01—Abstract
Summary
Summary of the 10-K filed February 19, 2010. Cited figures are marked; the original filing is the authoritative source.
Priceline.com Incorporated (now Booking Holdings Inc.) reported strong performance in its 2009 10-K filing, showcasing significant growth driven by its international operations, particularly Booking.com.
The company's strategic focus on global hotel reservations and expansion into Asia via Agoda proved successful, with international business contributing a substantial majority of gross bookings and operating income. Despite the ongoing global recession, Priceline.com navigated the challenging economic environment by leveraging its diverse booking models (both 'Name Your Own Price' and traditional price-disclosed) and maintaining a strong online marketing presence. The company highlighted the increasing importance of gross profit as a key performance indicator due to the differing revenue recognition methods between its gross and net reporting segments.
The filing also detailed the competitive landscape, including efforts by competitors to match pricing advantages and the growing influence of search engines in the online travel space. Management expressed confidence in continued international expansion and service enhancements to maintain its market position.
02—Key points
Key Highlights
- International operations, primarily Booking.com, were the main growth driver, accounting for approximately 61% of gross bookings and 75% of operating income in 2009.
- The company expanded its Asian presence through the Agoda brand, acquired in 2007.
- Priceline.com continued to invest heavily in online advertising, with approximately $365.4 million spent internationally to drive traffic and brand awareness.
- Competition intensified, with key rivals like Expedia and Orbitz matching Priceline.com's fee reductions, eroding previous pricing advantages.
- The company faced ongoing legal challenges related to hotel occupancy and other taxes in various jurisdictions, with a reserve of $21 million established.
- Stock performance showed significant recovery and growth throughout 2009, with the stock price reaching a high of $231.49 in the fourth quarter.
- The company benefited from favorable year-over-year comparisons in the second half of 2009 due to weak economic conditions in late 2008 and supplier discounts that stimulated demand.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Booking Holdings Inc. kept $0.21.
- Revenue$2.34B100.0%
- Cost of revenue−$1.08B46.1%
- Gross profit$1.26B53.9%
- Operating costs−$789.9M33.8%
- Operating income$470.8M20.1%
- Interest, other & tax$18.6M0.8%
- Net income$489.5M20.9%
Where FY2009 revenue went
$2.34B- Cost of revenue: $1.08B, 46% of revenue
- Operating costs: $789.9M, 34% of revenue
- Operating income: $470.8M, 20% of revenue
Kept 20% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 19, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $2.34B$1.88B | +24.1% |
| Cost of Revenue | $1.08B$928.84M | +16.0% |
| Gross Profit | $1.26B$955.97M | +31.9% |
| Operating Expenses | $789.93M$666.50M | +18.5% |
| Operating Income | $470.83M$289.47M | +62.7% |
| Interest Expense | $24.08M$34.85M | −30.9% |
| Net Income | $489.47M$182.25M | +168.6% |
| EPS (Basic) | $0.46$0.19 | +148.7% |
| EPS (Diluted) | $0.40$0.15 | +164.2% |
| Shares Outstanding (Basic) | 1.06B982.48M | +7.9% |
| Shares Outstanding (Diluted) | 1.24B1.22B | +1.7% |
05—Questions
Frequently Asked Questions
What is the primary driver of Priceline.com's business and growth?
The primary driver of Priceline.com's business and growth in 2009 was its international operations, particularly Booking.com, which generated the majority of gross bookings and operating income. The company was strategically expanding its presence in Europe and Asia through brands like Booking.com and Agoda.
How did the global recession impact Priceline.com's performance?
While the global recession negatively affected the broad travel market, Priceline.com benefited from favorable year-over-year comparisons in the latter half of 2009 due to weak economic conditions in late 2008. The company also noted that supplier discounts helped stimulate demand amidst the downturn. However, management acknowledged that these favorable comparisons might not persist into 2010.
What are the main competitive challenges faced by Priceline.com?
Priceline.com faced intense competition from online travel agencies like Expedia and Orbitz, which matched its pricing strategies and eroded its pricing advantages. Additionally, the rise of meta-search sites and the increasing direct engagement of search engines like Google and Bing in the travel sector presented significant challenges, potentially increasing customer acquisition costs.
What is the status of the legal proceedings regarding hotel occupancy taxes?
Priceline.com was involved in numerous lawsuits and audit proceedings across various states and municipalities concerning the payment of hotel occupancy and other taxes. The company believed these taxes did not apply to its services as a facilitator of reservations. A reserve of $21 million was established for potential resolutions, and a jury verdict in San Antonio found the company liable for collecting and remitting local hotel occupancy taxes, a decision the company intended to appeal.
06—Continue