Our certificate of incorporation and bylaws currently provide, and our restated certificate of incorporation and amended and restated bylaws, which will become effective immediately prior to the completion of this offering, will provide, that: (i) unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware) will, to the fullest extent permitted by law, be the sole and exclusive forum for: (A) any derivative action or proceeding brought on behalf of the company, (B) any action asserting a claim for or based on a breach of a fiduciary duty owed by any of our current or former director, officer, other employee, agent or stockholder to the company or our stockholders, including without limitation a claim alleging the aiding and abetting of such a breach of fiduciary duty, (C) any action asserting a claim against the company or any of our current or former director, officer, employee, agent or stockholder arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or bylaws or as to which the Delaware General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware, or (D) any action asserting a claim related to or involving the company that is governed by the internal affairs doctrine; (ii) unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America will, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder; (iii) any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the company will be deemed to have notice of and consented to these provisions; and (iv) failure to enforce the foregoing provisions would cause us irreparable harm, and we will be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions. Nothing in our current certificate of incorporation or bylaws or our restated certificate of incorporation or amended and restated bylaws precludes stockholders that assert claims under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), from bringing such claims in federal court to the extent that the Exchange Act confers exclusive federal jurisdiction over such claims, subject to applicable law.
We believe these provisions may benefit us by providing increased consistency in the application of Delaware law and federal securities laws by chancellors and judges, as applicable, particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. If a court were to find the choice of forum provision that will be contained in our restated certificate of incorporation or amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, results of operations, and financial condition.
General Risk Factors
The value of our marketable securities could decline, which could adversely affect our results of operations and financial condition.
Our marketable securities portfolio includes various holdings, types, and maturities. Market values of these investments can be adversely impacted by various factors, including liquidity in the underlying security, credit deterioration, the financial condition of the credit issuer, foreign exchange rates, and changes in interest rates. Our marketable securities, which we consider highly-liquid investments, are classified as available-for-sale and are recorded on our consolidated balance sheets at their estimated fair value. Unrealized gains and losses on available-for-sale debt securities are reported as a component of accumulated other comprehensive income (loss) in stockholders’ deficit. Realized gains and losses and
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other than-temporary impairments are reported within other income (expense), net in the consolidated statements of operations. Our marketable equity securities with readily determinable fair values are measured at fair value on a recurring basis with changes in fair value recognized within other income (expense), net in the consolidated statements of operations.
If the fair value of our marketable equity securities declines, our earnings will be reduced or losses will be increased. Furthermore, our interest income from cash, cash equivalents, and our marketable securities are impacted by changes in interest rates, and a decline in interest rates would adversely impact our interest income.
We will incur significant expenses as a result of being a public company, which could materially adversely affect our business, results of operations, and financial condition.
As a public company, we will incur significant legal, accounting, and other expenses that we have not incurred as a private company. We will be subject to the reporting requirements of the Exchange Act, the applicable requirements of the Sarbanes-Oxley Act, the Dodd-Frank Act, the rules and regulations of the SEC, and the Listing Rules of The Nasdaq Stock Market LLC (“Nasdaq”). Stockholder activism and the level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional significant compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate. The increased costs will increase our net loss or decrease our net income, and may require us to reduce costs in other areas of our business or increase our service fees which could result in a reduction in bookings. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on our board committees, or as executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our Class A common stock, fines, sanctions, and other regulatory action and potentially civil litigation.
Further, the majority of our management team, including our Chief Executive Officer and Chief Financial Officer, have either no or limited experience in managing publicly-traded companies. Our management team may not successfully or efficiently manage our transition to being a public company and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, and could materially adversely affect our business, results of operations, and financial condition.
As a public reporting company, we will be subject to rules and regulations established by the SEC and Nasdaq regarding our internal control over financial reporting. We may not complete needed improvements to our internal control over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which may adversely affect investor confidence in our company and, as a result, the value of our Class A common stock and your investment.
As a public reporting company, we will become subject to the rules and regulations established by the SEC and Nasdaq. These rules and regulations will require, among other things, that we establish and periodically evaluate procedures with respect to our internal control over financial reporting. Reporting obligations as a public company are likely to place a considerable strain on our financial and management systems, processes and controls, as well as on our personnel, including senior management. In addition, as a public company, we will be required to document and test our internal control over financial reporting pursuant to
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Section 404 of the Sarbanes-Oxley Act so that our management can certify as to the effectiveness of our internal control over financial reporting. Management’s initial certification under Section 404 of the Sarbanes-Oxley Act will be required with our annual report on Form 10-K for the year ending December 31, 2021. In support of such certifications, we will be required to document and make significant changes and enhancements, including potentially hiring additional personnel, to our internal control over financial reporting. Likewise, our independent registered public accounting firm will be required to provide an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2021. As a result, we anticipate investing significant resources to enhance and maintain our financial and managerial controls, reporting systems, and procedures.
To date, neither our management nor an independent registered public accounting firm has performed an evaluation of our internal control over financial reporting in accordance with the requirements of Section 404 of the Sarbanes-Oxley Act because no such evaluation has been required. If our management is unable to certify the effectiveness of our internal controls, our independent registered public accounting firm is unable to express an unqualified opinion on the effectiveness of our internal control over financial reporting, we identify or fail to remediate material weaknesses in our internal controls, or we do not effectively or accurately report our financial performance to the appropriate regulators on a timely basis, we could be subject to regulatory scrutiny and a loss of investor confidence, which could significantly harm our reputation and our stock price, and materially adversely affect our business, results of operations, and financial condition.
We previously identified a material weakness in our internal control over financial reporting in connection with a revision to previously issued financial statements for the year ended December 31, 2017 relating to the provision for income taxes resulting from the incorrect use of tax attributes. We identified that the cause of the income tax provision adjustment was a lack of qualified tax personnel with an appropriate level of experience to review the use of tax attributes in accordance with tax ordering rules. While we remediated this material weakness as of December 31, 2018 through hiring additional experienced personnel, we can give no assurance that additional material weaknesses will not be identified in the future. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis. We cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to prevent or avoid potential future material weaknesses. A material weakness in our internal control over financial reporting could result in an increased probability of fraud, the potential loss of customers, litigation from our stockholders, reduction in our ability to obtain financing, and require additional expenditures to remediate. Our failure to implement and maintain effective internal control over financial reporting could result in errors in our financial statements that could result in loss of investor confidence in the accuracy and completeness of our financial reports and a decline in our stock price, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities.
The failure to successfully implement and maintain accounting systems could materially adversely impact our business, results of operations, and financial condition.
In the third quarter of 2019, we implemented a new third-party revenue accounting system in order to automate our revenue accounting and reporting processes. System implementations of this scale are complex and time-consuming projects that require transformations of business and financial processes. Such transformations involve risk inherent in the conversion to a new system, including loss of information and potential disruption to normal operations. Additionally, if our revenue and other accounting or tax systems do not operate as intended or do not scale with anticipated growth in our business, the effectiveness of our internal control over financial reporting could be adversely affected. Any failure to develop, implement, or maintain effective internal controls related to our revenue and other accounting or
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tax systems and associated reporting could materially adversely affect our business, results of operations, and financial condition or cause us to fail to meet our reporting obligations. In addition, if we experience interruptions in service or operational difficulties with our revenue and other accounting or tax systems, our business, results of operations, and financial condition could be materially adversely affected.
Our results of operations and financial condition could be materially adversely affected by changes in accounting principles.
The accounting for our business is subject to change based on the evolution of our business model, interpretations of relevant accounting principles, enforcement of existing or new regulations, and changes in policies, rules, regulations, and interpretations, of accounting and financial reporting requirements of the SEC or other regulatory agencies. Adoption of a change in accounting principles or interpretations could have a significant effect on our reported results of operations and could affect the reporting of transactions completed before the adoption of such change. It is difficult to predict the impact of future changes to accounting principles and accounting policies over financial reporting, any of which could adversely affect our results of operations and financial condition and could require significant investment in systems and personnel.
Avoiding regulation under the Investment Company Act may adversely affect our operations.
The Investment Company Act of 1940, as amended (the “Investment Company Act”), contains substantive legal requirements that regulate the manner in which “investment companies” are permitted to conduct their business activities. We currently conduct, and intend to continue to conduct, our operations so that neither we nor any of our subsidiaries are required to register as an investment company under the Investment Company Act. We are not engaged primarily, nor do we hold ourselves out as being engaged primarily, in the business of investing, reinvesting, or trading in securities, and neither do we intend to own investment securities with a combined value in excess of 40% of the value, as determined by our board of directors, of our total assets, exclusive of U.S. government securities and cash items, on an unconsolidated basis. We do, however, make minority investments in companies and acquire other financial instruments from time to time that may be deemed investment securities. We expect to conduct our operations such that the value of those investments will not rise to a level where we might be deemed an investment company, but there can be no assurances that we will be successful in maintaining the required ratios without taking actions that may adversely affect our operations. For example, to avoid being deemed an investment company we may be required to sell certain of our assets and pay significant taxes upon the sale or transfer of such assets, which may have a material adverse effect on our business, results of operations, and financial condition.
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Special Note Regarding Forward-Looking Statements
This prospectus contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this prospectus, including statements regarding our strategy, future financial condition, future operations, projected costs, prospects, plans, objectives of management, and expected market growth, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “shall,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “goal,” “objective,” “seeks,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this prospectus include, but are not limited to, statements about:
| • |
the effects of the COVID-19 pandemic on our business, the travel industry, travel trends, and the global economy generally; |
| • |
our expectations regarding our financial performance, including our revenue, costs, Adjusted EBITDA, and Free Cash Flow; |
| • |
our expectations regarding future operating performance, including Nights and Experiences Booked, GBV, and GBV per Night and Experience Booked; |
| • |
our ability to attract and retain hosts and guests; |
| • |
our ability to compete in our industry; |
| • |
our expectations regarding the resilience of our model, including in areas such as domestic travel, short-distance travel, travel outside of top cities, and long-term stays; |
| • |
the effects of seasonal trends on our results of operations; |
| • |
the sufficiency of our cash, cash equivalents, and investments to meet our liquidity needs; |
| • |
our expectations regarding the impact of the reduction in performance marketing spend to focus on brand marketing, and our ability to continue to attract guests and hosts to our platform through direct and unpaid channels; |
| • |
our ability to make required payments under our credit agreements and to comply with the various requirements of our indebtedness, |
| • |
our ability to effectively manage our exposure to fluctuations in foreign currency exchange rates; |
| • |
the increased expenses associated with being a public company; |
| • |
the size of our addressable markets, market share, and market trends, including our ability to grow our business in the countries we have identified as near-term priorities; |
| • |
anticipated trends, developments, and challenges in our industry, business, and the highly competitive markets in which we operate; |
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| • |
our ability to anticipate market needs or develop new or enhanced offerings and services to meet those needs; |
| • |
our ability to manage expansion into international markets and new industries; |
| • |
our ability to stay in compliance with laws and regulations, including tax laws, that currently apply or may become applicable to our business both in the United States and internationally and our expectations regarding various laws and restrictions that relate to our business; |
| • |
our expectations regarding our income tax liabilities and the adequacy of our reserves; |
| • |
our ability to effectively manage our growth and expand our infrastructure and maintain our corporate culture; |
| • |
our ability to identify, recruit, and retain skilled personnel, including key members of senior management; |
| • |
the safety, affordability, and convenience of our platform and our offerings; |
| • |
our ability to successfully defend litigation brought against us; |
| • |
our ability to successfully identify, manage, and integrate any existing and potential acquisitions; |
| • |
our ability to maintain, protect, and enhance our intellectual property; |
| • |
our plan to donate 400,000 shares of our Class A common stock to a charitable foundation after the completion of this offering; and |
| • |
our intended use of the net proceeds from this offering. |
We caution you that the foregoing list does not contain all of the forward-looking statements made in this prospectus.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this prospectus primarily on our current expectations, estimates, forecasts, and projections about future events and trends that we believe may affect our business, results of operations, financial condition, and prospects. Although we believe that we have a reasonable basis for each forward-looking statement contained in this prospectus, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur at all. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this prospectus. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this prospectus relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this prospectus to reflect events or circumstances after the date of this prospectus or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.
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In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.
You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this prospectus by these cautionary statements.
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This prospectus contains estimates, projections and other information concerning our industry and our business, as well as data regarding market research, estimates, and forecasts prepared by our management. Information that is based on estimates, forecasts, projections, market research, or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors.” Unless otherwise expressly stated, we obtained this industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry and general publications, government data, and similar sources. In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from sources which we paid for, sponsored, or conducted, unless otherwise expressly stated or the context otherwise requires. While we have compiled, extracted, and reproduced industry data from these sources, we have not independently verified the data. Forecasts and other forward-looking information with respect to industry, business, market, and other data are subject to the same qualifications and additional uncertainties regarding the other forward-looking statements in this prospectus. See “Special Note Regarding Forward-Looking Statements.”
Among others, we refer to estimates compiled by the following industry sources:
| • |
World Travel & Tourism Council (“WTTC”), an organization that represents the travel and tourism private sector globally; |
| • |
Euromonitor International (“Euromonitor”), a company that provides strategic market research; |
| • |
United Nations Department of Economic and Social Affairs, the United Nations agency responsible for sustainable global development; |
| • |
United Nations World Tourism Organization (“UNWTO”), the United Nations agency responsible for the promotion of responsible, sustainable, and universally accessible tourism; |
| • |
Smith Travel Research, Inc. (“STR”), a company that provides data benchmarking, analytics, and marketplace insights for global hospitality sectors; |
| • |
The Business Research Company, a market research and intelligence company; |
| • |
OAG Aviation Worldwide Limited (“OAG Aviation”), a global data provider; and |
| • |
The Apartment Service Worldwide, a serviced apartment company that provides detailed reports on temporary housing programs for corporate clients. |
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We estimate that we will receive net proceeds from this offering of approximately $ million (or $ million if the underwriters exercise their option to purchase additional shares of Class A common stock in full), based upon an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive proceeds from the sale of Class A common stock in this offering by the selling stockholders.
Each $1.00 increase or decrease in the assumed initial public offering price per share of $ , which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease the net proceeds to us from this offering by approximately $ million, assuming the number of shares of Class A common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each 1.0 million share increase or decrease in the number of shares of Class A common stock offered in this offering would increase or decrease the net proceeds to us from this offering by approximately $ million, assuming that the initial public offering price per share remains at $ , which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The principal purposes of this offering are to increase our capitalization and financial flexibility and to create a public market for our common stock.
We currently intend to use the net proceeds from this offering for general corporate purposes, including working capital, operating expenses, and capital expenditures. We may also use a portion of the net proceeds to acquire or make investments in businesses, products, offerings, and technologies, although we do not have agreements or commitments for any material acquisitions or investments at this time.
We intend to use a portion of the net proceeds we receive from this offering to satisfy a portion of the anticipated tax withholding and remittance obligations of $ million related to the RSU Settlement based upon the assumed initial public offering price per share of $ , which is the midpoint of the price range set forth on the cover page of this prospectus. Each $1.00 increase or decrease in the assumed initial public offering price per share of $ , which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease the amount we would be required to pay to satisfy our tax withholding and remittance obligations related to the RSU Settlement by $ million.
The expected use of net proceeds from this offering represents our intentions based upon our present plans and business conditions. We cannot predict with certainty all of the particular uses for the proceeds of this offering or the amounts that we will actually spend on the uses set forth above. Accordingly, our management will have broad discretion in applying the net proceeds of this offering. The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the anticipated growth of our business. Pending their use, we intend to invest the net proceeds of this offering in a variety of capital-preservation investments, including short- and intermediate-term investments, interest-bearing investments, investment-grade securities, government securities, and money market funds.
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We intend to retain any future earnings and do not anticipate declaring or paying any cash dividends in the foreseeable future. The terms of certain of our outstanding debt instruments restrict our ability to pay dividends or make distributions, and we may enter into credit agreements or other borrowing arrangements in the future that may restrict our ability to declare or pay cash dividends or make distributions. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and other factors our board of directors may deem relevant.
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The following table sets forth cash, cash equivalents, and marketable securities, as well as our capitalization, as of September 30, 2020 as follows:
| • |
on an actual basis; |
| • |
on a pro forma basis, giving effect to (i) the conversion of all outstanding shares of our redeemable convertible preferred stock, of which 239,623,894 shares are outstanding as of September 30, 2020, into an aggregate of 240,910,588 shares of Class B common stock as if such conversion had occurred on September 30, 2020, including 1,286,694 shares of common stock issuable pursuant to the anti-dilution adjustment provisions relating to our Series C redeemable convertible preferred stock (the “Preferred Stock Conversion”), (ii) the net issuance of shares of our Class A common stock upon the vesting and settlement of RSUs, for which the service-based vesting condition was satisfied as of September 30, 2020 and for which we expect the liquidity-based vesting condition to be satisfied in connection with this offering, after withholding an aggregate of shares to satisfy associated estimated income tax obligations (based on the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and an assumed % tax withholding rate) (the “RSU Settlement”), (iii) the related increase in liabilities and corresponding decrease in additional paid-in capital for the associated tax liabilities related to the net settlement of the RSUs, (iv) stock-based compensation expense of $ related to RSUs for which the service-based vesting condition was satisfied or partially satisfied as of September 30, 2020 for which we expect the liquidity-based vesting condition to be satisfied in connection with this offering, reflected as an increase to additional paid-in capital and accumulated deficit, (v) the issuance of 9,200,000 shares of our Class H common stock to our wholly-owned Host Endowment Fund subsidiary in November 2020, and (vi) the filing and effectiveness of our restated certificate of incorporation in Delaware, which will occur immediately prior to the completion of this offering; and |
| • |
on a pro forma as adjusted basis, giving effect to (i) the pro forma adjustments set forth above, (ii) the sale and issuance of shares of our Class A common stock in this offering at an assumed initial public offering price per share of $ , which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, and (iii) the issuance of 400,000 shares of our Class A common stock that we plan to donate to a charitable foundation after the completion of this offering and an associated non-cash expense of approximately $ million, estimated based on an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus. |
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The information below is illustrative only, and our cash, cash equivalents, and marketable securities, additional paid-in capital, accumulated deficit, total stockholders’ equity (deficit), and total capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of the offering determined at the pricing of this offering. You should read this table together with our consolidated financial statements and related notes, and the sections titled “Selected Consolidated Financial and Other Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that are included elsewhere in this prospectus.
| As of September 30, 2020 | ||||||||||||
| Actual | Pro Forma | Pro Forma As Adjusted(1) |
||||||||||
| (unaudited) | ||||||||||||
| (in thousands, except share and per share data) | ||||||||||||
| Cash, cash equivalents, and marketable securities |
$ | 4,495,211 | $ | $ | ||||||||
|
Long-term debt(2) |
$ |
1,821,302 |
|
$ |
|
|
$ |
|
| |||
|
Redeemable convertible preferred stock, $0.0001 par value; 247,217,042 shares authorized, 239,623,894 shares issued and outstanding, actual; no shares authorized, issued, and outstanding, pro forma and pro forma as adjusted |
3,231,502 | |||||||||||
|
Stockholders’ equity (deficit): |
|
|
|
|
|
|
|
|
| |||
|
Preferred stock, $0.0001 par value; no shares authorized, issued and outstanding, actual; 10,000,000 shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted |
— |
|
|
|
|
|
| |||||
|
Class A common stock, $0.0001 par value; 710,000,000 shares authorized, 17,455,568 shares issued and outstanding, actual; 2,000,000,000 shares authorized, shares issued and outstanding, pro forma; 2,000,000,000 shares authorized, shares issued and outstanding, pro forma as adjusted |
1 |
|
|
|
|
|
| |||||
|
Class B common stock, $0.0001 par value; 710,000,000 shares authorized, 249,978,646 shares issued and outstanding, actual; 710,000,000 shares authorized, shares issued and outstanding, pro forma; 710,000,000 shares authorized, shares issued and outstanding, pro forma as adjusted |
25 |
|
|
|
|
|
| |||||
|
Class C common stock, $0.0001 par value; no shares authorized, issued and outstanding, actual; 2,000,000,000 shares authorized, no shares issued and outstanding, pro forma; 2,000,000,000 shares authorized, no shares issued and outstanding, pro forma as adjusted |
— |
|
|
|
|
|
| |||||
|
Class H common stock, $0.0001 par value; no shares authorized, issued and outstanding, actual; 26,000,000 shares authorized, 9,200,000 shares issued, pro forma; 26,000,000 shares authorized, 9,200,000 shares issued, pro forma as adjusted |
— |
|
|
|
|
|
| |||||
|
Additional paid-in capital |
744,413 |
|
|
|
|
|
| |||||
|
Accumulated other comprehensive loss |
(2,867 | ) |
|
|
|
|
|
| ||||
|
Accumulated deficit |
(2,117,856 | ) |
|
|
|
|
|
| ||||
|
Total stockholders’ equity (deficit) |
$ |
(1,376,284 |
) |
$ |
|
|
$ |
|
| |||
|
Total capitalization |
$ |
3,676,520 |
|
$ |
|
|
$ |
|
|
| (1) |
Each $1.00 increase or decrease in the assumed initial public offering price per share of $ , which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease each of cash, cash equivalents, and marketable securities, additional paid-in capital, total stockholders’ equity, and total capitalization on a pro forma as adjusted basis by approximately $ million, assuming the number of shares offered, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each 1.0 million share increase or decrease in the number of shares offered in this offering would increase or decrease each of cash, cash equivalents, and marketable securities, additional paid-in capital, total stockholders’ equity, and total capitalization on a pro forma as adjusted basis by approximately $ million, assuming that the initial public offering price per share remains at $ , which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. |
| (2) |
Consists of $1,997.5 million of principal, net of unamortized debt discount and issuance costs of $176.2 million. |
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The pro forma and pro forma as adjusted columns in the table above are based on shares of Class A common stock and shares of Class B common stock (after giving effect to the Preferred Stock Conversion and the RSU Settlement) outstanding as of September 30, 2020, no shares of Class C common stock outstanding, and 9,200,000 shares of Class H common stock issued to our wholly-owned Host Endowment Fund subsidiary in November 2020, and exclude:
| • |
24,460,092 shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock that were outstanding as of September 30, 2020, with a weighted-average exercise price of $5.96 per share, pursuant to our 2008 Plan; |
| • |
13,788,876 shares of our Class B common stock issuable upon the exercise of options to purchase shares of our Class B common stock that were outstanding as of September 30, 2020, with a weighted-average exercise price of $3.18 per share, pursuant to our 2008 Plan; |
| • |
6,408,714 shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock that were outstanding as of September 30, 2020, with a weighted-average exercise price of $49.77 per share, pursuant to our 2018 Plan; |
| • |
181,782 shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock that were outstanding as of September 30, 2020, with a weighted-average exercise price of $22.65 per share, pursuant to our Hotel Tonight Plan; |
| • |
1,265,344 RSUs covering shares of our Class A common stock that are issuable upon satisfaction of service-based and liquidity-based vesting conditions outstanding as of September 30, 2020, for which the service-based condition was not yet satisfied as of September 30, 2020, pursuant to our 2008 Plan (we expect that vesting of certain of these RSUs through , 2020 will result in the net issuance of shares of our Class A common stock in connection with this offering, after withholding shares of Class A common stock to satisfy associated estimated income tax obligations (based on the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and an assumed % tax withholding rate)); |
| • |
30,762,460 RSUs covering shares of our Class A common stock that are issuable upon satisfaction of service-based and liquidity-based vesting conditions outstanding as of September 30, 2020, for which the service-based condition was not yet satisfied as of September 30, 2020, pursuant to our 2018 Plan (we expect that vesting of certain of these RSUs through , 2020 will result in the net issuance of shares of our Class A common stock in connection with this offering, after withholding shares of Class A common stock to satisfy associated estimated income tax obligations (based on the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and an assumed % tax withholding rate)); |
| • |
16,344 RSUs covering shares of our Class A common stock that are issuable upon satisfaction of service-based and liquidity-based vesting conditions outstanding as of September 30, 2020, for which the service-based condition was not yet satisfied as of September 30, 2020, pursuant to our Hotel Tonight Plan (we expect that vesting of certain of these RSUs through , 2020 will result in the net issuance of shares of our Class A common stock in connection with this offering, after withholding shares of Class A common stock to satisfy associated estimated income tax obligations (based on the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and an assumed % tax withholding rate)); |
109
| • |
5,465,264 RSUs covering shares of our Class A common stock that are issuable upon satisfaction of a service-based vesting condition outstanding as of September 30, 2020, for which the service-based condition was not yet satisfied as of September 30, 2020, pursuant to our 2018 Plan (we expect that vesting of certain of these RSUs through , 2020 will result in the net issuance of shares of our Class A common stock, after withholding shares of Class A common stock to satisfy associated estimated income tax obligations (based on the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and an assumed % tax withholding rate)); |
| • |
shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock that were granted after September 30, 2020, with a weighted-average exercise price of $ per share, pursuant to our 2018 Plan; |
| • |
RSUs covering shares of our Class A common stock that are issuable upon satisfaction of a service-based vesting condition that were granted after September 30, 2020, pursuant to our 2018 Plan (we expect that vesting of certain of these RSUs through , 2020 will result in the net issuance of shares of our Class A common stock, after withholding shares of Class A common stock to satisfy associated estimated income tax obligations (based on the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and an assumed % tax withholding rate)); |
| • |
7,934,794 shares of Class A common stock issuable upon the exercise of warrants to purchase shares of Class A common stock outstanding as of September 30, 2020, with a weighted-average exercise price of $28.355 per share; |
| • |
shares of our Class A common stock reserved for future issuance under our 2020 Plan, which will become effective on the date immediately prior to the date our registration statement of which this prospectus forms a part becomes effective; and |
| • |
4,000,000 shares of our Class A common stock reserved for future issuance under our ESPP, which will become effective on the date immediately prior to the date our registration statement of which this prospectus forms a part becomes effective. |
Our 2020 Plan and ESPP each provides for annual automatic increases in the number of shares reserved thereunder, and our 2020 Plan also provides for increases to the number of shares of Class A common stock that may be granted thereunder based on shares underlying any awards under our 2008 Plan and 2018 Plan that expire, are forfeited or are otherwise terminated, as more fully described in the section titled “Compensation Discussion and Analysis—Executive Compensation Tables—Equity Plans—2020 Incentive Award Plan.”
110
If you invest in our Class A common stock in this offering, your interest will be diluted to the extent of the difference between the initial public offering price per share of Class A common stock and the pro forma as adjusted net tangible book value per share of our Class A, Class B, and Class H common stock immediately after this offering.
Our historical net tangible book value as of September 30, 2020 was $ million, or $ per share. Net tangible book value per share represents the amount of our total tangible assets less our total liabilities and redeemable convertible preferred stock, divided by the number of shares of our Class A and Class B common stock outstanding as of September 30, 2020.
Our pro forma net tangible book value as of September 30, 2020 was $ million, or $ per share. Pro forma net tangible book value per share represents the amount of our total tangible assets less our total liabilities, divided by the number of our shares of Class A, Class B, and Class H common stock outstanding as of September 30, 2020, after giving effect to (i) the conversion of all outstanding shares of our redeemable convertible preferred stock, of which 239,623,894 shares are outstanding as of September 30, 2020, into an aggregate of 240,910,588 shares of Class B common stock as if such conversion had occurred on September 30, 2020, including 1,286,694 shares of common stock issuable pursuant to the anti-dilution adjustment provisions relating to our Series C redeemable convertible preferred stock (the “Preferred Stock Conversion”), (ii) the net issuance of shares of our Class A common stock upon the vesting and settlement of RSUs, for which the service-based vesting condition was satisfied as of September 30, 2020 and for which we expect the liquidity-based vesting condition to be satisfied in connection with this offering, after withholding an aggregate of shares to satisfy associated estimated income tax obligations (based on the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and an assumed % tax withholding rate) (the “RSU Settlement”), (iii) the related increase in liabilities and corresponding decrease in additional paid-in capital for the associated tax liabilities related to the net settlement of the RSUs, (iv) stock-based compensation expense of $ related to RSUs for which the service-based vesting condition was satisfied or partially satisfied as of September 30, 2020 for which we expect the liquidity-based vesting condition to be satisfied in connection with this offering, reflected as an increase to additional paid-in capital and accumulated deficit, (v) the issuance of 9,200,000 shares of our Class H common stock to our wholly-owned Host Endowment Fund subsidiary in November 2020, and (vi) the filing and effectiveness of our restated certificate of incorporation in Delaware, which will occur immediately prior to the completion of this offering.
After giving effect to the sale and issuance by us of shares of Class A common stock in this offering at an assumed initial public offering price per share of $ , which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses, and the issuance of 400,000 shares of our Class A common stock that we plan to donate to a charitable foundation after the completion of this offering and an associated non-cash expense of approximately $ million, estimated based on an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, our pro forma as adjusted net tangible book value as of September 30, 2020 would have been $ million, or $ per share. This amount represents an immediate increase in pro forma as adjusted net tangible book value of $ per share to our existing stockholders and an immediate dilution in pro forma as adjusted net tangible book value of $ per share to new investors purchasing Class A common stock in this offering.
111
We determine dilution by subtracting the pro forma as adjusted net tangible book value per share after this offering from the initial public offering price per share paid by new investors for a share of Class A common stock. The following table illustrates this dilution on a per share basis:
|
Assumed initial public offering price per share |
|
|
|
$ |
|
| ||
|
Historical net tangible book value per share as of September 30, 2020 |
$ |
|
|
|
|
| ||
|
Increase per share attributable to the pro forma adjustments described above |
|
|
|
|
|
| ||
|
Pro forma net tangible book value per share as of September 30, 2020 |
|
|
|
|
|
| ||
|
Increase in pro forma net tangible book value per share attributable to new investors purchasing shares of Class A common stock in this offering |
|
|
|
|
|
| ||
|
Decrease in pro forma net tangible book value per share attributable to the 400,000 shares of our Class A common stock we plan to donate to a charitable foundation |
|
|
|
|
|
| ||
|
Pro forma as adjusted net tangible book value per share immediately after this offering |
|
|
|
|
|
| ||
|
Dilution in pro forma as adjusted net tangible book value per share to new investors in this offering |
|
|
|
$ |
|
|
The dilution information discussed above is illustrative only and may change based on the actual initial public offering price and other terms of this offering. Each $1.00 increase or decrease in the assumed initial public offering price per share of $ , which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, our pro forma as adjusted net tangible book value per share after this offering by $ per share and the dilution per share to new investors participating in this offering by $ per share, assuming that the number of shares of Class A common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, a 1.0 million share increase in the number of shares of Class A common stock offered by us would increase the pro forma as adjusted net tangible book value after this offering by $ per share and decrease the dilution per share to new investors participating in this offering by $ per share, and a share decrease in the number of shares of Class A common stock offered by us would decrease the pro forma as adjusted net tangible book value by $ per share, and increase the dilution per share to new investors in this offering by $ per share, assuming that the assumed initial public offering price per share of $ , which is the midpoint of the price range set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
If the underwriters exercise in full their option to purchase additional shares of Class A common stock from us, the pro forma as adjusted net tangible book value per share after giving effect to this offering would be $ per share, and the dilution to investors participating in this offering would be $ per share.
The following table summarizes on the pro forma as adjusted basis described above (but not including the 400,000 shares of our Class A common stock that we plan to donate to a charitable foundation described above), the differences between the number of shares purchased from us, the total consideration paid and the average price per share paid to us by existing stockholders and by investors purchasing shares of Class A common stock in this offering at the assumed initial public offering price per share of $ , which is the midpoint of the price range set forth on the cover page on this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us:
| Shares Purchased | Total Consideration | Weighted- Average Price Per Share |
||||||||||||||||||||||||||
| Number | Percent | Amount (in thousands) |
Percent | |||||||||||||||||||||||||
|
Existing stockholders |
|
|
|
|
|
% |
|
|
|
$ |
|
|
|
|
% |
|
|
|
$ |
|
| |||||||
|
New investors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
| |||||||
|
Total |
|
|
|
|
100 |
% |
|
|
|
$ |
|
|
|
100 |
% |
|
|
|
|
|
|
112
A $1.00 increase or decrease in the assumed initial public offering price per share of $ , which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, the total consideration paid by new investors by $ million and, in the case of an increase, would increase the percentage of total consideration paid by new investors to % and, in the case of a decrease, would decrease the percentage of total consideration paid by new investors to %, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. Similarly, a 1.0 million share increase or decrease in the number of shares offered by us would increase or decrease, as applicable, the total consideration paid by new investors by $ million and, in the case of an increase, would increase the percentage of total consideration paid by new investors to % and, in the case of a decrease, would decrease the percentage of total consideration paid by new investors to %, assuming that the assumed initial public offering price per share of $ , which is the midpoint of the price range set forth on the cover page of this prospectus, remains the same.
If the underwriters exercise their option to purchase additional shares of Class A common stock in full, our existing stockholders would own % and our new investors would own % of the total number of shares of our common stock outstanding upon the completion of this offering.
The pro forma and pro forma as adjusted columns in the table above are based on shares of Class A common stock and shares of Class B common stock (after giving effect to the Preferred Stock Conversion and the RSU Settlement) outstanding as of September 30, 2020, no shares of Class C common stock outstanding, and 9,200,000 shares of Class H common stock issued to our wholly-owned Host Endowment Fund subsidiary in November 2020, and exclude:
| • |
24,460,092 shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock that were outstanding as of September 30, 2020, with a weighted-average exercise price of $5.96 per share, pursuant to our 2008 Plan; |
| • |
13,788,876 shares of our Class B common stock issuable upon the exercise of options to purchase shares of our Class B common stock that were outstanding as of September 30, 2020, with a weighted-average exercise price of $3.18 per share, pursuant to our 2008 Plan; |
| • |
6,408,714 shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock that were outstanding as of September 30, 2020, with a weighted-average exercise price of $49.77 per share, pursuant to our 2018 Plan; |
| • |
181,782 shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock that were outstanding as of September 30, 2020, with a weighted-average exercise price of $22.65 per share, pursuant to our Hotel Tonight Plan; |
| • |
1,265,344 RSUs covering shares of our Class A common stock that are issuable upon satisfaction of service-based and liquidity-based vesting conditions outstanding as of September 30, 2020, for which the service-based condition was not yet satisfied as of September 30, 2020, pursuant to our 2008 Plan (we expect that vesting of certain of these RSUs through , 2020 will result in the net issuance of shares of our Class A common stock in connection with this offering, after withholding shares of Class A common stock to satisfy associated estimated income tax obligations (based on the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and an assumed % tax withholding rate)); |
113
| • |
30,762,460 RSUs covering shares of our Class A common stock that are issuable upon satisfaction of service-based and liquidity-based vesting conditions outstanding as of September 30, 2020, for which the service-based condition was not yet satisfied as of September 30, 2020, pursuant to our 2018 Plan (we expect that vesting of certain of these RSUs through , 2020 will result in the net issuance of shares of our Class A common stock in connection with this offering, after withholding shares of Class A common stock to satisfy associated estimated income tax obligations (based on the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and an assumed % tax withholding rate)); |
| • |
16,344 RSUs covering shares of our Class A common stock that are issuable upon satisfaction of service-based and liquidity-based vesting conditions outstanding as of September 30, 2020, for which the service-based condition was not yet satisfied as of September 30, 2020, pursuant to our Hotel Tonight Plan (we expect that vesting of certain of these RSUs through , 2020 will result in the net issuance of shares of our Class A common stock in connection with this offering, after withholding shares of Class A common stock to satisfy associated estimated income tax obligations (based on the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and an assumed % tax withholding rate)); |
| • |
5,465,264 RSUs covering shares of our Class A common stock that are issuable upon satisfaction of a service-based vesting condition outstanding as of September 30, 2020, for which the service-based condition was not yet satisfied as of September 30, 2020, pursuant to our 2018 Plan (we expect that vesting of certain of these RSUs through , 2020 will result in the net issuance of shares of our Class A common stock, after withholding shares of Class A common stock to satisfy associated estimated income tax obligations (based on the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and an assumed % tax withholding rate)); |
| • |
shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock that were granted after September 30, 2020, with a weighted-average exercise price of $ per share, pursuant to our 2018 Plan; |
| • |
RSUs covering shares of our Class A common stock that are issuable upon satisfaction of a service-based vesting condition that were granted after September 30, 2020, pursuant to our 2018 Plan (we expect that vesting of certain of these RSUs through , 2020 will result in the net issuance of shares of our Class A common stock, after withholding shares of Class A common stock to satisfy associated estimated income tax obligations (based on the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and an assumed % tax withholding rate)); |
| • |
7,934,794 shares of Class A common stock issuable upon the exercise of warrants to purchase shares of Class A common stock outstanding as of September 30, 2020, with a weighted-average exercise price of $28.355 per share; and |
| • |
shares of our Class A common stock reserved for future issuance under our 2020 Plan, which will become effective on the date immediately prior to the date our registration statement of which this prospectus forms a part becomes effective. |
114
Our 2020 Plan and ESPP each provides for annual automatic increases in the number of shares reserved thereunder, and our 2020 Plan also provides for increases to the number of shares of Class A common stock that may be granted thereunder based on shares underlying any awards under our 2008 Plan and 2018 Plan that expire, are forfeited or are otherwise terminated, as more fully described in the section titled “Compensation Discussion and Analysis—Executive Compensation Tables—Equity Plans—2020 Incentive Award Plan.”
To the extent that any outstanding options to purchase our common stock are exercised, RSUs are settled, or new awards are granted under our equity compensation plans, warrants to purchase our Class A common stock are exercised, or additional shares of our Class A common stock, our Class B common stock, or our Class H common stock (or Class A common stock issuable upon the conversion of our Class B common stock or our Class H common stock), or shares of our Class C common stock are issued, there will be further dilution to investors participating in this offering.
115
Selected Consolidated Financial And Other Data
The following selected consolidated statements of operations data for the years ended December 31, 2017, 2018, and 2019 and consolidated balance sheet data as of December 31, 2018 and 2019 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The consolidated balance sheet data as of December 31, 2017 has been derived from our audited consolidated financial statements not included in this prospectus. The following selected consolidated statements of operations data for the years ended December 31, 2015 and 2016 and consolidated balance sheet data as of December 31, 2015 and 2016 have been derived from our accounting records and have been prepared on the same basis as the audited consolidated financial statements included elsewhere in this prospectus, except that such data has not been recast to conform to Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”), as discussed in footnote (1) below. The selected consolidated statements of operations data for the nine months ended September 30, 2019 and 2020 and the consolidated balance sheet data as of September 30, 2020 have been derived from our unaudited interim consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial data set forth below have been prepared on the same basis as our audited consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, that are necessary for the fair statement of such data. Our historical results are not necessarily indicative of the results that may be expected in the future. You should read the following selected consolidated financial and other data below in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. The selected consolidated financial data included in this section are not intended to replace the consolidated financial statements and are qualified in their entirety by the consolidated financial statements and related notes included elsewhere in this prospectus.
| Year Ended December 31, | Nine Months Ended
September 30, |
|||||||||||||||||||||||||||
| 2015(1) | 2016(1) | 2017 | 2018 | 2019 | 2019 | 2020 | ||||||||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||||||||||
| Consolidated Statements of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Revenue |
$ |
919,041 |
|
$ |
1,655,576 |
|
$ |
2,561,721 |
|
$ |
3,651,985 |
|
$ |
4,805,239 |
|
$ |
3,698,443 |
|
$ |
2,518,935 |
| |||||||
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Cost of revenue |
|
226,397 |
|
|
412,748 |
|
|
647,690 |
|
|
864,032 |
|
|
1,196,313 |
|
|
902,695 |
|
|
666,295 |
| |||||||
|
Operations and support(2) |
|
181,285 |
|
|
270,292 |
|
|
395,739 |
|
|
609,202 |
|
|
815,074 |
|
|
600,788 |
|
|
548,369 |
| |||||||
|
Product development(2) |
|
99,685 |
|
|
228,061 |
|
|
400,749 |
|
|
579,193 |
|
|
976,695 |
|
|
693,796 |
|
|
690,677 |
| |||||||
|
Sales and marketing(2) |
|
397,238 |
|
|
663,057 |
|
|
871,749 |
|
|
1,101,327 |
|
|
1,621,519 |
|
|
1,184,506 |
|
|
545,510 |
| |||||||
|
General and administrative(2) |
|
138,133 |
|
|
214,411 |
|
|
327,156 |
|
|
479,487 |
|
|
697,181 |
|
|
490,262 |
|
|
421,082 |
| |||||||
|
Restructuring charges(2) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
136,969 |
| |||||||
|
Total costs and expenses |
|
1,042,738 |
|
|
1,788,569 |
|
|
2,643,083 |
|
|
3,633,241 |
|
|
5,306,782 |
|
|
3,872,047 |
|
|
3,008,902 |
| |||||||
|
Income (loss) from operations |
|
(123,697 |
) |
|
(132,993 |
) |
|
(81,362 |
) |
|
18,744 |
|
|
(501,543 |
) |
|
(173,604 |
) |
|
(489,967 |
) | |||||||
|
Interest income |
|
3,961 |
|
|
11,530 |
|
|
32,102 |
|
|
66,793 |
|
|
85,902 |
|
|
68,661 |
|
|
23,830 |
| |||||||
|
Interest expense |
|
(7,902 |
) |
|
(12,254 |
) |
|
(16,403 |
) |
|
(26,143 |
) |
|
(9,968 |
) |
|
(6,801 |
) |
|
(107,548 |
) | |||||||
|
Other income (expense), net |
|
(3,160 |
) |
|
(2,630 |
) |
|
6,564 |
|
|
(12,361 |
) |
|
13,906 |
|
|
42,130 |
|
|
(115,751 |
) | |||||||
|
Income (loss) before income taxes |
|
(130,798 |
) |
|
(136,347 |
) |
|
(59,099 |
) |
|
47,033 |
|
|
(411,703 |
) |
|
(69,614 |
) |
|
(689,436 |
) | |||||||
|
Provision for income taxes |
|
4,648 |
|
|
11,003 |
|
|
10,947 |
|
|
63,893 |
|
|
262,636 |
|
|
253,187 |
|
|
7,429 |
| |||||||
|
Net loss |
$ |
(135,446 |
) |
$ |
(147,350 |
) |
$ |
(70,046 |
) |
$ |
(16,860 |
) |
$ |
(674,339 |
) |
$ |
(322,801 |
) |
$ |
(696,865 |
) |
116
| Year Ended December 31, | Nine Months Ended
September 30, |
|||||||||||||||||||||||||||
| 2015(1) | 2016(1) | 2017 | 2018 | 2019 | 2019 | 2020 | ||||||||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||||||||||
|
Less: Deemed dividends to preferred stockholders(3) |
|
— |
|
|
(92,468 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
| |||||||
|
Net loss attributable to Class A and Class B common stockholders |
$ |
(135,446 |
) |
$ |
(239,818 |
) |
$ |
(70,046 |
) |
$ |
(16,860 |
) |
$ |
(674,339 |
) |
$ |
(322,801 |
) |
$ |
(696,865 |
) | |||||||
|
Net loss per share attributable to Class A and Class B common stockholders, basic and diluted(4) |
$ |
(0.54 |
) |
$ |
(0.95 |
) |
$ |
(0.27 |
) |
$ |
(0.07 |
) |
$ |
(2.59 |
) |
$ |
(1.24 |
) |
$ |
(2.64 |
) | |||||||
|
Weighted-average shares used in computing net loss per share attributable to Class A and Class B common stockholders, basic and diluted(3) |
|
248,528 |
|
|
251,344 |
|
|
255,006 |
|
|
256,326 |
|
|
260,556 |
|
|
259,946 |
|
|
263,726 |
| |||||||
|
Pro forma net loss per share attributable to Class A and Class B common stockholders, basic and diluted (unaudited)(4) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
| |||||||
|
Weighted-average shares used in computing pro forma net loss per share attributable to Class A and Class B common stockholders, basic and diluted (unaudited)(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
The Company adopted ASC 606 effective January 1, 2018, using the full retrospective transition method. Accordingly, our audited consolidated financial statements for 2017 were recast to conform to ASC 606. Comparative information for 2015 and 2016, as presented above, continues to be reported under ASC 605, Revenue Recognition. |
| (2) |
Includes stock-based compensation expense as follows: |
| Year Ended December 31, | Nine Months Ended
September 30, |
|||||||||||||||||||||||||||
| 2015 | 2016 | 2017 | 2018 | 2019 | 2019 | 2020 | ||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||
| Operations and support |
$ |
365 |
|
$ |
353 |
|
$ |
1,841 |
|
$ |
1,968 |
|
$ |
817 |
|
$ |
283 |
|
$ |
2,869 |
| |||||||
| Product development |
|
4,812 |
|
|
7,732 |
|
|
20,309 |
|
|
33,895 |
|
|
56,632 |
|
|
44,991 |
|
|
64,088 |
| |||||||
| Sales and marketing |
|
3,031 |
|
|
9,369 |
|
|
5,997 |
|
|
12,465 |
|
|
23,919 |
|
|
17,074 |
|
|
11,979 |
| |||||||
| General and administrative |
|
14,583 |
|
|
16,420 |
|
|
10,210 |
|
|
5,565 |
|
|
16,179 |
|
|
9,962 |
|
|
31,689 |
| |||||||
| Restructuring charges |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,849 |
) | |||||||
| Total stock-based compensation expense |
$ |
22,791 |
|
$ |
33,874 |
|
$ |
38,357 |
|
$ |
53,893 |
|
$ |
97,547 |
|
$ |
72,310 |
|
$ |
108,776 |
|
| (3) |
Deemed dividends to preferred stockholders represent the premium paid over carrying value on the repurchase of certain redeemable convertible preferred stock. |
| (4) |
See Notes 2 and 15 to our consolidated financial statements included elsewhere in this prospectus for an explanation of the method used to calculate basic and diluted net loss per share attributable to common stockholders for 2017, 2018, 2019, and the nine months ended September 30, 2019 and 2020 and pro forma basic and diluted net loss per share attributable to common stockholders and the weighted-average number of shares used in the computation of the per share amounts. |
117
| As of December 31, | As of September 30, |
|||||||||||||||||||||||
| 2015(1) | 2016(1) | 2017 | 2018 | 2019 | 2020 | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| Consolidated Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
| Cash, cash equivalents, and marketable securities |
$ |
2,024,988 |
|
$ |
2,842,470 |
|
$ |
2,887,808 |
|
$ |
3,329,308 |
|
$ |
3,074,273 |
|
$ |
4,495,211 |
| ||||||
| Restricted cash |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
115 |
|
|
55,628 |
| ||||||
| Funds receivable and amounts held on behalf of customers |
|
881,385 |
|
|
1,492,492 |
|
|
2,323,405 |
|
|
2,305,011 |
|
|
3,145,457 |
|
|
2,354,450 |
| ||||||
| Working capital(2) |
|
1,770,474 |
|
|
2,379,989 |
|
|
2,121,733 |
|
|
2,138,522 |
|
|
1,327,679 |
|
|
2,828,152 |
| ||||||
| Total assets |
|
3,108,279 |
|
|
4,706,075 |
|
|
6,050,830 |
|
|
6,613,089 |
|
|
8,310,119 |
|
|
8,728,479 |
| ||||||
| Funds payable and amounts payable to customers |
|
881,385 |
|
|
1,492,492 |
|
|
2,323,405 |
|
|
2,305,011 |
|
|
3,145,457 |
|
|
2,354,450 |
| ||||||
| Total liabilities |
|
1,248,555 |
|
|
2,144,942 |
|
|
3,386,403 |
|
|
3,898,895 |
|
|
5,886,302 |
|
|
6,873,261 |
| ||||||
| Redeemable convertible preferred stock |
|
2,283,308 |
|
|
3,181,637 |
|
|
3,231,502 |
|
|
3,231,502 |
|
|
3,231,502 |
|
|
3,231,502 |
| ||||||
| Additional paid-in capital |
|
113,895 |
|
|
64,492 |
|
|
184,943 |
|
|
259,466 |
|
|
617,690 |
|
|
744,413 |
| ||||||
| Accumulated deficit |
|
(535,595 |
) |
|
(682,945 |
) |
|
(753,888 |
) |
|
(768,888 |
) |
|
(1,420,991 |
) |
|
(2,117,856 |
) | ||||||
| Total stockholders’ deficit |
|
(423,584 |
) |
|
(620,504 |
) |
|
(567,075 |
) |
|
(517,308 |
) |
|
(807,685 |
) |
|
(1,376,284 |
) |
| (1) |
The Company adopted ASC 606 effective January 1, 2018, using the full retrospective transition method. Accordingly, our audited consolidated financial statements for 2017 were recast to conform to ASC 606. Comparative information for 2015 and 2016, as presented above, continues to be reported under ASC 605, Revenue Recognition. |
| (2) |
We define working capital as current assets less current liabilities. See our consolidated financial statements and related notes included elsewhere in this prospectus for further details regarding our current assets and current liabilities as of December 31, 2018 and 2019. |
Key Business Metrics
We review the following key business metrics to measure our performance, identify trends, formulate financial projections, and make strategic decisions. We are not aware of any uniform standards for calculating these key metrics, which may hinder comparability with other companies that may calculate similarly titled metrics in a different way.
| Year Ended December 31, | Nine Months Ended September 30, |
|||||||||||||||||||||||||||
| 2015 | 2016 | 2017 | 2018 | 2019 | 2019 | 2020 | ||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||
| Nights and Experiences Booked |
72.4 | 125.7 | 185.8 | 250.3 | 326.9 | 251.1 | 146.9 | |||||||||||||||||||||
| Gross Booking Value |
$ | 8,057.7 | $ | 13,924.8 | $ | 20,975.3 | $ | 29,440.7 | $ | 37,962.6 | $ | 29,424.2 | $ | 17,991.2 |
Nights and Experiences Booked
Nights and Experiences Booked is a key measure of the scale of our platform, which in turn drives our financial performance. Nights and Experiences Booked on our platform in a period represents the sum of
118
the total number of nights booked for stays and the total number of seats booked for experiences, net of cancellations and alterations that occurred in that period. For example, a booking made on February 15 would be reflected in Nights and Experiences Booked for our quarter ended March 31. If, in the example, the booking were canceled on May 15, Nights and Experiences Booked would be reduced by the cancellation for our quarter ended June 30. A night can include one or more guests and can be for a listing with one or more bedrooms. A seat is booked for each participant in an experience. Substantially all of the bookings on our platform to date have come from nights. We believe Nights and Experiences Booked is a key business metric to help investors and others understand and evaluate our results of operations in the same manner as our management team, as it represents a single unit of transaction on our platform.
Gross Booking Value
GBV represents the dollar value of bookings on our platform in a period and is inclusive of host earnings, service fees, cleaning fees, and taxes, net of cancellations and alterations that occurred during that period. The timing of recording GBV and any related cancellations is similar to that described in the subsection titled “—Key Business Metrics—Nights and Experiences Booked” above. Revenue from the booking is recognized upon check-in; accordingly, GBV is a leading indicator of revenue. The entire amount of a booking is reflected in GBV during the quarter in which booking occurs, whether the guest pays the entire amount of the booking upfront or elects to use our Pay Less Upfront program.
For additional information about our key business metrics, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics and Non-GAAP Financial Measures.”
Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial information, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance, and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results. The non-GAAP financial information is presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies. A reconciliation of each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP is provided below. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures. Adjusted EBITDA also excludes certain items related to transactional tax matters, for which management believes it is probable that we may be held jointly liable with hosts in certain jurisdictions, and we urge investors to review the detailed disclosure regarding these matters included in the subsection titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Lodging Tax Obligations,” as well as the notes to our consolidated financial statements included elsewhere in this prospectus.
119
The following table summarizes our non-GAAP financial measures, along with the most directly comparable GAAP measure, for each period presented below.
| Year Ended December 31, | Nine Months Ended September 30, |
|||||||||||||||||||||||||||
| 2015 | 2016 | 2017 | 2018 | 2019 | 2019 | 2020 | ||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||
| Net loss |
$ |
(135.4 |
) |
$ |
(147.4 |
) |
$ |
(70.0 |
) |
$ |
(16.9 |
) |
$ |
(674.3 |
) |
$ |
(322.8 |
) |
$ |
(696.9 |
) | |||||||
| Adjusted EBITDA |
$ |
(94.0 |
) |
$ |
(52.7 |
) |
$ |
60.0 |
|
$ |
170.6 |
|
$ |
(253.3 |
) |
$ |
23.1 |
|
$ |
(230.2 |
) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
| Net cash provided by (used in) operating activities |
$ |
(73.4 |
) |
$ |
115.0 |
|
$ |
251.2 |
|
$ |
595.6 |
|
$ |
222.7 |
|
$ |
419.1 |
|
$ |
(490.6 |
) | |||||||
| Free Cash Flow |
$ |
(123.6 |
) |
$ |
21.1 |
|
$ |
151.0 |
|
$ |
504.9 |
|
$ |
97.3 |
|
$ |
319.8 |
|
$ |
(520.1 |
) |
Adjusted EBITDA
Adjusted EBITDA is defined as net income or loss adjusted for (i) provision for income taxes; (ii) interest income, interest expense, and other income (expense), net; (iii) depreciation and amortization; (iv) stock-based compensation expense; (v) net changes to the reserves for lodging taxes for which management believes it is probable that we may be held jointly liable with hosts for collecting and remitting such taxes; and (vi) restructuring charges.
The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, or because the amount and timing of these items is unpredictable, not driven by core results of operations and renders comparisons with prior periods and competitors less meaningful. We believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, as well as provides a useful measure for period-to-period comparisons of our business performance. Moreover, we have included Adjusted EBITDA in this prospectus because it is a key measurement used by our management internally to make operating decisions, including those related to operating expenses, evaluate performance, and perform strategic planning and annual budgeting.
Adjusted EBITDA has limitations as a financial measure, should be considered as supplemental in nature, and is not meant as a substitute for the related financial information prepared in accordance with GAAP. These limitations include the following:
| • |
Adjusted EBITDA does not reflect interest income (expense) and other income (expense), net, which include unrealized and realized gains and losses on foreign currency exchange, investments, and financial instruments; |
| • |
Adjusted EBITDA excludes certain recurring, non-cash charges, such as depreciation of property and equipment and amortization of intangible assets, and although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect all cash requirements for such replacements or for new capital expenditure requirements; |
| • |
Adjusted EBITDA excludes stock-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy; |
| • |
Adjusted EBITDA does not reflect net changes to the reserves for lodging taxes for which management believes it is probable that we may be held jointly liable with hosts for collecting and remitting such taxes; and |
120
| • |
Adjusted EBITDA does not reflect restructuring charges, which include severance and other employee costs, lease impairments, and contract amendments and terminations. |
Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net loss and our other GAAP results.
The following is a reconciliation of Adjusted EBITDA to the most comparable GAAP measure, net loss:
| Year Ended December 31, | Nine Months Ended September 30, |
|||||||||||||||||||||||||||
| 2015 | 2016 | 2017 | 2018 | 2019 | 2019 | 2020 | ||||||||||||||||||||||
| (in thousands, except percentages) | ||||||||||||||||||||||||||||
|
Revenue |
$ |
919,041 |
|
$ |
1,655,576 |
|
$ |
2,561,721 |
|
$ |
3,651,985 |
|
$ |
4,805,239 |
|
$ |
3,698,443 |
|
$ |
2,518,935 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net loss |
$ |
(135,446 |
) |
$ |
(147,350 |
) |
$ |
(70,046 |
) |
$ |
(16,860 |
) |
$ |
(674,339 |
) |
$ |
(322,801 |
) |
$ |
(696,865 |
) | |||||||
|
Adjusted to exclude the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Provision for income taxes |
|
4,648 |
|
|
11,003 |
|
|
10,947 |
|
|
63,893 |
|
|
262,636 |
|
|
253,187 |
|
|
7,429 |
| |||||||
|
Other (income) expense, net |
|
3,160 |
|
|
2,630 |
|
|
(6,564 |
) |
|
12,361 |
|
|
(13,906 |
) |
|
(42,130 |
) |
|
115,751 |
| |||||||
|
Interest expense |
|
7,902 |
|
|
12,254 |
|
|
16,403 |
|
|
26,143 |
|
|
9,968 |
|
|
6,801 |
|
|
107,548 |
| |||||||
|
Interest income |
|
(3,961 |
) |
|
(11,530 |
) |
|
(32,102 |
) |
|
(66,793 |
) |
|
(85,902 |
) |
|
(68,661 |
) |
|
(23,830 |
) | |||||||
|
Depreciation and amortization |
|
11,481 |
|
|
23,404 |
|
|
79,342 |
|
|
82,401 |
|
|
114,162 |
|
|
76,332 |
|
|
93,438 |
| |||||||
|
Stock-based compensation expense(1) |
|
22,791 |
|
|
33,874 |
|
|
38,357 |
|
|
53,893 |
|
|
97,547 |
|
|
72,310 |
|
|
110,625 |
| |||||||
|
Net changes in lodging tax reserves |
|
(4,553 |
) |
|
23,038 |
|
|
23,682 |
|
|
15,587 |
|
|
36,574 |
|
|
48,088 |
|
|
(81,219 |
) | |||||||
|
Restructuring charges |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
136,969 |
| |||||||
| Adjusted EBITDA |
$ | (93,978 | ) | $ | (52,677 | ) | $ | 60,019 | $ | 170,625 | $ | (253,260 | ) | $ | 23,126 | $ | (230,154 | ) | ||||||||||
|
Adjusted EBITDA as a percentage of revenue |
|
(10 |
)% |
|
(3 |
)% |
|
2 |
% |
|
5 |
% |
|
(5 |
)% |
|
1 |
% |
|
(9 |
)% |
| (1) |
Excludes stock-based compensation related to restructuring, which is included in restructuring charges in the table above. |
Free Cash Flow
Free Cash Flow is a non-GAAP financial measure that is calculated by reducing purchases of property and equipment from net cash provided by (used in) operating activities. We believe that Free Cash Flow is a meaningful indicator of liquidity that provides information to management and investors about the amount of cash generated from operations that, after purchases of property and equipment, can be used for strategic initiatives, including continuous investment in our business, growth through acquisitions, and strengthening our balance sheet. Our Free Cash Flow is impacted by the timing of GBV because we collect our service fees at the time of booking, which is generally before a stay or experience occurs. Funds held on behalf of our hosts and guests and amounts payable to our hosts and guests do not impact Free Cash Flow, except interest earned on these funds. Free Cash Flow has limitations as an analytical tool and should not be considered in isolation or as substitutes for analysis of other GAAP financial measures, such as net
121
cash provided by operating activities. Free Cash Flow does not reflect our ability to meet future contractual commitments and may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure.
The following is a reconciliation of Free Cash Flow to the most comparable GAAP cash flow measure, net cash provided by (used in) operating activities:
| Year Ended December 31, | Nine Months Ended September 30, |
|||||||||||||||||||||||||||
| 2015 | 2016 | 2017 | 2018 | 2019 | 2019 | 2020 | ||||||||||||||||||||||
| (in thousands, except percentages) | ||||||||||||||||||||||||||||
|
Revenue |
$
|
919,041
|
|
$
|
1,655,576
|
|
$
|
2,561,721
|
|
$
|
3,651,985
|
|
$
|
4,805,239
|
|
$
|
3,698,443
|
|
$
|
2,518,935
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net cash provided by (used in) operating activities |
$ |
(73,422 |
) |
$ |
115,024 |
|
$ |
251,225 |
|
$ |
595,557 |
|
$ |
222,727 |
|
$ |
419,101 |
|
$ |
(490,622 |
) | |||||||
|
Purchases of property and equipment |
|
(50,138 |
) |
|
(93,894 |
) |
|
(100,204 |
) |
|
(90,624 |
) |
|
(125,452 |
) |
|
(99,278 |
) |
|
(29,489 |
) | |||||||
|
Free Cash Flow |
$
|
(123,560
|
)
|
$
|
21,130
|
|
$
|
151,021
|
|
$
|
504,933
|
|
$
|
97,275
|
|
$
|
319,823
|
|
$
|
(520,111
|
)
| |||||||
|
Free Cash Flow as a percentage of revenue |
|
(13 |
)% |
|
1 |
% |
|
6 |
% |
|
14 |
% |
|
2 |
% |
|
9 |
% |
|
(21 |
)% | |||||||
|
Other cash flow components: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net cash provided by (used in) investing activities |
$ |
(68,662 |
) |
$ |
23,194 |
|
$ |
(788,944 |
) |
$ |
(668,171 |
) |
$ |
(347,155 |
) |
$ |
(50,089 |
) |
$ |
(816,104 |
) | |||||||
|
Net cash provided by financing activities |
$ |
1,504,800 |
|
$ |
814,898 |
|
$ |
672,954 |
|
$ |
140,516 |
|
$ |
854,579 |
|
$ |
684,198 |
|
$ |
1,174,207 |
|
For additional information about these non-GAAP financial measures, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics and Non-GAAP Financial Measures.”
122
The Growth of Our Community Guests have booked more than 1 billion nights and experiences since 2007. Here are some year-by-year highlights. 2007 Brian and Joe host three guests—Kat, Amol, and Michael—who’ve traveled to San Francisco for a design conference. 2008 A host in Washington, D.C. lists the first private room on Airbnb. Over the next decade, they host hundreds of guests in their Victorian row house. 2009 Airbnb launches the Superhost program to recognize the highest standards of hosting on the platform. 2010 A host in Connecticut lists a five-acre private island. Today, there are more than 1,600 private islands available to book on Airbnb. 2011 We enhance our platform to empower hosts, including a $50,000 guarantee for property damage, and a 24-hour customer hotline. 2012 Airbnb enables hosts to offer free accommodations to those impacted by Hurricane Sandy in New York City, and the Open Homes program is born. 2013 In a moment of informal international cooperation, Japanese host Megumi restores an old farmhouse, and raises her daughter Akari with help from guests from all over the world. 2014 1,000 hosts congregate in San Francisco to share hospitality tips during the second Airbnb Open conference, including hosts from as far away as Europe and Australia. 2015 Some 1,000 new Airbnb hosts in Cuba open the doors to their Casas Particulares, as US-Cuban travel flourishes. 2016 Airbnb and the Self-Employed Women’s Association of India initiate a program enabling hosts to offer homestays, bringing new livelihood opportunities to rural India. 2017 In a company-wide commitment to growth in China, Airbnb announces its new Chinese name—Aibiying—which means “welcome each other with love.” 2018 The Experiences program gets its first superstar—beloved grandma Nonna Nerina is interviewed on Italian national television about her pasta-making experience. 2019 As a growing number of unusual properties join the platform, Kristie lists the first potato on Airbnb. Hundreds of guests will stay in the 6-ton Idaho spud. 2020 Hosts sign up to welcome COVID-19 first responders at 200,000 listings, as part of the new Frontline Stays program.
327m 300m 200m 100m Nights and Experiences Booked 0 2016 2010 2017 2011 2018 2012 2019 2013 2015 2008 2014 2009 2007
| Term |
Definition | |
| Active booker |
An active booker is a unique guest who has booked a stay or experience in a given period. | |
| Active listing |
We consider a listing of a home or an experience to be an “active listing” if it is viewable on Airbnb and has been previously booked at least once on Airbnb (excluding Hotel Tonight). | |
| Adjusted EBITDA |
Adjusted EBITDA is defined as net income or loss adjusted for (i) provision for income taxes; (ii) interest income, interest expense, and other income (expense), net; (iii) depreciation and amortization; (iv) stock-based compensation expense; (v) net changes to the reserves for lodging taxes for which management believes it is probable that we may be held jointly liable with hosts for collecting and remitting such taxes; and (vi) restructuring charges. | |
| Available listing |
Available listings are accommodations and experiences that are viewable on a certain date on our platform (excluding Hotel Tonight). | |
| Check-ins |
Check-ins represent individual stays or experiences that occur during a period that have not been canceled. | |
| Free Cash Flow |
Free Cash Flow represents net cash provided by (used in) operating activities less purchases of property and equipment. | |
| Gross Booking Value |
Gross Booking Value (“GBV”) represents the dollar value of bookings on our platform in a period and is inclusive of host earnings, service fees, cleaning fees, and taxes, net of cancellations and alterations that occurred during that period. | |
| Guest arrivals |
Guest arrivals represent an individual and all co-travelers included on a reservation for a stay for completed check-ins during a given period. | |
| Hosts |
We count the number of hosts on our platform based on the number of users with available listings as of a certain date. | |
| Individual host |
Individual hosts are individual entrepreneurs who list their spaces, including private rooms, primary homes, or vacation homes on Airbnb. We define individual hosts as those hosts who onboard and activate their spaces on Airbnb directly through our website or mobile apps. | |
| Nights and Experiences Booked |
Nights and Experiences Booked on our platform in a period represents the sum of the total number of nights booked for stays and the total number of seats booked for experiences, net of cancellations and alterations that occurred in that period. | |
| Professional host |
Professional hosts are all hosts who are not individual hosts. Professional hosts are often property managers or traditional hospitality operators (i.e. hotels, traditional bed and breakfasts, hostels, or serviced apartments). A professional host generally utilizes our professional hosting tools such as our application programming interfaces to list on Airbnb. | |
| Revenue |
Revenue consists of service fees, net of incentives and refunds, charged to our customers. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with the “Selected Consolidated Financial and Other Data” and our consolidated financial statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” or in other parts of this prospectus. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Except as otherwise noted, all references to 2019 refer to the year ended December 31, 2019, references to 2018 refer to the year ended December 31, 2018, and references to 2017 refer to the year ended December 31, 2017.
Overview
Airbnb started with two designers trying to solve a problem: how to pay their rent.
The year was 2007. Brian and Joe — two of our founders and friends from design school — were looking for a way to cover the cost of their San Francisco apartment. That week, they saw an opportunity. An international design conference was coming to town, and every hotel was sold out. They quickly created a website, AirBedandBreakfast.com, with the hope of renting airbeds in their apartment to attendees of the conference. Three designers, Michael, Kat, and Amol, took them up on their offer and became the first guests of Brian and Joe, our first hosts.
When Brian and Joe told people what they were doing, they thought the idea sounded crazy. “Strangers will never stay in each other’s homes,” they said. But something unexpected happened that first weekend. Brian and Joe treated their guests like old friends from out of town, connecting them to a unique slice of San Francisco that they could never have experienced on their own. Michael, Kat, and Amol came as outsiders, but left feeling like locals. The experience left Brian and Joe feeling something special too — the excitement of sharing the city they loved and seeing their guests form a deep connection to it.
Brian and Joe started thinking: maybe there were more people like Michael, Kat, and Amol who would like to travel this way and more people who would like to host this way. These are the ideas that Airbnb was founded on.
In 2008, Nate, a software engineer, joined Brian and Joe, and together the three founders took on a bigger design problem: how do you make strangers feel comfortable enough to stay in each other’s homes? The key was trust. The solution they designed combined host and guest profiles, integrated messaging, two-way reviews, and secure payments built on a technology platform that unlocked trust, and eventually led to hosting at a global scale that was unimaginable at the time.
Today, the idea does not seem so crazy after all. Our more than 4 million hosts now offer everything from a private room in their home to luxury villas, from one night to several months at a time. Hosting has expanded from homes to now include experiences that can be taken in cities all over the world, or even online. In more than 220 countries and regions around the world, our hosts have welcomed over 825 million guest arrivals and have cumulatively earned over $110 billion. “Airbnb” has become synonymous with one-of-a-kind travel on a global scale.
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Our Business Model
We operate a global marketplace, where hosts offer guests stays and experiences on our platform. As of September 30, 2020, our more than 4 million hosts had 7.4 million available listings of homes and experiences, of which 5.6 million were active listings. Our listings include private rooms, entire homes, luxury villas, treehouses, igloos, and experiences, in approximately 100,000 cities across more than 220 countries and regions. In 2019, 63% of our revenue was generated from listings outside of the United States. We believe that we have the largest collection of unique listings available for guests. Available listings are accommodations and experiences that are viewable on a certain date on our platform (excluding Hotel Tonight). We count the number of hosts on our platform based on the number of users with available listings as of a certain date; some individuals may have more than one account. Active listings are available listings that have been previously booked at least once at any time since inception. We believe this definition of active listings is appropriate given recent booking activity of listings that are defined as active listings. Approximately 76% of active listings had been booked in the twelve months ended September 30, 2020 and 90% had been booked in the 24-month period ended September 30, 2020.
During 2019, we had 54 million active bookers and 247 million guest arrivals. An active booker is a unique guest who has booked a stay or experience in a given period. Guest arrivals represent an individual and all co-travelers included on a reservation for a stay for completed check-ins during a given period. Because an individual guest may take more than one trip in a measurement period for guest arrivals, such guest will be counted separately for each check-in when calculating total guest arrivals for a period. In comparison, a check-in represents a check-in event for a single reservation for a stay or experience, regardless of the number of travelers or experience participants.
Our business model relies on the success of hosts and guests who join our community and generate consistent bookings over time. As hosts become more successful on our platform and as guests return over time, we benefit from the recurring activity of our community. For example, in 2019, 84% of our revenue resulted from stays with existing hosts who had completed at least one guest check-in on or before December 31, 2018, up from 82% in 2018 and 77% in 2017. In addition, 69% of our revenue in 2019 was generated from stays in that year by repeat guests, defined as guests with at least one prior booking, up from 66% in 2018 and 62% in 2017. We track revenue from existing hosts and guests based on revenue before adjustments for incentives and refunds, as we do not track contra-revenue adjustments by host and guest cohort. Incentives include our referral programs and marketing promotions to encourage the use of our platform and attract new customers, while our refunds to customers are part of our customer support activities. We believe such revenue generated from stays is the best available indicator of host and guest retention.
We experienced rapid growth since our founding through 2019. In 2019, we generated GBV of $38.0 billion, representing growth of 29% from $29.4 billion in 2018, and revenue of $4.8 billion, representing growth of 32% from $3.7 billion in 2018. During the nine months ended September 30, 2020, our business was materially impacted by the COVID-19 pandemic, with GBV of $18.0 billion, down 39% year over year and revenue of $2.5 billion, down 32% year over year.
Our GBV of $38.0 billion in 2019 consisted of $31.3 billion in host earnings, $5.3 billion in service fees for Airbnb, and $1.4 billion in taxes to our communities, consisting primarily of lodging taxes that we collect and remit to tax authorities. We recognize revenue upon check-in for a stay or experience from service fees charged to hosts and guests. We calculate Airbnb service fees based on a percentage of the booking value, exclusive of taxes.
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The table below shows an illustrative night booked where we collect and remit lodging taxes. Host and guest service fees vary based on factors specific to the booking, such as duration, geography, and host type. GBV and revenue in the table below exclude reductions in revenue resulting from payments made to hosts and guests, such as incentives and refunds.
| Illustrative Night Booked on Airbnb | ||||
|
Host: |
||||
|
Price per night set by host |
$ | 100.00 | ||
|
Less: Host fees (illustrative) |
3.00 | |||
|
|
|
|||
|
Total paid to host |
$ | 97.00 | ||
|
|
||||
|
Guest: |
||||
|
Price per night set by host |
$ | 100.00 | ||
|
Guest fees (illustrative) |
12.00 | |||
|
Lodging taxes (pass through and remitted to local authorities; illustrative) |
4.00 | |||
|
|
|
|||
|
Total collected from guest (GBV) |
$ | 116.00 | ||
|
|
||||
|
Airbnb: |
||||
|
|
|
|||
|
Total service fees (collected at booking and recognized as revenue upon check-in) |
$ | 15.00 |
For the majority of bookings, we collect the full amount of GBV at the time of booking. For the remainder of bookings, guests choose to pay in two installments with our Pay Less Upfront program. In either case, we collect our service fees at the time of booking, which contributes to Free Cash Flow before we recognize revenue upon check-in. Funds held on behalf of our hosts and guests and amounts payable to our hosts and guests do not impact Free Cash Flow, except interest earned on these funds.
Our business model is capital efficient. We have generated $1.0 billion of net cash provided by operating activities and incurred $507.0 million of purchases of property and equipment cumulatively from January 1, 2011 through December 31, 2019, resulting in cumulative positive Free Cash Flow of $520.1 million in the same period. We believe that we are still early in the global shift in consumer preferences toward one-of-a-kind stays and experiences, which provides an opportunity to further grow our community and business. As a result, we have consistently reinvested the Free Cash Flow that we have generated to meet our business needs and expand our operations. During 2019, net cash provided by operating activities was $222.7 million and Free Cash Flow was $97.3 million, compared to net cash provided by operating activities of $595.6 million and Free Cash Flow of $504.9 million in 2018. In addition, during 2019, we had a net loss of $674.3 million and Adjusted EBITDA of $(253.3) million, compared to a net loss of $16.9 million and Adjusted EBITDA of $170.6 million in 2018. During the nine months ended September 30, 2020, our business was materially impacted by COVID-19, with net cash used in operating activities of $490.6 million, a decrease of $909.7 million year over year; Free Cash Flow of $(520.1) million, a decrease of $839.9 million year over year; net loss of $696.9 million, a decrease of $374.1 million year over year; and Adjusted EBITDA of $(230.2) million, a decrease of $253.3 million year over year.
Adjusted EBITDA and Free Cash Flow are supplemental metrics that are not calculated and presented in accordance with GAAP. See the section titled “Selected Consolidated Financial and Other Data — Non-GAAP Financial Measures” for additional information.
While our business has been severely impacted by COVID-19 in 2020, we believe that travel will rebound and people will increasingly choose the one-of-a-kind stays and experiences offered by our hosts. Against
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an otherwise highly negative travel backdrop, our listing count has remained stable. Our active listings were 5.7 million as of December 31, 2019 and 5.6 million as of September 30, 2020. In addition, several areas of our business have shown resilience, notably, domestic travel, short-distance travel, travel outside of our top 20 cities, and long-term stays. While we believe that travel will change as a result of COVID-19, the adaptability of our business suggests that we are well-positioned to serve this dynamic market. Further detail is presented in the subsection titled “— Recent Developments” below.
Key Business Metrics and Non-GAAP Financial Measures
We track the following key business metrics and non-GAAP financial measures to evaluate our performance, identify trends, formulate financial projections, and make strategic decisions. Accordingly, we believe that these key business metrics and non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management team. These key business metrics and non-GAAP financial measures are presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled metrics or measures presented by other companies. A reconciliation of each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP is provided in the section titled “Selected Consolidated Financial and Other Data — Non-GAAP Financial Measures.”
Nights and Experiences Booked
Nights and Experiences Booked is a key measure of the scale of our platform, which in turn drives our financial performance. Nights and Experiences Booked on our platform in a period represents the sum of the total number of nights booked for stays and the total number of seats booked for experiences, net of cancellations and alterations that occurred in that period. For example, a booking made on February 15 would be reflected in Nights and Experiences Booked for our quarter ended March 31. If, in the example, the booking were canceled on May 15, Nights and Experiences Booked would be reduced by the cancellation for our quarter ended June 30. A night can include one or more guests and can be for a listing with one or more bedrooms. A seat is booked for each participant in an experience. Substantially all of the bookings on our platform to date have come from nights.
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In 2019, we had 326.9 million Nights and Experiences Booked, a 31% increase from 250.3 million Nights and Experiences Booked in 2018, which grew 35% from 185.8 million in 2017. Nights and Experiences Booked grows as we attract new hosts and guests to our platform and as repeat guests increase their activity on our platform.
We experience seasonality in the number of Nights and Experiences Booked. Typically, the first, second, and third quarters of the year each have higher Nights and Experiences Booked than the fourth quarter, as guests plan for travel during the peak travel season, which is in the third quarter for North America and EMEA. Our bookings can also be impacted by the timing of holidays and other events as described in the subsection titled “— Key Factors Affecting Our Performance — Seasonality” below.
In 2020, our Nights and Experiences Booked declined from prior levels as a result of the COVID-19 pandemic. For the nine months ended September 30, 2020, we had 146.9 million Nights and Experiences Booked, a 41% decrease from 251.1 million Nights and Experiences Booked for the comparative prior year period. The decline was most severe in the second quarter, with Nights and Experiences Booked declining 67% from the prior year period, and our business improved in the third quarter with a decline of 28% from the prior year period. This improvement was driven by stronger results in North America and Europe, in particular with resilience in domestic and short-distance travel, with more people gravitating toward Airbnb stays within driving distance of their homes. Further detail is presented in the subsection titled “—Recent Developments” below.
Gross Booking Value
GBV represents the dollar value of bookings on our platform in a period and is inclusive of host earnings, service fees, cleaning fees, and taxes, net of cancellations and alterations that occurred during that period. The timing of recording GBV and any related cancellations is similar to that described in the subsection titled “— Key Business Metrics and Non-GAAP Financial Measures — Nights and Experiences Booked” above. Revenue from the booking is recognized upon check-in; accordingly, GBV is a leading indicator of revenue. The entire amount of a booking is reflected in GBV during the quarter in which booking occurs, whether the guest pays the entire amount of the booking upfront or elects to use our Pay Less Upfront program.
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Growth in GBV reflects our ability to attract and retain hosts and guests and reflects growth in Nights and Experiences Booked. In 2019, our GBV was $38.0 billion, a 29% increase from $29.4 billion in 2018, which grew 40% from $21.0 billion in 2017. On a constant currency basis, growth in GBV was 33% in 2019 and 38% in 2018.
We experience seasonality in our GBV that is consistent with the seasonality of Nights and Experiences Booked. In 2019, guests booked stays on average 37 days before check-in although there is variability based on seasonality and geography. The average number of days between a booking and check-in tends to be shortest in the third quarter as this represents the peak travel period in North America and EMEA and longest in the first quarter. In comparison, for the nine months ended September 30, 2020, guests booked stays on average 35 days before check-in. This number was 28 days and 23 days for the second and third quarters of 2020, respectively, due to guests booking closer to their travel dates as a result of COVID-19.
The decrease in our GBV in the first nine months of 2020 was due to the reduction in Nights and Experiences Booked due to the COVID-19 pandemic, as described above. For the nine months ended September 30, 2020, our GBV was $18.0 billion, a 39% decrease from $29.4 billion for the comparative prior-year period. On a constant currency basis, the reduction in GBV was 39%. The decline was most severe in the second quarter, with GBV declining 67% from the prior year. We experienced an increase in GBV in the third quarter of 2020 as domestic travel rebounded on our platform, but below third quarter 2019 levels by 17%. In the third quarter of 2020, GBV declined less than Nights and Experiences Booked as a result of increased GBV per Night and Experience Booked driven by a shift towards North America compared to other regions and entire home bookings. Further detail is presented in the subsection titled “—Recent Developments” below.
Prior to 2020, we have historically experienced significant growth in the number of hosts listing on our platform and number of guests, resulting in strong year-over-year growth rates in both Nights and Experiences Booked and associated GBV. As we have achieved greater scale in our operations, particularly in 2018 and 2019, the annual growth rates for Nights and Experiences Booked and GBV have stabilized, although, as discussed in further detail in the subsection titled “— Recent Developments” below, COVID-19 has had and is continuing to have a negative impact in 2020.
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Adjusted EBITDA
We define Adjusted EBITDA as net income or loss adjusted for (i) provision for income taxes; (ii) interest income, interest expense, and other income (expense), net; (iii) depreciation and amortization; (iv) stock-based compensation expense; (v) net changes to the reserves for lodging taxes for which management believes it is probable that we may be held jointly liable with hosts for collecting and remitting such taxes; and (vi) restructuring charges.
The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, or because the amount and timing of these items is unpredictable, not driven by core results of operations and renders comparisons with prior periods and competitors less meaningful. We believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, as well as provides a useful measure for period-to-period comparisons of our business performance. Moreover, we have included Adjusted EBITDA in this prospectus because it is a key measurement used by our management internally to make operating decisions, including those related to analyzing operating expenses, evaluating performance, and performing strategic planning and annual budgeting.
In 2019, Adjusted EBITDA decreased to $(253.3) million primarily due to significant investments in growth initiatives and investments in our technical infrastructure. In 2018 and 2017, Adjusted EBITDA was $170.6 million, representing 5% of revenue, and $60.0 million, representing 2% of revenue, respectively. In 2018, Adjusted EBITDA increased as our annual revenue grew 43%, offset by ongoing growth initiatives.
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Seasonal trends in our check-ins impact Adjusted EBITDA for any given quarter. We track our trailing twelve months (“TTM”) Adjusted EBITDA as a percentage of revenue to account for seasonal fluctuations in our revenue and associated profitability. TTM Adjusted EBITDA as a percentage of revenue provides a longer-term view of our profitability that is not impacted by seasonality. See the section titled “Selected Consolidated Financial and Other Data — Non-GAAP Financial Measures” for a reconciliation of Adjusted EBITDA to the most relevant GAAP measure and the subsection titled “— Quarterly Reconciliations of Non-GAAP Financial Measures” below for a reconciliation of TTM Adjusted EBITDA to the most relevant GAAP measure.
For the nine months ended September 30, 2020, Adjusted EBITDA was $(230.2) million, compared to Adjusted EBITDA of $23.1 million in the prior year period. The decrease was due to the reduction in Nights and Experiences Booked and GBV due to the COVID-19 pandemic, as described above, offset by cost reductions. In the third quarter of 2020, typically our strongest seasonal quarter for check-ins, Adjusted EBITDA was $501.4 million, compared to $313.6 million in the prior year, reflecting a decrease in total costs and expenses of 35%, partially offset by a decrease in revenue of 18%.
Free Cash Flow
We define Free Cash Flow as net cash provided by (used in) operating activities less purchases of property and equipment. We believe that Free Cash Flow is a meaningful indicator of liquidity that provides information to our management and investors about the amount of cash generated from operations, after purchases of property and equipment, that can be used for investment in our business and for acquisitions as well as to strengthen our balance sheet. Our Free Cash Flow is impacted by the timing of GBV because we collect our service fees at the time of booking, which is generally before a stay or experience occurs. Funds held on behalf of our hosts and guests and amounts payable to our hosts and guests do not impact Free Cash Flow, except interest earned on these funds.
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In 2019, Free Cash Flow was $97.3 million, representing 2% of revenue, compared to $504.9 million in 2018, representing 14% of revenue, and $151.0 million in 2017, representing 6% of revenue. Free Cash Flow decreased in 2019 largely due to higher operating expenses, while it increased in 2018 primarily due to higher operating income and to a lesser extent, lower capital expenditures.
Seasonal trends in our GBV impact Free Cash Flow for any given quarter. We track our TTM Free Cash Flow to account for the timing difference in when we receive cash from service fees, which is at the time of booking. TTM Free Cash Flow provides a longer-term view of our business that is not impacted by seasonality. Our costs are relatively fixed across quarters or vary in line with the volume of transactions, and we historically achieve our highest GBV in the first and second quarters of the year with comparatively lower check-ins. As a result, increases in unearned fees make our Free Cash Flow and Free Cash Flow as a percentage of revenue the highest in the first two quarters of the year. We typically see a slight decline in GBV and a peak in check-ins in the third quarter, which results in a decrease in unearned fees and lower sequential level of Free Cash Flow, and a greater decline in GBV in the fourth quarter, where Free Cash Flow is typically negative. For additional information regarding seasonality, see the subsection titled “— Key Factors Affecting Our Performance — Seasonality” below. See the section titled “Selected Consolidated Financial and Other Data — Non-GAAP Financial Measures” for a reconciliation of Free Cash Flow to the most relevant GAAP measure. For additional information regarding the reconciliation of TTM Free Cash Flow to the most relevant GAAP measure, see the subsection titled “— Quarterly Reconciliations of Non-GAAP Financial Measures.”
For the nine months ended September 30, 2020, Free Cash Flow was $(520.1) million, compared to Free Cash Flow of $319.8 million in the prior year period. The decrease was due to the reduction in Nights and Experiences Booked and GBV due to the COVID-19 pandemic, as described above, offset by cost reductions. In the third quarter of 2020, Free Cash Flow was $328.0 million, compared to $(78.4) million in the prior year, reflecting an increase in accrued expenses and other liabilities and a lower decrease in unearned fees.
Recent Developments
COVID-19 Has Had a Disproportionately Negative Effect on the Travel Industry
In December 2019, a novel strain of coronavirus disease was first reported. Only three months later, in March 2020, the World Health Organization characterized COVID-19 as a global pandemic. The COVID-19
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pandemic has forced international, federal, state, and local governments to enforce prohibitions of non-essential activities. The outbreak will have a continued adverse impact on economic and market conditions and has already triggered a period of global economic slowdown, the depth and breadth of which are yet to be determined.
The COVID-19 pandemic has resulted in global travel restrictions and a corresponding significant reduction in travel. While many industries have been adversely impacted, travel has been disproportionately affected, as governments have implemented travel restrictions and as people have become reluctant to travel irrespective of such restrictions. As a result, global scheduled flights began to decline in February 2020, and by May 2020 were down 69% relative to May 2019. By September 2020, flights had slightly rebounded, down 48% compared to September 2019, according to OAG Aviation. In addition, global hotel occupancy rates have significantly declined in 2020 according to STR, with 48% occupancy in the United States and 39% in Europe in September 2020, down from 67% and 81% in September 2019, respectively.
Prior to the outbreak, we had seen strong year-over-year growth in Nights and Experiences Booked in the first three weeks of 2020. We first saw the impact of COVID-19 in China in the last week of January, which when contained to China, had a minor impact on the entire business. The outbreak spread throughout Asia, and then through Europe, North America, and the rest of the world by the end of the first quarter of 2020. In order to protect our business from these near-term market disruptions and the prospect of a prolonged business impact, we raised $2.0 billion in the form of term loans in April 2020 and took action to dramatically reduce our operating expenses as described below. We believe these incremental funds and our rapid management of expenses, in addition to our existing cash position, will help us to prudently manage our business through the effects of the COVID-19 pandemic.
As of the date of this prospectus, the full impact of the COVID-19 pandemic on the global economy and the extent to which the COVID-19 pandemic will continue to adversely impact our financial condition, results of operations, and cash flows remains uncertain. Our financial results for the first nine months of 2020 were materially adversely affected, and we expect that COVID-19 will continue to materially adversely impact our bookings, revenue, and business operations in future periods. While we experienced an increase in GBV and revenue in the third quarter of 2020 compared to the second quarter of 2020 as domestic travel rebounded, both were down for the first nine months of 2020 compared to the same period in 2019 by 39% and 32%, respectively; and both were down for the third quarter of 2020 compared to the third quarter of 2019 by 17% and 18%, respectively. The extent and duration of the impact of the COVID-19 pandemic over the longer term remain uncertain and dependent on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of COVID-19, the extent and effectiveness of containment actions taken, including mobility restrictions, the timing, availability, and effectiveness of vaccines, and the impact of these and other factors on travel behavior in general, and on our business in particular.
During the fourth quarter of 2020, another wave of COVID-19 infections emerged. As a result, countries imposed strict lockdowns, in particular in Europe. Similar to the impact of the initial COVID-19 wave in March 2020, we are seeing a decrease in bookings in the most affected regions. As a result, we expect greater year-over-year decline in Nights and Experiences Booked and GBV in the fourth quarter of 2020 than in the third quarter of 2020 and greater year-over-year increases in cancellations and alterations in the fourth quarter of 2020 than in the third quarter of 2020.
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COVID-19 Impact on our Business
To provide additional information on the impact of the COVID-19 pandemic on our business, we have included below the year-over-year comparisons of monthly booking and cancellation trends in the fourth quarter of 2019 and the first nine months of 2020.
| Monthly Nights and Experiences Booked Trends | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2019 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||
|
Oct |
Nov | Dec | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sept | |||||||||||||||||||||||||||||||||||||||||
| (in millions, except percentages) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross nights and experiences booked |
30.5 | 28.3 | 28.4 |
|
|
|
38.3 | 32.8 | 19.0 | 8.7 | 16.4 | 26.0 | 28.3 | 26.0 | 23.9 | |||||||||||||||||||||||||||||||||||||
| % YoY Change |
31% | 30% | 35% |
|
|
|
25% | 17% | (42)% | (72)% | (50)% | (21)% | (19)% | (21)% | (23)% | |||||||||||||||||||||||||||||||||||||
| (-) Cancellations and alterations |
3.9 | 3.6 | 3.9 |
|
|
|
5.0 | 4.9 | 23.1 | 9.4 | 7.2 | 6.5 | 6.6 | 5.4 | 4.4 | |||||||||||||||||||||||||||||||||||||
| Cancellations and alterations as a % of gross nights and experiences booked |
13% | 13% | 14% |
|
|
|
13% | 15% | 122% | 108% | 44% | 25% | 23% | 21% | 18% | |||||||||||||||||||||||||||||||||||||
| Nights and Experiences Booked* |
26.6 | 24.7 | 24.5 |
|
|
|
33.3 | 27.9 | (4.1) | (0.7) | 9.2 | 19.5 | 21.7 | 20.6 | 19.5 | |||||||||||||||||||||||||||||||||||||
| % YoY Change |
31% | 30% | 35% |
|
|
|
22% | 12% | (114)% | (103)% | (68)% | (31)% | (28)% | (28)% | (28)% |
| * |
We define Nights and Experiences Booked as net of cancellations and alterations. |
| • |
Gross nights and experiences booked materially contracted on a year-over-year basis, with a low in April 2020, down 72% year over year. From April through June 2020, we saw a steady rebound in gross nights and experiences booked before cancellations and alterations, which were down 21% in June relative to the same period in the prior year. From July through September 2020, gross nights and experiences booked have been stable, down approximately 20% relative to the same period in the prior year. |
| • |
Cancellations and alterations of previously booked trips increased dramatically after the COVID-19 outbreak, as guests were either unable to travel or uncomfortable doing so. While the number of nights and experiences canceled in January 2020 was 13% of the gross nights and experiences booked that month, the number of nights and experiences canceled in March and April 2020 exceeded the number of gross nights and experiences booked during those months. From April to September 2020, cancellations and alterations as a percentage of gross nights and experiences booked initially declined significantly and then have remained relatively stable for the past several months. |
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| • |
Nights and Experiences Booked was negative in March and April 2020. By May 2020, gross nights and experiences booked had begun to recover, while cancellations and alterations began to fall, resulting in a return to positive Nights and Experiences Booked from May through September 2020. From July through September 2020, Nights and Experiences Booked were stable, down 28% relative to the same period in the prior year. |
| Monthly Gross Booking Value Trends | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2019 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||
|
Oct |
Nov | Dec | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sept | |||||||||||||||||||||||||||||||||||||||||
| ($ in billions, except percentages and gross daily rate) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross daily rate |
$ | 110.20 | $ | 110.23 | $ | 110.36 |
|
|
|
$ | 122.51 | $ | 122.63 | $ | 104.35 | $ | 91.69 | $ | 135.73 | $ | 145.72 | $ | 133.84 | $ | 132.24 | $ | 127.84 | |||||||||||||||||||||||||
| % YoY Change |
(1)% | (1)% | 0% |
|
|
|
0% | 1% | (12)% | (21)% | 18% | 27% | 19% | 21% | 18% | |||||||||||||||||||||||||||||||||||||
| Gross Booking Value before cancellations and alterations |
3.4 | 3.1 | 3.1 |
|
|
|
4.7 | 4.0 | 2.0 | 0.8 | 2.2 | 3.8 | 3.8 | 3.4 | 3.1 | |||||||||||||||||||||||||||||||||||||
| % YoY Change |
29% | 28% | 35% |
|
|
|
26% | 19% | (49)% | (78)% | (41)% | 1% | (4)% | (4)% | (9)% | |||||||||||||||||||||||||||||||||||||
| Gross Booking Value* |
3.0 | 2.8 | 2.8 |
|
|
|
4.2 | 3.5 | (0.9) | (0.6) | 1.1 | 2.7 | 2.8 | 2.7 | 2.5 | |||||||||||||||||||||||||||||||||||||
| % YoY Change |
30% | 29% | 35% |
|
|
|
24% | 15% | (127)% | (119)% | (69)% | (17)% | (19)% | (14)% | (17)% |
| * |
We define Gross Booking Value as net of cancellations and alterations. |
| • |
Gross daily rate represents GBV per Night and Experience Booked, all before cancellations and alterations. This measure is a useful proxy for the ADR trend over this period; because the net metrics reflect elevated cancellations and were negative in March and April 2020, the net daily rate was not meaningful for those periods. The year-over-year increase in gross daily rate from May to September 2020 was driven by faster recovery in North America and EMEA during this period, which have historically higher daily rates than Latin America and Asia Pacific. The gross daily rate was also impacted by a mix shift toward entire home listings in non-urban destinations, which have higher daily rates. |
| • |
Gross Booking Value before cancellations and alterations followed a similar trend to gross nights and experiences booked, materially declining on a year-over-year basis between March and May 2020. GBV before cancellations and alterations recovered in June 2020, growing 1% year-over-year, driven by the increase in gross daily rate. From July through September 2020, GBV before cancellations and alterations has been stable, down less than 10% compared to the same periods in the prior year. |
| • |
Gross Booking Value declined and rebounded as a result of the trends described above. In September 2020, GBV was down 17% on a year-over-year basis, less than the 28% decline in Nights and Experiences Booked due to the growth in gross daily rate. GBV reflects bookings made in a period for future nights or experiences and is a leading indicator for revenue, which is recognized during the period that stays and experiences occur. |