Booking Holdings Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. Although the request identifies 2022 Q4, this filing reports annual results; the provided text does not give a clear standalone Q4 income statement or cash-flow value.
Business context
Booking Holdings operates Booking.com, Priceline, agoda, Rentalcars.com, KAYAK, and OpenTable. It earns most revenue from online travel reservations, with accommodation bookings the dominant source. In 2022, travel demand recovered broadly as pandemic restrictions eased; the company reported global room nights 6% above 2019. It suspended new travel bookings in Russia and Belarus after Russia’s invasion of Ukraine.
Key financial and operating metrics
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Revenue | $17.09 billion | $10.96 billion | +56% |
| Operating income | $5.10 billion | $2.50 billion | More than doubled |
| Net income | $3.06 billion | $1.17 billion | More than doubled |
| Diluted EPS | $76.35 | $28.17 | +171% |
| Operating cash flow | $6.55 billion | $2.82 billion | +$3.73 billion |
| Room nights | 896 million | 591 million | +51.6% |
| Gross bookings | $121.25 billion | $76.59 billion | +58.3% |
Operating margin was approximately 29.8% (22.8% in 2021); net margin was approximately 17.9% (10.6% in 2021). Revenue as a percentage of gross bookings declined to 14.1% from 14.3%, reflecting merchandising investments and a higher mix of airline bookings, partly offset by payment-related revenue. Results were affected by foreign exchange: revenue growth was approximately 71% on a constant-currency basis.
Marketing expense was $5.99 billion, up 57.6%; sales and other expense was $1.82 billion, up 106.3%, driven in part by increased merchant transaction costs and third-party customer-service costs. The merchant share of gross bookings rose to 44% from 34%. The company reported $15.2 billion of cash, cash equivalents, and investments at year-end and $12.5 billion of debt principal; $500 million of debt was due within 12 months. Its $2.0 billion revolving credit facility had no borrowings outstanding.
Changes, unusual items, and capital allocation
- Revenue growth reflected the travel recovery, increased room nights, and higher accommodation prices. Global ADRs rose about 15% year over year on a constant-currency basis.
- Other expense, net, was $788 million, including $963 million of net losses on equity securities. The company also recorded a $184 million impairment of its Yanolja investment.
- A $240 million gain from the sale and leaseback of Booking.com’s future headquarters reduced reported operating expenses; the transaction also created a 16.5-year lease commitment. A $41 million loss related to transferring customer-service operations to Majorel partly offset the gain.
- Income tax expense rose to $865 million from $300 million; the effective rate was 22.1% versus 20.5%. The 2022 rate reflected, among other factors, a higher valuation allowance and a lower benefit from the Dutch Innovation Box Tax regime.
- The company repurchased $6.7 billion of shares in 2022. In February 2023, the board authorized an additional $20 billion repurchase program, subject to credit-facility covenant requirements. The company does not expect to pay cash dividends in the foreseeable future.
- In February 2023, the company completed the sale of its Meituan investment for gross proceeds of $1.7 billion. This was subsequent to year-end.
Outlook, risks, and contingencies
Management’s 2023 outlook assumed gross bookings would rise by a low-teens percentage versus 2022. On that assumption, it expected revenue as a percentage of gross bookings to improve and operating profit to exceed both 2019 and 2022. For Q1 2023, it expected room-night growth above 30% year over year, with higher revenue yield and operating profit than Q1 2022. These are forward-looking estimates, not guarantees.
Key risks include weaker discretionary travel demand from inflation or recession, intense competition and dependence on search and marketing channels, partner concentration and availability, foreign-exchange movements, payment fraud and processing costs, cybersecurity and privacy incidents, and evolving competition, consumer-protection, tax, and short-term-rental regulation. The company also cited possible margin pressure from greater merchant and alternative-accommodation mix, investment in its Connected Trip strategy, and competition for talent.
Material matters include a French tax settlement of $163 million for 2006–2018; Italian tax assessments and a potential VAT settlement, for which a $47 million liability was recorded; and Turkish tax assessments being contested, with no liability recorded. A Dutch pension-fund dispute remains unresolved: the company said the maximum potential loss was approximately $363 million, excluding possible interest and penalties, but could not reasonably estimate a loss or range. The company reported no goodwill impairment in 2022, but identified sensitivity in the OpenTable/KAYAK reporting unit’s valuation.
Investor verification points
- Review the full financial statements and notes for the composition and volatility of investments, especially the $963 million equity-security loss and the subsequent Meituan sale.
- Check cash-flow quality and working-capital movements, including the $3.7 billion increase in deferred merchant bookings and other current liabilities.
- Assess debt maturities, covenant limits on repurchases, and the funding and timing of the announced buyback authorization.
- Track the French, Italian, Turkish, and Dutch pension matters, including recorded liabilities, deposits, and potential unrecorded exposures.
- Compare actual 2023 results with management’s stated assumptions for gross bookings, revenue yield, and operating profit.