1.00% to 1.75%, and (B) in the case of base rate loans, at rates ranging from 0.00% to 0.75%. The Revolving Credit Facility contained covenants including a maximum leverage ratio.
Notes to Consolidated Financial Statements – (Continued)
As of March 31, 2022 and December 31, 2021, we had no Revolving Credit Facility borrowings outstanding. The amount of stand-by letters of credit (“LOC”) issued under the Revolving Credit Facility reduced the credit amount available. As of March 31, 2022 and December 31, 2021, there was $36 million and $14 million of outstanding stand-by LOCs issued under the facility.
Foreign Credit Facility. As of March 31, 2022, the Company and Expedia Group International Holdings III, LLC (the “Borrower”) also maintained an $855 million credit facility with a group of lenders that was to expire on May 31, 2023 (the “Foreign Credit Facility”). Obligations under the Foreign Credit Facility were unsecured. Such obligations were guaranteed by the Company, its subsidiaries that guarantee obligations under the Revolving Credit Facility, as mentioned above, and certain of the Company’s additional subsidiaries.
Loans under the Foreign Credit Facility bore interest at a per annum rate equal to an index rate plus a margin depending on the Company’s credit ratings (A) in the case of eurocurrency loans, ranging from 1.25% to 2.00%, and (B) in the case of base rate loans, ranging from 0.25% to per 1.00%.
The covenants, events of default and other terms and conditions in the Foreign Credit Facility were substantially similar to those in the Revolving Credit Facility, but included additional limitations on the Borrower and certain other entities that are not obligors under the Revolving Credit Facility.
As of March 31, 2022 and December 31, 2021, we had no Foreign Credit Facility borrowings outstanding.
Note 5 – Capital Stock
Treasury Stock
As of March 31, 2022, the Company’s treasury stock was comprised of approximately 124.8 million common stock and 7.3 million Class B shares. As of December 31, 2021, the Company’s treasury stock was comprised of approximately 124.5 million shares of common stock and 7.3 million Class B shares.
Stock-based Awards
Stock-based compensation expense relates primarily to expense for restricted stock units (“RSUs”), performance stock units (“PSUs”) and stock options. As of March 31, 2022, we had stock-based awards outstanding representing approximately 12 million shares of our common stock, consisting of approximately 8 million RSUs and PSUs and options to purchase approximately 4 million shares of our common stock with a weighted average exercise price of $134.62 and weighted average remaining life of 4.2 years.
Annual employee stock-based award grants typically occur during the first quarter of each year and generally vest over four years. During the three months ended March 31, 2022, we granted approximately 2 million RSUs and PSUs.
Accumulated Other Comprehensive Income (Loss)
The balance of AOCI as of March 31, 2022 and December 31, 2021 was comprised of foreign currency translation adjustments. These translation adjustments include foreign currency transaction losses at March 31, 2022 of $7 million ($10 million before tax) and $15 million ($22 million before tax) at December 31, 2021 associated with our Euro-denominated 2.5% Notes, as well as foreign currency transaction losses at March 31, 2022 of $2 million ($3 million before tax) associated with our cross-currency interest rate swaps as described in Note 3 – Fair Value Measurements. Until their redemption in March 2022, the aggregate principal value of the 2.5% Notes was designated as a hedge of our net investment in certain Euro-functional currency subsidiaries. In March 2022, we redeemed the 2.5% Notes and terminated the related hedging relationship. The currency translation adjustment amounts associated with the net investment hedge of the 2.5% Notes will remain in AOCI until realized upon a full or partial sale or liquidation of the applicable Euro-functional currency subsidiaries.
Note 6 – Earnings (Loss) Per Share
Basic earnings per share is calculated using our weighted-average outstanding common shares. The earnings per share amounts are the same for common stock and Class B common stock because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.
Diluted earnings per share is calculated using our weighted-average outstanding common shares including the dilutive effect of stock awards and common stock warrants as determined under the treasury stock method and of our Convertible Notes using the if-converted method. In periods when we recognize a net loss, we exclude the impact of outstanding stock awards, common stock warrants and the potential share settlement impact related to our Convertible Notes from the diluted loss per
Notes to Consolidated Financial Statements – (Continued)
share calculation as their inclusion would have an antidilutive effect. For the three months ended March 31, 2022, approximately 12 million of outstanding stock awards and approximately 4 million shares related to the potential share settlement impact related to our Convertible Notes have been excluded from the calculations of diluted earnings per share attributable to common stockholders because their effect would have been antidilutive. For the three months ended March 31, 2021, approximately 25 million of outstanding stock awards and common stock warrants and approximately 4 million shares related to the potential share settlement impact related to our Convertible Notes were excluded.
Note 7 – Income Taxes
We determine our provision for income taxes for interim periods using an estimate of our annual effective tax rate. We record any changes affecting the estimated annual effective tax rate in the interim period in which the change occurs, including discrete items.
For the three months ended March 31, 2022, the effective tax rate was a 40.9% benefit on pre-tax loss, compared to a 22.5% benefit on pre-tax loss for the three months ended March 31, 2021. The change in the effective tax rate was primarily due to excess tax benefits from stock-based compensation recognized in the current year.
We are subject to taxation in the United States and foreign jurisdictions. Our income tax filings are regularly examined by federal, state and foreign tax authorities. During the fourth quarter of 2019, the Internal Revenue Service (“IRS”) issued final adjustments related to transfer pricing with our foreign subsidiaries for our 2011 to 2013 tax years. The proposed adjustments would increase our U.S. taxable income by $696 million, which would result in federal tax of approximately $244 million, subject to interest. We do not agree with the position of the IRS. We filed a protest with the IRS for our 2011 to 2013 tax years and Appeals returned the case to Exam for further review. We are also under examination by the IRS for our 2014 to 2016 tax years. Subsequent years remain open to examination by the IRS. We do not anticipate a significant impact to our gross unrecognized tax benefits within the next 12 months related to these years.
Note 8 – Commitments and Contingencies
Legal Proceedings
In the ordinary course of business, we are a party to various lawsuits. Management does not expect these lawsuits to have a material impact on the liquidity, results of operations, or financial condition of Expedia Group. We also evaluate other potential contingent matters, including value-added tax, excise tax, sales tax, transient occupancy or accommodation tax and similar matters. We do not believe that the aggregate amount of liability that could be reasonably possible with respect to these matters would have a material adverse effect on our financial results; however, litigation is inherently uncertain and the actual losses incurred in the event that our legal proceedings were to result in unfavorable outcomes could have a material adverse effect on our business and financial performance.
Litigation Relating to Occupancy Taxes. One hundred three lawsuits have been filed by or against cities, counties and states involving hotel occupancy and other taxes. Eight lawsuits are currently active. These lawsuits are in various stages and we continue to defend against the claims made in them vigorously. With respect to the principal claims in these matters, we believe that the statutes or ordinances at issue do not apply to us or the services we provide and, therefore, that we do not owe the taxes that are claimed to be owed. We believe that the statutes or ordinances at issue generally impose occupancy and other taxes on entities that own, operate or control hotels (or similar businesses) or furnish or provide hotel rooms or similar accommodations. To date, forty-nine of these lawsuits have been dismissed. Some of these dismissals have been without prejudice and, generally, allow the governmental entity or entities to seek administrative remedies prior to pursuing further litigation. Thirty-four dismissals were based on a finding that we and the other defendants were not subject to the local tax ordinance or that the local government lacked standing to pursue its claims. As a result of this litigation and other attempts by certain jurisdictions to levy such taxes, we have established a reserve for the potential settlement of issues related to hotel occupancy and other taxes, consistent with applicable accounting principles and in light of all current facts and circumstances, in the amount of $48 million and $50 million as of March 31, 2022 and December 31, 2021, respectively. Our settlement reserve is based on our best estimate of probable losses and the ultimate resolution of these contingencies may be greater or less than the liabilities recorded. An estimate for a reasonably possible loss or range of loss in excess of the amount reserved cannot be made. Changes to the settlement reserve are included within legal reserves, occupancy tax and other in the consolidated statements of operations.
Pay-to-Play. Certain jurisdictions may assert that we are required to pay any assessed taxes prior to being allowed to contest or litigate the applicability of the ordinances. This prepayment of contested taxes is referred to as “pay-to-play.” Payment of these amounts is not an admission that we believe we are subject to such taxes and, even when such payments are made, we continue to defend our position vigorously. If we prevail in the litigation, for which a pay-to-play payment was made, the jurisdiction collecting the payment will be required to repay such amounts and also may be required to pay interest.
Notes to Consolidated Financial Statements – (Continued)
We are in various stages of inquiry or audit with various tax authorities, some of which, including in the City of Los Angeles regarding hotel occupancy taxes, may impose a pay-to-play requirement to challenge an adverse inquiry or audit result in court.
Matters Relating to International VAT. We are in various stages of inquiry or audit in multiple European Union jurisdictions regarding the application of VAT to our European Union related transactions. While we believe we comply with applicable VAT laws, rules and regulations in the relevant jurisdictions, the tax authorities may determine that we owe additional taxes. In certain jurisdictions, including the United Kingdom, we may be required to “pay-to-play” any VAT assessment prior to contesting its validity. While we believe that we will be successful based on the merits of our positions with regard to audits in pay-to-play jurisdictions, it is nevertheless reasonably possible that we could be required to pay any assessed amounts in order to contest or litigate the applicability of any assessments and an estimate for a reasonably possible amount of any such payments cannot be made.
Competition and Consumer Matters. On August 23, 2018, the Australian Competition and Consumer Commission, or "ACCC", instituted proceedings in the Australian Federal Court against trivago. The ACCC alleged breaches of Australian Consumer Law, or "ACL," relating to trivago’s advertisements in Australia concerning the hotel prices available on trivago’s Australian site, trivago’s strike-through pricing practice and other aspects of the way offers for accommodation were displayed on trivago's Australian website. The matter went to trial in September 2019 and, on January 20, 2020, the Australian Federal Court issued a judgment finding trivago had engaged in conduct in breach of the ACL. On October 18 and 19, 2021, the Australian Federal Court heard submissions from the parties regarding penalties and other orders. On April 22, 2022, the Australian Federal Court issued a judgment ordering trivago to pay a penalty of AU$44.7 million and to cover the ACCC’s costs arising from the proceedings. The court also enjoined trivago from engaging in misleading conduct of the type found by the Australian Federal Court to be in contravention of the ACL. We recorded an estimated probable loss of approximately $11 million with respect to these proceedings in a previous period and an additional probable loss of approximately $23 million during the three months ended March 31, 2022, for a total of approximately $34 million.
Note 9 – Segment Information
We have the following reportable segments: Retail, B2B, and trivago. Our Retail segment provides a full range of travel and advertising services to our worldwide customers through a variety of consumer brands including: Expedia.com and Hotels.com in the United States and localized Expedia and Hotels.com websites throughout the world, Vrbo, Orbitz, Travelocity, Wotif Group, ebookers, CheapTickets, Hotwire.com, CarRentals.com and Expedia Cruises. Our B2B segment is comprised of our Expedia Business Services organization including Expedia Partner Solutions, which offers private label and co-branded products to make travel services available to travelers through third-party company branded websites, and Egencia (until its sale in November 2021), a full-service travel management company that provides travel services to businesses and their corporate customers. Our trivago segment generates advertising revenue primarily from sending referrals to online travel companies and travel service providers from its hotel metasearch websites.
We determined our operating segments based on how our chief operating decision makers manage our business, make operating decisions and evaluate operating performance. Our primary operating metric is Adjusted EBITDA. Adjusted EBITDA for our Retail and B2B segments includes allocations of certain expenses, primarily related to our global travel supply organization and the majority of costs from our product and technology platform, as well as facility costs and the realized foreign currency gains or losses related to the forward contracts hedging a component of our net merchant lodging revenue. We base the allocations primarily on transaction volumes and other usage metrics. We do not allocate certain shared expenses such as accounting, human resources, certain information technology and legal to our reportable segments. We include these expenses in Corporate and Eliminations. Our allocation methodology is periodically evaluated and may change. During the fourth quarter of 2021, we consolidated our divisional finance teams into one global finance organization, which resulted in the reclassification of expenses from Retail and B2B into our Corporate function. We have reclassified prior period segment information to conform to our current period presentation.
Our segment disclosure includes intersegment revenues, which primarily consist of advertising and media services provided by our trivago segment to our Retail segment. These intersegment transactions are recorded by each segment at amounts that approximate fair value as if the transactions were between third parties, and therefore, impact segment performance. However, the revenue and corresponding expense are eliminated in consolidation. The elimination of such intersegment transactions is included within Corporate and Eliminations in the table below.
Corporate and Eliminations also includes unallocated corporate functions and expenses. In addition, we record amortization of intangible assets and any related impairment, as well as stock-based compensation expense, restructuring and related reorganization charges, legal reserves, occupancy tax and other, and other items excluded from segment operating performance in Corporate and Eliminations. Such amounts are detailed in our segment reconciliation below.
Notes to Consolidated Financial Statements – (Continued)
The following tables present our segment information for the three months ended March 31, 2022 and 2021. As a significant portion of our property and equipment is not allocated to our operating segments and depreciation is not included in our segment measure, we do not report the assets by segment as it would not be meaningful. We do not regularly provide such information to our chief operating decision makers.
| Three months ended March 31, 2022 | |||||||||||||||||||||||||||||
| Retail | B2B | trivago | Corporate & Eliminations | Total | |||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Third-party revenue | $ | 1,740 | $ | 432 | $ | 77 | $ | — | $ | 2,249 | |||||||||||||||||||
| Intersegment revenue | — | — | 39 | (39) | — | ||||||||||||||||||||||||
| Revenue | $ | 1,740 | $ | 432 | $ | 116 | $ | (39) | $ | 2,249 | |||||||||||||||||||
| Adjusted EBITDA | $ | 188 | $ | 80 | $ | 25 | $ | (120) | $ | 173 | |||||||||||||||||||
| Depreciation | (128) | (20) | (2) | (25) | (175) | ||||||||||||||||||||||||
| Amortization of intangible assets | — | — | — | (22) | (22) | ||||||||||||||||||||||||
| Stock-based compensation | — | — | — | (90) | (90) | ||||||||||||||||||||||||
| Legal reserves, occupancy tax and other | — | — | — | (21) | (21) | ||||||||||||||||||||||||
| Operating income (loss) | $ | 60 | $ | 60 | $ | 23 | $ | (278) | (135) | ||||||||||||||||||||
| Other expense, net | (73) | ||||||||||||||||||||||||||||
| Loss before income taxes | (208) | ||||||||||||||||||||||||||||
| Provision for income taxes | 85 | ||||||||||||||||||||||||||||
| Net loss | (123) | ||||||||||||||||||||||||||||
| Net loss attributable to non-controlling interests | 1 | ||||||||||||||||||||||||||||
| Net loss attributable to Expedia Group, Inc. | $ | (122) | |||||||||||||||||||||||||||
Notes to Consolidated Financial Statements – (Continued)
| Three months ended March 31, 2021 | |||||||||||||||||||||||||||||
| Retail | B2B | trivago | Corporate & Eliminations | Total | |||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Third-party revenue | $ | 1,025 | $ | 184 | $ | 37 | $ | — | $ | 1,246 | |||||||||||||||||||
| Intersegment revenue | — | — | 9 | (9) | — | ||||||||||||||||||||||||
| Revenue | $ | 1,025 | $ | 184 | $ | 46 | $ | (9) | $ | 1,246 | |||||||||||||||||||
| Adjusted EBITDA | $ | 106 | $ | (57) | $ | (4) | $ | (103) | $ | (58) | |||||||||||||||||||
| Depreciation | (133) | (28) | (3) | (18) | (182) | ||||||||||||||||||||||||
| Amortization of intangible assets | — | — | — | (27) | (27) | ||||||||||||||||||||||||
| Stock-based compensation | — | — | — | (83) | (83) | ||||||||||||||||||||||||
| Legal reserves, occupancy tax and other | — | — | — | 1 | 1 | ||||||||||||||||||||||||
| Restructuring and related reorganization charges | — | — | — | (29) | (29) | ||||||||||||||||||||||||
| Realized (gain) loss on revenue hedges | 9 | — | — | — | 9 | ||||||||||||||||||||||||
| Operating loss | $ | (18) | $ | (85) | $ | (7) | $ | (259) | (369) | ||||||||||||||||||||
| Other expense, net | (381) | ||||||||||||||||||||||||||||
| Loss before income taxes | (750) | ||||||||||||||||||||||||||||
| Provision for income taxes | 169 | ||||||||||||||||||||||||||||
| Net loss | (581) | ||||||||||||||||||||||||||||
| Net loss attributable to non-controlling interests | 3 | ||||||||||||||||||||||||||||
| Net loss attributable to Expedia Group, Inc. | (578) | ||||||||||||||||||||||||||||
| Preferred stock dividend | (28) | ||||||||||||||||||||||||||||
| Net loss attributable to Expedia Group, Inc. common stockholders | $ | (606) |
Revenue by Business Model and Service Type
The following table presents revenue by business model and service type:
| Three months ended March 31, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Business Model: | |||||||||||||||||||||||
| Merchant | $ | 1,485 | $ | 796 | |||||||||||||||||||
| Agency | 566 | 323 | |||||||||||||||||||||
| Advertising, media and other | 198 | 127 | |||||||||||||||||||||
| Total revenue | $ | 2,249 | $ | 1,246 | |||||||||||||||||||
| Service Type: | |||||||||||||||||||||||
| Lodging | $ | 1,610 | $ | 903 | |||||||||||||||||||
| Air | 74 | 50 | |||||||||||||||||||||
| Advertising and media | 166 | 88 | |||||||||||||||||||||
| Other(1) | 399 | 205 | |||||||||||||||||||||
| Total revenue | $ | 2,249 | $ | 1,246 |
(1)Other includes car rental, insurance, destination services, cruise and fee revenue related to our corporate travel business prior to our sale of Egencia in November 2021, among other revenue streams, none of which are individually material.
Our Retail and B2B segments generate revenue from the merchant, agency and advertising, media and other business models as well as all service types. trivago segment revenue is generated through advertising and media.
Notes to Consolidated Financial Statements – (Continued)
Note 10 – Subsequent Event
On April 14, 2022, Expedia Group entered into a new $2.5 billion credit agreement (the “New Revolving Credit Facility”). Aggregate commitments under the New Revolving Credit Facility total $2.5 billion (with a $120 million letter of credit sublimit). The New Revolving Credit Facility matures on April 14, 2027. Loans under the New Revolving Credit Facility will bear interest at a rate equal to an index rate plus a margin (a) in the case of term benchmark loans, ranging from 1.00% to 1.75% per annum, depending on Expedia Group’s credit ratings, and (b) in the case of base rate loans, ranging from 0.00% to 0.75% per annum, depending on Expedia Group’s credit ratings. Such interest is payable (i) with respect to term benchmark loans, at the end of each applicable interest period, but in no event less frequently than every three months and (ii) with respect to base rate loans, quarterly. A participation fee, accruing at a rate equal to the margin used to determine the interest rate for term benchmark loans and payable quarterly, is payable in respect of outstanding letters of credit under the New Revolving Credit Facility (together with fronting fees and customary issuance fees). A fee is payable quarterly in respect of undrawn commitments under the New Revolving Credit Facility at a rate ranging from 0.10% to 0.25% per annum, depending on Expedia Group’s credit ratings. The New Revolving Credit Facility contains certain customary affirmative and negative covenants, representations and warranties and events of default (subject in certain cases to customary grace and cure periods). The occurrence of an event of default under the New Revolving Credit Facility could result in the termination of the commitments under the New Revolving Credit Facility and the acceleration of all outstanding borrowings under the New Revolving Credit Facility. The terms of the New Revolving Credit Facility require Expedia Group to not exceed a specified maximum consolidated leverage ratio as of the end of each fiscal quarter. In connection with the Expedia Group’s entry into the New Revolving Credit Facility, Expedia Group terminated all outstanding commitments and repaid all outstanding obligations under the Revolving Credit Facility and Foreign Credit Facility.
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