10-QPeriod: Q2 FY2009

Booking Holdings Inc. Quarterly Report for Q2 Ended Jun 30, 2009

Filed August 10, 2009For Securities:BKNG

Summary

Booking Holdings Inc. (BKNG), formerly priceline.com Incorporated, reported solid revenue growth in its Q2 2009 filing, with total revenues reaching $603.7 million, a 17.5% increase year-over-year. This growth was primarily driven by strong performance in its international segment, particularly Booking.com, which accounted for approximately 60% of gross bookings. The company saw a significant increase in hotel room night reservations sold, up 44.0% year-over-year, reflecting resilience in travel demand despite the ongoing global recession. Despite revenue growth, the company's financial statements reflect the ongoing economic challenges. While gross profit increased by 20.3%, operating expenses, particularly online advertising, also rose by 23.7%. The company is also navigating significant legal and tax-related contingencies, with a reserve of $18 million for hotel occupancy and other tax issues. Convertible debt remains a key financial consideration, with a substantial principal amount outstanding and ongoing discussions regarding potential conversions.

Financial Highlights

30 data points
Beta

Revenue

$603.74M

50.6% Gross Margin

Net Income

$67.01M

11.1% Net Margin

EPS (Diluted)

$0.06

Cash & Equivalents

$333.45M

Free Cash Flow

$160.11M

Financial Statements
Beta
Revenue$603.74M
Cost of Revenue$298.50M
Gross Profit$305.24M
Operating Expenses$195.86M
Operating Income$109.38M
Interest Expense$6.50M
Net Income$67.01M
EPS (Basic)$0.06
EPS (Diluted)$0.06
Shares Outstanding (Basic)1.04B
Shares Outstanding (Diluted)1.21B

Key Highlights

  • 1Total revenues increased by 17.5% to $603.7 million for the three months ended June 30, 2009, compared to the prior year period.
  • 2International gross bookings grew by 14.3% and accounted for a significant portion of the company's business, driven by Booking.com.
  • 3Hotel room night reservations sold saw a substantial increase of 44.0% year-over-year, indicating strong demand for hotel services.
  • 4The company is actively managing its financial resources, with $589.6 million in cash, cash equivalents, and short-term investments as of June 30, 2009.
  • 5Significant legal proceedings related to hotel occupancy and other taxes are ongoing, with the company maintaining an $18 million reserve for potential resolutions.
  • 6Convertible debt of $356.5 million (principal amount) remains outstanding, with potential for conversion due to market conditions.
  • 7The company is actively investing in online advertising to support its growth, with online advertising expenses increasing by 23.7%.

Frequently Asked Questions

Booking Holdings Inc. demonstrated strong revenue growth in Q2 2009, driven by its international operations and a significant increase in hotel bookings. Despite the challenging economic environment, the company managed its liquidity well, maintaining substantial cash reserves. However, ongoing legal battles regarding taxes and a considerable amount of convertible debt present significant financial considerations and potential risks.

The filing repeatedly mentions the adverse impact of the worldwide recession on the travel market, leading to decreased consumer demand, increased cancellations, and declining average daily rates (ADRs). Key risks include potential increases in delinquency rates from hotel partners, the risk of a decline in international operations' growth rate, and the possibility of early conversion of convertible notes due to market liquidity demands on hedge funds.

The company's strategy focuses on expanding its international operations, particularly through the Booking.com brand, which is a significant contributor to revenue and bookings. While this international growth has been strong, risks include potential slowing growth rates as the business scales, the impact of the strengthening U.S. Dollar, varying economic and regulatory environments in different countries, and competition within these markets. The company is also exposed to foreign currency exchange rate fluctuations.

The company is involved in numerous lawsuits and audits concerning hotel occupancy and other taxes, with a reserve of $18 million set aside for potential resolutions. There are also ongoing consumer and securities-related litigations. Financially, a significant amount of convertible debt ($356.5 million principal) is outstanding, which could lead to dilution if converted, and the company has entered into conversion spread hedges to mitigate some of this dilution.