01—Abstract
Summary
Summary of the 10-K filed February 27, 2012. Cited figures are marked; the original filing is the authoritative source.
Booking Holdings Inc. (formerly Priceline.com Incorporated) reported its 2011 annual results, highlighting a strong performance driven by its international operations, particularly Booking.com.
The company's strategy emphasizes continued growth in worldwide online hotel and rental car reservations, leveraging its dual model of both price-disclosed ('retail') and opaque ('Name Your Own Price®') offerings. International gross bookings represented a significant majority (78%a) of the total, contributing substantially to operating income (88%), underscoring the global nature of the business. Despite robust growth, the company faces intense competition from established players and emerging tech giants like Google.
It also navigates risks related to currency fluctuations, increasing online advertising costs, and ongoing litigation concerning hotel occupancy taxes. The company's financial health appears solid, with substantial cash reserves, although it focuses on reinvesting foreign earnings rather than repatriating them to avoid potential tax implications.
02—Key points
Key Highlights
- International operations are the primary growth engine, accounting for 78% of gross bookings and 88% of operating income in 2011.
- The company operates a dual business model: price-disclosed (retail) and opaque ('Name Your Own Price®') services for hotels, rental cars, and airline tickets.
- Online advertising expenses represent a significant portion of costs, increasing as a percentage of gross profit due to the faster growth of international operations.
- Booking.com is a key international brand, working with over 185,000 hotels across more than 160 countries.
- The company acquired rentalcars.com in May 2010, rebranding it from TravelJigsaw, and is focused on expanding its global rental car reservation service.
- Significant competition exists from online travel agencies (OTAs), direct suppliers (hotels, airlines), search engines (Google), and meta-search sites.
- The company faces ongoing legal challenges and potential liabilities related to hotel occupancy and other taxes in various U.S. jurisdictions.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Booking Holdings Inc. kept $0.24.
- Revenue$4.36B100.0%
- Cost of revenue−$1.28B29.3%
- Gross profit$3.08B70.7%
- Operating costs−$1.68B38.6%
- Operating income$1.40B32.1%
- Interest, other & tax−$339.8M7.8%
- Net income$1.06B24.3%
Where FY2011 revenue went
$4.36B- Operating costs: $1.68B, 39% of revenue
- Cost of revenue: $1.28B, 29% of revenue
- Net income: $1.06B, 24% of revenue
- Interest, other & tax: $339.8M, 7.8% of revenue
Kept 24% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 27, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $4.36B$3.08B | +41.2% |
| Cost of Revenue | $1.28B$1.18B | +8.5% |
| Gross Profit | $3.08B$1.91B | +61.3% |
| Operating Expenses | $1.68B$1.12B | +49.8% |
| Operating Income | $1.40B$786.80M | +77.8% |
| Interest Expense | $31.72M$29.94M | +5.9% |
| Net Income | $1.06B$528.14M | +100.5% |
| EPS (Basic) | $0.85$0.44 | +93.4% |
| EPS (Diluted) | $0.83$0.41 | +99.3% |
| Shares Outstanding (Basic) | 1.24B1.20B | +3.5% |
| Shares Outstanding (Diluted) | 1.28B1.27B | +0.4% |
05—Questions
Frequently Asked Questions
What is the primary driver of Booking Holdings' revenue and profitability?
The primary driver of Booking Holdings' revenue and profitability is its international operations, particularly through its Booking.com brand, which generated approximately 78% of gross bookings and 88% of consolidated operating income in 2011. The company's international hotel reservation services are key to its financial success.
What are the main risks the company is facing?
Key risks include intense competition from online travel agencies, search engines, and direct suppliers; exposure to currency exchange rate fluctuations due to its significant international presence; rising online advertising costs; and ongoing litigation related to hotel occupancy taxes in the U.S., which could result in substantial liabilities.
How does the company manage its cash, especially cash held internationally?
As of December 31, 2011, the company held approximately $1.6 billion in cash and short-term investments outside the U.S., primarily denominated in Euros and British Pounds. The company currently intends to reinvest this cash in its foreign operations to avoid potential U.S. tax implications of repatriation. They also have access to a $1 billion unsecured revolving credit facility.
What is the company's strategy for growth?
The company's strategy involves maintaining and growing its position as the leading worldwide online hotel reservation service by expanding service offerings and markets, particularly internationally. It also aims to remain a top online travel business in North America for value-conscious travelers and become a leading worldwide online rental car reservation service through its rentalcars.com brand.
06—Continue