Airbnb (ABNB 1.07%) reported fourth-quarter and fiscal year 2021 results after the markets closed on Tuesday, Feb. 15. The company impressed by delivering record profits.
Airbnb was devastated at the pandemic onset when travel demand decreased significantly. Management was forced to implement changes to its operations that began to pay off as travel demand rebounds.
Image source: Getty Images.
Cost discipline is paying off for Airbnb
Airbnb's net income increased to $55 million in Q4, which ended Dec. 31. That's a massive improvement from the $3.9 billion loss reported in the same quarter last year and the $352 million loss in Q4 2019.
Controlling costs was a big part of the increase in profits, but rising revenue also played a prominent role. Overall revenue was up by 38% to $1.5 billion compared to the same quarter in 2019, before the outbreak.
In the conference call that followed the Q4 earnings release, Airbnb CEO Brian Chesky said:
Nearly two years into the pandemic, it's clear that we are undergoing the biggest change in travel since the advent of commercial flying. Remote work has untethered many people from the need to be in an office. And as a result, people are spreading out to thousands of towns and cities, staying for weeks, months, or even entire seasons at a time.
The increase in flexibility is creating new opportunities for folks to travel. In Q4, nearly half of Airbnb's nights booked were for stays of one week or longer. Stays of 28 days or longer have been its fastest-growing category since 2019.
The boost in revenue has a more straightforward path to the bottom line because management made adjustments to its cost structure at the onset of the pandemic. Airbnb lowered its variable costs, marketing expenses, and fixed costs. It helps that in Q4, 90% of Airbnb's traffic came from direct and unpaid sources.
Profits are also increasing because Airbnb serves fewer people paying more for each night of travel. The favorable unit economics are connected to 25% of Airbnb's improving profit margins. That's evident by the 3% decrease from Q4 2019 in gross nights and experiences booked, while the value of those nights and experiences booked increased by 36% in the same period.
The good times continue for Airbnb
Fortunately for shareholders, management expects the momentum to continue into the next quarter and the rest of 2022. Airbnb is forecasting revenue of $1.45 billion at the midpoint and expects to report its first-ever positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the first quarter of 2022.
That's a sigh of relief for those who thought the rise of the omicron variant could slow the company's progress. If you have not already done so, now might be an excellent time to consider adding Airbnb shares to your portfolio.
