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~~March 3031, ~~2018~~2019

☐ 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 001-37938

LIBERTY EXPEDIA HOLDINGS, INC.

(Exact name of Registrant as specified in its charter)

State of Delaware		81-1838757
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

12300 Liberty Boulevard Englewood, Colorado		80112
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (720) 875-5800

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Series A common stock	LEXEA	The Nasdaq Stock Market LLC
Series B common stock	LEXEB	The Nasdaq Stock Market LLC

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 ☒

The number of outstanding shares of Liberty Expedia Holdings, Inc. common stock as of ~~October~~ April 15, ~~2018~~2019 was:

		Series A		Series B
Liberty Expedia Holdings, Inc. Common Stock		54,~~485~~496,~~588~~831		2,830,174

Table of Contents

Part I - Financial Information
Item 1. Financial Statements
LIBERTY EXPEDIA HOLDINGS, INC. Condensed Consolidated Balance Sheets (unaudited)	I-2
LIBERTY EXPEDIA HOLDINGS, INC. Condensed Consolidated Statements of Operations (unaudited)	I-3
LIBERTY EXPEDIA HOLDINGS, INC. Condensed Consolidated Statements of Comprehensive Earnings (Loss) (unaudited)	I-4
LIBERTY EXPEDIA HOLDINGS, INC. Condensed Consolidated Statements of Cash Flows (unaudited)	I-5
LIBERTY EXPEDIA HOLDINGS, INC. Condensed Consolidated Statement of Equity (unaudited)	I-6
LIBERTY EXPEDIA HOLDINGS, INC. Notes to Condensed Consolidated Financial Statements (unaudited)	I-7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	I-2825
Item 3. Quantitative and Qualitative Disclosures about Market Risk	I-3935
Item 4. Controls and Procedures	I-4036
Part II - Other Information
Item 1. Legal Proceedings	II-1
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	II-1
Item 1A. Risk Factors	II-1
Item 6. Exhibits	II-1
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	II-3
SIGNATURES	II-2
Item 6. Exhibits	II-4
SIGNATURES	II-6

I-1

Table of Contents

LIBERTY EXPEDIA HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(unaudited)

	September 30,		December 31,
	March 31,		December 31,
	2018		2017
	2019		2018
	amounts in millions
Assets
Current assets:
Cash and cash equivalents	$	3,~~012~~765	2,~~961~~512
Accounts receivable, net		2,~~298~~621	12,~~871~~154
Short-term marketable securities		~~458~~508	~~469~~53
Prepaid expenses		~~249~~305	~~257~~262
Other current assets		~~243~~607	~~113~~323
Total current assets		67,~~260~~806	5,~~671~~304
Property and equipment, net		~~974~~967	~~951~~1,043
Intangible assets not subject to amortization:
Goodwill		15,~~141~~076	15,~~251~~112
Tradenames		5,~~734~~714	65,~~256~~726
		20,875	21,507
		20,790	20,838
Intangible assets subject to amortization, net		43,~~239~~725	53,~~010~~931
Other assets, net		~~721~~1,358	~~829~~791
Total assets	$	3334,~~069~~646	3331,~~968~~907
Liabilities and Equity
Current liabilities:
Accounts payable, merchant	$	1,~~877~~736	1,~~838~~699
Accounts payable, other		~~885~~1,047	~~713~~800
Accrued liabilities		~~717~~703	~~1,285~~829
Deferred merchant bookings		46,~~795~~612	34,~~219~~327
Deferred revenue		~~348~~536	~~329~~367
Current portion of debt (note 7)		11	538
Current portion of debt (note 6)		—	5
Other current liabilities		~~144~~114	3051
Total current liabilities		810,~~777~~748	78,~~952~~078
Long-term debt and capital lease obligations, net, including $403 million and $398 million measured at fair value (note 7)		4,283	4,329
Long-term debt and capital lease obligations, net, including $392 million and $382 million measured at fair value (note 6)		4,223	4,238
Deferred income tax liabilities		1,~~573~~533	21,~~155~~540
Other liabilities		~~474~~837	~~430~~534
Total liabilities		1517,~~107~~341	14,~~866~~390
Equity
Preferred stock, $.01 par value. Authorized 50,000,000 shares; no shares issued		—	—
Series A common stock, $.01 par value. Authorized 160,000,000 shares; issued and outstanding 54,484,252 and 54,438,883 at September 30, 2018 and December 31, 2017, respectively		1	1
Series A common stock, $.01 par value. Authorized 160,000,000 shares; issued and outstanding 54,496,831 and 54,496,214 at March 31, 2019 and December 31, 2018, respectively		1	1
Series B common stock, $.01 par value. Authorized 6,000,000 shares; issued and outstanding 2,830,174 and 2,830,174 at September 30, 2018 and December 31, 2017, respectively		—	—
Series B common stock, $.01 par value. Authorized 6,000,000 shares; issued and outstanding 2,830,174 and 2,830,174 at March 31, 2019 and December 31, 2018, respectively		—	—
Additional paid-in capital		~~336~~283	~~370~~313
Accumulated other comprehensive earnings (loss), net of taxes		3829	5936
Retained earnings		21,~~066~~988	2,~~179~~051
Total stockholders' equity		2,~~441~~301	2,~~609~~401
Noncontrolling interests in equity of subsidiaries		15,~~521~~004	1615,~~493~~116
Total equity		17,~~962~~305	1917,~~102~~517
Commitments and contingencies (note 8)
Commitments and contingencies (note 9)
Total liabilities and equity	$	3334,~~069~~646	3331,~~968~~907

See accompanying notes to condensed consolidated financial statements.

I-2

Table of Contents

LIBERTY EXPEDIA HOLDINGS, INC.

Condensed Consolidated Statements Of Operations

(unaudited)

	Three months ended			~~Nine months ended~~
	September 30,			September 30,
	March 31,
	2018		2017	2018	2017
	2019		2018
	amounts in millions,
	except per share amounts
Service revenue	$	32,~~276~~609	2,~~963~~508	~~8,664~~	~~7,675~~
Product revenue		5552	66	~~181~~	~~230~~
Total revenue, net (note 2)		3,331	3,029	8,845	7,905
Total revenue, net (note 10)		2,661	2,574
Operating costs and expenses:
Selling and marketing (1)		1,~~496~~529	1,~~461~~513	~~4,546~~	~~4,176~~
Cost of service revenue (1)		~~479~~490	~~434~~460	~~1,411~~	~~1,248~~
Technology and content (1)		~~278~~297	~~242~~277	~~831~~	~~701~~
Cost of goods sold (exclusive of depreciation shown separately below)		43	51	136	172
General and administrative (1)		201	199
General and administrative (1)		201	99	594	443
Cost of goods sold (exclusive of depreciation shown separately below)		39	48
Other operating expense		4	45	14	16
Depreciation and amortization		~~489~~405	~~583~~479	~~1,442~~	~~1,669~~
Legal reserves, occupancy tax, restructuring and related reorganization charges and other		~~(79)~~20	34	~~(74)~~	39
Impairment of goodwill and intangible assets (note 6)		544	—	544	—
		2,985	2,985
		3,455	2,877	9,444	8,464
Operating income (loss)		(324)	(411)
Operating income (loss)		(124)	152	(599)	(559)
Other income (expense):
Other income (expense):
Interest expense		(32)	(36)
Interest expense		(32)	(29)	(103)	(88)
Other, net		27	58
Other, net		(17)	(23)	(38)	(71)
		(5)	22
		(49)	(52)	(141)	(159)
Earnings (loss) before income taxes		(329)	(389)
Earnings (loss) before income taxes		(173)	100	(740)	(718)
Income tax (expense) benefit		60	65
Income tax (expense) benefit		120	23	231	259
Net earnings (loss)		(269)	(324)
Net earnings (loss)		(53)	123	(509)	(459)
Less net earnings (loss) attributable to the noncontrolling interests		(205)	(280)
Less net earnings (loss) attributable to the noncontrolling interests		(11)	109	(396)	(362)
Net earnings (loss) attributable to Liberty Expedia Holdings, Inc. shareholders	$	(64)	(44)
Net earnings (loss) attributable to Liberty Expedia Holdings, Inc. shareholders	$	(42)	14	(113)	(97)
Basic net earnings (loss) attributable to Series A and Series B Liberty Expedia Holdings, Inc. shareholders per common share (note 2)	$	(1.12)	(0.77)
Basic net earnings (loss) attributable to Series A and Series B Liberty Expedia Holdings, Inc. shareholders per common share (note 3)	$	(0.74)	0.25	(1.98)	(1.70)
Diluted net earnings (loss) attributable to Series A and Series B Liberty Expedia Holdings, Inc. shareholders per common share (note 2)	$	(1.12)	(0.77)
Diluted net earnings (loss) attributable to Series A and Series B Liberty Expedia Holdings, Inc. shareholders per common share (note 3)	$	(0.74)	0.24	(1.98)	(1.70)
(1) Includes stock compensation as follows:
(1) Includes stock compensation as follows:
Selling and marketing	$	11	11
Selling and marketing	$	11	13	35	39
Cost of service revenue		3	2
Cost of service revenue		3	3	8	10
Technology and content		19	15
Technology and content		16	19	48	53
General and administrative		25	23
General and administrative		26	(60)	69	(10)

See accompanying notes to condensed consolidated financial statements.

I-3

Table of Contents

LIBERTY EXPEDIA HOLDINGS, INC.

Condensed Consolidated Statements Of Comprehensive Earnings (Loss)

(unaudited)

	Three months ended			~~Nine months ended~~
	September 30,			September 30,
	March 31,
	2018		2017	2018	2017
	2019		2018
	amounts in millions
Net earnings (loss)	$	(53269)	~~123~~(324)	~~(509)~~	~~(459)~~
Other comprehensive earnings (loss), net of taxes:
Currency translation adjustments and other		(3142)	~~208~~102	~~(138)~~	~~696~~
Unrealized holding gains (losses) arising during the period, net of taxes		—	21	—	21
Other comprehensive earnings (loss)		(42)	102
Other comprehensive earnings (loss)		(31)	229	(138)	717
Comprehensive earnings (loss)		(311)	(222)
Comprehensive earnings (loss)		(84)	352	(647)	258
Less comprehensive earnings (loss) attributable to the noncontrolling interest		(240)	(189)
Less comprehensive earnings (loss) attributable to the noncontrolling interest		(37)	305	(514)	251
Comprehensive earnings (loss) attributable to Liberty Expedia Holdings, Inc. shareholders	$	(71)	(33)
Comprehensive earnings (loss) attributable to Liberty Expedia Holdings, Inc. shareholders	$	(47)	47	(133)	7

See accompanying notes to condensed consolidated financial statements.

I-4

Table of Contents

LIBERTY EXPEDIA HOLDINGS, INC.

Condensed Consolidated Statements Of Cash Flows

(unaudited)

	Nine months ended
	Three months ended
	September 30,
	March 31,
	2018		2017
	2019		2018
	amounts in millions
Cash flows from operating activities:
Net earnings (loss)	$	(~~509~~269)	(~~459~~324)
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		~~1,442~~405	~~1,669~~479
Stock-based compensation		~~160~~58	9251
Realized (gain) loss on foreign currency forwards		(347)	(18)
(Gain) loss on equity securities		~~100~~(22)	—(37)
Deferred income tax expense (benefit)		(~~567~~3)	~~(369)~~44
Impairment of goodwill and intangible assets		544	—
Other noncash charges (credits), net		(7)	(35)
Other noncash charges (credits), net		69	(110)
Changes in operating assets and liabilities
Current and other assets		(~~419~~486)	(~~501~~400)
Payables and other liabilities		12,~~330~~482	1,~~623~~906
Net cash provided (used) by operating activities		2,~~116~~151	1,~~944~~676
Cash flows from investing activities:
Capital expended for property and equipment and capitalized software		(~~639~~275)	(~~532~~194)
Purchases of short-term marketable securities and other investments		(~~1,714~~462)	(~~1,713~~867)
Sales of short-term marketable securities		~~1,692~~7	~~921~~317
Acquisitions by subsidiary, net of cash acquired		(40)	(169)
Other, net		6	14
Other, net		41	8
Net cash provided (used) by investing activities		(724)	(730)
Net cash provided (used) by investing activities		(660)	(1,485)
Cash flows from financing activities:
Borrowings of debt		~~177~~32	~~1,624~~67
Repayments of debt		(~~681~~37)	(~~594~~66)
Shares issued by subsidiary		~~138~~91	~~180~~20
Shares repurchased by subsidiary		(~~620~~25)	(~~154~~202)
Dividends paid by subsidiary		(~~117~~40)	(~~110~~39)
Proceeds from exercise of equity awards and employee stock purchase plan		1	5
Taxes paid in lieu of shares issued for stock-based compensation		—	(2)
Taxes paid in lieu of shares issued for stock-based compensation		—	(9)
Other financing activities, net		4	(6)
Other financing activities, net		(65)	(18)
Net cash provided (used) by financing activities		25	(228)
Net cash provided (used) by financing activities		(1,167)	924
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash		(11)	17
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash		(119)	143
Net increase (decrease) in cash, cash equivalents and restricted cash		1,441	735
Net increase (decrease) in cash, cash equivalents and restricted cash		170	1,526
Cash, cash equivalents and restricted cash at beginning of period		2,774	3,031
Cash, cash equivalents and restricted cash at beginning of period		3,031	1,872
Cash, cash equivalents and restricted cash at end of period	$	4,215	3,766
Cash, cash equivalents and restricted cash at end of period	$	3,201	3,398

See accompanying notes to condensed consolidated financial statements.

The following table reconciles cash, cash equivalents and restricted cash reported in our condensed consolidated balance sheets to the total amount presented in our condensed consolidated statements of cash flows:


		March 31,	December 31,
		2019	2018
	(in millions)
Cash and cash equivalents	$	3,765	2,512
Restricted cash included within other current assets		447	259
Restricted cash included within other assets		3	3
Total cash, cash equivalents and restricted cash and cash equivalents in the condensed consolidated statement of cash flows	$	4,215	2,774

I-5

Table of Contents

LIBERTY EXPEDIA HOLDINGS, INC.

Condensed Consolidated Statement Of Equity

(unaudited)

~~Nine~~Three months ended ~~September~~ 30March 31, 2019 and March 31, 2018

						Accumulated
					Additional	other
	Preferred		Common stock		paid-in	comprehensive	Retained	Noncontrolling
	stock		Series A	Series B	capital	earnings (loss)	earnings	interests	Total equity
	amounts in millions
Balance at January 1, 2018	$	—	1	—	370	59	2,179	16,493	19,102
Balance at January 1, 2019	$	—	1	—	313	36	2,051	15,116	17,517
Net earnings (loss)		—	—	—	—	—	(~~113~~64)	(~~396~~205)	(~~509~~269)
Other comprehensive income (loss)		—	—	—	—	(207)	—	(~~118~~35)	(~~138~~42)
Stock compensation		—	—	—	269	—	—	~~138~~49	~~164~~58
Proceeds from exercise of equity instruments in parent		—	—	—	1	—	—	—	1
Proceeds from exercise of equity instruments in subsidiary		—	—	—	(36)	—	—	127	91
Proceeds from exercise of equity instruments in subsidiary		—	—	—	(52)	—	—	190	138
Shares repurchased by subsidiary		—	—	—	(3)	—	—	(22)	(25)
Shares repurchased by subsidiary		—	—	—	(8)	—	—	(612)	(620)
Dividends paid by subsidiary		—	—	—	—	—	—	(40)	(40)
Dividends paid by subsidiary		—	—	—	—	—	—	(117)	(117)
Adoption of new accounting guidance		—	—	—	—	—	1	5	6
Taxes paid in lieu of shares issued for stock-based compensation		—	—	—	(2)	—	—	—	(2)
Other		—	—	—	—	—	—	9	9
Adoption of new accounting guidance		—	—	—	—	(1)	—	(12)	(13)
Balance at March 31, 2019	$	—	1	—	283	29	1,988	15,004	17,305
Other		—	—	—	1	—	—	(45)	(44)
Balance at September 30, 2018	$	—	1	—	336	38	2,066	15,521	17,962


						Accumulated
					Additional	other
	Preferred		Common stock		paid-in	comprehensive	Retained	Noncontrolling
	stock		Series A	Series B	capital	earnings (loss)	earnings	interests	Total equity

	amounts in millions
Balance at January 1, 2018	$	—	1	—	370	59	2,179	16,493	19,102
Net earnings (loss)		—	—	—	—	—	(44)	(280)	(324)
Other comprehensive income (loss)		—	—	—	—	11	—	91	102
Stock compensation		—	—	—	8	—	—	43	51
Proceeds from exercise of equity instruments in subsidiary		—	—	—	(25)	—	—	45	20
Stock repurchases by subsidiary		—	—	—	18	—	—	(220)	(202)
Dividends paid by subsidiary		—	—	—	—	—	—	(39)	(39)
Taxes paid in lieu of shares issued for stock-based compensation		—	—	—	(2)	—	—	—	(2)
Adoption of new accounting guidance		—	—	—	—	(1)	1	(10)	(10)
Other		—	—	—	—	—	—	4	4
Balance at March 31, 2018	$	—	1	—	369	69	2,136	16,127	18,702

See accompanying notes to condensed consolidated financial statements.

I-6

Table of Contents

(1) Basis of Presentation

During November 2015, the board of directors of Liberty Interactive Corporation ("Liberty Interactive"), now known as Qurate Retail, Inc. (“Qurate Retail”), authorized management to pursue a plan to distribute to holders of its then-outstanding Liberty Ventures common stock shares of a newly formed entity, Liberty Expedia Holdings, Inc. ("Expedia Holdings" or the "Company" as discussed below) ("Expedia Holdings Split-Off"). Following the Expedia Holdings Split-Off, Expedia Holdings is comprised of, among other things, Qurate Retail's former ownership interest in Expedia Group, Inc. (formerly “Expedia, Inc.”) ("Expedia"), as well as Qurate Retail's former wholly-owned subsidiary Vitalize, LLC (which we refer to as “Bodybuilding”).

The Expedia Holdings Split-Off occurred on November 4, 2016. Following the Expedia Holdings Split-Off, Expedia Holdings and Qurate Retail operate as separate, publicly traded companies. The Expedia Holdings Split-Off was intended to be tax-free to Qurate Retail and the former stockholders of Liberty Ventures. In February 2017, the Internal Revenue Service (the “IRS”) completed its review of the Expedia Holdings Split-Off and informed Qurate Retail that it agreed with the nontaxable characterization of the transactions. Qurate Retail received an Issue Resolution Agreement from the IRS documenting this conclusion.

On April 15, 2019, the Company and Expedia entered into an Agreement and Plan of Merger (the “Merger Agreement”). As a result of the Merger Agreement the Company will become a wholly owned subsidiary of Expedia (the “Merger”). Pursuant to the Merger Agreement, each share of the Company’s Series A and Series B common stock, issued and outstanding immediately prior to the effective time of the Merger (except for shares held by Expedia Holdings as treasury stock or directly held by Expedia) will be converted into the right to receive 0.36 of a share of Expedia common stock, plus cash (without interest) in lieu of any fractional shares of Expedia common stock. It is expected that the Merger will close in the third quarter of 2019, subject to the completion of an exchange by Barry Diller of up to 5.7 million shares of Expedia common stock (“EXPE”) for an equal number of shares of Expedia class B common stock and customary closing conditions, including approval by a majority of the aggregate voting power of Expedia Holdings common stock and the receipt of any applicable regulatory approvals.

The accompanying condensed consolidated financial statements represent the consolidation of the historical financial information of Bodybuilding and Expedia. These financial statements refer to the consolidation of the aforementioned subsidiaries as "Expedia Holdings," "the Company," "us," "we" and "our" in the notes to the condensed consolidated financial statements. The Expedia Holdings Split-Off was accounted for at historical cost due to the pro rata nature of the distribution to the former holders of Liberty Ventures common stock. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements.

The accompanying (a) condensed consolidated balance sheet as of December 31, ~~2017~~2018, which has been derived from audited financial statements, and (b) the interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") for interim financial information and the instructions on Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for such periods have been included. The results of operations for any interim period are not necessarily indicative of results for the full year. Additionally, certain prior period amounts have been reclassified for comparability with current period presentation. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company considers (i) fair value measurement of non-financial instruments, (ii) accounting for certain merchant revenue, (iii) loyalty program accruals, (iv) valuation of other long-term liabilities, (v) measurement of stock-based compensation and (vi) income taxes to be its most significant estimates.

Split-Off of Expedia Holdings from Qurate Retail

Following the Expedia Holdings Split-Off, Qurate Retail and Expedia Holdings operate as separate, publicly traded companies, and neither has any stock ownership, beneficial or otherwise, in the other. In connection with the Expedia Holdings Split-Off, Expedia Holdings entered into certain agreements with Qurate Retail and/or Liberty Media Corporation (“Liberty Media”) (or certain of their subsidiaries) in order to govern certain of the ongoing relationships between these companies after the Expedia Holdings Split-Off and to provide for an orderly transition. These agreements include a reorganization agreement, a services agreement, a facilities sharing agreement and a tax sharing agreement.

I-7

Table of Contents

~~Qurate~~ Split-Off ~~Retail and Expedia Holdings provides for the allocation and indemnification~~ of ~~tax liabilities and benefits between Qurate Retail and~~ Expedia Holdings ~~and~~from other agreements related to tax matters. Pursuant to the services agreement, Liberty Media provides Expedia Holdings with general and administrative services including legal, tax, accounting, treasury and investor relations support. Under the facilities sharing agreement among Liberty Media, a subsidiary of Liberty Media and Expedia Holdings, Expedia Holdings shares office space with Qurate Retail and Liberty Media and related amenities at Liberty Media's corporate headquarters. Expedia Holdings will reimburse Liberty Media for direct, out-of-pocket expenses incurred by Liberty Media in providing these services and for costs that will be negotiated semi-annually. Under these various agreements, approximately $1 million and $1 million for the three months ended September 30, 2018 and 2017, respectively, and $3 million and $3 million for the nine months ended September 30, 2018 and 2017, respectively, was reimbursable to Liberty Media.

The reorganization agreement between Qurate Retail and Expedia Holdings provides for, among other things, the principal corporate transactions (including the internal restructuring) required to effect the Expedia Holdings Split-Off, certain conditions to the Expedia Holdings Split-Off and provisions governing the relationship between Expedia Holdings and Qurate Retail with respect to and resulting from the Expedia Holdings Split-Off. The tax sharing agreement between Qurate Retail and Expedia Holdings provides for the allocation and indemnification of tax liabilities and benefits between Qurate Retail and Expedia Holdings and other agreements related to tax matters. Pursuant to the services agreement, Liberty Media provides Expedia Holdings with general and administrative services including legal, tax, accounting, treasury and investor relations support. Under the facilities sharing agreement among Liberty Media, a subsidiary of Liberty Media and Expedia Holdings, Expedia Holdings shares office space with Qurate Retail and Liberty Media and related amenities at Liberty Media's corporate headquarters. Expedia Holdings will reimburse Liberty Media for direct, out-of-pocket expenses incurred by Liberty Media in providing these services and for costs that will be negotiated semi-annually. Under these various agreements, approximately $1 million for both of the three months ended March 31, 2019 and 2018, was reimbursable to Liberty Media.

Seasonality

Expedia generally experiences seasonal fluctuations in the demand for its 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 Expedia’s 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 its hotel business and can be several months or more for its ~~vacation~~alternative ~~rental~~accommodations business. Historically, ~~HomeAway,~~Vrbo ~~Inc.~~ (formerly referred to as “~~HomeAway~~Homeaway”), 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 Expedia’s variable cost of revenue and direct sales and marketing costs, which it typically realizes in closer alignment to booking volumes, and the more stable nature of its fixed costs. Furthermore, operating profits for Expedia’s primary advertising business, trivago N.V. (“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 they 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 continued growth of Expedia’s international operations, advertising business or a change in its product mix, including the growth of ~~HomeAway~~Vrbo, may influence the typical trend of the seasonality in the future, and there may also be business or market driven dynamics that result in short-term impacts to revenue or profitability that differ from the typical seasonal trends~~, including trivago’s recent changing marketplace dynamics~~.

The Tax Cuts and Jobs Act (the “Tax Act”) was enacted in December 2017. The Tax Act significantly changed U.S. tax law by, among other things, lowering U.S. corporate income tax rate, implementing a territorial tax system and imposing a one-time transition tax on deemed repatriated earnings of foreign subsidiaries. In the prior year, we recognized the provisional tax impacts related to the one-time transition tax and the revaluation of deferred tax balances and included these estimates in our consolidated financial statements for the year ended December 31, 2017. We are still in the process of analyzing the impact of the various provisions of the Tax Act. The ultimate impact may materially differ from these provisional amounts due to, among other things, continued analysis of the estimates and further guidance and interpretations on the application of the law. We expect to complete our analysis by December 2018.

(2) Recent Accounting Pronouncements

Recently Adopted Accounting Policies

Revenue from Contracts with Customers. As of January 1, 2018, the Company adopted the Accounting Standards Updates ("ASU") amending revenue recognition guidance using the modified retrospective method for all contracts reflecting the aggregate effect of modifications prior to the date of adoption. Results for reporting periods beginning after January 1, 2018 are presented under the new guidance, while prior period amounts were not adjusted and continue to be reported under the accounting standards in effect for those periods.

The new guidance impacted Expedia’s loyalty program accounting as it is no longer permitted to use the incremental cost method when recording the financial impact of rewards earned in conjunction with its traveler loyalty programs. Instead, Expedia re-values its liability using a relative fair value approach and now records its loyalty liability as a

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component of deferred merchant bookings. Additionally, due to the new definition of variable consideration, Expedia is required to estimate and record certain variable payments, primarily supplier overrides, earlier than previously recorded. Both modifications resulted in cumulative-effect adjustments to opening retained earnings, with an insignificant change to revenue on a go-forward basis. The new guidance also results in insignificant changes in the timing and classification of certain other revenue streams, including the reclassification of certain air fees from net revenue to cost of revenue. For a comprehensive discussion of our updated revenue recognition policy, refer to the Significant Accounting Policies-Revenue Recognition disclosure below.

The impact of the new guidance to our consolidated financial statements was not meaningful as of and for the three and nine months ended September 30, 2018.

The cumulative effect of the revenue accounting changes made to our consolidated balance sheet as of January 1, 2018 were as follows:

		Balance at			Balance at
		December 31,			January 1,
		2017		Adjustments	2018
	(in millions)
Current and long-term assets:
Accounts receivable, net	$	1,871	$	(40)	$	1,831
Prepaid expenses and other current assets		370		(1)		369
Long-term investments and other assets		829		(3)		826
Current and long-term liabilities:
Deferred merchant bookings		3,219		619		3,838
Accrued expenses and other current liabilities		1,315		(564)		751
Deferred income taxes		2,155		(3)		2,152
Stockholders' equity:
Retained earnings		2,179		(1)		2,178
Noncontrolling interests in equity of subsidiaries		16,493		(7)		16,486

Recognition and Measurement of Financial Instruments. As of January 1, 2018, the Company adopted new guidance related to accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. The most significant impact for the Company is with respect to the requirement that minority equity investments with readily determinable fair values, must be carried at fair value with changes in fair value recorded through net income. Previously such investments designated as available for sale were recorded at fair value with changes in fair value recorded through other comprehensive income. The Company elected to prospectively account for minority investments without readily determinable fair values at cost, with observable price changes reflected through net income. In addition, a portion of the unrealized gain (loss) recognized on the Company’s exchangeable debt accounted for at fair value is now presented in other comprehensive income as it relates to instrument specific credit risk, however this impact was not material to the overall financial statements for the three and nine month periods ended September 30, 2018. The Company recorded an immaterial decrease to non-controlling interest in equity of subsidiaries, and increase to accumulated other comprehensive income (loss) (“AOCI”) related to an unrealized loss, net of tax.

Statement of Cash Flows. As of January 1, 2018, the Company adopted the new guidance related to the statement of cash flows which clarifies how companies present and classify certain cash receipts and cash payments as well as amends current guidance to address the classification and presentation of changes in restricted cash in the statement of cash flows. Upon adoption, we retrospectively adjusted the prior periods presented in our consolidated statement of cash flows, which resulted in a slight working capital benefit in prepaid expenses and other assets within operating activities in the nine months ended September 30, 2017. Restricted cash includes cash and cash equivalents that is restricted through legal contracts, regulations or the Company’s intention to use the cash for a specific purpose. Expedia’s 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 condensed consolidated balance sheets to the total amount presented in our condensed consolidated statements of cash flows:

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		September 30,		December 31,
		2018		2017
	(in millions)
Cash and cash equivalents	$	3,012	$	2,961
Restricted cash included within other current assets		186		69
Restricted cash included within other assets		3		1
Total cash, cash equivalents and restricted cash and cash equivalents in the condensed consolidated statement of cash flows	$	3,201	$	3,031

Intra-entity Transfers of Assets Other Than Inventory. As of January 1, 2018, the Company adopted the new guidance amending the accounting for income taxes associated with intra-entity transfers of assets other than inventory. This new guidance requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory in earnings when the transfer occurs rather than our historical practice to defer and amortize the tax consequences over a specific period of time. As a result of the adoption, the Company recorded an immaterial reduction to retained earnings and non-controlling interest in equity of subsidiaries, a reduction to long-term investments and other assets and an increase to deferred tax assets related to the unrecognized income tax effects of asset transfers that occurred prior to adoption.

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. In February 2018, the Financial Accounting Standards Board (“FASB”) issued new guidance that allows an entity to elect to reclassify “stranded” tax effects in AOCI to retained earnings to address concerns related to accounting for certain provisions of the Tax Act. The guidance is effective for annual and interim reporting periods beginning after December 15, 2018, with early adoption permitted.

The Company elected to early adopt the new guidance during the first quarter of 2018, which resulted in the reclassification of the income tax effect of the Tax Act from AOCI to retained earnings in order to reflect the tax effects of items within AOCI at the appropriate tax rate. As a result, the Company recorded an immaterial increase to retained earnings and non-controlling interest in equity of subsidiaries, and a reduction to AOCI as of January 1, 2018. Our policy is to release income tax effects from AOCI based on the tax effects of amounts reclassified from AOCI to pre-tax income (loss) from continuing operations. Any remaining tax effect in AOCI is released following a portfolio approach.

Definition of a Business. As of January 1, 2018, the Company adopted the new guidance clarifying the definition of a business for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Upon adoption, the standard impacts how the Company assesses acquisitions (or disposals) of assets or businesses.

Non-employee Share-Based Payment Arrangements. In June 2018, the FASB issued new guidance related to accounting for share-based payments with non-employees. The updated guidance substantially aligns the accounting requirements of share-based payment awards to non-employees with those of employees. The guidance is effective for annual and interim reporting periods beginning after December 15, 2018, with early adoption permitted. The Company elected to early adopt the new guidance in the second quarter of 2018, which requires us to reflect any adjustments as of January 1, 2018, the beginning of the annual period that includes the interim period of adoption. The primary impact of adoption was the change in the measurement objective and the associated measurement date for all non-employee share-based payment awards to the grant-date fair value. Prior to adoption, non-employee awards were measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever could be more reliably measured. Additionally, the measurement date was previously determined by the earlier of the date at which either (1) a commitment for performance by the non-employee to earn the equity instruments was reached or (2) the non-employee’s performance was complete. Typically, the measurement date was delayed until performance was complete, which led to the non-employee awards being remeasured or “marked to market” each reporting period until they were vested. The adoption of this new guidance did not have a material impact on the Company’s consolidated financial statements for the three and nine months ended September 30, 2018, and had no impact on the Company’s previously reported quarterly results for the three months ended March 31, 2018 and the three and six months ended June 30, 2018.

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Recent Accounting Pronouncements Not Yet Adopted

Leases. In February 2016, the FASB issued new guidance which revises the accounting for leases. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases. The new guidance also simplifies the accounting for sale and leaseback transactions. The new standard is effective for the Company for fiscal years and interim periods beginning after December 15, 2018, with early adoption permitted. We plan to adopt this guidance on January 1, 2019 and expect to elect certain practical expedients under the transition guidance. Additionally, the Company plans to elect the optional transition method that allows for a cumulative-effect adjustment in the period of adoption and does not plan to restate prior periods. The Company is currently working with its consolidated subsidiaries to evaluate the impact of the adoption of this new guidance on our consolidated financial statements, including identifying the population of leases, evaluating technology solutions and collecting lease data.

Measurement of Credit Losses on Financial Instruments. In June 2016, the FASB issued new guidance on the measurement of credit losses for financial assets measured at amortized cost, which includes accounts receivable, and available-for-sale debt securities. The new guidance replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. This update is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted for annual periods beginning after December 15, 2018, including interim periods within those annual periods. We are in the process of evaluating the impact of adopting this new guidance on our consolidated financial statements.

~~Hedge Accounting. In August 2017, the FASB amended the existing accounting guidance for hedge accounting. The amendments require expanded hedge accounting for both non~~I-financial and financial risk components and refine the measurement of hedge results to better reflect an entity's hedging strategies. The new guidance also amends the presentation and disclosure requirements on a prospective basis as well as changes how entities assess hedge effectiveness. The new guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018 with early adoption permitted. The new guidance must be adopted using a modified retrospective transition method with a cumulative effect adjustment recorded to opening retained earnings as of the initial adoption date. The adoption of this new guidance is not expected to have a material impact on our consolidated financial statements.8

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Cloud Computing Arrangements. In August 2018, the FASB issued new guidance on the accounting for implementation costs incurred for a cloud computing arrangement that is a service contract. The update conforms 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 new guidance is effective for annual and interim reporting periods beginning after December 15, 2019, with early adoption permitted. We are in the process of evaluating the impact of adopting this new guidance on our consolidated financial statements.

Fair Value Measurements. In August 2018, the FASB issued new guidance related to the disclosure requirements on fair value measurements, which removes, modifies or adds certain disclosures. The guidance is effective for annual and interim reporting periods beginning after December 15, 2019, with early adoption permitted. We are in the process of evaluating the impact of adopting this new guidance on our consolidated financial statements disclosures.

~~Significant~~(2) ~~Accounting~~Earnings ~~Policies~~(Loss) Attributable to Expedia Holdings Shareholders per Common Share

Below are the significant accounting policies updated during 2018 as a result of the recently adopted accounting policies noted above. For a comprehensive description of our accounting policies, refer to our Annual Report on Form 10-K for the year ended December 31, 2017.

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Revenue Recognition

Expedia recognizes revenue upon transfer of control of its promised services in an amount that reflects the consideration it expects to be entitled to in exchange for those services.

For Expedia’s primary transaction-based revenue sources, discussed below, it has determined net presentation (that is, the amount billed to a traveler less the amount paid to a supplier) is appropriate for the majority of its revenue transactions as the supplier is primarily responsible for providing the underlying travel services and Expedia does not control the service provided by the supplier to the traveler. Expedia excludes all taxes assessed by a government authority, if any, from the measurement of transaction prices that are imposed on its travel related services or collected by Expedia from customers (which are therefore excluded from revenue).

The following table disaggregates revenue by major source:

	Three months ended		Nine months ended
	September 30, 2018		September 30, 2018
	(in millions)
Business Model:
Merchant	$	1,688	4,554
Agency		876	2,311
Advertising and media		302	858
HomeAway		410	941
Other (1)		55	181
Total revenue	$	3,331	8,845
Product and Service Type:
Lodging		2,347	5,951
Air		209	674
Advertising and media		302	858
Other (2)		473	1,362
Total revenue	$	3,331	8,845

______________________________

(1) Other is comprised of Bodybuilding revenue.

(2) Other includes car rental, insurance, destination services, cruise and fee revenue related to Expedia’s corporate travel business, among other revenue streams, none of which are individually material, as well as Bodybuilding revenue.

Expedia offers traditional travel services on a stand-alone and package basis generally either through the merchant or the agency business model. Under the merchant model, Expedia facilitates the booking of hotel rooms, airline seats, car rentals and destination services from its travel suppliers and Expedia is the merchant of record for such bookings. Under the agency model, Expedia passes reservations booked by the traveler to the relevant travel supplier and the travel supplier serves as the merchant of record for such bookings. Expedia receives commissions or ticketing fees from the travel supplier and/or traveler. For certain agency airline, hotel and car transactions, Expedia also receives fees through global distribution systems (“GDS”) that provide the computer systems through which the travel supplier inventory is made available and through which reservations are booked. Under the advertising model, Expedia offers travel and non-travel advertisers access to a potential source of incremental traffic and transactions through its various media and advertising offerings on trivago and its transaction-based websites. Expedia’s HomeAway business facilitates vacation rental bookings and provides listing and other ancillary services to property owners and managers.

The nature of Expedia’s travel booking service performance obligations vary based on the travel service with differences primarily related to the degree to which Expedia provides post booking services to the traveler and the timing when rights and obligations are triggered in Expedia’s underlying supplier agreements.

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Lodging. Expedia’s lodging revenue is comprised of revenue recognized under the merchant, agency and HomeAway business models.

Merchant Hotel. Expedia provides travelers access to book hotel room reservations through its contracts with lodging suppliers, which provide Expedia with rates and availability information for rooms but for which Expedia has no control over the rooms and does not bear inventory risk. Expedia’s travelers pay them for merchant hotel transactions prior to departing on their trip, generally when they book the reservation. Expedia records the payment in deferred merchant bookings until the stayed night occurs, at which point it recognizes the revenue, net of amounts paid to suppliers, as this is when its performance obligation is satisfied. In certain nonrefundable, nonchangeable transactions where Expedia has no significant post booking services (primarily opaque hotel offerings), Expedia records revenue when the traveler completes the transaction on its website, less a reserve for chargebacks and cancellations based on historical experience. Payments to suppliers are generally due within 30 days of check-in or stay. In certain instances when a supplier invoices Expedia for less than the cost it accrued, it generally reduces its accrued supplier payable and the supplier costs within net revenue six months in arrears, net of an allowance, when Expedia determines it is not probable that it will be required to pay the supplier, based on historical experience. Cancellation fees are collected and remitted to the supplier, if applicable.

Agency Hotel. Expedia generally records agency revenue from the hotel when the stayed night occurs as Expedia provides post booking services to the traveler and thus considers the stay as when its performance obligation is satisfied. Expedia records an allowance for cancellations on this revenue based on historical experience.

HomeAway. HomeAway’s lodging revenue is generally earned on a pay-per-booking or pay-per-subscription basis. Pay-per-booking arrangements are commission-based where rental property owners and managers bear the inventory risk, have latitude in setting the price and compensate HomeAway for facilitating bookings with travelers. Under pay-per booking arrangements, each booking is a separate contract as listings are typically cancelable at any time and the related revenue, net of amounts paid to property owners, is recognized at check in, which is the point in time when HomeAway’s service to the traveler is complete. In pay-per-subscription contracts, property owners or managers purchase in advance online advertising services related to the listing of their properties for rent over a fixed term (typically one year). As the performance obligation is the listing service and is provided to the property owner or manager over the life of the listing period, the pay-per-subscription revenue is recognized on a straight-line basis over the listing period. HomeAway also charges a traveler service fee at the time of booking. The service fee charged to travelers provides compensation for HomeAway’s services, including but not limited to the use of HomeAway’s website, and a “Book with Confidence Guarantee” providing travelers with comprehensive payment protection and 24/7 traveler support. The performance obligation is to facilitate the booking of a property and assist travelers through their check-in process and, as such, the traveler service fee revenue is recognized at check-in. Revenue from other ancillary vacation rental services or products are recorded either upon delivery or when Expedia provides the service.

Merchant and Agency Air. Expedia records revenue on air transactions when the traveler books the transaction, as it does not provide significant post booking services to the traveler and payments due to and from air carriers are typically due at the time of ticketing. Expedia records a reserve for chargebacks and cancellations at the time of the transaction based on historical experience. In certain transactions, the GDS collects commissions from Expedia’s suppliers and passes these commissions to Expedia, net of their fees. Therefore, Expedia views payments through the GDS as commissions from suppliers and records these commissions in net revenue. Fees paid to the GDS as compensation for their role in processing transactions are recorded as cost of revenue.

Advertising and Media. Expedia records revenue from click-through fees charged to its travel partners for leads sent to the travel partners’ websites. Expedia records revenue from click-through fees after the traveler makes the click-through to the related travel partners’ websites. Expedia records revenue for advertising placements ratably over the advertising period or upon delivery of advertising impressions, depending on the terms of the contract. Payments from advertisers are generally due within 30 days of invoicing.

Other. Other primarily includes transaction revenue for booking services related to products such as car, cruise and destination services under the agency business model. Expedia generally records the related revenue when the travel occurs, as in most cases Expedia provides post booking services and this is when its performance obligation is complete.

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Additionally, no rights or obligations are triggered in Expedia’s supplier agreements until the travel occurs. Expedia records an allowance for cancellations on this revenue based on historical experience. In addition, other also includes travel insurance products primarily under the merchant model, for which revenue is recorded at the time the transaction is booked.

Packages. Packages assembled by travelers through the packaging functionality on Expedia’s websites generally include a merchant hotel component and some combination of an air, car or destination services component. The individual package components are accounted for as separate performance obligations and recognized in accordance with Expedia’s revenue recognition policies stated above.

Deferred Merchant Bookings. Expedia classifies cash payments received in advance of its performance obligations as deferred merchant bookings. At January 1, 2018, $3.2 billion of cash advance cash payments was reported within deferred merchant bookings, of which $2.9 billion was recognized, resulting in $419 million of revenue during the nine months ended September 30, 2018. At September 30, 2018, the related balance was $4.1 billion.

Travelers enrolled in Expedia’s internally administered traveler loyalty rewards programs earn points for each eligible booking made which can be redeemed for free or discounted future bookings. Hotels.com Rewards offers travelers one free night at any Hotels.com partner property after that traveler stays 10 nights, subject to certain restrictions. Expedia Rewards enables participating travelers to earn points on all hotel, flight, package and activities made on over 30 Brand Expedia websites. Orbitz Rewards allows travelers to earn OrbucksSM, the currency of Orbitz Rewards, on flights, hotels and vacation packages and instantly redeem those Orbucks on future bookings at various hotels worldwide. As travelers accumulate points towards free travel products, Expedia defers the relative standalone selling price of earned points, net of expected breakage, as deferred loyalty rewards within deferred merchant bookings on the consolidated balance sheet. In order to estimate the standalone selling price of the underlying services on which points can be redeemed for all loyalty programs, Expedia uses an adjusted market assessment approach and considers the redemption values expected from the traveler. Expedia then estimates the number of rewards that will not be redeemed based on historical activity in its members' accounts as well as statistical modeling techniques. Revenue is recognized when Expedia has satisfied its performance obligation relating to the points, that is when the travel service purchased with the loyalty award is satisfied. The majority of rewards expected to be redeemed are recognized within one to two years of being earned. At January 1, 2018, $619 million of deferred loyalty rewards was reported within deferred merchant bookings, $531 million of which was recognized as revenue during the nine months ended September 30, 2018. At September 30, 2018, the related balance was $695 million.

Deferred Revenue. Deferred revenue primarily consists of HomeAway's traveler service fees received on bookings where Expedia is not merchant of record due to the use of a third party payment processor, unearned subscription revenue as well as deferred advertising revenue. At January 1, 2018, $326 million was recorded as deferred revenue, $287 million of which was recognized as revenue during the nine months ended September 30, 2018. At September 30, 2018, the related balance was $346 million.

Bodybuilding Revenue. The Company’s wholly owned subsidiary, Bodybuilding, is primarily an Internet retailer of dietary supplements, sports nutrition products, and other health and wellness products. In addition to product sales revenue, Bodybuilding generates a limited amount of revenue from shipping and handling, advertising, and through All Access, its exclusive subscription service that gives its customers access to expert-designed, gym-proven fitness plans.

Practical Expedients and Exemptions. Expedia has used the portfolio approach to account for its 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, Expedia will continue to assess and refine, if necessary, how a portfolio within each rewards program is defined.

Expedia does 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 Expedia recognizes revenue at the amount to which it has the right to invoice for services performed.

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(3) Earnings (Loss) Attributable to Expedia Holdings Shareholders per Common Share

Basic earnings (loss) per common share (“EPS”) is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding (“WASO”) for the period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares as if they had been converted at the beginning of the periods presented.

	Three months ended		~~Nine months ended~~
	September 30,		September 30,
	March 31,
	2018	2017	2018	2017
	2019	2018
	number of shares in millions
Basic WASO	57	57	57	57
Potentially dilutive shares (1)	1	1	1	1
Diluted WASO	58	58	58	58

(1)

Potentially dilutive shares are excluded from the computation of diluted EPS during periods in which losses are reported since the result would be antidilutive.

Excluded from diluted EPS for the three ~~and nine~~ months ended ~~September~~ 30March 31, 2019 ~~2018~~ and ~~2017~~2018, are less than a million potential common shares, because their inclusion would be anti-dilutive.

(43) Expedia Ownership

Expedia is an online travel company, empowering business and leisure travelers with the tools and information they need to efficiently research, plan, book and experience travel. Expedia seeks to grow its business through a dynamic portfolio of travel brands, including its majority owned subsidiaries that feature the world's broadest supply portfolio as well as destination services and activities. Historically, Qurate Retail was (and, following the completion of the Expedia Holdings Split-Off, the Company is) a party to the Stockholders Agreement with Mr. Diller, pursuant to which Mr. Diller held an irrevocable proxy (the “Diller Proxy”) over all the shares of EXPE and Expedia class B common stock then owned by Qurate Retail. Qurate Retail was also subject to a governance agreement (the “~~EXPE~~Governance Agreement”) ~~and~~with Expedia ~~class B~~which ~~common~~provided ~~stock~~for ~~owned~~the right to nominate 20% of the members of Expedia’s board of directors, which is currently comprised of 15 members (three of which were nominated by Qurate Retail). The Governance Agreement also provided for registration and other rights, and imposed certain restrictions on the ownership of shares of Expedia class B common stock. In connection with the Expedia Holdings Split-Off ~~and~~(i) the ~~proxy~~Stockholders ~~arrangements,~~Agreement and the ~~Stockholders~~Governance ~~Agreement~~agreement ~~was~~were assigned to us and ~~amended~~(ii) tothe ~~permit~~Diller ~~the~~Proxy ~~assignment~~was ofirrevocably ~~the~~assigned ~~Diller~~by ~~Proxy~~Mr. Diller to our company (the “Diller Assignment”) for a period of time up to 18 months following completion of the Expedia Holdings Split-Off (the “Outside Date”), subject to certain termination events as described in the Amended and Restated Transaction Agreement, dated as of September 22, 2016, among Mr. Diller, John C. Malone, and Leslie Malone (the “Malone Group”), Qurate Retail and the Company (the “Transaction Agreement” and the date on which such termination event occurs, the “Proxy Arrangement Termination Date”). On March 6, 2018, the Company, Qurate Retail, ~~Mr. Malone,~~the ~~Mrs.~~ Malone Group and Mr. Diller entered into a letter agreement (the “Letter Agreement”), which amended the termination provisions of the Transaction Agreement to extend the Outside Date for an additional one year period. As a result, unless sooner terminated upon the occurrence of certain events or the taking of certain actions, in either case, as set forth in the Transaction Agreement, as amended by the Letter Agreement, the Proxy Arrangement Termination Date will occur, and the Transaction Agreement together with certain Subject Instruments (as defined in the Transaction Agreement) will terminate, on May 4, 2019.

~~We began consolidating Expedia as of the completion of the Expedia Holdings Split~~I-Off on November 4, 2016, as we then controlled a majority of the voting interest in Expedia for accounting purposes. Additionally, in conjunction with the application of acquisition accounting, we recorded a full step up in basis of Expedia along with a gain between our historical basis and the fair value of our interest in Expedia. As of September 30, 2018, Expedia Holdings beneficially owned approximately 16.0% of the outstanding Expedia common stock which represents a 52.6% voting interest in Expedia. During the third quarter of 2018, the Company purchased 269,646 additional shares of Expedia common stock for approximately $31 million pursuant to and in accordance with the preemptive rights as detailed by the Amended and Restated Governance Agreement with Expedia, dated as of December 20, 2011, by and among the Company, Qurate Retail and Mr. Diller as assigned to and assumed by the Company pursuant to the Assignment and Assumption of Governance Agreement, dated as of November 4, 2016, by and among the Company, LEXE Marginco, LLC, LEXEB, LLC, Qurate Retail, Mr. Diller and Expedia. 9

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taking of certain actions, in either case, as set forth in the Transaction Agreement, as amended by the Letter Agreement, the Proxy Arrangement Termination Date would occur, and the Transaction Agreement together with certain Subject Instruments (as defined in the Transaction Agreement) would have terminated, on May 4, 2019 (see discussion below).

By virtue of (i) certain governance rights with respect to the Company as set forth in the Company’s restated certificate of incorporation, an amendment to the Stockholders Agreement and the Amended and Restated Transaction Agreement and (ii) the grant by the Malone Group to Mr. Diller of an irrevocable proxy to vote, subject to certain exceptions, shares of the Company’s common stock beneficially owned by the Malone Group upon the completion of the Expedia Holdings Split-Off or thereafter for a period of time ending upon termination of the Diller Assignment (the arrangements described in clauses (i) and (ii), together with the Diller Assignment, the “Proxy Arrangements”), prior to the termination of the Proxy Arrangements as described below, Mr. Diller was able to elect and replace the directors of the Company who determined how the Company would exercise certain rights and vote the shares of EXPE and Expedia class B common stock owned by the Company in the election of Expedia directors, though the Malone Group retained the ability to remove such directors of the Company. The rights under the Governance Agreement and Stockholders Agreement, each as assigned and amended, will be maintained even upon termination of the Proxy Arrangements.

We began consolidating Expedia as of the completion of the Expedia Holdings Split-Off on November 4, 2016, as we then controlled a majority of the voting interest in Expedia for accounting purposes. Additionally, in conjunction with the application of acquisition accounting, we recorded a full step up in basis of Expedia along with a gain between our historical basis and the fair value of our interest in Expedia. As of March 31, 2019, Expedia Holdings beneficially owned approximately 16.1% of the outstanding Expedia common stock which represented a 52.7% voting interest in Expedia. During the third quarter of 2018, the Company purchased 269,646 additional shares of Expedia common stock for approximately $31 million pursuant to and in accordance with the preemptive rights as detailed by the Governance Agreement as assigned to the Company.

On April 15, 2019, and prior to the Company’s entry into the Merger Agreement (see discussion in note 1), Mr. Diller, the Company, Qurate Retail and the Malone Group entered into Amendment No. 2 to the Amended and Restated Transaction Agreement, providing for the immediate termination of the Transaction Agreement, which automatically resulted in the termination of the Proxy Arrangements. As a result of the termination of the Proxy Arrangements, the Company no longer controls a majority of the voting interest in Expedia. Accordingly, the Company will deconsolidate Expedia as of April 15, 2019. Until the Merger is completed, the Governance Agreement and Stockholders Agreement remain in effect, meaning the Company has significant influence with respect to Expedia and accordingly will account for its investment in Expedia as an equity method affiliate and expects to elect the fair value option of accounting. The Company’s economic ownership percentage in Expedia remains the same.

Dividends declared by Expedia

During the ~~nine~~three months ended ~~September~~March 3031, ~~2018~~ 2019, Expedia has declared quarterly cash dividends, and has paid in cash an aggregate amount of $~~138~~47 million to stockholders of which the Company has received $217 million. In addition, in ~~October~~May ~~2018~~2019, Expedia declared a quarterly cash dividend of $0.32 per share of outstanding common stock payable on ~~December~~June 613, ~~2018~~2019 to stockholders of record as of the close of business on ~~November~~May 1523, ~~2018~~2019.

~~Expedia~~(4) ~~share~~Assets ~~repurchases~~and Liabilities Measured at Fair Value

In February 2015, Expedia’s Executive Committee, acting on behalf of the Board of Directors, authorized a repurchase of up to 10 million shares of its common stock. In April 2018, Expedia’s Executive Committee, acting on behalf of the Board of Directors, authorized a repurchase of an additional 15 million shares of its common stock. During the nine months ended September 30, 2018, Expedia repurchased through open market transactions, 5.2 million shares for a total cost of $602 million, excluding transaction costs and the impact of share repurchases as a result of the vesting of equity instruments. As of September 30, 2018 there were approximately 14.7 million shares remaining authorized for repurchase under the 2018 authorization. There is no fixed termination date for the repurchases. Subsequent to the end of the third quarter, Expedia repurchased an additional 0.3 million shares for a total cost of $33 million, excluding transactions costs.

(5) Assets and Liabilities Measured at Fair Value

For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs, other than quoted market prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The Company does not have any recurring assets or liabilities measured at fair value that would be considered Level 3.

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The Company’s assets and liabilities measured at fair value are as follows:

September 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Quoted prices

Significant other

Quoted prices

Significant other

in active markets

observable

in active markets

observable

for identical assets

inputs

for identical assets

inputs

Description

Total

(Level 1)

(Level 2)

Total

(Level 1)

(Level 2)

amounts in millions

Cash equivalents

~~880~~1,287

~~119~~110

~~761~~1,177

~~682~~725

~~130~~79

~~552~~646

Short-term marketable securities

~~458~~508

—20

~~458~~488

~~469~~53

—11

~~469~~42

Equity securities (1)

~~161~~143

—

~~264~~119

—

Debt

~~403~~392

—

~~403~~392

~~398~~382

—

~~398~~382

(1)

Equity securities are included in the Other assets, net line item in the condensed consolidated balance sheet.

Cash equivalents are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs and are accordingly classified within Level 1 or Level 2. As of ~~September~~March 3031, ~~2018~~ 2019, Cash equivalents consisted primarily of prime institutional money market funds with maturities of three months or less, time deposits as well as bank account balances.

Expedia holds time deposit investments with financial institutions. Time 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 marketable securities.

During the ~~nine~~three months ended ~~September~~March 3031, 2019 and 2018, we recognized gross unrealized ~~losses~~gains ~~related to equity securities~~ of approximately $~~102~~24 million and $36 million, respectively, related to equity securities within Other, net in our condensed consolidated statements of operations. ~~As of~~

~~I-16~~(5) Goodwill and Other Intangible Assets

Table of Contents

December 31, 2017, prior to our adoption of the new guidance for recognition and measurement of financial instruments, the gross unrealized loss was $9 million and was recognized in other comprehensive income.

(6) Goodwill and Other Intangible Assets

Goodwill and Other Indefinite-lived Intangible Assets

Other indefinite-lived intangible assets relate principally to Expedia trademarks and tradenames recognized in acquisition accounting.

At December 31, 2017 a goodwill impairment was recognized for trivago, one of the Company’s reporting units, which resulted in the carrying value approximating fair value as of that date. trivago’s business environment is a highly competitive and volatile market. Over the first three quarters of 2018 trivago reported revenue and Adjusted OIBDA amounts that were behind previous projections and prior year amounts. Accordingly, trivago decided to shift its strategy from a focus on aggressive revenue growth with lower profitability to less aggressive revenue growth with higher profitability. As a result of this shift in revenue growth projections it was determined that an indication of impairment existed for trivago’s tradenames. Updated long-term forecasts with new revenue growth assumptions were used to determine fair value as of September 30, 2018. The fair value of the tradenames was determined using the relief from royalty method (Level 3), and an impairment in the amount of $487 million was recorded as of September 30, 2018, in the Impairment of goodwill and intangible assets line item in the condensed consolidated statement of operations. In addition, the Company calculated the fair value of trivago based on the trading price (level 1) of trivago, with a control premium for the Company’s portion (level 2), which was determined with the assistance of a third party specialist, and it was determined that no goodwill impairment existed as of September 30, 2018. As of September 30, 2018, the carrying value of the trivago reporting unit goodwill and tradenames was approximately $1.4 billion and $0.6 billion, respectively.

Changes in the carrying amount of goodwill are as follows (amounts in millions):

	Expedia		Corporate and other	Total
Balance as of January 1, 2018	$	15,194	57	15,251
Balance as of January 1, 2019	$	15,112	—	15,112
Foreign exchange translation and other		(5336)	—	(5336)
Impairments (1)		—	(57)	(57)
Balance as of March 31, 2019	$	15,076	—	15,076
Balance as of September 30, 2018	$	15,141	—	15,141

(1) During the third quarter of 2018, declining operating results and certain other trends related to Bodybuilding led to an interim impairment test and a determination of fair value. The fair value of Bodybuilding, including the related intangibles and goodwill, was determined using Bodybuilding’s projections of future operating performance and applying a combination of market multiples (market approach) and discounted cash flow (income approach) calculations (Level 3). The test indicated that Bodybuilding’s goodwill was fully impaired as of September 30, 2018. I-11

Intangible Assets Subject to Amortization

Amortization expense for intangible assets with finite useful lives was $438 million and $517 million for the three months ended September 30, 2018 and 2017, respectively, and $1,281 million and $1,476 million for the nine months ended September 30, 2018 and 2017, respectively. Based on its amortizable intangible assets as of September 30, 2018, the Company expects that amortization expense will be as follows for the next five years (amounts in millions):

Remainder of 2018	$	434
2019		1,296
2020		815
2021		543
2022		372

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Table of Contents

~~(7)~~Intangible ~~Long-Term~~Assets ~~Debt~~Subject ~~and~~to ~~Capital Lease Obligations~~Amortization

~~Outstanding~~Amortization ~~debt~~expense for intangible assets with finite useful lives was $358 million and ~~capital~~$416 million ~~leases~~for atthe ~~September~~three months ended March 3031, 2019 and 2018, ~~and~~respectively. Based ~~December~~on its amortizable intangible assets as of March 31, 2019, ~~2017~~the ~~are~~Company ~~summarized~~expects that amortization expense will be as follows for the next five years (amounts in millions):

	Outstanding		Carrying value
Remainder of 2019	$	1,033
	Principal		September 30,		December 31,
2020		893
	September 30, 2018		2018		2017
2021		619
	amounts in millions
2022		381
Expedia Holdings 1% Exchangeable Senior Debentures due 2047		400		403	398
2023		260
Expedia 7.456% senior notes due 2018		—		—	519
Expedia 5.95% senior notes due 2020		750		796	814
Expedia 2.5% (€650 million) senior notes due 2022		754		790	823
Expedia 4.5% senior notes due 2024		500		518	520
Expedia 5.0% senior notes due 2026		750		781	784
Expedia 3.8% senior notes due 2028		1,000		991	990
Bodybuilding secured notes		7		7	8
Bodybuilding revolving line of credit due 2020		8		8	10
Capital lease obligations		—		—	1
Total debt and capital lease obligations	$	4,169		4,294	4,867
Less portion classified as current				(11)	(538)
Total long-term debt and capital lease obligations			$	4,283	4,329

(6) Long-Term Debt and Capital Lease Obligations

Outstanding debt and capital leases at March 31, 2019 and December 31, 2018 are summarized as follows:


	Outstanding		Carrying value
	Principal		March 31,		December 31,
	March 31, 2019		2019		2018
	amounts in millions
Expedia Holdings 1% Exchangeable Senior Debentures due 2047		400		392	382
Expedia 5.95% senior notes due 2020		750		784	790
Expedia 2.5% (€650 million) senior notes due 2022		729		760	777
Expedia 4.5% senior notes due 2024		500		517	518
Expedia 5.0% senior notes due 2026		750		779	780
Expedia 3.8% senior notes due 2028		1,000		991	991
Bodybuilding revolving line of credit due 2020		—		—	5
Total debt and capital lease obligations	$	4,129		4,223	4,243
Less portion classified as current				—	(5)
Total long-term debt and capital lease obligations			$	4,223	4,238

1.0% Exchangeable Senior Debentures

On June 13, 2017, the Company closed a private offering of $400 million of 1.0% Exchangeable Senior Debentures due 2047 (the “debentures”). Upon exchange of the debentures, the Company, at its option, may deliver registered EXPE shares, cash or a combination of EXPE and cash. Initially, 5.1566 shares of EXPE (the “EXPE Reference Shares”) are attributable to each $1,000 original principal amount of the debentures, representing an initial exchange price of approximately $193.93 for each share of EXPE. A total of approximately 2.1 million shares of Expedia common stock are attributable to the debentures. Interest is payable quarterly on March 31, June 30, September 30 and December 31 of each year, and commenced on September 30, 2017. The debentures may be redeemed by the Company, in whole or in part, on or after July 5, 2022. Holders of the debentures also have the right to require the Company to purchase their debentures on July 5, 2022. The redemption and purchase price will generally equal 100% of the adjusted principal amount of the debentures plus accrued and unpaid interest, plus any final period distribution. The Company has elected to account for the debentures using the fair value option. The Company estimates the fair value of its debt based on the quoted market price for the same or similar issues or on the current rate offered to it for debt of the same remaining maturities not considered to be trading on active markets (level 2). Accordingly, changes in the fair value of these instruments of $5 million and $111 million for the three months ended ~~September~~March 3031, 2019 ~~2018~~ and ~~2017~~2018, respectively, are recorded as unrealized losses and unrealized gains, respectively, ~~and $1 million and $33 million for the nine months ended September 30, 2018 and 2017, respectively, are recognized as unrealized gains,~~ in the Other, net line item in the condensed consolidated statements of operations. The Company will make an additional distribution on the debentures if Expedia makes a distribution of cash on the EXPE Reference Shares in excess of $0.28 (an “Excess Regular Cash Dividend”). Expedia began paying Excess Regular Cash Dividends during the third quarter of 2017. The Company will make additional distributions on the debentures under certain circumstances.

~~Expedia Outstanding Debt~~ I-12

Expedia 7.456% senior notes due 2018

In August 2018, Expedia’s $500 million in registered senior unsecured notes that bore interest at 7.456% matured and the balance was repaid.

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Table of Contents

Expedia Outstanding Debt

Expedia 5.95% senior notes due 2020

Expedia has $750 million in registered senior unsecured notes outstanding at ~~September~~March 3031, 2019 ~~2018~~ that are due in August 2020 and bear interest at 5.95% (the “Expedia 5.95% Notes”). The Expedia 5.95% Notes were issued at 99.893% of par. Interest is payable semi-annually in February and August of each year. Expedia may redeem the Expedia 5.95% Notes, in whole or in part, at a redemption price of 100% of the principal plus accrued interest, plus a “make-whole” premium. The premium associated with the Expedia 5.95% Notes was recorded in acquisition accounting as the difference between fair value and the outstanding principal amount at the date of acquisition. This premium is being amortized over the remaining period to maturity through interest expense using the effective interest rate method.

Expedia 2.5% senior notes due 2022

Expedia has €650 million of registered senior unsecured notes outstanding at ~~September~~March 3031, 2019 ~~2018~~ that are due in June 2022 and bear interest at 2.5% (the “Expedia 2.5% Notes”). The Expedia 2.5% Notes were issued at 99.525% of par. Interest is payable annually in arrears in June of each year. Expedia may redeem the Expedia 2.5% Notes at its option, in whole or in part, at any time or from time to time. If Expedia elects to redeem the Expedia 2.5% Notes prior to March 3, 2022, it may redeem them at a specified “make-whole” premium. If Expedia elects to redeem the Expedia 2.5% Notes on or after March 3, 2022, it 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 Expedia 2.5% Notes will be made in Euros. The premium associated with the Expedia 2.5% Notes was recorded in acquisition accounting as the difference between fair value and the outstanding principal amount at the date of acquisition. This premium is being amortized over the remaining period to maturity through interest expense using the effective interest rate method.

Expedia 4.5% senior notes due 2024

Expedia has $500 million in registered senior unsecured notes outstanding at ~~September~~March 3031, 2019 ~~2018~~ that are due in August 2024 and bear interest at 4.5% (the “Expedia 4.5% Notes”). The Expedia 4.5% Notes were issued at 99.444% of par. Interest is payable semi-annually in February and August of each year. Expedia may redeem the Expedia 4.5% Notes at its option at any time in whole or from time to time in part. If Expedia elects to redeem the Expedia 4.5% Notes prior to May 15, 2024, it may redeem them at a redemption price of 100% of the principal plus accrued interest, plus a “make-whole” premium. If Expedia elects to redeem the Expedia 4.5% Notes on or after May 15, 2024, it may redeem them at a redemption price of 100% of the principal plus accrued interest. The premium associated with the Expedia 4.5% Notes was recorded in acquisition accounting as the difference between fair value and the outstanding principal amount at the date of acquisition. This premium is being amortized over the remaining period to maturity through interest expense using the effective interest rate method.

Expedia 5.0% senior notes due 2026

Expedia has $750 million in registered senior unsecured notes outstanding at ~~September~~March 3031, 2019 ~~2018~~ that are due in February 2026 and bear interest at 5.0% (the "Expedia 5.0% Notes"). The Expedia 5.0% Notes were issued at 99.535% of par. Interest is payable semi-annually in arrears in February and August of each year. Expedia may redeem the Expedia 5.0% Notes at its option at any time in whole or from time to time in part. If Expedia elects to redeem the Expedia 5.0% Notes prior to November 12, 2025, it may redeem them at a redemption price of 100% of the principal plus accrued interest, plus a “make-whole” premium. If Expedia elects to redeem the Expedia 5.0% Notes on or after November 12, 2025, it may redeem them at a redemption price of 100% of the principal plus accrued interest. The premium associated with the Expedia 5.0% Notes was recorded in acquisition accounting as the difference between fair value and the outstanding principal amount at the date of acquisition. This premium is being amortized over the remaining period to maturity through interest expense using the effective interest rate method.

Expedia 3.8% senior notes due 2028

Expedia has $1 billion in senior unsecured notes outstanding at ~~September~~March 3031, 2019 ~~2018~~ that are due in February 2028 and bear interest at 3.8% (the "Expedia 3.8% Notes"). The Expedia 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, beginning February 15, 2018. Expedia may redeem the Expedia 3.8% Notes at its option at any time in whole

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Table of Contents

discount, which is being amortized over their life. Interest is payable semi-annually in arrears in February and August of each year, beginning February 15, 2018. Expedia may redeem the Expedia 3.8% Notes at its option at any time in whole or from time to time in part. If Expedia elects to redeem the Expedia 3.8% Notes prior to November 15, 2027, it may redeem them at a redemption price of 100% of the principal plus accrued interest, plus a “make-whole” premium. If Expedia elects to redeem the Expedia 3.8% Notes on or after November 15, 2027, it may redeem them at a redemption price of 100% of the principal plus accrued interest.

The Expedia 5.95%, 2.5%, 4.5%, 5.0% and 3.8% Notes (collectively the “Notes”) are senior unsecured obligations issued by Expedia and guaranteed by certain domestic Expedia subsidiaries. The Notes rank equally in right of payment with all existing and future unsecured and unsubordinated obligations of Expedia and the guarantor subsidiaries. In addition, the Notes include covenants that limit Expedia’s 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 its assets. The Expedia 5.95%, 2.5%, 4.5%, 3.8% and 5.0% 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.

Expedia Credit Facility

Expedia maintains a $2 billion unsecured revolving credit facility with a group of lenders, which is unconditionally guaranteed by certain domestic Expedia subsidiaries that are the same as under the Notes, and expires in May 2023. As of ~~September 30~~December 31, 2018 and March 31, 2019, Expedia did not have any revolving credit facility borrowings outstanding. The facility bears interest based on Expedia’s credit ratings, with drawn amounts bearing interest at LIBOR plus 1.25% and the commitment fee on undrawn amounts at 0.175% as of ~~September~~March 3031, ~~2018~~ 2019. The facility contains covenants including maximum leverage and minimum interest coverage ratios. The amount of stand-by letters of credit (“LOCs”) issued under the facility reduces the credit amount available. As of ~~September~~March 3031, ~~2018~~ 2019, there were $1415 million of outstanding stand-by LOCs issued under the facility.

~~Expedia~~In ~~entered~~addition, ~~into~~one ~~the~~of ~~current~~Expedia’s ~~credit~~international ~~facility~~subsidiaries inmaintains ~~May~~a ~~2018~~€50 ~~and~~million ~~replaced~~uncommitted ~~its~~credit ~~prior~~facility, ~~$1.5~~which ~~billion~~is ~~unsecured~~guaranteed ~~revolving~~by ~~credit~~Expedia ~~facility~~and ~~that~~may ~~was~~be ~~due~~terminated toat ~~expire~~any intime ~~February~~by ~~2021~~the lender. As of ~~December~~ March 31, ~~2017~~ 2019, ~~Expedia~~there ~~had~~were no ~~revolving credit facility~~ borrowings outstanding under ~~the~~this ~~prior~~ facility ~~and $14 million of outstanding stand-by LOCs issued under that facility~~.

In addition, one of Expedia’s international subsidiaries maintains a €50 million uncommitted credit facility, which is guaranteed by Expedia and may be terminated at any time by the lender. As of September 30, 2018, there were no borrowings outstanding under this facility.

Bodybuilding Secured Notes

As of September 30, 2018, Bodybuilding has two outstanding secured notes. Principal and interest payments on the secured notes are payable monthly. One of the secured notes has an interest rate of 4.14% and the other is variable at LIBOR plus 2.50% (4.63% at September 30, 2018). The maturity dates on the secured notes range from 2019 to 2022. As of September 30, 2018, the total outstanding balance of the secured notes is $7 million.

Bodybuilding Revolving Line of Credit

As of ~~September~~March 3031, ~~2018~~ 2019, Bodybuilding has a revolving line of credit (the "Revolver") which is secured by substantially all of Bodybuilding’s assets. The maximum amount allowed under the Revolver is $25 million. Bodybuilding periodically borrows and repays amounts outstanding under the Revolver depending on its cash needs. The Revolver matures on January 20, 2020. The outstanding balance accrued interest at the CB Floating Rate less 1.0%, with a rate option balance that accrued interest at LIBOR plus 1.75%. As of ~~September~~March 3031, ~~2018~~ 2019, ~~the~~there was no outstanding balance on the Revolver. Bodybuilding was ~~approximately~~not ~~$8 million~~in ~~subject~~compliance towith anthe ~~interest~~fixed ~~rate~~charge ofcoverage ~~3.88%. Additionally,~~ratio ~~pursuant~~covenant toas anof ~~amendment~~March ~~during~~31, 2019. Although the ~~first~~original ~~quarter~~maturity ofdate ~~2018~~was January 20, 2020, Bodybuilding ~~does~~entered ~~not~~into ~~need~~an toagreement ~~comply~~ with the ~~fixed~~lender ~~charge~~to ~~coverage~~terminate ~~ratio~~the ~~covenant~~Revolver ~~until~~on ~~January~~April 3115, 2019. Future potential operating losses of Bodybuilding will be funded by corporate level available cash.

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Table of Contents

Fair Value of Debt

The fair value, based on quoted market prices in less active markets (Level 2), of Expedia’s publicly traded debt securities is as follows (amounts in millions):

	September 30,
	March 31,
	2018
	2019
Expedia 7.456% senior notes due 2018	$	—
Expedia 5.95% senior notes due 2020	$	780
Expedia 5.95% senior notes due 2020	$	784
Expedia 2.5% (€650 million) senior notes due 2022 (1)	$	767
Expedia 2.5% (€650 million) senior notes due 2022 (1)	$	793
Expedia 4.5% senior notes due 2024	$	521
Expedia 4.5% senior notes due 2024	$	504
Expedia 5.0% senior notes due 2026	$	797
Expedia 5.0% senior notes due 2026	$	767
Expedia 3.8% senior notes due 2028	$	968
Expedia 3.8% senior notes due 2028	$	926

(1) Approximately 683 million Euro as of ~~September~~March 3031, ~~2018~~2019.

The Company believes that the carrying value of its Revolver and secured notes approximated fair value at ~~September~~March 3031, 2019 ~~2018~~ and December 31, ~~2017~~ 2018.

Covenant Compliance

Expedia Holdings, ~~Expedia~~ and ~~Bodybuilding~~Expedia were in compliance with their debt covenants which consist of both financial and non-financial covenants as of ~~September~~March 3031, 2019. ~~2018~~See discussion above related to Bodybuilding debt covenant compliance.

(87) ~~Commitments and Contingencies~~Leases

Leases. In February 2016, the FASB issued new guidance which revises the accounting for leases. Under the new guidance, lessees are required to recognize a lease liability and a right-of-use (“ROU”) asset for all leases. The new guidance also simplifies the accounting for sale and leaseback transactions. The Company adopted this guidance on January 1, 2019. Additionally, the Company elected the optional transition method that allows for a cumulative-effect adjustment in the period of adoption and did not restate prior periods. The Company elected certain of the available transition practical expedients, including those that permit us to not reassess 1) whether any expired or existing contracts are or contain leases, 2) the lease classification for any expired or exiting leases, and 3) any initial direct costs for any existing leases as of the effective date. The Company did not elect the hindsight practical expedient, which permits entities to use hindsight in determining the lease term and assessing impairment. The standard had a material impact on the consolidated balance sheets, but did not have a material impact on the consolidated statements of operations or statements of cash flows. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases. Additionally, the Company removed the assets and liabilities previously recorded pursuant to build-to-suit lease guidance resulting in an increase to retained earnings of approximately $1 million, and of approximately $5 million to non-controlling interest in equity of subsidiaries.

The Company determines if an arrangement is a lease at inception. Operating leases ~~certain~~are ~~warehouse~~primarily ~~and~~for office space, ~~equipment,~~and ~~furniture~~data centers and ~~computer~~are ~~software~~included ~~under~~in ~~both~~operating ~~capital~~lease ROU assets, accrued expenses and ~~noncancelable~~other ~~operating~~current ~~leases~~liabilities, ~~that~~and ~~expire~~operating atlease ~~various~~liabilities ~~dates~~on ~~through~~the ~~2026~~consolidated balance sheets. ~~The~~ROU ~~Company~~assets isrepresent ~~responsible,~~a ~~under~~right ~~all~~to ~~leases,~~use an underlying asset for ~~related~~the ~~building~~lease ~~maintenance~~term and ~~property~~lease ~~taxes.~~liabilities ~~Certain~~represent ~~leases~~an ~~contain~~obligation ~~periodic~~to ~~rent~~make ~~escalation~~lease ~~adjustments~~payments ~~and~~arising ~~renewal~~from ~~options~~the lease. ~~Total~~Operating ~~rental~~lease ~~expense~~ROU ~~was~~assets ~~$46~~and ~~million~~liabilities ~~and~~are ~~$45~~recognized ~~million~~at ~~for~~commencement date based on the ~~three~~present ~~months~~value ~~ended~~of ~~September~~lease ~~30,~~payments ~~2018~~over ~~and~~the ~~2017,~~lease ~~respectively~~term. As most of our leases do not provide an implicit rate, ~~and~~the ~~$139~~Company ~~million~~uses ~~and~~its ~~$127~~incremental ~~million~~borrowing ~~for~~rate based on the ~~nine~~information ~~months~~available ~~ended~~at ~~September 30,~~commencement ~~2018~~date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and ~~2017,~~excludes ~~respectively~~lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

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Table of Contents

For operating leases with a term of one year or less, the Company has elected to not recognize a lease liability or ROU asset on its consolidated balance sheet. Instead, it recognizes the lease payments as expense on a straight-line basis over the lease term. Short-term lease costs are immaterial to the consolidated statements of operations and cash flows.

The Company has office space and data center lease agreements with insignificant non-lease components and has elected the practical expedient to combine and account for lease and non-lease components as a single lease component.

The Company has operating leases for office space, data centers and distribution centers, and its leases have remaining lease terms of one year to 19 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within one year.

Operating lease costs were $38 million for the three months ended March 31, 2019. Total rental expense was $47 million for the three months ended March 31, 2018.

Supplemental cash flow information related to leases were as follows:


	Three months ended
	March 31, 2019
	in millions
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	39
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	6

Supplemental consolidated balance sheet information related to leases were as follows:


	March 31,
	2019
	in millions
Operating lease right-of-use assets (1)	$	542

Current operating lease liabilities (2)	$	114
Operating lease liabilities (3)		476
Total operating lease liabilities	$	590

Weighted average remaining lease term (in years)		8.8
Weighted average discount rate		4.0%

(1)

Operating lease right-of-use assets are included within the Other assets, net line item in the condensed consolidated balance sheets.

(2)

Current operating lease liabilities are included within the Other current liabilities line item in the condensed consolidated balance sheets.

(3)

Operating lease liabilities are included within the Other liabilities line item in the condensed consolidated balance sheets.

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Maturities of lease liabilities are as follows:


	Operating Leases
	in millions
Remainder of 2019	$	104
2020		107
2021		90
2022		73
2023		53
2024 and thereafter		278
Total lease payments	$	705
Less: implied interest		115
Present value of lease liabilities	$	590

As of March 31, 2019, the Company has additional operating leases, primarily for corporate offices, that have not yet commenced of $210 million. These operating leases will commence between 2019 and 2021 with lease terms of 2 years to 11 years.

(8) Stock-Based Compensation

Expedia Holdings Incentive Plan

The Company has granted to certain of its directors and employees restricted stock units (“RSUs”) and options to purchase shares of Expedia Holdings common stock (“Awards”). The Company measures the cost of employee services received in exchange for an equity classified Award based on the grant-date fair value (“GDFV”) of the Award, and recognizes that cost over the period during which the employee is required to provide service (usually the vesting period of the Award).

The Company has calculated the GDFV for all of its equity classified Awards using the Black-Scholes-Merton Model. The Company estimates the expected term of the Awards based on historical exercise and forfeiture data. The volatility used in the calculation for Awards is based on the historical volatility of Expedia Holdings common stock and the implied volatility of publicly traded Expedia Holdings options. The Company uses a zero dividend rate and the risk-free rate for Treasury Bonds with a term similar to that of the subject options.

There were no options to purchase shares of Series A or Series B common stock granted and no exercise, forfeiture or cancellation activity for Series B common stock during the three months ended March 31, 2019.

Expedia Holdings – Outstanding Awards

The following table presents the number and weighted average exercise price (“WAEP”) of Awards to purchase Expedia Holdings common stock granted to certain officers, employees and directors of the Company, as well as the weighted average remaining life and aggregate intrinsic value of the Awards.


				Weighted
				average		Aggregate
				remaining		intrinsic
	Series A	WAEP		contractual life		value
	(in thousands)					(in millions)
Outstanding at January 1, 2019	957	$	26.28
Granted	—	$	—
Exercised	(1)	$	27.21
Forfeited/Cancelled	—	$	—
Outstanding at March 31, 2019	956	$	26.28	1.8	years	$	16
Exercisable at March 31, 2019	739	$	21.90	1.1	years	$	15

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As of March 31, 2019, there was no unrecognized compensation cost related to unvested Expedia Holdings options.

As of March 31, 2019, the Company reserved 1.6 million shares of Series A and Series B common stock for issuance under exercise privileges of outstanding stock Awards.

Expedia – Stock-based Compensation

Pursuant to the Amended and Restated Expedia, Inc. 2005 Stock and Annual Incentive Plan, Expedia may grant restricted stock, RSUs, stock options and other stock-based awards to its directors, officers, employees and consultants. Expedia issues new shares to satisfy the exercise or release of stock-based awards.

Expedia’s annual employee stock-based award grants typically occur during the first quarter of each year and generally vest over four years. During 2019, Expedia started issuing RSUs as its primary form of stock-based compensation, which vest 25% after one year and will then vest quarterly over the following three years. During the three months ended March 31, 2019, Expedia granted approximately 3 million RSUs. As of March 31, 2019, Expedia had stock-based awards outstanding representing approximately 21 million shares of its common stock, consisting of options to purchase approximately 16 million shares of its common stock with a weighted average exercise price of $101.79 and weighted average remaining life of 4.2 years and approximately 5 million RSUs.

The stock-based compensation recognized by Expedia Holdings related to Expedia stock options and restricted stock awards was $58 million for the three months ended March 31, 2019.

(9) Commitments and Contingencies

Litigation

The Company is subject to legal proceedings and other matters arising in the ordinary course of business. Although it is reasonably possible the Company may incur losses upon conclusion of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of management, it is expected that amounts, if any, which may be required to satisfy such contingencies will not be material in relation to the accompanying condensed consolidated financial statements.

Litigation Relating to Occupancy Taxes. ~~Ninety-six~~ One hundred one lawsuits have been filed by or against cities, counties and states involving hotel occupancy and other taxes. ~~Ten~~Fourteen lawsuits are currently active. These lawsuits are in various stages and Expedia continues to defend against the claims made in them vigorously. With respect to the principal claims in these matters, Expedia believes that the statutes or ordinances at issue do not apply to Expedia or the services it provides and, therefore, that Expedia does not owe the taxes that are claimed to be owed. Expedia believes that the statutes or ordinances at issue generally impose occupancy and other taxes on entities that own, operate or control hotels (or similar businesses) or furnish or provide hotel rooms or similar accommodations. To date, forty-~~five~~six of these lawsuits have been dismissed. Some of these dismissals have been without prejudice and, generally, allow the governmental entity or entities to seek administrative remedies prior to pursuing further litigation. Thirty-~~one~~two dismissals were based on a finding that Expedia and the other defendants were not subject to the local ~~hotel occupancy~~ tax ordinance or that the local government lacked standing to pursue ~~their~~its claims. As a result of this litigation and other attempts by certain jurisdictions to levy such taxes, Expedia has established a reserve for the potential settlement of issues related to hotel occupancy and other taxes, consistent with applicable accounting principles and in light of all current facts and circumstances, in the amount of $54 million as of March 31, 2019. Expedia’s settlement reserve is based on its best estimate of probable losses, and the ultimate resolution of these contingencies may be greater or less than the liabilities recorded. An estimate for a reasonably possible loss or range of loss in excess of the amount reserved cannot be made. Changes to the settlement reserve are included within Legal reserves, occupancy tax, and other in the condensed consolidated statements of operations.

IPay-21 to-Play. Certain jurisdictions may assert that Expedia is required to pay any assessed taxes prior to being allowed to contest or litigate the applicability of the ordinances. This prepayment of contested taxes is referred to as “pay-to-play.” Payment of these amounts is not an admission that Expedia believes it is subject to such taxes and, even when such

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~~established~~payments aare ~~reserve~~made, ~~for~~Expedia ~~the~~continues ~~potential settlement of issues related~~ to ~~hotel~~defend ~~occupancy~~its ~~and~~position ~~other~~vigorously. ~~taxes,~~If ~~consistent~~Expedia ~~with~~prevails ~~applicable accounting principles and~~ in ~~light of all current facts and circumstances, in~~ the ~~amount of $40 million as of September 30~~litigation, ~~2018.~~for ~~Expedia’s~~which ~~settlement~~a ~~reserve~~pay-to-play ispayment ~~based~~was ~~on its best estimate of probable losses~~made, ~~and~~ the ~~ultimate~~jurisdiction ~~resolution~~collecting ~~of these contingencies may be greater or less than~~ the ~~liabilities~~payment ~~recorded.~~will ~~An estimate for a reasonably possible loss or range of loss in excess of the amount reserved cannot~~ be ~~made.~~required ~~Changes~~ to ~~the~~repay ~~settlement~~such ~~reserve~~amounts ~~are included within Legal reserves, occupancy tax, restructuring~~ and ~~related~~also ~~reorganization~~may ~~charges~~be ~~and~~required ~~other~~to inpay ~~the condensed consolidated statements of operations~~interest.

In addition, Expedia was audited by the State of Colorado. The state issued assessments for claimed tax, interest and penalty in the approximate amount of $23 million for the periods December 1, 1999 through December 31, 2005 and January 1, 2009 through December 31, 2011. Expedia does not agree with these assessments and has filed protests.

Pay-to-Play. Certain jurisdictions may assert that Expedia is required to pay any assessed taxes prior to being allowed to contest or litigate the applicability of the ordinances. This prepayment of contested taxes is referred to as “pay-to-play.” Payment of these amounts is not an admission that Expedia believes it is subject to such taxes and, even when such payments are made, Expedia continues to defend its position vigorously. If Expedia prevails in the litigation, for which a pay-to-play payment was made, the jurisdiction collecting the payment will be required to repay such amounts and also may be required to pay interest.

Hawaii (General Excise Tax). During 2013, the Expedia companies were required to “pay-to-play” and paid a total of $171 million in advance of litigation relating to general excise taxes for merchant model hotel reservations in the State of Hawaii. In September 2015, following a ruling by the Hawaii Supreme Court, the State of Hawaii refunded the Expedia companies $132 million of the original “pay-to-play” amount. Orbitz also received a similar refund of $22 million from the State of Hawaii in September 2015. The amount paid, net of refunds, by the Expedia companies and Orbitz to the State of Hawaii in satisfaction of past general excise taxes on their services for merchant model hotel reservations was $44 million. The parties reached a settlement relating to Orbitz merchant model hotel tax liabilities, and on October 5, 2016, the Expedia companies paid the State of Hawaii for the tax years 2012 through 2015. The Expedia companies and Orbitz have now resolved all assessments by the State of Hawaii for merchant model hotel taxes through 2015.

The ~~Hawaii~~ Department of Taxation also issued final assessments for general excise taxes against the Expedia companies, including Orbitz, dated December 23, 2015 for the time period 2000 to 2014 for hotel and car rental revenue for “agency model” transactions. Those assessments are currently under review in the Hawaii tax ~~courts. The Hawaii tax~~ court ~~has scheduled trial on the agency hotel and car rental matters for February 4~~, ~~2019.~~which ~~On December 29, 2017, the defendant online travel companies filed a motion for partial summary judgment. On January 10, 2018, the Department of Taxation~~ has ~~asked~~stayed ~~the tax court to stay~~ proceedings in the agency hotel and car rental case pending athe decision by the Hawaii Supreme Court in the merchant model car rental case addressed below~~; the defendants opposed that request~~. ~~On February 5, 2018, the tax court granted the motion to stay.~~

Final assessments by the Hawaii Department of Taxation for general excise taxes against ~~the~~certain Expedia companies, including Orbitz, relating to merchant car rental transactions during the years 2000 to 2014 are also under review ~~in the Hawaii tax courts~~. With respect to merchant model car rental transactions at issue for the tax years 2000 through 2013, the Hawaii tax court held on August 5, 2016 that general excise tax is due on the online travel companies’ services to facilitate car rentals. The court further ruled that for merchant model car rentals in Hawaii, the online travel companies are required to pay general excise tax on the total amount paid by consumers, with no credit for tax amounts already remitted by car rental companies to the State of Hawaii for tax years 2000 through 2013, thus resulting in a double tax on the amount paid by consumers to car rental companies for the rental of the vehicle. The court, however, ruled that when car rentals are paid for as part of a vacation package, tax is only due once on the amount paid by consumers to the car rental company for the rental of the vehicle. In addition, the court ruled that the online travel companies are required to pay interest and certain penalties on the amounts due. On April 25, 2017, the court entered a stipulated order and final judgment. On May 15, 2017, the Expedia companies paid under protest the full amount claimed due, or approximately $16.7 million, as a condition of appeal. The parties filed notices of cross-appeal from the order. ~~The~~On ~~appeals~~March ~~were~~4, ~~transferred~~2019, to the Hawaii Supreme Court ~~which~~affirmed ~~heard~~the ~~argument~~tax oncourt ~~the~~in ~~appeals~~part onand ~~April~~reversed 5in part, ~~2018.~~finding ~~The~~that ~~parties~~the ~~await~~defendant aonline ~~ruling.~~travel ~~The~~companies ~~Hawaii~~are not obligated to pay tax ~~court’s~~on ~~decision~~the ~~did~~amount ~~not~~paid ~~resolve~~by ~~merchant~~consumers to the car rental ~~transactions~~company for the ~~tax~~rental ~~year~~of ~~2014~~the vehicle; instead, ~~which~~for ~~also~~both ~~remain~~package ~~under~~and ~~review~~standalone merchant model car rentals, they need only pay the tax on the amounts they charge for their services.

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San Francisco (Occupancy Tax). During 2009, Expedia companies were required to “pay-to-play” and paid $48 million in advance of litigation relating to occupancy tax proceedings with the City of San Francisco and, in May 2014, the Expedia companies paid an additional $25.5 million under protest in order to contest additional assessments for later time periods. In addition, Orbitz in total has paid $4.6 million to the City of San Francisco to contest similar assessments issued against it by the city. On August 6, 2014, the California Court of Appeals stayed this case pending review and decision by the California Supreme Court in the City of San Diego, California Litigation. The California Court of Appeals lifted the stay, and on May 23, 2018, affirmed the trial court’s holding that the online travel companies are not liable to remit hotel occupancy taxes to San Francisco. On July 2, 2018, the City of San Francisco filed a petition for review by the California Supreme Court, which was denied on August 29, 2018. On September 13, 2018, the City of San Francisco refunded all pay-to-play payments made by the Expedia companies (including Orbitz), along with accumulated interest. The $78 million refund was recorded as a gain within Legal reserves, occupancy tax, restructuring and related reorganization charges and other in the condensed consolidated statement of operations and the $19 million of accumulated interest to interest income during the three months ended September 30, 2018.

Other Jurisdictions. Expedia is also in various stages of inquiry or audit with domestic and foreign tax authorities, some of which, including in the City of Los Angeles regarding hotel occupancy taxes and in the United Kingdom, regarding the application of value added tax (“VAT”) to its European Union related transactions as discussed below, may impose a pay-to-play requirement to challenge an adverse inquiry or audit result in court.

The ultimate resolution of these contingencies may be greater or less than the pay-to-play payments made and Expedia’s estimates of additional assessments mentioned above.

Matters Relating to International VAT. Expedia is in various stages of inquiry or audit in multiple European Union jurisdictions, including the United Kingdom, regarding the application of VAT to ~~Expedia’s~~its European Union related transactions. While Expedia believes it complies with applicable VAT laws, rules and regulations in the relevant jurisdictions, the tax authorities may determine that itExpedia owes additional taxes. In certain jurisdictions, including the United Kingdom, itExpedia may be required to “pay-to-play” any VAT assessment prior to contesting its validity. While Expedia believes that it will be successful based on the merits of its positions with regard to the United Kingdom and other VAT audits in pay-to-play jurisdictions, it is nevertheless reasonably possible that Expedia could be required to pay any assessed amounts in order to contest or litigate the applicability of any assessments and an estimate for a reasonably possible amount of any such payments cannot be made.

Competition and Consumer Protection Matters. Over the last several years, the online travel industry has become the subject of investigations by various national competition authorities ("NCAs"), particularly in Europe. Expedia is or has been involved in investigations predominately related to whether certain parity clauses in contracts between Expedia entities and accommodation providers, sometimes also referred to as "most favored nation" provisions, are antiI-~~competitive.~~19

In Europe, investigations or inquiries into contractual parity provisions between hotels and online travel companies, including Expedia, were initiated in 2012, 2013 and 2014 by NCAs in Austria, Belgium, Czech Republic, Denmark, France, Germany, Greece, Hungary, Ireland, Italy, Poland, Sweden and Switzerland. While the ultimate outcome of some of these investigations or inquiries remains uncertain, and Expedia’s circumstances are distinguishable from other online travel companies subject to similar investigations and inquiries, Expedia notes in this context, that on April 21, 2015, the French, Italian and Swedish NCAs, working in close cooperation with the European Commission, announced that they accepted formal commitments offered by Booking.com to resolve and close the investigations against Booking.com in France, Italy and Sweden by Booking.com removing and/or modifying certain rate, conditions and availability parity provisions in its contracts with accommodation providers in France, Italy and Sweden as of July 1, 2015, among other commitments. Booking.com voluntarily extended the geographic scope of these commitments to accommodation providers throughout Europe as of the same date.

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~~implementation~~ Competition ofand ~~Expedia’s~~Consumer ~~waivers,~~Matters. ~~nearly~~Over ~~all~~the ~~NCAs~~last inseveral ~~Europe~~years, ~~have~~the ~~announced~~online ~~either~~travel industry has become the ~~closure~~subject of ~~their~~investigations ~~investigation~~by orvarious ~~inquiries~~national ~~involving~~competition authorities ("NCAs"), particularly in Europe. Expedia is or ahas ~~decision~~been ~~not~~involved in investigations predominately related to ~~open~~whether ancertain ~~investigation~~parity orclauses ~~inquiry~~in ~~involving~~contracts between Expedia~~. Below~~ ~~are~~entities ~~descriptions~~and ofaccommodation ~~additional~~providers, ~~rate~~sometimes ~~parity-related~~also ~~matters~~referred ofto ~~note~~as in"most ~~Europe~~favored nation" provisions, are anti-competitive.

With effect from August 1, 2015, Expedia waived certain rate, conditions and availability parity clauses in agreements with European hotel partners for a period of five years. While Expedia maintains that its parity clauses have always been lawful and in compliance with competition law, these waivers were nevertheless implemented as a positive step towards facilitating the closure of the open investigations into such clauses on a harmonized pan-European basis. Following the implementation of Expedia’s waivers, nearly all NCAs in Europe have announced either the closure of their investigation or inquiries involving Expedia or a decision not to open an investigation or inquiry involving Expedia. Below are descriptions of additional rate parity-related matters of note in Europe.

The German Federal Cartel Office ("FCO") has required another online travel company, Hotel Reservation Service ("HRS"), to remove certain clauses from its contracts with hotels. HRS’ appeal of this decision was rejected by the Higher Regional Court Düsseldorf on January 9, 2015. On December 23, 2015, the FCO announced that it had also required Booking.com by way of an infringement decision to remove certain clauses from its contracts with German hotels. Booking.com has appealed the decision and the appeal was heard by the Higher Regional Court Düsseldorf on February 8, 2017. Those proceedings remain ongoing.

The Italian competition authority's case closure decision against Booking.com and Expedia has subsequently been appealed by two Italian hotel trade associations, i.e. Federalberghi and AICA. These appeals remain at an early stage and no hearing date has been fixed.

On November 6, 2015, the Swiss competition authority announced that it had issued a final decision finding certain parity terms existing in previous versions of agreements between Swiss hotels and each of Expedia, Booking.com and HRS to be prohibited under Swiss law. The decision explicitly notes that Expedia's current contract terms with Swiss hotels are not subject to this prohibition. The Swiss competition authority imposed no fines or other sanctions against Expedia and did not find an abuse of a dominant market position by Expedia. The FCO’s case against Expedia’s contractual parity provisions with accommodation providers in Germany remains open but is still at a preliminary stage with no formal allegations of wrong-doing having been communicated to Expedia to date.

The Directorate General for Competition, Consumer Affairs and Repression of Fraud (the “DGCCRF”), a directorate of the French Ministry of Economy and Finance with authority over unfair trading practices, brought a lawsuit in France against Expedia entities objecting to certain parity clauses in contracts between Expedia and French hotels. In May 2015, the French court ruled that certain of the parity provisions in certain contracts that were the subject of the lawsuit were not in compliance with French commercial law, but imposed no fine and no injunction. The DGCCRF appealed the decision and, on June 21, 2017, the Paris Court of Appeal published a judgment overturning the decision. The court annulled parity clauses contained in the agreements at issue, ordered Expedia to amend its contracts, and imposed a fine. Expedia has appealed the decision. The appeal will not stay payment of the fine.

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Hotelverband Deutschland (“IHA”) e.V. (a German hotel association) brought proceedings before the Cologne regional court against Expedia, Expedia.com GmbH and Expedia Lodging Partner Services Sàrl. IHA applied for a ‘cease and desist’ order against these companies in relation to the enforcement of certain rate and availability parity clauses contained in contracts with hotels in Germany. On or around February 16, 2017, the court dismissed IHA’s action and declared the claimant liable for the Expedia defendants’ statutory costs. IHA appealed the decision and, on December 4, 2017, the Court of Appeals rejected IHA’s appeal. The Court of Appeals expressly confirmed that Expedia’s MFNs are in compliance both with European and German competition law. While IHA had indicated an intention to appeal the decision to the Federal Supreme Court, it has not lodged an appeal within the applicable deadline, with the consequence that the Court of Appeals judgment has now become final.

A working group of 10 European NCAs (Belgium, Czech Republic, Denmark, France, Hungary, Ireland, Italy, Netherlands, Sweden and the United Kingdom) and the European Commission has been established by the European Competition Network (“ECN”) at the end of 2015 to monitor the functioning of the online hotel booking sector, following amendments made by a number of online travel companies (including Booking.com and Expedia) in relation to certain parity provisions in their contracts with hotels. The working group issued questionnaires to online travel agencies including Expedia, metasearch sites and hotels in 2016. The underlying results of the ECN monitoring exercise were published on April 6, 2017.

Legislative bodies in France (July 2015), Austria (December 2016), ~~and~~ Italy (August 2017), and Belgium (August 2018) have also adopted new domestic anti-parity clause legislation. Expedia believes each of these pieces of legislation violates both EU and national legal principles and therefore, Expedia has challenged these laws at the European Commission.

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legal principles and therefore, Expedia has challenged these laws at the European Commission. Moreover, in Belgium, new domestic anti-parity legislation entered into force on August 20, 2018.

A motion requesting the Swiss government to take action on narrow price parity has been adopted in the Swiss parliament. The Swiss government is now required to draft legislation implementing the motion. Expedia is unable to predict whether and with what content legislation will ultimately be adopted and, if so, when this might be the case. It is not yet clear how any adopted domestic anti-parity clause legislations and/or any possible future legislation in this area may affect Expedia’s business.

Outside of Europe, a number of NCAs have also opened investigations or inquired about contractual parity provisions in contracts between hotels and online travel companies in their respective territories, including Expedia. A Brazilian hotel sector association — Forum de Operadores Hoteleiros do Brasil — filed a complaint with the Brazilian Administrative Council for Economic Defence (“CADE”) against a number of online travel companies, including Booking.com, Decolar.com and Expedia, on July 27, 2016 with respect to parity provisions in contracts between hotels and online travel companies. On September 13, 2016, Expedia submitted its response to the complaint to CADE. On March 27, 2018, Expedia resolved CADE’s concerns based on a settlement implementing waivers substantially similar to those provided to accommodation providers in Europe. In late 2016, Expedia resolved the concerns of the Australia and New Zealand NCAs based on implementation of the waivers substantially similar to those provided to accommodation providers in Europe (on September 1, 2016 in Australia and on October 28, 2016 in New Zealand). More recently however, the Australian NCA has reopened its investigation. On and with effect from March 22, 2019, Expedia voluntarily and unilaterally waived certain additional rate parity provisions in agreements with Australian hotel partners. Expedia is in ongoing discussions with a limited number of NCAs in other countries in relation to its contracts with hotels. In April 2019, the Japan Fair Trade Commission (“JFTC”) launched an investigation into certain practices of a number of online travel companies, including Expedia. Expedia is cooperating with the JFTC in this investigation. Expedia is currently unable to predict the impact the implementation of the waivers both in Europe and elsewhere will have on Expedia's business, on investigations or inquiries by NCAs in other countries, or on industry practice more generally.

In addition, regulatory authorities in Europe (including the UK Competition and Markets Authority, or “CMA”), Australia, and elsewhere have initiated ~~market~~legal ~~studies,~~proceedings and/or market studies, inquiries ~~and~~or investigations ~~into~~relating to online marketplaces and how information is presented to consumers using those marketplaces, ~~investigating~~including practices such as search results rankings and algorithms, discount claims, disclosure of charges, and availability and similar messaging. ~~On June 28, 2018, the CMA announced that it will be requiring hotel booking websites to take action to address concerns identified in the course of its ongoing investigation.~~

~~Expedia~~On isJune ~~cooperating~~28, ~~with~~2018, ~~regulators~~the inCMA ~~the~~announced ~~investigations~~that ~~described~~it ~~above~~will ~~where~~be ~~applicable,~~requiring ~~but~~hotel isbooking ~~unable~~websites to ~~predict~~take ~~what,~~action ifto ~~any,~~address ~~effect~~concerns ~~such~~identified ~~actions~~in ~~will~~the ~~have~~course onof its ~~business~~ongoing investigation. After consulting with the CMA, ~~industry~~on ~~practices~~January or31, ~~online~~2019, ~~commerce~~Expedia ~~more~~agreed ~~generally.~~ to offer certain voluntary undertakings with respect to the presentation of information on certain of its UK

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consumer-facing websites in order to address the CMA’s concerns. On February 4, 2019, the CMA confirmed that, as a result of the undertakings offered, it has closed its investigation without any admission or finding of liability. The undertakings become effective on September 1, 2019. On August 23, 2018, the Australian Competition and Consumer Commission, or “ACCC,” instituted proceedings in the Australian Federal Court against trivago. The ACCC alleged breaches of Australian consumer law relating to trivago’s advertisements in Australia concerning the hotel prices available on trivago’s Australian site and trivago’s strike-through pricing practice. A trial date is set for September 9, 2019 and an appropriate reserve has been accrued in respect to this matter.

Expedia is cooperating with regulators in the investigations described above where applicable, but is unable to predict what, if any, effect such actions will have on its business, industry practices or online commerce more generally. Other than described above, the Company has not accrued a reserve in connection with the market studies, investigations, inquiries or legal proceedings described above either because the likelihood of an unfavorable outcome is not probable or the amount of any loss is not estimable.

Certain Risks and Concentrations

Expedia is subject to certain risks and concentrations including dependence on relationships with travel suppliers, primarily airlines and hotels, dependence on third-party technology providers, exposure to risks associated with online commerce security and payment related fraud. Expedia also relies on global distribution system partners and third-party service providers for certain fulfillment services.

Off-Balance Sheet Arrangements

Expedia Holdings did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the Company's financial condition, results of operations, liquidity, capital expenditures or capital resources.

(910) Segment Information

Expedia Holdings identifies its reportable segments as (A) those consolidated companies that represent 10% or more of its consolidated annual revenue, annual Adjusted OIBDA or total assets and (B) those equity method affiliates whose share of earnings or losses represent 10% or more of Expedia Holdings’ annual pre-tax earnings (losses).

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Expedia Holdings evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as revenue and Adjusted OIBDA. In addition, Expedia Holdings reviews nonfinancial measures such as unique visitors, customer acquisition and conversion rates.

~~Expedia~~For ~~Holdings~~the ~~defines~~three ~~Adjusted~~months ~~OIBDA~~ended ~~as revenue less cost of sales~~March 31, ~~operating expenses~~ 2019, ~~and~~Expedia ~~selling,~~Holdings ~~general~~has ~~and~~identified ~~administrative~~Expedia ~~expenses~~as ~~(excluding~~its ~~stock-based~~reportable ~~compensation)~~segment. Expedia ~~Holdings believes this measure~~ is ana ~~important~~consolidated ~~indicator~~subsidiary of the ~~operational~~Company ~~strength~~that ~~and~~provides ~~performance~~travel ofand ~~its~~services ~~businesses, including each business's ability~~ to ~~service~~leisure ~~debt~~ and ~~fund~~corporate ~~capital~~travelers ~~expenditures.~~in Inthe ~~addition,~~United ~~this~~States ~~measure allows management to view operating results~~ and ~~perform~~abroad ~~analytical~~as ~~comparisons~~well ~~and~~as ~~benchmarking~~various ~~between~~media ~~businesses~~ and ~~identify~~advertising ~~strategies~~offerings to ~~improve~~travel ~~performance. This measure of performance excludes depreciation~~ and ~~amortization, stock~~non-~~based~~travel ~~compensation,~~advertisers. ~~separately~~Expedia's ~~reported~~revenue ~~litigation~~primarily ~~settlements~~consists ~~and~~of ~~restructuring~~sales ~~and impairment charges that are included in the measurement~~ of ~~operating~~travel ~~income pursuant to GAAP~~services. ~~Accordingly,~~Prior ~~Adjusted OIBDA should be considered in addition~~ to, ~~but~~obtaining ~~not as~~ a ~~substitute~~controlling ~~for,~~interest ~~operating~~in ~~income~~Expedia ~~(loss), net earnings (loss), cash flow provided by operating activities and other measures of financial performance prepared~~ in ~~accordance~~connection with ~~GAAP.~~the Expedia Holdings ~~generally~~Split-Off, ~~accounts~~the ~~for~~Company ~~intersegment~~identified ~~sales~~Expedia ~~and transfers~~ as ifa ~~the~~reportable ~~sales~~segment, oreven ~~transfers~~though ~~were~~it towas ~~third~~previously ~~parties,~~accounted ~~that~~for ~~is,~~as atan ~~current~~equity ~~prices~~method investment.

For the nine months ended September 30, 2018, Expedia Holdings has identified Expedia as its reportable segment. Expedia is a consolidated subsidiary of the Company that provides travel 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. Expedia's revenue primarily consists of sales of travel services. Prior to obtaining a controlling interest in Expedia in connection with the Expedia Holdings Split-Off, the Company identified Expedia as a reportable segment, even though it was previously accounted for as an equity method investment.

The results of Bodybuilding are included in the Corporate and other segment for all periods presented.

Expedia Holdings' operating segments are strategic business units that offer different products and services. They are managed separately because each segment requires different technologies, distribution channels and marketing strategies. The accounting policies of the segments that are also consolidated companies are the same as those described in the Company's Summary of Significant Accounting Policies in the Annual Report on Form 10-K for the year ended December 31, ~~2017, and the Summary of Significant Accounting Policies updated for the adoption of new accounting guidance in note 2~~2018.

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Performance Measures

	Three months ended September 30,
	2018			2017
	Revenue from			Revenue from
	external		Adjusted	external	Adjusted
	customers		OIBDA	customers	OIBDA
	amounts in millions
Expedia	$	3,276	891	2,963	715
Corporate and other		55	(5)	66	(2)
	$	3,331	886	3,029	713

Revenue Recognition

~~I-26~~The following table disaggregates revenue by reportable segment, business model and product and service type:


		Three months ended		Three months ended
		March 31, 2019		March 31, 2018
	(in millions)
Business Model:
Expedia
Merchant		$	1,392	1,334
Agency			686	658
Advertising and media			264	282
Vrbo			267	234
Corporate and other
Retail			52	66
Total revenue		$	2,661	2,574

Product and Service Type:
Expedia
Lodging			1,725	1,612
Air			248	242
Advertising and media			264	282
Other			372	372
Corporate and other
Retail			52	66
Total revenue		$	2,661	2,574

Deferred Merchant Bookings. At December 31, 2018, $3.6 billion of cash advance cash payments was reported within deferred merchant bookings, of which $2.4 billion was recognized, resulting in $343 million of revenue during the three months ended March 31, 2019. At March 31, 2019, the related balance was $5.9 billion.

At December 31, 2018, $700 million of deferred loyalty rewards was reported within deferred merchant bookings, $167 million of which was recognized as revenue during the three months ended March 31, 2019. At March 31, 2019, the related balance was $716 million.

Deferred Revenue. At December 31, 2018, $364 million was recorded as deferred revenue, $172 million of which was recognized as revenue during the three months ended March 31, 2019. At March 31, 2019, the related balance was $533 million.

Expedia Holdings defines Adjusted OIBDA as revenue less cost of sales, operating expenses, and selling, general and administrative expenses (excluding stock-based compensation). Expedia Holdings believes this measure is an important indicator of the operational strength and performance of its businesses, including each business's ability to service debt and fund capital expenditures. In addition, this measure allows management to view operating results and perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes depreciation and amortization, stock-based compensation, separately reported litigation settlements and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income (loss), net earnings (loss), cash flow provided by operating activities and other measures of financial performance prepared

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	Nine months ended September 30,
	2018			2017
	Revenue from			Revenue from
	external		Adjusted	external	Adjusted
	customers		OIBDA	customers	OIBDA
	amounts in millions
Expedia	$	8,664	1,482	7,675	1,241
Corporate and Other		181	(9)	230	—
	$	8,845	1,473	7,905	1,241

in accordance with GAAP. Expedia Holdings generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current prices.

Adjusted OIBDA is summarized as follows:


	Three months ended March 31,
	2019		2018
	amounts in millions
Expedia	$	173	127
Corporate and other		(14)	(4)
	$	159	123

Other Information

	September 30, 2018
	March 31, 2019
	Total		Capital
	assets		expenditures
	amounts in millions
Expedia	$	3234,~~888~~474	~~634~~274
Corporate and other		~~181~~172	51
	$	3334,~~069~~646	~~639~~275

The following table provides a reconciliation of segment Adjusted OIBDA to Operating income (loss) and Earnings (loss) before income taxes:

	Three months ended			~~Nine months ended~~
	September 30,			September 30,
	March 31,
	2018		2017	2018	2017
	2019		2018
	amounts in millions
Consolidated segment Adjusted OIBDA	$	~~886~~159	~~713~~123	~~1,473~~	~~1,241~~
Legal reserves, occupancy tax, restructuring and related reorganization charges and other		79(20)	(34)	74	~~(39)~~
Stock-based compensation		(5658)	25(51)	~~(160)~~	~~(92)~~
Depreciation and amortization		(~~489~~405)	(~~583~~479)	~~(1,442)~~	~~(1,669)~~
Impairment of goodwill and intangible assets		(544)	—	(544)	—
Operating income (loss)		(324)	(411)
Operating income (loss)		(124)	152	(599)	(559)
Interest expense		(32)	(36)
Interest expense		(32)	(29)	(103)	(88)
Other, net		27	58
Other, net		(17)	(23)	(38)	(71)
Earnings (loss) before income taxes	$	(329)	(389)
Earnings (loss) before income taxes	$	(173)	100	(740)	(718)

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our businesses, the Merger (as defined below) and the expected timing for its completion, the recoverability of our goodwill and other long-lived assets; our projected sources and uses of cash; and the anticipated impact of certain contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. The following include some but not all of the factors (as they relate to our consolidated subsidiaries) that could cause actual results or events to differ materially from those anticipated:

customer demand for our products and services and our ability to adapt to changes in demand;

competitor responses to our products and services;

the levels of online traffic to our businesses' websites and our ability to convert visitors into customers or contributors;

uncertainties inherent in the development and integration of new business lines and business strategies;

our future financial performance, including availability, terms and deployment of capital;

· ~~our~~the ability to successfully integrate and recognize anticipated efficiencies and benefits from the businesses we or Expedia acquire;

the ability of suppliers and vendors to deliver products, equipment, software and services;

· the outcome of any pending or threatened litigation, including potential litigation related to the Merger;

availability of qualified personnel;

changes in the nature of key strategic relationships with partners, distributors, suppliers and vendors;

domestic and international economic and business conditions and industry trends, including the impact of the United Kingdom’s referendum in which British citizens approved an exit from the European Union;

consumer spending levels, including the availability and amount of individual consumer debt;

rapid technological changes;

failure to protect the security of personal information, subjecting us to potentially costly government enforcement actions and/or private litigation and reputational damage;

· the regulatory and competitive environment of the industries in which we and Expedia operate;

· threatened terrorist attacks, political and economic unrest in international markets and ongoing military action around the world; ~~and~~

· fluctuations in foreign currency exchange rates.;

~~For~~· ~~additional~~failure ~~risk~~to ~~factors,~~satisfy ~~please see Part I, Item 1A of our Annual Report on Form 10-K for~~ the ~~year~~conditions ~~ended~~to ~~December~~consummate ~~31, 2017. These forward-looking statements and such risks, uncertainties and other factors speak only as of~~ the date of this Quarterly Report, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based. Merger;

~~The~~· ~~following~~the ~~discussion~~occurrence ~~and~~of ~~analysis~~any ~~provides~~event, ~~information~~change ~~concerning~~or ~~our~~other ~~results~~circumstance ofthat ~~operations~~could ~~and~~give ~~financial~~rise ~~condition.~~to ~~This~~the ~~discussion~~termination ~~should~~of bethe ~~read~~Merger inAgreement ~~conjunction~~(as ~~with~~defined ~~our~~below), ~~accompanying~~including ~~condensed~~under ~~consolidated~~circumstances ~~financial~~that ~~statements~~might ~~and~~require the ~~notes~~Company ~~thereto~~to ~~and~~pay ~~our~~a ~~audited~~termination ~~consolidated~~fee ~~financial~~of ~~statements~~$72 ~~for~~million ~~the~~to ~~year ended December 31, 2017.~~ Expedia;

~~I-28~~ · the failure to consummate the Merger in a timely manner or at all for any other reason;

the possibility that the anticipated benefits from the Merger cannot be realized in full or at all or may take longer to realize than expected;

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~~See~~· ~~note~~effects 2of in the ~~accompanying~~pendency ~~condensed consolidated financial statements for an overview~~ of ~~new~~the ~~accounting~~Merger ~~standards~~on ~~that~~relationships wewith ~~have~~employees, ~~adopted~~suppliers, orcustomers ~~that~~and weother ~~plan~~business ~~to adopt that have had or may have an impact on our financial statements.~~ partners;

negative effects of the announcement or the completion of the Merger on the market price of Expedia’s and/or the Company’s common stock and/or on their respective financial performance; and

the risks related to the Company and Expedia being restricted in their operation of the business while the merger agreement is in effect.

For additional risk factors, please see Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018, as well as Part II, Item 1A. of this Quarterly Report on Form 10-Q. These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Quarterly Report, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based.

The following discussion and analysis provides information concerning our results of operations and financial condition. This discussion should be read in conjunction with our accompanying condensed consolidated financial statements and the notes thereto and our audited consolidated financial statements for the year ended December 31, 2018. See note 1 and note 7 in the accompanying condensed consolidated financial statements for an overview of new accounting standards that we have adopted or that we plan to adopt that have had or may have an impact on our financial statements.

Explanatory Note

Overview

Expedia Holdings began consolidating Expedia as of the completion of the Expedia Holdings Split-Off, as Expedia Holdings then controlled a majority of the voting interest in Expedia. We ~~own~~owned an approximate 16.01% equity interest and 52.67% voting interest in Expedia as of ~~September~~March 3031, ~~2018~~2019.

The financial information herein refers to the consolidation of Bodybuilding and Expedia as "Expedia Holdings," "Consolidated Expedia Holdings," "the Company," "us," "we" and "our" here and in the notes to the condensed consolidated financial statements.

Expedia is an online travel company, empowering business and leisure travelers with the tools and information they need to efficiently research, plan, book and experience travel. Expedia has created a global travel marketplace used by a broad range of leisure and corporate travelers, offline retail travel agents and travel service providers. Expedia makes available, on a stand-alone and package basis, travel products and services provided by numerous lodging properties, airlines, car rental companies, destination service providers, cruise lines, vacation rental property owners and managers, and other travel product and service companies. Expedia also offers travel and non-travel advertisers access to a potential ~~source of incremental traffic and transactions through its various media and advertising offerings on its transaction-based websites.~~

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source of incremental traffic and transactions through its various media and advertising offerings on its transaction-based websites.

Bodybuilding is primarily an Internet retailer of dietary supplements, sports nutrition products, and other health and wellness products. It is also a large publisher of online health and fitness content, offering fitness content, workout programs, video databases, articles, recipes, health advice and motivational stories, as well as a paid subscription model for structured online fitness trainers and nutrition education.

Results of Operations—Consolidated

Consolidated Operating Results

General. We provide in the tables below information regarding our consolidated operating results and other income and expense, as well as information regarding the contribution to those items from our reportable segments. The “Corporate and other” category consists of those assets or businesses which do not qualify as a separate reportable segment. For a more detailed discussion and analysis of the financial results of our principal reportable segment see “Results of Operations – Expedia” below.

I-29



	Three months ended
	March 31,
	2019		2018

	amounts in millions
Revenue
Expedia	$	2,609	2,508
Corporate and other		52	66
Consolidated Expedia Holdings	$	2,661	2,574

Operating income (loss)
Expedia		(308)	(404)
Corporate and other		(16)	(7)
Consolidated Expedia Holdings	$	(324)	(411)

Adjusted OIBDA
Expedia		173	127
Corporate and other		(14)	(4)
Consolidated Expedia Holdings	$	159	123

Table of Contents

For a more detailed discussion and analysis of the financial results of our principal reportable segment see “Results of Operations – Expedia” below.

	Three months ended			Nine months ended
	September 30,			September 30,
	2018		2017	2018	2017
	amounts in millions
Revenue
Expedia	$	3,276	2,963	8,664	7,675
Corporate and other		55	66	181	230
Consolidated Expedia Holdings	$	3,331	3,029	8,845	7,905
Operating income (loss)
Expedia		(59)	158	(522)	(549)
Corporate and other		(65)	(6)	(77)	(10)
Consolidated Expedia Holdings	$	(124)	152	(599)	(559)
Adjusted OIBDA
Expedia		891	715	1,482	1,241
Corporate and other		(5)	(2)	(9)	—
Consolidated Expedia Holdings	$	886	713	1,473	1,241

Revenue

Consolidated Expedia Holdings revenue increased $~~302~~87 million ~~and $940 million~~ for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019, ~~respectively,~~ as compared to the corresponding ~~periods~~period in the prior year.

The increase in revenue during 2018 was primarily due to a $313 million and $989 million increase in revenue from Expedia during the three and nine months ended September 30, 2018, respectively. See “Results of Operations – Expedia” below for a more detailed discussion of Expedia’s standalone results.I-27

The $313 million and $989 million increase in revenue at Expedia during the three and nine months ended September 30, 2018, respectively, as compared to the corresponding periods in the prior year, was partially offset by a decrease in Corporate and other revenue of $11 million and $49 million during the same respective periods due to a decrease in Bodybuilding revenue. The decrease in Bodybuilding revenue during the current year was primarily driven by a 26% decrease in store visits, leading to a decrease in order volumes from the prior year by approximately 21%. The site visit declines to the retail website are the result of a decrease in traffic from search engine optimization marketing channel due to algorithmic and ranking changes, combined with a decrease in direct navigation to the retail website as a result of distributed content now available on many social media feeds and increased product discovery on competitor channels. Strategic changes to shipping and advertising revenue also contributed to the revenue decrease, as free and flat rate shipping was launched to improve the customer experience. The decrease in revenue during the nine months ended September 30, 2018 was primarily due to a 25% decline in store visits and a 21% decrease in order volumes.

Operating Income (Loss)

Consolidated Expedia Holdings operating income decreased $276 million and operating loss increased $40 million for the three and nine months ended September 30, 2018, respectively, as compared to the corresponding periods in the prior year.

Expedia operating income decreased $217 million and operating loss decreased $27 million during the three and nine months ended September 30, 2018, respectively, when compared to the same periods in 2017. The decreases in the three and nine months ended September 30, 2018 were the result of a $487 million impairment of trivago’s tradenames that was

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Table of Contents

~~recorded~~ The byincrease ~~the~~in ~~Company~~revenue during ~~the~~2019 ~~third~~was ~~quarter~~primarily ofdue ~~2018,~~to ~~partially~~a ~~offset~~$101 bymillion ~~lower~~increase ~~amortization~~in ~~resulting~~revenue from ~~accelerated expense recognition in the prior year.~~ Expedia’s ~~operating~~during ~~income (loss) for~~ the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018 and 2017 includes acquisition accounting adjustments~~2019. See “Results of Operations – Expedia” below for a more detailed discussion of Expedia’s standalone results.

~~Corporate~~The ~~and~~increase ~~other~~in ~~operating~~revenue ~~loss~~at ~~increased~~Expedia ~~$59 million and $67 million~~ during the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019, ~~respectively,~~as ~~when~~ compared to the ~~same~~corresponding ~~periods~~period in ~~2017~~the prior year, ~~due~~was topartially ~~the~~offset ~~$57~~by ~~million~~a ~~goodwill~~decrease ~~impairment~~in atCorporate ~~Bodybuilding~~and ~~(see~~other ~~note~~revenue 6of to$14 ~~the~~million ~~accompanying~~or ~~condensed~~21% ~~consolidated~~during ~~financial~~the ~~statements)~~same asrespective ~~well~~period asdue ~~increased~~to ~~operating~~a ~~loss~~decrease atin Bodybuilding revenue. ~~Bodybuilding’s~~The ~~operating~~decrease ~~loss~~in ~~increased~~Bodybuilding ~~for~~revenue during the ~~three~~current ~~months~~year ~~ended~~was ~~September 30, 2018~~primarily asdriven ~~compared~~by a 32% todecrease ~~the corresponding period~~ in ~~the~~store ~~prior year~~visits, ~~primarily~~offset asslightly aby ~~result of~~ an ~~$11~~increase ~~million decline~~ in ~~revenue~~conversion, aswhich ~~discussed~~lead ~~above,~~to ~~partially offset by~~ an $8overall ~~million~~ decrease in ~~operating~~order ~~expenses,~~volumes ~~primarily~~from ~~due~~the toprior ~~reduced~~year ~~cost~~by ofapproximately ~~goods~~24%. ~~sold~~Additionally, asthe arevenue ~~result of a~~ decrease inwas ~~product~~slightly ~~sales.~~offset ~~Bodybuilding’s~~by ~~operating~~an ~~loss~~increase ~~increased~~in ~~for~~average ~~the~~order ~~nine~~value ~~months~~due ~~ended~~to ~~September 30,~~a ~~2018,~~shipping aspromotion ~~compared~~which toprompted the ~~corresponding~~customer ~~period~~to inkeep the ~~prior~~cart ~~year,~~above ~~primarily as~~ a ~~result~~certain ofthreshold. aThe ~~$49~~site ~~million~~visit ~~decline~~declines into ~~revenue,~~the asretail ~~discussed~~website ~~above,~~are ~~partially~~the ~~offset~~result byof a ~~$41 million~~ decrease in ~~operating~~traffic ~~expenses.~~from ~~The~~search ~~decrease~~engine inoptimization ~~Bodybuilding’s~~marketing ~~operating~~channel ~~expense~~due ~~was~~to ~~primarily~~algorithmic ~~due~~and toranking achanges, ~~$36~~combined ~~million~~with a decrease in ~~cost~~direct ofnavigation ~~goods~~to ~~sold~~the retail website as a result of adistributed ~~21%~~content ~~decrease~~now inavailable ~~the~~on ~~number~~many ofsocial ~~orders~~media ~~year~~feeds ~~over~~and ~~year,~~increased ~~and~~product adiscovery $5on ~~million~~competitor ~~decrease~~channels. inThe ~~operating~~overall ~~expenses~~decreases ~~primarily~~were ~~due~~further tooffset by a small ~~decrease~~increase in ~~personnel~~content ~~expenses~~revenue.

Operating Income (Loss)

Consolidated Expedia Holdings operating loss decreased $87 million for the three months ended March 31, 2019, as compared to the corresponding period in the prior year.

Expedia operating loss decreased $96 million during the three months ended March 31, 2019, when compared to the same period in 2018. Expedia’s operating income (loss) for the three months ended March 31, 2019 and 2018 includes acquisition accounting adjustments. See “Results of Operations – Expedia” below for a more detailed discussion of Expedia’s standalone results.

Corporate and other operating loss increased $9 million during the three months ended March 31, 2019, when compared to the same period in 2018, due to increased operating loss at Bodybuilding and increased legal expenses at the corporate level due to the transaction between Expedia and the Company (discussed above). Bodybuilding’s operating loss increased for the three months ended March 31, 2019 as compared to the corresponding period in the prior year, primarily as a result of a $14 million decline in revenue, as discussed above, partially offset by an $7 million decrease in operating expenses, primarily due to reduced cost of goods sold as a result of a decrease in product sales.

Adjusted OIBDA

We define Adjusted OIBDA as revenue less cost of sales, operating expenses and selling, general and administrative expense (excluding stock compensation). Our chief operating decision maker and management team use this measure of performance in conjunction with other measures to evaluate our businesses and make decisions about allocating resources among our businesses. We believe this is an important indicator of the operational strength and performance of our businesses, including each business's ability to service debt and fund capital expenditures. In addition, this measure allows us to view operating results, perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes such costs as depreciation and amortization, stock-based compensation, separately reported litigation settlements and restructuring and impairment charges that are included in the measurement of operating income pursuant to U.S. generally accepted accounting principles (“GAAP”). Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for operating income (loss), net earnings (loss), cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. See note 910 to the accompanying condensed consolidated financial statements for a reconciliation of Adjusted OIBDA to Earnings (loss) before income taxes.

Consolidated Expedia Holdings Adjusted OIBDA increased $~~173~~36 million ~~and $232 million~~ for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019, ~~respectively,~~ as compared to the corresponding ~~periods~~period in the prior year.

Expedia Adjusted OIBDA increased $176 million and $241 million during the three and nine months ended September 30, 2018, respectively, when compared to the corresponding periods in 2017. See “Results of Operations – Expedia” below for a more detailed discussion of Expedia’s standalone results.I-28

Additionally, corporate and other Adjusted OIBDA decreased $3 million and $9 million for the three and nine months ended September 30, 2018, respectively, as compared to the corresponding periods in the prior year. The changes in both periods were primarily due to changes in Bodybuilding Adjusted OIBDA, primarily as a result of the revenue and operating expense fluctuations discussed above.

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Table of Contents

Expedia Adjusted OIBDA increased $46 million during the three months ended March 31, 2019, when compared to the corresponding period in 2018. See “Results of Operations – Expedia” below for a more detailed discussion of Expedia’s standalone results.

Additionally, corporate and other Adjusted OIBDA decreased $10 million for the three months ended March 31, 2019, as compared to the corresponding period in the prior year. The change was primarily due to changes in Bodybuilding Adjusted OIBDA, primarily as a result of the revenue and operating expense fluctuations discussed above, as well as increased legal expenses at the corporate level due to the transaction between Expedia and the Company (discussed above).

Other Income and Expense

Components of Other income (expense) are presented in the table below.

	Three months ended			~~Nine months ended~~
	September 30,			September 30,
	March 31,
	2018		2017	2018	2017
	2019		2018
	amounts in millions
Interest expense
Expedia	$	(3130)	(2734)	~~(99)~~	~~(81)~~
Corporate and other		(12)	(2)	~~(4)~~	~~(7)~~
Consolidated Expedia Holdings	$	(32)	(2936)	~~(103)~~	~~(88)~~
Other, net
Expedia	$	~~(12)~~31	~~(22)~~47	~~(40)~~	~~(41)~~
Corporate and other		(54)	~~(1)~~11	2	~~(30)~~
Consolidated Expedia Holdings	$	~~(17)~~27	~~(23)~~58	~~(38)~~	~~(71)~~

Interest expense

Consolidated Expedia Holdings interest expense ~~increased~~decreased $34 million ~~and $15 million~~ during the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019, ~~respectively,~~ as compared to the corresponding ~~periods~~period in the prior year. The ~~increase~~decrease in ~~2018~~2019 was primarily as a result of the ~~Expedia 3.8% senior notes due 2028 that were issued in September 2017, partially offset by the~~ August 2018 maturity of Expedia’s 7.456% senior notes.

Other, net

Other expense decreased $631 million ~~and $33 million~~ during the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019, ~~respectively,~~ as compared to the corresponding ~~periods~~period in the prior year. Expedia Other expense decreased by $1016 million ~~and $1 million~~ for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019, compared to the same ~~periods~~period in the prior year primarily due to ~~unrealized losses on Expedia’s minority equity investment in Despegar, offset by~~ foreign exchange ~~gains and interest and dividend income~~losses. Corporate and other Other expense ~~increased $4 million and~~ decreased $3215 million for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019, ~~respectively,~~ primarily due to a $416 million ~~decrease~~change ~~and a $35 million increase~~ in ~~unrealized~~the ~~gains,~~fair ~~respectively,~~value onof the Expedia Holdings 1% Exchangeable Senior Debentures due 2047.

Income tax benefit (expense)

We had an income tax ~~benefits~~benefit of $~~120~~60 million ~~and $231 million~~ for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018, respectively~~2019. For the three months ended ~~September~~March 3031, ~~2018~~2019, the effective tax rate is ~~greater~~less than the U.S. statutory tax rate of 21% due to income tax benefits from losses in foreign jurisdictions taxed at rates other than the 21% U.S. federal tax rate and an increase in federal tax credits, partially offset by excess tax expense related to share-based compensation, changes in ~~unrecognized tax benefits, and changes in~~ the valuation allowance. ~~For~~and ~~the~~a ~~nine~~change ~~months~~in ~~ended September 30, 2018,~~ the effective ~~rate is greater than the U.S. statutory~~ tax rate ~~of 21% due to income tax benefits from losses in foreign jurisdictions taxed at rates other than the 21% U.S. federal tax rate and an increase in federal tax credits~~, partially offset by ~~changes~~the ineffect ~~unrecognized~~of ~~tax~~state ~~benefits,~~income ~~excess tax expense related to share-based compensation, and changes in the valuation allowance~~taxes. We had an income tax benefit of $2365 million ~~and $259 million~~ for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2017, respectively~~2018. For the three months ended ~~September~~March 3031, ~~2017~~2018, the effective tax rate ~~was~~is less than the U.S. statutory tax rate of 3521% income tax benefits from earnings in foreign jurisdictions taxed at rates lower than the 35% U.S. federal tax rate, an increase in federal tax credits, and the effect of state taxes, partially offset by changes in unrecognized tax benefits and the recognition of excess tax expense and windfalls related to share-based compensation. For the nine months ended September 30, 2017, the effective tax rate is greater than the U.S. statutory rate due to income tax benefits from earnings in foreign jurisdictions taxed at rates lower than the 3521% U.S. federal tax rate, ~~an increase in federal tax credits, and the effect of state taxes,~~ partially offset by changes in unrecognized tax benefits ~~and the recognition of excess tax expense and windfalls related to share-based compensation~~.

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Net earnings (losses)

We had net losses of $53269 million and ~~earnings of~~ $~~123~~324 million for the three months ended ~~September~~March 3031, ~~2018~~2019 and ~~2017, respectively, and net losses of $509 million and $459 million for the nine months ended September 30,~~ 2018 ~~and 2017~~, respectively. The change in net ~~earnings and net~~ losses were the result of the above described fluctuations in our revenue, expenses and other income (expense) items discussed above.

Material Changes in Financial Condition

As of ~~September~~March 3031, ~~2018~~2019, substantially all of our cash and cash equivalents consist of cash on hand in global financial institutions, money market funds and marketable securities with maturities of 90 days or less at the date purchased.

The following are potential sources of liquidity: available cash balances, cash generated by Bodybuilding’s operating activities (to the extent such cash exceeds the working capital needs of the subsidiary and is not otherwise restricted), proceeds from asset sales, outstanding debt facilities, debt and equity issuances and dividend and interest receipts.

Under Expedia’s merchant model, Expedia receives cash from travelers at the time of booking, which are recorded in the consolidated balance sheets as deferred merchant bookings. Expedia pays its airline suppliers related to these merchant model bookings generally within a few weeks after completing the transaction, but Expedia is liable for the full value of such transactions until the flights are completed. For most other merchant bookings, primarily Expedia’s merchant hotel business, Expedia generally pays after the travelers’ use and, in some cases, subsequent to the billing from the hotel suppliers. Therefore, Expedia generally receives cash from the traveler prior to paying its supplier, and this operating cycle represents a working capital source of cash. Additionally, seasonal fluctuations in Expedia’s merchant hotel bookings affect the timing of its annual cash flows. During the first half of the year, hotel bookings have traditionally exceeded stays, resulting in much higher cash flow related to working capital. During the second half of the year, this pattern reverses and cash flows are typically negative.

As of ~~September~~March 3031, ~~2018~~2019 the Company had a cash balance of $3,~~012~~765 million. Approximately $23,~~920~~708 million of the cash balance is held by Expedia. Although we ~~have~~had an approximate 52.67% voting interest in Expedia as of ~~September~~March 3031, ~~2018~~2019, Expedia is a separate public company with a significant noncontrolling interest, as we only ~~have~~had a 16.01% economic interest in Expedia as of ~~September~~March 3031, ~~2018~~2019. Accordingly, decision making with respect to using Expedia's cash balances must consider Expedia's ~~minority~~other holders. Even ~~upon~~prior ~~consolidation~~to ofthe ~~Expedia~~Deconsolidation (as defined below), we dodid not have ready access to Expedia’s cash due to the significant minority interest. Any potential distributions of cash from Expedia to us would generally be on a pro rata basis based on economic ownership interests. Expedia has historically paid quarterly cash dividends to its shareholders, of which Expedia Holdings has received cash distributions from Expedia based on our economic ownership interest.

As of ~~September~~March 3031, ~~2018~~2019, the total cash and cash equivalents and short-term investments held outside the United States was $~~1.4~~856 ~~billion~~million ($~~1.2~~623 ~~billion~~million in wholly-owned foreign subsidiaries and $~~180~~233 million in majority-owned subsidiaries of Expedia).

As of ~~September~~March 3031, ~~2018~~2019, Expedia has $2.0 billion available for borrowing under its revolving credit facility. As of ~~September~~March 3031, ~~2018~~2019, the Company has a corporate cash balance of approximately $9155 million.

Expedia Holdings does not have a debt rating.

~~Expedia~~Bodybuilding ~~Holdings~~was not in compliance with the fixed charge coverage ratio covenant on its revolving line of credit (the “Revolver”) as of March 31, ~~Expedia~~2019, ~~and~~however Bodybuilding ~~were~~entered ininto ~~compliance~~an agreement with ~~their~~the ~~debt~~lender ~~covenants~~to asterminate ofthe ~~September~~Revolver 30on April 15, ~~2018~~2019. Future potential operating losses of Bodybuilding will be funded by corporate level available cash.

~~I-33~~Expedia Holdings and Expedia were in compliance with their debt covenants as of March 31, 2019.

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	Nine months ended
	Three months ended
	September 30,
	March 31,
	2018		2017
	2019		2018
	amounts in millions
Cash flow information
Expedia net cash provided (used) by operating activities	$	2,~~120~~149	1,~~946~~676
Corporate and other net cash provided (used) by operating activities		~~(4)~~2	~~(2)~~—
Net cash provided (used) by operating activities	$	2,~~116~~151	1,~~944~~676
Expedia net cash provided (used) by investing activities	$	(~~655~~706)	(~~1,479~~728)
Corporate and other net cash provided (used) by investing activities		(518)	(62)
Net cash provided (used) by investing activities	$	(~~660~~724)	(~~1,485~~730)
Expedia net cash provided (used) by financing activities	$	~~(1,154)~~21	~~861~~(236)
Corporate and other net cash provided (used) by financing activities		~~(13)~~4	638
Net cash provided (used) by financing activities	$	~~(1,167)~~25	~~924~~(228)
Effect of foreign exchange rate changes on cash and cash equivalents	$	(~~119~~11)	~~143~~17

During the ~~nine~~three months ended ~~September~~March 3031, ~~2018~~ 2019, our Corporate and other primary sources of cash were dividends received from Expedia of approximately $217 million and sales of marketable securities of $7 million. Our Corporate and other primary uses of cash were ~~capital~~purchases ~~expenditures~~of marketable securities of $524 million and ~~purchase~~net ofdebt ~~shares~~repayments of ~~Expedia of~~ $315 million ~~(see note 4 to the accompanying condensed consolidated financial statements)~~. This use of cash was funded by cash on hand and cash provided by operating activities.

The projected use of our cash will be continued investment in the Bodybuilding business and potential additional investments in new or existing businesses.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2018~~2019, Expedia’s primary uses of cash included $~~634~~274 million in capital expenditures, $~~620~~438 million in ~~share~~purchase ~~repurchases, $500 million in repayment~~ of ~~long-term~~investments, ~~debt~~ and $~~138~~47 million of cash dividends paid (including $217 million paid to Expedia Holdings). These uses of cash were funded by cash on hand, cash provided by operating activities, cash provided by the exercise of options and employee stock purchase plans.

The $~~119~~11 million effect of foreign exchange rate changes on cash and cash equivalents during the ~~nine~~three months ended ~~September~~March 3031, ~~2018~~2019 reflects appreciations of foreign currencies during the period.

Expedia’s ongoing investments include but are not limited to improvements in infrastructure, which include its servers, networking equipment and software, release improvements to its software code, platform migrations and consolidation and search engine marketing and optimization efforts. In addition, in 2016, Expedia began its expansion into the cloud computing environment. While cloud computing expenses are expected to increase significantly over the next few years, they are expected to result in lower overall capital expenditures related to Expedia’s data centers over time. Expedia’s future capital requirements may include capital needs for acquisitions (including purchases of non-controlling interest), share repurchases, dividend payments or expenditures in support of its business strategy. For the new headquarters Expedia expects to spend approximately $900 million~~, with final estimates contingent on completion of design plans and final determination of completed office space required in the initial build out as well as impacts from any additional tariffs~~. Of the total, approximately $30290 million was spent inbetween 2016 and ~~approximately~~2018 and $7079 million was spent in ~~2017~~the first quarter of 2019. During ~~2018~~full ~~and~~year 2019 and 2020, Expedia expects to spend $~~230~~425 ~~million~~ to $~~250~~475 million, ~~having~~and ~~incurred~~$135 ~~approximately~~to $~~120~~185 million ~~year-to-date~~, ~~and~~respectively. ~~$425~~However, ~~million~~the totiming ~~$475~~of ~~million,~~spend ~~respectively,~~could ~~with~~shift ~~the~~as ~~remaining~~Expedia ~~costs~~progresses totoward becompletion ~~incurred~~of inthe ~~2020~~project.

We believe that the available sources of liquidity are sufficient to cover our projected future uses of cash.

Results of Operations – Expedia

Expedia. Expedia is an online travel company, empowering business and leisure travelers with the tools and information they need to efficiently research, plan, book and experience travel. Expedia has created a global travel marketplace used by a broad range of leisure and corporate travelers, offline retail travel agents and travel service providers. Expedia makes available, on a stand-alone and package basis, travel products and services provided by numerous airlines, lodging properties, car rental companies, destination service providers, cruise lines, vacation rental property owners and managers, and other travel product and service companies. Expedia also offers travel and non-travel advertisers access to

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~~managers, and other travel product and service companies. Expedia also offers travel and non-travel advertisers access to~~ a potential source of incremental traffic and transactions through its various media and advertising offerings on its transaction-based websites.

As of ~~September~~March 3031, ~~2018~~ 2019, we ~~own~~owned an approximate 16.01% equity interest and 52.67% voting interest in Expedia. Historically, Qurate Retail was (and, following the completion of the Expedia Holdings Split-Off, the Company is) a party to the Stockholders Agreement with Mr. Diller, pursuant to which Mr. Diller held an irrevocable proxy (the “Diller Proxy”) over all the shares of EXPE and Expedia class B common stock owned by Qurate Retail. In connection with the Expedia Holdings Split-Off and the proxy arrangements, the Stockholders Agreement was assigned to us and amended to permit the assignment of the Diller Proxy to our company for a period of time up to 18 months following completion of the Expedia Holdings Split-Off (May 4, 2018, the “Outside Date”), subject to certain termination events as described in the Amended and Restated Transaction Agreement, dated as of September 22, 2016, among Mr. Diller, John C. Malone, and Leslie Malone (the “Malone Group”), Qurate Retail and the Company (the “Transaction Agreement”). On March 6, 2018, the Company, Qurate Retail, ~~Mr. Malone,~~the ~~Mrs.~~ Malone Group and Mr. Diller entered into a letter agreement (the “Letter Agreement”), which amended the termination provisions of the Transaction Agreement to extend the Outside Date for an additional one year period. As a result, unless sooner terminated upon the occurrence of certain events or the taking of certain actions, in either case, as listed in the Transaction Agreement, as amended by the Letter Agreement, the Proxy Arrangement Termination Date ~~will~~would occur, and the Transaction Agreement together with certain Subject Instruments (as defined in the Transaction Agreement) ~~will~~would ~~terminate~~have terminated, on May 4, 2019.

As a result, we began consolidating Expedia as of the completion of the Expedia Holdings Split-Off, as we then controlled a majority of the voting interest in Expedia for accounting purposes. Additionally, in conjunction with the application of acquisition accounting, we recorded a full step up in basis of Expedia along with a gain between our historical basis and the fair value of our interest in Expedia. On April 15, 2019, and prior to the Company’s entry into the Merger Agreement, Mr. Diller, the Company, Qurate Retail and the Malone Group entered into Amendment No. 2 to the Amended and Restated Transaction Agreement, providing for the immediate termination of the Transaction Agreement, which automatically resulted in the termination of the Proxy Arrangements (as discussed in note 3 in the accompanying condensed consolidated financial statements). As a result of the termination of the Proxy Arrangements, the Company no longer controls a majority of the voting interest in Expedia. Accordingly, the Company will deconsolidate Expedia as of April 15, 2019 (the “Deconsolidation”). Until the Merger is completed, the Governance Agreement and Stockholders Agreement (as discussed in note 3 in the accompanying condensed consolidated financial statements) remain in effect, meaning the Company has significant influence with respect to Expedia and accordingly will account for its investment in Expedia as an equity method affiliate and expects to elect the fair value option of accounting. The Company’s economic ownership percentage in Expedia remains the same.

The following is a discussion of Expedia's stand-alone results of operations. In order to provide a better understanding of Expedia's operations, we have included a summarized presentation of Expedia's results of operations. Expedia is a separate publicly traded company and additional information about Expedia can be obtained through its website and public filings. The amounts included in the table below represent Expedia's stand-alone results for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019 and ~~2017~~2018.

	Three months ended			~~Nine months ended~~
	September 30,			September 30,
	March 31,
	2018		2017	2018	2017
	2019		2018
	amounts in millions
Revenue	$	32,~~276~~609	2,~~966~~508	~~8,664~~	~~7,741~~
Operating expenses, excluding stock-based compensation		(2,~~385~~436)	(2,~~248~~381)	~~(7,182)~~	~~(6,434)~~
Adjusted OIBDA		~~891~~173	~~718~~127	~~1,482~~	~~1,307~~
Depreciation and amortization		(~~243~~228)	(~~227~~239)	~~(723)~~	~~(653)~~
Stock-based compensation		(5456)	(750)	~~(154)~~	~~(104)~~
Impairment of goodwill		—	—	(61)	—
Legal reserves, occupancy tax and other		(10)	(3)
Legal reserves, occupancy tax and other		78	1	74	(23)
Restructuring and related reorganization charges		(10)	—
Restructuring and related reorganization charges		—	(4)	—	(16)
Operating income (loss)	$	(131)	(165)
Operating income (loss)	$	672	481	618	511

Expedia's revenue increased $~~310~~101 million ~~and $923 million~~ during the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019, ~~respectively,~~ as compared to the corresponding ~~periods~~period in the prior year. The increase in ~~2018~~2019 was primarily driven by growth in the Expedia’s Core Online ~~Travel Companies (“Core OTA”), including growth at Brand Expedia, Hotels.com and Expedia Partner Solutions (“EPS”), as well as growth at HomeAway.~~

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	Three months ended			Nine months ended
	September 30,			September 30,
	2018		2017	2018	2017
	amounts in millions
Revenue by Service Type
Lodging	$	2,347	2,102	5,951	5,246
Air		209	189	674	608
Advertising and media (1)		302	299	858	858
Other		418	376	1,181	1,029
Total revenue	$	3,276	2,966	8,664	7,741

Travel Companies (“Core OTA”), including growth at Expedia Partner Solutions (“EPS”) and Brand Expedia, as well as growth at Vrbo, partially offset by declines at trivago.


	Three months ended
	March 31,
	2019		2018
	amounts in millions
Revenue by Service Type
Lodging	$	1,725	1,612
Air		248	242
Advertising and media (1)		264	282
Other		372	372
Total revenue	$	2,609	2,508

(1)

Includes third-party revenue from trivago as well as Expedia’s transaction-based websites.

Lodging revenue increased 127% ~~and 13%~~ for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019, compared to the same ~~periods~~period in ~~2017~~2018, ~~driven~~on bya ~~growth~~9% atincrease ~~HomeAway,~~in ~~Hotels.com,~~room ~~EPS and Brand Expedia. Room~~ nights stayed ~~increased~~driven ~~13%~~by ~~for~~growth ~~both~~at ~~the~~Expedia ~~three~~Partner ~~and~~Solutions, ~~nine~~Hotels.com ~~months~~and ~~ended~~Brand ~~September 30~~Expedia, ~~2018,~~partially ~~compared~~offset toby ~~the~~a ~~same~~2% ~~periods~~decrease in ~~2017, and~~ revenue per room night ~~declined 1% for the three months ended September 30~~, ~~2018~~due ~~and was essentially flat for the nine months ended September 30, 2018, compared~~ to the ~~same~~negative ~~periods~~impact inof ~~2017~~foreign exchange.

Worldwide air revenue increased 113% for ~~both~~ the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~ 2019, ~~respectively,~~ compared to the same ~~periods~~period in ~~2017~~2018, on a 411% increase in air tickets sold ~~for~~driven ~~both~~by ~~periods~~growth asat ~~well~~Expedia asPartner aSolutions 6% and Brand Expedia, partially offset by a 7% ~~increase~~decrease in revenue per ticket., ~~Air~~which ~~revenue~~was ~~growth~~driven ~~included~~by ana ~~approximately~~shift ~~3.0%~~in ~~and~~product ~~3.5%~~mix ~~benefit~~and ~~due~~reclassification ~~to an accounting change related to revenue classification~~ of certain partner fees, ~~which~~to ~~were~~other ~~previously~~revenue ~~recorded~~ as awell ~~contra-revenue but now classified~~ as ~~cost~~a ofnegative ~~revenue with no net~~ impact tofrom ~~operating~~foreign ~~income (loss)~~exchange.

Advertising and media revenue ~~increased~~decreased 16% for the three months ended ~~September~~March 3031, ~~2018 and was essentially flat for the nine months ended September 30~~2019, ~~2018,~~ compared to the same ~~periods~~ period in ~~2017~~2018, due to ~~continued~~declines ~~growth~~ at ~~Expedia Group Media Solutions~~trivago, ~~mostly~~partially offset by acontinued ~~decline~~growth at ~~trivago~~Expedia ~~for~~Group ~~both~~Media ~~periods~~Solutions. All other revenue, which includes car rental, insurance, destination services and fee revenue related to Expedia’s corporate travel business, ~~increased~~was byessentially ~~11%~~flat ~~and 15%~~ for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019, compared to the same ~~periods~~period in ~~2017, primarily due to growth in travel insurance products and car rental revenue~~2018.

In addition to the above service category revenue discussion, Expedia’s revenue by business model is as follows:

	Three months ended			~~Nine months ended~~
	September 30,			September 30,
	March 31,
	2018		2017	2018	2017
	2019		2018
	amounts in millions
Revenue by Business Model
Merchant	$	1,~~688~~392	1,~~559~~334	~~4,554~~	~~4,111~~
Agency		~~876~~686	~~803~~658	~~2,311~~	~~2,058~~
Advertising and media		~~302~~264	~~299~~282	~~858~~	~~858~~
HomeAway		410	305	941	714
Vrbo		267	234
Total revenue	$	32,~~276~~609	2,~~966~~508	~~8,664~~	~~7,741~~

Merchant revenue increased for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019, compared to the same ~~periods~~period in ~~2017~~2018, primarily due to the increase in merchant hotel revenue driven by an increase in room nights stayed. Agency revenue increased for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019, compared to the same ~~periods~~period in ~~2017~~2018, primarily due to the growth in agency ~~hotel~~air and ~~air~~hotel. ~~HomeAway~~Vrbo revenue increased for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019, compared to the same ~~periods~~period in ~~2017~~2018, primarily due to growth in transactional revenue of approximately 50 25% ~~and 60%~~, driven by a benefit from the traveler service fee, partially offset by subscription revenue decreasing ~~approximately 20~~10% ~~and 25%~~.

~~I-36~~ The increase in operating expenses during 2018 was primarily due to a $19 million increase in selling and marketing expense during the three months ended March 31, 2019, as compared to the same period in the prior year. The increase for the three months ended March 31, 2019 was primarily due to higher indirect costs of $22 million as a result of increases at Vrbo, Expedia Partner Solutions and Brand Expedia, which were partially offset by a decrease at trivago. Additionally,

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The increase in operating expenses during 2018 was primarily due to a $40 million and $384 million increase in selling and marketing expense during the three and nine months ended September 30, 2018, respectively, as compared to the same periods in the prior year. The increase for the three months ended September 30, 2018 was primarily due to higher indirect costs of $36 million which were driven by growth in personnel in the lodging supply organization, and the increase for the nine months ended September 30, 2018 was driven by higher direct costs of $246 million, including online and offline marketing expenses. Hotels.com, EPS and HomeAway accounted for the majority of the total direct cost increases. Additionally, technology and content expenses increased $5433 million ~~and $185 million~~ during the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019, ~~respectively,~~ compared to the same ~~periods~~period in ~~2017~~2018, due to ~~increased~~higher ~~personnel~~depreciation and ~~overhead~~amortization of ~~$29~~technology ~~million~~assets ~~and~~of $~~103~~13 million ~~from investments in Expedia’s ecommerce platform and products and growth at HomeAway,~~ as well as ~~inorganic~~higher ~~impact~~licensing ~~from~~and ~~acquisitions.~~maintenance expenses. Additionally, the increase in cost of revenue during ~~2018~~2019 was driven by $2016 million ~~and $82 million~~ of higher customer operations expenses, at ~~including~~Expedia ~~direct~~Partner Solutions and ~~headcount costs to support the growth of the business~~Egencia, as well as $189 million ~~and $82 million~~ of higher data center, cloud and other costs during the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~ 2019, as compared to the same ~~periods~~period in the prior year.

The ~~increase~~decrease in depreciation and amortization during 2018 was primarily due to ~~increased~~the ~~depreciation~~completion ~~and amortization~~ of ~~technology and data center assets, and increased~~ amortization ~~of intangible assets during the period~~ related to ~~new~~certain ~~business~~intangible ~~acquisitions~~assets.

Stock-based compensation increased during the three ~~and nine~~ months ended ~~September~~March 3031, ~~2018~~2019 as compared to the same ~~periods~~period in ~~2017~~2018, primarily as a result of ~~the~~increased ~~prior year reversal of approximately $41 million of previously recognized~~ stock~~-based~~ compensation ~~expense~~ related to ~~the~~technology ~~departure~~and ~~of Expedia’s former CEO in September 2017~~content.

~~During~~Legal ~~the~~reserves, ~~nine~~occupancy ~~months~~tax ~~ended~~and ~~September~~other ~~30,~~consists ~~2018,~~of changes in Expedia’s ~~recognized~~reserves afor ~~goodwill~~court ~~impairment~~decisions ~~charge~~and the potential and final settlement of ~~$61~~issues ~~million~~related to hotel occupancy taxes, expenses recognized related to amonies ~~reporting~~paid ~~unit~~in ~~within~~advance ~~its~~of ~~Core~~occupancy ~~OTA~~and ~~segment.~~other tax proceedings (“pay-to-play”) as well as certain other legal reserves.

~~Legal~~Expedia ~~reserves,~~recognized ~~occupancy~~$10 ~~tax~~million ~~and other consists~~ of ~~changes~~restructuring ~~in Expedia’s reserves for court decisions~~ and ~~the potential and final settlement of issues~~ related tocharges ~~hotel occupancy taxes, expenses recognized related to monies paid~~ in ~~advance of occupancy and other tax proceedings (“pay-to-play”) as well as certain other legal reserves. During~~ the three months ended ~~September 30~~March 31, ~~2018~~2019, ~~Expedia~~and ~~received~~no arestructuring ~~refund~~charges ofduring ~~prepaid~~the ~~pay-to-play~~same ~~payments~~periods ofin ~~$78~~2018. The ~~million~~expenses ~~from~~in ~~the~~2019 ~~City~~related ofto ~~San~~the ~~Francisco~~migration and ~~recorded~~centralization aof ~~related~~certain ~~gain~~technology inplatforms, ~~legal~~primarily ~~reserves,~~related ~~occupancy~~to ~~tax~~severance and ~~other~~benefits.

Expedia recognized no restructuring and related charges in the three and nine months ended September 30, 2018, and $4 million and $16 million during the same periods in 2017. The expenses in 2017 related to activities to centralize and optimize certain operations as well as migrate technology platforms as a result of acquisitions.

The following is a reconciliation of the results reported by Expedia, used for comparison purposes above to understand their operations, to the results reported by Expedia Holdings:

	Three months ended September 30, 2018
	Three months ended March 31, 2019
	As Reported by Expedia		Acquisition Accounting and Other Adjustments	As reported by Expedia Holdings
	amounts in millions
Service revenue	$	32,~~276~~609	—	32,~~276~~609
Operating expenses, excluding stock-based compensation		(2,~~385~~436)	—	(2,~~385~~436)
Adjusted OIBDA		~~891~~173	—	~~891~~173
Depreciation and amortization		(~~243~~228)	(~~241~~175)	(~~484~~403)
Stock-based compensation		(5456)	(32)	(5758)
Impairment of goodwill and intangible assets (1)		—	(487)	(487)
Other operating income (expenses)		(20)	—	(20)
Other operating income (expenses)		78	—	78
Operating income (loss)	$	(131)	(177)	(308)
Operating income (loss)	$	672	(731)	(59)

I-37


	Three months ended March 31, 2018
	As Reported by Expedia		Acquisition Accounting Adjustments	As reported by Expedia Holdings
	amounts in millions
Service revenue	$	2,508	—	2,508
Operating expenses, excluding stock-based compensation		(2,381)	—	(2,381)
Adjusted OIBDA		127	—	127
Depreciation and amortization		(239)	(237)	(476)
Stock-based compensation		(50)	(2)	(52)
Other operating income (expenses)		(3)	—	(3)
Operating income (loss)	$	(165)	(239)	(404)

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	Nine months ended September 30, 2018
	As Reported by Expedia		Acquisition Accounting and Other Adjustments	As reported by Expedia Holdings
	amounts in millions
Service revenue	$	8,664	—	8,664
Operating expenses, excluding stock-based compensation		(7,182)	—	(7,182)
Adjusted OIBDA		1,482	—	1,482
Depreciation and amortization		(723)	(707)	(1,430)
Stock-based compensation		(154)	(7)	(161)
Impairment of goodwill and intangible assets (1)		(61)	(426)	(487)
Other operating income (expenses)		74	—	74
Operating income (loss)	$	618	(1,140)	(522)

(1) As Expedia Holdings views its reporting units on a different level than Expedia, Expedia Holdings determined that it had no indicators of impairment to goodwill for Expedia’s Core OTA reporting unit for the nine months ended September 30, 2018 and reversed Expedia’s $61 million goodwill impairment. Expedia Holdings recorded an impairment of trivago’s tradenames of $487 million that was not recorded by Expedia (see note 6 to the accompanying condensed consolidated financial statements).

	Three months ended September 30, 2017
	As Reported by Expedia		Acquisition Accounting Adjustments	As reported by Expedia Holdings
	amounts in millions
Service revenue	$	2,966	(3)	2,963
Operating expenses, excluding stock-based compensation		(2,248)	—	(2,248)
Adjusted OIBDA		718	(3)	715
Depreciation and amortization		(227)	(352)	(579)
Stock-based compensation		(7)	32	25
Other operating income (expenses)		(3)	(1)	(4)
Operating income (loss)	$	481	(324)	157

	Nine months ended September 30, 2017
	As Reported by Expedia		Acquisition Accounting Adjustments	As reported by Expedia Holdings
	amounts in millions
Service revenue	$	7,741	(66)	7,675
Operating expenses, excluding stock-based compensation		(6,434)	(1)	(6,435)
Adjusted OIBDA		1,307	(67)	1,240
Depreciation and amortization		(653)	(1,003)	(1,656)
Stock-based compensation		(104)	9	(95)
Other operating income (expenses)		(39)	—	(39)
Operating income (loss)	$	511	(1,061)	(550)

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk in the normal course of business due to our ongoing investing and financial activities. Market risk refers to the risk of loss arising from adverse changes in stock prices, interest rates and foreign exchange rates. We are exposed to market risk through the Company’s long-term debt, revolving credit facility, derivative instruments, cash and cash equivalents, accounts receivable, intercompany receivables, investments, merchant accounts payable and deferred merchant bookings denominated in foreign currencies. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. We have established policies, procedures and internal processes governing our management of market risks and the use of financial instruments to manage our exposure to such risks.

Interest Rate Risk

We are exposed to changes in interest rates primarily as a result of our borrowing activities, which include borrowings used to maintain liquidity and to fund business operations. The nature and amount of our long-term and short-term debt are expected to vary as a result of future requirements, market conditions and other factors. We manage our exposure to interest rates by maintaining what we believe is an appropriate mix of fixed and variable rate debt. We believe this best protects us from interest rate risk. We have achieved this mix by (i) issuing fixed rate debt that we believe has a low stated interest rate and significant term to maturity, (ii) issuing variable rate debt with appropriate maturities and interest rates and (iii) entering into interest rate swap arrangements when we deem appropriate.

As of ~~September~~March 3031, ~~2018~~ 2019, our debt is comprised of the following amounts:

	Variable rate debt				Fixed rate debt
	Principal		Weighted avg		Principal		Weighted avg
	amount		interest rate		amount		interest rate
	dollar amounts in millions
Expedia	$	—	—	%	$	3,~~754~~729	4.3031	%
Corporate and Other	$	11—	~~4.07~~—	%	$	~~404~~400	1.0400	%

Foreign Exchange Risk

Expedia conducts business in certain international markets, primarily in Australia, Canada, China and the European Union. Because it operates in international markets, it has exposure to different economic climates, political arenas, tax systems and regulations that could affect foreign exchange rates. Expedia’s primary exposure to foreign currency risk relates to transacting in foreign currency and recording the activity in U.S. Dollars. Changes in exchange rates between the U.S. dollar and these other currencies will result in transaction gains or losses, which are recognized in the consolidated statements of operations.

To the extent practicable, Expedia minimizes its foreign currency exposures by maintaining natural hedges between its current assets and current liabilities in similarly denominated foreign currencies. Additionally, Expedia uses foreign currency forward contracts to economically hedge certain merchant revenue exposures, foreign denominated liabilities related to certain of Expedia’s loyalty programs and other foreign currency-denominated operating liabilities. These instruments are typically short-term and are recorded at fair value with gains and losses recorded in Other, net. As of ~~September~~March 3031, ~~2018~~ 2019, Expedia had a net forward asset of $239 million included in Other current assets. Expedia may enter into additional foreign exchange derivative contracts or other economic hedges in the future. Expedia’s goal in managing its foreign exchange risk is to reduce to the extent practicable its potential exposure to the changes that exchange rates might have on its earnings, cash flows and financial position. Expedia makes a number of estimates in conducting hedging activities including in some cases the level of future bookings, cancellations, refunds, customer stay patterns and payments in foreign currencies. In the event those estimates differ significantly from actual results, Expedia could experience greater volatility as a result of its hedges.

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In June 2015, Expedia issued 650 million Euro of Expedia 2.5% Notes. The aggregate principal value of the Expedia 2.5% Notes is designated as a hedge of Expedia’s 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). 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 Accumulated other comprehensive income (loss). Since the notional amount of the recorded Euro-denominated debt is less than the notional amount of Expedia’s net investment, Expedia does not expect to incur any ineffectiveness on this hedge.

Future net transaction gains and losses are inherently difficult to predict as they are reliant on how the multiple currencies in which Expedia transacts fluctuate in relation to the U.S. Dollar, the relative composition and denomination of current assets and liabilities each period, and Expedia’s effectiveness at forecasting and managing, through balance sheet netting or the use of derivative contracts, such exposures.

During the three months ended ~~September~~ 30March 31, 2019 ~~2018~~ and ~~2017~~2018, Expedia recorded net foreign exchange rate ~~gains of $3 million and~~ losses of $1114 million, ~~respectively,~~ and ~~during the nine months ended September 30, 2018 and 2017, Expedia recorded net foreign exchange rate gains of~~ $~~51 million and losses of $~~2 million, respectively. As Expedia increases its operations in international markets, its exposure to fluctuations in foreign currency exchange rates increases. The economic impact to Expedia of foreign currency exchange rate movements is linked to variability in real growth, inflation, interest rates, governmental actions and other factors. These changes, if material, could cause Expedia to adjust its financing and operating strategies.

Item 4. Controls and Procedures

In accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company carried out an evaluation, under the supervision and with the participation of management, including its chief executive officer, and principal accounting and principal financial officer (the "Executives"), of the effectiveness of its disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based on that evaluation, the Executives concluded that the Company's disclosure controls and procedures were effective as of ~~September~~March 3031, 2019 ~~2018~~ to provide reasonable assurance that information required to be disclosed in its reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

There has been no change in the Company's internal control over financial reporting that occurred during the three months ended ~~September~~March 3031, 2019 ~~2018~~ that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of their respective businesses, each of Expedia and its subsidiaries and Bodybuilding are party to legal proceedings and claims involving property, occupancy taxes, personal injury, contract, alleged infringement of third-party intellectual property rights and other claims. The amounts that may be recovered in such matters may be subject to insurance coverage. There are no material pending legal proceedings or claims to which we or our subsidiaries are party or of which any of our property is the subject. However, Expedia has disclosed a number of pending legal proceedings in its Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 and its Quarterly Report on Form 10-Q for the quarter ended ~~September~~March 3031, ~~2018~~2019 that, while not material to Expedia, may be of interest to its stockholders. There may be claims or actions pending or threatened against us or our subsidiaries of which we are currently not aware and the ultimate disposition of which would have a material adverse effect on us.

Item 1A. Risk Factors

Except as discussed below, there have been no material changes in the Company’s risk factors from those disclosed in Part I, Item 1A of its Annual Report on Form 10-K for the year ended December 31, 2018.

The Merger is subject to conditions, some or all of which may not be satisfied, or completed on a timely basis, if at all. Failure to complete the Merger could have material adverse effects on the Company.

The completion of the Merger is subject to a number of conditions, including, among other things, approval by holders of at least a majority of the aggregate voting power of the outstanding shares of Expedia Holdings common stock, voting together as a single class. The failure to satisfy all of the required conditions could delay the completion of the Merger for a significant period of time or prevent it from occurring at all. Any delay in completing the Merger could cause Expedia not to realize some or all of the benefits, or realize them on a different timeline than expected, that Expedia expects to achieve if the Merger is successfully completed within the expected timeframe. There can be no assurance that the conditions to the closing of the mergers will be satisfied or (to the extent permitted by law) waived or that the mergers will be completed. Also, subject to limited exceptions, either Expedia or the Company may terminate the Merger Agreement if the mergers have not been completed by on or before October 15, 2019, subject to possible extension as set forth in the Merger Agreement.

If the Merger is not completed, the Company may be materially adversely affected and, without realizing any of the benefits of having completed the Merger, the Company will be subject to a number of risks, including the following:

the market price of our Series A and Series B common stock could decline;

the Company could owe a substantial termination fee to Expedia under certain circumstances;

if the Merger Agreement is terminated and our board of directors seeks another business combination, our stockholders cannot be certain that we will be able to find a party willing to enter into a transaction on terms equivalent to or more attractive than the terms that Expedia has agreed to in the Merger Agreement;

time and resources, financial and other, committed by the Company’s and its subsidiaries’ management to matters relating to the Merger could otherwise have been devoted to pursuing other beneficial opportunities for the Company and its subsidiaries;

the Company and its subsidiaries may experience negative reactions from the financial markets or from its customers, suppliers or employees;

the Company will be required to pay its costs relating to the Merger, such as legal, accounting, financial advisory and printing fees, whether or not the Merger is completed; and

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after giving effect to any applicable grace period and unless it qualifies for an exemption, the Company may be required to register as an investment company under the Investment Company Act of 1940, which we refer to as the 40 Act.

In addition, if the Merger is not completed, the Company could be subject to litigation related to any failure to complete the Merger or related to any enforcement proceeding commenced against the Company to perform its obligations under the Merger Agreement. Any of these risks could materially and adversely impact the Company’s financial condition, financial results and stock price.

Similarly, delays in the completion of the Merger could, among other things, result in additional transaction costs or other negative effects associated with uncertainty about completion of the Merger and could materially and adversely impact Expedia’s ongoing business, financial condition, financial results and stock price following the completion of the Merger.

The Merger Agreement contains provisions that limit the Company’s ability to pursue alternatives to the Merger, could discourage a potential competing acquirer of the Company from making a favorable alternative company transaction proposal and, in specified circumstances, could require the Company to pay a substantial termination fee to Expedia.

The Merger Agreement contains provisions that make it more difficult for the Company to be acquired by any person other than Expedia. The Merger Agreement contains certain provisions that restrict the Company’s ability to, among other things, solicit, initiate, knowingly facilitate, knowingly induce, knowingly encourage, or enter into or continue or otherwise participate in any discussions relating to, or approve or recommend, any third-party acquisition proposal. Further, even if our board of directors withdraws or qualifies its recommendation with respect to the approval of the Merger proposal, unless the Merger Agreement is terminated in accordance with its terms, the Company will still be required to submit the merger proposal to a vote at the special meeting of the Company’s stockholders. In addition, following receipt by the Company of any third-party acquisition proposal that constitutes a “superior proposal,” Expedia will have an opportunity to offer to modify the terms of the Merger Agreement before our board of directors may withdraw or qualify its recommendation with respect to the merger proposal in favor of such superior proposal.

In some circumstances, upon termination of the Merger Agreement, the Company would be required to pay a termination fee of $72 million to Expedia.

These provisions could discourage a potential third-party acquirer or merger partner that might have an interest in acquiring all or a significant portion of the Company or pursuing an alternative company transaction from considering or proposing such a transaction, even if it were prepared to pay consideration with a higher per share value than the value proposed to be received in the merger. In particular, the termination fee, if applicable, would be substantial, and could result in a potential third-party acquirer or merger partner proposing to pay a lower price to our stockholders than it might otherwise have proposed to pay absent such a fee.

If the Merger Agreement is terminated and the Company determines to seek another business combination, the Company may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the merger.

Each party is subject to contractual restrictions while the mergers are pending, which could adversely affect each party’s business and operations.

Under the terms of the Merger Agreement, the Company is subject to certain restrictions on the conduct of its business prior to completing the Merger which may adversely affect its and its aubsidiaries’ ability to execute certain of its business strategies, maintain customers, or manage risks associated with its business, operations, technology, infrastructure or compliance functions, including the ability in certain cases to enter into or amend contracts, acquire or dispose of assets, incur indebtedness, incur capital expenditures, engage with regulators, settle actual or potential claims, or (in certain instances) communicate with its customers, employees and/or vendors. Such limitations could adversely affect the Company prior to the completion of the Merger.

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Under the terms of the Merger Agreement, Expedia is subject to a more limited set of restrictions on the conduct of its business prior to completing the mergers which may adversely affect its ability to execute certain of its business strategies, including the ability in certain cases to amend its organizational documents, pay extraordinary dividends or distributions or repurchase shares of EXPE. Such limitations could adversely affect Expedia prior to the completion of the Merger.

Each of the risks described above may be exacerbated by delays or other adverse developments with respect to the completion of the Merger.

The Merger could result in a significant liability to the Company and Expedia if it causes the 2016 split-off of the Company by Qurate Retail to fail to qualify as a tax-free distribution under applicable tax laws.

The completion of the mergers is conditioned upon the delivery by Skadden to the Company of an opinion to the effect that the Merger will not cause the Expedia Holdings Split-Off to fail to qualify as a tax-free distribution under Sections 355 and 361 of the Internal Revenue Code of 1986, as amended (the “Code”), which is referred to as the split-off tax opinion. If, for any reason, it is subsequently determined that the Expedia Holdings Split-Off does not qualify for tax-free treatment under Sections 355 and 361 of the Code, the Company and Expedia could be required, in certain circumstances, to indemnify Qurate Retail, its subsidiaries and certain related persons for significant tax liabilities resulting from the Expedia Holdings Split-Off.

As described in the Company’s registration statement on Form S-1 (File No. 333-210377) initially filed with the SEC on March 24, 2016, as amended, if the Expedia Holdings Split-Off does not qualify under Section 355, Section 368(a)(1)(D) and related provisions of the Code, Qurate Retail would generally be subject to tax as if it sold the shares of our common stock distributed in the Expedia Holdings Split-Off in a taxable transaction. In such a circumstance, Qurate Retail would recognize taxable gain in an amount equal to the excess of (1) the total fair market value of the shares of our common stock distributed in the Expedia Holdings Split-Off over (2) Qurate Retail’s aggregate tax basis in such shares of our common stock. Pursuant to the tax sharing agreement by and between Qurate Retail and the Company and the joinder to the tax sharing agreement by and among Qurate Retail, the Company and Expedia, in certain circumstances, the Company and Expedia will be required to jointly and severally indemnify Qurate Retail and its subsidiaries for any taxes or losses resulting from the failure of the Expedia Holdings Split-Off to qualify as a tax-free transaction under Section 355, Section 368(a)(1)(D) and related provisions of the Code, including to the extent that such taxes or losses (1) result primarily from, individually or in the aggregate, the breach of certain covenants made by the Company (applicable to actions or failures to act by the Company and its subsidiaries following the completion of the Expedia Holdings Split-Off), (2) result from the application of Section 355(e) of the Code to the Expedia Holdings Split-Off as a result of the treatment of the Expedia Holdings Split-Off as part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, a 50-percent or greater interest (measured by either vote or value) in the stock of the Company (or any successor corporation) or (3) result primarily from, individually or in the aggregate, the breach by Expedia of certain covenants under the tax sharing agreement following the completion of the Merger. Any such indemnity obligation could be material.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended ~~September~~March 3031, ~~2018~~ 2019, no shares of Series A Expedia Holdings common stock and no shares of Series B Expedia Holdings common stock were surrendered by ~~certain of~~ our officers and employees to pay withholding taxes and other deductions in connection with the vesting of their restricted stock and restricted stock units.

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Item 6. Exhibits

(a) Exhibits

Listed below are the exhibits which are filed as a part of this Report (according to the number assigned to them in Item 601 of Regulation S-K):

10.1	Fifth Amendment, dated as of September 10, 2018, to the Amended and Restated Credit Agreement dated as of September 5, 2014 among Expedia Group, Inc., a Delaware corporation, Expedia, Inc., a Washington corporation, Travelscape, LLC, a Nevada limited liability company, Hotwire, Inc., a Delaware corporation, the other Borrowing Subsidiaries from time to time party thereto, the Lenders from time to time party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and London Agent (incorporated by reference to Exhibit 10.1 to Expedia Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 filed on October 26, 2018 (File No. 001-37429)).
2.1†	Agreement and Plan of Merger, dated as of April 15, 2019, by and among the Company, Expedia, Inc., LEMS I LLC and LEMS II Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 16, 2019 (File No. 001-37938) (the “April 2019 8-K”)).
10.1	Amendment No. 2 to Transaction Agreement, dated as of April 15, 2019, by and among the Company, Qurate Retail, Inc., Barry Diller, John C. Malone and Leslie Malone (incorporated by reference to Exhibit 10.1 to the April 2019 8-K).
10.2	Exchange Agreement, dated as of April 15, 2019, by and among the Company, Barry Diller, The Diller Foundation d/b/a The Diller – von Furstenberg Family Foundation and Expedia, Inc. (incorporated by reference to Exhibit 10.2 to the April 2019 8-K).
10.3	Voting Agreement, dated as of April 15, 2019, by and among John C. Malone, Leslie Malone and Expedia, Inc. (incorporated by reference to Exhibit 10.3 to the April 2019 8-K).
10.4	Stockholders Agreement Termination Agreement, by and among Barry Diller, the Company, LEXEB, LLC and LEXE Marginco, LLC, dated as of April 15, 2019 (incorporated by reference to Exhibit 10.4 to the April 2019 8-K).
10.5	Governance Agreement Termination Agreement by and among Barry Diller, Expedia, Inc., the Company, LEXEB, LLC and LEXE Marginco, LLC, dated as of April15, 2019 (incorporated by reference to Exhibit 10.5 to the April 2019 8-K).
10.6	Assumption and Joinder Agreement to Tax Sharing Agreement by and among Expedia, Inc., the Company and Qurate Retail, Inc., dated as of April 15, 2019 (incorporated by reference to Exhibit 10.6 to the April 2019 8-K).
10.7	Tax Sharing Agreement, by and between Liberty Interactive Corporation and the Company, dated as of November 4, 2016 (incorporated by reference to Exhibit 10.1 to Qurate Retail’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on November 7, 2016 (File No.001-33982)).
10.8	Assumption Agreement Concerning Transaction Agreement Obligations by and among Expedia, Inc., the Company, Qurate Retail, Inc., Barry Diller, John C. Malone and Leslie Malone, dated as of April 15, 2019 (incorporated by reference to Exhibit 10.8 to the April 2019 8-K).
10.9	Assumption and Joinder Agreement to Reorganization Agreement by and among Expedia, Inc., the Company and Qurate Retail, Inc., dated as of April 15, 2019 (incorporated by reference to Exhibit 10.9 to the April 2019 8-K).
10.10	Reorganization Agreement by and between Liberty Interactive Corporation and the Company, dated as of October 26, 2016 (incorporated by reference to Exhibit 2.1 to Post-Effective Amendment No. 1 to the Company’s Registration Statement on Form S-4 filed with the SEC on November 4, 2016 (File No. 333-210377)).
10.11	Form of Indemnification Agreement by and between the Registrant and its executive officers/directors (incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on February 8, 2019 (File No. 001-37938)).
31.1	Rule 13a-14(a)/15d-14(a) Certification*
31.2	Rule 13a-14(a)/15d-14(a) Certification*
32	Section 1350 Certification**
101.INS	XBRL Instance Document*
101.SCH	XBRL Taxonomy Extension Schema Document*
101.CAL	XBRL Taxonomy Calculation Linkbase Document*
101.LAB	XBRL Taxonomy Label Linkbase Document*
101.PRE	XBRL Taxonomy Presentation Linkbase Document*
101.DEF	XBRL Taxonomy Definition Document*

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101.DEF

XBRL Taxonomy Definition Document*

* Filed herewith

** Furnished herewith

II† Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-1K. The Company hereby undertakes to furnish supplemental copies of any of the omitted schedules upon request by the SEC; provided, however, that the Company may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedules so furnished.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	LIBERTY EXPEDIA HOLDINGS, INC.
Date: November 1, 2018	By:	/s/ CHRISTOPHER W. SHEAN
Date: May 2, 2019	By:	/s/ CHRISTOPHER W. SHEAN
		Christopher W. Shean
		President and Chief Executive Officer
Date: November 1, 2018	By:	/s/ WADE HAUFSCHILD
Date: May 2, 2019	By:	/s/ WADE HAUFSCHILD
		Wade Haufschild
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

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