Online travel agency Expedia (NASDAQ:EXPE) fell short of the market’s revenue expectations in Q3 CY2024 as sales rose 3.3% year on year to $4.06 billion. Its non-GAAP profit of $6.13 per share was in line with analysts’ consensus estimates.
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Expedia (EXPE) Q3 CY2024 Highlights:
- Revenue: $4.06 billion vs analyst estimates of $4.11 billion (1.3% miss)
- Adjusted EPS: $6.13 vs analyst expectations of $6.12 (in line)
- EBITDA: $1.25 billion vs analyst estimates of $1.23 billion (1.6% beat)
- Gross Margin (GAAP): 90.4%, in line with the same quarter last year
- Operating Margin: 18.8%, up from 15.4% in the same quarter last year
- EBITDA Margin: 30.8%, in line with the same quarter last year
- Free Cash Flow was -$1.69 billion, down from $1.31 billion in the previous quarter
- Room Nights Booked: 97.4 million, up 8.1 million year on year
- Market Capitalization: $22.37 billion
“Our third quarter results exceeded our expectations on gross bookings and earnings with revenue landing in-line. We accelerated bookings growth in our consumer business for the second consecutive quarter, and our advertising and B2B businesses continue to deliver strong double-digit growth," said Ariane Gorin, CEO of Expedia Group.
Company Overview
Originally founded as a part of Microsoft, Expedia (NASDAQ:EXPE) is one of the world’s leading online travel agencies.
Online Travel
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. Online travel platforms today make up over 50% of the industry’s bookings, a percentage that has been rising for 20 years, and will likely continue in the years ahead.
Sales Growth
Reviewing a company’s long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. Luckily, Expedia’s sales grew at an excellent 22.8% compounded annual growth rate over the last three years. This is encouraging because it shows Expedia’s offerings resonate with customers, a helpful starting point.
This quarter, Expedia’s revenue grew 3.3% year on year to $4.06 billion, falling short of Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 7.5% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and shows the market believes its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.
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Room Nights Booked
Booking Growth
As an online travel company, Expedia generates revenue growth by increasing both the number of stays (or experiences) booked and the commission charged on those bookings.
Over the last two years, Expedia’s room nights booked, a key performance metric for the company, increased by 11.9% annually to 97.4 million in the latest quarter. This growth rate is strong for a consumer internet business and indicates people love using its offerings. 
In Q3, Expedia added 8.1 million room nights booked, leading to 9.1% year-on-year growth. The quarterly print was lower than its two-year result, suggesting its new initiatives aren’t accelerating booking growth just yet.
Revenue Per Booking
Average revenue per booking (ARPB) is a critical metric to track for consumer internet businesses like Expedia because it not only measures how much users book on its platform but also the commission that Expedia can charge.
Expedia’s ARPB fell over the last two years, averaging 2.2% annual declines. This isn’t great, but the increase in room nights booked is more relevant for assessing long-term business potential. We’ll monitor the situation closely; if Expedia tries boosting ARPB by taking a more aggressive approach to monetization, it’s unclear whether bookings can continue growing at the current pace. 
This quarter, Expedia’s ARPB clocked in at $41.68. It declined 5.3% year on year, worse than the change in its room nights booked.
Key Takeaways from Expedia’s Q3 Results
It was good to see Expedia beat analysts’ EBITDA expectations this quarter. We were also glad its bookings outperformed Wall Street’s estimates. Overall, this quarter could have been better. The stock traded up 8.1% to $188.20 immediately after reporting.
Is Expedia an attractive investment opportunity right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
