Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023, including Part I, Item 1A "Risk Factors," as well as our Unaudited Consolidated Financial Statements and accompanying notes and the Section entitled "Special Note Regarding Forward-Looking Statements" in this Quarterly Report on Form 10-Q. The information on our websites is not a part of this Quarterly Report and is not incorporated herein by reference.

We evaluate certain operating and financial measures on both an as-reported and constant-currency basis. We calculate constant currency based on the predominant transactional currency in each country, converting our current-year period results in currencies other than U.S. Dollars using the corresponding prior-year period monthly average exchange rates.

Overview

Our mission is to make it easier for everyone to experience the world. We aim to provide consumers with a best-in-class experience offering the travel choices they want, with tailored language, payment, and other options, seamlessly connecting them with our travel service provider partners. We offer these services through five primary consumer-facing brands: Booking.com, Priceline, Agoda, KAYAK, and OpenTable.

We derive substantially all of our revenues from enabling consumers to make travel service reservations. We also earn revenues from advertising services, restaurant reservations and restaurant management services, travel-related insurance services, and other services. See Note 2 to our Unaudited Consolidated Financial Statements for more information.

Trends

In the first quarter of 2024, global room nights increased 9% year-over-year driven primarily by healthy travel demand in Europe and Asia. In the second quarter of 2024, global room nights increased 7% year-over-year, sequentially slower than the first quarter of 2024 primarily due to lower year-over-year growth in Europe. In the third quarter of 2024, global room nights increased 8%, sequentially faster than the second quarter of 2024 primarily due to higher year-over-year growth in Europe.

Quarterly Room Nights and Change versus the prior year

The cancellation rate in the third quarter of 2024 was slightly lower than the cancellation rate in the third quarter of 2023. Because we recognize revenues from bookings when the traveler checks in, our reported revenues are not at risk of being reversed due to cancellations. Increases in cancellation rates can negatively impact our marketing efficiency as a result of incurring performance marketing expenses at the time a booking is made even though that booking could be canceled in the future if it was booked under a flexible cancellation policy.

Our global average daily rates ("ADRs") decreased by less than 1% on a constant currency basis in the third quarter of 2024 as compared to the third quarter of 2023, driven primarily by a lower mix of room nights in North America, which is a higher ADR region, and a higher mix of room nights from Asia, which is a lower ADR region. Excluding the changes in regional mix, our global ADRs on a constant currency basis increased year-over-year by less than 1%. The year-over-year decrease in our global ADRs has resulted in our accommodation gross bookings growing slower than our room nights in the third quarter of 2024. It is difficult to predict what the trend in industry ADRs will be in the future.

We focus on relentless innovation to grow our business by providing a best-in-class user experience with intuitive, easy-to-use online platforms that aim to exceed the expectations of consumers. We have a long-term strategy to create an ideal traveler experience, offering our customers relevant options and connections at the times and in the language they want them, making trips booked with us seamless, easy, and valuable. We refer to this as the "Connected Trip." The goal of our Connected Trip vision is to offer a differentiated and personalized online travel planning, booking, payment, and in-trip experience for each trip, enhanced by a robust loyalty program that provides value to travelers and partners across all trips. We believe these efforts will help improve traveler loyalty, frequency, and mix of direct bookings over time. We believe these improvements will benefit revenue growth and marketing efficiency in the future, however, to the extent our non-accommodation services have lower margins and increase as a percentage of our total business, our operating margins may be negatively affected.

We believe that our mobile app is an important platform for experiencing the Connected Trip since the app travels with the traveler. The mix of our room nights booked on a mobile app in the third quarter of 2024 was a mid-fifties percentage, up from a low-fifties percentage in the third quarter of 2023. The significant majority of room nights booked on our mobile apps are direct, and we continue to see favorable repeat direct booking behavior from consumers in our mobile apps, which allow us more opportunities to engage directly with consumers. The revenues earned on a transaction on a mobile app may be less than a typical desktop transaction as we see different consumer purchasing patterns across devices. For example, accommodation reservations made on a mobile app typically are for shorter lengths of stay and have lower accommodation ADRs.

As part of our strategy to provide more payment options to consumers and travel service providers, increase the number and variety of our accommodations, and enable our long-term Connected Trip strategy, Booking.com increasingly processes transactions on a merchant basis, where it facilitates payments from travelers for the services provided. This allows Booking.com to process transactions for travel service providers and to increase its ability to offer secure and flexible transaction terms to consumers, such as the form and timing of payment. We believe that expanding these types of service offerings will benefit consumers and travel service providers, as well as our gross bookings, room night, and earnings growth rates. However, this results in additional expenses for personnel, payment processing, chargebacks (including those related to fraud), and other expenses related to these transactions, which are recorded in "Personnel" expenses and "Sales and other expenses" in our Unaudited Consolidated Statements of Operations, as well as associated incremental revenues (e.g., payment card rebates), which are recorded in "Merchant revenues." To the extent more of our business is generated on a merchant basis, we incur a greater level of these merchant-related expenses, which negatively impacts our operating margins despite increases in associated incremental revenues. The mix of our total gross bookings generated on a merchant basis was 65% in the third quarter of 2024, an increase from 56% in the third quarter of 2023.

We have established widely-used and recognized brands through marketing and promotional campaigns. Our total marketing expenses, which are comprised of performance and brand marketing expenses that are substantially variable in nature, were $2.2 billion in the third quarter of 2024, up 6% versus the third quarter of 2023 as a result of the year-over-year growth in travel demand in the quarter and our efforts to invest in marketing. Our performance marketing expenses, which represent a substantial majority of our marketing expenses, are primarily related to the use of online search engines (primarily Google), affiliate marketing, meta-search, and social media channels to generate traffic to our platforms. Our brand marketing expenses are primarily related to costs associated with producing and airing digital branding and television advertising.

Marketing efficiency, expressed as marketing expenses as a percentage of gross bookings, and performance marketing returns on investment ("ROIs") are impacted by a number of factors that are subject to variability and are in some cases outside of our control, including ADRs, costs per click, cancellation rates, foreign currency exchange rates, our ability to convert paid traffic to booking customers, and the timing and effectiveness of our brand marketing campaigns. In recent years, we observed periods of stable or increasing ROIs. Although it is difficult to predict how performance marketing ROIs will change in the future, ROIs could be negatively impacted by increased levels of competition and other factors. When evaluating our performance marketing spend, we typically consider several factors for each channel, such as the customer experience on the advertising platform, the incremental traffic we receive, and anticipated repeat rates. Marketing efficiency can also be impacted by the extent to which consumers come directly to our platforms for bookings. The mix of our room nights booked by consumers coming directly to our platforms was a mid-fifties percentage over the trailing twelve months ended September 30, 2024, and this mix increased versus the trailing twelve months ended September 30, 2023.

Marketing expenses as a percentage of total gross bookings in the third quarter of 2024 were lower than in the third quarter of 2023 due to an increase in the share of room nights booked by consumers coming directly to our platforms and higher performance marketing ROIs, partially offset by increased spend in social media channels. See Part I, Item 1A, Risk Factors - "We face risks relating to our marketing efforts" and "We are dependent on travel service providers, restaurants, search platforms, and other third parties" in our Annual Report on Form 10-K for the year ended December 31, 2023.

Booking.com had approximately 3.9 million total properties on its website at September 30, 2024, consisting of over 475,000 hotels, motels, and resorts and over 3.4 million alternative accommodation properties (including homes, apartments, and other unique places to stay), representing an increase from approximately 3.3 million total properties at September 30, 2023.

The mix of Booking.com's room nights booked for alternative accommodation properties in the third quarter of 2024 was approximately 35%, up versus approximately 33% in the third quarter of 2023. We have observed a longer-term trend of an increasing mix of room nights booked for alternative accommodation properties as consumer demand for these types of properties has grown, and as we have increased the number and variety of these properties on Booking.com. We may experience lower profit margins due to additional costs, such as increased customer service or certain partner related costs, related to offering alternative accommodations. As our alternative accommodation business has grown, these different characteristics have negatively impacted our profit margins and this trend may continue.

Although we believe that providing an extensive collection of properties, excellent customer service, and an intuitive, easy-to-use consumer experience are important factors influencing a consumer's decision to make a reservation, for many consumers, the price of the travel service is the primary factor determining whether to book. Discounting and couponing (i.e., merchandising) occurs across the major regions in which we operate, particularly in Asia. In some cases, our competitors are willing to make little or no profit on a transaction or offer travel services at a loss in order to gain market share. As a result, it is increasingly important to offer travel services, such as accommodation reservations, at a competitive price, whether through discounts, coupons, closed-user group rates or loyalty programs, increased flexibility in cancellation policies, or otherwise. These initiatives have resulted and, in the future, may result in lower ADRs and lower revenues as a percentage of gross bookings.

Many taxing authorities are increasingly focused on ways to increase tax revenues and have targeted large multinational technology companies in these efforts. As a result, many countries and some U.S. states have implemented or are considering the adoption of a digital services tax or similar tax that imposes a tax on revenues earned from digital advertisements or the use of online platforms, even when there is no physical presence in the jurisdiction. Currently, rates for these taxes range from 1.5% to 10% of revenues deemed generated in the jurisdiction. The digital services taxes currently in effect, which we record in "Sales and other expenses" in the Unaudited Consolidated Statements of Operations, have negatively impacted our results of operations. For more information, see Part I, Item 1A, Risk Factors - "We may have exposure to additional tax liabilities" in our Annual Report on Form 10-K for the year ended December 31, 2023.

Increased regulatory focus on online businesses, including online travel businesses like ours, could result in increased compliance costs or otherwise adversely affect our business. For example, the Digital Markets Act ("DMA") and Digital Services Act ("DSA") give regulators in the EU more instruments to investigate and regulate digital businesses and impose new rules and requirements on platforms designated as "gatekeepers" under the DMA and online platforms more generally, with separate rules for "Very Large Online Platforms" (VLOP) under the DSA. In early 2023, Booking.com received a VLOP designation notice from the European Commission. The Company met the quantitative notification criteria set forth in the DMA and in May 2024, the European Commission designated the Company as a gatekeeper under the DMA. Certain of the DMA's requirements will become enforceable in the fourth quarter of 2024. As a result of the DMA, compliance costs may increase and changes to our products or business practices may be required. For information regarding risks related to the DMA and DSA, please see Part I, Item 1A, Risk Factors - "Our business is subject to various competition/anti-trust, consumer protection, and online commerce laws and regulations around the world, and as the size of our business grows, scrutiny of our business by legislators and regulators in these areas may intensify" in our Annual Report on Form 10-K for the year ended December 31, 2023. For more information on the impacts of regulations on our business, see Note 13 to our Unaudited Consolidated Financial Statements.

Our businesses outside of the U.S. represent a substantial majority of our financial results, but because we report our results in U.S. Dollars, we face exposure to movements in foreign currency exchange rates as the financial results and the financial condition of our businesses outside of the U.S. are translated from local currency (principally Euros and British Pounds Sterling) into U.S. Dollars. See Note 2 to our Unaudited Consolidated Financial Statements for information related to revenues by geographic area. As a result of the movements in foreign currency exchange rates, both the absolute amounts of and percentage changes in our foreign-currency-denominated net assets, gross bookings, revenues, operating expenses, and net income as expressed in U.S. Dollars are affected. Movements in foreign currency exchange rates did not have a meaningful impact on our total gross bookings or revenue growth in the third quarter of 2024 as compared to the third quarter of 2023. Since our expenses are generally denominated in foreign currencies on a basis similar to our revenues, our operating margins have not been significantly impacted by currency fluctuations.

We generally enter into derivative instruments to minimize the impact of foreign currency exchange rate fluctuations. We enter into foreign currency exchange derivative contracts to hedge our exposure to the impact of movements in foreign currency exchange rates on our transactional balances denominated in currencies other than the functional currency. See Note 6 to our Unaudited Consolidated Financial Statements for additional information related to our derivative contracts. In addition, we designate certain portions of the aggregate principal value of our Euro-denominated debt as a hedge of the foreign currency exposure of the net investment in certain Euro functional currency subsidiaries. Foreign currency transaction gains or losses on the Euro-denominated debt that is not designated as a hedging instrument for accounting purposes are recognized in "Other income (expense), net" in the Unaudited Consolidated Statements of Operations (see Notes 9 and 14 to our Unaudited Consolidated Financial Statements). Such foreign currency transaction gains or losses are dependent on the amount of net assets of the Euro functional currency subsidiaries, the amount of the Euro-denominated debt that is designated as a hedge, and fluctuations in foreign currency exchange rates. For more information, see Part I, Item 1A, Risk Factors - "We are exposed to fluctuations in foreign currency exchange rates" in our Annual Report on Form 10-K for the year ended December 31, 2023.

Other Factors

Over the long term, we intend to continue to invest in marketing and promotion, technology, and personnel within parameters consistent with attempts to improve long-term operating results, even if those expenditures create pressure on operating margins. In recent years, our investments in initiatives to drive future growth added pressure on operating margins. We also intend to broaden the scope of our business, including exploring strategic alternatives such as acquisitions.

The competition for technology talent in our industry is intense. As a result of the competitive labor market and inflationary pressure on compensation, our personnel expenses to attract and retain key talent have increased, which has adversely affected our results of operations and may adversely affect our results of operations in the future. See Part I, Item 1A, Risk Factors - "We rely on the performance of highly skilled employees; and, if we are unable to retain or motivate key employees or hire, retain, and motivate well-qualified employees, our business would be harmed" in our Annual Report on Form 10-K for the year ended December 31, 2023.

Outlook

For the fourth quarter of 2024, we expect:

• the year-over-year growth in room nights will be between 6% and 8%;

• the year-over-year growth in gross bookings will be between 7% and 9%;

• the year-over-year growth in revenues will be between 7% and 9%; and

• operating income will be higher than the fourth quarter of 2023, as the fourth quarter of 2023 was negatively impacted by an accrual of $530 million related to the fine by the Spanish competition authority, as well as an accrual of $276 million related to the Netherlands pension fund matter. Excluding both of those accruals, we expect operating income will be higher than the fourth quarter of 2023.

For the full year 2024, we expect:

• the year-over-year growth in gross bookings will be about 8%;

• the year-over-year growth in revenues will be just below 10%; and

• operating income will be higher than in 2023.

Critical Accounting Estimates

Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our Unaudited Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). Certain of our accounting estimates are particularly important to our financial position and results of operations and require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. We use our judgment to determine the appropriate assumptions to be used in the determination of certain estimates and we evaluate our estimates on an ongoing basis. Estimates are based on historical experience, terms of existing contracts, our observance of trends in the travel industry, and on various other assumptions that we believe to be reasonable under the circumstances. Our actual results may differ from these estimates under different assumptions or conditions. Matters that involve significant estimates and judgments of management include the valuation of investments in private entities, the valuation of goodwill and other long-lived assets, income taxes, and contingencies. For a discussion of our critical accounting estimates, see the "Critical Accounting Estimates" section of Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023.

Recent Accounting Pronouncements

See Note 1 to our Unaudited Consolidated Financial Statements, which is incorporated by reference into this Item 2, for details regarding recent accounting pronouncements.

Results of Operations

Three and Nine Months Ended September 30, 2024 compared to the Three and Nine Months Ended September 30, 2023

Operating and Statistical Metrics

Our financial results are driven by certain operating metrics that encompass the booking and other business activity generated by our travel and travel-related services. See "Results of Operations" in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information on our Operating and Statistical Metrics, including room nights, rental car days, airline tickets, and merchant and agency gross bookings.

Room nights, rental car days, and airline tickets reserved through our services for the three and nine months ended September 30, 2024 and 2023 were as follows:

						Three Months Ended September 30,												Increase (Decrease)						Nine Months Ended September 30,												Increase (Decrease)
(in millions)						2024						2023									2024						2023
Room nights						299						276						8.1		%				883						818						7.9		%
Rental car days						23						20						16.2		%				66						59						12.3		%
Airline tickets						13						9						38.7		%				36						27						33.3		%

Room nights reserved through our services increased for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023, driven primarily by increased travel demand in Europe and Asia. Rental car days reserved through our services increased for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023, driven primarily by year-over-year growth in rental car days reserved on Booking.com. Airline tickets reserved through our services increased for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023, driven primarily by the expansion of the flight offerings at Booking.com and Agoda.

Gross bookings resulting from reservations of room nights, rental car days, and airline tickets made through our merchant and agency categories for the three and nine months ended September 30, 2024 and 2023 were as follows (numbers may not total due to rounding):

						Three Months Ended September 30,												Increase (Decrease)						Nine Months Ended September 30,												Increase (Decrease)
(in millions)						2024						2023									2024						2023
Merchant gross bookings						$	28,362					$	22,271					27.3		%				$	79,952					$	63,320					26.3		%
Agency gross bookings						15,085						17,542						(14.0)		%				48,460						55,612						(12.9)		%
Total gross bookings						$	43,447					$	39,813					9.1		%				$	128,413					$	118,932					8.0		%

Merchant gross bookings increased and agency gross bookings decreased for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023, due primarily to the ongoing shift from agency bookings to merchant bookings at Booking.com.

The year-over-year increase in total gross bookings during the three months ended September 30, 2024 was due primarily to the increase in room nights and the positive impact from year-over-year growth in flight gross bookings, partially offset by a decrease in constant currency accommodation ADRs of less than 1%.

The year-over-year increase in total gross bookings during the nine months ended September 30, 2024 was due primarily to the increase in room nights and the positive impact from year-over-year growth in flight gross bookings, partially offset by a negative impact of foreign exchange rate fluctuations, and by a decrease in constant currency accommodation ADRs of less than 1%.

Flight gross bookings increased 28% and 22% year-over-year during the three and nine months ended September 30, 2024, respectively, due to airline ticket growth, partially offset by lower airline ticket prices. Rental car gross bookings increased 15% and 5% year-over-year during the three and nine months ended September 30, 2024, respectively, due primarily to rental car days growth, partially offset by lower average daily car rental prices.

Revenues

Online travel reservation services

Substantially all of our revenues are generated by providing online travel reservation services, which facilitate online travel purchases from travel service providers by travelers. See "Results of Operations" in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information on our revenues, including merchant and agency revenues.

Advertising and other revenues

See "Results of Operations" in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information on our advertising and other revenues.

						Three Months Ended September 30,												Increase (Decrease)						Nine Months Ended September 30,												Increase (Decrease)
(in millions)						2024						2023									2024						2023
Merchant revenues						$	4,972					$	3,945					26.0		%				$	10,806					$	8,467					27.6		%
Agency revenues						2,753						3,135						(12.2)		%				6,660						7,346						(9.3)		%
Advertising and other revenues						269						261						3.4		%				802						768						4.5		%
Total revenues						$	7,994					$	7,341					8.9		%				$	18,268					$	16,581					10.2		%
% of Total gross bookings						18.4		%				18.4		%										14.2		%				13.9		%

Merchant revenues increased while agency revenues decreased for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 due primarily to the ongoing shift from agency revenues to merchant revenues at Booking.com. Advertising and other revenues increased for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 due to growth in advertising revenues at Booking.com as well as growth at OpenTable.

Total revenues as a percentage of gross bookings was 18.4% and 14.2% for the three and nine months ended September 30, 2024, respectively, which compares to 18.4% and 13.9% for the three and nine months ended September 30, 2023, respectively. The year-over-year increase in total revenues as a percentage of gross bookings for the nine months ended September 30, 2024 was due to an increase in revenues related to facilitating payments, partially offset by an increase in the mix of flight gross bookings.

Operating Expenses

Marketing Expenses

						Three Months Ended September 30,												Increase (Decrease)						Nine Months Ended September 30,												Increase (Decrease)
(in millions)						2024						2023									2024						2023
Marketing expenses						$	2,151					$	2,022					6.4		%				$	5,700					$	5,340					6.7		%
% of Total gross bookings						5.0		%				5.1		%										4.4		%				4.5		%
% of Total revenues						26.9		%				27.5		%										31.2		%				32.2		%

Marketing expenses consist primarily of the costs of:

• search engine keyword purchases;

• affiliate programs;

• referrals from meta-search websites;

• offline and online brand marketing; and

• other performance-based marketing.

Our marketing expenses, which are substantially variable in nature, increased for the three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023, to help drive additional gross bookings and revenues. Marketing expenses as a percentage of total gross bookings in the three and nine months ended September 30, 2024 were lower than in the three and nine months ended September 30, 2023 due primarily to an increase in the share of room nights booked by consumers coming directly to our platforms and higher performance marketing ROIs, partially offset by increased spend in social media channels.

Sales and Other Expenses

						Three Months Ended September 30,												Increase (Decrease)						Nine Months Ended September 30,												Increase (Decrease)
(in millions)						2024						2023									2024						2023
Sales and other expenses						$	872					$	807					8.2		%				$	2,370					$	2,094					13.3		%
% of Total gross bookings						2.0		%				2.0		%										1.8		%				1.8		%
% of Total revenues						10.9		%				11.0		%										13.0		%				12.6		%

Sales and other expenses consist primarily of:

• credit card and other payment processing fees associated with merchant transactions;

• fees paid to third parties that provide call center and other customer services;

• digital services taxes and other similar taxes;

• chargeback provisions and fraud prevention expenses associated with merchant transactions;

• provisions for expected credit losses, mostly related to accommodation commission receivables; and

• customer relations costs.

Sales and other expenses, which are substantially variable in nature, increased for the three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023 due primarily to an increase in merchant transaction costs of $34 million and $171 million, respectively, and an increase in digital services taxes and other similar taxes of $15 million and $63 million, respectively. Sales and other expenses for the nine months ended September 30, 2024 were impacted by an accrual of $17 million related to the Canadian digital services taxes related to the years ended December 31, 2023 and 2022 that were enacted in June 2024 with retrospective effect. Merchant transactions increased year-over-year in the three and nine months ended September 30, 2024 due primarily to the ongoing shift from agency transactions to merchant transactions at Booking.com.

Personnel

						Three Months Ended September 30,												Increase (Decrease)						Nine Months Ended September 30,												Increase (Decrease)
(in millions)						2024						2023									2024						2023
Personnel						$	868					$	788					10.1		%				$	2,501					$	2,262					10.6		%
% of Total revenues						10.9		%				10.7		%										13.7		%				13.6		%

Personnel expenses consist primarily of:

• salaries, bonuses, and stock-based compensation;

• payroll taxes; and

• employee health and other benefits.

Personnel expenses increased for the three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023, due to increases in salary expenses of $50 million and $145 million, respectively, as well as increases in stock-based compensation expense and employee benefits expense, partially offset by a decrease in bonus expense accruals. The year-over-year increase in personnel expenses was impacted by a 3% increase in employee headcount from approximately 23,450 as of September 30, 2023 to 24,200 as of September 30, 2024.

General and Administrative

						Three Months Ended September 30,												Increase (Decrease)						Nine Months Ended September 30,												Increase (Decrease)
(in millions)						2024						2023									2024						2023
General and administrative						$	575					$	305					88.2		%				$	873					$	821					6.4		%
% of Total revenues						7.2		%				4.2		%										4.8		%				5.0		%

General and administrative expenses consist primarily of:

• fees for certain outside professionals;

• occupancy and office expenses;

• certain travel transaction taxes; and

• personnel-related expenses such as travel, relocation, recruiting, and training expenses.

General and administrative expenses increased for the three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023, due to an accrual in the third quarter of 2024 related to the proposed settlement of certain Italian indirect tax matters of $365 million, partially offset by the termination fee of $90 million related to the acquisition agreement for the Etraveli Group in the third quarter of 2023. In addition, the year-over-year increase in general and administrative expenses in the nine months ended September 30, 2024 was impacted by a $78 million reduction in the accrual related to the fine imposed by the Spanish competition authority in the second quarter of 2024, as well as accruals in the first half of 2023 related to the settlement of certain indirect tax matters of $62 million.

Information Technology

						Three Months Ended September 30,												Increase (Decrease)						Nine Months Ended September 30,												Increase (Decrease)
(in millions)						2024						2023									2024						2023
Information technology						$	194					$	187					3.4		%				$	564					$	468					20.5		%
% of Total revenues						2.4		%				2.5		%										3.1		%				2.8		%

Information technology expenses consist primarily of:

• software license and system maintenance fees;

• cloud computing costs and outsourced data center costs;

• payments to contractors; and

• data communications and other expenses associated with operating our services.

Information technology expenses increased year-over-year for the three months ended September 30, 2024 due to an increase in expenses related to cloud software. Information technology expenses increased year-over-year for the nine months ended September 30, 2024 due to increased software license and system maintenance fees, as well as increased cloud computing costs and outsourced data center costs.

Depreciation and Amortization

						Three Months Ended September 30,												Increase (Decrease)						Nine Months Ended September 30,												Increase (Decrease)
(in millions)						2024						2023									2024						2023
Depreciation and amortization						$	155					$	129					19.7		%				$	434					$	370					17.1		%
% of Total revenues						1.9		%				1.8		%										2.4		%				2.2		%

Depreciation and amortization expenses consist of:

• amortization of intangible assets with determinable lives;

• amortization of internally-developed and purchased software;

• depreciation of computer equipment; and

• depreciation of leasehold improvements, furniture and fixtures, and office equipment.

Depreciation and amortization expenses increased during the three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023, due primarily to increased depreciation of computer equipment, as well as amortization expense related to internally-developed and purchased software.

Interest Expense and Interest and Dividend Income

The following table presents the changes in interest expense and interest and dividend income for the three and nine months ended September 30, 2024 and 2023:

						Three Months Ended September 30,												Increase (Decrease)						Nine Months Ended September 30,												Increase (Decrease)
(in millions)						2024						2023									2024						2023
Interest expense						$	(305)					$	(254)					20.2		%				$	(788)					$	(689)					14.4		%
Interest and dividend income						327						289						13.5		%				863						783						10.3		%

Interest expense increased for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due to the issuance of senior notes in March 2024 and an increase in the volume of cash management activities with associated interest costs. Interest expense increased for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily due to the issuance of senior notes in March 2024 and May 2023. Interest and dividend income increased for the three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023, primarily due to higher money market fund investments.

Other Income (Expense), Net

The following table sets forth the composition of "Other income (expense), net" for the three and nine months ended September 30, 2024 and 2023:

						Three Months Ended September 30,												Nine Months Ended September 30,
(in millions)						2024						2023						2024						2023
Foreign currency transaction losses						$	(365)					$	(1)					$	(204)					$	(102)
Net gains (losses) on equity securities						32						16						27						(151)
Other						1						(4)						4						3
Other income (expense), net						$	(332)					$	11					$	(173)					$	(250)

See Note 5 to our Unaudited Consolidated Financial Statements for additional information related to net gains (losses) on equity securities.

Foreign currency transaction losses for the three and nine months ended September 30, 2024 includes losses of $343 million and $108 million, respectively, related to our Euro-denominated debt and accrued interest that were not designated as net investment hedges and gains of $130 million and losses of $32 million, respectively, on derivative contracts. Foreign currency transaction losses for the three and nine months ended September 30, 2023 includes gains of $36 million and $2 million, respectively, related to our Euro-denominated debt and accrued interest that were not designated as net investment hedges and losses of $56 million and $140 million, respectively, on derivative contracts.

Income Taxes

						Three Months Ended September 30,												Increase (Decrease)						Nine Months Ended September 30,												Increase (Decrease)
(in millions)						2024						2023									2024						2023
Income tax expense						$	352					$	638					(44.9)		%				$	914					$	1,003					(8.9)		%
% of Income before income taxes						12.3		%				20.3		%										16.0		%				19.8		%

Our 2024 effective tax rates differ from the U.S. federal statutory tax rate of 21%, primarily due to the benefit of the Netherlands Innovation Box Tax (discussed below) and a reduction to our 2018 federal one-time deemed repatriation liability, pursuant to the U.S. Tax Cuts and Jobs Act ("Tax Act"), resulting from a recent U.S. Tax Court decision in Varian Medical Systems, Inc. v. Commissioner, partially offset by higher international tax rates, unrecognized tax benefits, and U.S. federal and state tax associated with our international earnings. Our 2023 effective tax rates differed from the U.S. federal statutory tax rate of 21%, primarily due to the benefit of the Netherlands Innovation Box Tax, partially offset by higher international tax rates and certain non-deductible expenses.

Our effective tax rates for the three and nine months ended September 30, 2024 were lower compared to the effective tax rates for the three and nine months ended September 30, 2023, primarily due to a reduction to our 2018 federal one-time deemed repatriation liability, pursuant to the Tax Act, resulting from a recent U.S. Tax Court decision in Varian Medical Systems, Inc. v. Commissioner, partially offset by higher unrecognized tax benefits and higher U.S. federal and state tax associated with our international earnings. We recorded a net tax expense reduction of $250 million during the three and nine months ended September 30, 2024 related to our 2018 federal one-time deemed repatriation liability.

During the three and nine months ended September 30, 2024 and 2023, a majority of our income was reported in the Netherlands, where Booking.com is based. Under Dutch corporate income tax law, income generated from qualifying innovative activities is taxed at a rate of 9% ("Innovation Box Tax") rather than the Dutch statutory rate of 25.8%. A portion of Booking.com's earnings during the nine months ended September 30, 2024 and 2023 qualified for Innovation Box Tax treatment, which had a beneficial impact on the effective tax rates for these periods. For additional information relating to Booking.com's Innovation Box Tax treatment, including associated risks, please see Part I, Item 1A, Risk Factors - "We may not be able to maintain our 'Innovation Box Tax' benefit" in our Annual Report on Form 10-K for the year ended December 31, 2023.

Liquidity and Capital Resources

Our primary source of funds for operations is the cash flow that we generate from operations. We use our cash for a variety of needs, including ongoing investments in our business, share repurchases, dividends, repayment of debt, and capital expenditures. Our continued access to sources of liquidity depends on multiple factors. See Part I, Item 1A, Risk Factors - "Our liquidity, credit ratings, and ongoing access to capital could be materially and negatively affected by global financial conditions and events" in our Annual Report on Form 10-K for the year ended December 31, 2023. Our financial results and prospects are almost entirely dependent on facilitating the sale of travel-related services. Marketing expenses and personnel expenses are the most significant operating expenses for our business. We rely on marketing channels to generate traffic to our websites. See our Unaudited Consolidated Statements of Operations and "Trends" and "Results of Operations" above for additional information on marketing expenses and personnel expenses including stock-based compensation expenses.

At September 30, 2024, we had $16.3 billion in cash, cash equivalents, and investments, of which approximately $11.1 billion is held by our international subsidiaries. Cash, cash equivalents, and long-term investments held by our international subsidiaries are denominated primarily in Euros, U.S. Dollars, and British Pounds Sterling. See Notes 5 and 6 to our Unaudited Consolidated Financial Statements for additional information about our cash equivalents and investments. Our investment policy seeks to preserve capital and maintain sufficient liquidity to meet operational and other needs of the business.

Deferred merchant bookings of $4.9 billion at September 30, 2024 includes cash payments received from travelers in advance of us completing our performance obligations and are comprised principally of amounts estimated to be payable to travel service providers as well as our estimated future revenue for our commission or margin and fees. The amounts are mostly subject to refunds for cancellations.

At September 30, 2024, we had a remaining transition tax liability of $487 million as a result of the Tax Act, which included $257 million reported as "Long-term U.S. transition tax liability" and $230 million included in "Accrued expenses and other current liabilities" in the Unaudited Consolidated Balance Sheet. This liability will be paid over the next two years. Due to a recent U.S. Tax Court decision in Varian Medical Systems, Inc. vs. Commissioner, a portion of our total transition tax liability may be refunded. In accordance with the Tax Act, generally, future repatriation of our international cash will not be subject to a U.S. federal income tax liability as a dividend, but will be subject to U.S. state income taxes and international withholding taxes, which have been accrued by us.

See Note 9 to our Unaudited Consolidated Financial Statements for additional information related to our debt arrangements, including principal amounts, interest rates, and maturity dates. Our revolving credit facility extends a revolving line of credit up to $2 billion to us and provides for the issuance of up to $80 million of letters of credit, as well as up to $100 million of borrowings on same-day notice. The revolving credit facility contains a maximum leverage ratio covenant, compliance with which is a condition to our ability to borrow. At September 30, 2024 there were no borrowings outstanding and $26 million of letters of credit issued under the revolving credit facility. In March 2024, we issued senior notes with varying maturities for an aggregate principal amount of 2.8 billion Euros ($3.0 billion). The proceeds from the issuance of these senior notes are available for general corporate purposes, including to repurchase shares of our common stock and to redeem or repay outstanding indebtedness. In September 2024, we paid $1.1 billion on the maturity of the Senior Notes due September 2024. The convertible senior notes due in May 2025 are currently convertible at the option of the holder and have been classified as "Short-term debt" in the Unaudited Consolidated Balance Sheet as of September 30, 2024. If the note holders exercise their option to convert, we deliver cash to repay the principal amount of the notes and deliver shares of common stock or cash, at our option, to satisfy the conversion value in excess of the principal amount. The outstanding senior notes at September 30, 2024 had cumulative interest to maturity of $3.9 billion, with $529 million payable within the next twelve months.

See Note 10 to our Unaudited Consolidated Financial Statements for additional information related to our share repurchases and dividends declared and paid. During the nine months ended September 30, 2024, we repurchased shares of our common stock for an aggregate cost of $5.3 billion, including $330 million to repurchase shares of our common stock withheld to satisfy employee withholding tax obligations related to stock-based compensation. At September 30, 2024, we had a total remaining authorization of $8.8 billion related to a program authorized by our Board of Directors ("the Board") in 2023 to repurchase up to $20 billion of our common stock. We expect to complete the share repurchases under the remaining authorization by the end of 2026, assuming no major downturn in the travel market. Excise tax obligations that result from our share repurchases are accounted for as a cost of the treasury stock transaction. As of September 30, 2024, we recorded an estimated excise tax liability of $141 million. During the nine months ended September 30, 2024, we paid cash dividends of $885 million. In October 2024, the Board declared a cash dividend of $8.75 per share of common stock, payable on December 31, 2024 to stockholders of record as of the close of business on December 6, 2024.

At September 30, 2024, we had lease obligations of $814 million, of which $194 million is payable within the next twelve months. Additionally, at September 30, 2024, we had, in the aggregate, $1.0 billion of non-cancellable purchase obligations individually greater than $10 million, of which $220 million is payable within the next twelve months. Such purchase obligations relate to agreements to purchase goods and services that are enforceable and legally binding and that specify significant terms, including the quantities to be purchased, price provisions, and the approximate timing of the transaction.

At September 30, 2024, there were $652 million of standby letters of credit and bank guarantees issued on our behalf, which were obtained primarily for regulatory purposes. See Note 13 to our Unaudited Consolidated Financial Statements for additional information related to our commitments and contingencies.

We believe that our existing cash balances and liquid resources will be sufficient to fund our operating activities, capital expenditures, and other obligations through at least the next twelve months. However, if we are not successful in generating sufficient cash flow from operations or in raising additional capital when required in sufficient amounts and on terms acceptable to us, we may be required to reduce our planned capital expenditures and scale back the scope of our business plans, either of which could have a material adverse effect on our business, our ability to compete or our future growth prospects, financial condition, and results of operations. If additional funds were raised through the issuance of equity securities, the percentage ownership of our then current stockholders would be diluted. We may not generate sufficient cash flow from operations in the future, revenues growth or sustained profitability may not be realized, and future borrowings or equity sales may not be available in amounts sufficient to make anticipated capital expenditures, finance our strategies, or repay our indebtedness.

Cash Flow Analysis

Net cash provided by operating activities for the nine months ended September 30, 2024 was $7.6 billion, resulting from net income of $4.8 billion, a favorable net impact from adjustments for non-cash and other items of $1.3 billion, and a favorable net change in working capital and other assets and liabilities of $1.5 billion. Non-cash and other items were principally associated with depreciation and amortization, stock-based compensation expense, provision for expected credit losses and chargebacks, operating lease amortization, and unrealized foreign currency transaction losses related to Euro-denominated debt. For the nine months ended September 30, 2024, deferred merchant bookings and other current liabilities increased by $2.3 billion and accounts receivable increased by $651 million, primarily due to higher business volumes. Merchant revenues increased while agency revenues decreased for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 due to the ongoing shift from agency revenues to merchant revenues at Booking.com.

Net cash provided by operating activities for the nine months ended September 30, 2023 was $6.0 billion, resulting from net income of $4.1 billion, a favorable net impact from adjustments for non-cash and other items of $826 million, and a favorable net change in working capital and other assets and liabilities of $1.1 billion. Non-cash and other items were principally associated with deferred income tax benefit, depreciation and amortization, stock-based compensation expense, provision for expected credit losses and chargebacks, net losses on equity securities, and operating lease amortization. For the nine months ended September 30, 2023, deferred merchant bookings and other current liabilities increased by $2.6 billion and accounts receivable increased by $1.5 billion, primarily due to increases in business volumes.

Net cash provided by investing activities for the nine months ended September 30, 2024 was $204 million, resulting mainly from proceeds from the maturity of investments of $590 million, partially offset with additions to property and equipment of $353 million. Net cash provided by investing activities for the nine months ended September 30, 2023 was $1.5 billion, principally resulting from proceeds from the sale and maturity of investments of $1.8 billion, partially offset with additions to property and equipment of $251 million.

Net cash used in financing activities for the nine months ended September 30, 2024 was $4.3 billion, resulting mainly from payments for the repurchase of common stock of $5.3 billion, payment on the maturity of debt of $1.1 billion, and dividends of $885 million, partially offset with proceeds from the issuance of long-term debt of $3.0 billion. Net cash used in financing activities for the nine months ended September 30, 2023 was $6.4 billion, resulting from payments for the repurchase of common stock of $7.9 billion and payment on the maturity of debt of $500 million, partially offset with proceeds from the issuance of long-term debt of $1.9 billion.

Contingencies

For information related to tax matters, see Note 13 to our Unaudited Consolidated Financial Statements and Part I, Item IA, Risk Factors - "We may have exposure to additional tax liabilities" in our Annual Report on Form 10-K for the year ended December 31, 2023.

For information related to our contingent liabilities, see Note 13 to our Unaudited Consolidated Financial Statements.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operation" in Part I, Item 2, and the documents incorporated by reference contain forward-looking statements. These statements reflect our views regarding current expectations and projections about future events and conditions and are based on currently available information. They are not guarantees of future performance and are subject to risks, uncertainties, and assumptions that are difficult to predict including the Risk Factors identified in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023; therefore, our actual results could differ materially from those expressed or described in the forward-looking statements.

Expressions of future goals and expectations and similar expressions, including "may," "will," "should," "could," "aims," "seeks," "expects," "plans," "anticipates," "intends," "believes," "estimates," "predicts," "potential," "targets," and "continue," reflecting something other than historical fact are intended to identify forward-looking statements. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. However, readers should carefully review the reports and documents we file or furnish from time to time with the Securities and Exchange Commission, particularly our Annual Report on Form 10-K for the year ended December 31, 2023, our subsequent Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K.