01—Abstract
Summary
Summary of the 10-K filed February 20, 2014. Cited figures are marked; the original filing is the authoritative source.
Booking Holdings Inc. (then The Priceline Group) presented its 2013 annual report, highlighting robust growth primarily driven by its international operations, especially Booking.com.
The company emphasized its diversified business model, which includes accommodations, rental cars, and meta-search services, with international segments contributing approximately 85%a of gross bookings and 94% of operating income. Strategic acquisitions like KAYAK further expanded its market reach and service offerings. Financially, the company demonstrated strong top-line growth, with a significant increase in gross bookings and revenues.
A key focus for investors is the company's increasing reliance on and investment in online advertising, which outpaced gross profit growth, impacting return on investment. The company also highlighted ongoing investments in technology and mobile platforms to maintain its competitive edge in the rapidly evolving online travel industry. Potential risks include intense competition, currency fluctuations, and significant ongoing litigation related to travel transaction taxes.
02—Key points
Key Highlights
- International operations, led by Booking.com, were the primary growth engine, accounting for approximately 85% of gross bookings and 94% of operating income in 2013.
- The company successfully integrated its acquisition of KAYAK in May 2013, expanding its meta-search capabilities and market presence.
- Gross bookings increased by 37.7% year-over-year, driven by strong performance in accommodation room nights and rental car days.
- Online advertising expenses grew by 41.2%, outpacing gross profit growth, leading to lower online advertising ROIs.
- The company faces ongoing litigation and regulatory scrutiny concerning travel transaction taxes in various U.S. jurisdictions, with an accrual of $55 million established for potential resolution.
- International cash balances totaled approximately $4.9 billion, with the company intending to reinvest them in foreign operations rather than repatriating them to the U.S. due to tax implications.
- The company's stock symbol was PCLN during this period.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, Booking Holdings Inc. kept $0.28.
- Revenue$6.79B100.0%
- Cost of revenue−$1.08B15.9%
- Gross profit$5.72B84.1%
- Operating costs−$3.30B48.6%
- Operating income$2.41B35.5%
- Interest, other & tax−$519.8M7.7%
- Net income$1.89B27.9%
Where FY2013 revenue went
$6.79B- Operating costs: $3.30B, 49% of revenue
- Net income: $1.89B, 28% of revenue
- Cost of revenue: $1.08B, 16% of revenue
- Interest, other & tax: $519.8M, 7.7% of revenue
Kept 28% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 20, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $6.79B$5.26B | +29.1% |
| Cost of Revenue | $1.08B$1.18B | −8.5% |
| Gross Profit | $5.72B$4.08B | +40.0% |
| Operating Expenses | $3.30B$2.25B | +46.6% |
| Operating Income | $2.41B$1.83B | +31.8% |
| Interest Expense | $83.29M$62.06M | +34.2% |
| Net Income | $1.89B$1.42B | +32.9% |
| EPS (Basic) | $1.49$1.14 | +30.5% |
| EPS (Diluted) | $1.44$1.11 | +30.5% |
| Shares Outstanding (Basic) | 1.27B1.25B | +2.2% |
| Shares Outstanding (Diluted) | 1.31B1.28B | +2.1% |
05—Questions
Frequently Asked Questions
What was the primary driver of Booking Holdings' growth in 2013?
The primary driver of Booking Holdings' growth in 2013 was its international operations, particularly the Booking.com brand, which contributed the substantial majority of gross bookings and operating income.
What is the company's strategy regarding online advertising?
The company continues to invest heavily in online advertising to drive traffic and brand awareness, primarily through search engines, meta-search services, and affiliate marketing. However, it noted that online advertising expenses grew faster than gross profit, leading to lower return on investment (ROI) in 2013.
What significant legal or regulatory challenges is the company facing?
The company is involved in numerous lawsuits and inquiries related to the collection and remittance of travel transaction taxes (e.g., hotel occupancy taxes) in various U.S. jurisdictions. It has established an accrual of $55 million for potential resolutions.
How did the acquisition of KAYAK impact the company?
The acquisition of KAYAK in May 2013 expanded the company's service offerings into meta-search, allowing consumers to compare travel options from various websites. It also contributed to advertising revenues and influenced the company's online advertising expense ratio.
06—Continue