Booking Holdings Q1 - Earnings Update

Booking Holdings: the king of travel companies?

Bookings growth

The hotel aggregator once again delivered record-breaking figures, surpassing its own expectations by a significant margin. Q1 is typically the least profitable quarter, so any time there is good revenue performance in this period, profitability sees a significant rise due to better coverage of fixed costs. This impact is less pronounced in other, more profitable quarters.

• Revenue surge: Revenue smashed expectations with a 17% increase, where only 12% was anticipated.

• Adjusted EPS Increase: Adjusted earnings per share witnessed a remarkable surge of 76%. Benefits from economies of scale and a reduction in the number of outstanding shares played a key role in the increased profitability.

• Booking nights: The number of booked nights showed impressive growth, with 297 million nights recorded last quarter. This shows the percentage growth over past quarters. This decline is likely to continue, with only 5% growth expected for the upcoming quarter. It will be nearly impossible for Booking to grow its revenue by more than 10% annually at this scale in the coming years.

Table 1 | Growth in total booked nights | Source: Finchat.io

The connected trip seems to be slowly gaining traction. Fogel:

“I'm encouraged to see strong growth in transactions that are connected to another booking from a different travel vertical in a trip. These connected transactions increased by just over 50% year-over-year in Q1."

The Booking App

“The mobile apps also allow us more opportunities to engage directly with consumers. In Q1, the mobile app mix of about 51% was 5% higher than the first quarter of 2023.”

The upward trend of users accessing Booking directly, either through the website or the app, continued as expected. Currently, 51% of bookings are made via the app, a 5% increase from Q1 2023.

Capital Allocation

Booking persists in its share buyback program, resulting in a 9% reduction in outstanding shares compared to a year ago. Additionally, the company has embraced dividend payouts, with $300 million distributed last quarter and another $8.75 per share planned for the upcoming quarter.

The $300 million dividend represents only a fraction of the $1.9 billion spent on share repurchases. However, due to the increased stock price, the cash allocated to buying back shares might have decreased over recent quarters. Here you can see the amounts for the past quarters up to 2023.

Table 2 | Share buybacks in billions of $ | Source: Finchat.io

Future Outlook

As long as Booking maintains its projected 15% growth in earnings per share over the coming years, it remains an attractive investment. To achieve this goal, revenue growth must outpace the global economy with the help of scale advantages and share buybacks.

Financial Highlights

• Revenue growth of 17% YoY, totaling $4.4 billion.

• Net profit of $776 million, marking a staggering 192% YoY growth.

• Room nights booked increased by 9% YoY.

• Adjusted EPS rose by 76% YoY.

• The cash position increased to $15.6 billion.

• Merchant revenue growth outpaced agency revenue.

• G&A (general and administrative) costs decreased by approximately 30% YoY.

• Diluted shares outstanding decreased by approximately 9% YoY. Although overnight stays still account for the vast majority of revenue, we also see growth in other segments. Especially airline tickets continue to grow fast.

Key Takeaways

• Strong growth in mobile app usage.

• Diversification into airline ticket bookings.

• Significant free cash flow of $2.4 billion, accounting for 55% of turnover.

• Encouraging traction was observed in connected trip transactions, growing by over 50% YoY in Q1.

Conclusion

Booking Holdings had a better-than-expected quarter, demonstrating robust growth and generating substantial cash reserves, primarily allocated towards share repurchases.