Airbnb, Inc. — Form 10-Q Summary
Business context and reporting period
Airbnb operates a global marketplace connecting hosts and guests for stays and experiences. This unaudited Form 10-Q covers the three months ended March 31, 2021, with comparisons to the three months ended March 31, 2020. Results continued to reflect the COVID-19 pandemic, although domestic and short-distance travel improved, particularly in North America.
Key financial metrics
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $886.9 million | $841.8 million | Up 5% |
| Gross Booking Value | $10.3 billion | $6.8 billion | Up 52%; 48% constant currency |
| Nights and Experiences Booked | 64.4 million | 57.1 million | Up 13% |
| Loss from operations | $(446.9) million | $(325.5) million | Loss increased |
| Net loss | $(1.172) billion | $(340.6) million | Loss increased |
| Net loss per share | $(1.95) | $(1.30) | Loss per share increased |
| Adjusted EBITDA | $(58.6) million | $(334.3) million | Improved |
| Adjusted EBITDA margin | (7)% | (40)% | Improved |
| Net cash from operating activities | $494.4 million | $(569.8) million | Improved |
| Free Cash Flow | $486.7 million | $(585.5) million | Improved |
Revenue less cost of revenue implied a gross margin of approximately 71% in Q1 2021 versus approximately 67% in Q1 2020. Operating margin was approximately (50)% versus (39)%, and net margin was approximately (132)% versus (40)%. The reported Q1 2021 net loss was heavily affected by debt extinguishment costs, warrant remeasurement, restructuring charges, and increased stock-based compensation.
Balance sheet, debt and liquidity
- Cash and cash equivalents were $4.5 billion at March 31, 2021, compared with $5.5 billion at December 31, 2020.
- Marketable securities increased to $2.1 billion from $0.9 billion. Cash, cash equivalents and marketable securities totaled approximately $6.6 billion.
- Funds receivable and amounts held on behalf of customers were $4.0 billion, with a corresponding $4.0 billion liability; these funds primarily relate to bookings before guest check-in and are not equivalent to unrestricted corporate liquidity.
- Total debt was $2.0 billion at March 31, 2021, consisting of 0% convertible senior notes due 2026. The notes had a $288.64 initial conversion price and an initial principal amount of $2.0 billion.
- Airbnb repaid $1.995 billion of First Lien and Second Lien term loans in March 2021, using proceeds from the convertible notes and existing cash. The repayment generated a $377.2 million loss on extinguishment of debt, including $212.9 million of prepayment penalties.
- The $500 million 2020 revolving credit facility had no borrowings outstanding; letters of credit totaled approximately $18.4 million. Airbnb reported compliance with its financial covenants.
Material changes versus the prior comparable period
- Revenue increased 5%, despite fewer check-ins, primarily due to higher average daily rates, fewer cancellations, and lower customer payments and refunds. Revenue reductions from customer payments declined to $25.9 million from $173.1 million.
- GBV increased 52% and Nights and Experiences Booked increased 13%, driven principally by domestic and short-distance travel.
- Cost of revenue decreased 8% to $254.5 million, while operations and support expense decreased 16% to $185.4 million.
- Product development expense increased 40% to $363.1 million, primarily due to stock-based compensation related to restricted stock units.
- Sales and marketing expense decreased 28% to $229.1 million as performance marketing was reduced and the company shifted toward brand marketing.
- General and administrative expense increased 107% to $189.8 million, partly because Q1 2020 benefited from an $81.7 million reduction in lodging-tax reserves and Q1 2021 included higher stock-based compensation.
- Stock-based compensation increased to $229.5 million from $41.6 million, reflecting post-IPO awards and related vesting activity.
- Restructuring charges were $112.0 million in Q1 2021, including $75.3 million of operating lease right-of-use asset impairments and $37.2 million of leasehold improvement impairments.
Guidance, outlook, commentary and risks
Management did not provide a specific quantitative full-year revenue or earnings outlook in the filing. Management reported signs of travel recovery as vaccinations increased and restrictions eased, while noting that the timing and strength of the recovery remained uncertain. The company expects first-half 2021 operations and support and sales and marketing expense as a percentage of revenue to be higher than in the second half, reflecting investments in trust and safety, community support, and a marketing campaign launched ahead of the summer travel season.
- COVID-19 remains the primary operating uncertainty, including possible changes in travel restrictions, virus transmission, vaccine effectiveness, and travel behavior.
- Airbnb expects capital expenditures in 2021 to exceed 2020 levels but remain significantly below 2019 levels.
- The IRS proposed a 2013 tax adjustment that could result in approximately $1.35 billion of additional U.S. income tax, plus penalties and interest. The company is contesting the proposed adjustment, and the potential exposure exceeds its current reserve by more than $1.0 billion.
- Lodging-tax disputes and audits remain outstanding. Accrued obligations related to estimated lodging taxes were $53.7 million at March 31, 2021, and management stated that ultimate losses could be greater or less than recorded reserves.
- The company estimated reasonably possible additional losses of $40 million to $50 million related to certain withholding and value-added tax matters for which no reserve was recorded.
- The 2026 Notes may require cash repurchases following a fundamental change and could create dilution if converted. Capped calls are intended to reduce dilution, subject to their $360.80 initial cap price.
- Foreign exchange, regulatory changes, lodging restrictions, litigation, data protection, competition, intellectual property claims, and public-company costs remain material risks.
Important facts investors should verify
- Whether the recovery in domestic and short-distance travel broadens to international and long-distance travel without renewed COVID-19 disruption.
- Revenue conversion from GBV, including the effects of booking lead times, cancellations, average daily rates, and check-in timing.
- The sustainability of positive operating cash flow and Free Cash Flow, particularly as customer funds and unearned fees normalize seasonally.
- The effect of substantial stock-based compensation on future expenses, share dilution, and adjusted versus GAAP profitability.
- The outcome and timing of the IRS proposed adjustment and other lodging, withholding, and transaction-tax matters.
- Future obligations, dilution, and potential cash requirements associated with the $2.0 billion convertible notes and the company’s revolving credit facility.