Can't stop indulging in food, drink, and fun, Airbnb "levels up" and runs

After the US stock market closed on February 15th Beijing time, Airbnb announced its 4Q2022 earnings. Overall, the performance was good and the guidance for the next quarter was more optimistic than expected. The details are as follows:

1. Stable volume and price, the demand for travel and accommodation is quite strong: Unlike concerns about whether travel and tourism demand will weaken in the fourth quarter after the previous quarter's performance, Airbnb's Gross Booking Value (GBV) did not indicate a continued decline in demand. In the end, it achieved a booking amount of US$13.5 billion, which is basically consistent with the market expectations. From a price-volume perspective, it reflects stable volume and price. The total number of booked room nights on the company's platform this quarter was 88 million, which is a growth rate consistent with the previous quarter of 16% in the same period of 2019. This indicates that accommodation demand did not continue to decline after the previous quarter.

From a price perspective, the Average Daily Rate (ADR) for this quarter was US$153, which finally decreased by 1% compared to the same period last year, but it was significantly more resilient than the market's expected US$150. After excluding the impact of inflation, the company's ADR actually increased by 5% year-on-year, and it increased year-on-year in all regions around the world. The market's concern that ADR will continue to decline after accommodation demand returns to normal has not occurred.

2. There is no sign of demand decline in the first quarter of this year: Looking ahead to the first quarter of next year, the company expects revenue to be between US$1.75 billion and US$1.82 billion, which is much higher than the market expectation of US$1.68 billion. It can be seen that while the market expected a significant decline in accommodation demand in the first quarter of next year, the company's guidance reflects a demand that is quite strong, with revenue growth of 16% to 21%.

From a price-volume perspective, the company believes that the growth rate of bookings will only slightly slow down quarter-on-quarter this season, and ADR will also only slightly decrease quarter-on-quarter. Although the trend will slow down, it is not a scene of decline. The company even expects that the marketing expense rate in the first quarter will increase year-on-year, which seems to imply that the overall environment may even be good enough that the company needs to increase marketing investment.

3. ADR is resilient, monetization rate is improved, and gross profit margin is increased: The company actually achieved revenue of US$1.9 billion in the fourth quarter, slightly exceeding the market's expectations by 2%, with a considerable year-on-year growth rate of 24%. Since the company's booking amount in nominal terms (including exchange rate effects) was in line with expectations, the main reason why revenue exceeded expectations was that the monetization rate increased slightly. The monetization rate this quarter was 14.1%, which is an increase of 0.5 points over the same period last year. As bookings and revenue growth stabilized this quarter, the company no longer needs to reduce monetization rates to maintain growth.

Due to the fact that the company's ADR is more resilient than expected and the monetization rate has also slightly increased, the company's actual gross profit margin this quarter is 2 percentage points higher than expected, and the company ultimately achieved a gross profit of US$1.56 billion, which exceeded the market expectation by about 4%.

4. Solid revenue, improved gross profit, and no relaxation of cost control: Except for a relatively significant increase in management expenses this quarter (the management team should explain this in the conference call), operating support, sales, and research and development expenses only increased by 8% to 14% year-on-year, which is significantly lower than the revenue growth. Therefore, the reduction of the three expenses of operating support, sales, and R&D has contributed to a 6% increase in profit margins, while only a slight increase of 1% in management expense ratio.

After exceeding expectations in terms of revenue, gross profit, and cost control, the company achieved a GAAP operating profit of $240 million this quarter, about 8% higher than market expectations, and a whopping 221% increase from the same period last year. The company's operating leverage continues to be released, with profit margins continuing to rise.

Dolphin Analyst Viewpoint:

Overall, compared to last quarter's financial report, the company's various indicators were mediocre and the market outlook for the four seasons was also pessimistic. Financially, this quarter the company exceeded market expectations in terms of booking amount/revenue/gross profit/operating profit by 0%/2%/4%/8%, although the magnitude of any individual indicator exceeding expectations was not large. The company gradually released operating leverage by making minor improvements in every aspect, eventually achieving a 20% increase in booking amount and a 200% surge in profit.

On the operational side, accommodation demand did not continue to decline in terms of both quantity and price, and the company's outlook for next quarter is quite strong. This further confirmed that European and American residents' actual consumption was stronger than expected, and there are currently no signs of further decline. Therefore, the performance of C-end enterprises will also show stronger resilience and relative advantages.

In summary, the slightly better-than-expected performance for the quarter, the more optimistic outlook for the future, and the mid-term logic of the continuous release of operating leverage all make this financial report's message worthy of market rewards.

Dolphin Analyst will share the telephone conference summary with the Dolphin user group through the Longbridge App. Interested users are welcome to add the WeChat account "dolphinR123" to join the Dolphin Investment Research Group and get the telephone conference summary first.

The details are as follows:

1. Volume and price are stable, is there really a recession?

For Airbnb, almost all of the company's revenue comes from commissions on homes rented on the platform, with a simple structure. Therefore, the total amount of housing rentals booked during the period is the indicator that most reflects the company's business trends and is the focal point that investors need to pay attention to. In the 4Q of the travel booking season, Airbnb achieved a total booking amount (GBV) of $13.5 billion, which is roughly in line with market expectations. Although the year-on-year growth rate continued to decline from last quarter's 31% to a trend of 20%, double-digit absolute growth rate is still considerable.

**Looking at the driving factors of price and volume separately, this quarter's volume and price were both stable, and it seems that there is still strong demand from residents for travel, **as detailed below: The total number of bookings this season is 88 million, slightly lower than the market's expected 90 million. Although the year-on-year growth rate may seem to have slowed down from 25% in the previous quarter to 20%, the main reason is actually the fluctuation of the base caused by the epidemic. If we directly compare the booking volume before the epidemic in 2019, the booking growth rates for Q3 and Q4 are both 16% and have not slowed down compared to the previous quarter. From the perspective of travel demand from mainly European and American residents, there is no sign of further decline.

However, as the epidemic is coming to an end and work from home is gradually phased out, the rental structure is also shifting from North America to the global market, from vacation hotels to business travel, and from long-term rentals to short-term rentals. Therefore, the ADR (average daily rate) of Airbnb in this season finally decreased by 1% year-on-year to 153 US dollars, but it was still relatively strong compared to the market's expected 150 US dollars. In fact, after excluding the impact of currency exchange, Airbnb's ADR increased by 5% year-on-year this season and is still increasing year-on-year in all regions around the world. This is completely opposite to the market's expectations and is also the key reason why this season's performance exceeded expectations.

According to the operating data disclosed by the company in different regions:

(1) The revenue in North America this season increased by 19% year-on-year, and cross-border orders increased by 35%; it can be seen that the order amount growth rate will be lower than the revenue growth rate, so the growth rate in North America should be the slowest.

(2) The booking volume in Europe & the Middle East region increased by 25% compared with the same period of 2021, and the growth rate continued to increase from the previous quarter, which should surpass North America, and the tourism demand in Europe is still recovering;

(3) The South American region achieved a year-on-year growth of 23%, with relatively stable performance in Mexico and Brazil.

(4) With the gradual lifting of restrictions in countries such as Japan, South Korea, and Southeast Asia, the order amount in the Asia-Pacific region this quarter increased by 40% compared with the same period last year, but it is still significantly lower than the pre-epidemic level. It can be foreseen that the Asia-Pacific market will continue to recover.

From the recovery of hotel occupancy rates in different regions, the company's main market-Europe and America's hotel occupancy rate has entered a plateau after recovering to the level of 2019 in the second half of 2022. The occupancy rate has not continued to break through but has entered a slow upward trend. However, the Asia market, represented by Japan, still has a rapid growth stage in hotel occupancy rates, which also confirms the company's performance.

Second, ADR robustness & slight increase in monetization rate help improve company's gross profit margin

The company's actual revenue achieved in the fourth quarter was USD 1.9 billion, slightly surpassing the market's expectation by 2%, and the year-on-year growth rate still reached 24%, only a slight slowdown compared to the previous quarter. As the company's nominal booking amount (including the impact of exchange rates) was consistent with expectations, the main reason for the actual revenue exceeding expectations was the slight increase in the monetization rate this season.

The monetization rate for this season was 14.1%, which was 0.5 points higher than the same period last year. After the growth rate of the company's orders and revenue clearly declined in the second and third quarters, the monetization rate in the third quarter also decreased by 0.3 points compared with the same period last year. The Dolphin Analyst believes that in the case of stable growth in orders and revenue this quarter without further deterioration, the demand for the company to reduce the monetization rate to maintain growth has also decreased.

Precisely because of the ADR's strong performance exceeding expectations and the slight increase in the monetization rate, the company's gross profit margin for this season also increased by about 1 percentage point to 82% compared with the same period last year. Finally, the company actually achieved a gross profit of 1.56 billion, which was about 4% higher than the market's expectation. The actual gross margin also exceeded expectations by 2 percentage points.

Third, the release of economies of scale, profit recovery, but equity incentives are still a considerable expense

As Airbnb has not been listed for a long time, the scale and volatility of stock price incentive expenses are relatively large. Therefore, when considering costs and expenses, we mainly adopt the caliber after excluding stock equity incentive expenses, in order to better observe the trend of the company's expenses. At the same time, because the demand for travel and tourism has obvious seasonal changes, we mainly compare the performance of the same period, without considering the month-on-month changes.

Overall, while the company's orders and revenue performance exceeded expectations, the company did not slack off on cost control. Specifically, except for a relatively significant increase in management expenses this season (which can be followed up in the conference call to see if the management will explain), other operating support, sales, and research and development expenses have only increased by 8% to 14% compared with the same period last year, which is significantly lower than the growth of revenue.

Therefore, in terms of the proportion of revenue, these three items, namely operating support, sales, and research and development expenses, contributed to a 6% increase in profit margin, and only management expense rates slightly increased by 1 percentage point.

Thanks to the unexpectedly resilient increase in revenue and the help of improved cash conversion rates and ADR, the gross profit margin of the company surpassed expectations. Despite this, the company's expense control remained excellent, and with the gradual expansion of multiple benefits, the final operating profit of the company exceeded expectations by 8%.

Specifically, the company achieved a GAAP-calculated operating profit of 240 million U.S. dollars this quarter, which is higher than the market's expected 220 million. This is a substantial increase of 221% compared to the same period last year, and the profit margin has also increased by about 7 percentage points to 12%. After deducting share-based compensation expenses accounting for 13% of total revenue, the Non-GAAP-calculated operating profit reached 490 million, and the company's operating leverage continues to be released.

Previous Research:

Earnings Season

November 2, 2022 Telephone Conference Call "What is Airbnb's Outlook for Travel and Tourism? (3Q22 Conference Call Summary)"

November 2, 2022 Earnings Review "No Good News is Bad News, How Much Attractiveness Does Airbnb Have Left?"

August 3, 2022 Telephone Conference Call "How Does Airbnb's Management View the Strategy for the Second Half of the Year? (2Q22 Conference Call Summary)"

August 3, 2022 Earnings Review "Is Overvaluation the Original Sin? Airbnb Can't Be Helped by Good Results"

May 4, 2022 Telephone Conference Call "Ride-Hailing Industry Revival (Airbnb Conference Call Summary)" On May 4th, 2022, "New Crown Recedes, Airbnb King Returns" was reviewed in depth.

On June 1st, 2022, "Airbnb: Growing Strong, But with High Valuation" was published.

On June 1st, 2022, "After the Epidemic Craze, Airbnb and Disneyland Finally Bounce Back" was published.

On April 6th, 2022, "Airbnb: The Alternative in the Epidemic, Why Can It Turn the Tide When Others Are Struggling?" was published.

On April 7th, 2022, "Airbnb: Crown Too Heavy, Valuation Is Running Too Fast" was published.

Risk Disclosure and Statement of this Article: Dolphin Analyst Disclaimer and General Disclosure