01—Abstract
Summary
Summary of the 10-K/A filed February 27, 2013. Cited figures are marked; the original filing is the authoritative source.
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 billiona, 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.
02—Key points
Key Highlights
- International operations are the primary revenue and profit driver, with Booking.com being the dominant brand.
- The company is actively expanding its global presence, with a focus on continued growth in international online travel markets.
- A significant strategic initiative is the pending acquisition of KAYAK Software Corporation for $1.8 billion, expected to close in early 2013.
- Online advertising expenses have increased significantly, outpacing gross profit growth, due to brand mix, channel mix, and recent lower ROI.
- The company faces intense competition from established online travel agencies, search engines (like Google), and emerging platforms.
- Legal proceedings related to hotel occupancy and other taxes represent a material risk, with significant accruals made for potential liabilities.
- The company is exposed to foreign currency exchange rate fluctuations due to its substantial international operations.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Booking Holdings Inc. kept $0.27.
- Revenue$5.26B100.0%
- Cost of revenue−$1.18B22.4%
- Gross profit$4.08B77.6%
- Operating costs−$2.25B42.8%
- Operating income$1.83B34.8%
- Interest, other & tax−$405.8M7.7%
- Net income$1.42B27.1%
Where FY2012 revenue went
$5.26B- Operating costs: $2.25B, 43% of revenue
- Net income: $1.42B, 27% of revenue
- Cost of revenue: $1.18B, 22% of revenue
- Interest, other & tax: $405.8M, 7.7% of revenue
Kept 27% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-K/AFY2012filed February 27, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $5.26B$4.36B | +20.8% |
| Cost of Revenue | $1.18B$1.28B | −7.7% |
| Gross Profit | $4.08B$3.08B | +32.6% |
| Operating Expenses | $2.25B$1.68B | +34.1% |
| Operating Income | $1.83B$1.40B | +30.8% |
| Interest Expense | $62.06M$31.72M | +95.7% |
| Net Income | $1.42B$1.06B | +34.5% |
| EPS (Basic) | $1.14$0.85 | +33.9% |
| EPS (Diluted) | $1.11$0.83 | +34.1% |
| Shares Outstanding (Basic) | 1.25B1.24B | +0.4% |
| Shares Outstanding (Diluted) | 1.28B1.28B | +0.2% |
05—Questions
Frequently Asked Questions
What is Booking Holdings' primary business and geographical focus?
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.
What are the key growth strategies and strategic initiatives for the company?
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.
What are the major risks and challenges identified by the company?
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.
How does the company generate revenue, and what is its revenue model?
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.
06—Continue