Booking Holdings Inc. Earnings Review Q3’22
Booking Holdings Inc. Earnings Review Q3’22
Booking Holdings BKNG 0.00%↑ reported its Q3’2022 results on 2nd November 2022. The below is our review of Q3’2022 earnings.
Source: Booking Holdings 10-Q reports, Booking Holdings Q3’22 Earnings release, StockOpine analysis
* ADR was calculated by dividing Gross Bookings with Nights Booked. It should be noted that Gross bookings include all travel services (i.e., accommodation, car rentals, and flights).
The below comparison is based on Q3’2019 unless otherwise stated.
Revenue
Revenue of $6.1B, up by 20% compared to Q3’2019 (34% on a constant currency basis).
Record Gross Bookings of $32.1B, up 27% compared to Q3’2019 (41% on a constant currency basis). Growth was driven by increase in Room Nights, continued strength in Average Daily Rates and strong flight bookings. GBV growth was partially offset by FX headwind.
Room nights in Europe were up by high single digits and U.S. was up by almost 30%. Growth in Europe decelerated (20% room night growth in Q2’22) whereas U.S. remains strong (30% growth in Q2’22). ROW nights were up 10% whereas Asia was down mid-single digits. It is worth noting that September was the first month that room nights in Asia surpassed 2019 levels showing signs of recovery.
Source: Booking Holdings Inc. 10-Q September 30, 2022
Constant currency ADR growth versus 2019 accelerated from 25% in Q2’2022 to 28% in Q3’2022.
“Despite the high ADRs in the third quarter, we have not seen a change in the mix of wholesale star ratings being booked or changes in length of stay that could indicate that consumers are trending down.” David Goulden, CFO
Profitability and Liquidity
Adjusted EBITDA of $2.7B (including SBC) compared to $2.5B in Q3’2019. “Our Q3 revenue and adjusted EBITDA were 20% and 7% higher than Q3 2019 and grew 34% and 25% on a constant currency basis.” Glenn Fogel, CEO
Adjusted EBITDA margin was 43.9% compared to 49.3% for Q3’2019. The decrease in margin relate primarily to the FX headwind and the timing differences between gross bookings and revenue recognition.
$336 million unrealized loss on equity investments, primarily related to Meituan.
$4.1B of free cash flow for the nine months ending September 2022 (31.4% of revenue), up from $3.5B (29.9% of revenue) in Q3’2019.
Cash and cash equivalents and total debt (excluding leases) equaled to $9B and $9.2B respectively, as of 30 September 2022.
Increase in the pace of share repurchases. $2B worth of shares (average price of $1,843) acquired during the quarter compared to $1.3B during Q2’2022. Since the start of the year the number of shares declined by c.5%.
Source: Koyfin
Alternative Accommodation
Alternative accommodation room nights grew by 11% compared to Q3’2019. The global mix of alternative accommodation room nights was about 30%. Growth in alternative accommodation nights decelerated from 25% in Q2’2022 (32% of global mix booked).
Take Rates
Revenue as a percentage of Gross booking was 18.8%, down from 19.9% in Q3’2019. The decrease is due to investments in merchandising, increase in the mix of flights, slower recovery of advertising and other revenues and negative impact from FX.
Overall take rates for the year are expected to be just over 14% (lower than the 15.6% of 2019) due to timing difference between revenue and gross bookings and slower recovery of advertising and other revenue.
“Compared to the 15.6% take rate in 2019, the expected take rate in 2022 includes almost a full point of noted impact from timing, about 40 basis points from a slower recovery in advertising and other revenue, which have no associated gross bookings and about 30 basis points from increased mix of flights.” David Goulden, CFO
Mobile, App Bookings and Direct Bookings
“Our mix of customers booking directly on our platforms reached its highest third quarter level ever.” Glenn Fogel, CEO
45% of the room nights were booked through the Company’s mobile apps in Q3’2022 which is 5 percentage points higher than Q2’2022 and about 10 percentage points higher than in 2019.
“Booking.com app remains the number one downloaded OTA app globally according to a third-party research firm, and we have seen increasing levels of downloads in the U.S.” Glenn Fogel, CEO
Payments and Connected Trip
40% of gross bookings were processed through the payment platform versus 38% in Q2’2022, another sequential record breaking on payments processed on Booking. com.
Airline tickets were up by 45% compared to Q3’2021 driven by expansion of the flight offering.
Full Year and Q4’2022 Outlook
“More recently, we have seen resiliency in the level of demand from travelers with room night growth improving slightly from September levels to about 12% growth estimated for the month of October versus October 2019. Gross bookings in October are estimated to be up about 30% or just over 45% on a constant currency basis. The slight improvement in October was primarily driven by the continued recovery in Asia as well as a slight improvement in Europe.” Glenn Fogel, CEO
Room night growth for Q4’2022 is expected at 10% relative to Q4’2019. 12% growth in nights booked already seen in October.
GBV growth of 25% relative to Q4’2019.
Revenue as a % of GBV is expected to be 120 basis points lower than in Q4’2019 due to investments in merchandizing, increase in mix of clients and negative impact from timing differences between gross bookings and revenue recognition.
Q4’2022 adjusted EBITDA expected to be over $1.1B compared to $1.3B in Q4’2019.
Based on the above, revenue for Q4’2022 could reach c. $3.86B resulting to an adjusted EBITDA margin of around 28% (Vs c. 38% in Q4’2019). The forecast implies revenue growth of approximately 16% and 30% compared to Q4’2019 and Q4’2021, respectively.
For the full year 2022, the above forecast implies revenue of $16.9B, up 12% and 54% compared to 2019 and 2021, respectively. Implied adjusted EBITDA margin will be around 30% compared to 27% and 39% in 2021 and 2019, respectively.
Concluding Remarks
Overall, it was a strong quarter with the continued travel recovery and the strength in ADRs benefiting the company. Currently, the macro environment did not impact travel demand and positive indications exist for GBV growth for both Q4’2022 and Q1’2023. Even though, it is probable that the macro conditions will catch up to the travel industry at one point, we remain bullish on the company over the long-term as it continues to execute.
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