After the U.S. stock market closed on August 7th Beijing time, Airbnb released its financial report for the second quarter of the 2024 fiscal year. Although the performance for the quarter weakened as expected, the guidance for the next quarter showed a significant underperformance, shattering the market's "good wishes" for a recovery and acceleration in business growth in the second half of the year. The detailed points are as follows:

1. In terms of key operating indicators, Airbnb's total booking amount for this quarter was approximately $21.2 billion, with a year-on-year growth rate slowing down from the previous quarter's 12.4% to 11%. However, the market expected a deeper slowdown, and the actual performance was slightly better than the more conservative expectations.

In terms of driving factors, the total number of booked nights this quarter was about 125 million, with a slight decrease of 0.8% compared to the previous quarter. Contrary to market expectations of a flat growth rate in booked nights, the actual performance was 0.7% lower than expected. On the pricing side, the average nightly rate reached $170, which was 0.6% higher than expected. The increase in average nightly rate to some extent offset the decline in booked nights, which was the main reason why the booking amount for this quarter slightly exceeded expectations.

Looking at different regions, the emerging markets of South America and the Asia-Pacific region saw growth rates of 17% and 19% in booked nights, significantly outperforming the overall company's growth rate of less than 9%, indicating that the growth rate of booked nights in North America and Europe/Africa markets should be in the low single digits.

2. From a revenue perspective, the monetization rate decreased slightly year-on-year this quarter, but the actual decrease was slightly lower than expected by 0.1%, resulting in revenue being 0.4% higher than expected. However, despite the slight outperformance, the resonance between the year-on-year decrease in monetization rate and the decline in booking amount growth rate led to a significant drop in revenue growth this quarter to 10.6%, with a sharp decrease of 7% compared to the previous quarter.

Similarly, due to the slight decrease in monetization rate, the gross profit margin this quarter decreased by about 1% year-on-year. Despite revenue slightly exceeding expectations, gross profit fell slightly short of expectations.

3. On the expense side, excluding equity incentives, apart from a slight decrease in R&D expenses compared to the previous quarter, other expenses increased in the first quarter. Among them, marketing expenses increased significantly from $480 million to about $530 million, a growth of approximately 19% compared to the previous quarter. This is consistent with the guidance given by management last quarter to increase investment, reflecting that the company is facing continued growth slowdown and increasing marketing investment is both an active and forced choice.

Due to increased investment, the company's operating profit under GAAP was $497 million, lower than the $523 million in the same period last year. This was mainly due to the company's equity incentive expenses reaching $382 million this quarter, a 26% year-on-year increase. Excluding equity incentives, the adjusted operating profit was $880 million, still a 6.3% increase year-on-year. Nevertheless, with the continuous increase in performance pressure on the company, management continues to significantly increase equity incentives, which is clearly not well received by investors

4. The bigger issue is that for the third quarter of 2024, the revenue guidance of 3.67~3.73 billion is significantly lower than the expected 3.84 billion. The mid-point growth rate in the guidance further slowed to 8.9%, rather than the market's expected acceleration to 12.9%. In terms of price and volume driving factors, the company's guidance shows that the night order volume growth rate for 3Q continues to slow down compared to this quarter's 8.7%, rather than the market's expected 11.3% acceleration in growth. It remains that only the expected average order value will slightly increase year-on-year, relying solely on price factors to support GBV growth.

Dolphin Research Viewpoint:

Overall, Airbnb's performance this quarter is not outstanding, with significant slowdowns in key metrics such as booking amount, night volume, and revenue growth. However, this quarter's weakness is generally within expectations, and although slightly weaker, it is not a "thunderstorm" level issue.

The bigger issue is that originally benefiting from the quadrennial Paris Olympics, the market expected Airbnb's growth in the second half of the year to accelerate significantly. If this turns out to be true, then the slightly weaker performance in the first and second quarters of this year is forgivable (for now). However, the disappointment lies in the fact that according to the guidance, the third quarter not only did not accelerate, but further slowed down, breaking the market's expectation that the slowdown was only temporary, and is more likely to be continuous. This to some extent has become a serious problem of "killing narrative logic".

Furthermore, according to the company's communication prior to the performance, the management clearly stated that the investment intensity this year will increase to cope with the slowdown in growth and the expansion of new businesses, clearly indicating that the adjusted operating profit margin for the 24 fiscal year will shrink year-on-year. With the slowdown in growth, increase in expenses, and narrowing of profit margins, it is a "double blow" of bad news.

From a valuation perspective, with the post-market decline, the company's stock price has fallen below the $110 mark, finally entering the neutral range previously estimated by Dolphin Research. However, this pullback is due to the pressure of deteriorating performance and environment, rather than simply a valuation bubble squeeze, so we believe it is not a blind bottom fishing opportunity. But after all, the valuation is not sky-high, so if we can observe that the deterioration in performance is not as severe as indicated, there may be an opportunity to enter.

The following is a detailed analysis:

I. Volume Decline but Price Increase, Slight Slowdown in Booking Amount Growth this Quarter

This quarter, Airbnb's total booking amount is approximately $21.2 billion, with a year-on-year growth rate slowing down from last quarter's 12.4% to 11%, but the actual performance is slightly better than the more conservative expectations.

From a price and volume perspective, this quarter Airbnb's total booked night volume is about 125 million times, with a slight further slowdown of 0.8% compared to the previous quarter, but the market expected the night volume growth rate to remain flat, with the actual night volume lower than expected by 0.7%From a pricing perspective, this quarter's average daily rate reached $170 per night, 0.6% higher than expected. The increase in prices and the increase in average daily rate due to changes in room structure have to some extent offset the weakening room nights, resulting in slightly better-than-expected booking amount for this quarter.

By region, the company disclosed that room nights in Latin America grew faster than the previous quarter, while room night growth in Europe and the Middle East remained stable on a quarter-on-quarter basis, considering a similar 4% increase in average daily rate.

Room night growth rates in the emerging markets of South America and the Asia-Pacific region were 17% and 19% respectively, significantly outperforming the company's overall room night growth of less than 9%, indicating that room night growth in North America and Europe-Africa markets should only be in the low single digits.

II. The monetization rate decreased slightly year-on-year, with revenue growth and gross margin declining

From a revenue perspective, the monetization rate decreased slightly year-on-year, but slightly exceeded market expectations by 0.1 percentage points. Therefore, despite the booking amount being slightly lower than expected, revenue was slightly higher than expected by 0.4%.

However, surpassing the expectations gap, the resonance of the year-on-year slight decrease in monetization rate and the slowdown in booking amount growth led to a significant decrease in revenue growth to 10.6% this quarter, with a quarter-on-quarter decline of 7 percentage points.

Due to the slight year-on-year decrease in monetization rate, this quarter's gross margin also decreased by about 1 percentage point year-on-year, resulting in a situation where revenue slightly exceeded expectations, but gross profit fell slightly short of expectations.

III. Facing growth pressure, marketing expenses are increasing

On the expense side, excluding equity incentives, apart from a slight decrease in research and development expenses on a quarter-on-quarter basis, other expenses increased in the first quarter. Among them, marketing expenses increased significantly from around $480 million to around $530 million, a nearly 19% increase on a quarter-on-quarter basis. This is consistent with the guidance given by management in the previous quarter's performance, reflecting the company's proactive choice to increase marketing spending in the face of continued growth slowdown and the pressure of growth.

In the end, under the GAAP basis, the company's operating profit was $497 million, lower than the $523 million in the same period last year. However, mainly due to the stock incentive expenses of $382 million in the current quarter, a year-on-year increase of 26%. Excluding stock incentives, the adjusted operating profit was $880 million, still a 6.3% increase year-on-year. Despite the company's business growth trend continuing to slow down and operating pressure increasing, the management still significantly increased stock incentives, which undoubtedly gives investors a negative impression.