Expedia Group Reports Second Quarter 2023 Results

Expedia Group, Inc. (NASDAQ: EXPE) announced financial results today for the second quarter ended June 30, 2023.

“The second quarter saw travel demand remain strong, and we were pleased that along with the progress on our tech transformation we were able to post another record quarter. Our focus on driving consumers into our loyalty programs and apps has helped us build the most valuable pool of consumers we have ever had. On top of which, we recently took a major leap forward in our consumer business with the launch of One Key in the U.S., the most flexible and comprehensive rewards program in the industry. Yet another compelling reason that the most desirable online travelers will continue to choose Expedia,” said Peter Kern, Vice Chairman and CEO, Expedia Group. “With the backdrop of continuing innovation in our B2C business, and our B2B business significantly outpacing the industry, we continued to repurchase our stock opportunistically and have purchased a record $1.2 billion year-to-date."

Second Quarter Highlights

• Lodging gross bookings at $19.2 billion and revenue at $3.4 billion were at record levels for any second quarter.
• Significant earnings growth with net income of $385 million, compared to a net loss of $185 million in 2022, with approximately 1,730 basis points of margin expansion. Adjusted net income was $428 million, an increase of 38%, compared to 2022.
• Record second quarter Adjusted EBITDA was $747 million, an increase of 15% with 190 basis points of margin expansion, compared to 2022.
• B2B revenue at $861 million was a record and was an increase of 32%, compared to 2022.
• For the first half of 2023, net cash from operating activities was $4.3 billion and free cash flow was $3.8 billion.
• Repurchased approximately 12 million shares for a record $1.2 billion year-to-date.

Financial Summary & Operating Metrics (In millions except per share amounts)

	Expedia Group, Inc.
Metric	Q2 2023	Q2 2022	Δ Y/Y
Booked room nights	89.7	82.5	9%
Gross bookings	$27,321	$26,139	5%
Revenue	$3,358	$3,181	6%
Operating income	$443	$345	28%
Net income (loss) attributable to Expedia Group, Inc.	$385	$(185)	NM
Diluted earnings (loss) per share	$2.54	$(1.17)	NM
Adjusted EBITDA(1)	$747	$648	15%
Adjusted net income(1)	$428	$310	38%
Adjusted EPS(1)	$2.89	$1.96	48%
Net cash provided by operating activities	$1,146	$1,628	(30)%
Free cash flow(1)	$923	$1,469	(37)%

(1) See Definitions of Non-GAAP Measures and reconciliations of GAAP to non-GAAP measures beginning on page 8.

Conference Call

Expedia Group, Inc. will webcast a conference call to discuss second quarter 2023 financial results and certain forward-looking information on Thursday, August 3, 2023 at 6:30 a.m. Pacific Time (PT). The webcast will be open to the public and available via ir.expediagroup.com. Expedia Group expects to maintain access to the webcast on the IR website for approximately twelve months subsequent to the initial broadcast.

About Expedia Group

Expedia Group, Inc. (NASDAQ: EXPE) companies power travel for everyone, everywhere through our global platform. Driven by the core belief that travel is a force for good, we help people experience the world in new ways and build lasting connections. Our organization is made up of three pillars: Expedia Product and Technology, focused on the group’s product and technical strategy and offerings; Expedia Brands, housing all our consumer brands; and Expedia for Business, consisting of business-to-business solutions and relationships throughout the travel ecosystem. The Expedia Group family of brands includes: Expedia®, Hotels.com®, Expedia® Partner Solutions, Vrbo®, trivago®, Orbitz®, Travelocity®, Hotwire®, Wotif®, ebookers®, CheapTickets®, Expedia Group™ Media Solutions, CarRentals.com™, and Expedia Cruises™.

© 2023 Expedia, Inc., an Expedia Group company. All rights reserved. Trademarks and logos are the property of their respective owners. CST: 2029030-50

Expedia Group, Inc.

Trended Metrics

(All figures in millions)

The supplemental metrics below are intended to supplement the financial statements in this release and in our filings with the SEC, and do not include adjustments for one-time items, acquisitions, foreign exchange or other adjustments. The definition, methodology and appropriateness of any of our supplemental metrics are subject to removal and/or change, and such changes could be material. In the event of any discrepancy between any supplemental metric and our historical financial statements, you should rely on the information filed with the SEC and the financial statements in our most recent earnings release.

			2021															2022															2023									Full Year
			Q1			Q2			Q3			Q4						Q1			Q2			Q3			Q4						Q1			Q2							2021			2022
Units sold
Booked room nights				54.0			68.4			65.4			59.7						77.0			82.5			81.6			70.8						94.5			89.7						247.5			312.0
Booked air tickets				8.9			13.4			12.7			11.3						13.1			13.5			12.2			11.1						14.0			13.6						46.3			49.9
Gross bookings by business model
Agency			$	6,737		$	10,362		$	8,855		$	8,325					$	11,346		$	12,773		$	10,904		$	9,469					$	13,425		$	12,370					$	34,279		$	44,492
Merchant				8,685			10,453			9,870			9,138						13,066			13,366			13,083			11,042						15,976			14,951						38,146			50,557
Total			$	15,422		$	20,815		$	18,725		$	17,463					$	24,412		$	26,139		$	23,987		$	20,511					$	29,401		$	27,321					$	72,425		$	95,049
Lodging gross bookings			$	12,002		$	14,431		$	13,046		$	12,000					$	17,756		$	17,867		$	17,099		$	14,117					$	21,055		$	19,167					$	51,479		$	66,839
Revenue by segment
B2C			$	1,025		$	1,715		$	2,351		$	1,730					$	1,740		$	2,420		$	2,707		$	1,874					$	1,921		$	2,415					$	6,821		$	8,741
B2B				184			305			490			481						432			650			788			676						668			861						1,460			2,546
trivago (third-party revenue)				37			91			121			68						77			111			124			68						76			82						317			380
Total			$	1,246		$	2,111		$	2,962		$	2,279					$	2,249		$	3,181		$	3,619		$	2,618					$	2,665		$	3,358					$	8,598		$	11,667
Revenue by product
Lodging			$	903		$	1,533		$	2,300		$	1,713					$	1,610		$	2,400		$	2,881		$	2,014					$	2,029		$	2,698					$	6,449		$	8,905
Air				50			78			61			65						74			95			100			93						113			111						254			362
Advertising and media				88			161			202			152						166			213			222			176						175			201						603			777
Other(1)				205			339			399			349						399			473			416			335						348			348						1,292			1,623
Total			$	1,246		$	2,111		$	2,962		$	2,279					$	2,249		$	3,181		$	3,619		$	2,618					$	2,665		$	3,358					$	8,598		$	11,667
Revenue by geography
U.S. points of sale			$	1,001		$	1,736		$	2,177		$	1,655					$	1,656		$	2,208		$	2,358		$	1,717					$	1,748		$	2,172					$	6,569		$	7,939
Non-U.S. points of sale				245			375			785			624						593			973			1,261			901						917			1,186						2,029			3,728
Total			$	1,246		$	2,111		$	2,962		$	2,279					$	2,249		$	3,181		$	3,619		$	2,618					$	2,665		$	3,358					$	8,598		$	11,667
Adjusted EBITDA by segment(3)
B2C			$	106		$	316		$	879		$	481					$	188		$	582		$	943		$	411					$	148		$	653					$	1,782		$	2,124
B2B				(57	)		(4	)		74			97						80			156			221			142						133			206						110			599
Other(2)				(107	)		(111	)		(98	)		(99	)					(95	)		(90	)		(85	)		(104	)					(96	)		(112	)					(415	)		(374	)
Total			$	(58	)	$	201		$	855		$	479					$	173		$	648		$	1,079		$	449					$	185		$	747					$	1,477		$	2,349
Net income (loss) attributable to Expedia Group common stockholders(4)			$	(606	)	$	(301	)	$	362		$	276					$	(122	)	$	(185	)	$	482		$	177					$	(145	)	$	385					$	(269	)	$	352

(1) Other revenue primarily includes insurance, car rental, destination services and cruise revenue.

(2) Other is comprised of trivago, corporate and intercompany eliminations. See the section below titled "Tabular Reconciliations for Non-GAAP Measures — Adjusted EBITDA by segment" for additional details.

(3) See Definitions of Non-GAAP Measures and reconciliations of GAAP to non-GAAP measures beginning on page 8.

(4) Expedia Group does not calculate or report net income (loss) by segment.

Notes:

• All trivago revenue is classified as Non-U.S. point of sale.
• B2B includes Egencia, our former full-service travel management company, through its sale in November 2021.
• Some numbers may not add due to rounding. All percentages above and throughout this release are calculated on precise, unrounded numbers.

EXPEDIA GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except share and per share data) (Unaudited)
	Three months ended June 30,								Six months ended June 30,
		2023				2022				2023				2022
Revenue	$	3,358			$	3,181			$	6,023			$	5,430
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below) (1)		407				419				821				790
Selling and marketing (1)		1,770				1,716				3,444				3,055
Technology and content (1)		344				284				661				554
General and administrative (1)		194				189				378				375
Depreciation and amortization		199				197				391				394
Impairment of intangible assets		—				29				—				29
Legal reserves, occupancy tax and other		1				2				6				23
Operating income		443				345				322				210
Other income (expense):
Interest income		63				10				106				13
Interest expense		(61	)			(73	)			(122	)			(154	)
Loss on debt extinguishment		—				(24	)			—				(24	)
Other, net		19				(385	)			97				(380	)
Total other income (expense), net		21				(472	)			81				(545	)
Income (loss) before income taxes		464				(127	)			403				(335	)
Provision for income taxes		(77	)			(58	)			(156	)			27
Net income (loss)		387				(185	)			247				(308	)
Net (income) loss attributable to non-controlling interests		(2	)			—				(7	)			1
Net income (loss) attributable to Expedia Group, Inc.	$	385			$	(185	)		$	240			$	(307	)
Earnings (loss) per share attributable to Expedia Group, Inc. available to common stockholders:
Basic	$	2.62			$	(1.17	)		$	1.60			$	(1.96	)
Diluted		2.54				(1.17	)			1.55				(1.96	)
Shares used in computing earnings (loss) per share (000's):
Basic		147,168				157,290				149,808				156,831
Diluted		151,844				157,290				154,425				156,831
(1) Includes stock-based compensation as follows:
Cost of revenue	$	4			$	3			$	7			$	6
Selling and marketing		20				17				40				32
Technology and content		36				27				70				54
General and administrative		46				46				92				91

EXPEDIA GROUP, INC. CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and par value)
	June 30, 2023				December 31, 2022				June 30, 2022
	(Unaudited)								(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	6,274			$	4,096			$	5,568
Restricted cash and cash equivalents		2,484				1,755				2,756
Short-term investments		27				48				26
Accounts receivable, net of allowance of $51, $40 and $62		2,903				2,078				2,173
Income taxes receivable		70				40				105
Prepaid expenses and other current assets		1,055				774				1,158
Total current assets		12,813				8,791				11,786
Property and equipment, net		2,318				2,210				2,163
Operating lease right-of-use assets		348				363				378
Long-term investments and other assets		1,202				1,184				1,151
Deferred income taxes		665				661				825
Intangible assets, net		1,180				1,209				1,306
Goodwill		7,150				7,143				7,135
TOTAL ASSETS	$	25,676			$	21,561			$	24,744
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, merchant	$	1,775			$	1,709			$	1,548
Accounts payable, other		1,066				947				1,178
Deferred merchant bookings		11,523				7,151				10,041
Deferred revenue		185				163				173
Income taxes payable		61				21				36
Accrued expenses and other current liabilities		819				787				861
Total current liabilities		15,429				10,778				13,837
Long-term debt		6,247				6,240				6,727
Deferred income taxes		35				52				45
Operating lease liabilities		302				312				334
Other long-term liabilities		447				451				420
Commitments and contingencies
Stockholders’ equity:
Common stock: $.0001 par value; Authorized shares: 1,600,000		—				—				—
Shares issued: 280,006, 278,264 and 276,967; Shares outstanding: 138,885, 147,757 and 152,024
Class B common stock: $.0001 par value; Authorized shares: 400,000		—				—				—
Shares issued: 12,800; Shares outstanding: 5,523
Additional paid-in capital		15,072				14,795				14,549
Treasury stock - Common stock and Class B, at cost; Shares 148,398, 137,783 and 132,220		(11,937	)			(10,869	)			(10,331	)
Retained earnings (deficit)		(1,169	)			(1,409	)			(2,068	)
Accumulated other comprehensive income (loss)		(207	)			(234	)			(240	)
Total Expedia Group, Inc. stockholders’ equity		1,759				2,283				1,910
Non-redeemable non-controlling interests		1,457				1,445				1,471
Total stockholders’ equity		3,216				3,728				3,381
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	25,676			$	21,561			$	24,744

EXPEDIA GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited)
	Six months ended June 30,
		2023				2022
Operating activities:
Net income (loss)	$	247			$	(308	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation of property and equipment, including internal-use software and website development		361				351
Amortization of intangible assets		30				43
Impairment of intangible assets		—				29
Amortization of stock-based compensation		209				183
Deferred income taxes		(17	)			(83	)
Foreign exchange (gain) loss on cash, restricted cash and short-term investments, net		(3	)			109
Realized (gain) loss on foreign currency forwards, net		(26	)			75
(Gain) loss on minority equity investments, net		(54	)			352
Loss on debt extinguishment		—				24
Other, net		28				(19	)
Changes in operating assets and liabilities:
Accounts receivable		(846	)			(921	)
Prepaid expenses and other assets		(147	)			(330	)
Accounts payable, merchant		66				214
Accounts payable, other, accrued expenses and other liabilities		175				547
Tax payable/receivable, net		(91	)			(1	)
Deferred merchant bookings		4,371				4,354
Net cash provided by operating activities		4,303				4,619
Investing activities:
Capital expenditures, including internal-use software and website development		(456	)			(315	)
Purchases of investments		—				(60	)
Sales and maturities of investments		22				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		46				(73	)
Net cash used in investing activities		(388	)			(248	)
Financing activities:
Payment of long-term debt		—				(1,724	)
Debt extinguishment costs		—				(20	)
Purchases of treasury stock		(1,062	)			(69	)
Proceeds from exercise of equity awards and employee stock purchase plan		40				114
Other, net		4				12
Net cash used in financing activities		(1,018	)			(1,687	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents		10				(165	)
Net increase in cash, cash equivalents and restricted cash and cash equivalents		2,907				2,519
Cash, cash equivalents and restricted cash and cash equivalents at beginning of period		5,851				5,805
Cash, cash equivalents and restricted cash and cash equivalents at end of period	$	8,758			$	8,324
Supplemental cash flow information
Cash paid for interest	$	115			$	167
Income tax payments, net		193				56

Notes & Definitions:

Booked Room Nights: Booked room nights represent booked hotel room nights and property nights for our B2C reportable segment and booked hotel room nights for our B2B reportable segment. Booked hotel room nights include both merchant and agency hotel room nights. Property nights are related to our alternative accommodation business.

Booked Air Tickets: Includes both merchant and agency air bookings.

Gross Bookings: Gross bookings generally represent the total retail value of transactions booked, recorded at the time of booking reflecting the total price due for travel by travelers, including taxes, fees and other charges, adjusted for cancellations and refunds.

Lodging Metrics: Reported on a booked basis except for revenue, which is on a stayed basis. Lodging consists of both merchant and agency model hotel and alternative accommodations.

B2C: The B2C segment (formerly referred to as Retail) provides a full range of travel and advertising services to our worldwide customers through a variety of consumer brands including: Expedia, Hotels.com, Vrbo, Orbitz, Travelocity, Wotif Group, ebookers, Hotwire.com, and CarRentals.com.

B2B: The B2B segment is comprised of Expedia Partner Solutions, which operates private label and co-branded programs to make travel services available to leisure travelers though third-party company branded websites and Egencia through its sale on November 1, 2021. In addition, this segment also includes Expedia Cruises and Traveldoo.

trivago: The trivago segment generates advertising revenue primarily from sending referrals to online travel companies and travel service providers from its localized hotel metasearch websites.

Corporate: Includes unallocated corporate expenses.

Definitions of Non-GAAP Measures

Expedia Group reports Adjusted EBITDA, Leverage Ratio, Adjusted Net Income (Loss), Adjusted EPS, Free Cash Flow and Adjusted Expenses (non-GAAP cost of revenue, non-GAAP selling and marketing, non-GAAP technology and content and non-GAAP general and administrative), all of which are supplemental measures to GAAP and are defined by the SEC as non-GAAP financial measures. These measures are among the primary metrics by which management evaluates the performance of the business and on which internal budgets are based. Management believes that investors should have access to the same set of tools that management uses to analyze our results. These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP. Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted EPS have certain limitations in that they do not take into account the impact of certain expenses to our consolidated statements of operations. We endeavor to compensate for the limitation of the non-GAAP measures presented by also providing the most directly comparable GAAP measures and descriptions of the reconciling items and adjustments to derive the non-GAAP measures. Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted EPS also exclude certain items related to transactional tax matters, which may ultimately be settled in cash. We urge investors to review the detailed disclosure regarding these matters in the Management Discussion and Analysis and Legal Proceedings sections, as well as the notes to the financial statements, included in the Company's annual and quarterly reports filed with the Securities and Exchange Commission. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

Adjusted EBITDA is defined as net income (loss) attributable to Expedia Group adjusted for:

(1) net income (loss) attributable to non-controlling interests;

(2) provision for income taxes;

(3) total other expenses, net;

(4) stock-based compensation expense, including compensation expense related to certain subsidiary equity plans;

(5) acquisition-related impacts, including

(i) amortization of intangible assets and goodwill and intangible asset impairment,

(ii) gains (losses) recognized on changes in the value of contingent consideration arrangements; and

(iii) upfront consideration paid to settle employee compensation plans of the acquiree;

(6) certain other items, including restructuring;

(7) items included in legal reserves, occupancy tax and other, which includes reserves for potential settlement of issues related to transactional taxes (e.g. hotel and excise taxes), related to court decisions and final settlements, and charges incurred, if any, for monies that may be required to be paid in advance of litigation in certain transactional tax proceedings;

(8) that portion of gains (losses) on revenue hedging activities that are included in other, net that relate to revenue recognized in the period; and

(9) depreciation.

The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, or because the amount and timing of these items is unpredictable, not driven by core operating results and renders comparisons with prior periods and competitors less meaningful. We believe Adjusted EBITDA is a useful measure for analysts and investors to evaluate our future on-going performance as this measure allows a more meaningful comparison of our performance and projected cash earnings with our historical results from prior periods and to the results of our competitors. Moreover, our management uses this measure internally to evaluate the performance of our business as a whole and our individual business segments. In addition, we believe that by excluding certain items, such as stock-based compensation and acquisition-related impacts, Adjusted EBITDA corresponds more closely to the cash operating income generated from our business and allows investors to gain an understanding of the factors and trends affecting the ongoing cash earnings capabilities of our business, from which capital investments are made and debt is serviced.

Trailing Twelve Month Financial Information

Expedia Group includes certain unaudited financial information for the trailing twelve months ("TTM") ended June 30, 2023, which is calculated as the six months ended June 30, 2023 plus the year ended December 31, 2022 less the six months ended June 30, 2022. This presentation is not in accordance with GAAP. However, we believe that this presentation provides useful information to investors regarding its recent financial performance, and it views this presentation of the four most recently completed fiscal quarters as a key measurement period for investors to assess its historical results.

Adjusted Net Income (Loss) generally captures all items on the statements of operations that occur in normal course operations and have been, or ultimately will be, settled in cash and is defined as net income (loss) attributable to Expedia Group plus the following items, net of tax^(a):

(1) stock-based compensation expense, including compensation expense related to equity plans of certain subsidiaries and equity-method investments;

(2) acquisition-related impacts, including;

(i) amortization of intangible assets, including as part of equity-method investments, and goodwill and intangible asset impairment;

(ii) gains (losses) recognized on changes in the value of contingent consideration arrangements;

(iii) upfront consideration paid to settle employee compensation plans of the acquiree; and

(iv) gains (losses) recognized on non-controlling investment basis adjustments when we acquire or lose controlling interests;

(3) currency gains or losses on U.S. dollar denominated cash;

(4) the changes in fair value of equity investments;

(5) certain other items, including restructuring charges;

(6) items included in legal reserves, occupancy tax and other, which includes reserves for potential settlement of issues related to transactional taxes (e.g., hotel occupancy and excise taxes), related court decisions and final settlements, and charges incurred, if any, for monies that may be required to be paid in advance of litigation in certain transactional tax proceedings, including as part of equity method investments;

(7) discontinued operations;

(8) the non-controlling interest impact of the aforementioned adjustment items; and

(9) unrealized gains (losses) on revenue hedging activities that are included in other, net.

Adjusted Net Income (Loss) includes preferred share dividends. We believe Adjusted Net Income (Loss) is useful to investors because it represents Expedia Group's combined results, taking into account depreciation, which management believes is an ongoing cost of doing business, but excluding the impact of certain expenses and items not directly tied to the core operations of our businesses.

^(a) Effective January 1, 2023, we changed our methodology for the computation of the effective tax rate on pretax adjusted net income to a long-term projected tax rate as our management believes this tax rate provides better consistency across reporting periods and produces results that are reflective of Expedia Group’s long-term effective tax rate. This projected effective tax rate excludes the income tax effects of Adjusted Net Income items described above and eliminates the effects of non-recurring and period specific items which can vary in size and frequency. Based on our current long-term projections, we are using an effective tax rate on pretax adjusted net income of 21.5% for 2023.

Adjusted EPS is defined as Adjusted Net Income (Loss) divided by adjusted weighted average shares outstanding, which, when applicable, include dilution from our convertible debt instruments per the treasury stock method for Adjusted EPS. The treasury stock method assumes we would elect to settle the principal amount of the debt for cash and the conversion premium for shares. If the conversion prices for such instruments exceed our average stock price for the period, the instruments generally would have no impact to adjusted weighted average shares outstanding. This differs from the GAAP method for dilution from our convertible debt instruments, which include them on an if-converted method. We believe Adjusted EPS is useful to investors because it represents, on a per share basis, Expedia Group's consolidated results, taking into account depreciation, which we believe is an ongoing cost of doing business, as well as other items which are not allocated to the operating businesses such as interest expense, taxes, foreign exchange gains or losses, and minority interest, but excluding the effects of certain expenses not directly tied to the core operations of our businesses. Adjusted Net Income (Loss) and Adjusted EPS have similar limitations as Adjusted EBITDA. In addition, Adjusted Net Income (Loss) does not include all items that affect our net income (loss) and net income (loss) per share for the period. Therefore, we think it is important to evaluate these measures along with our consolidated statements of operations.

Free Cash Flow is defined as net cash flow provided by operating activities less capital expenditures. Management believes Free Cash Flow is useful to investors because it represents the operating cash flow that our operating businesses generate, less capital expenditures but before taking into account other cash movements that are not directly tied to the core operations of our businesses, such as financing activities, foreign exchange or certain investing activities. Free Cash Flow has certain limitations in that it does not represent the total increase or decrease in the cash balance for the period, nor does it represent the residual cash flow for discretionary expenditures. Therefore, it is important to evaluate Free Cash Flow along with the consolidated statements of cash flows.

Adjusted Expenses (cost of revenue, direct and indirect selling and marketing, technology and content and general and administrative expenses) exclude stock-based compensation related to expenses for stock options, restricted stock units and other equity compensation under applicable stock-based compensation accounting standards. Expedia Group excludes stock-based compensation from these measures primarily because they are non-cash expenses that we do not believe are necessarily reflective of our ongoing cash operating expenses and cash operating income. Moreover, because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use when adopting applicable stock-based compensation accounting standards, management believes that providing non-GAAP financial measures that exclude stock-based compensation allows investors to make meaningful comparisons between our recurring core business operating results and those of other companies, as well as providing management with an important tool for financial operational decision making and for evaluating our own recurring core business operating results over different periods of time. There are certain limitations in using financial measures that do not take into account stock-based compensation, including the fact that stock-based compensation is a recurring expense and a valued part of employees' compensation. Therefore, it is important to evaluate both our GAAP and non-GAAP measures. See the Notes to the Consolidated Statements of Operations for stock-based compensation by line item.

Expedia Group, Inc. (excluding trivago) In order to provide increased transparency on the transaction-based component of the business, Expedia Group is reporting results both in total and excluding trivago.

In addition, we evaluate certain operating and financial measures, including revenue growth, on both an as-reported and excluding the impact of foreign exchange, FX neutral, basis. FX neutral results are among the primary metrics by which management evaluates the performance of the business and management believes that investors should have access to the same set of tools that management uses to analyze our results. We estimate FX neutral revenue growth by (i) excluding the FX impacts resulting from the time period between a transaction's booking date and revenue recognition date for both the current and prior year periods, and (ii) converting our current-year period results for transactions recorded in currencies other than U.S. Dollars using the corresponding prior-year period exchange rates rather than the current-year period exchange rates.

Tabular Reconciliations for Non-GAAP Measures

Adjusted EBITDA (Adjusted Earnings Before Interest, Taxes, Depreciation & Amortization) by Segment⁽¹⁾

	Three months ended June 30, 2023
	B2C				B2B				trivago				Corporate & Eliminations				Total
	(In millions)
Operating income (loss)	$	529			$	175			$	12			$	(273	)		$	443
Realized gain (loss) on revenue hedges		(6	)			4				—				—				(2	)
Legal reserves, occupancy tax and other		—				—				—				1				1
Stock-based compensation		—				—				—				106				106
Amortization of intangible assets		—				—				—				15				15
Depreciation		130				27				1				26				184
Adjusted EBITDA(1)	$	653			$	206			$	13			$	(125	)		$	747

	Three months ended June 30, 2022
	B2C				B2B				trivago				Corporate & Eliminations				Total
	(In millions)
Operating income (loss)	$	470			$	139			$	30			$	(294	)		$	345
Realized gain (loss) on revenue hedges		(15	)			(3	)			—				—				(18	)
Legal reserves, occupancy tax and other		—				—				—				2				2
Stock-based compensation		—				—				—				93				93
Amortization of intangible assets		—				—				—				21				21
Depreciation		127				20				3				26				176
Impairment of intangible assets		—				—				—				29				29
Adjusted EBITDA(1)	$	582			$	156			$	33			$	(123	)		$	648

(1) Adjusted EBITDA for our B2C and B2B segments includes allocations of certain expenses, primarily cost of revenue and facilities, the total costs of our global travel supply organizations, the majority of platform and marketplace technology 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.

Adjusted EBITDA (Adjusted Earnings Before Interest, Taxes, Depreciation & Amortization)

		Three months ended June 30,								Six months ended June 30,								Year Ended December 31,				TTM June 30,
			2023				2022				2023				2022				2022				2023
		($ in millions)
Net income (loss) attributable to Expedia Group, Inc.		$	385			$	(185	)		$	240			$	(307	)		$	352			$	899
Net income (loss) attributable to non-controlling interests			2				—				7				(1	)			(9	)			(1	)
Provision for income taxes			77				58				156				(27	)			195				378
Total other (income) expense, net			(21	)			472				(81	)			545				547				(79	)
Operating income			443				345				322				210				1,085				1,197
Gain (loss) on revenue hedges related to revenue recognized			(2	)			(18	)			4				(18	)			(6	)			16
Legal reserves, occupancy tax and other			1				2				6				23				23				6
Stock-based compensation			106				93				209				183				374				400
Depreciation and amortization			199				197				391				394				792				789
Impairment of intangible assets			—				29				—				29				81				52
Adjusted EBITDA		$	747			$	648			$	932			$	821			$	2,349			$	2,460
Net income margin(1)			11.5	%			(5.8	)%			4.0	%			(5.6	)%			3.0	%			7.3	%
Adjusted EBITDA margin(1)			22.2	%			20.4	%			15.5	%			15.1	%			20.1	%			20.1	%
Long-term debt																						$	6,247
Long-term debt to net income ratio																							7.0
Long-term debt																						$	6,247
Unamortized discounts and debt issuance costs																							47
Adjusted debt																						$	6,294
Leverage ratio(2)																							2.6

(1) Net income and Adjusted EBITDA margins represent net income (loss) attributable to Expedia Group, Inc. or Adjusted EBITDA divided by revenue.

(2) Leverage ratio represents adjusted debt divided by TTM Adjusted EBITDA.

Adjusted Net Income (Loss) & Adjusted EPS

		Three months ended June 30,								Six months ended June 30,
			2023				2022				2023				2022
		(In millions, except share and per share data)
Net income (loss) attributable to Expedia Group, Inc.		$	385			$	(185	)		$	240			$	(307	)
Less: Net (income) loss attributable to non-controlling interests			(2	)			—				(7	)			1
Less: Provision for income taxes			(77	)			(58	)			(156	)			27
Income (loss) before income taxes			464				(127	)			403				(335	)
Amortization of intangible assets			15				21				30				43
Stock-based compensation			106				93				209				183
Legal reserves, occupancy tax and other			1				2				6				23
Impairment of intangible assets			—				29				—				29
Unrealized (gain) loss on revenue hedges			17				(13	)			15				(6	)
(Gain) loss on minority equity investments, net			(53	)			373				(54	)			352
Loss on debt extinguishment, net			—				24				—				24
TripAdvisor tax indemnification adjustment			2				—				(67	)			—
Gain on sale of business			(4	)			—				(24	)			(2	)
Adjusted income before income taxes			548				402				518				311
GAAP Provision for income taxes			(77	)			(58	)			(156	)			27
Provision for income taxes for adjustments			(40	)			(25	)			45				(86	)
Total Adjusted provision for income taxes			(117	)			(83	)			(111	)			(59	)
Total Adjusted income tax rate			21.5	%			20.8	%			21.5	%			19.2	%
Non-controlling interests			(3	)			(9	)			(9	)			(16	)
Adjusted net income attributable to Expedia Group, Inc.		$	428			$	310			$	398			$	236
GAAP diluted weighted average shares outstanding (000's)			151,844				157,290				154,425				156,831
Adjustment to dilutive securities (000's)			(3,921	)			1,227				(3,921	)			2,071
Adjusted weighted average shares outstanding (000's)			147,923				158,517				150,504				158,902
GAAP diluted earnings (loss) per share		$	2.54			$	(1.17	)		$	1.55			$	(1.96	)
Adjusted earnings per share attributable to Expedia Group, Inc.		$	2.89			$	1.96			$	2.64			$	1.49
Ex-trivago Adjusted Net Income and Adjusted EPS
Adjusted net income attributable to Expedia Group, Inc.		$	428			$	310			$	398			$	236
Less: Adjusted net income attributable to trivago			7				15				16				29
Adjusted net income excluding trivago		$	421			$	295			$	382			$	207
Adjusted earnings per share attributable to Expedia Group, Inc.		$	2.89			$	1.96			$	2.64			$	1.49
Less: Adjusted earnings per share attributable to trivago			0.05				0.10				0.11				0.18
Adjusted earnings per share excluding trivago		$	2.84			$	1.86			$	2.53			$	1.30

Free Cash Flow

		Three months ended June 30,								Six months ended June 30,
			2023				2022				2023				2022
		(In millions)
Net cash provided by operating activities		$	1,146			$	1,628			$	4,303			$	4,619
Less: Total capital expenditures			(223	)			(159	)			(456	)			(315	)
Free cash flow		$	923			$	1,469			$	3,847			$	4,304

Adjusted Expenses (Cost of revenue, direct and indirect selling and marketing, technology and content and general and administrative expenses)

		Three months ended June 30,								Six months ended June 30,
			2023				2022				2023				2022
		(In millions)
Cost of revenue		$	407			$	419			$	821			$	790
Less: stock-based compensation			4				3				7				6
Adjusted cost of revenue		$	403			$	416			$	814			$	784
Less: trivago cost of revenue(1)			4				4				9				8
Adjusted cost of revenue excluding trivago		$	399			$	412			$	805			$	776
Selling and marketing expense - direct		$	1,579			$	1,549			$	3,066			$	2,725
Selling and marketing expense - indirect			191				167				378				330
Selling and marketing expense			1,770				1,716				3,444				3,055
Less: stock-based compensation			20				17				40				32
Adjusted selling and marketing expense		$	1,750			$	1,699			$	3,404			$	3,023
Less: trivago selling and marketing expense(1)(2)			44				53				75				80
Adjusted selling and marketing expense excluding trivago		$	1,706			$	1,646			$	3,329			$	2,943
Technology and content expense		$	344			$	284			$	661			$	554
Less: stock-based compensation			36				27				70				54
Adjusted technology and content expense		$	308			$	257			$	591			$	500
Less: trivago technology and content expense(1)			12				12				23				25
Adjusted technology and content expense excluding trivago		$	296			$	245			$	568			$	475
General and administrative expense		$	194			$	189			$	378			$	375
Less: stock-based compensation			46				46				92				91
Adjusted general and administrative expense		$	148			$	143			$	286			$	284
Less: trivago general and administrative expense(1)			9				8				17				16
Adjusted general and administrative expense excluding trivago		$	139			$	135			$	269			$	268
Total adjusted overhead expenses(3)		$	627			$	550			$	1,215			$	1,082

Note: Some numbers may not add due to rounding.

(1) trivago amount presented without stock-based compensation as those are included with the consolidated totals above.

(2) Selling and marketing expense adjusted to add back B2C direct marketing spend on trivago eliminated in consolidation.

(3) Total adjusted overhead expenses is the sum of adjusted expenses for Selling and marketing - indirect, Technology and content, and General and administrative.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

This release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These forward-looking statements are based on assumptions that are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. The use of words such as “believe,” “estimate,” “expect” and “will,” or the negative of these terms or other similar expressions, among others, generally identify forward-looking statements. However, these words are not the exclusive means of identifying such statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements and may include statements relating to future revenues, expenses, margins, profitability, net income (loss), earnings per share and other measures of results of operations and the prospects for future growth of Expedia Group, Inc.’s business. Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, those described in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our most recently filed periodic reports on Form 10-K and Form 10-Q, which are available on our investor relations website at ir.expediagroup.com and on the SEC website at www.sec.gov. All information provided in this release is as of August 3, 2023. Undue reliance should not be placed on forward-looking statements in this release, which are based on information available to us on the date hereof. We undertake no duty to update this information unless required by law.

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