filings.toolsItem 1. Condensed Consolidated Financial Statements
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Item 1. Condensed Consolidated Financial Statements
Airbnb, Inc.
Condensed Consolidated Balance Sheets
(in millions, except par value)
(unaudited)
| December 31, 2022 | June 30, 2023 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 7,378 | $ | 7,905 | ||||
| Short-term investments (including assets reported at fair value of $2,224 and $1,945, respectively) | 2,244 | 2,435 | ||||||
| Funds receivable and amounts held on behalf of customers | 4,783 | 9,144 | ||||||
| Prepaids and other current assets (including customer receivables of $200 and $264 and allowances of $39 and $46, respectively) | 456 | 568 | ||||||
| Total current assets | 14,861 | 20,052 | ||||||
| Property and equipment, net | 121 | 132 | ||||||
| Operating lease right-of-use assets | 138 | 131 | ||||||
| Goodwill and intangible assets, net | 684 | 679 | ||||||
| Other assets, noncurrent | 234 | 194 | ||||||
| Total assets | $ | 16,038 | $ | 21,188 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 137 | $ | 100 | ||||
| Accrued expenses and other current liabilities | 1,876 | 2,033 | ||||||
| Funds payable and amounts payable to customers | 4,783 | 9,144 | ||||||
| Unearned fees | 1,182 | 2,347 | ||||||
| Total current liabilities | 7,978 | 13,624 | ||||||
| Long-term debt | 1,987 | 1,989 | ||||||
| Operating lease liabilities, noncurrent | 295 | 285 | ||||||
| Other liabilities, noncurrent | 218 | 231 | ||||||
| Total liabilities | 10,478 | 16,129 | ||||||
| Commitments and contingencies (Note 9) | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock, $0.0001 par value: Class A - authorized 2,000 shares; 408 and 422 shares issued and outstanding, respectively; Class B - authorized 710 shares; 223 and 212 shares issued and outstanding, respectively; Class C - authorized 2,000 shares; zero shares of Class C common stock issued and outstanding, respectively; Class H - authorized 26 shares; 9 shares issued and zero shares outstanding, respectively | — | — | ||||||
| Additional paid-in capital | 11,557 | 11,290 | ||||||
| Accumulated other comprehensive loss | (32) | (33) | ||||||
| Accumulated deficit | (5,965) | (6,198) | ||||||
| Total stockholders’ equity | 5,560 | 5,059 | ||||||
| Total liabilities and stockholders’ equity | $ | 16,038 | $ | 21,188 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Airbnb, Inc.
Condensed Consolidated Statements of Operations
(in millions, except per share amounts)
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2022 | 2023 | 2022 | 2023 | ||||||||||||||
| Revenue | $ | 2,104 | $ | 2,484 | $ | 3,613 | $ | 4,302 | |||||||||
| Costs and expenses: | |||||||||||||||||
| Cost of revenue | 390 | 432 | 753 | 860 | |||||||||||||
| Operations and support | 258 | 317 | 491 | 599 | |||||||||||||
| Product development | 375 | 451 | 738 | 871 | |||||||||||||
| Sales and marketing | 379 | 486 | 724 | 936 | |||||||||||||
| General and administrative | 244 | 275 | 454 | 518 | |||||||||||||
| Restructuring charges | 89 | — | 89 | — | |||||||||||||
| Total costs and expenses | 1,735 | 1,961 | 3,249 | 3,784 | |||||||||||||
| Income from operations | 369 | 523 | 364 | 518 | |||||||||||||
| Interest income | 20 | 191 | 25 | 337 | |||||||||||||
| Interest expense | (8) | (2) | (14) | (6) | |||||||||||||
| Other income (expense), net | 2 | (36) | — | (43) | |||||||||||||
| Income before income taxes | 383 | 676 | 375 | 806 | |||||||||||||
| Provision for income taxes | 4 | 26 | 15 | 39 | |||||||||||||
| Net income | $ | 379 | $ | 650 | $ | 360 | $ | 767 | |||||||||
| Net income per share attributable to Class A and Class B common stockholders: | |||||||||||||||||
| Basic | $ | 0.59 | $ | 1.02 | $ | 0.57 | $ | 1.21 | |||||||||
| Diluted | $ | 0.56 | $ | 0.98 | $ | 0.53 | $ | 1.15 | |||||||||
| Weighted-average shares used in computing net income per share attributable to Class A and Class B common stockholders: | |||||||||||||||||
| Basic | 638 | 635 | 637 | 634 | |||||||||||||
| Diluted | 684 | 665 | 684 | 667 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Airbnb, Inc.
Condensed Consolidated Statements of Comprehensive Income
(in millions)
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2022 | 2023 | 2022 | 2023 | ||||||||||||||
| Net income | $ | 379 | $ | 650 | $ | 360 | $ | 767 | |||||||||
| Other comprehensive loss: | |||||||||||||||||
| Net unrealized loss on available-for-sale marketable securities, net of tax | (3) | (6) | (7) | (4) | |||||||||||||
| Net unrealized income (loss) on cash flow hedges, net of tax | — | 2 | — | (2) | |||||||||||||
| Foreign currency translation adjustments | (9) | 1 | (10) | 5 | |||||||||||||
| Other comprehensive loss | (12) | (3) | (17) | (1) | |||||||||||||
| Comprehensive income | $ | 367 | $ | 647 | $ | 343 | $ | 766 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Airbnb, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in millions)
(unaudited)
| Three and Six Months Ended June 30, 2022 | ||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||
| Shares | Amount | |||||||||||||||||||
| Balances as of December 31, 2021 | 633 | $ | — | * | $ | 11,140 | $ | (7) | $ | (6,358) | $ | 4,775 | ||||||||
| Net loss | — | — | — | — | (19) | (19) | ||||||||||||||
| Other comprehensive loss | — | — | — | (5) | — | (5) | ||||||||||||||
| Exercise of common stock options, net of shares withheld for taxes | 1 | — | * | 12 | — | — | 12 | |||||||||||||
| Issuance of common stock upon settlement of RSUs, net of shares withheld for taxes | 2 | — | * | (224) | — | — | (224) | |||||||||||||
| Stock-based compensation | — | — | 198 | — | — | 198 | ||||||||||||||
| Balances as of March 31, 2022 | 636 | $ | — | * | $ | 11,126 | $ | (12) | $ | (6,377) | $ | 4,737 | ||||||||
| Net income | — | — | * | — | — | 379 | 379 | |||||||||||||
| Other comprehensive loss | — | — | — | (12) | — | (12) | ||||||||||||||
| Exercise of common stock options, net of shares withheld for taxes | 1 | — | * | 5 | — | — | 5 | |||||||||||||
| Issuance of common stock upon settlement of RSUs, net of shares withheld for taxes | 2 | — | * | (133) | — | — | (133) | |||||||||||||
| Issuance of common stock under employee stock purchase plan, net of shares withheld for taxes | — | * | — | * | 20 | — | — | 20 | ||||||||||||
| Stock-based compensation | — | — | 249 | — | — | 249 | ||||||||||||||
| Balances as of June 30, 2022 | 639 | $ | — | * | $ | 11,267 | $ | (24) | $ | (5,998) | $ | 5,245 |
*Amounts round to zero and do not change rounded totals.
The accompanying notes are an integral part of these condensed consolidated financial statements.
Airbnb, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in millions)
(unaudited)
| Three and Six Months Ended June 30, 2023 | ||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||
| Shares | Amount | |||||||||||||||||||
| Balances as of December 31, 2022 | 631 | $ | — | * | $ | 11,557 | $ | (32) | $ | (5,965) | $ | 5,560 | ||||||||
| Net income | — | — | — | — | 117 | 117 | ||||||||||||||
| Other comprehensive income | — | — | — | 2 | — | 2 | ||||||||||||||
| Exercise of common stock options, net of shares withheld for taxes | 2 | — | * | 17 | — | — | 17 | |||||||||||||
| Issuance of common stock upon settlement of RSUs, net of shares withheld for taxes | 1 | — | * | (155) | — | — | (155) | |||||||||||||
| Stock-based compensation | — | — | 243 | — | — | 243 | ||||||||||||||
| Repurchases of common stock | (4) | — | * | — | — | (493) | (493) | |||||||||||||
| Balances as of March 31, 2023 | 630 | $ | — | * | $ | 11,662 | $ | (30) | $ | (6,341) | $ | 5,291 | ||||||||
| Net income | — | — | — | — | 650 | 650 | ||||||||||||||
| Other comprehensive loss | — | — | — | (3) | — | (3) | ||||||||||||||
| Exercise of common stock options, net of shares withheld for taxes | 6 | — | * | (561) | — | — | (561) | |||||||||||||
| Issuance of common stock upon settlement of RSUs, net of shares withheld for taxes | 2 | — | * | (153) | — | — | (153) | |||||||||||||
| Issuance of common stock under employee stock purchase plan, net of shares withheld for taxes | — | * | — | * | 31 | — | — | 31 | ||||||||||||
| Stock-based compensation | — | — | 311 | — | — | 311 | ||||||||||||||
| Repurchases of common stock | (4) | — | * | — | — | (507) | (507) | |||||||||||||
| Balances as of June 30, 2023 | 634 | $ | — | * | $ | 11,290 | $ | (33) | $ | (6,198) | $ | 5,059 |
*Amounts round to zero and do not change rounded totals.
The accompanying notes are an integral part of these condensed consolidated financial statements.
Airbnb, Inc.
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)
| Six Months Ended June 30, | ||||||||
| 2022 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 360 | $ | 767 | ||||
| Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
| Depreciation and amortization | 55 | 20 | ||||||
| Stock-based compensation expense | 442 | 544 | ||||||
| Foreign exchange (gain) loss | 38 | (46) | ||||||
| Impairment of long-lived assets | 89 | — | ||||||
| Other, net | 43 | 29 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaids and other assets | (187) | (83) | ||||||
| Operating lease right-of-use assets | 18 | 7 | ||||||
| Accounts payable | 23 | (38) | ||||||
| Accrued expenses and other liabilities | 44 | 133 | ||||||
| Unearned fees | 1,078 | 1,163 | ||||||
| Net cash provided by operating activities | 2,003 | 2,496 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (11) | (15) | ||||||
| Purchases of short-term investments | (2,079) | (1,691) | ||||||
| Sales and maturities of short-term investments | 2,264 | 1,503 | ||||||
| Other investing activities, net | (3) | — | ||||||
| Net cash provided by (used in) investing activities | 171 | (203) | ||||||
| Cash flows from financing activities: | ||||||||
| Taxes paid related to net share settlement of equity awards | (345) | (872) | ||||||
| Proceeds from exercise of stock options | 16 | 23 | ||||||
| Proceeds from the issuance of common stock under employee stock purchase plan | 20 | 31 | ||||||
| Repurchases of common stock | — | (1,000) | ||||||
| Change in funds payable and amounts payable to customers | 3,958 | 4,271 | ||||||
| Net cash provided by financing activities | 3,649 | 2,453 | ||||||
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (308) | 132 | ||||||
| Net increase in cash, cash equivalents, and restricted cash | 5,515 | 4,878 | ||||||
| Cash, cash equivalents, and restricted cash, beginning of period | 9,727 | 12,103 | ||||||
| Cash, cash equivalents, and restricted cash, end of period | $ | 15,242 | $ | 16,981 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for income taxes, net of refunds | $ | 28 | $ | 50 | ||||
| Cash paid for interest | $ | 6 | $ | 1 | ||||
| Non-cash financing activities | ||||||||
| Net settlement of cashless stock option exercises | $ | — | $ | 36 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
Note 1. Description of Business
Airbnb, Inc. (the “Company” or “Airbnb”) was incorporated in Delaware in June 2008 and is headquartered in San Francisco, California. The Company operates a global platform for unique stays and experiences. The Company’s marketplace model connects Hosts and guests (collectively referred to as “customers”) online or through mobile devices to book spaces and experiences around the world.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements (“financial statements”) have been prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial information. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K, filed with the SEC on February 17, 2023. The results for the interim periods are not necessarily indicative of results for the full year. The Company has changed its presentation from thousands to millions and, as a result, any necessary rounding adjustments have been made to prior period disclosed amounts. Certain immaterial amounts in prior periods have been reclassified to conform with current period presentation.
In the opinion of management, these financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the condensed consolidated financial position, results of operations and cash flows for these interim periods.
Principles of Consolidation
The accompanying financial statements include the accounts of the Company and its wholly-owned subsidiaries and variable interest entities (“VIE”) in which the Company is the primary beneficiary in accordance with consolidation accounting guidance. All intercompany transactions have been eliminated in consolidation.
The Company determines, at the inception of each arrangement, whether an entity in which it has made an investment or in which it has other variable interest in is considered a VIE. The Company consolidates a VIE when it is deemed to be the primary beneficiary. The primary beneficiary of a VIE is the party that meets both of the following criteria: (i) has the power to direct the activities that most significantly affect the economic performance of the VIE; and (ii) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Periodically, the Company determines whether any changes in its interest or relationship with the entity impact the determination of whether the entity is still a VIE and, if so, whether the Company is the primary beneficiary. If the Company is not deemed to be the primary beneficiary in a VIE, the Company accounts for the investment or other variable interest in a VIE in accordance with applicable U.S. GAAP. As of June 30, 2023, the Company’s consolidated VIEs were not material to the financial statements.
Use of Estimates
The preparation of the Company’s financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company regularly evaluates its estimates, including those related to bad debt reserves, fair value of investments, useful lives of long-lived assets and intangible assets, valuation of goodwill and intangible assets from acquisitions, contingent liabilities, insurance reserves, revenue recognition, valuation of common stock, stock-based compensation, and income and non-income taxes, among others. Actual results could differ materially from these estimates.
As the impact of the uncertain macroeconomic conditions, including inflation and rising interest rates, continues to evolve, estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require increased judgment. These estimates and assumptions may change in future periods and will be recognized in the financial statements as new events occur and additional information becomes known. To the extent the Company’s actual results differ materially from those estimates and assumptions, the Company’s future financial statements could be affected.
Short-term Investments
The Company considers all highly-liquid investments with original maturities of greater than 90 days to be short-term investments. Short-term investments include time deposits, which are accounted for at amortized cost, and available-for-sale debt securities that consist of corporate debt securities, commercial paper, certificates of deposit, U.S. government and government agency debt securities (“government bonds”), and mortgage-backed and asset-backed securities. The Company determines the appropriate classification of its investments at the time of purchase. The Company determines realized gains or losses on the sale of equity and debt securities on a specific identification method.
Unrealized gains and non-credit related losses on available-for-sale debt securities are reported as a component of accumulated other comprehensive income (loss) (“AOCI”) in stockholders’ equity. Realized gains and losses and impairments are reported within other income (expense), net in the condensed consolidated statements of operations. The assessment for impairment takes into account the severity and
Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
duration of the decline in value, adverse changes in the market or industry of the investee, the Company’s intent to sell the security, and whether it is more likely than not that it will be required to sell the security before recovery of the amortized cost basis.
The Company’s equity investments with readily determinable fair values are measured at fair value on a recurring basis with changes in fair value recognized within other income (expense), net in the condensed consolidated statements of operations.
Derivative Instruments and Hedging
The Company’s primary objective for holding derivative instruments is to manage foreign currency exchange rate risk. The Company enters into master netting arrangements to mitigate credit risk in derivative transactions by permitting net settlement of transactions with the same counterparty. All derivative instruments are recorded in the condensed consolidated balance sheets at fair value. The accounting treatment for derivative gains and losses is based on intended use and hedge designation.
Gains and losses arising from amounts that are included in the assessment of cash flow hedge effectiveness are initially deferred in AOCI and subsequently reclassified into earnings when the hedged transaction affects earnings and in the same line item within the condensed consolidated statement of operations. The Company does not exclude any components in the assessment of hedge effectiveness for forwards and options.
When it is no longer probable that a forecasted hedged transaction will occur in the initially identified time period, hedge accounting is discontinued and the Company accounts for the associated derivatives as undesignated derivative instruments. Gains and losses associated with derivatives no longer designated as hedging instruments in AOCI are recognized immediately in other income (expense), net, if it is probable that the forecasted hedged transaction will not occur by the end of the initially identified time period or within an additional two month period thereafter. In rare circumstances, the additional period of time may exceed two months due to extenuating circumstances related to the nature of the forecasted transaction that are outside the control or influence of the Company.
Gains and losses arising from changes in the fair value of derivative instruments that are not designated as accounting hedges are recognized in the condensed consolidated statement of operations in other income (expense), net.
The Company presents derivative assets and liabilities at their gross fair values in the condensed consolidated balance sheets, even if they are subject to master netting arrangements with the counterparties. The Company classifies cash flows related to derivative instruments as operating activities in the condensed consolidated statement of cash flows.
Recently Adopted Accounting Standards
In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815), which clarifies the guidance on fair value hedge accounting of interest rate risk for portfolios of financial assets. The standard is effective for public entities in fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted on any date on or after the issuance of ASU 2017-12. The Company adopted the standard during the first quarter of 2023, which did not have an impact on the Company's financial statements.
Recently Issued Accounting Standards Not Yet Adopted
In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which clarifies the guidance of equity securities that are subject to a contractual sale restriction as well as includes specific disclosure requirements for such equity securities. The standard is effective for public entities in fiscal years beginning after December 15, 2023, including interim periods within those fiscal years and will be applied prospectively. Early adoption is permitted. The Company is evaluating the impact on the Company’s financial statements.
There are other new accounting pronouncements issued by the FASB that the Company has adopted or will adopt, as applicable, and the Company does not believe any of these accounting pronouncements have had, or will have, a material impact on its financial statements or disclosures.
Note 3. Supplemental Financial Statement Information
Cash, Cash Equivalents, and Restricted Cash
The following table reconciles cash, cash equivalents, and restricted cash reported on the Company’s condensed consolidated balance sheets to the total amount presented in the condensed consolidated statements of cash flows (in millions):
| December 31, 2022 | June 30, 2023 | |||||||
| Cash and cash equivalents | $ | 7,378 | $ | 7,905 | ||||
| Cash and cash equivalents included in funds receivable and amounts held on behalf of customers | 4,708 | 9,047 | ||||||
| Restricted cash included in prepaids and other current assets | 17 | 29 | ||||||
| Total cash, cash equivalents, and restricted cash presented in the condensed consolidated statements of cash flows | $ | 12,103 | $ | 16,981 |
Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in millions):
| December 31, 2022 | June 30, 2023 | |||||||
| Indirect taxes payable | $ | 418 | $ | 588 | ||||
| Compensation and employee benefits | 380 | 310 | ||||||
| Indirect tax reserves | 206 | 212 | ||||||
| Gift card liability | 141 | 148 | ||||||
| Operating lease liabilities, current | 59 | 50 | ||||||
| Other | 672 | 725 | ||||||
| Total accrued expenses and other current liabilities | $ | 1,876 | $ | 2,033 |
Payments to CustomersThe Company makes payments to customers as part of its incentive programs (composed of referral programs and marketing promotions) and refund activities. The payments are generally in the form of coupon credits to be applied toward future bookings or as cash refunds.
The following table summarizes total payments made to customers (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2022 | 2023 | 2022 | 2023 | ||||||||||||||
| Reductions to revenue | $ | 67 | $ | 78 | $ | 112 | $ | 155 | |||||||||
| Charges to operations and support | 22 | 24 | 44 | 46 | |||||||||||||
| Charges to sales and marketing expense | 15 | 16 | 25 | 29 | |||||||||||||
| Total payments made to customers | $ | 104 | $ | 118 | $ | 181 | $ | 230 |
Revenue Disaggregated by Geographic Region
The following table presents revenue disaggregated by listing location (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2022 | 2023 | 2022 | 2023 | ||||||||||||||
| North America | $ | 1,098 | $ | 1,192 | $ | 1,920 | $ | 2,117 | |||||||||
| Europe, the Middle East, and Africa | 732 | 941 | 1,105 | 1,399 | |||||||||||||
| Latin America | 137 | 163 | 315 | 398 | |||||||||||||
| Asia Pacific | 137 | 188 | 273 | 388 | |||||||||||||
| Total revenue disaggregated by geographic region | $ | 2,104 | $ | 2,484 | $ | 3,613 | $ | 4,302 |
Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
Note 4. Investments
The following tables summarize the Company’s investments by major security type (in millions):
| December 31, 2022 | ||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Total Estimated Fair Value | |||||||||||
| Short-term investments | ||||||||||||||
| Debt securities: | ||||||||||||||
| Certificates of deposit | $ | 573 | $ | — | $ | — | $ | 573 | ||||||
| Government bonds | 83 | — | — | 83 | ||||||||||
| Commercial paper | 574 | — | — | 574 | ||||||||||
| Corporate debt securities | 965 | 1 | (7) | 959 | ||||||||||
| Mortgage-backed and asset-backed securities | 37 | — | (3) | 34 | ||||||||||
| Total debt securities | 2,232 | 1 | (10) | 2,223 | ||||||||||
| Time deposits | 20 | — | — | 20 | ||||||||||
| Equity investments (1) | 1 | — | — | 1 | ||||||||||
| Total short-term investments | $ | 2,253 | $ | 1 | $ | (10) | $ | 2,244 | ||||||
| Long-term investments (2) | ||||||||||||||
| Debt securities: | ||||||||||||||
| Corporate debt securities | $ | 13 | $ | — | $ | (9) | $ | 4 | ||||||
| June 30, 2023 | ||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Total Estimated Fair Value | |||||||||||
| Short-term investments | ||||||||||||||
| Debt securities: | ||||||||||||||
| Certificates of deposit | $ | 403 | $ | — | $ | — | $ | 403 | ||||||
| Government bonds | 284 | — | — | 284 | ||||||||||
| Commercial paper | 316 | — | — | 316 | ||||||||||
| Corporate debt securities | 875 | 1 | (9) | 867 | ||||||||||
| Mortgage-backed and asset-backed securities | 78 | — | (4) | 74 | ||||||||||
| Total debt securities | 1,956 | 1 | (13) | 1,944 | ||||||||||
| Time deposits | 490 | — | — | 490 | ||||||||||
| Equity investments (1) | 1 | — | — | 1 | ||||||||||
| Total short-term investments | $ | 2,447 | $ | 1 | $ | (13) | $ | 2,435 | ||||||
| Long-term investments (2) | ||||||||||||||
| Debt securities: | ||||||||||||||
| Corporate debt securities | $ | 13 | $ | — | $ | (9) | $ | 4 | ||||||
(1)Unrealized gain (loss) on equity investments were immaterial for the three and six months ended June 30, 2022 and 2023.
(2)Classified within other assets, noncurrent on the condensed consolidated balance sheets.
As of December 31, 2022 and June 30, 2023, the Company does not have any available-for-sale debt securities for which the Company has recorded credit related losses.
Unrealized gains and losses, net of tax before reclassifications from AOCI to other income (expense), net were not material for the three and six months ended June 30, 2022 and 2023. Realized gains and losses reclassified from AOCI to other income (expense), net were not material for the three and six months ended June 30, 2022 and 2023.
Debt securities in an unrealized loss position had an estimated fair value of $748 million and $901 million, and unrealized losses of $19 million and $22 million as of December 31, 2022 and June 30, 2023, respectively. A total of $92 million and $91 million of these securities, with unrealized losses of $13 million and $14 million, were in a continuous unrealized loss position for more than twelve months as of December 31, 2022 and June 30, 2023, respectively.
Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
The following table summarizes the contractual maturities of the Company’s available-for-sale debt securities (in millions):
| June 30, 2023 | ||||||||
| Amortized Cost | Estimated Fair Value | |||||||
| Due within one year | $ | 1,277 | $ | 1,276 | ||||
| Due in one year to five years | 650 | 633 | ||||||
| Due within five to ten years | 7 | 7 | ||||||
| Due beyond ten years | 35 | 32 | ||||||
| Total | $ | 1,969 | $ | 1,948 |
Equity Investments Without Readily Determinable Fair Values
The Company holds investments in privately-held companies in the form of equity securities without readily determinable fair values and in which the Company does not have a controlling interest or significant influence. These investments had a net carrying value of $75 million as of both December 31, 2022 and June 30, 2023, and are classified within other assets, noncurrent on the condensed consolidated balance sheets. There were no upward or downward adjustments for observable price changes or impairment charges recorded for the three and six months ended June 30, 2022 and 2023. As of December 31, 2022 and June 30, 2023, the cumulative downward adjustments for observable price changes and impairment were $56 million.
Investments Accounted for Under the Equity Method
As of December 31, 2022 and June 30, 2023, the carrying values of the Company’s equity method investments were $14 million and $9 million, respectively. The Company recorded unrealized losses of $2 million and $3 million for the three and six months ended June 30, 2022, respectively, and $1 million and $5 million for the three and six months ended June 30, 2023, respectively, within other income (expense), net in the condensed consolidated statements of operations, representing its proportionate share of net income or loss based on the investee’s financial results.
The Company recorded no impairment charges related to the carrying value of equity method investments for the three and six months ended June 30, 2022 and 2023.
Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
Note 5. Fair Value Measurements and Financial Instruments
The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis (in millions):
| December 31, 2022 | ||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||
| Assets | ||||||||||||||
| Cash and cash equivalents: | ||||||||||||||
| Money market funds | $ | 2,326 | $ | — | $ | — | $ | 2,326 | ||||||
| Certificates of deposit | 26 | — | — | 26 | ||||||||||
| Government bonds | — | 32 | — | 32 | ||||||||||
| Commercial paper | — | 327 | — | 327 | ||||||||||
| Corporate debt securities | — | 68 | — | 68 | ||||||||||
| 2,352 | 427 | — | 2,779 | |||||||||||
| Short-term investments: | ||||||||||||||
| Certificates of deposit | 573 | — | — | 573 | ||||||||||
| Government bonds | — | 83 | — | 83 | ||||||||||
| Commercial paper | — | 574 | — | 574 | ||||||||||
| Corporate debt securities | — | 959 | — | 959 | ||||||||||
| Mortgage-backed and asset-backed securities | — | 34 | — | 34 | ||||||||||
| Equity investments | 1 | — | — | 1 | ||||||||||
| 574 | 1,650 | — | 2,224 | |||||||||||
| Funds receivable and amounts held on behalf of customers: | ||||||||||||||
| Money market funds | 501 | — | — | 501 | ||||||||||
| Prepaids and other current assets: | ||||||||||||||
| Foreign exchange derivative assets | — | 14 | — | 14 | ||||||||||
| Other assets, noncurrent: | ||||||||||||||
| Corporate debt securities | — | — | 4 | 4 | ||||||||||
| Total assets at fair value | $ | 3,427 | $ | 2,091 | $ | 4 | $ | 5,522 | ||||||
| Liabilities | ||||||||||||||
| Accrued expenses and other current liabilities: | ||||||||||||||
| Foreign exchange derivative liabilities | $ | — | $ | 31 | $ | — | $ | 31 | ||||||
| Total liabilities at fair value | $ | — | $ | 31 | $ | — | $ | 31 |
Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
| June 30, 2023 | ||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||
| Assets | ||||||||||||||
| Cash and cash equivalents: | ||||||||||||||
| Money market funds | $ | 2,796 | $ | — | $ | — | $ | 2,796 | ||||||
| Government bonds | — | 90 | — | 90 | ||||||||||
| Commercial paper | — | 103 | — | 103 | ||||||||||
| Corporate debt securities | — | 4 | — | 4 | ||||||||||
| 2,796 | 197 | — | 2,993 | |||||||||||
| Short-term investments: | ||||||||||||||
| Certificates of deposit | 403 | — | — | 403 | ||||||||||
| Government bonds | — | 284 | — | 284 | ||||||||||
| Commercial paper | — | 316 | — | 316 | ||||||||||
| Corporate debt securities | — | 867 | — | 867 | ||||||||||
| Mortgage-backed and asset-backed securities | — | 74 | — | 74 | ||||||||||
| Equity investments | 1 | — | — | 1 | ||||||||||
| 404 | 1,541 | — | 1,945 | |||||||||||
| Funds receivable and amounts held on behalf of customers: | ||||||||||||||
| Money market funds | 2,428 | — | — | 2,428 | ||||||||||
| Prepaids and other current assets: | ||||||||||||||
| Foreign exchange derivative assets | — | 23 | — | 23 | ||||||||||
| Other assets, noncurrent: | ||||||||||||||
| Corporate debt securities | — | — | 4 | 4 | ||||||||||
| Total assets at fair value | $ | 5,628 | $ | 1,761 | $ | 4 | $ | 7,393 | ||||||
| Liabilities | ||||||||||||||
| Accrued expenses and other current liabilities: | ||||||||||||||
| Foreign exchange derivative liabilities | $ | — | $ | 30 | $ | — | $ | 30 | ||||||
| Other liabilities, noncurrent: | ||||||||||||||
| Foreign exchange derivative liabilities | — | 1 | — | 1 | ||||||||||
| Total liabilities at fair value | $ | — | $ | 31 | $ | — | $ | 31 |
The following table presents additional information about investments that are measured at fair value for which the Company has utilized Level 3 inputs to determine fair value (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2022 | 2023 | 2022 | 2023 | ||||||||||||||
| Balance, beginning of period | $ | 11 | $ | 4 | $ | 10 | $ | 4 | |||||||||
| Changes in unrealized losses included in other comprehensive income related to investments held at the reporting date | (1) | — | — | — | |||||||||||||
| Balance, end of period | $ | 10 | $ | 4 | $ | 10 | $ | 4 | |||||||||
There were no transfers of financial instruments into or out of Level 3 during the six months ended June 30, 2022 and 2023.
Note 6**.** Derivative Instruments and Hedging
The Company has a portion of its business denominated and transacted in foreign currencies, which subjects the Company to foreign exchange risk, and uses derivative instruments to manage financial exposures that occur in the normal course of business. The Company does not hold or issue derivatives for trading or speculative purposes.
The Company may elect to designate certain derivatives to partially offset its business exposure to foreign exchange risk. However, the Company may choose not to hedge certain exposures for a variety of reasons including accounting considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange rates.
Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
Foreign Exchange Risk
To protect revenue from fluctuations in foreign currency exchange rates, the Company may enter into forward contracts, option contracts, or other instruments, and may designate these instruments as cash flow hedges. The Company generally hedges portions of its forecasted foreign currency exposure associated with revenue, typically for up to 18 months. In the first quarter of 2023, the Company initiated a foreign exchange cash flow hedging program to minimize the effects of foreign currency fluctuations on future revenue.
The Company may also enter into derivative instruments that are not designated as accounting hedges to offset a portion of the foreign currency exchange gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies.
The following table summarizes the effect of derivative instruments on the Company’s condensed consolidated balance sheets (in millions):
| Derivative Assets**(1)** | |||||||||||
| Location | December 31, 2022 | June 30, 2023 | |||||||||
| Derivatives designated as hedging instruments: | |||||||||||
| Foreign exchange contracts (current) | Prepaids and other current assets | $ | — | $ | 2 | ||||||
| Total derivatives designated as hedging instruments | $ | — | $ | 2 | |||||||
| Derivatives not designated as hedging instruments: | |||||||||||
| Foreign exchange contracts (current) | Prepaids and other current assets | $ | 14 | $ | 21 | ||||||
| Total derivatives not designated as hedging instruments | $ | 14 | $ | 21 |
| Derivative Liabilities**(1)** | |||||||||||
| Location | December 31, 2022 | June 30, 2023 | |||||||||
| Derivatives designated as hedging instruments: | |||||||||||
| Foreign exchange contracts (current) | Accrued expenses and other current liabilities | $ | — | $ | 3 | ||||||
| Foreign exchange contracts (noncurrent) | Other liabilities, noncurrent | — | 1 | ||||||||
| Total derivatives designated as hedging instruments | $ | — | $ | 4 | |||||||
| Derivatives not designated as hedging instruments: | |||||||||||
| Foreign exchange contracts (current) | Accrued expenses and other current liabilities | $ | 31 | $ | 27 | ||||||
| Total derivatives not designated as hedging instruments | $ | 31 | $ | 27 |
(1)Derivative assets and derivatives liabilities are measured using Level 2 inputs.
To limit credit risk, the Company generally enters into master netting arrangements with the respective counterparties to the Company’s derivative contracts, under which the Company is allowed to settle transactions with a single net amount payable by one party to the other. As of June 30, 2023, the potential effect of these rights of off-set associated with the Company’s derivative contracts would be a reduction to both derivative assets and liabilities of $17 million, resulting in net derivative assets of $6 million and net derivative liabilities of $14 million.
The effect of derivative instruments designated as hedging instruments on the condensed consolidated statements of operations was not material for the three and six months ended June 30, 2023.
Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
Effect of derivative instruments designated as hedging instruments on AOCI
The following table summarizes the activity of derivative instruments designated as cash flow hedges and the impact of these derivative contracts on AOCI (in millions):
| Gain (Loss) Recognized in Other Comprehensive Income (Loss) | |||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
| 2023 | 2023 | ||||||||||||||||||||||||||||||||||
| Derivatives designated as cash flow hedges: | |||||||||||||||||||||||||||||||||||
| Foreign exchange contracts | $ | 2 | $ | (2) | |||||||||||||||||||||||||||||||
| Total designated cash flow hedges | $ | 2 | $ | (2) |
As of June 30, 2023, cumulative unrealized losses recorded in AOCI related to derivative instruments designated as hedging instruments were $2 million.
Effect of derivative instruments not designated as hedging instruments on the condensed consolidated statements of operations
The following table presents the activity of derivative instruments not designated as hedging instruments and the impact of these derivative contracts on the condensed consolidated statements of operations (in millions):
| Realized Gain (Loss) on Derivatives | Unrealized Gain on Derivatives | ||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||
| 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | ||||||||||||||||||||||||||||
| Derivatives not designated as hedging instruments: | |||||||||||||||||||||||||||||||||||
| Foreign exchange contracts | $ | 27 | $ | (64) | $ | 40 | $ | (84) | $ | 49 | $ | 13 | $ | 25 | $ | 12 | |||||||||||||||||||
| Total derivatives not designated as hedging instruments | $ | 27 | $ | (64) | $ | 40 | $ | (84) | $ | 49 | $ | 13 | $ | 25 | $ | 12 |
Cash flow hedges
The total notional amount of outstanding foreign currency derivatives designated as cash flow hedges was $918 million as of June 30, 2023.
Derivatives not designated as hedging instruments
The total notional amount of outstanding derivatives not designated as hedging instruments was $2.4 billion and $3.9 billion as of December 31, 2022 and June 30, 2023, respectively.
Note 7**.** Debt
Convertible Senior Notes
In 2021, the Company issued $2.0 billion aggregate principal amount of 0% convertible senior notes due 2026 (the "2026 Notes") pursuant to an indenture, dated March 8, 2021 (the "Indenture"), between the Company and U.S. Bank National Association, as trustee.
As of both December 31, 2022 and June 30, 2023, total outstanding debt, net of unamortized debt discount and debit issuance costs, was $2.0 billion. The Company recorded interest expense of $1 million for both the three months ended June 30, 2022 and 2023, and $2 million for both the six months ended June 30, 2022 and 2023 for the 2026 Notes relating to amortization of the debt discount and debt issuance costs.
As of June 30, 2023, the if-converted value of the 2026 Notes did not exceed the outstanding principal amount.
As of June 30, 2023, the total estimated fair value of the 2026 Notes was $1.8 billion and was determined based on a market approach using actual bids and offers of the 2026 Notes in an over-the-counter market on the last trading day of the period, or Level 2 inputs.
2022 Credit Facility
In 2022, the Company entered into a five-year unsecured Revolving Credit Agreement, which provides for initial commitments by a group of lenders led by Morgan Stanley Senior Funding, Inc. of $1.0 billion (“2022 Credit Facility”). The 2022 Credit Facility provides a $200 million sub-limit for the issuance of letters of credit.
Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
The 2022 Credit Facility contains customary events of default, affirmative and negative covenants, including restrictions on the Company’s and certain of its subsidiaries’ ability to incur debt and liens, undergo fundamental changes, as well as certain financial covenants. The Company was in compliance with all financial covenants as of June 30, 2023.
No amounts were drawn under the 2022 Credit Facility as of December 31, 2022 and June 30, 2023, and outstanding letters of credit totaled $29 million and $26 million as of December 31, 2022 and June 30, 2023, respectively.
Note 8. Stock-Based Compensation
Stock-Based Compensation Expense
The following table summarizes total stock-based compensation expense (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2022 | 2023 | 2022 | 2023 | ||||||||||||||
| Operations and support | $ | 17 | $ | 19 | $ | 29 | $ | 34 | |||||||||
| Product development | 145 | 191 | 263 | 340 | |||||||||||||
| Sales and marketing | 29 | 36 | 50 | 64 | |||||||||||||
| General and administrative | 56 | 58 | 100 | 106 | |||||||||||||
| Stock-based compensation expense | $ | 247 | $ | 304 | $ | 442 | $ | 544 |
Stock Option and Restricted Stock Unit Activity
A summary of stock option and restricted stock unit (“RSU”) activity under the Company’s equity incentive plans was as follows (in millions, except per share amounts):
| Outstanding Stock Options | Outstanding RSUs | ||||||||||||||||||||||
| Shares Available for Grant | Number of Shares | Weighted- Average Exercise Price | Number of Shares | Weighted- Average Grant Date Fair Value | |||||||||||||||||||
| As of December 31, 2022 | 108 | 22 | $ | 23.41 | 34 | $ | 77.07 | ||||||||||||||||
| Granted | (10) | 1 | 122.41 | 9 | 119.27 | ||||||||||||||||||
| Increase in shares available for grant | 32 | — | — | — | — | ||||||||||||||||||
| Exercised/Vested | 2 | (14) | 4.34 | (7) | 97.47 | ||||||||||||||||||
| Canceled | 1 | — | — | (1) | 117.71 | ||||||||||||||||||
| As of June 30, 2023 | 133 | 9 | $ | 60.09 | 35 | $ | 82.98 |
In May 2023, 11.2 million stock options were exercised in cashless transactions pursuant to which the Company withheld and retired 5.7 million shares of common stock, valued at their fair market value on the exercise date, to cover the related $567 million of employee withholding tax and $36 million of exercise cost.
| Number of Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life (years) | Aggregate Intrinsic Value | |||||||||||
| Options outstanding as of June 30, 2023 | 9 | $ | 60.09 | 5.32 | $ | 655 | ||||||||
| Options exercisable as of June 30, 2023 | 7 | $ | 46.19 | 4.37 | $ | 587 |
Employee Stock Purchase Plan (“ESPP”)
The Company recorded stock-based compensation expense related to the ESPP of $9 million and $7 million for the three months ended June 30, 2022 and 2023, respectively, and $14 million for both the six months ended June 30, 2022 and 2023.
For the six months ended June 30, 2022, the Company issued 0.2 million shares of Class A common stock under the ESPP at a weighted-average price of $103.23 per share, resulting in net cash proceeds of $20 million. For the six months ended June 30, 2023, the Company issued 0.3 million shares at a weighted-average price of $88.77 per share, resulting in net cash proceeds of $31 million.
Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
Note 9. Commitments and Contingencies
Commitments
The Company has commitments including purchase obligations for web-hosting services and other commitments for brand marketing. As of June 30, 2023, there were no material changes outside the ordinary course of business to the Company’s commitments, as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022.
Lodging Tax Obligations and Other Non-Income Tax Matters
Some states and localities in the 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. As of June 30, 2023, the Company collects and remits Lodging Taxes in approximately 32,400 jurisdictions on behalf of its Hosts. Such Lodging Taxes are generally remitted to tax jurisdictions within a 30 to 90-day period following the end of each month.
As of December 31, 2022 and June 30, 2023, the Company had an obligation to remit Lodging Taxes collected from guests on bookings in these jurisdictions totaling $251 million and $352 million, respectively. These payables were recorded in accrued expenses and other current liabilities on the condensed consolidated balance sheets.
In jurisdictions where the Company does not collect and remit Lodging Taxes, the responsibility for collecting and remitting these taxes primarily rests with Hosts. The Company has estimated Lodging Tax liabilities in a certain number of jurisdictions with respect to state, city, and local taxes where management believes it is probable that the Company can be held jointly liable with Hosts for taxes and the related amounts can be reasonably estimated. As of December 31, 2022 and June 30, 2023, accrued obligations related to these estimated taxes, including estimated penalties and interest, totaled $71 million and $72 million, respectively. As of June 30, 2023, the Company estimates that the reasonably possible loss related to certain Lodging Taxes that can be determined in excess of the amounts accrued is between
$140 million to $160 million; however, no assurance can be given as to the outcomes and the Company could be subject to significant additional tax liabilities. With respect to all other jurisdictions’ Lodging Taxes for which a loss is probable or reasonably possible, the Company is unable to determine an estimate of the possible loss or range of loss beyond the amounts already accrued.
The Company’s potential obligations with respect to Lodging Taxes could be affected by various factors, which include, but are not limited to, whether the Company determines, or any tax authority asserts, that the Company has a responsibility to collect lodging and related taxes on either historical or future transactions or by the introduction of new ordinances and taxes which subject the Company’s operations to such taxes. Accordingly, the ultimate resolution of Lodging Taxes may be greater or less than reserve amounts that the Company has recorded.
The Company is currently involved in disputes brought by certain states and localities involving the payment of Lodging Taxes. These jurisdictions are asserting that the Company is liable or jointly liable with Hosts to collect and remit Lodging Taxes. These disputes are in various stages and the Company continues to vigorously defend these claims. The Company believes that the statutes at issue impose a Lodging Tax obligation on the person exercising the taxable privilege of providing accommodations, or the Company’s Hosts.
The imposition of such taxes on the Company could increase the cost of a guest booking and potentially cause a reduction in the volume of bookings on the Company’s platform, which would adversely impact the Company’s results of operations. The Company will continue to monitor the application and interpretation of lodging and related taxes and ordinances and will adjust accruals based on any new information or further developments.
The Company is under audit and inquiry by various domestic and foreign tax authorities with regard to non-income tax matters. The subject matter of these contingent liabilities primarily arises from the Company’s transactions with its customers, as well as the tax treatment of certain employee benefits and related employment taxes. In jurisdictions with disputes connected to transactions with customers, disputes involve the applicability of transactional taxes (such as sales, value-added, and similar taxes) to services provided, as well as the applicability of withholding tax on payments made to such Hosts. As of December 31, 2022 and June 30, 2023, the Company accrued a total of $135 million and $139 million of estimated taxes and interest related to Hosts’ withholding tax obligations, respectively. Due to the inherent complexity and uncertainty of these matters and judicial processes in certain jurisdictions, the final outcomes may exceed the estimated liabilities recorded.
The Company has identified reasonably possible exposures related to withholding income taxes, transactional taxes, and business taxes and has not accrued for these amounts since the likelihood of the contingent liability is less than probable. As of June 30, 2023, the Company estimates that the reasonably possible loss related to these matters in excess of the amounts accrued is between $270 million to $290 million; however, no assurance can be given as to the outcomes and the Company could be subject to significant additional tax liabilities.
In 2017, Italy passed a law requiring short-term rental platforms that process payments to withhold Host income tax and collect and remit tourist tax, amongst other obligations (“2017 Law”). The Company has challenged this law before the Italian courts and the Court of Justice of the European Union (“CJEU”). In December 2022, the CJEU found that European law does not prohibit member states from passing legislation requiring short-term rental platforms to withhold income taxes from their hosts, however a requirement to appoint a tax representative, on which the 2017 Law and the withholding obligations are based, is contrary to European Union (“EU”) law and the case has now returned to the Italian national court. The Company’s subsidiary in Italy and subsidiary in Ireland are subject to tax audits in Italy, including in relation to permanent establishment, transfer pricing, and withholding obligations.
In May 2023, the Guardia di Finanza de Milano issued a Tax Audit Report recommending to the Italian tax authorities a formal tax assessment of 779 million Euros on Airbnb’s subsidiary in Ireland relating to the 2017 Law and associated withholding tax obligations. While the Company continues to believe that it is not subject to the 2017 Law based on the CJEU ruling, the Company and the Italian tax authorities are actively
Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
working to resolve this matter. However due to the inherent complexity and uncertainty of the 2017 Law, the Company is unable to determine an estimate of the possible loss or range of loss.
With respect to all other withholding tax on payments made to Hosts and transactional taxes for which a loss is probable or reasonably possible, the Company is unable to determine an estimate of the possible loss or range of loss beyond the amounts already accrued.
In addition, as of both December 31, 2022 and June 30, 2023, the Company accrued a total of $33 million of estimated tax liabilities related to employment taxes on certain employee benefits.
The Company is subject to regular payroll tax examinations by various international, state and local jurisdictions. Although management believes its tax withholding remittance practices are appropriate, the Company may be subject to additional tax liabilities, including interest and penalties, if any tax authority disagrees with the Company’s withholding and remittance practices, or if there are changes in laws, regulations, administrative practices, principles or interpretations related to payroll tax withholding in the various international, state and local jurisdictions.
Legal and Regulatory Matters
The Company has been and is currently a party to various legal and regulatory matters arising in the normal course of business. Such proceedings and claims, even if not meritorious, can require significant financial and operational resources, including the diversion of management’s attention from the Company’s business objectives.
Regulatory Matters
The Company operates in a complex legal and regulatory environment and its operations are subject to various U.S. and foreign laws, rules, and regulations, including those related to: Internet activities; short-term rentals, long-term rentals and home sharing; real estate, property rights, housing and land use; travel and hospitality; privacy and data protection; intellectual property; competition; health and safety; protection of minors; consumer protection; employment; payments, money transmission, economic and trade sanctions, anti-corruption and anti-bribery; taxation; and others. In addition, the nature of the Company’s business exposes it to inquiries and potential claims related to the compliance of the business with applicable law and regulations. In some instances, applicable laws and regulations do not yet exist or are being applied, interpreted or implemented to address aspects of the Company’s business, and such adoption or interpretation could further alter or impact the Company’s business.
In certain instances, the Company has been party to litigation with municipalities relating to or arising out of certain regulations. In addition, the implementation and enforcement of regulation can have an impact on the Company’s business.
Intellectual Property
The Company has been and is currently subject to claims relating to intellectual property, including alleged patent infringement. Adverse results in such lawsuits may include awards of substantial monetary damages, costly royalty or licensing agreements, or orders preventing the Company from offering certain features, functionalities, products, or services, and may also cause the Company to change its business practices or require development of non-infringing products or technologies, which could result in a loss of revenue or otherwise harm its business. To date, the Company has not incurred any material costs as a result of such cases and has not recorded any material liabilities in its financial statements related to such matters.
Litigation and Other Legal Proceedings
The Company is currently involved in, and may in the future be involved in, legal proceedings, claims, and government investigations in the ordinary course of business. These include proceedings, claims, and investigations relating to, among other things, regulatory matters, commercial matters, intellectual property, competition, tax, employment, pricing, discrimination, consumer rights, personal injury, and property rights.
The Australian Competition and Consumer Commission (“ACCC”) commenced proceedings against Airbnb, Inc. and Airbnb Ireland UC alleging that Airbnb has breached the Australian Consumer Law by making false and misleading representations, because certain users were shown prices and charged in U.S. dollars versus Australian dollars. The Company disputes the allegations of the ACCC.
Depending on the nature of the proceeding, claim, or investigation, the Company may be subject to monetary damage awards, fines, penalties, and/or injunctive orders. Furthermore, the outcome of these matters could materially adversely affect the Company’s business, results of operations, and financial condition. The outcomes of legal proceedings, claims, and government investigations are inherently unpredictable and subject to significant judgment to determine the likelihood and amount of loss related to such matters. While it is not possible to determine the outcomes, the Company believes based on its current knowledge that the resolution of all such pending matters will not, either individually or in the aggregate, have a material adverse effect on the Company’s business, results of operations, financial condition, or cash flows.
The Company establishes an accrued liability for loss contingencies related to legal matters when a loss is both probable and reasonably estimable. These accruals represent management’s best estimate of probable losses. Such currently accrued amounts are not material to the Company’s financial statements. However, management’s views and estimates related to these matters may change in the future, as new events and circumstances arise and the matters continue to develop. Until the final resolution of legal matters, there may be an exposure to losses in excess of the amounts accrued. With respect to outstanding legal matters, based on current knowledge, the amount or range of reasonably possible loss will not, either individually or in the aggregate, have a material adverse effect on the Company’s business, results of operations, financial condition, or cash flows. Legal fees are expensed as incurred.
Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
Host Protections
The Company offers AirCover coverage, which includes but is not limited to, the Company’s Host Damage Protection program that provides protection of up to $3 million for direct physical loss or damage to a Host’s covered property caused by guests during a confirmed booking and when the Host and guest are unable to resolve the dispute. The Company retains risk and also maintains insurance from third parties on a per claim basis to protect the Company’s financial exposure under this program. In addition, through third-party insurers and self-insurance mechanisms, including a wholly-owned captive insurance subsidiary, the Company provides insurance coverage for third-party bodily injury or property damage liability claims that occur during a stay. The Company’s Host Liability Insurance and Experiences Liability Insurance consists of a commercial general liability policy, with Hosts and the Company as named insureds and landlords of Hosts as additional insureds. The Host Liability Insurance and Experiences Liability Insurance provides primary coverage for up to $1 million per occurrence, subject to a $1 million cap per listing location, and includes various market standard conditions, limitations, and exclusions.
Indemnifications
The Company has entered into indemnification agreements with certain of its employees, officers and directors. The indemnification agreements and the Company’s Amended and Restated Bylaws (the “Bylaws”) require the Company to indemnify its directors and officers and those employees who have entered into indemnification agreements to the fullest extent not prohibited by Delaware law. Subject to certain limitations, the indemnification agreements and Bylaws also require the Company to advance expenses incurred by its directors and officers and those employees who have entered into indemnification agreements. No demands have been made upon the Company to provide indemnification or advancement under the indemnification agreements or the Bylaws, and thus, there are no indemnification or advancement claims that the Company is aware of that could have a material adverse effect on the Company’s business, results of operations, financial condition, or cash flows.
In the ordinary course of business, the Company has included limited indemnification provisions in certain agreements with parties with whom the Company has commercial relations, which provisions are of varying scope and terms with respect to indemnification of certain matters, which may include losses arising out of the Company’s breach of such agreements or out of intellectual property infringement claims made by third parties. 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 the Company’s indemnification provisions.
Note 10. Income Taxes
The Company’s tax provision for interim periods is determined by using an estimated annual effective tax rate, adjusted for discrete items arising in that quarter. In each quarter, the Company updates the estimated annual effective tax rate and makes a year-to-date adjustment to the provision. The estimated annual effective tax rate is subject to significant volatility due to several factors, including accurately predicting the Company’s pre-tax and taxable income and loss and the mix of jurisdictions to which they relate, intercompany transactions, audit-related developments, and changes in statutes, regulations, case law, and administrative actions.
The Company recorded income tax expense of $4 million and $26 million for the three months ended June 30, 2022 and 2023, respectively, and $15 million and $39 million for the six months ended June 30, 2022 and 2023, respectively. The increase in tax expense for all periods was primarily driven by current tax on foreign earnings and the accrual of interest on certain uncertain tax positions.
In determining the need for a valuation allowance, the Company weighs both positive and negative evidence in the various jurisdictions in which it operates to determine whether it is more likely than not that its deferred tax assets are recoverable. The Company regularly assesses all available evidence, including cumulative historic losses and forecasted earnings. Due to cumulative losses in the United States during the prior three years, including tax deductible stock compensation, and based on all available positive and negative evidence, the Company does not believe it is more likely than not that its U.S. deferred tax assets will be realized as of June 30, 2023. Accordingly, a full valuation allowance has been established in the United States, and no deferred tax assets and related tax benefit have been recognized in the financial statements. However, given the Company’s current earnings and anticipated future earnings, the Company believes that there is a reasonable possibility that by December 31, 2023, sufficient positive evidence may become available to allow the Company to reach a conclusion that some portion of or the entire U.S. valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of material U.S. federal and state deferred tax assets and a corresponding decrease to income tax expense estimated to be $2.5 billion to $3.0 billion 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 sustained U.S. profitability that the Company is able to actually achieve, as well as the amount of tax deductible stock compensation dependent upon the Company’s publicly traded share price, foreign currency movements, and macroeconomic conditions, among other factors.
The Company’s significant tax jurisdictions include the United States, California, and Ireland. The Company is currently under examination for income taxes by the Internal Revenue Service (“IRS”) for the 2013, 2016, 2017, and 2018 tax years. The primary issue under examination in the 2013 audit is the valuation of the Company’s international intellectual property which was sold to a subsidiary in 2013. In the year ended December 31, 2019, new information became available which required the Company to remeasure its reserve for unrecognized tax benefits. The Company recorded additional tax expense of $196 million during the year ended December 31, 2019. In December 2020, the Company received a Notice of Proposed Adjustment (“NOPA”) from the IRS which proposed an increase to the Company’s U.S. taxable income that could result in additional income tax expense and cash liability of $1.3 billion, plus penalties and interest, which exceeds its current reserve recorded in its consolidated financial statements by more than $1.0 billion. The Company disagrees with the proposed adjustment and continues to vigorously contest it. In February 2021, the Company submitted a protest to the IRS describing its disagreement with the proposed adjustment and requesting the case to be transferred to the IRS Independent Office of Appeals (“IRS Appeals”). In December 2021, the Company received a rebuttal from the IRS with the same proposed adjustments that were in the NOPA. In January 2022, the Company entered into an administrative dispute process with IRS Appeals. The Company will continue to pursue all available remedies to resolve this dispute, including petitioning the U.S. Tax Court (“Tax Court”) for redetermination if an acceptable outcome cannot be reached
Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
with IRS Appeals, and if necessary, appealing the Tax Court’s decision to the appropriate appellate court. The Company believes that adequate amounts have been reserved for any adjustments that may ultimately result from these examinations. If the IRS prevails in the assessment of additional tax due based on its position and such tax and related interest and penalties, if any, exceeds the Company’s current reserves, such outcome could have a material adverse impact on the Company’s financial position and results of operations, and any assessment of additional tax could require a significant cash payment and have a material adverse impact on the Company’s condensed consolidated statements of cash flow.
On August 16, 2022, the Inflation Reduction Act was signed into law, with tax provisions primarily focused on implementing a 15% minimum tax on global adjusted financial statement income and a 1% excise tax on share repurchases. The Inflation Reduction Act became effective beginning in fiscal year 2023. The Company does not anticipate the new law to have a material impact on the current year, and will continue to evaluate its impact as further information becomes available.
Note 11. Net Income per Share
The following table sets forth the computation of basic and diluted net income per share attributable to common stockholders for the periods indicated (in millions, except per share amounts):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2022 | 2023 | 2022 | 2023 | ||||||||||||||
| Net income | $ | 379 | $ | 650 | $ | 360 | $ | 767 | |||||||||
| Add: convertible notes interest expense, net of tax | 1 | 1 | 2 | 2 | |||||||||||||
| Net income - diluted | $ | 380 | $ | 651 | $ | 362 | $ | 769 | |||||||||
| Weighted-average shares in computing net income per share attributable to Class A and Class B common stockholders: | |||||||||||||||||
| Basic | 638 | 635 | 637 | 634 | |||||||||||||
| Effect of dilutive securities | 46 | 30 | 47 | 33 | |||||||||||||
| Diluted | 684 | 665 | 684 | 667 | |||||||||||||
| Net income per share attributable to Class A and Class B common stockholders: | |||||||||||||||||
| Basic | $ | 0.59 | $ | 1.02 | $ | 0.57 | $ | 1.21 | |||||||||
| Diluted | $ | 0.56 | $ | 0.98 | $ | 0.53 | $ | 1.15 |
As of both June 30, 2022 and 2023, RSUs to be settled in 9.6 million shares of Class A common stock were excluded from the table below because they are subject to market conditions that were not achieved as of such date.
Additionally, the following securities were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2023 | 2022 | 2023 | ||||||||||||||||||||
| Stock options | 1 | 2 | 1 | 2 | |||||||||||||||||||
| RSUs | 11 | 7 | 7 | 7 | |||||||||||||||||||
| Total | 12 | 9 | 8 | 9 |
On August 2, 2022, the Company announced that its board of directors approved a share repurchase program with authorization to purchase up to $2.0 billion of the Company's Class A common stock. On May 9, 2023, the Company announced that its board of directors approved another share repurchase program with authorization to purchase up to $2.5 billion of the Company's Class A common stock at management’s discretion. Share repurchases under these share repurchase programs 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 programs do not obligate the Company to repurchase any specific number of shares and may be modified, suspended or terminated at any time at the Company’s discretion.
During the three and six months ended June 30, 2023, the Company repurchased and subsequently retired 4.4 million and 8.4 million shares of Class A common stock for $507 million and $1.0 billion, respectively. As of June 30, 2023, the Company completed the repurchase of the $2.0 billion of shares of Class A common stock authorized for repurchase under the August 2022 share repurchase program and had $2.0 billion available to repurchase shares of Class A common stock under the May 2023 share repurchase program.
The Inflation Reduction Act imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. For the three and six months ended June 30, 2023, the excise tax on share repurchases was not material.
Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
Note 12. Restructuring
In the second quarter of 2022, the Company shifted to a remote work model, allowing its employees to work from anywhere in the country. The shift to a remote work model was in direct response to the change in how employees work due to the impact of COVID-19. As a result, the Company recorded restructuring charges of $89 million during the three and six months ended June 30, 2022, which includes $81 million relating to an impairment of both domestic and international operating lease right-of-use assets, and $8 million of related leasehold improvements. There were no restructuring charges during the three and six months ended June 30, 2023.
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