filings.toolsItem 1. Consolidated Financial Statements
98K characters. Original on sec.gov · Markdown
Item 1. Consolidated Financial Statements
EXPEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share and per share data)
(Unaudited)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Revenue | $ | 4,060 | $ | 3,929 | $ | 10,507 | $ | 9,952 | |||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization shown separately below) (1) | 388 | 412 | 1,108 | 1,233 | |||||||||||||||||||
| Selling and marketing - direct | 1,855 | 1,671 | 5,298 | 4,737 | |||||||||||||||||||
| Selling and marketing - indirect (1) | 197 | 185 | 580 | 563 | |||||||||||||||||||
| Technology and content (1) | 320 | 340 | 992 | 1,001 | |||||||||||||||||||
| General and administrative (1) | 229 | 194 | 595 | 572 | |||||||||||||||||||
| Depreciation and amortization | 211 | 208 | 626 | 599 | |||||||||||||||||||
| Impairment of goodwill | — | 297 | — | 297 | |||||||||||||||||||
| Impairment of intangible assets | 33 | 15 | 33 | 15 | |||||||||||||||||||
| Legal reserves, occupancy tax and other | 59 | — | 100 | 6 | |||||||||||||||||||
| Restructuring and related reorganization charges (1) | 6 | — | 72 | — | |||||||||||||||||||
| Operating income | 762 | 607 | 1,103 | 929 | |||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest income | 67 | 56 | 185 | 162 | |||||||||||||||||||
| Interest expense | (61) | (62) | (184) | (184) | |||||||||||||||||||
| Other, net | 106 | (157) | 103 | (60) | |||||||||||||||||||
| Total other income (expense), net | 112 | (163) | 104 | (82) | |||||||||||||||||||
| Income before income taxes | 874 | 444 | 1,207 | 847 | |||||||||||||||||||
| Provision for income taxes | (190) | (139) | (284) | (295) | |||||||||||||||||||
| Net income | 684 | 305 | 923 | 552 | |||||||||||||||||||
| Net loss attributable to non-controlling interests | — | 120 | 12 | 113 | |||||||||||||||||||
| Net income attributable to Expedia Group, Inc. | $ | 684 | $ | 425 | $ | 935 | $ | 665 | |||||||||||||||
| Earnings per share attributable to Expedia Group, Inc. available to common stockholders: | |||||||||||||||||||||||
| Basic | $ | 5.28 | $ | 2.98 | $ | 7.07 | $ | 4.51 | |||||||||||||||
| Diluted | 5.04 | 2.87 | 6.75 | 4.37 | |||||||||||||||||||
| Shares used in computing earnings per share (000's): | |||||||||||||||||||||||
| Basic | 129,758 | 142,228 | 132,393 | 147,253 | |||||||||||||||||||
| Diluted | 135,732 | 147,748 | 138,655 | 152,172 |
| (1) Includes stock-based compensation as follows: | |||||||||||||||||||||||
| Cost of revenue | $ | 3 | $ | 3 | $ | 9 | $ | 10 | |||||||||||||||
| Selling and marketing | 19 | 20 | 61 | 60 | |||||||||||||||||||
| Technology and content | 40 | 35 | 120 | 105 | |||||||||||||||||||
| General and administrative | 85 | 47 | 167 | 139 | |||||||||||||||||||
| Restructuring and related reorganization charges | — | — | 8 | — |
See accompanying notes.
EXPEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)
(Unaudited)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Net income | $ | 684 | $ | 305 | $ | 923 | $ | 552 | |||||||||||||||
| Currency translation adjustments, net of tax(1) | 33 | (39) | 16 | (8) | |||||||||||||||||||
| Comprehensive income | 717 | 266 | 939 | 544 | |||||||||||||||||||
| Less: Comprehensive income (loss) attributable to non-controlling interests | 4 | (126) | (11) | (115) | |||||||||||||||||||
| Comprehensive income attributable to Expedia Group, Inc. | $ | 713 | $ | 392 | $ | 950 | $ | 659 |
(1)Currency translation adjustments include a tax expense of approximately $8 million for both the three and nine months ended September 30, 2024 and a tax expense of approximately $1 million and a tax benefit of approximately $1 million for the three and nine months ended September 30, 2023 primarily associated with net investment hedges.
See accompanying notes.
EXPEDIA GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except number of shares, which are reflected in thousands, and par value)
| September 30, 2024 | December 31, 2023 | ||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 4,722 | $ | 4,225 | |||||||
| Restricted cash and cash equivalents | 1,324 | 1,436 | |||||||||
| Short-term investments | 196 | 28 | |||||||||
| Accounts receivable, net of allowance of $60 and $46 | 3,764 | 2,786 | |||||||||
| Income taxes receivable | 68 | 47 | |||||||||
| Prepaid expenses and other current assets | 758 | 708 | |||||||||
| Total current assets | 10,832 | 9,230 | |||||||||
| Property and equipment, net | 2,400 | 2,359 | |||||||||
| Operating lease right-of-use assets | 334 | 357 | |||||||||
| Long-term investments and other assets | 1,527 | 1,238 | |||||||||
| Deferred income taxes | 514 | 586 | |||||||||
| Intangible assets, net | 947 | 1,023 | |||||||||
| Goodwill | 6,851 | 6,849 | |||||||||
| TOTAL ASSETS | $ | 23,405 | $ | 21,642 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable, merchant | $ | 1,980 | $ | 2,041 | |||||||
| Accounts payable, other | 1,178 | 1,077 | |||||||||
| Deferred merchant bookings | 9,413 | 7,723 | |||||||||
| Deferred revenue | 173 | 164 | |||||||||
| Income taxes payable | 114 | 26 | |||||||||
| Accrued expenses and other current liabilities | 887 | 752 | |||||||||
| Current maturities of long-term debt | 1,042 | — | |||||||||
| Total current liabilities | 14,787 | 11,783 | |||||||||
| Long-term debt, excluding current maturities | 5,221 | 6,253 | |||||||||
| Deferred income taxes | 34 | 33 | |||||||||
| Operating lease liabilities | 291 | 314 | |||||||||
| Other long-term liabilities | 506 | 473 | |||||||||
| Commitments and contingencies | |||||||||||
| Stockholders’ equity: | |||||||||||
| Common stock: $.0001 par value; Authorized shares: 1,600,000 | — | — | |||||||||
| Shares issued: 286,437 and 282,149; Shares outstanding: 123,316 and 131,522 | |||||||||||
| 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 | 15,890 | 15,398 | |||||||||
| Treasury stock - Common stock and Class B, at cost; Shares 170,397 and 157,903 | (14,677) | (13,023) | |||||||||
| Retained earnings (deficit) | 303 | (632) | |||||||||
| Accumulated other comprehensive income (loss) | (194) | (209) | |||||||||
| Total Expedia Group, Inc. stockholders’ equity | 1,322 | 1,534 | |||||||||
| Non-redeemable non-controlling interests | 1,244 | 1,252 | |||||||||
| Total stockholders’ equity | 2,566 | 2,786 | |||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 23,405 | $ | 21,642 |
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 September 30, 2023 | 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 June 30. 2023 | 280,006,237 | $ | — | 12,799,999 | $ | — | $ | 15,072 | 148,398,159 | $ | (11,937) | $ | (1,169) | $ | (207) | $ | 1,457 | $ | 3,216 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | 425 | (120) | 305 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of taxes | (33) | (6) | (39) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Proceeds from exercise of equity instruments and employee stock purchase plans | 951,044 | — | 13 | 13 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Withholding taxes for stock options | (1) | (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Treasury stock activity related to vesting of equity instruments | 275,050 | (30) | (30) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock repurchases | 5,229,924 | (577) | (577) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other changes in ownership of non-controlling interests | 2 | (78) | (76) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 121 | 121 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | 20 | (6) | (20) | (6) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of September 30. 2023 | 280,957,281 | $ | — | 12,799,999 | $ | — | $ | 15,227 | 153,903,133 | $ | (12,550) | $ | (764) | $ | (240) | $ | 1,253 | $ | 2,926 |
| Nine months ended September 30, 2023 | 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, 2022 | 278,264,235 | $ | — | 12,799,999 | $ | — | $ | 14,795 | 137,783,429 | $ | (10,869) | $ | (1,409) | $ | (234) | $ | 1,445 | $ | 3,728 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | 665 | (113) | 552 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of taxes | (6) | (2) | (8) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Proceeds from exercise of equity instruments and employee stock purchase plans | 2,693,046 | — | 53 | 53 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Withholding taxes for stock options | (5) | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Treasury stock activity related to vesting of equity instruments | 722,302 | (75) | (75) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock repurchases | 15,397,402 | (1,594) | (1,594) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other changes in ownership of non-controlling interests | 7 | (77) | (70) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 357 | 357 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | 20 | (12) | (20) | (12) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of September 30. 2023 | 280,957,281 | $ | — | 12,799,999 | $ | — | $ | 15,227 | 153,903,133 | $ | (12,550) | $ | (764) | $ | (240) | $ | 1,253 | $ | 2,926 |
EXPEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In millions, except share and per share data)
(Unaudited)
| Three months ended September 30, 2024 | 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 June 30. 2024 | 284,861,071 | $ | — | 12,799,999 | $ | — | $ | 15,697 | 166,856,537 | $ | (14,204) | $ | (381) | $ | (223) | $ | 1,237 | $ | 2,126 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | 684 | — | 684 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of taxes | 29 | 4 | 33 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Proceeds from exercise of equity instruments and employee stock purchase plans | 1,575,912 | — | 29 | 29 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Treasury stock activity related to vesting of equity instruments | 475,109 | (62) | (62) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock repurchases | 3,065,558 | (407) | (407) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other changes in ownership of non-controlling interests | (1) | — | 3 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 165 | 165 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | — | (4) | — | (4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of September 30. 2024 | 286,436,983 | $ | — | 12,799,999 | $ | — | $ | 15,890 | 170,397,204 | $ | (14,677) | $ | 303 | $ | (194) | $ | 1,244 | $ | 2,566 |
| Nine months ended September 30, 2024 | 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, 2023 | 282,148,576 | $ | — | 12,799,999 | $ | — | $ | 15,398 | 157,902,985 | $ | (13,023) | $ | (632) | $ | (209) | $ | 1,252 | $ | 2,786 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | 935 | (12) | 923 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of taxes | 15 | 1 | 16 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Proceeds from exercise of equity instruments and employee stock purchase plans | 4,288,407 | — | 77 | 77 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Withholding taxes for stock options | (2) | (2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Treasury stock activity related to vesting of equity instruments | 1,294,581 | (162) | (162) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock repurchases | 11,199,638 | (1,479) | (1,479) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other changes in ownership of non-controlling interests | 1 | — | 3 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 416 | 416 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | — | (13) | — | (13) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of September 30. 2024 | 286,436,983 | $ | — | 12,799,999 | $ | — | $ | 15,890 | 170,397,204 | $ | (14,677) | $ | 303 | $ | (194) | $ | 1,244 | $ | 2,566 |
See accompanying notes.
EXPEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
| Nine months ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Operating activities: | |||||||||||
| Net income | $ | 923 | $ | 552 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation of property and equipment, including internal-use software and website development | 582 | 555 | |||||||||
| Amortization of intangible assets | 44 | 44 | |||||||||
| Impairment of goodwill and intangible assets | 33 | 312 | |||||||||
| Amortization of stock-based compensation | 365 | 314 | |||||||||
| Deferred income taxes | 66 | 49 | |||||||||
| Foreign exchange (gain) loss on cash, restricted cash and short-term investments, net | — | 32 | |||||||||
| Realized (gain) loss on foreign currency forwards, net | (21) | 35 | |||||||||
| (Gain) loss on minority equity investments, net | (121) | 73 | |||||||||
| Other, net | 69 | 34 | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | (1,007) | (704) | |||||||||
| Prepaid expenses and other assets | (19) | 43 | |||||||||
| Accounts payable, merchant | (61) | 178 | |||||||||
| Accounts payable, other, accrued expenses and other liabilities | 235 | 223 | |||||||||
| Tax payable/receivable, net | 109 | (55) | |||||||||
| Deferred merchant bookings | 1,690 | 1,243 | |||||||||
| Net cash provided by operating activities | 2,887 | 2,928 | |||||||||
| Investing activities: | |||||||||||
| Capital expenditures, including internal-use software and website development | (565) | (669) | |||||||||
| Purchases of investments | (405) | — | |||||||||
| Sales and maturities of investments | 43 | 49 | |||||||||
| Other, net | 26 | (15) | |||||||||
| Net cash used in investing activities | (901) | (635) | |||||||||
| Financing activities: | |||||||||||
| Purchases of treasury stock | (1,641) | (1,669) | |||||||||
| Proceeds from exercise of equity awards and employee stock purchase plan | 77 | 53 | |||||||||
| Other, net | (26) | 17 | |||||||||
| Net cash used in financing activities | (1,590) | (1,599) | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents | (11) | (53) | |||||||||
| Net increase in cash, cash equivalents and restricted cash and cash equivalents | 385 | 641 | |||||||||
| Cash, cash equivalents and restricted cash and cash equivalents at beginning of period | 5,661 | 5,851 | |||||||||
| Cash, cash equivalents and restricted cash and cash equivalents at end of period | $ | 6,046 | $ | 6,492 | |||||||
| Supplemental cash flow information | |||||||||||
| Cash paid for interest | $ | 197 | $ | 197 | |||||||
| Income tax payments, net | 97 | 228 |
See accompanying notes.
Notes to Consolidated Financial Statements
September 30, 2024
(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™ and Expedia CruisesTM. 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.
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, 2023 (“2023 Form 10-K”), 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.
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
Notes to Consolidated Financial Statements – (Continued)
booking volumes, and the more stable nature of our fixed costs. As a result on a consolidated basis, revenue and income are typically the lowest in the first quarter and highest in the third quarter.
Note 2 – Summary of Significant Accounting Policies
Recent Accounting Policies Not Yet Adopted
In November 2023, the Financial Accounting Standards Board ("FASB") issued new guidance that modifies the disclosure and presentation requirements of reportable segments. The new guidance requires the disclosure of significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit and loss. In addition, the new guidance enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for entities with a single reportable segment, and contains other disclosure requirements. The update is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are in the process of evaluating the impact of adopting this new guidance on our consolidated financial statement disclosures.
In December 2023, the FASB issued new guidance to improve its income tax disclosure requirements. Under the new guidance, public business entities must annually (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (loss) by the applicable statutory income tax rate). The new guidance is effective for public business entities for annual periods beginning after December 15, 2024. We are in the process of evaluating the impact of adopting this new guidance on our consolidated financial statement disclosures.
Significant Accounting Policies
Below are the significant accounting policies with interim disclosure requirements. For a comprehensive description of our accounting policies, refer to our 2023 Form 10-K.
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 $333 million as of September 30, 2024 and $365 million as of December 31, 2023.
Deferred Merchant Bookings. We classify cash payments received in advance of our performance obligations as deferred merchant bookings. At December 31, 2023, $6.9 billion of advance cash payments was reported within deferred merchant bookings, $5.7 billion of which was recognized resulting in $901 million of revenue during the nine months ended September 30, 2024. At September 30, 2024, the related balance was $8.5 billion.
At December 31, 2023, $871 million of deferred loyalty rewards was reported within deferred merchant bookings, $678 million of which was recognized within revenue during the nine months ended September 30, 2024. At September 30, 2024, the related balance was $946 million.
Deferred Revenue. At December 31, 2023, $164 million was recorded as deferred revenue, $122 million of which was recognized as revenue during the nine months ended September 30, 2024. At September 30, 2024, the related balance was $173 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 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
Notes to Consolidated Financial Statements – (Continued)
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:
| September 30, 2024 | December 31, 2023 | ||||||||||
| (in millions) | |||||||||||
| Cash and cash equivalents | $ | 4,722 | $ | 4,225 | |||||||
| Restricted cash and cash equivalents | 1,324 | 1,436 | |||||||||
| Total cash, cash equivalents and restricted cash and cash equivalents in the consolidated statements of cash flows | $ | 6,046 | $ | 5,661 |
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 nine months ended September 30, 2024, we recorded approximately $29 million of incremental allowance for expected uncollectible accounts, offset by $15 million of write-offs.
Note 3 – Fair Value Measurements
Financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2024 are classified using the fair value hierarchy in the table below:
| Total | Level 1 | Level 2 | |||||||||||||||
| (In millions) | |||||||||||||||||
| Assets | |||||||||||||||||
| Cash equivalents: | |||||||||||||||||
| Money market funds | $ | 164 | $ | 164 | $ | — | |||||||||||
| Term deposits and certificates of deposit | 93 | — | 93 | ||||||||||||||
| Corporate debt securities | 32 | — | 32 | ||||||||||||||
| U.S. treasury securities | 15 | — | 15 | ||||||||||||||
| Commercial paper | 7 | — | 7 | ||||||||||||||
| Derivatives: | |||||||||||||||||
| Foreign currency forward contracts | 34 | — | 34 | ||||||||||||||
| Cross-currency interest rate swaps | 3 | — | 3 | ||||||||||||||
| Investments: | |||||||||||||||||
| Equity investments | 705 | 705 | — | ||||||||||||||
| Corporate debt securities | 284 | — | 284 | ||||||||||||||
| U.S. treasury securities | 50 | — | 50 | ||||||||||||||
| Asset-backed securities | 49 | — | 49 | ||||||||||||||
| Term deposits and certificates of deposit | 8 | — | 8 | ||||||||||||||
| U.S. agency securities | 3 | — | 3 | ||||||||||||||
| Total assets | $ | 1,447 | $ | 869 | $ | 578 | |||||||||||
Notes to Consolidated Financial Statements – (Continued)
Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 are classified using the fair value hierarchy in the table below:
| Total | Level 1 | Level 2 | |||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | 168 | $ | 168 | $ | — | |||||||||||||||||
| Term deposits | 71 | — | 71 | ||||||||||||||||||||
| Derivatives: | |||||||||||||||||||||||
| Cross-currency interest rate swaps | 8 | — | 8 | ||||||||||||||||||||
| Investments: | |||||||||||||||||||||||
| Term deposits | 28 | — | 28 | ||||||||||||||||||||
| Equity investments | 584 | 584 | — | ||||||||||||||||||||
| Total assets | $ | 859 | $ | 752 | $ | 107 | |||||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Derivatives: | |||||||||||||||||||||||
| Foreign currency forward contracts | $ | 9 | $ | — | $ | 9 |
We classify our cash equivalents and investments 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. Those with remaining maturities of less than one year are classified within short-term investments and those with remaining maturities of greater than one year are classified within long-term investments and other assets.
As of September 30, 2024 and December 31, 2023, our cash and cash equivalents consisted primarily of term deposits, certificates of deposit, money market funds, and corporate debt securities with maturities of three months or less and bank account balances.
We primarily invest in investment grade corporate debt securities, U.S. treasury securities, and asset-backed securities, all of which are classified as available-for-sale. As of September 30, 2024, we had $196 million of short-term and $198 million of long-term available-for-sale investments, which generally mature within 4 years. The amortized cost basis of the investments approximated their fair value with gross unrealized gains and losses of less than $1 million. We review our debt securities on a regular basis for impairment. During the nine months ended September 30, 2024, we did not recognize an allowance for credit-related losses on any of our investments.
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 September 30, 2024, we were party to outstanding forward contracts hedging our liability exposures with a total net notional value of $4.6 billion. We had a net forward asset of $34 million ($60 million gross forward asset) as of September 30, 2024 recorded in prepaid expenses and other current assets and a net forward liability of $9 million ($28 million gross forward liability) as of December 31, 2023 recorded in accrued expenses and other current liabilities. We recorded $123 million and $(43) million in net gains (losses) from foreign currency forward contracts during the three months ended September 30, 2024 and 2023, as well as $65 million and $(58) million during the nine months ended September 30, 2024 and 2023.
We maintain two fixed-to-fixed cross-currency interest rate swaps with an aggregate notional amount of €300 million and maturity dates of February 2026. 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. The fair value of the cross-currency interest rate swaps was a $3 million and an $8 million asset as of as of September 30, 2024 and December 31, 2023, recorded in long-term investments and other assets. The gain recognized in interest expense was $4 million during both the nine months ended September 30, 2024 and 2023.
Notes to Consolidated Financial Statements – (Continued)
Our equity investments include our marketable equity investments in Despegar and Global Business Travel Group, Inc., both publicly traded companies, which are included in long-term investments and other assets in our consolidated balance sheets. During the nine months ended September 30, 2024 and 2023, we recognized net gains (losses) of approximately $121 million and $(73) million within other, net in our consolidated statements of operations related to the fair value changes of these equity investments.
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.
Goodwill. During the third quarter of 2023, we recognized a goodwill impairment charge of $297 million related to our trivago segment. This impairment charge resulted from trivago’s recent strategic shift which included intensifying its brand marketing investments with an anticipated decrease in profitability. As a result, we concluded that sufficient indicators existed to require us to perform an interim quantitative assessment of goodwill for our trivago segment as of September 30, 2023, in which we compared the fair value of the reporting unit to its carrying value. The fair value estimate for the reporting unit was based on a blended analysis of the present value of future discounted cash flows and market value approach, Level 3 inputs. The significant estimates used in the discounted cash flows model included our weighted average cost of capital, projected cash flows and the long-term rate of growth. Our assumptions were based on the actual historical performance of the reporting unit and considered the weakening of operating results, and implied risk premiums based on market prices of our equity and debt as of the assessment date. Our significant estimates in the market approach model included identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment and assessing comparable revenue and earnings multiples in estimating the fair value of the reporting unit. The excess of the reporting unit's carrying value over our estimate of the fair value was recorded as the goodwill impairment charge in the third quarter of 2023. As of September 30, 2023, our trivago segment had no goodwill remaining.
Intangible Assets. During the three and nine months ended September 30, 2024, we recognized intangible impairment charges of $33 million related to an indefinite-lived trade name within our trivago segment that resulted a decline in revenue in the current year as well as trivago’s share price decline reducing its total market capitalization relative to its assets. During the three and nine months ended September 30, 2023, we recognized intangible impairment charges of $15 million, related to an indefinite-lived trade name within our trivago segment that resulted from a decrease in the estimated royalty rate. The indefinite-lived trade name asset, classified as a Level 3 measurement, was valued using the relief-from-royalty method, which includes unobservable inputs, including projected revenues, royalty rates and weighted average cost of capital.
Minority Investments without Readily Determinable Fair Values. As of September 30, 2024 and December 31, 2023, the carrying values of our minority investments without readily determinable fair values totaled $315 million and $330 million. During the nine months ended September 30, 2024, we sold a minority investment for $15 million and recognized an immaterial gain on the transaction. During the nine months ended September 30, 2023, we had no material gains or losses recognized related to these minority investments. As of September 30, 2024, total cumulative adjustments made to the initial cost basis of these investments included $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:
| September 30, 2024 | December 31, 2023 | ||||||||||
| (In millions) | |||||||||||
| 6.25% senior notes due 2025 | $ | 1,042 | $ | 1,039 | |||||||
| 5.0% senior notes due 2026 | 748 | 748 | |||||||||
| 0% convertible senior notes due 2026 | 995 | 993 | |||||||||
| 4.625% senior notes due 2027 | 747 | 746 | |||||||||
| 3.8% senior notes due 2028 | 997 | 996 | |||||||||
| 3.25% senior notes due 2030 | 1,240 | 1,238 | |||||||||
| 2.95% senior notes due 2031 | 494 | 493 | |||||||||
| Total debt(1) | 6,263 | 6,253 | |||||||||
| Current maturities of long-term debt | (1,042) | — | |||||||||
| Long-term debt, excluding current maturities | $ | 5,221 | $ | 6,253 | |||||||
(1)Net of applicable discounts and debt issuance costs.
Outstanding 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 7 – Debt of the Notes to Consolidated Financial Statements in our 2023 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 $48 million and $73 million as of September 30, 2024 and December 31, 2023.
Estimated Fair Value. The total estimated fair value of our Senior Notes was approximately $5.2 billion and $5.1 billion as of September 30, 2024 and December 31, 2023. Additionally, the estimated fair value of the Convertible Notes was $954 million and $953 million as of September 30, 2024 and December 31, 2023. The fair value was determined based on quoted market prices in less active markets and is categorized accordingly as Level 2 in the fair value hierarchy.
Credit Facility
As of September 30, 2024, Expedia Group maintained a $2.5 billion revolving credit facility that matures in April 2027. As of September 30, 2024 and December 31, 2023, we had no revolving credit facility borrowings outstanding. Loans under the revolving credit facility 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. A fee is payable quarterly in respect of undrawn commitments under the revolving credit facility at a rate ranging from 0.10% to 0.25% per annum, depending on Expedia Group’s credit ratings. The terms of the revolving credit facility require Expedia Group to not exceed a specified maximum consolidated leverage ratio as of the end of each fiscal quarter.
The revolving credit facility has a $120 million letter of credit (“LOC”) sublimit, and the amount of LOCs issued under the facility reduced the credit amount available. Outstanding stand-by LOCs issued under the facility were $47 million and $40 million as of September 30, 2024 and December 31, 2023, respectively.
Note 5 – Stockholders’ Equity
Treasury Stock
As of September 30, 2024, the Company’s treasury stock was comprised of approximately 163.1 million shares of common stock and 7.3 million Class B shares. As of December 31, 2023, the Company’s treasury stock was comprised of approximately 150.6 million shares of common stock and 7.3 million Class B shares.
Notes to Consolidated Financial Statements – (Continued)
Share Repurchase Programs. In October 2023, the Executive Committee of the Board of Directors, pursuant to a delegation of authority from the Board, authorized a program to repurchase up to $5 billion of our common stock (“2023 Share Repurchase Program”). During the nine months ended September 30, 2024, we repurchased, through open market transactions, 11.2 million shares under the 2023 Share Repurchase Program for a total cost of $1.5 billion, excluding transaction costs and excise tax due under the Inflation Reduction Act of 2022, representing an average repurchase price of $132.04 per share. As of September 30, 2024, $3.4 billion remains authorized for repurchase under the 2023 Share Repurchase Program. Our 2023 Share Repurchase Program does not have fixed expiration dates and does not obligate the Company to acquire any specific number of shares. Under the program, shares may be repurchased in the open market or in privately negotiated transactions. The timing, manner, price and amount of any repurchases will be subject to the discretion of the Company and depend on a variety of factors, including the market price of Expedia Group’s common stock, general market and economic conditions, regulatory requirements and other business considerations. Subsequent to the end of the third quarter of 2024, we repurchased an additional 0.8 million shares for a total cost of $126 million, excluding transaction costs and excise tax, representing an average purchase price of $155.34 per share.
Accumulated Other Comprehensive Income (Loss)
The balance of AOCI as of September 30, 2024 and December 31, 2023 was comprised of foreign currency translation adjustments. These translation adjustments include foreign currency transaction gains as of September 30, 2024 of $2 million ($3 million before tax) and $6 million ($8 million before tax) as of December 31, 2023 associated with our cross-currency interest rate swaps as described in Note 3 – Fair Value Measurements. Additionally, translation adjustments include foreign currency transaction losses of $7 million ($10 million before tax) as of both September 30, 2024 and December 31, 2023 associated with previously settled Euro-denominated notes that were designated as net investment hedges.
Note 6 – Earnings Per Share
The following table presents our basic and diluted earnings per share:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (In millions, except share and per share data) | |||||||||||||||||||||||
| Net income attributable to Expedia Group, Inc. | $ | 684 | $ | 425 | $ | 935 | $ | 665 | |||||||||||||||
| Earnings per share attributable to Expedia Group, Inc. available to common stockholders: | |||||||||||||||||||||||
| Basic | $ | 5.28 | $ | 2.98 | $ | 7.07 | $ | 4.51 | |||||||||||||||
| Diluted | 5.04 | 2.87 | 6.75 | 4.37 | |||||||||||||||||||
| Weighted average number of shares outstanding (000's): | |||||||||||||||||||||||
| Basic | 129,758 | 142,228 | 132,393 | 147,253 | |||||||||||||||||||
| Dilutive effect of: | |||||||||||||||||||||||
| Convertible Notes | 3,921 | 3,921 | 3,921 | 3,921 | |||||||||||||||||||
| Stock-based awards | 2,053 | 1,599 | 2,341 | 998 | |||||||||||||||||||
| Diluted | 135,732 | 147,748 | 138,655 | 152,172 |
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 and the potential share settlement impact related to our Convertible Notes from the diluted loss per share calculation as their inclusion would have an antidilutive effect. For the three and nine months ended September 30, 2024, approximately 3 million shares from outstanding stock awards 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 and nine months ended September 30, 2023, approximately 5 million shares of outstanding stock awards were excluded.
Note 7 - Restructuring and Related Reorganization Charges
In February 2024, we committed to restructuring actions to recalibrate resources as most of the Company’s organizational
Notes to Consolidated Financial Statements – (Continued)
and technological transformation is now completed, which have resulted in headcount reductions. As a result, we recognized $6 million and $72 million in restructuring and related reorganization charges during the three and nine months ended September 30, 2024. The charges were predominately related to employee severance, stock-based compensation and benefit costs and approximately $11 million was included in accrued expenses and other current liabilities on our consolidated balance sheet as of September 30, 2024. Based on current plans which are subject to change, we expect total reorganization charges in the remainder of 2024 to be in the range of approximately $5 million to $10 million. These costs could be higher or lower should we make additional decisions in future periods that impact our reorganization efforts.
Note 8 – Income Taxes
Our tax provision for interim periods is determined 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 September 30, 2024, the effective tax rate was 21.7%, compared to 31.2% for the three months ended September 30, 2023. The change in the effective tax rate was primarily due to a nondeductible goodwill impairment and nondeductible mark-to-market charges recorded in the prior year period.
For the nine months ended September 30, 2024, the effective tax rate was 23.5%, compared to 34.8% for the nine months ended September 30, 2023. The change in the effective tax rate was primarily due to discrete tax effects of the TripAdvisor audit assessment recorded in the prior year period, as described below.
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. For tax years 2011 to 2013 and 2014 to 2016, the Internal Revenue Service (“IRS”) issued final adjustments related to transfer pricing with our foreign subsidiaries. The 2011 to 2013 adjustments would result in federal income tax of approximately $244 million, subject to interest. The 2014 to 2016 adjustments would result in federal income tax of approximately $431 million, subject to interest. We do not agree with these adjustments and will continue to vigorously defend our position through administrative procedures. We are also under examination by the IRS for tax years 2017 to 2020.
On December 20, 2011, we completed a spin-off of TripAdvisor into a separate publicly traded corporation. Pursuant to the tax sharing agreement between Expedia Group and TripAdvisor, TripAdvisor is responsible for its potential income tax liabilities in connection with any consolidated income tax returns filed as a part of Expedia Group’s consolidated income tax return prior to or in connection with the spin-off. TripAdvisor is required to indemnify Expedia Group for any such taxes, including interest, penalties, legal, and professional fees.
In 2023, TripAdvisor agreed in principle with the IRS to an assessed amount of $120 million, inclusive of interest and state tax effects, for transfer pricing adjustments with its foreign subsidiaries for the 2009 to 2011 tax years. The assessment is a tax liability for tax years when TripAdvisor was part of Expedia Group's consolidated income tax return and is covered by the indemnification pursuant to the tax sharing agreement. In May 2023, Expedia Group received from the IRS the final assessment for the 2009 through 2011 tax years related to the TripAdvisor matter. Expedia Group remitted $113 million in settlement payments to the IRS, as the primary obligor for this assessment, and received the reimbursement required from TripAdvisor in settlement of the indemnification receivable for this matter. During 2023, we recorded a total of $67 million of additional income tax expense and a corresponding tax indemnification adjustment in other, net in our consolidated statements of operations representing the estimate of the incremental assessed payment to the IRS, including state tax effects. During the second quarter of 2024, we recorded an additional $6 million of income tax expense related to interest adjustments for the 2010-2011 tax years.
Note 9 – 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. Four lawsuits are currently active. These lawsuits are in various stages and we
Notes to Consolidated Financial Statements – (Continued)
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 $3 million and $46 million as of September 30, 2024 and December 31, 2023. The reserve balance decreased $43 million as of September 30, 2024 due to the favorable resolution of two cases during the year. 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.
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.
During the third quarter of 2024, we entered into discussions with Italian authorities to resolve issues raised in a tax audit regarding the Company’s purported Italian VAT obligations. While no tax assessment has been issued and we believe that Expedia Group has complied with Italian tax laws, we recorded a reserve for the potential settlement of these issues, consistent with applicable accounting principles and in light of all current facts and circumstances, in the amount of $92 million as of September 30, 2024 within legal reserves, occupancy tax and other in the consolidated statements of operations. Our settlement reserve is based on our best estimate and the ultimate resolution of these contingencies may be greater or less than the liabilities recorded.
In certain jurisdictions, including the United Kingdom and Italy, 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.
Note 10 – Segment Information
We have the following reportable segments: B2C, B2B, and trivago. Our B2C segment provides a full range of travel and advertising services to our worldwide customers through a variety of consumer brands including: Expedia.com, Hotels.com, Vrbo, Orbitz, Travelocity, Wotif Group, ebookers, CheapTickets, Hotwire.com and CarRentals.com. Our B2B segment fuels a wide range of travel and non-travel companies including airlines, offline travel agents, online retailers, corporate travel management and financial institutions, who leverage our leading travel technology and tap into our diverse supply to augment their offerings and market Expedia Group rates and availabilities to their travelers. 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 B2C 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
Notes to Consolidated Financial Statements – (Continued)
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.
Our segment disclosure includes intersegment revenues, which primarily consist of advertising and media services provided by our trivago segment to our B2C 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.
The following tables present our segment information for the three and nine months ended September 30, 2024 and 2023. 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 September 30, 2024 | |||||||||||||||||||||||||||||
| B2C | B2B | trivago | Corporate & Eliminations | Total | |||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Third-party revenue | $ | 2,780 | $ | 1,178 | $ | 102 | $ | — | $ | 4,060 | |||||||||||||||||||
| Intersegment revenue | — | — | 58 | (58) | — | ||||||||||||||||||||||||
| Revenue | $ | 2,780 | $ | 1,178 | $ | 160 | $ | (58) | $ | 4,060 | |||||||||||||||||||
| Adjusted EBITDA | $ | 1,028 | $ | 338 | $ | 14 | $ | (130) | $ | 1,250 | |||||||||||||||||||
| Depreciation | (133) | (37) | (1) | (26) | (197) | ||||||||||||||||||||||||
| Amortization of intangible assets | — | — | — | (14) | (14) | ||||||||||||||||||||||||
| Impairment of intangible assets | — | — | — | (33) | (33) | ||||||||||||||||||||||||
| Stock-based compensation | — | — | — | (147) | (147) | ||||||||||||||||||||||||
| Legal reserves, occupancy tax and other | — | — | — | (59) | (59) | ||||||||||||||||||||||||
| Restructuring and related reorganization charges, excluding stock-based compensation | — | — | — | (6) | (6) | ||||||||||||||||||||||||
| Realized (gain) loss on revenue hedges | (16) | (16) | — | — | (32) | ||||||||||||||||||||||||
| Operating income (loss) | $ | 879 | $ | 285 | $ | 13 | $ | (415) | 762 | ||||||||||||||||||||
| Other income, net | 112 | ||||||||||||||||||||||||||||
| Income before income taxes | 874 | ||||||||||||||||||||||||||||
| Provision for income taxes | (190) | ||||||||||||||||||||||||||||
| Net income | 684 | ||||||||||||||||||||||||||||
| Net loss attributable to non-controlling interests | — | ||||||||||||||||||||||||||||
| Net income attributable to Expedia Group, Inc. | $ | 684 | |||||||||||||||||||||||||||
Notes to Consolidated Financial Statements – (Continued)
| Three months ended September 30, 2023 | |||||||||||||||||||||||||||||
| B2C | B2B | trivago | Corporate & Eliminations | Total | |||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Third-party revenue | $ | 2,819 | $ | 995 | $ | 115 | $ | — | $ | 3,929 | |||||||||||||||||||
| Intersegment revenue | — | — | 57 | (57) | — | ||||||||||||||||||||||||
| Revenue | $ | 2,819 | $ | 995 | $ | 172 | $ | (57) | $ | 3,929 | |||||||||||||||||||
| Adjusted EBITDA | $ | 1,056 | $ | 266 | $ | 18 | $ | (124) | $ | 1,216 | |||||||||||||||||||
| Depreciation | (137) | (29) | (2) | (26) | (194) | ||||||||||||||||||||||||
| Amortization of intangible assets | — | — | — | (14) | (14) | ||||||||||||||||||||||||
| Impairment of goodwill | — | — | — | (297) | (297) | ||||||||||||||||||||||||
| Impairment of intangible assets | — | — | — | (15) | (15) | ||||||||||||||||||||||||
| Stock-based compensation | — | — | — | (105) | (105) | ||||||||||||||||||||||||
| Realized (gain) loss on revenue hedges | 16 | — | — | — | 16 | ||||||||||||||||||||||||
| Operating income (loss) | $ | 935 | $ | 237 | $ | 16 | $ | (581) | 607 | ||||||||||||||||||||
| Other expense, net | (163) | ||||||||||||||||||||||||||||
| Income before income taxes | 444 | ||||||||||||||||||||||||||||
| Provision for income taxes | (139) | ||||||||||||||||||||||||||||
| Net income | 305 | ||||||||||||||||||||||||||||
| Net loss attributable to non-controlling interests | 120 | ||||||||||||||||||||||||||||
| Net income attributable to Expedia Group, Inc. | $ | 425 | |||||||||||||||||||||||||||
| Nine months ended September 30, 2024 | |||||||||||||||||||||||||||||
| B2C | B2B | trivago | Corporate & Eliminations | Total | |||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Third-party revenue | $ | 7,198 | $ | 3,060 | $ | 249 | $ | — | $ | 10,507 | |||||||||||||||||||
| Intersegment revenue | — | — | 149 | (149) | — | ||||||||||||||||||||||||
| Revenue | $ | 7,198 | $ | 3,060 | $ | 398 | $ | (149) | $ | 10,507 | |||||||||||||||||||
| Adjusted EBITDA | $ | 1,897 | $ | 773 | $ | — | $ | (379) | $ | 2,291 | |||||||||||||||||||
| Depreciation | (395) | (104) | (4) | (79) | (582) | ||||||||||||||||||||||||
| Amortization of intangible assets | — | — | — | (44) | (44) | ||||||||||||||||||||||||
| Impairment of intangible assets | — | — | — | (33) | (33) | ||||||||||||||||||||||||
| Stock-based compensation | — | — | — | (365) | (365) | ||||||||||||||||||||||||
| Legal reserves, occupancy tax and other | — | — | — | (100) | (100) | ||||||||||||||||||||||||
| Restructuring and related reorganization charges, excluding stock-based compensation | — | — | — | (64) | (64) | ||||||||||||||||||||||||
| Realized (gain) loss on revenue hedges | 5 | (5) | — | — | — | ||||||||||||||||||||||||
| Operating income (loss) | $ | 1,507 | $ | 664 | $ | (4) | $ | (1,064) | 1,103 | ||||||||||||||||||||
| Other expense, net | 104 | ||||||||||||||||||||||||||||
| Income before income taxes | 1,207 | ||||||||||||||||||||||||||||
| Provision for income taxes | (284) | ||||||||||||||||||||||||||||
| Net income | 923 | ||||||||||||||||||||||||||||
| Net loss attributable to non-controlling interests | 12 | ||||||||||||||||||||||||||||
| Net income attributable to Expedia Group, Inc. | $ | 935 | |||||||||||||||||||||||||||
Notes to Consolidated Financial Statements – (Continued)
| Nine months ended September 30, 2023 | |||||||||||||||||||||||||||||
| B2C | B2B | trivago | Corporate & Eliminations | Total | |||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Third-party revenue | $ | 7,155 | $ | 2,524 | $ | 273 | $ | — | $ | 9,952 | |||||||||||||||||||
| Intersegment revenue | — | — | 154 | (154) | — | ||||||||||||||||||||||||
| Revenue | $ | 7,155 | $ | 2,524 | $ | 427 | $ | (154) | $ | 9,952 | |||||||||||||||||||
| Adjusted EBITDA | $ | 1,857 | $ | 605 | $ | 51 | $ | (365) | $ | 2,148 | |||||||||||||||||||
| Depreciation | (393) | (81) | (4) | (77) | (555) | ||||||||||||||||||||||||
| Amortization of intangible assets | — | — | — | (44) | (44) | ||||||||||||||||||||||||
| Impairment of goodwill | — | — | — | (297) | (297) | ||||||||||||||||||||||||
| Impairment of intangible assets | — | — | — | (15) | (15) | ||||||||||||||||||||||||
| Stock-based compensation | — | — | — | (314) | (314) | ||||||||||||||||||||||||
| Legal reserves, occupancy tax and other | — | — | — | (6) | (6) | ||||||||||||||||||||||||
| Realized (gain) loss on revenue hedges | 18 | (6) | — | — | 12 | ||||||||||||||||||||||||
| Operating income (loss) | $ | 1,482 | $ | 518 | $ | 47 | $ | (1,118) | 929 | ||||||||||||||||||||
| Other expense, net | (82) | ||||||||||||||||||||||||||||
| Income before income taxes | 847 | ||||||||||||||||||||||||||||
| Provision for income taxes | (295) | ||||||||||||||||||||||||||||
| Net income | 552 | ||||||||||||||||||||||||||||
| Net loss attributable to non-controlling interests | 113 | ||||||||||||||||||||||||||||
| Net income attributable to Expedia Group, Inc. | $ | 665 |
Revenue by Business Model and Service Type
The following table presents revenue by business model and service type:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Business Model: | |||||||||||||||||||||||
| Merchant | $ | 2,805 | $ | 2,739 | $ | 7,228 | $ | 6,833 | |||||||||||||||
| Agency | 953 | 918 | 2,469 | 2,408 | |||||||||||||||||||
| Advertising, media and other | 302 | 272 | 810 | 711 | |||||||||||||||||||
| Total revenue | $ | 4,060 | $ | 3,929 | $ | 10,507 | $ | 9,952 | |||||||||||||||
| Service Type: | |||||||||||||||||||||||
| Lodging | $ | 3,317 | $ | 3,233 | $ | 8,407 | $ | 7,960 | |||||||||||||||
| Air | 104 | 100 | 330 | 324 | |||||||||||||||||||
| Advertising and media | 269 | 240 | 713 | 616 | |||||||||||||||||||
| Other(1) | 370 | 356 | 1,057 | 1,052 | |||||||||||||||||||
| Total revenue | $ | 4,060 | $ | 3,929 | $ | 10,507 | $ | 9,952 |
(1)Other includes car rental, insurance, activities and cruise revenue, among other revenue streams, none of which are individually material.
Our B2C 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.
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