10-QPeriod: Q1 FY2018

Booking Holdings Inc. Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 9, 2018For Securities:BKNG

Summary

Booking Holdings Inc. reported strong financial results for the first quarter of 2018, with total revenues growing 25.2% year-over-year (18% on a constant-currency basis) to $2.9 billion. This growth was primarily driven by an 18.4% increase in agency revenues and a substantial 45.6% increase in merchant revenues, signaling a shift towards a merchant-based model for accommodation bookings. Net income surged by 33.3% to $607.2 million, leading to a diluted EPS of $12.34, up from $9.11 in the prior year period. The company also announced significant stock repurchase activity, authorizing an additional $8 billion buyback program and repurchasing $731.6 million of its common stock in the quarter. Investments in marketing, both performance and brand, increased to support growth, with performance marketing up 12.6% and brand marketing up 25.5%. The company's balance sheet remains strong, with over $16 billion in cash and investments, providing ample liquidity for future operations and strategic initiatives.

Financial Highlights

50 data points
Beta

Revenue

$2.93B

Net Income

$607.00M

20.7% Net Margin

EPS (Diluted)

$0.49

Total Assets

$25.02B

Cash & Equivalents

$2.65B

Free Cash Flow

$509.00M

Financial Statements
Beta
Revenue$2.93B
Operating Expenses$2.20B
Operating Income$730.00M
Interest Expense$70.00M
Net Income$607.00M
EPS (Basic)$0.50
EPS (Diluted)$0.49
Shares Outstanding (Basic)1.21B
Shares Outstanding (Diluted)1.23B

Key Highlights

  • 1Total revenues increased by 25.2% year-over-year to $2.9 billion, with 18% growth on a constant-currency basis.
  • 2Net income increased by 33.3% to $607.2 million, translating to diluted EPS of $12.34, up from $9.11 in Q1 2017.
  • 3Accommodation room night reservations grew by a strong 13.2%, indicating robust demand in the core business.
  • 4Merchant revenues saw significant growth of 45.6%, highlighting a strategic shift towards a merchant-based booking model.
  • 5The company authorized an additional $8 billion stock repurchase program and repurchased $731.6 million of its common stock in the quarter.
  • 6Marketing expenses increased across both performance (12.6%) and brand (25.5%) categories to support business growth.
  • 7The company's cash and investments position remained strong at over $16 billion as of March 31, 2018.

Frequently Asked Questions

Total revenues increased by 25.2% to $2.9 billion, primarily driven by strong performance in accommodation reservation services, with a 13.2% increase in room nights. This growth was supported by both agency revenues (up 18.4%) and a significant rise in merchant revenues (up 45.6%), indicating a shift towards a merchant-based model for bookings.

Booking Holdings adopted new revenue recognition standards (ASC 606) effective January 1, 2018. This change shifted the recognition of accommodation revenue from 'check-out' to 'check-in.' While the cumulative impact on retained earnings was positive, the change had a minor unfavorable impact of approximately 2% on Q1 2018 total revenues compared to if the old standard had been applied. The company expects this timing difference to have a more significant impact on quarterly revenues than annual revenues.

The company continues to prioritize capital allocation towards growth initiatives, including marketing. Additionally, Booking Holdings demonstrated a strong commitment to returning capital to shareholders by authorizing an additional $8 billion stock repurchase program in the first quarter of 2018 and repurchasing $731.6 million of its common stock. This reflects confidence in the business and a strategy to enhance shareholder value.

The company faces several risks, including intense competition from online travel agencies, meta-search sites, and large technology companies like Google. It is also exposed to fluctuations in currency exchange rates due to its significant international operations. Regulatory scrutiny, particularly concerning price parity clauses and tax matters in various jurisdictions like France and Turkey, also presents ongoing challenges. Furthermore, the company relies heavily on performance marketing and could be affected by changes in search engine algorithms and dynamics.