01—Abstract
Summary
Summary of the 10-Q filed November 9, 2009. Cited figures are marked; the original filing is the authoritative source.
Booking Holdings Inc. (formerly priceline.com Incorporated) reported strong performance for the third quarter and first nine months of 2009, demonstrating resilience amidst a challenging economic environment.
Total revenues grew by a significant 30.1%a and 21.5% respectively, year-over-year. This growth was largely driven by a substantial increase in international operations, particularly Booking.com's hotel reservation services, which accounted for a majority of gross bookings and operating income. The company also saw robust growth in agency and merchant revenues, bolstered by increased hotel room night reservations and airline ticket sales.
Despite the overall economic downturn, the company's strategic focus on its international segment and its diverse revenue streams, including agency and merchant models, have proven effective. Management highlighted the favorable year-over-year comparisons due to the economic conditions in late 2008, alongside the competitive advantages gained from fee reductions by competitors. While the company faces ongoing risks related to the recession, increased competition, and legal challenges, particularly concerning hotel occupancy taxes, its solid financial results and strong liquidity position provide a positive outlook.
02—Key points
Key Highlights
- Total revenues increased by 30.1% to $730.7 million for the three months ended September 30, 2009, compared to $561.6 million in the prior year period.
- International gross bookings saw significant growth of 37.8% for the three months and 20.0% for the nine months ended September 30, 2009.
- Hotel room night reservations sold increased substantially by 56.3% for the three months and 46.2% for the nine months ended September 30, 2009.
- Gross profit increased by 37.3% to $434.0 million for the three months ended September 30, 2009, with gross margin improving to 59.4%.
- The company benefited from a significant income tax benefit of $124.9 million for the three months ended September 30, 2009, largely due to the reversal of a portion of its deferred tax asset valuation allowance.
- Cash, cash equivalents, and short-term investments stood at $719.3 million as of September 30, 2009, providing ample liquidity.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2009, Booking Holdings Inc. kept $0.44.
- Revenue$730.7M100.0%
- Cost of revenue−$296.7M40.6%
- Gross profit$434.0M59.4%
- Operating costs−$233.3M31.9%
- Operating income$200.8M27.5%
- Interest, other & tax$118.2M16.2%
- Net income$319.0M43.7%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2009filed November 9, 2009Financial Statements
| Revenue | $730.66M |
| Cost of Revenue | $296.65M |
| Gross Profit | $434.01M |
| Operating Expenses | $233.25M |
| Operating Income | $200.75M |
| Interest Expense | $5.91M |
| Net Income | $318.98M |
| EPS (Basic) | $0.30 |
| EPS (Diluted) | $0.26 |
| Shares Outstanding (Basic) | 1.06B |
| Shares Outstanding (Diluted) | 1.24B |
05—Questions
Frequently Asked Questions
What was the primary driver of Booking Holdings' revenue growth in Q3 2009?
The primary driver of Booking Holdings' revenue growth in the third quarter of 2009 was the strong performance of its international operations, particularly Booking.com's hotel reservation services, which experienced a 37.8% increase in international gross bookings year-over-year. This growth was also supported by an increase in agency and merchant revenues and favorable year-over-year comparisons due to economic conditions in late 2008.
What is the company's exposure to legal proceedings, and what are the potential financial impacts?
Booking Holdings is involved in numerous lawsuits and audits related to hotel occupancy and other taxes across various jurisdictions. A significant recent development was a jury verdict in San Antonio finding the company liable for collecting and remitting local hotel occupancy taxes. While the final judgment amount is yet to be determined, the company recorded a charge of $3.7 million related to this verdict. Adverse outcomes in these proceedings could result in substantial liabilities, including past and future taxes, interest, penalties, and legal fees, which could materially impact the company's business and financial results. The company has established a reserve of approximately $19 million for potential resolution of these tax issues.
How did the company manage its debt, particularly its convertible notes, during this period?
The company had convertible senior notes outstanding, with a principal amount of approximately $270.9 million as of September 30, 2009. Due to increased investor redemption demands in the recessionary environment, there was a higher likelihood of noteholders converting their notes. The company also noted that early conversions could reduce its cash and investment balances and that its 'Conversion Spread Hedges' might not be fully effective for early conversions. The company intended to fund any principal repayments from existing cash reserves and its revolving credit facility.
06—Continue