Booking Holdings Inc

16. COMMITMENTS AND CONTINGENCIES

Competition and Consumer Protection Reviews

Online travel platforms have been the subject of investigations or inquiries by national competition authorities ("NCAs") or other governmental authorities regarding competition law matters, consumer protection issues, and other areas. The Company is and has been involved in many such investigations. For example, the Company is involved in investigations related to whether Booking.com's contractual parity arrangements with accommodation providers are anti-competitive because they require partners to provide Booking.com with rates, conditions, and availability at least as favorable as those offered to other OTCs or by the partner itself. To resolve certain of the parity-related investigations, the Company has from time to time made commitments regarding future business practices or activities, such as agreeing to narrow the scope of its parity clauses. Some of these investigations have resulted in fines and the Company could incur additional fines and/or be restricted in certain of its business practices in the future.

In 2024, the Comisión Nacional de los Mercados y la Competencia in Spain (the "CNMC") imposed a fine of 413 million Euros and decided to restrict certain of Booking.com's business practices such as those relating to parity provisions and the ranking criteria that Booking.com can use to determine how to rank hotels in its display to customers. Booking.com does not agree with the rationale stated in the decision and the restrictions imposed, and has filed an appeal. Although the Company disagrees with the rationale stated in the decision, the Company accrued a loss of 486 million Euros ($530 million) during the year ended December 31, 2023 (reflecting the initial fine amount in the CNMC's draft decision). As of June 30, 2024, to align with the CNMC's reduced final fine, the Company recorded a decrease of 72 million Euros ($78 million) in its accrual. The initial accrual and subsequent decrease are reflected in "General and administrative" expenses in the Consolidated Statements of Operations. The related liability is included in "Accrued expenses and other current liabilities" in the Consolidated Balance Sheets as of December 31, 2024 and 2023.

In September 2017, the Swiss Price Surveillance Office (the "Swiss PSO") opened an investigation into the level of commissions of Booking.com in Switzerland. Booking.com anticipates a negative decision ordering a reduction of commission in Switzerland. The exact scope, impact, and timing of its effects will depend on the order. Booking.com does not agree with the rationale underlying this expected negative decision and the restrictions expected to be imposed, and is continuing to engage with the Swiss PSO prior to the order being finalized. If the order were to become final, Booking.com plans to challenge aspects of it. In July 2023, the Polish Office of Competition and Consumer Protection opened an investigation into Booking.com's identification of private and professional hosts and its messaging in relation to obligations owed to consumers, and the investigation is ongoing. In 2024, the Italian Competition Authority (the "AGCM") investigated certain Booking.com business practices relating to hotels and other online travel agencies. Booking.com resolved the investigation by making certain commitments to the AGCM regarding its future business practices. If any of the investigations were to find that Booking.com practices violated the respective laws, or as part of a negotiated resolution, Booking.com may face significant fines, restrictions on its business practices, and/or be required to make other commitments.

The Company is and has been involved in investigations or inquiries by NCAs or other governmental authorities involving consumer protection matters. The Company has previously made certain voluntary commitments to authorities to resolve investigations or inquiries that have included showing prices inclusive of all mandatory taxes and charges, providing information about the effect of money earned on search result rankings on or before the search results page, adjusting how discounts and statements concerning popularity or availability are shown, and displaying additional customer service details. It is possible new jurisdictions could negotiate with the Company to implement changes to its business. The Company is unable to predict what, if any, effect any future such commitments will have on its business. To the extent that investigations or inquiries result in additional commitments, fines, damages, or other remedies, the Company's business, financial condition, and results of operations could be harmed.

The Company is unable to predict how any current or future investigations or litigation may be resolved or the long-term impact of any such resolution on its business. For example, competition and consumer-law-related investigations, legislation, or issues could result in private litigation and the Company is currently involved in such litigation. More immediate results could include, among other things, the imposition of fines, payment of damages, commitments to change certain business practices, or reputational damage, any of which could harm the Company's business, results of operations, brands, or competitive position.

Tax Matters

Between December 2018 and August 2021, the Italian tax authorities issued assessments on Booking.com's Italian subsidiary totaling approximately 251 million Euros ($260 million) for the tax years 2013 through 2018, asserting that its transfer pricing policies were inadequate. The Company believes Booking.com has been and continues to be in compliance with Italian tax law. In September 2020, the Italian tax authorities approved the opening of a mutual agreement procedure ("MAP") between Italy and the Netherlands for the 2013 tax year and the Italian tax authorities subsequently approved the inclusion of the tax years 2014 through 2018 in the MAP. Based on the Company's expectation that the Italian assessments for 2013 through 2018, and any transfer pricing assessments received for subsequent open years, will be settled through the MAP process, and after considering potential resolution amounts,33 million Euros ($34 million) have been reflected in net unrecognized tax benefits, the majority of which is recorded to "Other assets, net" in the Consolidated Balance Sheets at December 31, 2024 and 2023. This unrecognized tax benefit is partially offset by a deferred income tax benefit of 15 million Euros ($16 million). As of December 31, 2024, the Company made prepayments of 74 million Euros ($77 million) to the Italian tax authorities to forestall collection enforcement pending the appeal phase of the case. The payments do not constitute an admission that the Company owes the taxes and will be refunded (with interest) to the Company to the extent that the Company prevails. The payments are included in "Other assets, net" in the Consolidated Balance Sheets at December 31, 2024 and 2023.

In June 2024, the Guardia di Finanza ("GdF") of Rome issued a tax audit report to Booking.com, proposing a tax assessment to the Italian Tax Authorities ("ITA") of 396 million Euros ($410 million), excluding penalties and interest, for June 2017 through December 2023. The GdF alleged that a 2017 law (the "STR Law") obliged Booking.com to withhold and remit 21% of the total transaction value for the income tax liabilities of certain short-term rental partners in Italy for the period under audit. While the Company believes that Booking.com has been and continues to be in compliance with Italian tax laws, in November 2024, the Company entered into a settlement agreement with the ITA without admitting liability and paid 313 million Euros ($332 million) to resolve the matter. The settlement is reflected in "General and administrative" expenses in the Consolidated Statement of Operations for the year ended December 31, 2024.

The Company is also involved in other tax-related audits, investigations, and litigation relating to income taxes, value-added taxes, travel transaction taxes (e.g., hotel occupancy taxes), withholding taxes, and other taxes.

Any taxes or assessments in excess of the Company's tax provisions, including the resolution of any tax proceedings or litigation, could have a material adverse impact on the Company's results of operations, cash flows, and financial condition. In some cases, assessments may be significantly in excess of the Company's tax provisions, particularly in instances where the Company does not agree with the tax authority's assessment of how the tax laws may apply to the Company's business.

Other Matters

Beginning in 2014, Booking.com B.V. received several letters from the Netherlands Pension Fund for the Travel Industry (Reiswerk) ("BPF") claiming that it was required to participate in the mandatory pension scheme of the BPF with retroactive effect to 1999, which has a higher contribution rate than the pension scheme in which it is currently participating. BPF instituted legal proceedings and in 2016 the District Court of Amsterdam rejected all of BPF's claims. BPF appealed the decision to the Court of Appeal, and, in May 2019, the Court of Appeal also rejected all of BPF's claims, in each case by ruling that Booking did not meet the definition of a travel intermediary for purposes of the mandatory pension scheme. BPF then appealed to the Netherlands Supreme Court. In April 2021, the Supreme Court overturned the previous decision of the Court of Appeal and held that Booking.com B.V. met the definition of a travel intermediary for the purposes of the mandatory pension scheme. The Supreme Court ruled only on the qualification of Booking.com B.V. as a travel intermediary for the purposes of the mandatory pension scheme and did not rule on the various other defenses brought forward by the Company against BPF's claims. The Supreme Court referred the matter to another Court of Appeal to assess the other defenses brought forward by the Company. In January 2024, that Court of Appeal ruled that Booking.com B.V. is required to participate in the mandatory pension scheme of the BPF with retroactive effect to 1999. The Company has filed an appeal of the decision to the Netherlands Supreme Court. Although the Company disagrees with the decision, it accrued a loss of 253 million Euros ($276 million), included in "Personnel" expenses in the Consolidated Statement of Operations for the year ended December 31, 2023. During the year ended December 31, 2024, the Company recorded additional estimated expenses of 72 million Euros ($77 million) included in "Personnel" expenses in the Consolidated Statements of Operations. The related liability is included in "Accrued expenses and other current liabilities" in the Consolidated Balance Sheets as of December 31, 2024 and 2023. On a go-forward basis, Booking.com B.V. expects to begin paying pension premiums to the BPF scheme or to increase contributions to the benefit of employees under its existing pension scheme.

From time to time, the Company notifies the competent data protection authority, such as the Dutch data protection authority in accordance with its obligations under the General Data Protection Regulation, of certain data security incidents. Should, for example, the Dutch data protection authority decide these incidents were the result of inadequate technical and organizational security measures or practices, it may impose a fine or require other commitments.

The Company has been, is currently, and expects to continue to be, subject to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of third-party intellectual property rights. Such claims could result in the expenditure of significant financial and managerial resources, divert management's attention, and adversely affect the Company's business, reputation, results of operations, and cash flows.

The Company accrues for certain other legal contingencies where it is probable that a loss has been incurred and the amount can be reasonably estimated. Such accrued amounts are not material to the Company's balance sheets and provisions recorded have not been material to the Company's results of operations or cash flows.

Other Contractual Obligations and Contingencies

The Company had $650 million and $533 million of standby letters of credit and bank guarantees issued on behalf of the Company as of December 31, 2024 and 2023, respectively, including those issued under the revolving credit facility. These were obtained primarily for regulatory purposes. See Note 12 for information related to letters of credit issued under the revolving credit facility.

Booking.com offers partner liability insurance that provides protection to certain accommodation partners ("home partners") in instances where a reservation has been made via Booking.com. The partner liability insurance may provide those home partners (both owners and property managers) coverage up to $1 million equivalent per occurrence, subject to limitations and exclusions, against third-party lawsuits claims for bodily injury, or third party personal property damage that occurred during a stay booked through Booking.com. Booking.com retains certain financial risks related to this insurance offering, which is underwritten by third party insurance companies.

17. SEGMENT REPORTING AND GEOGRAPHIC INFORMATION

See Note 1 for a description of the Company's business. The Company's portfolio of brands is organized into four operating segments. The Company determined its operating segments based on how its chief operating decision maker ("CODM"), who is the Chief Executive Officer and President, manages the business, makes operating decisions, and evaluates operating performance. The operating segments are aggregated intoone reportable segment based on the similarity in economic characteristics, other qualitative factors, and the objectives and principles of ASC 280, Segment Reporting.

The CODM reviews revenues and an adjusted measure of earnings before interest, taxes, depreciation, and amortization less additions to property and equipment ("Adjusted EBITDA less Capex") for each operating segment. The following table presents information for the Company's reportable segment. Other segment items include operating expenses such as general and administrative and information technology. See Note 2 for additional information on these expenses.

Decisions to allocate resources to each operating segment are made predominantly through the budgeting and forecasting process. The CODM reviews budget-to-actual variances for revenues and Adjusted EBITDA less Capex to assess performance of the operating segments. The information is also used as a basis for determining compensation for certain employees. Estimates and judgments are made in allocating certain revenues and Adjusted EBITDA less Capex to operating segments due to the integrated nature of the operating segments in the underlying transactions. The allocation process is consistent with the manner in which the CODM assesses the performance of the operating segments. Information on segment assets is not presented as depreciation and amortization is not included in measuring Adjusted EBITDA less Capex.

The following table presents the reconciliation of the Company's segment Adjusted EBITDA less Capex to Income before income taxes:

(1) See Note 16 for additional information.

(2) See Note 22 for additional information.

(3) See Consolidated Statements of Operations.

(4) See Note 20 for additional information.

(5) See Note 21 for additional information.

(6) See Note 18 for additional information.

(7) See Note 12 for additional information.

(8) Primarily consists of the expenses of corporate headquarters and certain other functional departments.

Stock-based compensation included in the determination of segment Adjusted EBITDA less Capex was $522 million, $447 million, and $347 million for the years ended December 31, 2024, 2023, and 2022, respectively.

Geographic Information

The Company's revenues from its businesses outside of the U.S. consists of the results of Booking.com and Agoda in their entirety and the results of the KAYAK and OpenTable businesses located outside of the U.S. This classification is independent of where the consumer resides, where the consumer is physically located while using the Company's services, or the location of the travel service provider or restaurant. For example, a reservation made through Booking.com at a hotel in New York by a consumer in the U.S. is part of the results of the Company's businesses outside of the U.S. The Company's geographic information on revenues for the years ended December 31, 2024, 2023, and 2022 is as follows:

(1) Includes $18.6 billion, $17.0 billion, and $13.4 billion for the years ended December 31, 2024, 2023, and 2022, respectively, attributed to an entity domiciled in the Netherlands.

The following table presents information on the Company's property and equipment (excluding capitalized software) and operating lease assets based on location of the assets at December 31, 2024 and 2023:

18. OTHER INCOME (EXPENSE), NET

The components of other income (expense), net included the following:

(1) Foreign currency transaction gains (losses) include gains of $526 million, losses of $163 million, and gains of $46 million for the years ended December 31, 2024, 2023, and 2022, respectively, related to Euro-denominated debt and accrued interest that were not designated as net investment hedges (see Note 12).

(2) See Note 5 for additional information related to net gains (losses) on equity securities.

(3) See Note 12 for additional information.

19. SUPPLEMENTAL CASH FLOW INFORMATION

As of December 31, 2024 and December 31, 2023, cash and cash equivalents reported in the Consolidated Balance Sheets differ from the amounts of total cash and cash equivalents and restricted cash and cash equivalents as shown in the Consolidated Statements of Cash Flows due to restricted cash and cash equivalents, which are included in "Other current assets" in the Consolidated Balance Sheets, primarily related to the Company's travel-related insurance business.

Noncash investing activity related to additions to property and equipment, including stock-based compensation and accrued liabilities, was $55 million, $50 million, and $48 million for the years ended December 31, 2024, 2023, and 2022, respectively. See Note 13 for additional information on noncash financing activity related to the excise tax on share repurchases.

During the years ended December 31, 2024, 2023, and 2022, the Company made income tax payments of $1.9 billion, $1.8 billion, and $600 million, respectively, and interest payments of $953 million, $842 million, and $380 million, respectively.

20. TRANSFORMATION COSTS

In November 2024, the Company announced its intention to implement certain organizational changes that are expected to improve operating expense efficiency, increase organizational agility, free up resources that can be reinvested into further improving its offering to travelers and partners, and better position the Company for the long term (the "Transformation Program"). The Company currently expects that restructuring costs and accelerated investments related to the Transformation Program will be incurred in the nexttwo tothree years and anticipates these costs to primarily relate to expected workforce reductions, technology investments, and professional fees. The details of the Transformation Program are not yet final and remain subject to consultation with works councils, employee representative bodies, and other relevant organizations, legal requirements in multiple jurisdictions, and the Company completing its analysis of overall Transformation Program costs. For the year ended December 31, 2024, the Transformation Program related costs are recorded in "Transformation costs" in the Consolidated Statement of Operations and primarily consist of professional fees.

21. OTHER OPERATING EXPENSES

During the year ended December 31, 2022, the Company transferred certain customer service operations of Booking.com to Majorel Group Luxembourg S.A. resulting in a loss of $41 million included in "Other operating expenses" in the Consolidated Statement of Operations for the year ended December 31, 2022.

See Note 10 for information on the gain recognized during the year ended December 31, 2022 related to the sale and leaseback transaction for the Booking.com's headquarters building in the Netherlands.

22. OTHER

Terminated Acquisition

In November 2021, the Company entered into an agreement to acquire global flight booking provider Etraveli Group. The completion of the acquisition was subject to certain closing conditions, including regulatory approvals. In September 2023, the European Commission announced its decision to prohibit the acquisition and consequently a termination fee of 85 million Euros ($90 million) was paid by the Company in October 2023 and is recorded in "General and administrative" expenses in the Consolidated Statement of Operations for the year ended December 31, 2023.

Benefit Plans

The Company maintains a defined contribution 401(k) savings plan covering certain U.S. employees and participates in certain defined contribution plans outside of the U.S. for which it provides contributions for eligible employees. The Company's contributions to the defined contribution plans during the years ended December 31, 2024, 2023, and 2022 were $59 million, $55 million, and $40 million, respectively. See Note 16 for information on accruals related to the Netherlands pension fund matter.

Accrued expenses and other current liabilities

Included in "Accrued expenses and other current liabilities" in the Consolidated Balance Sheets at December 31, 2024 and 2023 are accrued liabilities of $597 million and $587 million, respectively, related to marketing expenses and $611 million and $634 million, respectively, related to personnel expenses. In addition, "Accrued expenses and other current liabilities" in the Consolidated Balance Sheets at December 31, 2024 and 2023 include accruals of $336 million and $276 million, respectively, related to the Netherlands pension fund matter (see Note 16).

CONDENSED BALANCE SHEETS

See Notes to Condensed Financial Statements.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

See Notes to Condensed Financial Statements

CONDENSED STATEMENTS OF CASH FLOWS

See Notes to Condensed Financial Statements.

NOTES TO CONDENSED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

These condensed parent company-only financial statements of Booking Holdings Inc. (the "Parent"), are prepared on a "parent company-only" basis and have been derived from and should be read in conjunction with the consolidated financial statements and related notes of Booking Holdings Inc. and subsidiaries included in Part IV, Item 15 of this Annual Report on Form 10-K (the "Consolidated Financial Statements"). Under a parent company-only presentation, investments in the parent's subsidiaries are accounted for under the equity method of accounting. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.

2. DEBT

See Note 12 to the Consolidated Financial Statements for additional information on the Parent's revolving credit facility and outstanding debt.

3. DIVIDENDS FROM SUBSIDIARIES

Cash dividends paid to the Parent by the subsidiaries were $7.2 billion, $7.3 billion, and $7.3 billion for the years ended December 31, 2024 and 2023, and 2022, respectively, and are classified within "Net cash provided by operating activities" or "Net cash provided by (used in) investing activities," as appropriate, in the Condensed Statements of Cash Flows.

4. GUARANTEES

The Parent had $721 million and $389 million of guarantees issued on behalf of the Parent's subsidiaries as of December 31, 2024 and 2023, respectively, which are primarily related to arrangements with payment processors and networks.