Airbnb Earnings: What to Watch

The hospitality business is recovering, but is not quite back to full strength. In this video from "Beat & Raise" on Motley Fool Live, recorded on Oct. 6 , Fool.com contributors Rachel Warren, Demitri Kalogeropoulos, and Brian Withers share their perspective about the upcoming earnings report from Airbnb (ABNB 1.17%), slated for Nov. 11.

Brian Withers: Let's hit Airbnb. Rachel, I hope that's you.

Rachel Warren: Okay. It is, yes. I'm going to share my screen this time, now I'll know what to do. [laughs] I think just about all of our members at least familiar with Airbnb ticker symbol ABNB.

The company isn't set to report its earnings until November 11th. I think a lot of investors are very curious to see what those earnings are going to look like. Particularly because the travel industry has started to recover from the pandemic. But it's still isn't back to pre-pandemic levels.

Some estimates I've seen are saying that the travel industry as a whole may not return to pre-pandemic levels until 2024 and beyond. It's very interesting to see how Airbnb is operating within this changing space. Before we dive into the earnings premium, just going to do a very quick rundown of the company. Airbnb is a relatively new company, so it was only founded in 2008.

It just became publicly traded last December, and from that time to now, shares are only up about 19 percent. I think this goes to show that there's still a lot of hesitation among investors regarding the travel industry with COVID cases still rising in some parts of the world and variance, and also continuing to be mixed restrictions in terms of orders and people having the ability to travel.

Another point I'd like to mention for investors, who maybe have been unsure about Airbnb given the general climate surrounding travel, is the fact that it has increasingly seized a bigger and bigger slice of overall vacation rental market over time.

There was actually an article on Vox in 2019 that reported that American consumers spent more on Airbnb than they did on Hilton in the prior year. That Airbnb had grown to control about 20 percent of the entire US consumer lodging market. More than 20 percent share of the vacation rental market of the US alone, and that was, of course, now a couple of years ago, that doesn't even begin to tap into its role in the international vacation rental market.

I'm to take a brief look at management's projections for the upcoming quarter, as well as the stock performance over the past year. Then delve into some quick numbers from the company's previous two reports to offer some context. The interesting thing is we're looking toward the third quarter for Airbnb. Historically, the third quarter has always been Airbnb's best quarter, which makes sense when you consider that period includes much of the busy summer travel vacation season. I'm going to share my screen here.

Withers: Look at this, look at that, pro. [laughs]

Warren: There we go. [laughs]

The funny thing is management did not actually release specific numbers. They gave themselves some wiggle room here, which I think is great. It also keeps investors on their toes a little bit of wild anticipation of what are they going to report. They did say, though in very strong terms, they are projecting the strongest quarterly revenue on record in the history of their company this far, and the highest adjusted EBITDA dollars and margin ever.

They're also projecting that nights and experiences booked in the third quarter will significantly outperform the third quarter of 2020, but they do think those could come down compared to the second quarter of this year and might still remain below the third quarter of 2019 levels, which again makes sense given that the travel industry is still in this slow but steady recovery pattern.

Things to watch. Definitely want to watch those revenue numbers. I will say the most recent quarter that Airbnb reported, which we'll briefly go over here in a minute, was excellent in terms of its revenue growth. You want to look at the net losses it's reporting, or indeed it actually turned a profit in this quarter. Airbnb, again, relatively new company, very high-growth.

They have not had a profitable quarter in their company's history, and they had some pretty severe net losses during those earlier days of the pandemic.

But the most recent quarter, they had really narrowed down that net loss numbers, so definitely want to be looking at that. You have looking at adjusted earnings before interest, taxes, depreciation, amortization. You want to be looking at nights and experiences booked.

That's another key metric for Airbnb. That is a huge source of their quarterly and annual revenues, as well as gross booking value, which indicates the total payments processed on their platform.

Those are all key things to be watching. I'll stop my share here real quick. A quick look back at how Airbnb's financial performance has been lately. Given those things you're going to want to be looking for in its upcoming quarter. It's no surprise that it reported revenue losses in 2020, but it did manage to finish the year with revenue down only 30 percent last year, which considering how bad things were with the travel industry at the height of the pandemic, I think it could have definitely been worse. Then you fast forward to the most recent quarter. The second quarter of fiscal 2021. Its revenue increased nearly 300 percent year-over-year, and it was actually 10 percent higher than its revenue in the second quarter of 2019, before the pandemic.

Exceptional numbers there. It improved net losses, which was another big thing to look for in this upcoming quarter. Its net loss in the second quarter was 68 million, which was actually an improvement of more than 500 million year-over-year. Also in the second quarter, it's nights and experiences booked rose to a 197 percent year-over-year, and gross bookings value rose 320 percent year-over-year and was actually up by nearly 40 percent compared to pre-COVID level.

Given how fast Airbnb has recovered in these most recent quarters, I'm pretty excited to see what it has to say in November. What do you guys think?

Withers: I love Airbnb. I think it's just a neat way to travel.

I feel like that it isn't just taking market share from like hotels and stuff. I think it's expanding the universe of things people can do and places people can go and the way that they can travel, it's just giving travelers one more option, a way to do things. We use Vrbo just because I've been a longtime customer.

I often go to Airbnb and compare and whatnot. This past weekend, we needed to do a short trip and had an overnight stay, and all the Airbnb places were completely booked. There was one place [laughs] that was like 35 minutes away, and my wife was like, no, we need to be closer. We ended up getting a hotel. We ended up spending more money. It was a hotel. It was a sleep in. [laughs] I don't know if ever been in a sleep in. It wasn't great. It wasn't in a great part of town. It's not a fun experience. They allowed the dog, which was surprising, we hadn't had the dog in a hotel room before, so I don't know that I'm going to repeat that.

We were looking at going to the mountains the other weekend and they were all booked up too. All of these Airbnb properties were booked. People are absolutely getting back out there. I'm excited to see the nights and experiences booked. I wish them the best. I think this is really fun way to travel. Demitri, you ever use their platform?

Demitri Kalogeropoulos: I likely I've used the app a lot. I really loved the shopping experience there and I prefer to live in, from visiting a city. I'd like to get to a neighborhood a little bit more rather than wherever the hotels normally are. I haven't booked yet.

One thing, I wish they do a little better, obviously, given the numbers you were talking about, Rachel, the revenues up even though they are nights are down, so clearly prices are going up is what that's telling me.

That makes a lot of sense because there's a lot of demand like Brian just said, for travel right now. I guess not a whole lot of supply in that way, but I guess I don't like those fees toward the end, that seemed to always jack the price way up higher than what you were thinking. I realize they have those fees, cleaning fees, and I guess they've got a booking fee or something like that.

Warren: Yes, [inaudible 03:47:31] . [laughs]

Kalogeropoulos: Yes. But I guess I love they're shopping their product. I love the idea too.