AIRBNB, INC. 
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled "Risk Factors" or in other parts of this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Except as otherwise noted, all references to 2021 refer to the year endedDecember 31, 2021 , references to 2020 refer to the year endedDecember 31, 2020 , and references to 2019 refer to the year endedDecember 31, 2019 . The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Part II, Item 8 of this Annual Report on Form 10-K. This section of this Annual Report on Form 10-K generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 are not included in this Form 10-K, and can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year endedDecember 31, 2020 , filed onFebruary 26, 2021 . Due to the unprecedented impact of COVID-19 on our operating results in 2020, we have included certain key comparisons to 2019 to provide a more useful picture of our results in 2021. We believe that the modest recovery in the latter half of 2020 beginning in the second quarter was attributable to the renewed ability and willingness for guests to travel, the resilience of our Hosts, and relative strength of our business model. FromDecember 31, 2019 throughDecember 31, 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.
Overview
We are a community based on connection and belonging-a community that was born in 2007 when two Hosts welcomed three guests to theirSan Francisco home, and has since grown to over 4 million Hosts who have welcomed over 1 billion guest arrivals to over 100,000 cities and towns in almost every country and region across the globe. Hosts onAirbnb are everyday people who share their worlds to provide guests with the feeling of connection and being at home. We have 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. 53 -------------------------------------------------------------------------------- Table of Contents Our Business Model We operate a global marketplace, where Hosts offer guests stays and experiences on our platform. Our business model relies on the success of Hosts and guests who join our community and generate consistent bookings over time. As Hosts become more successful on our platform and as guests return over time, we benefit from the recurring activity of our community.
Initial Public Offering
Our IPO was completed onDecember 14, 2020 . Our consolidated financial statements as ofDecember 31, 2020 and for the year then-ended reflect the sale by us of an aggregate of 55,000,000 shares in our IPO, including the exercise of the underwriters' option to purchase additional shares, at the public offering price of$68.00 per share, for net proceeds to us of approximately$3.7 billion , after underwriting discounts and commissions and offering expenses, and the conversion of all outstanding shares of our redeemable convertible preferred stock into an aggregate of 240,910,588 shares of Class B common stock, including 1,286,694 shares of Class B common stock issuable pursuant to the anti-dilution adjustment provisions relating to our Series C redeemable convertible preferred stock. Our consolidated financial statements as ofDecember 31, 2020 and for the year then-ended include stock-based compensation expense of$2.8 billion associated with the vesting of RSUs in connection with our IPO for which the requisite service-based vesting condition was met as ofDecember 31, 2020 . The liquidity-based vesting condition for RSUs was satisfied upon the effectiveness of our IPO Registration Statement onDecember 9, 2020 . Key Business Metrics and Non-GAAP Financial Measures We track the following key business metrics and financial measures that are not calculated and presented in accordance with GAAP ("non-GAAP financial measures") to evaluate our operating performance, identify trends, formulate financial projections, and make strategic decisions. Accordingly, we believe that these key business metrics and non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management team. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance, and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results. These key business metrics and non-GAAP financial measures are presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled metrics or measures presented by other companies. A reconciliation of each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP is provided under the subsection titled "- Adjusted EBITDA" and "- Free Cash Flow" below. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.
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,
2019 2020 2021
(in millions)
Nights and Experiences Booked 326.9 193.2 300.6
Gross Booking Value $ 37,962.6 $ 23,896.9 $ 46,877.0 Nights and Experiences Booked
Nights and Experiences Booked is a key measure of the scale of our platform, which in turn drives our financial performance. Nights and Experiences Booked on our platform in a period represents the sum of the total number of nights booked for stays and the total number of seats booked for experiences, net of cancellations and alterations that occurred in that period. For example, a booking made onFebruary 15 would be reflected in Nights and Experiences Booked for our quarter endedMarch 31 . If, in the example, the booking were canceled onMay 15 , Nights and Experiences Booked would be reduced by the cancellation for our quarter endedJune 30 . A night can include one or more guests and can be for a listing with one or more bedrooms. A seat is booked for each participant in an experience. Substantially all of the bookings on our platform to date have come from nights. We believe Nights and Experiences Booked is a key business metric to help investors and others understand and evaluate our results of operations in the same manner as our management team, as it represents a single unit of transaction on our platform. In 2021, we had 300.6 million Nights and Experiences Booked, a 56% increase from 193.2 million in 2020 and an 8% decrease from 326.9 million in 2019. Nights and Experiences Booked grows as we attract new Hosts and guests to our platform and as repeat guests increase their activity on our platform. Our Nights and Experiences Booked saw continued strength in Nights and Experiences Booked inNorth America , EMEA andLatin America . 54
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Gross Booking Value
GBV represents the dollar value of bookings on our platform in a period and is inclusive of Host earnings, service fees, cleaning fees, and taxes, net of cancellations and alterations that occurred during that period. The timing of recording GBV and any related cancellations is similar to that described in the subsection titled "- Key Business Metrics and Non-GAAP Financial Measures - Nights and Experiences Booked" above. Revenue from the booking is recognized upon check-in; accordingly, GBV is a leading indicator of revenue. The entire amount of a booking is reflected in GBV during the quarter in which booking occurs, whether the guest pays the entire amount of the booking upfront or elects to use our Pay Less Upfront program. Growth in GBV reflects our ability to attract and retain Hosts and guests and reflects growth in Nights and Experiences Booked. In 2021, our GBV was$46.9 billion , a 96% increase from$23.9 billion in 2020 and a 23% increase from$38.0 billion in 2019. The increase in our GBV was primarily due to an increase in Nights and Experiences Booked and higher average daily rates ("ADRs"). The travel recovery we are experiencing has been dominated by our higher ADR regions-North America andEurope , in particular, whereas our lowest ADR region,Asia Pacific remains depressed. On a constant currency basis, the increase in GBV was 92% for the year endedDecember 31, 2021 , as compared to 2020. Non-GAAP Financial Measures In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial information, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance, and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results. The non-GAAP financial information is presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies. A reconciliation of each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP is provided below. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.
The following table summarizes our non-GAAP financial measures, along with the most directly comparable GAAP measure, for each period presented below.
Year Ended December 31,
2019 2020 2021
(in thousands)
Net loss $ (674,339) $ (4,584,716) $ (352,034)
Adjusted EBITDA $ (253,260) $ (250,673) $ 1,593,406
Net cash provided by (used in) operating activities $ 222,727 $ (629,732) $ 2,189,694
Free Cash Flow $ 97,275 $ (667,103) $ 2,164,372
Adjusted EBITDA
We define Adjusted EBITDA as net income or loss adjusted for (i) provision for
(benefit from) income taxes; (ii) interest income, interest expense, and other
income (expense), net; (iii) depreciation and amortization; (iv) stock-based
compensation expense and stock-settlement obligations related to the IPO; (v)
acquisition-related impacts consisting of gains (losses) recognized on changes
in the fair value of contingent consideration arrangements; (vi) net changes to
the reserves for lodging taxes for which management believes it is probable that
we may be held jointly liable with Hosts for collecting and remitting such
taxes; and (vii) restructuring charges.
The above items are excluded from our Adjusted EBITDA measure because these
items are non-cash in nature, or because the amount and timing of these items is
unpredictable, not driven by core results of operations and renders comparisons
with prior periods and competitors less meaningful. We believe Adjusted EBITDA
provides useful information to investors and others in understanding and
evaluating our results of operations, as well as provides a useful measure for
period-to-period comparisons of our business performance. Moreover, we have
included Adjusted EBITDA in this Annual Report on Form 10-K because it is a key
measurement used by our management internally to make operating decisions,
including those related to operating expenses, evaluating performance, and
performing strategic planning and annual budgeting.
Adjusted EBITDA also excludes certain items related to transactional tax matters, for which management believes it is probable that we may be held jointly liable with Hosts in certain jurisdictions, and we urge investors to review the detailed disclosure regarding these matters included in the subsection titled "-Critical Accounting Policies and Estimates-Lodging Tax Obligations," as well as the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Adjusted EBITDA has limitations as a financial measure, should be considered as supplemental in nature, and is not meant as a substitute for the related financial information prepared in accordance with GAAP. These limitations include the following:
•Adjusted EBITDA does not reflect interest income (expense) and other income (expense), net, which include loss on extinguishment of debt and unrealized and realized gains and losses on foreign currency exchange, investments, and financial instruments, including the warrants issued in connection with a term loan agreement entered into inApril 2020 . We amended the 55 -------------------------------------------------------------------------------- Table of Contents anti-dilution feature in the warrant agreements inMarch 2021 . The balance of the warrants of$1.3 billion was reclassified from liability to equity as the amended warrants met the requirements for equity classification and are no longer remeasured at each reporting period; •Adjusted EBITDA excludes certain recurring, non-cash charges, such as depreciation of property and equipment and amortization of intangible assets, and although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect all cash requirements for such replacements or for new capital expenditure requirements; •Adjusted EBITDA excludes stock-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy as well as stock-settlement obligations, which represent employer and related taxes related to the IPO; •Adjusted EBITDA excludes acquisition-related impacts consisting of gains (losses) recognized on changes in the fair value of contingent consideration arrangements. The contingent consideration, which was in the form of equity, was valued as of the acquisition date and is marked-to-market at each reporting period based on factors including our stock price. The changes in fair value of contingent consideration were insignificant prior to the fourth quarter of 2020; •Adjusted EBITDA does not reflect net changes to reserves for lodging taxes for which management believes it is probable that we may be held jointly liable with Hosts for collecting and remitting such taxes; and
•Adjusted EBITDA does not reflect restructuring charges, which include severance and other employee costs, lease impairments, and contract amendments and terminations.
Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net loss and our other GAAP results.
In 2021, Adjusted EBITDA was$1.6 billion , compared to$(250.7) million in 2020 and$(253.3) million in 2019. This favorable change was due to our record high revenue combined with continued cost management.
Adjusted EBITDA Reconciliation
The following is a reconciliation of Adjusted EBITDA to the most comparable GAAP
measure, net loss:
Year Ended December 31,
2019 2020 2021
(in thousands, except percentages)
Revenue $ 4,805,239 $ 3,378,199 $ 5,991,760
Net loss $ (674,339) $ (4,584,716) $ (352,034)
Adjusted to exclude the following:
Provision for (benefit from) income taxes 262,636 (97,222) 51,827
Other (income) expense, net (13,906) 947,220 304,659
Interest expense 9,968 171,688 437,599
Interest income (85,902) (27,117) (12,734)
Depreciation and amortization 114,162 125,876 138,319
Stock-based compensation expense(1) 97,547 3,002,148 898,847
Stock-settlement obligations related to IPO - 103,411 -
Acquisition-related impacts - 37,215 11,248
Net changes in lodging tax reserves 36,574 (80,531) 2,826
Restructuring charges - 151,355 112,849
Adjusted EBITDA $ (253,260) $ (250,673) $ 1,593,406
Adjusted EBITDA as a percentage of Revenue (5) % (7) % 27 %
(1)Excludes stock-based compensation related to restructuring, which is included in restructuring charges in the table above.
Free Cash Flow
We define Free Cash Flow as net cash provided by (used in) operating activities
less purchases of property and equipment. We believe that Free Cash Flow is a
meaningful indicator of liquidity that provides information to our management
and investors about the amount of cash generated from operations, after
purchases of property and equipment, that can be used for investment in our
business and for acquisitions as well as to strengthen our balance sheet. Our
Free Cash Flow is impacted by the timing of GBV because we collect our service
fees at the time of booking, which is generally before a stay or experience
occurs. Funds held on behalf of our Hosts and guests and amounts payable to our
Hosts and guests do not impact Free Cash Flow, except interest earned on these
funds. Free Cash Flow has limitations as an analytical
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tool and should not be considered in isolation or as a substitute for analysis
of other GAAP financial measures, such as net cash provided by (used in)
operating activities. Free Cash Flow does not reflect our ability to meet future
contractual commitments and may be calculated differently by other companies in
our industry, limiting its usefulness as a comparative measure.
In 2021, Free Cash Flow was $2.2 billion compared to $(667.1) million in 2020,
representing 36% of revenue. Free Cash Flow increased in 2021 due to the
increase in Nights and Experiences Booked and GBV, as described above. Free Cash
Flow decreased in 2020 due to the reduction in Nights and Experiences Booked and
GBV due to the COVID-19 pandemic, as described above, partially offset by cost
reductions.
Free Cash Flow Reconciliation
The following is a reconciliation of Free Cash Flow to the most comparable GAAP cash flow measure, net cash provided by (used in) operating activities:
Year Ended December 31,
2019 2020 2021
(in thousands, except percentages)
Revenue $ 4,805,239
Net cash provided by (used in) operating activities
(125,452) (37,371) (25,322)
Free Cash Flow $ 97,275 $ (667,103) $ 2,164,372
Free Cash Flow as a percentage of Revenue 2 % (20) % 36 %
Other cash flow components:
Net cash provided by (used in) investing activities $ (347,155) $ 79,590 $ (1,351,955)
Net cash provided by financing activities $ 854,579 Impact of COVID-19 on our Business
COVID-19 Has Had a Disproportionately Negative Effect on the Travel Industry
For over a year, many travelers have avoided traveling long distance because of COVID-19 concerns, quarantines, and travel restrictions. However, we have been seeing signs of travel recovery as the rate of vaccinations increases and quarantine requirements and certain travel restrictions are lifted. For example, during 2021, we saw a significant increase in Nights and Experiences Booked compared to the same prior year period. While COVID-19, including new strains of variants, continues to disrupt travel across the world, we have seen continued resiliency in not only our guests' travel behavior, but in our business model and its ability to adapt to the changing needs of our guests. In early 2020, as COVID-19 disrupted travel across the world,Airbnb 's business declined significantly. However, beginning in the second quarter of 2020, 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 onAirbnb 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 onAirbnb . We believe that the lines between travel and living are blurring, and the global pandemic has accelerated the ability to live anywhere. Our platform is suited to and has proven adaptable to serve these new ways of traveling. From long weekends to monthly stays,Airbnb allows you to book any home, anywhere, for any duration-and ultimately, to live anywhere. We believe this trend towards more flexibility will continue to accelerate. In 2021, some of the largest companies in the world announced increased flexibility for employees to work remotely, and we expect more companies to follow their lead. While COVID-19 still plagues the world, for the year endedDecember 31, 2021 , GBV and revenue were$46.9 billion and$6.0 billion , respectively, which were both higher compared to the same periods in 2019 and 2020. These improvements were primarily driven by stronger results inNorth America and EMEA, and acceleration inLatin America , in particular with resilience in domestic and short-distance travel, with more people gravitating towardAirbnb stays within driving distance of their homes. The extent and duration of the impact of the COVID-19 pandemic over the longer term remain uncertain and dependent on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of COVID-19, the introduction and spread of new variants of the virus, including, for example, the Omicron variant which emerged in November of 2021, that may be more easily transmittable and resistant to currently approved vaccines, the continuation of existing or implementation of new government travel restrictions, the extent and effectiveness of containment actions taken, including mobility restrictions, the timing, availability, and effectiveness of vaccines, and the impact of these and other factors on travel behavior in general, and on our business in particular, which may result in a reduction in bookings and an increase in booking cancellations.
Geographic Mix
Our operations are global, and certain trends in our business, such as Nights
and Experiences Booked, GBV, revenue, GBV per Night and Experience Booked, and
Nights per Booking vary by geography. We measure Nights and Experiences Booked
by region based on the location of the listing.
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Year ended Year ended
December 31, December 31,
2020 % of Total 2021 % of Total
(in millions, except percentages)
Nights and Experiences Booked
North America 75.5 39 % 114.0 38 %
EMEA 67.7 35 % 118.1 39 %
Latin America 22.4 12 % 38.8 13 %
Asia Pacific 27.6 14 % 29.7 10 %
Total 193.2 100 % 300.6 100 %
Gross Booking Value
North America $ 13,169.9 55 % $ 25,305.5 54 %
EMEA 6,660.1 28 % 14,606.9 31 %
Latin America 1,700.8 7 % 3,706.0 8 %
Asia Pacific 2,366.1 10 % 3,258.6 7 %
Total $ 23,896.9 100 % $ 46,877.0 100 %
Revenue
North America $ 1,772.7 53 % $ 3,201.1 54 %
EMEA 1,023.8 30 % 1,930.8 32 %
Latin America 242.0 7 % 431.2 7 %
Asia Pacific 339.7 10 % 428.7 7 %
Total $ 3,378.2 100 % $ 5,991.8 100 %
We saw an increase in GBV per Night and Experience Booked in 2021 compared to
2020, again in part because our geographic mix shifted to these higher GBV per
Night and Experience Booked regions. Specifically, GBV per Night and Experience
Booked in 2021 was $221.92 for North America compared to $123.71 for EMEA,
$109.75 for Asia Pacific , and $95.42 for Latin America , with a total global GBV
per Night and Experience Booked of $155.93 .
Average nights per booking, excluding experiences, for 2021 were 4.4 nights for
EMEA, 4.3 nights for each of North America and Latin America , and 2.7 nights for
Asia Pacific , with a total average of 4.1 nights. The average nights per booking
decreased slightly in 2021, but still reflects elevated demand for longer stays.
We expect that our blended global average nights per booking will continue to
fluctuate based on our geographic mix and changes in traveler behaviors.
Seasonality
Our business is seasonal, reflecting typical travel behavior patterns over the course of the calendar year. In a typical year, the first, second, and third quarters have higher Nights and Experiences Booked than the fourth quarter, as guests plan for travel during the peak travel season, which is in the third quarter forNorth America and EMEA. Our business metrics, including GBV and Adjusted EBITDA, can also be impacted by the timing of holidays and other events. We experience seasonality in our GBV that is generally consistent with the seasonality of Nights and Experiences Booked. Revenue and Adjusted EBITDA have historically been, and are expected to continue to be, highest in the third quarter when we have the most check-ins, which is the point at which we recognize revenue. Seasonal trends in our GBV impact Free Cash Flow for any given quarter. Our costs are relatively fixed across quarters or vary in line with the volume of transactions, and we historically achieve our highest GBV in the first and second quarters of the year with comparatively lower check-ins. As a result, increases in unearned fees make our Free Cash Flow and Free Cash Flow as a percentage of revenue the highest in the first two quarters of the year. We typically see a slight decline in GBV and a peak in check-ins in the third quarter, which results in a decrease in unearned fees and lower sequential level of Free Cash Flow, and a greater decline in GBV in the fourth quarter, where Free Cash Flow is typically negative. As our business matures, other seasonal trends may develop, or these existing seasonal trends may become more extreme. We have seen COVID-19 overwhelm the historical patterns of seasonality in our GBV, revenue, Adjusted EBITDA, and Free Cash Flow as a result of travel restrictions and changing travel preferences relating to the COVID-19 pandemic. While we expect this impact on seasonality to continue as long as COVID-19 is impacting travel patterns globally, we have seen the time between when guests make their bookings on our platform and when they expect to complete their stays increase towards a return to pre-COVID-19 levels. Typically, booking lead times sequentially lengthen from the fourth quarter to the first quarter when guests start to book travel for later in the year. Even taking normal seasonal patterns into consideration, we have seen lead times lengthen during 2021.
Regulations Permitting or Limiting Our Offerings
Regulations that permit or limit our Hosts' ability to provide their listings impact our growth and penetration in certain geographies. In particular, among other regulations governing our short-term rentals, many large cities have placed night caps on short-term rentals of certain types of properties, limited short-term rentals to primary residences, or limited the length of a stay. No single city represented more than 1.0% of our revenue before adjustments for incentives and refunds during the year endedDecember 31, 2021 or 1.1% of our active listings as ofDecember 31, 2021 . An increase in short-term rental regulations could harm our business and negatively impact our financial performance. See the section titled "Risk Factors - 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." 58
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Components of Results of Operations
Revenue
Our revenue consists of service fees, net of incentives and refunds, charged to our customers. We consider both Hosts and guests to be our customers. For stays, service fees, which are charged to customers as a percentage of the value of the booking, excluding taxes, vary based on factors specific to the booking, such as booking value, the duration of the booking, geography, and Host type. For experiences, we only earn a Host fee. Substantially all of our revenue comes from stays booked on our platform. Incentives include our referral programs and marketing promotions to encourage the use of our platform and attract new customers, while our refunds to customers are part of our customer support activities. We experience a difference in timing between when a booking is made and when we recognize revenue, which occurs upon check-in. We record the service fees that we collect from customers prior to check-in on our balance sheet as unearned fees. Revenue is net of incentives and refunds provided to customers.
Cost of Revenue
Cost of revenue includes payment processing costs, including merchant fees and chargebacks, costs associated with third-party data centers used to host our platform, and amortization of internally developed software and acquired technology. Because we act as the merchant of record, we incur all payment processing costs associated with our bookings, and we have chargebacks, which arise from account takeovers and other fraudulent activities. We expect our cost of revenue will continue to increase on an absolute dollar basis for the foreseeable future to the extent that we continue to see growth on our platform. Cost of revenue may vary as a percentage of revenue from year to year based on activity on our platform and may also vary from quarter to quarter as a percentage of revenue based on the seasonality of our business and the difference in the timing of when bookings are made and when we recognize revenue.
Operations and Support
Operations and support expense primarily consists of personnel-related expenses and third-party service provider fees associated with community support provided via phone, email, and chat to Hosts and guests; customer relations costs, which include refunds and credits related to customer satisfaction and expenses associated with our Host protection programs; and allocated costs for facilities and information technology. We expect that operations and support expense will continue to increase on an absolute dollar basis for the foreseeable future to the extent that we continue to see growth on our platform. We also expect operations and support expense to increase in the near-term as a percentage of revenue, as we had made investments in trust and safety programs and scaled our frontline community support staff in preparation for the travel rebound. We are also investing in the near-term in initiatives to reduce customer contact rates and improve the operational efficiency of our operations and support organization, which we expect will decrease operations and support expense as a percentage of revenue over the longer term.
Product Development
Product development expense primarily consists of personnel-related expenses and third-party service provider fees incurred in connection with the development of our platform, and allocated costs for facilities and information technology. We expect that our product development expense will increase on an absolute dollar basis and will vary from period to period as a percentage of revenue for the foreseeable future as we continue to invest in product development activities relating to ongoing improvements to and maintenance of our technology platform and other programs, including the hiring of personnel to support these efforts.
Sales and Marketing
Sales and marketing expense primarily consists of brand and performance marketing, personnel-related expenses, including those related to our field operations, policy and communications, portions of referral incentives and coupons, and allocated costs for facilities and information technology. We expect our sales and marketing expense will vary from period to period as a percentage of revenue for the foreseeable future, and over the long term, we expect it will decline as a percentage of revenue relative to 2019. Sales and marketing expense as a percentage of revenue was lower in the second half of 2021 than in the first half. This is partially due to the marketing campaign that we began running inFebruary 2021 in advance of the summer travel season.
General and Administrative
General and administrative expense primarily consists of personnel-related expenses for management and administrative functions, including finance and accounting, legal, and human resources. General and administrative expense also includes certain professional services fees, general corporate and director and officer insurance, allocated costs for facilities and information technology, indirect taxes, including lodging tax reserves for which we may be held jointly liable with Hosts for collecting and remitting such taxes, and bad debt expense. We expect to incur additional general and administrative expense as a result of operating as a public company, including expenses to comply with the rules and regulations of theSEC and Listing Rules of Nasdaq, as well as higher expenses for corporate insurance, director and officer insurance, investor relations, and professional services. Overall, we expect our general and administrative expense will vary from period to period as a percentage of revenue for the foreseeable future. Restructuring Charges Restructuring charges primarily consist of costs associated with a global workforce reduction inMay 2020 , lease impairments, and costs associated with amendments and terminations of contracts, including commercial agreements with service providers. 59
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Stock-Based Compensation
We grant stock-based awards consisting primarily of stock options, restricted
common stock, and restricted stock units ("RSUs") to employees, members of our
board of directors, and non-employees. In addition, we have an Employee Stock
Purchase Plan ("ESPP"), which was adopted by our board of directors in December
2020 . Stock-based compensation expense was $898.8 million for the year ended
December 31, 2021 .
Prior to
Interest Income
Interest income consists primarily of interest earned on our cash, cash equivalents, marketable securities, and amounts held on behalf of customers.
Interest Expense
Interest expense consists primarily of interest associated with various indirect tax reserves, amortization of debt issuance and debt discount costs, and the loss on extinguishment of debt related to the repayment of the first and second lien loans inMarch 2021 . Other Income (Expense), Net Other income (expense), net consists primarily of realized and unrealized gains and losses on foreign currency transactions and balances, the change in fair value of investments and financial instruments, including the warrants issued in connection with a term loan agreement entered into inApril 2020 , and our share of income or loss from our equity method investments. Our platform generally enables guests to make payments in the currency of their choice to the extent that the currency is supported byAirbnb , which may not match the currency in which the Host elects to be paid. As a result, in those cases, we bear the currency risk of both the guest payment as well as the Host payment due to timing differences in such payments. We enter into derivative contracts to offset a portion of our exposure to the impact of movements in currency exchange rates on our transactional balances denominated in currencies other than theU.S. dollar. The effects of these derivative contracts are reflected in other income (expense), net.
Provision for (Benefit from) Income Taxes
We are subject to income taxes inthe United States and foreign jurisdictions in which we do business. Foreign jurisdictions have different statutory tax rates than those inthe United States . Additionally, certain of our foreign earnings may also be taxable inthe United States . Accordingly, our effective tax rate is subject to significant variation due to several factors, including variability in our pre-tax and taxable income and loss and the mix of jurisdictions to which they relate, intercompany transactions, changes in how we do business, acquisitions, investments, tax audit developments, changes in our deferred tax assets and liabilities and their valuation, foreign currency gains and losses, changes in statutes, regulations, case law, and administrative practices, principles, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions, and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate can vary based on the amount of pre-tax income or loss. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower. We have a valuation allowance for our net deferred tax assets, including federal and state net operating loss carryforwards, tax credits, and intangible assets. We expect to maintain these valuation allowances until it becomes more likely than not that the benefit of our deferred tax assets will be realized by way of expected future taxable income inthe United States . We recognize accrued interest and penalties related to unrecognized tax benefits in the provision for (benefit from) income taxes. 60
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Results of Operations
The following table sets forth our results of operations for the periods
presented:
Year Ended December 31,
2019 2020 2021
(in thousands)
Revenue $ 4,805,239 $ 3,378,199 $ 5,991,760
Costs and expenses:
Cost of revenue 1,196,313 876,042 1,155,833
Operations and support(1) 815,074 877,901 847,057
Product development(1) 976,695 2,752,872 1,425,048
Sales and marketing(1) 1,621,519 1,175,325 1,186,332
General and administrative(1) 697,181 1,134,851 835,324
Restructuring charges(1) - 151,355 112,849
Total costs and expenses 5,306,782 6,968,346 5,562,443
Income (loss) from operations (501,543) (3,590,147) 429,317
Interest income 85,902 27,117 12,734
Interest expense (9,968) (171,688) (437,599)
Other income (expense), net 13,906 (947,220) (304,659)
Loss before income taxes (411,703) (4,681,938)
(300,207)
Provision for (benefit from) income taxes 262,636 (97,222)
51,827 Net loss$ (674,339) $ (4,584,716) $ (352,034)
(1)Includes stock-based compensation expense as follows:
Year Ended December 31,
2019 2020 2021
(in thousands)
Operations and support $ 817 $ 143,997 $ 48,473
Product development 56,632 1,878,793 545,113
Sales and marketing 23,919 435,272 99,969
General and administrative 16,179 544,086 205,292
Restructuring charges - (200) (17)
Stock-based compensation expense
The following table sets forth the components of our consolidated statements of operations for each of the periods presented as a percentage of revenue:
Year Ended December 31,
2019 2020 2021
Revenue 100 % 100 % 100 %
Costs and expenses:
Cost of revenue 25 26 19
Operations and support 17 26 14
Product development 20 81 24
Sales and marketing 34 35 20
General and administrative 14 34 14
Restructuring charges - 4 2
Total costs and expenses 110 206 93
Income (loss) from operations (10) (106) 7
Interest income 2 1 -
Interest expense (1) (5) (7)
Other income (expense), net - (28) (5)
Loss before income taxes (9) (138) (5)
Provision for (benefit from) income taxes 5 (2) 1
Net loss (14) % (136) % (6) %
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Comparison of the Years Ended
Revenue
Year Ended December 31, % Change
2019 2020 2021 2020 to 2021
(in thousands, except percentages)
Revenue $ 4,805,239 $ 3,378,199 $ 5,991,760 77 %
Revenue increased $2.6 billion , or 77%, in 2021 compared to 2020, and 25%
compared to 2019, primarily due to the recovery in Nights and Experiences Booked
combined with higher ADRs. In addition, during 2020, we had higher reductions to
revenue largely attributable to payments made to customers related to our
extenuating circumstances policy for cancellations resulting from COVID-19
totaling $205.1 million , the majority of which was recorded as reduction to
revenue. The increase compared to pre-COVID pandemic levels in 2019, reflects
the resiliency of the business and higher ADRs. On a constant currency basis,
revenue increased 74% in 2021 compared to 2020.
Cost of Revenue
Year Ended December 31, % Change
2019 2020 2021 2020 to 2021
(in thousands, except percentages)
Cost of revenue $ 1,196,313 $ 876,042 $ 1,155,833 32 %
Percentage of revenue 25 % 26 % 19 %
Cost of revenue increased $279.8 million , or 32%, in 2021 compared to 2020. The
change was primarily due to a $285.2 million increase in merchant fees and an
increase of $32.8 million of amortization expense for internally developed
software and acquired technology, partially offset by a $40.9 million decrease
in chargebacks. For the year ended 2020 and 2021, payment processing costs,
consisting of merchant fees and chargebacks, totaled $600.2 million and
$844.4 million , respectively, which represented 3% and 2% of GBV, respectively.
The increase in merchant fees is primarily due to increased dollar value of
payments processed through our platform associated with the growth in GBV.
Operations and Support
Year Ended December 31, % Change
2019 2020 2021 2020 to 2021
(in thousands, except percentages)
Operations and support $ 815,074 $ 877,901 $ 847,057 (4) %
Percentage of revenue 17 % 26 % 14 %
Operations and support expense decreased $30.8 million , or 4%, in 2021 compared
to 2020. The change was primarily due to a $76.4 million decrease in
payroll-related expenses, predominantly comprised of stock-based compensation
related to RSUs, and information technology expenses of $7.2 million , partially
offset by a $41.9 million increase in insurance costs.
Product Development
Year Ended December 31, % Change
2019 2020 2021 2020 to 2021
(in thousands, except percentages)
Product development $ 976,695 $ 2,752,872 $ 1,425,048 (48) %
Percentage of revenue 20 % 81 % 24 %
Product development expense decreased $1.3 billion , or 48%, in 2021 compared to
2020. The change was primarily due to a $1.3 billion decrease in payroll-related
expenses, predominantly comprised of stock-based compensation related to RSUs.
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Sales and Marketing
Year Ended December 31, % Change
2019 2020 2021 2020 to 2021
(in thousands, except percentages)
Brand and performance marketing $ 1,140,366 $ 478,608 $ 723,167 51 %
Field operations and policy 481,153 696,717 463,165 (34) %
Total sales and marketing $ 1,621,519 $ 1,175,325 $ 1,186,332 1 %
Percentage of revenue 34 % 35 % 20 %
Sales and marketing expense increased $11.0 million , or 1%, in 2021 compared to
2020. The change was primarily due to a $382.7 million increase in marketing
activities, partially offset by a $340.2 million decrease in payroll-related
expenses, predominantly comprised of stock-based compensation related to RSUs,
decrease in shared costs for facilities and information technology of $16.5
million , and decreases in customer relations expense and coupon and referral
expense of $11.1 million and $7.5 million , respectively. Total brand and
performance marketing expense increased $244.6 million , driven by an increase in
brand marketing, partially offset by a reduction of performance marketing. In
March 2020 , driven by COVID-19, we paused our sales and marketing investments in
new initiatives and significantly reduced our performance marketing spend. We
implemented a marketing strategy that shifted our marketing mix towards brand
marketing spend and away from spending on performance marketing. During 2021, we
launched several marketing campaigns focused on our brand. Total field
operations and policy expense decreased $233.6 million from the same period in
2020 due to stock-based compensation related to RSUs.
General and Administrative
Year Ended December 31, % Change
2019 2020 2021 2020 to 2021
(in thousands, except percentages)
General and administrative $ 697,181 $ 1,134,851 $ 835,324 (26) %
Percentage of revenue 14 % 34 % 14 %
General and administrative expense decreased $299.5 million , or 26%, in 2021
compared to 2020. The change was primarily due to a decrease of $315.1 million
in payroll-related expenses, predominantly comprised of stock-based compensation
related to RSUs, a $80.4 million decrease in bad debt expense due to decrease in
receivables and increased collections. These movements were partially offset by
a prior year reduction of $81.7 million in our reserve for lodging taxes in
jurisdictions in which management no longer believed a liability was probable
following a favorable outcome in a related legal proceeding and increase in
corporate insurance of $22.9 million , primarily due to higher Director and
Officer insurance premiums.
Restructuring Charges
Year Ended December 31, % Change
2019 2020 2021 2020 to 2021
(in thousands, except percentages)
Restructuring charges $ - $ 151,355 $ 112,849 (25) %
Percentage of revenue - % 4 % 2 %
Restructuring charges decreased $38.5 million , or 25%, in 2021 compared to 2020.
In May 2020 , we announced a reduction in force resulting in restructuring
charges that primarily included severance and other employee-related costs,
lease impairments, and contract amendments and terminations. In March 2021 , we
ceased use of a leased office and made the office available for sublease
resulting in an additional lease impairment, which represented a substantial
portion of the expense for 2021.
Interest Income and Expense
Year Ended December 31, % Change
2019 2020 2021 2020 to 2021
(in thousands, except percentages)
Interest income $ 85,902 $ 27,117 $ 12,734 (53) %
Percentage of revenue 2 % 1 % - %
Interest expense $ (9,968) $ (171,688) $ (437,599) 155 %
Percentage of revenue (1) % (5) % (7) %
Interest income decreased $14.4 million , or 53%, in 2021 compared to 2020. The
decrease was primarily due to a decline in interest rates and our investment
portfolio mix, which was largely invested in money market funds and short-term,
high-quality bonds. Interest expense increased $265.9 million for the year ended
December 31, 2021 , compared to the same period in the prior year, primarily due
to the $377.2 million loss on extinguishment of debt resulting from retirement
of two term loans in March 2021 . Refer to the section titled "Liquidity and
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Capital Resources - Loan Agreements" below for further information.
Other Income (Expense), Net
Year Ended December 31, % Change
2019 2020 2021 2020 to 2021
(in thousands, except percentages)
Other income (expense), net $ 13,906 $ (947,220) $ (304,659) (68) %
Percentage of revenue - % (28) % (5) %
Other income (expense), net decreased $642.6 million for the year ended
December 31, 2021 , compared to 2020. The change was primarily driven by $576.6
million of fair value remeasurement on our warrants issued in connection with
our second lien loan and a $19.0 million increase in net realized and unrealized
gains on our investments, partially offset by a $79.0 million reduction in
impairment charges and a $36.5 million increase in net realized and unrealized
foreign exchange losses. In the first quarter of 2021, the warrants issued in
connection with our second lien loan were reclassified to equity and no longer
require fair value remeasurement. See Note 10, Debt, to our consolidated
financial statements included in Item 8 of this Annual Report on Form 10-K for
further details.
Provision for (Benefit from) Income Taxes
Year Ended December 31, % Change
2019 2020 2021 2020 to 2021
(in thousands, except percentages)
Provision for (benefit from) income taxes
$ 51,827 (153) % Effective tax rate (64) % 2 % (17) % The provision for income taxes for the year endedDecember 31, 2021 increased$149.0 million , compared to 2020, primarily due to current tax on foreign earnings and the prior year benefit from income taxes primarily due to the five-year net operating loss carryback provision of the CARES Act accrued for in 2020. See Note 13, Income Taxes, to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details.
Liquidity and Capital Resources
As ofDecember 31, 2021 , our principal sources of liquidity were cash and cash equivalents and marketable securities totaling$8.3 billion . As ofDecember 31, 2021 , cash and cash equivalents totaled$6.1 billion , which included$2.0 billion held by our foreign subsidiaries. Cash and cash equivalents consist of checking and interest-bearing accounts and highly-liquid securities with an original maturity of 90 days or less. As ofDecember 31, 2021 , marketable securities totaled$2.2 billion . Marketable securities consist of corporate debt securities, mutual funds, highly-liquid debt instruments of theU.S. government and its agencies, and certificates of deposit. These amounts do not include funds of$3.7 billion as ofDecember 31, 2021 that we held for bookings in advance of guests completing check-ins that we record separately on our balance sheet in funds receivable and amounts held on behalf of customers with a corresponding liability in funds payable and amounts payable to customers. Cash, cash equivalents, and marketable securities held outsidethe United States may be repatriated, subject to certain limitations, and would be available to be used to fund our domestic operations. However, repatriation of such funds may result in additional tax liabilities. We believe that our existing cash, cash equivalents, and marketable securities balances inthe United States are sufficient to fund our working capital needs inthe United States . We expect our capital expenditures in 2022 will be higher than those of 2021 and 2020, but significantly lower than 2019. The majority of our expected investments are related to offices inNorth America , many of which were delayed in 2020. We assess our liquidity in terms of our ability to generate cash to fund our short- and long-term cash requirements. As such, we believe that the cash flows generated from operating activities will meet our anticipated cash requirements. In addition to normal working capital requirements, we anticipate that our short- and long-term cash requirements will include funding capital expenditures, debt repayments, and platform and systems transformation initiatives. We anticipate long-term cash uses may also include strategic acquisitions. On a long-term basis, we would rely on either our access to the capital markets or our credit facility for any long-term funding not provided by operating cash flows. IPO InDecember 2020 , upon the completion of our IPO, we received net proceeds of$3.7 billion after deducting underwriting discounts and commissions of$79.3 million and offering expenses of$9.8 million . We used a portion of these net proceeds to satisfy the tax withholding and remittance obligations of approximately$1.6 billion related to the settlement of our outstanding RSUs in connection with our IPO. Convertible Senior Notes
On
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The 2026 Notes are senior unsecured obligations and will not bear regular
interest. The 2026 Notes mature on March 15, 2026 , unless earlier converted,
redeemed or repurchased. The net proceeds from the 2026 Notes were
$1,979.2 million , after deducting the initial purchasers' commissions and debt
issuance costs.
The initial conversion rate for the 2026 Notes is 3.4645 shares of our Class A
common stock per $1,000 principal amount of 2026 Notes, which is equivalent to
an initial conversion price of approximately $288.64 per share of the Class A
common stock. The conversion rate is subject to adjustment under certain
circumstances in accordance with the terms of the Indenture.
The 2026 Notes will be convertible at the option of the holders prior to the
close of business on the business day immediately preceding March 15, 2026 only
under the following circumstances:
•during any calendar quarter (and only during such calendar quarter) commencing
after the calendar quarter ending on June 30, 2021 , if the last reported sale
price per share of our common stock exceeds 130% of the conversion price for
each of at least 20 trading days, whether or not consecutive, during the 30
consecutive trading days ending on, and including, the last trading day of the
immediately preceding calendar quarter;
•during the five consecutive business days immediately after any 10 consecutive
trading day period (such 10 consecutive trading day period, the "measurement
period") if the trading price per $1,000 principal amount of notes for each
trading day of the measurement period is less than 98% of the product of the
last reported sale price per share of our common stock on such trading day and
the conversion rate on such trading day;
•upon the occurrence of certain corporate events or distributions on our common
stock, as described in this offering memorandum;
•or if we call such notes for redemption; and
•at any time from, and including, December 15, 2025 until the close of business
on the second scheduled trading day immediately before the maturity date.
Upon conversion, we may satisfy our conversion obligation by paying or
delivering, as applicable, cash, shares of our Class A common stock or a
combination of cash and shares of our Class A common stock, at our election,
based on the applicable conversion rate. Holders of the 2026 Notes who convert
their 2026 Notes in connection with certain corporate events that constitute a
make-whole fundamental change (as defined in the Indenture) are, under certain
circumstances, entitled to an increase in the conversion rate. Additionally in
the event of a corporate event constituting a fundamental change (as defined in
the Indenture), holders of the 2026 Notes may require us to repurchase all or a
portion of their 2026 Notes at a repurchase price equal to 100% of the principal
amount of the Notes being repurchased.
Capped Calls
OnMarch 3, 2021 , in connection with the pricing of the 2026 Notes, we entered into privately negotiated capped call transactions (the "Capped Calls") with certain of the initial purchasers and other financial institutions (the "option counterparties") at a cost of approximately$100.2 million . The Capped Calls cover, subject to anti-dilution adjustments, the number of shares of Class A common stock initially underlying the 2026 Notes sold in the offering. By entering into the Capped Calls, we expect to reduce the potential dilution to our common stock (or, in the event a conversion of the 2026 Notes is settled in cash, to reduce our cash payment obligation) in the event that at the time of conversion of the 2026 Notes our common stock price exceeds the conversion price of the 2026 Notes. The cap price of the Capped Calls will initially be$360.80 per share of Class A common stock, which represents a premium of 100% over the last reported sale price of the Class A common stock of$180.40 per share onMarch 3, 2021 , and is subject to certain customary adjustments under the terms of the Capped Call Transactions. The Capped Calls meet the criteria for classification in equity, are not remeasured each reporting period and included as a reduction to additional paid-in-capital within stockholders' equity.
2020 Credit Facility
OnNovember 19, 2020 , we entered into a five-year secured revolving Credit and Guarantee Agreement, which provides initial commitments from a group of lenders led byMorgan Stanley Senior Funding, Inc. of$500.0 million ("2020 Credit Facility"). The 2020 Credit Facility provides a$200.0 million sub-limit for the issuance of letters of credit. The 2020 Credit Facility has a commitment fee of 0.15% per annum on any undrawn amounts, payable quarterly in arrears. Interest on borrowings is equal to (i) in the case of LIBOR borrowings, 1.5% plus LIBOR, subject to a floor of 0%, or (ii) in the case of base rate borrowings, 0.5% plus the greatest of (a) the federal funds effective rate plus 0.5%, (b) the rate of interest in effect for such day byMorgan Stanley Senior Funding, Inc. as its "prime rate", and (c) LIBOR for a one-month period plus 1.0%, in each case subject to a floor of 1.0%. Outstanding balances may be repaid prior to maturity without penalty. The 2020 Credit Facility contains customary affirmative and negative covenants, including restrictions on our and certain of our subsidiaries' ability to incur debt and liens, undergo fundamental changes, and pay dividends or other distributions, as well as certain financial covenants. We were in compliance with all financial covenants as ofDecember 31, 2021 . No amounts have been drawn on the 2020 Credit Facility as ofDecember 31, 2020 and 2021, and outstanding letters of credit totaled$21.4 million and$15.9 million as ofDecember 31, 2020 and 2021, respectively. See Note 10, Debt, to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K, for additional information on our outstanding debt. 65 -------------------------------------------------------------------------------- Table of Contents Cash Flows
The following table summarizes our cash flows for the periods indicated:
Year Ended December 31,
2019 2020 2021
(in thousands)
Net cash provided by (used in) operating activities $ 222,727 $ (629,732) $ 2,189,694
Net cash provided by (used in) investing activities (347,155) 79,590 (1,351,955)
Net cash provided by financing activities 854,579 2,940,814 1,431,159 Effect of exchange rate changes on cash, cash equivalents and restricted cash
(25,284)
134,137 (209,861)
Net increase in cash, cash equivalents and restricted cash
Cash Provided by (Used in) Operating Activities
Net cash provided by operating activities in 2021 was$2.2 billion . Our net loss for 2021 was$352.0 million , adjusted for non-cash charges, primarily consisting of$898.8 million of stock-based compensation expense,$377.2 million of loss on extinguishment of debt,$292.0 million of fair value remeasurement on warrants issued in connection with a term loan agreement entered into inApril 2020 ,$138.3 million of depreciation and amortization,$112.5 million of impairment of long-lived assets and$27.3 million of bad debt expense. Additional inflow of cash resulted from changes in working capital, including a$495.8 million increase in unearned fees resulting from significantly higher bookings. Net cash used in operating activities in 2020 was$629.7 million . Our net loss for 2020 was$4.6 billion , adjusted for non-cash charges, primarily consisting of$3.0 billion of stock-based compensation expense,$868.5 million of fair value remeasurement on warrants issued in connection with a term loan agreement entered into inApril 2020 ,$125.9 million of depreciation and amortization,$107.7 million of bad debt expense, and$82.1 million of impairment charges of investments. Additional uses of cash resulted from changes in working capital, including a$267.0 million decrease in unearned fees resulting from fewer bookings on our platform due to COVID-19.
Cash Provided by (Used in) Investing Activities
Net cash used in investing activities in 2021 was$1.4 billion , which was primarily due to purchases of marketable securities of$4.9 billion , partially offset by proceeds resulting from sales and maturities of marketable securities of$1.6 billion and$2.0 billion , respectively. Net cash provided by investing activities in 2020 was$79.6 million , which was primarily provided by proceeds resulting from sales and maturities of marketable securities of$1.3 billion and$1.8 billion , respectively, partially offset by cash used to purchase marketable securities of$3.0 billion and property and equipment of$37.4 million .
Cash Provided by Financing Activities
Net cash provided by financing activities in 2021 was$1.4 billion , primarily reflecting the proceeds from the issuance of convertible senior notes, net of issuance costs, of$2.0 billion and an increase in funds payable and amounts payable to customers of$1.6 billion , partially offset by the repayment of long-term debt and a related prepayment penalty of$2.0 billion and$212.9 million , respectively. Net cash provided by financing activities in 2020 was$2.9 billion , primarily reflecting proceeds of$3.7 billion from the issuance of Class A common stock upon IPO, net of underwriting discounts and offering costs,$1.9 billion from the issuance of long-term debt and warrants, net of issuance costs, partially offset by a decrease of$1.7 billion for taxes paid related to net share settlement of equity awards and$1.0 billion in funds payable and amounts payable to customers.
Effect of Exchange Rates
The effect of exchange rate changes on cash, cash equivalents, and restricted cash on our consolidated statements of cash flows relates to certain of our assets, principally cash balances held on behalf of Hosts and guests, that are denominated in currencies other than the functional currency of certain of our subsidiaries. During 2021, we recorded a$209.9 million decrease in cash, cash equivalents, and restricted cash primarily due to the strengthening of theU.S. dollar. During 2020 we recorded a$134.1 million increase in cash, cash equivalents, and restricted cash, respectively, primarily due to the weakening of theU.S. dollar. The impact of exchange rate changes on cash balances can serve as a natural hedge for the effect of exchange rates on our liabilities to our Hosts and guests. We believe that our current available cash, cash equivalents, and marketable securities, along with cash generated by ongoing operations and continued access to capital markets, will be sufficient to meet our operational cash needs for at least the next twelve months and beyond. Our future capital requirements, however, will depend on many factors, including, but not limited to our growth, headcount, ability to attract and retain Hosts and guests on our platform, capital expenditures, acquisitions, introduction of new products and offerings, timing and extent of spending to support our efforts to develop our platform, and expansion of sales and marketing activities. Additionally, we may in the future raise additional capital or incur additional indebtedness to continue to fund our strategic initiatives. In the event that additional financing is required from outside sources, we may seek to raise additional funds at any time through equity, equity-linked arrangements, and/or debt, which may not be available on favorable terms, or at all. If we are unable to raise additional capital when desired and at reasonable rates, our business, results of operations, and financial condition could be materially adversely affected. Our liquidity is 66 -------------------------------------------------------------------------------- Table of Contents subject to various risks including the risks identified in the section titled "Risk Factors" in Item 1A and market risks identified in the section entitled "Quantitative and Qualitative Disclosures about Market Risk" in Item 7A, each of which is incorporated herein by reference.
Indemnification Agreements
In the ordinary course of business, we include limited indemnification provisions under certain agreements with parties with whom we have commercial relations of varying scope and terms. Under these contracts, we may indemnify, hold harmless and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party in connection with breach of the agreements, or intellectual property infringement claims made by a third party, including claims by a third party with respect to our domain names, trademarks, logos and other branding elements to the extent that such marks are applicable to its performance under the subject agreement. It is not possible to determine the maximum potential loss under these indemnification provisions due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. To date, no significant costs have been incurred, either individually or collectively, in connection with our indemnification provisions. In addition, we have entered into indemnification agreements with our directors, executive officers and certain other employees that require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, executive officers, or employees.
Contractual Obligations and Commitments
We have various contractual obligations and commitments, such as long-term leases, purchase commitments, long-term debt, and other executory contracts, that are disclosed in the footnotes to the financial statements. See Note 8. Leases, Note 10, Debt, and Note 12, Commitments and Contingencies to the consolidated financial statements, included in Item 8 of this Annual Report on Form 10-K, for further information regarding these commitments.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted inthe United States . The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions. We believe that of our significant accounting policies, which are described in Note 2 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition, results of operations, and cash flows.
Revenue Recognition
We generate substantially all of our revenue from facilitating guest stays at accommodations offered by Hosts on theAirbnb platform. We consider both Hosts and guests to be our customers. Our revenue is comprised of service fees from our customers. Our single performance obligation is identified as the facilitation of a stay, which occurs upon the completion of a check-in event. Revenue is recognized at a point in time when the performance obligation is satisfied upon check-in. Revenue is presented net of certain payments we make to customers as part of our referral programs and marketing promotions, collectively referred to as our incentive programs, and refund activities. The payments are generally in the form of coupon credits to be applied toward future bookings or as cash refunds. We encourage the use of our platform and attract new customers through our incentive programs. Under the referral program, the referring party ("referrer") earns a coupon when the new Host or guest ("referee") completes their first stay on our platform. We record the incentive as a liability at the time the incentive is earned by the referrer with the corresponding charge recorded to sales and marketing expense. Any amounts paid in excess of the fair value of the referral service received are recorded as a reduction of revenue. Through marketing promotions, we issue customer coupon credits to encourage the use of our platform. After a customer redeems such incentives, we record a reduction to revenue at the date we record the corresponding revenue transaction. From time to time, we issue refunds to customers in the form of cash or credits to be applied toward a future booking. We reduce the transaction price by the estimated amount of the payments by applying the most likely outcome method based on known facts and circumstances and historical experience. These refunds are recorded as a reduction to revenue. We evaluate whether the cumulative amount of payments made to customers that are not in exchange for a distinct good or service received from a customer exceeds the cumulative revenue earned since inception of the customer relationship. Any cumulative payments in excess of cumulative revenue are presented as operating expenses in our consolidated statements of operations.
Stock-Based Compensation
We have granted stock-based awards consisting primarily of stock options,
restricted common stock, and restricted stock units ("RSUs") to employees,
members of our board of directors, and non-employees. We estimate the fair value
of stock options granted using the Black-Scholes option-pricing model. The
Black-Scholes option-pricing model requires certain subjective inputs and
assumptions, including the fair value of our common stock, exercise price, the
expected term, risk-free interest rates, expected stock price volatility, and
expected dividend yield of our common stock. The fair value of stock options is
recognized as stock-based compensation expense on a straight-line basis over the
requisite service period. We account for forfeitures as they occur.
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Table of Contents The assumptions used in the Black-Scholes option-pricing model are as follows:
•Expected term. We estimate the expected term based on the simplified method. •Risk-free interest rate. The risk-free interest rate is based on theU.S. Treasury yield curve in effect at the time of grant. •Expected volatility. We estimate the volatility of our common stock on the date of grant based on the average historical stock price volatility of comparable publicly-traded companies. •Expected dividend yield. Expected dividend yield is zero, as we have not paid and do not anticipate paying dividends on our common stock. We continue to use judgment in evaluating the expected volatility and expected term utilized in our stock-based compensation expense calculation on a prospective basis. As we continue to accumulate additional data related to our common stock, we may refine our estimates of expected volatility and expected term, which could materially impact our future stock-based compensation expense.
Lodging Tax Obligations
Some states, cities, and localities inthe United States and elsewhere in the world impose transient occupancy or lodging accommodations taxes ("lodging taxes") on the use or occupancy of lodging accommodations or other traveler services. We collect and remit lodging taxes in more than 30,400 jurisdictions on behalf of our Hosts, and lodging taxes are primarily collected inthe United States andFrance . Such lodging taxes are generally remitted to tax jurisdictions within a 30 to 90-day period following the end of each month. In jurisdictions where we do not collect and remit lodging taxes, the responsibility for collecting and remitting these taxes, if applicable, generally rests with Hosts. We estimate liabilities for a certain number of jurisdictions with respect to state, city, and local taxes related to lodging where we believe it is probable thatAirbnb could be held jointly liable with Hosts for collecting and remitting such taxes and the related amounts can be reasonably estimated. Changes to these liabilities are recorded in general and administrative expense in our consolidated statements of operations. We are currently involved in a number of lawsuits brought by certain states and localities involving the payment of lodging taxes. These jurisdictions are asserting that we are liable or jointly liable with Hosts to collect and remit lodging taxes. These lawsuits are in various stages and we continue to vigorously defend these claims. We believe that the statutes at issue impose a lodging tax obligation on the person exercising the taxable privilege of providing accommodations, our Hosts. The ultimate resolution of these lawsuits cannot be determined at this time. Evaluating potential outcomes for lodging taxes is inherently uncertain and requires us to utilize various judgments, assumptions and estimates in determining our reserves. A variety of factors could affect our potential obligation for collecting and remitting such taxes which include, but are not limited to, whether we determine, or any tax authority asserts, that we have a responsibility to collect lodging and related taxes on either historic or future transactions; the introduction of new ordinances and taxes which subject our operations to such taxes; or the ultimate resolution of any historic claims that may be settled through negotiation. Accordingly, the ultimate resolution of lodging taxes may be greater or less than reserve amounts we have established. See Note 12, Commitments and Contingencies, to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for additional information. Income Taxes We are subject to income taxes inthe United States and foreign jurisdictions. We account for income taxes using the asset and liability method. We account for uncertainty in tax positions by recognizing a tax benefit from uncertain tax positions when it is more likely than not that the position will be sustained upon examination. Evaluating our uncertain tax positions, determining our provision for (benefit from) income taxes, and evaluating the impact of the Tax Cuts and Jobs Act, are inherently uncertain and require making judgments, assumptions, and estimates. While we believe that we have adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for (benefit from) income taxes and the effective tax rate in the period in which such determination is made. The provision for (benefit from) income taxes includes the impact of reserve provisions and changes to reserves as well as the related net interest and penalties. In addition, we are subject to the continuous examination of our income tax returns by theUnited States Internal Revenue Service and other tax authorities that may assert assessments against us. We regularly assess the likelihood of adverse outcomes resulting from these examinations and assessments to determine the adequacy of our provision for (benefit from) income taxes.
Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. We have one reporting unit. We test goodwill for impairment at least annually, in the fourth quarter, and whenever events or changes in circumstances indicate that goodwill might be impaired. As a result of the goodwill impairment assessment, management concluded goodwill was not impaired as ofDecember 31, 2021 and does not believe that its reporting unit is at risk of failing the impairment test since the fair value of the reporting unit substantially exceeded the carrying value. Long-lived assets that are held and used by us are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Determination of recoverability of long-lived assets is based on an estimate of the undiscounted cash flows resulting from the use of the asset group and its eventual disposition. If the carrying value of the long-lived asset group is not recoverable on an undiscounted cash flow basis, we recognize impairment to the extent that the carrying value exceeds its fair 68 -------------------------------------------------------------------------------- Table of Contents value. We determine fair value through various valuation techniques including discounted cash flow models, quoted market values, and third-party independent appraisals. Any impairments to right-of-use ("ROU") assets, leasehold improvements, or other assets as a result of a sublease, abandonment, or other similar factor are initially recognized when a decision to do so is made and recorded as an operating expense. Similar to other long-lived assets, management tests ROU assets for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. For lease assets, such circumstances would include subleases that do not fully recover the costs of the associated leases or a decision to abandon the use of all or part of an asset. For the years endedDecember 31, 2020 and 2021, the Company recorded$35.8 million and$112.5 million , respectively, of long-lived assets impairment charges within restructuring charges in the consolidated statement of operations. There were no impairments of long-lived assets for the year endedDecember 31, 2019 . Significant judgment and estimates are required in assessing impairment of goodwill and long-lived assets, including identifying whether events or changes in circumstances require an impairment assessment, estimating future cash flows, and determining appropriate discount rates. Our estimates of fair value are based on assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.
Recent Accounting Pronouncements
See Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
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