The Bellevue company’s expenses rose faster than revenue in the fourth quarter, a trend Expedia said will persist this year.
Expedia is planning to spend a lot more in 2018, moving to modernize operations and bolster its short-term vacation rental unit to compete with nimbler startups.
The news pushed the Bellevue online travel company’s stock down 19 percent to $99.63 in extended trading Thursday, after it sank 4.9 percent in the regular session.
The company gave a forecast of 6 percent to 11 percent annual growth in earnings before interest, taxes, depreciation and amortization — or Ebitda, a measure of profitability. That indicated a maximum of $1.9 billion, falling short of the average analyst estimate of $1.94 billion. All that Ebitda growth will come in the second half of 2018, executives said, signaling heavy spending in the first half.
Expenses rose faster than revenue in the fourth quarter, a trend Expedia said will persist this year. Some of the extra cost in 2018 will be for the company’s transition to cloud-based infrastructure: Chief Financial Officer Alan Pickerell said Expedia will spend $170 million on the cloud this year, an acceleration from 2017.
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The company is also trying to stake out a larger piece of the burgeoning short-term home rental market, a key area for growth. Expedia plans to accelerate spending on sales and marketing for HomeAway, focusing on adding new rental units to the platform and spreading brand awareness. Chief Executive Officer Mark Okerstrom said investments made in HomeAway last year are starting to work, “and when they work, it allows HomeAway to start stepping on the gas in sales and marketing.”
Still, Okerstrom added, “the flip side of that, of course, is that it can put pressure on near-term profitability.” HomeAway was significantly less profitable in the fourth quarter than in the same period a year earlier.
Upstarts challenging the dominance of Expedia and its rival Priceline Group with mobile-only travel booking apps say the older companies are struggling to adapt to the smartphone world. While the companies still are the leaders in online booking, they’re spending money to keep up with changing consumer tastes and developments in technology.
Profit excluding certain costs was 84 cents a share in the fourth quarter, down almost 30 percent from a year earlier. Analysts expected $1.15 a share, marking the sixth straight quarter the company missed projections. Revenue was $2.32 billion in the period, which included much of the busy holiday season. Analysts estimated $2.36 billion.