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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM 10-Q
______________
(Mark One)
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____ to _____
Commission File Number: 001-39778
______________
Airbnb, Inc.
(Exact Name of Registrant as Specified in Its Charter)
______________
Delaware 26-3051428
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
888 Brannan Street
San Francisco, California 94103
(Address of Principal Executive Offices) (Zip Code)
(415) 510-4027
(Registrant’s Telephone Number, Including Area Code)
______________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Class A common stock, par value $0.0001 per share
ABNB The Nasdaq Stock Market
______________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 18, 2022, 399,166,995 shares of the registrant's Class A common stock were outstanding, 240,331,603 shares of the registrant's Class B common stock were outstanding, no shares of the registrant’s Class C common stock were outstanding, and 9,200,000 shares of the registrant’s Class H common stock were outstanding.



AIRBNB, INC.
Form 10-Q

TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1.
3
3
4
5
6
8
Item 3.
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.



Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future financial condition, future operations, projected costs, prospects, plans, objectives of management, and expected market growth, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “shall,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “goal,” “objective,” “seeks,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

the effects of the COVID-19 pandemic, including as a result of new strains or variants of the virus on our business, the travel industry, travel trends, and the global economy generally;
the effects of certain global events, such as current or future military conflict, including between Russia and Ukraine, terrorism, sanctions, rising energy prices, inflation, interest rates, the depth and duration of any recession, and other geopolitical events globally, on our business, the travel industry, travel trends, and the global economy generally;
our expectations regarding our financial performance, including our revenue, costs, Adjusted EBITDA, and Free Cash Flow;
our expectations regarding future operating performance, including Nights and Experiences Booked, Gross Booking Value (“GBV”), and GBV per Night and Experience Booked;
our ability to attract and retain Hosts and guests;
our ability to compete in our industry;
our expectations regarding the resilience of our model, including in areas such as domestic travel, short-distance travel, travel outside of top cities, and long-term stays;
seasonality, including the return of pre-COVID-19 pandemic patterns of seasonality in 2022, and the effects of seasonal trends on our results of operations;
our expectations regarding the impact of the reduction in performance marketing spend to focus on brand marketing, and our ability to continue to attract guests and Hosts to our platform through direct and unpaid channels;
our ability to effectively manage our exposure to fluctuations in foreign currency exchange rates;
anticipated trends, developments, and challenges in our industry, business, and the highly competitive markets in which we operate;
our ability to anticipate market needs or develop new or enhanced offerings and services to meet those needs;
our ability to manage expansion into international markets and new businesses;
our ability to stay in compliance with laws and regulations, including tax laws, that currently apply or may become applicable to our business both in the United States and internationally and our expectations regarding various laws and restrictions that relate to our business;
our expectations regarding our income tax liabilities, including anticipated increases in foreign taxes, and the adequacy of our reserves;
our ability to effectively manage our growth and expand our infrastructure and maintain our corporate culture;
our ability to identify, recruit, and retain skilled personnel, including key members of senior management;
the safety, affordability, and convenience of our platform and our offerings;
the sufficiency of our cash, cash equivalents, and investments to meet our liquidity needs;
our ability to successfully defend litigation brought against us;
our ability to maintain, protect, and enhance our intellectual property;
our ability to make required payments under our credit agreement and to comply with the various requirements of our indebtedness; and
the increased expenses associated with being a public company.

We caution you that the foregoing list does not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations, estimates, forecasts, and projections about future events and trends that we believe may affect our business, results of operations, financial condition, and prospects. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur at all. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2021, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, and any subsequent filings, as well as those identified in this Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made available. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information
1

forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this Quarterly Report on Form 10-Q, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this Quarterly Report on Form 10-Q by these cautionary statements.


2

PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements

Airbnb, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except par value)
(unaudited)
As of As of
December 31,
2021
June 30,
2022
Assets
Current assets:
Cash and cash equivalents $ 6,067,438  $ 7,837,992 
Marketable securities 2,255,038  2,057,487 
Restricted cash 14,764  14,768 
Funds receivable and amounts held on behalf of customers 3,715,471  7,465,510 
Prepaids and other current assets (including customer receivables of $142,519 and $204,559 and allowances of $30,870 and $34,071, respectively)
333,669  449,892 
Total current assets 12,386,380  17,825,649 
Property and equipment, net 156,585  118,056 
Operating lease right-of-use assets 272,036  164,633 
Intangible assets, net 52,308  42,426 
Goodwill 652,602  649,418 
Other assets, noncurrent 188,563  258,944 
Total assets $ 13,708,474  $ 19,059,126 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 118,361  $ 139,248 
Operating lease liabilities, current 63,479  61,702 
Accrued expenses and other current liabilities 1,558,243  1,639,842 
Funds payable and amounts payable to customers 3,715,471  7,465,510 
Unearned fees 903,728  1,980,863 
Total current liabilities 6,359,282  11,287,165 
Long-term debt 1,982,537  1,984,618 
Operating lease liabilities, noncurrent 372,483  334,989 
Other liabilities, noncurrent 218,459  207,329 
Total liabilities 8,932,761  13,814,101 
Commitments and contingencies (Note 8)
Stockholders’ equity:
Common stock, $0.0001 par value, 2,000,000 shares of Class A common stock authorized as of December 31, 2021 and June 30, 2022; 364,500 and 398,763 shares of Class A common stock issued and outstanding as of December 31, 2021 and June 30, 2022, respectively; 710,000 shares of Class B common stock authorized as of December 31, 2021 and June 30, 2022; 269,024 and 240,729 shares of Class B common stock issued and outstanding as of December 31, 2021 and June 30, 2022, respectively; 2,000,000 shares of Class C common stock authorized as of December 31, 2021 and June 30, 2022, respectively; zero shares of Class C common stock issued and outstanding as of December 31, 2021 and June 30, 2022; 26,000 shares of Class H common stock authorized as of December 31, 2021 and June 30, 2022; 9,200 shares issued and zero shares of Class H common stock outstanding as of December 31, 2021 and June 30, 2022
63  64 
Additional paid-in capital 11,140,284  11,266,683 
Accumulated other comprehensive loss (6,893) (24,030)
Accumulated deficit (6,357,741) (5,997,692)
Total stockholders’ equity 4,775,713  5,245,025 
Total liabilities and stockholders’ equity $ 13,708,474  $ 19,059,126 


The accompanying notes are an integral part of these condensed consolidated financial statements.
3

Airbnb, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2021 2022 2021 2022
Revenue $ 1,335,196  $ 2,104,107  $ 2,222,132  $ 3,613,044 
Costs and expenses:
Cost of revenue 294,427  390,107  548,942  752,730 
Operations and support 208,125  258,255  393,561  491,267 
Product development 349,734  375,050  712,795  737,977 
Sales and marketing 315,323  379,875  544,448  724,491 
General and administrative 218,303  243,254  408,065  453,827 
Restructuring charges 562  88,743  112,544  89,060 
Total costs and expenses 1,386,474  1,735,284  2,720,355  3,249,352 
Income (loss) from operations (51,278) 368,823  (498,223) 363,692 
Interest income 2,942  20,247  5,994  24,991 
Interest expense (6,520) (7,483) (428,431) (13,247)
Other income (expense), net (2,128) 1,524  (302,226) (411)
Income (loss) before income taxes (56,984) 383,111  (1,222,886) 375,025 
Provision for income taxes 11,233  4,270  17,542  14,976 
Net income (loss) $ (68,217) $ 378,841  $ (1,240,428) $ 360,049 
Net income (loss) per share attributable to Class A and Class B common stockholders:
Basic $ (0.11) $ 0.59  $ (2.05) $ 0.57 
Diluted $ (0.11) $ 0.56  $ (2.05) $ 0.53 
Weighted-average shares used in computing net income (loss) per share attributable to Class A and Class B common stockholders:
Basic 611,739  638,407  606,380  636,869 
Diluted 611,739  683,536  606,380  684,148 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

Airbnb, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2021 2022 2021 2022
Net income (loss) $ (68,217) $ 378,841  $ (1,240,428) $ 360,049 
Other comprehensive income (loss):
Net unrealized loss on available-for-sale marketable securities, net of tax (165) (2,108) (1,121) (6,662)
Foreign currency translation adjustments 2,372  (9,507) (1,511) (10,475)
Other comprehensive income (loss) 2,207  (11,615) (2,632) (17,137)
Comprehensive income (loss) $ (66,010) $ 367,226  $ (1,243,060) $ 342,912 


The accompanying notes are an integral part of these condensed consolidated financial statements.
5

Airbnb, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
(unaudited)
Common Stock Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’ Equity
Shares
Amount
Balances as of March 31, 2021 608,057  $ 61  $ 10,339,480  $ (2,200) $ (7,177,918) $ 3,159,423 
Net loss —  —  —  —  (68,217) (68,217)
Other comprehensive income —  —  —  2,207  —  2,207 
Exercise of common stock options 5,848  36,061  —  —  36,062 
Issuance of common stock upon settlement of RSUs, net of shares withheld 4,635  —  (7,738) —  —  (7,738)
Issuance of common stock under employee stock purchase plan, net of shares withheld 466  —  25,464  —  —  25,464 
Stock-based compensation —  —  246,000  —  —  246,000 
Balances as of June 30, 2021 619,006  $ 62  $ 10,639,267  $ $ (7,246,135) $ 3,393,201 

Common Stock Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’ Equity
Shares
Amount
Balances as of March 31, 2022 636,422  $ 64  $ 11,126,300  $ (12,415) $ (6,376,533) $ 4,737,416 
Net income —  —  —  —  378,841  378,841 
Other comprehensive loss —  —  —  (11,615) —  (11,615)
Exercise of common stock options 847  —  4,821  —  —  4,821 
Issuance of common stock upon settlement of RSUs, net of shares withheld 2,026  —  (132,831) —  —  (132,831)
Issuance of common stock under employee stock purchase plan, net of shares withheld 197  —  20,330  —  —  20,330 
Stock-based compensation —  —  248,063  —  —  248,063 
Balances as of June 30, 2022 639,492  $ 64  $ 11,266,683  $ (24,030) $ (5,997,692) $ 5,245,025 

The accompanying notes are an integral part of these condensed consolidated financial statements.




6

Airbnb, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
(unaudited)
Common Stock Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’ Equity
Shares
Amount
Balances as of December 31, 2020 599,197  $ 60  $ 8,904,791  $ 2,639  $ (6,005,707) $ 2,901,783 
Net loss —  —  —  —  (1,240,428) (1,240,428)
Other comprehensive loss —  —  —  (2,632) —  (2,632)
Exercise of common stock options 11,137  83,853  —  —  83,855 
Issuance of common stock upon settlement of RSUs, net of shares withheld 8,206  —  (22,792) —  —  (22,792)
Reclassification of derivative warrant liability to equity —  —  1,277,168  —  —  1,277,168 
Purchase of capped calls —  —  (100,200) —  —  (100,200)
Issuance of common stock under employee stock purchase plan, net of shares withheld 466  —  25,464  —  —  25,464 
Stock-based compensation —  —  470,983  —  —  470,983 
Balances as of June 30, 2021 619,006  $ 62  $ 10,639,267  $ $ (7,246,135) $ 3,393,201 

Common Stock Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’ Equity
Shares
Amount
Balances as of December 31, 2021 633,524  $ 63  $ 11,140,284  $ (6,893) $ (6,357,741) $ 4,775,713 
Net income —  —  —  —  360,049  360,049 
Other comprehensive loss —  —  —  (17,137) —  (17,137)
Exercise of common stock options 1,631  —  16,473  —  —  16,473 
Issuance of common stock upon settlement of RSUs, net of shares withheld 4,140  (357,190) —  —  (357,189)
Issuance of common stock under employee stock purchase plan, net of shares withheld 197  —  20,330  —  —  20,330 
Stock-based compensation —  —  446,786  —  —  446,786 
Balances as of June 30, 2022 639,492  $ 64  $ 11,266,683  $ (24,030) $ (5,997,692) $ 5,245,025 

The accompanying notes are an integral part of these condensed consolidated financial statements.
7

Airbnb, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six Months Ended June 30,
2021 2022
Cash flows from operating activities:
Net income (loss) $ (1,240,428) $ 360,049 
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization 73,788  55,237 
Bad debt expense 9,622  20,270 
Stock-based compensation expense 462,337  442,028 
(Gain) loss on investments, net (10,847) 2,852 
Change in fair value of warrant liability 291,987  — 
Amortization of debt discount and debt issuance costs 6,362  2,081 
Noncash interest expense, net 4,879  4,979 
Foreign exchange (gain) loss (16,974) 38,241 
Impairment of long-lived assets 112,545  88,749 
Loss from extinguishment of debt 377,248  — 
Other, net 4,417  9,904 
Changes in operating assets and liabilities:
Prepaids and other assets (52,146) (186,718)
Operating lease right-of-use assets 19,708  18,054 
Accounts payable 18,109  23,266 
Accrued expenses and other liabilities 281,607  71,237 
Operating lease liabilities (22,177) (26,811)
Unearned fees 1,075,993  1,078,321 
Net cash provided by operating activities 1,396,030  2,001,739 
Cash flows from investing activities:
Purchases of property and equipment (15,358) (11,007)
Purchases of marketable securities (2,807,829) (2,078,797)
Sales of marketable securities 1,172,953  581,436 
Maturities of marketable securities 803,464  1,682,246 
Other investing activities, net —  (2,847)
Net cash provided by (used in) investing activities (846,770) 171,031 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8

Airbnb, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six Months Ended June 30,
2021 2022
Cash flows from financing activities:
Taxes paid related to net share settlement of equity awards $ (138,924) $ (344,559)
Principal repayment of long-term debt (1,995,000) — 
Prepayment penalty on long-term debt (212,883) — 
Proceeds from issuance of convertible senior notes, net of issuance costs 1,979,166  — 
Purchases of capped calls related to convertible senior notes (100,200) — 
Proceeds from exercise of stock options 83,855  16,473 
Proceeds from the issuance of common stock under employee stock purchase plan 25,464  20,330 
Change in funds payable and amounts payable to customers 4,141,754  3,957,242 
Net cash provided by financing activities 3,783,232  3,649,486 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (55,754) (307,885)
Net increase in cash, cash equivalents, and restricted cash 4,276,738  5,514,371 
Cash, cash equivalents, and restricted cash, beginning of period 7,668,252  9,727,289 
Cash, cash equivalents, and restricted cash, end of period $ 11,944,990  $ 15,241,660 
Supplemental disclosures of cash flow information:
Cash paid for income taxes, net of refunds $ 11,744  $ 27,523 
Cash paid for interest $ 45,047  $ 6,179 
The accompanying notes are an integral part of these condensed consolidated financial statements.
9


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 (“condensed consolidated 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, 2021, included in our Annual Report on Form 10-K, filed with the SEC on February 25, 2022. There have been no changes to the Company’s significant accounting policies described in the Annual Report on Form 10-K for the year ended December 31, 2021 that have had a material impact on our condensed consolidated financial statements and related notes. The results for the interim periods are not necessarily indicative of results for the full year.

In the opinion of management, these condensed consolidated 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 condensed consolidated 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, 2022, the Company’s consolidated VIEs were not material to the condensed consolidated financial statements.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the condensed consolidated 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 coronavirus disease (“COVID-19”) pandemic 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 consolidated 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 consolidated financial statements could be affected.

Recently Adopted Accounting Standards

In May 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-04, Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Topic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40), which clarifies existing guidance for freestanding written call options which are equity classified and remain so after they are modified or exchanged in order to reduce diversity in practice. The standard is effective for public entities in fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company adopted the standard during the first quarter of 2022, which did not have an impact on the Company's condensed consolidated financial statements.

10


Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
Recently Issued Accounting Standards Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which provides optional expedients and exceptions to contract modifications and hedging relationships that reference the London Interbank Offered Rate or another reference rate expected to be discontinued. The standard is effective upon issuance and may be applied at the beginning of the interim period that includes March 12, 2020 through December 31, 2022. In January 2021, the FASB issued ASU 2021-01, which clarified the scope of Topic 848 to include derivatives that are affected by a change in the interest rate used for margining, discounting, or contract price alignment that do not also reference London Interbank Offered Rate or another reference rate that is expected to be discontinued as a result of the reference rate reform. The standard is effective upon issuance and may be applied retroactively as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively to any new modifications within an interim period including or subsequent to January 7, 2021. The Company is evaluating the impact on the Company’s consolidated financial statements.

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 is evaluating the impact on the Company’s consolidated financial statements.

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 consolidated 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 consolidated financial statements or disclosures.

Revision of Previously Issued Financial Statements

The condensed consolidated statements of cash flows for the six months ended June 30, 2021 has been revised to correct for errors identified by management during the preparation of the financial statements for the three months ended March 31, 2022. The errors understated cash flows from operating activities by $110 million and overstated the cash flows from financing activities by $118 million for the six months ended June 30, 2021, and the ending balance of cash, cash equivalents, and restricted cash, by $8 million for the period ended June 30, 2021. Management has determined that these errors did not result in the previously issued financial statements being materially misstated. These errors primarily related to the timing of tax payments from the net settlement of equity awards at the initial public offering in December 2020. In particular, in 2020, the Company reported $1.7 billion of cash used in financing activities to cover taxes paid related to the net share settlement of its equity awards that vested upon the initial public offering. However, approximately $123 million of this amount was actually remitted to taxing authorities in foreign jurisdictions in 2021, of which $116 million was remitted during the six months ended June 30, 2021. This had no impact on the Company’s condensed consolidated financial statements outside of the presentation in the condensed consolidated statements of cash flow and did not affect the condensed consolidated balance sheets, condensed consolidated statements of operations or condensed consolidated statements of stockholders’ equity.

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 thousands):

As of
December 31,
2021
June 30,
2022
Cash and cash equivalents $ 6,067,438  $ 7,837,992 
Cash and cash equivalents included in funds receivable and amounts held on behalf of customers 3,645,087  7,388,900 
Restricted cash 14,764  14,768 
Total cash, cash equivalents, and restricted cash presented in the condensed consolidated statements of cash flows $ 9,727,289  $ 15,241,660 
11


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 thousands):
As of
December 31,
2021
June 30,
2022
Indirect taxes payable $ 309,616  $ 473,894 
Compensation and related benefits 415,626  307,126 
Indirect tax reserves 182,796  190,198 
Gift card liability 98,129  102,187 
Other 552,076  566,437 
Total accrued expenses and other current liabilities $ 1,558,243  $ 1,639,842 

Payments to Customers

The 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 thousands):

Three Months Ended June 30, Six Months Ended June 30,
2021 2022 2021 2022
Reductions to revenue
$ 33,498  $ 67,341  $ 59,354  $ 112,293 
Charges to operations and support
12,689  22,311  27,498  44,041 
Charges to sales and marketing expense
12,342  14,635  22,117  25,108 
Total payments made to customers
$ 58,529  $ 104,287  $ 108,969  $ 181,442 

Note 4. Investments

Debt Securities

The following tables summarize the amortized cost, gross unrealized gains and losses, and fair value of the Company’s available-for-sale debt securities aggregated by investment category (in thousands):

As of December 31, 2021 Classification as of December 31, 2021
Cost or
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Total
Estimated
Fair Value
Cash and
Cash
Equivalents
Marketable
Securities
Other
Assets,
Noncurrent
Certificates of deposit $ 395,351  $ —  $ —  $ 395,351  $ 31,117  $ 364,234  $ — 
Government bonds(1)
850  13  —  863  —  863  — 
Commercial paper 1,156,963  —  —  1,156,963  163,959  993,004  — 
Corporate debt securities 917,718  220  (3,147) 914,791  41,439  862,901  10,451 
Mortgage-backed and asset-backed securities
34,019  338  (321) 34,036  —  34,036  — 
Total
$ 2,504,901  $ 571  $ (3,468) $ 2,502,004  $ 236,515  $ 2,255,038  $ 10,451 

(1)Includes U.S. government and government agency debt securities
12


Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
As of June 30, 2022 Classification as of June 30, 2022
Cost or
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Total
Estimated
Fair Value
Cash and
Cash
Equivalents
Marketable
Securities
Other
Assets,
Noncurrent
Certificates of deposit
$ 571,218  $ —  $ —  $ 571,218  $ 11,500  $ 559,718  $ — 
Government bonds(1)
850  —  (24) 826  —  826  — 
Commercial paper
1,057,708  —  (5) 1,057,703  288,510  769,193  — 
Corporate debt securities
746,904  (7,195) 739,715  31,976  697,274  10,465 
Mortgage-backed and asset-backed securities
32,803  (2,328) 30,476  —  30,476  — 
Total
$ 2,409,483  $ $ (9,552) $ 2,399,938  $ 331,986  $ 2,057,487  $ 10,465 

(1)Includes U.S. government and government agency debt securities

As of December 31, 2021 and June 30, 2022, the Company does not have any available-for-sale debt securities for which the Company has recorded credit related losses.

Before reclassifications of gains and losses from accumulated other comprehensive income (loss) on the condensed consolidated balance sheets to other income (expense), net in the condensed consolidated statements of operations, unrealized gains and losses, net of tax, for the three and six months ended June 30, 2021 and 2022, were not material. Realized gains and losses reclassified from accumulated other comprehensive income (loss) to other income (expense), net were not material for the three and six months ended June 30, 2021 and 2022.

Debt securities in an unrealized loss position had an estimated fair value of $801.5 million and unrealized losses of $3.5 million as of December 31, 2021, and an estimated fair value of $734.5 million and unrealized losses of $9.5 million as of June 30, 2022. An immaterial amount of securities were in a continuous unrealized loss position for more than twelve months as of December 31, 2021, and $46.2 million of securities were in a continuous unrealized loss position for more than twelve months as of June 30, 2022.

The following table summarizes the contractual maturities of the Company’s available-for-sale debt securities (in thousands):

As of June 30, 2022
Amortized
Cost
Estimated
Fair Value
Due within one year $ 2,248,257  $ 2,244,780 
Due in one year to five years 138,551  134,770 
Due within five to ten years 20,332  18,110 
Due beyond ten years 2,343  2,278 
Total $ 2,409,483  $ 2,399,938 

Equity Investments

Gains and Losses on Marketable Equity Investments

During the six months ended June 30, 2021, the marketable equity investments were sold, and the Company realized a net loss of $14.3 million in other income (expense), net on the condensed consolidated statements of operations.

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 $75.0 million as of both December 31, 2021 and June 30, 2022, 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 for the three and six months ended June 30, 2021 and 2022. As of December 31, 2021 and June 30, 2022, the cumulative downward adjustments for observable price changes and impairment were $56.2 million.

Investments Accounted for Under the Equity Method

As of December 31, 2021 and June 30, 2022, the carrying values of the Company’s equity method investments were $17.4 million and $14.6 million, respectively. The Company recorded unrealized losses of $1.3 million and $0.9 million for the three and six months ended June 30, 2021, respectively, and $1.6 million and $2.8 million for the three and six months ended June 30, 2022, 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, 2021 and 2022.

13


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 thousands):
As of December 31, 2021
Level 1 Level 2 Level 3 Total
Assets
Cash equivalents:
Money market funds $ 1,923,184  $ —  $ —  $ 1,923,184 
Certificates of deposit 31,117  —  —  31,117 
Commercial paper —  163,959  —  163,959 
Corporate debt securities —  41,439  —  41,439 
1,954,301  205,398  —  2,159,699 
Marketable securities:
Certificates of deposit 364,234  —  —  364,234 
U.S. government and government agency debt securities —  863  —  863 
Commercial paper —  993,004  —  993,004 
Corporate debt securities —  862,901  —  862,901 
Mortgage-backed and asset-backed securities —  34,036  —  34,036 
364,234  1,890,804  —  2,255,038 
Funds receivable and amounts held on behalf of customers:
Money market funds 466,319  —  —  466,319 
Prepaids and other current assets:
Foreign exchange derivative assets —  25,918  —  25,918 
Other assets, noncurrent:
Corporate debt securities —  —  10,451  10,451 
Total assets at fair value $ 2,784,854  $ 2,122,120  $ 10,451  $ 4,917,425 
Liabilities
Accrued expenses and other current liabilities:
Foreign exchange derivative liabilities $ —  $ 10,280  $ —  $ 10,280 
Total liabilities at fair value $ —  $ 10,280  $ —  $ 10,280 
14


Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
As of June 30, 2022
Level 1 Level 2 Level 3 Total
Assets
Cash equivalents:
Money market funds $ 3,575,350  $ —  $ —  $ 3,575,350 
Certificates of deposit 11,500  —  —  11,500 
Commercial paper —  288,510  —  288,510 
Corporate debt securities —  31,976  —  31,976 
3,586,850  320,486  —  3,907,336 
Marketable securities:
Certificates of deposit 559,718  —  —  559,718 
U.S. government and government agency debt securities —  826  —  826 
Commercial paper —  769,193  —  769,193 
Corporate debt securities —  697,274  —  697,274 
Mortgage-backed and asset-backed securities —  30,476  —  30,476 
559,718  1,497,769  —  2,057,487 
Funds receivable and amounts held on behalf of customers:
Money market funds 619,283  —  —  619,283 
Prepaids and other current assets:
Foreign exchange derivative assets —  54,253  —  54,253 
Other assets, noncurrent:
Corporate debt securities —  —  10,465  10,465 
Total assets at fair value $ 4,765,851  $ 1,872,508  $ 10,465  $ 6,648,824 
Liabilities
Accrued expenses and other current liabilities:
Foreign exchange derivative liabilities $ —  $ 13,457  $ —  $ 13,457 
Total liabilities at fair value $ —  $ 13,457  $ —  $ 13,457 

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 thousands):

Three Months Ended June 30, Six Months Ended June 30,
2021 2022 2021 2022
Balance, beginning of period $ 11,477  $ 10,511  $ 11,490  $ 10,451 
Changes in unrealized gains or losses included in other comprehensive income (loss) related to investments held at the reporting date —  (46) (13) 14 
Balance, end of period $ 11,477  $ 10,465  $ 11,477  $ 10,465 

There were no transfers of financial instruments into or out of Level 3 during the six months ended June 30, 2021 and 2022.

The Company amended the anti-dilution feature in the warrant agreements associated with the Second Lien Credit Agreement, as defined in Note 6, Debt, which resulted in a change in classification from liability to equity, on March 30, 2021 (the “Modification Date”). The Company recorded a marked-to-market charge of $292.0 million through the first quarter of 2021, which was recorded in other income (expense), net on the condensed consolidated statements of operations. Subsequent to the Modification Date, the warrants were no longer subject to marked-to-market charges. The balance of $1.3 billion was then reclassified from liability to equity as the amended warrants met the requirements for equity classification. Refer to Note 6, Debt, for additional information.

Derivatives Not Designated as Hedging Instruments

As of December 31, 2021, the fair value of foreign exchange derivative assets and liabilities totaled $25.9 million and $10.3 million, respectively, with the aggregate notional amount totaling $2.4 billion. As of June 30, 2022, the fair value of foreign exchange derivative assets and liabilities totaled $54.3 million and $13.5 million, respectively, with the aggregate notional amount totaling $2.1 billion. Derivative assets are included in prepaids and other current assets and derivative liabilities are included in accrued expenses and other current liabilities in the condensed consolidated balance sheets.

The Company recorded total net realized gains (losses) of $(8.3) million and $27.2 million for the three months ended June 30, 2021 and 2022, respectively, and $(23.6) million and $40.1 million for the six months ended June 30, 2021 and 2022, respectively, related to foreign exchange derivative assets and liabilities.
15


Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)

The Company recorded total net unrealized gains (losses) of $(4.5) million and $49.1 million for the three months ended June 30, 2021 and 2022, respectively, and $35.4 million and $25.2 million for the six months ended June 30, 2021 and 2022, respectively, related to foreign exchange derivative assets and liabilities.

The realized and unrealized gains and losses on non-designated derivatives are reported in other income (expense), net in the condensed consolidated statements of operations. The cash flows related to derivative instruments not designated as hedging instruments are classified within operating activities in the condensed consolidated statements of cash flows.

The Company has master netting arrangements with the respective counterparties to its derivative contracts, which are designed to reduce credit risk by permitting net settlement of transactions with the same counterparty. The Company presents its derivative assets and derivative liabilities at their gross fair values in its condensed consolidated balance sheets. As of December 31, 2021, the potential effect of these rights of set-off associated with the Company’s derivative contracts would be a reduction to both assets and liabilities of $10.3 million, resulting in net derivative assets of $15.6 million. As of June 30, 2022, the potential effect of these rights of set-off associated with the Company’s derivative contracts would be a reduction to both assets and liabilities of $13.5 million, resulting in net derivative assets of $40.8 million.

Note 6. Debt

The following table summarizes the Company’s outstanding debt (in thousands):

December 31, 2021 June 30, 2022
Balance
Effective
Interest Rate
Balance
Effective
Interest Rate
Convertible senior notes due March 2026 $ 2,000,000  0.2  % $ 2,000,000  0.2  %
Less: Unamortized debt discount and debt issuance costs (17,463) (15,382)
Total long-term debt $ 1,982,537  $ 1,984,618 

Convertible Senior Notes

On March 8, 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. The 2026 Notes were offered and sold in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

The 2026 Notes are senior unsecured obligations of the Company and will not bear regular interest. The 2026 Notes mature on March 15, 2026, unless earlier converted, redeemed or repurchased. The proceeds, net of debt issuance costs, were $1,979.2 million.

The initial conversion rate for the 2026 Notes is 3.4645 shares of the Company's Class A common stock per $1,000 principal amount of 2026 Notes, which is equivalent to an initial conversion price of approximately $288.64 per share of the Class A common stock. The conversion rate and conversion price are subject to customary adjustments under certain circumstances in accordance with the terms of the Indenture.

The 2026 Notes are convertible at the option of the holders before December 15, 2025 only upon the occurrence of certain events, and from and after December 15, 2025, at any time at their election until the close of business on the second scheduled trading day immediately preceding March 15, 2026, only under certain circumstances. Upon conversion, the Company may satisfy its conversion obligation by paying or delivering, as applicable, cash, shares of the Company’s Class A common stock, or a combination of cash and shares of the Company’s Class A common stock, at the Company’s election, based on the applicable conversion rate. In addition, if certain corporate events that constitute a make-whole fundamental change (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time. Additionally, in the event of a corporate event constituting a fundamental change (as defined in the Indenture), holders of the 2026 Notes may require the Company to repurchase all or a portion of their 2026 Notes at a repurchase price equal to 100% of the principal amount of the Notes being repurchased, plus accrued and unpaid special interest or additional interest, if any, to, but excluding, the date of the fundamental change repurchase.

Debt issuance costs related to the 2026 Notes totaled $20.8 million and were composed of commissions payable to the initial purchasers and third-party offering costs. Debt issuance costs are amortized to interest expense using the effective interest method over the contractual term. The Company recorded interest expense of $1.0 million and $1.1 million for the three months ended June 30, 2021 and 2022, respectively, and $1.3 million and $2.1 million for the six months ended June 30, 2021 and 2022, respectively, for the 2026 Notes relating to amortization of the debt discount and debt issuance costs.

As of June 30, 2022, the if-converted value of the 2026 Notes did not exceed the outstanding principal amount.

As of June 30, 2022, the total estimated fair value of the 2026 Notes was $1.7 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.

16


Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
Capped Calls

On March 3, 2021, in connection with the pricing of the 2026 Notes, the Company entered into privately negotiated capped call transactions (the “Capped Calls”) with certain of the initial purchasers and other financial institutions (the "option counterparties") at a cost of $100.2 million. The Capped Calls cover, subject to customary adjustments, the number of shares of Class A common stock initially underlying the 2026 Notes. By entering into the Capped Calls, the Company expects to reduce the potential dilution to its Class A common stock (or, in the event a conversion of the 2026 Notes is settled in cash, to reduce its cash payment obligation) in the event that at the time of conversion of the 2026 Notes its common stock price exceeds the conversion price of the 2026 Notes. The cap price of the Capped Calls will initially be $360.80 per share of Class A common stock, which represents a premium of 100% over the last reported sale price of the Class A common stock of $180.40 per share on March 3, 2021, and is subject to certain customary adjustments under the terms of the Capped Calls.

The Capped Calls meet the criteria for classification in equity, are not remeasured each reporting period and are included as a reduction to additional paid-in-capital within stockholders’ equity.

Term Loans

In April 2020, the Company entered into a $1.0 billion First Lien Credit and Guaranty Agreement (the “First Lien Credit Agreement,” and the loans thereunder, the “First Lien Loan”), resulting in net proceeds of $961.4 million, net of debt discount and debt issuance costs of $38.6 million. The loan was due and payable in April 2025 and could be repaid in whole or in part at the Company’s option, subject to applicable prepayment premiums and make-whole premiums. Beginning in September 2020, the Company was required to repay the First Lien Loan in quarterly installments equal to 0.25% of the $1.0 billion aggregate principal amount of the First Lien Loan, with the remaining principal amount payable on the maturity date.

Also in April 2020, the Company entered into a $1.0 billion Second Lien Credit and Guaranty Agreement (the “Second Lien Credit Agreement,” and the loans thereunder, the “Second Lien Loan”), resulting in net proceeds of $967.5 million, net of debt discount and debt issuance costs of $32.5 million. The loan was due and payable in July 2025 and could be repaid in whole or in part, subject to applicable prepayment premiums, make-whole premiums, and the priority of lenders under the First Lien Credit Agreement over any proceeds the Company receives from the sale of collateral.

In March 2021, the Company repaid the principal amount outstanding of $1,995.0 million under the First Lien and Second Lien loans, which resulted in a loss of extinguishment of debt of $377.2 million, including early redemption premiums of $212.9 million and a write-off of $164.3 million of unamortized debt discount and debt issuance costs. The loss on extinguishment of debt was included in interest expense in the condensed consolidated statements of operations. Additionally, the Company incurred third-party costs, principally legal and administrative fees, of $0.1 million relating to the extinguishment of the loans.

The debt discount and debt issuance costs are amortized to interest expense using the effective interest rate method. For the three months ended March 31, 2021, interest expense of $17.0 million and $24.3 million, respectively, was recorded for the First Lien and Second Lien Loans relating to the contractual interest and amortization of the debt discount and debt issuance costs.

The First Lien Loan and the Second Lien Loan were unconditionally guaranteed by certain of the Company’s domestic subsidiaries and were both secured by substantially all the assets of the Company and of these subsidiary guarantors.

In connection with the Second Lien Loan, the Company issued warrants to purchase 7,934,794 shares of Class A common stock with an initial exercise price of $28.355 per share, subject to adjustment upon the occurrence of certain specified events, to the Second Lien Loan lenders. The warrants expire on April 17, 2030 and the exercise price can be paid in cash or in net shares at the holder’s option. The fair value of the warrants at issuance was $116.6 million and was recorded as a liability in accrued expenses and other current liabilities on the condensed consolidated balance sheet with a corresponding debt discount recorded against the Second Lien Loan. The warrant liability was remeasured to fair value at each reporting date as long as the warrants remained outstanding and unexercised with changes in fair value recorded in other income (expense), net in the condensed consolidated statements of operations. As of December 31, 2020, the fair value of the warrant totaled $985.2 million. The Company amended the anti-dilution feature in the warrant agreements on March 30, 2021, which resulted in a change in classification from liability to equity. Accordingly, the Company recorded $292.0 million in other income (expense), net during the first quarter of 2021. The liability balance of $1.3 billion was then reclassified to equity as the amended warrants met the requirements for equity classification.

2020 Credit Facility

On November 19, 2020, the Company entered into a five-year secured revolving Credit and Guarantee Agreement, which provides for initial commitments by a group of lenders led by Morgan Stanley Senior Funding, Inc. of $500.0 million (“2020 Credit Facility”). The 2020 Credit Facility provides a $200.0 million sub-limit for the issuance of letters of credit. The 2020 Credit Facility has a commitment fee of 0.15% per annum on any undrawn amounts, payable quarterly in arrears. Interest on borrowings is equal to (i) in the case of LIBOR borrowings, 1.5% plus LIBOR, subject to a floor of 0%, or (ii) in the case of base rate borrowings, 0.5% plus the greatest of (a) the federal funds effective rate plus 0.5%, (b) the rate of interest in effect for such day by Morgan Stanley Senior Funding, Inc. as its “prime rate”, and (c) LIBOR for a one-month period plus 1.0%, in each case subject to a floor of 1.0%. Outstanding balances may be repaid prior to maturity without penalty. The 2020 Credit Facility contains customary affirmative and negative covenants, including restrictions on the Company’s and certain of its subsidiaries’ ability to incur debt and liens, undergo fundamental changes, and pay dividends or other distributions, as well as certain financial covenants. The Company was in compliance with all financial covenants as of June 30, 2022. No amounts have been drawn on the 2020 Credit Facility as of December 31, 2021 and June 30, 2022, and outstanding letters of credit totaled $15.9 million and $28.5 million as of December 31, 2021 and June 30, 2022, respectively.

17


Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
Note 7. Stock-Based Compensation

Stock-Based Compensation Expense

The following table summarizes total stock-based compensation expense (in thousands):

Three Months Ended June 30, Six Months Ended June 30,
2021 2022 2021 2022
Operations and support $ 14,236  $ 16,914  $ 25,648  $ 28,609 
Product development 143,812  144,932  287,527  262,808 
Sales and marketing 24,064  29,118  49,965  50,325 
General and administrative 50,728  56,164  99,185  100,278 
Restructuring charges 23  (23) 12 
Stock-based compensation expense $ 232,863  $ 247,105  $ 462,337  $ 442,028 

Stock Option and Restricted Stock Unit Activity

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option-pricing model using the range of assumptions in the following table:

Three Months Ended June 30, Six Months Ended June 30,
2021 2022 2021 2022
Expected dividend yield —  —  —  — 
Expected volatility
44.9%
48.6%
44.9%
 48.6%
Expected term (years)
8.0
6.1
8.0
6.1
Risk-free interest rate 1.5  %
2.2%
1.5%
2.2%

A summary of stock option and restricted stock unit (“RSU”) activity under the Plans was as follows (in thousands, except per share amounts):

Outstanding
Stock Options
Outstanding
Restricted Stock Units
  Shares
Available for
Grant
Number of
Shares
Weighted-
Average
Exercise
Price
Number of
Shares
Weighted-
Average
Grant
Date Fair
Value
As of December 31, 2021 81,365  24,122  $ 19.69  36,789  $ 61.22 
Granted (7,346) 635  167.00  6,711  158.82 
Increase in shares available for grant 31,675  —  —  —  — 
Shares withheld for taxes 2,512  —  —  (2,512) 76.20 
Exercised/Vested —  (1,631) 10.10  (4,140) 77.52 
Canceled 1,973  (240) 80.57  (1,733) 92.75 
As of June 30, 2022 110,179  22,886  $ 23.82  35,115  $ 75.35 

Number of
Shares
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Life (years)
Aggregate
Intrinsic
Value
Options outstanding as of June 30, 2022 22,886  $ 23.82  3.40 $ 1,591,785 
Options exercisable as of June 30, 2022 20,081  $ 15.41  2.69 $ 1,499,461 

Restricted Stock Awards

The Company has granted restricted stock awards to certain continuing employees, primarily in connection with acquisitions. Vesting of this stock is primarily dependent on a service-based vesting condition that generally becomes satisfied over a period of four years. The Company has the right to repurchase or cancel shares for which the vesting condition is not satisfied.

18


Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
The following table summarizes the activity related to the Company’s restricted stock awards (in thousands, except for per share amounts):

Number of
Shares
Weighted-Average
Grant-Date 
Fair Value
Per Share
Unvested restricted stock awards as of December 31, 2021 632  $ 62.32 
Issued —  — 
Vested (77) 62.48 
Unvested restricted stock awards as of June 30, 2022 555  $ 62.30 

Employee Stock Purchase Plan (“ESPP”)

In December 2020, the Company’s board of directors adopted the ESPP. The maximum number of shares of Class A common stock authorized for sale under the ESPP is equal to the sum of (i) 4,000,000 shares of Class A common stock and (ii) an annual increase on the first day of each year beginning in 2022 and ending in 2030, equal to the lesser of (a) 1% of shares of Class A common stock (on an as converted basis) on the last day immediately preceding year and (b) such number of shares of common stock as determined by the board of directors; provided, however, that no more than 89,785,394 shares may be issued under the ESPP. The Company estimates the fair value of shares to be issued under the ESPP based on a combination of options valued using the Black-Scholes option-pricing model. The Company recorded stock-based compensation expense related to the ESPP of $32.5 million and $8.5 million for the three months ended June 30, 2021 and 2022, respectively, and $64.8 million and $13.9 million for the six months ended June 30, 2021 and 2022, respectively.

During the three and six months ended June 30, 2021, 0.5 million shares of common stock were purchased under the ESPP at a weighted-average price of $57.80 per share, resulting in net cash proceeds of $25.5 million. During the three and six months ended June 30, 2022, 0.2 million shares of common stock were purchased under the ESPP at a weighted-average price of $103.23 per share, resulting in net cash proceeds of $20.3 million.

Note 8. 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, 2022, 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, 2021.

Extenuating Circumstances Policy

In March 2020, the Company applied its extenuating circumstances policy to cancellations resulting from COVID-19. That policy provides customers with greater flexibility to cancel reservations that are disrupted by epidemics, natural disasters, and other emergencies. Specifically, accommodation bookings made by guests on or before March 14, 2020, have so far been covered by the policy and may be canceled before check-in. To support Hosts impacted by elevated guest cancellations under that policy, the Company committed up to $250 million for Hosts, and had a remaining reserve balance of $45.8 million as of June 30, 2022. The reservations eligible for this $250.0 million Host program were defined as reservations made on or before March 14, 2020 with a check-in date between March 14, 2020 and May 31, 2020. For these reservations, eligible Hosts are entitled to receive 25% of the amount they would have received from guests under the Host’s cancellation policies. These payments are accounted for as consideration paid to a customer and as such, primarily result in a reduction to revenue. Under this policy, the Company recorded payments, primarily to Hosts, that were not material for the three and six months ended June 30, 2021 and 2022, in its condensed consolidated statement of operations.

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, 2022, the Company collects and remits Lodging Taxes in approximately 31,300 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, 2021 and June 30, 2022, the Company had an obligation to remit Lodging Taxes collected from guests on bookings in these jurisdictions totaling $180.8 million and $268.6 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 liabilities in a certain number of jurisdictions with respect to state, city, and local taxes related to lodging 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, 2021 and June 30, 2022, accrued obligations related to these estimated taxes, including estimated penalties and interest, totaled $57.3 million and $59.4 million, respectively. With respect to lodging and related 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.

19


Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
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 lawsuits 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 lawsuits 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. 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.

As of December 31, 2021 and June 30, 2022, the Company accrued a total of $124.2 million and $129.6 million of estimated tax liabilities, including interest, related to Hosts’ withholding tax obligations, respectively.

The Company has identified reasonably possible exposures related to withholding income taxes and transactional taxes, and has not accrued for these amounts since the likelihood of the contingent liability is less than probable. The Company estimates that the reasonably possible loss related to these matters in excess of the amounts accrued is between $140.0 million to $160.0 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 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 December 31, 2021 and June 30, 2022, the Company accrued a total of $33.6 million and $34.1 million of estimated tax liabilities related to employment taxes on certain employee benefits, respectively.

The Company is subject to regular payroll tax examinations by various 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 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 condensed consolidated financial statements related to such matters.
20


Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)

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.

Depending on the nature of the proceeding, claim, or investigation, the Company may be subject to monetary damage awards, fines, penalties, 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 condensed consolidated 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.

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 $1.0 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 created during the year ended December 31, 2019, 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 $1.0 million per occurrence, subject to a $1.0 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 officers and directors. The indemnification agreements and the Company’s Amended and Restated Bylaws (the “Bylaws”) require the Company to indemnify these individuals 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. No demands have been made upon the Company to provide indemnification under the indemnification agreements or the Bylaws, and thus, there are no 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 under certain agreements with parties with whom the Company has commercial relations of varying scope and terms with respect to certain matters, including losses arising out of its 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 9. 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 $11.2 million and $4.3 million for the three months ended June 30, 2021 and 2022, respectively, and $17.5 million and $15.0 million for the six months ended June 30, 2021 and 2022, respectively. Tax expense for all periods was primarily driven by current tax on foreign earnings.

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 $196.4 million during the year ended December 31, 2019. In December 2020, the Company
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Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
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 intends to vigorously contest it. In February 2021, the Company submitted a protest to the IRS describing its disagreement with the proposed agreement and requesting the case to be transferred to 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 with IRS Appeals, and if necessary, appealing the Tax Court’s decision to the appropriate appellate court.

Note 10. Net Income (Loss) per Share

The following table sets forth the computation of basic and diluted net income (loss) per share attributable to common stockholders for the periods indicated (in thousands, except per share amounts):

Three Months Ended June 30, Six Months Ended June 30,
2021 2022 2021 2022
Net income (loss) attributable to Class A and Class B common stockholders $ (68,217) $ 378,841  $ (1,240,428) $ 360,049 
Weighted-average shares in computing net income (loss) per share attributable to Class A and Class B common stockholders:
Basic 611,739  638,407  606,380  636,869 
Diluted 611,739  683,536  606,380  684,148 
Net income (loss) per share attributable to Class A and Class B common stockholders:
Basic $ (0.11) $ 0.59  $ (2.05) $ 0.57 
Diluted $ (0.11) $ 0.56  $ (2.05) $ 0.53 

The rights, including the liquidation and dividend rights, of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to 20 votes per share. Each share of Class B common stock is convertible into a share of Class A common stock voluntarily at any time by the holder, and automatically upon certain events. The Class A common stock has no conversion rights. As the liquidation and dividend rights are identical for Class A and Class B common stock, the undistributed earnings are allocated on a proportional basis and the resulting net income (loss) per share attributable to common stockholders is the same for both Class A and Class B common stock on an individual or combined basis.

There were no preferred dividends declared or accumulated for the three and six months ended June 30, 2021 and 2022. As of June 30, 2021, RSUs to be settled in 12.0 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. As of June 30, 2021, 0.5 million shares of restricted stock awards were excluded from the table below because they are subject to performance conditions that were not achieved as of such date. As of June 30, 2022, 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. As of June 30, 2022, 0.5 million shares of restricted stock awards were excluded from the table below because they are subject to performance 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 thousands):

Three Months Ended June 30, Six Months Ended June 30,
2021 2022 2021 2022
2026 Notes(1)
11,086  —  11,086  — 
Warrants 7,935  —  7,935  — 
Escrow shares 74  74  74  74 
Stock options 30,764  1,129  30,764  707 
RSUs 44,103  10,396  44,103  7,424 
Restricted stock awards 170  —  170  — 
ESPP 538  —  538  — 
Total 94,670  11,599  94,670  8,205 

(1)Holders of the 2026 Notes who convert their 2026 Notes in connection with certain corporate events that constitute a make-whole fundamental change are entitled to an increase in the conversion rate. The 11.1 million shares represents the maximum number of shares that can be issued upon conversion after considering the make-whole fundamental change adjustment on an unweighted basis.

22


Airbnb, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
Note 11. Geographic Information

The following table sets forth the breakdown of revenue by geography, determined based on the location of the Host’s listing (in thousands):

Three Months Ended June 30, Six Months Ended June 30,
2021 2022 2021 2022
United States $ 769,100  $ 1,023,657  $ 1,279,886  $ 1,795,796 
International (1)
566,096  1,080,450  942,246  1,817,248 
Total revenue $ 1,335,196  $ 2,104,107  $ 2,222,132  $ 3,613,044 

(1)No individual international country represented 10% or more of the Company’s total revenue for three and six months ended June 30, 2021 and 2022.

Note 12. Restructuring

During the year ended December 31, 2020, the Company experienced significant economic challenges associated with a severe decline in bookings, resulting primarily from COVID-19 and overall global travel restrictions. To address these impacts, in May 2020, the Company’s management approved a restructuring plan to realign the Company’s business and strategic priorities based on the current market and economic conditions as a result of COVID-19. This worldwide restructuring plan included a 25% reduction in the number of full-time employees, or approximately 1,800 employees, as well as a reduction in the contingent workforce and amendments to certain commercial agreements. These restructuring expenses are included in the Company’s condensed consolidated statements of operations, and unpaid amounts are included in accrued expenses and other current liabilities on its condensed consolidated balance sheets. Cumulative restructuring charges as of June 30, 2022 were $353.2 million. As of June 30, 2022, the remaining liability for restructuring costs was not material.

In the second quarter of 2022, the Company announced it would shift to a remote work model, allowing its employees to work from anywhere in the country they currently work. 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 a restructuring charge of $88.7 million during the three months ended June 30, 2022, which includes $80.3 million relating to an impairment of both domestic and international operating lease right-of-use assets, and $8.4 million of related leasehold improvements. Restructuring charges for the six months ended June 30, 2022, were $89.1 million.

For the three and six months ended June 30, 2021, the Company incurred $0.6 million and $112.5 million in restructuring charges, which primarily includes $75.3 million related to impairments of operating lease right-of-use assets and $37.2 million related to impairments of leasehold improvements.
Note 13. Subsequent Events

On August 1, 2022, the Company’s 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 at management’s discretion (the “Share Repurchase Program”). Share repurchases under the Share Repurchase Program 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 Program does 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.

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

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “2021 Annual Report”). This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” of our 2021 Annual Report, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, and any subsequent filings, as well as those identified in this Form 10-Q. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Revision of Previously Issued Financial Statements

As described in Note 2, Summary of Significant Accounting Policies, to our condensed consolidated financial statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q, we have revised previously issued financial statements to correct immaterial misstatements.

Overview

We are a community based on connection and belonging—a community that was born in 2007 when two Hosts welcomed three guests to their San Francisco home, and has since grown to over 4 million Hosts who have welcomed over 1 billion guest arrivals to over 100,000 cities and towns in almost every country and region across the globe. Hosts on Airbnb are everyday people who share their worlds to provide guests with the feeling of connection and being at home. We have five stakeholders and are designed with all of them in mind. Along with employees and shareholders, we serve Hosts, guests, and the communities in which they live. We intend to make long-term decisions considering all of our stakeholders because their collective success is key for our business to thrive.

We operate a global marketplace, where Hosts offer guests stays and experiences on our platform. Our business model relies on the success of Hosts and guests (collectively referred to as “customers”) who join our community and generate consistent bookings over time. As Hosts become more successful on our platform and as guests return over time, we benefit from the recurring activity of our community.

Impact of COVID-19 and Macroeconomic Conditions on our Business

In response to the outbreak of the novel strain of the coronavirus disease (“COVID-19”) in the first half of 2020, as well as subsequent outbreaks driven by new variants of COVID-19, governments around the world have implemented, and continue to implement, a variety of measures to reduce the spread of COVID-19, including travel restrictions, social distancing, shelter-in-place orders, vaccination mandates or requirements for businesses to confirm employees’ vaccination status, and other restrictions.

Throughout 2021, we continued to face lower demand for long distance travel and overall depressed Nights and Experiences Booked compared to 2019. However, in 2022, we have seen significant growth with Nights and Experiences Booked exceeding 2019 levels for the same period. While COVID-19 still plagues the world, for the three months ended June 30, 2022, Gross Booking Value (“GBV”) and revenue were $17.0 billion and $2.1 billion, respectively, which were both higher compared to the same periods in 2021, 2020 and 2019 (pre-COVID-19 pandemic).The trends in our recovery continue to vary by region due to a variety of factors, including the emergence of COVID-19 variants, vaccination rates, COVID-19 caseloads and associated travel restrictions, as well as historical cross-border compared to domestic travel dependence. In the second quarter of 2022, we saw strength in all regions relative to the same period in 2021 and growth in nights booked in EMEA and Asia Pacific compared to the first quarter of 2022.

The extent and duration of the impact of the COVID-19 pandemic over the longer term remain uncertain and dependent on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of COVID-19, the introduction and spread of new variants of the virus that may be resistant to currently approved vaccines and the continuation of existing or implementation of new government travel restrictions, the extent and effectiveness of containment actions taken, including mobility restrictions, the timing, availability, and effectiveness of vaccines, and the impact of these and other factors on travel behavior in general, and on our business in particular, which may result in a reduction in bookings and an increase in booking cancellations.

As we look forward, we recognize the challenging macroeconomic conditions, including inflation, depressed consumer spending and the strengthening of the U.S. dollar. To date, these conditions have not had a material impact on our business, results of operations, cash flows, or financial condition; however, the impact in the future of these macroeconomic events on our business, results of operations, cash flows, and financial condition is uncertain and will depend on future developments that we may not be able to accurately predict.

Key Business Metrics and Non-GAAP Financial Measures

We track the following key business metrics and financial measures that are not calculated and presented in accordance with GAAP (“non-GAAP financial measures”) to evaluate our operating performance, identify trends, formulate financial projections, and make strategic decisions. Accordingly, we believe that these key business metrics and non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management team. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance, and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results.

These key business metrics and non-GAAP financial measures are presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled metrics or measures presented by other companies. A reconciliation of each non-GAAP financial measure to the most directly comparable financial
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measure stated in accordance with GAAP is provided under the subsection titled “— Adjusted EBITDA” and “— Free Cash Flow” below. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

Nights and Experiences Booked

Nights and Experiences Booked is a key measure of the scale of our platform, which in turn drives our financial performance. Nights and Experiences Booked on our platform in a period represents the sum of the total number of nights booked for stays and the total number of seats booked for experiences, net of cancellations and alterations that occurred in that period. For example, a booking made on February 15 would be reflected in Nights and Experiences Booked for our quarter ended March 31. If, in the example, the booking were canceled on May 15, Nights and Experiences Booked would be reduced by the cancellation for our quarter ended June 30. A night can include one or more guests and can be for a listing with one or more bedrooms. A seat is booked for each participant in an experience. Substantially all of the bookings on our platform to date have come from nights. We believe Nights and Experiences Booked is a key business metric to help investors and others understand and evaluate our results of operations in the same manner as our management team, as it represents a single unit of transaction on our platform.

In the second quarter of 2022, we had 103.7 million Nights and Experiences Booked, a 25% increase from 83.1 million in the same prior year period, and a 24% increase compared to the second quarter of 2019 (pre-COVID-19 pandemic). For the six months ended June 30, 2022, we had 205.8 million Nights and Experiences Booked, a 40% increase from 147.5 million in the same prior year period, and a 25% increase compared to the same period of 2019 (pre-COVID-19 pandemic). Nights and Experiences Booked grows as we attract new customers to our platform and as repeat guests increase their activity on our platform. Our Nights and Experiences Booked increased from prior year levels largely driven by stronger results in North America, EMEA and Latin America, where we continued to see resilience in domestic and short-distance travel, as well as improvement in both longer-distance and cross border travel during the first half of 2022.

Gross Booking Value

GBV represents the dollar value of bookings on our platform in a period and is inclusive of Host earnings, service fees, cleaning fees, and taxes, net of cancellations and alterations that occurred during that period. The timing of recording GBV and any related cancellations is similar to that described in the subsection titled “— Key Business Metrics and Non-GAAP Financial Measures — Nights and Experiences Booked” above. Revenue from the booking is recognized upon check-in; accordingly, GBV is a leading indicator of revenue. The entire amount of a booking is reflected in GBV during the quarter in which booking occurs, whether the guest pays the entire amount of the booking upfront or elects to use our Pay Less Upfront program. Growth in GBV reflects our ability to attract and retain customers and reflects growth in Nights and Experiences Booked.

In the second quarter of 2022, our GBV was $17.0 billion, a 27% increase from $13.4 billion in the same prior year period. For the six months ended June 30, 2022, our GBV was $34.1 billion, a 44% increase from $23.7 billion in the same prior year period. The increase in our GBV was primarily due to an increase in Nights and Experiences Booked. The travel recovery we are experiencing has been dominated by our higher average daily rate (“ADR”) regions—North America and Europe, in particular, whereas Asia Pacific, one of our lowest ADR regions, remains depressed. Similar to Nights and Experiences Booked, our GBV improvement was largely driven by stronger bookings in North America, EMEA and Latin America, in particular with resilience in domestic and short-distance travel. On a constant currency basis, the increase in GBV was 34% and 50% for the three and six months ended June 30, 2022, respectively, as compared to the same periods in 2021.

Non-GAAP Financial Measures

In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial information, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance, and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results. The non-GAAP financial information is presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies. A reconciliation of each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP is provided below. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

The following table summarizes our non-GAAP financial measures, along with the most directly comparable GAAP measure, for each period presented below (in thousands):

Three Months Ended June 30, Six Months Ended June 30,
2021 2022 2021 2022
Net income (loss) $ (68,217) $ 378,841  $ (1,240,428) $ 360,049 
Adjusted EBITDA $ 217,394  $ 711,124  $ 158,756  $ 940,270 
Net cash provided by operating activities $ 789,654  $ 799,747  $ 1,396,030  $ 2,001,739 
Free Cash Flow $ 782,002  $ 794,699  $ 1,380,672  $ 1,990,732 

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Adjusted EBITDA

We define Adjusted EBITDA as net income or loss adjusted for (i) provision for (benefit from) income taxes; (ii) interest income, interest expense, and other income (expense), net; (iii) depreciation and amortization; (iv) stock-based compensation expense and stock-settlement obligations related to the IPO; (v) acquisition-related impacts consisting of gains (losses) recognized on changes in the fair value of contingent consideration arrangements; (vi) net changes to the reserves for lodging taxes for which management believes it is probable that we may be held jointly liable with Hosts for collecting and remitting such taxes; and (vii) restructuring charges.
The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, or because the amount and timing of these items is unpredictable, not driven by core results of operations and renders comparisons with prior periods and competitors less meaningful. We believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, as well as provides a useful measure for period-to-period comparisons of our business performance. Moreover, we have included Adjusted EBITDA in this Quarterly Report on Form 10-Q because it is a key measurement used by our management internally to make operating decisions, including those related to operating expenses, evaluating performance, and performing strategic planning and annual budgeting.

Adjusted EBITDA also excludes certain items related to transactional tax matters, for which management believes it is probable that we may be held jointly liable with Hosts in certain jurisdictions, and we urge investors to review the detailed disclosure regarding these matters included in the subsection titled “—Critical Accounting Policies and Estimates—Lodging Tax Obligations,” as well as the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Adjusted EBITDA has limitations as a financial measure, should be considered as supplemental in nature, and is not meant as a substitute for the related financial information prepared in accordance with GAAP. These limitations include the following:

Adjusted EBITDA does not reflect interest income (expense) and other income (expense), net, which include loss on extinguishment of debt and unrealized and realized gains and losses on foreign currency exchange, investments, and financial instruments, including the warrants issued in connection with a term loan agreement entered into in April 2020. We amended the anti-dilution feature in the warrant agreements in March 2021. The balance of the warrants of $1.3 billion was reclassified from liability to equity as the amended warrants met the requirements for equity classification and are no longer remeasured at each reporting period;

Adjusted EBITDA excludes certain recurring, non-cash charges, such as depreciation of property and equipment and amortization of intangible assets, and although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect all cash requirements for such replacements or for new capital expenditure requirements;

Adjusted EBITDA excludes stock-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy as well as stock-settlement obligations, which represent employer and related taxes related to the IPO;

Adjusted EBITDA excludes acquisition-related impacts consisting of gains (losses) recognized on changes in the fair value of contingent consideration arrangements. The contingent consideration, which was in the form of equity, was valued as of the acquisition date and is marked-to-market at each reporting period based on factors including our stock price;

Adjusted EBITDA does not reflect net changes to reserves for lodging taxes for which management believes it is probable that we may be held jointly liable with Hosts for collecting and remitting such taxes; and

Adjusted EBITDA does not reflect restructuring charges, which include severance and other employee costs, lease impairments, and contract amendments and terminations.

Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net loss and our other GAAP results.

For the three months ended June 30, 2022, Adjusted EBITDA was $711.1 million compared to $217.4 million in the same prior year period. This favorable change was due to our record high revenue combined with continued cost management.

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Adjusted EBITDA Reconciliation

The following is a reconciliation of Adjusted EBITDA to the most comparable GAAP measure, net income (loss) (in thousands, except percentages):

Three Months Ended June 30, Six Months Ended June 30,
2021 2022 2021 2022
Revenue $ 1,335,196  $ 2,104,107  $ 2,222,132  $ 3,613,044 
Net income (loss) $ (68,217) $ 378,841  $ (1,240,428) $ 360,049 
Adjusted to exclude the following:
Provision for income taxes 11,233  4,270  17,542  14,976 
Other income (expense), net 2,128  (1,524) 302,226  411 
Interest expense 6,520  7,483  428,431  13,247 
Interest income (2,942) (20,247) (5,994) (24,991)
Depreciation and amortization 35,536  26,005  73,788  55,237 
Stock-based compensation expense(1)
232,840  247,128  462,325  442,020 
Acquisition-related impacts (741) (22,800) 7,248  (11,400)
Net changes in lodging tax reserves 475  3,225  1,074  1,661 
Restructuring charges 562  88,743  112,544  89,060 
Adjusted EBITDA $ 217,394  $ 711,124  $ 158,756  $ 940,270 
Adjusted EBITDA as a percentage of revenue 16  % 34  % % 26  %

(1)Excludes stock-based compensation related to restructuring, which is included in restructuring charges in the table above.

Free Cash Flow

We define Free Cash Flow as net cash provided by (used in) operating activities less purchases of property and equipment. We believe that Free Cash Flow is a meaningful indicator of liquidity that provides information to our management and investors about the amount of cash generated from operations, after purchases of property and equipment, that can be used for strategic initiatives, including continuous investment in our business, growth through acquisitions, and strengthening our balance sheet. Our Free Cash Flow is impacted by the timing of GBV because we collect our service fees at the time of booking, which is generally before a stay or experience occurs. Funds held on behalf of our customers and amounts payable to our customers do not impact Free Cash Flow, except interest earned on these funds. Free Cash Flow has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash provided by (used in) operating activities. Free Cash Flow does not reflect our ability to meet future contractual commitments and may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure.

For the three months ended June 30, 2022, Free Cash Flow was $794.7 million, representing 38% of revenue, compared to $782.0 million, representing 59% of revenue, for the three months ended June 30, 2021. The increase was primarily driven by revenue growth, margin expansion and significant growth in unearned fees. Due to seasonality, the first half of the year typically benefits from working capital as unearned fees are generated by bookings, but not recognized as revenue until future periods when guests check-in.

Free Cash Flow Reconciliation

The following is a reconciliation of Free Cash Flow to the most comparable GAAP cash flow measure, net cash provided by operating activities (in thousands, except percentages):

  Three Months Ended June 30, Six Months Ended June 30,
  2021 2022 2021 2022
Revenue $ 1,335,196  $ 2,104,107  $ 2,222,132  $ 3,613,044 
 
Net cash provided by operating activities $ 789,654  $ 799,747  $ 1,396,030  $ 2,001,739 
Purchases of property and equipment (7,652) (5,048) (15,358) (11,007)
Free Cash Flow $ 782,002  $ 794,699  $ 1,380,672  $ 1,990,732 
Free Cash Flow as a percentage of revenue 59  % 38  % 62  % 55  %
Other cash flow components:
Net cash provided by (used in) investing activities $ 325,516  $ 368,001  $ (846,770) $ 171,031 
Net cash provided by financing activities $ 2,327,706  $ 1,445,967  $ 3,783,232  $ 3,649,486 

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Seasonality

Our business is seasonal, reflecting typical travel behavior patterns over the course of the calendar year. In a typical year, the first, second, and third quarters have higher Nights and Experiences Booked than the fourth quarter, as guests plan for travel during the peak travel season, which is in the third quarter for North America and EMEA. Our business metrics, including GBV and Adjusted EBITDA, can also be impacted by the timing of holidays and other events. We experience seasonality in our GBV that is generally consistent with the seasonality of Nights and Experiences Booked. Revenue and Adjusted EBITDA have historically been, and are expected to continue to be, highest in the third quarter when we have the most check-ins, which is the point at which we recognize revenue. Seasonal trends in our GBV impact Free Cash Flow for any given quarter. Our costs are relatively fixed across quarters or vary in line with the volume of transactions, and we historically achieve our highest GBV in the first and second quarters of the year with comparatively lower check-ins. As a result, increases in unearned fees make our Free Cash Flow and Free Cash Flow as a percentage of revenue the highest in the first two quarters of the year. We typically see a slight decline in GBV and a peak in check-ins in the third quarter, which results in a decrease in unearned fees and lower sequential level of Free Cash Flow, and a greater decline in GBV in the fourth quarter, where Free Cash Flow is typically lower. As our business matures, other seasonal trends may develop, or these existing seasonal trends may become more extreme.

We have seen COVID-19 overwhelm the historical patterns of seasonality in our GBV, revenue, Adjusted EBITDA, and Free Cash Flow as a result of travel restrictions and changing travel preferences relating to the COVID-19 pandemic. While we have seen COVID-19 distort the historical patterns of seasonality in 2020 and to a lesser extent, the first half of 2021 as a result of travel restrictions and changing travel preferences relating to the pandemic, we are seeing pre-pandemic patterns of seasonality return in 2022.

Results of Operations

The following table sets forth our results of operations for the periods presented (in thousands):

Three Months Ended June 30, Six Months Ended June 30,
2021 2022 2021 2022
Revenue $ 1,335,196  $ 2,104,107  $ 2,222,132  $ 3,613,044 
Costs and expenses:
Cost of revenue 294,427  390,107  548,942  752,730 
Operations and support(1)
208,125  258,255  393,561  491,267 
Product development(1)
349,734  375,050  712,795  737,977 
Sales and marketing(1)
315,323  379,875  544,448  724,491 
General and administrative(1)
218,303  243,254  408,065  453,827 
Restructuring charges(1)
562  88,743  112,544  89,060 
Total costs and expenses 1,386,474  1,735,284  2,720,355  3,249,352 
Income (loss) from operations (51,278) 368,823  (498,223) 363,692 
Interest income 2,942  20,247  5,994  24,991 
Interest expense (6,520) (7,483) (428,431) (13,247)
Other income (expense), net (2,128) 1,524  (302,226) (411)
Income (loss) before income taxes (56,984) 383,111  (1,222,886) 375,025 
Provision for income taxes 11,233  4,270  17,542  14,976 
Net income (loss) $ (68,217) $ 378,841  $ (1,240,428) $ 360,049 

(1)Includes stock-based compensation expense as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,
2021 2022 2021 2022
Operations and support $ 14,236  $ 16,914  $ 25,648  $ 28,609 
Product development 143,812  144,932  287,527  262,808 
Sales and marketing 24,064  29,118  49,965  50,325 
General and administrative 50,728  56,164  99,185  100,278 
Restructuring charges 23  (23) 12 
Stock-based compensation expense $ 232,863  $ 247,105  $ 462,337  $ 442,028 

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The following table sets forth the components of our condensed consolidated statements of operations for each of the periods presented as a percentage of revenue:

Three Months Ended June 30, Six Months Ended June 30,
2021 2022 2021 2022
Revenue 100  % 100  % 100  % 100  %
Costs and expenses:
Cost of revenue 22  19  25  21 
Operations and support 16  12  18  14 
Product development 26  18  32  20 
Sales and marketing 24  18  25  20 
General and administrative 16  12  18  13 
Restructuring charges — 
Total costs and expenses 104  82  122  90 
Income (loss) from operations (4) 18  (22) 10 
Interest income —  —  —  — 
Interest expense —  —  (19) — 
Other income (expense), net —  —  (14) — 
Income (loss) before income taxes (4) 18  (55) 10 
Provision for income taxes —  — 
Net income (loss) (5) % 18  % (56) % 10  %

Comparison of the Three and Six Months Ended June 30, 2022 with the Same Periods in 2021

Revenue

Three Months Ended June 30, Six Months Ended June 30,
2021 2022

% Change
2021 2022

% Change
(in thousands, except percentages)
Revenue $ 1,335,196  $ 2,104,107  58  % $ 2,222,132  $ 3,613,044  63  %

Three Months Ended June 30, 2022 Compared with the Same Period in 2021

Revenue increased $768.9 million, or 58%, for the three months ended June 30, 2022, compared to the same period in the prior year, primarily due to a 25% increase in Nights and Experiences Booked combined with higher ADRs. On a constant currency basis, revenue increased 64% compared to the three months ended June 30, 2021.

Six Months Ended June 30, 2022 Compared with the Same Period in 2021

Revenue increased $1.4 billion, or 63%, for the six months ended June 30, 2022, compared to the same period in the prior year, primarily due to a 40% increase in Nights and Experiences Booked combined with higher ADRs. On a constant currency basis, revenue increased 68% compared to the six months ended June 30, 2021.

Cost of Revenue

Three Months Ended June 30, Six Months Ended June 30,
2021 2022

% Change
2021 2022

% Change
(in thousands, except percentages)
Cost of revenue $ 294,427  $ 390,107  32  % $ 548,942  $ 752,730  37  %
Percentage of revenue 22  % 19  % 25  % 21  %

Three Months Ended June 30, 2022 Compared with the Same Period in 2021

Cost of revenue increased $95.7 million, or 32%, for the three months ended June 30, 2022, compared to the same period in the prior year, primarily due to an increase in merchant fees of $87.2 million largely due to an increase in pay-in volumes, an increase in data hosting service costs of $7.2 million, and $5.8 million in chargebacks, partially offset by a decrease of $7.3 million in amortization expense for internally developed software and acquired technology. Cost of revenue as a percent of revenue decreased to 19% for the three months ended June 30, 2022, compared to 22% in the same period in the prior year, primarily due to growth in revenue outpacing growth in cost of revenue as a result of the significant increase in Nights and Experiences Booked combined with higher ADRs and cost saving initiatives.
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Six Months Ended June 30, 2022 Compared with the Same Period in 2021

Cost of revenue increased $203.8 million, or 37%, for the six months ended June 30, 2022, compared to the same period in the prior year, primarily due to an increase in merchant fees of $180.0 million largely due to an increase in pay-in volumes, an increase in data hosting service costs of $16.2 million due to an increase in on-demand costs and reserved instances, and $13.9 million in chargebacks, partially offset by a decrease of $16.7 million in amortization expense for internally developed software and acquired technology. Cost of revenue as a percent of revenue decreased to 21% for the six months ended June 30, 2022, compared to 25% in the same period in the prior year, primarily due to growth in revenue outpacing growth in cost of revenue as a result of the significant increase in Nights and Experiences Booked combined with higher ADRs and cost saving initiatives.

Operations and Support

Three Months Ended June 30, Six Months Ended June 30,
2021 2022

% Change
2021 2022

% Change
(in thousands, except percentages)
Operations and support $ 208,125  $ 258,255  24  % $ 393,561  $ 491,267  25  %
Percentage of revenue 16  % 12  % 18  % 14  %

Three Months Ended June 30, 2022 Compared with the Same Period in 2021

Operations and support expense increased $50.1 million, or 24%, for the three months ended June 30, 2022, compared to the same period in the prior year, primarily due to a $37.5 million increase in third-party community support personnel and customer relations costs, and an $8.2 million increase in insurance costs due to a higher Host Liability Insurance (“HLI”) premium resulting from higher overall nights and a higher premium rate. Operations and support expense as a percent of revenue decreased to 12% for the three months ended June 30, 2022, compared to 16% in the same period in the prior year, primarily due to growth in revenue outpacing growth in operations and support expense as a result of the significant increase in Nights and Experiences Booked combined with higher ADRs and cost saving initiatives.

Six Months Ended June 30, 2022 Compared with the Same Period in 2021

Operations and support expense increased $97.7 million, or 25%, for the six months ended June 30, 2022, compared to the same period in the prior year, primarily due to a $68.5 million increase in third-party community support personnel and customer relations costs, a $16.9 million increase in insurance costs due to a higher HLI premium resulting from higher overall nights and a higher premium rate, and a $8.0 million increase in payroll-related expenses due to growth in headcount and increase in compensation. Operations and support expense as a percent of revenue decreased to 14% for the six months ended June 30, 2022, compared to 18% in the same period in the prior year, primarily due to growth in revenue outpacing growth in operations and support expense as a result of the significant increase in Nights and Experiences Booked combined with higher ADRs and cost saving initiatives.

Product Development

Three Months Ended June 30, Six Months Ended June 30,
2021 2022

% Change
2021 2022

% Change
(in thousands, except percentages)
Product development $ 349,734  $ 375,050  % $ 712,795  $ 737,977  %
Percentage of revenue 26  % 18  % 32  % 20  %

Three Months Ended June 30, 2022 Compared with the Same Period in 2021

Product development expense increased $25.3 million, or 7%, for the three months ended June 30, 2022, compared to the same period in the prior year, primarily due to a $20.9 million increase in payroll-related expenses due to growth in headcount and increase in compensation, and a $4.1 million increase in third-party service providers. Product development expense as a percent of revenue decreased to 18% for the three months ended June 30, 2022, from 26% for the same period in the prior year, primarily due to growth in revenue outpacing growth in product development expense as a result of the significant increase in Nights and Experiences Booked combined with higher ADRs and cost saving initiatives.

Six Months Ended June 30, 2022 Compared with the Same Period in 2021

Product development expense increased $25.2 million, or 4%, for the six months ended June 30, 2022, compared to the same period in the prior year, primarily due to a $13.2 million increase in third-party service providers for contingent worker and consultant support for infrastructure projects, quality assurance services and support of new product rollouts, including AirCover, a $4.8 million increase in payroll-related expenses (which reflects a large offsetting decrease of $24.7 million from stock-based compensation and associated employer taxes due to a lower employee stock purchase plan expense), and a $1.7 million increase in outside services. Product development expense as a percent of revenue decreased to 20% for the six months ended June 30, 2022, from 32% for the same period in the prior year, primarily due to growth in revenue outpacing growth in product development expense as a result of the significant increase in Nights and Experiences Booked combined with higher ADRs and cost saving initiatives.

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Sales and Marketing

Three Months Ended June 30, Six Months Ended June 30,
2021 2022

% Change
2021<