As filed with the Securities and Exchange Commission on November 16, 2020.
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Airbnb, Inc.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware |
7372 |
26-3051428 | ||
| (State or Other Jurisdiction of |
(Primary Standard Industrial |
(I.R.S. Employer |
888 Brannan Street
San Francisco, California 94103
(415) 510-4027
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant’s Principal Executive Offices)
Brian Chesky
Chief Executive Officer
Airbnb, Inc.
888 Brannan Street
San Francisco, California 94103
(415) 510-4027
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service)
Copies to:
| Tad J. Freese Kathleen M. Wells Anthony J. Richmond Latham & Watkins LLP 140 Scott Drive Menlo Park, California 94025<PHONE_NUMBER> |
Kevin P. Kennedy Simpson Thacher & Bartlett LLP 2475 Hanover Street Palo Alto, California 94304<PHONE_NUMBER> |
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box: ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
| Non-accelerated filer | ☒ | Smaller reporting company | ☐ | |||
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
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| Title of Each Class of Securities to be Registered |
Proposed Maximum |
Amount of | ||
| Class A common stock, $0.0001 par value per share |
$1,000,000,000 |
$109,100 | ||
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| (1) |
Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. Includes the aggregate offering price of additional shares that the underwriters have the option to purchase. |
| (2) |
Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price. |
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
Subject to Completion, dated November 16, 2020
The information in this preliminary prospectus is not complete and may be changed. We and the selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.
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Class A Common Stock
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Shares
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This is an initial public offering of shares of Class A common stock of Airbnb, Inc. We are offering shares of our Class A common stock. The selling stockholders identified in this prospectus are offering shares of Class A common stock. We will not receive any of the proceeds from the sale of shares by the selling stockholders. Prior to this offering, there has been no public market for our Class A common stock. It is currently estimated that the initial public offering price will be between $ and $ per share. We have applied to list our Class A common stock on the Nasdaq Global Select Market under the symbol “ABNB.”
We have four series of common stock, Class A, Class B, Class C, and Class H common stock (collectively, our “common stock”). The rights of holders of Class A, Class B, Class C, and Class H common stock are identical, except voting and conversion rights, and with respect to our Class H common stock, redemption rights. Each share of Class A common stock is entitled to one vote, each share of Class B common stock is entitled to 20 votes and is convertible at any time into one share of Class A common stock, each share of Class C common stock is entitled to no votes, and each share of Class H common stock is entitled to no votes and will convert into a share of Class A common stock on a share-for-share basis upon the sale of such share of Class H common stock to any person or entity that is not our subsidiary. Outstanding shares of Class B common stock will represent approximately % of the voting power of our outstanding capital stock immediately following this offering, with our directors, executive officers, and 5% stockholders and their respective affiliates representing approximately % of the voting power. See the section titled “Description of Capital Stock.”
Investing in our Class A common stock involves risks. See the section titled “Risk Factors” beginning on page 27.
| Per Share |
Total |
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| Initial public offering price |
$ |
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$ |
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| Underwriting discounts and commissions(1) |
$ |
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$ |
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| Proceeds to us, before expenses |
$ |
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$ |
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| Proceeds to selling stockholders, before expenses |
$ |
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$ |
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| (1) |
See the section titled “Underwriting” for a description of the compensation payable to the underwriters. |
At our request, the underwriters have reserved up to shares of Class A common stock, or up to % of the shares offered by this prospectus, for sale at the initial public offering price through a directed share program to eligible hosts on our platform and certain individuals identified by our officers and directors. See the section titled “Underwriting — Directed Share Program.”
We have granted to the underwriters the option for a period of 30 days to purchase up to an additional shares of Class A common stock from us on the same terms as set forth above.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares of Class A common stock to purchasers on , 2020.
Morgan Stanley Goldman Sachs & Co. LLC
Allen & Company LLC BofA Securities Barclays Citigroup
BNP PARIBAS Mizuho Securities Credit Suisse Deutsche Bank Securities Jefferies Wells Fargo Securities
Baird Canaccord Genuity Cowen D.A. Davidson & Co. JMP Securities KeyBanc Capital Markets Needham & Company
Oppenheimer & Co. Piper Sandler Raymond James Stifel Wedbush Securities William Blair
Academy Securities Blaylock Van, LLC CastleOak Securities, L.P. C.L. King & Associates
Guzman & Company Loop Capital Markets MFR Securities, Inc. Mischler Financial Group, Inc. Ramirez & Co., Inc.
Siebert Williams Shank Telsey Advisory Group Tigress Financial Partners
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Prospectus dated , 2020 |
In the beginning, two friends opened their door.
Brian and Joe, our first hosts
Thirteen years later, four million Airbnb hosts have opened theirs.
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F-1 |
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You should rely only on the information contained in this prospectus or contained in any free writing prospectus filed with the Securities and Exchange Commission (the “SEC”). Neither we, the selling stockholders, nor any of the underwriters have authorized anyone to provide any information or make any representations other than those contained in this prospectus or in any free writing prospectus we have prepared. Neither we, the selling stockholders, nor the underwriters take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares of Class A common stock offered by this prospectus, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the Class A common stock. Our business, results of operations, financial condition, and prospects may have changed since such date.
For investors outside of the United States: Neither we, the selling stockholders, nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus or any free writing prospectus we may provide to you in connection with this offering in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside of the United States who come into possession of this prospectus and any free writing prospectus must inform themselves about and observe any restrictions relating to this offering and the distribution of this prospectus outside of the United States.
This summary highlights selected information that is presented in greater detail elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our Class A common stock. You should read this entire prospectus carefully, including the sections titled “Risk Factors,” “Special Note Regarding Forward-Looking Statements,” and “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, before making an investment decision. Unless the context otherwise requires, the terms “Airbnb,” the “company,” “we,” “us,” and “our” in this prospectus refer to Airbnb, Inc. and its consolidated subsidiaries.
Airbnb, Inc.
We are eager to tell you the story of Airbnb. Before we start, we want to acknowledge the serious impact of the COVID-19 pandemic on people’s health, safety, and economic well-being. Given this backdrop, we feel incredibly fortunate to be able to tell our story. In it, we will explain how we are addressing today’s challenges, as well as how we are focusing on the opportunities ahead. Our goal is to build an enduring business, and we want to tell you about it, starting at the beginning.
The Beginning
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
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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.
13 Years Later
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.
Looking back over the past 13 years, we have done something we hope is even more meaningful: we have helped millions of people satisfy a fundamental human need for connection. And it is through this connection that people can experience a greater sense of belonging. This is at the root of what brought people to Airbnb and is what continues to bring people back.
A New Category
Travel is one of the world’s largest industries, and its approach has become commoditized. The travel industry has scaled by offering standardized accommodations in crowded hotel districts and frequently-visited landmarks and attractions. This one-size-fits-all approach has limited how much of the world a person can access, and as a result, guests are often left feeling like outsiders in the places they visit.
Airbnb has enabled home sharing at a global scale and created a new category of travel. Instead of traveling like tourists and feeling like outsiders, guests on Airbnb can stay in neighborhoods where people live, have authentic experiences, live like locals, and spend time with locals in approximately 100,000 cities around the world. In our early days, we described this new type of travel with the tagline “Travel like a human.” Today, people simply refer to it with a single word: “Airbnb.”
Hosting is at the Center
Hosting is the foundation of the Airbnb experience. Airbnb enables hosts to provide guests access to a vast world of unique homes and experiences that were previously inaccessible, or even undiscovered. The role of the host is about more than opening their door. A great host enables guests to find a deeper connection to the places they visit and the people who live there.
What began with our hosts sharing their spare bedrooms on Airbnb in a few large cities has grown into hosts listing spaces of all kinds, in communities of all sizes, in nearly every corner of the world. Today, hosts even share their interests and talents through Airbnb Experiences.
We believe that we have just scratched the surface of the opportunities that hosting provides. There are many more ways people will want to connect with each other and the world around them, and so we will continue to design and enable new ways to host. No matter what form it takes, hosting will be at the center of Airbnb.
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Guests are Members of Our Community
Our hosts have welcomed hundreds of millions of guest arrivals through Airbnb. Our guests are not transactions — they are engaged, contributing members of our community. Once they become a part of Airbnb, guests actively participate in our community, return regularly to our platform to book again, and recommend Airbnb to others who then join themselves. This demand encourages new hosts to join, which in turn attracts even more guests. It is a virtuous cycle — guests attract hosts, and hosts attract guests.
A Resilient Model
In early 2020, as COVID-19 disrupted travel across the world, Airbnb’s business declined significantly. But within two months, our business model started to rebound even with limited international travel, demonstrating its resilience. People wanted to get out of their homes and yearned to travel, but they did not want to go far or to be in crowded hotel lobbies. Domestic travel quickly rebounded on Airbnb around the world as millions of guests took trips closer to home. Stays of longer than a few days started increasing as work-from-home became work-from-any-home on Airbnb. We believe that the lines between travel and living are blurring, and the global pandemic has accelerated the ability to live anywhere. Our platform has proven adaptable to serve these new ways of traveling.
And just as when Airbnb started during the Great Recession of 2008, we believe that people will continue to turn to hosting to earn extra income. In light of the evolving nature of COVID-19 and the uncertainty it has produced around the world, we do not believe it is possible to predict COVID-19’s cumulative and ultimate impact on our future business, results of operations, and financial condition. COVID-19 has materially adversely affected our recent operating and financial results and is continuing to materially adversely impact our long-term operating and financial results. However, we believe that as the world recovers from this pandemic, Airbnb will be a vital source of economic empowerment for millions of people.
We have experienced rapid growth since our founding. In 2019, we generated Gross Booking Value (“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 global 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.
We 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 during 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
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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. See the section titled “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures” for a reconciliation of Adjusted EBITDA and Free Cash Flow to net loss and net cash provided by operating activities, respectively, the most directly comparable financial measures calculated in accordance with U.S. generally accepted accounting principles (“GAAP”).
Serving Our Stakeholders
Airbnb has five stakeholders and is designed with all of them in mind. Along with employees and shareholders, we serve hosts, guests, and the communities in which they live. We intend to make long-term decisions considering all of our stakeholders because their collective success is key for our business to thrive. Below, we will share more about our hosts, our guests, our communities, and how we serve them.
Our Hosts
Who are our hosts?
Airbnb’s hosts are the foundation of our community and business. It is their individuality that makes Airbnb unique. From schoolteachers to artists, our hosts span more than 220 countries and regions and approximately 100,000 cities, and 55% of our hosts are women. As of September 30, 2020, we had over 4 million hosts around the world, with 86% of hosts located outside of the United States.
Our hosts had 7.4 million available listings of homes and experiences as of September 30, 2020, of which 5.6 million were active listings. 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. In 2019, 84% of our revenue resulted from stays with existing hosts who had completed at least one guest check-in event (a “check-in”) on or before December 31, 2018. Our hosts largely come to us organically with 79% of our hosts coming directly to our platform to sign up to host in 2019. In 2019, we added more hosts than any year in our history with 23% of our new hosts first starting out as guests on Airbnb.
Why do they host?
Our hosts have multiple motivations for hosting on Airbnb:
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Hosts can earn extra income. In a 2019 survey of hosts that we conducted, half of our hosts told us that the supplemental income they generated helped them afford to stay in their homes. |
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Hosts can connect guests to their communities. In the same survey, of the hosts who made recommendations, 87% said that they recommend local restaurants and cafes to their guests, and 82% said they recommend businesses that are locally owned. |
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Hosts can share their skills and passions. Airbnb Experiences allow our hosts to not only share their homes with guests, but also their skills and passions by offering authentic activities in over 1,000 cities around the world. |
What do we provide our hosts?
Airbnb is more than just a distribution channel — we are an enablement platform for our more than 4 million hosts. We have designed our platform to empower anyone to become a host and give them what they need to be successful and deliver a high quality experience.
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Global demand. Because of strong demand from guests around the world, for active listings in 2019 that were new to our platform, 50% received a booking within 4 days of becoming available, and 75% received a booking within 16 days of becoming available. |
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Activation and merchandising. Our product makes it easy for a new host to create, activate, and merchandise their new listing, and we also provide recommendations and tools for hosts to attract incremental demand. |
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Pricing. While hosts set their own prices, we provide hosts with Smart Pricing tools that suggest prices for their listings, and we also provide data insights that include how host occupancy rates compare to other listings on our platform. |
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Scheduling. Hosts can easily manage their calendars and accept, track, and manage their upcoming reservations on our website and mobile apps. |
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Payments. We facilitate all payments on our platform: collecting payments from guests and processing payments to hosts. We also provide tools to hosts to manage and track their earnings. |
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Community support. We have a global community support team to help with issues that arise before, during, or after a stay or experience. |
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Host protections. Our host protections include property damage protection and liability coverage. In addition, our trust and safety initiatives include risk scoring, watchlist and background checks, fraud and scam prevention, secure messaging, secure payments, and minimum age requirements. |
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Reviews and feedback. Our platform builds trust by enabling hosts and guests to learn from each other through the reviews they leave following each stay or experience. |
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Superhost program. Our Superhost program recognizes our most active and high-quality hosts. Superhosts typically enjoy higher occupancy rates because guests value the hospitality, quality, and reliability they offer. |
Our Guests
Who are our guests?
From young people to retirees, our guests come from a range of cultures and places. They seek everything from budget stays to luxury accommodations in large cities to remote villages. What they often have in common is a curiosity about the world and open-mindedness to other people and cultures.
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In 2019, 54 million active bookers worldwide booked 327 million nights and experiences on our platform, and since our founding, there have been over 825 million guest arrivals on Airbnb.
Most of our guests discover Airbnb organically, with approximately 91% of all traffic to Airbnb coming through direct or unpaid channels during the nine months ended September 30, 2020. Guests are highly engaged and contribute value for hosts and other guests: over 68% of guests left reviews of their stays in 2019, and collectively, hosts and guests have written more than 430 million cumulative reviews as of September 30, 2020. Many of these guests return to our platform; during 2019, 69% of our revenue was generated by stays from repeat guests.
Why do guests choose Airbnb?
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Guests can be hosted. Whether guests stay with a host or have a home all to themselves, they can experience the cities they visit the same way locals do. |
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Guests can visit real neighborhoods. From visiting local neighborhood coffeehouses, shops, grocers, restaurants, bakeries, parks, hikes, and bike paths, guests can feel like part of a local community and discover a world right outside their door. |
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Guests can stay in unique spaces. We believe we offer more unique homes than any other platform and that the majority of our listings, from igloos to treehouses, and castles to boats, are only available on Airbnb. |
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Guests can feel at home. Spaces on Airbnb have all the amenities of a place you can call home, such as living rooms, kitchens, and backyards. |
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Guests can find superior value. Based on our survey data, a majority of guests tell us they choose Airbnb to save money while traveling, as listings on Airbnb often provide greater value through more space and amenities than options like chain hotels that typically provide only single rooms. |
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Guests can take any type of trip. From nearby stays to international vacations, family gatherings to corporate meetings, and weekend getaways to multi-month stays, Airbnb offers a wide range of accommodations for all types of trips. |
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Guests can stay anywhere. Our hosts offer listings for guests in approximately 100,000 cities, many of which are not served by hotels, and according to a report that we commissioned in 2018, even in popular destinations, at least two-thirds of our guest arrivals take place outside of traditional tourist districts. |
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Guests can have authentic experiences. From making handmade pasta in Rome to studying music history in Havana, Airbnb Experiences offer tens of thousands of experiences in communities around the world. |
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Guests can rely on a trusted platform. Guests can rely on reviews to give them confidence about what they are booking, community support to help with issues arising before, during, or after a stay or experience, as well as our guest refund policy that Airbnb will rebook or refund a guest if a listing does not meet our hosting standards. |
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Our Communities
In 2007, we began with a single listing on Rausch Street in San Francisco’s SOMA district. Today, Airbnb operates in approximately 100,000 cities, ranging from large cities to small towns and rural communities, in more than 220 countries and regions around the world. Our business is intertwined with these communities, and we are focused on seeing them thrive.
How do we serve the communities in which we operate?
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We create economic stimulus. Between host income and guest discretionary spending, we believe the majority of the economic activity on Airbnb remains in the neighborhoods where guests stay. |
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We are committed to being good partners. We have invested in creating tools to help cities to more effectively enforce their regulations, and we have worked with thousands of local regulators, policymakers, and other local leaders to engage with the communities in which we operate. |
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We offer support in times of crisis. We have created a program through which hosts offer their spaces to people in need and, to date, hosts in 99 countries have housed more than 75,000 people recovering from natural disasters, international refugees, or more recently, frontline responders during COVID-19. |
Our System of Trust
One of our core innovations has been the design of a system that allows millions of strangers to trust one another. The system for trust that we have designed includes: reviews, secure messaging and account protection, risk scoring, secure payments, watchlist and background checks, cleanliness standards, fraud and scam prevention, insurance and protections, age restrictions, an urgent safety line, a 24/7 neighborhood support line, and our guest refund policy. We deploy some of these features such as reviews and secure payments globally, and others such as background checks in specific countries and regions.
Our Market Opportunity
We have a substantial market opportunity in the growing travel market and experience economy. We estimate our serviceable addressable market (“SAM”) today to be $1.5 trillion, including $1.2 trillion for short-term stays and $239 billion for experiences. We estimate our total addressable market (“TAM”) to be $3.4 trillion, including $1.8 trillion for short-term stays, $210 billion for long-term stays, and $1.4 trillion for experiences.
We have estimated key components of our SAM and TAM using 2019 actual figures and believe our market opportunity can grow over the long term at the rate of travel spending. While the current travel market remains unpredictable, we believe estimates made prior to the COVID-19 pandemic to be the best representation of our long-term travel opportunity.
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Our Strengths
We have six core strengths that helped Airbnb create a new category and give us a competitive advantage:
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Unique host community. The more than 4 million hosts in our community are as unique as the homes and experiences they share, with the majority of our 5.6 million active listings only available on Airbnb. |
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Engaged guest community. Our hosts have welcomed hundreds of millions of guest arrivals through Airbnb. Our guests come directly to our platform, actively participate in our community, and return regularly to book again. |
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Globally recognized brand. Our brand is recognized globally, and “Airbnb” is used as a noun and a verb in countries all over the world. |
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Global network. Hosts and guests attract each other to Airbnb, creating a global network across more than 220 countries and regions. |
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Custom-built platform. Our technology platform was built for the unique needs of our hosts and guests; it allows us to quickly adapt to what our hosts and guests around the world require and delivers deep business intelligence insights to help us manage our marketplace. |
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Design-driven approach. Since the beginning, design has been at the core of everything we do, and it has enabled us to create a new category. |
Our Long-Term Growth Strategy
Our strategy is to continue to invest in our key strengths:
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Unlock more hosting. In order to have enough selection for guests booking on our platform, we will continue to invest in growing the size and quality of our host community. We believe that we have just scratched the surface of the opportunities that hosting can provide. |
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Grow and engage our guest community. We intend to attract new guests to Airbnb and convert more of them into brand advocates. We will continue to focus on engaging our existing guests to return to book and to use Airbnb with more frequency. |
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Invest in our brand. We intend to invest more deeply in our brand to educate new hosts and guests on the benefits of Airbnb and the uniqueness of our offering. |
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Expand our global network. We plan to expand our global network in the countries in which we already have a deep presence, as well as to expand into markets where our penetration is lower, such as India, China, Latin America, Southeast Asia, and tens of thousands of smaller markets and remote areas around the world. |
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Innovate on our platform. We will innovate to improve our host and guest experience, making Airbnb more accessible and appealing for new hosts and guests and driving increased engagement and loyalty with our existing community. |
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Design new products and offerings. We will design new opportunities for connection. As the world continues to change, we will continue to bring together new technologies with our design expertise to expand possibilities for our hosts and offer new experiences for our guests. |
Recent Developments
COVID-19 Has Had a Disproportionately Negative Effect on the Travel Industry
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.
Prior to the outbreak, we had seen strong year-over-year growth in Nights and Experiences Booked in the first three weeks of 2020. Nights and Experiences Booked 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. 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.
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 to September 2020. From July through September 2020, Nights and Experiences Booked have been 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 Experiences Booked, all before cancellations and alterations. This measure is a useful proxy for the average daily rate (“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 Europe, the Middle East, and Africa (“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. |
We expect continued volatility in these trends and fluctuations from month to month as the continued impact from COVID-19 is not linear across geographies, as some countries and cities have recently enacted new lockdowns and prohibitions on travel, and as COVID-19 is continuing to materially adversely affect our business and financial results.
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Multiple Resilient Categories Were Less Impacted and Showed Strong Recovery
We believe that the COVID-19 pandemic reinforced that travel is an enduring human desire, even in the face of challenges. People have increasingly sought travel options closer to home during COVID-19, and Airbnb’s offerings are well suited to adapt to this changing dynamic. We offer all types of accommodations, allowing guests to find spaces suited to their individual needs under these circumstances. We have worked closely with our hosts, guests, and communities to prioritize and support safe and responsible travel during these challenging times and have adapted our offerings for changing trends in travel and experiences. The U.S. Centers for Disease Control and Prevention guidelines have listed homes shared with members of the same household as safer than hotels during the pandemic, which supports the way guests travel on our platform.
We believe that the recovery in the second and third quarters of 2020 is attributable to the renewed ability and willingness for guests to travel, the resilience of our hosts, and relative strength of our business model. From December 31, 2019 through September 30, 2020, active listings remained stable at approximately 5.6 million despite the decline in booking activity on our platform due to COVID-19. Against an otherwise highly negative travel backdrop, there are several areas of our business that 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 in several ways:
| • |
Domestic travel represents travel within the same country, when the guest’s origin country is the same as the destination country. While air and cross-border international travel has been significantly impacted by COVID-19, domestic travel around the world has been extremely resilient. |
| • |
Short-distance travel within 50 miles of guest origin has been highly resilient, even at the peak of the business interruption in April. We have also seen stays between 50 miles and 500 miles from guest origin recover. |
| • |
Travel outside of our top 20 cities (based on 2019 GBV) has been more resilient than those booked in our top 20 cities. |
| • |
Long-term stays are stays on our platform of at least 28 nights. Long-term stays were one of our fastest growing categories in 2019 as guests increasingly chose Airbnb listings to meet their need for stays of greater length. |
COVID-19 Cost Reductions Position Our Business for Improved Financial Performance
In response to the spread of COVID-19 and the resulting material decrease in GBV, we undertook an internal review of our cost structure, ultimately making changes to improve the strength of our business in the long term. We rapidly made changes to manage our expenses in a period of material business interruption, which included the following, among others:
| • |
Suspending substantially all discretionary marketing program spend; |
| • |
Reducing full-time employee headcount by approximately 25%; |
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| • |
Setting expectation for the potential of no employee bonuses for 2020 and reducing executive team member salaries for six months; |
| • |
Significantly reducing all discretionary spend; |
| • |
Suspending all facilities build-outs and significantly reducing capital expenditures; and |
| • |
Significantly reducing our contingent workforce. |
These headcount reductions and other restructuring actions are expected to result in charges for 2020 ranging between $135 million and $150 million. We believe these changes should allow us to more effectively manage our business and improve our financial operating results.
Risk Factors Summary
Our business is subject to a number of risks and uncertainties of which you should be aware before making a decision to invest in our Class A common stock. These risks are more fully described in the section titled “Risk Factors” immediately following this prospectus summary. These risks include, among others, the following:
| • |
The COVID-19 pandemic and the impact of actions to mitigate the COVID-19 pandemic have materially adversely impacted and will continue to materially adversely impact our business, results of operations, and financial condition. |
| • |
We have incurred net losses in each year since inception, and we may not be able to achieve profitability. We incurred net losses of $70.0 million, $16.9 million, $674.3 million, and $696.9 million for the years ended December 31, 2017, 2018, and 2019, and nine months ended September 30, 2020, respectively. Our accumulated deficit was $1.4 billion and $2.1 billion as of December 31, 2019 and September 30, 2020, respectively. |
| • |
Our Adjusted EBITDA and Free Cash Flow have been declining, and this trend could continue. |
| • |
Our revenue growth rate has slowed, and we expect it to continue to slow in the future. |
| • |
If we fail to retain existing hosts or add new hosts, or if hosts fail to provide high-quality stays and experiences, our business, results of operations, and financial condition would be materially adversely affected. |
| • |
If we fail to retain existing guests or add new guests, our business, results of operations, and financial condition would be materially adversely affected. |
| • |
Any further and continued decline or disruption in the travel and hospitality industries or economic downturn would materially adversely affect our business, results of operations, and financial condition. |
| • |
The business and industry in which we participate are highly competitive, and we may be unable to compete successfully with our current or future competitors. |
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| • |
Laws, regulations, and rules that affect the short-term rental and home sharing business may limit the ability or willingness of hosts to share their spaces over our platform and expose our hosts or us to significant penalties, which could have a material adverse effect on our business, results of operations, and financial condition. |
| • |
We are subject to a wide variety of complex, evolving, and sometimes inconsistent and ambiguous laws and regulations that may adversely impact our operations and discourage hosts and guests from using our platform, and that could cause us to incur significant liabilities including fines and criminal penalties, which could have a material adverse effect on our business, results of operations, and financial condition. |
| • |
Our substantial level of indebtedness could materially adversely affect our financial condition. We had outstanding indebtedness with a principal amount of $1,997.5 million as of September 30, 2020. |
| • |
At the time of the offering, we expect to recognize stock-based compensation expense of approximately $ for which the service-based vesting condition was satisfied or partially satisfied as of and for which we expect the liquidity-based vesting condition to be satisfied in connection with this offering. |
| • |
We may have exposure to greater than anticipated income tax liabilities. In September 2020, we received a Draft Notice of Proposed Adjustment from the IRS for the 2013 tax year proposing an increase to our U.S. taxable income that could result in additional income tax expense and cash tax liability of $1.35 billion, plus penalties and interest, which exceeds our current reserve recorded in our consolidated financial statements by more than $1.0 billion. |
Corporate Information
We were incorporated on June 27, 2008 as AirBed & Breakfast, Inc., a Delaware corporation. On November 15, 2010, we changed our name to Airbnb, Inc. Our principal executive offices are located at 888 Brannan Street, San Francisco, California 94103, and our telephone number is<PHONE_NUMBER>. Our website address is www.airbnb.com. Information contained on, or that can be accessed through, our website does not constitute part of this prospectus, and the inclusion of our website address in this prospectus is an inactive textual reference only. Investors should not rely on any such information in deciding whether to purchase our Class A common stock.
The Airbnb design logo, “Airbnb,” and our other registered or common law trademarks, service marks, or trade names appearing in this prospectus are the property of Airbnb, Inc. Solely for convenience, our trademarks, tradenames, and service marks referred to in this prospectus appear without the ®, TM, and SM symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks, tradenames, and service marks. This prospectus contains additional trademarks, tradenames, and service marks of other companies that are the property of their respective owners.
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The Offering
| Class A common stock offered by us |
shares |
| Option to purchase additional shares of Class A common stock offered by us |
shares |
| Class A common stock offered by the selling stockholders |
shares |
| Class A common stock to be outstanding after this offering |
shares (or shares if the underwriters exercise their option to purchase additional shares of Class A common stock in full) |
| Class B common stock to be outstanding after this offering |
shares |
| Class C common stock to be outstanding after this offering |
None |
| Class H common stock to be outstanding after this offering |
9,200,000 shares |
| Total Class A, Class B, Class C, and Class H common stock to be outstanding after this offering |
shares (or shares if the underwriters exercise their option to purchase additional shares of Class A common stock in full) |
| Voting rights |
We have four series of common stock, Class A, Class B, Class C, and Class H common stock. The rights of holders of Class A, Class B, Class C, and Class H common stock are identical, except voting and conversion rights, and with respect to our Class H common stock, redemption rights. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to 20 votes and is convertible at any time into one share of Class A common stock. Each share of Class C common stock is entitled to no votes. Each share of Class H common stock is entitled to no votes and will convert into a share of Class A common stock on a share-for-share basis upon the sale of such share of Class H common stock to any person or entity that is not our subsidiary. |
| The holders of our outstanding Class B common stock will hold % of the voting power of our outstanding capital stock following this offering, with our directors, executive officers, and 5% stockholders and their |
15
| respective affiliates holding approximately % of the voting power. These holders will have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of our directors and the approval of any change of control transaction. See the section titled “Description of Capital Stock” for additional information. |
| Use of proceeds |
We estimate that 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 any 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.
| We currently intend to use the net proceeds from this offering for general corporate purposes, including working capital, operating expenses, and capital expenditures. We intend to use $ of the net proceeds to satisfy a portion of the anticipated tax withholding and remittance obligations related to the |
16
| RSU Settlement (as defined below). We will have broad discretion in the way that we use the net proceeds of this offering. See the section titled “Use of Proceeds” for additional information. |
| Directed share program |
At our request, the underwriters have reserved up to shares of Class A common stock, or % of the shares offered by this prospectus, for sale at the initial public offering price through a directed share program to: |
| • |
eligible U.S. hosts who hosted on our platform in 2019 or 2020; and |
| • |
certain individuals identified by our officers and directors. |
| Hosts who reside in the United States and had, by November 1, 2020, accepted a reservation that began, or was scheduled to begin, in 2019 or 2020 are potentially eligible for the program. Airbnb employees are not eligible. If demand for the program exceeds capacity, we may invite hosts to participate based on tenure, as determined by the year they first hosted on Airbnb. |
The number of shares of Class A common stock available for sale to the general public will be reduced to the extent that such persons purchase such reserved shares. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus. Morgan Stanley & Co. LLC will administer our directed share program.
| See the sections titled “Certain Relationships and Related Party Transactions,” “Shares Eligible for Future Sale,” and “Underwriting — Directed Share Program.” |
| Risk factors |
See the section titled “Risk Factors” and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our Class A common stock. |
| Proposed Nasdaq Global Select Market symbol |
“ABNB” |
17
The number of shares of our common stock to be outstanding after this offering is based on shares of Class A common stock and shares of Class B common stock (after giving effect to the Preferred Stock Conversion (as defined below) 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 (as described in the section titled “Description of Capital Stock”), and excludes:
| • |
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 Equity Incentive Plan (“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 Equity Incentive Plan (“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, Inc. 2011 Equity Incentive Plan (“Hotel Tonight Plan”); |
| • |
1,265,344 restricted stock units (“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)); |
18
| • |
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; |
| • |
shares of our Class A common stock reserved for future issuance under our 2020 Incentive Award Plan (“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; |
| • |
4,000,000 shares of our Class A common stock reserved for future issuance under our Employee Stock Purchase Plan (“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; and |
| • |
400,000 shares of our Class A common stock that we plan to donate to a charitable foundation after the completion of this offering. |
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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.”
Except as otherwise indicated, all information in this prospectus assumes or gives effect to:
| • |
the amendment of our equity awards under our 2008 Plan and our 2018 Plan for all awards to settle into Class A common stock instead of Class B common stock in connection with and after this offering, excluding the stock options held by individuals holding at least 1% of our outstanding capital stock. See the section titled “Description of Capital Stock — Equity Award Amendment” for additional information; |
| • |
a two-for-one stock split of our outstanding common stock and redeemable convertible preferred stock effected on October 26, 2020; |
| • |
the filing and effectiveness of our restated certificate of incorporation in Delaware and the effectiveness of our amended and restated bylaws, each of which will occur immediately prior to the completion of this offering; |
| • |
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 our Class B common stock, 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 conversion of which will occur immediately prior to the completion of this offering (the “Preferred Stock Conversion”); |
| • |
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”); |
| • |
no exercise of the outstanding options or settlement of outstanding RSUs except as described above; |
| • |
no exercise of the outstanding warrants described above; and |
| • |
no exercise by the underwriters of their option to purchase up to additional shares of our Class A common stock. |
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Summary Consolidated Financial and Other Data
The following tables summarize our consolidated financial and other data. The summary consolidated statements of operations data for the years ended December 31, 2017, 2018, and 2019 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary 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 summary 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.
| Year Ended December 31, | Nine Months Ended September 30, |
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| 2017 | 2018 | 2019 | 2019 | 2020 | ||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||||||
| Consolidated Statements of Operations Data: |
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| Revenue |
$ | 2,561,721 | $ | 3,651,985 | $ | 4,805,239 | $ | 3,698,443 | $ | 2,518,935 | ||||||||||
| Costs and expenses: |
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| Cost of revenue |
647,690 | 864,032 | 1,196,313 | 902,695 | 666,295 | |||||||||||||||
| Operations and support(1) |
395,739 | 609,202 | 815,074 | 600,788 | 548,369 | |||||||||||||||
| Product development(1) |
400,749 | 579,193 | 976,695 | 693,796 | 690,677 | |||||||||||||||
| Sales and marketing(1) |
871,749 | 1,101,327 | 1,621,519 | 1,184,506 | 545,510 | |||||||||||||||
| General and administrative(1) |
327,156 | 479,487 | 697,181 | 490,262 | 421,082 | |||||||||||||||
| Restructuring charges(1) |
— | — | — | — | 136,969 | |||||||||||||||
| Total costs and expenses |
2,643,083 | 3,633,241 | 5,306,782 | 3,872,047 | 3,008,902 | |||||||||||||||
| Income (loss) from operations |
(81,362 | ) | 18,744 | (501,543 | ) | (173,604 | ) | (489,967 | ) | |||||||||||
| Interest income |
32,102 | 66,793 | 85,902 | 68,661 | 23,830 | |||||||||||||||
| Interest expense |
(16,403 | ) | (26,143 | ) | (9,968 | ) | (6,801 | ) | (107,548 | ) | ||||||||||
| Other income (expense), net |
6,564 | (12,361 | ) | 13,906 | 42,130 | (115,751 | ) | |||||||||||||
| Income (loss) before income taxes |
(59,099 | ) | 47,033 | (411,703 | ) | (69,614 | ) | (689,436 | ) | |||||||||||
| Provision for income taxes |
10,947 | 63,893 | 262,636 | 253,187 | 7,429 | |||||||||||||||
| Net loss |
$ | (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(2) |
$ | (0.27 | ) | $ | (0.07 | ) | $ | (2.59 | ) | $ | (1.24 | ) | $ | (2.64 | ) |
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| Year Ended December 31, | Nine Months Ended September 30, |
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| 2017 | 2018 | 2019 | 2019 | 2020 | ||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||||||
| Weighted-average shares used in computing net loss per share attributable to Class A and Class B common stockholders, basic and diluted(2) |
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)(2) |
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$ |
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$ | |||||||||
| 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)(2) |
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| (1) |
Includes stock-based compensation expense as follows: |
| Year Ended December 31, | Nine Months Ended September 30, |
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| 2017 | 2018 | 2019 | 2019 | 2020 | ||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Operations and support |
$ | 1,841 | $ | 1,968 | $ | 817 | $ | 283 | $ | 2,869 | ||||||||||
| Product development |
20,309 | 33,895 | 56,632 | 44,991 | 64,088 | |||||||||||||||
| Sales and marketing |
5,997 | 12,465 | 23,919 | 17,074 | 11,979 | |||||||||||||||
| General and administrative |
10,210 | 5,565 | 16,179 | 9,962 | 31,689 | |||||||||||||||
| Restructuring charges |
— | — | — | — | (1,849 | ) | ||||||||||||||
| Total stock-based compensation expense |
$ | 38,357 | $ | 53,893 | $ | 97,547 | $ | 72,310 | $ | 108,776 |
| (2) |
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. |
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| As of September 30, 2020 | ||||||||||||
| Actual | Pro Forma(1) | Pro Forma As Adjusted(2)(3) |
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| (in thousands) | ||||||||||||
| Consolidated Balance Sheet Data: |
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| Cash, cash equivalents, and marketable securities |
$ 4,495,211 |
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| Restricted cash |
55,628 |
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| Funds receivable and amounts held on behalf of customers |
2,354,450 |
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| Working capital(4) |
2,828,152 |
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| Total assets |
8,728,479 |
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| Funds payable and amounts payable to customers |
2,354,450 |
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| Total liabilities |
6,873,261 |
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| Redeemable convertible preferred stock |
3,231,502 |
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| Additional paid-in capital |
744,413 |
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| Accumulated deficit |
(2,117,856 | ) |
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| Total stockholders’ equity (deficit) |
(1,376,284 | ) |
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| (1) |
The pro forma column in the consolidated balance sheet data table above reflects (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, 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, as if such conversion had occurred on September 30, 2020; (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); (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; and (v) the filing and effectiveness of our restated certificate of incorporation in Delaware, which will occur immediately prior to the completion of this offering. |
| (2) |
The pro forma as adjusted column reflects: (i) the pro forma adjustments set forth in footnote (1) above; (ii) the sale 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. |
| (3) |
The pro forma as adjusted information discussed above is illustrative only and will depend on the actual initial public offering price and other terms of this offering determined at pricing. 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, each of our pro forma as adjusted cash, cash equivalents and marketable securities, working capital, total assets, additional paid-in capital, and total stockholders’ equity 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, as applicable, each of our pro forma as adjusted cash, cash equivalents and marketable securities, working capital, total assets, additional paid-in capital, and total stockholders’ equity 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. |
| (4) |
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. |
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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, |
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| 2017 | 2018 | 2019 | 2019 | 2020 | ||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Nights and Experiences Booked(1) |
185.8 | 250.3 | 326.9 | 251.1 | 146.9 | |||||||||||||||
| Gross Booking Value(2) |
$ 20,975.3 | $ 29,440.7 | $ 37,962.6 | $ 29,424.2 | $ 17,991.2 |
| (1) |
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. |
| (2) |
Gross Booking Value 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. |
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
The following table summarizes certain financial measures that are not calculated and presented in accordance with GAAP (“non-GAAP financial measures”), along with the most directly comparable GAAP measure, for each period presented below. In addition to our results determined in accordance with GAAP, we believe the following non-GAAP financial 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.
| Year Ended December 31, | Nine Months Ended September 30, |
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| 2017 | 2018 | 2019 | 2019 | 2020 | ||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Net loss |
$ | (70.0 | ) | $ | (16.9 | ) | $ | (674.3 | ) | $ | (322.8 | ) | $ | (696.9 | ) | |||||
| Adjusted EBITDA(1) |
$ | 60.0 | $ | 170.6 | $ | (253.3 | ) | $ | 23.1 | $ | (230.2 | ) | ||||||||
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| Net cash provided by (used in) operating activities |
$ | 251.2 | $ | 595.6 | $ | 222.7 | $ | 419.1 | $ | (490.6 | ) | |||||||||
| Free Cash Flow(2) |
$ | 151.0 | $ | 504.9 | $ | 97.3 | $ | 319.8 | $ | (520.1 | ) |
| (1) |
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 we may be held jointly liable with hosts for collecting and remitting such taxes; and (vi) restructuring charges. |
| (2) |
Free Cash Flow is defined as net cash provided by (used in) operating activities less purchases of property and equipment. |
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For additional information about these non-GAAP financial measures and reconciliations of the non-GAAP financial measures to the most directly comparable financial measures stated in accordance with GAAP, see the sections titled “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics and Non-GAAP Financial Measures.”
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Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this prospectus, before making a decision to invest in our Class A common stock. If any of the risks actually occur, our business, results of operations, financial condition, and prospects could be harmed. In that event, the trading price of our Class A common stock could decline, and you could lose part or all of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.
Risks Related to Our Business
The COVID-19 pandemic and the impact of actions to mitigate the COVID-19 pandemic have materially adversely impacted and will continue to materially adversely impact our business, results of operations, and financial condition.
In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. In an attempt to limit the spread of the virus, governments have imposed various restrictions, including emergency declarations at the federal, state, and local levels, school and business closings, quarantines, “shelter at home” orders, restrictions on travel, limitations on social or public gatherings, and other social distancing measures, which have had and may continue to have a material adverse impact on our business and operations and on travel behavior and demand.
The COVID-19 pandemic, which has required and may continue to require cost reduction measures, has materially adversely affected our near-term operating and financial results and will continue to materially adversely impact our long-term operating and financial results. 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. In light of the evolving nature of COVID-19 and the uncertainty it has produced around the world, we do not believe it is possible to predict the COVID-19 pandemic’s cumulative and ultimate impact on our future business, results of operations, and financial condition. The extent of the impact of the COVID-19 pandemic on our business and financial results will depend largely on future developments, including the duration and extent of the spread of COVID-19 both globally and within the United States, the prevalence of local, national, and international travel restrictions, significantly reduced flight volume, the impact on capital and financial markets and on the U.S. and global economies, foreign currencies exchange, and governmental or regulatory orders that impact our business, all of which are highly uncertain and cannot be predicted. Moreover, even after shelter-in-place orders and travel advisories are lifted, demand for our offerings, particularly those related to cross-border travel, may remain depressed for a significant length of time, and we cannot predict if and when demand will return to pre-COVID-19 levels. In addition, we cannot predict the impact the COVID-19 pandemic has had and will have on our business partners and third-party vendors and service providers, and we may continue to be materially adversely impacted as a result of the material adverse impact our business partners and third-party vendors suffer now and in the future. To the extent the COVID-19 pandemic continues to materially adversely affect our business, results of operations, and financial condition, it may also have the effect of heightening many of the other risks
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described in these “Risk Factors” or elsewhere in this prospectus. Any of the foregoing factors, or other cascading effects of the COVID-19 pandemic that are not currently foreseeable, will materially adversely impact our business, results of operations, and financial condition.
In response to the economic challenges and uncertainty resulting from the COVID-19 pandemic and its impact on our business, in May 2020, we announced a reduction in our workforce of approximately 1,800 employees. This reduction in workforce particularly impacted our marketing, design, customer service, transportation, Airbnb Studios, Hotels, and Airbnb Luxe teams. This reduction in workforce also resulted in the loss of institutional knowledge, relationships, and expertise for critical roles, which may not have been effectively transferred to continuing employees and may divert attention from operating our business, create personnel capacity constraints, and hamper our ability to grow, develop innovative products, and compete. Any of these impacts could materially adversely impact our business and reputation and impede our ability to operate or meet strategic objectives. This has led to increased attrition and could lead to reduced employee morale and productivity and problems retaining existing and recruiting future employees, which could have a material adverse impact on our business, results of operations, and financial condition. The reduction in force and other restructuring activities are expected to result in charges of $135 million to $150 million in 2020.
Most of our employees and third-party vendors and service providers are working remotely, and it is possible that widespread remote work arrangements could have a materially negative impact on host and guest satisfaction resulting from potential delays or slower than usual response times in receiving assistance from our customer support organization. The negative impact on our hosts’ and guests’ satisfaction could adversely impact our operations, the execution of our business plans, and productivity and availability of key personnel and other employees necessary to conduct our business, and of third-party service providers that perform critical services for us, or otherwise cause operational failures due to changes in our normal business practices necessitated by the COVID-19 pandemic and related governmental actions. If a natural disaster, power outage, connectivity issue, or other event occurs that impacts our employees’ ability to work remotely, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time. The increase in remote working may also result in material consumer privacy, information technology security, and fraud risks. The reduction in force in May 2020 and remote work arrangements resulting from the COVID-19 pandemic caused us to recognize an impairment of certain of our real property lease arrangements, and depending on the duration and extent of the remote work arrangements, we may incur additional impairment charges related to our real property lease agreements. The manner in which we have adjusted our business following the COVID-19 pandemic is based on our understanding of applicable legal and regulatory requirements, as well as the latest guidance from regulatory authorities, and is subject to legal or regulatory challenge, particularly as regulatory guidance evolves in response to future developments.
We have incurred net losses in each year since inception, and we may not be able to achieve profitability.
We incurred net losses of $70.0 million, $16.9 million, $674.3 million, and $696.9 million for the years ended December 31, 2017, 2018, and 2019 and the nine months ended September 30, 2020, respectively. As of December 31, 2019 and September 30, 2020, we had an accumulated deficit of $1.4 billion and $2.1 billion, respectively. Historically, we have invested significantly in efforts to grow our host and guest community, introduced new or enhanced offerings and features, increased our marketing spend, expanded our operations, hired additional employees, and enhanced our platform. Beginning in the second quarter of 2020, as a result of COVID-19 pandemic, we have significantly reduced our fixed and variable costs including a reduction in force and a suspension of substantially all discretionary marketing program spend. However, overall, we expect to resume making significant investments in our business and our host and guest community, including improvements to our payments platform, trust and safety on our platform,
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technology, and infrastructure in the future. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses. In particular, we expect the ongoing economic impact from the COVID-19 pandemic to have a material adverse impact on our revenue and financial results for 2020 and beyond. While we have enacted measures to reduce our expenses, we expect to incur a significant net loss for 2020 as a result of the COVID-19 pandemic, and we are utilizing a significant portion of our cash to support our operations in 2020 resulting from a material decrease in bookings and revenue as compared to 2019.
Certain of our offerings and certain regions in which we operate result in listings with lower service fees and will require significant additional investments from us, which could have a materially negative impact on our overall operating margins as these offerings and regions increase in size over time relative to other areas in which we operate. For example, seats for Airbnb Experiences are generally booked at lower prices than nights booked for stays. In addition, we have changed, and may in the future reduce, our service fees for strategic or competitive reasons. Any failure to increase our revenue or any failure to manage the increase in our operating expenses could prevent us from achieving or sustaining profitability as measured by net income, operating income, or Adjusted EBITDA.
We have granted RSUs to our employees and certain non-employees, with substantially all of such RSUs vesting upon the satisfaction of both a service-based vesting condition and a liquidity-based vesting condition. During the quarter in which this offering is completed, we will begin recording stock-based compensation expense for these RSUs with a liquidity-based vesting condition. If this offering had occurred on September 30, 2020, we would have recognized $2.7 billion of cumulative stock-based compensation expense related to RSUs for which the service-based vesting condition was satisfied or partially satisfied, and the remaining unrecognized stock-based compensation expense relating to these RSUs would have been $0.8 billion as of September 30, 2020. At the time of the offering, we expect to recognize stock-based compensation expense of approximately $ for which the service-based vesting condition was satisfied or partially satisfied as of and for which we expect the liquidity-based vesting condition to be satisfied in connection with this offering. Following this offering, our future operating expenses, particularly during the quarter in which this offering is completed, will include a substantial amount of stock-based compensation expense with respect to these RSUs, as well as any other equity awards we have granted and may grant in the future, which will have an adverse impact on our ability to achieve profitability. For additional information, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates — Stock-Based Compensation — Restricted Stock Units.”
Our Adjusted EBITDA and Free Cash Flow have been declining, and this trend could continue.
We had Adjusted EBITDA of $60.0 million, $170.6 million, $(253.3) million, and $(230.2) million for the years ended December 31, 2017, 2018, and 2019 and for the nine months ended September 30, 2020, respectively. Our Free Cash Flow was $151.0 million, $504.9 million, $97.3 million, and $(520.1) million for the years ended December 31, 2017, 2018, and 2019 and for the nine months ended September 30, 2020, respectively. Our Adjusted EBITDA and Free Cash Flow declined in 2019, as a result of our decision to make 2019 a year in which we made significant investments in new product and growth initiatives, including in China, and to improve our technical infrastructure. As a result of the COVID-19 pandemic and the resulting impact on the travel industry, we have experienced further declines in 2020, and will continue to experience declines in future periods as long as the COVID-19 pandemic continues to materially adversely impact our business. Other adverse developments in our business, including lower than anticipated revenue, higher than anticipated operating expenses, and net unfavorable changes in working capital, could hinder our ability to reverse the recent negative trend in our Adjusted EBITDA and Free Cash Flow. If our future Adjusted EBITDA
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or Free Cash Flow fail to meet investor or analyst expectations, it is likely to have a materially negative effect on our stock price. 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.
Our revenue growth rate has slowed, and we expect it to continue to slow in the future.
We have experienced significant revenue growth in the past; however, our revenue growth has slowed in recent periods and there is no assurance that historic growth rates will return. Our year-over-year growth rate in revenue decreased in 2019 as compared to 2018 and also decreased in 2018 as compared to 2017. In the first nine months of 2020, as a result of the COVID-19 pandemic, our revenue decreased significantly compared to the first nine months of 2019. Our future revenue growth depends on the growth of supply and demand for listings on our platform, and our business is affected by general economic and business conditions worldwide as well as trends in the global travel and hospitality industries. In addition, we believe that our revenue growth depends upon a number of factors, including:
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the COVID-19 pandemic and its impact on the travel and accommodations industries; |
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our ability to retain and grow the number of guests and Nights and Experiences Booked; |
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our ability to retain and grow the number of hosts and the number of available listings on our platform; |
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events beyond our control such as pandemics and other health concerns, increased or continuing restrictions on travel and immigration, trade disputes, economic downturns, and the impact of climate change on travel, including fires, floods, severe weather and other natural disasters, and the impact of climate change on seasonal destinations; |
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competition; |
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the legal and regulatory landscape and changes in the application of existing laws and regulations or adoption of new laws and regulations that impact our business, hosts, and/or guests, including changes in short-term occupancy and tax laws; |
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the attractiveness of home sharing to prospective hosts and guests; |
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the level of consumer awareness and perception of our brand; |
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our ability to build and strengthen trust and safety on our platform and among members of our community; |
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the level of spending on brand and performance marketing to attract hosts and guests to our platform; |
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our ability to grow new offerings and tiers, such as Airbnb Experiences, and to deepen our presence in certain geographies; |
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timing, effectiveness, and costs of expansion and upgrades to our platform and infrastructure; and |
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other risks described elsewhere in this prospectus. |
A softening of demand, whether caused by events outside of our control, such as COVID-19, changes in host and guest preferences, any of the other factors described above, or in this prospectus or otherwise, will result in decreased revenue. If our revenue does not improve, we may not achieve profitability and our business, results of operations, and financial condition would be materially adversely affected.
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If we fail to retain existing hosts or add new hosts, or if hosts fail to provide high-quality stays and experiences, our business, results of operations, and financial condition would be materially adversely affected.
Our business depends on hosts maintaining their listings on our platform and engaging in practices that encourage guests to book those listings, including increasing the number of nights and experiences that are available to book, providing timely responses to inquiries from guests, offering a variety of desirable and differentiated listings at competitive prices that meet the expectations of guests, and offering exceptional hospitality, services, and experiences to guests. These practices are outside of our direct control. If hosts do not establish or maintain a sufficient number of listings and availability for listings, the number of Nights and Experiences Booked declines for a particular period, or the price charged by hosts declines, our revenue would decline and our business, results of operations, and financial condition would be materially adversely affected.
Hosts manage and control their spaces and experiences and typically market them on our platform with no obligation to make them available to guests for specified dates and with no obligation to accept bookings from prospective guests. We have had many hosts list their properties on our platform in one period and cease to offer these properties in subsequent periods for a variety of reasons. While we plan to continue to invest in our host community and in tools to assist hosts, these investments may not be successful in growing our hosts and listings on our platform. In addition, hosts may not establish or maintain listings if we cannot attract prospective guests to our platform and generate bookings from a large number of guests. If we are unable to retain existing hosts or add new hosts, or if hosts elect to market their listings exclusively with a competitor or cross-list with a competitor, we may be unable to offer a sufficient supply and variety of properties or experiences to attract guests to use our platform. In particular, it is critical that we continue to attract and retain individual hosts who list their spaces, including private rooms, primary homes, or vacation homes on Airbnb. We attract individual hosts predominantly through organic channels such as word of mouth and our strong brand recognition. If we are unable to attract and retain individual hosts in a cost-effective manner, or at all, our business, results of operations, and financial condition would be materially adversely affected.
Professional hosts, including property management companies, serviced apartment providers, and boutique hotels, expand the types of listings available to our guests. These professional hosts often list on our platform as well as on the platforms of our competitors. We do not control whether professional hosts provide us with a sizable allocation of rooms and competitive pricing relative to the same properties listed with other services. If we are not able to effectively deploy professional tools, application programming interfaces, and payment processes, work with third-party channel managers, and develop effective sales and account management teams that address the needs of these professional hosts, we may not be able to attract and retain professional hosts. If our fee structure and payment terms are not as competitive as those of our competitors, these professional hosts may choose to provide less inventory and availability with us. Historically, we have seen an increase in the number of, and revenue from, professional hosts on our platform. The uniqueness of listings on our platform will be negatively impacted if the number of individual hosts does not grow at the same rate.
In addition, the number of listings on Airbnb has declined and may continue to decline as a result of a number of other factors affecting hosts, including: the COVID-19 pandemic; enforcement or threatened enforcement of laws and regulations, including short-term occupancy and tax laws; private groups, such as homeowners, landlords, and condominium and neighborhood associations, adopting and enforcing contracts that prohibit or restrict home sharing; leases, mortgages and other agreements, or regulations that purport to ban or otherwise restrict home sharing; hosts opting for long-term rentals on other third-
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party platforms as an alternative to listing on our platform; economic, social, and political factors; perceptions of trust and safety on and off our platform; negative experiences with guests, including guests who damage host property, throw unauthorized parties, or engage in violent and unlawful acts; and our decision to remove hosts from our platform for not adhering to our host standards or other factors we deem detrimental to our community. We believe a number of our hosts are individuals who rely on the additional income generated from our platform to pay their living expenses or mortgages or have acquired properties specifically for listing. It is not yet clear what financial impact the severe travel reduction occurring during the COVID-19 pandemic will have on these individuals or whether they will be able to keep their homes or operate their businesses as travel resumes. Our business, results of operations, and financial condition could be materially adversely affected if our hosts are unable to return to normal operations in the near to immediate term.
We believe that our host protection programs are integral to retaining and acquiring hosts. Our Host Protection Insurance and Experience Protection Insurance provide liability coverage to our hosts, with amounts paid to claimants, for up to $1 million per occurrence in the event of a third-party claim of bodily injury or property damage related to a stay or experience, and our Host Guarantee Program provides reimbursement of up to $1 million for loss or damages to a host property caused by guests during a reservation. While we intend to continue these programs, if we discontinue these programs, whether because our payouts under these programs or our insurance premiums become cost prohibitive or for any other reason, then the number of hosts who list with us may decline.
In addition to a reduction in the number of bookings, we have incurred, and expect to continue to incur, higher than normal payments via refunds and travel credit issuance to guests who cancel for reasons related to COVID-19. Under our extenuating circumstances policy, guests who made reservations on or before March 14, 2020 and cannot travel due to the pandemic have been eligible to cancel their reservations for a full cash refund or in some cases travel credit. Similarly, hosts with reservations confirmed on or before March 14, 2020 who cannot host due to the pandemic have been eligible to cancel under this policy without adverse consequences. A large number of guest cancellations under the policy caused lost earnings for our hosts. To support our hosts and lessen the impact of cancellations under our extenuating circumstances policy, we have made a $250 million commitment, the majority of which has been distributed as of September 30, 2020, which provides hosts a portion of the amount they expected to earn from bookings that were canceled under this policy. The eligible reservations for this support program were defined as reservations made on or before March 14, 2020 with a check-in date between March 14, 2020 and May 31, 2020. For these reservations, eligible hosts are entitled to receive 25% of the amount they would have received from guests under the host’s cancellation policies. Because this commitment is limited in amount and timeframe, hosts will not receive full payment related to guest cancellations, and some hosts may remove their listings from our platform if they are not satisfied with our policies during the COVID-19 pandemic. We have not seen a material change in the number of active listings on our platform between December 2019 and September 2020. For the nine months ended September 30, 2020, we recorded in our consolidated statement of operations $204.4 million in payments to customers under this policy.
Hosts and guests whose reservations are canceled under our extenuating circumstances policy have had and may continue to have a negative view of such policy and may experience negative financial impacts as a result of such cancellations. This could materially negatively impact our relationship with our hosts and guests, resulting in hosts leaving our platform, removing their listings and/or offering less availability, or fewer repeat guests, which in turn could have a material adverse impact on our business, results of operations, and financial condition.
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If we fail to retain existing guests or add new guests, our business, results of operations, and financial condition would be materially adversely affected.
Our success depends significantly on existing guests continuing to book and attracting new guests to book on our platform. Our ability to attract and retain guests could be materially adversely affected by a number of factors discussed elsewhere in these “Risk Factors,” including:
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events beyond our control such as the COVID-19 pandemic, other pandemics and health concerns, increased or continuing restrictions on travel, immigration, trade disputes, economic downturns, and the impact of climate change on travel, including fires, floods, severe weather and other natural disasters, and the impact of climate change on seasonal destinations; |
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hosts failing to meet guests’ expectations, including increased expectations for cleanliness in light of the COVID-19 pandemic; |
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increased competition and use of our competitors’ platforms and services; |
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hosts failing to provide differentiated, high-quality, and an adequate supply of stays or experiences at competitive prices; |
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guests not receiving timely and adequate community support from us; |
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our failure to provide new or enhanced offerings, tiers, or features that guests value; |
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declines or inefficiencies in our marketing efforts; |
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negative associations with, or reduced awareness of, our brand; |
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actual or perceived racial discrimination by hosts in deciding whether to accept a requested reservation; |
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negative perceptions of the trust and safety on our platform; and |
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macroeconomic and other conditions outside of our control affecting travel and hospitality industries generally. |
In addition, if our platform is not easy to navigate, guests have an unsatisfactory sign-up, search, booking, or payment experience on our platform, the listings and other content provided on our platform is not displayed effectively to guests, we are not effective in engaging guests across our various offerings and tiers, or we fail to provide an experience in a manner that meets rapidly changing demand, we could fail to convert first-time guests and fail to engage with existing guests, which would materially adversely affect our business, results of operations, and financial condition.
Any further and continued decline or disruption in the travel and hospitality industries or economic downturn would materially adversely affect our business, results of operations, and financial condition.
Our financial performance is dependent on the strength of the travel and hospitality industries. The outbreak of COVID-19 has caused many governments to implement quarantines and significant restrictions on travel or to advise that people remain at home where possible and avoid crowds, which has had a particularly negative impact on cross-border travel. In addition, most airlines have suspended or significantly reduced their flights during this period, further decreasing opportunities for travel. This has led to a decrease in our bookings and an increase in cancellations and associated claims brought against us. We expect that COVID-19 will continue to materially adversely impact our bookings and business in 2020 and beyond. The extent and duration of such impact over the longer term remains uncertain and is
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dependent on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of COVID-19, the timing, availability, and effectiveness of a vaccine, the extent and effectiveness of containment actions taken, including mobility restrictions, and the impact of these and other factors on travel behavior in general, and on our business in particular. See our risk factor titled “— The COVID-19 pandemic and the impact of actions to mitigate the COVID-19 pandemic have materially adversely impacted and will continue to materially adversely impact our business, results of operations, and financial condition.”
Other events beyond our control, such as unusual or extreme weather or natural disasters, such as earthquakes, hurricanes, fires, tsunamis, floods, severe weather, droughts, and volcanic eruptions, and travel-related health concerns including pandemics and epidemics such as Ebola, Zika, and Middle East Respiratory Syndrome, restrictions related to travel, trade or immigration policies, wars, terrorist attacks, sources of political uncertainty, such as the United Kingdom’s departure from the European Union (“Brexit”), protests, foreign policy changes, regional hostilities, imposition of taxes or surcharges by regulatory authorities, changes in regulations, policies, or conditions related to sustainability, including climate change, work stoppages, labor unrest or travel-related accidents can disrupt travel globally or otherwise result in declines in travel demand. Because these events or concerns, and the full impact of their effects, are largely unpredictable, they can dramatically and suddenly affect travel behavior by consumers, and therefore demand for our platform and services, which would materially adversely affect our business, results of operations, and financial condition. Events such as sudden outbreaks of wars or regional instability have led to a large number of localized cancellations and safety concerns, which harm our business and our relationship with our hosts and guests. In addition, increasing awareness around the impact of air travel on climate change and the impact of over-tourism may adversely impact the travel and hospitality industries and demand for our platform and services.
Our financial performance is also subject to global economic conditions and their impact on levels of discretionary consumer spending. Some of the factors that have an impact on discretionary consumer spending include general economic conditions, worldwide or regional recession, unemployment, consumer debt, reductions in net worth, fluctuations in exchange rates, residential real estate and mortgage markets, taxation, energy prices, interest rates, consumer confidence, tariffs, and other macroeconomic factors. Consumer preferences tend to shift to lower-cost alternatives during recessionary periods and other periods in which disposable income is adversely affected, which could lead to a decline in the bookings and prices for stays and experiences on our platform and an increase in cancellations, and thus result in lower revenue. Leisure travel in particular, which accounts for a substantial majority of our current business, is dependent on discretionary consumer spending levels. Downturns in worldwide or regional economic conditions, such as the current downturn resulting from the COVID-19 pandemic, have led to a general decrease in leisure travel and travel spending, and similar downturns in the future may materially adversely impact demand for our platform and services. Such a shift in consumer behavior would materially adversely affect our business, results of operations, and financial condition.
The business and industry in which we participate are highly competitive, and we may be unable to compete successfully with our current or future competitors.
We operate in a highly competitive environment and we face significant competition in attracting hosts and guests.
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Hosts. We compete to attract, engage, and retain hosts on our platform to list their spaces and experiences. Hosts have a range of options for listing their spaces and experiences, both online and offline. It is also common for hosts to cross-list their offerings. We compete for hosts based on many factors, including the volume of bookings generated by our guests; ease of use of our platform |
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| (including onboarding, community support, and payments); the service fees we charge; host protections such as our Host Protection Insurance, Experience Protection Insurance and Host Guarantee Program; and our brand. Throughout the COVID-19 pandemic, we have also competed based on our cancellation and extenuating circumstances policies. |
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Guests. We compete to attract, engage, and retain guests on our platform. Guests have a range of options to find and book spaces, hotel rooms, serviced apartments, and other accommodations and experiences, both online and offline. We compete for guests based on many factors, including unique inventory and availability of listings, the value and all-in cost of our offerings relative to other options, our brand, ease of use of our platform, the relevance and personalization of search results, the trust and safety of our platform, and community support. Throughout the COVID-19 pandemic, we have also competed based on the availability of inventory close to where guests live and in non-urban markets as well as the perceived safety and cleanliness of listings on our platform. |
We believe that our competitors include:
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Online travel agencies (“OTAs”), such as Booking Holdings (including the brands Booking.com, KAYAK, Priceline.com, and Agoda.com); Expedia Group (including the brands Expedia, Vrbo, HomeAway, Hotels.com, Orbitz, and Travelocity); Trip.com Group (including the brands Ctrip.com, Trip.com, Qunar, Tongcheng-eLong, and SkyScanner); Meituan Dianping; Fliggy (a subsidiary of Alibaba) Despegar; MakeMyTrip; and other regional OTAs; |
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Internet search engines, such as Google, including its travel search products; Baidu; and other regional search engines; |
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Listing and meta search websites, such as TripAdvisor, Trivago, Mafengwo, AllTheRooms.com, and Craigslist; |
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Hotel chains, such as Marriott, Hilton, Accor, Wyndham, InterContinental, OYO, and Huazhu, as well as boutique hotel chains and independent hotels; |
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Chinese short-term rental competitors, such as Tujia, Meituan B&B, and Xiaozhu; and |
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Online platforms offering experiences, such as Viator, GetYourGuide, Klook, Traveloka, and KKDay. |
Our competitors are adopting aspects of our business model, which could affect our ability to differentiate our offerings from competitors. Increased competition could result in reduced demand for our platform from hosts and guests, slow our growth, and materially adversely affect our business, results of operations, and financial condition.
Many of our current and potential competitors enjoy substantial competitive advantages over us, such as greater name and brand recognition, longer operating histories, larger marketing budgets, and loyalty programs, as well as substantially greater financial, technical, and other resources. In addition, our current or potential competitors have access to larger user bases and/or inventory for accommodations, and may provide multiple travel products, including flights. As a result, our competitors may be able to provide consumers with a better or more complete product experience and respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or host and guest requirements or preferences. The global travel industry has experienced significant consolidation, and we expect this trend may continue as companies attempt to strengthen or hold their market positions in a highly competitive industry. Consolidation amongst our competitors will give them increased scale and may enhance their capacity, abilities, and resources, and lower their cost structures. In addition, emerging start-ups may be
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able to innovate and focus on developing a new product or service faster than we can or may foresee consumer need for new offerings or technologies before us.
There are now numerous competing companies that offer homes for booking, which can be available on our platform, on competing platforms, and through direct booking sites. Some of these competitors also aggregate property listings obtained through various sources, including the websites of property managers. Some of our hosts have chosen to cross-list their properties, which reduces the availability of such properties on our platform. When properties are cross-listed, the price paid by guests on our platform may be or may appear to be less competitive for a number of reasons, including differences in fee structure and policies, which may cause guests to book through other services, which could materially adversely affect our business, results of operations, and financial condition. Certain property managers reach out to our hosts and guests to incentivize them to list or book directly with them and bypass our platform, and certain hosts may encourage transactions outside of our platform, which reduces the use of our platform and services.
Some of our competitors or potential competitors have more established or varied relationships with consumers than we do, and they could use these advantages in ways that could affect our competitive position, including by entering the travel and accommodations businesses. For example, some competitors or potential competitors are creating “super-apps” where consumers can use many online services without leaving that company’s app, e.g., in particular regions, such as Asia, where e-commerce transactions are conducted primarily through apps on mobile devices. If any of these platforms are successful in offering services similar to ours to consumers, or if we are unable to offer our services to consumers within these super-apps, our customer acquisition efforts could be less effective and our customer acquisition costs, including our brand and performance marketing expenses, could increase, any of which could materially adversely affect our business, results of operations, and financial condition. We also face increasing competition from search engines including Google. How Google presents travel search results, and its promotion of its own travel meta-search services, such as Google Travel and Google Vacation Rental Ads, or similar actions from other search engines, and their practices concerning search rankings, could decrease our search traffic, increase traffic acquisition costs, and/or disintermediate our platform. These parties can also offer their own comprehensive travel planning and booking tools, or refer leads directly to suppliers, other favored partners, or themselves, which could also disintermediate our platform. In addition, if Google or Apple use their own mobile operating systems or app distribution channels to favor their own or other preferred travel service offerings, or impose policies that effectively disallow us to continue our full product offerings in those channels, it could materially adversely affect our ability to engage with hosts and guests who access our platform via mobile apps or search.
Laws, regulations, and rules that affect the short-term rental and home sharing business have limited and may continue to limit the ability or willingness of hosts to share their spaces over our platform and expose our hosts or us to significant penalties, which have had and could continue to have a material adverse effect on our business, results of operations, and financial condition.
Since we began our operations in 2008, there have been and continue to be legal and regulatory developments that affect the short-term rental and home sharing business. Hotels and groups affiliated with hotels have engaged and will likely continue to engage in various lobbying and political efforts for stricter regulations governing our business in both local and national jurisdictions. Other private groups, such as homeowners, landlords, and condominium and neighborhood associations, have adopted contracts or regulations that purport to ban or otherwise restrict short-term rentals, and third-party lease agreements between landlords and tenants, home insurance policies, and mortgages may prevent or restrict the ability of hosts to list their spaces. In Europe, a group of mayors representing 22 cities (including Amsterdam, Barcelona, and London) has been meeting with the European Commission to seek increased regulatory control in relation
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to short-term rental platforms. These groups and others cite concerns around affordable housing and over-tourism in major cities, and some state and local governments have implemented or considered implementing rules, ordinances, or regulations governing the short-term rental of properties and/or home sharing. Such regulations include ordinances that restrict or ban hosts from short-term rentals, set annual caps on the number of days hosts can share their homes, require hosts to register with the municipality or city, or require hosts to obtain permission before offering short-term rentals. In addition, some jurisdictions regard short-term rental or home sharing as “hotel use” and claim that such use constitutes a conversion of a residential property to a commercial property requiring a permitting process. Macroeconomic pressures and public policy concerns could continue to lead to new laws and regulations, or interpretations of existing laws and regulations, that limit the ability of hosts to share their spaces. If laws, regulations, rules, or agreements significantly restrict or discourage hosts in certain jurisdictions from sharing their properties, it would have a material adverse effect on our business, results of operations, and financial condition.
While a number of cities and countries have implemented legislation to address short-term rentals, there are many others that are not yet explicitly addressing or enforcing short-term rental laws, and could follow suit and enact regulations. A discussion of short-term rental regulations in our top 10 cities by revenue in 2019 is included in “Business — Regulatory Considerations in Our Largest Cities.” New laws, regulations, government policies, or changes in their interpretations in the approximately 100,000 cities where we operate entail significant challenges and uncertainties. In the event of any such changes, pre-existing bookings may not be honored and current and future listings and bookings could decline significantly, and our relationship with our hosts and guests could be negatively impacted, which would have a materially adverse effect on our business, results of operations, and financial condition. For example, listings in New York City generated approximately 2% of our revenue in 2019, and when new regulations requiring us to share host data with the city are implemented, our revenue from listings there may be substantially reduced due to the departure from our platform of hosts who do not wish to share their data with the city and related cancellations. A reduction in supply and cancellations could make our platform less attractive to guests, and any reduction in the number of guests could further reduce the number of hosts on our platform.