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 September 30, 2022

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

The number of shares outstanding of each of the registrant’s classes of common stock as of October 21, 2022 was:

Common stock, $0.0001 par value per share	150,567,424	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 September 30, 2022

Contents

Part I	Financial Information
Item 1	Consolidated Financial Statements
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)	2
	Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)	3
	Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021	4
	Consolidated Statements of Stockholders Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)	5
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (unaudited)	7
	Notes to Consolidated Financial Statements (unaudited)	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3	Quantitative and Qualitative Disclosures about Market Risk	37
Item 4	Controls and Procedures	38
Part II	Other Information
Item 1	Legal Proceedings	39
Item 1A	Risk Factors	40
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 6	Exhibits	41
Signature		42

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 September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Revenue	$	3,619	$	2,962	$	9,049	$	6,319
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below) (1)	455		442		1,245		1,127
Selling and marketing (1)	1,669		1,314		4,724		3,177
Technology and content (1)	310		277		864		800
General and administrative (1)	187		182		562		522
Depreciation and amortization	199		201		593		615
Impairment of intangible assets	52		—		81		—
Legal reserves, occupancy tax and other	—		10		23		1
Restructuring and related reorganization charges	—		12		—		54
Operating income	747		524		957		23
Other income (expense):
Interest income	20		2		33		5
Interest expense	(63)		(86)		(217)		(267)
Gain (loss) on debt extinguishment, net	73		—		49		(280)
Other, net	(87)		25		(467)		10
Total other expense, net	(57)		(59)		(602)		(532)
Income (loss) before income taxes	690		465		355		(509)
Provision for income taxes	(214)		(87)		(187)		129
Net income (loss)	476		378		168		(380)
Net (income) loss attributable to non-controlling interests	6		(2)		7		6
Net income (loss) attributable to Expedia Group, Inc.	482		376		175		(374)
Preferred stock dividend	—		(14)		—		(64)
Loss on redemption of preferred stock	—		—		—		(107)
Net income (loss) attributable to Expedia Group, Inc. common stockholders	$	482	$	362	$	175	$	(545)
Earnings (loss) per share attributable to Expedia Group, Inc. available to common stockholders
Basic	$	3.05	$	2.40	$	1.11	$	(3.67)
Diluted	2.98		2.26		1.08		(3.67)
Shares used in computing earnings (loss) per share (000's):
Basic	157,628		151,019		157,100		148,453
Diluted	161,829		160,460		162,495		148,453

_______

(1) Includes stock-based compensation as follows:
Cost of revenue	$	4	$	6	$	10	$	17
Selling and marketing	18		29		50		78
Technology and content	28		32		82		91
General and administrative	47		49		138		133

See accompanying notes.

2

EXPEDIA GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Net income (loss)	$	476	$	378	$	168	$	(380)
Currency translation adjustments, net of tax(1)	(96)		(44)		(212)		(62)
Comprehensive income (loss)	380		334		(44)		(442)
Less: Comprehensive loss attributable to non-controlling interests	(25)		(7)		(51)		(25)
Less: Preferred stock dividend	—		14		—		64
Less: Loss on redemption of preferred stock	—		—		—		107
Comprehensive income (loss) attributable to Expedia Group, Inc. common stockholders	$	405	$	327	$	7	$	(588)

(1)Currency translation adjustments include tax expense of $4 million and $13 million associated with net investment hedges for the three and nine months ended September 30, 2022 and tax expense of $5 million and $11 million for the three and nine months ended September 30, 2021.

See accompanying notes.

3

EXPEDIA GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except number of shares, which are reflected in thousands, and par value)

	September 30, 2022		December 31, 2021
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	4,588	$	4,111
Restricted cash and cash equivalents	1,778		1,694
Short-term investments	49		200
Accounts receivable, net of allowance of $61 and $65	1,991		1,264
Income taxes receivable	65		85
Prepaid expenses and other current assets	799		827
Total current assets	9,270		8,181
Property and equipment, net	2,169		2,180
Operating lease right-of-use assets	360		407
Long-term investments and other assets	1,122		1,450
Deferred income taxes	626		766
Intangible assets, net	1,223		1,393
Goodwill	7,109		7,171
TOTAL ASSETS	$	21,879	$	21,548
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, merchant	$	1,535	$	1,333
Accounts payable, other	1,132		688
Deferred merchant bookings	7,457		5,688
Deferred revenue	160		166
Income taxes payable	46		16
Accrued expenses and other current liabilities	789		824
Current maturities of long-term debt	—		735
Total current liabilities	11,119		9,450
Long-term debt, excluding current maturities	6,237		7,715
Deferred income taxes	50		58
Operating lease liabilities	315		360
Other long-term liabilities	445		413
Commitments and contingencies
Stockholders’ equity:
Common stock: $.0001 par value; Authorized shares: 1,600,000	—		—
Shares issued: 277,607 and 274,661; Shares outstanding: 150,966 and 150,125
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	14,674		14,229
Treasury stock - Common stock and Class B, at cost; Shares 133,917 and 131,813	(10,503)		(10,262)
Retained earnings (deficit)	(1,586)		(1,761)
Accumulated other comprehensive income (loss)	(317)		(149)
Total Expedia Group, Inc. stockholders’ equity	2,268		2,057
Non-redeemable non-controlling interests	1,445		1,495
Total stockholders’ equity	3,713		3,552
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	21,879	$	21,548

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 September 30, 2021	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 June 30, 2021	269,239,032	$	—	12,799,999	$	—	$	13,995	131,318,418	$	(10,182)	$	(2,531)	$	(186)	$	1,486	$	2,582
Net income												376				2		378
Other comprehensive income (loss), net of taxes														(35)		(9)		(44)
Proceeds from exercise of equity instruments and employee stock purchase plans	878,243	—					42											42
Treasury stock activity related to vesting of equity instruments									151,203	(23)								(23)
Adjustment to the fair value of redeemable non-controlling interests							11					8						19
Other changes in ownership of non-controlling interests							(3)									9		6
Stock-based compensation expense							130											130
Other							1		—									1
Balance as of September 30, 2021	270,117,275	$	—	12,799,999	$	—	$	14,176	131,469,621	$	(10,205)	$	(2,147)	$	(221)	$	1,488	$	3,091

Nine months ended September 30, 2021	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, 2020	261,563,912	$	—	12,799,999	$	—	$	13,566	130,766,537	$	(10,097)	$	(1,781)	$	(178)	$	1,494	$	3,004
Net loss												(374)				(6)		(380)
Other comprehensive income (loss), net of taxes														(43)		(19)		(62)
Payment of preferred dividends (declared at $47.11 per share)							(50)											(50)
Proceeds from exercise of equity instruments and employee stock purchase plans	6,083,142	—					421											421
Exercise of common stock warrants	2,470,221	—					—											—
Loss on redemption of preferred stock							(107)											(107)
Withholding taxes for stock options							(7)											(7)
Treasury stock activity related to vesting of equity instruments									703,084	(108)								(108)
Adjustment to the fair value of redeemable non-controlling interests							—					8						8
Other changes in ownership of non-controlling interests							(3)									19		16
Stock-based compensation expense							355											355
Other							1		—									1
Balance as of September 30, 2021	270,117,275	$	—	12,799,999	$	—	$	14,176	131,469,621	$	(10,205)	$	(2,147)	$	(221)	$	1,488	$	3,091

5

EXPEDIA GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In millions, except share and per share data)

(Unaudited)

Three months ended September 30, 2022	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 June 30, 2022	276,967,093	$	—	12,799,999	$	—	$	14,549	132,219,690	$	(10,331)	$	(2,068)	$	(240)	$	1,471	$	3,381
Net income (loss)												482				(6)		476
Other comprehensive income (loss), net of taxes														(77)		(19)		(96)
Proceeds from exercise of equity instruments and employee stock purchase plans	639,564	—					11											11
Treasury stock activity related to vesting of equity instruments									172,498	(19)								(19)
Common stock repurchases									1,524,580	(153)								(153)
Other changes in ownership of non-controlling interests							8									(1)		7
Stock-based compensation expense							106											106
Balance as of September 30, 2022	277,606,657	$	—	12,799,999	$	—	$	14,674	133,916,768	$	(10,503)	$	(1,586)	$	(317)	$	1,445	$	3,713

Nine months ended September 30, 2022	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, 2021	274,660,725	—		12,799,999	—		14,229		131,812,764	(10,262)		(1,761)		(149)		1,495		$	3,552
Net income (loss)												175				(7)		168
Other comprehensive income (loss), net of taxes														(168)		(44)		(212)
Proceeds from exercise of equity instruments and employee stock purchase plans	2,945,932	—					125											125
Treasury stock activity related to vesting of equity instruments									579,424	(88)								(88)
Common stock repurchases									1,524,580	(153)								(153)
Other changes in ownership of non-controlling interests							13									1		14
Stock-based compensation expense							307											307
Balance as of September 30, 2022	277,606,657	$	—	12,799,999	$	—	$	14,674	133,916,768	$	(10,503)	$	(1,586)	$	(317)	$	1,445	$	3,713

See accompanying notes.

6

EXPEDIA GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	Nine months ended September 30,
	2022		2021
Operating activities:
Net income (loss)	$	168	$	(380)
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	527		538
Amortization of intangible assets	66		77
Impairment of intangible assets	81		—
Amortization of stock-based compensation	280		319
Deferred income taxes	106		(158)
Foreign exchange loss on cash, restricted cash and short-term investments, net	193		76
Realized loss on foreign currency forwards	170		21
Loss on minority equity investments, net	423		7
(Gain) loss on debt extinguishment, net	(49)		280
Other, net	(26)		(33)
Changes in operating assets and liabilities:
Accounts receivable	(748)		(781)
Prepaid expenses and other assets	31		(190)
Accounts payable, merchant	202		663
Accounts payable, other, accrued expenses and other liabilities	427		238
Tax payable/receivable, net	6		7
Deferred merchant bookings	1,770		2,787
Deferred revenue	(5)		(8)
Net cash provided by operating activities	3,622		3,463
Investing activities:
Capital expenditures, including internal-use software and website development	(485)		(530)
Purchases of investments	(60)		(1)
Sales and maturities of investments	200		23
Proceeds from initial exchange of cross-currency interest rate swaps	337		—
Payments for initial exchange of cross-currency interest rate swaps	(337)		—
Other, net	(169)		2
Net cash used in investing activities	(514)		(506)
Financing activities:
Proceeds from issuance of long-term debt, net of issuance costs	—		1,964
Payment of long-term debt	(2,141)		(1,706)
Debt extinguishment costs	(22)		(258)
Redemption of preferred stock	—		(618)
Purchases of treasury stock	(241)		(108)
Payment of preferred stock dividends	—		(50)
Proceeds from exercise of equity awards and employee stock purchase plan	125		421
Other, net	34		4
Net cash used in financing activities	(2,245)		(351)
Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents	(302)		(126)
Net increase in cash, cash equivalents and restricted cash and cash equivalents	561		2,480
Cash, cash equivalents and restricted cash and cash equivalents at beginning of period	5,805		4,138
Cash, cash equivalents and restricted cash and cash equivalents at end of period	$	6,366	$	6,618
Supplemental cash flow information
Cash paid for interest	$	254	$	298
Income tax payments, net	71		15

See accompanying notes.

7

Notes to Consolidated Financial Statements

September 30, 2022

(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®, trivago®, Orbitz®, Travelocity®, Hotwire®, Wotif®, ebookers®, CheapTickets®, Expedia Group™ Media Solutions, CarRentals.com™, Expedia CruisesTM and Traveldoo®. 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

The COVID-19 pandemic, and measures to contain the virus, including government travel restrictions and quarantine orders, have had a significant negative impact on the global travel industry and materially and negatively impacted our business, financial results and financial condition. Since the first quarter of 2020, COVID-19 has negatively impacted consumer sentiment and consumer’s ability to travel, and many of our supply partners, particularly airlines and hotels, continue to operate at reduced but improving service levels in 2022. More recently, travel trends have continued to improve. 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, going forward.

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 record our investments in entities that we do not control, but over which we have the ability to exercise significant influence, using the equity method or at fair value. 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, 2021, 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 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; 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.

8

Notes to Consolidated Financial Statements – (Continued)

Reclassifications

We have reclassified prior period financial statements to conform to the current period presentation.

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. Since 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 seasonality in the future.

Impacts from COVID-19 disrupted our typical seasonal pattern for bookings, revenue, profit and cash flows during 2020 and 2021. Significantly higher cancellations and reduced booking volumes, particularly in the first half of 2020, resulted in material operating losses and negative cash flow. Booking and travel trends improved in the second half of 2020, throughout 2021, and in the first nine months of 2022. This has resulted in working capital benefits and positive cash flow more akin to typical historical trends. It remains difficult to forecast the seasonality for upcoming quarters, given the uncertainty related to the shape and timing of any sustained recovery.

Note 2 – Summary of Significant Accounting Policies

Recent Adopted Accounting Policies

In June 2022, the Financial Accounting Standards Board (“FASB”) issued new guidance related to fair value measurement of equity securities, which clarifies the fair value measurement of an equity security that is subject to a contractual sale restriction and requires specific disclosures related to such an equity security. The new guidance is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. We elected to early adopt the new guidance in the second quarter of 2022 on a prospective basis. One of our minority equity investments is accounted for in accordance with this new guidance. See Note 3 – Fair Value Measurements for additional information.

Recent Accounting Policies Not Yet Adopted

In October 2021, the FASB issued new guidance relate to recognizing and measuring contract assets and contract liabilities from contracts with customers acquired in a business combination. The new guidance will require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination as compared to current GAAP where an acquirer generally recognizes such items at fair value on the acquisition date. The new guidance is effective on a prospective basis for fiscal years beginning after December 15, 2022, with early adoption permitted. We do not expect it will have a material impact, if any, on our consolidated financial statements.

Significant Accounting Policies

Below are the significant 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, 2021.

Revenue

Prepaid Merchant Bookings. We classify payments made to suppliers in advance of Vrbo performance obligations as prepaid merchant bookings included within prepaid and other current assets. Prepaid merchant bookings was $522 million as of September 30, 2022 and $591 million as of December 31, 2021.

9

Notes to Consolidated Financial Statements – (Continued)

Deferred Merchant Bookings. We classify cash payments received in advance of our performance obligations as deferred merchant bookings. At December 31, 2021, $4.9 billion of advance cash payments was reported within deferred merchant bookings, $4.2 billion of which was recognized resulting in $686 million of revenue during the nine months ended September 30, 2022. At September 30, 2022, the related balance was $6.5 billion.

At December 31, 2021, $798 million of deferred loyalty rewards was reported within deferred merchant bookings, $575 million of which was recognized within revenue during the nine months ended September 30, 2022. At September 30, 2022, the related balance was $915 million.

Deferred Revenue. At December 31, 2021, $166 million was recorded as deferred revenue, $109 million of which was recognized as revenue during the nine months ended September 30, 2022. At September 30, 2022, the related balance was $160 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 U.S. treasury securities, 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 relates to certain traveler deposits, primarily for Vrbo, 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:

	September 30, 2022		December 31, 2021
	(in millions)
Cash and cash equivalents	$	4,588	$	4,111
Restricted cash and cash equivalents	1,778		1,694
Total cash, cash equivalents and restricted cash and cash equivalents in the consolidated statements of cash flows	$	6,366	$	5,805

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 nine months ended September 30, 2022, we recorded approximately $12 million of incremental allowance for expected uncollectible accounts, offset by $16 million of write-offs. 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.

10

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 September 30, 2022 are classified using the fair value hierarchy in the table below:

	Total		Level 1		Level 2
	(In millions)
Assets
Cash equivalents:
Money market funds	$	4	$	4	$	—
Term deposits	184		—		184
Derivatives:
Foreign currency forward contracts	29		—		29
Cross-currency interest rate swaps	42		—		42
Investments:
Term deposits	49		—		49
Equity investments	486		55		431
Total assets	$	794	$	59	$	735

Financial assets measured at fair value on a recurring basis as of December 31, 2021 are classified using the fair value hierarchy in the table below:

	Total		Level 1		Level 2		Level 3
	(In millions)
Assets
Cash equivalents:
Money market funds	$	47	$	47	$	—	$	—
Mutual funds	23		23		—		—
Term deposits	153		—		153		—
Derivatives:
Foreign currency forward contracts	3		—		3		—
Investments:
Term deposits	200		—		200		—
Equity investments	909		94		—		815
Total assets	$	1,335	$	164	$	356	$	815

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. Valuation of the cross-currency interest rate swaps is based on foreign currency exchange rates and the current interest rate curve, Level 2 inputs.

We hold term deposit investments with financial institutions. Term deposits with original maturities of less than three months are classified as cash equivalents, those with remaining maturities of less than one year are classified within short-term investments and those with remaining maturities of greater than one year are classified within long-term investments and other assets.

As of September 30, 2022 and December 31, 2021, our cash and cash equivalents consisted primarily of term deposits, money market funds and mutual funds with maturities of three months or less and bank account balances.

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 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 September 30, 2022, we were party to outstanding forward contracts hedging our liability exposures with a total net notional value of $2.3 billion. We had a net forward asset of $29 million ($47 million gross asset) as

11

Notes to Consolidated Financial Statements – (Continued)

of September 30, 2022 and a net forward asset of $3 million ($12 million gross asset) as of December 31, 2021 recorded in prepaid expenses and other current assets. We recorded $(60) million and $15 million in net gains (losses) from foreign currency forward contracts during the three months ended September 30, 2022 and 2021 as well as $144 million and $8 million in net losses from foreign currency forward contracts during the nine months ended September 30, 2022 and 2021.

On March 2, 2022, we entered into two fixed-to-fixed cross-currency interest rate swaps with an aggregate notional amount of €300 million. The swaps were designated as net investment hedges of Euro assets with the objective to protect the U.S. dollar value of our net investments in the Euro foreign operations due to movements in foreign currency. Hedge effectiveness is assessed each quarter based on the net investment in the foreign subsidiaries designated as the hedged item and the changes in the fair value of designated interest rate swaps based on spot rates. For hedges that meet the effectiveness requirements, changes in fair value are recorded as accumulated other comprehensive income (loss) (“AOCI”) within the foreign currency translation adjustment. Amounts excluded from hedge effectiveness at inception are recognized as interest accrues within interest expense. The maturity date of both swaps is February 2026, whereby, we will receive U.S. dollars from and pay Euros to the contract counterparties. During the term of each contract, we receive interest payments in U.S. dollars at a fixed rate of 5% and make interest payments in Euros at an average fixed rate of 3.38% based on a notional amount and fixed interest rates determined at contract inception. The fair value of the cross-currency interest rate swaps was a $42 million asset as of September 30, 2022 recorded in long-term investments and other assets, and the gain recognized in interest expense during the nine months ended September 30, 2022 was $4 million.

Our equity investments include our marketable equity investment in Despegar, a publicly traded company, which is included in long-term investments and other assets in our consolidated balance sheets. During the nine months ended September 30, 2022 and 2021, we recognized a loss of approximately $39 million and approximately $7 million within other, net in our consolidated statements of operations related to the fair value changes of this equity investment.

In connection with our disposition of Egencia (our former corporate travel arm) in November 2021, we became an indirect holder of an approximately 19% interest in GBT JerseyCo Ltd. (“GBT”), doing business as American Express Global Business Travel, with an initial fair value of $