Booking Holdings Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited results compared with Q1 2023. Amounts are in U.S. dollars unless stated otherwise.
Business context and operating trends
Booking Holdings operates Booking.com, Priceline, Agoda, KAYAK and OpenTable. Its revenue is primarily generated by facilitating travel reservations; approximately 89% of Q1 revenue related to online accommodation reservations. Travel demand remained healthy, particularly in Europe and Asia. Room nights rose 8.5% to 297 million, rental car days increased 10.7% to 21 million, and airline tickets increased 33.1% to 11 million.
Total gross bookings increased 10.4% to $43.5 billion. Merchant gross bookings rose 29.3% to $25.8 billion, while agency gross bookings declined 8.9% to $17.8 billion, reflecting the continuing shift to merchant transactions at Booking.com.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $4.415 billion | $3.778 billion | +16.9% |
| Operating income | $791 million | $450 million | +75.8% |
| Net income | $776 million | $266 million | +191.7% |
| Diluted EPS | $22.37 | $7.00 | +219.6% |
| Operating margin | 17.9% | 11.9% | +6.0 percentage points |
| Operating cash flow | $2.704 billion | $2.889 billion | -6.4% |
Revenue growth reflected higher gross bookings, the shift toward merchant transactions, and timing differences related to Easter. Merchant revenue rose 36.3% to $2.388 billion; agency revenue was down 1.1% to $1.763 billion. Revenue as a percentage of gross bookings increased to 10.1% from 9.6%.
Marketing expense increased 6.1% to $1.610 billion, but declined as a share of gross bookings to 3.7% from 3.8%, with management citing improved performance-marketing returns and more direct traffic. Sales and other expenses rose 19.0% to $678 million, partly due to higher merchant transaction costs. Personnel expense increased 14.5% to $826 million, and information technology expense rose 36.8% to $187 million. General and administrative expense fell 29.1% to $186 million, partly because Q1 2023 included a $39 million accrual for certain indirect tax matters.
Net income also benefited from the swing in other income (expense), net, to income of $122 million from expense of $181 million. This included $136 million of foreign-currency transaction gains and $16 million of equity-security losses in Q1 2024, compared with $53 million of foreign-currency losses and $133 million of equity-security losses in Q1 2023. The effective tax rate rose to 17.1% from 12.4%.
Cash, debt and capital allocation
Cash and cash equivalents were $15.629 billion at March 31, 2024, versus $12.107 billion at year-end 2023. Management reported $16.4 billion in cash, cash equivalents and investments, including approximately $9.6 billion held by international subsidiaries. Operating cash flow was $2.704 billion; the increase in deferred merchant bookings and other current liabilities contributed $2.123 billion, so working-capital movements were a significant source of quarterly cash.
Total debt outstanding was $16.998 billion principal ($16.900 billion carrying value), compared with $14.249 billion principal at year-end. The increase included €2.8 billion ($3.0 billion) of senior notes issued in March. Short-term debt was $3.462 billion carrying value, including the €1 billion notes due September 2024 and convertible notes due May 2025. The convertible notes are currently convertible at the holders’ option. No borrowings were outstanding under the $2 billion revolving credit facility.
Q1 financing cash flow was positive $784 million, reflecting debt proceeds partly offset by $1.856 billion of cash share repurchases and $299 million of dividends paid. The company reported $1.904 billion in total Q1 repurchases, including shares withheld for employee taxes; $12.2 billion remained under its repurchase authorization. A further $8.75-per-share dividend was declared in May for payment in June.
Outlook, management commentary and risks
For Q2 2024, management expects year-over-year growth of 4%–6% in room nights and revenue and 3%–5% in gross bookings. Operating income is expected to be slightly lower than Q2 2023, partly due to the shift in Easter timing. The filing does not provide full-year numerical guidance. Management expects existing cash and liquid resources to fund operations, capital expenditures and other obligations for at least the next 12 months.
Management highlighted continued investment in its “Connected Trip” strategy, marketing, technology and personnel. It cautioned that a greater merchant mix brings payment-processing, chargeback and related costs that can pressure margins; growth in alternative accommodations may also add costs. Marketing returns, travel demand, pricing and competition remain variable. Foreign-exchange movements did not materially affect Q1 gross-bookings or revenue growth, according to management.
Material contingencies: Booking.com had accrued a €486 million ($530 million) Spanish competition fine following a draft decision; the final decision was expected by July 2024 and could include business-practice restrictions. The company intends to challenge aspects if finalized. In the Dutch pension dispute, a court ruled that Booking.com must join the mandatory pension scheme retroactively; the company appealed. It had accrued €253 million ($276 million) in 2023 and recorded an additional €19 million ($21 million) expense in Q1 2024. Italian tax assessments for 2013–2018 totaled approximately €251 million ($271 million); the company reported €74 million ($80 million) of prepayments pending appeal and resolution procedures.
Other risks include evolving EU digital-platform regulation, further competition and consumer-protection investigations, additional tax exposure, foreign-currency and market risks, and the possibility of fines or required changes to business practices. Management reported effective disclosure controls as of quarter-end; the financial-systems implementation continues, with additional process and control changes expected.
Important facts for investors to verify
- Whether Q2 room-night, gross-booking and revenue growth meet the company’s stated ranges, and whether operating income is slightly below the prior-year quarter.
- How the merchant-booking mix affects revenue take rate, transaction costs and operating margins as the shift continues.
- The final outcome, amount and potential business restrictions in the Spanish competition proceeding, as well as the Dutch pension appeal and related ongoing costs.
- Debt maturities and conversion or repayment requirements, particularly the September 2024 notes and May 2025 convertible notes, alongside the use of proceeds from the March issuance.
- The sustainability of operating cash flow, given the substantial contribution from deferred merchant bookings and other working-capital changes.
- Whether Q1 earnings comparisons are affected by unusual foreign-currency and equity-investment results, tax-rate changes, Easter timing and prior-year expense items.