Under The Spotlight: Booking Holdings

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Booking Holdings (BKNG) is the world leader in online travel and related services provided to customers and partners in over 220 countries through six primary brands - Booking.com, priceline.com, Kayak, agoda.com, rentalcars.com, and OpenTable. Booking Holdings helps people experience the world by providing consumers, travel service providers, and restaurants with leading travel and restaurant reservation and related services

Strong Brands

Booking Holdings was launched in 1998 in the U.S. under the priceline.com brand. Since then, the operations have expanded to include other strong travel-related brands, including Booking.com, agoda.com, rentalcars.com, KAYAK, and OpenTable.

Booking.com is available in 40 languages and is the most profitable and largest online accommodation reservation service in the world with approximately 2.4 million properties in more than 220 countries, including 400,000 hotels, motels, and resorts and over 1.9 million homes, apartments, and other unique places to stay. Agoda.com is a leading online accommodation reservation service catering primarily to consumers in the Asia-Pacific region.

Rentalcars.com is a multinational car hire service, offering its reservation services in over 48,800 locations, including more than 1,450 airports throughout the world. Priceline.com offers leisure travelers, primarily in the U.S., multiple ways to save on airline tickets, hotel rooms, car rentals, vacation packages, and cruises.

KAYAK, acquired in 2013, is a leading travel research site allowing people to easily compare hundreds of travel sites when searching for flights, hotels, and rental cars. OpenTable, acquired in 2014, is a leading brand for booking online restaurant reservations. OpenTable primarily does business in the United States with plans to expand internationally.

Strong Cash Flow

Booking Holdings’ business is not capital intensive and thus generates very strong free cash flow. Year-to-date, free cash flow jumped 75% to $4.1 billion with the company repurchasing $4.3 billion of its common stock. Booking has reduced its shares outstanding by 5% since the beginning of the year. Over the last five years, Booking Holdings has reduced its share count by 20%, despite suspending the share buyback activity for 21 months during the pandemic. In October, the company repurchased an additional $595 million of its common stock with $5.6 billion remaining authorized for future share repurchases. Thanks to the strong cash flow, the company ended the 9-30-2022 quarter with more than $11.7 billion in cash and investments on its hospitable balance sheet.

During the past five years, Booking Holdings has generated over $16 billion in free cash flow and has returned over $17 billion to shareholders through share repurchases. In addition, Booking Holdings’ highly profitable business model has provided an average net profit margin of 18% over the last five years despite the pandemic.

Third Quarter 2022

Booking Holdings reported strong third-quarter financial results with record revenues traveling 29% higher, or 47% on a constant currency basis, to $6.1 billion with net income and EPS both more than doubling to $1.7 billion and $41.98, respectively. Third-quarter gross travel bookings soared 36%, or 52% on a constant currency basis, to $32.1 billion. Room nights booked in the third quarter jumped 31% to 240 million. Rental car days motored 25% higher while airline tickets flew 45% higher. Third-quarter cancelation rates remained below 2019 levels and the booking window expanded meaningfully versus the third quarter of 2021. The company is gaining market share with 45% of its bookings done directly on its own app, and a record 40% of Booking.com’s gross bookings were processed through its payment platform, delivering a more seamless booking experience for customers.

Despite rising concerns about the macroeconomic environment, the company is encouraged by an improvement in room night trends which continued into October, and by the strong level of bookings for travel in early 2023. The company is not seeing travelers trading down to cheaper travel or shortening their stays. The company is seeing travel growth in all geographic regions with Asia’s delayed travel now recovering to exceed pre-pandemic levels.

Long-term investors should consider booking a reservation with Booking Holdings, a high-quality quality company with strong brands, strong cash flows, and strong future growth. Buy.

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