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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 March 31, 2022
OR
☐         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) 
Delaware06-1528493
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
800 Connecticut Avenue
Norwalk, Connecticut 06854
(Address of principal executive offices) (Zip Code)
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(s)Name of each exchange on which registered:
Common Stock par value $0.008 per share BKNGThe NASDAQ Global Select Market
2.150% Senior Notes Due 2022BKNG 22The NASDAQ Stock Market LLC
2.375% Senior Notes Due 2024BKNG 24The NASDAQ Stock Market LLC
0.100% Senior Notes Due 2025BKNG 25The NASDAQ Stock Market LLC
1.800% Senior Notes Due 2027BKNG 27The NASDAQ Stock Market LLC
0.500% Senior Notes Due 2028BKNG 28The NASDAQ Stock Market LLC
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. 
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 Exchange Act).  Yes ☐ No ☒
Number of shares of Common Stock outstanding at April 27, 2022:
Common Stock, par value $0.008 per share40,623,256
(Class)(Number of Shares)


Booking Holdings Inc.
Form 10-Q
 
For the Three Months Ended March 31, 2022
 
PART I - FINANCIAL INFORMATION 
  
Item 1. Financial Statements
  
Consolidated Balance Sheets at March 31, 2022 (Unaudited) and December 31, 2021
Consolidated Statements of Operations (Unaudited) For the Three Months Ended March 31, 2022 and 2021
Consolidated Statements of Comprehensive Loss (Unaudited) For the Three Months Ended March 31, 2022 and 2021
Consolidated Statements of Changes in Stockholders' Equity (Unaudited) For the Three Months Ended March 31, 2022 and 2021
Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended March 31, 2022 and 2021
Notes to Unaudited Consolidated Financial Statements
  
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
  
Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
Item 4. Controls and Procedures
  
PART II - OTHER INFORMATION 
  
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
  
SIGNATURES
2

PART I — FINANCIAL INFORMATION
Item 1.  Financial Statements

Booking Holdings Inc.
CONSOLIDATED BALANCE SHEETS
(In millions, except share and per share data)
 March 31,
2022		December 31,
2021
(Unaudited)
ASSETS  
Current assets:  
Cash and cash equivalents$10,549 $11,127 
Accounts receivable, net (Allowance for expected credit losses of $102 and $101, respectively)
1,611 1,358 
Prepaid expenses, net (Allowance for expected credit losses of $23 and $29, respectively)
395 404 
Other current assets320 256 
Total current assets12,875 13,145 
Property and equipment, net844 822 
Operating lease assets487 496 
Intangible assets, net1,997 2,057 
Goodwill2,878 2,887 
Long-term investments2,200 3,175 
Other assets, net (Allowance for expected credit losses of $20 and $18, respectively)
1,103 1,059 
Total assets$22,384 $23,641 
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current liabilities:  
Accounts payable$1,504 $1,586 
Accrued expenses and other current liabilities1,876 1,765 
Deferred merchant bookings2,765 906 
Short-term debt1,333 1,989 
Total current liabilities7,478 6,246 
Deferred income taxes721 905 
Operating lease liabilities349 351 
Long-term U.S. transition tax liability825 825 
Other long-term liabilities203 199 
Long-term debt 8,435 8,937 
  Total liabilities18,011 17,463 
Commitments and contingencies (see Note 13)
Stockholders' equity:  
Common stock, $0.008 par value,
Authorized shares: 1,000,000,000
Issued shares: 63,759,178 and 63,584,444, respectively
— — 
Treasury stock, 23,004,503 and 22,518,391 shares, respectively
(25,390)(24,290)
Additional paid-in capital6,163 6,159 
Retained earnings23,783 24,453 
Accumulated other comprehensive loss(183)(144)
  Total stockholders' equity4,373 6,178 
Total liabilities and stockholders' equity$22,384 $23,641 

See Notes to Unaudited Consolidated Financial Statements.
3

Booking Holdings Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share and per share data)
 
 Three Months Ended
March 31,
 20222021
Agency revenues$1,450 $717 
Merchant revenues1,050 373 
Advertising and other revenues195 51 
Total revenues2,695 1,141 
Operating expenses:  
Marketing expenses1,147 461 
Sales and other expenses339 112 
Personnel, including stock-based compensation of $93 and $109, respectively
596 552 
General and administrative158 119 
Information technology134 87 
Depreciation and amortization111 113 
Restructuring, disposal, and other exit costs36 8 
Total operating expenses2,521 1,452 
Operating income (loss)174 (311)
Interest expense(68)(98)
Other income (expense), net(955)131 
Loss before income taxes(849)(278)
Income tax benefit(149)(223)
Net loss$(700)$(55)
Net loss applicable to common stockholders per basic common share$(17.10)$(1.34)
Weighted-average number of basic common shares outstanding (in 000's)40,921 40,973 
Net loss applicable to common stockholders per diluted common share$(17.10)$(1.34)
Weighted-average number of diluted common shares outstanding (in 000's)40,921 40,973 

See Notes to Unaudited Consolidated Financial Statements.

4

Booking Holdings Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In millions)
Three Months Ended
March 31,
20222021
Net loss$(700)$(55)
Other comprehensive loss, net of tax
Foreign currency translation adjustments(38)(30)
Unrealized losses on cash flow hedges— (11)
Net unrealized losses on available-for-sale securities(1)(1)
Total other comprehensive loss, net of tax(39)(42)
Comprehensive loss$(739)$(97)

See Notes to Unaudited Consolidated Financial Statements.
5

Booking Holdings Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2022 and 2021
(In millions, except share data)
 
Common StockTreasury StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal
Shares
(in 000's)		AmountShares
(in 000's)		Amount
Balance, December 31, 202163,584 $— (22,518)$(24,290)$6,159 $24,453 $(144)$6,178 
Cumulative effect of adoption of accounting standards update— — — — (96)30 — (66)
Net loss— — — — — (700)— (700)
Foreign currency translation adjustments, net of tax— — — — — — (38)(38)
Net unrealized losses on available-for-sale securities, net of tax— — — — — — (1)(1)
Exercise of stock options and vesting of restricted stock units and performance share units175 — — — 3 — — 3 
Repurchase of common stock— — (487)(1,100)— — — (1,100)
Stock-based compensation and other stock-based payments— — — — 97 — — 97 
Balance, March 31, 202263,759 $— (23,005)$(25,390)$6,163 $23,783 $(183)$4,373 

Common StockTreasury StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal
Shares
(in 000's)		AmountShares
(in 000's)		Amount
Balance, December 31, 202063,406 $— (22,447)$(24,128)$5,851 $23,288 $(118)$4,893 
Net loss— — — — — (55)— (55)
Foreign currency translation adjustments, net of tax— — — — — — (30)(30)
Unrealized losses on cash flow hedges, net of tax— (11)(11)
Net unrealized losses on available-for-sale securities, net of tax— — — — — — (1)(1)
Exercise of stock options and vesting of restricted stock units and performance share units156 — — — 1 — — 1 
Repurchase of common stock— — (64)(146)— — — (146)
Stock-based compensation and other stock-based payments— — — — 113 — — 113 
Balance, March 31, 202163,562 $— (22,511)$(24,274)$5,965 $23,233 $(160)$4,764 

See Notes to Unaudited Consolidated Financial Statements.

6

Booking Holdings Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
 Three Months Ended
March 31,
 20222021
OPERATING ACTIVITIES:
Net loss$(700)$(55)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: 
Depreciation and amortization111 113 
Provision for expected credit losses and chargebacks55 — 
Deferred income tax benefit(216)(50)
Net losses (gains) on equity securities987 (36)
Stock-based compensation expense and other stock-based payments93 113 
Operating lease amortization39 45 
Unrealized foreign currency transaction gains related to Euro-denominated debt(30)(91)
Other30 16 
Changes in assets and liabilities: 
Accounts receivable(326)(72)
Prepaid expenses and other current assets(56)(258)
Deferred merchant bookings and other current liabilities1,868 114 
Long-term assets and liabilities (160)(46)
Net cash provided by (used in) operating activities1,695 (207)
INVESTING ACTIVITIES: 
Purchase of investments(12)— 
Additions to property and equipment(109)(65)
Net cash used in investing activities(121)(65)
FINANCING ACTIVITIES:
Proceeds from the issuance of long-term debt— 2,015 
Repayment of debt(1,102)— 
Payments for repurchase of common stock (1,049)(137)
Other financing activities12 (9)
Net cash (used in) provided by financing activities(2,139)1,869 
Effect of exchange rate changes on cash and cash equivalents and restricted cash and cash equivalents(9)(7)
Net (decrease) increase in cash and cash equivalents and restricted cash and cash equivalents(574)1,590 
Total cash and cash equivalents and restricted cash and cash equivalents, beginning of period 11,152 10,582 
Total cash and cash equivalents and restricted cash and cash equivalents, end of period $10,578 $12,172 
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for income taxes (see Note 17)
$98 $216 
Cash paid during the period for interest$72 $66 

See Notes to Unaudited Consolidated Financial Statements.
7

Booking Holdings Inc.
Notes to Unaudited Consolidated Financial Statements
 
1.    BASIS OF PRESENTATION
 
Management of Booking Holdings Inc. (the "Company") is responsible for the Unaudited Consolidated Financial Statements included in this document. The Unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and include all normal and recurring adjustments that management of the Company considers necessary for a fair presentation of its financial position and operating results. The Company prepared the Unaudited Consolidated Financial Statements following the requirements of the Securities and Exchange Commission ("SEC") for interim reporting. As permitted under those rules, the Company condensed or omitted certain footnotes or other financial information that are normally required by U.S. GAAP for annual financial statements. These statements should be read in combination with the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
 
The Unaudited Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries, including acquired businesses from the dates of acquisition. All intercompany accounts and transactions have been eliminated in consolidation. The functional currency of the Company's subsidiaries is generally the respective local currency. For international operations, assets and liabilities are translated into U.S. Dollars at the rate of exchange existing at the balance sheet date. Income statement amounts are translated at monthly average exchange rates applicable for the period. Translation gains and losses are included as a component of "Accumulated other comprehensive loss" in the accompanying Consolidated Balance Sheets. Foreign currency transaction gains and losses are included in "Other income (expense), net" in the Unaudited Consolidated Statements of Operations.
 
Revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be the same as those for any subsequent quarter or the full year.

Impact of COVID-19

In response to the outbreak of COVID-19 (the "COVID-19 pandemic"), as well as subsequent outbreaks driven by new variants of COVID-19, governments and businesses around the world have implemented a variety of restrictive measures to reduce the spread of COVID-19. These measures have had a significant adverse effect on many of the customers on whom the Company’s business relies, including hotels and other accommodation providers, airlines, and restaurants, as well as the Company's operations, employees, and consumers. The COVID-19 pandemic and the resulting implementation of restrictive measures resulted in a significant decline in travel activities and consumer demand for related services, in 2020 in particular. The Company’s financial results and prospects are almost entirely dependent on the sale of travel-related services. The spread of new variants of COVID-19 has caused uncertainty as to when restrictions will be lifted, if additional restrictions may be initiated or reimposed, if there will be permanent changes to travel behavior patterns, and the timing of distribution and administration of COVID-19 vaccines and other medical interventions globally. See Note 2 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 for further information.

Even though there have been some improvements in the economic and operating conditions for the Company's business since the outset of the COVID-19 pandemic, the Company cannot predict the long-term effects of the pandemic on its business or the travel and restaurant industries as a whole.

Reclassification
Certain amounts from prior periods have been reclassified to conform to the current period presentation.

Recent Accounting Pronouncements Adopted

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

On January 1, 2022, the Company adopted the new accounting standards update relating to convertible instruments and contracts in an entity’s own equity. Compared to legacy U.S. GAAP, the accounting standards update reduces the number of accounting models for convertible debt instruments, requires fewer embedded conversion features to be separately recognized from the host contract, and amends certain guidance to reduce form-over-substance-based accounting conclusions. Under the updated guidance, upon the initial recognition of convertible debt, the Company presents the entire amount attributable to the debt as a liability. The initial carrying amount of the convertible debt liability is reduced by any direct and
8

incremental issuance costs paid to third parties that are associated with the convertible debt issuance. No amount attributable to the debt is initially recognized within equity unless the instrument is issued at a substantial premium. In calculating diluted earnings per share, the accounting standards update also requires the use of the if-converted method for the Company’s convertible debt.

The Company adopted the accounting standards update on a modified retrospective basis applied to the 0.75% convertible senior notes due May 2025 (see Note 9) resulting in an increase of $30 million to "Retained earnings" as of January 1, 2022. The significant corresponding balance sheet changes as of that date were an increase of $86 million to "Long-term debt" and decreases of $96 million to "Additional paid-in capital" and $21 million to "Deferred income taxes". For the Company’s convertible debt, interest expense for the periods beginning after January 1, 2022 is reflected in the financial statements using interest rates that are closer to the coupon interest rate of the debt rather than the higher imputed interest expense that resulted from the separation of conversion features required by legacy U.S. GAAP. See Note 4 for additional information on net income per share calculations.

2.    REVENUE

Disaggregation of Revenue

Geographic Information

The Company's revenue from its businesses outside of the U.S. consists of the results of Booking.com, agoda, and Rentalcars.com in their entirety and the results of the KAYAK and OpenTable businesses located outside of the U.S. This classification is independent of where the consumer resides, where the consumer is physically located while using the Company's services, or the location of the travel service provider or restaurant. For example, a reservation made through Booking.com (which is domiciled in the Netherlands) at a hotel in New York by a consumer in the United States is part of the results of the Company's businesses outside of the U.S. The Company's geographic information is as follows (in millions):
Outside of the U.S.
United StatesThe NetherlandsOtherTotal
Total revenues for the three months ended March 31,
2022$475 $1,969 $251 $2,695 
2021$197 $811 $133 $1,141 

Revenue by Type of Service

Approximately 86% of the Company's revenues for the three months ended March 31, 2022 and 2021 relate to online accommodation reservation services. Revenue from all other sources of online travel reservation services and advertising and other revenues each individually represent less than 10% of the Company's total revenue for each period.

Deferred Merchant Bookings and Deferred Revenue

Cash payments received from travelers in advance of the Company completing its performance obligations are included in "Deferred merchant bookings" in the Company's Consolidated Balance Sheets and are comprised principally of amounts estimated to be payable to the travel service providers as well as the Company's estimated deferred revenue for its commission or margin and fees. At March 31, 2022 and December 31, 2021, deferred merchant bookings included deferred revenue for online travel reservation services of $421 million and $148 million, respectively. The amounts are subject to refunds for cancellations. The Company expects to complete its performance obligations generally within one year from the reservation date. During the three months ended March 31, 2022, the Company recognized revenues of $91 million from the deferred revenue balance as of December 31, 2021. The increase in the deferred revenue balance for the three months ended March 31, 2022 is principally driven by payments received from travelers, net of amounts estimated to be payable to travel service providers, for online travel reservations in the current period.

Incentive Programs

The Company provides various incentive programs such as referral bonuses, rebates, credits, and discounts. In addition, the Company offers loyalty programs, such as OpenTable's loyalty program, where participating consumers may be awarded loyalty points on current transactions that can be redeemed in the future. The estimated value of the incentives granted
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and the loyalty points expected to be redeemed is generally recognized as a reduction of revenue at the time they are granted. At March 31, 2022 and December 31, 2021, liabilities of $60 million and $58 million, respectively, for incentives granted and $11 million and $13 million, respectively, for the loyalty programs were included in "Accrued expenses and other current liabilities" in the Consolidated Balance Sheets.

3.    STOCK-BASED COMPENSATION
 
The Company maintains equity incentive plans that include performance share units granted to officers and certain other employees, broad-based grants of restricted stock units, and stock options granted to certain employees.

During the three months ended March 31, 2021, the Company modified the performance-based awards granted in 2018 and 2019 to its executive officers, to fix the number of shares to be issued, subject to other vesting conditions. The modification, in aggregate, resulted in additional stock-based compensation expense of $40 million, which was recognized over the remaining requisite service periods for the performance-based awards.

Restricted stock units and performance share units granted by the Company during the three months ended March 31, 2022 had an aggregate grant-date fair value of $450 million. Restricted stock units and performance share units that vested during the three months ended March 31, 2022 had an aggregate fair value at vesting of $363 million. At March 31, 2022, there was $850 million of estimated total future stock-based compensation expense related to unvested restricted stock units and performance share units to be recognized over a weighted-average period of 2.3 years, and $21 million of estimated total future stock-based compensation expense related to unvested stock options to be recognized over a weighted-average period of 0.9 years.

The following table summarizes the activity in restricted stock units for employees and non-employee directors during the three months ended March 31, 2022: 
Restricted Stock UnitsSharesWeighted-average Grant-date Fair Value
Unvested at December 31, 2021281,924 $1,914 
Granted161,384 $2,102 
Vested(129,438)$1,805 
Forfeited(11,234)$2,022 
Unvested at March 31, 2022302,636 $2,057 

The following table summarizes the activity in performance share units for employees during the three months ended March 31, 2022:
Performance Share UnitsSharesWeighted-average Grant-date Fair Value
Unvested at December 31, 2021(1)
108,323 $2,123 
Granted(2),(3)
50,063 $2,211 
Vested(42,888)$1,854 
Performance shares adjustment (4)
31,598 $2,392 
Forfeited(1,128)$2,274 
Unvested at March 31, 2022145,968 $2,290 
(1)    Excludes 12,251 performance share units awarded during the year ended December 31, 2021 for which the grant date under Accounting Standards Codification ("ASC") 718, Compensation - Stock Compensation, was not established as of December 31, 2021. Among other conditions, for the grant date to be established, a mutual understanding is required to be reached between the Company and the employee of the key terms and conditions of the award, including the performance targets. The performance targets for each of the annual performance periods under the award are set at the beginning of the respective year.
(2)     Excludes 9,692 performance share units awarded during the three months ended March 31, 2022 for which the grant date under ASC 718 has not been established as of March 31, 2022.
(3)     Includes 7,856 performance share units awarded during the year ended December 31, 2021 for which the grant date under ASC 718 was established.
(4)    Probable outcome for performance-based awards is updated based upon changes in actual and forecasted operating results or expected achievement of performance goals, as applicable, and the impact of modifications.
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The following table summarizes the activity in stock options during the three months ended March 31, 2022: 
Employee Stock Options Number of SharesWeighted-average
 Exercise Price		Aggregate
 Intrinsic Value (in millions)		Weighted-average Remaining Contractual Term
(in years)
Balance, December 31, 2021135,851 $1,407 $135 8.3
Exercised(2,386)$1,411 
Forfeited (3,085)$1,411 
Balance, March 31, 2022130,380 $1,407 $123 8.0
Exercisable at March 31, 20221,317 $1,015 $2 1.1

4.    NET LOSS PER SHARE
 
The Company computes basic net loss per share by dividing net loss applicable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is based upon the weighted-average number of common and common equivalent shares outstanding during the period.
 
Common equivalent shares related to stock options, restricted stock units and performance share units are calculated using the treasury stock method. Performance share units are included in the weighted-average common equivalent shares based on the number of shares that would be issued if the end of the reporting period were the end of the performance period, if the result would be dilutive.
 
The Company's convertible senior notes have net share settlement features requiring the Company upon conversion to settle the principal amount of the debt for cash and the conversion premium for cash or shares of the Company's common stock, at the Company's option. If the conversion prices for the convertible senior notes exceed the Company's average stock price for the period, the convertible senior notes generally have no impact on diluted net income/loss per share. For periods prior to January 1, 2022, the treasury stock method was used for convertible senior notes in the calculation of diluted net income per share. Following the adoption of the accounting standards update on January 1, 2022 (see Note 1), the if-converted method is used for all periods after that date.

As the Company had net losses for both the three months ended March 31, 2022 and 2021, no incremental shares related to stock-based awards and convertible senior notes are included in the weighted-average numbers of diluted common and common equivalent shares outstanding because the effect would be anti-dilutive.

For the three months ended March 31, 2022 and 2021, 269,653 and 403,620 potential common shares, respectively, related to stock options, restricted stock units, performance share units, and convertible senior notes as applicable, were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the respective period.
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5.    INVESTMENTS

The following table summarizes, by major security type, the Company's investments at March 31, 2022 (in millions): 
 CostGross
Unrealized Gains /Upward Adjustments		Gross
Unrealized Losses /Downward Adjustments
Carrying
 Value
Short-term investments:
Debt securities$25 $— $(1)$24 
Long-term investments:
  Equity securities of private companies$78 $259 $— $337 
Equity securities with readily determinable fair values1,165 1,153 (455)1,863 
Total$1,243 $1,412 $(455)$2,200 

The following table summarizes, by major security type, the Company's investments at December 31, 2021 (in millions):
 CostGross
Unrealized Gains/Upward Adjustments
Gross
Unrealized Losses/Downward Adjustments
Carrying
 Value
Short-term investments:
Debt securities$25 $— $— $25 
Long-term investments:
Equity securities of private companies$66 $259 $— $325 
Equity securities with readily determinable fair values1,165 1,990 (305)2,850 
Total $1,231 $2,249 $(305)$3,175 

Short-term investments in debt securities are included in "Other current assets" in the Consolidated Balance Sheets.

Equity securities with readily determinable fair values include the Company's investments in Meituan, Grab Holdings Limited ("Grab"), and DiDi Global Inc. ("DiDi") with fair values of $1.6 billion, $148 million, and $98 million, respectively, at March 31, 2022 and $2.3 billion, $301 million, and $195 million at December 31, 2021, respectively, which are included in "Long-term investments" in the Consolidated Balance Sheets. Net unrealized losses of $728 million, $153 million, and $97 million for the three months ended March 31, 2022 related to Meituan, Grab, and DiDi, respectively, and net unrealized gains of $29 million for the three months ended March 31, 2021 related to Meituan, are included in "Other income (expense), net" in the Unaudited Consolidated Statements of Operations. In April 2022, DiDi announced that a shareholders' meeting will be held in May 2022 to consider the delisting of its American Depositary Shares ("ADSs") from the New York Stock Exchange and that it will not apply for listing of its shares on any other stock exchange before completion of the delisting. As of May 3, 2022, the market prices of DiDi's ADSs and Grab's shares decreased by 20% and 10%, respectively, as compared to their respective market prices on March 31, 2022.

Investments in equity securities without readily determinable fair values are measured at cost less impairment, if any. Such investments are also required to be measured at fair value as of the date of certain observable transactions for the identical or a similar investment of the same issuer. The Company’s investment in equity securities of private companies at March 31, 2022 and December 31, 2021, includes $51 million invested in Yanolja Co., Ltd. ("Yanolja"), which had a carrying value of $306 million as of those dates.

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6.    FAIR VALUE MEASUREMENTS
 
Financial assets and liabilities carried at fair value at March 31, 2022 and nonrecurring fair value measurements are classified in the categories described in the table below (in millions):
 Level 1Level 2Level 3Total
Recurring fair value measurements
ASSETS:   
Cash equivalents and restricted cash equivalents:
Money market fund investments$9,691 $— $— $9,691 
Time deposits and certificates of deposit63 — — 63 
Short-term investments:   
Debt securities— 24 — 24 
Long-term investments:
Equity securities1,863 — — 1,863 
Derivatives:
Foreign currency exchange derivatives— 11 — 11 
Total assets at fair value$11,617 $35 $— $11,652 
LIABILITIES:
Foreign currency exchange derivatives$— $19 $— $19 
Nonrecurring fair value measurements
Assets held for sale (1)
$— $— $10 $10 
Total nonrecurring fair value measurements$— $— $10 $10 
(1)    See Note 15 for additional information related to assets held for sale.

Financial assets and liabilities carried at fair value at December 31, 2021 and nonrecurring fair value measurements are classified in the categories described in the table below (in millions):    
 Level 1Level 2Total
Recurring fair value measurements (1)
   
ASSETS:
Cash equivalents and restricted cash equivalents:
Money market fund investments$10,410 $— $10,410 
Time deposits and certificates of deposit25 — 25 
Short-term investments:   
Debt securities — 25 25 
Long-term investments:
Equity securities2,850 — 2,850 
Derivatives:
Foreign currency exchange derivatives— 5 5 
Total assets at fair value$13,285 $30 $13,315 
LIABILITIES:
Foreign currency exchange derivatives$— $11 $11 
Nonrecurring fair value measurements
Investments in equity securities of private companies (2)
$— $325 $325 
Total nonrecurring fair value measurements$— $325 $325 
(1)    The Company did not have any Level 3 fair value measurements at December 31, 2021.
(2)    During the year ended December 31, 2021, the Company recorded upward adjustments to its investments in equity securities of private companies based on observable price changes in orderly transactions for identical or similar investments of the same issuer (see Note 5).

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There are three levels of inputs to measure fair value. The definition of each input is described below:
 
Level 1:    Quoted prices in active markets that are accessible by the Company at the measurement date for identical assets and liabilities.

Level 2:    Inputs that are observable, either directly or indirectly. Such prices may be based upon quoted prices for identical or comparable securities in active markets or inputs not quoted on active markets, but corroborated by market data.

Level 3:    Unobservable inputs are used when little or no market data is available.

Investments

See Note 5 for additional information related to the Company's investments.

The valuation of the Company's investment in debt securities is considered a "Level 2" valuation because the Company has access to quoted prices for identical or comparable securities, but does not have visibility into the volume and frequency of trading for this investment. A market approach is used for recurring fair value measurements and the valuation techniques use inputs that are observable, or can be corroborated by observable data, in an active marketplace.
    
Derivatives

The Company's derivative instruments are valued using pricing models. Pricing models take into account the contract terms as well as multiple inputs where applicable, such as interest rate yield curves, option volatility, and foreign currency exchange rates. The valuation of derivatives are considered "Level 2" fair value measurements. The Company's derivative instruments are typically short-term in nature. The Company reports the fair values of its derivative assets and liabilities on a gross basis in the Consolidated Balance Sheets in "Other current assets" and "Accrued expenses and other current liabilities," respectively.

In the normal course of business, the Company is exposed to the impact of foreign currency fluctuations which it mitigates by following established risk management policies and procedures, including the use of derivatives. The Company enters into foreign currency forward contracts to hedge its exposure to the impact of movements in foreign currency exchange rates primarily on its transactional balances denominated in currencies other than the functional currency and does not use derivatives for trading or speculative purposes. As of March 31, 2022 and December 31, 2021, the Company did not designate any foreign currency exchange derivatives as hedges for accounting purposes.

The table below provides estimated fair values and notional amounts of foreign currency exchange derivatives outstanding at March 31, 2022 and December 31, 2021 (in millions). The notional amount of a foreign currency forward contract is the contracted amount of foreign currency to be exchanged and is not recorded in the balance sheets.
 March 31, 2022December 31, 2021
Estimated fair value of derivative assets$11 $5 
Estimated fair value of derivative liabilities$19 $11 
Notional amount:
 Foreign currency purchases$1,360 $840 
 Foreign currency sales$2,019 $1,857 

The Company recorded losses of $16 million and $9 million in "Other income (expense), net" in the Unaudited Consolidated Statements of Operations related to foreign currency exchange derivatives for the three months ended March 31, 2022 and 2021, respectively.

Other Financial Assets and Liabilities

At March 31, 2022 and December 31, 2021, the Company's cash consisted of bank deposits. Cash equivalents principally include money market fund investments, time deposits, and certificates of deposit and their carrying value generally approximates the fair value as they are readily convertible to known amounts of cash. Other financial assets and liabilities,
14

including restricted cash, accounts payable, accrued expenses, and deferred merchant bookings, are carried at cost which approximates their fair values because of the short-term nature of these items. Accounts receivable and other financial assets measured at amortized cost are carried at cost less an allowance for expected credit losses to present the net amount expected to be collected (see Note 7). See Note 9 for the estimated fair value of the Company's outstanding senior notes, including the estimated fair value of the Company's convertible senior notes.

7.     ACCOUNTS RECEIVABLE AND OTHER FINANCIAL ASSETS
 
Accounts receivable in the Consolidated Balance Sheets at March 31, 2022 and December 31, 2021 includes receivables from customers of $1.1 billion and receivables from payment processors and networks of $545 million and $343 million, respectively. The remaining balance principally relates to receivables from marketing affiliates. The Company’s receivables are short-term in nature. In addition, the Company had prepayments to certain customers of $51 million and $67 million included in "Prepaid expenses, net" and $20 million and $18 million included in "Other assets, net" in the Consolidated Balance Sheets at March 31, 2022 and December 31, 2021, respectively. The amounts mentioned above are stated on gross basis, before deducting the allowance for expected credit losses.

Significant judgments and assumptions are required to estimate the allowance for expected credit losses and such assumptions may change in future periods, particularly the assumptions related to the business prospects and financial condition of customers and marketing affiliates, including the impact of the COVID-19 pandemic, and the Company’s ability to collect the receivable or recover the prepayment.

The following table summarizes the activity of the allowance for expected credit losses on receivables (in millions):
Three Months Ended
March 31,
 20222021
Balance, beginning of year$101 $166 
Provision charged to expense30 (12)
Write-offs and adjustments(28)(57)
Foreign currency translation adjustments(1)(3)
Balance, end of period$102 $94