10-K/APeriod: FY2012

Booking Holdings Inc. Annual Report (Amendment), Year Ended Dec 31, 2012

Filed February 27, 2013For Securities:BKNG

Summary

Booking Holdings Inc. (formerly Priceline.com Incorporated) is a leading online travel company with a strong international presence, primarily driven by its Booking.com brand. In 2012, international operations accounted for approximately 82% of gross bookings and 92% of operating income, highlighting the company's global reach and success, particularly in hotel reservations. The company's strategy focuses on maintaining its leadership in worldwide online hotel and accommodation reservations, expanding its service offerings and markets, and continuing to be a top online travel service in North America. A significant development mentioned is the pending acquisition of KAYAK Software Corporation, valued at $1.8 billion, which is expected to close in the first half of 2013, signaling a strategic move to enhance its meta-search capabilities. Investors should note the company's substantial investment in online advertising, which has grown faster than gross profit due to factors like brand mix and lower advertising returns on investment. While the company demonstrates robust growth, it also faces increasing competition from large technology companies and faces potential risks related to economic downturns, currency fluctuations, and ongoing legal proceedings, particularly concerning hotel occupancy taxes.

Financial Highlights

52 data points
Beta

Revenue

$5.26B

77.6% Gross Margin

Net Income

$1.42B

27.1% Net Margin

EPS (Diluted)

$1.11

Total Assets

$6.57B

Cash & Equivalents

$1.54B

Free Cash Flow

$1.73B

Financial Statements
Beta
Revenue$5.26B
Cost of Revenue$1.18B
Gross Profit$4.08B
Operating Expenses$2.25B
Operating Income$1.83B
Interest Expense$62.06M
Net Income$1.42B
EPS (Basic)$1.14
EPS (Diluted)$1.11
Shares Outstanding (Basic)1.25B
Shares Outstanding (Diluted)1.28B

Key Highlights

  • 1International operations are the primary revenue and profit driver, with Booking.com being the dominant brand.
  • 2The company is actively expanding its global presence, with a focus on continued growth in international online travel markets.
  • 3A significant strategic initiative is the pending acquisition of KAYAK Software Corporation for $1.8 billion, expected to close in early 2013.
  • 4Online advertising expenses have increased significantly, outpacing gross profit growth, due to brand mix, channel mix, and recent lower ROI.
  • 5The company faces intense competition from established online travel agencies, search engines (like Google), and emerging platforms.
  • 6Legal proceedings related to hotel occupancy and other taxes represent a material risk, with significant accruals made for potential liabilities.
  • 7The company is exposed to foreign currency exchange rate fluctuations due to its substantial international operations.

Frequently Asked Questions

Booking Holdings Inc., then known as Priceline.com Incorporated, operates as a leading online travel company. Its primary focus is on hotel and accommodation reservations, with a significant global presence. In 2012, its international operations, largely driven by the Booking.com brand, accounted for approximately 82% of gross bookings and 92% of consolidated operating income, demonstrating a strong reliance on and success in international markets.

The company's core strategy is to maintain and grow its position as the leading worldwide online hotel and accommodation reservation service, while also aiming to remain a top online travel service in North America. A major strategic initiative is the pending acquisition of KAYAK Software Corporation, a leading meta-search service, valued at $1.8 billion. This acquisition is expected to close in the first half of 2013 and signifies an effort to expand its service offerings and competitive positioning.

The company faces several key risks. These include intense competition from other online travel agencies, search engines, and technology companies; susceptibility to declines or disruptions in the travel industry due to economic downturns or unforeseen events; exposure to foreign currency exchange rate fluctuations; and significant legal proceedings, particularly concerning the collection and remittance of hotel occupancy and other related taxes, which have led to substantial accruals for potential liabilities. Additionally, increasing online advertising costs and the evolving mobile landscape present ongoing challenges.

The company generates revenue primarily through two models: agency and merchant. Agency revenues are earned as commissions when the company facilitates reservations where it is not the merchant of record. Merchant revenues are generated when the company is the merchant of record and charges the customer directly, including transaction profits and processing fees. Other revenues are derived from advertising on its websites. The company notes that gross profit is a key metric for evaluating business growth due to the difference in revenue recognition between 'gross' and 'net' reporting for its various services.