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 2022 refer to the year endedDecember 31, 2022 , references to 2021 refer to the year endedDecember 31, 2021 , and references to 2020 refer to the year endedDecember 31, 2020 . 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 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 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 our Annual Report on Form 10-K for the year endedDecember 31, 2021 , filed onFebruary 25, 2022 .
Revision of Previously Issued Financial Statements
As described in Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K, we have revised previously issued financial statements to correct immaterial misstatements. This had no impact on our consolidated financial statements outside of the presentation in the consolidated statements of cash flow and did not affect the consolidated statements of operations.
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 1.4 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 we have designed our company 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. 51 -------------------------------------------------------------------------------- Table of Contents 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 (collectively referred to as "customers") 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 initial public offering ("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 Registration Statement on Form S-1 onDecember 9, 2020 .
2022 Financial Highlights
In 2022, revenue grew by 40% to$8.4 billion compared to 2021, primarily due to a 31% increase in Nights and Experiences Booked of 93.0 million combined with higher average daily rates driving a 35% increase in Gross Booking Value of$16.3 billion . The growth in revenue demonstrated the continued strong travel demand. On a constant-currency basis, revenue increased 46% in 2022 compared to 2021. We ended 2022 with net income of$1.9 billion , an improvement from a net loss of$352.0 million in 2021, and our first profitable year to date. Our net profit margin increased to 23% from a negative 6% in 2021, primarily due to our revenue growth outpacing the growth in our operating expenses and cost management.
Adjusted EBITDA1 increased 82% to
Our net cash provided by operating activities was$3.4 billion in 2022, up from$2.3 billion in 2021, and we generated Free Cash Flow1 of$3.4 billion . The increase was driven by our revenue growth, net margin expansion, and significant growth in unearned fees. InAugust 2022 , our board of directors approved a share repurchase program with authorization to purchase up to$2.0 billion of our Class A common stock at management's discretion. During 2022, we repurchased and retired 13.8 million shares of common stock for$1.5 billion .
Macroeconomic Conditions on our Business
As we look forward, we recognize the potential impact of challenging macroeconomic conditions on our business, including inflation and rising interest rates, foreign currency fluctuations, and potential decreased consumer spending. To date, these conditions have had a modest impact on our business, results of operations, cash flows, and financial condition; however, the impact in the future of these macroeconomic events on our business, results of operations, cash flows, and financial condition is uncertain and will depend on future developments that we may not be able to accurately predict.
Impact of COVID-19
In response to the outbreak of the novel strain of the coronavirus disease
("COVID-19") in the first half of 2020, as well as subsequent outbreaks driven
by new variants of COVID-19, governments around the world have implemented, and
continue to implement, a variety of measures to reduce the spread of COVID-19,
including travel restrictions, social distancing, shelter-in-place orders,
vaccination mandates, or requirements for businesses to confirm employees'
vaccination status, and other restrictions.
While COVID-19 still plagues the world, for the year ended December 31, 2022 ,
Gross Booking Value ("GBV") and revenue were $63.2 billion and $8.4 billion ,
respectively, which were both higher compared to the same periods in 2021, 2020,
and pre-COVID-19. In 2020 and 2021, we faced lower demand for long distance
travel and overall depressed Nights and Experiences Booked compared to
pre-COVID-19. However, in 2022, we saw significant growth with Nights and
Experiences Booked exceeding pre-COVID-19 levels for the same period. The trends
in our recovery continue to vary by region due to a variety of factors,
including the emergence of COVID-19 variants, vaccination rates, COVID-19
caseloads, and associated travel restrictions, as well as historical
cross-border compared to domestic travel dependence. During 2022, we saw
strength in all regions relative to 2021 as well as sequential growth in nights
booked in Latin America and Asia Pacific .
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 that may be
resistant to currently approved vaccines, and 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.
1 A reconciliation of non-generally accepted accounting principal financial measures to the most comparable generally accepted accounting principal financial measures is provided under the subsection titled "Key Business Metrics and Non-GAAP Financial Measures- Adjusted EBITDA" and "- Free Cash Flow" below.
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Inflation Reduction Act of 2022
OnAugust 16, 2022 , the Inflation Reduction Act (the "IRA") was signed into law inthe United States . Among other changes, the IRA introduced a corporate minimum tax on certain corporations with average adjusted financial statement income over a three-tax year period in excess of$1 billion and an excise tax on certain stock repurchases by certain covered corporations for taxable years beginning afterDecember 31, 2022 . While the corporate minimum tax law change has no immediate effect and is not expected to have a material adverse effect on our results of operations going forward, we will continue to evaluate its impact as further information becomes available. 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 generally accepted accounting principles inthe United States of America ("U.S. 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 theirU.S. 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 withU.S. 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 withU.S. GAAP is provided under the subsection titled "- Adjusted EBITDA" and "- Free Cash Flow" below. Investors are encouraged to review the relatedU.S. GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparableU.S. 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.
2021 2022
(in millions)
Nights and Experiences Booked 301 394
Gross Booking Value $ 46,877 $ 63,212 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 2022, we had 393.7 million Nights and Experiences Booked, a 31% increase from 300.6 million in 2021. Nights and Experiences Booked grows as we attract new customers to our platform and as repeat customers increase their activity on our platform. Our Nights and Experiences Booked increased from prior year levels driven by strong growth across all regions, in particular inEurope ,Latin America , andAsia .
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 customers and reflects growth in Nights and Experiences Booked. In 2022, our GBV was$63.2 billion , a 35% increase from$46.9 billion in 2021. The increase in our GBV was primarily due to an increase in Nights and Experiences Booked. The travel recovery we are experiencing has been dominated by our higher average daily rate ("ADR") regions-North America andEurope , in particular. Similar to Nights and Experiences Booked, our GBV improvement was driven by stronger bookings in all regions. 53 -------------------------------------------------------------------------------- Table of Contents Non-GAAP Financial Measures Our non-GAAP financial measures include Adjusted EBITDA, Free Cash Flow, and revenue growth rates in constant currency, which are described below. A reconciliation of each non-GAAP financial measure to the most directly comparable financial measure stated in accordance withU.S. GAAP is provided below. Investors are encouraged to review the relatedU.S. GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparableU.S. GAAP financial measures.
The following table summarizes our non-GAAP financial measures, along with the most directly comparable GAAP measure:
2021 2022
(in millions)
Net income (loss) $ (352) $ 1,893
Adjusted EBITDA $ 1,593 $ 2,903
Net cash provided by operating activities $ 2,313 $ 3,430
Free Cash Flow $ 2,288 $ 3,405
Adjusted EBITDA
We define Adjusted EBITDA as net income or loss adjusted for (i) provision for
(benefit from) income taxes; (ii) other income (expense), net, interest expense,
and interest income; (iii) depreciation and amortization; (iv) stock-based
compensation expense; (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 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; •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; •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.
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In 2022, Adjusted EBITDA was $2.9 billion , compared to $1.6 billion in 2021.
This favorable change was due to our revenue growth combined with continued cost
management.
Adjusted EBITDA Reconciliation
The following is a reconciliation of Adjusted EBITDA to the most comparable GAAP
measure, net income (loss):
2021 2022
(in millions, except percentages)
Revenue $ 5,992 $ 8,399
Net income (loss) $ (352) $ 1,893
Adjusted to exclude the following:
Provision for (benefit from) income taxes 52 96
Other income (expense), net 304 (25)
Interest expense 438 24
Interest income (13) (186)
Depreciation and amortization 138 81
Stock-based compensation expense(1) 899 930
Acquisition-related impacts 11
(12)
Net changes in lodging tax reserves 3 13 Restructuring charges 113 89 Adjusted EBITDA $ 1,593 $ 2,903 Adjusted EBITDA as a percentage of Revenue 27 %
35 %
(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, investors and others about the amount of cash generated from operations, after purchases of property and equipment, that can be used for strategic initiatives, including continuous investment in our business, growth through acquisitions, and strengthening our balance sheet. Our Free Cash Flow is impacted by the timing of GBV because we collect our service fees at the time of booking, which is generally before a stay or experience occurs. Funds held on behalf of our customers and amounts payable to our customers do not impact Free Cash Flow, except interest earned on these funds. Free Cash Flow has limitations as an analytical tool and should not be considered in isolation or as 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 2022, Free Cash Flow was
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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 operating activities:
2021 2022
(in millions, except percentages)
Revenue $
5,992
Net cash provided by operating activities $ 2,313$ 3,430 Purchases of property and equipment (25) (25) Free Cash Flow $ 2,288$ 3,405 Free Cash Flow as a percentage of Revenue 38 % 41 % Other cash flow components: Net cash used in investing activities $ (1,352) $ (28) Net cash provided by (used in) financing activities $ 1,308 $ (689) Constant Currency In addition to revenue growth rates derived from revenue presented in accordance withU.S. GAAP, we disclose below the percentage change in our current period revenue from the corresponding prior period by comparing results using constant currencies. We present constant currency revenue growth rate information to provide a framework for assessing how our underlying revenue performed excluding the effect of changes in exchange rates. We use the percentage change in constant currency revenues for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe the presentation of revenue on a constant currency basis in addition to theU.S. GAAP presentation helps improve the ability to understand our performance because it excludes the effects of foreign currency volatility that are not indicative of our core operating results. We calculate the percentage change in constant currency by determining the change in the current period revenue over the prior comparable period where current period foreign currency revenue is translated using the exchange rates of the comparative period.
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.
2021 % of Total 2022 % of Total
(in millions, except percentages)
Nights and Experiences Booked
North America 114 38 % 133 34 %
EMEA 118 39 % 168 43 %
Latin America 39 13 % 53 13 %
Asia Pacific 30 10 % 40 10 %
Total 301 100 % 394 100 %
Gross Booking Value
North America $ 25,305 54 % $ 32,246 51 %
EMEA 14,607 31 % 21,486 34 %
Latin America 3,706 8 % 4,838 8 %
Asia Pacific 3,259 7 % 4,642 7 %
Total $ 46,877 100 % $ 63,212 100 %
Revenue
North America $ 3,201 54 % $ 4,210 50 %
EMEA 1,931 32 % 2,924 35 %
Latin America 431 7 % 643 8 %
Asia Pacific 429 7 % 622 7 %
Total $ 5,992 100 % $ 8,399 100 %
We saw an increase in GBV per Night and Experience Booked in 2022 compared to
2021, 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 2022 was $240.29 for North America compared to $127.99 for EMEA, $117.41 for
Asia Pacific , and $92.89 for Latin America , with a total global GBV per Night
and Experience Booked of $160.56 .
Our total company average nights per booking, excluding experiences for 2022
were 4.2 nights for each of
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America, and 3.2 nights for Asia Pacific , with a total average of 4.1 nights. We
expect that our blended global average nights per booking will continue to
fluctuate based on our geographic mix and changes in traveler behaviors.
Components of Results of Operations
Revenue
Our revenue consists of service fees, net of incentives and refunds, charged to 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. 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 customers; 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.
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.
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.
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.
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. Stock-Based Compensation We grant stock-based awards consisting primarily of stock options, restricted stock awards ("RSAs"), 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 inDecember 2020 . Interest Income
Interest income consists primarily of interest earned on our cash, cash equivalents, marketable securities, and amounts held on behalf of customers.
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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 in March 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 in April 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 by Airbnb , 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 the U.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 netU.S. 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 regularly assess all available evidence, including cumulative historic losses and forecasted earnings. Given our current earnings and anticipated future earnings, we believe that there is a reasonable possibility that sufficient positive evidence may become available in a future period to reach a conclusion that theU.S. valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of materialU.S. federal and state deferred tax assets and a corresponding decrease to income tax expense in the period the release is recorded. The exact timing and amount of the valuation allowance release are subject to change on the basis of the level of sustainedU.S. profitability that we are able to actually achieve, as well as the amount of tax deductible stock compensation dependent upon our publicly traded share price, foreign currency movements, and macroeconomic conditions, among other factors.
We recognize accrued interest and penalties related to unrecognized tax benefits in the provision for (benefit from) income taxes.
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Results of Operations
The following table sets forth our results of operations for the periods presented (in millions, except percentages):
2021 2022
Amount % of Revenue Amount % of Revenue
Revenue $ 5,992 100 % $ 8,399 100 %
Costs and expenses:
Cost of revenue 1,156 19 1,499 18
Operations and support(1) 847 14 1,041 12
Product development(1) 1,425 24 1,502 18
Sales and marketing(1) 1,186 20 1,516 18
General and administrative(1) 836 14 950 11
Restructuring charges(1) 113 2 89 1
Total costs and expenses 5,563 93 6,597 78
Income from operations 429 7 1,802 22
Interest income 13 - 186 2
Interest expense (438) (7) (24) -
Other income (expense), net (304) (5) 25 -
Income (loss) before income taxes (300) (5) 1,989 24 Provision for income taxes 52 1 96 1 Net income (loss)$ (352) (6) %$ 1,893 23 %
(1)Includes stock-based compensation expense as follows (in millions):
2021 2022
Operations and support $ 49 $ 63
Product development 545 548
Sales and marketing 100 114
General and administrative 205 205
Stock-based compensation expense
Comparison of the Years Ended
Revenue
2021 2022 % Change
(in millions, except percentages)
Revenue $ 5,992 $ 8,399 40 %
Revenue increased $2.4 billion , or 40%, in 2022 compared to 2021, primarily due
to a 31% increase in Nights and Experiences Booked combined with higher ADRs. On
a constant-currency basis, revenue increased 46% compared to 2021, due to the
strengthening of the U.S. dollar against the Euro and British Pounds.
Cost of Revenue
2021 2022 % Change
(in millions, except percentages)
Cost of revenue $ 1,156 $ 1,499 30 %
Percentage of revenue 19 % 18 %
Cost of revenue increased $343.2 million , or 30%, in 2022 compared to 2021,
primarily due to an increase in merchant fees of $313.9 million and an increase
of $35.8 million in chargebacks, both related to an increase in pay-in volumes,
an increase in cloud computing costs of $24.9 million due to increased server
and data storage usage, and an increase of $10.0 million related to SMS
notification costs, partially offset by a decrease of $44.3 million in
amortization expense for internally developed software and acquired technology.
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Operations and Support
2021 2022 % Change
(in millions, except percentages)
Operations and support $ 847 $ 1,041 23 %
Percentage of revenue 14 % 12 %
Operations and support expense increased
Product Development
2021 2022 % Change
(in millions, except percentages)
Product development $ 1,425 $ 1,502 5 %
Percentage of revenue 24 % 18 %
Product development expense increased $77.4 million , or 5%, in 2022 compared to
2021, primarily due to a $51.9 million increase in payroll-related expenses due
to growth in headcount and increased compensation costs, and a $14.9 million
increase in third-party service providers for contingent workers and consultant
support for infrastructure projects, quality assurance services, and support of
new product rollouts, including AirCover. Product development expense as a
percent of revenue decreased to 18% in 2022, from 24% in the prior year,
primarily due to growth in revenue outpacing growth in product development
expense as a result of the significant increase in Nights and Experiences Booked
combined with higher ADRs and cost saving initiatives.
Sales and Marketing
2021 2022 % Change
(in millions, except percentages)
Brand and performance marketing $ 723 $ 1,030 42 %
Field operations and policy 463 486 5 %
Total sales and marketing $ 1,186 $ 1,516 28 %
Percentage of revenue 20 % 18 %
Sales and marketing expense increased $329.9 million , or 28%, in 2022 compared
to 2021, primarily due to a $197.8 million increase in marketing activities
associated with our Made Possible by Hosts, Strangers, AirCover, Categories, and
OMG marketing campaigns and launches, a $67.9 million increase in our search
engine marketing and advertising spend, a $25.1 million increase in
payroll-related expenses due to growth in headcount and increase in compensation
costs, a $22.0 million increase in third-party service provider expenses, and a
$11.1 million increase in coupon expense in line with increase in revenue and
launch of AirCover for guests, partially offset by a decrease of $22.9 million
related to the changes in the fair value of contingent consideration related to
a 2019 acquisition.
General and Administrative
2021 2022 % Change
(in millions, except percentages)
General and administrative $ 836 $ 950 14 %
Percentage of revenue 14 % 11 %
General and administrative expense increased $114.0 million , or 14%, in 2022
compared to 2021, primarily due to an increase in other business and operational
taxes of $41.3 million , a $25.5 million increase in professional services
expenses, primarily due to third-party service provider expenses, a $21.7
million increase in bad debt expenses, a $6.2 million increase in travel and
entertainment expenses, and a $6.0 million increase in charitable contributions
to Airbnb.org, primarily to support Ukrainian refugees.
Restructuring Charges
2021 2022 % Change
(in millions, except percentages)
Restructuring charges $ 113 $ 89 (21) %
Percentage of revenue 2 % 1 %
Restructuring charges decreased $23.7 million , or 21%, in 2022 compared to 2021.
The shift to a remote work model was in direct response to the change in how our
employees work due to the impact of COVID-19. As a result, in 2022 we recorded
restructuring charges of $89.1 million , which include $80.5 million relating to
an impairment of both domestic and international operating lease right-of-use
("ROU") assets,
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and $8.4 million of related leasehold improvements. Refer to Note 17,
Restructuring, to our consolidated financial statements included in Item 8 of
Part 2 of this Annual Report on Form 10-K for additional information.
Interest Income and Expense
2021 2022 % Change
(in millions, except percentages)
Interest income $ 13 $ 186 1,361 %
Percentage of revenue - % 2 %
Interest expense $ (438) $ (24) (95) %
Percentage of revenue (7) % - %
Interest income increased $173.2 million , or 1,361%, in 2022 compared to 2021,
primarily due to higher interest rates. Our investment portfolio was largely
invested in money market funds and short-term, high-quality bonds. Interest
expense decreased $413.9 million in 2022, primarily due to the $377.2 million
loss on extinguishment of debt resulting from retirement of two term loans in
March 2021 . Refer to Note 9, Debt, to our consolidated financial statements
included in Item 8 of Part II of this Annual Report on Form 10-K, for additional
information.
Other Income (Expense), Net
2021 2022 % Change
(in millions, except percentages)
Other income (expense), net $ (304) $ 25 (108) %
Percentage of revenue (5) % - %
Other income (expense), net increased $328.3 million in 2022 compared to 2021,
primarily driven by $292.0 million of fair value remeasurement on our warrants
issued in connection with our second lien loan in the prior year, which were
reclassified to equity in March 2021 and no longer require fair value
remeasurement.
Provision for Income Taxes
2021 2022 % Change
(in millions, except percentages)
Provision for income taxes $ 52 $ 96 85 %
Effective tax rate (17) % 5 %
The provision for income taxes for the year ended December 31, 2022 increased
$44.0 million , compared to 2021, primarily due to increased profitability. 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
Sources and Conditions of Liquidity
As ofDecember 31, 2022 , our principal sources of liquidity were cash and cash equivalents and marketable securities totaling$9.6 billion . As ofDecember 31, 2022 , cash and cash equivalents totaled$7.4 billion , which included$2.1 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, 2022 , marketable securities totaled$2.2 billion . Marketable securities primarily consist of highly-liquid investment grade corporate debt securities, commercial paper, certificates of deposit, andU.S. government and agency bonds. These amounts do not include funds of$4.8 billion as ofDecember 31, 2022 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 have access to$1.0 billion of commitments under the 2022 Credit Facility. As ofDecember 31, 2022 , no amounts were drawn under the 2022 Credit Facility. See Note 9, Debt, to our consolidated financial statements included in Item 8 of Part 2 of this Annual Report on Form 10-K for a description of the 2022 Credit Facility entered into onOctober 31, 2022 .
Material Cash Requirements
As ofDecember 31, 2022 , we had outstanding$2.0 billion in aggregate principal amount of indebtedness of our convertible senior notes due 2026. 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 61 -------------------------------------------------------------------------------- Table of Contents$100.2 million . The cap price of the Capped Calls was$360.80 per share of Class A common stock, which represented a premium of 100% over the last reported sale price of the Class A common stock of$180.40 per share onMarch 3, 2021 , subject to certain customary adjustments under the terms of the Capped Call Transactions. See Note 9, Debt, to our consolidated financial statements included in Item 8 of Part 2 of this Annual Report on Form 10-K for additional information. As ofDecember 31, 2022 , our total minimum lease payments were$354.0 million , of which$80.7 million is due in the succeeding 12 months. We have a commercial agreement with a data hosting services provider to spend or incur an aggregate of at least$941.7 million for vendor services through 2027. See Note 8. Leases, Note 9, 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. OnAugust 2, 2022 , we announced that our board of directors approved a share repurchase program with authorization to purchase up to$2.0 billion of our Class A common stock at management's discretion (the "Share Repurchase Program"). Share repurchases under the Share Repurchase Program may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades, or accelerated share repurchase transactions, or by any combination of such methods. Any such repurchases will be made from time to time subject to market and economic conditions, applicable legal requirements, and other relevant factors. The Share Repurchase Program does not have an expiration date, does not obligate us to repurchase any specific number of shares, and may be modified, suspended, or terminated at any time at our discretion. During 2022, we repurchased and subsequently retired 13.8 million shares of our common stock for$1.5 billion under the Share Repurchase Program. As ofDecember 31, 2022 , we had$500.0 million available to repurchase shares pursuant to the Share Repurchase Program.
Cash Flows
The following table summarizes our cash flows for the periods indicated (in
millions):
2021 2022
Net cash provided by operating activities $ 2,313 $ 3,430
Net cash used in investing activities (1,352) (28)
Net cash provided by (used in) financing activities 1,308 (689)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(210) (337)
Net increase in cash, cash equivalents, and restricted cash $
2,059
Cash Provided by Operating Activities
Net cash provided by operating activities in 2022 was$3.4 billion , which is due to net income in 2022 of$1.9 billion , adjusted for non-cash charges, primarily consisting of$929.6 million of stock-based compensation expense, impairment of long-lived assets of$91.4 million , and$62.5 million of foreign exchange losses due to the strengthening of theU.S. dollar against the Euro and British Pound. Additional cash was provided by changes in working capital, including a$279.9 million increase in unearned fees resulting from significantly higher bookings and accrued expenses and other liabilities of$272.7 million . Net cash provided by operating activities in 2021 was$2.3 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.
Cash Used in Investing Activities
Net cash used in investing activities in 2022 was$28.0 million , which was primarily from the proceeds from maturities and sales of marketable securities of$3.2 billion and$909.5 million , respectively, partially offset by purchases of marketable securities of$4.1 billion . 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.
Cash Provided by (Used in) Financing Activities
Net cash used in financing activities in 2022 was$689.2 million , primarily reflecting the increase in funds payable and amounts payable to customers of$1.3 billion resulting from significantly higher bookings, offset by our share repurchase of$1.5 billion under the Share Repurchase Program, and an increase in the taxes paid related to net share settlement of equity awards of$607.4 million . Net cash provided by financing activities in 2021 was$1.3 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.
Effect of Exchange Rates
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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 customers, that are denominated in currencies other than the functional currency of certain of our subsidiaries. During 2021 and 2022, we recorded reductions of$209.9 million and$337.4 million , respectively, in cash, cash equivalents, and restricted cash, primarily due to the strengthening of theU.S. dollar against certain currencies. 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 customers. 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 the short-term. In addition to normal working capital requirements, we anticipate that our short- and long-term cash requirements will include funding capital expenditures, debt repayments, share repurchases, 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. Our future capital requirements, however, will depend on many factors, including, but not limited to our growth, headcount, and ability to attract and retain customers on our platform. Additionally, we may in the future raise additional capital or incur additional indebtedness to continue to fund our strategic initiatives. 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 and cash on hand. 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 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. 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.
Critical Accounting 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.
Lodging Tax Obligations
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. 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) 63
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In determining the need for a valuation allowance, we weigh both positive and negative evidence in the various jurisdictions in which we operate to determine whether it is more likely than not that our deferred tax assets are recoverable. We regularly assess all available evidence, including cumulative historic losses and forecasted earnings. Due to cumulative losses in theU.S. during the prior three years, including tax deductible stock compensation, and based on all available positive and negative evidence, we do not believe it is more likely than not that ourU.S. deferred tax assets will be realized as ofDecember 31, 2022 . Accordingly, a full valuation allowance has been established inthe United States , and no deferred tax assets and related tax benefit have been recognized in the financial statements. However, given our current earnings and anticipated future earnings, we believe that there is a reasonable possibility that sufficient positive evidence may become available in a future period to allow us to reach a conclusion that theU.S. valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of materialU.S. federal and state deferred tax assets and a corresponding decrease to income tax expense in the period the release is recorded. The exact timing and amount of the valuation allowance release are subject to change on the basis of the level of sustainedU.S. profitability that we are able to actually achieve, as well as the amount of tax deductible stock compensation dependent upon our publicly traded share price, foreign currency movements, and macroeconomic conditions, among other factors. 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.
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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