01—Abstract
Summary
Summary of the 10-K filed February 27, 2017. Cited figures are marked; the original filing is the authoritative source.
Booking Holdings Inc. (formerly The Priceline Group Inc.) presents its 2016 annual report, highlighting its diversified portfolio of online travel reservation brands, including Booking.com, priceline.com, KAYAK, agoda.com, Rentalcars.com, and OpenTable.
The company's mission is to 'help people experience the world' by providing leading online reservation and related services. A significant majority of its gross profit (88%a in 2016) is derived from international operations, predominantly driven by Booking.com. The business model relies on commissions from facilitating reservations, transaction gross profit on a merchant basis, and advertising revenues.
For the fiscal year ended December 31, 2016, the company demonstrated robust growth, with total revenues reaching $10.74 billionb and gross profit increasing by 20.1% to $10.31 billion. This growth was largely fueled by a substantial increase in accommodation room nights booked (28.7% year-over-year). However, the company also recorded a significant $940.7 million goodwill impairment charge related to its OpenTable acquisition, impacting net income.
The company continues to invest heavily in marketing and brand awareness, with performance advertising expenses totaling $3.5 billionc in 2016. Key risks identified include intense competition, macroeconomic uncertainties, currency fluctuations, and reliance on technology and advertising channels.
02—Key points
Key Highlights
- Diversified brand portfolio: Operates six key brands (Booking.com, priceline.com, KAYAK, agoda.com, Rentalcars.com, OpenTable) serving various segments of the travel and dining markets.
- Strong international revenue base: 88% of consolidated gross profit in 2016 generated from international operations, primarily driven by Booking.com.
- Robust Gross Profit Growth: Gross profit increased by 20.1% year-over-year to $10.31 billion, indicating strong underlying business performance.
- Significant Investment in Marketing: Performance advertising expenses reached $3.5 billion in 2016, underscoring the company's commitment to customer acquisition and brand visibility.
- OpenTable Goodwill Impairment: A substantial non-cash charge of $940.7 million was recognized due to goodwill impairment related to the OpenTable acquisition, impacting reported net income.
- Continued Expansion in Accommodations: Booking.com's property count grew to over 1.1 million, with over 568,000 being vacation rentals, demonstrating continued supply growth.
- Strategic Focus on Growth and Innovation: The company's strategy emphasizes providing the best consumer experience, partnering with service providers, operating independent brands, and investing in profitable growth.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Booking Holdings Inc. kept $0.20.
- Revenue$10.74B100.0%
- Cost of revenue−$415.0M3.9%
- Gross profit$10.33B96.1%
- Operating costs−$7.42B69.1%
- Operating income$2.91B27.1%
- Interest, other & tax−$771.0M7.2%
- Net income$2.13B19.9%
Where FY2016 revenue went
$10.74B- Operating costs: $7.42B, 69% of revenue
- Net income: $2.13B, 20% of revenue
- Cost of revenue: $415.0M, 3.9% of revenue
- Interest, other & tax: $771.0M, 7.2% of revenue
Kept 20% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 27, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $10.74B$9.22B | +16.5% |
| Cost of Revenue | $415.00M$632.18M | −34.4% |
| Gross Profit | $10.33B$8.59B | +20.2% |
| Operating Expenses | $7.42B$5.33B | +39.2% |
| Operating Income | $2.91B$3.26B | −10.8% |
| Interest Expense | $208.00M$160.23M | +29.8% |
| Net Income | $2.13B$2.55B | −16.3% |
| EPS (Basic) | $1.73$2.00 | −13.9% |
| EPS (Diluted) | $1.71$1.98 | −13.8% |
| Shares Outstanding (Basic) | 1.24B1.27B | −2.8% |
| Shares Outstanding (Diluted) | 1.25B1.29B | −3.0% |
05—Questions
Frequently Asked Questions
What are the primary revenue streams for Booking Holdings?
Booking Holdings derives its revenue from commissions earned on facilitating reservations (agency basis), transaction gross profit on a merchant basis for services where it handles payments, and advertising revenues, primarily from KAYAK. Additionally, OpenTable contributes revenue through reservation fees and subscription services for restaurants.
How significantly do international operations contribute to Booking Holdings' financial performance?
International operations are a crucial driver of Booking Holdings' financial performance. In 2016, approximately 88% of its consolidated gross profit was generated from international business, with Booking.com being the dominant contributor.
What was the impact of the OpenTable acquisition on the company's financial results in 2016?
The OpenTable acquisition led to a significant $940.7 million non-cash goodwill impairment charge in 2016. This charge was recognized due to a modification in OpenTable's business strategy, leading to a reduction in long-term financial forecasts for that segment, and it materially impacted the company's net income for the year.
What are the main risks highlighted in the 2016 annual report?
Key risks include intense competition from both online travel agencies and large tech companies, macroeconomic uncertainties impacting travel demand (such as economic downturns and geopolitical events like Brexit), significant fluctuations in currency exchange rates due to its international operations, reliance on performance and brand advertising, and the challenge of keeping pace with rapid technological changes in the digital landscape.
06—Continue