10-QPeriod: Q3 FY2012

Booking Holdings Inc. Quarterly Report for Q3 Ended Sep 30, 2012

Filed November 1, 2012For Securities:BKNG

Summary

Booking Holdings Inc. (then priceline.com Incorporated) reported strong financial performance for the nine months ended September 30, 2012. Total revenues grew significantly, driven primarily by international operations, particularly Booking.com. The company demonstrated robust growth in hotel room night reservations and rental car days, while airline ticket reservations saw more modest increases. The company's strategy continues to focus on international expansion and innovation, with a substantial portion of its business originating outside the U.S. The company maintained a strong liquidity position with significant cash reserves. However, the filing also highlighted ongoing legal proceedings related to hotel occupancy and other taxes, which could pose a material risk to future results.

Financial Highlights

51 data points
Beta

Revenue

$1.71B

81.8% Gross Margin

Net Income

$599.97M

35.2% Net Margin

EPS (Diluted)

$0.47

Total Assets

$6.22B

Cash & Equivalents

$898.47M

Free Cash Flow

$664.42M

Financial Statements
Beta
Revenue$1.71B
Cost of Revenue$309.81M
Gross Profit$1.40B
Operating Expenses$640.91M
Operating Income$755.59M
Interest Expense$17.07M
Net Income$599.97M
EPS (Basic)$0.48
EPS (Diluted)$0.47
Shares Outstanding (Basic)1.25B
Shares Outstanding (Diluted)1.28B

Key Highlights

  • 1Total revenues increased by 21.0% to $4.07 billion for the nine months ended September 30, 2012, compared to $3.36 billion for the same period in 2011.
  • 2Agency revenues, largely driven by Booking.com, saw a substantial 35.1% increase for the nine months ended September 30, 2012.
  • 3Hotel room night reservations increased by 40.1% for the nine months ended September 30, 2012, indicating strong demand for accommodation bookings.
  • 4International operations represented approximately 82% of gross bookings and 91% of consolidated operating income, underscoring the global nature of the business.
  • 5The company maintained a healthy cash position, with $4.7 billion in cash, cash equivalents, and short-term investments as of September 30, 2012.
  • 6Operating expenses, particularly online advertising, increased significantly to support business growth, with online advertising expenses rising 37.9% for the nine months ended September 30, 2012.
  • 7The company is actively engaged in numerous legal proceedings concerning hotel occupancy and other taxes, with an accrual of approximately $39 million set aside as of September 30, 2012.

Frequently Asked Questions

The primary drivers of revenue growth were the strong performance of international operations, particularly Booking.com, and a significant increase in hotel room night reservations. Agency revenues, which are largely derived from Booking.com, showed substantial growth.

The most significant risk highlighted is the ongoing litigation and audit proceedings related to hotel occupancy and other taxes in various jurisdictions. These proceedings could result in substantial liabilities, including penalties and legal fees, and could impact future bookings and competitive positioning. Additionally, the company faces risks from intense competition, currency fluctuations, and potential changes in search engine algorithms.

As of September 30, 2012, the company held approximately $2.6 billion in cash and short-term investments outside the United States, primarily denominated in Euros and British Pounds Sterling. The company's intention was to indefinitely reinvest this cash in its foreign operations, as repatriation to the U.S. could incur additional tax liabilities. This strategy aimed to avoid immediate U.S. tax implications and support international growth.

Booking Holdings believes that the laws in question do not apply to its service of facilitating reservations and that it does not owe the taxes claimed. The company is vigorously defending against these claims, arguing that such taxes generally apply to entities that own or operate hotels. Despite this stance, the company has accrued approximately $39 million for probable costs to resolve these issues, acknowledging the uncertainty and potential for substantial liabilities.