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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
OR 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-37429
 
 
 
EXPEDIA GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
20-2705720
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer Identification No.)
1111 Expedia Group Way W.
Seattle, WA 98119
(Address of principal executive office) (Zip Code)
(206) 481-7200
(Registrant’s telephone number, including area code)
__________________________________ 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes         No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
  
Accelerated filer
 
Non-accelerated filer
 
  
Smaller reporting company
 
Emerging growth company
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading symbol(s)
 
Name of each exchange on which registered
Common stock, $0.0001 par value
 
EXPE
 
The Nasdaq Global Select Market
Expedia Group, Inc. 2.500% Senior Notes due 2022
 
EXPE22
 
New York Stock Exchange
The number of shares outstanding of each of the registrant’s classes of common stock as of July 17, 2020 was:
 
Common stock, $0.0001 par value per share
 
135,703,255

shares
 
Class B common stock, $0.0001 par value per share
 
5,523,452

shares
 
 
 
 
 



Expedia Group, Inc.
Form 10-Q
For the Quarter Ended June 30, 2020
Contents
 
 
 
 
Part I
 
 
 
 
Item 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2
 
 
 
Item 3
 
 
 
Item 4
 
 
 
Part II
 
 
 
 
Item 1
 
 
 
Item 1A
 
 
 
Item 2
 
 
 
Item 6




Part I. Item 1. Consolidated Financial Statements
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,
 
2020
 
2019
 
2020
 
2019
 
 
 
 
 
 
 
 
Revenue
$
566

 
$
3,153

 
$
2,775

 
$
5,762

Costs and expenses:
 
 
 
 
 
 
 
Cost of revenue (exclusive of depreciation and amortization shown separately below) (1)
389

 
500

 
1,018

 
990

Selling and marketing (1)
296

 
1,643

 
1,506

 
3,164

Technology and content (1)
255

 
304

 
563

 
601

General and administrative (1)
152

 
205

 
339

 
389

Depreciation and amortization
232

 
228

 
461

 
456

Impairment of goodwill
20

 

 
785

 

Impairment of intangible assets
10

 

 
131

 

Legal reserves, occupancy tax and other
8

 
4

 
(13
)
 
14

Restructuring and related reorganization charges
53

 
4

 
128

 
14

Operating income (loss)
(849
)
 
265

 
(2,143
)
 
134

Other income (expense):
 
 
 
 
 
 
 
Interest income
3

 
17

 
13

 
28

Interest expense
(95
)
 
(39
)
 
(145
)
 
(80
)
Other, net
(12
)
 
(8
)
 
(157
)
 
12

Total other expense, net
(104
)
 
(30
)
 
(289
)
 
(40
)
Income (loss) before income taxes
(953
)
 
235

 
(2,432
)
 
94

Provision for income taxes
213

 
(48
)
 
295

 
(7
)
Net income (loss)
(740
)
 
187

 
(2,137
)
 
87

Net (income) loss attributable to non-controlling interests
4

 
(4
)
 
100

 
(7
)
Net income (loss) attributable to Expedia Group, Inc.
(736
)
 
183

 
(2,037
)
 
80

Preferred stock dividend
(17
)
 

 
(17
)
 

Net income (loss) attributable to Expedia Group, Inc. common stockholders
$
(753
)
 
$
183

 
$
(2,054
)
 
$
80

 
 
 
 
 
 
 
 
Earnings (loss) per share attributable to Expedia Group, Inc. available to common stockholders
 
 
 
 
 
 
 
Basic
$
(5.34
)
 
$
1.23

 
$
(14.57
)
 
$
0.54

Diluted
(5.34
)
 
1.21

 
(14.57
)
 
0.53

Shares used in computing earnings (loss) per share (000's):
 
 
 
 
 
 
 
Basic
141,072

 
149,049

 
140,947

 
148,468

Diluted
141,072

 
151,561

 
140,947

 
151,057

_______
(1) Includes stock-based compensation as follows:
 
 
 
 
 
 
 
Cost of revenue
$
3

 
$
3

 
$
6

 
$
6

Selling and marketing
13

 
12

 
25

 
23

Technology and content
18

 
19

 
38

 
38

General and administrative
20

 
25

 
40

 
48

See accompanying notes.

2


EXPEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)
(Unaudited)
 
 
Three months ended
June 30,
 
Six months ended
June 30,
 
2020
 
2019
 
2020
 
2019
Net income (loss)
$
(740
)
 
$
187

 
$
(2,137
)
 
$
87

Currency translation adjustments, net of tax(1)
34

 
7

 
(56
)
 
2

Comprehensive income (loss)
(706
)
 
194

 
(2,193
)
 
89

Less: Comprehensive income (loss) attributable to non-controlling interests
2

 
10

 
(100
)
 
5

Less: Preferred stock dividend
17

 

 
17

 

Comprehensive income (loss) attributable to Expedia Group, Inc. common stockholders
$
(725
)
 
$
184

 
$
(2,110
)
 
$
84

 
(1)
Currency translation adjustments include tax benefit of $3 million and $1 million associated with net investment hedges for the three and six months ended June 30, 2020 and tax benefit of $2 million and tax expense of $1 million for the three and six months ended June 30, 2019.


See accompanying notes.

3


EXPEDIA GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except number of shares, which are reflected in thousands, and par value)
 
June 30,
2020
 
December 31,
2019
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
5,053

 
$
3,315

Restricted cash and cash equivalents
1,311

 
779

Short-term investments
422

 
526

Accounts receivable, net of allowance of $115 and $41
1,002

 
2,524

Income taxes receivable
107

 
70

Prepaid expenses and other current assets
1,049

 
521

Total current assets
8,944

 
7,735

Property and equipment, net
2,305

 
2,198

Operating lease right-of-use assets
626

 
611

Long-term investments and other assets
618

 
796

Deferred income taxes
482

 
145

Intangible assets, net
1,600

 
1,804

Goodwill
7,330

 
8,127

TOTAL ASSETS
$
21,905

 
$
21,416

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable, merchant
$
531

 
$
1,921

Accounts payable, other
518

 
906

Deferred merchant bookings
4,632

 
5,679

Deferred revenue
197

 
321

Income taxes payable
78

 
88

Accrued expenses and other current liabilities
1,166

 
1,050

Current maturities of long-term debt
750

 
749

Total current liabilities
7,872

 
10,714

Long-term debt, excluding current maturities
6,903

 
4,189

Revolving credit facility
1,900

 

Deferred income taxes
74

 
56

Operating lease liabilities
543

 
532

Other long-term liabilities
388

 
389

Commitments and contingencies

 

Series A Preferred Stock: $.001 par value, Authorized shares: 100,000; Shares issued and outstanding: 1,200 and 0
1,022

 

Stockholders’ equity:
 
 
 
Common stock: $.0001 par value; Authorized shares: 1,600,000

 

Shares issued: 259,085 and 256,692; Shares outstanding: 135,691 and 137,076
 
 
 
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
13,300

 
12,978

Treasury stock - Common stock and Class B, at cost; Shares 130,670 and 126,893
(10,087
)
 
(9,673
)
Retained earnings (deficit)
(1,206
)
 
879

Accumulated other comprehensive income (loss)
(273
)
 
(217
)
Total Expedia Group, Inc. stockholders’ equity
1,734

 
3,967

Non-redeemable non-controlling interests
1,469

 
1,569

Total stockholders’ equity
3,203

 
5,536

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
21,905

 
$
21,416

See accompanying notes.

4


EXPEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In millions, except share and per share data)
(Unaudited)
Three months ended June 30, 2019
 
Common stock
 
Class B
common stock
 
Additional
paid-in
capital
 
Treasury stock
 
Retained
earnings
(deficit)
 
Accumulated
other
comprehensive
income (loss)
 
Non-redeemable
non-controlling
interest
 
Total
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Balance as of March 31, 2019
 
233,294,034

 
$

 
12,799,999

 
$

 
$
9,694

 
97,355,708

 
$
(5,767
)
 
$
373

 
$
(217
)
 
$
1,551

 
$
5,634

Net income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
183

 
 
 
4

 
187

Other comprehensive income (loss), net of taxes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1

 
6

 
7

Payment of dividends to common stockholders (declared at $0.32 per share)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(48
)
 
 
 
 
 
(48
)
Proceeds from exercise of equity instruments and employee stock purchase plans
 
808,152

 

 
 
 
 
 
65

 
 
 
 
 
 
 
 
 
 
 
65

Withholding taxes for stock options
 
 
 
 
 
 
 
 
 
(2
)
 
 
 
 
 
 
 
 
 
 
 
(2
)
Treasury stock activity related to vesting of equity instruments
 
 
 
 
 
 
 
 
 
 
 
28,504

 
(4
)
 
 
 
 
 
 
 
(4
)
Other changes in ownership of non-controlling interests
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
4

 
4

Stock-based compensation expense
 
 
 
 
 
 
 
 
 
63

 
 
 
 
 
 
 
 
 
 
 
63

Other
 
 
 
 
 
 
 
 
 
1

 
 
 


 


 
 
 
 
 
1

Balance as of June 30, 2019
 
234,102,186

 
$

 
12,799,999

 
$

 
$
9,821

 
97,384,212

 
$
(5,771
)
 
$
508

 
$
(216
)
 
$
1,565

 
$
5,907




Six months ended June 30, 2019
 
Common stock
 
Class B
common stock
 
Additional
paid-in
capital
 
Treasury stock
 
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, 2018
 
231,492,986

 
$

 
12,799,999

 
$

 
$
9,549

 
97,158,586

 
$
(5,742
)
 
$
517

 
$
(220
)
 
$
1,547

 
$
5,651

Net income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
80

 
 
 
7

 
87

Other comprehensive income (loss), net of taxes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4

 
(2
)
 
2

Payment of dividends to common stockholders (declared at $0.64 per share)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(95
)
 
 
 
 
 
(95
)
Proceeds from exercise of equity instruments and employee stock purchase plans
 
2,609,200

 

 
 
 
 
 
156

 
 
 
 
 
 
 
 
 
 
 
156

Withholding taxes for stock options
 
 
 
 
 
 
 
 
 
(2
)
 
 
 
 
 
 
 
 
 
 
 
(2
)
Treasury stock activity related to vesting of equity instruments
 
 
 
 
 
 
 
 
 
 
 
225,626

 
(29
)
 
 
 
 
 
 
 
(29
)
Other changes in ownership of non-controlling interests
 
 
 
 
 
 
 
 
 
(3
)
 
 
 
 
 
 
 
 
 
13

 
10

Impact of adoption of new accounting guidance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6

 
 
 
 
 
6

Stock-based compensation expense
 
 
 
 
 
 
 
 
 
119

 
 
 
 
 
 
 
 
 
 
 
119

Other
 
 
 
 
 
 
 
 
 
2

 
 
 
 
 
 
 
 
 
 
 
2

Balance as of June 30, 2019
 
234,102,186

 
$

 
12,799,999

 
$

 
$
9,821

 
97,384,212

 
$
(5,771
)
 
$
508

 
$
(216
)
 
$
1,565

 
$
5,907







5



EXPEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In millions, except share and per share data)
(Unaudited)
Three months ended June 30, 2020
 
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 March 31, 2020
 
258,769,812

 
$

 
12,799,999

 
$

 
$
13,124

 
130,592,112

 
$
(10,083
)
 
$
(470
)
 
$
(301
)
 
$
1,471

 
$
3,741

Net income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(736
)
 
 
 
(4
)
 
(740
)
Other comprehensive income (loss), net of taxes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
28

 
6

 
34

Payment of preferred dividends (declared at $14.02 per share)
 
 
 
 
 
 
 
 
 
(17
)
 
 
 
 
 
 
 
 
 
 
 
(17
)
Proceeds from exercise of equity instruments and employee stock purchase plans
 
315,120

 

 
 
 
 
 
10

 
 
 
 
 
 
 
 
 
 
 
10

Common stock warrants, net of issuance costs
 
 
 
 
 
 
 
 
 
110

 
 
 
 
 
 
 
 
 
 
 
110

Treasury stock activity related to vesting of equity instruments
 
 
 
 
 
 
 
 
 
 
 
57,631

 
(4
)
 
 
 
 
 
 
 
(4
)
Adjustment to the fair value of redeemable non-controlling interests
 
 
 
 
 
 
 
 
 
4

 
 
 
 
 
 
 
 
 
 
 
4

Other changes in ownership of non-controlling interests
 
 
 
 
 
 
 
 
 
9

 
 
 
 
 
 
 
 
 
(4
)
 
5

Stock-based compensation expense
 
 
 
 
 
 
 
 
 
59

 
 
 
 
 
 
 
 
 
 
 
59

Other
 
 
 
 
 
 
 
 
 
1

 
20,630

 

 
 
 
 
 
 
 
1

Balance as of June 30, 2020
 
259,084,932

 
$

 
12,799,999

 
$

 
$
13,300

 
130,670,373

 
$
(10,087
)
 
$
(1,206
)
 
$
(273
)
 
$
1,469

 
$
3,203

Six months ended June 30, 2020
 
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, 2019
 
256,691,777

 
$

 
12,799,999

 
$

 
$
12,978

 
126,892,525

 
$
(9,673
)
 
$
879

 
$
(217
)
 
$
1,569

 
$
5,536

Net income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2,037
)
 
 
 
(100
)
 
(2,137
)
Other comprehensive income (loss), net of taxes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(56
)
 

 
(56
)
Payment of dividends to common stockholders (declared at $0.34 per share)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(48
)
 
 
 
 
 
(48
)
Payment of preferred dividends (declared at $14.02 per share)
 
 
 
 
 
 
 
 
 
(17
)
 
 
 
 
 
 
 
 
 
 
 
(17
)
Proceeds from exercise of equity instruments and employee stock purchase plans
 
2,393,155

 

 
 
 
 
 
96

 
 
 
 
 
 
 
 
 
 
 
96

Common stock warrants, net of issuance costs
 
 
 
 
 
 
 
 
 
110

 
 
 
 
 
 
 
 
 
 
 
110

Treasury stock activity related to vesting of equity instruments
 
 
 
 
 
 
 
 
 
 
 
393,099

 
$
(44
)
 
 
 
 
 
 
 
(44
)
Common stock repurchases
 
 
 
 
 
 
 
 
 
 
 
3,364,119

 
(370
)
 
 
 
 
 
 
 
(370
)
Adjustment to the fair value of redeemable non-controlling interests
 
 
 
 
 
 
 
 
 
4

 
 
 
 
 
 
 
 
 
 
 
4

Other changes in ownership of non-controlling interests
 
 
 
 
 
 
 
 
 
10

 
 
 
 
 
 
 
 
 

 
10

Stock-based compensation expense
 
 
 
 
 
 
 
 
 
118

 
 
 
 
 
 
 
 
 
 
 
118

Other
 
 
 
 
 
 
 
 
 
1

 
20,630

 

 
 
 
 
 
 
 
1

Balance as of June 30, 2020
 
259,084,932

 
$

 
12,799,999

 
$

 
$
13,300

 
130,670,373

 
$
(10,087
)
 
$
(1,206
)
 
$
(273
)
 
$
1,469

 
$
3,203

See accompanying notes.

6


EXPEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
Six months ended
June 30,
 
2020
 
2019
Operating activities:
 
 
 
Net income (loss)
$
(2,137
)
 
$
87

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 
 
 
Depreciation of property and equipment, including internal-use software and website development
376

 
352

Amortization of intangible assets
85

 
104

Impairment of goodwill and intangible assets
916

 

Amortization of stock-based compensation
109

 
115

Deferred income taxes
(279
)
 
(15
)
Foreign exchange (gain) loss on cash, restricted cash and short-term investments, net
65

 
(13
)
Realized gain on foreign currency forwards
(79
)
 
(16
)
(Gain) loss on minority equity investments, net
195

 
(12
)
Provision for credit losses and other, net
119

 
(13
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
1,479

 
(742
)
Prepaid expenses and other assets
(585
)
 
(7
)
Accounts payable, merchant
(1,389
)
 
271

Accounts payable, other, accrued expenses and other liabilities
(244
)
 
436

Tax payable/receivable, net
(82
)
 
(143
)
Deferred merchant bookings
(1,058
)
 
2,726

Deferred revenue
(121
)
 
157

Net cash provided by (used in) operating activities
(2,630
)
 
3,287

Investing activities:
 
 
 
Capital expenditures, including internal-use software and website development
(493
)
 
(573
)
Purchases of investments
(685
)
 
(636
)
Sales and maturities of investments
761

 
27

Other, net
76

 
16

Net cash provided by (used in) investing activities
(341
)
 
(1,166
)
Financing activities:
 
 
 
Revolving credit facility borrowings
1,900

 

Proceeds from issuance of long-term debt, net of issuance costs
2,714

 

Net proceeds from issuance of preferred stock and warrants
1,132

 

Purchases of treasury stock
(414
)
 
(29
)
Payment of dividends to common stockholders
(48
)
 
(95
)
Payment of preferred stock dividends
(17
)
 

Proceeds from exercise of equity awards and employee stock purchase plan
96

 
156

Other, net
(30
)
 
2

Net cash provided by financing activities
5,333

 
34

Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents
(93
)
 
20

Net increase in cash, cash equivalents and restricted cash and cash equivalents
2,269

 
2,175

Cash, cash equivalents and restricted cash and cash equivalents at beginning of period
4,097

 
2,705

Cash, cash equivalents and restricted cash and cash equivalents at end of period
$
6,366

 
$
4,880

Supplemental cash flow information
 
 
 
Cash paid for interest
$
118

 
$
87

Income tax payments, net
63

 
157

See accompanying notes.

7


Notes to Consolidated Financial Statements
June 30, 2020
(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®, Egencia®, trivago®, HomeAway®, Orbitz®, Travelocity®, Hotwire®, Wotif®, ebookers®, CheapTickets®, Expedia Group™ Media Solutions, Expedia Local Expert®, CarRentals.comTM, Expedia® CruiseShipCenters®, Classic Vacations®, Traveldoo®, VacationRentals.com and SilverRailTM. In addition, many of these brands have related international points of sale. We refer to Expedia Group, Inc. and its subsidiaries collectively as “Expedia Group,” the “Company,” “us,” “we” and “our” in these consolidated financial statements.
COVID-19
During the quarter ended June 30, 2020, travel booking volumes remain significantly below prior year levels and cancellation levels remain elevated compared to pre-COVID levels. We have seen varying degrees of containment of the virus in certain countries and some signs of travel recovery; however, the degree of containment and the recovery in travel, has varied country to country and there have been instances where cases of COVID-19 have started to increase again after a period of decline. Additionally, many travel restrictions and quarantine orders remain in place. Overall, the full duration and total impact of COVID-19 remains uncertain and it is difficult to predict how the recovery will unfold for the travel industry and, in particular, our business.
Due to the high degree of cancellations and customer refunds and lower new bookings in the merchant business model, the Company experienced unfavorable working capital trends and material negative cash flow in the second quarter of 2020, although the level of negative cash flow moderated as booking trends improved and cancellations stabilized during the quarter. We expect cash flow to remain negative until the decline in new merchant bookings improves further with cancellations either remaining stable or moderating further. For a discussion on incremental credit losses and allowance impacts related to our accounts receivable and prepaid merchant bookings, see Note 2 – Summary of Significant Accounting Policies. For a discussion of goodwill and intangible asset impairments recognized in conjunction with this pandemic, see Note 3 – Fair Value Measurements. For a discussion of recent actions to strengthen our liquidity position in the current environment, see Note 4 – Debt, Note 5 – Capital Stock - Preferred Stock and Warrants, as well as Note 11 – Subsequent Events.
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 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, 2019, 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

8

Notes to Consolidated Financial Statements – (Continued)
 


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; acquisition purchase price allocations; stock-based compensation; accounting for derivative instruments and provisions for credit losses, customer refunds and chargebacks.
The COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further business disruptions and adversely impact our results of operations. As a result, many of our estimates and assumptions required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, our estimates may change materially in future periods.
Reclassifications
We have reclassified prior period financial statements to conform to the current period presentation. During the first quarter of 2020, we reclassified depreciation expense from within our operating expense line items on our consolidated statements of operations to be included with intangible asset amortization expense. The following table presents a summary of the amounts as reported and as reclassified in our consolidated statements of operations for the three and six months ended June 30, 2019:
 
Three months ended June 30, 2019
 
Six months ended June 30, 2019
 
As reported
 
As reclassified
 
As reported
 
As reclassified
 
(In millions)
Cost of revenue
$
522

 
$
500

 
$
1,035

 
$
990

Selling and marketing
1,657

 
1,643

 
3,192

 
3,164

Technology and content
435

 
304

 
864

 
601

General and administrative
214

 
205

 
405

 
389

Depreciation and amortization
52

 
228

 
104

 
456


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. Because revenue for most of our travel services, including merchant and agency hotel, is recognized as the travel takes place rather than when it is booked, revenue typically lags bookings by several weeks for our hotel business and can be several months or more for our alternative accommodations business. Historically, Vrbo has seen seasonally stronger bookings in the first quarter of the year, with the relevant stays occurring during the peak summer travel months. The seasonal revenue impact is exacerbated with respect to income by the nature of our variable cost of revenue and direct sales and marketing costs, which we typically realize in closer alignment to booking volumes, and the more stable nature of our fixed costs. Furthermore, operating profits for our primary advertising business, trivago, have typically been experienced in the second half of the year, particularly the fourth quarter, as selling and marketing costs offset revenue in the first half of the year as we typically increase marketing during the busy booking period for spring, summer and winter holiday travel. As a result on a consolidated basis, revenue and income are typically the lowest in the first quarter and highest in the third quarter. The growth of our international operations, advertising business or a change in our product mix, including the growth of Vrbo, may influence the typical trend of the seasonality in the future.
Due to COVID-19, which impacted travel bookings in the first half of 2020 and led to significant cancellations for future travel, we do not expect our typical seasonal pattern for bookings, revenue and profit during 2020. In addition, with the lower new bookings and elevated cancellations in the merchant business model, our typical, seasonal working capital source of cash has been significantly disrupted resulting in the Company experiencing unfavorable working capital trends and material negative cash flow. It is difficult to forecast the seasonality for the upcoming quarters, given the uncertainty related to the duration of the impact from COVID-19 and the shape and timing of any sustained recovery.
Note 2 – Summary of Significant Accounting Policies
Recently Adopted Accounting Policies
Measurement of Credit Losses on Financial Instruments. As of January 1, 2020, we adopted the Accounting Standards Updates (“ASU”) guidance on the measurement of credit losses for financial assets measured at amortized cost, which includes accounts receivable, and available-for-sale debt securities, using the modified retrospective method. The new guidance replaced

9

Notes to Consolidated Financial Statements – (Continued)
 


the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. Upon adoption, this new guidance did not have a material impact on our consolidated financial statements and no cumulative-effect adjustment to retained earnings was made.
Cloud Computing Arrangements. As of January 1, 2020, we adopted the new ASU guidance on the accounting for implementation costs incurred for a cloud computing arrangement that is a service contract using the prospective method. The update conformed the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the accounting guidance that provides for capitalization of costs incurred to develop or obtain internal-use-software. The adoption of this new guidance did not have a material impact on our consolidated financial statements.
Fair Value Measurements. As of January 1, 2020, we adopted the new ASU guidance related to the disclosure requirements on fair value measurements, which removed, modified or added certain disclosures using the prospective method. The adoption of this new guidance did not have a material impact on our consolidated financial statements.
Guarantor Financial Information. In March 2020, the SEC amended Rule 3-10 of Regulation S-X regarding financial disclosure requirements for registered debt offerings involving subsidiaries as either issuers or guarantors and affiliates whose securities are pledged as collateral. This new guidance narrows the circumstances that require separate financial statements of subsidiary issuers and guarantors and streamlines the alternative disclosures required in lieu of those statements. We adopted these amendments for the quarter ended March 31, 2020. Accordingly, combined summarized financial information has been presented only for the issuer and guarantors of our senior notes for the most recent fiscal year and the year-to-date interim period, and the location of the required disclosures has been removed from the Notes to the Consolidated Financial Statements and moved to Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Recent Accounting Policies Not Yet Adopted
Simplifying the Accounting for Income Taxes. In December 2019, the Financial Accounting Standards Board issued new guidance to simplify the accounting for income taxes. This new standard eliminates certain exceptions in current guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. For public business entities, this guidance is effective for interim or annual periods beginning after December 15, 2020, with early adoption permitted in any interim period within that year. We are currently evaluating the impact of this guidance on our consolidated financial statements and the timing of adoption
Investments - equity securities; Investments - Equity Method and Joint Ventures; Derivatives and Hedging. In January 2020, the FASB issued an accounting standards update which clarifies the interaction between the accounting for investments in equity securities, equity method investments and certain derivative instruments. The new standard is expected to reduce diversity in practice and increase comparability of the accounting for these interactions. The standards update is effective for interim or annual periods beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements and the timing of adoption.
Significant Accounting Policies
Below are the significant accounting policies updated during 2020 as a result of the recently adopted accounting policies noted above as well as certain other accounting policies with interim disclosure requirements. For a comprehensive description of our accounting policies, refer to our Annual Report on Form 10-K for the year ended December 31, 2019.
Revenue
Prepaid Merchant Bookings. We classify payments made to suppliers in advance of our performance obligations as prepaid merchant bookings included within prepaid and other current assets. Prepaid merchant bookings was $579 million as of June 30, 2020, which is net of a $11 million reserve for future collectibility risk in consideration of the impact of the COVID-19 pandemic on the economy, and $226 million as of December 31, 2019.
Deferred Merchant Bookings. We classify cash payments received in advance of our performance obligations as deferred merchant bookings. At December 31, 2019, $4.898 billion of cash advance cash payments was reported within deferred merchant bookings, $3.173 billion of which was recognized resulting in $506 million of revenue during the six months ended June 30, 2020. At June 30, 2020, the related balance was $3.842 billion.
At December 31, 2019, $781 million of deferred loyalty rewards was reported within deferred merchant bookings, $209 million of which was recognized within revenue during the six months ended June 30, 2020. At June 30, 2020, the related balance was $790 million.

10

Notes to Consolidated Financial Statements – (Continued)
 


Deferred Revenue. At December 31, 2019, $321 million was recorded as deferred revenue, $159 million of which was recognized as revenue during the six months ended June 30, 2020. At June 30, 2020, the related balance was $197 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 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:
 
June 30,
2020
 
December 31,
2019
 
(in millions)
Cash and cash equivalents
$
5,053

 
$
3,315

Restricted cash and cash equivalents
1,311

 
779

Restricted cash included within long-term investments and other assets
2

 
3

Total cash, cash equivalents and restricted cash and cash equivalents in the consolidated statement of cash flow
$
6,366

 
$
4,097


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 six months ended June 30, 2020, we recorded approximately $82 million of incremental allowance for expected uncollectible amounts, including estimated future losses in consideration of the impact of COVID-19 pandemic on the economy and the Company, partially offset by $8 million of other adjustments. Actual future bad debt could differ materially from this estimate resulting from changes in our assumptions of the duration and severity of the impact of the COVID-19 pandemic.

11

Notes to Consolidated Financial Statements – (Continued)
 



Note 3 – Fair Value Measurements
Financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2020 are classified using the fair value hierarchy in the table below:
 
Total
 
Level 1
 
Level 2
 
(In millions)
Assets
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
Money market funds
$
458

 
$
458

 
$

Term deposits
107

 

 
107

Derivatives:
 
 
 
 
 
Foreign currency forward contracts
12

 

 
12

Investments:
 
 
 
 
 
Term deposits
422

 

 
422

Marketable equity securities
69

 
69

 

Total assets
$
1,068

 
$
527

 
$
541

Financial assets measured at fair value on a recurring basis as of December 31, 2019 are classified using the fair value hierarchy in the table below:
 
Total
 
Level 1
 
Level 2
 
(In millions)
Assets
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
Money market funds
$
36

 
$
36

 
$

Term deposits
865

 

 
865

U.S. treasury securities
10

 
10

 

Investments:
 
 
 
 
 
Term deposits
526

 

 
526

Marketable equity securities
129

 
129

 

Total assets
$
1,566

 
$
175

 
$
1,391

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Derivatives:
 
 
 
 
 
Foreign currency forward contracts
$
8

 
$

 
$
8


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.
As of June 30, 2020 and December 31, 2019, our cash and cash equivalents consisted primarily of term deposits with maturities of three months or less and bank account balances.
We hold term deposit investments with financial institutions. Term deposits with original maturities of less than three months are classified as cash equivalents and those with remaining maturities of less than one year are classified within short-term investments.
Our marketable equity securities consist of our investment in Despegar, a publicly traded company, which is included in long-term investments and other assets in our consolidated balance sheets. During the six months ended June 30, 2020 and 2019, we recognized a gain (loss) of approximately $(60) million and $14 million within other, net in our consolidated statements of operations related to the fair value changes of this equity investment.
Derivative instruments are carried at fair value on our consolidated balance sheets. 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. Our goal in managing our foreign exchange

12

Notes to Consolidated Financial Statements – (Continued)
 


risk is to reduce, to the extent practicable, our potential exposure to the changes that exchange rates might have on our earnings, cash flows and financial position. Our foreign currency forward contracts are typically short-term and, as they do not qualify for hedge accounting treatment, we classify the changes in their fair value in other, net. As of June 30, 2020, we were party to outstanding forward contracts hedging our liability and revenue exposures with a total net notional value of $2.4 billion. We had a net forward asset of $12 million ($37 million gross forward asset) as of June 30, 2020 recorded in prepaid expenses and other current assets and a net forward liability of $8 million ($30 million gross forward liability) as of December 31, 2019 recorded in accrued expenses and other current liabilities. We recorded $(6) million in net gains (losses) from foreign currency forward contracts during both of the three months ended June 30, 2020 and 2019 as well as $100 million and $(12) million in net gains (losses) from foreign currency forward contracts during the six months ended June 30, 2020 and 2019.
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, 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 first quarter of 2020, we recognized goodwill impairment charges of $765 million, of which $539 million related to our Retail segment, primarily our Vrbo reporting unit, and $226 million related to our trivago segment. These impairment charges resulted from the significant negative impact related to COVID-19, which has had a severe effect on the entire global travel industry. As a result, we concluded that sufficient indicators existed to require us to perform an interim quantitative assessment of goodwill as of March 31, 2020 in which we compared the fair value of the reporting units to their carrying value. The fair value estimates for all reporting units except trivago were 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 took into account the recent severe and continued weakening of operating results as well as the anticipated rate of recovery, and implied risk premiums based on market prices of our equity and debt as of the assessment dates. 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 fair value estimate for the trivago reporting unit was based on trivago’s stock price, a Level 1 input, adjusted for an estimated control premium. 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 first quarter of 2020. In addition, during the second quarter of 2020, we recognized goodwill impairment charges of $20 million related to a recent decision to streamline operations for a smaller brand within our Retail segment. As of June 30, 2020, the applicable reporting units within our Retail segment had $2.2 billion goodwill remaining and our trivago segment had $315 million goodwill remaining.
Intangible Assets. During the first quarter of 2020, also as a result of the significant negative impact related to COVID-19, which has had a severe effect on the entire global travel industry, we recognized intangible asset impairment charges of $121 million. The impairment charges were primarily related to indefinite-lived trade names within our Retail segment and resulted from changes in estimated future revenues of the related brands. The assets, classified as Level 3 measurements, were written down to $237 million based on valuation using the relief-from-royalty method, which includes unobservable inputs, including royalty rates and projected revenues. In addition, during the second quarter of 2020, we recognized intangible impairment charges of $10 million primarily related to supplier relationship assets that were entirely written off in connection with our recent decision to streamline a smaller brand within our Retail segment.
The full duration and total impact of COVID-19 remains uncertain and it is difficult to predict how the recovery will unfold for global economies, the travel industry or our business. As a result, we may continue to record impairment charges in the future due to the potential long-term economic impact and near-term financial impacts of the COVID-19 pandemic.
Minority Investments without Readily Determinable Fair Values. As of June 30, 2020 and December 31, 2019, the carrying values of our minority investments without readily determinable fair values totaled $331 million and $467 million. During the three and six months ended June 30, 2020, we recorded $21 million and $134 million of impairment losses related to a minority investment, which had recent observable and orderly transactions for similar investments, using an option pricing model that utilizes judgmental inputs such as discounts for lack of marketability and estimated exit event timing. As of June 30, 2020, total cumulative adjustments made to the initial cost bases of these investments included $103 million in unrealized downward adjustments (including impairments). During the three and six months ended June 30, 2019, we had no material gains or losses recognized related to these minority investments.

13

Notes to Consolidated Financial Statements – (Continued)
 



Note 4 – Debt
The following table sets forth our outstanding debt:
 
June 30,
2020
 
December 31,
2019
 
(In millions)
5.95% senior notes due 2020
$
750

 
$
749

2.5% (€650 million) senior notes due 2022
729

 
725

4.5% senior notes due 2024
497

 
497

6.25% senior notes due 2025
1,970

 

7.0% senior notes due 2025
739

 

5.0% senior notes due 2026
744

 
743

3.8% senior notes due 2028
992

 
992

3.25% senior notes due 2030
1,232

 
1,232

Long-term debt(1)
7,653

 
4,938

Current maturities of long-term debt
(750
)
 
(749
)
Long-term debt, excluding current maturities
$
6,903

 
$
4,189

 
 
 
 
Revolving credit facility
$
1,900

 
$

 
_______________
(1)
Net of applicable discounts and debt issuance costs.
Outstanding Debt
Our $750 million in registered senior unsecured notes outstanding at June 30, 2020 are due in August 2020 and bear interest at 5.95% (the “5.95% Notes”). The 5.95% Notes were issued at 99.893% of par resulting in a discount, which is being amortized over their life. Interest is payable semi-annually in February and August of each year. We may redeem the 5.95% Notes at a redemption price of 100% of the principal plus accrued interest, plus a “make-whole” premium, in whole or in part.
Our Euro 650 million in registered senior unsecured notes outstanding at June 30, 2020 are due in June 2022 and bear interest at 2.5% (the “2.5% Notes”). The 2.5% Notes were issued at 99.525% of par resulting in a discount, which is being amortized over their life. Interest is payable annually in arrears in June of each year. We may redeem the 2.5% Notes at our option, at whole or in part, at any time or from time to time. If we elect to redeem the 2.5% Notes prior to March 3, 2022, we may redeem them at a specified “make-whole” premium. If we elect to redeem the 2.5% Notes on or after March 3, 2022, we may redeem them at a redemption price of 100% of the principal plus accrued and unpaid interest. Subject to certain limited exceptions, all payments of interest and principal for the 2.5% Notes will be made in Euros.
The aggregate principal value of the 2.5% Notes is designated as a hedge of our net investment in certain Euro functional currency subsidiaries. The notes are measured at Euro to U.S. Dollar exchange rates at each balance sheet date and transaction gains or losses due to changes in rates are recorded in accumulated other comprehensive income (loss) (“AOCI”). The Euro-denominated net assets of these subsidiaries are translated into U.S. Dollars at each balance sheet date, with effects of foreign currency changes also reported in AOCI. Since the notional amount of the recorded Euro-denominated debt is less than the notional amount of our net investment, we do not expect to incur any ineffectiveness on this hedge.
Our $500 million in registered senior unsecured notes outstanding at June 30, 2020 are due in August 2024 and bear interest at 4.5% (the “4.5% Notes”). The 4.5% Notes were issued at 99.444% of par resulting in a discount, which is being amortized over their life. Interest is payable semi-annually in February and August of each year. We may redeem the 4.5% Notes at our option at any time in whole or from time to time in part. If we elect to redeem the 4.5% Notes prior to May 15, 2024, we may redeem them at a redemption price of 100% of the principal plus accrued interest, plus a “make-whole” premium. If we elect to redeem the 4.5% Notes on or after May 15, 2024, we may redeem them at a redemption price of 100% of the principal plus accrued interest.
In May 2020, we privately placed $2 billion of senior unsecured notes that are due in May 2025 that bear interest at 6.250% (the “6.25% Notes”). The 6.25% Notes were issued at a price of 100% of the aggregate principal amount. Interest is payable semi-annually in arrears in May and November of each year, beginning November 1, 2020. We may redeem some or all of the 6.25% Notes at any time prior to February 1, 2025 by paying a “make-whole” premium plus accrued and unpaid interest, if any. We may redeem some or all of the 6.25% Notes on or after February 1, 2025 at par plus accrued and unpaid interest, if any.

14

Notes to Consolidated Financial Statements – (Continued)
 


In May 2020, we also privately placed $750 million of senior unsecured notes due May 2025 that bear interest at 7.000% (the “7.0% Notes”). The 7.0% Notes were issued at a price of 100% of the aggregate principal amount. Interest is payable semi-annually in arrears in May and November of each year, beginning November 1, 2020. We may redeem some or all of the 7.0% Notes at any time prior to May 1, 2022 at a redemption price equal to 100% of the principal amount of the 7.0% Notes to be redeemed, plus a “make-whole” premium, plus accrued and unpaid interest, if any. We may redeem some or all of the 7.0% Notes on or after May 1, 2022 at specified redemption prices set forth in the 7.0% Indenture, plus accrued and unpaid interest, if any. In addition, at any time or from time to time prior to May 1, 2022, we may redeem up to 40% of the aggregate principal amount of the 7.0% Notes with the net proceeds of certain equity offerings at the specified redemption price described in the 7.0% Indenture, plus accrued and unpaid interest, if any.
Our $750 million in registered senior unsecured notes outstanding at June 30, 2020 are due in February 2026 and bear interest at 5.0% (the “5.0% Notes”). The 5.0% Notes were issued at 99.535% of par resulting in a discount, which is being amortized over their life. Interest is payable semi-annually in arrears in February and August of each year. We may redeem the 5.0% Notes at our option at any time in whole or from time to time in part. If we elect to redeem the 5.0% Notes prior to November 12, 2025, we may redeem them at a redemption price of 100% of the principal plus accrued interest, plus a “make-whole” premium. If we elect to redeem the 5.0% Notes on or after November 12, 2025, we may redeem them at a redemption price of 100% of the principal plus accrued interest.
Our $1 billion in registered senior unsecured notes outstanding at June 30, 2020 are due in February 2028 and bear interest at 3.8% (the “3.8% Notes”). The 3.8% Notes were issued at 99.747% of par resulting in a discount, which is being amortized over their life. Interest is payable semi-annually in arrears in February and August of each year. We may redeem the 3.8% Notes at our option at any time in whole or from time to time in part. If we elect to redeem the 3.8% Notes prior to November 15, 2027, we may redeem them at a redemption price of 100% of the principal plus accrued interest, plus a “make-whole” premium. If we elect to redeem the 3.8% Notes on or after November 15, 2027, we may redeem them at a redemption price of 100% of the principal plus accrued interest.
In September 2019, we privately placed $1.25 billion of senior unsecured notes that are due in February 2030 and bear interest at 3.25%. In February 2020, we completed an offer to exchange these notes for registered notes having substantially the same financial terms and covenants as the original notes (the unregistered and registered notes collectively, the “3.25% Notes”). The 3.25% Notes were issued at 99.225% of par resulting in a discount, which is being amortized over their life. Interest is payable semi-annually in arrears in February and August of each year. We may redeem the 3.25% Notes at our option at any time in whole or from time to time in part. If we elect to redeem the 3.25% Notes prior to November 15, 2029, we may redeem them at a redemption price of 100% of the principal plus accrued interest, plus a “make-whole” premium. If we elect to redeem the 3.25% Notes on or after November 15, 2029, we may redeem them at a redemption price of 100% of the principal plus accrued interest.
In July 2020, we privately placed an additional $1.25 billion in unsecured senior notes. See Note 11 – Subsequent Events for additional information.
The 5.95%, 2.5%, 4.5%, 5.0%, 3.8%, 3.25%, 6.25% and 7.0% Notes (collectively the “Notes”) are senior unsecured obligations issued by Expedia Group and guaranteed by certain domestic Expedia Group subsidiaries. The 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 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. Accrued interest related to the Notes was $98 million and $76 million as of June 30, 2020 and December 31, 2019. The 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.

15

Notes to Consolidated Financial Statements – (Continued)
 


The following table sets forth the approximate fair value of our outstanding debt, which is based on quoted market prices in less active markets (Level 2 inputs):
 
June 30,
2020
 
December 31,
2019
 
(In millions)
5.95% senior notes due 2020
$
753

 
$
767

2.5% (€650 million) senior notes due 2022 (1)
731

 
764

4.5% senior notes due 2024
518

 
536

6.25% senior notes due 2025
2,134

 

7.0% senior notes due 2025
790

 

5.0% senior notes due 2026
778

 
825

3.8% senior notes due 2028
960

 
1,021

3.25% senior notes due 2030
1,171

 
1,206

 
_______________
(1)
Approximately 649 million Euro as of June 30, 2020 and 682 million Euro as of December 31, 2019.
Credit Facility
As of December 31, 2019, Expedia Group maintained a $2 billion unsecured revolving credit facility with a group of lenders, which was unconditionally guaranteed by certain domestic Expedia Group subsidiaries that were the same as under the Notes and expired in May 2023. The facility contained covenants including maximum leverage and minimum interest coverage ratios. As of December 31, 2019, we had no revolving credit facility borrowings outstanding. On March 18, 2020, we borrowed $1.9 billion under the revolving credit facility.
On May 4, 2020, the Company, certain of the Company’s subsidiaries party thereto and the lenders party thereto (the “Consenting Lenders”) executed a restatement agreement, which amends and restates our existing revolving credit facility (as amended and restated, the “Amended Credit Facility”) to, among other things, suspend the maximum leverage ratio covenant until December 31, 2021, increase the maximum permissible leverage ratio (once such covenant is reinstated) until March 31, 2023 (at which time the maximum permissible leverage ratio will return to the level in effect immediately prior to effectiveness of the Amended Credit Facility), eliminate the covenant imposing a minimum interest coverage ratio and add a covenant regarding minimum liquidity, as well as to make certain other amendments to the affirmative and negative covenants therein. The Amended Credit Facility became effective on May 5, 2020 (the “Amended Credit Facility Effective Date”).
Obligations under the Amended Credit Facility are secured by substantially all of the assets of the Company and its subsidiaries that guarantee the Amended Credit Facility (subject to certain exceptions, including for our new headquarters located in Seattle, WA) up to the maximum amount permitted under the indentures governing the Notes and the Company’s existing 5.95% Notes, 2.5% Notes, 4.5% Notes, 5.0% Notes, 3.8% Notes and 3.25% Senior Notes (collectively, the “Existing Notes”) as of the Amended Credit Facility Effective Date without securing such notes. Aggregate commitments under the Amended Credit Facility initially total $2 billion, and will mature on May 31, 2023.
Pursuant to the terms of the Amended Credit Facility, the Company agreed to use reasonable best efforts to enter into (and to cause certain of its subsidiaries, including certain of its subsidiaries that are not guarantors of the 6.25% and 7.0% Notes or the Existing Notes, to enter into), promptly after the Amended Credit Facility Effective Date, a new credit facility incurred by one or more of the Company’s subsidiaries that are not obligors with respect to the Amended Credit Facility, the 6.25% and 7.0% Notes or the Existing Notes and which will be guaranteed by the Company, its subsidiaries that guarantee the Amended Credit Facility, the 6.25% and 7.0% Notes and the Existing Notes and certain of the Company’s non-guarantor subsidiaries (the “Additional Credit Facility”), on specified terms in an aggregate principal amount up to approximately $855 million. Upon establishment of the Additional Credit Facility, the Company will prepay indebtedness, and reduce commitments, under the Amended Credit Facility, in an amount equal to the aggregate commitments in respect of the Additional Credit Facility.
Loans under the Amended Credit Facility held by Consenting Lenders will bear interest (A) in the case of eurocurrency loans, at rates ranging from (i) prior to December 31, 2021, 2.35% per annum for any day that the aggregate unused commitments and funded exposure under the Amended Credit Facility exceed $1.145 billion to 2.25% per annum otherwise and (ii) on and after December 31, 2021, or prior to such date for each quarter that the leverage ratio, as of the end of the most recently ended fiscal quarter for which financial statements have been delivered, calculated on an annualized basis using consolidated EBITDA for the two most recently ended fiscal quarters included in such financial statements multiplied by two, is not greater than 5.00:1.00, 1.10% to 1.85% per annum for any day that the aggregate unused commitments and funded

16

Notes to Consolidated Financial Statements – (Continued)
 


exposure under the Amended Credit Facility exceed $1.145 billion and, otherwise, ranging from 1.00% to 1.75% per annum, in each case, depending on the Company’s credit ratings, and (B) in the case of base rate loans, at rates ranging from (i) prior to December 31, 2021, 1.35% per annum for any day that the aggregate unused commitments and funded exposure under the Amended Credit Facility exceed $1.145 billion to 1.25% per annum otherwise and (ii) on and after December 31, 2021, or prior to such date if the leverage ratio condition referred to above is satisfied, 0.10% to 0.85% per annum for any day that the aggregate unused commitments and funded exposure under the Amended Credit Facility exceed $1.145 billion, and, otherwise, ranging from 0.00% to 0.75% per annum, in each case, depending on the Company’s credit ratings.
As of June 30, 2020, $1.9 billion was outstanding under the Amended Credit Facility and the interest rate on the outstanding balance was 2.55%.
The amount of stand-by letters of credit (“LOC”) issued under the prior credit facility as well as the Amended Credit Facility reduced the credit amount available. As of both June 30, 2020 and December 31, 2019, there was $16 million of outstanding stand-by LOCs issued under the facilities.
In addition, one of our international subsidiaries maintains a Euro 50 million uncommitted credit facility, which is guaranteed by Expedia Group, which may be terminated at any time by the lender. As of June 30, 2020 and December 31, 2019, there were no borrowings outstanding.
Note 5 – Capital Stock
Preferred Stock and Warrants
On May 5, 2020, we completed the sale of Series A Preferred Stock (as defined below) and warrants (the “Warrants”) to purchase our common stock (“Common Stock”) to AP Fort Holdings, L.P., an affiliate of Apollo Global Management, Inc. (the “Apollo Purchaser”) and SLP Fort Aggregator II, L.P. and SLP V Fort Holdings II, L.P., affiliates of Silver Lake Group, L.L.C. (the “Silver Lake Purchasers”) pursuant to the Company’s previously announced Investment Agreements, dated as of April 23, 2020, with the Apollo Purchaser and the Silver Lake Purchasers (together, the “Investment Agreements”).
We issued and sold (1) to the Apollo Purchaser, pursuant to the Apollo Investment Agreement, 600,000 shares of the Company’s newly created Series A Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock”) and warrants (the “Warrants”) to purchase 4.2 million shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”), for an aggregate purchase price of $588 million and (2) to the Silver Lake Purchaser, pursuant to the Silver Lake Investment Agreement, 600,000 shares of Series A Preferred Stock and Warrants to purchase 4.2 million shares of Common Stock, for an aggregate purchase price of $588 million. At closing, we paid certain fees in an aggregate amount of $12 million to affiliates of the Apollo Purchaser and the Silver Lake Purchaser. On the terms and subject to the conditions set forth in the Investment Agreements, from and after the closing, (1) each of the Apollo Purchaser and the Silver Lake Purchaser designated one representative who was appointed to the Board of Directors of the Company (the “Board”) and (2) the Apollo Purchaser appointed one non-voting observer to the Board, in each case until such time as the applicable Purchaser and its Permitted Transferees (as defined in the Investment Agreements) no longer beneficially own (a) at least 50% of the shares of Series A Preferred Stock purchased by the applicable Purchaser under the Investment Agreement (unless the applicable Purchaser holds less than 50% of the shares of Series A Preferred Stock as a result of redemptions by the Company, in which case the reference to 50% shall be replaced with a reference to 20%) and (b) Warrants and/or Common Stock for which the Warrants were exercised that represent in the aggregate and on an as exercised basis, at least 50% of the shares underlying the Warrants purchased by the applicable Purchaser under the Investment Agreement.
The Investment Agreements (including the forms of Certificate of Designations, Warrants and Registration Rights Agreement) contain other customary covenants and agreements, including certain standstill provisions and customary preemptive rights.
Certificate of Designations for Series A Preferred Stock. Dividends on each share of Series A Preferred Stock accrue daily on the Preference Amount (as defined below) at the then-applicable Dividend Rate (as defined below) and are payable semi-annually in arrears. As used herein, “Dividend Rate” with respect to the Series A Preferred Stock means (a) from the closing until the day immediately preceding the fifth anniversary of the closing, 9.5% per annum, (b) beginning on each of the fifth, sixth and seventh anniversaries of the closing, the then-applicable Dividend Rate shall be increased by 100 basis points on each such yearly anniversary, and (c) beginning on each of the eighth and ninth anniversaries of the closing date, the then-applicable Dividend Rate shall be increased by 150 basis points on each such yearly anniversary. The Dividend Rate is also subject to certain adjustments if the Company incurs indebtedness causing its leverage to exceed certain thresholds. Dividends are payable (a) until the third anniversary of the closing, either in cash or through an accrual of unpaid dividends (“Dividend Accrual”), at the Company’s option, (b) from the third anniversary of the closing until the sixth anniversary of the closing, either in cash or in a combination of cash and Dividend Accrual (with no more than 50% of the total amount of such Dividend being paid through a Dividend Accrual), at the Company’s option and (c) thereafter, in cash.

17

Notes to Consolidated Financial Statements – (Continued)
 


The Series A Preferred Stock rank senior to the Common Stock and the Class B common stock, par value $0.0001 per share, of the Company (the “Class B Common Stock”) with respect to dividend rights, redemption rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company.
At any time on or before the first anniversary of the closing, we may redeem all or any portion of the Series A Preferred Stock in cash at a price equal to 105.0% of the sum of the original liquidation preference of $1,000 per share of Series A Preferred Stock plus any Dividend Accruals (the “Preference Amount”), plus accrued and unpaid distributions as of the redemption date. Any time after the first anniversary of the closing but on or prior to the second anniversary of the closing, we may redeem all or any portion of the Series A Preferred Stock in cash at a price equal to 103.0% of the Preference Amount, plus accrued and unpaid distributions as of the redemption date. Any time after the second anniversary of the closing but on or prior to the third anniversary of the closing, we may redeem all or any portion of the Series A Preferred Stock in cash at a price equal to 102.0% of the Preference Amount, plus accrued and unpaid distributions as of the redemption date. Any time after the third anniversary of the closing but on or prior to the fourth anniversary of the closing, we may redeem all or any portion of the Series A Preferred Stock in cash at a price equal to 101.0% of the Preference Amount, plus accrued and unpaid distributions as of the redemption date. At any time after the fourth anniversary of the closing, we may redeem all or any portion of the Series A Preferred Stock in cash at a price equal to the Preference Amount plus accrued and unpaid distributions as of the redemption date.
In addition, upon the occurrence of a change of control, (i) we shall have the right, but not the obligation, to redeem any or all of the outstanding shares of Series A Preferred Stock at the then applicable redemption price, payable in cash and (ii) each holder will have the right, but not the obligation, to require the Company to redeem any or all of the outstanding shares of Series A Preferred Stock owned by such holder at the then applicable redemption price, payable in cash.
The Series A Preferred Stock is not convertible into Common Stock or Class B Common Stock.
Each holder of Series A Preferred Stock will have one vote per share on any matter on which holders of Series A Preferred are entitled to vote separately as a class (as described below), whether at a meeting or by written consent. The holders of shares of Series A Preferred Stock do not otherwise have any voting rights.
The vote or consent of the holders of at least two-thirds of the shares of Series A Preferred Stock outstanding at such time, voting together as a separate class, is required in order for the Company to (i) amend, alter or repeal any provision of its Amended and Restated Certificate of Incorporation (including the certificates of designations relating to the Series A Preferred Stock) in a manner that would have an adverse effect on the rights, preferences or privileges of the Series A Preferred Stock, as applicable, (ii) issue, any capital stock ranking senior or pari passu to the Series A Preferred Stock, other than certain issuances to a governmental entity in connection with a financing transaction or (iii) liquidate, dissolve or wind up the Company.
The Series A Preferred Stock is classified within temporary equity on our consolidated balance sheets due to provisions that could cause the equity to be redeemable at the option of the holder. However, such events that could cause the Series A Preferred Stock to become redeemable are not considered probable of occurring. As of June 30, 2020, the carrying value of the Series A Preferred Stock was $1,022 million, net of $68 million in initial discount and issuance costs as well as $110 million allocated on a relative fair value basis to the concurrently issued Warrants recorded to additional paid-in capital (as described below). The Series A Preferred Stock accumulated and we paid $17 million (or $14.02 per share of Series A Preferred Stock) of total dividends during the three and six months ended June 30, 2020.
Warrants to Purchase Company Common Stock. Pursuant to the Investment Agreements, we issued to each of (1) the Silver Lake Purchasers (in the aggregate) and (2) the Apollo Purchaser, Warrants to purchase 4.2 million shares of Common Stock at an exercise price of $72.00 per share, subject to certain customary anti-dilution adjustments provided under the Warrants, including for stock splits, reclassifications, combinations and dividends or distributions made by the Company on the Common Stock. The Warrants are exercisable on a net share settlement basis. The Warrants expire ten years after the closing date.
Registration Rights Agreement. In connection with and concurrently with the effective time of the transactions contemplated by the Investment Agreements, the Company, the Apollo Purchaser and the Silver Lake Purchasers entered into a Registration Rights Agreement (the “Registration Rights Agreement”), pursuant to which the Apollo Purchaser and the Silver Lake Purchasers are entitled to certain registration rights. Under the terms of the Registration Rights Agreement, the Apollo Purchaser and the Silver Lake Purchasers are entitled to customary registration rights with respect to the shares of Common Stock for which the Warrants may be exercised and, from and after the fifth anniversary of the closing, the Series A Preferred Stock.

Dividends on our Common Stock
The Executive Committee, acting on behalf of the Board of Directors, declared the following dividends during the periods presented:

18

Notes to Consolidated Financial Statements – (Continued)
 


Declaration Date
Dividend
Per Share
 
Record Date
 
Total Amount
(in millions)
 
Payment Date
Six Months Ended June 30, 2020


 

 


 

February 13, 2020
$
0.34

 
March 10, 2020
 
$
48

 
March 26, 2020
Six Months Ended June 30, 2019


 

 


 

February 6, 2019
0.32

 
March 7, 2019
 
47

 
March 27, 2019
May 1, 2019
0.32

 
May 23, 2019
 
48

 
June 13, 2019

During the second quarter of 2020, we suspended quarterly dividends on our common stock. We do not expect to declare future dividends on our common stock, at least until the current economic and operating environment improves.
Treasury Stock
As of June 30, 2020, the Company’s treasury stock was comprised of approximately 123.4 million common stock and 7.3 million Class B shares. As of December 31, 2019, the Company’s treasury stock was comprised of approximately 119.6 million shares of common stock and 7.3 million Class B shares.
Share Repurchases. In April 2018, the Executive Committee, acting on behalf of the Board of Directors, authorized a repurchase of up to 15 million outstanding shares of our common stock. In December 2019, the Board of Directors authorized a repurchase of up to 20 million outstanding shares of our common stock. During the six months ended June 30, 2020, we repurchased, through open market transactions, 3.4 million shares under these authorizations for the total cost of $370 million, excluding transaction costs, representing an average repurchase price of $109.88 per share. As of June 30, 2020, there were approximately 23.3 million shares remaining under the 2018 and 2019 repurchase authorizations. There is no fixed termination date for the repurchases.
Accumulated Other Comprehensive Loss
The balance of accumulated other comprehensive loss as of June 30, 2020 and December 31, 2019 was comprised of foreign currency translation adjustments. These translation adjustments include foreign currency transaction losses at June 30, 2020 of $17 million ($22 million before tax) and $15 million ($19 million before tax) at December 31, 2019 associated with our 2.5% Notes. The 2.5% Notes are Euro-denominated debt designated as hedges of certain of our Euro-denominated net assets. See Note 4 – Debt for more information.
Note 6 – Earnings (Loss) Per Share
The following table presents our basic and diluted earnings (loss) per share:
 
Three months ended
June 30,
 
Six months ended
June 30,
 
2020
 
2019
 
2020
 
2019
 
(In millions, except share and per share data)
Net income (loss) attributable to Expedia Group, Inc.
$
(736
)
 
$
183

 
$
(2,037
)
 
$
80

Preferred stock dividend
(17
)
 

 
(17
)
 

Net income (loss) attributable to Expedia Group, Inc. common stockholders
$
(753
)
 
$
183

 
$
(2,054
)
 
$
80

Earnings (loss) per share attributable to Expedia Group, Inc. available to common stockholders:
 
 
 
 
 
 
 
Basic
$
(5.34
)
 
$
1.23

 
$
(14.57
)
 
$
0.54

Diluted
(5.34
)
 
1.21

 
(14.57
)
 
0.53

Weighted average number of shares outstanding (000's):
 
 
 
 
 
 
 
Basic
141,072

 
149,049

 
140,947

 
148,468

Dilutive effect of:
 
 
 
 
 
 
 
Options to purchase common stock

 
1,893

 

 
1,944

Other dilutive securities

 
619

 

 
645

Diluted
141,072

 
151,561

 
140,947

 
151,057



19

Notes to Consolidated Financial Statements – (Continued)
 


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. In periods when we recognize a net loss, we exclude the impact of outstanding stock awards and common stock warrants from the diluted loss per share calculation as their inclusion would have an antidilutive effect. For both of the three and six months ended June 30, 2020, approximately 26 million of outstanding stock awards and common stock warrants have been excluded from the calculations of diluted earnings per share attributable to c