SEC Filing - Booking Holdings

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-36691

Booking Holdings Inc.

(Exact name of Registrant as specified in its charter)



Delaware	06-1528493
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

800 Connecticut Avenue

Norwalk, Connecticut 06854

(address of principal executive offices)

Registrant's telephone number, including area code: (203) 299-8000

Former name, former address and former fiscal year, if changed, since last report: N/A

_____________________________________________________________________________________________

Securities Registered Pursuant to Section 12(b) of the Act:



Title of Each Class:	Trading Symbol	Name of Each Exchange on which Registered:
Common Stock par value $0.008 per share	BKNG	The NASDAQ Global Select Market
0.800% Senior Notes Due 2022	BKNG 22A	New York Stock Exchange
2.150% Senior Notes Due 2022	BKNG 22	New York Stock Exchange
2.375% Senior Notes Due 2024	BKNG 24	New York Stock Exchange
1.800% Senior Notes Due 2027	BKNG 27	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act (Check one):



Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Number of shares of Common Stock outstanding at July 31, 2019:



Common Stock, par value $0.008 per share		42,511,903
(Class)		(Number of Shares)

Booking Holdings Inc.

Form 10-Q

For the Three Months Ended June 30, 2019



PART I - FINANCIAL INFORMATION

Item 1. Financial Statements	3

Consolidated Balance Sheets at June 30, 2019 (Unaudited) and December 31, 2018	3
Consolidated Statements of Operations (Unaudited) For the Three and Six Months Ended June 30, 2019 and 2018	4
Consolidated Statements of Comprehensive Income (Unaudited) For the Three and Six Months Ended June 30, 2019 and 2018	5
Consolidated Statements of Changes in Stockholders' Equity (Unaudited) For the Three and Six Months Ended June 30, 2019 and 2018	6
Consolidated Statements of Cash Flows (Unaudited) For the Six Months Ended June 30, 2019 and 2018	8
Notes to Unaudited Consolidated Financial Statements	9

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3. Quantitative and Qualitative Disclosures About Market Risk	47

Item 4. Controls and Procedures	48

PART II - OTHER INFORMATION

Item 1. Legal Proceedings	49

Item 1A. Risk Factors	49

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	72

Item 6. Exhibits	73

SIGNATURES	74

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Booking Holdings Inc.

CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share data)



	June 30, 2019			December 31, 2018
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	5,256		$	2,624
Short-term investments in marketable securities	1,553			3,660
Accounts receivable, net of allowance for doubtful accounts of $56 and $61, respectively	1,973			1,523
Prepaid expenses and other current assets	1,238			600
Total current assets	10,020			8,407
Property and equipment, net	716			656
Operating lease assets	639			—
Intangible assets, net	2,041			2,125
Goodwill	2,915			2,910
Long-term investments	4,618			8,408
Other assets	545			181
Total assets	$	21,494		$	22,687

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,291		$	1,134
Accrued expenses and other current liabilities	1,740			1,399
Deferred merchant bookings	2,343			1,022
Convertible debt	975			—
Total current liabilities	6,349			3,555
Deferred income taxes	504			370
Operating lease liabilities	495			—
Long-term U.S. transition tax liability	1,063			1,166
Other long-term liabilities	90			162
Long-term debt	7,686			8,649
Total liabilities	16,187			13,902

Commitments and Contingencies (See Note 13)

Stockholders' equity:
Common stock, $0.008 par value; authorized 1,000,000,000 shares, 63,143,816 and 62,948,762 shares issued, respectively	—			—
Treasury stock, 20,378,354 and 17,317,126 shares, respectively	(20,173		)	(14,711		)
Additional paid-in capital	5,599			5,445
Retained earnings	20,111			18,367
Accumulated other comprehensive loss	(230		)	(316		)
Total stockholders' equity	5,307			8,785
Total liabilities and stockholders' equity	$	21,494		$	22,687

See Notes to Unaudited Consolidated Financial Statements.

Booking Holdings Inc.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share and per share data)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Agency revenues	$	2,607		$	2,567		$	4,556		$	4,680
Merchant revenues	959			710			1,562			1,236
Advertising and other revenues	284			260			569			549
Total revenues	3,850			3,537			6,687			6,465
Operating expenses:
Performance marketing	1,192			1,142			2,222			2,248
Brand marketing	175			124			338			225
Sales and other expenses	248			203			463			369
Personnel, including stock-based compensation of $79, $75, $153 and $146, respectively	619			522			1,120			1,021
General and administrative	180			159			371			322
Information technology	70			59			135			119
Depreciation and amortization	119			107			235			210
Total operating expenses	2,603			2,316			4,884			4,514
Operating income	1,247			1,221			1,803			1,951
Other income (expense):
Interest income	34			46			69			93
Interest expense	(68		)	(65		)	(134		)	(135		)
Net unrealized gains on marketable equity securities	17			21			468			76
Foreign currency transactions and other	(23		)	(13		)	(31		)	(22		)
Total other (expense) income	(40		)	(11		)	372			12
Earnings before income taxes	1,207			1,210			2,175			1,963
Income tax expense	228			232			431			378
Net income	$	979		$	978		$	1,744		$	1,585
Net income applicable to common stockholders per basic common share	$	22.62		$	20.34		$	39.52		$	32.87
Weighted-average number of basic common shares outstanding (in 000's)	43,251			48,055			44,124			48,202
Net income applicable to common stockholders per diluted common share	$	22.44		$	20.13		$	39.17		$	32.42
Weighted-average number of diluted common shares outstanding (in 000's)	43,601			48,550			44,514			48,877

See Notes to Unaudited Consolidated Financial Statements.

Booking Holdings Inc.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net income ⁽¹⁾	$	979		$	978		$	1,744		$	1,585
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustments, net of tax benefits (charges) of $15, ($36), $7 and ($20), respectively ⁽²⁾	(16		)	(129		)	(28		)	(68		)
Net unrealized (losses) gains on debt securities, net of tax benefits (charges) of $15, ($1), ($36) and $1, respectively ⁽¹⁾	(45		)	(5		)	114			(5		)

Comprehensive income	$	918		$	844		$	1,830		$	1,512

(1) The Company reclassified from accumulated other comprehensive income net gains of $10 million ($9 million, net of tax) and $11 million ($10 million, net of tax) for the three and six months ended June 30, 2019, respectively, and a net loss of $1 million ($1 million, net of tax) for the six months ended June 30, 2018 from sales of investments in debt securities. The reclassified net gains (losses) are included in "Foreign currency transactions and other" in the Unaudited Consolidated Statements of Operations.

(2) Foreign currency translation adjustments result from currency fluctuations on the translation of the Company's non-U.S. Dollar functional currency subsidiaries' net assets, net of the impact of net investment hedges.

The Company recorded tax benefits of $4 million and $15 million for the three and six months ended June 30, 2019, respectively, and tax benefits of $21 million and $11 million for the three and six months ended June 30, 2018, respectively, related to foreign currency translation adjustments to its one-time deemed repatriation tax liability recorded at December 31, 2017 and foreign earnings for periods after December 31, 2017 that are subject to U.S. federal and state income tax, resulting from the introduction of the U.S. Tax Cuts and Jobs Act (the "Tax Act").

Foreign currency translation adjustments also include a tax benefit of $11 million and a tax charge of $8 million for the three and six months ended June 30, 2019, respectively, and tax charges of $57 million and $31 million for the three and six months ended June 30, 2018, respectively, associated with the Company's Euro-denominated debt that is designated as a net investment hedge against the impact of currency fluctuations on the net assets of a Euro functional currency subsidiary (see Note 9).

See Notes to Unaudited Consolidated Financial Statements.

Booking Holdings Inc.

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019

(In millions except share data)



	Common Stock			Treasury Stock					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)
	Shares (in 000's)	Amount		Shares (in 000's)		Amount			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total
Balance, March 31, 2019	63,122	$	—	(18,936	)	$	(17,567	)	$	5,519	$	19,132	$	(169	)	$	6,915
Net income	—	—		—		—			—		979		—			979
Foreign currency translation adjustments	—	—		—		—			—		—		(16		)	(16		)
Net unrealized losses on debt securities	—	—		—		—			—		—		(45		)	(45		)
Exercise of stock options and vesting of restricted stock units and performance share units	22	—		—		—			1		—		—			1
Repurchase of common stock	—	—		(1,442	)	(2,606		)	—		—		—			(2,606		)
Stock-based compensation and other stock-based payments	—	—		—		—			79		—		—			79
Balance, June 30, 2019	63,144	$	—	(20,378	)	$	(20,173	)	$	5,599	$	20,111	$	(230	)	$	5,307



	Common Stock			Treasury Stock					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)
	Shares (in 000's)	Amount		Shares (in 000's)		Amount			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total
Balance, December 31, 2018	62,949	$	—	(17,317	)	$	(14,711	)	$	5,445	$	18,367	$	(316	)	$	8,785
Net income	—	—		—		—			—		1,744		—			1,744
Foreign currency translation adjustments	—	—		—		—			—		—		(28		)	(28		)
Net unrealized gains on debt securities	—	—		—		—			—		—		114			114
Exercise of stock options and vesting of restricted stock units and performance share units	195	—		—		—			1		—		—			1
Repurchase of common stock	—	—		(3,061	)	(5,462		)	—		—		—			(5,462		)
Stock-based compensation and other stock-based payments	—	—		—		—			153		—		—			153
Balance, June 30, 2019	63,144	$	—	(20,378	)	$	(20,173	)	$	5,599	$	20,111	$	(230	)	$	5,307

See Notes to Unaudited Consolidated Financial Statements.

Booking Holdings Inc.

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018

(In millions except share data)



	Common Stock			Treasury Stock					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)
	Shares (in 000's)	Amount		Shares (in 000's)		Amount			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total
Balance, March 31, 2018	62,838	$	—	(14,590	)	$	(9,431	)	$	5,033	$	14,976	$	58		$	10,636
Net income	—	—		—		—			—		978		—			978
Foreign currency translation adjustments	—	—		—		—			—		—		(129		)	(129		)
Net unrealized losses on debt securities	—	—		—		—			—		—		(5		)	(5		)
Reclassification adjustment for convertible debt in mezzanine	—	—		—		—			5		—		—			5
Exercise of stock options and vesting of restricted stock units and performance share units	37	—		—		—			1		—		—			1
Repurchase of common stock	—	—		(573	)	(1,199		)	—		—		—			(1,199		)
Stock-based compensation and other stock-based payments	—	—		—		—			76		—		—			76
Common stock issued in an acquisition	52	—		—		—			110		—		—			110
Balance, June 30, 2018	62,927	$	—	(15,163	)	$	(10,630	)	$	5,225	$	15,954	$	(76	)	$	10,473



	Common Stock			Treasury Stock					Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss)
	Shares (in 000's)	Amount		Shares (in 000's)		Amount			Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total
Balance, December 31, 2017	62,689	$	—	(14,217	)	$	(8,699	)	$	5,783		$	13,939	$	238		$	11,261
Cumulative effect of adoption of accounting standards updates	—	—		—		—			—			430		(241		)	189
Net income	—	—		—		—			—			1,585		—			1,585
Foreign currency translation adjustments	—	—		—		—			—			—		(68		)	(68		)
Net unrealized losses on debt securities	—	—		—		—			—			—		(5		)	(5		)
Reclassification adjustment for convertible debt in mezzanine	—	—		—		—			(43		)	—		—			(43		)
Exercise of stock options and vesting of restricted stock units and performance share units	186	—		—		—			1			—		—			1
Repurchase of common stock	—	—		(946	)	(1,931		)	—			—		—			(1,931		)
Stock-based compensation and other stock-based payments	—	—		—		—			147			—		—			147
Conversion of debt	—	—		—		—			(773		)	—		—			(773		)
Common stock issued in an acquisition	52	—		—		—			110			—		—			110
Balance, June 30, 2018	62,927	$	—	(15,163	)	$	(10,630	)	$	5,225		$	15,954	$	(76	)	$	10,473

See Notes to Unaudited Consolidated Financial Statements.

Booking Holdings Inc.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)



	Six Months Ended June 30,
	2019			2018
OPERATING ACTIVITIES:
Net income	$	1,744		$	1,585
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	235			210
Provision for uncollectible accounts	74			62
Deferred income tax expense (benefit)	60			(21		)
Net unrealized gains on marketable equity securities	(468		)	(76		)
Stock-based compensation expense and other stock-based payments	162			150
Operating lease amortization	85			—
Amortization of debt discount and debt issuance costs	28			30
Contingent consideration fair value adjustment	9			—
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable	(523		)	(392		)
Prepaid expenses and other current assets	(584		)	(574		)
Accounts payable, accrued expenses and other current liabilities	1,513			1,329
Other long-term assets and liabilities	(398		)	(13		)
Net cash provided by operating activities	1,937			2,290

INVESTING ACTIVITIES:
Purchase of investments	(580		)	(1,360		)
Proceeds from sale and maturity of investments	6,977			3,497
Additions to property and equipment	(199		)	(235		)
Acquisitions and other investments, net of cash acquired	(9		)	(139		)
Net cash provided by investing activities	6,189			1,763

FINANCING ACTIVITIES:
Proceeds from revolving credit facility and short-term borrowings	437			3
Repayments of revolving credit facility and short-term borrowings	(425		)	—
Payments for conversion of senior notes	—			(1,487		)
Payments for repurchase of common stock	(5,491		)	(1,905		)
Other financing activities	(8		)	1
Net cash used in financing activities	(5,487		)	(3,388		)
Effect of exchange rate changes on cash and cash equivalents and restricted cash and cash equivalents	(8		)	(20		)
Net increase in cash and cash equivalents and restricted cash and cash equivalents	2,631			645
Total cash and cash equivalents and restricted cash and cash equivalents, beginning of period	2,645			2,563
Total cash and cash equivalents and restricted cash and cash equivalents, end of period	$	5,276		$	3,208

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for income taxes	$	949		$	985
Cash paid during the period for interest	$	101		$	101
Non-cash operating and financing activity for an acquisition (see Note 8)	$	—		$	51
Non-cash investing and financing activity for an acquisition (see Note 8)	$	—		$	59

See Notes to Unaudited Consolidated Financial Statements.

Booking Holdings Inc.

Notes to Unaudited Consolidated Financial Statements

1. &#