Airbnb, Inc. Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2022. The filing is unaudited and prepared under U.S. GAAP. Airbnb operates a global marketplace connecting Hosts and guests for stays and experiences.
Financial performance and key metrics
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $2.104 billion | $1.335 billion | $3.613 billion | $2.222 billion |
| Operating income (loss) | $368.8 million | $(51.3) million | $363.7 million | $(498.2) million |
| Net income (loss) | $378.8 million | $(68.2) million | $360.0 million | $(1.240) billion |
| Diluted EPS | $0.56 | $(0.11) | $0.53 | $(2.05) |
| Adjusted EBITDA | $711.1 million | $217.4 million | $940.3 million | $158.8 million |
| Adjusted EBITDA margin | 34% | 16% | 26% | 7% |
| Operating cash flow | $799.7 million | $789.7 million | $2.002 billion | $1.396 billion |
| Free cash flow | $794.7 million | $782.0 million | $1.991 billion | $1.381 billion |
Q2 revenue increased 58% year over year, or 64% on a constant-currency basis. Six-month revenue increased 63%, or 68% on a constant-currency basis. Nights and Experiences Booked rose 25% to 103.7 million in Q2 and 40% to 205.8 million for the first six months. Gross Booking Value increased 27% to $17.0 billion in Q2 and 44% to $34.1 billion for the first six months.
Revenue growth was driven by higher booking volumes and higher average daily rates. Total costs and expenses were 82% of revenue in Q2 versus 104% in the prior-year quarter, and 90% for the first half versus 122% in the prior-year period. Cost of revenue declined to 19% of revenue in Q2 from 22%, while sales and marketing declined to 18% from 24%.
Liquidity, cash flow, debt, and balance sheet
- Cash and cash equivalents were $7.838 billion at June 30, 2022, compared with $6.067 billion at December 31, 2021.
- Marketable securities were $2.057 billion, resulting in $9.9 billion of principal liquidity sources, excluding customer funds.
- The company held $7.466 billion of funds receivable and amounts held on behalf of customers, matched by corresponding customer-related liabilities; these amounts are not generally available for corporate use.
- Long-term debt was $1.985 billion, consisting primarily of $2.0 billion of 0% convertible senior notes due March 2026. The notes had an estimated fair value of $1.7 billion at June 30, 2022.
- The $500 million revolving credit facility was undrawn, except for $28.5 million of outstanding letters of credit. Airbnb was in compliance with its financial covenants.
- Six-month operating cash flow increased to $2.002 billion, supported by net income, stock-based compensation, and a $1.078 billion increase in unearned fees from higher bookings. Investing activities provided $171.0 million, while financing activities provided $3.649 billion, primarily reflecting customer-related funds payable.
Material changes versus the prior comparable period
- Airbnb moved from an operating loss of $51.3 million to operating income of $368.8 million in Q2 and from a six-month operating loss of $498.2 million to operating income of $363.7 million.
- The company moved from net losses to net income in both the quarter and first six months. The prior-year six-month loss included a $377.2 million loss on extinguishment of debt and a $292.0 million warrant fair-value charge.
- Adjusted EBITDA increased 227% in Q2 and 492% for the first six months, reflecting revenue growth and cost management.
- Restructuring charges were $88.7 million in Q2 2022, including $80.3 million of operating lease right-of-use asset impairments and $8.4 million of leasehold improvement impairments, following the shift to a remote work model.
- Stock-based compensation remained significant at $247.1 million in Q2 and $442.0 million for the first six months.
- The company revised previously issued six-month 2021 cash-flow statements for immaterial presentation errors. Operating cash flow was understated by $110 million, financing cash flow was overstated by $118 million, and ending cash was understated by $8 million.
Guidance, outlook, commentary, and risks
The filing does not provide a clear formal numerical revenue or earnings forecast. Management reported that Q2 bookings exceeded 2019 pre-pandemic levels, with strength across regions and continued resilience in domestic and short-distance travel. Pre-pandemic seasonality was returning in 2022, with revenue and Adjusted EBITDA generally expected to be highest in the third quarter.
Management stated that inflation, weaker consumer spending, a stronger U.S. dollar, and broader macroeconomic conditions had not materially affected results through June 30, 2022, but future effects remain uncertain. COVID-19 variants, travel restrictions, geopolitical events, the Russia-Ukraine conflict, sanctions, foreign exchange, interest rates, competition, regulatory changes, and tax developments remain material risks.
- The company suspended operations in Russia, Belarus, and certain regions of Ukraine. The company stated this was not expected to materially affect operating results, but it identified payment instructions involving sanctioned Russian banks that are under civil investigation by the U.S. Treasury Department's Office of Foreign Assets Control.
- An IRS dispute regarding the valuation of international intellectual property could result in approximately $1.3 billion of additional income tax, plus penalties and interest, exceeding the recorded reserve by more than $1.0 billion. Airbnb contests the proposed adjustment.
- Reasonably possible additional losses related to withholding and transactional tax matters were estimated at $140 million to $160 million beyond accrued amounts, although other potential exposures cannot be reliably estimated.
- Accrued lodging-tax obligations and reserves totaled $268.6 million for taxes collected from guests and $59.4 million for estimated joint-liability obligations at June 30, 2022. The company is defending related lawsuits by states and localities.
- On August 1, 2022, after quarter-end, the board authorized up to $2.0 billion of Class A share repurchases. The program is discretionary and may be modified, suspended, or terminated.
Facts investors should verify
- Whether booking growth, higher rates, and international recovery remain sufficient to offset foreign-exchange pressure and macroeconomic weakness.
- The sustainability of the 34% Q2 Adjusted EBITDA margin and the extent to which margin expansion reflects recurring operating improvements versus temporary seasonality or working-capital effects.
- The impact of significant stock-based compensation, potential dilution from convertible notes and equity awards, and the economics of the authorized share repurchase program.
- Developments in the IRS intellectual-property valuation dispute and the potential $1.3 billion tax assessment, plus penalties and interest.
- Outcomes of lodging-tax litigation, other tax audits, and the estimated $140 million to $160 million of reasonably possible unaccrued tax exposure.
- Effects of COVID-19 developments, sanctions and the OFAC investigation, currency movements, travel restrictions, and changes in consumer demand.
- Cash-flow comparability, including the revised 2021 cash-flow presentation and the substantial customer funds held on behalf of users.