01—Abstract
Summary
Summary of the 10-Q filed August 4, 2016. Cited figures are marked; the original filing is the authoritative source.
Booking Holdings Inc. (formerly The Priceline Group Inc.) reported a solid second quarter for 2016, demonstrating continued growth across its key segments.
Total revenues increased by 12.1%a year-over-year, driven primarily by a 17.1% increase in agency revenues, largely from the Booking.com platform. Gross profit saw a robust 16.1% increase, with a notable expansion in gross margin to 95.1% from 91.8% in the prior year's quarter. This improvement in profitability was supported by a significant decrease in cost of revenues, largely due to a reduction in the company's priceline.com Name Your Own Price® services, which are recorded on a gross basis.
The company maintained a strong liquidity position with substantial cash and investments. Despite a stronger U.S. Dollar impacting reported international results, the company showed healthy growth on a constant-currency basis.
Management highlighted continued investment in brands and technology as key drivers for future growth. However, the company also faces ongoing challenges related to competition, regulatory scrutiny (particularly concerning pricing parity), and macroeconomic uncertainties.
02—Key points
Key Highlights
- Total revenues grew 12.1% to $2.56 billion, with agency revenues up 17.1% driven by Booking.com.
- Gross profit increased by 16.1% to $2.43 billion, and gross margin improved significantly to 95.1% due to a shift in revenue mix and lower cost of revenues.
- Accommodation room nights booked increased by a strong 24.4%, indicating continued demand for lodging services.
- The company repurchased approximately $402.9 million of its common stock in the first half of 2016 under a $3.0 billion authorization.
- Cash, cash equivalents, short-term, and long-term investments totaled $12.3 billion, with $10.7 billion held by international subsidiaries.
- The effective tax rate decreased to 16.2% for the quarter, down from 20.3% in the prior year's quarter, primarily due to U.S. state tax law changes and a higher proportion of income taxed internationally.
- The company is facing ongoing competition and regulatory scrutiny, particularly in Europe regarding price parity clauses, and also noted potential impacts from Brexit.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2016, Booking Holdings Inc. kept $0.23.
- Revenue$2.56B100.0%
- Cost of revenue−$126.1M4.9%
- Gross profit$2.43B95.1%
- Operating costs−$1.70B66.4%
- Operating income$732.4M28.7%
- Interest, other & tax−$151.8M5.9%
- Net income$580.6M22.7%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2016filed August 4, 2016Financial Statements
Q2 FY2016 against Q2 FY2015
| Line item | Q2 FY2016Q2 FY2015 | Change |
|---|---|---|
| Revenue | $2.56B$2.28B | +12.1% |
| Cost of Revenue | $126.08M$187.49M | −32.8% |
| Gross Profit | $2.43B$2.09B | +16.1% |
| Operating Expenses | $1.70B$1.41B | +20.0% |
| Operating Income | $732.41M$678.33M | +8.0% |
| Interest Expense | $50.29M$41.55M | +21.0% |
| Net Income | $580.64M$517.03M | +12.3% |
| EPS (Basic) | $0.47$0.40 | +16.9% |
| EPS (Diluted) | $0.46$0.40 | +16.7% |
| Shares Outstanding (Basic) | 1.24B1.29B | −3.8% |
| Shares Outstanding (Diluted) | 1.25B1.30B | −3.8% |
05—Questions
Frequently Asked Questions
What was the primary driver of revenue growth in the second quarter of 2016?
The primary driver of revenue growth was the significant increase in agency revenues, which grew by 17.1%. This growth was largely attributable to the strong performance of the Booking.com brand, particularly in accommodation room night reservations.
How did the company's gross margin perform in this quarter, and why?
The company's gross margin improved substantially to 95.1% from 91.8% in the same quarter of the prior year. This improvement was primarily due to a decrease in the cost of revenues, which was significantly impacted by a reduction in priceline.com's Name Your Own Price® services. Additionally, a shift in revenue mix towards net revenue-based services contributed to the higher gross margin.
What is the company's cash position and how is it being utilized?
As of June 30, 2016, the company held $12.3 billion in cash, cash equivalents, short-term, and long-term investments. A significant portion, $10.7 billion, was held by international subsidiaries. The company intends to reinvest these funds internationally but also has an ongoing stock repurchase program and significant authorization remaining for future repurchases.
What are the key risks or challenges the company highlighted in this filing?
The company highlighted several key risks, including intense competition from online travel agencies and other large technology companies, potential negative impacts from macroeconomic conditions and geopolitical events like Brexit, regulatory scrutiny concerning price parity clauses in Europe, and potential tax liabilities from international audits and evolving tax laws. The company also mentioned risks associated with technological changes and cybersecurity.
06—Continue