Booking Holdings Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Unaudited results reflect a travel business still recovering from COVID-19 disruptions. Comparisons with Q2 2020 are heavily affected by the prior-year collapse in travel.
Key financial and operating metrics
| Metric | Q2 2021 | Six months 2021 |
|---|---|---|
| Revenue | $2.160 billion, up 243% year over year | $3.301 billion, up 13% |
| Operating loss | $56 million | $367 million |
| Net loss | $167 million; diluted loss per share $4.08 | $222 million; diluted loss per share $5.42 |
| Operating cash flow | Not separately presented here | $945 million, versus cash used of $258 million in 2020 |
| Cash and cash equivalents | $11.231 billion at June 30 | |
| Debt carrying value | $2.180 billion current; $9.986 billion long-term |
- Q2 agency revenue was $1.328 billion, merchant revenue $661 million, and advertising and other revenue $171 million. Revenue was 9.8% of gross bookings, versus 27.3% in Q2 2020; timing between booking and travel weighed on the 2021 ratio.
- Q2 operating expenses were $2.216 billion, including $988 million of marketing and $686 million of personnel expense. Marketing equaled 45.8% of revenue. The filing does not report a gross margin metric.
- Q2 other income, net, was $96 million, including $391 million of equity-security gains offset in part by a $242 million loss on early debt extinguishment. These investment and financing items materially affected reported results.
- Six-month operating cash flow benefited from a $1.973 billion increase in deferred merchant bookings and other current liabilities, partly offset by an $820 million increase in receivables. The cash-flow improvement therefore included substantial working-capital effects.
- Cash, cash equivalents, and short- and long-term investments totaled approximately $16.1 billion. The portfolio includes market-sensitive equity investments. The company also had a $2.0 billion undrawn revolving facility and reported compliance with its minimum-liquidity covenant.
Changes versus comparable periods
- Room nights were 157 million in Q2, up sharply from the pandemic-affected 28 million in Q2 2020, but still 26% below Q2 2019. Six-month room nights rose 68% year over year to 257 million.
- Q2 gross bookings reached $21.956 billion, up 852% year over year; six-month gross bookings were $33.891 billion, up 131%. The filing attributes much of the increase to the low 2020 base and recovering travel demand.
- Six-month revenue rose 13% year over year, while marketing expense rose 36% and personnel expense rose 32%. Sales and other expense fell 37%, primarily reflecting lower expected-credit-loss costs than in 2020.
- Compared with Q2 2020, the Q2 2021 net result moved from $122 million income to a $167 million loss. The comparison also reflects lower equity-security gains and the $242 million debt-extinguishment loss.
- Cash and cash equivalents increased from $10.562 billion at year-end 2020 to $11.231 billion. Carrying value of total debt declined from approximately $12.014 billion to $12.166 billion, with debt issuance and redemption activity changing its mix and maturities.
Outlook, commentary, and risks
- Management expected a Q3 2021 operating profit. It expected Q3 gross-bookings decline versus 2019 to be several percentage points less than the room-night decline, supported by higher accommodation average daily rates and flight bookings; revenue as a percentage of gross bookings was expected to be about the Q3 2019 level.
- Room nights were down about 22% versus July 2019, a worsening from a 13% decline in June. Management said Delta-related case increases and renewed restrictions made Q3 trends difficult to predict.
- The company said existing liquidity should fund operating activities, capital expenditures, and obligations for at least the next 12 months, while cautioning that the pandemic, credit conditions, ratings, and covenant compliance could affect access to financing. Share repurchases under the authorization remained paused; credit-facility restrictions also limit distributions and repurchases.
- Booking Holdings recorded $137 million of expense in Q2 to reflect its decision to return pandemic government assistance. It had repaid $86 million by June, recorded about $21 million payable during 2021, and repaid another $19 million after quarter-end.
- Material uncertainties include the pandemic and travel restrictions, competition and marketing-channel dependence, alternative-accommodation regulation, foreign exchange and equity-price volatility, cybersecurity and privacy, and tax and legal proceedings. A Dutch pension-fund dispute could result in an estimated maximum loss of about $316 million, excluding interest and penalties; no liability was recorded. Tax proceedings in France and Italy and other legal matters also remain uncertain.
- After quarter-end, the market prices of the company’s Meituan and DiDi investments had fallen 34% and 29%, respectively, from June 30 levels as of August 3. The company noted no new goodwill impairment indicators at June 30, but future impairment remains possible.
Important facts for investors to verify
- Whether travel recovery and Q3 operating-profit expectations materialized, particularly given July’s deterioration and continuing COVID-related restrictions.
- How much of operating cash flow reflects sustainable operating performance versus working-capital movements, especially deferred merchant bookings.
- The effect of equity-investment volatility on earnings, cash resources, and potential impairment exposure.
- The status and eventual financial impact of the pension, tax, competition, and consumer-protection matters, including the unrecorded potential pension loss.
- Debt maturities, covenant headroom, and the status of the $1.0 billion convertible notes due September 2021, which were current at June 30.