Cutbacks are coming at Expedia Group, according to the Seattle-based travel giant’s annual regulatory filing and comments made by chairman Barry Diller on its Thursday earnings call.
The company stopped short of using the word layoffs, and a spokesperson declined to comment Friday when asked about the possibility of job cuts. But in its fourth quarter earnings report, Expedia said it is targeting $300 to $500 million of annual cost savings, a significant restructuring on a level that would typically include layoffs.
“We were a bloated organization,” Diller said on on Expedia’s earnings call Thursday, explaining that the company plans to simplify and streamline operations, acknowledging later that the restructuring would have an impact on people.
Expedia employed 25,400 people as of Dec. 31, up from 24,500 employees at the end of 2018. The company posted $12 billion in revenue in 2019, up 8 percent, and profits of $565 million.
The company moved its headquarters from Bellevue, Wash., to a large campus on the Seattle waterfront last year, just weeks before a major shakeup in its executive suite. Diller took control of the company in December with the abrupt resignation of former CEO Mark Okerstrom and CFO Alan Pickerill on Dec. 4.
Diller, the former Paramount Pictures chairman, started the Fox television network and USA Broadcasting. He oversees a wide range of online brands as chairman of the IAC media and Internet company. Diller made his first investment in Expedia in 2001 and remains its chairman.
The chairman cited a strategy disagreement between the former top executives and the board over efforts to unify the company’s brands and technology. Expedia Group includes brands and sites such as Vrbo, Travelocity, Orbitz, HomeAway and many others, in addition to the flagship Expedia.com. The reorganization effort led by Okerstrom aimed to unify the company’s brands and technology, and help Expedia take better advantage of the larger company’s scale.
Diller on Thursday called the plan a “complicated process that froze us” and misled management.
In Expedia’s annual 10K filing with the Securities and Exchange Commission on Friday, the company said, “in February 2020, we announced our intention to pursue operating cost savings by further simplifying our organization, streamlining priorities and operating more efficiently.”
The 78-year-old media mogul also said this, toward the end of the call with analysts:
“I think it should be said: This process of simplifying our business and lowering our costs has an effect, obviously, on people. We’ve been in that process of going through this over the last, at least a month. I have never seen a process like this. I keep saying it to my colleagues that are involved, how impressed I am with the thoughtfulness, the deliberations that go on, in every part. Because this is not just saying, okay, this is one little piece of the company. Every one of our senior leaders has participated in this. And in a way I almost feel like we should publish the process we’ve gone through. I have been around and I have been through a lot of these processes. I’ve never seen one as thoughtfully and decently done as this. And the plan for communications is — I’m sure we’ll make mistakes here or there — but it’s just impressive.”
Expedia vice chairman Peter Kern, who is helping Diller run day-to-day operations after the executive shuffle, cited “wasted marketing spend” as part of his comments on Thursday’s call.
“Overall the common themes here are really about simplification, precision — really bringing an efficient operating mind to everything we do,” Kern said. “We will be aggressive about that and we plan to get a lot out of that as we push through the year.”
The company’s shares were up more than 10 percent on Friday, trading at around $123 per share. RBC Capital raised its 12-month price target to $143 following the earnings report Thursday.
“We are somewhat cautious on EXPE arguably operating without a full-time CEO, though we are fully respectful of the almost unparalleled experience Barry Diller has in the ‘Net sector,” RBC Capital Analyst Mark Mahaney wrote in a note to investors. “Yes, we are initially skeptical – and we believe the market will be as well – of EXPE’s ability to deliver double digit EBITDA growth in ’20. The good news is that this skepticism is arguably priced in… so if EXPE can actually do this, there is upside to shares.”