Online travel agency Expedia (NASDAQ: EXPE) reported Q2 FY2022 results topping analyst expectations, with revenue up 50.6% year on year to $3.18 billion. Expedia made a GAAP loss of $185 million, down on its loss of $177 million, in the same quarter last year.
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Expedia (EXPE) Q2 FY2022 Highlights:
- Revenue: $3.18 billion vs analyst estimates of $2.98 billion (6.42% beat)
- EPS (non-GAAP): $1.86 vs analyst estimates of $1.56 (19.1% beat)
- Free cash flow of $1.46 billion, down 48.1% from previous quarter
- Gross Margin (GAAP): 86.8%, up from 82.2% same quarter last year
- Stayed Room Nights: 79.1 million, up 22.5 million year on year
“We are very pleased with our financial performance this quarter. Lodging bookings reached a record high, and we posted our highest ever second quarter revenue and adjusted EBITDA. These were even more noteworthy given the simplification efforts we undertook two years ago including the sale of our Egencia corporate travel business.” said Peter Kern, Vice Chairman and CEO, Expedia Group.
Originally founded as a part of Microsoft, Expedia (NASDAQ: EXPE) is one of the world’s leading online travel agencies.
Marketplaces have existed for centuries. Where once it was a main street in a small town or a mall in the suburbs, sellers benefitted from proximity to one another because they could draw customers by offering convenience and selection. Today, a myriad of online marketplaces fulfill that same role, aggregating large customer bases, which attracts commission paying sellers, generating flywheel scale effects which feed back into further customer acquisition. Because of the enormous number of flights, hotels, and accommodations available, travel is a natural fit for marketplaces that aggregate suppliers, simplifying the shopping process for consumers.
Sales Growth
Expedia's revenue growth over the last three years has been very strong, averaging 33.2% annually.
This quarter, Expedia beat analyst estimates and reported a very impressive 50.6% year on year revenue growth.
Ahead of the earnings results the analysts covering the company were estimating sales to grow 17.5% over the next twelve months.
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Usage Growth
As an online travel company, Expedia generates revenue growth by a combination of increasing the number of stays (or experiences) booked, as well as the level of commission charged on those bookings.
Over the last two years the number of Expedia's nights booked, a key usage metric for the company, grew 62.3% annually to 79.1 million users. This is among the fastest growth of any consumer internet company, indicating that users are excited about the offering.
In Q2 the company added 22.5 million nights booked, translating to a 39.7% growth year on year.
Key Takeaways from Expedia's Q2 Results
Sporting a market capitalization of $16.5 billion, more than $5.59 billion in cash and with positive free cash flow over the last twelve months, we're confident that Expedia has the resources it needs to pursue a high growth business strategy.
We were impressed by the exceptional revenue growth Expedia delivered this quarter. And we were also glad to see the user growth and solid free cash flow. Zooming out, we think this impressive quarter should have shareholders feeling very positive. The company is up 7.85% on the results and currently trades at $110.4 per share.
Expedia may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
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The author has no position in any of the stocks mentioned.