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, ~~2020~~2021

☐ 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: 1-36691

Booking Holdings Inc.

(Exact name of registrant as specified in its charter)


Delaware			06-1528493
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

800 Connecticut Avenue

Norwalk, Connecticut 06854

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (203) 299-8000

Former name, former address and former fiscal year, if changed, since last report: N/A

_____________________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class:

Trading Symbol(s)

Name of each exchange on which registered:

Common Stock par value $0.008 per share

BKNG

The NASDAQ Global Select Market

0.800% Senior Notes Due 2022

BKNG 22A

The NASDAQ Stock Market LLC

2.150% Senior Notes Due 2022

BKNG 22

The NASDAQ Stock Market LLC

2.375% Senior Notes Due 2024

BKNG 24

The NASDAQ Stock Market LLC

0.100% Senior Notes Due 2025

BKNG 2425

The NASDAQ Stock Market LLC

1.800% Senior Notes Due 2027

BKNG 27

The NASDAQ Stock Market LLC

0.500% Senior Notes Due 2028

BKNG 2728

The NASDAQ Stock Market LLC

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 ☒

Number of shares of Common Stock outstanding at July ~~30, 2020:~~28, 2021:


Common Stock, par value $0.008 per share						~~40,948,631~~41,059,841
(Class)						(Number of Shares)

Booking Holdings Inc.

Form 10-Q

For the Three Months Ended June 30, ~~2020~~2021


PART I - FINANCIAL INFORMATION

Item 1. Financial Statements			3

Consolidated Balance Sheets at June 30, ~~2020~~2021 (Unaudited) and December 31, ~~2019~~2020			3
Consolidated Statements of Operations (Unaudited) For the Three and Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020			4
Consolidated Statements of Comprehensive (Loss) Income ~~(Loss)~~ (Unaudited) For the Three and Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020			5
Consolidated Statements of Changes in Stockholders' Equity (Unaudited) For the Three and Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020			6
Consolidated Statements of Cash Flows (Unaudited) For the Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020			8
Notes to Unaudited Consolidated Financial Statements			9

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			3839

Item 3. Quantitative and Qualitative Disclosures About Market Risk			5962

Item 4. Controls and Procedures			6063

PART II - OTHER INFORMATION

Item 1. Legal Proceedings			6264

Item 1A. Risk Factors			6264

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			8994

Item 6. Exhibits			9095

SIGNATURES			9196

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Booking Holdings Inc.

CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share data)


		June 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	10,404	$	6,312	Cash and cash equivalents	$	11,231	$	10,562
Short-term investments (Available-for-sale debt securities: Amortized cost of $998 at December 31, 2019)		—		998
Accounts receivable, net (Allowance for expected credit losses of $282 and $49, respectively)		566		1,680
Prepaid expenses and other current assets, net (Allowance for expected credit losses of $12 and $6, respectively)		483		843
Short-term investments (Available-for-sale debt securities: Amortized cost of $500 at June 30, 2021 and December 31, 2020)						Short-term investments (Available-for-sale debt securities: Amortized cost of $500 at June 30, 2021 and December 31, 2020)	501		501
Accounts receivable, net (Allowance for expected credit losses of $92 and $166, respectively)						Accounts receivable, net (Allowance for expected credit losses of $92 and $166, respectively)	1,290		529
Prepaid expenses, net (Allowance for expected credit losses of $30 and $22, respectively)						Prepaid expenses, net (Allowance for expected credit losses of $30 and $22, respectively)	332		337
Other current assets						Other current assets	435		277
Total current assets	Total current assets	11,453		9,833		Total current assets	13,789		12,206
Property and equipment, net	Property and equipment, net	736		738		Property and equipment, net	748		756
Operating lease assets	Operating lease assets	577		620		Operating lease assets	457		529
Intangible assets, net	Intangible assets, net	1,865		1,954		Intangible assets, net	1,725		1,812
Goodwill	Goodwill	2,412		2,913		Goodwill	1,886		1,895
Long-term investments (Includes available-for-sale debt securities: Amortized cost of $775 and $2,192, respectively)		2,946		4,477
Other assets, net (Allowance for expected credit losses of $44 at June 30, 2020)		923		867
Long-term investments (Includes available-for-sale debt securities: Amortized cost of $225 at June 30, 2021 and December 31, 2020)						Long-term investments (Includes available-for-sale debt securities: Amortized cost of $225 at June 30, 2021 and December 31, 2020)	4,319		3,759
Other assets, net (Allowance for expected credit losses of $24 and $33, respectively)						Other assets, net (Allowance for expected credit losses of $24 and $33, respectively)	957		917
Total assets	Total assets	$	20,912	$	21,402	Total assets	$	23,881	$	21,874

LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	581	$	1,239	Accounts payable	$	1,028	$	735
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	1,445		1,578		Accrued expenses and other current liabilities	1,620		1,382
Deferred merchant bookings	Deferred merchant bookings	910		1,561		Deferred merchant bookings	1,896		323
Convertible debt		973		988
Short-term debt						Short-term debt	2,180		985
Total current liabilities	Total current liabilities	3,909		5,366		Total current liabilities	6,724		3,425
Deferred income taxes	Deferred income taxes	931		876		Deferred income taxes	1,107		1,127
Operating lease liabilities	Operating lease liabilities	417		462		Operating lease liabilities	314		366
Long-term U.S. transition tax liability	Long-term U.S. transition tax liability	922		1,021		Long-term U.S. transition tax liability	824		923
Other long-term liabilities	Other long-term liabilities	101		104		Other long-term liabilities	122		111
Long-term debt	Long-term debt	10,633		7,640		Long-term debt	9,986		11,029
Total liabilities	Total liabilities	16,913		15,469		Total liabilities	19,077		16,981

Commitments and Contingencies (see Note 13)

Commitments and contingencies (see Note 13)						Commitments and contingencies (see Note 13)	0		0
Convertible debt						Convertible debt	5		0
Stockholders' equity:	Stockholders' equity:					Stockholders' equity:
Common stock, $0.008 par value, Authorized shares: 1,000,000,000 Issued shares: 63,390,891 and 63,179,471, respectively		—		—
Treasury stock, 22,442,328 and 21,762,070 shares, respectively		(24,119)		(22,864)
Common stock, $0.008 par value, Authorized shares: 1,000,000,000 Issued shares: 63,574,902 and 63,406,451, respectively						Common stock, $0.008 par value, Authorized shares: 1,000,000,000 Issued shares: 63,574,902 and 63,406,451, respectively	0		0
Treasury stock, 22,515,119 and 22,446,897 shares, respectively						Treasury stock, 22,515,119 and 22,446,897 shares, respectively	(24,283)		(24,128)
Additional paid-in capital	Additional paid-in capital	5,699		5,756		Additional paid-in capital	6,059		5,851
Retained earnings	Retained earnings	22,652		23,232		Retained earnings	23,066		23,288
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(233)		(191)		Accumulated other comprehensive loss	(43)		(118)
Total stockholders' equity	Total stockholders' equity	3,999		5,933		Total stockholders' equity	4,799		4,893
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	20,912	$	21,402	Total liabilities and stockholders' equity	$	23,881	$	21,874

See Notes to Unaudited Consolidated Financial Statements.

Booking Holdings Inc.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share and per share data)


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Agency revenues	Agency revenues	$	357	$	2,607	$	1,781	$	4,556	Agency revenues	$	1,328	$	357	$	2,045	$	1,781
Merchant revenues	Merchant revenues	245		959		904		1,562		Merchant revenues	661		245		1,034		904
Advertising and other revenues	Advertising and other revenues	28		284��		233		569		Advertising and other revenues	171		28		222		233
Total revenues	Total revenues	630		3,850		2,918		6,687		Total revenues	2,160		630		3,301		2,918
Operating expenses:	Operating expenses:									Operating expenses:
Marketing expenses	Marketing expenses	211		1,367		1,062		2,560		Marketing expenses	988		211		1,449		1,062
Sales and other expenses	Sales and other expenses	131		248		508		463		Sales and other expenses	206		131		318		508
Personnel, including stock-based compensation of $77, $79, $83 and $153, respectively		452		619		936		1,120
Personnel, including stock-based compensation of $90, $77, $199 and $83, respectively										Personnel, including stock-based compensation of $90, $77, $199 and $83, respectively	686		452		1,238		936
General and administrative	General and administrative	104		180		305		371		General and administrative	134		104		253		305
Information technology	Information technology	70		70		148		135		Information technology	93		70		180		148
Depreciation and amortization	Depreciation and amortization	112		119		229		235		Depreciation and amortization	108		112		221		229
Restructuring and other exit costs	Restructuring and other exit costs	34		—		34		—		Restructuring and other exit costs	1		34		9		34
Impairment of goodwill	Impairment of goodwill	—		—		489		—		Impairment of goodwill	0		0		0		489
Total operating expenses	Total operating expenses	1,114		2,603		3,711		4,884		Total operating expenses	2,216		1,114		3,668		3,711
Operating (loss) income		(484)		1,247		(793)		1,803
Other income (expense):
Interest income		12		34		44		69
Operating loss										Operating loss	(56)		(484)		(367)		(793)

Interest expense	Interest expense	(96)		(68)		(160)		(134)		Interest expense	(81)		(96)		(179)		(160)
Net gains on marketable equity securities		835		17		528		468
Impairment of investment		—		—		(100)		—
Foreign currency transactions and other		(58)		(23)		(32)		(31)
Total other income (expense)		693		(40)		280		372
Income (loss) before income taxes		209		1,207		(513)		2,175
Income tax expense		87		228		64		431
Net income (loss)		$	122	$	979	$	(577)	$	1,744
Net income (loss) applicable to common stockholders per basic common share		$	2.98	$	22.62	$	(14.07)	$	39.52
Other income (expense), net										Other income (expense), net	96		789		227		440

(Loss) income before income taxes										(Loss) income before income taxes	(41)		209		(319)		(513)
Income tax expense (benefit)										Income tax expense (benefit)	126		87		(97)		64
Net (loss) income										Net (loss) income	$	(167)	$	122	$	(222)	$	(577)
Net (loss) income applicable to common stockholders per basic common share										Net (loss) income applicable to common stockholders per basic common share	$	(4.08)	$	2.98	$	(5.42)	$	(14.07)
Weighted-average number of basic common shares outstanding (in 000's)	Weighted-average number of basic common shares outstanding (in 000's)	40,922		43,251		41,007		44,124		Weighted-average number of basic common shares outstanding (in 000's)	41,054		40,922		41,014		41,007
Net income (loss) applicable to common stockholders per diluted common share		$	2.97	$	22.44	$	(14.07)	$	39.17
Net (loss) income applicable to common stockholders per diluted common share										Net (loss) income applicable to common stockholders per diluted common share	$	(4.08)	$	2.97	$	(5.42)	$	(14.07)
Weighted-average number of diluted common shares outstanding (in 000's)	Weighted-average number of diluted common shares outstanding (in 000's)	40,995		43,601		41,007		44,514		Weighted-average number of diluted common shares outstanding (in 000's)	41,054		40,995		41,014		41,007

See Notes to Unaudited Consolidated Financial Statements.

Booking Holdings Inc.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME ~~(LOSS)~~

(In millions)

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Net income (loss) $ 122 $ 979 $ (577) $ 1,744
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments, net of tax 32 (16) (45) (28)
Net unrealized gains (losses) on available-for-sale securities, net of tax 77 (45) 3 114
Total other comprehensive income (loss), net of tax 109 (61) (42) 86
Comprehensive income (loss) $ 231 $ 918 $ (619) $ 1,830


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net (loss) income	$	(167)	$	122	$	(222)	$	(577)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments	8		32		(22)		(45)
Losses on cash flow hedges	11		0		0		0
Net unrealized gains on available-for-sale securities	98		77		97		3
Total other comprehensive income (loss), net of tax	117		109		75		(42)
Comprehensive (loss) income	$	(50)	$	231	$	(147)	$	(619)

See Notes to Unaudited Consolidated Financial Statements.

Booking Holdings Inc.

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, ~~2020~~2021 and ~~2019~~2020

(In millions, except share data)

Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss
Shares
(in 000's) Amount Shares
(in 000's) Amount Total
Balance, March 31, 2020 63,370 $ — (22,440) $ (24,115) $ 5,758 22,530 $ (342) $ 3,831
Net income — — — — — 122 — 122
Foreign currency translation adjustments, net of tax — — — — — — 32 32
Net unrealized gains on available-for-sale securities, net of tax — — — — — — 77 77
Issuance of convertible senior notes — — — — 96 — — 96
Conversion of debt — — — — (241) — — (241)
Exercise of stock options and vesting of restricted stock units and performance share units 21 — — — 6 — — 6
Repurchase of common stock — — (2) (4) — — — (4)
Stock-based compensation and other stock-based payments — — — — 80 — — 80
Balance, June 30, 2020 63,391 $ — (22,442) $ (24,119) $ 5,699 $ 22,652 $ (233) $ 3,999
Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss
Shares
(in 000's) Amount Shares
(in 000's) Amount Total
Balance, December 31, 2019 63,179 $ — (21,762) $ (22,864) $ 5,756 $ 23,232 $ (191) $ 5,933
Cumulative effect of adoption of accounting standards update — — — — — (3) — (3)
Net loss — — — — — (577) — (577)
Foreign currency translation adjustments, net of tax — — — — — — (45) (45)
Net unrealized losses on available-for-sale securities, net of tax — — — — — — 3 3
Issuance of convertible senior notes — — — — 96 — — 96
Conversion of debt — — — — (245) — — (245)
Exercise of stock options and vesting of restricted stock units and performance share units 212 — — — 6 — — 6
Repurchase of common stock — — (680) (1,255) — — — (1,255)
Stock-based compensation and other stock-based payments — — — — 86 — — 86
Balance, June 30, 2020 63,391 $ — (22,442) $ (24,119) $ 5,699 $ 22,652 $ (233) $ 3,999


	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
	Shares (in 000's)	Amount		Shares (in 000's)	Amount
Balance, March 31, 2021	63,562	$	0	(22,511)	$	(24,274)	$	5,965	$	23,233	$	(160)	$	4,764

Net loss	—	—		—	—		—		(167)		—		(167)
Foreign currency translation adjustments, net of tax	—	—		—	—		—		—		8		8
Losses on cash flow hedges, net of tax	—	—		—	—		—		—		11		11
Net unrealized gains on available-for-sale securities, net of tax	—	—		—	—		—		—		98		98


Exercise of stock options and vesting of restricted stock units and performance share units	13	0		—	—		3		—		—		3
Repurchase of common stock	—	—		(4)	(9)		—		—		—		(9)
Stock-based compensation and other stock-based payments	—	—		—	—		96		—		—		96
Reclassification adjustment for convertible debt in mezzanine	—	—		—	—		(5)		—		—		(5)

Balance, June 30, 2021	63,575	$	0	(22,515)	$	(24,283)	$	6,059	$	23,066	$	(43)	$	4,799

	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss
	Shares (in 000's)	Amount		Shares (in 000's)	Amount								Total
Balance, December 31, 2020	63,406	$	0	(22,447)	$	(24,128)	$	5,851	$	23,288	$	(118)	$	4,893

Net loss	—	—		—	—		—		(222)		—		(222)
Foreign currency translation adjustments, net of tax	—	—		—	—		—		—		(22)		(22)

Net unrealized gains on available-for-sale securities, net of tax	—	—		—	—		—		—		97		97


Exercise of stock options and vesting of restricted stock units and performance share units	169	0		—	—		4		—		—		4
Repurchase of common stock	—	—		(68)	(155)		—		—		—		(155)
Stock-based compensation and other stock-based payments	—	—		—	—		209		—		—		209
Reclassification adjustment for convertible debt in mezzanine	—	—		—	—		(5)		—		—		(5)

Balance, June 30, 2021	63,575	$	0	(22,515)	$	(24,283)	$	6,059	$	23,066	$	(43)	$	4,799


		Common Stock				Treasury Stock						Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss						Common Stock					Treasury Stock						Additional Paid-in Capital				Retained Earnings				Accumulated Other Comprehensive Loss		Total
		Shares (in 000's)	Amount		Shares (in 000's)	Amount													Total			Shares (in 000's)		Amount			Shares (in 000's)			Amount			Additional Paid-in Capital			Retained Earnings				Accumulated Other Comprehensive Loss			Total
Balance, March 31, 2019		63,122	$	—	(18,936)	$	(17,567)	$	5,519	$	19,132	$	(169)	$	6,915
Balance, March 31, 2020																Balance, March 31, 2020		63,370		$	0		(22,440)		$	(24,115)		$	5,758		$	22,530				$	(342)			$	3,831

Net income	Net income	—	—		—	—		—		979		—		979		Net income		—		—			—		—			—			122			—				122
Foreign currency translation adjustments, net of tax	Foreign currency translation adjustments, net of tax	—	—		—	—		—		—		(16)		(16)		Foreign currency translation adjustments, net of tax		—		—			—		—			—			—			32				32
Net unrealized losses on available-for-sale securities, net of tax		—	—		—	—		—		—		(45)		(45)

Net unrealized gains on available-for-sale securities, net of tax																Net unrealized gains on available-for-sale securities, net of tax		—		—			—		—			—			—			77				77
Issuance of convertible senior notes																Issuance of convertible senior notes		—		—			—		—			96			—			—				96
Conversion of debt																Conversion of debt		—		—			—��		—			(241)			—			—				(241)
Exercise of stock options and vesting of restricted stock units and performance share units	Exercise of stock options and vesting of restricted stock units and performance share units	22	—		—	—		1		—		—		1		Exercise of stock options and vesting of restricted stock units and performance share units		21		0			—		—			6			—			—				6
Repurchase of common stock	Repurchase of common stock	—	—		(1,442)	(2,606)		—		—		—		(2,606)		Repurchase of common stock		—		—			(2)		(4)			—			—			—				(4)
Stock-based compensation and other stock-based payments	Stock-based compensation and other stock-based payments	—	—		—	—		79		—		—		79		Stock-based compensation and other stock-based payments		—		—			—		—			80			—			—				80

Balance, June 30, 2019		63,144	$	—	(20,378)	$	(20,173)	$	5,599	$	20,111	$	(230)	$	5,307
Balance, June 30, 2020																Balance, June 30, 2020		63,391		$	0		(22,442)		$	(24,119)		$	5,699		$	22,652		$	(233)			$	3,999

		Common Stock				Treasury Stock						Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss						Common Stock					Treasury Stock						Additional Paid-in Capital				Retained Earnings				Accumulated Other Comprehensive Loss
		Shares (in 000's)	Amount		Shares (in 000's)	Amount													Total			Shares (in 000's)		Amount			Shares (in 000's)			Amount			Additional Paid-in Capital			Retained Earnings				Accumulated Other Comprehensive Loss			Total
Balance, December 31, 2018		62,949	$	—	(17,317)	$	(14,711)	$	5,445	$	18,367	$	(316)	$	8,785

Net income		—	—		—	—		—		1,744		—		1,744
Balance, December 31, 2019																Balance, December 31, 2019		63,179		$	0		(21,762)		$	(22,864)		$	5,756		$	23,232		$	(191)			$	5,933
Cumulative effect of adoption of accounting standards update																Cumulative effect of adoption of accounting standards update		—		—			—		—			—			(3)			—				(3)
Net loss																Net loss		—		—			—		—			—			(577)			—				(577)
Foreign currency translation adjustments, net of tax	Foreign currency translation adjustments, net of tax	—	—		—	—		—		—		(28)		(28)		Foreign currency translation adjustments, net of tax		—		—			—		—			—			—			(45)				(45)
Net unrealized gains on available-for-sale securities, net of tax	Net unrealized gains on available-for-sale securities, net of tax	—	—		—	—		—		—		114		114		Net unrealized gains on available-for-sale securities, net of tax		—		—			—		—			—			—			3				3

Issuance of convertible senior notes																Issuance of convertible senior notes		—		—			—		—			96			—			—				96
Conversion of debt																Conversion of debt		—		—			—		—			(245)			—			—				(245)
Exercise of stock options and vesting of restricted stock units and performance share units	Exercise of stock options and vesting of restricted stock units and performance share units	195	—		—	—		1		—		—		1		Exercise of stock options and vesting of restricted stock units and performance share units		212		0			—		—			6			—			—				6
Repurchase of common stock	Repurchase of common stock	—	—		(3,061)	(5,462)		—		—		—		(5,462)		Repurchase of common stock		—		—			(680)		(1,255)			—			—			—				(1,255)
Stock-based compensation and other stock-based payments	Stock-based compensation and other stock-based payments	—	—		—	—		153		—		—		153		Stock-based compensation and other stock-based payments		—		—			—		—			86			—			—				86

Balance, June 30, 2019		63,144	$	—	(20,378)	$	(20,173)	$	5,599	$	20,111	$	(230)	$	5,307
Balance, June 30, 2020																Balance, June 30, 2020		63,391		$	0		(22,442)		$	(24,119)		$	5,699		$	22,652		$	(233)			$	3,999

See Notes to Unaudited Consolidated Financial Statements.

Booking Holdings Inc.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)


		Six Months Ended June 30,							Six Months Ended June 30,
		2020		2019			2021		2020
OPERATING ACTIVITIES:	OPERATING ACTIVITIES:					OPERATING ACTIVITIES:
Net (loss) income		$	(577)	$	1,744
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Net loss						Net loss	$	(222)	$	(577)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:						Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	Depreciation and amortization	229		235		Depreciation and amortization	221		229
Provision for expected credit losses and chargebacks	Provision for expected credit losses and chargebacks	322		74		Provision for expected credit losses and chargebacks	37		322
Deferred income tax expense		11		60
Net gains on marketable equity securities		(528)		(468)
Deferred income tax (benefit) expense						Deferred income tax (benefit) expense	(120)		11
Net gains on equity securities						Net gains on equity securities	(427)		(528)

Stock-based compensation expense and other stock-based payments	Stock-based compensation expense and other stock-based payments	94		162		Stock-based compensation expense and other stock-based payments	204		94
Operating lease amortization	Operating lease amortization	91		85		Operating lease amortization	91		91
Amortization of debt discount and debt issuance costs	Amortization of debt discount and debt issuance costs	33		28		Amortization of debt discount and debt issuance costs	30		33
Unrealized foreign currency transaction losses on Euro-denominated debt		22		19
Unrealized foreign currency transaction (gains) losses on Euro-denominated debt						Unrealized foreign currency transaction (gains) losses on Euro-denominated debt	(54)		22
Impairment of goodwill	Impairment of goodwill	489		—		Impairment of goodwill	0		489
Impairment of investment	Impairment of investment	100		—		Impairment of investment	0		100
Loss on early extinguishment of debt						Loss on early extinguishment of debt	242		0

Other	Other	3		9		Other	17		3
Changes in assets and liabilities, net of effect of acquisition:
Changes in assets and liabilities:						Changes in assets and liabilities:
Accounts receivable	Accounts receivable	805		(523)		Accounts receivable	(820)		805
Prepaid expenses and other current assets	Prepaid expenses and other current assets	248		(584)		Prepaid expenses and other current assets	(173)		248
Deferred merchant bookings and other current liabilities	Deferred merchant bookings and other current liabilities	(1,567)		1,513		Deferred merchant bookings and other current liabilities	1,973		(1,567)

Other long-term assets and liabilities	Other long-term assets and liabilities	(33)		(417)		Other long-term assets and liabilities	(54)		(33)
Net cash (used in) provided by operating activities		(258)		1,937

Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	945		(258)
INVESTING ACTIVITIES:	INVESTING ACTIVITIES:					INVESTING ACTIVITIES:
Purchase of investments	Purchase of investments	(72)		(580)		Purchase of investments	(15)		(72)
Proceeds from sale and maturity of investments	Proceeds from sale and maturity of investments	2,997		6,977		Proceeds from sale and maturity of investments	8		2,997
Additions to property and equipment	Additions to property and equipment	(150)		(199)		Additions to property and equipment	(124)		(150)
Acquisitions and other investments, net of cash acquired		—		(9)
Net cash provided by investing activities		2,775		6,189
Other investing activities						Other investing activities	(5)		0
Net cash (used in) provided by investing activities						Net cash (used in) provided by investing activities	(136)		2,775
FINANCING ACTIVITIES:						FINANCING ACTIVITIES:
Proceeds from short-term borrowings						Proceeds from short-term borrowings	0		56

FINANCING ACTIVITIES:
Proceeds from revolving credit facility and short-term borrowings		56		437
Repayments of revolving credit facility and short-term borrowings		—		(425)
Proceeds from the issuance of long-term debt	Proceeds from the issuance of long-term debt	4,108		—		Proceeds from the issuance of long-term debt	2,015		4,108
Payments of debt issuance costs	Payments of debt issuance costs	(38)		—		Payments of debt issuance costs	(10)		(38)
Payments for conversion of debt		(1,244)		—
Payments for redemption and conversion of debt						Payments for redemption and conversion of debt	(1,982)		(1,244)
Payments for repurchase of common stock	Payments for repurchase of common stock	(1,294)		(5,491)		Payments for repurchase of common stock	(150)		(1,294)

Other financing activities	Other financing activities	5		(8)		Other financing activities	(11)		5
Net cash provided by (used in) financing activities		1,593		(5,487)
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(138)		1,593
Effect of exchange rate changes on cash and cash equivalents and restricted cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents and restricted cash and cash equivalents	(19)		(8)		Effect of exchange rate changes on cash and cash equivalents and restricted cash and cash equivalents	(1)		(19)
Net increase in cash and cash equivalents and restricted cash and cash equivalents	Net increase in cash and cash equivalents and restricted cash and cash equivalents	4,091		2,631		Net increase in cash and cash equivalents and restricted cash and cash equivalents	670		4,091
Total cash and cash equivalents and restricted cash and cash equivalents, beginning of period (see Note 14)		6,332		2,645
Total cash and cash equivalents and restricted cash and cash equivalents, end of period (see Note 14)		$	10,423	$	5,276

Total cash and cash equivalents and restricted cash and cash equivalents, beginning of period						Total cash and cash equivalents and restricted cash and cash equivalents, beginning of period	10,582		6,332
Total cash and cash equivalents and restricted cash and cash equivalents, end of period						Total cash and cash equivalents and restricted cash and cash equivalents, end of period	$	11,252	$	10,423
SUPPLEMENTAL CASH FLOW INFORMATION:	SUPPLEMENTAL CASH FLOW INFORMATION:					SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for income taxes (see Note 14)		$	61	$	949
Cash paid during the period for income taxes (see Note 17)						Cash paid during the period for income taxes (see Note 17)	$	406	$	61
Cash paid during the period for interest	Cash paid during the period for interest	$	92	$	101	Cash paid during the period for interest	$	164	$	92

See Notes to Unaudited Consolidated Financial Statements.

Booking Holdings Inc.

Notes to Unaudited Consolidated Financial Statements

1. BASIS OF PRESENTATION

Management of Booking Holdings Inc. (the "Company") is responsible for the Unaudited Consolidated Financial Statements included in this document. The Unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and include all normal and recurring adjustments that management of the Company considers necessary for a fair presentation of its financial position and operating results. The Company prepared the Unaudited Consolidated Financial Statements following the requirements of the Securities and Exchange Commission ("SEC") for interim reporting. As permitted under those rules, the Company condensed or omitted certain footnotes or other financial information that are normally required by U.S. GAAP for annual financial statements. These statements should be read in combination with the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

The Unaudited Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All ~~inter-company accounts~~intercompany balances and transactions have been eliminated in consolidation. The functional currency of the Company's subsidiaries is generally the respective local currency. For international operations, assets and liabilities are translated into U.S. Dollars at the rate of exchange existing at the balance sheet date. Income statement amounts are translated at monthly average exchange rates applicable for the period. Translation gains and losses are included as a component of "Accumulated other comprehensive loss" in the accompanying Consolidated Balance Sheets. Foreign currency transaction gains and losses are included in ~~"Foreign currency transactions and other"~~"Other income (expense), net" in the Unaudited Consolidated Statements of Operations.

Revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be the same as those for any subsequent quarter or the full year, especially during the periods that are impacted by the COVID-19 pandemic.

Impact of COVID-19

~~In December 2019, a~~The ongoing outbreak of the novel strain of the coronavirus COVID-19 was first detected in Wuhan, China, and has since spread to other regions, including Europe and the United States. On March 11, 2020, the World Health Organization declared that the rapidly spreading COVID-19 outbreak was a global pandemic (the "COVID-19 pandemic")~~. In response~~, as well as subsequent outbreaks driven by new variants of COVID-19, and the resulting economic conditions and government restrictions have resulted in a material decrease in consumer spending and an unprecedented decline in travel and restaurant activities and consumer demand for related services as compared to 2019 levels. See Note 2 to the ~~COVID-19 pandemic, many~~Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 for further information. The Company’s financial results and prospects are almost entirely dependent on the sale of travel-related services. Many governments around the world ~~have implemented, and~~ continue to implement a variety of measures to reduce the spread of COVID-19, including travel restrictions, bans and ~~bans,~~advisories, instructions to residents to practice social distancing, curfews, quarantine advisories, including quarantine restrictions after travel in certain locations, shelter-in-place orders, required closures of non-essential businesses and additional restrictions on businesses as part of re-opening plans. These government mandates have ~~forced~~had a significant adverse effect on many of the customers on whom the Company’s business relies, including hotels and other accommodation providers, airlines and restaurants, to seek government support in order to continue operating, to curtail drastically their service offerings, to file for bankruptcy protection or to cease operations entirely. Further, these measures have materially adversely affected, and may further adversely affect, consumer sentiment and discretionary spending patterns, economies and financial markets, andas well as the ~~Company’s~~Company's workforce, operations and ~~customers.~~consumers. Though some governments have started to relax COVID-19-related restrictions and vaccine distributions are well underway in some countries, there remains uncertainty around the impact of the new variants of COVID-19, when remaining restrictions will be lifted, if additional restrictions may be initiated or reimposed, if there will be changes to travel behavior patterns when government restrictions are fully lifted, and the timing of distribution and administration of the vaccines globally.

~~The COVID-19 pandemic and~~In 2020, given the ~~resulting economic conditions and government orders have resulted~~severe downturn in ~~a material decrease in consumer spending and an unprecedented decline in~~the global travel and restaurant activities and consumer demand for related services. The Company’s financial results and prospects are almost entirely dependent on the sale of such travel and restaurant-related services. The Company’s results for each of the quarters ended March 31, 2020 and June 30, 2020 have been significantly and negatively impacted as compared to the corresponding periods in 2019. The impact of COVID-19 pandemic for the quarter ended June 30, 2020, is more significant than for the quarter ended March 31, 2020, primarily because an increasing number of markets and locations have been subject to the governmental measures and economic disruptions noted above during the entirety of the second quarter (as compared to the first quarter, when the effects of the outbreak were largely limited to China and certain other Asian markets during January 2020 and much of February 2020).

Due to the uncertain and rapidly evolving nature of current conditions around the world, the Company is unable to predict accurately the impact that the COVID-19 pandemic will have on its business going forward. With the spread of COVID-19 to all major regions, the Company expects the COVID-19 pandemic and its effects to continue to have a significant adverse impact on its business for the duration of the pandemic, during any resurgence of the pandemic and during the subsequent economic recovery, which could be an extended period of time.

~~Given the volatility in global markets~~industry and the financial difficulties faced by many of the Company's travel service provider and restaurant customers and marketing affiliates, the Company ~~has~~ increased its provision for expected credit losses (also referred to as provision for bad debt or provision for uncollectible accounts) on receivables from and prepayments to its travel service provider and restaurant customers and marketing affiliates (see Note 7). Moreover, due to the high level of cancellations of existing reservations, the Company ~~has~~ incurred ~~and may continue to incur,~~ higher than normal cash outlays to refund consumers for prepaid reservations, including certain situations where the Company had already transferred the prepayment to the travel service provider (see Note 2). In 2021, based on its review of recent historical credit loss experience and stability in the economic conditions in certain markets, the Company has revised its estimates of expected credit losses (see Note 7). Any ~~material~~significant increase in the ~~Company’s~~Company's provision for expected credit losses and any ~~material~~significant increase in cash outlays to refund consumers would have a corresponding adverse effect on the Company's results of operations and related cash flows.

As a result of the deterioration of the Company’s business due to the COVID-19 pandemic, the Company ~~determined that a portion of its~~ recorded significant goodwill ~~had experienced a decline~~impairment charges in ~~value at March 31,~~ 2020 ~~and recorded a significant impairment charge~~ (see Note 8)8). In addition, the Company recorded a significant impairment ~~charge at March 31,~~

charge in 2020 for ~~one~~1 of the Company's long-term investments ~~due to the impact of the COVID-19 pandemic on the business of the investee and the Company's estimate of the resulting decline in the value of the investment~~ (see Notes 5 and 6). Even though no additional impairment indicators were identified as of June 30, ~~2020~~2021 for these assets, it is possible that the Company may have to record additional significant impairment charges in future periods.

See Note 9 for additional information about the Company’s existing debt arrangements, including ~~$4.1~~1.7 billion Euros of debt issued in March 2021 and payment of $2.0 billion in April 2021 to redeem certain Senior Notes issued in April 2020. The Company’s continued access to sources of liquidity depends on multiple factors, including global economic conditions, the condition of global financial markets, the availability of sufficient amounts of financing, the Company’s ability to meet debt covenant requirements, the Company’s operating performance and ~~its~~the Company's credit ratings. If the Company’s credit ratings were to be downgraded, or financing sources were to ascribe higher risk to its rating levels, the Company or its industry, the Company’s access to capital and the cost of any financing would be negatively impacted. There is no guarantee that additional debt financing will be available in the future to fund the Company’s obligations, or that it will be available on commercially reasonable terms, in which case the Company may need to seek other sources of funding.

While there have been some signs of a recovery in travel demand in certain parts of the world including the United States and Europe, the Company continues to expect that its business will be adversely impacted by surges of COVID-19 case counts, including those driven by variants of COVID-19, as well as any government-imposed travel restrictions in reaction to COVID-19 outbreaks, which could remain a risk for an extended period of time. The extent of the effects of the COVID-19 pandemic on the Company’s business, results of operations, cash flows and growth prospects is highly uncertain and will ultimately depend on future developments. These include, but are not limited to, the severity, extent and duration of the COVID-19 pandemic, including as a result of any new variants of COVID-19 and ~~its impact~~any resurgences of the pandemic, the global distribution of the vaccines and their efficacy against existing and any future variants of COVID-19, and their impacts on the travel and restaurant industries and consumer spending more broadly. While it is encouraging that the rate of vaccination distribution is increasing throughout the world, many countries in Asia, Africa, South America and other parts of the world have made slower progress. Additionally, the highly-transmissible Delta variant of COVID-19 has caused authorities in various countries to reimpose restrictions such as mask mandates, curfews and prohibitions on large gatherings. Even ifthough there have been some improvements in the economic and operating conditions for the ~~Company’s~~Company's business ~~improve,~~since the outset of the COVID-19 pandemic, the Company cannot predict the long-term effects of the pandemic on its business or the travel and restaurant industries as a whole. If the travel and restaurant industries are fundamentally changed by the COVID-19 pandemic in ways that are detrimental to the Company’s operating model, the Company’s business may continue to be adversely affected even as the broader global economy recovers.

In response to the reduction in the Company's business volumes as a result of the impact of the COVID-19 pandemic, during the year ended December 31, 2020, the Company ~~has taken~~took actions to reduce the size of its workforce to optimize ~~efficiency.~~efficiency and reduce costs. See Note 14 for additional information. The Company also participated in certain governmental assistance programs and received certain grants and other assistance. In June 2021, the Company announced its intention to voluntarily return the government assistance received and has repaid $105 million as of August 3, 2021. See Note 15 for additional information.

~~Certain~~ governments have passed or are considering legislation to help businesses during the COVID-19 pandemic through loans, wage subsidies, tax relief or other financial aid, and some of these governments have extended or are considering extending these programs. The Company has participated in several of these programs, including the Netherlands' wage subsidy program, the United Kingdom's job retention scheme and certain other jurisdictions' programs. See Note 14 for additional information.

~~Change in Presentation and~~ Reclassification

In the year ended December 31, 2019 and prior periods, the Company's marketing expenses were presented in the Consolidated Statements of Operations as "Performance marketing" and "Brand marketing" expenses. In the first quarter of 2020, the Company changed the presentation of marketing expenses by combining "Performance marketing" and "Brand marketing" into "Marketing expenses" in the Unaudited Consolidated Statement of Operations because of the increased convergence of performance marketing and brand marketing channels in areas including digital marketing and the Company's view of overall marketing expenditure as its investment in customer acquisition and retention. The change in presentation had no impact on operating income or net income. The Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2019 has been recast to conform to the current year presentation.

~~In addition to the change in presentation for marketing expenses, certain~~Certain amounts from prior periods have been reclassified to conform to the current period presentation.

Recent Accounting Pronouncements Adopted

~~Simplifying the Test for Goodwill Impairment~~

In January 2017, the Financial Accounting Standards Board ("FASB") issued a new accounting update to simplify the test for goodwill impairment. The revised guidance eliminates the previously required step two of the goodwill impairment test, which required a hypothetical purchase price allocation to measure goodwill impairment. Under the revised guidance, a goodwill impairment loss will be measured at the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. The Company adopted this update in the first quarter of 2020 and applied it on a prospective basis (see Note 8 for additional information on the goodwill impairment test performed at March 31, 2020).

~~Measurement of Credit Losses on Financial Instruments~~

In June 2016, the FASB issued a new accounting update on the measurement of credit losses for certain financial assets measured at amortized cost and available-for-sale debt securities. For financial assets measured at amortized cost, this update requires an entity to (1) estimate its lifetime expected credit losses upon recognition of the financial assets and establish an allowance to present the net amount expected to be collected, (2) recognize this allowance and changes in the allowance during subsequent periods through net income and (3) consider relevant information about past events, current conditions and reasonable and supportable forecasts in assessing the lifetime expected credit losses. For available-for-sale debt securities, this update made several targeted amendments to the existing other-than-temporary impairment model, including (1) requiring disclosure of the allowance for expected credit losses, (2) allowing reversals of the previously recognized credit losses until the entity has the intent to sell, is more-likely-than-not required to sell the securities or the maturity of the securities, (3) limiting impairment to the difference between the amortized cost basis and fair value and (4) not allowing entities to consider the length of time that fair value has been less than amortized cost as a factor in evaluating whether a credit loss exists. The Company adopted this update in the first quarter of 2020 and applied this update on a modified retrospective basis. Upon adoption of the new standard on January 1, 2020, the Company recorded a net decrease to its retained earnings of $3 million, net of tax. See Note 7 for additional information related to allowance for expected credit losses on accounts receivable and other financial assets and Note 5 for additional information related to investments in available-for-sale debt securities.

~~Other Recent Accounting Pronouncement~~

~~Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity~~

In August 2020, the FASB issued a new accounting update relating to convertible instruments and contracts in an entity’s own equity. For convertible instruments, the accounting update reduces the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. The accounting update amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. The accounting update also simplifies the diluted earnings per share calculation in certain areas. For public business entities, the update is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently evaluating the impact to its Consolidated Financial Statements of adopting this update.

Simplifying the Accounting for Income Taxes

~~In December 2019, the FASB~~The Financial Accounting Standards Board ("FASB") issued a new accounting update relating to income taxes. This update provides an exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. This update also (1) requires an entity to recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, (2) requires an entity to evaluate when a step-up in the tax basis of goodwill should be considered part of the business combination in which goodwill was originally recognized for accounting purposes and when it should be considered a separate transaction, and (3) requires that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date.

~~For public business entities,~~The Company adopted this update ~~is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early~~on January 1, 2021 and applied the applicable amendments on a prospective basis. The adoption ~~is permitted. The amendment related to franchise taxes that are partially based~~did not have a material impact on ~~income should be applied on either a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of~~ the ~~beginning of the fiscal year of adoption. All other~~Company's Unaudited Consolidated Financial Statements.

1110

~~amendments should~~Other Recent Accounting Pronouncements

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

The update is effective for the Company from January 1, 2022. The update can be ~~applied~~adopted on either a ~~prospective~~full or modified retrospective basis. The Company is currently evaluating the impact to its Consolidated Financial Statements of adopting this ~~update and does not expect it to have a material impact.~~

update.

2. REVENUE

Disaggregation of ~~revenue~~Revenue

Geographic Information

The Company's international revenue information consists of the results of Booking.com, agoda and Rentalcars.com in their entirety and the results of the international businesses of KAYAK and OpenTable. This classification is independent of where the consumer resides, where the consumer is physically located while using the Company's services or the location of the travel service provider or restaurant. For example, a reservation made through Booking.com (which is domiciled in the Netherlands) at a hotel in New York by a consumer in the United States is part of the Company's international results. The Company's geographic information is as follows (in millions):


				International											International
		United States		The Netherlands		Other		Total			United States		The Netherlands		Other		Total
Total revenues for the three months ended June 30,	Total revenues for the three months ended June 30,									Total revenues for the three months ended June 30,
2021										2021	$	393	$	1,601	$	166	$	2,160
2020	2020	$	105	$	444	$	81	$	630	2020	$	105	$	444	$	81	$	630
2019 ⁽¹⁾		400		2,997		453		3,850

Total revenues for the six months ended June 30,	Total revenues for the six months ended June 30,									Total revenues for the six months ended June 30,
2021										2021	$	590	$	2,412	$	299	$	3,301
2020	2020	$	390	$	2,121	$	407	$	2,918	2020	$	390	$	2,121	$	407	$	2,918
2019 ⁽¹⁾		766		5,069		852		6,687

~~(1) Geographic information~~

Revenue by Type of Service

Approximately 83% and 84% of the Company's revenue for the three and six months ended June 30, ~~2019 has been recast to conform to the current period presentation.~~

~~Revenue by Type of Service~~

~~Approximately~~2021, respectively, and 86% and 85% of the Company's revenue for the three and six months ended June 30, 2020, ~~respectively, and 87% and 86% of the Company's revenue for the three and six months ended June 30, 2019,~~ respectively, relates to online accommodation reservation services. Revenue from all other sources of online travel reservation services and advertising and other revenues each individually represent less than 10% of the Company's total ~~revenues.~~revenues for each period.

Deferred Merchant Bookings and Deferred Revenue

Cash payments received from travelers in advance of the Company completing its ~~service~~performance obligations are included in "Deferred merchant bookings" in the Company's Consolidated Balance Sheets and are comprised principally of amounts estimated to be payable to the travel service providers as well as the Company's estimated deferred revenue for its commission or margin and fees. At June 30, 2021 and December 31, 2020, deferred merchant bookings included deferred revenue for online travel reservation services of $289 million and $50 million, respectively. The amounts are subject to refunds for cancellations. The Company expects to complete its ~~service obligation~~performance obligations generally within one year from the reservation date. ~~The amounts are subject to refunds for cancellations.~~

~~The following table summarizes~~During the ~~activity~~six months ended June 30, 2021, the Company recognized revenues of $29 million from the deferred revenue ~~for online travel reservation services~~balance as of December 31, 2020. The increase in the deferred revenue balance for the six months ended June 30, ~~2020 (in millions):~~

~~Balance, December 31, 2019~~

~~220~~

~~Revenues recognized from the beginning deferred revenue balance~~

~~(147)~~

~~Cancellations and amendments~~

~~(61)~~

~~Payments received from travelers, net of amounts estimated to be payable to travel service providers, and other~~

~~137~~

~~Balance, June 30, 2020~~

~~149~~

2021 is

1211

principally driven by payments received from travelers, net of amounts estimated to be payable to travel service providers, for online travel reservations in the current period.

Loyalty and Other Incentive Programs

The Company provides loyalty programs where participating consumers are awarded loyalty points on current transactions that can be redeemed in the future. At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, liabilities for loyalty program incentives of ~~$67~~$16 million and ~~$80~~$21 million, respectively, were included in "Accrued expenses and other current liabilities" in the Consolidated Balance Sheets. ~~The Company’s largest~~Under OpenTable's loyalty program, ~~is at OpenTable, where~~ points can be earned for making reservations on OpenTable and redeemed for rewards such as ~~qualifying reservations at participating restaurants, third-party~~discounts on dining and travel and gift ~~cards and accommodation reservations booked through some~~cards. In March 2018, OpenTable introduced a three-year time-based expiration for points earned by diners. Unredeemed loyalty points existing as of the ~~Company’s other platforms.~~date of introduction of the expiration provision expired in March 2021. Unredeemed loyalty points earned after the date of introduction of the expiration provision expire three years from the end of the calendar quarter in which the points were earned. In addition, all unredeemed points in a diner's account expire if there is no qualifying activity (e.g., a seated reservation) for a period of 12 months. The estimated fair value of the loyalty points that are expected to be redeemed is recognized as a reduction of revenue at the time the incentives are granted.

In addition to the loyalty programs, at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, liabilities of ~~$30~~$40 million and ~~$22~~$60 million, respectively, for other incentive programs, such as referral bonuses, rebates, credits and discounts, were included in "Accrued expenses and other current liabilities" in the Consolidated Balance Sheets.

~~Impact of COVID-19~~Refunds to Travelers

Due to the high level of cancellations of existing reservations as a result of the COVID-19 pandemic (see Note 1), in 2020, the Company ~~has~~ incurred ~~and may continue to incur,~~ higher than normal cash outlays to refund travelers for prepaid reservations, including certain situations where the Company ~~has~~had already transferred the prepayment to the travel service provider. For the six months ended June 30, 2020, the Company recorded a reduction in revenue of $63 million for refunds paid or estimated to be payable to travelers where the Company ~~has~~had agreed to provide free cancellation for certain non-refundable reservations without a corresponding estimated expected recovery from the travel service providers.

3. STOCK-BASED EMPLOYEE COMPENSATION

Stock-based compensation expense included in "Personnel" expenses in the Unaudited Consolidated Statements of Operations was $77 million and $79 million for the three months ended June 30, 2020 and 2019, respectively, and $83 million and $153 million for the six months ended June 30, 2020 and 2019, respectively.

Stock-based compensation expense related to performance share units, restricted stock units and stock options is recognized based on fair value on a straight-line basis over the respective requisite service periods and forfeitures are accounted for when they occur. The fair value on the grant date of performance share units and restricted stock units is determined based on the number of units granted and the quoted price of the Company's common stock. For performance share units with market conditions, the effect of the market condition is also considered in the determination of fair value on the grant date using Monte Carlo simulations. The fair value of employee stock options is determined using the Black-Scholes model. Performance share units and restricted stock units are payable in shares of the Company's common stock upon vesting. The Company issues shares of its common stock upon the exercise of stock options.

The Company records stock-based compensation expense for performance-based awards using its estimate of the probable outcome at the end of the performance period (i.e., the estimated performance against the performance ~~targets)~~targets or performance goals, as applicable). The Company periodically adjusts the cumulative stock-based compensation expense recorded when the probable outcome for these performance-based awards is updated based upon changes in actual and forecasted operating ~~results.~~results or expected achievement of performance goals, as applicable.

~~For the performance share units outstanding at March 31, 2020, due~~Due to the impact of the COVID-19 pandemic (see Note 1), there was a significant decline, as of March 31, 2020, in the estimated performance over the performance periods against the performance targets and consequently, a significant reduction in the number of shares that were probable to be issued as compared to December 31, ~~2019.~~2019. As a result, infor the three months ended March 31, 2020, the Company recognized a reduction in stock-based compensation expense of $73 million, which is included in "Personnel" expense in the Unaudited Consolidated Statement of Operations for the six months ended June 30, 2020. During the three months ended June 30, 2020, considering pre-COVID-19 performance and the significant effect of the COVID-19 pandemic on Company performance and consequently on the number of shares that were probable to be issued to employees, the Company modified the performance-based awards granted in 2018 (other than the performance-based awards granted to executive officers and certain other employees) to fix the number of shares to be issued, subject to other vesting conditions. As a result, the Company incurred an additional stock-based compensation expense of $11 million, which was recognized over the remaining requisite service period. During the three months ended March 31, 2021, the Company modified the performance-based awards granted in 2018 and 2019 to its executive officers, to fix the number of shares to be issued,

subject to other vesting conditions. The modification, in the aggregate, resulted in additional stock-based compensation expense of $40 million, to be recognized over the remaining requisite service ~~period.~~periods for the performance-based awards.

Restricted stock units and performance share units granted by the Company during the three and six months ended June 30, ~~2020~~2021 had an aggregate grant-date fair ~~values~~value of ~~$85~~$10 million and ~~$350~~$378 million, respectively. Restricted stock units and performance share units that vested during the three and six months ended June 30, ~~2020~~2021 had an aggregate fair ~~values~~value at vesting of ~~$14~~$24 million and ~~$333~~$377 million, respectively. At June 30, ~~2020,~~2021, there was ~~$542~~$610 million of estimated total future stock-based compensation expense related to unvested restricted stock units and performance share units to be recognized over a weighted-average period of ~~2.2~~2.1 years.

~~Stock options granted by the Company during the three and six months ended June 30, 2020 had an aggregate grant-date fair value of $79 million.~~ At June 30, ~~2020,~~2021, there was ~~$75~~$39 million of estimated total future stock-based compensation expense related to unvested stock options to be recognized over a weighted-average period of ~~2.7~~1.7 years.

Restricted Stock Units

The Company makes broad-based grants of restricted stock units that generally vest during a period of ~~one-~~one- to three-years, subject to certain exceptions for terminations other than for "cause," for "good reason" or on account of death or disability.

The following table summarizes the activity of restricted stock units for employees and non-employee directors during the six months ended June 30, ~~2020:~~2021:


Restricted Stock Units	Restricted Stock Units	Shares	Weighted-average Grant-date Fair Value Per Share					Restricted Stock Units	Shares			Weighted-average Grant-date Fair Value
Unvested at December 31, 2019		256,745		$	1,801
Unvested at December 31, 2020						Unvested at December 31, 2020	305,959			$	1,697

Granted	Granted	212,913		$	1,644	Granted	123,939			$	2,275
Vested	Vested	(117,709)		$	1,811	Vested	(110,550)			$	1,789
Forfeited	Forfeited	(15,636)		$	1,784	Forfeited	(25,308)			$	1,836
Unvested at June 30, 2020		336,313		$	1,698
Unvested at June 30, 2021						Unvested at June 30, 2021	294,040			$	1,895

Performance Share Units

The Company grants performance share units to executives and certain other employees, which generally vest at the end of a three-year period (with the exception of certain shorter term performance share units granted in 2021 that vest at the end of one and two years), subject to certain exceptions for terminations other than for "cause," for "good reason" or on account of death or disability. The number of shares that ultimately vest depends on achieving certain performance metrics, performance goals, stock price increase and/or relative total shareholder return, as applicable, by the end of the performance period, assuming there is no accelerated vesting for, among other things, a termination of employment under certain circumstances.

The following table summarizes the activity of performance share units for employees during the six months ended June 30, ~~2020:~~2021:


Performance Share Units	Performance Share Units	Shares	Weighted-average Grant-date Fair Value Per Share					Performance Share Units	Shares		Weighted-average Grant-date Fair Value
Unvested at December 31, 2019		216,083		$	1,835
Unvested at December 31, 2020						Unvested at December 31, 2020	84,478		$	1,930

Granted (1)						Granted (1)	42,173		$	2,287
Vested	Vested	(81,396)		$	1,740	Vested	(55,426)		$	1,999
Performance Shares Adjustment *		(50,182)		$	1,944
Performance shares adjustment (2)						Performance shares adjustment (2)	44,449		$	2,125
Forfeited	Forfeited	(4,547)		$	1,840	Forfeited	(6,649)		$	1,773
Unvested at June 30, 2020		79,958		$	1,859
Unvested at June 30, 2021						Unvested at June 30, 2021	109,025		$	2,123

*(1) Excludes 12,251 performance share units awarded during the six months ended June 30, 2021 for which the grant date under Accounting Standards Codification ("ASC") 718, Compensation - Stock Compensation, has not yet been established. Amongst other conditions, for the grant date to be established, a mutual understanding is required to be reached between the Company and the employee of the key terms and conditions of the award, including the performance targets. The performance targets for each of the annual performance periods under the award are set at the beginning of the respective year.

(2) Probable outcome for ~~these~~ performance-based awards is updated based upon changes in actual and forecasted operating results or expected achievement of performance goals, as applicable, and the impact of modifications.

~~NaN performance share units were granted during the six months ended June 30, 2020.~~ The following table summarizes the estimated vesting, as of June 30, ~~2020,~~2021, of performance share units granted in 2021, 2020 and 2019, ~~and 2018,~~ net of forfeiture and vesting since the respective grant dates:


Performance Share Units, by grant year	2021(1)	2020	2019

Shares probable to be issued	63,934	11,752	33,339
Shares not subject to the achievement of minimum performance thresholds	28,506	0	33,339
Shares that could be issued if maximum performance thresholds are met	63,934	18,080	62,251

Performance Share Units, by grant year 2019 2018
Shares probable to be issued 44,237 35,721
Shares not subject to the achievement of minimum performance thresholds 44,237 35,721
Shares that could be issued if maximum performance thresholds are met 115,310 62,606

(1) Excludes performance share units awarded during the six months ended June 30, 2021 for which the grant date under ASC 718 has not yet been established as disclosed above.

Stock Options

In ~~May~~ 2020, the Company granted stock options to certain employees that vest in March 2023, subject to certain exceptions for terminations other than for "cause," for "good reason" or on account of death or disability. NoNaN stock options were granted to the executive officers of the Company. Stock options granted or assumed in acquisitions generally have a term of 10 years from the grant date. The fair value of stock options granted is estimated on the grant date using the Black-Scholes option pricing model and is affected by assumptions regarding a number of complex and subjective variables. The use of an option pricing model requires the use of several assumptions including expected volatility, risk-free interest rate, expected dividends, and expected term. Expected volatility is based on the Company’s historical volatility over the expected term of the option and implied volatility of publicly traded options of the Company’s common stock. The expected term of the options represents the estimated period of time until option exercise. Since the Company has limited historical stock option exercise experience, the Company used the simplified method in estimating the expected term, which is calculated as the average of the sum of the vesting term and the original contractual term of the options. The risk-free interest rate is based on U.S. Treasury zero-coupon issues at the time of grant for the expected term of the option.

~~The following table summarizes the assumptions used to value option grants granted in the six months ended June 30, 2020 using the Black-Scholes options pricing model:~~


~~Black-Scholes assumptions~~
~~Risk-free interest rate~~	~~0.56~~	%
~~Expected term in years~~	~~6.4~~
~~Expected stock price volatility~~	~~33.8~~	%
~~Expected dividend yield~~	0	%

The following table summarizes the activity for stock options during the six months ended June 30, ~~2020:~~2021:

Employee Stock Options Number of Shares Weighted-average
Exercise Price Aggregate
Intrinsic Value (in millions) Weighted-average Remaining Contractual Term
(in years)
Balance, December 31, 2019 15,122 $ 484 $ 24 2.6
Granted 163,494 $ 1,411
Exercised (12,884) $ 464
Forfeited (690) $ 1,411
Balance, June 30, 2020 165,042 $ 1,400 $ 32 9.8
Exercisable at June 30, 2020 2,238 $ 616 $ 2 2.5


Employee Stock Options	Number of Shares	Weighted-average Exercise Price			Aggregate Intrinsic Value (in millions)			Weighted-average Remaining Contractual Term (in years)
Balance, December 31, 2020	152,746		$	1,401		$	126	9.3

Exercised	(3,491)		$	1,248

Forfeited	(10,677)		$	1,411
Balance, June 30, 2021	138,578		$	1,405		$	109	8.7
Exercisable at June 30, 2021	1,394		$	767		$	2	2.1

~~Stock options granted by the Company during the six months ended June 30, 2020 had a weighted-average grant-date fair value per option of $485.~~ The aggregate intrinsic value of employee stock options exercised during the six months ended June 30, 2021 and 2020 ~~and 2019~~ was ~~$14~~$4 million and $2$14 million, respectively.

4. NET (LOSS) INCOME ~~(LOSS)~~ PER SHARE

The Company ~~computes~~computes basic net (loss) income ~~(loss)~~ per share by dividing net (loss) income ~~(loss)~~ applicable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net (loss) income per share is based upon the weighted-average number of common and common equivalent shares outstanding during the period.

Common equivalent shares related to stock options, restricted stock units and performance share units are calculated using the treasury stock method. Performance share units are included in the weighted-average common equivalent shares based on the number of shares that would be issued if the end of the reporting period were the end of the performance period, if the result would be dilutive.

The Company's convertible notes have net share settlement features requiring the Company upon conversion to settle the principal amount of the debt for cash and the conversion premium for cash or shares of the Company's common stock, at the

Company's option. Under the treasury stock method, if the conversion prices for the convertible notes exceed the Company's average stock price for the period, the convertible notes generally have no impact on diluted net income per share. The convertible notes are included in the calculation of diluted net income per share if their inclusion is dilutive under the treasury stock method.

A reconciliation of the weighted-average number of shares outstanding used in calculating diluted net (loss) income ~~(loss)~~ per share is as follows (in thousands):

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Weighted-average number of basic common shares outstanding 40,922 43,251 41,007 44,124
Weighted-average dilutive stock options, restricted stock units and performance share units 73 146 — 188
Assumed conversion of convertible senior notes — 204 — 202
Weighted-average number of diluted common and common equivalent shares outstanding 40,995 43,601 41,007 44,514


	Three Months Ended June 30,		Six Months Ended June 30,
	2021	2020	2021	2020
Weighted-average number of basic common shares outstanding	41,054	40,922	41,014	41,007
Weighted-average dilutive stock options, restricted stock units and performance share units	0	73	0	0

Weighted-average number of diluted common and common equivalent shares outstanding	41,054	40,995	41,014	41,007

For the three and six months ended June 30, ~~2020, 334,000~~2021, 301,950 and ~~166,000~~352,790 potential common shares, respectively, and for the three and six months ended June 30, 2020, 334,251 and 165,870 potential common shares, respectively,related to stock options, restricted stock units, performance share units and convertible senior notes were excluded from the calculation of ~~diluted~~diluted net (loss) income ~~(loss)~~ per share because their effect would have been anti-dilutive for the respective perio~~ds.~~

5. INVESTMENTS

The following table summarizes, by major security type, the Company's investments at June 30, ~~2020~~2021 (in millions):

Cost Gross
Unrealized Gains /Upward Adjustments Gross
Unrealized Losses /Downward Adjustments
Carrying
Value
Long-term investments:
Investments in private companies:
  Debt securities $ 250 $ — $ — $ 250
  Equity securities 501 — (100) 401
Other long-term investments:
  Debt securities:
Trip.com Group convertible debt securities 525 — (25) 500
  Equity securities 461 1,336 (2) 1,795
Total $ 1,737 $ 1,336 $ (127) $ 2,946


	Cost		Gross Unrealized Gains /Upward Adjustments		Gross Unrealized Losses /Downward Adjustments		Carrying Value
Short-term investments:
Debt securities:
Trip.com Group convertible debt securities	$	500	$	1	$	0	$	501

Long-term investments:
Investments in private companies:
Debt securities	$	200	$	126	$	0	$	326
Equity securities	66		0		0		66
Other long-term investments:
Debt securities:
Trip.com Group convertible debt securities	25		0		(1)		24
Equity securities	963		3,040		(100)		3,903
Total	$	1,254	$	3,166	$	(101)	$	4,319

1615

The following table summarizes, by major security type, the Company's investments at December 31, ~~2019~~2020 (in millions):


		Cost		Gross Unrealized Gains/Upward Adjustments		Gross Unrealized Losses/Downward Adjustments		Carrying Value			Cost		Gross Unrealized Gains/Upward Adjustments		Gross Unrealized Losses/Downward Adjustments		Carrying Value
Short-term investments:	Short-term investments:									Short-term investments:
Debt securities:	Debt securities:									Debt securities:
International government securities		$	109	$	—	$	—	$	109
U.S. government securities		138		—		—		138
Corporate debt securities		751		1		(1)		751
Trip.com Group convertible debt securities										Trip.com Group convertible debt securities	$	500	$	1	$	0	$	501

Total		$	998	$	1	$	(1)	$	998

Long-term investments:	Long-term investments:									Long-term investments:
Investments in private companies:	Investments in private companies:									Investments in private companies:
Debt securities	Debt securities	$	250	$	—	$	—	$	250	Debt securities	$	200	$	0	$	0	$	200
Equity securities	Equity securities	501		—		—		501		Equity securities	552		3		(100)		455
Other long-term investments:	Other long-term investments:									Other long-term investments:
Debt securities:	Debt securities:									Debt securities:
International government securities		68		—		—		68
U.S. government securities		136		—		(1)		135
Corporate debt securities		963		2		(2)		963

Trip.com Group convertible debt securities	Trip.com Group convertible debt securities	775		—		(8)		767		Trip.com Group convertible debt securities	25		0		(1)		24

Equity securities	Equity securities	1,117		684		(8)		1,793		Equity securities	463		2,617		0		3,080
Total	Total	$	3,810	$	686	$	(19)	$	4,477	Total	$	1,240	$	2,620	$	(101)	$	3,759

The Company assesses the classification of its investments in the Consolidated Balance Sheets as short-term or long-term at the individual security level. Classification as short-term or long-term is based upon the maturities of the securities, as applicable, and the Company's expectations regarding the timing of sales and redemptions. Investments of a strategic nature that have been made for the purpose of affiliation or potential business advantage or in connection with a commercial relationship are included in "Long-term investments" in the Consolidated Balance Sheets, except in situations where the Company expects the investment to be realized in cash, redeemed or sold within one year.

The Company has classified its investments in debt securities as available-for-sale securities. Preferred stock that is either mandatorily redeemable or redeemable at the option of the investor is also considered a debt security for accounting purposes. Available-for-sale debt securities are reported at estimated fair value (see Note 6) with the aggregate unrealized gains and losses, net of tax, reflected in "Accumulated other comprehensive loss" in the Consolidated Balance Sheets. If the amortized cost basis of an available-for-sale security exceeds its fair value and if the Company has the intention to sell the security or it is more likely than not that the Company will be required to sell the security before recovery of the amortized cost basis, an impairment is recognized in the Unaudited Consolidated Statements of Operations. If the Company does not have the intention to sell the security and it is not more likely than not that the Company will be required to sell the security before recovery of the amortized cost basis and the Company determines that the decline in fair value below the amortized cost basis of an available-for-sale security is entirely or partially due to credit-related factors, the credit loss is measured and recognized as an allowance for expected credit losses along with the related expense in the Unaudited Consolidated Statements of Operations. The allowance is measured as the amount by which the debt security’s amortized cost basis exceeds the Company’s best estimate of the present value of cash flows expected to be collected. The fair values of these investments are based on the specific quoted market price of the securities or comparable securities at the balance sheet dates. Unobservable inputs are also used when little or no market data is available. See Note 6 for information related to fair value measurements.

Investments in equity securities include ~~marketable~~ equity securities with readily determinable fair values and equity ~~investments~~securities without readily determinable fair values. ~~Marketable equity~~Equity securities with readily determinable fair values are reported at estimated fair value with changes in fair value recognized in ~~"Net gains on marketable equity securities"~~"Other income (expense), net" in the Unaudited Consolidated Statements of Operations. The Company also holds investments in equity securities of private companies, over which the Company does not have the ability to exercise significant influence or control. The Company ~~has~~ elected to measure these investments at cost less impairment, if any, plus or

minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

~~Investments in Government and Corporate Debt Securities~~

~~The Company has classified its investments in international government securities, U.S. government securities and corporate debt securities as available-for-sale securities.~~ During the six months ended June 30, 2020, the Company realized $2.2 billion in cash from the sales and maturities of its investments in government and corporate debt securities.

Investments in Trip.com Group

At June 30, ~~2020,~~2021, the Company had $525 million invested in convertible senior notes issued at par value by Trip.com Group ~~maturing in September 2022 and December 2025. The strategic investments in Trip.com Group~~including $25 million six-year convertible senior notes ~~were classified as "Long-term investments"~~issued in ~~the Consolidated Balance Sheet at June 30, 2020. In May 2020, the Company's May 2015 investment of $250~~September 2016 and $500 million ten-year convertible senior notes issued in ~~Trip.com Group's~~December 2015. The $500 million convertible notes was repaid upon maturity. At June 30, 2020, the estimated fair values of the Company’s investments in the convertible notes were lower than their respective amortized cost basis. At June 30, 2020, the Company did not have the intent or a requirement to sell its investment in Trip.com Group convertible notes prior to their anticipated recovery. The Company believes that the decline in fair values of the investments are largely due to changes in market and economic conditions related to the COVID-19 pandemic (see Note 1), which had a negative impact on Trip.com's share price and other market conditions. The Company reviewed available information to evaluate Trip.com's financial solvency and at June 30, 2020 expects recovery of the amortized cost basis of the investments.

~~Certain Trip.com Group convertible~~senior notes include a put option allowing the Company, at ~~certain points of time,~~its option, to require ~~at its option, redemption of the convertible notes and repayment~~a prepayment in cash from Trip.com ~~Group.~~ Group at the end of the sixth year of the note. The $500 million convertible senior notes were classified as "Short-term investments" in the Consolidated Balance Sheets at June 30, 2021 and December 31, 2020 as the Company expects to exercise the put option and redeem the investment.

The Company determined that the economic characteristics and risks of the put ~~options~~option related to the $500 million convertible senior notes are clearly and closely related to the notes, and therefore did not meet the requirement for separate accounting as embedded derivatives. The Company monitors the conversion features of these notes to determine whether they meet the definition of an embedded derivative during each reporting period. The conversion feature associated with the $25 million convertible senior notes ~~issued in 2016~~ meets the definition of an embedded derivative that requires separate accounting. The embedded derivative is bifurcated for fair value measurement purposes only and is reported in the Consolidated Balance Sheets with its host contract in "Long-term investments." The mark-to-market adjustments of the embedded derivative are included in ~~"Foreign currency transactions and other"~~"Other income (expense), net" in the Company's Unaudited Consolidated Statements of Operations.

~~At December 31, 2019, the Company had $655 million invested in Trip.com Group American Depositary~~

~~Shares ("ADSs") with a fair value of $726 million, which is reported in "Long-term investments" in the Consolidated Balance Sheet. In~~During the six months ended June 30, 2020, the Company sold its entire investment in ~~these ADSs~~Trip.com Group American Depositary Shares ("ADSs"), with a cost basis of $655 million, for $525 million. ~~"Net gains on marketable equity securities"~~"Other income (expense), net" in the Unaudited Consolidated ~~Statement~~Statements of Operations for the three and six months ended June 30, 2020 includes a net realized gain of $17 million and a net realized loss of $201 million, respectively, related to the sale of ADSs. "Net gains on marketable equity securities" in the Unaudited Consolidated Statements of Operations included a net unrealized loss of $147 million and a net unrealized gain of $213 million for the three and six months ended June 30, 2019, respectively, related to the Company's investment in theseTrip.com Group ADSs.

Investment in Meituan ~~Dianping~~

In 2017, the Company invested $450 million in preferred shares of Meituan, ~~Dianping,~~ the leading e-commerce platform for local services in China. The investment has been converted to ordinary shares and classified as ~~a marketable~~ equity ~~security~~securities with readily determinable fair values since ~~Meituan Dianping's~~Meituan's initial public offering in 2018. The investment had a fair ~~values~~value of ~~$1.8~~$3.3 billion and ~~$1.1~~$3.1 billion at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, which is included in "Long-term investments" in the Consolidated Balance Sheets. Net unrealized gains of $234 million and $263 million for the three and six months ended June 30, 2021, respectively, and net unrealized gains of $813 million and $732 million for the three and six months ended June 30, 2020, respectively, related to this investment, are included in "Other income (expense), net" in the Unaudited Consolidated Statements of Operations. As of August 3, 2021, the market price of Meituan's shares decreased by 34% as compared to the market price on June 30, 2021.

Investment in DiDi Global Inc.

In 2018, the Company invested $500 million in preferred shares of DiDi Global Inc. ("DiDi"). In June 2021, DiDi completed its initial public offering of ADSs, with four ADSs representing one Class A ordinary share. In connection with the initial public offering, the Company entered into a lock-up agreement with the underwriters. The lock-up agreement expires in December 2021 and ~~net~~restricts the sale, transfer or disposal by other means of the Company's investment in DiDi. Prior to DiDi's initial public offering, the investment was measured at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment issued by DiDi. As a result of DiDi's initial public offering, the investment was converted to Class A ordinary shares and classified as equity securities with readily determinable fair values. The investment had a fair value of $555 million at June 30, 2021, which is included in "Long-term investments" in the Company's Consolidated Balance Sheet. The Company recorded an unrealized ~~gains~~gain of ~~$164~~$155 million ~~and $255 million~~in "Other income (expense), net" in the Unaudited Consolidated Statements of Operations for the three and six months ended June 30, ~~2019, respectively, related~~2021. As of August 3, 2021, the market price of DiDi's ADSs decreased by 29% as compared to ~~this~~the market price on June 30, 2021.

During the three months ended March 31, 2020, the Company recognized an impairment charge of $100 million to the investment ~~are included~~due to the impact of the COVID-19 pandemic (see Note 1) that resulted in ~~"Net gains on marketable equity securities" in the Unaudited Consolidated Statements~~an adjusted carrying value of ~~Operations.~~$400 million at each of March 31, 2020, December 31, 2020 and March 31, 2021 (see Note 6).

Investments in Private Companies

Equity Securities without Readily Determinable Fair Values

The Company had ~~$501~~$66 million and $552 million invested in equity securities of private companies at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, including ~~$500~~$51 million invested in ~~Didi Chuxing.~~Yanolja Co., Ltd. ("Yanolja"). These investments are measured at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer and are included in "Long-term investments" in the Company's Consolidated Balance Sheets. The investment balance at December 31, 2020 includes the Company's investment in DiDi, which was reclassified as equity securities with readily determinable fair values as a result of DiDi's initial public offering in June 2021 as disclosed above.

~~Considering~~In July 2021, Yanolja announced the ~~impact~~completion of a new round of funding into the company. The transaction was completed at a valuation significantly higher than the valuation related to the carrying amount of the ~~COVID-19 pandemic (see Note 1), the Company performed an impairment analysis, as of March 31, 2020, on the~~Company's investment in Didi Chuxing. The Company recognized an impairment charge of $100 million in the three months ended March 31, 2020, resulting in an adjusted carrying value of $400 million at March 31, 2020 and June 30, 2020 (see Note 6). No additional impairment indicators were identified as of June 30, 2020.Yanolja.

Debt Securities

The Company had ~~$250~~$200 million invested in preferred shares of ~~private companies, including~~ Grab Holdings Inc. ("Grab"), with an ~~aggregate~~ estimated fair value of ~~$250~~$326 million and $200 million at ~~both~~ June 30, ~~2020~~2021 and December 31, ~~2019. These investments are~~2020, respectively (see Note 6). The investment in Grab is classified as a debt ~~securities~~security for accounting purposes and categorized as available-for-sale. The preferred shares are convertible to ordinary shares at the Company’s option and are mandatorily convertible upon an initial public offering. The preferred shares also contain a redemption feature that can be exercised by the Company after certain points of time. ~~These features have been evaluated as embedded derivatives, however, they do not meet the requirements to be accounted for separately.~~

The investment is reported at estimated fair value ofin "Long-term investments" in the Company's ~~investment in Grab was $200 million at both June 30, 2020~~Consolidated Balance Sheets, with the aggregate unrealized gains and ~~December 31, 2019. The Company recognized an unrealized loss~~losses, net of ~~$20 million in the three months ended March 31, 2020 andan unrealized gain of $20 million in the three months ended June 30, 2020, related to the investment in Grab,~~tax, reflected in "Accumulated other comprehensive loss" in the Consolidated Balance ~~Sheets (see Note 6).~~Sheets.

In April 2021, Grab announced its intention to pursue a public listing of its shares in the U.S. through a merger with Altimeter Growth Corp. (“Altimeter”) (the "Grab Transaction"). The transaction is subject to certain closing conditions, including, the effectiveness of the relevant registration statement filed with the SEC and the approval of Altimeter and Grab shareholders. In connection with the proposed transaction, the Company has entered into a voting support and lock-up agreement with Grab. The voting support and lock-up agreement, among other things, restricts the sale or transfer of certain of the Company's shares in Grab for specified periods.

6. FAIR VALUE MEASUREMENTS

Financial assets and liabilities carried at fair value at June 30, ~~2020~~2021 are classified in the categories described in the table below (in millions):


		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Recurring fair value measurements	Recurring fair value measurements									Recurring fair value measurements
ASSETS:	ASSETS:									ASSETS:
Cash equivalents and restricted cash equivalents:	Cash equivalents and restricted cash equivalents:									Cash equivalents and restricted cash equivalents:
Money market fund investments	Money market fund investments	$	10,089	$	—	$	—	$	10,089	Money market fund investments	$	10,766	$	0	$	0	$	10,766

Time deposits and certificates of deposit	Time deposits and certificates of deposit	25		—		—		25		Time deposits and certificates of deposit	52		0		0		52
Short-term investments:										Short-term investments:

Trip.com Group convertible debt securities										Trip.com Group convertible debt securities	0		501		0		501

Long-term investments:	Long-term investments:									Long-term investments:
Investments in private companies:	Investments in private companies:									Investments in private companies:
Debt securities	Debt securities	—		—		250		250		Debt securities	0		0		326		326
Other long-term investments:	Other long-term investments:									Other long-term investments:

Trip.com Group convertible debt securities	Trip.com Group convertible debt securities	—		500		—		500		Trip.com Group convertible debt securities	0		24		0		24

Equity securities	Equity securities	1,795		—		—		1,795		Equity securities	3,903		0		0		3,903
Derivatives:	Derivatives:									Derivatives:
Foreign currency exchange derivatives	Foreign currency exchange derivatives	—		4		—		4		Foreign currency exchange derivatives	0		7		0		7
Total assets at fair value	Total assets at fair value	$	11,909	$	504	$	250	$	12,663	Total assets at fair value	$	14,721	$	532	$	326	$	15,579

LIABILITIES:	LIABILITIES:									LIABILITIES:
Foreign currency exchange derivatives	Foreign currency exchange derivatives	$	—	$	3	$	—	$	3	Foreign currency exchange derivatives	$	0	$	12	$	0	$	12

Nonrecurring fair value measurements
Investment in Didi Chuxing⁽¹⁾		$	—	$	—	$	400	$	400
Goodwill of the OpenTable and KAYAK reporting unit ⁽²⁾		—		—		1,545		1,545
Total nonrecurring fair value measurements		$	—	$	—	$	1,945	$	1,945

Financial assets and liabilities carried at fair value at December 31, 2020 and nonrecurring fair value measurements are classified in the categories described in the table below (in millions):


	Level 1		Level 2		Level 3		Total
Recurring fair value measurements
ASSETS:
Cash equivalents and restricted cash equivalents:
Money market fund investments	$	10,208	$	0	$	0	$	10,208



Time deposits and certificates of deposit	32		0		0		32
Short-term investments:
Trip.com Group convertible debt securities	0		501		0		501



Long-term investments:
Investments in private companies:
Debt securities	0		0		200		200
Other long-term investments:

Trip.com Group convertible debt securities	0		24		0		24

Equity securities	3,080		0		0		3,080
Derivatives:
Foreign currency exchange derivatives	0		9		0		9
Total assets at fair value	$	13,320	$	534	$	200	$	14,054

LIABILITIES:
Foreign currency exchange derivatives	$	0	$	7	$	0	$	7

Nonrecurring fair value measurements
Investments in equity securities of private companies (1)	$	0	$	0	$	404	$	404
Goodwill of the OpenTable and KAYAK reporting unit (2)	0		0		1,000		$	1,000
Total nonrecurring fair value measurements	$	0	$	0	$	1,404	$	1,404

(1) At March 31, 2020, the investment in DiDi ~~Chuxing~~ was written down to its estimated fair value of $400 million, resulting in an impairment charge of $100 million (see Note 5).

(2) At March 31, 2020, the goodwill of the OpenTable and KAYAK reporting unit was written down to its estimated fair value of $1.5 billion, resulting in an impairment charge of $489 million. At September 30, 2020, the goodwill was further written down to its estimated fair value of $1.0 billion, resulting in an additional impairment charge of $573 million (see Note 8).

~~Financial assets and liabilities carried at fair value at December 31, 2019 are classified in the categories described in the table below (in millions):~~

Level 1 Level 2 Level 3 Total
Recurring fair value measurements
ASSETS:
Cash and restricted cash equivalents:
Money market fund investments $ 5,734 $ — $ — $ 5,734
Corporate debt securities — 2 — 2
Time deposits and certificates of deposit 29 — — 29
Short-term investments:
International government securities — 109 — 109
U.S. government securities — 138 — 138
Corporate debt securities — 751 — 751
Long-term investments:
Investments in private companies:
Debt securities — — 250 250
Other long-term investments:
International government securities — 68 — 68
U.S. government securities — 135 — 135
Corporate debt securities — 963 — 963
Trip.com Group convertible debt securities — 767 — 767
Equity securities 1,793 — — 1,793
Derivatives:
Foreign currency exchange derivatives — 12 — 12
Total assets at fair value $ 7,556 $ 2,945 $ 250 $ 10,751
LIABILITIES:
Foreign currency exchange derivatives $ — $ 5 $ — $ 5

There are three levels of inputs to measure fair value. The definition of each input is described below:

Level 1: Quoted prices in active markets that are accessible by the Company at the measurement date for

identical assets and liabilities.

Level 2: Inputs that are observable, either directly or indirectly. Such prices may be based upon quoted

prices for identical or comparable securities in active markets or inputs not quoted on active

markets, but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available.

Rollforward of Level 3 Fair Value Measurements

The following table summarizes the fair value adjustments for debt securities measured using significant unobservable inputs (level 3) (in millions):


	For the Six Months Ended June 30,
	2021		2020(1)
Balance, beginning of year	$	200	$	250
Unrealized gains included in accumulated other comprehensive loss(2)	126		0
Balance, end of period	$	326	$	250

(1) The Company recognized an unrealized loss of $20 million during the three months ended March 31, 2020 and an unrealized gain of $20 million during the three months ended June 30, 2020 related to the investment in Grab.

(2) The unrealized gains are recorded in “Accumulated other comprehensive loss” in the Consolidated Balance Sheet.

Investments

See Note 5 for additional information related to the Company's investments.

The valuation of investments in ~~corporate debt securities, U.S. and international government securities and~~ Trip.com Group convertible debt securities are considered "Level 2" valuations because the Company has access to quoted prices, but does not have visibility into the volume and frequency of trading for these investments. A market approach is used for recurring fair value measurements and the valuation techniques use inputs that are observable, or can be corroborated by observable data, in an active marketplace.

Investments in private companies measured using Level 3 inputs

The Company’s investments measured using Level 3 inputs primarily consist of preferred stock investments in privately-held companies that are classified as either debt securities or equity securities without readily determinable fair values. Fair values of privately held securities are estimated using a variety of valuation methodologies, including both market and income approaches. The Company has used valuation techniques appropriate for the type of investment and the information

available about the investee as of the valuation date to determine fair value. Recent financing transactions in the investee, such as new investments in preferred stock, are generally considered the best indication of the enterprise value and therefore used as a basis to estimate fair value. As applicable, the Company also considers publicly disclosed information for certain merger transactions (not yet consummated), including those involving special purpose acquisition companies. However, based on a number of factors, such as the proximity in timing to the valuation date or the volume or other terms of these financing transactions, the Company may also use other valuation techniques to supplement this data, including the income approach. In addition, an option-pricing model (“OPM”) is utilized to allocate value to the various classes of securities of the investee, including the class owned by the Company. In certain situations, the current value method ("CVM") is utilized to allocate value to the various classes of equity based on their as-converted values. The ~~model includes~~OPM and CVM include assumptions around the investees' expected time to liquidity and volatility.

The ~~Company's investments in private companies accounted for as debt securities had an aggregate estimated fair value of $250 million at June 30, 2020, which includes the~~ Company's investment in Grab, ~~with~~which is classified as a debt security for accounting purposes, had an estimated fair value of $326 million and $200 ~~million. The~~million at June 30, 2021 and December 31, 2020, respectively. At June 30, 2021, the Company measured ~~these investments~~this investment using Level 3 inputs and management's estimates that incorporate current market participant expectations of future cash flows ~~considered~~ alongside ~~recent financing transactions of~~ the ~~investees~~Grab Transaction value and other relevant information.

For the investment in equity securities of Didi Chuxing, considering the impact of the COVID-19 pandemic, the Company performed an impairment analysis as of March 31, 2020 resulting in an adjusted carrying value of $400 million at March 31, 2020 and June 30, 2020. No additional impairment indicators were identified as of June 30, 2020. As discussed below, the Company used unobservable inputs in order to determine fair value. The Company used an income approach in estimatingTo estimate the fair value of ~~Didi Chuxing.~~Grab, the Company used a relative weighting of 60% market approach using the Grab Transaction value and 40% income approach. The market approach uses the Grab Transaction value and an estimated discount for the lack of marketability. The key unobservable inputs used include the volatility (65%) and an estimated time to liquidity of six months. The income approach estimates value based on the expectation of future cash flows that a company will generate. These future cash flows are discounted to their present values using a discount rate based on a company’s weighted-average cost of capital, and is adjusted to reflect the risks inherent in its cash flows. The key unobservable inputs and ranges used include the ~~weighted average~~weighted-average cost of capital ~~(12%-14%~~(12.0%-14.5%), terminal ~~Earnings~~earnings before ~~income~~interest, taxes, depreciation and amortization (“EBITDA”) ~~Multiple (13x-15x)~~multiple (12x-14x), volatility (60%-70%) and an estimated time to liquidity of ~~4 years.~~ one year. Significant changes in any of these inputs in isolation would result in significantly different fair value measurements. Generally, a change in the assumption used for terminal EBITDA multiples would result in a directionally similar change in the fair value and a change in the assumption used for ~~weighted average~~weighted-average cost of capital or volatility would result in a directionally opposite change in the fair value.

The determination of the fair ~~values~~value of ~~investments, where~~Grab, inclusive of the ~~Company is a minority shareholder and has access to limited information from~~consideration of the ~~investee,~~Grab Transaction value, reflects numerous assumptions that are subject to various risks and uncertainties, including ~~key assumptions regarding~~ the ~~investee’s expected growth rates and operating margin, expected length and severity~~timing of when the transaction will be completed. The Grab Transaction is subject to certain closing conditions, including, the effectiveness of the ~~impact from~~relevant registration statement filed with the ~~COVID-19 pandemic~~SEC and the ~~shape~~approval of Altimeter and ~~timing of~~Grab shareholders.

For the subsequent recovery, as well as other key assumptions with respect to matters outside of the Company's control, such as discount rates and market comparables. It requires significant judgments and estimates and actual results could be materially different than those judgments and estimates utilizedinvestment in the ~~fair value estimate. Future events and changing market conditions may lead~~equity securities of DiDi, considering the ~~Company to re-evaluate the assumptions reflected in the valuation, particularly the assumptions related to the length and severity~~impact of the COVID-19 pandemic (see Note 1), the Company performed an impairment analysis as of March 31, 2020 that resulted in an adjusted carrying value of $400 million at each of March 31, 2020, December 31, 2020 and March 31, 2021. As a result of DiDi's initial public offering in June 2021, the shape and timing of the subsequent recovery and the overall impact on the investee’s business, which may result in a need to recognize an additional impairment charge that could have a material adverse effect on the Company's results of operations.Company reclassified its DiDi investment as equity securities with readily determinable fair values at June 30, 2021 (see Note 5).

Derivatives

Derivatives not designated as hedges

The Company's derivative instruments are valued using pricing models. Pricing models take into account the contract terms as well as multiple inputs where applicable, such as interest rate yield curves, option volatility and foreign currency exchange rates. The valuation of derivatives are considered "Level 2" fair value measurements. The Company's derivative instruments are typically short-term in nature.

In the normal course of business, the Company is exposed to the impact of foreign currency fluctuations. The Company mitigates these risks by following established risk management policies and procedures, including the use of derivatives. The Company enters into foreign currency forward contracts to hedge its exposure to the impact of movements in foreign currency exchange rates on its transactional balances denominated in currencies other than the functional currency. In periods prior to the second quarter of 2020, the Company also entered into foreign currency derivative contracts to hedge translation risks from short-term foreign currency exchange rate fluctuations for the Euro, British Pound Sterling and certain other currencies versus the U.S. Dollar. InSince the ~~second~~ first quarter of 2020, the Company ~~did~~has not ~~enter~~entered into such derivative instruments as the impact of the COVID-19 pandemic on the Company’s operating results ~~were~~are highly uncertain. The Company does not use derivatives for trading or speculative purposes. As of June 30, 2021 and December 31, 2020, the Company did not designate any foreign currency exchange derivatives as hedges for accounting purposes.

The Company reports the fair values of its derivative assets and liabilities on a gross basis in the Consolidated Balance Sheets in ~~"Prepaid expenses and other~~"Other current ~~assets, net"~~assets" and "Accrued expenses and other current ~~liabilities,"~~liabilities", respectively.

Unless designated as hedges for accounting purposes, gains and losses resulting from changes in the fair values of derivative instruments are recognized in ~~"Foreign currency transactions and other"~~"Other income (expense), net" in the Unaudited Consolidated Statements of Operations in the period that the changes occur and cash flow impacts, if any, are classified within "Net cash provided by (used in) ~~provided by~~ operating activities" in the Unaudited Consolidated Statements of Cash Flows. ~~As of June 30, 2020 and December 31, 2019, the Company did not designate any derivatives as hedges for accounting purposes.~~

The table below provides estimated fair values and notional amounts of foreign currency exchange derivatives outstanding at June 30, ~~2020~~2021 and December 31, ~~2019~~2020 (in millions). The notional amount of a foreign currency forward contract is the contracted amount of foreign currency to be exchanged and is not recorded in the balance sheets.


		June 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
Estimated fair value of derivative assets	Estimated fair value of derivative assets	$	4	$	12	Estimated fair value of derivative assets	$	7	$	9
Estimated fair value of derivative liabilities	Estimated fair value of derivative liabilities	3		5		Estimated fair value of derivative liabilities	$	12	$	7

Notional amount:	Notional amount:					Notional amount:
Foreign currency purchases	Foreign currency purchases	1,050		1,770		Foreign currency purchases	$	729	$	898
Foreign currency sales	Foreign currency sales	636		901		Foreign currency sales	$	1,101	$	839

The effect of foreign currency exchange derivatives recorded in ~~"Foreign currency transactions and other"~~"Other income (expense), net" in the Unaudited Consolidated Statements of Operations for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 is as follows (in millions):

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
(Losses) gains on foreign currency exchange derivatives $ (8) $ 8 $ (31) $ (5)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Gains (losses) on foreign currency exchange derivatives	$	1	$	(8)	$	(8)	$	(31)

Derivatives designated as cash flow hedges

In March 2021, the Company entered into reverse treasury lock agreements with certain financial institutions, with an aggregate notional amount of $1.8 billion and expiration date of March 31, 2021, to hedge the risk of changes in the cash flows related to the planned redemption, in April 2021, of the Senior Notes due April 2025 (the "April 2025 Notes") and the Senior Notes due April 2027 (the "April 2027 Notes") attributable to changes in the underlying U.S. treasury notes' interest rates. The Company designated the reverse treasury lock agreements as cash flow hedges. As of March 31, 2021, the Company recognized unrealized losses of $15 million in "Accumulated other comprehensive loss" in the Consolidated Balance Sheet. In April 2021, the Company settled the reverse treasury lock agreements for an aggregate amount of $15 million and also redeemed the April 2025 Notes and the April 2027 Notes. The cash flows related to the reverse treasury lock agreements are classified within "Net cash (used in) provided by financing activities" in the Unaudited Consolidated Statement of Cash Flows. During the three months ended June 30, 2021, the Company reclassified the losses on the cash flow hedges from "Accumulated other comprehensive loss" in the Consolidated Balance Sheet to "Other income (expense), net" in the Unaudited Consolidated Statement of Operations, concurrently with the recognition of the losses upon early extinguishment of the April 2025 Notes and the April 2027 Notes (see Note 9).

Other Financial Assets and Liabilities

At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company's cash consisted of bank deposits. Cash equivalents principally include money market fund investments, time deposits and certificates of deposit. Other financial assets and liabilities, including restricted cash, accounts payable, accrued expenses and deferred merchant bookings, are carried at cost which approximates their fair values because of the short-term nature of these items. Accounts receivable and other financial assets measured at amortized cost are carried at cost less an allowance for expected credit losses to present the net amount expected to be collected (see Note 7). See Note 9 for the estimated fair value of the Company's outstanding senior notes and Note 5 for information related to an embedded derivative associated with the $25 million Trip.com Group convertible notes issued in 2016.

Goodwill

See Note 8 for nonrecurring fair value measurements related to the goodwill impairment test.

7. ACCOUNTS RECEIVABLE AND OTHER FINANCIAL ASSETS

Accounts receivable in the Consolidated Balance Sheets at June 30, ~~2020~~2021 and December 31, ~~2019~~2020 includes receivables from customers of ~~$620~~$973 million and ~~$1.2 billion,~~$510 million, respectively, and receivables from marketing affiliates of ~~$32~~$29 million and ~~$110~~$32 million, respectively. The remaining balance principally relates to receivables from third-party payment processors. The Company’s receivables are short-term in nature. In addition, the Company had prepayments to certain customers of ~~$130~~$82 million

and ~~$232~~$107 million ~~at June 30, 2020 and December 31, 2019, respectively, which are~~ included in "Prepaid expenses, net" and ~~other current assets, net,"~~$37 million and ~~$80~~$45 million ~~at June 30, 2020, which is~~ included in "Other assets, net" in the Consolidated Balance ~~Sheets.~~Sheets at June 30, 2021 and December 31, 2020, respectively. The amounts mentioned above are stated on a gross basis, before deducting the allowance for expected credit losses.

For periods prior to January 1, 2020, receivables from customers were recorded at the original invoiced amounts net of an allowance for doubtful accounts. On January 1, 2020, the Company adopted the accounting standards update on the measurement of expected credit losses, which requires the Company to estimate lifetime expected credit losses upon

recognition of the financial assets. The Company adopted the accounting standards update using a modified retrospective approach and the adoption did not have a material impact to the Company's Unaudited Consolidated Financial Statements.

The Company has identified the ~~following~~relevant risk characteristics, of its customers and the related receivables and ~~prepayments:~~prepayments, which include the following: size, type (alternative accommodations vs. hotels) or geographic location of the customer, or a combination of these characteristics. Receivables with similar risk characteristics have been grouped into pools. For each pool, the Company considers the historical credit loss experience, current economic conditions, supportable forecasts of future economic conditions, and any recoveries in assessing the lifetime expected credit losses. Other key factors that influence the expected credit loss analysis include customer demographics, payment terms offered in the normal course of business to customers, the nature of competition, and industry-specific factors that could impact the Company's receivables. Additionally, external data and macroeconomic factors are considered. This is assessed at each quarter based on the Company’s specific facts and circumstances.

~~The following table summarizes the activity of the allowance for expected credit losses on receivables (in millions):~~

Six Months Ended
June 30,
2020 2019
Balance, beginning of year $ 49 $ 51
Provision charged to earnings 241 38
Write-offs and adjustments (11) (40)
Currency translation adjustments 3 (1)
Balance, end of period $ 282 $ 48

~~The allowance for expected credit losses on receivables as of June 30,~~In 2020, includes a portion of the amounts related to refunds paid or payable to certain travelers without a corresponding estimated expected recovery from the travel service providers (see Note 2). For the six months ended June 30, 2020, the Company recorded a reduction in revenue of $55 million for such refunds, which is included in "Provision charged to earnings" in the table above.

In addition, the Company recorded an allowance for expected credit loss on prepayments to certain customers of $56 million and $6 million at June 30, 2020 and December 31, 2019, respectively, which are included in "Prepaid expenses and other current assets, net" and "Other assets, net" in the Consolidated Balance Sheets.

~~Due~~due to the impact of the COVID-19 pandemic (see Note 1), given the ~~volatility~~severe downturn in the global ~~markets~~travel industry and the financial difficulties faced by many of the Company’s travel service provider and restaurant customers and marketing affiliates, the Company ~~has~~ increased its ~~allowance~~provision for expected credit losses on receivables from and prepayments to its customers and marketing affiliates. Expected credit loss expenses included in "Sales and other expenses" in the Unaudited Consolidated Statements of Operations, increased from $38 million for the six months ended June 30, 2019 to $233 million for the six months ended June 30, 2020. Significant judgments and assumptions are required to estimate the allowance for expected credit losses ~~on receivables from and prepayments to customers~~ and such assumptions may change in future periods, particularly the assumptions related to the impact of the COVID-19 pandemic on the business prospects and financial condition of customers and marketing affiliates and the Company’s ability to collect the receivable or recover the prepayment. In 2021, based on its review of recent historical credit loss experience and stability in the economic conditions in certain markets, the Company has revised its estimates of expected credit losses.

The following table summarizes the activity of the allowance for expected credit losses on receivables (in millions):


	Six Months Ended June 30,
	2021		2020
Balance, beginning of year	$	166	$	49
Provision charged to earnings	11		241
Write-offs and adjustments	(82)		(11)
Foreign currency translation adjustments	(3)		3
Balance, end of period	$	92	$	282

The allowance for expected credit losses on receivables includes a portion of the amounts related to refunds paid or payable to certain travelers without a corresponding estimated expected recovery from the travel service providers, primarily due to the impact of the COVID-19 pandemic (see Note 2). For the six months ended June 30, 2021 and 2020, the Company recorded a reduction in revenue of $6 million and $58 million, respectively, for such refunds, which is included in "Provision charged to earnings" in the table above.

In addition to the allowance for expected credit losses on receivables, the Company recorded an allowance for expected credit losses on prepayments to certain customers, which are included in "Prepaid expenses, net" and "Other assets, net" in the Consolidated Balance Sheets. The following table summarizes the activity of the allowance for expected credit losses on prepayments to customers (in millions):


	Six Months Ended June 30,
	2021		2020
Balance, beginning of year	$	55	$	6
Provision charged to expense	1		50
Write-offs and adjustments	(2)		0

Balance, end of period	$	54	$	56

2423

8. GOODWILL, INTANGIBLE ASSETS AND OTHER LONG-LIVED ASSETS

A substantial portion of the ~~Company’s~~Company's intangible assets and goodwill relates to the acquisitions of OpenTable and KAYAK.

Goodwill

~~The changes in the balance of goodwill for the six months ended June 30, 2020 consist of the following (in millions):~~


~~Balance, December 31, 2019~~ ⁽¹⁾	$	~~2,913~~

~~Impairment~~	~~(489)~~
~~Foreign currency translation adjustments~~	~~(12)~~
~~Balance, June 30, 2020~~ ⁽¹⁾	$	~~2,412~~

~~(1) The balance of goodwill as of June 30, 2020 and December 31, 2019 is stated net of cumulative impairment charges of $1.4 billion and $941 million, respectively.~~

The Company tests goodwill for impairment ~~annually~~on an annual basis and ~~whenever~~between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company tests goodwill at a reporting unit level. The Company’s annual goodwill ~~impairments~~impairment tests are performed as of September 30.

Due to the significant and negative financial impact of the COVID-19 pandemic ~~(see~~(see Note 1), the Company performed an interim period goodwill impairment test at March 31, ~~2020. Under the current goodwill impairment standard adopted in the first quarter of~~ 2020 a goodwill impairment loss is measured at the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill (see Note 1). No additional impairment indicators were identified as of June 30, 2020.

~~As of March 31, 2020, the estimated fair value of each of the Company’s reporting units, except the OpenTable~~ and ~~KAYAK reporting unit, exceeded its respective carrying value. For the OpenTable and KAYAK reporting unit, the Company~~ recognized a goodwill impairment charge of $489 million related to the OpenTable and KAYAK reporting unit for the three months ended March 31, 2020, which is not ~~tax-deductible, resulting in an adjusted carrying value~~tax-deductible. As of ~~goodwill for OpenTable and KAYAK of $1.5 billion at March 31, 2020. The~~September 30, 2020, the Company performed its annual goodwill impairment ~~was primarily driven by~~test and recognized a ~~significant reduction in the forecasted near-term cash flows of OpenTable and KAYAK as well as the significant decline in comparable companies' market values as a result of the COVID-19 pandemic.~~

The estimated fair value of OpenTable and KAYAK was determined using a combination of standard valuation techniques, including an income approach (discounted cash flows) and a market approach (applying the recent decline in enterprise values of comparable publicly-traded companies to the recently calculated fair value for OpenTable and KAYAK, as well as applying comparable company multiples).

~~The income approach estimates fair value utilizing long-term growth rates and discount rates applied to cash flow projections. In the cash flow projections, the Company assumes that~~ ~~OpenTable and KAYAK will experience~~ a significant decline in near-term cash flows with a recovery to 2019 levels of financial performance occurring in 2023. The shape and timing of the recovery is a key assumption in the fair value calculation (both in the income and market approaches), however, it is highly uncertain whether the actual recovery will match the trajectory or magnitude of the Company's assumptions. If the timing of recovery to 2019 levels of financial performance were to occur in 2022 or 2024, the impact to the estimated fair value, at March 31, 2020, ranges from an increase of over $230 million to a decrease of over $410 million.

The estimation of fair value reflects numerous assumptions that are subject to various risks and uncertainties, including key assumptions regarding OpenTable and KAYAK’s expected growth rates and operating margin, expected length and severity of the impact from the COVID-19 pandemic and the shape and timing of the subsequent recovery, as well as other key assumptions with respect to matters outside of the Company's control, such as discount rates and market comparables. It requires significant judgments and estimates and actual results could be materially different than the judgments and estimates used to estimate fair value. Future events and changing market conditions may lead the Company to re-evaluate the assumptions reflected in the current forecast disclosed above, particularly the assumptions related to the length and severity of the COVID-19 pandemic and the shape and timing of the subsequent recovery, which may result in a need to recognize an additional goodwill impairment charge of $573 million for the same reporting unit for the three months ended September 30, 2020, which ~~could have a material adverse effect on the Company's results~~is not tax-deductible. No additional impairment indicators were identified as of ~~operations.~~

June 30, 2021. The balance of goodwill as of June 30, 2021 and December 31, 2020 is net of cumulative impairment charges of $2.0 billion.

Intangible Assets and Other Long-lived Assets

The Company's intangible assets at June 30, ~~2020~~2021 and December 31, ~~2019~~2020 consist of the following (in millions):


		June 30, 2020										December 31, 2019												June 30, 2021					December 31, 2020
		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Amortization Period		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Amortization Period
Supply and distribution agreements	Supply and distribution agreements	$	1,094	$	(498)	$	596	$	1,100	$	(472)	$	628	3 - 20 years	Supply and distribution agreements	$	1,126	$	(575)	$	551	$	1,136	$	(552)	$	584	3 - 20 years

Technology	Technology	170		(135)		35		170		(129)		41		2 - 7 years	Technology	175		(148)		27		174		(144)		30		2 - 7 years

Internet domain names	Internet domain names	39		(33)		6		40		(32)		8		5 - 20 years	Internet domain names	42		(37)		5		44		(37)		7		5 - 20 years

Trade names	Trade names	1,808		(580)		1,228		1,811		(534)		1,277		4 - 20 years	Trade names	1,820		(678)		1,142		1,824		(633)		1,191		4 - 20 years

Other intangible assets	Other intangible assets	2		(2)		—		2		(2)		—		Up to 15 years	Other intangible assets	2		(2)		0		2		(2)		0		Up to 15 years
Total intangible assets	Total intangible assets	$	3,113	$	(1,248)	$	1,865	$	3,123	$	(1,169)	$	1,954		Total intangible assets	$	3,165	$	(1,440)	$	1,725	$	3,180	$	(1,368)	$	1,812

Intangible assets are amortized on a straight-line basis. Amortization expense was $41 million and $82 million for the three and six months ended June 30, 2021, respectively, and $42 million and $85 million for the three and six months ended June 30, 2020, ~~respectively, and $44 million and $89 million for the three and six months ended June 30, 2019,~~ respectively.

The Company reviews long-lived assets, including intangible assets and operating lease assets, whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The assessment of possible impairment is based upon the ability to recover the carrying value of the assets from the estimated undiscounted future net cash flows, before interest and taxes, of the related asset group. ~~Due to the significant and negative financial impact~~As of ~~the COVID-19 pandemic (see Note 1)~~June 30, 2021, ~~at March 31, 2020, the Company performed the recoverability test of its long-lived assets and concluded that there was~~ no ~~impairment. No additional~~ impairment indicators were identified ~~as of June 30, 2020.~~for the Company's long-lived assets.

9. DEBT

~~Short-term Borrowings~~

On June 30, 2020, the Company had bank overdrafts of $56 million, which were repaid in July 2020. The bank overdrafts are reported in "Accrued expenses and other current liabilities" in the Consolidated Balance Sheet at June 30, 2020.

Revolving Credit Facility

In August 2019, the Company entered into a $2.0 billion five-year unsecured revolving credit facility with a group of lenders. Borrowings under the revolving credit facility will bear interest, at the Company’s option, at a rate per annum equal to either (i) the London Inter-bank Offer Rate, or if such London Inter-bank Offer Rate is no longer available, the agreed alternate rate of interest ("LIBOR") (but no less than 0%) for the interest period in effect for such borrowing plus an applicable margin ranging from 0.875% to 1.50%; or (ii) for U.S. Dollar-denominated loans only, the sum of (x) the greatest of (a) JPMorgan Chase Bank, N.A.'s prime lending rate, (b) the U.S. federal funds rate plus 0.50% and (c) LIBOR (but no less than 0%) for an interest period of one month plus 1.00%, plus (y) an applicable margin ranging from 0% to 0.50%. Undrawn balances available under the revolving credit facility are subject to commitment fees at the applicable rate ranging from 0.07% to 0.20%.

The revolving credit facility provides for the issuance of up to $80 million of letters of credit as well as borrowings of up to $100 million on same-day notice, referred to as swingline loans. Other than swingline loans, which are available only in U.S. Dollars, borrowings and letters of credit under the revolving credit facility may be made in U.S. Dollars, Euros, British Pounds Sterling and any other foreign currency agreed to by the lenders. The proceeds of loans made under the facility can be used for working capital and general corporate purposes, including acquisitions, share repurchases and debt repayments. ~~There~~At June 30, 2021 and December 31, 2020, there were 0 borrowings outstanding and ~~$3 million and $5~~$4 million of letters of credit issued under this revolving credit ~~facility at June 30, 2020 and December 31, 2019, respectively.~~facility.

Upon entering into this revolving credit facility, the Company terminated its prior $2.0 billion five-year revolving credit facility entered into in June 2015. During the six months ended June 30, 2019, the Company made short-term

~~borrowings under the prior revolving credit facility totaling $400 million with a weighted-average interest rate of 3.5%, which were repaid prior to June 30, 2019.~~

The current revolving credit facility contains a maximum leverage ratio covenant, compliance with which is a condition to the Company's ability to borrow thereunder. In ~~April~~ 2020, the Company amended the revolving credit facility ~~pursuant~~ to ~~which~~(i) suspend the maximum leverage ratio covenant ~~has been suspended~~ through and including the ~~quarter~~three months ending March 31, ~~2021, and has been~~2022, which was replaced with a $4.5 billion minimum liquidity covenant based on unrestricted cash, cash equivalents, short-term investments and unused capacity under this revolving credit facility and (ii) increase the permitted maximum leverage ratio from and including the three months ending June 30, 2022 through and including the three months ending March 31, 2023.The Company agreed not to declare or make any cash distribution and not to repurchase any of its shares (with certain exceptions including in connection with tax withholding related to shares issued to employees) unless (i) prior to the delivery of financial statements for the three months ending June 30, 2022, it has at least $6.0 billion of liquidity on a pro forma basis, based on unrestricted cash, cash equivalents, short-term investments and unused capacity under this revolving credit facility and (ii) after the delivery of financial statements for the three months ending June 30, 2022, it is in compliance on a pro forma basis with the maximum leverage ratio covenant then in effect. Such restriction ends upon delivery of financial statements required for the three months ending June 30, 2023, or the Company has the ability to terminate this restriction earlier if it demonstrates compliance with the original maximum leverage ratio covenant in the revolving credit facility.Beginning with the ~~quarter~~three months ending June 30, ~~2021,~~2022, the minimum liquidity covenant will cease to apply and the maximum leverage ratio covenant, as increased, will again be in effect.

Outstanding Debt

Outstanding debt at June 30, 2021 consists of the following (in millions):


June 30, 2021	Outstanding Principal Amount		Unamortized Debt Discount and Debt Issuance Cost		Carrying Value
Current liabilities:
0.9% Convertible Senior Notes due September 2021	$	1,000	$	(5)	$	995
0.8% (€1 billion) Senior Notes due March 2022	1,186		(1)		1,185
Total short-term debt	$	2,186	$	(6)	$	2,180

Long-term debt:
2.15% (€750 million) Senior Notes due November 2022	$	889	$	(1)	$	888
2.75% Senior Notes due March 2023	500		(1)		499
2.375% (€1 billion) Senior Notes due September 2024	1,186		(6)		1,180
3.65% Senior Notes due March 2025	500		(2)		498
0.1% (€950 million) Senior Notes due March 2025	1,126		(5)		1,121
0.75% Convertible Senior Notes due May 2025	863		(113)		750
3.6% Senior Notes due June 2026	1,000		(4)		996
1.8% (€1 billion) Senior Notes due March 2027	1,186		(3)		1,183
3.55% Senior Notes due March 2028	500		(2)		498
0.5% (€750 million) Senior Notes due March 2028	889		(5)		884
4.625% Senior Notes due April 2030	1,500		(11)		1,489
Total long-term debt	$	10,139	$	(153)	$	9,986

Outstanding debt at December 31, 2020 consists of the following (in millions):


June 30, 2020		Outstanding Principal Amount		Unamortized Debt Discount and Debt Issuance Cost		Carrying Value
Current liabilities:
December 31, 2020								December 31, 2020	Outstanding Principal Amount		Unamortized Debt Discount and Debt Issuance Cost		Carrying Value
Current Liabilities:								Current Liabilities:
0.9% Convertible Senior Notes due September 2021	0.9% Convertible Senior Notes due September 2021	$	1,000	$	(27)	$	973	0.9% Convertible Senior Notes due September 2021	$	1,000	$	(15)	$	985
Long-term debt:	Long-term debt:							Long-term debt:
0.8% (€1 Billion) Senior Notes due March 2022		$	1,123	$	(2)	$	1,121
2.15% (€750 Million) Senior Notes due November 2022		842		(1)		841
0.8% (€1 billion) Senior Notes due March 2022								0.8% (€1 billion) Senior Notes due March 2022	$	1,223	$	(1)	$	1,222
2.15% (€750 million) Senior Notes due November 2022								2.15% (€750 million) Senior Notes due November 2022	919		(4)		915
2.75% Senior Notes due March 2023	2.75% Senior Notes due March 2023	500		(2)		498		2.75% Senior Notes due March 2023	500		(1)		499
2.375% (€1 Billion) Senior Notes due September 2024		1,123		(8)		1,115
2.375% (€1 billion) Senior Notes due September 2024								2.375% (€1 billion) Senior Notes due September 2024	1,223		(7)		1,216
3.65% Senior Notes due March 2025	3.65% Senior Notes due March 2025	500		(2)		498		3.65% Senior Notes due March 2025	500		(2)		498
4.1% Senior Notes due April 2025	4.1% Senior Notes due April 2025	1,000		(5)		995		4.1% Senior Notes due April 2025	1,000		(5)		995
0.75% Convertible Senior Notes due May 2025	0.75% Convertible Senior Notes due May 2025	863		(141)		722		0.75% Convertible Senior Notes due May 2025	863		(128)		735
3.6% Senior Notes due June 2026	3.6% Senior Notes due June 2026	1,000		(5)		995		3.6% Senior Notes due June 2026	1,000		(4)		996
1.8% (€1 Billion) Senior Notes due March 2027		1,123		(4)		1,119
1.8% (€1 billion) Senior Notes due March 2027								1.8% (€1 billion) Senior Notes due March 2027	1,223		(2)		1,221
4.5% Senior Notes due April 2027	4.5% Senior Notes due April 2027	750		(6)		744		4.5% Senior Notes due April 2027	750		(5)		745
3.55% Senior Notes due March 2028	3.55% Senior Notes due March 2028	500		(3)		497		3.55% Senior Notes due March 2028	500		(2)		498
4.625% Senior Notes due April 2030	4.625% Senior Notes due April 2030	1,500		(12)		1,488		4.625% Senior Notes due April 2030	1,500		(11)		1,489
Total long-term debt	Total long-term debt	$	10,824	$	(191)	$	10,633	Total long-term debt	$	11,201	$	(172)	$	11,029

~~Outstanding debt at December 31, 2019 consists of the following (in millions):~~

December 31, 2019 Outstanding
Principal
Amount Unamortized Debt
Discount and Debt
Issuance Cost
Carrying
Value
Current Liabilities:
0.35% Convertible Senior Notes due June 2020 $ 1,000 $ (12) $ 988
Long-term debt:
0.9% Convertible Senior Notes due September 2021 $ 1,000 $ (39) $ 961
0.8% (€1 Billion) Senior Notes due March 2022 1,123 (3) 1,120
2.15% (€750 Million) Senior Notes due November 2022 842 (3) 839
2.75% Senior Notes due March 2023 500 (2) 498
2.375% (€1 Billion) Senior Notes due September 2024 1,123 (9) 1,114
3.65% Senior Notes due March 2025 500 (2) 498
3.6% Senior Notes due June 2026 1,000 (5) 995
1.8% (€1 Billion) Senior Notes due March 2027 1,123 (5) 1,118
3.55% Senior Notes due March 2028 500 (3) 497
Total long-term debt $ 7,711 $ (71) $ 7,640

2726

Based on the closing price of the Company's common stock for the prescribed measurement periods for the three months ended June 30, 2020 and December 31, 2019, the contingent conversion threshold on the 2021 Notes (as defined below) was not exceeded and therefore the notes were not convertible at the option of the holders. The 2021 Notes were reported as non-current liabilities in the Consolidated Balance Sheet at December 31, 2019 and reclassified as current liabilities at June 30, 2020 since the holders will have the right to convert all or any portion of the 2021 Notes starting on June 15, 2021 regardless of the Company's stock price.

Fair Value of Debt

At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the estimated fair value of the outstanding ~~Senior Notes~~debt was approximately ~~$13.0~~$13.6 billion and ~~$9.8~~$14.0 billion, respectively, and was considered a "Level 2" fair value measurement (see Note 6). Fair value was estimated based upon actual trades at the end of the reporting period or the most recent trade available as well as the Company's stock price at the end of the reporting period. The estimated fair value of the Company's debt in excess of the outstanding principal amount primarily relates to the conversion premium on the Convertible Senior Notes and the ~~Convertible~~outstanding Senior Notes issued in April 2020.

Convertible Senior Notes

If the note holders exercise their option to convert, the Company delivers cash to repay the principal amount of the notes and delivers shares of common stock or cash, at its option, to satisfy the conversion value in excess of the principal amount. If the Company's convertible debt is redeemed or converted prior to maturity, a gain or loss on extinguishment is recognized. The gain or loss is the difference between the fair value of the debt component immediately prior to extinguishment and its carrying value. To estimate the fair value of the debt at the conversion date, the Company estimates the borrowing rate, considering the credit rating and similar debt of comparable corporate issuers without the conversion feature.

Description of Convertible Senior Notes

In April 2020, the Company issued ~~a private placement of~~ $863 million aggregate principal amount of Convertible Senior Notes due May 1, 2025 with an interest rate of 0.75% (the "May 2025 Notes"). The Company paid $19 million in debt issuance costs during the ~~three months~~year ended ~~June 30,~~December 31, 2020 related to this offering. The May 2025 Notes are convertible, subject to certain conditions, into the Company's common stock at a conversion price of $1,886.44 per share. The May 2025 Notes are convertible, at the option of the holder, prior to November 1, 2024, upon the occurrence of specific events, including but not limited to a change in control, or if the closing sales price of the Company's common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is more than 130% of the conversion price in effect for the notes on the last trading day of the immediately preceding quarter. In the event that all or substantially all of the Company's common stock is acquired on or prior to the maturity of the May 2025 Notes in a transaction in which the consideration paid to holders of the Company's common stock consists of all or substantially all cash, the Company would be required to make additional payments in the form of additional shares of common stock to the holders of the May 2025 Notes in an aggregate value ranging from $0 to $235 million depending upon the date of the transaction and the then current stock price of the Company. Starting on November 1, 2024, holders will have the right to convert all or any portion of the May 2025 Notes, regardless of the Company's stock price. The May 2025 Notes may not be redeemed by the Company prior to maturity. The holders may require the Company to repurchase the May 2025 Notes for cash in certain circumstances. Interest on the May 2025 Notes is payable on May 1 and November 1 of each ~~year, beginning on November 1, 2020.~~year. At June 30, ~~2020,~~2021, the if-converted value of the May 2025 Notes ~~was lower than~~exceeded the aggregate principal amount. The proceeds from the issuance of the Convertible Senior Notes can be used for general corporate purposes, which may include repayment of debt, including the repayment, at maturity or upon conversion prior thereto, of the Company’s outstanding Convertible Senior Notes.amount by $184 million.

In August 2014, the Company issued ~~in a private placement~~ $1.0 billion aggregate principal amount of Convertible Senior Notes due September ~~15,~~ 2021 with an interest rate of 0.9% (the ~~"2021~~"September 2021 Notes"). The Company paid $11 million in debt issuance costs during the year ended December 31, 2014 related to this offering. The September 2021 Notes are convertible, subject to certain conditions, into the Company's common stock at a conversion price of $2,055.50 per share. The September 2021 Notes are convertible, at the option of the holder, prior to September 15, 2021, upon the occurrence of specific events, including but not limited to a change in control, or if the closing sales price of the Company's common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is more than 150% of the conversion price in effect for the notes on the last trading day of the immediately preceding quarter. In the event that all or substantially all of the Company's common stock is acquired on or prior to the maturity of the September 2021 Notes in a transaction in which the consideration paid to holders of the Company's common stock consists of all or substantially all cash, the Company would be required to make additional payments in the form of additional shares of common stock to the holders of the September 2021 Notes in an aggregate value ranging from $0 to $375 million depending upon the date of the transaction and the

then current stock price of the Company. ~~Starting on~~ Since June 15, 2021, holders ~~will~~ have had the right to convert all or any portion of the September 2021 Notes, regardless of the Company's stock price. The September 2021 Notes may not be redeemed by the Company prior to maturity. The holders may require the Company to repurchase the September 2021 Notes for cash in certain circumstances. Interest on the September 2021 Notes is payable on March 15 and September 15 of each year. At June 30, ~~2020,~~2021, the if-converted value of the September 2021 Notes ~~was lower than~~exceeded the aggregate principal ~~amount.~~amount by $117 million.

In May 2013, the Company issued ~~in a private placement~~ $1.0 billion aggregate principal amount of Convertible Senior Notes due June 15,

2020, with an interest rate of 0.35% (the ~~"2020~~"June 2020 Notes"). In June 2020, in connection with the maturity of the outstanding June 2020 Notes, the Company paid $1.0 billion to satisfy the aggregate principal amount due and paid an additional $245 million in satisfaction of the conversion value in excess of the principal amount.

Cash-settled convertible debt, such as the Company's convertible senior notes, is separated into debt and equity components at issuance and each component is assigned a value. The value assigned to the debt component is the estimated fair value, at the issuance date, of a similar bond without the conversion feature. The difference between the bond cash proceeds and this estimated fair value, representing the value assigned to the equity component, is recorded as a debt discount. Debt discount is amortized using the effective interest rate method over the period from the origination date through the stated maturity date. The Company estimated the borrowing rates at debt origination to be 4.10% for the May 2025 Notes and 3.18% for the September 2021 ~~Notes and 3.13% for the 2020~~ Notes, considering its credit rating and similar debt of the Company or comparable corporate issuers without the conversion feature. The yield to maturity was estimated at an at-market coupon priced at par.

Debt discount after tax of $100 million ($130 million before tax) related to the May 2025 Notes and $83 million ($143 million before tax) related to the September 2021 ~~Notes and $92 million ($154 million before tax) related to the 2020~~ Notes less financing costs allocated to the equity component of the respective convertible notes was recorded in "Additional paid-in capital" in the balance sheet at debt origination.

~~For~~Based on the closing price of the Company's common stock for the prescribed measurement periods for the three months ended June 30, 2021 and December 31, 2020, the contingent conversion thresholds on the September 2021 Notes and ~~2019,~~ the May 2025 Notes were not exceeded. The May 2025 Notes were not convertible at the option of the holder at June 30, 2021 and December 31, 2020. The September 2021 Notes became convertible at the option of the holder starting on June 15, 2021 and the principal amount is required to be paid in cash. The Company ~~recognized interest expense~~reclassified the equity component in the amount of ~~$21~~$5 million ~~and $16 million, respectively, related~~at June 30, 2021, from additional paid-in-capital to convertible ~~notes, which is almost entirely comprised of the amortization of~~ debt ~~discount of $15 million and $12 million, respectively, and the contractual coupon interest of $4 million and $3 million, respectively. For the three months ended June 30, 2019, included~~ in the ~~amortization of debt discount mentioned above is $1 million of original issuance discount related to~~mezzanine section in the ~~2020 Notes. The remaining interest expense relates to the amortization of debt issuance costs. The weighted-average effective interest ratefor both the three months ended June 30, 2020 and 2019 was 3.2%.~~Company's Consolidated Balance Sheet.

~~For~~The following table summarizes the ~~six months ended June 30, 2020~~interest expenses and ~~2019, the Company recognized~~weighted-average effective interest expense of $36 million and $31 million, respectively, related to convertible notes, which was almost entirely comprised of the amortization of debt discount of $27 million and $24 million, respectively, and the contractual coupon interest of $7 million and $6 million, respectively. For the six months ended June 30, 2020 and 2019, included in the amortization of debt discount mentioned above was $1 million and $2 million of original issuance discount, respectively,rates related to the ~~2020 Notes. The remaining~~convertible senior notes (in millions, except for interest ~~expense related to the amortization of debt issuance costs.~~ rates). The remaining period for amortization of debt discount and debt issuance costs is the period until the stated maturity date for the respective debt. ~~The weighted-average effective interest rates for the six months ended June 30, 2020 and 2019 were 3.3% and 3.2%, respectively.~~


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2021			2020			2021			2020
Coupon interest expense	$	4		$	4		$	8		$	7
Amortization of debt discount and debt issuance costs	10			17			24			29
Total interest expense	$	14		$	21		$	32		$	36

Weighted-average effective interest rate	3.5		%	3.2		%	3.7		%	3.3		%

Other ~~Long-term Debt~~Senior Notes

In ~~April 2020,~~March 2021, the Company issued Senior Notes due ~~April 13,~~March 2025 with an interest rate of ~~4.10%~~0.1% for an aggregate principal amount of ~~$1.0 billion,~~950 million Euros and Senior Notes due ~~April 13, 2027~~March 2028 with an interest rate of ~~4.50%~~0.5% for an aggregate principal amount of ~~$750~~750 million ~~and Senior Notes due April 13, 2030 with an interest rate of 4.625% for an aggregate principal amount of $1.5 billion.~~Euros. The proceeds from the issuance of ~~the~~these Senior Notes ~~can be~~were used ~~for general corporate purposes, which may include repayment of debt, including~~to redeem the ~~repayment, at maturity or upon conversion prior thereto, of~~April 2025 Notes and the ~~Company’s outstanding Convertible Senior~~April 2027 Notes.

In March 2021, the Company delivered notices to the holders of the April 2025 Notes and the April 2027 Notes for the redemption, on April 3, 2021, of all the outstanding notes at the respective redemption prices determined as per the indenture governing the Notes, plus accrued and unpaid interest to, but not including the redemption date. In April 2021, the Company paid $1.1 billion and $868 million to redeem the April 2025 Notes and the April 2027 Notes, respectively. In addition, the Company paid the applicable accrued and unpaid interest. In the Unaudited Consolidated Statements of Operations for the three and six months ending June 30, 2021, the Company recorded a loss, before tax, of $242 million on the early extinguishment of these Senior Notes, being the difference between the carrying value of the Notes and the amount paid for their redemption.

Other ~~long-term debt,~~senior notes, including the Senior Notes issued in ~~April 2020,~~March 2021, had a total carrying value of ~~$9.9~~$10.4 billion and ~~$6.7~~$10.3 billion at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Debt discount isand debt issuance costs are amortized using the effective interest rate method over the period from the origination date through the stated maturity date. The following table summarizes the information related to other ~~long-term debt~~senior notes outstanding at June 30, ~~2020:~~2021:

Other ~~Long-term Debt~~Senior Notes

~~Period~~Date of Issuance

Effective Interest Rate ~~at Debt Origination~~(1)

Timing of Interest Payments

0.8% Senior Notes due March 2022

March 2017

~~0.84~~0.94

Annually in March

2.15% Senior Notes due November 2022

November 2015

~~2.20~~2.27

Annually in November

2.75% Senior Notes due March 2023

August 2017

~~2.78~~2.88

Semi-annually in March and September

2.375% Senior Notes due September 2024

September 2014

~~2.48~~2.54

Annually in September

3.65% Senior Notes due March 2025

March 2015

~~3.68~~3.76

Semi-annually in March and September

~~4.1%~~0.1% Senior Notes due ~~April~~March 2025

March 2021

~~April 2020~~

~~4.10~~0.30

~~Semi-annually~~Annually in ~~April and October~~March

3.6% Senior Notes due June 2026

May 2016

~~3.62~~3.70

Semi-annually in June and December

1.8% Senior Notes due March 2027

March 2015

~~1.80~~1.86

Annually in March

~~4.5% Senior Notes due April 2027~~

~~April 2020~~

~~4.54~~

~~Semi-annually in April and October~~

3.55% Senior Notes due March 2028

August 2017

~~3.56~~3.63

Semi-annually in March and September

0.5% Senior Notes due March 2028

March 2021

0.63

Annually in March

4.625% Senior Notes due April 2030

April 2020

~~4.65~~4.72

Semi-annually in April and October

~~For~~(1) Represents the ~~three months ended June 30, 2020 and 2019, the Company recognized~~coupon interest expense of $72 million and $41 million, respectively, related to other long-term debt, which is almost entirely comprised of $70 million and $40 million, respectively, related to the contractual coupon interest. The remaining interest expense relates to the amortization of debt discount and debt issuance costs.

For the six months ended June 30, 2020 and 2019, the Company recognized interest expense of $114 million and $83 million, respectively, related to other long-term debt, which was almost entirely comprised of $110 million and $80 million, respectively, related to the contractual coupon interest. The remaining interest expense related to the amortization of debt discount and debt issuance costs. The remaining periodrate adjusted for ~~amortization of debt discount and~~deferred debt issuance costs, ispremiums or discounts existing at the ~~period until~~origination of the ~~stated maturity dates for the respective~~ debt.

~~Historically,~~The following table summarizes the ~~aggregate principal value of the Euro-denominated Senior Notes maturing in March 2022, November 2022, September 2024 and March 2027 (collectively the "Euro-denominated debt") and accrued~~ interest ~~thereon had been designated as a hedge of the Company's net investment in a Euro functional currency subsidiary. Beginning in the second quarter of 2019, the~~expenses related to other senior notes (in millions):


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2021		2020
Coupon interest expense	$	60	$	70	$	138	$	110
Amortization of debt discount and debt issuance costs	4		2		6		4
Total interest expense	$	64	$	72	$	144	$	114

The Company ~~has only designated~~designates certain portions of the ~~aggregated~~aggregate principal value of the Euro-denominated debt as a ~~hedge.~~hedge of the foreign currency exposure of the net investment in certain Euro functional currency subsidiaries. For the six months ended June 30, 2021 and 2020, the carrying value of the portion of Euro-denominated debt, designated as a net investment hedge, ranged from $2.5 billion to $2.8 billion and from $1.8 billion to $3.2 ~~billion. The foreign currency transaction gains or losses on these Euro-denominated liabilities are measured based upon changes in spot rates.~~billion, respectively. The foreign currency transaction gains or losses on the Euro-denominated debt that is designated as a hedging instrument for accounting purposes are recorded in "Accumulated other comprehensive loss" in the Consolidated Balance Sheets. The net assets of this Euro functional currency subsidiary are translated into U.S. Dollars at each balance sheet date, with the effects of foreign currency changes also reported in "Accumulated other comprehensive loss" in the Consolidated Balance Sheets. The foreign currency transaction gains or losses on the Euro-denominated debt that is not designated as a hedging instrument are recognized ~~in "Foreign currency transactions and other"~~in "Other income (expense), net" in the Unaudited Consolidated Statements of Operations.

10. TREASURY STOCK

At December 31, 2019, the Company had a total remaining authorization of $11.5 billion to repurchase its common stock related to a program authorized by the Company's Board of Directors in 2019 for $15.0 billion. At June 30, 2021 and December 31, 2020, the Company had a total remaining authorization of $10.4 billion to repurchase its common stock under a program authorized by the Company's Board of Directors in 2019 to repurchase up to $15.0 billion of the Company's common stock. The Company has not repurchased any shares ~~in the second quarter of~~since March 2020 ~~and the third quarter of 2020 to date~~ under this authorization and does not intend to initiate any repurchases under this authorization until it has better visibility into the shape and timing of a recovery from the COVID-19 pandemic. See Note 9 for a description of the impact of the 2020 credit facility amendment on the Company's ability to repurchase shares. Additionally, the Board of Directors has given the Company the general authorization to repurchase shares of its common stock withheld to satisfy employee withholding tax obligations related to stock-based compensation.

The following table summarizes the Company's stock repurchase activities during the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 (in millions, except for shares, which are reflected in thousands):

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Shares Amount Shares Amount Shares Amount Shares Amount
Authorized stock repurchase programs — $ — 1,434 $ 2,590 601 $ 1,122 2,982 $ 5,325
General authorization for shares withheld on stock award vesting 2 4 8 16 79 133 79 137
Total 2 $ 4 1,442 $ 2,606 680 $ 1,255 3,061 $ 5,462

~~Stock repurchases of $40 million in December 2019 were settled in January 2020.~~


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Authorized stock repurchase programs	0	$	0	0	$	0	0	$	0	601	$	1,122
General authorization for shares withheld on stock award vesting	4	9		2	4		68	155		79	133
Total	4	$	9	2	$	4	68	$	155	680	$	1,255

For the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, the Company remitted employee withholding taxes of ~~$132~~$150 million and ~~$136~~$132 million, respectively, to the tax authorities, which is different from the aggregate cost of the shares withheld for taxes for each period due to the timing in remitting the taxes. The cash remitted to the tax authorities is included in financing activities in the Unaudited Consolidated Statements of Cash Flows.

~~At June 30, 2020, there were 22,442,328 shares of the Company's common stock held in treasury.~~

11. INCOME TAXES

Income tax expense consists of U.S. and international income taxes, determined using an estimate of the Company's annual effective tax rate, which is based upon the applicable tax rates and tax laws of the countries in which the income is generated. A deferred tax liability is recognized for all taxable temporary differences, and a deferred tax asset is recognized for all deductible temporary differences and operating loss and tax credit carryforwards. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The Company considers many factors when assessing the likelihood of future realization of the deferred tax assets, including its recent cumulative earnings experience by taxing jurisdiction, expectations of future income, tax planning strategies, the carryforward periods available for tax reporting purposes and other relevant factors.

The Company's effective tax rates for the three and six months ended June 30, ~~2020~~2021 were ~~41.4%~~(311.7)% and ~~(12.4)%~~30.3%, respectively, compared to ~~18.9%~~41.4% and ~~19.8%~~(12.4)% for the three and six months ended June 30, ~~2019,~~2020, respectively. The Company's 2021 effective tax rates differ from the U.S. federal statutory tax rate of 21%, primarily due to the benefit of the Netherlands Innovation Box Tax (discussed below), partially offset by higher international tax rates and certain non-deductible expenses. The Company's 2020 effective tax rates differ from the U.S. federal statutory tax rate of 21%, primarily due to the non-deductible goodwill impairment charge related to OpenTable and KAYAK, certain non-deductible expenses relative to lower ~~worldwide~~world-wide earnings and the valuation allowance recorded against the deferred tax ~~assets~~asset generated from the impairment of ~~certain~~a long-term ~~investments,~~investment, partially offset by the benefit of the Netherlands Innovation Box Tax ~~(discussed below)~~ and U.S. state tax benefits. The Company's 2019 effective tax rates differ from the U.S. federal statutory tax rate of 21%, primarily due to the benefit of the Netherlands Innovation Box Tax, partially offset by the effect of higher international tax rates.

The ~~Company's~~Company incurred a pre-tax loss and recorded an income tax provision during the three months ended June 30, 2021, which resulted in a negative effective tax rate. The difference in the Company’s effective tax rate for the three months ended June 30, ~~2020 was higher than~~2021, compared to the three months ended June 30, ~~2019,~~2020, is primarily due tohigher international tax rates and certain non-deductible expenses, partially offset by an increase in the benefit of the Netherlands Innovation Box Tax and a decrease in discrete U.S. tax ~~charges~~expense related to unrealized gains on equity securities ~~as well as certain non-deductible expenses relative to lower worldwide earnings, partially offset by higher U.S. state tax benefits.~~.

The Company incurred a pre-tax loss and recorded an income tax provision during the six months ended June 30, 2020, which resulted in a negative effective tax rate. The difference in the Company’s effective tax rate for the six months ended June 30, ~~2020~~2021, compared to the six months ended June 30, ~~2019~~2020, is primarily due to higher international tax rates and certain non-deductible expenses, partially offset by an increase in the benefit of the Netherlands Innovation Box Tax and a decrease in discrete U.S. tax expense related to unrealized gains on equity securities.In addition, the effective tax rate for the six months ended June 30, 2020 reflected the non-deductible goodwill impairment charge related to OpenTable and KAYAK, discrete U.S. tax charges related to unrealized gains on equity securities, certain non-deductible expenses relative to lower worldwide earnings, and the valuation allowance recorded against the deferred tax asset generated from the impairment of certain long-term investments.KAYAK.

During the three and six months ended June 30, ~~2020,~~2021, a ~~portion~~majority of the Company's income, and during the three and six months ended June 30, ~~2019,~~2020, a ~~majority~~portion of the Company's income was reported in the Netherlands, where Booking.com is based. According to Dutch corporate income tax law, income generated from qualifying innovative activities is taxed at a rate of 7%9% ("Innovation Box Tax") for periods beginning on or after January 1, 2021 rather than the Dutch statutory rate of 25%. Previously, the Innovation Box Tax rate had been 7%. A portion of Booking.com's earnings during the three and six months

ended June 30, ~~2020~~2021 and ~~June 30, 2019~~2020 qualified for Innovation Box Tax treatment, which had a beneficial impact on the Company's effective tax ~~rate~~rates for these periods.

The aggregate amount of unrecognized tax benefits for all matters at June 30, 2021 and December 31, 2020 was $102 million and $84 million, respectively. The unrecognized tax benefits, if recognized, would impact the effective tax rate. As of June 30, 2021 and December 31, 2020, total gross interest and penalties accrued was $32 million and $31 million, respectively. The majority of these unrecognized tax benefits are included in "Other long-term liabilities" and "Other assets, net" in the Consolidated Balance Sheets.

12. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS BY COMPONENT

The tables below present the changes in the balances of accumulated other comprehensive loss("~~AOCl"~~AOCI") by component for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 (in millions):


	~~Foreign currency translation adjustments, net of tax~~																							~~Net unrealized (losses) gains on available-for-sale securities, net of tax~~				~~Total AOCI, net of tax~~
			~~Foreign currency translation~~									~~Net Investment~~ ~~Hedges~~ ⁽¹⁾							~~Total, net of tax~~			~~Before tax~~	~~Tax (expense) benefit~~		~~Total, net of tax~~
			~~Before tax~~			~~Tax benefit~~⁽²⁾			~~Before tax~~			~~Tax (expense) benefit~~
~~Three Months Ended June 30, 2020~~
~~Balance, March 31, 2020~~	$	~~(314)~~		$	58		$	60		$	~~(20)~~		$	~~(216)~~	$	~~(97)~~	$	~~(29)~~		$	~~(126)~~					$	~~(342)~~

~~Other Comprehensive Income (Loss) ("OCI") before reclassifications~~	65			—			~~(43)~~			10			32		73		~~(11)~~			62						94
~~Amounts reclassified to~~ ~~net income~~⁽³⁾	—			—			—			—			—		—		15			15						15
~~OCI for the period~~	65			—			~~(43)~~			10			32		73		4			77						~~109~~

~~Balance, June 30, 2020~~	$	~~(249)~~		$	58		$	17		$	~~(10)~~		$	~~(184)~~	$	~~(24)~~	$	~~(25)~~		$	~~(49)~~					$	~~(233)~~

~~Six Months Ended June 30, 2020~~
~~Balance, December 31, 2019~~	$	~~(186)~~		$	54		$	~~(2)~~		$	~~(5)~~		$	~~(139)~~	$	~~(7)~~	$	~~(45)~~		$	~~(52)~~					$	~~(191)~~

~~OCI before reclassifications~~	~~(63)~~			4			19			~~(5)~~			~~(45)~~		~~(21)~~		6			~~(15)~~						~~(60)~~
~~Amounts reclassified to   net income~~ ⁽³⁾	—			—			—			—			—		4		14			18						18
~~OCI for the period~~	~~(63)~~			4			19			~~(5)~~			~~(45)~~		~~(17)~~		20			3						~~(42)~~

~~Balance, June 30, 2020~~	$	~~(249)~~		$	58		$	17		$	~~(10)~~		$	~~(184)~~	$	~~(24)~~	$	~~(25)~~		$	~~(49)~~					$	~~(233)~~


	Foreign currency translation adjustments										Unrealized losses on cash flow hedges(1)						Net unrealized gains (losses) on available-for-sale securities						Total AOCI, net of tax
	Foreign currency translation				Net investment hedges (2)				Total, net of tax		Before tax		Tax		Total, net of tax		Before tax		Tax		Total, net of tax
	Before tax		Tax (3)		Before tax		Tax

Three Months Ended June 30, 2021
Balance, March 31, 2021	$	(106)	$	51	$	(75)	$	11	$	(119)	$	(15)	$	4	$	(11)	$	2	$	(32)	$	(30)	$	(160)

Other comprehensive income (loss) ("OCI") before reclassifications	24		(1)		(20)		5		8		0		0		0		128		(30)		98		106
Amounts reclassified to net income (4)	0		0		0		0		0		15		(4)		11		0		0		0		11
OCI for the period	24		(1)		(20)		5		8		15		(4)		11		128		(30)		98		117

Balance, June 30, 2021	$	(82)	$	50	$	(95)	$	16	$	(111)	$	0	$	0	$	0	$	130	$	(62)	$	68	$	(43)

Six Months Ended June 30, 2021
Balance, December 31, 2020	$	11	$	47	$	(184)	$	37	$	(89)	$	0	$	0	$	0	$	3	$	(32)	$	(29)	$	(118)

OCI before reclassifications	(93)		3		89		(21)		(22)		(15)		4		(11)		127		(30)		97		64
Amounts reclassified to net income (4)	0		0		0		0		0		15		(4)		11		0		0		0		11
OCI for the period	(93)		3		89		(21)		(22)		0		0		0		127		(30)		97		75

Balance, June 30, 2021	$	(82)	$	50	$	(95)	$	16	$	(111)	$	0	$	0	$	0	$	130	$	(62)	$	68	$	(43)

3231

Foreign currency translation adjustments, net of tax Net unrealized (losses) gains on available-for-sale securities, net of tax
Total AOCI, net of tax

Foreign currency translation
Net Investment
Hedges ⁽¹⁾
Total, net of tax Before tax Tax (expense) benefit Total, net of tax
Before tax
Tax benefit⁽²⁾
Before tax Tax (expense) benefit
Three Months Ended June 30, 2019
Balance, March 31, 2019 $ (189) $ 52 $ 3 $ (7) $ (141) $ 53 $ (81) $ (28) $ (169)
OCI before reclassifications 10 4 (41) 11 (16) (50) 14 (36) (52)
Amounts reclassified to
net income⁽³⁾
— — — — — (10) 1 (9) (9)
OCI for the period 10 4 (41) 11 (16) (60) 15 (45) (61)
Balance, June 30, 2019 $ (179) $ 56 $ (38) $ 4 $ (157) $ (7) $ (66) $ (73) $ (230)
Six Months Ended June 30, 2019
Balance, December 31, 2018 $ (109) $ 41 $ (73) $ 12 $ (129) $ (157) $ (30) $ (187) $ (316)
OCI before reclassifications (70) 15 35 (8) (28) 161 (37) 124 96
Amounts reclassified to
net income⁽³⁾
— — — — — (11) 1 (10) (10)
OCI for the period (70) 15 35 (8) (28) 150 (36) 114 86
Balance, June 30, 2019 $ (179) $ 56 $ (38) $ 4 $ (157) $ (7) $ (66) $ (73) $ (230)























	Foreign currency translation adjustments										Unrealized losses on cash flow hedges(1)						Net unrealized (losses) gains on available-for-sale securities						Total AOCI, net of tax
	Foreign currency translation				Net investment hedges (2)				Total, net of tax		Before tax		Tax		Total, net of tax		Before tax		Tax		Total, net of tax
	Before tax		Tax (3)		Before tax		Tax

Three Months Ended June 30, 2020
Balance, March 31, 2020	$	(314)	$	58	$	60	$	(20)	$	(216)	$	0	$	0	$	0	$	(97)	$	(29)	$	(126)	$	(342)

OCI before reclassifications	65		0		(43)		10		32		0		0		0		73		(11)		62		94
Amounts reclassified to net income (4)	0		0		0		0		0		0		0		0		0		15		15		15
OCI for the period	65		0		(43)		10		32		0		0		0		73		4		77		109

Balance, June 30, 2020	$	(249)	$	58	$	17	$	(10)	$	(184)	$	0	$	0	$	0	$	(24)	$	(25)	$	(49)	$	(233)

Six Months Ended June 30, 2020
Balance, December 31, 2019	$	(186)	$	54	$	(2)	$	(5)	$	(139)	$	0	$	0	$	0	$	(7)	$	(45)	$	(52)	$	(191)

OCI before reclassifications	(63)		4		19		(5)		(45)		0		0		0		(21)		6		(15)		(60)
Amounts reclassified to net income (4)	0		0		0		0		0		0		0		0		4		14		18		18
OCI for the period	(63)		4		19		(5)		(45)		0		0		0		(17)		20		3		(42)

Balance, June 30, 2020	$	(249)	$	58	$	17	$	(10)	$	(184)	$	0	$	0	$	0	$	(24)	$	(25)	$	(49)	$	(233)

(1)Relates to the reverse treasury lock agreements entered in March 2021 that were designated as cash flow hedges and settled in April 2021 (see Note 6).

~~(1)~~(2) Net investment hedges balance ~~net of tax,~~ at June 30, ~~2020~~2021 and earlier dates presented above, ~~include~~includes accumulated net losses from fair value adjustments of $35 million ~~after tax~~ ($53 million before tax) associated with previously settled derivatives that were designated as net investment hedges. The remaining balances relate to foreign currency transaction gains (losses) and related tax benefits (expenses) associated with the Company's Euro-denominated debt that is designated as a hedge ~~against~~of the ~~impact~~foreign currency exposure of ~~currency fluctuations on~~ the net ~~assets of a~~investment in certain Euro functional currency ~~subsidiary~~subsidiaries (see Note 9).

~~(2)~~(3) The tax benefits relate to foreign currency translation adjustments to the Company's one-time deemed repatriation tax liability recorded at December 31, 2017 and foreign earnings for periods after December 31, 2017 that are subject to U.S. federal and state income tax, resulting from the enactment of the U.S. Tax Cuts and Jobs Act (the "Tax Act").

~~(3)~~(4) The reclassified ~~net realized (losses) gains before tax from sales of investments in debt securities and impairment~~ losses before tax ~~related to debt securities~~ are included in ~~"Foreign currency transactions and other"~~"Other income (expense), net" and the related reclassified tax benefits ~~(expenses)~~ are included in "Income tax ~~expense"~~expense (benefit)" in the Unaudited Consolidated Statements of Operations. The cost of marketable debt securities sold is determined using a first-in and first-out method. For the three and six months ended June 30, 2020, the amounts reclassified ~~tax expenses includes~~to net income include a tax expense of $15 million related to the maturity in May 2020 of the Company's investment of $250 million in Trip.com Group convertible ~~notes (see Note 5).~~notes. The tax expense is included in "Income tax expense (benefit)" in the Unaudited Consolidated Statements of Operations.

13. COMMITMENTS AND CONTINGENCIES

Competition and Consumer Protection Reviews

At times, online platforms, including online travel platforms, have been the subject of investigations or inquiries by various national competition authorities ("NCAs") or other governmental authorities regarding competition law matters, consumer protection issues or other areas of concern. The Company is or has been involved in many such investigations. For example, the Company has been and continues to be involved in investigations related to whether Booking.com's contractual parity arrangements with accommodation providers, sometimes also referred to as "most favored nation" or "MFN" provisions, are anti-competitive because they require accommodation providers to provide Booking.com with room rates, conditions or availability that are at least as favorable as those offered to other online travel companies ("OTCs") or through the accommodation provider's website. To resolve and close certain of the investigations, the Company has from time to time made commitments to the investigating authorities regarding future business practices or activities. For example, Booking.com has made commitments to several NCAs, including agreeing to narrow the scope of its parity clauses, in order to resolve parity-related investigations. These investigations can also result in fines and the Company had accrued liabilities of $22 million and

$23 million, for potential fines associated with its contractual parity arrangements, included in "Accrued expenses and other current liabilities" in the Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020, respectively. In addition, in September 2017, the Swiss Price Surveillance Office opened an investigation into the level of commissions of Booking.com in Switzerland and the investigation is ongoing. If there is an adverse outcome and

Booking.com is unsuccessful in any appeal, Booking.com could be required to reduce its commissions in Switzerland. Some authorities are reviewing the online hotel booking sector more generally through market inquiries and the Company cannot predict the outcome of such inquiries or any resulting impact on its business, results of operations, cash flows or financial condition.

NCAs or other governmental authorities are continuing to review the activities of online platforms, including through the use of consumer protection powers. For example, the United Kingdom's NCA (the Competition and Markets Authority, or CMA) conducted a consumer protection law investigation into the clarity, accuracy and presentation of information on hotel booking sites. In connection with this investigation, in 2019, Booking.com, agoda and KAYAK, along with a number of other OTCs, voluntarily agreed to certain commitments with the CMA, ~~in resolution of this~~which resolved the CMA's investigation without a finding by the CMA of an infringement or an admission of wrongdoing by the OTCs involved. Among other things, the commitments provided to the CMA included showing prices inclusive of all mandatory taxes and charges, providing information about the effect of money earned on search result rankings on or before the search results page and making certain adjustments to how discounts and statements concerning popularity or availability are shown to consumers. The CMA has stated that it expects all participants in the online travel market to adhere to the same standards, regardless of whether they formally signed the commitments. As a result of additional inquiries from other NCAs in the European Union, Booking.com has made similar commitments with the Consumer Protection Cooperation Network that became applicable in the European Union in June 2020. In the future, it is possible other jurisdictions could engage Booking.com in discussions to implement similar changes to its business in those countries. The Company is unable to predict what, if any, effect ~~these commitments and~~ any future similar commitments will have on its business, industry practices or online commerce more generally. To the extent that any other investigations or inquiries result in additional commitments, fines, damages or other remedies, the Company's business, financial condition and results of operations could be harmed.

The Company is involved in ~~litigation~~multiple litigations in Israel claiming that it has violated Israeli consumer protection and competition laws. ~~One~~For example, one such lawsuit alleges that the Company violated Israeli consumer protection laws by failing to properly display Israeli local taxes in the total prices shown to Israeli residents on its platform. Another lawsuit claims that the Company's parity contractual terms with partners violate Israeli competition laws because they are anti-competitive. A third lawsuit claims Israeli consumer protection laws prohibit the Company from facilitating non-refundable bookings to Israeli residents. Each of the plaintiffs in these matters is requesting certification of a class and the Company is defending against class certification. If the court were to grant class certification for any of these matters and if the plaintiffs were successful on the merits of the claims, the Company could be required to pay damages. However, ~~it is not~~the Company cannot reasonably ~~possible to~~ estimate the amount of such potential damages because there are several unknown variables at this early stage, including the likelihood of class certification, ~~and the success of the merits of these cases are both too speculative at this stage in the litigation and also because a reasonable assessment of~~ the size of any potential class and the likelihood of success of the merits of the claims.

A German hotel association has initiated a class action lawsuit against Booking.com in Germany on behalf of a group of German hotels that alleges that the hotels overpaid commissions to Booking.com because of wide parity terms in the contracts between the hotels and Booking.com between 2006 and 2015. Booking.com is ~~not possible~~pursuing court proceedings in the Netherlands to declare that the Netherlands is the proper forum for this matter. Although the Company believes the claim to be without merit and intends to defend against the claim, if the hotel association were successful in its litigation and the Company were required to pay damages, the amount could be significant. The Company cannot reasonably estimate an amount of potential loss because there are several unknown variables at this ~~time.~~early stage.

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

Tax Matters

French tax authorities conducted audits of Booking.com for the years 2003 through 2012 and years 2013 through 2015 and currently are conducting an audit for the years 2016 through 2018. ~~They are asserting that Booking.com has a permanent establishment in France and are seeking to recover what they claim are unpaid income and value-added taxes.~~ In December 2015, the French tax authorities issued Booking.com assessments for unpaid income and value added taxes ("VAT") related to tax years 2006 through 2012 for approximately 356 million Euros ($403 million), the majority of which represents penalties and interest. The assessments assert that Booking.com had a permanent establishment in France. In December 2019, the French tax authorities issued an additional assessment of 70 million Euros ($83 million), including interest and penalties, for the 2013 tax year asserting that

Booking.com had taxable income attributable to a permanent establishment in France. The French tax authorities also have issued assessments totaling 39 million Euros ($47 million), including interest and penalties, for certain tax years between 2011 and 2015 on Booking.com's French subsidiary asserting that the subsidiary did not receive sufficient compensation for the services it rendered to Booking.com in the Netherlands. As a result of a formal demand from the French tax authorities for payment of the amounts assessed against Booking.com for the years 2006 through 2012, in January 2019, the Company paid the assessments of approximately 356 million Euros ($403 million) in order to preserve its right to contest those assessments in court. The payment, which is included in "Other assets, net" in the Consolidated Balance Sheets at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, does not constitute an admission that the Company owes the taxes and will be refunded (with interest) to the Company to the extent the Company prevails. ~~If the Company is unable to resolve the matter with the French tax authorities, the Company plans to challenge the assessments in the French courts.~~ In December 2019 and October 2020, the French tax authorities issued an additional assessment of 70 million Euros ($79 million), including interest and penalties, for the 2013 year asserting that Booking.com has taxable income in France attributableCompany initiated court proceedings with respect to ~~a permanent establishment in France. Furthermore, the French tax authorities issued assessments totaling 39 million Euros ($44 million), including interest and penalties, for~~ certain tax years between 2011 and 2015 on Booking.com's French subsidiary asserting that the subsidiary did not receive sufficient compensation for the services it rendered to Booking.com in the Netherlands. The Company has not recorded a liability in

~~connection with any~~ of the ~~French tax assessments as~~assessments. Although the Company believes that Booking.com has been, and continues to be, in compliance with French tax law, and the Company is contesting the ~~assessments.~~assessments, during the three months ended September 30, 2020, the Company contacted the French tax authorities regarding the potential to achieve resolution of the matter through a settlement. After assessing several potential outcomes and potential settlement amounts and terms, an unrecognized tax benefit in the amount of 50 million Euros ($59 million) was recorded during the year ended December 31, 2020, of which the majority was included as a partial reduction to the tax payment recorded in "Other assets, net" in the Consolidated Balance Sheets at June 30, 2021 and December 31, 2020. In December 2020, the French Administrative Court (Conseil d’Etat) delivered a decision in the "ValueClick" case that could have an impact on the outcome in the Company's case. After considering the potential adverse impact of the new decision on the potential outcomes for the Booking.com assessments, the Company currently estimates that the reasonably possible loss related to VAT is approximately 20 million Euros ($24 million). Additional assessments could result when the French tax authorities complete the outstanding audits.

For the periods 2016 through 2018, Italian tax authorities are reviewing Booking.com's ~~activities~~transfer pricing policies and for the years ~~2011~~2013 through ~~2018. They are reviewing~~2019, whether Booking.com ~~has a permanent establishment in Italy and Booking.com's transfer pricing policies in Italy. The Company~~ is ~~cooperating with the investigation but intends~~subject to ~~contest any allegation that Booking.com has a permanent establishment in Italy or that its transfer pricing policies are inappropriate.~~VAT. In December 2018, December 2019 and ~~2019,~~March 2021, the Italian tax authorities issued assessments on Booking.com's Italian subsidiary for approximately 48 million Euros ($5356 million) for the 2013 tax year, ~~and~~ 58 million Euros ($6569 million) for the 2014 tax year, and 31 million Euros ($37 million) for the 2015 tax year, respectively, asserting that its transfer pricing policies were inadequate. ~~The Company has not recorded a liability in connection with these assessments.~~ The Company believes that Booking.com has been, and continues to be, in compliance with Italian tax law. In September 2020, the Italian tax authorities approved the opening of a Mutual Agreement Procedure (“MAP”) between Italy and the Netherlands for the 2013 tax year and in March 2021 suspended the court proceedings underway for the 2014 tax year upon the Company's request for the opening of a MAP for 2014 as well. The Company intends to request similar MAP proceedings be opened for the 2015 tax year and for any subsequent open tax years for which Booking.com’s Italian subsidiary receives transfer pricing related income tax assessments from the Italian tax authorities. Based on the possibility of the Italian assessments for 2013 and 2014 being settled through the MAP process, and after considering potential resolution amounts, a net unrecognized tax benefit amount of 4 million Euros ($5 million) was recorded during the year ended December 31, 2020. Based on the Company’s expectation that the Italian assessment for 2015 and any transfer pricing assessments received for subsequent open years will be settled through the MAP process, and after considering potential resolution amounts, an additional net unrecognized tax benefit of 13 million Euros ($16 million) has been recorded during the six months ended June 30, 2021. In December 2019, the Company paid 10 million Euros ($11 million) ~~in December 2019~~ as a partial prepayment of the 2013 assessment to avoid any collection enforcement from the Italian tax authorities pending the appeal phase of ~~this~~the case. The payment, which is included in "Other assets, net" in the Consolidated Balance Sheets at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, does not constitute an admission that the Company owes the taxes and will be refunded (with interest) to the Company to the extent that the Company prevails. Similar to the partial prepayment for 2013, the Company expects to be required to make prepayment deposits or provide bank guarantees equal to one third of the interest and taxes for the 2014 and 2015 assessments to avoid any collection enforcement from the Italian tax authorities pending the MAP proceedings. A total of 5 million Euros ($6 million) of the net unrecognized tax benefits recorded during the six months ended June 30, 2021 and the year ended December 31, 2020 has been included as a partial reduction to the tax payment recorded in "Other assets, net" in the Consolidated Balance Sheets at June 30, 2021 and December 31, 2020. In June 2021, the investigative arm of the Italian tax authorities issued a Tax Audit Report for the 2013 through 2019 Italian VAT audit. While the Tax Audit Report does not constitute a formal tax assessment, it recommends that an assessment of 154 million Euros ($182 million), plus interest and penalties, should be made on Booking.com BV for VAT related to commissions charged to certain Italian accommodation providers. The Company believes that Booking.com has been, and continues to be, in compliance with Italian and EU VAT laws and the Company has not recorded any liability in connection with the Tax Audit Report. It is unclear what further actions, if any, the Italian authorities will ~~take.~~take with respect to the VAT audit for the periods 2013 through 2019 or the income tax audit for the periods 2016 through 2018. Such actions could include closing the ~~investigation,~~investigations, assessing Booking.com additional taxes and/or imposing interest, fines, ~~and penalties.~~penalties or criminal proceedings.

In addition, Turkish tax authorities have asserted that Booking.com has a permanent establishment in Turkey and have issued tax assessments for the years 2012 through ~~2017~~2018 for approximately ~~544~~789 million Turkish Lira ($7991 million), ~~including~~which includes interest and ~~penalties.~~penalties through June 30, 2021. The Company believes that Booking.com has been, and continues to be,

in compliance with Turkish tax law, and the Company is contesting these assessments. The Company has not recorded a liability in connection with these assessments.

As a result of an internal review of tax policies and positions at one of the Company's smaller subsidiaries in 2018, the Company identified two issues related to the application of certain non-income-based tax laws to that subsidiary's ~~business in 2018.~~business. At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had ~~$75~~accrued $59 million ~~and $67 million, respectively, accrued~~ related to these travel transaction taxes, based on the Company's estimate of the probable travel transaction tax owed for the prior periods, including interest and penalties, as applicable. The related expenses are included in "General and administrative" expense in the Unaudited Consolidated Statements of Operations. The Company currently estimates that the reasonably possible loss related to these matters in excess of the amount accrued is approximately ~~$25~~$20 million. ~~The Company's internal review is ongoing, and, to~~To the extent the Company determines that the probable taxes owed related to these matters exceed what has already been accrued or new issues are identified, ~~during this review,~~ the Company may need to accrue additional amounts, which could adversely affect the Company’s business, results of operations, financial condition and cash flows.

From time to time, the Company is involved in other tax-related audits, investigations or proceedings, which could relate to income taxes, value-added taxes, sales taxes, employment taxes, etc. For example, the Company is subject to legal proceedings in the United States related to travel transaction taxes (e.g., hotel occupancy taxes, sales taxes, etc.). In May 2021, Clark County, Nevada filed a suit against the Company and other third-party OTCs alleging an underpayment of hotel occupancy taxes. The Company believes that the tax laws at issue do not apply to the services it provides, and, therefore, that it does not owe the taxes alleged to be owed. Although the Company intends to defend itself against the lawsuit, if there was an adverse outcome in this litigation, it could result in liabilities for past and/or future bookings, and it is unknown whether the liability would include interest, penalties, punitive damages and/or attorney’s fees and costs. At this early stage the Company cannot reasonably estimate the amount of any potential loss or range of loss.

Any taxes or other assessments in excess of the Company's current tax provisions, whether in connection with the foregoing or otherwise (including the resolution of any tax proceedings), could have a materially adverse impact on the Company's results of operations, cash flows and financial condition.

Other Matters

Beginning in 2014, Booking.com received several letters from the Netherlands Pension Fund for the Travel Industry (Reiswerk) (“BPF”) claiming that Booking.com is required to participate in the mandatory pension scheme of the BPF with retroactive effect to 1999, which has a higher contribution rate than the pension scheme in which Booking.com is currently participating. BPF instituted legal proceedings against Booking.com and in 2016 the District Court of Amsterdam rejected all of BPF’s claims. BPF appealed the decision to the Court of Appeal, and, in May 2019, the Court of Appeal also rejected all of BPF’s ~~claims.~~claims, in each case by ruling that Booking.com does not meet the definition of a travel intermediary for purposes of the mandatory pension scheme. BPF ~~has~~then appealed to the Netherlands Supreme Court. ~~The Company expects~~In April 2021, the Supreme Court overturned the previous decision of the Court of Appeal and held that Booking.com meets the definition of a travel intermediary for the purposes of the mandatory pension scheme. The Supreme Court ruled only on the qualification of Booking.com as a travel intermediary for the purposes of the mandatory pension scheme, and did not rule on the various other defenses brought forward by the Company against BPF's claims. The Supreme Court referred the matter to ~~rule in early 2021.~~another Court of Appeal that will have to assess the other defenses brought forward by the Company if BPF were to proceed with the litigation. The Company ~~believes~~intends to pursue a number of defenses in any subsequent proceedings and may ultimately prevail in whole or in part. While the Company continues to believe that Booking.com is in compliance with its pension ~~obligations.~~obligations and that the Court of Appeal could ultimately rule in favor of Booking.com, given the Supreme Court’s decision, the Company believes it is probable that it has incurred a loss related to this matter. The Company is not able to reasonably estimate a loss or a range of loss because there are significant factual and legal questions yet to be determined in any subsequent proceedings. As a result, as of June 30, 2021, the Company has not recorded a liability in connection with a potential adverse ultimate outcome to this litigation. However, if Booking.com were to ultimately lose and all of BPF’s claims were to be accepted (including ~~retroactivity~~with retroactive effect to 1999), the Company estimates that as of June 30, ~~2020~~2021, the maximum loss, not including any potential interest or penalties, would be approximately ~~$245~~$316 million. Such estimated potential loss increases as Booking.com continues not to contribute to the BPF and depends on ~~Booking.com’s~~Booking.com's applicable employee compensation after June 30, ~~2020.~~2021.

From time to time the Company notifies data protection authorities in various jurisdictions in accordance with its obligations under applicable data protection regulations, including its notification obligations of certain incidental and accidental personal data security incidents to the Dutch data protection authority in accordance with the E.U. General Data Protection Regulation. Although the Company believes it has fulfilled its data protection regulatory obligations including those to the Dutch data protection authority, should any data protection authority decide these incidents were the result of inadequate technical and organizational security measures, such authority could decide to impose a fine. While the Company believes that

any fine imposed on it relating to such obligations would be immaterial, the Company estimates that if a fine were imposed by the Dutch data protection authority, it could range from a de minimis amount to 20 million Euros ($24 million) per incident, depending on the Dutch data protection authority’s evaluation of the facts and circumstances associated with the incident after investigation.

The Company's alternative accommodation reservation business is subject to various laws, rules and regulations. These laws, rules and regulations are complex, vary by jurisdiction and their interpretation is rapidly evolving. From time to time, the Company is subject to inquiries related to compliance with alternative accommodation laws, rules and regulations that it may or may not be able to respond to in a timely manner or in full satisfaction of such requests. The outcome of such inquiries could result in fines or penalties or require modifications to the Company’s business plans or operations, which could result in increased legal and compliance costs. As governments adopt new laws, rules and regulations related to alternative accommodations, the Company is unable to predict what, if any, effect any such future laws, rules and regulations will have on its business.

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

From time to time, the Company has been, is currently, and expects to continue to be, subject to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of third-party intellectual property rights. Such claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources, divert management's attention from the Company's business objectives and adversely affect the Company's business, results of operations, financial condition and cash flows.

Building Construction

In September 2016, the Company signed a turnkey agreement to construct an office building for ~~Booking.com’s~~Booking.com's future headquarters in the ~~Netherlands.~~Netherlands for 270 million Euros ($321 million). Upon signing this agreement, the Company paid 43 million Euros ($48 million) for the acquired land-use rights, which was included in "Operating lease assets" in the Consolidated Balance Sheets. In addition, since signing the turnkey agreement the Company has made several progress payments principally related to the construction of the building, which are included in "Property and equipment, net" in the Consolidated Balance Sheets. As of June 30, ~~2020,~~2021, the Company ~~has paid 178 million Euros ($204 million) and~~ had a remaining obligation of 8433 million Euros ($9439 million) ~~at June 30, 2020,~~ related to the turnkey agreement. ~~The Company's contractual obligation was reduced by 9 million Euros ($10 million) during the three months ended June 30, 2020.~~ The remaining obligation will be paid through mid-2022, when the Company anticipates construction will be complete.

In addition to the turnkey agreement, the Company has a remaining obligation at June 30, ~~2020~~2021 to pay 7169 million Euros ($8082 million) over the remaining initial term of the acquired land lease, which expires in 2065. The Company has made and will continue to make additional capital expenditures to fit out and furnish the office space. At June 30, 2021, the Company had 32 million Euros ($38 million) of outstanding commitments to vendors to fit out and furnish the office space.

Other Contractual Obligations

In 2018, the Company entered into an agreement to sign a future lease ~~related to approximately 222,000 square feet of~~for office space in ~~the city of~~ Manchester, ~~in the~~ United Kingdom for the future headquarters of ~~Rentalcars.com. The~~Rentalcars.com, whereby the Company's obligation to execute the lease is conditional upon the lessor completing certain activities. Under the 2018 agreement, it was anticipated that upon completion of the required activities ~~which are expected to be completed in 2021. If these activities are completed,~~by the lessor, the lease ~~will~~would be executed and commence for a term of approximately 13 years ~~and the Company will have~~with a lease payments obligation of approximately 65 million British Pounds Sterling ($8089 million), excluding lease incentives. The required activities are being completed and the terms and conditions of the lease are being finalized. The Company expects the lease to commence during the three months ending September 30, 2021. In addition to its obligations under the lease, the Company will also make capital expenditures to fit out and furnish the office space.

14. RESTRUCTURING AND OTHER EXIT COSTS

In response to the reduction in the Company's business volumes as a result of the impact of the COVID-19 pandemic (see Note 1), during the year ended December 31, 2020, the Company took actions at all its brands to reduce the size of its workforce across more than 60 countries to optimize efficiency and reduce costs. As part of these actions, the Company engaged in consultations, with its employees, works councils, employee representatives and other relevant organizations related to the reductions in force in certain countries (including the Netherlands and the United Kingdom), which have substantially concluded as of December 31, 2020. These consultations resulted in the Company executing either voluntary leaver schemes or

involuntary reductions in force, or, in some countries, a combination of the two. The Company completed the vast majority of announcements to affected employees by December 2020. During the six months ended June 30, 2021, the Company approved and communicated the final portion of workforce reductions in the Netherlands, France and several other countries.

During the three and six months ended June 30, 2021, the Company recorded expenses of $1 million and $9 million, respectively, for the restructuring actions, which are included in "Restructuring and other exit costs" in the Unaudited Consolidated Statements of Operations. These expenses are primarily cash-based and consist of employee severance and other termination benefits, and other costs. During the six months ended June 30, 2021, the Company made payments of $36 million. Noncash restructuring expenses and other adjustments to the restructuring liability during the six months ended June 30, 2021 were $3 million. At June 30, 2021 and December 31, 2020, restructuring liabilities of $7 million and $37 million, respectively, are included in "Accrued expenses and other current liabilities" in the Consolidated Balance Sheets.

As of June 30, 2021, the Company estimates that it will record additional restructuring and other exit costs of approximately $10 million, related to lease and contract terminations and employee severance and other termination benefits, in the remainder of 2021, with $4 million recorded thereafter. This estimate may change as the Company finalizes the execution of its cost reduction plans. The Company’s evaluation of various alternative courses of action related to certain other leases and contract terminations and modifications is still in progress and the Company may incur additional costs resulting from such actions.

15.GOVERNMENT GRANTS AND OTHER ASSISTANCE

Certain governments passed legislation to help businesses during the COVID-19 pandemic through loans, wage subsidies, tax relief or other financial aid. During the year ended December 31, 2020 and the three months ended March 31, 2021, the Company participated in several of these programs and recognized, in the aggregate, government grants and other assistance benefits of $131 million, principally recorded as a reduction of "Personnel" expense in the Consolidated Statement of Operations for the respective periods. As of March 31, 2021, the Company had a receivable of $28 million for payments expected to be received for the programs where it had met the qualifying requirements.

In June 2021, the Company announced its intention to voluntarily return assistance received through various government aid programs and, for the three and six months ended June 30, 2021, the Company recorded expenses of $137 million in the Unaudited Consolidated Statements of Operations, principally in “Personnel” expense, to reflect the return of such assistance. The Company repaid $86 million of assistance in June 2021 and recorded a liability of approximately $21 million, as of June 30, 2021 for the amount that the Company expects to repay during 2021. The previously recorded receivable for payments expected to be received was also written off in June 2021. Subsequent to June 30, 2021, the Company repaid an additional $19 million.

During the three and six months ended June 30, 2020, the Company recognized government grants and other assistance benefit of $100 million.

16.OTHER INCOME (EXPENSE), NET

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020

Interest and dividend income	$	4	$	12	$	8	$	44
Net gains on equity securities (1)	391		835		427		528

Impairment of investment (1)	0		0		0		(100)
Foreign currency transaction (losses) gains	(41)		(58)		47		(27)
Loss on early extinguishment of debt (2)	(242)		0		(242)		0

Other (3)	(16)		0		(13)		(5)
Other income (expense), net	$	96	$	789	$	227	$	440

(1) See Note 5 for additional information related to the net gains on equity securities and impairment of investment.

(2) See Note 9 for additional information related to the loss on early extinguishment of debt.

(3) The amounts for the three and six months ended June 30, 2021 include losses on reverse treasury lock agreements which were designated as cash flow hedges (see Note 6).

17.OTHER

~~Restricted~~Unaudited Consolidated Statements of Cash ~~and Cash Equivalents~~Flows: Additional Information

Restricted cash and cash equivalents at June 30, ~~2020~~2021 and December 31, ~~2019~~2020 principally relates to the minimum cash requirement for the Company's travel-related insurance business. The following table reconciles cash and cash equivalents and restricted cash and cash equivalents reported in the Consolidated Balance Sheets to the total amounts shown in the Unaudited Consolidated Statements of Cash Flows (in millions):


		June 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
		(Unaudited)					(Unaudited)
As included in the Consolidated Balance Sheets:	As included in the Consolidated Balance Sheets:					As included in the Consolidated Balance Sheets:
Cash and cash equivalents	Cash and cash equivalents	$	10,404	$	6,312	Cash and cash equivalents	$	11,231	$	10,562
Restricted cash and cash equivalents included in "Prepaid expenses and other current assets, net"		19		20
Restricted cash and cash equivalents included in "Other current assets"						Restricted cash and cash equivalents included in "Other current assets"	21		20
Total cash and cash equivalents and restricted cash and cash equivalents as shown in the Unaudited Consolidated Statements of Cash Flows	Total cash and cash equivalents and restricted cash and cash equivalents as shown in the Unaudited Consolidated Statements of Cash Flows	$	10,423	$	6,332	Total cash and cash equivalents and restricted cash and cash equivalents as shown in the Unaudited Consolidated Statements of Cash Flows	$	11,252	$	10,582

~~Income Taxes Prepayment and Refund~~

In the first quarter of 2020, the Company made a prepayment of the Netherlands income taxes of 660 million Euros ($717 million) to earn prepayment discounts. The Company requested a refund of this amount from the Dutch tax authorities and it was received in April 2020.

~~Restructuring and other Exit Costs~~

In response to the reduction in the Company's business volumes as a result of the impact of the COVID-19 pandemic (see Note 1), the Company has taken actions to reduce the size of its workforce to optimize efficiency. During the three months ended June 30, 2020, agoda, KAYAK and OpenTable initiated restructuring actions, as part of their respective restructuring plans, resulting in a reduction in the workforce of approximately 1,700 employees. In addition, in July 2020, the Company initiated restructuring actions at priceline.

The total pretax charges related to these restructuring actions initiated during the three months ended June 30, 2020, estimated at approximately $34 million, are primarily cash-based and consist of employee severance and other one-time termination benefits, and other costs. The Company expects the payments for these restructuring costs to be substantially completed by December 2020. During the three and six months ended June 30, ~~2020,~~2021, the Company ~~recorded expenses~~prepaid Netherlands income taxes of ~~$34~~149 million Euros ($175 million), which ~~are~~is included in “Restructuring and other exit costs” in the Unaudited Consolidated Statements of Operations and made cash payments of $25 million. At June 30, 2020, restructuring liabilities of $7 million are included in "Accrued expenses and other"Other current ~~liabilities"~~assets" in the Consolidated Balance ~~Sheets.~~Sheet at June 30, 2021.

~~On August 4, 2020,~~Noncash investing activity related to additions to property and equipment was $24 million and $16 million for the Company announced its intention to reduce Booking.com's global workforce by up to approximately 25% as a result of the impact of the COVID-19 pandemic on Booking.com and the travel industry. Booking.com is in the process of consulting with its works councils, employee representatives and other relevant organizations where applicable (including in the Netherlands) regarding the intended reduction in force and related cost reduction and restructuring actions. As the Company consults with works councils, employee representatives and other organizations regarding its intentions, the Company expects to develop more clarity on the timing, the number of affected employees, financial impact and other aspects of the contemplated cost reduction actions. The Company expects to finalize its plans and make relevant announcements to employees on a country-by-country basis, with the first countries starting in September 2020, and expects to complete all such announcements by the end of 2020.

~~Government Grants and other Assistance~~

Certain governments have passed or are considering modifying legislation to help businesses during the COVID-19 pandemic through loans, wage subsidies, tax relief or other financial aid, and some of these governments have extended or are considering extending these programs. The Company has participated in several of these programs, including the Netherlands' wage subsidy program, the United Kingdom's job retention scheme and certain other jurisdictions' programs. In addition, in certain countries, such as Singapore and China, the Company is also participating in programs where the government assistance is in the form of wage subsidies and reductions in wage-related employer taxes paid by the Company. During the three and six months ended June 30, 2021 and 2020, the Company recognized government grants and other assistance benefit of $100 million, of which $84 million has been received as of June 30, 2020. The government grants and other assistance is recorded as a reduction of "Personnel" expense in the Unaudited Consolidated Statements of Operations. At June 30, 2020, the Company has recorded a receivable of $16 million, included in “Prepaid expenses and other current assets, net” in the Consolidated Balance Sheets, for payments expected to be received for the programs where it has met the qualifying requirements and it is probable that payment will be received. These payments are expected to be received in 2020.

respectively.

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

The following discussion should be read in conjunction with our Unaudited Consolidated Financial Statements, including the notes to those statements, included elsewhere in this Quarterly Report on Form 10-Q, and the Section entitled "Special Note Regarding Forward-Looking Statements" at the end of this Item 2. As discussed in more detail in the Section entitled "Special Note Regarding Forward-Looking Statements," this discussion contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause those differences include those discussed in "Risk Factors" and elsewhere in this Quarterly Report. The information on our websites is not a part of this Quarterly Report and is not incorporated herein by reference.

We evaluate certain operating and financial measures on both an as-reported and constant-currency basis. We calculate constant currency by converting our current-year period operating and financial results for transactions recorded in currencies other than U.S. Dollars using the corresponding prior-year period monthly average exchange rates rather than the current-year period monthly average exchange rates.

Overview

Our mission is to make it easier for everyone to experience the world. We seek to empower people to cut through travel barriers, such as money, time, language and overwhelming options, so they can use our services to easily and confidently go where they want to go, stay where they want to stay, dine where they want to dine, pay how they want to pay and experience what they want to experience. We connect consumers wishing to make travel reservations with providers of travel services around the world through our online platforms. Through one or more of our brands, consumers can: book a broad array of accommodations (including hotels, motels, resorts, homes, apartments, bed and breakfasts, hostels and other properties); make a car rental reservation or arrange for an airport taxi; make a dinner reservation; or book a flight, cruise, vacation package, tour or activity. Consumers can also use our meta-search services to easily compare travel reservation information, such as airline ticket, hotel reservation and rental car reservation information, from hundreds of online travel platforms at once. In addition, we offer various other services to consumers and partners, such as certain travel-related insurance products and restaurant management services to restaurants.

We offer these services through six primary consumer-facing brands: Booking.com, ~~KAYAK, priceline,~~Priceline, agoda, Rentalcars.com, KAYAK and OpenTable. While historically our brands operated on a largely independent basis and many of them focused on a particular service (e.g., accommodation reservations) or geography, we are increasing the collaboration, cooperation and interdependency among our brands in our efforts to provide consumers with the best and most comprehensive services. We also seek to maximize the benefits of our scale by sharing resources and technological innovations, co-developing new services and coordinating activities in key markets among our brands. For example, Booking.com, the world’s leading brand for booking online accommodation reservations (based on room nights booked), offers rental car and other ground transportation services, flights, ~~restaurant reservations,~~ tours and activities reservations, restaurant reservations and other services, many of which are supported by our other brands. Similarly, hotel reservations available through Booking.com are also generally available through agoda and ~~priceline.~~Priceline.

We refer to our company and all of our subsidiaries and brands collectively as "Booking Holdings," the "Company," "we," "our" or "us."

Our business is driven primarily by international results, which consist of the results of Booking.com, agoda and Rentalcars.com in their entirety and the international businesses of KAYAK and OpenTable. This classification is independent of where the consumer resides, where the consumer is physically located while using our services or the location of the travel service provider or restaurant. For example, a reservation made through Booking.com (which is domiciled in the Netherlands) at a hotel in New York by a consumer in the United States is part of our international results. In ~~2019,~~2020, our international business (the substantial majority of which is generated by Booking.com) represented approximately ~~90%~~88% of our consolidated revenues. A significant majority of our revenues, including a significant majority of our international revenues, is earned in connection with facilitating accommodation reservations. See Note 2 to the Unaudited Consolidated Financial Statements for more geographic information.

We derive substantially all of our revenues from enabling consumers to make travel service reservations. We also earn revenues from credit card processing rebates and customer processing fees, advertising services, restaurant reservations and restaurant management services, and various other services, such as travel-related insurance revenues.

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Trends

In December 2019, a novel strain of coronavirus, COVID-19, was first detected in Wuhan, China, and has since spread to other regions, including Europe and the United States. On March 11, 2020, the World Health Organization declared that the rapidly spreading COVID-19 outbreak was a global pandemic (“COVID-19 pandemic”). In response to the ~~pandemic,~~outbreak of the novel strain of the coronavirus, COVID-19 (the "COVID-19 pandemic"), as well as subsequent outbreaks driven by new variants of COVID-19, many governments around the world have implemented, and continue to implement, a variety of measures to reduce the spread of COVID-19, including travel restrictions, bans and ~~bans,~~advisories, instructions to residents to practice social distancing, curfews, quarantine advisories, including quarantine restrictions after travel in certain locations, shelter-in-place orders, ~~and~~ required closures of non-essential ~~businesses.~~businesses and additional restrictions on businesses as part of re-opening plans. These government mandates have ~~forced~~had a significant adverse effect on many of the partners on whom our business relies, including hotels and other accommodation providers, airlines and restaurants, to seek government support in order to continue operating, to curtail drastically their service offerings or to cease operations entirely. Further, these measures have materially adversely affected, and may further adversely affect, consumer sentiment and discretionary spending patterns, economies and financial markets, andas well as on our workforce, operations and ~~customers.~~consumers. The COVID-19 pandemic and the resulting economic conditions and government orders have resulted in a material decrease in consumer spending and an unprecedented decline in travel and restaurant activities and consumer demand for related ~~services.~~services as compared to 2019 levels. Our financial results and prospects are almost entirely dependent on the sale of ~~such travel and restaurant-related~~travel-related services. Our results for the ~~quarters~~year ended ~~March~~December 31, 2020 and six months ended June 30, ~~2020 have been significantly~~2021 were materially and negatively impacted, with a material decline in gross travel bookings, room nights booked, total revenues, net income and cash flow from operations as compared to the ~~corresponding period in~~year ended December 31, 2019 and six months ended June 30, 2019. ~~Newly-booked~~Accommodation room ~~night reservations, excluding~~nights, which include the impact of cancellations ("room nights"), declined rapidly as the COVID-19 pandemic spread in the first quarter and ~~decreased by over 85% in April~~the beginning of the second quarter of 2020, ~~as compared to April 2019,~~ but ~~have~~then steadily improved through the end of the second quarter and into the summer travel period in the third quarter of 2020. However, in the fourth quarter of 2020, we saw an increased decline in room nights, due in part to ~~a decrease~~increased COVID-19 case counts and reimposed or additional government-imposed travel restrictions, particularly in Europe, some of ~~approximately~~ ~~50% i~~nwhich continued to remain in place during the six months ended June ~~2020 as compared to June 2019. The improvement in newly-booked~~30, 2021. In spite of these travel restrictions, room night trends ~~since April has primarily been~~improved in the first quarter of 2021, driven by domestic travel (travelers booking a stay within their own country) ~~while~~in Europe and the United States. In Europe, the improvement in room nights was driven by bookings for travel expected to occur later in the year, as many government-imposed travel restrictions remained in place in the first quarter of 2021. The United States had positive room night growth in the first quarter of 2021 as compared to the first quarter of 2019.

Room nights declined 26% in the second quarter of 2021 relative to the second quarter of 2019, which was an improvement of about 28 percentage points from the room night decline in the first quarter of 2021 relative to the first quarter of 2019. The comparison of the second quarter of 2021 to the second quarter of 2019 avoids the distortion created from comparing to the second quarter of 2020, which was the first quarter that was fully impacted by the COVID-19 pandemic. This improvement in trends in the second quarter of 2021 was driven by domestic travel (travelers booking a stay within their own country) and international travel (travelers booking a stay outside of their own country), primarily in Europe as well as continued improvement in domestic travel in the United States. The growth of international bookings in Europe was mainly driven by bookings within the European region. In Europe, we saw an increase in vaccination rates and the easing of many government-imposed travel restrictions towards the end of the second quarter, which helped drive positive room night growth in the month of June compared to the same period in 2019. The United States had strong room night growth in the second quarter of 2021 as compared to the second quarter of 2019.

While it is encouraging that the rate of vaccination distribution is increasing throughout the world, many countries in Asia, Africa, South America and other parts of the world have made slower progress. In the second quarter of 2021, the Delta variant of COVID-19, which is a variant first discovered in India, became the dominant strain in many countries. Many reports indicate that although existing COVID-19 vaccines appear to be mostly effective against the Delta variant, it is more transmissible than other variants and has ~~shown limited signs~~led certain authorities to reimpose mask requirements and other restrictions, including in countries that have widely distributed vaccines. We believe that as effective vaccines become more widely distributed, people will increasingly feel it is safe to travel again and government restrictions will be relaxed, although the timing remains uncertain.

From April 2020 through the first quarter of ~~recovery.~~ ~~Over this same time period,~~2021, we saw a substantial increase versus 2019 in the share of room nights booked for domestic travel while room nights booked for international travel remained very limited. However, during the second quarter of 2021 we saw an improvement in room nights booked for international travel, and the share of room nights booked for domestic travel of about 75% in the second quarter of 2021 decreased as compared to the first quarter of 2021. Since the second quarter of 2020, we have seen ~~a year-over-year~~an increase in the share of our ~~newly-booked~~ room nights ~~for alternative accommodation properties as well as~~booked on a mobile device versus 2019. Also, we have seen an increase in the share of ~~bookings made on a mobile device.~~room nights booked for alternative accommodation properties for the year ended December 31, 2020 and six months ended June 30, 2021, as compared to the year ended December 31, 2019 and six months ended June 30, 2019. In addition, we have observed an improvement in cancellation rates since the high in April ~~which benefits our room nights booked including cancellations but does not impact newly-booked room nights.~~2020, though we have seen periods of elevated cancellation rates typically coinciding with newly imposed or reimposed travel restrictions. The cancellation rate in the second quarter of 2021 was at comparable levels as the second quarter of 2019.

Our revenue decline in ~~April 2020~~the second quarter of 2021, as compared to the second quarter of 2019, was ~~impacted to a greater extent~~more significant than ~~newly-booked~~our room night ~~reservations due to the impact of cancellations in March for April stays and also since many hotels, especially in Europe, temporarily closed as a result of the COVID-19 pandemic. Revenue~~ decline ~~levels since April have also steadily improved through June 2020, but to a lesser extent than newly-booked room night reservations~~ due primarily to ~~the~~ timing of booking versus travel as a portion of the room nights booked in the second quarter of 2021 are related to expected travel in subsequent quarters, which is when we expect to recognize the associated revenue. While we have seen signs of a recovery in travel demand in certain parts of the world including the United States and Europe, we continue to expect that our business will be adversely impacted by surges of COVID-19 case counts, including those driven by variants of COVID-19, as well as any government-imposed travel restrictions in reaction to COVID-19 outbreaks, which could remain a risk for an extended period of time.

In July 2021, room nights declined about 22% relative to July 2019, which compares to a 13% decline in June 2021 relative to June 2019. The modest sequential worsening of room night declines in July relative to June was primarily driven by booking trends in Europe, where we have recently seen increasing COVID case counts as well as some newly imposed travel and leisure restrictions in the ~~impacts~~region. Given the recent additional uncertainty around COVID cases as a result of ~~higher cancellations and lower accommodation average daily rates ("ADRs") as compared~~the spread of the more transmissible Delta variant, we cannot accurately predict the level of room night declines in the third quarter of 2021 relative to the ~~corresponding period in~~third quarter of 2019. We expect that the decline in gross bookings in the third quarter of 2021 relative to ~~continue~~the third quarter of 2019 will be several percentage points less than the decline in room nights due to ~~see severely reduced new travel~~increases in accommodation ADRs and ~~restaurant reservation~~flight bookings, which benefit gross bookings. We also expect that revenues as ~~compared to 2019 levels for~~a percentage of gross bookings in the ~~foreseeable future, which~~third quarter of 2021 will ~~have a materially adverse impact on our business, financial condition, results~~be about the same as it was in the third quarter of ~~operations and cash flows. Further, given~~2019. In addition, we currently expect that we will experience an operating profit in the ~~volatility in global markets and the financial difficulties faced by many~~third quarter of ~~our travel service provider and restaurant partners, we have increased our provision for~~ ~~expected credit losses~~ ~~on receivables from and cash advances made to our travel service provider and restaurant partners.~~2021.

~~Due to~~The extent of the ~~uncertain and rapidly evolving nature~~effects of ~~current conditions around the world, we are unable to predict accurately the impact that~~ the COVID-19 pandemic ~~will have~~ on our business, ~~going forward. We currently expect, however, that~~results of operations, cash flows and growth prospects is highly uncertain and will ultimately depend on future developments. These include, but are not limited to, the severity, extent and duration of the COVID-19 pandemic, will impact our financial performance for the quarter ended September 30, 2020, less significantly than it impacted the quarter ended June 30, 2020, primarily because we have seen a general improvement in our business since April 2020, as an increasing number of markets and locations, such as Europe, have eased government restrictions, including ~~those related to travel and restaurant activities. However, in certain markets and locations, we have seen a reversal of the improving trends in recent weeks~~ as a result of ~~rising COVID-19 case counts and a resulting implementation of travel restrictions. With the continued spread~~any new variants of COVID-19 ~~in the United States~~ and ~~various other countries, we expect the pandemic and its effects to continue to have a significant adverse impact on our business for the duration of the pandemic, during~~ any resurgences of the pandemic, the global distribution of the vaccines and ~~during~~their efficacy against existing and any future variants of COVID-19, and their impact on the ~~subsequent economic recovery, which could be an extended period of time.~~ travel and restaurant industries and consumer spending more broadly. For more information, see Part II, Item 1A, Risk Factors - "The COVID-19 pandemic has materially adversely affected, and may further adversely impact, our business and financial performance."

In response to the ~~COVID-19 pandemic, we have taken and are taking various actions to address the impact of the pandemic on~~reduction in our ~~business. Among other things, we have:~~

•~~Raised $4.1 billion in debt and negotiated an amendment to our revolving credit facility to provide additional financial flexibility~~

•~~Initiated restructuring activities at our agoda, KAYAK and OpenTable brands that resulted in a reduction of our workforce of approximately 1,700 employees and furloughs of over 150 employees~~

•~~Participated in certain government aid programs, including those that provide employee wage support~~

•~~Suspended general share repurchases~~

•~~Eliminated non-essential~~ business ~~travel~~

•~~Canceled internal company events and offsites~~

•~~Significantly reduced marketing spend worldwide~~

•~~Implemented a general company-wide hiring freeze~~

•~~Sold investments in government debt securities, corporate debt securities and Trip.com Group American Depositary~~

~~Shares ("ADSs")~~

Further, our Chief Executive Officer and the Chief Executive Officers of our brands have voluntarily declined their salaries during the crisis, certain other senior managers have voluntarily reduced their salaries during the crisis and our non-employee Directors have voluntarily waived their cash fees for the rest of 2020. During the second quarter of 2020, we began restructuring activities at our agoda, KAYAK and OpenTable brands. Asvolumes as a result of ~~these restructuring activities, we expect to realize annualized costs savings of approximately $75 million related to personnel-related expenses.~~

~~Since June 30, 2020, we have taken additional actions to reduce our costs and structure our operations at a level reflecting~~ the impact of the COVID-19 pandemic, onduring the year ended December 31, 2020, we took actions at all of our ~~business~~brands to reduce the size of our workforce to optimize efficiency and reduce costs, which we expect will result in annualized cost savings of approximately $370 million in personnel-related expenses. Restructuring expenses of $1 million and $9 million were recorded during the three and six months ended June 30, 2021, respectively, and included in “Restructuring and other exit costs” in the Unaudited Consolidated Statements of Operations. As of June 30, 2021, we estimate that we will record additional restructuring and other exit costs of approximately $10 million, related to lease and contract terminations and employee severance and other termination benefits, in the remainder of 2021, with $4 million recorded thereafter (see Note 14 to our ~~expectations regarding~~Unaudited Consolidated Financial Statements). Our headcount decreased 22% year-over-year as of June 30, 2021, primarily due to the ~~recovery~~restructuring activities and attrition.

Certain governments passed legislation to help businesses during the COVID-19 pandemic through loans, wage subsidies, tax relief or other financial aid. We participated in several of these programs, including the ~~travel industry. For example, on August 4, 2020,~~Netherlands' wage subsidy program and the United Kingdom's job retention scheme. In June 2021, we announced our intention to ~~reduce Booking.com's global workforce by up to approximately 25%. Booking.com is~~voluntarily return assistance received through various government aid programs and, for the three and six months ended June 30, 2021, we recorded expenses of $137 million in the ~~process~~Unaudited Consolidated Statements of ~~consulting with its works councils, employee representatives~~Operations, principally in “Personnel” expense, to reflect the return of such assistance. In June 2021, we repaid $86 million of assistance, recorded a liability of approximately $21 million, as of June 30, 2021, for the amount that we expected to repay during 2021 and ~~other relevant organizations~~wrote off a previously recorded receivable for payments expected to be received for government aid programs where ~~applicable (including in~~we met the ~~Netherlands) regarding the intended reduction in force and related cost reduction and restructuring actions. We expect that business functions most closely tied~~qualifying requirements. As of March 31, 2021, we had a receivable of $28 million for such payments. Subsequent to transaction volumes will be impacted to the greatest extent. At this time, and subject to finalizing our plans following consultation with Booking.com’s works councils, including the Dutch works council, employee representatives and other relevant organizations,June 30, 2021, we ~~estimate that these cost reductions at Booking.com could produce annualized personnel run-rate savings between $250 million to $300~~repaid an additional $19 million. This preliminary estimate may change and will be updated as we finalize our cost reduction plans at Booking.com. We expect to finalize our plans and make relevant announcements to employees on a country-by-country basis, with the first countries starting in September 2020, and expect to completeWhile not all such ~~announcements by the end of 2020.~~funds have been returned yet, we are working with various governments to voluntarily make repayments. See Part II, Item 1A, Risk Factors - "Participation in government stimulus programs may negatively impact our business, operations and/or reputation." In addition, ~~in July 2020, we implemented restructuring actions at priceline,~~certain governments have extended support for the travel and ~~we expect that these actions will result in annual run-rate savings of approximately $6 million.~~tourism industry through special programs whereby discounts are extended to travelers through travel service providers or through travel agents for reservations facilitated by them.

We have also been working with travelers and our travel service provider partners to deal with reservation cancellations and other disruptions arising from the impact of the pandemic. For example, Booking.com committed to allow cancellations of certain non-refundable bookings that were impacted by government travel restrictions and OpenTable has suspended some restaurant subscription fees for the remainder of the year. The impacts of the COVID-19 pandemic are wide-ranging and affect all aspects of our business. As a result, the pandemic has negatively affected our financial results and condition as described throughout this Quarterly Report on Form 10-Q. We anticipate that we will continue to make decisions and take actions to address the impacts of the pandemic on our business, including additional efforts to reduce costs while preserving our ability to offer valuable services to consumers and partners when the industry recovers. The full impact of the pandemic on our business is impossible to predict, and therefore we may recognize additional negative impacts to our operating results and financial condition in future periods as a result of the pandemic.

Prior to the COVID-19 pandemic, we experienced many years of significant growth in our accommodation reservation services. We believe this growth was the result of, among other things, the broader shift of travel purchases from offline to online, the widespread adoption of mobile devices and the growth of travel overall. We also believe this growth was the result of the continued innovation and execution by our teams around the world to increase the number and the variety of accommodations we offer consumers, increase and improve content, build distribution and improve the consumer experience on our online platforms, as well as consistently and effectively marketing our brands through performance and brand marketing efforts. Prior to the COVID-19 pandemic, these year-over-year growth rates generally decelerated due to the size of our

accommodation reservation business and the generally slowing growth rate of the online travel market. As the travel market recovers from the impact of the COVID-19 pandemic, we expect to see higher than pre-COVID-19 pandemic growth rates until we return to the level of travel market demand that we observed prior to the COVID-19 pandemic, after which we expect prior trends to generally resume.

We are a global business, and online travel growth rates vary across the world depending on numerous factors, including local and regional economic conditions, individual disposable income, access to the internet and adoption of e-commerce. Over the last several years, and prior to the COVID-19 pandemic, online travel growth rates had generally slowed in markets such as North America and Europe where online activity was high and consumers had been engaging in e-commerce transactions for many years, while online travel growth rates remained relatively high in markets such as Asia-Pacific where incomes were rising more quickly and the increased availability and use of mobile devices had accelerated the growth of internet usage and travel e-commerce transactions. Over the long term, we expect the broader global economy and online travel

market to recover from the COVID-19 pandemic, and following the recovery of the travel industry to the level of pre-COVID-19 pandemic demand, we would expect online travel growth rates will slow as markets continue to mature. However, we believe that the opportunity to grow our business beyond pre-COVID-19 pandemic levels exists for the markets in which we operate, including in both mature and less mature markets. Further, we believe that this opportunity for growth exists because we ~~believe we~~ provide significant value to travel service providers of all types, regardless of size or geography, due to our global reach and ~~online~~ marketing expertise. For example, we believe that accommodation providers of all sizes, from large hotel chains to small, independent hotels and alternative accommodations such as homes and apartments, benefit from using our services,expertise, which ~~enable~~enables them to reach a broader audience of potential customers.

Historically, our growth has primarily been generated by the worldwide accommodation reservation business of Booking.com, which is our most significant brand, and has been due, in part, to the availability of a large number of properties through Booking.com. Booking.com included approximately ~~2,574,000~~2,385,000 properties on its website at June 30, ~~2020,~~2021, consisting of approximately 432,000 hotels, motels and resorts and approximately 1,953,000 homes, apartments and other unique places to stay, compared to approximately 2,574,000 properties (including approximately 469,000 hotels, motels and resorts and approximately 2,105,000 homes, apartments, and other unique places to ~~stay, compared to approximately 2,376,000 properties (including approximately 438,000 hotels, motels and resorts and approximately 1,938,000 homes, apartments, and other unique places to~~ stay) at June 30, ~~2019.~~2020. Booking.com categorizes properties listed on its website as either (a) hotels, motels and resorts, which groups together more traditional accommodation types (including hostels and inns), or (b) homes, apartments and other unique places to stay, also referred to as alternative accommodations, which encompasses all other types of accommodations, including bed and breakfasts, villas, apart-hotels and beyond.

We intend to continue to improve the accommodation choices available for reservation on our platforms, however, the ~~growth rate of the~~ number of accommodations on our platforms may vary in part as a result of removing accommodations from time to time. ~~We have seen~~At June 30, 2021, we saw a year-over-year ~~increase~~decrease in the number of properties on Booking.com’s website, as compared to June 30, 2020, driven by an elevated number of accommodations removed from the platform due primarily to the properties not providing availability on our ~~platform during the COVID-19 pandemic, and we~~platforms, property closures, or non-payment of invoices. We may see further accommodation removals in the future, ~~due~~however, at June 30, 2021, we saw a sequential increase in the number of properties on Booking.com’s website as compared to ~~increases in property closures or changes in ownership.~~ March 31, 2021. During the second quarter of 2021, we also saw the lowest quarterly number of properties removed from Booking.com’s website since the onset of the COVID-19 pandemic.

Many of the newer accommodations we add to our travel reservation services, especially in highly-penetrated markets, may have fewer rooms or higher credit risk and may appeal to a smaller subset of consumers (e.g., hostels and bed and breakfasts). Because alternative accommodations are often either a single unit or a small collection of independent units, these properties generally represent more limited booking opportunities than hotels, motels and resorts, which generally have more units to rent per property. Further, alternative accommodations in general may be subject to increased seasonality due to local tourism seasons or other factors or may not be available at peak times due to use by the property owners. We may also experience lower profit margins with respect to these properties due to certain additional costs, such as increased customer service costs, related to offering these accommodations on our platforms. As our alternative accommodation business has grown, these different characteristics have negatively impacted our profit margins and we expect this trend to continue. Further, to the extent that these properties represent an increasing percentage of the properties ~~added to~~on our platforms, we expect that our room nights growth rate and property growth rate will continue to diverge over time (since each such property has fewer booking opportunities). As a result of the foregoing, as the percentage of alternative accommodation properties increases, the number of reservations per property will likely continue to ~~decrease. In the second quarter of 2020, we have observed a higher share of our newly-booked room nights to be for stays at our~~decrease since alternative accommodation properties ~~as compared to the first quarter of 2020 and the corresponding period in 2019.~~typically have fewer booking opportunities per property. We believe that continuing to ~~expand~~improve the ~~number and variety~~choices of accommodations available through our services, in particular Booking.com, will help us to continue to grow our accommodation reservation business.

We are constantly innovating to grow our business by, among other things, providing a best-in-class user experience with intuitive, easy-to-use online platforms (i.e., websites and mobile apps) to ensure that we are meeting the needs of online consumers while aiming to exceed their expectations. As part of these ongoing efforts, we have a long-term strategy to build a more integrated offering of multiple elements of travel, which we refer to as the "Connected ~~Trip.~~Trip," and we expect these efforts to increase room night growth and revenue growth over time. Although we expect our efforts to build the Connected Trip ~~may~~will increase revenue growth over time, we may see a negative impact on our operating margins in the near term as we incur the

expenses associated with these investments. Further, to the extent our non-accommodation services (e.g., airline ticket reservation services) grow faster than our accommodation services, whether as part of the Connected Trip or otherwise, our operating margins may be negatively affected if we experience an increasing mix of revenues from lower-margin services.

As part of our strategy to provide more payment options to consumers and travel service providers, increase the number and variety of accommodations available on Booking.com and enable the growth of our in-destination activities businesses, Booking.com is increasingly processing transactions on a merchant basis, where it facilitates payments from travelers for the services provided. This allows Booking.com to process transactions for travel service providers and to increase its ability to offer secure and flexible transaction terms to consumers, such as the form and timing of payment. We believe that adding these types of service offerings will benefit consumers and travel service providers, as well as our gross bookings, room night and earnings growth rates. However, this results in additional expenses for personnel, payment processing, customer chargebacks (including those related to fraud) and other expenses related to these transactions, which are recorded in

~~"Personnel"~~ "Personnel" and "Sales and other expenses" in our Unaudited Consolidated Statements of Operations, as well as associated incremental revenues in the form of credit card rebates, for example, which are recorded in "Merchant revenues." To the extent more of our business is generated on a merchant basis, we will incur a greater level of these merchant-related expenses, which would negatively impact our operating margins despite increases in associated incremental revenues. Components of revenues and expenses related to our merchant business may be recognized in different periods. These timing factors could impact our operating margins as well as the relationship between our gross bookings and revenues in a particular period, especially as our merchant business increases as a percentage of our overall business.

We compete globally with both online and traditional providers of travel and restaurant reservation and related services. The markets for the services we offer are intensely competitive, constantly evolving and subject to rapid change, and current and new competitors can launch new services at relatively low cost. Some of our current and potential competitors, such as Google, Apple, Alibaba, Tencent, Amazon and Facebook, have significantly more customers or users, consumer data and financial and other resources than we do, and they may be able to leverage other aspects of their businesses (e.g., search or mobile device businesses) to enable them to compete more effectively with us. For example, Google has entered various aspects of the online travel market and has grown rapidly in this area, including by offering a flight meta-search product (Google Flights), a hotel meta-search product (Google Hotel Ads), a vacation rental meta-search product, its "Book on Google" reservation functionality, ~~and integrating its hotel and restaurant meta-search products into its Google Maps app, as well as~~ Google Travel, a planning tool ~~which~~that aggregates its flight, hotel and packages products in one ~~website.~~website and by integrating its hotel meta-search products and restaurant information and reservation products into its Google Maps app. Moreover, as the economy and the travel industry recover from the impact of the COVID-19 pandemic, the structure of the travel industry could change in unexpected ways, which could advantage or disadvantage us and benefit certain of our existing competitors or new entrants. As a result, our historical strengths may not provide the competitive advantages that they did prior to the pandemic. If we are unable to successfully adapt to any changes in how the travel industry operates or to changes in the ways in which consumers purchase travel services, our ability to compete, and therefore our business and results of operations, would be adversely affected.

Our markets are also subject to rapidly changing conditions, including technological developments, consumer behavior changes, regulatory changes and travel service provider consolidation. We expect these trends to continue. For example, we have experienced a significant shift of both direct and indirect business to mobile platforms and our advertising partners are also seeing a rapid shift of traffic to mobile platforms. In addition, the revenue earned on a mobile transaction may be less than a typical desktop transaction due to different consumer purchasing patterns. For example, accommodation reservations made on a mobile device typically are for shorter lengths of stay, have lower accommodation ~~ADRs~~average daily rates ("ADRs") and are not made as far in advance. ~~In the second quarter of 2020, we~~We have observed a higher share of our ~~newly-booked~~ room nights made on a mobile device in the first and second quarters of 2021, as compared to the first ~~quarter~~and second quarters of ~~2020 and the corresponding period in~~ 2019. For more detail regarding the competitive trends and risks we face, see Part II, Item 1A, Risk Factors - "Intense competition could reduce our market share and harm our financial performance." and "Consumer adoption and use of mobile devices creates challenges and may enable device companies such as Google and Apple to compete directly with us." and "We may not be able to keep up with rapid technological or other market changes."

We ~~have~~ experienced a meaningful decline in constant-currency accommodation ADRs ~~since the outbreak of~~in 2020 due to the COVID-19 ~~pandemic~~pandemic. However, in the second quarter of 2021 our global ADRs increased, as compared to the second quarter of 2019, due in part to changes in the geographical mix of our business driven primarily by stronger room night performance in North America, which is a high ADR region, and itweaker room night performance in Asia, which is ~~uncertain how long~~a low ADR region. In addition, our global ADRs in the ~~COVID-19 pandemic will impact our ADRs.~~second quarter of 2021, as compared to the second quarter of 2019, benefited from higher ADRs in North America and Europe. The higher ADRs in North America were driven by high levels of demand for beach oriented leisure destinations. The higher ADRs in Europe were driven by a higher mix of bookings for the summer travel period in Western Europe, which are high ADR bookings. Prior to the COVID-19 outbreak, we observed a trend of declining constant-currency accommodation ~~ADRs, which we expected to continue, though the rate of decline may fluctuate and there may be periods of stable or increasing~~ ADRs. We believe the trend of declining ADRs, observed prior to the outbreak, was partially driven by the negative impact of the changing geographical mix of our business (e.g., lower ADR regions like Asia-Pacific ~~are~~were generally growing faster than higher ADR regions like Western ~~Europe)~~Europe and North America) as well as pricing pressures within local markets from time to time which resulted from competitive conditions, weakening economic conditions or changes in travel patterns. These declining ADR trends have resulted in and ~~may continue to~~could in the future result in our gross bookings ~~growing at a lower rate of growth~~declining more than our ~~accommodation~~ room nights. As the travel market recovers from the impact of the COVID-19 pandemic, we expect travel industry ADRs generally to increase and, as a result, we expect our ADRs similarly to increase during the recovery, however, it is uncertain whether industry ADRs will improve at the same pace as travel demand. In addition, we expect the ADR trends we observed before the COVID-19 pandemic will generally resume after the recovery, which would negatively pressure our ADRs, but there could be periods of stable or increasing ADRs.

We have established widely used and recognized e-commerce brands through marketing and promotional campaigns. Historically, our marketing expenses ~~have~~ increased significantly, however, we experienced more moderate growth rates in recent years, and since the COVID-19 pandemic, our marketing expenses have declined significantly. Our marketing expense is comprised of performance marketing and brand marketing expenses. Our performance marketing expense, which represents a substantial majority of our marketing expense, is primarily related to the use of online search engines (primarily Google), meta-search and travel research services and affiliate marketing to generate traffic to our ~~websites.~~platforms. Our brand marketing expense is primarily related to costs associated with producing and airing television advertising, online video advertising (for example, on YouTube and Facebook), online display advertising and other brand marketing. Total marketing expenses were $1.0 billion, $0.2 billion, and ~~$1.1~~$1.4 billion for the three ~~and six~~ months ended June 30, 2021, 2020, and 2019, respectively, ~~compared to~~and $1.4 billion, $1.1 billion, and $2.6 billion for the ~~three and~~ six months ended June 30, 2021, 2020, and 2019, respectively. We expect that our marketing expenses in 2021 will remain ~~significantly~~ below 2019 levels, ~~for the remainder of 2020.~~but higher than 2020 levels.

Marketing efficiency, expressed as marketing expense as a percentage of total revenues, is impacted by a number of factors that are subject to variability and that are, in some cases, outside of our control, including ADRs, costs per click, cancellation rates, foreign currency exchange rates, our ability to convert paid traffic to booking customers, the timing difference between when revenue is recognized and when marketing expense is recorded, the timing and effectiveness of our brand marketing campaigns and the extent to which consumers come directly to our platforms for bookings. For example, competition for desired rankings in search results and/or a decline in ad clicks by consumers could increase our costs per click and reduce our marketing efficiency. Changes by Google or any of our other search or meta-search partners in how it presents travel search results, including, if applicable, by placing its own offerings at or near the top of search results, or the manner in which it conducts the auction for placement among search results may be competitively disadvantageous to us and may impact our ability to efficiently generate traffic to our websites.

We have observed a long-term trend of decreasing performance marketing returns on investment ("ROIs")~~. In~~, however, in recent years, we observed periods of stable or increasing ~~ROIs, however, for~~ROIs. During the first several months ~~during~~of the COVID-19 pandemic, we experienced large year-over-year declines in ROIs driven by a significant increase in cancellation rates. ~~More recently starting in June 2020,~~However, we have observed ~~year-over-year~~ increases in ROIs in ~~part due~~the first and second quarters of 2021 relative to the first and second quarters of 2019 and 2020. Although we have seen recent improvement in ~~cancellation rates since April 2020.~~ROI trends, we expect volatility in our ROIs for the duration of the pandemic. When evaluating our performance marketing spend, we typically consider several factors for each channel, such as the customer experience on the advertising platform, the incrementality of the traffic we receive and the anticipated repeat rate from a particular platform, as well as other factors. ~~However, with~~Given the ~~significant decrease in demand due to~~elevated cancellation rates during the COVID-19 pandemic, our performance marketing spend is highly influenced by expected cancellation rates in addition to the other factors listed above. The amount of business we obtain through each performance marketing channel is impacted by numerous factors, including the level of consumer demand for travel, bidding decisions by us and our competitors (including decisions to optimize performance marketing ROIs) and the marketing efforts and success of those channels to attract consumers and generate demand. See Part II, Item 1A, Risk Factors - "We rely on marketing channels to generate a significant amount of traffic to our platforms and grow our business." and "Our business could be negatively affected by changes in online search and meta-search algorithms and dynamics or traffic-generating arrangements."

In recent years, we experienced significant increases in our cancellation rates, which negatively affected our marketing efficiency and results of operations. However, from the third quarter of 2018 until the fourth quarter of 2019, our cancellation rates generally decreased, which benefited our marketing efficiency and results of operations. Since the COVID-19 pandemic we have experienced unprecedented increases in cancellation rates, which negatively impacted our marketing efficiency and results of operations. For example, increased cancellations, especially early in the pandemic, have resulted in increased customer service costs, as well as higher than normal cash outlays to refund consumers for prepaid ~~reservations, however,~~reservations. However, in the second and third quarters of 2020, we ~~have seen recent improvements~~saw a steady improvement in ~~these trends as the~~ cancellation ~~rate has been trending~~rates, which trended towards ~~the more normal~~ levels that we observed ~~prior to~~in 2019. In the ~~COVID-19 pandemic. While~~fourth quarter of 2020, we saw ana reversal of the improving cancellation rate trend. In the first quarter of 2021, we again started to see improvements in cancellation rate trends. The improvement in cancellation rate trends continued in ~~May and June 2020 as compared~~the second quarter of 2021, with cancellation rates in line with the second quarter of 2019. We expect to ~~March and April 2020, it is uncertain whether this trend will~~ continue asto see volatility in cancellation rates due to any ~~resurgence~~resurgences of the pandemic leading to reinstituted or additional travel restrictions, ~~shelter in place~~shelter-in-place rules and reduced willingness to ~~travel will likely result~~travel. Further, in ~~increased cancellation rates. Further, we have observed~~the first and second quarters of 2021, a higher share of our ~~newly-booked~~ room nights ~~to be made~~booked with a flexible cancellation ~~policy in the second quarter of 2020,~~policies, as compared to the first ~~quarter~~and second quarters of ~~2020~~2019 and ~~the corresponding period in 2019,~~2020, which could result in higher than normal cancellation rates in future quarters.

Perceived or actual adverse economic conditions, including slow, slowing or negative economic growth, high or rising unemployment rates, inflation and weakening currencies, and concerns over government responses such as higher taxes or tariffs and reduced government spending have impaired and could, in the future, impair consumer spending and adversely affect travel demand. We expect the lingering concerns of consumers around the safety of traveling as well as reduced discretionary incomes could negatively impact leisure travel ~~demand.~~demand for an extended period of time. Further, political uncertainty, conditions or events, such as the variety of measures implemented by many governments around the world to reduce the spread of COVID-19, including travel restrictions and bans, instructions to residents to practice social distancing, curfews, quarantine advisories, including quarantine restrictions after travel in certain locations, shelter-in-place orders, ~~and~~ required closures of non-essential businesses and additional restrictions on businesses as part of reopening plans can also negatively affect consumer spending and adversely affect travel demand.

At times, we have experienced volatility in transaction growth rates, increased cancellation rates and weaker trends in ADRs across many regions of the world, particularly in those countries that appear to be most affected by economic and political uncertainties, which we believe are due at least in part to these macro-economic conditions and concerns. For more detail, see Part II, Item 1A, Risk Factors - "The COVID-19 pandemic has materially adversely affected, and may further adversely impact, our business and financial ~~performance"~~performance." and "Declines or disruptions in the travel industry could adversely affect our business and financial performance."

These and other macro-economic uncertainties, such as geopolitical tensions and differing central bank monetary policies, have led to periods of significant volatility in the exchange rates between the U.S. Dollar and the Euro, the British Pound Sterling and other currencies. Significant fluctuations in foreign currency exchange rates, stock markets and oil prices can also impact consumer travel behavior.

As noted earlier, our international business represents a substantial majority of our financial results. Therefore, because we report our results in U.S. Dollars, we face exposure to movements in foreign currency exchange rates as the financial results and the financial condition of our international businesses are translated from local currency (principally Euros and British Pounds Sterling) into U.S. Dollars. As a result, both the absolute amounts of and percentage changes in our foreign-currency-denominated net assets, gross bookings, revenues, operating expenses and net income as expressed in U.S. Dollars are affected by foreign currency exchange rate changes. ~~However,~~For example, total revenues from our international operations increased by 7% for the ~~three and~~six months ended June 30, 2021 as compared to the six months ended June 30, 2020, ~~movements~~but, without the impact of changes in foreign currency exchange rates, ~~had little or no impact~~increased year-over-year on ~~our performance metrics and financial results.~~a constant-currency basis by approximately 3%. Since our expenses are generally denominated in foreign currencies on a basis similar to our revenues, our operating margins have not been significantly impacted by currency fluctuations. Historically, the aggregate principal value of our Euro-denominated long-term debt and accrued interest thereon provided a hedge against the impact of foreign currency exchange rate fluctuations on the net assets of one of our Euro functional currency subsidiaries. Beginning in the second quarter of 2019, we have only designatedWe designate certain portions of the aggregate principal value of our Euro-denominated debt as a hedge ~~and as a result we have recognized~~of the foreign currency ~~transaction gains or losses. The foreign~~exposure of the net investment in certain Euro functional currency subsidiaries. Foreign currency transaction gains or losses on the Euro-denominated debt that is not designated as a hedging instrument for accounting purposes are recognized in ~~"Foreign currency transactions and other"~~"Other income (expense), net" in the Unaudited Consolidated ~~Statement~~Statements of Operations (see ~~Note~~Notes 6 and 9 to our Unaudited Consolidated Financial Statements). Such foreign currency transaction gains or losses are dependent on the amount of net assets of the Euro functional currency subsidiaries, the amount of the Euro-denominated debt that is designated as a hedge and fluctuations in foreign currency exchange rates. For more information, see Part II, Item 1A, Risk Factors - "We are exposed to fluctuations in foreign currency exchange rates."

We generally enter into derivative instruments to minimize the impact of foreign currency exchange rate fluctuations on our transactional balances denominated in currencies other than the functional currency. In periods prior to the second quarter of 2020, we also entered into derivative instruments to minimize the impact of short-term foreign currency exchange rate fluctuations on the translation of our consolidated operating results into U.S. Dollars. However, these instruments were short-term in nature and not designed to hedge against currency fluctuations that could impact growth rates for our gross bookings or revenues. In the second quarter of 2020, we did not enter into such derivative instruments as the impact of the COVID-19 pandemic on our operating results were highly uncertain. We will continue to evaluate the use of derivative instruments in the future. ~~(See~~See Note 6 to our Unaudited Consolidated Financial Statements for additional information related to our derivative ~~contracts).~~contracts.

Many taxing authorities are increasingly focused on ways to increase tax revenues and have targeted large multinational technology companies in these efforts. As a result, many countries and some U.S. states have implemented or are

considering the adoption of a digital services tax or similar tax that imposes a tax on revenue earned from digital advertisements ~~and~~or the use of online platforms, even when there is no physical presence in the jurisdiction. Currently, rates for this tax range from 2%1.5% to ~~7.5%~~10% of revenue deemed generated in the jurisdiction. The digital services taxes currently in effect, which we record in "General and administrative" expense in the Unaudited Consolidated Statements of Operations, have negatively impacted our results of operations and if many other ~~countries~~jurisdictions pass similar legislation, the collective impact of all of these measures could have a materially adverse impact on our results of operations and cash flows. While the Organisation for Economic Co-operation and Development’s recently announced Inclusive Framework could impact digital services taxes, the final form of this Framework is not yet agreed and the details of its impact on digital services taxes globally is not yet known. For more information, see Part II, Item 1A, Risk Factors - "We may have exposure to additional tax liabilities."

Many national governments have conducted or are conducting investigations into competitive practices within the online travel industry, and we may be involved or affected by such investigations and their results. Some countries have adopted or proposed legislation that could also affect business practices within the online travel industry. For example, France, Italy, Belgium and Austria have passed legislation prohibiting parity contract clauses in their entirety. Also, a number of governments are investigating or conducting information-gathering exercises with respect to compliance by ~~OTCs~~online travel companies ("OTCs") with consumer protection laws, including practices related to the display of search results and search ranking algorithms, claims regarding discounts, disclosure of charges and availability, and similar messaging. In December 2020, the European Commission proposed the Digital Markets Act and the Digital Services Act, which are expected to give regulators more instruments to investigate digital businesses and impose new rules on certain digital platforms if they are determined to be "gatekeepers." The proposed legislation is not final and it is not known what the laws will look like in their final forms. If the regulators were to determine that we are a gatekeeper under the proposed legislation, we could be subject to additional rules and regulations not applicable to all our competitors and our business could be harmed. For more information on these ~~investigations~~matters and their potential effects on our business, see Note 13 to our Unaudited Consolidated Financial Statements and Part II, Item 1A, Risk Factors - "Our business is subject to various competition/anti-trust, consumer protection and online commerce laws, rules and regulations around the world, and as the size of our business grows, scrutiny of our business by

legislators and regulators in these areas may intensify." If there is an adverse outcome of the ongoing litigation with the Netherlands Pension Fund for the Travel Industry discussed in Note 13 to the Unaudited Consolidated Financial Statements, we could incur additional ongoing expenses related to employee benefits. There could also be other employee benefit related expenses that we may become subject to in the Netherlands and/or other locations. Such increased employee benefit costs could be significant and would negatively impact our results of operations and cash flows. In addition to the price parity and consumer protection investigations and the ongoing pension matter, from time to time national competition authorities, other governmental agencies, trade associations and private parties take legal actions, including commencing legal proceedings, that may affect our operations. In general, increased regulatory focus on online businesses, including online travel businesses like ours, could result in increased compliance costs or otherwise adversely affect our business.

Seasonality and Other Timing Factors

In recent years prior to 2020, the majority of our gross bookings have been generated in the first half of the year, as consumers planned and reserved their spring and summer vacations in Europe and North America. However, we would generally recognize revenue from these bookings when the travel begins (at "check-in"), which can be in a quarter other than when the associated reservations are booked. In contrast, we expensed the substantial majority of our marketing activities as the expense is incurred, which ~~in the case of marketing in particular,~~ is typically in the quarter in which associated reservations were booked. As a result of this timing difference between when we recorded marketing expense and when we recognized associated revenue, we have experienced our highest levels of profitability in the third quarter of the year, which is when we experienced the highest levels of accommodation check-ins for the year for our European and North American ~~businesses.~~markets. The first quarter of the year was typically ~~our~~the quarter in which we recognized the lowest amount of revenue as well as the lowest level of profitability and highest level of volatility in earnings growth rates due to these seasonal timing factors. ~~For our Asia-Pacific business,~~The COVID-19 pandemic impacted seasonality in 2020; for example, we ~~experienced~~witnessed a higher share of travel being booked during the ~~highest level~~second and third quarters as well as a higher share of ~~accommodation~~ check-ins during the third quarter than in ~~the fourth quarter. As the relative growth rates for our businesses fluctuate, the quarterly distribution of our operating results may vary.~~prior years. We cannot currently predict travel patterns given the COVID-19 pandemic, and we may not experience typical seasonality ~~impacts~~effects on our business in ~~2020.~~2021.

For several years, we experienced an expansion of the booking window (the average time between the ~~making~~booking of a travel reservation and when the ~~travel)~~travel begins), which impacts the relationship between our gross bookings (recognized at the time of booking) and our revenues (recognized at the time of check-in). However, we saw a contraction of the booking window throughout 2018 and 2019. Due to the impact of the COVID-19 pandemic on our booking trends, we saw an initial expansion in the booking window in the second quarter of 2020 versus the comparable prior-year period as an increased percentage of ~~newly-booked room nights~~bookings were made for travel occurring ~~further~~ in the ~~future. More recently~~third quarter of 2020. However, in ~~June,~~the third and fourth quarters of 2020, we saw a significant contraction of the booking window versus the comparable prior-year period as an increased percentage of bookings were made for ~~newly-booked room nights did not expand year-over-year~~travel that was to occur close to the time of booking. In the first and ~~is now more in line with~~second quarters of 2021 we

continued to see a contraction of the booking window ~~we observed~~as compared to the first and second quarters of 2019 and 2020. The contraction in ~~June~~the second quarter of 2021 as compared to the second quarter of 2019 was less significant than the contraction in the first quarter of 2021 as compared to the first quarter of 2019. We expect that the length of the booking window will be volatile and difficult to predict throughout the duration of the COVID-19 pandemic, and potentially for some time thereafter. Future changes in the length of the booking window will affect the degree to which our gross bookings and revenues occur in the same period and, as a result, whether our gross bookings growth rates and revenue growth rates converge or diverge.

In addition, the date on which certain holidays (e.g., Easter and Ramadan) fall can have an impact on our quarterly ~~results. For example, in 2019, Easter fell on April 21~~results and Easter-related travel began in the second quarter, when the associated revenue was recognized. By comparison, in 2018, Easter was on April 1 and a meaningful amount of Easter-related travel began in the week leading upour quarterly year-over-year growth rates. Due to the ~~holiday with the associated revenue being recognized~~similar timing of Easter in ~~the first quarter of 2018. As a result of the shift in Easter timing relative to 2018, our first quarter 2019 year-over-year growth rates in revenue, operating income~~April 2021 and ~~operating margins were negatively impacted and our second quarter 2019 year-over-year growth rates were positively impacted. In~~April 2020, Easter fell on April 12, in the second quarter as it did in 2019, and as a result we did not experience a meaningful impact to our year-over-year growth rates in 2020 from the Easter holiday. Further, due to the significant reduction in travel demand related to the COVID-19 pandemic, we do not expect the timing of the Easter holiday todid not have a meaningful impact on our year-over-year growth rates in ~~2021. The timing~~the first and second quarters of ~~other holidays such as Ramadan can also impact our quarterly year-over-year growth rates.~~2021.

The impact of seasonality can be exaggerated in the short term by the gross bookings growth rate of the business. For example, in periods where our gross bookings growth rate substantially decelerates, our operating margins typically benefit from relatively less variable marketing expense. In addition, revenue growth is typically less impacted by decelerating gross bookings growth in the near term due to the benefit of revenue related to reservations booked in previous quarters, but any such deceleration would negatively impact revenue growth in subsequent periods. Conversely, in periods where our gross bookings growth rate accelerates, our operating margins are typically negatively impacted by relatively more variable marketing expense. In addition, revenue growth is typically less impacted by accelerating gross bookings growth in the near term, but any such acceleration would positively impact revenue growth in subsequent periods as a portion of the revenue recognized from such gross bookings will occur in future quarters. As the travel market recovers from the impact of the COVID-19 pandemic, we expect to see higher than pre-COVID-19 pandemic gross bookings growth rates, which will likely result in periods where our operating margins are negatively impacted due to the timing difference of when marketing expense is recorded and when revenue is recognized.

Other Factors

We believe that our future success depends in large part on our ability to continue to profitably grow our brands worldwide, and, over time, to offer other travel and travel-related services. Factors beyond our control, such as oil prices, stock market volatility, terrorist attacks, unusual or extreme weather or natural disasters such as earthquakes, hurricanes, tsunamis, floods, fires, droughts and volcanic eruptions, travel-related health concerns including pandemics and epidemics such as

COVID-19 and other coronaviruses, Ebola and Zika, political instability, changes in economic conditions, wars and regional hostilities, imposition of taxes, tariffs or surcharges by regulatory authorities, changes in trade policies or trade disputes, changes in immigration policies or travel-related accidents or increased focus on the environmental impact of travel, can disrupt travel, limit the ability or willingness of travelers to visit certain locations or otherwise result in declines in travel demand. These kinds of events have negatively affected our business and results of operations in the past and may do so again in the future. Because these events or concerns, and the full impact of their effects, are largely unpredictable, they can dramatically and suddenly affect travel behavior by consumers, and therefore demand for our services and our relationships with travel service providers and other partners, any of which can adversely affect our business and results of operations. See Part II, Item 1A, Risk Factors - "The COVID-19 pandemic has materially adversely affected, and may further adversely impact, our business and financial ~~performance"~~performance." and "Declines or disruptions in the travel industry could adversely affect our business and financial performance."

The extent of the effects of the COVID-19 pandemic on our business, results of operations, cash flows and growth prospects is highly uncertain and will ultimately depend on future developments. ~~We expect~~While we have seen signs of a recovery in travel demand in certain parts of the ~~pandemic~~world including the United States and ~~its effects to~~Europe, we continue to ~~have a significant adverse impact on~~expect that our business ~~for the duration~~will be adversely impacted by surges of ~~the pandemic and during the subsequent economic recovery,~~COVID-19 case counts, including those driven by variants of COVID-19, as well as any government-imposed travel restrictions in reaction to COVID-19 outbreaks, which could beremain a risk for an extended period of time. Over the ~~long-term,~~long term, we intend to continue to invest in marketing and promotion, technology and personnel within parameters consistent with attempts to improve long-term operating results, even if those expenditures create pressure on operating margins. In recent years, we have experienced pressure on operating margins as we invested in initiatives to drive future growth. We also intend to broaden the scope of our business, and to that end, we explore strategic alternatives from time to time in the form of, among other things, acquisitions. We believe competitive pressure to innovate will encompass a wider range of services and technologies, including services and technologies that may be outside of our historical core business, and our ability to keep pace may slow. Potential competitors, such as emerging start-ups, may be able to innovate and focus on developing a particularly new product or service faster than we can or may foresee consumer need for new services or technologies before us. Some of our larger competitors or potential competitors have more resources or more established or diversified relationships with consumers than we do, and they could use these advantages in ways that could affect our competitive position, including by making acquisitions, entering or investing in travel reservation businesses, investing in

research and development, and competing aggressively for highly-skilled employees. For example, because consumers often utilize other online services more frequently than online travel services, a competitor or potential competitor that has established other, more frequent online interactions with consumers may be able to more easily or cost-effectively acquire customers for its online travel services than we can. Our goal is to grow revenue and achieve healthy operating margins in an effort to maintain profitability. The uncertain and highly competitive environment in which we operate makes the prediction of future results of operations difficult, and accordingly, we may not be able to return to the levels of revenue growth and profitability we experienced ~~before~~prior to the COVID-19 pandemic.

A variety of factors has made and may continue to make the attraction and retention of well-qualified employees more difficult. The competition for talent in our industry has intensified, including among established technology companies and startups. There is also competition for technology talent from companies that are transitioning to digital, with whom we did not historically compete for talent. The competition for talent is exacerbated by an increased willingness of certain companies to offer flexible and remote working policies, which expands the pool of candidates from which our competitors may attract talent. This could continue in the future due to other technology companies recruiting and hiring our employees, an actual or perceived slower pace of recovery of the travel industry as a result of the COVID-19 pandemic than other industries, and other factors beyond our control. If we do not succeed in attracting well-qualified employees, our business, our ability to grow and innovate, competitive position, reputation and results of operations would be adversely affected. The competition for talented employees has in the past and may in the future increase our personnel expenses for the acquisition and retention of talent, which may adversely affect our results of operations. We are unable to predict if there will be any significant and continuing impact on our workforce as a result of the COVID-19 pandemic. See Part II, Item 1A, Risk Factors - “We rely on the performance of highly skilled employees; and, if we are unable to retain or motivate key employees or attract, retain and motivate well-qualified employees, our business would be harmed.”

Critical Accounting Policies and Estimates

Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our Unaudited Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). Certain of our accounting estimates are particularly important to our financial position and results of operations and require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Our management uses its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. We evaluate our estimates on an ongoing basis. Estimates are based on, among other things, historical experience, terms of existing contracts, our observance of trends in the travel industry and on various other assumptions that we believe to be reasonable under the circumstances. Our actual results may differ from these estimates under different assumptions or conditions. For a complete discussion of our critical accounting policies, see "Critical Accounting Policies and Estimates" section of the Management's Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the year ended December 31, 2020.

Valuation of Goodwill ~~and Other Long-lived Assets~~

A substantial portion of our ~~intangible assets and~~ goodwill relates to the acquisitions of OpenTable and KAYAK.

We review long-lived assets whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The assessment of possible impairment is based upon the ability to recover the carrying value of the assets from the estimated undiscounted future net cash flows, before interest and taxes, of the related asset group. Due to the significant and negative financial impact of the COVID-19 pandemic, at March 31, 2020, we performed the recoverability test of our long-lived assets and concluded there was no impairment. No additional impairment indicators were identified as of June 30, 2020.

We test goodwill for impairment ~~annually~~on an annual basis and ~~whenever~~between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We test goodwill at a reporting unit level.

Our annual goodwill ~~impairments~~impairment tests are performed as of September 30.

Due to the significant and negative financial impact of the COVID-19 pandemic (see Note 1 to our Unaudited Consolidated Financial Statements),we performed an interim period goodwill impairment test at March 31, ~~2020. Under the current goodwill impairment standard adopted in the first quarter of~~ 2020 a goodwill impairment loss is measured at the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill (see Note 1 to our Unaudited Consolidated Financial Statements). No additional impairment indicators were identified as of June 30, 2020.

~~As of March 31, 2020, the estimated fair value of each of our reporting units, except the OpenTable~~ and ~~KAYAK reporting unit, substantially exceeded its respective carrying value. For OpenTable and KAYAK, we~~ recognized a goodwill impairment charge of $489 million related to the OpenTable and KAYAK reporting unit for the three months ended March 31, 2020, which is not ~~tax-deductible, resulting in an adjusted carrying value~~tax-deductible. As of ~~goodwill for OpenTable and KAYAK of $1.5 billion at March 31, 2020. The~~September 30, 2020, we performed our annual goodwill impairment ~~was primarily driven by~~test and recognized a ~~significant reduction in~~goodwill impairment charge of $573 million for the ~~forecasted near-term cash flows~~same reporting unit for the three months ended September 30, 2020, which is not tax-deductible. No additional impairment indicators were identified as of ~~OpenTable and KAYAK as well as the significant decline in comparable companies' market values as a result of the COVID-19 pandemic.~~

The estimated fair value of OpenTable and KAYAK was determined using a combination of standard valuation techniques, including an income approach (discounted cash flows) and a market approach (applying the recent decline in enterprise values of comparable publicly-traded companies to the recently calculated fair value for OpenTable and KAYAK as well as applying comparable company multiples).June 30, 2021.

~~The income approach estimates fair value utilizing long-term growth rates and discount rates applied to the cash flow projection. In the cash flow projection, we assumed that OpenTable and KAYAK will~~ ~~experience~~ a significant decline in near-term cash flows with a recovery to 2019 levels of financial performance occurring in 2023. The shape and timing of the recovery is a key assumption in our fair value calculation (both in the income and market approaches), however, it is highly uncertain whether the actual recovery will match the trajectory or magnitude of our assumptions. If the timing of recovery to 2019 levels of financial performance were to occur in 2022 or 2024, the impact to the estimated fair value, at March 31, 2020, ranges from an increase of over $230 million to a decrease of over $410 million.

The estimation of fair value of the OpenTable and KAYAK reporting unit reflects numerous assumptions that are subject to various risks and uncertainties, including key assumptions regarding OpenTable and KAYAK’s expected growth rates and operating margin, expected length and severity of the impact from the COVID-19 pandemic, ~~and~~ the shape and timing of the subsequent recovery and the competitive environment, as well as other key assumptions with respect to matters outside of our control, such as discount rates and market comparables. It requires significant judgments and estimates and actual results could be materially different than the judgments and estimates used to estimate fair value. Future events and changing market conditions may lead us to re-evaluate the assumptions ~~reflected in~~used to estimate the ~~current forecast disclosed above,~~fair value of the OpenTable and KAYAK reporting

unit, particularly the assumptions related to the length and severity of the COVID-19 pandemic and the shape and timing of the subsequent recovery, which may result in a need to recognize an additional goodwill impairment charge that could have a material adverse effect on our results of operations.

Valuation of Investments in Private Companies

See Note 5 to our Unaudited Consolidated Financial Statements for additional information related to the investments in private companies. The fair value of these investments are measured using unobservable inputs when little or no market data is available ("Level 3 inputs"). See Note 6 to our Unaudited Consolidated Financial Statements for additional information.

Our investments measured using Level 3 inputs primarily consist of preferred stock investments in privately-held companies that are classified as either debt securities or equity securities without readily determinable fair values. Fair values of privately held securities are estimated using a variety of valuation methodologies, including both market and income approaches. We have used valuation techniques appropriate for the type of investment and the information available about the investee as of the valuation date to determine fair value. Recent financing transactions in the investee, such as new investments in preferred stock, are generally considered the best indication of the enterprise value and therefore used as a basis to estimate fair value. As applicable, we also consider publicly disclosed information for certain merger transactions (not yet consummated), including those involving special purpose acquisition companies. However, based on a number of factors, such as the proximity in timing to the valuation date or the volume or other terms of these financing transactions, we may also use other valuation techniques to supplement this data, including the income approach. In addition, an option-pricing model (“OPM”) is utilized to allocate value to the various classes of securities of the investee, including the class owned by us. In certain situations, the current value method ("CVM") is utilized to allocate value to the various classes of equity based on their as-converted values. The ~~model includes~~OPM and CVM include assumptions around the investees’ expected time to liquidity and volatility.

In April 2021, Grab announced its intention to pursue a public listing of its shares in the U.S. through a merger with Altimeter Growth Corp. (“Altimeter”) (the "Grab Transaction") (see Note 5 to our Unaudited Consolidated Financial Statements). Our ~~investments~~investment in ~~private companies accounted~~Grab, which is classified as a debt security for ~~as debt securities~~accounting purposes, had ~~an aggregate estimated fair value of $250 million at June 30, 2020, which includes the Grab investment with~~ an estimated fair value of $326 million and $200 ~~million. We~~million at June 30, 2021 and December 31, 2020, respectively. At June 30, 2021, we measured ~~these investments with a "Level 3" valuation~~this investment using Level 3 inputs and management's estimates that incorporate current market participant expectations of future cash flows ~~considered~~ alongside ~~recent financing transactions of~~ the ~~investees~~Grab Transaction value and other relevant information.

We performed an impairment analysis on the investment in Didi Chuxing at March 31, 2020 considering the impact of the COVID-19 pandemic, which resulted in an adjusted carrying value of $400 million at March 31, 2020 and June 30, 2020. No additional impairment indicators were identified as of June 30, 2020. As discussed below, we used unobservable inputs in order to determine fair value. We used an income approach in estimatingTo estimate the fair value of ~~Didi Chuxing.~~Grab, we used a relative weighting of 60% market approach using the Grab Transaction value and 40% income approach. The market approach uses the Grab Transaction value and an estimated discount for the lack of marketability. The key unobservable inputs used include the volatility (65%) and an estimated time to liquidity of six months. The income approach estimates value based on the expectation of future cash flows that a company will generate. These future cash flows are discounted to their present values using a discount rate based on a company’s ~~weighted- average~~weighted-average cost of capital, and is adjusted to reflect the risks inherent in its cash flows. The key unobservable inputs and ranges used include the ~~weighted average~~weighted-average cost of capital ~~(12%-14%~~(12.0%-14.5%), terminal ~~Earnings~~earnings before ~~income~~interest, taxes, depreciation and amortization (“EBITDA”) ~~Multiple (13x-15x)~~multiple (12x-14x), volatility (60%-70%) and an estimated time to liquidity of ~~4 years.~~ one year. Significant changes in any of these inputs in isolation would ~~have resulted~~result in significantly different fair value measurements. Generally, a change in the assumption used for terminal EBITDA multiples would result in a directionally similar change in the fair value and a change in the assumption used for ~~weighted average~~weighted-average cost of capital or volatility would result in a directionally opposite change in the fair value.

The determination of the fair ~~values~~value of ~~investments, where we are a minority shareholder and have access to limited information from~~Grab, inclusive of the ~~investee,~~consideration of the Grab Transaction value, reflects numerous assumptions that are subject to various risks and uncertainties, including ~~key assumptions regarding~~ the ~~investee’s expected growth rates and operating margin, expected length and severity~~timing of when the transaction will be completed. The Grab Transaction is subject to certain closing conditions, including the effectiveness of the ~~impact from~~relevant registration statement filed with the ~~COVID-19 pandemic~~SEC and the ~~shape~~approval of Altimeter and ~~timing of the subsequent recovery, as well as other key assumptions with respect to matters outside of~~Grab shareholders.

For our ~~control, such as discount rates and market comparables. It requires significant judgments and estimates and actual results could be materially different than those judgments and estimates utilized~~investment in the ~~fair value estimate. Future events and changing market conditions may lead us to re-evaluate~~equity securities of DiDi Global Inc. ("DiDi"), considering the ~~assumptions reflected in our valuation, particularly the assumptions related to the length and severity~~impact of the COVID-19 pandemic (see Note 1 to our Unaudited Consolidated Financial Statements), we performed an impairment analysis as of March 31, 2020 that resulted in an adjusted carrying value of $400 million at each of March 31, 2020, December 31, 2020 and ~~the shape and timing~~March 31, 2021. As a result of ~~the subsequent recovery and the overall impact on the investee’s business,~~DiDi's initial public offering in June 2021, we reclassified our DiDi investment as equity securities with readily determinable fair values at June 30, 2021.

Recent Accounting Pronouncements

See Note 1 to our Unaudited Consolidated Financial Statements for details, which ~~may result in a need to recognize an additional impairment charge that could have a material adverse effect on our results of operations.~~is incorporated into this Item 2 by reference thereto.

4849

Results of Operations

Three and Six Months Ended June 30, ~~2020~~2021 compared to the Three and Six Months Ended June 30, ~~2019~~2020

Operating and Statistical Metrics

Our financial results are driven by certain operating metrics that encompass the booking and other business activity generated by our travel and travel-related services. Specifically, reservations of ~~accommodation~~ room nights, rental car days and airline tickets capture the volume of units booked through our OTC brands by our travel reservation services customers. Gross bookings is an operating and statistical metric that captures the total dollar value, generally inclusive of taxes and fees, of all travel services booked through our OTC brands by our customers, net of cancellations, and is widely used in the travel business. Our non-OTC brands (KAYAK and OpenTable) have different business metrics from those of our OTC brands and therefore search queries through KAYAK and restaurant reservations through OpenTable do not contribute to our gross bookings.

~~Accommodation room~~Room nights, rental car days and airline tickets reserved through our services for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Three Months Ended June 30, (in millions)					Six Months Ended June 30, (in millions)						Decrease			Three Months Ended June 30, (in millions)					Increase (Decrease)		Six Months Ended June 30, (in millions)			Increase (Decrease)
		2020	2019	Decrease		2020	2019			Decrease		2021			2020			Increase (Decrease)		2021		2020			Increase (Decrease)
Room nights	Room nights	28	213	(86.7)	%	152	430	(64.6)	%		157			28		457.5	%		257		152		68.4	%
Rental car days	Rental car days	2	21	(90.4)	%	14	40	(65.2)	%	Rental car days	13			2		558.8	%		23		14		69.8	%
Airline tickets	Airline tickets	—	2	(69.7)	%	2	4	(39.1)	%	Airline tickets	4			—		626.7	%		7		2		203.8	%

~~Accommodation room~~Room nights and rental car days ~~and airline tickets~~ reserved through our services ~~each declined~~increased significantly for the three months ended June 30, 2021, compared to the three months ended June 30, 2020, due primarily to the significant improvement in travel demand trends since the second quarter of 2020, which was severely impacted by the COVID-19 pandemic. Room nights and rental car days reserved through our services increased for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, due to the year-over-year increase in room nights and rental car days in the second quarter of 2021, partially offset by the year-over-year decrease in room nights and rental car days in the first quarter of 2021. Airline tickets increased by 626.7% and 203.8% for the three and six months ended June 30, 2021, respectively, compared to the three and six months ended June 30, ~~2019,~~2020, due primarily to strong execution and growth at Priceline, which operates primarily in the U.S. domestic travel market, a market that has recovered from the COVID-19 pandemic significantly faster than the global travel market. Strong growth at Booking.com, which ~~drove~~reserved a ~~substantial decline~~relatively small amount of airline tickets through its services in ~~new travel bookings~~the first and ~~significantly increased cancellation rates.~~second quarter of 2020, contributed to the increase to a lesser extent.

Gross bookings resulting from reservations of ~~accommodation~~ room nights, rental car days and airline tickets made through our agency and merchant models for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 were as follows (numbers may not total due to rounding):


		Three Months Ended June 30, (in millions)						Decrease			Six Months Ended June 30, (in millions)									Decrease			Three Months Ended June 30, (in millions)						Increase (Decrease)				Six Months Ended June 30, (in millions)					Increase (Decrease)
		2020		2019						2020			2019				Decrease					2021	2020		Increase (Decrease)								2020				Increase (Decrease)
Agency	Agency	$	1,536	$	18,638	(91.8)	%	$	9,856		$	38,316		(74.3)	%	Agency			15,290		$	1,536	895.6	%			$	9,856			143.4	%
Merchant	Merchant	771		6,401		(88.0)	%	4,844			12,133			(60.1)	%	Merchant		6,665			771		764.4	%			9,897				4,844				104.3	%
Total	Total	$	2,307	$	25,039	(90.8)	%	$	14,700		$	50,449		(70.9)	%	Total		$	21,956		$	2,307	851.7	%	$	33,891			$	14,700			130.5	%

Gross bookings ~~decreased~~increased by ~~90.8%~~851.7% and ~~70.9%~~130.5% for the three and six months ended June 30, ~~2020,~~2021, respectively, compared to the three and six months ended June 30, ~~2019 (decreased~~2020 (increased on a constant-currency basis by approximately ~~91%~~802% and ~~71%~~120%, respectively), ~~almost entirely~~ due to ~~the 86.7%~~an increase in gross bookings from our accommodation reservation services, rental car reservation and ~~64.6% decline~~airline ticket reservation services.

The increase in gross bookings from our accommodation ~~room night reservations~~reservation services for the three and six months ended June 30, ~~2020, respectively, as well as a decline in accommodation ADRs of approximately 35% and 18% on a constant-currency basis for the three and six months ended June 30, 2020, respectively,~~2021, compared to the three and six months ended June 30, ~~2019.~~ 2020, was due to the 457.5% and 68.4% increase in room nights, respectively, a year-over-year increase in accommodation ADRs of approximately 60% and 28%, respectively, on a constant-currency basis and the positive impact of foreign exchange rate fluctuations. The year-over-year increase in accommodation ADRs on a constant-currency basis was impacted by the comparison to the three and six months ended June 30, 2020, when ADRs declined sharply in the early days of the pandemic as travel demand was significantly reduced and higher ADR bookings saw a greater share of cancellations.

The increase in gross bookings from our rental car reservation services for the three months ended June 30, 2021, compared to the three months ended June 30, 2020, was due primarily to the significant improvement in travel demand trends since the second quarter of 2020, which was severely impacted by the COVID-19 pandemic. The increase in gross bookings from our rental car reservation services for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, was due primarily to the year-over-year increase in rental car gross bookings in the second quarter of 2021, as well as due to the year-over-year increase in rental car gross bookings in the first quarter of 2021.

The increase in gross bookings from our airline ticket reservation services for the three months ended June 30, 2021, compared to the three months ended June 30, 2020 was driven primarily by strong execution and growth at Priceline, which operates primarily in the U.S. domestic travel market, a market that has recovered significantly faster than the global travel market from the COVID-19 pandemic. The increase in gross bookings from our airline ticket reservation services over the same period was also driven to a lesser extent by strong growth at Booking.com, which had a relatively small amount of airline ticket gross bookings in the first and second quarters of 2020.

We believe that unit growth rates and growth in total gross bookings on a constant-currency basis, which excludes the impact of foreign currency exchange rate fluctuations, are important measures to understand the fundamental performance of the business.

Agency gross bookings are derived from travel-related transactions where we do not facilitate payments from travelers for the travel services provided. Agency gross bookings ~~decreased~~increased by ~~91.8% and 74.3%~~895.6% for the three ~~and six~~ months ended

June 30, ~~2020, respectively,~~2021 compared to the three ~~and~~months ended June 30, 2020, due primarily to the significant improvement in travel demand trends since the second quarter of 2020, which was severely impacted by the COVID-19 pandemic. Agency gross bookingsincreased by 143.4% for the six months ended June 30, ~~2019, almost entirely~~2021, compared to the six months ended June 30, 2020, due primarily to ~~a decrease~~the year-over-year increase in agency gross bookings ~~from~~in the second quarter of 2021, as well as the relatively small year-over-year increase in agency ~~accommodation room night reservations at Booking.com.~~gross bookings in the first quarter of 2021.

Merchant gross bookings are derived from services where we facilitate payments from travelers for the travel services provided. Merchant gross bookings ~~decreased~~increased by ~~88.0% and 60.1%~~764.4% for the three ~~and six~~months ended June 30, 2021, compared to the three months ended June 30, 2020, ~~respectively, compared~~due primarily to the ~~three and six months ended June 30, 2019, almost entirely due to a decrease~~significant improvement in travel demand trends since the second quarter of 2020, which was severely impacted by the COVID-19 pandemic. Merchant gross bookings ~~from our merchant accommodation reservation services at Booking.com, agoda and priceline. Merchant gross bookings~~increased by 104.3% for the six months ended June 30, ~~2020,~~2021, compared to the six months ended June 30, ~~2019, declined less than agency gross bookings~~2020, due to ~~stronger growth of~~the year-over-year increase in merchant gross bookings ~~early~~ in the ~~six-month period as Booking.com had been expanding its~~second quarter of 2021, partially offset by the year-over-year decrease in merchant ~~accommodation reservation services prior to~~gross bookings in the ~~COVID-19 pandemic.~~first quarter of 2021.

Revenues

Online travel reservation services

Substantially all of our revenues are generated by providing online travel reservation services, which facilitate online travel purchases between travel service providers and travelers.

Revenues from online travel reservation services are classified into two categories:

•Agency. Agency revenues are derived from travel-related transactions where we do not facilitate payments from travelers for the services provided. Agency revenues consist almost entirely of travel reservation commissions. Substantially all of our agency revenue is from Booking.com agency accommodation reservations.

•Merchant. Merchant revenues are derived from travel-related transactions where we facilitate payments from travelers for the services provided, generally at the time of booking. Merchant revenues include (1) travel reservation commissions and transaction net revenues (i.e., the amount charged to travelers less the amount owed

to travel service providers) in connection with our merchant reservation services; (2) credit card processing rebates and customer processing fees; and (3) ancillary fees, including travel-related insurance ~~revenues and certain global distribution system ("GDS") reservation booking fees.~~revenues. Substantially all merchant revenues are derived from transactions where travelers book accommodation reservations or rental car reservations.

Advertising and other revenues

Advertising and other revenues are derived primarily from (1) revenues earned by KAYAK for (a) sending referrals to OTCs and travel service providers and (b) advertising placements on its platforms; and (2) revenues earned by OpenTable for (a) restaurant reservation services (fees paid by restaurants for diners seated through OpenTable's online reservation service) and (b) subscription fees for restaurant management services.


		Three Months Ended June 30, (in millions)						Decrease			Six Months Ended June 30, (in millions)									Decrease			Three Months Ended June 30, (in millions)						Increase (Decrease)				Six Months Ended June 30, (in millions)					Increase (Decrease)
		2020		2019						2020			2019				Decrease					2021	2020		Increase (Decrease)								2020				Increase (Decrease)
Agency revenues	Agency revenues	$	357	$	2,607	(86.3)	%	$	1,781		$	4,556		(60.9)	%	Agency revenues			1,328		$	357	272.0	%			$	1,781			14.8	%
Merchant revenues	Merchant revenues	245		959		(74.5)	%	904			1,562			(42.1)	%	Merchant revenues		661			245		170.6	%			1,034				904				14.4	%
Advertising and other revenues	Advertising and other revenues	28		284		(90.1)	%	233			569			(59.1)	%	Advertising and other revenues		171			28		507.0	%	222				233				(4.4)	%
Total revenues	Total revenues	$	630	$	3,850	(83.7)	%	$	2,918		$	6,687		(56.4)	%	Total revenues		$	2,160		$	630	243.2	%	$	3,301			$	2,918			13.1	%

Total revenues for the three ~~and six~~months ended June 30, 2021, compared to the three months ended June 30, 2020, ~~compared to the three and six months ended June 30, 2019, decreased by 83.7% and 56.4%, respectively (decreased~~increased 243.2% (increased on a constant-currency basis by approximately ~~83% and 55%~~229%), ~~respectively). A~~due primarily to the significant ~~majority~~improvement in travel demand trends since the second quarter of 2020, which was severely impacted by the ~~year-over-yeardecrease was related to revenues from our accommodation reservation services.~~COVID-19 pandemic. Total revenues for the six months ended June 30, ~~2020 were negatively impacted by a reduction in revenue of $63 million for refunds paid or estimated~~2021, compared to ~~be payable to travelers as a result of~~ the COVID-19 pandemic where we have agreed to provide free cancellation for certain non-refundable reservations without a corresponding estimated expected recovery from the travel service providers (see Notes 1 and 2 to the Unaudited Consolidated Financial Statements).

~~Agency revenues decreased by 86.3% and 60.9% for the three and~~ six months ended June 30, 2020, ~~respectively,~~increased 13.1% (increased on a constant-currency basis by approximately 9%), due to the year-over-year revenue increase in the second quarter of 2021, mostly offset by the year-over-year revenue decrease in the first quarter of 2021.

Agency revenues increased by 272.0% for the three months ended June 30, 2021, compared to the three ~~and~~months ended June 30, 2020, due primarily to the significant improvement in travel demand trends since the second quarter of 2020, which was severely impacted by the COVID-19 pandemic. Agency revenues increased by 14.8% for the six months ended June 30, ~~2019,~~2021, due to the ~~impacts~~year-over-year agency revenue increase in the second quarter of 2021, mostly offset by the ~~COVID-19 pandemic.~~

year-over-year agency revenue decrease in the first quarter of 2021.

Merchant revenues ~~decreased~~increased by ~~74.5% and 42.1%~~170.6% for the three ~~and~~months ended June 30, 2021, compared to the three months ended June 30, 2020, due primarily to the significant improvement in travel demand trends since the second quarter of 2020, which was severely impacted by the COVID-19 pandemic. Merchant revenue increased by 14.4% for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, respectively, compared to the three and six months ended June 30, 2019, due primarily to decreases in gross bookings from our merchant accommodation reservation services and merchant rental car reservation services due to the ~~impacts~~year-over-year merchant revenue increase in the second quarter of 2021, mostly offset by the ~~COVID-19 pandemic.~~year-over-year merchant revenue decrease in the first quarter of 2021.

Advertising and other revenues ~~decreased~~increased by ~~90.1% and 59.1%,~~507.0% for the three months ended June 30, 2021, compared to the three months ended June 30, 2020, due primarily to the significant improvement in travel and restaurant demand trends since the second quarter of 2020, which was severely impacted by the COVID-19 pandemic. Advertising and other revenues decreased by 4.4% for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, ~~respectively, compared to the three and six months ended June 30, 2019, primarily~~ due to the ~~COVID-19 pandemic, which resulted~~year-over-year advertising and other revenue decrease in ~~a decline~~the first quarter of 2021, almost entirely offset by the year-over-year advertising and other revenue increase in ~~consumer demand~~the second quarter of 2021. In addition, in the second quarter of 2021 our advertising and other revenues benefited from fees payable by restaurants for diners seated through OpenTable's online reservation service and subscription fees for restaurant management services, as the ~~travel and restaurant-related services offered by KAYAK and OpenTable.~~program that waived those fees ended March 31, 2021.

Total revenues as a percentage of gross bookings was 9.8% for the three months ended June 30, 2021, compared to 27.3% for the three months ended June 30, ~~2020,~~2020. For the three months ended June 30, 2021, revenues as ~~compared~~a percentage of gross bookings was negatively impacted by timing of booking versus travel as a portion of gross bookings made in the quarter were related to ~~15.4%~~expected travel in subsequent quarters, which is when we expect to recognize the associated revenue. In addition, revenue as a percentage of gross bookings for the three months ended June 30, ~~2019, due primarily to experiencing~~2020 was impacted by cancellations ~~with a value~~ exceeding the value of new bookings in ~~the month of~~ April 2020, which caused ~~April 2020~~ gross bookings to be negative while ~~April 2020~~ revenue remained ~~positive but at a very low level.~~positive. Total revenues as a percentage of gross bookings was 9.7% for the six months ended June 30, 2021, compared to 19.8% for the six months ended June 30, ~~2020,~~2020. For the six months ended June 30, 2021, revenues as ~~compared~~a percentage of gross bookings was negatively impacted by the timing of booking versus travel as a portion of the gross bookings made in the first and second

quarters of 2021 were related to ~~13.3%~~expected travel in subsequent quarters, which is when we expect to recognize the associated revenue. In addition, for the six months ended June 30, ~~2019 due primarily to~~2020, revenues as a percentage of gross bookings was positively impacted by timing of booking versus travel as revenue benefited from travel ~~early~~earlier in the ~~six-month period ended June 30, 2020~~year before the COVID-19 pandemic, ~~as well as the aforementioned impact of cancellations being larger than new~~while gross bookings were more negatively impacted by a significant increase in ~~the month of~~cancellations in March and April 2020.

Our international businesses accounted for approximately ~~$0.5~~$1.8 billion and ~~$2.5~~$2.7 billion of our total revenues for the three and six months ended June 30, ~~2020,~~2021, respectively, compared to ~~$3.4~~$0.5 billion and ~~$5.9~~$2.5 billion for the three and six months ended June 30, ~~2019,~~2020, respectively. Total revenues attributable to our international businesses for the three and six months ended June 30, ~~2020decreased~~2021 increased by ~~84.8%~~238% and ~~57.3%~~7%, respectively, compared to the three and six months ended June 30, ~~2019 (decreased~~2020 (increased on a constant-currency basis by approximately ~~85%~~220% and ~~56%~~3%, respectively). Total revenues attributable to our U.S. businesses ~~decreased 73.7%~~increased 270% and ~~49.1%~~51%, for the three and six months ended June 30, ~~2020,~~2021, respectively, compared to the three and six months ended June 30, ~~2019.~~2020. Total revenues attributable to our international and U.S. businesses increased for the three months ended June 30, 2021, compared to the three months ended June 30, 2020, due primarily to the significant improvement in travel demand trends since the second quarter of 2020, which was severely impacted by the initial spread of the COVID-19 pandemic last year. Total revenues attributable to our international and U.S. businesses increased for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, due to the year-over-year revenue increase in the second quarter of 2021, offset by the year-over-year revenue decrease in the first quarter of 2021.

Operating Expenses

Marketing ~~expenses~~Expenses


		Three Months Ended June 30, (in millions)								Decrease				Six Months Ended June 30, (in millions)											Decrease				Three Months Ended June 30, (in millions)						Increase (Decrease)			Six Months Ended June 30, (in millions)		Increase (Decrease)
		2020			2019								2020				2019				Decrease						2021		2020		Increase (Decrease)							2020	Increase (Decrease)
Marketing expenses	Marketing expenses	$	211		$	1,367		(84.6)	%	$	1,062			$	2,560			(58.5)	%	Marketing expenses			988			$	211		368.4	%		$	1,062			36.4	%
% of Total revenues	% of Total revenues	33.5		%	35.5		%			36.4		%		38.3		%				% of Total revenues		45.8		%		33.5		%				43.9		%		36.4	%

We rely on marketing channels to generate a significant amount of traffic to our websites. Marketing expenses consist primarily of the costs of: (1) search engine keyword purchases; (2) referrals from meta-search and travel research websites; (3) affiliate programs; (4) offline and online brand marketing; and (5) other performance-based marketing and incentives. For the three ~~and~~months ended June 30, 2021, our marketing expense increased significantly compared to the three months ended June 30, 2020, due primarily to the significant improvement in travel demand trends since the second quarter of 2020, which was severely impacted by the initial spread of the COVID-19 pandemic last year. For the six months ended June 30, 2021, our marketing expense increased compared to the six months ended June 30, 2020, ~~our~~due to the year-over-year marketing expense ~~declined significantly due to reduced travel demand as a result~~increase in the second quarter of 2021, offset by the ~~COVID-19 pandemic.~~year-over-year marketing expense decrease in the first quarter of 2021. We adjust our marketing spend based on our growth and profitability objectives, as well as the travel demand and expected ROIs in our marketing channels. Marketing ~~expense~~expenses as a percentage of total revenues ~~decreased~~increased for the three and six months ended June 30, ~~2020,~~2021, compared to the three and six months ended June 30, ~~2019~~2020, primarily due to ~~actions we took to reduce~~the differences in timing between booking and travel with the majority of our ~~brand~~marketing expense recognized at the time of booking and revenue recognized when travel occurs. These timing differences were partially offset by year-over-year increases in performance marketing ~~spend~~ROIs and favorable changes in ~~response to~~ the ~~reduced travel demand.~~share of traffic by channel for the three and six months ended June 30, 2021.

Sales and Other Expenses


		Three Months Ended June 30, (in millions)								Decrease				Six Months Ended June 30, (in millions)											Increase				Three Months Ended June 30, (in millions)						Increase (Decrease)			Six Months Ended June 30, (in millions)		Increase (Decrease)
		2020			2019								2020				2019				Increase						2021		2020		Increase (Decrease)							2020	Increase (Decrease)
Sales and other expenses	Sales and other expenses	$	131		$	248		(47.0)	%	$	508			$	463			9.7	%	Sales and other expenses			206			$	131		56.9	%		$	508			(37.4)	%
% of Total revenues	% of Total revenues	20.9		%	6.5		%			17.4		%		6.9		%				% of Total revenues		9.6		%		20.9		%				9.6		%		17.4	%

Sales and other expenses consist primarily of: (1) credit card and other payment processing fees associated with merchant transactions; (2) fees paid to third parties that provide call center, website content translations and other services; (3)

customer chargeback provisions and fraud prevention expenses associated with merchant transactions; (4) customer relations costs and other costs; and (5) provisions for expected credit losses, primarily related to ~~agency~~ accommodation commission receivables

and prepayments to certain customers. For the three months ended June 30, ~~2020,~~2021, sales and other expenses, which are substantially variable in nature, ~~decreased~~increased compared to the three months ended June 30, ~~2019~~2020, due primarily to ~~a decrease~~an increase in expenses related to transactions processed on a merchant basis, ~~as well as lower call center expenses. Sales and other expenses~~which increased ~~for~~due to the significant improvement in travel demand trends since the second quarter of 2020, which was severely impacted by the initial spread of the COVID-19 pandemic last year. For the six months ended June 30, ~~2020,~~2021, sales and other expenses decreased compared to the six months ended June 30, ~~2019,~~2020, due primarily to ~~an increase~~a decrease in expected credit loss expenses as we substantially increased our provision for expected credit losses in the first quarter of ~~$195 million primarily resulting from~~2020 due to the ~~impact~~outbreak of the COVID-19 pandemic (see Notes 1 and 7 to the Unaudited Consolidated Financial Statements), partially offset by lower expenses related to a decrease in transactions processed on a merchant basis, as well as lower call center expenses.pandemic.

Personnel


		Three Months Ended June 30, (in millions)								Decrease				Six Months Ended June 30, (in millions)											Decrease				Three Months Ended June 30, (in millions)						Increase (Decrease)			Six Months Ended June 30, (in millions)		Increase (Decrease)
		2020			2019								2020				2019				Decrease						2021		2020		Increase (Decrease)							2020	Increase (Decrease)
Personnel	Personnel	$	452		$	619		(26.9)	%	$	936			$	1,120			(16.4)	%	Personnel			686			$	452		51.9	%		$	936			32.3	%
% of Total revenues	% of Total revenues	71.8		%	16.1		%			32.1		%		16.7		%				% of Total revenues		31.8		%		71.8		%				37.5		%		32.1	%

Personnel expenses consist of compensation to our personnel, ~~including salaries,~~including: (1) salaries; (2) stock-based ~~compensation, bonuses,~~compensation; (3) bonuses; (4) payroll ~~taxes,~~taxes; and (5) employee health and other benefits. Personnel expenses ~~decreased~~increased during the three and six months ended June 30, ~~2020,~~2021, compared to the three ~~months ended June 30, 2019, primarily due to $100 millionof government aid benefit, of which $84 million has been received as of June 30, 2020. Personnel expenses decreased during the~~and six months ended June 30, 2020, ~~compared~~due to the $136 million of expense associated with the return of government assistance received through various government aid programs which was recorded in the second quarter of 2021, the $100 million benefit from government grants and other assistance recognized in the second quarter of 2020, and an increase in stock-based compensation expense, partially offset by lower salary expenses. Stock-based compensation expense was $90 million and $199 million for the three and six months ended June 30, ~~2019, primarily due~~2021, respectively, compared to the aforementioned government aid we received as well as a decrease in stock-based compensation expense of $70 million, which is impacted by reduced financial performance as a result of the COVID-19 pandemic. Stock-based compensation expense was $77 million and $83 million for the three and six months ended June 30, 2020, ~~respectively, compared to $79 million and $153 million~~respectively. The increase in stock-based compensation expense for the ~~three and~~ six months ended June 30, ~~2019.~~2020, was impacted by a reduction in stock-based compensation expense of $73 million recorded during the three months ended March 31, 2020 as a result of reduced financial performance driven by the COVID-19 pandemic. In addition, stock-based compensation expense increased during the six months ended June 30, 2021 due to the modification of performance-based awards during the three months ended March 31, 2021. Headcount decreased 22% year-over-year to approximately 19,500 as of June 30, 2021, compared to approximately 25,000 as of June 30, 2020, ~~decreased 7% compared to June 30, 2019,~~ primarily due to restructuring actions ~~taken at agoda, KAYAK~~ and ~~OpenTable in the second quarter of 2020 as well as a general company-wide hiring freeze.~~attrition.

General and Administrative


		Three Months Ended June 30, (in millions)								Decrease				Six Months Ended June 30, (in millions)											Decrease				Three Months Ended June 30, (in millions)						Increase (Decrease)			Six Months Ended June 30, (in millions)		Increase (Decrease)
		2020			2019								2020				2019				Decrease						2021		2020		Increase (Decrease)							2020	Increase (Decrease)
General and administrative	General and administrative	$	104		$	180		(43.3)	%	$	305			$	371			(18.2)	%	General and administrative			134			$	104		29.0	%		$	305			(17.3)	%
% of Total revenues	% of Total revenues	16.3		%	4.7		%			10.4		%		5.5		%				% of Total revenues		6.1		%		16.3		%				7.6		%		10.4	%

General and administrative expenses consist primarily of: (1) occupancy and office expenses; (2) ~~personnel-related expenses such as travel, relocation, recruiting and training expenses; (3)~~ fees for outside professionals, including litigation expenses; ~~and (4)~~(3) indirect taxes such as travel transaction taxes and digital services ~~taxes.~~taxes; and (4) personnel-related expenses such as travel, relocation, recruiting and training expenses. General and administrative expenses increased for the three months ended June 30, 2021, compared to the three months ended June 30, 2020, due to higher indirect taxes driven by the improvement in revenue, as well as higher fees for professional services. General and administrative expenses decreased during the ~~three and~~six months ended June 30, 2021, compared to the six months ended June 30, 2020, ~~compared to the three and six months ended June 30, 2019,~~ due to lower personnel-related expenses associated with a ~~general company-wide freeze on~~significant reduction in non-essential travel and entertainment, lower indirect taxes, and ~~employee hiring due to the COVID-19 pandemic,~~ lower occupancy and office expenses due to employees working remotely, and lower professional service fees. The decrease for the six months ended June 30, 2020 is driven by the aforementioned factors and is partially offset by increased indirect taxes, which increased by $16 million for the six months ended June 30, 2020.

remotely.

5254

Information Technology


		Three Months Ended June 30, (in millions)								Decrease				Six Months Ended June 30, (in millions)											Increase				Three Months Ended June 30, (in millions)						Increase (Decrease)			Six Months Ended June 30, (in millions)		Increase (Decrease)
		2020			2019								2020				2019				Increase						2021		2020		Increase (Decrease)							2020	Increase (Decrease)
Information technology	Information technology	$	70		$	70		(0.9)	%	$	148			$	135			9.2	%	Information technology			93			$	70		33.7	%		$	148			22.1	%
% of Total revenues	% of Total revenues	11.1		%	1.8		%			5.1		%		2.0		%				% of Total revenues		4.3		%		11.1		%				5.5		%		5.1	%

Information technology expenses consist primarily of: (1) software license and system maintenance fees; (2) outsourced data center and cloud computing costs; (3) payments to contractors; and (4) data communications and other expenses associated with operating our services. Information technology expenses ~~decreased~~increased during the three and six months ended June 30, ~~2020,~~2021, compared to the three ~~months ended June 30, 2019, due to decreased cloud computing costs. Information technology expenses increased during the~~and six months ended June 30, 2020, ~~compared to the six months ended June 30, 2019,~~ due to increased software license fees, some of which relate to cybersecurity and ~~outsourced~~ data ~~center costs.~~privacy software, and increased payments to contractors.

Depreciation and Amortization


		Three Months Ended June 30, (in millions)								Decrease				Six Months Ended June 30, (in millions)											Decrease				Three Months Ended June 30, (in millions)						Increase (Decrease)			Six Months Ended June 30, (in millions)		Increase (Decrease)
		2020			2019								2020				2019				Decrease						2021		2020		Increase (Decrease)							2020	Increase (Decrease)
Depreciation and amortization	Depreciation and amortization	$	112		$	119		(5.2)	%	$	229			$	235			(2.5)	%	Depreciation and amortization			108			$	112		(3.9)	%		$	229			(3.4)	%
% of Total revenues	% of Total revenues	17.9		%	3.1		%			7.9		%		3.5		%				% of Total revenues		5.0		%		17.9		%				6.7		%		7.9	%

Depreciation and amortization expenses consist of: (1) amortization of intangible assets with determinable lives; (2) ~~depreciation of computer equipment; (3)~~ amortization of internally-developed and purchased software; (3) depreciation of computer equipment; and (4) depreciation of leasehold improvements, furniture and fixtures and office equipment. Depreciation and amortization expenses decreased during the three and six months ended June 30, ~~2020,~~2021, compared to the three and six months ended June 30, ~~2019,~~2020, as a result of decreased depreciation of computer equipment, ~~amortization of intangible assets and depreciation of leasehold improvements,~~ partially offset by increased internally-developed software amortization ~~expenses.~~expense.

Restructuring and Other Exit Costs


	Three Months Ended June 30, (in millions)						Increase (Decrease)		Six Months Ended June 30, (in millions)						Increase (Decrease)
	2021			2020					2021			2020
Restructuring and other exit costs	$	1		$	34		(96.5)	%	$	9		$	34		(74.0)	%
% of Total revenues	0.1		%	5.5		%			0.3		%	1.2		%

Restructuring and other exit costs

Three Months Ended
June 30,
(in millions) Increase Six Months Ended
June 30,
(in millions) Increase
2020 2019 2020 2019
Restructuring and other exit costs $ 34 $ — N/A $ 34 $ — N/A
% of Total revenues 5.5 % N/A 1.2 % N/A

~~During~~ principally relate to the ~~three months ended June 30, 2020, we took~~restructuring charges as a result of restructuring actions ~~at our agoda, KAYAK and OpenTable brands~~taken in response to the ~~expected long-term~~ impact of the COVID-19 pandemic on our ~~business,~~business. Restructuring and other exit costs decreased during the three and six months ended June 30, 2021, compared to the three and six months ended June 30, 2020, as ~~a result incurred~~these restructuring activities have substantially concluded as of December 31, 2020. These restructuring charges ~~amounting to $34 million,~~are primarily related to employee severance and benefits at Booking.com (see Note 14 to the Unaudited Consolidated Financial Statements). The restructuring actions at our agoda, KAYAK and OpenTable brands resulted in a reduction of our workforce of approximately 1,700 employees and furloughs of over 150 employees. As a result, we expect to realize annualized costs savings of approximately $75 million related to personnel expenses.

Impairment of Goodwill


		Three Months Ended June 30, (in millions)					Increase				Six Months Ended June 30, (in millions)								Increase			Three Months Ended June 30, (in millions)				Increase (Decrease)			Six Months Ended June 30, (in millions)		Increase (Decrease)
		2020		2019						2020			2019			Increase					2021	2020	Increase (Decrease)						2020	Increase (Decrease)
Impairment of goodwill	Impairment of goodwill	$	—	$	—	N/A	$	489			$	—		N/A	Impairment of goodwill			—		$	—	N/A		$	489		N/A
% of Total revenues	% of Total revenues	N/A		N/A			16.7		%		N/A				% of Total revenues		N/A			N/A				N/A			16.7	%

During the ~~three~~six months ended ~~March 31,~~June 30, 2020, we recorded an impairment charge to goodwill related to OpenTable and KAYAK, which is not tax-deductible, of $489 million (see Note 8 to our Unaudited Consolidated Financial ~~Statements and Critical Accounting Policies and Estimates included in this Management's Discussion and Analysis of Financial Condition and Results of Operations)~~Statements).

~~Other Income (Expense)~~Interest Expense

Three Months Ended
June 30,
(in millions) Increase (decrease) Six Months Ended
June 30,
(in millions) Increase (decrease)
2020 2019 2020 2019
Interest income $ 12 $ 34 (65.6) % $ 44 $ 69 (37.0) %
Interest expense (96) (68) 40.7 % (160) (134) 19.1 %
Net gains on marketable equity securities 835 17 4,899.5 % 528 468 12.9 %
Impairment of investment — — N/A (100) — N/A
Foreign currency transactions and other (58) (23) 146.3 % (32) (31) (3.4) %
Total $ 693 $ (40) (1,818.5) % $ 280 $ 372 (24.8) %


	Three Months Ended June 30, (in millions)				Increase (Decrease)		Six Months Ended June 30, (in millions)				Increase (Decrease)
	2021		2020				2021		2020
Interest expense	$	81	$	96	(16.1)	%	$	179	$	160	11.9	%

Interest ~~income~~expense decreased for the three months ended June 30, 2021, compared to the three months ended June 30, 2020, primarily due to the issuance of senior notes with lower interest rates in March 2021 and the redemption of senior notes with higher interest rates in April 2021. Interest expense increased for the six months ended June 30, ~~2020,~~2021, compared to the ~~three and~~ six months ended June 30, ~~2019, primarily due to lower average invested balances of marketable securities and lower yields as well as increased usage of investments classified as cash equivalents.~~

~~Interest expense increased for the three and six months ended June 30,~~ 2020, ~~compared to the three and six months ended June 30, 2019,~~ primarily due to interest expense attributable to our Senior Notes and Convertible Senior Notes issued in April ~~2020.~~2020, partially offset by the effect of the maturity in June 2020 of our Convertible Senior Notes issued in May 2013 (see Note 9 to our Unaudited Consolidated Financial Statements).

Other Income (Expense), Net


	Three Months Ended June 30, (in millions)				Increase (Decrease)		Six Months Ended June 30, (in millions)				Increase (Decrease)
	2021		2020				2021		2020
Other income (expense), net	$	96	$	789	(87.8)	%	$	227	$	440	(48.3)	%

The following table sets forth the breakdown of "Other income (expense), net" for the three and six months ended June 30, 2021 and 2020:


	Three Months Ended June 30, (in millions)				Six Months Ended June 30, (in millions)
	2021		2020		2021		2020
Interest and dividend income	$	4	$	12	$	8	$	44
Net gains on equity securities	391		835		427		528

Impairment of investment	—		—		—		(100)
Foreign currency transaction (losses) gains	(41)		(58)		47		(27)
Loss on early extinguishment of debt	(242)		—		(242)		—

Other	(16)		—		(13)		(5)
Other income (expense), net	$	96	$	789	$	227	$	440

Interest and dividend income decreased for the three and six months ended June 30, 2021, compared to the three and six months ended June 30, 2020, primarily due to lower yields as well as the change in the mix of investments with increased usage of investments classified as cash equivalents.

Net gains on ~~marketable~~equity securities for the three and six months ended June 30, 2021 are principally related to the gains on our equity investment in Meituan and DiDi. Net gains on equity securities for the three and six months ended June 30, 2020 ~~and 2019~~ are principally related to the gains on our equity ~~investment~~investments in Meituan ~~Dianping~~ and the gains (losses) on our equity ~~investments~~investment in Trip.com ~~Group (see~~Group. See Note 5 to our Unaudited Consolidated Financial Statements for additional ~~information).~~information.

Impairment of investment for the six months ended June 30, 2020 is related to the impairment of our investment in ~~Didi Chuxing~~DiDi that we recorded in the three months ended March 31, 2020 (see Notes 5 and 6 to our Unaudited Consolidated Financial ~~Statements and Critical Accounting Policies and Estimates included in this Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information)~~Statements).

Foreign currency ~~transactions and other includes foreign currency~~transaction (losses) gains or losses on derivative contracts, foreign currency transaction gains or losses, including costs related to foreign currency transactions, and net realized gains or losses on investments and other income or expense.

~~Foreign currency transactions and other~~ for the three and six months ended June 30, ~~2020 includes foreign currency~~2021 include losses ~~on derivative contracts~~ of $8$37 million and ~~foreign currency transaction losses~~gains of $50 million. Foreign currency transactions and other for the three months ended June 30, 2019 includes foreign currency gains on derivative contracts of $8 million and foreign currency transaction losses of $42 million. The foreign currency transaction losses for the three months ended June 30, 2020 and 2019, include losses of $55 million and $19$54 million, respectively, related to the portion of our Euro-denominated debt that was not designated as a net investment ~~hedge.~~

hedge and gains of $1 million and losses of $8 million, respectively, related to derivative contracts. Foreign currency ~~transactions and other~~transaction losses for the three and six months ended June 30, 2020 ~~includes foreign currency~~ includelosses ~~on derivative contracts~~ of ~~$31~~$55 million and foreign currency transaction gains of $4 million. Foreign currency transactions and other for the six months ended June 30, 2019 includes foreign currency losses on derivative contracts of $5 million and foreign currency transaction losses of $38 million. The foreign currency transaction gains (losses) for the six months ended June 30, 2020 and 2019, include losses of $22 ~~million and $19~~ million, respectively, related to the portion of our Euro-denominated debt that was not designated as a net investment ~~hedge.~~hedge and losses of $8 million and $31 million, respectively, related to derivative contracts.

~~In addition, foreign currency transactions~~

Loss on early extinguishment of debt is related to our Senior Notes due April 2025 (the "April 2025 Notes") and ~~other included net realized losses of $1 million for the six months ended June 30, 2020 and net realized gains of $10 million and $11 million~~our Senior Notes due April 2027 (the "April 2027 Notes") that were redeemed in April 2021 (see Note 9 to our Unaudited Consolidated Financial Statements).

Other expenses for the three and six months ended June 30, ~~2019, respectively, from sales of investments in debt securities.~~2021 include losses on reverse treasury lock agreements which were designated as cash flow hedges (see Note 6 to our Unaudited Consolidated Financial Statements).

Income Taxes

Three Months Ended
June 30,
(in millions) Six Months Ended
June 30,
(in millions) Increase (decrease)
2020 2019 Change 2020 2019
Income tax expense $ 87 $ 228 (62.2) % $ 64 $ 431 (85.2) %
% of income (loss) before income taxes 41.4 % 18.9 % (12.4) % 19.8 %


	Three Months Ended June 30, (in millions)						Increase (Decrease)		Six Months Ended June 30, (in millions)						Increase (Decrease)
	2021			2020					2021			2020
Income tax expense (benefit)	$	126		$	87		46.9	%	$	(97)		$	64		(251.6)	%
% of (Loss) income before income taxes	(311.7)		%	41.4		%			30.3		%	(12.4)		%

Our 2021 effective tax rates differ from the U.S. federal statutory tax rate of 21%, primarily due to the benefit of the Netherlands Innovation Box Tax (discussed below), partially offset by higher international tax rates and certain non-deductible expenses. Our 2020 effective tax rates differ from the U.S. federal statutory tax rate of 21%, primarily due to the non-deductible goodwill impairment charge related to OpenTable and KAYAK, certain non-deductible expenses relative to lower ~~worldwide~~world-wide earnings and the valuation allowance recorded against the deferred tax ~~assets~~asset generated from the impairment of ~~certain~~a long-term ~~investments,~~investment, partially offset by the benefit of the Netherlands Innovation Box Tax ~~(discussed below)~~ and U.S. state tax benefits. Our 2019 effective tax rates differ from the U.S. federal statutory tax rate of 21%, primarily due to the benefit of the Netherlands Innovation Box Tax (discussed below), partially offset by the effect of higher international tax rates.

~~Our~~We incurred a pre-tax loss and recorded an income tax provision during the three months ended June 30, 2021, which resulted in a negative effective tax ~~rate~~rate. ~~was higher~~The difference in our effective tax rate for the three months ended June 30, ~~2020,~~2021, compared to the three months ended June 30, ~~2019,~~2020, is primarily due to higher international tax rates and certain non-deductible expenses, partially offset by an increase in the benefit of the Netherlands Innovation Box tax and a decrease in discrete U.S. tax ~~charges~~expense related to unrealized gains on equity ~~securities, as well as certain non-deductible expenses relative to lower worldwide earnings, partially offset by higher U.S. state tax benefits.~~securities.

We incurred a pre-tax loss and recorded an income tax provision during the six months ended June 30, 2020, which resulted in a negative effective tax rate. The difference in our effective tax rate for the six months ended June 30, ~~2020,~~2021, compared to the six months ended June 30, ~~2019,~~2020, is primarily due to higher international tax rates and certain non-deductible expenses, partially offset by an increase in the benefit of the Netherlands Innovation Box Tax and a decrease in discrete U.S. tax expense related to unrealized gains on equity securities. In addition, the effective tax rate for the six months ended June 30, 2020 reflected the non-deductible goodwill impairment charge related to OpenTable and KAYAK, discrete U.S. tax charges related to unrealized gains on equity securities, certain non-deductible expenses relative to lower worldwide earnings, and the valuation allowance recorded against the deferred tax asset generated from the impairment of certain long-term investments.KAYAK.

During the three and six months ended June 30, 2021, a majority of our income, and during the three and six months ended June 30, 2020, a portion of our income was reported in the Netherlands, where Booking.com is based. According to Dutch corporate income tax law, income generated from qualifying innovative activities is taxed at a rate of 9% ("Innovation Box Tax") for periods beginning on or after January 1, 2021 rather than the Dutch statutory rate of 25%. Previously, the Innovation Box Tax rate had been 7%. A portion of Booking.com's earnings during the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 qualified for Innovation Box Tax treatment, ~~under Dutch tax law. For the three and six months ended June 30, 2019, this resulted in~~which had a ~~significant~~ beneficial impact on ~~our~~the effective tax ~~rate~~rates for that period. For the three and six months ended June 30, 2020, our effective tax rate also benefited from the Innovation Box Tax. In 2019, the Dutch government approved a reduction in its corporate income tax rate from 25% to 21.7%, effective in 2021. Furthermore, the Dutch government has proposed an increase in the Innovation Box Tax rate from 7% to 9%, which, if enacted, could be effective beginning in 2021.these periods. While we expect Booking.com to continue to qualify for Innovation Box Tax treatment with respect to a portion of its earnings for the foreseeable future, the loss of the Innovation Box Tax benefit, whether due to a change in tax law or a determination by the Dutch government that Booking.com's activities are not innovative or for any other reason, could substantially increase our effective tax rate and adversely impact our results of operations and cash flows in future periods. See Part II, Item 1A, Risk Factors - "We may not be able to maintain our 'Innovation Box Tax' benefit."

5557

Liquidity and Capital Resources

The extent of the effects of the COVID-19 pandemic on our business, results of operations, cash flows and growth prospects is highly uncertain and will ultimately depend on future developments. These include, but are not limited to, the severity, extent and duration of the COVID-19 pandemic, including as a result of any new variants of COVID-19 and ~~its impact~~any

resurgences of the pandemic, the global distribution of the vaccines and their efficacy against existing and any future variants of COVID-19, and their impacts on the travel and restaurant industries and consumer spending more broadly. Even ifthough we have seen some improvements in the economic and operating conditions for our business ~~improve,~~since the outset of the COVID-19 pandemic, we cannot predict the long-term effects of the pandemic on our business or the travel and restaurant industries as a whole. If the travel and restaurant industries are fundamentally changed by the COVID-19 pandemic in ways that are detrimental to our operating model, our business may continue to be adversely affected even as the broader global economy recovers.

At June 30, ~~2020,~~2021, we had ~~$13.4~~$16.1 billion in cash, cash equivalents and short-term and long-term investments, of which approximately ~~$4.1~~$7.1 billion is held by our international subsidiaries. Cash, cash equivalents and long-term investments held by our international subsidiaries are denominated primarily in ~~U.S.~~Hong Kong Dollars, ~~Hong Kong~~U.S. Dollars and Euros. Cash equivalents and short-term and long-term investments are principally comprised of money market funds, time deposits and certificates of deposit, convertible debt securities of Trip.com Group, ~~Meituan Dianping~~ equity securities of Meituan and DiDi and our investments in private companies (see Notes 5 and 6 to the Unaudited Consolidated Financial Statements). ~~In May 2020, the Company's May 2015 investment of $250 million in Trip.com Group's convertible notes was repaid upon maturity.~~

In the six months ended June 30, 2020, we realized $2.2 billion in cash from the sales and maturity of our investments in government and corporate debt securities. In addition, we sold our entire investment in Trip.com Group ADSs, with a cost basis of $655 million for $525 million.

At June 30, ~~2020,~~2021, we had a remaining transition tax liability of ~~$1.1 billion~~$911 million as a result of the Tax Cuts and Jobs Act (the "Tax Act"), which included ~~$922~~$824 million reported as "Long-term U.S. transition tax liability" and ~~$152~~$87 million included in "Accrued expenses and other current liabilities" in the Consolidated Balance Sheet. This liability will be paid over the next six years. In accordance with the Tax Act, generally, future repatriation of our international cash will not be subject to a U.S. federal income tax liability as a dividend, but will be subject to U.S. state income taxes and international withholding taxes, which have been accrued by us.

~~In the first quarter of 2020, we made a prepayment of the Netherlands income taxes of 660 million Euros ($717 million) to earn prepayment discounts.~~ ~~Due to the impact of~~ ~~the COVID-19 pandemic, we requested a refund of this amount from the Dutch tax authorities and it was received in April 2020.~~

In August 2019, we entered into a $2.0 billion five-year unsecured revolving credit facility with a group of lenders. The revolving credit facility provides for the issuance of up to $80 million of letters of credit as well as borrowings of up to $100 million on same-day notice, referred to as swingline loans. The proceeds of loans made under the facility can be used for working capital and general corporate purposes, including acquisitions, share repurchases and debt repayments. At June 30, ~~2020,~~2021, there were no borrowings outstanding and $3$4 million of letters of credit issued under the facility. The revolving credit facility contains a maximum leverage ratio covenant, compliance with which is a condition to our ability to borrow thereunder. In ~~April~~ 2020, we amended the revolving credit facility ~~pursuant~~ to ~~which~~(i) suspend the maximum leverage ratio covenant ~~has been suspended~~ through and including the ~~quarter~~three months ending March 31, ~~2021, and has been~~2022, which was replaced with a $4.5 billion minimum liquidity covenant based on unrestricted cash, cash equivalents, short-term investments and unused capacity under this revolving credit facility and (ii) increase the permitted maximum leverage ratio from and including the three months ending June 30, 2022 through and including the three months ending March 31, 2023. We agreed not to declare or make any cash distribution and not to repurchase any of our shares (with certain exceptions including in connection with tax withholding related to shares issued to employees) unless (i) prior to the delivery of financial statements for the three months ending June 30, 2022, we have at least $6.0 billion of liquidity on a pro forma basis, based on unrestricted cash, cash equivalents, short-term investments and unused capacity under this revolving credit facility and (ii) after the delivery of financial statements for the three months ending June 30, 2022, we are in compliance on a pro forma basis with the maximum leverage ratio covenant then in effect. Such restriction

ends upon delivery of financial statements required for the three months ending June 30, 2023, or we have the ability to terminate this restriction earlier if we demonstrate compliance with the original maximum leverage ratio covenant in the revolving credit facility. Beginning with the ~~quarter~~three months ending June 30, ~~2021,~~2022, the minimum liquidity covenant will cease to apply and the maximum

leverage ratio covenant, as increased, will again be in effect. At June 30, ~~2020,~~2021, we were in compliance with the minimum liquidity covenant. There can be no assurance that we will be able to meet either the minimum liquidity covenant or the maximum leverage ratio covenant, as applicable, at any particular time, and our ability to borrow under the revolving credit facility depends on compliance with the applicable covenant. Further, the lenders have the right to require repayment of any amounts borrowed under the facility if we are not in compliance with the applicable covenant (see Note 9 to the Unaudited Consolidated Financial Statements). ~~As a result, we have not taken into account the availability of the revolving credit facility in evaluating our ability to meet our minimum liquidity requirements.~~

~~In June 2020, in connection with the maturity~~The holders of our Convertible Senior Notes due June 2020 (the "2020 Notes"), we paid $1.0 billion to satisfy the aggregate principal amount due and paid an additional $245 million in satisfaction of the conversion value in excess of the principal amount. In addition, our Convertible Senior Notes due September 2021 ~~(the “2021 Notes”) are reported as current liabilities in the Consolidated Balance Sheet at June 30, 2020 as the holders will~~ have had the right to convert all or any portion of the ~~2021~~ Notes ~~beginning on~~since June 15, 2021, regardless of our stock price (see Note 9 to the

Unaudited Consolidated Financial Statements).

In ~~April 2020,~~March 2021, we issued Senior Notes due ~~April 13,~~March 2025 with an interest rate of ~~4.10%~~0.1% for an aggregate principal amount of ~~$1.0 billion,~~950 million Euros and Senior Notes due ~~April 13, 2027~~March 2028 with an interest rate of ~~4.50%~~0.5% for an aggregate principal amount of ~~$750~~750 million and Senior Notes due April 13, 2030 with an interest rate of 4.625% for an aggregate principal amount of $1.5 billion. In addition, in April 2020, we issued $863 million aggregate principal amount of Convertible Senior Notes due May 1, 2025 with an interest rate of 0.75%.Euros. The proceeds from the issuance of these Senior Notes issued in March 2021 were used to redeem the April 2025 Notes and ~~Convertible Senior~~the April 2027 Notes. In April 2021, we paid $2.0 billion to redeem the April 2025 Notes ~~can be used for general corporate purposes, which may include repayment of debt, including~~and the ~~repayment, at maturity or upon conversion prior thereto, of our outstanding Convertible Senior~~April 2027 Notes (see Note 9 to the Unaudited Consolidated Financial Statements).

See Note 9 to the Unaudited Consolidated Financial Statements for additional information related to our debt arrangements, including principal amounts, interest rates and maturity dates.

During the six months ended June 30, ~~2020,~~2021, we repurchased ~~680,000~~ 68,222 shares of our common stock for an aggregate cost of ~~$1.3 billion.~~$155 million to satisfy employee withholding tax obligations related to stock-based compensation. At June 30, ~~2020,~~2021, we had a remaining aggregate amount of $10.4 billion authorized by our Board of Directors to repurchase our common stock. We have not repurchased any shares ~~in the second quarter of~~since March 2020 ~~and the third quarter of 2020 to date~~ under this stock repurchase authorization and do not intend to initiate any repurchases under this authorization until we have better visibility into the shape and timing of a recovery from the COVID-19 pandemic. See Note 9 to the Unaudited Consolidated Financial Statements for a description of the impact of the 2020 credit facility amendment on our ability to repurchase shares.

In September 2016, we signed a turnkey agreement to construct an office building for Booking.com’s future headquarters in the ~~Netherlands.~~Netherlands for 270 million Euros ($321 million). Upon signing this agreement, we paid 43 million Euros ($48 million) for the acquired land-use rights. In addition, since signing the turnkey agreement we have made several progress payments principally related to the construction of the building. As of June 30, ~~2020,~~2021, we ~~have paid 178 million Euros ($204 million) and~~ had a remaining obligation of 8433 million Euros ($9439 million) ~~at June 30, 2020,~~ related to the turnkey agreement. ~~The contractual obligation was reduced by 9 million Euros ($10 million) during the three months ended June 30, 2020.~~ The remaining obligation will be paid through mid-2022, when we anticipate construction will be complete. In addition to the turnkey agreement, we have a remaining obligation at June 30, ~~2020~~2021 to pay 7169 million Euros ($8082 million) over the remaining initial term of the acquired land lease, which expires in 2065. At June 30, 2021, we had 32 million Euros ($38 million) of outstanding commitments to vendors to fit out and furnish the office space.

In 2018, we entered into an agreement to sign a future lease for office space in Manchester, United Kingdom for the future headquarters of Rentalcars.com, whereby our obligation to execute the lease is conditional upon the lessor completing certain activities. Under the 2018 agreement, it was anticipated that upon completion of the required activities by the lessor, the lease would be executed and commence for a term of approximately 13 years with a lease payments obligation of approximately 65 million British Pounds Sterling ($89 million), excluding lease incentives. The required activities are being completed and the terms and conditions of the lease are being finalized. We ~~have made and~~expect the lease to commence during the three months ending September 30, 2021. In addition to our obligations under the lease, we will ~~continue to~~also make ~~additional~~ capital expenditures to fit out and furnish the office space.

At June 30, 2021 and December 31, 2020, we had lease obligations of $528 million and $590 million, respectively. Additionally, at June 30, 2021 and December 31, 2020, we had, in the aggregate, $152 million and $193 million, respectively, of non-cancellable purchase obligations individually greater than $10 million.

At June 30, 2021 and December 31, 2020, there were $377 million and $138 million, respectively, of standby letters of credit and bank guarantees issued on our behalf. These are obtained primarily for regulatory purposes and payment guarantees to third-party payment processors.

See Note 13 to the Unaudited Consolidated Financial Statements for additional information related to our commitments and contingencies.

~~At June 30, 2020 and December 31, 2019, we had lease obligations of~~ ~~$650 million and~~ ~~$690 million, respectively. Additionally, at June 30, 2020 and December 31, 2019, we had, in the aggregate,~~ ~~$102 million and $79 million, respectively, of non-cancellable purchase obligations individually greater than $10 million.~~

~~At June 30, 2020 and December 31, 2019 there were $176 million and~~ ~~$160 million, respectively, standby letters of credit and bank guarantees issued on behalf of us, primarily related to payment guarantees to third-party payment processors.~~

~~We have taken and are taking actions~~In order to improve our liquidity ~~including, but not limited to, raising~~following the impact of the COVID-19 pandemic on our business, among other actions, we raised additional capital through the issuance of Senior Notes and Convertible Senior Notes, ~~as disclosed above, reducing~~reduced capital expenditures and operating expenses by significantly reducing marketing spend worldwide and working to eliminate non-essential operating costs, ~~monitoring~~monitored the financial health of our partners, suppliers and other third-party relationships, ~~implementing~~implemented a general temporary company-wide hiring freeze for much of 2020 and ~~initiating~~undertook certain personnel actions such as furloughs and workforce reductions. We could have to take additional actions to improve our liquidity in the future. We believe that our existing cash balances and liquid resources will be sufficient to fund our operating activities, capital expenditures and other obligations through at least the next twelve months. However, whether as a result of the COVID-19 pandemic or otherwise, if we are not successful in generating sufficient cash flow from operations or in raising additional capital when required in sufficient amounts and on terms acceptable to us, we may be required to reduce our planned capital expenditures and scale back the scope of our business plans, either of which could have a material adverse effect on our business, our ability to compete or our future growth prospects, financial condition and results of operations. If additional funds were raised through the issuance of equity securities, the percentage ownership of our then current stockholders would be diluted. We may not generate sufficient cash flow from operations in the future, revenue growth

or sustained profitability may not be realized, and future borrowings or equity sales may not be available in amounts sufficient to make anticipated capital expenditures, finance our strategies or repay our indebtedness.

Cash Flow Analysis

Net cashprovided by operating activities for the six months ended June 30, 2021 was $945 million, resulting from a favorable net change in working capital and other long-term assets and liabilities of $926 million and a favorable impact from adjustments for non-cash items of $241 million, partially offset by a net loss of $222 million. Non-cash items were principally associated with net gains on equity securities, loss on early extinguishment of debt, depreciation and amortization, stock-based compensation expense and other stock-based payments, deferred income tax benefit, and operating lease amortization. For the six months ended June 30, ~~2020,~~2021, prepaid expenses and other current assets ~~net cash used in operating activities was $258~~increased by $173 million, ~~as compared~~primarily related to ~~net cash provided by operating activities~~the prepayment of ~~$1.9 billion for~~Netherlands income taxes of $175 million. For the six months ended June 30, ~~2019. The change is~~2021, accounts receivableincreased by $820 million and deferred merchant bookings and other current liabilities increased by $2.0 billion, primarily due to ~~the negative impact of the COVID-19 pandemic to our businesses and financial results, partially offset by the impact of the payment of $403 million~~increases in ~~2019 to French tax authorities to preserve our right in order to contest certain tax assessments in court (see Note 13 to our Unaudited Consolidated Financial Statements).~~business volumes.

Net cash used in operating activities for the six months ended June 30, 2020 was $258 million, resulting from a net loss of $577 million and an unfavorable net change in working capital and other long-term assets and liabilities of $547 million, partially offset by a favorable impact from adjustments for non-cash items of $866 million. Non-cash items were principally associated with impairment of goodwill, provision for expected credit losses and chargebacks, depreciation and amortization, impairment of investment and net gains on ~~marketable~~ equity securities. For the six months ended June 30, 2020, prepaid expenses and other current assets decreased by $248 million, primarily due to the refund for overpayment from a vendor and lower prepayment to third-party payment processors due to decreases in business volumes as a result of the COVID-19 pandemic. For the six months ended June 30, 2020, accounts receivable decreased by $805 million and deferred merchant bookings and other current liabilities decreased by $1.6 billion primarily due to decreases in business volumes as a result of the COVID-19 pandemic.

Net cash ~~provided by operating~~used in investing activities for the six months ended June 30, ~~2019~~2021 was ~~$1.9 billion,~~$136 million, principally resulting from ~~net income~~the purchase of ~~$1.7 billion~~property and ~~a favorable impact from adjustments for non-cash items~~equipment of~~$204 million, offset by net unfavorable changes in working capital and other long-term assets and liabilities of $11~~ $124 million. Non-cash items were principally associated with net unrealized gains on marketable equity securities, depreciation and amortization and stock-based compensation expense. For the six months ended June 30, 2019, prepaid expenses and other current liabilities increased by $584 million, primarily related to the prepayments of the Netherlands income taxes, net of utilization during the period, of $486 million to earn prepayment discounts and an increase in prepayments to suppliers of $97 million. For the six months ended June 30, 2019, accounts receivable increased by $523 million primarily related to increases in business volumes. For the six months ended June 30, 2019, accounts payable, accrued expenses and other current liabilities increased by $1.5 billion primarily related to growth in our merchant transactions and increases in business volumes. Net change in other long-term assets and liabilities of $417 million was due to the increase in other long-term assets related to the payment of $403 million to French tax authorities in order to preserve our right to contest the assessments in court (see Note 13 to our Unaudited Consolidated Financial Statements).

Net cash provided by investing activities for the six months ended June 30, 2020 was $2.8 billion, ~~principally~~ resulting from the proceeds from sales and maturities of investments of $3.0 billion, net of purchases of $72 million, partially offset by the purchase of property and equipment of $150 million.

Net cash ~~provided by investing~~used in financing activities for the six months ended June 30, ~~2019~~2021 was ~~$6.2 billion,~~$138 million, principally resulting from payments for redemption of debt of $2.0 billion and payments for the repurchase of common stock of $150 million, partially offset by the proceeds from ~~sales and maturities~~the issuance of ~~investmen~~tslong-term debt of ~~$7.0 billion, net of purchases of $0.6~~$2.0 billion. ~~Cash invested in the purchase of property and equipment was $150 million and $199 million in the six months ended June 30, 2020~~ ~~and 2019, respectively.~~

Net cash provided by financing activities was $1.6 billion for the six months ended June 30, 2020, almost entirely resulting from the proceeds from the issuance of long-term debt of $4.1 billion, partially offset by payments for the repurchase of common stock of $1.3 billion and payments for the conversion of convertible notes of $1.2 billion. ~~Net cash used in financing activities was $5.5 billion for the six months ended June 30, 2019, principally resulting from payments for the repurchase of common stock.~~

Contingencies

assert that Booking.com had a permanent establishment in France. In December 2019, the French tax authorities issued an additional assessment of 70 million Euros ($83 million), including interest and penalties, for the 2013 tax year asserting that Booking.com had taxable income attributable to a permanent establishment in France. The French tax authorities also have issued assessments totaling 39 million Euros ($47 million), including interest and penalties, for certain tax years between 2011 and 2015 on Booking.com's French subsidiary asserting that the subsidiary did not receive sufficient compensation for the services it rendered to Booking.com in the Netherlands. As a result of a formal demand from the French tax authorities for payment of the amounts assessed against Booking.com for the years 2006 through 2012, in January 2019, we paid the assessments of approximately 356 million Euros ($403 million) in order to preserve our right to contest those assessments in court. The payment, which is included in "Other assets, net" in the Consolidated Balance Sheets at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, does not constitute an admission that we owe the taxes and will be refunded (with interest) to us to the extent we prevail. IfIn December 2019 and October 2020, we

~~are unable~~ initiated court proceedings with respect to resolve the matter with the French tax authorities, we plan to challenge the assessments in the French courts. The French tax authorities have issued other tax assessments for other years for which demand for payment has not been made. We have not recorded a liability in connection with anycertain of the ~~French tax assessments as~~assessments. Although we believe that Booking.com has been, and continues to be, in compliance with French tax law, and we are contesting the ~~assessments.~~ assessments, during the three months ended September 30, 2020, we contacted the French tax authorities regarding the potential to achieve resolution of the matter through a settlement. After assessing several potential outcomes and potential settlement amounts and terms, an unrecognized tax benefit in the amount of 50 million Euros ($59 million) was recorded during the year ended December 31, 2020, of which the majority was included as a partial reduction to the tax payment recorded in "Other assets, net" in the Consolidated Balance Sheets at June 30, 2021 and December 31, 2020. In December 2020, the French Administrative Court (Conseil d’Etat) delivered a decision in the "ValueClick" case that could have an impact on the outcome in our case. After considering the potential adverse impact of the new decision on the potential outcomes for the Booking.com assessments, we currently estimate that the reasonably possible loss related to VAT is approximately 20 million Euros ($24 million). Additional assessments could result when the French tax authorities complete the outstanding audits. For additional information related to the French and other tax assessments, ~~and our other contingent liabilities,~~ see Note 13 to our Unaudited Consolidated Financial Statements and Part II, Item 1A, Risk Factors - "We may have exposure to additional tax liabilities."

Beginning in 2014, Booking.com received several letters from the Netherlands Pension Fund for the Travel Industry (Reiswerk) (“BPF”) claiming that Booking.com is required to participate in the mandatory pension scheme of the BPF with retroactive effect to 1999, which has a higher contribution rate than the pension scheme in which Booking.com is currently participating. BPF instituted legal proceedings against Booking.com and in 2016 the District Court of Amsterdam rejected all of BPF’s claims. BPF appealed the decision to the Court of Appeal, and, in May 2019, the Court of Appeal also rejected all of BPF’s claims, in each case by ruling that Booking.com does not meet the definition of a travel intermediary for purposes of the mandatory pension scheme. BPF then appealed to the Netherlands Supreme Court. In April 2021, the Supreme Court overturned the previous decision of the Court of Appeal and held that Booking.com meets the definition of a travel intermediary for the purposes of the mandatory pension scheme. The Supreme Court ruled only on the qualification of Booking.com as a travel intermediary for the purposes of the mandatory pension scheme, and did not rule on the various other defenses we brought forward against BPF's claims. The Supreme Court referred the matter to another Court of Appeal that will have to assess the other defenses we brought forward if BPF were to proceed with the litigation. We intend to pursue a number of defenses in any subsequent proceedings and may ultimately prevail in whole or in part. While we continue to believe that Booking.com is in compliance with its pension obligations and that the Court of Appeal could ultimately rule in favor of Booking.com, given the Supreme Court’s decision, we believe it is probable that we have incurred a loss related to this matter. We are not able to reasonably estimate a loss or a range of loss because there are significant factual and legal questions yet to be determined in any subsequent proceedings. As a result, as of June 30, 2021, we have not recorded a liability in connection with a potential adverse ultimate outcome to this litigation. However, if Booking.com were to ultimately lose and all of BPF’s claims were to be accepted (including with retroactive effect to 1999), we estimate that as of June 30, 2021, the maximum loss, not including any potential interest or penalties, would be approximately $316 million. Such estimated potential loss increases as Booking.com continues not to contribute to the BPF and depends on Booking.com’s applicable employee compensation after June 30, 2021. For additional information related to the pension matter and our other contingent liabilities, see Note 13 to our Unaudited Consolidated Financial Statements.

Off-Balance Sheet Arrangements

At June 30, ~~2020,~~2021, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Sections of this Form 10-Q including, in particular, our Management's Discussion and Analysis of Financial Condition and Results of Operations above and the Risk Factors contained in Part II Item 1A hereof, contain forward-looking statements. These forward-looking statements reflect the views of our management regarding current expectations and projections about future events and are based on currently available information. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict; therefore, actual results could differ materially from those described in the forward-looking statements.

Expressions of future goals and expectations and similar expressions, including "may," "will," "should," "could," "aims," "seeks," "expects," "plans," "anticipates," "intends," "believes," "estimates," "predicts," "potential," "targets," or "continue," reflecting something other than historical fact are intended to identify forward-looking statements. Our actual results could differ materially from those described in the forward-looking statements for various reasons including the risks we face which are more fully described in Part II, Item 1A, Risk Factors. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. However, readers should carefully review the reports and documents we file or furnish from time to time with the Securities and Exchange Commission, particularly our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, and our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have exposure to several types of market risk: changes in interest rates, foreign currency exchange rates and equity prices.

We manage our exposure to interest rate risk and foreign currency risk through internally established policies and procedures and, when deemed appropriate, through the use of derivative financial instruments. We use foreign currency exchange derivative contracts to manage short-term foreign currency risk.

The objective of our policies is to mitigate potential income statement, cash flow and fair value exposures resulting from possible future adverse fluctuations in rates. We evaluate our exposure to market risk by assessing the anticipated near-term and long-term fluctuations in interest rates and foreign currency exchange rates. This evaluation includes the review of leading market indicators, discussions with financial analysts and investment bankers regarding current and future economic conditions and the review of market projections as to expected future rates. We utilize this information to determine our own investment strategies as well as to determine if the use of derivative financial instruments is appropriate to mitigate any potential future market exposure that we may face. Our policy does not allow speculation in derivative instruments for profit or execution of derivative instrument contracts for which there are no underlying exposures. We do not use financial instruments for trading purposes and are not a party to any leveraged derivatives. To the extent that changes in interest rates and foreign currency exchange rates affect general economic conditions, we would also be affected by such changes.

~~During the six months ended June 30, 2020, we sold our investments in government and corporate debt securities other than our~~Our investments in Trip.com Group convertible senior ~~notes (see Note 5 to the Unaudited Consolidated Financial Statements). Our investments in Trip.com Group convertible seniors~~ notes are more sensitive to the equity market price volatility of Trip.com Group's American Depositary Shares ("ADSs") than changes in interest rates. The estimated fair value of our Trip.com Group convertible senior notes will likely increase as the market price of Trip.com Group's ADSs increases and will likely decrease as the market price of Trip.com Group's ADSs falls.

At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the outstanding aggregate principal amount of our debt was ~~$11.8~~$12.3 billion and ~~$8.7~~$12.2 billion, respectively. We estimate that the fair value of such debt was approximately ~~$13.0~~$13.6 billion and ~~$9.8~~$14.0 billion at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The estimated fair value of ~~the Company's~~our debt in excess of the outstanding principal amount primarily relates to the conversion premium on the Convertible Senior Notes and the ~~Convertible~~outstanding Senior Notes issued in April 2020. Excluding the effect on the fair value of our convertible senior notes, a hypothetical 100 basis point (1.0%) decrease in interest rates would have resulted in an increase in the estimated fair value of our other debt of ~~approximately $562~~approximately $471 million and ~~$325~~$544 million at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Our convertible senior notes are more sensitive to the equity market price volatility of our shares than changes in interest rates. The fair value of the convertible senior notes will likely increase as the market price of our shares increases and will likely decrease as the market price of our shares falls.

Our international business represents a substantial majority of our financial results. Therefore, because we report our results in U.S. Dollars, we face exposure to movements in foreign currency exchange rates as the financial results and the financial condition of our international businesses are translated from local currencies (principally Euros and British Pounds

Sterling) into U.S. Dollars. If the U.S. Dollar weakens against the local currencies, the translation of these foreign-currency-denominated balances will result in increased net assets, gross bookings, revenues, operating expenses and net income. Similarly, our net assets, gross bookings, revenues, operating expenses and net income will decrease if the U.S. Dollar strengthens against the local currencies. ~~However,~~For example, total revenues from our international operations increased by 7% for the ~~three and~~six months ended June 30, 2021 as compared to the six months ended June 30, 2020, ~~movements~~but, without the impact of changes in foreign currency exchange rates, ~~had little or no impact~~increased year-over-year on ~~our performance metrics and financial results. Since~~a constant-currency basis by approximately 3%. Since our expenses are generally denominated in foreign currencies on a basis similar to our revenues, our operating margins have not been significantly impacted by currency fluctuations. Additionally, foreign currency exchange rate fluctuations on transactions, denominated in currencies other than the functional currency, result in gains and losses that are reflected in our Unaudited Consolidated Statements of Operations. We have a significant investment that is denominated in Hong Kong Dollars and the related impact from the movements in foreign currency exchange rates is recognized in "Other income (expense), net" in the Unaudited Consolidated Statements of Operations.

~~Historically,~~We designate certain portions of the aggregate principal value of our Euro-denominated debt ~~and accrued interest thereon had provided~~as a hedge ~~against~~of the ~~impact of~~ foreign currency ~~exchange rate fluctuations on~~exposure of the net ~~assets of one of our~~investment in certain Euro functional currency subsidiaries. ~~Beginning in the second quarter of 2019, we have only designated certain portions of the aggregate principal value of the Euro-denominated debt as a hedge.~~ The foreign currency transaction gains or losses on the Euro-denominated debt that is not designated as a hedging instrument for accounting purposes are recognized in ~~"Foreign currency transactions and other"~~"Other income (expense), net" in our Unaudited Consolidated Statements of Operations.

~~We enter into~~ See Note 9 to our Unaudited Consolidated Financial Statements. Such foreign currency ~~forward contracts to~~transaction gains or losses are dependent on the amount of net assets of the Euro functional currency subsidiaries, the amount of the Euro-denominated debt that is designated as a hedge ~~our exposure to the impact of movements~~and fluctuations in foreign currency exchange ~~rates~~rates.

We generally enter into derivative instruments to minimize the impact of foreign currency exchange rate fluctuations on our transactional balances denominated in currencies other than the functional currency.In periods prior to the second quarter of 2020, we also entered into foreign currency derivative contracts to hedge translation risks from short-term foreign currency exchange rate fluctuations for the Euro, British Pound Sterling and certain other currencies versus the U.S. Dollar. In the second quarter of 2020, we did not enter into such derivative instruments as the impact of the COVID-19 pandemic on our operating results were highly uncertain. We will continue to evaluate the use of derivative instruments in the future. ~~(See~~See Note 6 to our Unaudited Consolidated Financial Statements for additional ~~information).~~information related to our derivative contracts.

We are exposed to equity price risk as it relates to changes in fair values of our investments in equity securities of publicly-traded companies and private companies. Due to the impact of the COVID-19 pandemic (see Note 1 to the Unaudited Consolidated Financial Statements) on the business of the investee and the estimated decline in the value of our investment, we recorded a significant impairment charge related to our investment in a private company in the three months ended March 31, 2020 (see Notes 5 and 6 to the Unaudited Consolidated Financial Statements). The estimated fair values of our investments in equity securities of publicly-traded companies and private companies, excluding ~~certain investments~~our investment in Grab that is classified as a debt ~~securities~~security for accounting purposes, were ~~$1.8~~$3.9 billion and ~~$401~~$66 million, respectively, at June 30, ~~2020,~~2021, and ~~$1.8~~$3.1 billion and ~~$501~~$455 million, respectively, at December 31, ~~2019.~~2020. Our investments in private companies, excluding ~~certain investments classified as debt securities for accounting purposes,~~our investment in Grab, are measured at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. A hypothetical 10% decrease in the fair values of these investments at June 30, ~~2020~~2021 and December 31, ~~2019~~2020 would have resulted in a loss, before tax, of approximately ~~$220~~$395 million and~~$230~~ $355 million, respectively, being recognized in net income. As of August 3, 2021, the market prices of Meituan's shares and DiDi's ADSs decreased by 34% and 29%, respectively, as compared to their respective market prices on June 30, 2021.

Item 4. Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Exchange Act Rule 13a-15(e). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

No change in our internal control over financial reporting, as defined in Exchange Act Rule 13a-15(e), occurred during the three months ended June 30, ~~2020~~2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We believe we have not experienced any material impact on our internal control over financial reporting as a result of the COVID-19 pandemic and the resulting remote working conditions. We continue to monitor and assess the effectiveness and design of our internal controls.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

A description of any material legal proceedings to which we are a party, and updates thereto, is included in Note 13 to our Unaudited Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for the three months ended June 30, ~~2020,~~2021, and is incorporated into this Item 1 by reference thereto.

Item 1A. Risk Factors

The following risk factors and other information included in this Quarterly Report should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe are immaterial may also impair our business, results of operations or financial condition. If any of the following risks occur, our business, financial condition, operating results and cash flows could be materially adversely affected.

The risk factors section below contains a description of the significant risks facing our Company and should be carefully considered in full. The following is only a summary of the principal risks that make an investment in our securities speculative or risky.

Risk Factors Summary

•The adverse impact of the COVID-19 pandemic on our business, financial performance and travel demand, generally, including the impact on our liquidity, credit ratings and ongoing access to capital, the restructuring of our business and our participation in government stimulus programs;

•Adverse changes in general market conditions for travel services, including the effects of macroeconomic conditions, terrorist attacks, natural disasters, health concerns, civil or political unrest or other events outside our control;

•Any write-downs or impairments of goodwill or intangible assets related to acquisitions or investments, any increases in provisions for expected credit losses on receivables from and cash advances made to our travel service provider and restaurant partners and any increases in cash outlays to refund consumers for prepaid reservations;

•Our ability to attract and retain qualified personnel;

•Adverse changes in relationships with travel service providers and restaurants and other third parties on which we are dependent;

•The effects of competition;

•Risks associated with the restructuring of our business;

•Our ability to successfully manage growth and expand our global business;

•Our ability to respond to and keep up with the rapid pace of technological and market changes;

•Our performance marketing efficiency and the general effectiveness of our marketing efforts;

•Any change by our search and meta-search partners in how they present travel search results or conduct their auctions for search placement in a manner that is competitively disadvantageous to us;

•IT systems-related failures or security breaches and data privacy risks and obligations;

•Tax, legal and regulatory risks;

•Risks associated with the facilitation of payments from consumers, including fraud and compliance with evolving rules and regulations and reliance on third parties;

•Fluctuations in foreign currency exchange rates and other risks associated with doing business in multiple currencies and jurisdictions;

•Success of investments and acquisitions, including integration of acquired businesses; and

•Financial risks including increased debt levels and stock price volatility.

Industry and Business Risks

The COVID-19 pandemic has materially adversely affected, and may further adversely impact, our business and financial performance.

In ~~December 2019, a~~response to the outbreak of the novel strain of the coronavirus, COVID-19 was first detected in Wuhan, China, and has since spread to other regions, including Europe and the United States. On March 11, 2020, the World Health Organization declared that the rapidly spreading COVID-19 outbreak was a global pandemic (the "COVID-19 pandemic")~~. In response to the~~, as well as subsequent outbreaks driven by new variants of COVID-19, ~~pandemic,~~ many governments around the world have implemented, and continue to implement, a variety of measures to reduce the spread of COVID-19, including travel restrictions, bans and ~~bans,~~advisories, instructions to residents to practice social distancing, curfews, quarantine advisories, including quarantine restrictions after travel in certain locations, shelter-in-place orders, required closures of non-essential businesses and additional restrictions on businesses as part of re-opening plans. These government mandates have ~~forced~~had a significant adverse effect on many of the ~~partners~~customers on whom our business relies, including hotels and other accommodation providers, airlines, restaurants and restaurants, to seek government support in order to continue operating, to curtail drastically their service offerings, to file for bankruptcy protection or to cease operations entirely. Further, these measures have materially adversely affected, and may further adversely affect, consumer sentiment and discretionary spending patterns, economies and financial markets, andother partners, as well as on our workforce, operations and ~~customers.~~consumers. In addition, there remains uncertainty around the impact of the new variants of COVID-19, when existing restrictions will be lifted, if additional restrictions may be initiated or reimposed, if there will be changes to travel behavior patterns when government restrictions are fully lifted, and the timing of distribution and administration of the vaccines globally.

The COVID-19 pandemic and the resulting economic conditions and government ~~orders~~restrictions have resulted in a material decrease in consumer spending and an unprecedented decline in travel and restaurant activities and consumer demand for related ~~services.Our financial results and prospects are almost entirely dependent on the sale of such travel and restaurant-related services. Although it is impossible~~services as compared to ~~accurately predict the ultimate impact of the COVID-19 pandemic and any resurgences of the pandemic on our business, our~~2019 levels. Our results for the ~~quarter~~year ended December 31, 2020 and six months ended June 30, ~~2020~~2021 were ~~significantly~~materially and negatively impacted, with a material decline in gross travel bookings, room nights booked, total revenues, net income and cash flow from operations as compared to the ~~corresponding period in~~year ended December 31, 2019 and six months ended June 30, 2019. ~~Newly-booked~~Accommodation room ~~night reservations, excluding~~nights, which include the impact of cancellations ("room nights"), declined rapidly as the COVID-19 pandemic spread in the first quarter and ~~decreased~~the beginning of the second quarter of 2020, but then steadily improved through the end of the second quarter and into the summer travel period in the third quarter of 2020. However, in the fourth quarter of 2020, we saw an increased decline in room nights, due in part to increased COVID-19 case counts and reimposed or additional government-imposed travel restrictions, particularly in Europe, some of which continued to remain in place during the six months ended June 30, 2021. In spite of these travel restrictions, room night trends improved in the first quarter of 2021, driven by ~~over~~ ~~85%~~domestic travel (travelers booking a stay within their own country) in ~~April 2020~~Europe and the United States. In Europe, the improvement in room nights was driven by bookings for travel expected to occur later in the year, as many government-imposed travel restrictions remained in place in the first quarter of 2021. The United States had positive room night growth in the first quarter of 2021 as compared to ~~April 2019, but have steadily improved to a decrease~~the first quarter of ~~approximately~~ ~~50%in June 2020 as compared to June~~ 2019.We expect to continue to see severely reduced new travel and restaurant reservation bookings as compared to 2019 levels for the foreseeable future, which will have a materially adverse impact on our business, financial condition, results of operations and cash flows.

~~Due~~Room nights declined 26% in the second quarter of 2021 relative to the ~~uncertain~~second quarter of 2019, which was an improvement of about 28 percentage points from the room night decline in the first quarter of 2021 relative to the first quarter of 2019. The comparison of the second quarter of 2021 to the second quarter of 2019 avoids the distortion created from comparing to the second quarter of 2020, which was the first quarter that was fully impacted by the COVID-19 pandemic. This improvement in trends in the second quarter of 2021 was driven by domestic travel (travelers booking a stay within their own country) and ~~rapidly evolving nature~~international travel (travelers booking a stay outside their own country), primarily in Europe as well as continued improvement in domestic travel in the United States. The growth of ~~current conditions~~international bookings in Europe was mainly driven by bookings within the European region. In Europe, we saw an increase in vaccination rates and the easing of many government-imposed travel restrictions towards the end of the second quarter, which helped drive positive room night growth in the month of June compared to the same period in 2019. The United States had strong room night growth in the second quarter of 2021 as compared to the second quarter of 2019.

While it is encouraging that the rate of vaccination distribution is increasing throughout the world, many countries in Asia, Africa, South America and other parts of the world have made slower progress. In the second quarter of 2021, the Delta variant of COVID-19, which is a variant first discovered in India, became the dominant strain in many countries. Many reports indicate that although existing COVID-19 vaccines appear to be mostly effective against the Delta variant, it is more transmissible than other variants and has led certain authorities to reimpose mask requirements and other restrictions, including in countries that have widely distributed vaccines. We believe that as effective vaccines become more widely distributed, people will increasingly feel it is safe to travel again and government restrictions will be relaxed, although the timing remains uncertain.

Following the second quarter of 2021, even as some governments around the world wehave started to lift restrictions and vaccine distributions are ~~unable~~well underway in some countries, there remains significant uncertainty around the recovery due to ~~predict accurately~~ the challenging logistics of distributing the vaccines globally, as well as the unknown impact ~~that~~of the COVID-19 pandemic will have on our business going forward. We currently expect, however, that the COVID-19 pandemic will impact our financial performance for the quarter ended September 30, 2020 less significantly than it impacted the quarter endednew variants of COVID-19. In July 2021, room nights declined about 22% relative to July 2019, which compares to a 13% decline in June ~~30, 2020,~~2021 relative to

June 2019. The modest sequential worsening of room night declines in July relative to June was primarily ~~because~~driven by booking trends in Europe, where we have recently seen ~~a general improvement in our business since April 2020,~~increasing COVID case counts as ~~an increasing number of markets and locations have eased government restrictions, including those related to~~well as some newly imposed travel and ~~restaurant activities. However,~~leisure restrictions in ~~certain markets and locations, we have seen a reversal of~~ the ~~improving trends in~~region. Given the recent ~~weeks~~additional uncertainty around COVID cases as a result of ~~rising COVID-19 case counts~~the spread of the more transmissible Delta variant, we cannot accurately predict the level of room night declines in the third quarter of 2021 relative to the third quarter of 2019. We expect that the decline in gross bookings in the third quarter of 2021 relative to the third quarter of 2019 will be several percentage points less than the decline in room nights due to increases in accommodation ADRs and flight bookings, which benefit gross bookings. We also expect that revenues as a ~~resulting implementation~~percentage of ~~travel restrictions.~~gross bookings in the third quarter of 2021 will be about the same as it was in the third quarter of 2019. In addition, we currently expect that we will experience an operating profit in the third quarter of 2021. With the continued spread of COVID-19 inand other variants throughout the ~~United States and various other countries,~~world, we ~~expect the COVID-19 pandemic and its effects to~~ continue to ~~have a significant adverse impact on~~expect our business ~~for the duration~~will be adversely impacted by outbreaks of ~~the pandemic, during~~COVID-19, including those driven by variants of COVID-19, as well as any ~~resurgences of the pandemic and during the subsequent economic recovery,~~government-imposed travel restrictions in reaction to COVID-19 outbreaks, which could beremain a risk for an extended period of time.

The extent of the effects of the COVID-19 pandemic on our business, results of operations, cash flows and growth prospects is highly uncertain and will ultimately depend on future developments. These include, but are not limited to, the severity, extent and duration of the global pandemic, including as a result of any ~~resurgence~~new variants of COVID-19 and any resurgences of the ~~pandemic,~~pandemic; the global distribution of the vaccines and ~~its impact~~their efficacy against existing and any future variants of COVID-19, their impacts on the travel and

restaurant industries and consumer spending more broadly; actions taken by national, state and local governments to contain the disease or treat its impact, including travel restrictions and bans, required closures of non-essential businesses, constraints on businesses during reopening transitions and aid and economic stimulus efforts; the effect of our restructuring activities and attrition, as well as the changes in hiring levels and remote working arrangements that we have implemented on our operations, including the health and productivity of management and our employees, and our ability to maintain our financial reporting processes and related controls; the impact on our contracts and relationships with our partners, including the impact ~~as a result~~ of invoking force majeure provisions; our ability to withstand increased cyberattacks that we and many businesses are experiencing; the speed and extent of the recovery across the broader travel ecosystem, including the speed at which customers feel comfortable traveling again once restrictions on travel have been ~~lifted;~~lifted, which we believe will be impacted by how quickly there can be effective and widespread vaccinations, treatments or cures; and the duration, timing and severity of the impact on customer spending, including ~~the length and the severity of~~how long it takes to recover from the economic recession resulting from the pandemic. The pandemic may continue to expand throughout the world and/or worsen in areas that had seen progress in reducing or containing the disease (as currently being seen in Australia and various countries in Asia, Africa and South America), which could continue to affect our business. Also, existing restrictions in affected regions could be extended after the virus has been contained in order to avoid ~~relapses.~~relapses and there may be restrictions on certain travel activity related to whether travelers have been vaccinated.

Our business is dependent on the availability of a large number of accommodations (particularly independently-owned accommodations) and restaurants, and on the ability of consumers to travel to such accommodations and restaurants on airlines, railways and rental cars. The ability of consumers to travel internationally has been significantly impacted by the various travel restrictions between countries, including for example, the variety of requirements instituted on a country-by-country basis in the European ~~Union’s restriction on travelers from the United States.~~Union including quarantine, testing and/or vaccination requirements for international travelers. We do not expect economic and operating conditions for our business to ~~improve~~recover fully until ~~consumers are once again willing~~there is widespread consumer confidence and ~~able~~ability to travel, and our travel service provider and restaurant partners are ~~once again willing and~~ able to ~~serve those consumers.~~meet the demand for services. This may not occur until well after the broader global economy begins to improve. Additionally, our business is also dependent on consumer sentiment and discretionary spending patterns. Increased unemployment resulting from the COVID-19 pandemic ~~such as that experienced in the European Union and the United States,~~ is likely to have a negative impact on consumer discretionary spending, including for the travel and restaurant industries. Even ifthough we have seen some improvements in the economic and operating conditions for our business ~~improve,~~since the outset of the COVID-19 pandemic, we cannot predict the long-term effects of the pandemic on our business or the travel and restaurant industries as a whole. As an example, in the first and second quarters of 2021, a higher share of our room nights booked with flexible cancellation policies, as compared to the first and second quarters of 2019 and 2020, which could result in higher than normal cancellation rates in future quarters, which would negatively impact future revenue and cause increased cash refunds to travelers in the case of certain cancellable bookings. If the travel and restaurant industries are fundamentally changed by the COVID-19 pandemic in ways that are detrimental to our operating model, our business may continue to be adversely affected even as the broader global economy recovers.

To the extent that the COVID-19 pandemic continues to adversely affect our business and financial performance, it may also have the effect of heightening many of the other risks identified in this section, such as those relating to our substantial amount of outstanding indebtedness.

~~Our liquidity, credit ratings and ongoing access to capital could be materially and negatively affected by the impacts of the COVID-19 pandemic.~~

Our continued access to sources of liquidity depends on multiple factors, including global economic conditions, the condition of global financial markets, the availability of sufficient amounts of financing, our ability to meet debt covenant requirements, our operating performance and our credit ratings. Since the COVID-19 pandemic, there has been increased volatility in the financial and securities markets, which has generally made access to capital less certain and increased the cost of obtaining new capital. Further, if our credit ratings were to be downgraded or if financing sources were to ascribe higher risk to our rating levels, our industry or us, our access to capital and the cost of any financing would be negatively impacted. We currently have $2.0 billion available under our revolving credit facility, which provides an additional potential source of liquidity. The revolving credit facility contains a maximum leverage ratio covenant, compliance with which is a condition to our ability to borrow thereunder. In April 2020, we amended the revolving credit facility, pursuant to which the maximum leverage ratio covenant has been suspended through and including the quarter ending March 31, 2021, and has been replaced with a minimum liquidity covenant based on unrestricted cash, cash equivalents, short-term investments and unused capacity under this revolving credit facility. At June 30, 2020, we were in compliance with the minimum liquidity covenant. Beginning with the quarter ending June 30, 2021, the minimum liquidity covenant will cease to apply and the maximum leverage ratio covenant will again be in effect. There can be no assurance that we will be able to meet either the minimum liquidity covenant or the maximum leverage ratio covenant, as applicable, at any particular time, and our ability to borrow under the revolving credit facility depends on compliance with the applicable covenant. Further, the lenders have the right to require repayment of any amounts borrowed under the facility if we are not in compliance with the applicable covenant.

There is no guarantee that additional debt financing will be available in the future to fund our obligations, or that it will be available on commercially reasonable terms, in which case we may need to seek other sources of funding. In addition, the terms of future debt agreements could include more restrictive covenants, which could restrict our business operations. See~~Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources for more information on our liquidity and capital resources.~~

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~~Utilization of governmental~~Participation in government stimulus ~~packages~~programs may negatively impact our business, operations and/or reputation.

Certain governments ~~have~~ passed ~~or are considering~~ legislation to help businesses during the COVID-19 pandemic through loans, wage subsidies, tax relief or other financial ~~aid, and some of these governments have extended or are considering extending these programs.~~aid. We ~~have~~ participated in several of these programs, including the Netherlands' wage subsidy program and the United Kingdom's job retention ~~scheme and certain other jurisdictions' programs.~~scheme. In some cases, these programs restrict the ability of participating companies to take certain actions, such as restructurings, while participating in the program, though we are not currently under any such restrictions. Additionally, in certain jurisdictions, there has been public scrutiny of government aid beneficiaries, including us, and as a result, our reputation could be harmed by having participated in these programs or participating in ~~these programs.~~the future.

In the second quarter of 2021, we announced our intention to return government assistance received through the Netherlands’ wage subsidy program and various other government aid programs outside the Netherlands in which we participated as a result of the impact of the COVID-19 pandemic on our business. For the three and six months ended June 30, 2021, we recorded expenses of $137 million in the Unaudited Consolidated Statements of Operations, principally in “Personnel” expense, to reflect the return of such assistance. In June 2021, we repaid $86 million of assistance, recorded a liability of approximately $21 million, as of June 30, 2021, for the amount that we expect to repay during 2021 and wrote off a previously recorded receivable for payments expected to be received for government aid programs where we met the qualifying requirements. As of March 31, 2021, we had a receivable of $28 million for such payments. Subsequent to June 30, 2021, we repaid an additional $19 million. While not all such funds have been returned yet, we are working with various governments to voluntarily make repayments. In consideration of the ongoing COVID-19 pandemic, there can be no assurance that we will not accept available government aid in the future, including any restrictions on our business that such programs may impose. Any such risks associated with our participation in government assistance programs, public backlash caused by our participation in such programs and any decision to subsequently return funds to governments could adversely impact our business, results of operations and/or reputation.

Impairments of goodwill, long-term investments and long-lived assets, increases in provisions for expected credit losses on receivables from and cash advances made to our travel service provider and restaurant partners and increases in cash outlays to refund consumers for prepaid reservations have a negative impact on our results of operations.

As a result of the deterioration of our business due to the COVID-19 pandemic, we evaluated goodwill, long-term investments and long-lived assets for possible impairment as of March 31, 2020. As a result of this evaluation, we determined that our goodwill relating to OpenTable and KAYAK experienced a decline in value due to the COVID-19 pandemic, and therefore we recognized a ~~non-deductible~~ goodwill impairment charge of $489 million (which is non-deductible for income tax purposes) as of March 31, 2020. In addition, we recorded an impairment charge of $100 million at March 31, 2020 related to our investment in DiDi Global Inc. ("DiDi") due to the impact of the COVID-19 pandemic on the business of the investee and our estimate of the resulting decline in the value of the investment. As of September 30, 2020, we performed our annual goodwill impairment testing. As a result of this testing, we recognized an additional goodwill impairment charge of $573 million (which is non-deductible for income tax purposes) for the three months ended September 30, 2020 relating to OpenTable and KAYAK. The determination of the fair value ~~reflects~~reflected numerous assumptions that are subject to various risks and uncertainties, including key assumptions regarding OpenTable and KAYAK’s expected growth rates and operating ~~margin,~~margins, expected length and severity of the impact from the COVID-19 pandemic and the shape and timing of the subsequent recovery, the performance of the businesses during and following the COVID-19 pandemic, as well as other key assumptions with respect to matters outside of our control, such as discount rates and market comparables. The ~~evaluation requires~~evaluations required significant judgments and estimates and actual results could be materially different than those judgments and estimates utilized in the fair value ~~estimate. No additional impairment indicators were identified as of June 30, 2020.~~estimates. Future events and changing market conditions may lead us to re-evaluate the assumptions ~~reflected in~~used to estimate the ~~current forecast disclosed above,~~fair value of OpenTable and KAYAK, particularly the assumptions related to the length and severity of the COVID-19 pandemic, ~~and~~ the shape and timing of the subsequent recovery and the performance of the businesses during and following the COVID-19 pandemic, which may result in a need to recognize an additional goodwill impairment charge, which could have a material adverse effect on ~~the~~ our results of operations. See ~~Note~~Notes 5, 6 and 8 to the Unaudited Consolidated Financial Statements for additional information related to the impairment ~~charge.~~charges.

In addition, in 2020, given the ~~volatility~~severe downturn in the global ~~markets~~travel industry and the financial difficulties faced by many of our travel service provider and restaurant partners ~~as a result of the COVID-19 pandemic,~~and marketing affiliates, we ~~have~~ increased our provision for expected credit losses on receivables from and ~~cash advances made~~prepayments to our travel service provider and restaurant ~~partners.~~partners and marketing affiliates. For the ~~six months~~year ended ~~June 30,~~December 31, 2020, there was a ~~$195~~$161 million increase in expected credit loss expense compared to the same period in ~~the prior year.~~2019. Moreover, due to the high level of cancellations of existing reservations, we ~~have~~ incurred ~~and may continue to incur,~~ higher than normal cash outlays to refund consumers for prepaid reservations. In some instances, we dodid not estimate a recovery of prepayment already made to a travel service provider where we ~~have~~had agreed to provide free cancellations to customers for non-refundable reservations, and this ~~has~~ resulted in an aggregate reduction in revenue of ~~$63~~$44 million for the ~~six months~~year ended ~~June 30,~~December 31, 2020. Any ~~additional~~ significant increase in our provision for expected credit losses ~~on receivables from and cash advances made to travel service provider and restaurant partners,~~ and any ~~additional~~ significant increase in cash outlays to refund consumers would have a corresponding ~~negative~~adverse effect on our results of operations and related cash flows.

~~We face risks associated with the restructuring of our business.~~

Due to the impact of the COVID-19 pandemic on our business volumes, we have taken or intend to take actions to reduce the size of our workforce, and there could be further reductions in the size of our workforce and/or consolidations to optimize efficiency. See Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Trends for more information on the workforce reductions. We have incurred and expect to incur charges related to the reductions in the workforce, changes in our facilities requirements, contract terminations and other non-cash charges, and there could be unanticipated costs in the future. Implementation of these restructuring actions presents several significant risks, including the potential negative impact on employee morale and productivity, the loss of talented employees that we would not otherwise want to lose, difficulty retaining valuable key employees that have not been terminated, adverse impact on our culture, diversion of attention away from operating our business, public scrutiny, personnel capacity constraints, adverse effects on our internal control environment, actual or perceived disruption of service to our customers and hampering of our ability to grow, develop innovative products and compete, any of which could adversely impact our business and reputation. If we do not successfully manage the restructurings, the anticipated efficiencies and cost savings may be delayed or not realized. Risks associated with managing the restructurings effectively include unforeseen delays in the implementation of workforce reductions, delays in completing required consultations with works councils or other relevant organizations or in obtaining any

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~~required approvals, regulatory impediments~~

We rely on the performance of highly skilled employees; and, if we are unable to retain or ~~litigation. Any~~motivate key employees or hire, retain and motivate well-qualified employees, our business would be harmed.

Our performance is largely dependent on the talents and efforts of ~~these risks associated with~~highly skilled individuals. Our future success depends on our continuing ability to identify, attract, hire, develop, motivate and retain highly skilled employees across our organization. In particular, the ~~implementation~~contributions of key senior management in the United States, Europe and Asia are critical to the performance of our business. We may not be able to retain the services of members of our senior management or ~~management~~other key employees, the loss of whom could harm our business and competitive position. Our continued ability to compete effectively and to innovate and develop products, services, technologies and enhancements depends on our ability to attract, retain and motivate well-qualified employees. As a result of our recent workforce restructurings and the potential for a long recovery period for the travel industry as a result of the ~~restructurings~~COVID-19 pandemic, and as we reopen certain of our offices (depending on local restrictions and health protocols), it is possible our employees may not view employment with us and our new working policies as positively as they did prior to the pandemic. We expect that the COVID-19 pandemic will have a long-term effect on the nature of our office environments and remote working policies. While we believe that this will be a positive change over the longer term, there may continue to be operational and workplace cultural challenges that may adversely affect our business, including talent retention, in the shorter term. We are unable to predict if there will be any significant and continuing impact on our workforce as a result of the COVID-19 pandemic.

Competition for well-qualified employees in all aspects of our business, including software engineers, mobile communication talent and other technology professionals, is intense. In particular, our success in markets across Europe, the United States and Asia has led to increased efforts by our competitors and others to hire our employees. These difficulties may be amplified by increased ability to work remotely, evolving restrictions on immigration, travel or availability of visas or work permits for skilled technology workers. The competition for talent in our industry has intensified, including among established technology companies and startups. There is also competition for technology talent from companies that are transitioning to digital, with whom we did not historically compete for talent. The competition for talent is exacerbated by an increased willingness of certain companies to offer flexible and remote working policies, which expands the pool of candidates from which our competitors may attract talent. This could ~~adversely impact~~continue in the future due to other technology companies recruiting and hiring our employees, an actual or perceived slower pace of recovery of the travel industry as a result of the COVID-19 pandemic than other industries and other factors beyond our control. If we do not succeed in attracting well-qualified employees, our business, our ability to grow and innovate, competitive position, reputation and results of operations ~~and/or reputation.~~would be adversely affected. The competition for talented employees has in the past and may in the future increase our personnel expenses for the acquisition and retention of talent, which may adversely affect our results of operations.

Declines or disruptions in the travel industry could adversely affect our business and financial performance.

Our financial results and prospects are almost entirely dependent upon the sale of travel services. Travel, including accommodation (including hotels, motels, resorts, homes, apartments and other unique places to stay), rental car and airline ticket reservations, is significantly dependent on discretionary spending levels. As a result, sales of travel services decline during general economic downturns and recessions and times of political or economic uncertainty, such as currently being experienced due to the COVID-19 pandemic, as consumers engage in less discretionary spending, are concerned about unemployment or inflation, have reduced access to credit or experience other concerns or effects that reduce their ability or willingness to travel.

Political uncertainty, conditions or events ~~such as the United Kingdom’s transition out of the European Union ("Brexit"), including uncertainty in the implementation of Brexit and other political concerns,~~ can also negatively affect consumer spending and adversely affect travel demand. In the past, and prior to the significantly changed circumstances brought on by the onset of the COVID-19 pandemic, we experienced volatility in transaction growth rates, increased cancellation rates and weaker trends in accommodation average daily rates ("ADRs") across many regions of the world, particularly in those countries that appear to be most affected by economic and political uncertainties, which we believed were due at least in part to these macro-economic conditions and concerns. Further economic or political disruptions beyond those resulting from the COVID-19 pandemic could cause, contribute to or be indicative of deteriorating macro-economic conditions, which in turn could negatively affect travel ~~to or from such countries~~ or the travel industry in general and therefore have an adverse impact on our results of operations. While lower occupancy rates have historically resulted in accommodation providers increasing their distribution of accommodation reservations through third-party intermediaries such as us, our remuneration for accommodation reservation transactions changes proportionately with

price, and therefore, lower ADRs generally have a negative effect on our accommodation reservation business and on our revenues and results of operations. As a result of the COVID-19 pandemic and its material adverse impact on travel, we have generally seen a significant decrease in occupancy rates and ADRs.

These and other macro-economic uncertainties, such as oil prices, geopolitical tensions and differing central bank monetary policies, have led to significant volatility in the exchange rates between the U.S. Dollar and the Euro, the British Pound Sterling and other currencies. Significant fluctuations in foreign currency exchange rates, stock markets and oil prices can also impact consumer travel behavior. For example, although lower oil prices may lead to increased travel activity as consumers could have more discretionary funds and airline fares decrease, declines in oil prices may be indicative of broader macro-economic weakness, which in turn could negatively affect the travel industry, our business and results of operations. Conversely, higher oil prices may result in higher airfares and decreased travel activity, which can negatively affect our business and results of operations.

~~Since the United Kingdom's Brexit vote in 2016, global markets and foreign currency exchange rates have experienced increased volatility, including~~As a ~~decline in the value~~result of ~~the British Pound Sterling as compared to the U.S. Dollar. Although~~ the United Kingdom ~~has formally left~~leaving the European Union ~~many uncertainties remain in the transition period during which the United Kingdom~~("Brexit"), we anticipate that we will negotiate its future relationship with the European Union and other nations. After finalization of the transition period of the United Kingdom's exit from the European Union, among other things, the United Kingdom could lose access to the single European Union market and travel between the United Kingdom and European Union countries could be restricted. We could face new regulatory costs and challenges ifas U.K. regulations and policies diverge from those of the European Union or if additional business licenses are required. Since some of the ~~terms~~details of the United Kingdom's exit from the European Union ~~and/or the European Economic Area are uncertain,~~continue to unfold, we are unable to predict all of the ~~effect~~effects Brexit will have on our business and results of operations.

The uncertainty of macro-economic factors and their impact on consumer behavior, which may differ across regions, makes it more difficult to forecast industry and consumer trends and the timing and degree of their impact on our markets and business, which in turn could adversely affect our ability to effectively manage our business and adversely affect our results of operations.

In addition to the impact of the COVID-19 pandemic described earlier in ~~this section,~~these Risk Factors, other events beyond our control, such as oil prices, stock market volatility, terrorist attacks, changing, unusual or extreme weather or natural disasters such as earthquakes, hurricanes, tsunamis, floods, fires, droughts and volcanic eruptions (whether due to climate change or otherwise), travel-related health concerns including pandemics and epidemics such as coronaviruses, Ebola and Zika, political instability, changes in economic conditions, wars and regional hostilities, imposition of taxes, tariffs or surcharges by regulatory authorities, changes in trade policies or trade disputes, changes in immigration policies or other travel restrictions, travel-related accidents or increased focus on the environmental impact of travel, have previously and may in the future disrupt travel, limit the ability or willingness of travelers to visit certain locations or otherwise result in declines in travel demand and adversely affect our business and results of operations. Because these events or concerns, and the full impact of their effects, are largely unpredictable, they can dramatically and suddenly affect travel behavior by consumers, and therefore demand for our services and our relationships with travel service providers and other partners, any of which can adversely affect our business and results of operations. Prior to the COVID-19 pandemic, certain jurisdictions, particularly in Europe, were considering regulations intended to address the issue of "overtourism", including by restricting access to city centers or popular tourist destinations or limiting accommodation offerings in surrounding areas, such as by restricting construction of new hotels or the renting of homes or apartments. Once the COVID-19 pandemic and its impact subsides, such regulations could adversely affect travel to, or our ability to offer accommodations in, such markets, which could negatively impact our business, growth and results of operations.

Intense competition could reduce our market share and harm our financial performance.

We compete globally with both online and traditional travel and restaurant reservation and related services. The markets for the services we offer are intensely competitive, constantly evolving and subject to rapid change, and current and new competitors can launch new services at a relatively low cost. Some of our current and potential competitors, such as Google, Apple, Alibaba, Tencent, Amazon and Facebook, have significantly more customers or users, consumer data and financial and other resources than we do, and they may be able to leverage other aspects of their businesses (e.g., search or mobile device businesses) to enable them to compete more effectively with us. For example, Google has entered various aspects of the online travel market and has grown rapidly in this area, including by offering a flight meta-search product ("Google Flights"), a hotel meta-search product ("Google Hotel Ads"), a vacation rental meta-search product, its "Book on Google" reservation functionality, Google Travel, a planning tool that aggregates its flight, hotel and packages products in one website, and by integrating its hotel meta-search products ~~into its Google Maps app. Google has also integrated~~and restaurant information and ~~reservations~~reservation products into ~~the~~its Google Maps app. In addition, Amazon has ~~previously~~ experimented with online travel in the past and ~~has partnered~~continues to experiment in this area, such as by partnering with travel companies to offer its customers travel products, including a partnership with Booking.com to provide travel deals to Amazon Prime users in certain ~~countries and with an OTC in India to offer domestic flights through Amazon Pay.~~countries. Moreover, as the economy and the travel industry recover from the impact of the COVID-19 pandemic, the structure of the travel industry or consumer preferences could change in ways that could disadvantage us and benefit certain of our existing competitors or new entrants. For example, as a result of the COVID-19 pandemic and the resulting international travel restrictions and social distancing practices, there has been a shift in favor of domestic travel and alternative accommodations. This shift could benefit competitors that are more well established in domestic markets and alternative accommodations than we are. As a result, our historical strengths may not provide the competitive advantages that they did prior to the pandemic. If we are unable to successfully adapt to any changes in how the travel industry operates or to changes in the ways in which consumers purchase travel services, our ability to compete, and therefore our business and results of operations, would be adversely affected.

We currently, or may in the future, compete with a variety of companies, including:

•online travel reservation services such as Expedia, Hotels.com, Hotwire, Orbitz, Travelocity, Wotif, Cheaptickets, ebookers ~~HotelClub, RatesToGo~~ and CarRentals.com, which are owned by Expedia Group, Traveloka (in which Expedia Group holds a minority interest) and Despegar/Decolar (in which Expedia Group holds a minority interest); Trip.com Group (in which we ~~hold~~have made a small ~~minority interest)~~investment), Trip.com (which is owned by Trip.com Group), Tongcheng-eLong (in which Trip.com Group holds a significant minority interest), ezTravel (in which Trip.com Group holds a majority interest) and MakeMyTrip (in which Trip.com Group holds a significant minority interest); Hotel Reservation Service (HRS) and hotel.de, which are owned by Hotel Reservation Service; and AutoEurope, CarTrawler, ~~Meituan Dianping (in which we hold a small minority interest),~~ Rakuten, Jalan (which is owned by Recruit), Fliggy (which is owned by Alibaba), HotelTonight (which is owned by Airbnb), CheapOair and eDreams ODIGEO;

•online accommodation search and/or reservation services that are currently focused primarily on alternative accommodations, including individually owned properties such as homes and apartments, such as Airbnb, Vrbo (which is owned by Expedia Group), Tujia (in which Trip.com Group and Expedia Group hold investments) and Xiaozhu;

•large online companies, including search, social networking and marketplace companies such as Google, Facebook, Alibaba, Tencent, Amazon and Baidu;

•traditional travel agencies, travel management companies, wholesalers and tour operators, many of which combine physical locations, telephone services and online services, such as Carlson Wagonlit, ~~American Express,~~Amex GBT, Egencia (which Expedia has entered into a transaction to sell to Amex GBT), BCD ~~Travel, Egencia~~ and Expedia Partner Solutions (which ~~are~~is owned by Expedia Group), Concur (which is owned by SAP), TUI, Webjet and Hotelbeds Group, as well as thousands of individual travel agencies around the world;

•travel service providers such as accommodation providers, rental car companies and airlines, many of which have their own branded online platforms to which they drive business, including large hotel chains such as Marriott International, Hilton and Intercontinental Hotel Group and emerging hotel chains such as OYO ~~Rooms, as well as joint efforts by travel service providers such as Room Key, an online hotel reservation service owned by several major hotel companies;~~Rooms;

•online travel search and price comparison services (generally referred to as "meta-search" services), such as Google Flights, Google Hotel Ads, Google's vacation rental meta-search product, TripAdvisor, trivago (in which Expedia Group holds a majority interest), Qunar (which is controlled by Trip.com Group) and Skyscanner (which is owned by Trip.com Group);

•online restaurant reservation services, such as ~~LaFourchette~~TheFork and Bookatable (which are owned by TripAdvisor), SeatMe (which is owned by Yelp), Zomato, Quandoo (which is owned by Recruit) and Resy (which is owned by American Express);

•“Super apps” which offer consumers a wide range of everyday and other services including travel bookings such as We Chat (owned by Tencent), Meituan (in which we hold a small minority interest), Grab (in which we hold a small minority interest) and Go-Jek;

•companies offering new rental car business models or car- or ride-sharing services that affect demand for rental cars, some of which have developed innovative technologies to improve efficiency of point-to-point transportation and extensively utilize mobile platforms, such as Uber, Lyft, Gett, Zipcar (which is owned by Avis), Turo, BlaBlaCar, ~~Didi Chuxing~~DiDi (in which we hold a small minority interest), Grab (in which we hold a small minority interest), Go-Jek and Ola; and

•companies offering technology services and software solutions to travel service providers, including large global distribution systems ("GDSs"), such as Amadeus, Sabre and Travelport, and hospitality software platforms, such as Oracle and Shiji.

Google, the world's largest search engine and one of the world's largest companies and other large, established companies with substantial resources and expertise in developing online commerce and facilitating internet traffic offer travel or travel-related search, meta-search and/or reservation booking services and may create additional inroads into online travel. Google's travel meta-search services, Google Hotel Ads and Google Flights, have grown rapidly and ~~have~~ achieved significant market share in a relatively short time. Meta-search services leverage their search technology to aggregate travel search results

for the consumer's specific itinerary across travel service providers (e.g., accommodations, rental car companies or airlines), online travel companies ("~~OTC"~~OTCs") and other online platforms and, in many instances, compete directly with us for customers. Meta-search services intend to appeal to consumers by showing broader travel search results than may be available through OTCs or other online platforms, which could lead to travel service providers or others gaining a larger share of search traffic. Google leverages its general search business to promote its meta-search offerings by showing meta-search results at the top of its organic search results. Further, TripAdvisor and trivago, two other leading meta-search companies, support their meta-search services with significant marketing efforts. Through our KAYAK meta-search service, we compete directly with these and other meta-search services. If we are unable to effectively compete with these companies, our business and results of operations could be harmed.

Consumers may favor travel services offered by meta-search platforms or search companies over OTCs, which could reduce traffic to our travel reservation platforms, increase consumer awareness of our competitors' brands and services and increase our marketing and other customer acquisition costs. To the extent any such consumer behavior leads to growth in our KAYAK meta-search business, such growth may not result in sufficient increases in revenues from our KAYAK meta-search business to offset any related decrease in revenues or increase in marketing and other customer acquisition costs experienced by our OTC brands. Further, meta-searchMeta-search services may evolve into more traditional OTCs by offering consumers the ability to make travel reservations directly through their platforms. For example, TripAdvisor allows consumers to make a reservation at some accommodations while staying on TripAdvisor through its "Instant Booking" offering, which includes participation by many of the leading global hotel chains. Google also provides reservation services through "Book on Google." To the extent we participate in any such offerings provided by meta-search services, resulting reservations could be less profitable and could cannibalize business that would otherwise come directly to us or through other more profitable channels. If consumers book

travel services through a service such as TripAdvisor's Instant Booking, Google's "Book on Google," a meta-search website or directly with a travel service provider after visiting a meta-search platform or using a meta-search utility on a traditional search engine without using an OTC like us, or if meta-search services limit our participation within their search results or evolve into more traditional OTCs, we may need to increase our marketing or other customer acquisition costs to maintain or grow our reservation bookings and our business and results of operations could be adversely affected.

Over the years, there has been a proliferation of new channels through which accommodation providers can offer reservations as the market for travel services has evolved. For example, companies such as Airbnb and Expedia Group offer services providing alternative accommodation property owners, particularly individuals, an online place to list their accommodations where travelers can search and book such properties and compete directly with our alternative accommodation services. In addition, Airbnb, which owns HotelTonight, offers some hotel reservations through its online platforms. Companies specializing in one type of travel service or product could expand their offerings to compete with us more broadly. Further, meta-search services may lower the cost for new companies to enter the market by providing a distribution channel without the cost of promoting the new entrant's brand to drive consumers directly to its platform. New travel-related services are frequently being introduced to the market. ~~For example, in 2019, Google launched Google Travel, which combines its hotel, flight and packages offerings into one website with trip-planning tools.~~ Some of our competitors and potential competitors offer a variety of online services, such as food delivery, shopping, gaming or search services, many of which are used by consumers more frequently than online travel services. As a result, a competitor or potential competitor that has established other, more frequent online interactions with consumers may be able to more easily or cost-effectively acquire customers for its online travel services than we can. For example, some competitors or potential competitors with more frequent online interactions with consumers are seeking to create "super-apps" where consumers can use many online services without leaving that company's app, in particular in markets such as Asia where online activity (including e-commerce) is conducted primarily through apps on mobile devices. If any of these platforms are successful in offering new travel-related services or services similar to ours to consumers who would otherwise use our platforms or if we are unable to offer our services to consumers within these super-apps, our customer acquisition efforts could be less effective and our customer acquisition costs, including our ~~brand and performance~~ marketing expenses, could increase, either of which would harm our business and results of operations.

Although we believe that providing an extensive collection of properties, excellent customer service and an intuitive, easy-to-use consumer experience are important factors influencing a consumer's decision to make a reservation, for many consumers, particularly in certain markets, the price of the travel service is the primary factor determining whether a consumer will book a reservation. As a result, it is increasingly important to offer travel services, such as accommodation reservations, at competitive prices, whether through discounts, coupons, closed-user group rates or loyalty programs, or otherwise. Discounting and couponing coupled with a high degree of consumer shopping behavior is particularly common in Asian markets. In some cases, our competitors are willing to make little or no profit on a transaction, or offer travel services at a loss, in order to gain market share. As a result, in certain markets we may need to provide discounts or other incentives in order to be competitive, which may make it difficult for us to maintain or grow market share and to maintain historical profit margins. These initiatives may also result in lower ADRs and lower revenues as a percentage of gross bookings. As part of our strategy to provide more payment options to consumers and travel service providers, Booking.com is increasingly processing transactions on a merchant basis, where it facilitates payments on behalf of customers. This allows Booking.com to present consumers with more pricing options. If we are unable to effectively offer competitive prices, our market share, business and results of operations could be materially adversely affected.

Travel service providers, including hotel chains, rental car companies and airlines with which we conduct business, compete with us in online channels to drive consumers to their own platforms in lieu of third-party distributors such as us.

Travel service providers may charge lower prices and, in some instances, offer advantages such as loyalty points or special discounts to members of closed-user groups (such as loyalty program participants or consumers with registered accounts), any of which could make their offerings more attractive to consumers than our services. For example, many large hotel chains have instituted additional initiatives, such as increased discounting and incentives, to encourage consumers to book accommodations directly through their online platforms. We also offer various incentives to consumers and may need to offer additional or increased ~~advantages~~incentives to maintain or grow our reservation bookings, which adversely impacts our profit margins. Further, consolidation among travel service providers ~~such as Marriott International's acquisition of Starwood Hotels & Resorts in 2017,~~ could result in lower rates of commission paid to OTCs, increased discounting and greater incentives for consumers to join closed-user groups as such travel service providers expand their offerings. If we are not as effective as our competitors (including hotel chains) in offering discounted prices and other incentives to consumers, our ability to grow and compete and our results of operations could be harmed.

~~We are exposed to fluctuations in foreign currency exchange rates.~~

We conduct a substantial majority of our business outside the United States but we report our results in U.S. Dollars. As a result, we face exposure to movements in foreign currency exchange rates as the financial results of our international businesses are translated from local currency (principally Euros and British Pounds Sterling) into U.S. Dollars. When the U.S. Dollar strengthens against other currencies in which we transact, as it generally did in 2015, our foreign-currency-denominated net assets, gross bookings, revenues, operating expenses and net income are lower as expressed in U.S. Dollars. When the U.S. Dollar weakens against other currencies in which we transact, as it generally did in 2017 and 2018, our foreign-currency-denominated net assets, gross bookings, revenues, operating expenses and net income are higher as expressed in U.S. Dollars. Foreign currency exchange rate fluctuations on transactions denominated in currencies other than the functional currency result in gains and losses that are reflected in our financial results.

Recent years have seen significant volatility in the exchange rate between the Euro, the British Pound Sterling, the U.S. Dollar and other currencies. Significant fluctuations in foreign currency exchange rates can affect consumer travel behavior. For example, the strengthening of the U.S. Dollar relative to the Euro in 2015 made it more expensive for Europeans to travel to the United States. Consumers traveling from a country whose currency has weakened against other currencies may book lower ADR accommodations, choose to shorten or cancel their international travel plans or choose to travel domestically rather than internationally, any of which could adversely affect our gross bookings, revenues and results of operations, in particular when expressed in U.S. Dollars. However, as a result of the travel restrictions and health concerns arising from the COVID-19 pandemic, we do not believe the exchange rates have significantly altered consumer behavior recently. Since the COVID-19 pandemic, there has been volatility and weakening in the Euro and the British Pound Sterling relative to the U.S. Dollar. If a foreign currency weakens relative to the U.S. Dollar, foreign-currency denominated net assets, gross bookings, revenues, operating expenses and net income are lower when they are expressed in U.S. Dollars.

Volatility in foreign currency exchange rates and its impact on consumer behavior, which may differ across regions, make it more difficult to forecast industry and consumer trends and the timing and degree of their impact on our markets and business, which in turn makes it more difficult to manage our business and forecast our financial and operational performance.

We face risks related to the growth rate and the global expansion of our business.

We derive a substantial portion of our revenues, and have significant operations, outside the United States. Our international businesses include our Netherlands-based OTC brand Booking.com (including Rentalcars.com, based in the United Kingdom), our Asia-based OTC brand agoda and, to a lesser extent, KAYAK's international meta-search services and OpenTable's international restaurant reservation services. Before the COVID-19 pandemic, our international OTC operations historically had achieved significant year-over-year growth in their gross bookings, in particular with respect to their accommodation reservation services. Without taking into consideration the recent declines caused by the COVID-19 pandemic, these growth rates, which contributed significantly to our historical growth in consolidated revenues and earnings, had generally declined over time as the absolute level of our gross bookings increased and online travel growth rates declined. In addition to the general slowing growth rates of online travel and the effects of the COVID-19 pandemic, other factors may also slow the growth rates of our international businesses, including, for example, worldwide or regional economic conditions, strengthening of the U.S. Dollar versus the Euro, the British Pound Sterling and other currencies, declines in ADRs, increases in cancellations, adverse changes in travel market conditions and the competitiveness of the market. Any decline in the growth rates of our international businesses negatively impacts our revenue and earnings growth rates and, as a consequence, our stock price.

Our long-term strategy involves continued expansion throughout the world. Many regions have different economic conditions, customs, languages, currencies, consumer expectations, levels of consumer acceptance and use of online platforms for commerce, legislation, regulatory environments (including labor laws and customs), tax laws and levels of political stability, and we are subject to associated risks typical of international businesses. International markets may have strong local competitors with an established brand and travel service provider or restaurant relationships that may make expansion in that market difficult or costly and take more time than anticipated. In addition, compliance with legal, regulatory or tax requirements in multiple jurisdictions places demands on our time and resources, and we may nonetheless experience unforeseen and potentially adverse legal, regulatory or tax consequences. In some markets such as China, legal and other regulatory requirements may prohibit or limit participation by foreign businesses, such as by making foreign ownership or management of internet or travel-related businesses illegal or difficult, or may make direct participation in those markets uneconomic, which could make our entry into and expansion in those markets difficult or impossible, require that we work with a local partner or result in higher operating costs. Certain markets in which we operate that are in earlier stages of development have lower operating margins compared to more mature markets, which could have a negative impact on our overall profit margins as these markets increase in size over time. If we are unsuccessful in expanding in new and existing markets and effectively managing that expansion, our business and results of operations could be adversely affected.

We intend to continue to improve the accommodation choices available for reservation on our platforms, however the growth rate of the number of accommodations on our platforms may vary in part as a result of removing accommodations from our platforms from time to time. We have seen a year-over-year decrease in the number of accommodations on our platform during and resulting from the impacts of the COVID-19 pandemic, however, we observed a sequential increase in the number of accommodations ~~removed from~~on our platform ~~during the COVID-19 pandemic, and we~~at June 30, 2021 as compared to March 31, 2021. We may see further ~~accommodation removals~~reductions in the number of accommodations in the future primarily due to ~~increases in~~properties not providing availability on our platforms, property closures or ~~changes in ownership.~~non-payment of invoices. Many of the newer accommodations we add to our travel reservation services, especially in highly-penetrated markets, may have fewer rooms or higher credit risk and may appeal to a smaller subset of consumers (e.g., hostels and bed and breakfasts). Because alternative accommodations are often either a single unit or a small collection of independent units, these properties generally represent more limited booking opportunities than hotels, motels and resorts, which generally have more units to rent per property. Further, alternative accommodations in general may be subject to increased seasonality due to local tourism seasons, weather or other factors or may not be available at peak times due to use by the property owners. ~~We also experience lower~~Lower profit margins are associated with ~~respect to~~ alternative accommodation properties due to certain additional costs related to offering these accommodations on our platforms. As we increase our alternative accommodation business, these different characteristics negatively impact our profit margins; and, to the extent these properties represent an increasing

percentage of the properties added to our platforms, we expect that our room-night growth rate and property growth rate will continue to diverge over time (since each such alternative accommodation property has fewer booking opportunities). As a result of the foregoing, as the percentage of alternative accommodation properties increases, the number of reservations per property will likely continue to decrease.

In addition, as our alternative accommodation reservation business grows, we may incur increasing numbers of complaints related to non-existent properties or properties that are significantly different than as described in the listing, as well as claims of liability based on events occurring at such properties such as robbery, injury, death and other similar events. ~~Such~~We have no control over the actions or ability to predict the actions of our customers, property owners and other third parties during the customer’s stay, and therefore, we cannot guarantee the safety of our customers, property owners and third parties. In addition, we have not in the past and may not in the future undertake to independently verify the safety, suitability, location, quality, and legal compliance, such as fire code compliance or the presence of carbon monoxide detectors, of all our alternative accommodation listings. We have in the past relied, and may in the future, rely on property owners to disclose information relating to their listings and such information may be inaccurate or incomplete. Any resulting complaints or claims could result in negative publicity and increased costs, which could adversely affect our reputation, business and results of operations.

Further, the regulatory environment related to ~~some~~the alternative accommodations ~~such as homes and apartments~~business is evolving, and laws, regulations or property association rules could impose restrictions or burdens on these property owners and managers that limit or negatively affect their ability to rent their properties. Some jurisdictions have adopted or are considering statutes or ordinances that prohibit owners and managers from renting certain properties for fewer than a stated number of consecutive days or for more than an aggregate total number of days per year or that require owners or managers to obtain a license to rent their properties. From time to time, we are subject to inquiries related to compliance with alternative accommodation laws, rules and regulations that we may or may not be able to respond to in a timely manner or in full satisfaction of such requests. The outcome of such inquiries could result in fines or penalties, adversely affect our reputation, or require modifications to our business operations, which could result in increased legal and compliance costs. In addition, several jurisdictions have adopted or are considering adopting statutes or ordinances requiring online platforms that list certain alternative accommodations to obtain a license to list such accommodations and/or to comply with other restrictions or requirements. This dynamic regulatory environment requires us to expend significant time and resources and could negatively impact the growth and/or size of our alternative accommodation reservation business. As governments adopt new laws, rules and regulations related to alternative accommodations, we are unable to predict what, if any, effect any future laws and regulations will have on our business.

We believe that the ~~increase in the~~ number, variety and ~~variety~~quality of ~~accommodation providers that participate~~accommodations on our platforms, and the corresponding access to accommodation room nights, had been a key driver of the growth of our accommodation reservation business prior to the COVID-19 pandemic. The breadth of our accommodation bookings typically made us an attractive source of consumer demand for our accommodation providers, and we believe it will continue to do so as the travel industry recovers. However, after accommodation providers recover from the COVID-19 pandemic, they may wish to limit the amount of business that flows through a single distribution channel. Also, certain jurisdictions, particularly in Europe, are considering regulations intended to address the issue of "overtourism," including by restricting accommodation offerings in city centers or near popular tourist destinations, such as by restricting construction of new hotels or the renting of homes or apartments. Such restrictions could also include limiting the number of tourists permitted to visit and stay near popular areas during peak seasons or as a general matter. As a result, we may experience constraints on the number of listings, or accommodation room nights, actually available to us, which could negatively impact our business growth rate and results of operations.

The number of our employees worldwide has grown from approximately ~~9,500~~15,500 at December 31, ~~2013~~2015 to approximately ~~25,000~~19,500 at June 30, ~~2020,~~2021, which growth is mostly comprised of hires by our international operations. Changes in our workforce may make it more difficult to hire, train, retain, motivate and manage ~~the required~~ employees. Historically, our brands operated on a largely independent basis and many of them focused on particular services or geographies. As we look to develop the Connected Trip and pursue our other strategic objectives, we are increasing the collaboration, cooperation and interdependency among our brands. As we manage this shift, in addition to managing any changes in our workforce, whether due to organic growth, growth through acquisitions, workforce reductions or restructurings, we may find it difficult to maintain the beneficial aspects of our corporate culture at the brand companies and throughout the organization as a whole. In addition, as travel recovers from the COVID-19 pandemic, any future expansion or shift increases the complexity of our business and places additional strain on our management, operations, technical performance, financial resources and administrative, legal, tax, internal control and financial reporting functions. Our current and planned employees, systems, procedures and controls may not be adequate to support and effectively manage growth and increased complexity, especially as we employ employees in multiple geographic locations around the world and increase the number and variety of our products and payment systems. The implementation of new information technology, payment, enterprise resource planning (ERP) or other systems could be

disruptive and/or costly or we may experience difficulty successfully integrating new systems into existing systems or migrating to new systems from existing systems, any of which could adversely affect our business and results of operations.

We rely on marketing channels to generate a significant amount of traffic to our platforms and grow our business.

We believe that maintaining and strengthening our brands are important aspects of our efforts to attract and retain customers. We have invested considerable ~~money and~~ resources in the establishment and maintenance of our brands, and we intend to continue to invest resources in marketing and other brand building efforts to preserve and enhance consumer awareness of our brands when and to the extent we deem appropriate, in particular as the COVID-19 pandemic subsides and consumers begin to travel again. Effective marketing has been an important factor in our growth, and we believe it will continue to be important to our future success. Our marketing spend is influenced by the marketing spend of our competitors as we seek to maintain and increase our brand recognition among consumers and to maintain and grow traffic to our platforms through performance marketing channels. We may not be able to successfully maintain or enhance consumer awareness and acceptance of our brands, and, even if we are successful in our branding efforts, such efforts may not be cost-effective. For instance, increased marketing by OTCs, meta-search services and travel service providers, which we saw prior to the COVID-19 pandemic and would expect to see again as the COVID-19 pandemic subsides, make our marketing efforts more expensive and less effective. If we are unable to maintain or enhance consumer awareness and acceptance of our brands in a cost-effective manner, our business, market share and results of operations would be materially adversely affected.

Our ~~online~~ marketing efficiency, expressed as marketing expense as a percentage of revenues, is impacted by a number of factors that are subject to variability and that are, in some cases, outside of our control, including ADRs, costs per click, cancellation rates, foreign currency exchange rates, our ability to convert paid traffic to booking customers and the extent to which consumers come directly to our websites or mobile apps for bookings. For example, competition for desired rankings in search results and/or a decline in ad clicks by consumers could increase our costs-per-click and reduce our marketing efficiency. We use third-party websites, including online search engines (primarily Google), meta-search and travel research services and affiliate marketing as the primary means of generating traffic to our websites. Growth of some of these channels had slowed prior to the COVID-19 pandemic. Historically our marketing expenses have increased significantly, however, we have experienced more moderate growth rates in recent years, and since the COVID-19 pandemic, our marketing expenses have declined significantly ~~year-over-year.~~relative to the comparable period in 2019. Our marketing efficiency has declined in recent years, a trend we expect to continue in the long term, though the rate of decrease may fluctuate and there may be periods of stable or increasing returns on investment ("ROIs") from time to time, and we cannot predict how our marketing efficiency will trend during the recovery from the COVID-19 pandemic. Further, at times we may pursue a strategy of increasing marketing ROIs, which could negatively affect our gross bookings and revenue growth rates. When evaluating our performance marketing spend generally, we consider several factors for each channel, such as the customer experience on the advertising platform, the incrementality of the traffic we receive, ~~and~~ the anticipated repeat rate from a particular platform and the likelihood of cancellation, as well as other factors. Currently, we have reduced our marketing spend significantly year-over-year and are generally limiting our performance marketing efforts to address particular booking characteristics that are identified as having a high likelihood of conversion and a low likelihood of cancellation under the current circumstances of the COVID-19 pandemic. Pursuing a strategy of improving marketing ROIs ~~as we did beginning in the third quarter of 2017 through the fourth quarter of 2018,~~ along with factors such as competitors' actions in the bidding environment, the amount of marketing invested by these channels to generate demand and overall marketing platform traffic growth trends, which have shown volatility and long-term deceleration of growth rates, may also impact growth rates for marketing channels. Under market conditions excluding the impact of the COVID-19 pandemic, ~~impact,~~ any reduction in our marketing efficiency could have an adverse effect on our business and results of operations, whether through reduced revenues or revenue growth, or through marketing expenses increasing faster than revenues and thereby reducing margins and earnings growth.

We believe that a number of factors could cause consumers to increase their shopping activity before making a travel purchase. Increased shopping activity reduces our marketing efficiency and effectiveness because traffic becomes less likely to result in a reservation through our platforms, and such traffic is more likely to be obtained through paid marketing channels than through direct channels. Further, consumers may favor travel services offered by search or meta-search companies over OTCs, which could reduce traffic to our travel reservation platforms, increase consumer awareness of our competitors' brands and platforms, increase our marketing and other customer acquisition costs and adversely affect our business, margins and results of operations. To the extent any such increased shopping behavior leads to growth in our KAYAK meta-search business, such growth may not result in sufficient increases in revenues from our KAYAK meta-search business to offset any related decrease in revenues or increase in marketing and other customer acquisition costs experienced by our OTC brands.

We may not be able to keep up with rapid technological or other market changes.

The markets in which we compete are characterized by rapidly changing technology, evolving industry standards, consolidation, frequent new service announcements, introductions and enhancements and changing consumer demands and preferences. These characteristics are changing at an even greater pace as OTCs and travel service providers seek to address consumer needs and preferences resulting from the COVID-19 pandemic. We may not be able to keep up with these rapid changes. In addition, these market characteristics are heightened by the progress of technology adoption in various markets, including the continuing adoption of the internet and online commerce in certain geographies and the emergence and growth of

the use of smartphones, tablets and other smart devices, including those with voice and artificial intelligence capabilities, for mobile e-commerce transactions. New developments in other areas, such as cloud computing, could make entering our markets easier for competitors due to lower upfront technology costs. As a result, our future success will depend on our ability to adapt to rapidly changing technologies, to adapt our services and online platforms to evolving industry standards and local preferences and to continually innovate and improve the performance, features and reliability of our services and online platforms in response to competitive service offerings and the evolving demands of the marketplace. In particular, it is increasingly important for us to effectively offer our services on mobile devices through mobile apps and mobile-optimized websites and to tailor our services to varying devices and platforms. Any failure by us to successfully develop and achieve consumer adoption of our mobile platforms would have a material and adverse effect on our growth, market share, business and results of operations. Further, to the extent mobile devices or platforms enable users to block advertising content, our advertising revenue and our ability to market our brands and acquire new consumers may be negatively affected. We believe it is increasingly critical that features of our mobile platforms, including ease-of-use, comprehensive functionality and the look and feel of ~~our mobile~~such platforms, are ~~increasingly competitively critical~~competitive with our peers as consumers obtain more of their travel and restaurant services through mobile devices and platforms. As a result, we intend to continue to spend significant resources maintaining, developing and enhancing our mobile platforms and other technologies and platforms in the long term. Additionally, our ability to achieve our long-term strategy to build the Connected Trip depends on successfully integrating and developing new and evolving technologies, which is likely to require increased financial and personnel investments that could have an adverse impact on our results of operations until we achieve the expected return on these investments. However, these efforts may not be successful in improving the travel experience or retaining and attracting new customers, which would harm our business and results of operations. Further, technical innovation often results in bugs, vulnerabilities and other system failures. Any such bug, vulnerability or failure, especially in connection with a significant technical implementation or change, could result in lost business, harm to our brand or reputation, consumer complaints and other adverse consequences, any of which could adversely affect our business and results of operations.

We believe that another critical component to our future success will be our ability to enhance our payments capabilities, including by offering alternative payment solutions to consumers even when those payment solutions may not be accepted by the travel service provider or restaurant. Alternate payment providers such as Alipay, Paytm and WeChat Pay operate closed-loop payments systems with direct connections to both consumers and merchants. In many markets, particularly in Asia where credit cards are not readily available and/or e-commerce is largely carried out through mobile devices, these and other emerging alternative payment methods are the exclusive or preferred means of payment for many consumers. Therefore, if we are unable to offer consumers their preferred method of payment by integrating new or emerging payment methods into our platforms, we may not be able to effectively offer our services to these consumers, which would limit our growth opportunities in these markets and our business and results of operations could be harmed.

Furthermore, in the future the competitive pressure to innovate could encompass a wider range of services and technologies, including services and technologies that may be outside of our historical core business, and our ability to keep pace may slow. Our current and potential competitors range from large and established companies to emerging start-ups. Emerging start-ups may be able to innovate and focus on developing a particularly new product or service faster than we can or may foresee consumer need for new services or technologies before we do. Some of our larger competitors or potential competitors have more resources or more established or varied relationships with consumers than we have, and they could use these advantages in ways that could affect our competitive position, including by making acquisitions, entering or investing in travel reservation businesses, investing in research and development and competing aggressively for highly-skilled employees. For example, because consumers often utilize other online services more frequently than online travel services, a competitor or potential competitor that has established other, more frequent online interactions with consumers may be able to more easily or cost effectively acquire consumers for its online travel services than we can.

In addition, the widespread adoption of new internet, networking or telecommunications technologies or other technological changes (including ~~new~~ devices and services, such as Amazon's Echo and Alexa and Google Home and Google Assistant, developing technologies, such as artificial intelligence, chatbot and virtual reality technologies, and the creation of "super-apps" where consumers can use many online services without leaving a particular app) could require us to incur substantial expenditures to modify or adapt our services or infrastructure to these new technologies, which could adversely affect our results of operations or financial condition. Any failure to implement or adapt to new technologies in a timely

manner or at all could adversely affect our ability to compete, increase our consumer acquisition costs or otherwise adversely affect our business, and therefore adversely affect our brand, market share and results of operations.

~~Our processing, storage, use and disclosure of personal data exposes us to risks of internal or external security breaches and could give rise to liabilities and/or damage to reputation.~~

The security of data when engaging in e-commerce is essential to maintaining consumer and travel service provider confidence in our services. Cyberattacks by individuals, groups of hackers and state-sponsored organizations are increasing in frequency and sophistication and are constantly evolving. For example, cyberattacks on organizations such as the targeted attack on Twitter accounts in July of this year have increased during the crisis of the COVID-19 pandemic. Any security breach whether instigated internally or externally on our systems or third-party systems could significantly harm our reputation and therefore our business, brand, market share and results of operations. Consumers who use certain of our services provide us with their credit card information. We require user names and passwords in order to access our information technology systems. We also use encryption and authentication technologies to secure the transmission and storage of data and prevent unauthorized access to our data or accounts. Computer circumvention capabilities, new discoveries or advances or other developments, including our own acts or omissions, could result in a compromise or breach of consumer data. For example, third parties may attempt to fraudulently induce employees, travel service provider partners or consumers to disclose user names, passwords or other sensitive information ("phishing"), which may in turn be used to access our information technology systems or to defraud our partners or consumers. Third parties may also attempt to take over consumer accounts by using passwords, usernames and other personal information obtained elsewhere to attempt to login to consumer accounts on our platforms. We have experienced targeted and organized phishing and account takeover attacks, which have increased recently during the COVID-19 pandemic, and we expect to continue to experience these events in the future. These risks are likely to increase as we expand our offerings, integrate our products and services, and store and process more data, including personal information. Our efforts to protect information from unauthorized access may be unsuccessful or may result in the rejection of legitimate attempts to book reservations through our services, any of which could result in lost business and could materially and adversely affect our business, reputation and results of operations.

Our existing security measures may not be successful in preventing security breaches. A party (whether internal, external, an affiliate or unrelated third party) that is able to circumvent our security systems could steal consumer information or transaction data or other proprietary information. In the last few years, several major companies experienced high-profile security breaches that exposed their systems and information and/or their consumers' or employees' personal information, and it is expected that these types of events will continue to occur. We have a heightened risk of security breaches due to some of our operations being located in certain international jurisdictions. We expend significant resources to protect against security breaches, and regularly increase our security-related expenditures to maintain or increase our systems' security. We have experienced and responded to cyberattacks, which we believe have not had a significant impact on the integrity of our systems or the security of data, including customer data maintained by us. These issues are likely to become more difficult to manage as we expand the number of places where we operate and the number and variety of services we offer, and as the tools and techniques used in such attacks become more advanced. Security breaches could result in severe damage to our information technology infrastructure, including damage that could impair our ability to offer our services or the ability of consumers to make reservations or conduct searches through our services, as well as loss of consumer, financial or other data that could materially and adversely affect our ability to conduct our business, satisfy our commercial obligations or meet our public reporting requirements in a timely fashion or at all. Security breaches could also result in negative publicity, damage our reputation, expose us to risk of loss or litigation and possible liability, subject us to regulatory penalties and sanctions, or cause consumers to lose confidence in our security and choose to use the services of our competitors, any of which would have a negative effect on our brands, market share, results of operations and financial condition. Our insurance policies have coverage limits and may not be adequate to reimburse us for all losses caused by security breaches.

We also face risks associated with security breaches affecting third parties conducting business over the internet. Consumers generally are concerned with security and privacy on the internet, and any publicized security problems could negatively affect consumers' willingness to provide private information or effect online commercial transactions generally, including through our services. Some of our business is conducted with third-party marketing affiliates, which may generate travel reservations through our infrastructure or through other systems. Additionally, our consumers' personal data could be affected by security breaches at third parties upon which we rely, such as travel service providers, payroll providers, health plan providers, payment processors or GDSs. A security breach at any such third-party marketing affiliate, travel service provider, payment processor, GDS or other third party on which we rely, such as the security breach experienced by Sabre in May 2017, could be perceived by consumers as a security breach of our systems and in any event could result in negative publicity, subject us to notification requirements, damage our reputation, expose us to risk of loss or litigation and possible liability and subject us to regulatory penalties and sanctions. In addition, such third parties may not comply with applicable disclosure requirements or with parameters within which we permit them to process data, which could expose us to liability.

In the operation of our business, we receive and store a large volume of personally identifiable data and payment information. This data is increasingly subject to legislation and regulations in numerous jurisdictions around the world. The European Union's General Data Protection Regulation (the "GDPR"), which is designed to unify data protection within the European Union under a single law, has resulted and will continue to result in significantly greater compliance burdens and costs for us. Under the GDPR, fines of up to 20 million Euros or up to 4% of the annual global revenues of the infringer, whichever is greater, could be imposed. Several data protection authorities have imposed significant fines on companies of various sizes across industry sectors for violations of the GDPR. The California Consumer Privacy Act (the "CCPA"), which went into effect in January 2020, has created new data privacy rights for users in California and has resulted and will continue to result in additional complexity and costs related to compliance. Many other jurisdictions continue to consider adopting or may adopt similar data protection regulations. These regulations are typically intended to protect the privacy of personal data that is collected, processed and transmitted in or from the governing jurisdiction as well as to give individuals greater rights and/or control over how their data is processed. In many cases, these laws apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries, including employee information. These laws and their interpretations continue to develop and may be inconsistent from jurisdiction to jurisdiction. For example, the recent invalidation of the EU-US Privacy Shield has altered one of the acceptable approaches upon which many companies have relied to ensure compliant data transfers between the European Union and the United States. Additionally, some of these regulations, such as the CCPA, give consumers a private right of action against companies for violations of these rules. While we have invested and continue to invest significant resources to comply with the GDPR, CCPA and other privacy regulations, many of these regulations are new, extremely complex and subject to interpretation. Non-compliance with these laws could result in negative publicity, damage to our reputation, significant penalties or other legal liability. If legislation or regulations are expanded to require changes in our business practices or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our business, our results of operations, financial condition or competitive position could be adversely affected.

Our business could be negatively affected by changes in online search and meta-search algorithms and dynamics or traffic-generating arrangements.

We use Google to generate a significant portion of the traffic to our platforms, and, to a lesser extent, we use other search and meta-search services to generate traffic to our platforms, principally through pay-per-click marketing campaigns. The pricing and operating dynamics on these search and meta-search platforms can experience rapid change commercially, technically and competitively. For example, Google frequently updates and changes the logic which determines the placement

and display of results of a consumer's search, such that the placement of links to our platforms can be negatively affected and our costs to improve or maintain our placement in search results can increase. The European Commission has fined Google significant amounts for anti-competitive behavior relating to its comparison-shopping service and online search advertising services. Changes by Google in how it presents travel search results, including its promotion of its travel meta-search services, or the manner in which it conducts the auction for placement among search results, whether as a result of a court order, investigation or other reason, may be competitively disadvantageous to us and may impact our ability to efficiently generate traffic to our platforms, which in turn would have an adverse effect on our business, market share and results of operations. In January 2020, Google announced modifications to its flights display model, including that it would not be charging airlines and OTCs for sending referrals from Google Flights. As a result, certain airline and OTC partners ~~may choose to limit~~have limited or ~~eliminate~~eliminated their use of other meta-search services ~~or may demand~~and have demanded cost savings from their other meta-search ~~services and/or~~services. Further, Google may receive access to certain discounted fares not provided to meta-search services that charge for ~~referrals, any of which~~referrals. Most recently, Google modified its hotel price-comparison search tool to display prices for accommodation and booking providers for free. These modifications could adversely affect our meta-search business, profit margins and results of operations. Similarly, changes by our other search and meta-search partners in how they present travel search results or the manner in which they conduct the auction for placement among search results may be competitively disadvantageous to us and may impact our ability to efficiently generate traffic to our platforms. In addition, a decline or slowing growth in travel search traffic negatively impacts our ability to efficiently generate traffic to our platforms through performance marketing on general search platforms, which could have an adverse effect on our business and results of operations.

In addition, we purchase online traffic from a number of other sources, including some operated by our competitors, in the form of pay-per-click arrangements that can be terminated with little or no notice. If one or more of such arrangements is terminated, our business, market share and results of operations could be adversely affected. We rely on various third-party distribution channels (i.e., marketing affiliates) to distribute accommodation, rental car and airline ticket reservations. Should one or more of such third parties cease distribution of reservations made through us, or suffer deterioration in its search or meta-search ranking, due to changes in search or meta-search algorithms or otherwise, our business, market share and results of operations could be negatively affected.

~~System capacity constraints, system failures or denial-of-service or other attacks could harm our business and our reputation.~~

disruptions in service, slower response times, decreased customer service and customer satisfaction and delays in the introduction of new services, any of which could impair our reputation, damage our brands and materially and adversely affect our results of operations. Further, as an online business, we are dependent on the internet and maintaining connectivity between ourselves and consumers, sources of internet traffic, such as Google, and our travel service providers and restaurants. As consumers increasingly turn to mobile and other smart devices, we also become dependent on consumers' access to the internet through mobile carriers and their systems. Disruptions in internet access, such as the denial-of-service attack against Dyn in October 2016 that resulted in a service outage for several major internet companies, whether generally, in a specific market or otherwise, especially if widespread or prolonged, could materially adversely affect our business and results of operations. While we do maintain redundant systems and hosting services, it is possible that we could experience an interruption in our business, and we do not carry business interruption insurance sufficient to compensate us for all losses that may occur.

Our computer hardware for operating our services is currently located at hosting facilities around the world. These systems and operations are vulnerable to damage or interruption from human error, computer viruses, floods, fires, power loss, telecommunication failures and similar events. They are also subject to break-ins, sabotage, intentional acts of vandalism, terrorism and similar misconduct. Despite any precautions we may take, the occurrence of any disruption of service due to any such misconduct, natural disaster or other unanticipated problems at such facilities, or the failure by such facilities to provide our required data communications capacity could result in lengthy interruptions or delays in our services. Any system failure that causes an interruption or delay in service could impair our reputation, damage our brands, result in lost business or result in consumers choosing to use a competitive service, any of which could have a material adverse effect on our business and results of operations.

Our existing security measures may not be successful in preventing attacks on our systems, and any such attack could cause significant interruptions in our operations. For instance, from time to time, we have experienced denial-of-service type attacks on our systems that have made portions of our websites slow or unavailable for periods of time. There are numerous other potential forms of attack, such as phishing, account takeover attacks, SQL injection (where a third party attempts to insert malicious code into our software through data entry fields in our websites in order to gain control of the system) and attempting to use our websites as a platform to launch a denial-of-service attack on another party, each of which could cause significant interruptions in our operations and potentially adversely affect the value of our brands, operations and results of operations or involve us in legal or regulatory proceedings. We expend significant resources in an attempt to prepare for and mitigate the effects of any such attacks. Reductions in the availability and response time of our online services could cause loss of substantial business volumes during the occurrence of any such attack on our systems and measures we may take to divert suspect traffic in the event of such an attack could result in the diversion of bona fide customers. These issues are more difficult to manage during any expansion of the number of places where we operate and the variety of services we offer, and as the tools and techniques used in such attacks become more advanced. Successful attacks could result in negative publicity, damage our reputation and prevent consumers from booking travel services, researching travel services or making restaurant reservations through us during the attack, any of which could cause consumers to use the services of our competitors, which would have a negative effect on the value of our brands, our market share, business and results of operations.

We depend upon various third parties to process payments, including credit cards, for our merchant transactions around the world. In addition, we rely on third parties to provide credit card numbers which we use as a payment mechanism for merchant transactions. If any such third party were wholly or partially compromised or ceased or suspended operations (whether due to the COVID-19 pandemic or otherwise), our cash flows could be disrupted or we may not be able to generate merchant transactions (and related revenues) until such a time as a replacement process could be put in place with a different vendor, and this could have a negative effect on our business, reputation and results of operations and, in certain cases of the insolvency of such a partner, could result in additional payments by us and loss of the total transaction value, which would negatively affect our results of operations and financial condition.

We do not have a completely formalized or comprehensive disaster recovery plan in every geographic region in which we conduct business. In the event of certain system failures, we may not be able to switch to back-up systems immediately and the time to full recovery could be prolonged. Like many online businesses, we have experienced system failures from time to time. In addition to placing increased burdens on our engineering staff, these outages create a significant amount of consumer questions and complaints that need to be addressed by our customer support employees. Any unscheduled interruption in our service could result in an immediate loss of revenues that could be substantial, increase customer service costs, harm our reputation and result in some consumers switching to our competitors. If we experience frequent or persistent system failures, our reputation and brand could be permanently and significantly harmed. We have taken and continue to take steps to increase the reliability and redundancy of our systems. These steps are expensive, may reduce our margins and may not be successful in reducing the frequency or duration of unscheduled downtime.

We use both internally-developed systems and third-party systems to operate our services, including transaction processing, order management and financial and accounting systems. If the number of consumers using our services increases substantially, or if critical third-party systems stop operating as designed, we may need to significantly expand and upgrade our technology, transaction processing systems, financial and accounting systems or other infrastructure. We may not be able to upgrade our systems and infrastructure to accommodate such conditions in a timely manner, and, depending on the systems affected, our transactional, financial and accounting systems could be impacted for a meaningful amount of time before upgrade, expansion or repair. Many of our processes and systems, including those related to processing and recording revenue, are highly automated and involve multiple inputs from various IT systems, which can mitigate the risk of human error but which can also make testing, troubleshooting and auditing more difficult. As a result, it may be difficult to quickly detect and correct errors embedded in these processes or systems.

Consumer adoption and use of mobile devices creates challenges and may enable device companies such as Google and Apple to compete directly with us.

Widespread adoption of mobile devices, such as the iPhone and Android-enabled smartphones, ~~and tablets such as the iPad,~~ coupled with the web browsing functionality and development of thousands of apps available on these devices, ~~is driving~~continues to drive substantial online traffic and commerce to mobile platforms. We have experienced a significant shift of business, both direct and indirect, to mobile platforms and our advertising partners are also seeing a rapid shift of traffic to mobile platforms. Some competitors offer last-minute discounts for mobile accommodation reservations. The revenues earned on a mobile transaction may be less than a typical desktop transaction due to different consumer purchasing patterns. For example, accommodation reservations made on a mobile device typically are for shorter lengths of stay, have lower ADRs and are not made as far in advance. Further, given the device sizes and technical limitations of ~~tablets and~~ smartphones, mobile consumers may not be willing to download multiple apps from multiple companies providing a similar service and instead prefer to use one or a limited number of apps for their mobile travel and restaurant research and reservation activity. As a result, the consumer experience with mobile apps as well as brand recognition and loyalty ~~are likely~~continue to ~~become~~be increasingly important. Our mobile offerings have received generally strong reviews and are driving a material and increasing share of our business. We believe that mobile bookings present an opportunity for growth and are necessary to maintain and grow our business as consumers increasingly turn to mobile devices instead of a personal computer. As a result, it is increasingly important for us to develop and maintain effective mobile platforms to provide consumers with an appealing, easy-to-use mobile experience. If we are unable to continue to rapidly innovate and create new, user-friendly and differentiated mobile offerings and efficiently and effectively advertise and distribute on these platforms, or if our mobile offerings are not used by consumers, we could lose market share and our business, future growth and results of operations could be adversely affected.

Google's Android operating system is the leading smartphone operating system in the world. As a result, Google has the ability to leverage its Android operating system to give its travel services a competitive advantage, either technically or with prominence on its Google Play app store or within its mobile search results. Further, Google is the leading internet search service and has leveraged its search popularity to promote its travel services. The European Commission has fined Google significant amounts and the U.S. Justice Department (the "U.S. DOJ") and dozens of state Attorneys General have sued Google for breaching ~~European Union~~ antitrust rules by imposing restrictions on Android device manufacturers and mobile network operators, including by mandating the pre-installation of Google apps and limiting access to its Google Play app ~~store. In addition,~~store, and giving its own services and products preferential treatment in the online search market. The European Commission's decision requires Google to end those anticompetitive device and operating system practices or face penalty payments of up to 5% of the average daily worldwide turnover of Alphabet, Google's parent company. Google has appealed the European Commission's decision and

refutes the U.S. DOJ's and state Attorneys General's claims, though it has instituted certain changes to how it distributes its Google Play app store and Google apps. It is not yet clear how or whether ~~the decision~~these actions will further affect Google's business, including its travel services.

Apple, the producer of, among other things, the iPhone and iPad, ~~obtained~~owns a patent for "iTravel," a mobile app that would allow a traveler to check in for a travel reservation. In addition, Apple's iPhone operating system includes "Wallet," a virtual wallet app that holds tickets, boarding passes, coupons and gift cards, and, along with iTravel, may be indicative of Apple's intent to enter the travel reservations business in some capacity. Apple has substantial market share in the smartphone

market and controls integration of offerings, including travel services, into its mobile operating system. Apple also has more experience producing and developing mobile apps and has access to greater resources than we have. Apple may use or expand iTravel, Wallet, Siri (Apple's voice recognition "concierge" service), Apple Pay (Apple's mobile payment system) or another mobile app or functionality as a means of entering the online travel reservations marketplace. To the extent Google or Apple use their mobile operating systems, app distribution channels or, in the case of Google, search services, to favor their own travel service offerings, our business and results of operations could be harmed.

~~We may have exposure to additional tax liabilities.~~

As an international business providing reservation and marketing services around the world, we are subject to income taxes and non-income-based taxes in the United States and various international jurisdictions. Due to economic and political conditions, tax rates and tax regimes in various jurisdictions may be subject to significant change. Our future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets or changes in tax laws or their interpretation. If our effective tax rates were to increase, our results of operations and cash flows would be adversely affected.

Although we believe that our tax filing positions are reasonable and comply with applicable law, we regularly review our tax filing positions, especially in light of tax law or business practice changes, and may change our positions or determine that previous positions should be amended, either of which could result in additional tax liabilities. The final determination of tax audits or tax disputes may be different from what is reflected in our historical income tax provisions and accruals. To date, we have been audited in many taxing jurisdictions with no significant impact on our results of operations. If current or future audits find that additional taxes are due, we may be subject to incremental tax liabilities, possibly including interest and penalties, which could have a material adverse effect on our results of operations, financial condition and cash flows. For example, Booking.com is the subject of tax proceedings in France and has been assessed approximately 465 million Euros, the majority of which represents penalties and interest. We believe that Booking.com has been, and continues to be, in compliance with French tax law, and we are contesting the assessments. In January 2019, we were required to pay the assessments for the years 2006 through 2012 (356 million Euros) in order to preserve our right to contest the assessments for that period in court, though the payment is not an admission that we owe the taxes. See~~Note 13 to our Unaudited Consolidated Financial Statements for more information regarding certain tax contingencies~~.

In general, governments are increasingly focused on ways to increase tax revenues, which has contributed to an increase in audit activity, more aggressive positions taken by tax authorities, more time and difficulty to resolve any audits or disputes and an increase in new tax legislation. Any such additional taxes or other assessments may be in excess of our current tax provisions or may require us to modify our business practices in order to reduce our exposure to additional taxes going forward, any of which could have a material adverse effect on our business, results of operations and financial condition.

In December 2017, the Tax Cuts and Jobs Act (the "Tax Act") was enacted into law in the United States. The Tax Act introduced a tax on 50% of global intangible low-taxed income, which is income determined to be in excess of a specified routine rate of return on qualifying business assets. The Tax Act further introduced a base erosion and anti-abuse tax ("BEAT") aimed at preventing the erosion of the U.S. tax base and a new tax deduction with respect to certain foreign-derived intangible income. If we are unable to operate our business so that BEAT does not impact us, our effective tax rate, results of operations and cash flows would be materially adversely affected. The tax law changes made by the Tax Act are broad and complex, and there continues to be significant uncertainty about how the Tax Act will be interpreted at both the U.S. federal and state levels. The interpretation and implementation of the Tax Act and regulations, rules or guidance that have been or may be adopted under, or result from, the Tax Act have had and could have a negative impact on our results of operations and cash flows.

potential for double taxation on the same transaction. The interpretation and implementation of the various digital services taxes (especially if there is inconsistency in the application of these taxes across tax jurisdictions) could have a materially adverse impact on our results of operations and cash flows. Further, digital services taxes may not apply to our competitors such as hotel chains and smaller OTCs, which harms our business and competitive position. Any changes to international tax laws, including new definitions of permanent establishment, new nexus and profit allocation rules, or changes affecting the benefits of preferential tax regimes such as the Dutch "Innovation Box Tax" (discussed below), could impact the tax treatment of our foreign earnings and adversely impact our effective tax rate. Further, changes to tax laws and additional reporting requirements could increase the complexity, burden and cost of compliance. Due to the large and expanding scale of our international business activities, any changes in U.S. or international taxation of our activities or the combined effect of tax laws in multiple jurisdictions may increase our worldwide effective tax rate, increase the complexity and costs associated with tax compliance (especially if changes are implemented or interpreted inconsistently across tax jurisdictions) and adversely affect our cash flows and results of operations.

We are also subject to non-income-based taxes, such as value-added, payroll, sales, use, excise, net worth, property, hotel occupancy and goods and services taxes. We refer generally to taxes on travel transactions (e.g., value-added taxes, sales taxes, excise taxes, hotel occupancy taxes, etc.) as "travel transaction taxes." From time to time, we are under audit or investigation by tax authorities or involved in legal proceedings related to these non-income-based taxes or we may revise or amend our tax positions, which may result in additional non-income-based tax liabilities. A number of jurisdictions in the United States have initiated lawsuits against online travel companies, including us, related to, among other things, the payment of certain travel transaction taxes (such as hotel occupancy taxes) that could include historical taxes that are claimed to be owed, interest, penalties, punitive damages and/or attorney's fees and costs. In addition, a number of jurisdictions have initiated audit proceedings, issued proposed tax assessments or started inquiries relating to the payment of travel transaction taxes. Additional jurisdictions may assert that we are subject to, among other things, travel transaction taxes and could seek to collect such taxes, either retroactively, prospectively or both. Jurisdictions could also seek to amend their tax statutes in order to collect travel transaction taxes from us on a prospective basis. Litigation is subject to uncertainty and there could be adverse developments in these pending or future cases and proceedings. Additionally, a number of jurisdictions have adopted or may adopt laws that require us to collect and remit sales tax on behalf of travel service providers, which in some instances may negatively impact our revenue. Adverse tax decisions or new laws could have a material adverse effect on our business, margins, cash flows and results of operations. An unfavorable outcome or settlement of pending litigation may encourage the commencement of additional litigation, audit proceedings or other regulatory inquiries. In addition, an unfavorable outcome or settlement of these actions or proceedings could result in substantial liabilities for past and/or future bookings, including, among other things, interest, penalties, punitive damages and/or attorneys' fees and costs.

~~We may not be able to maintain our "Innovation Box Tax" benefit.~~

The Netherlands corporate income tax law provides that income generated from qualifying innovative activities is taxed at the rate of 7% ("Innovation Box Tax") rather than the Dutch statutory rate of 25%. A portion of Booking.com's earnings historically has qualified for Innovation Box Tax treatment. In 2019, the Innovation Box Tax benefit reduced our consolidated income tax expense by $443 million. In 2019, the Dutch government approved a reduction in its corporate income tax rate from 25% to 21.7%, effective in 2021. Furthermore, the Dutch government has proposed an increase in the Innovation Box Tax rate from 7% to 9%, which, if enacted, could be effective beginning in 2021.

In order to be eligible for Innovation Box Tax treatment, Booking.com must, among other things, apply for and obtain a research and development ("R&D") certificate from a Dutch governmental agency every six months confirming that the activities that Booking.com intends to be engaged in over the subsequent six-month period are "innovative." The R&D certificate is current but should Booking.com fail to secure such a certificate in any future period - for example, because the governmental agency does not view Booking.com's new or anticipated activities as innovative - or should this agency determine that the activities performed in a prior period were not performed as contemplated or did not comply with the agency's requirements, Booking.com may lose its certificate and, as a result, the Innovation Box Tax benefit may be reduced or eliminated. Booking.com intends to apply for continued Innovation Box Tax treatment for future periods. However, Booking.com's application may not be accepted, or, if accepted, the amount of qualifying earnings may be reduced.

The loss of the Innovation Box Tax benefit (or any material portion thereof), whether due to a change in tax law or a determination by the Dutch government that Booking.com's activities are not innovative or for any other reason, could substantially increase our effective tax rate and adversely impact our results of operations and cash flows in the future.

We are dependent on providers of accommodations, rental cars and airline tickets and on restaurants.

We rely on providers of accommodations, rental cars and airline tickets and on restaurants to make their services available to consumers through us. Our arrangements with travel service providers generally do not require them to make

available any specific quantity of accommodation reservations, rental cars or airline tickets, or to make accommodation reservations, rental cars or airline tickets available in any geographic area, for any particular route or at any particular price. Similarly, our arrangements with restaurants generally do not require them to provide all of their available tables and reservations to customers through us. We are in regular dialogue with our major travel service providers about the nature and extent of their participation in our services. A significant reduction on the part of any of our major travel service providers or providers that are particularly popular with consumers in their participation in our services for a sustained period of time or their complete withdrawal, whether as a result of limitations on occupant capacity or business closures stemming from the COVID-19 pandemic or otherwise, could have a material adverse effect on our business, market share and results of operations. To the extent any of those major or popular travel service providers ceased to participate in our services in favor of one of our competitors' services or decided to require consumers to purchase services directly from them, our business, market share and results of operations could be harmed. During periods of higher occupancy rates, accommodation providers may decrease their distribution of accommodation reservations through third-party intermediaries like us, in particular through our discount services. Further, as consolidation among travel service providers increases, the potential adverse effect of a decision by any particular significant travel service provider (such as a large hotel chain, airline or rental car company) to withdraw from or reduce its participation in our services also increases. The COVID-19 pandemic has increased the risk that our travel service provider and restaurant partners voluntarily or involuntarily declare bankruptcy or otherwise cease or limit their operations, which could harm our business and results of operations. In particular, the potential harm to our business and results of operations is greater if there are bankruptcies or closures of larger partners such as airlines, hotel chains or large rental car companies. To the extent restaurants limit the availability of reservations through OpenTable or if a significant number of restaurants cease to participate in our services (whether as a result of the COVID-19 pandemic or otherwise) or if government ~~orders restrict~~restrictions limit occupant capacity of any travel service providers or restaurants as a result of the COVID-19 pandemic, consumers may not continue to use our services and/or our revenues and results of operations could be adversely affected, especially if reservations during highly desirable times on high volume days are not made available through us.

KAYAK, a meta-search service, depends on access to information related to travel service pricing, schedules, availability and other related information from OTCs and travel service providers to attract consumers. Many of KAYAK's agreements with OTCs and travel service providers are short-term agreements that may be terminated on 30 days' notice. To the extent OTCs or travel service providers no longer provide such information to KAYAK, KAYAK's ability to provide comprehensive travel service information to consumers could be diminished and its brand, business and results of operations could be harmed. To the extent consumers do not view KAYAK as a reliable source of comprehensive travel service information, fewer consumers would likely visit its websites, which would also likely have a negative impact on KAYAK's advertising revenue and results of operations. In addition, if OTCs or travel service providers choose not to advertise with KAYAK or choose to reduce or eliminate the fees paid to KAYAK for referrals from query results, KAYAK's business and results of operations could be adversely affected.

We ~~rely~~face risks associated with the restructuring of our business.

Due to the impact of the COVID-19 pandemic on our business volumes, we took actions to reduce the size of our workforce, and there could be further reductions in the size of our workforce and/or consolidations to optimize efficiency and reduce costs. See Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Trends for more information on the ~~performance~~workforce reductions. We have incurred and expect to incur charges related to the reductions in our workforce, changes in our facilities requirements, contract terminations and other non-cash charges, and there could be unanticipated costs in the future. Implementation of ~~highly skilled employees;~~these restructuring actions presents several significant risks, including the potential negative impact on employee morale and ifproductivity, the loss of talented employees that we would not otherwise want to lose, difficulty retaining valuable key employees that have not been terminated, adverse impact on our culture, diversion of attention away from operating our business, public scrutiny, personnel capacity constraints, adverse effects on our internal control environment, actual or perceived disruption of service to our customers and hampering of our ability to grow, develop innovative products and compete, any of which could adversely impact our business and reputation. If we do not successfully manage the restructurings, the anticipated efficiencies and cost savings may be delayed or not realized. Risks associated with managing any restructurings effectively include unforeseen delays in the implementation of workforce reductions, delays in completing required consultations with works councils or other relevant organizations or in obtaining any required approvals, regulatory impediments or litigation. Any of these risks associated with the implementation or management of the restructurings could adversely impact our business, results of operations and/or reputation.

Investment in new business strategies and acquisitions could disrupt our ongoing business and present risks not originally contemplated.

Our mission is to make it easier for everyone to experience the world. As a result, our strategy involves evaluating and potentially entering complementary businesses in furtherance of that mission. We have invested, and in the future may invest, in new business strategies and acquisitions. For example, we acquired FareHarbor in April 2018 to increase our ability to offer local activities and experiences (such as tours and attractions). We also have acquired, and in the future may acquire, businesses similar to those we already operate in an effort to expand our geographic markets, acquire technology or products or to otherwise improve or grow our business. For example, in July 2017 we acquired the Momondo Group and in November 2018 we acquired HotelsCombined, in each case, among other things, to enhance the global reach of our meta-search services. Such endeavors may involve significant risks and uncertainties, including diversion of management's attention from current operations, greater than expected liabilities and expenses, inadequate return on capital, new risks with which we are ~~unable~~not familiar, legal compliance obligations that previously did not apply to ~~retain or motivate key employees or hire, retain~~us, integration risks and ~~motivate well-qualified employees,~~difficulties and unidentified issues not discovered in our investigations and evaluations of those strategies and acquisitions. As a result, entering new businesses involves risks and costs that could, if realized, have an adverse effect on our business, ~~would be harmed.~~

~~Our performance is largely dependent on the talents and efforts~~reputation, results of ~~highly skilled individuals. Our future success depends~~operations, profit margins, cash flows or financial condition, as well as on our ~~continuing~~ ability to ~~identify, hire, develop, motivate~~achieve the expected benefits of any such investments or acquisitions.

We may decide to make minority investments, including through joint ventures, in which we have limited or no management or operational control. The controlling person in such a case may have business interests, strategies or goals that are inconsistent with ours, and ~~retain highly skilled employees for all areas~~decisions of the company or venture in which we invested may result in harm to our reputation or business or adversely affect the value of our ~~organization. In particular, the contributions~~investment. A substantial portion of ~~key senior management~~our goodwill and intangible assets were acquired in acquisitions. If we determine that any of our goodwill and intangible assets, or any goodwill or intangible assets acquired in future transactions, experiences a decline in value, we may be required to record, as we did in the ~~United States, Europe~~first and ~~Asia are critical~~third quarters of 2020, an impairment (see Note 8 to ~~the overall management~~our Unaudited Consolidated Financial Statements), which could materially adversely affect our results of operations. Further, we may issue shares of our ~~business.~~ common stock in these transactions, which could result in dilution to our stockholders.

We may not be able to ~~retain~~successfully integrate acquired businesses or combine internal businesses.

The integration of acquired businesses requires significant time and resources, and we may not manage these processes successfully. Further, as our businesses developed, our strategy evolved and market conditions changed, we have integrated businesses that had been managed independently, integrated certain functions across businesses and restructured or ceased operating certain assets or businesses, and we may do so in the future, including through divestitures. The integrations may be of varying degree, depending on many factors such as business compatibility, strategic goals or geographic location, among others. Integrations are complex, often involve additional or unexpected costs and create a variety of issues and risks, including:

•disruption or harm to the businesses involved;

•disruption to our other businesses, including as a result of the need for management to spend time and attention on the integration;

•difficulty combining different company cultures, systems, reporting structures, titles and job descriptions and compensation schemes;

•problems retaining key personnel, in particular at the acquired or integrated company;

•loss of travel service providers, restaurants or partners of the acquired business; and

•difficulty implementing and maintaining effective controls, procedures and policies.

We may not successfully integrate companies or achieve the strategic, financial or operating objectives of the acquisition or integration, any of which could adversely affect our business, results of operations or the value of our acquisitions.

Information Security, Cybersecurity and Data Privacy Risks

Our processing, storage, use and disclosure of personal data exposes us to risks of internal or external security breaches and could give rise to liabilities and/or damage to our reputation.

We are an innovative technology company dependent on sophisticated software applications and computing infrastructure. The security of data when engaging in e-commerce is essential to maintaining consumer and travel service provider confidence in our services. Cyberattacks by individuals, groups of hackers and state-sponsored organizations are increasing in frequency and sophistication and are constantly evolving. Cyberattacks on organizations have increased during the crisis of the COVID-19 pandemic. Any security breach whether instigated internally or externally on our systems or third-party systems could significantly harm our reputation and therefore our business, brand, market share and results of operations. Consumers who use certain of our services provide us with their credit card information. We require user names and passwords in order to access our information technology systems. We also use encryption and authentication technologies to secure the transmission and storage of data and prevent unauthorized access to our data or accounts. Computer circumvention capabilities, new discoveries or advances or other developments, including our own acts or omissions, could result in a compromise or breach of consumer data. For example, third parties may attempt to fraudulently induce employees, travel service provider partners or consumers to disclose user names, passwords or other sensitive information ("phishing"), which may in turn be used to access our information technology systems or to defraud our partners or consumers. Third parties may also attempt to take over consumer accounts by using passwords, usernames and other personal information obtained elsewhere to attempt to unlawfully access consumer accounts on our platforms. We have experienced targeted and organized phishing and account takeover attacks, which have increased during the COVID-19 pandemic, and we expect to continue to experience these events in the future. These risks are likely to increase as we expand our offerings, integrate our products and services, and store and process more data, including personal information. Our efforts to protect information from unauthorized access may be unsuccessful or may result in the rejection of legitimate attempts to book reservations through our services, any of which could result in lost business and could materially and adversely affect our business, reputation and results of operations.

Our existing technical, administrative and physical security measures may not be successful in preventing security breaches. A party (whether internal, external, an affiliate or unrelated third party) that is able to circumvent our security systems could steal consumer information or transaction data or other proprietary information. As a result of increased numbers of employee exits due to the restructuring actions or otherwise, we face heightened risks related to the loss or unauthorized use of or access to our systems, intellectual property or other protected data. In the last few years, several major companies experienced high-profile security breaches that exposed their systems and information and/or their consumers' or employees' personal information, and it is expected that these types of events will continue to occur. We have a heightened risk of security breaches due to some of our operations being located in certain international jurisdictions. We expend significant resources to protect against security breaches, and regularly increase our security-related expenditures to maintain or increase our systems' security. We have experienced and responded to cyberattacks, which we believe have not had a significant impact on the integrity of our systems or the security of data, including personal information maintained by us. These issues are likely to become more difficult to manage as we expand the number of places where we operate and the number and variety of services we offer, and as the tools and techniques used in such attacks increasingly become more sophisticated. Security breaches could result in severe damage to our information technology infrastructure, including damage that could impair our ability to offer our services or the ability of consumers to make reservations or conduct searches through our services, as well as loss of consumer, financial or other data that could materially and adversely affect our ability to conduct our business, satisfy our commercial obligations or meet our public reporting requirements in a timely fashion or at all. Security breaches could also

result in negative publicity, damage our reputation, expose us to risk of loss or litigation and possible liability, subject us to regulatory penalties and sanctions, or cause consumers to lose confidence in our security and choose to use the services of our competitors, any ~~members~~of which would have a negative effect on our brands, market share, results of operations and financial condition. Our insurance policies have coverage limits and may not be adequate to reimburse us for all losses caused by security breaches.

We also face risks associated with security breaches affecting third parties conducting business over the internet. Consumers generally are concerned with security and privacy on the internet, and any publicized security problems could negatively affect consumers' willingness to provide private information or effect online commercial transactions generally, including through our services. Some of our ~~senior management~~business is conducted with third-party marketing affiliates, which may generate travel reservations through our infrastructure or through other systems. Additionally, our consumers' personal data could be affected by security breaches at third parties upon which we rely, such as travel service providers, connectivity partners, payroll providers, health plan providers, payment processors or GDSs. A security breach at any such third-party marketing affiliate, travel service provider, payment processor, GDS or other ~~key employees,~~third party on which we rely, such as the security breach experienced by MGM Resorts International in 2020, could be perceived by consumers as a security breach of our systems and in any event could result in negative publicity, subject us to notification requirements, damage our reputation, expose us to risk of loss or litigation and possible liability and subject us to regulatory penalties and sanctions. In addition, such third parties may not comply with applicable disclosure requirements or with parameters within which we permit them to process data, which could expose us to liability.

In the operation of ~~whom~~our business, we receive and store a large volume of personally identifiable data and payment information. This data is increasingly subject to legislation and regulations in numerous jurisdictions around the world. The European Union's General Data Protection Regulation (the "GDPR") imposes significant compliance obligations and costs for us. Under the GDPR, violations could result in fines of up to 20 million Euros or up to 4% of the annual global revenues of the infringer, whichever is greater. Several data protection authorities have imposed significant fines on companies of various sizes across industry sectors for violations of the GDPR. The California Consumer Privacy Act (the "CCPA") became operative in January 2020, and the recently enacted California Privacy Rights Act, which is set to become operative in January 2023, impose new privacy requirements and rights for consumers in California and has resulted and will continue to result in additional complexity and costs related to compliance. Many other jurisdictions (and the Federal Trade Commission, as the recently-designated primary United States regulator for privacy) continue to consider adopting or may adopt similar data protection regulations and certain jurisdictions, including Colorado and Virginia, have recently enacted data protection regulations. These regulations are typically intended to protect the privacy of personal data that is collected, processed and transmitted in or from the governing jurisdiction as well as to give individuals greater rights and/or control over how their data is processed. In many cases, these laws apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries, including employee information. These laws and their interpretations continue to develop and may be inconsistent from jurisdiction to jurisdiction. For example, the recent invalidation of the EU-US Privacy Shield has altered one of the acceptable approaches upon which many companies have relied to ensure compliant data transfers between the European Union and the United States. Additionally, some of these regulations, such as the CCPA, give consumers a private right of action against companies for violations of these rules. While we have invested and continue to invest significant resources to comply with the GDPR, CCPA and other privacy regulations, many of these regulations are new, extremely complex and subject to interpretation. Non-compliance with these laws could result in negative publicity, damage to our reputation, significant penalties or other legal liability. If legislation or regulations are expanded to require changes in our business practices or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our business, our results of operations, financial condition or competitive position could be adversely affected.

System capacity constraints, system failures or denial-of-service or other attacks could harm our business and ~~competitive position. We~~our reputation.

Prior to the COVID-19 pandemic, we experienced rapid growth in consumer traffic to our online platforms, the number of accommodations on our extranets and the geographic breadth of our operations. As consumers begin to travel at pre-pandemic levels again, if our systems cannot be expanded to cope with increased demand or fail to perform, we could experience unanticipated disruptions in service, slower response times, decreased customer service and customer satisfaction and delays in the introduction of new services, any of which could impair our reputation, damage our brands and materially and adversely affect our results of operations. Further, as an online business, we are dependent on the internet and maintaining connectivity between ourselves and consumers, sources of internet traffic, such as Google, and our travel service providers and restaurants. As consumers increasingly turn to mobile and other smart devices, we also become dependent on consumers' access to the internet through mobile carriers and their systems. Disruptions in internet access, whether generally, in a specific market or otherwise, especially if widespread or prolonged, could materially adversely affect our business and results of

operations. While we maintain redundant systems and hosting services, it is possible that we could experience an interruption in our business, and we do not ~~maintain~~carry business interruption insurance sufficient to compensate us for all losses that may occur.

Our computer hardware for operating our services is currently located at hosting facilities around the world. These systems and operations are vulnerable to damage or interruption from human error, computer viruses, floods, fires, power loss, telecommunication failures and similar events. They are also subject to break-ins, sabotage, intentional acts of vandalism, terrorism and similar misconduct. Despite any ~~key person life insurance policies.~~precautions we may take, the occurrence of any disruption of service due to any such misconduct, natural disaster or other unanticipated problems at such facilities, or the failure by such facilities to provide our required data communications capacity could result in lengthy interruptions or delays in our services. Any system failure that causes an interruption or delay in service could impair our reputation, damage our brands, result in lost business or result in consumers choosing to use a competitive service, any of which could have a material adverse effect on our business and results of operations.

~~In addition, competition for well-qualified employees~~

Our existing security measures may not be successful in ~~all aspects~~preventing attacks on our systems, and any such attack could cause significant interruptions in our operations. For instance, from time to time, we have experienced denial-of-service type attacks on our systems that have made portions of our websites slow or unavailable for periods of time. There are numerous other potential forms of attack, such as phishing, ransomware, account takeover attacks, SQL injection (where a third party attempts to insert malicious code into our software through data entry fields in our websites in order to gain control of the system) and attempting to use our websites as a platform to launch a denial-of-service attack on another party, each of which could cause significant interruptions in our operations and potentially adversely affect the value of our brands, operations and results of operations or involve us in legal or regulatory proceedings. We expend significant resources in an attempt to prepare for and mitigate the effects of any such attacks. Reductions in the availability and response time of our online services could cause loss of substantial business ~~including software engineers, mobile communication talent~~volumes during the occurrence of any such attack on our systems and ~~other technology professionals, is intense. Our international success~~measures we may take to divert suspect traffic in ~~particular has led~~the event of such an attack could result in the diversion of bona fide customers. These issues are more difficult to ~~increased efforts by~~manage during any expansion of the number of places where we operate and the variety of services we offer, and as the tools and techniques used in such attacks become more advanced. Successful attacks could result in negative publicity, damage our reputation and prevent consumers from booking travel services, researching travel services or making restaurant reservations through us during the attack, any of which could cause consumers to use the services of our competitors, which would have a negative effect on the value of our brands, our market share, business and ~~others~~results of operations.

We rely on certain third-party computer systems and third-party service providers, including GDSs and computerized central reservation systems of the accommodation, rental car and airline industries in connection with providing some of our services. Any damage to, ~~hire~~breach of or interruption in these third-party services and systems or deterioration in their performance could prevent us from booking related accommodation, rental car and airline reservations and have a material adverse effect on our ~~international employees. These difficulties~~business, brands and results of operations. Our agreements with some third-party service providers are terminable upon short notice and often do not provide recourse for service interruptions. In the event our arrangement with any such third party is terminated, we may not be ~~amplified by evolving restrictions~~able to find an alternative source of systems support on ~~immigration, travel~~a timely basis or ~~availability~~on commercially reasonable terms and, as a result, it could have a material adverse effect on our business and results of ~~visas or work permits for skilled technology workers.~~operations. Further, as a result of the COVID-19 pandemic, ~~the potential for a long recovery period for the travel industry and~~some of our ~~recent workforce reduction announcements, employees~~third-party service providers may ~~not view employment with us as positively as they did prior to the pandemic,~~go out of business, suspend operations, reduce their support services or system maintenance activities, any of which ~~would make retention of well-qualified employees more difficult. The competition for talent in our industry has in the past and may in the future increase our personnel expenses, which may~~could adversely affect our ~~results of operations. Our continued ability~~business and reputation.

We depend upon various third parties to ~~compete effectively~~process payments, including credit cards, for our merchant transactions around the world. In addition, we rely on third parties to provide credit card numbers which we use as a payment mechanism for merchant transactions. If any such third party were wholly or partially compromised or ceased or suspended operations (whether due to the COVID-19 pandemic or otherwise), our cash flows could be disrupted or we may not be able to generate merchant transactions (and related revenues) until such a time as a replacement process could be put in place with a different vendor, and ~~to innovate and develop products, services, technologies and enhancements depends~~this could have a negative effect on our ~~ability to attract, retain and motivate well-qualified employees. If we do not succeed in attracting well-qualified employees or retaining, training, managing and motivating existing employees, our~~ business, ~~competitive position,~~ reputation and results of operations and, in certain cases of the insolvency of such a partner, could result in additional payments by us and loss of the total transaction value, which would negatively affect our results of operations and financial condition.

We do not have a completely formalized or comprehensive disaster recovery plan in every geographic region in which we conduct business. In the event of certain system failures, we may not be ~~adversely affected.~~able to switch to back-up systems immediately and the time to full recovery could be prolonged. Like many online businesses, we have experienced system failures from time to time. In addition to placing increased burdens on our engineering staff, these outages create a significant amount of consumer questions and complaints that need to be addressed by our customer support employees. Any unscheduled interruption in our service could result in an immediate loss of revenues that could be substantial, increase customer service costs, harm our reputation and result in some consumers switching to our competitors. If we experience frequent or persistent system failures, our reputation and brand could be permanently and significantly harmed. We have taken and continue to take steps to increase

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the reliability and redundancy of our systems. These steps are expensive, may reduce our margins and may not be successful in reducing the frequency or duration of unscheduled downtime.

Legal, Tax, Regulatory, Compliance and Reputational Risks

We may have exposure to additional tax liabilities.

Although we believe that our tax filing positions are reasonable and comply with applicable law, we regularly review our tax filing positions, especially in light of tax law or business practice changes, and we may change our positions or determine that previous positions should be amended, either of which could result in additional tax liabilities. The final determination of tax audits or tax disputes may be different from what is reflected in our historical income tax provisions and accruals. To date, we have been audited in many taxing jurisdictions with no significant impact on our results of operations. If current or future audits find that additional taxes are due, we may be subject to incremental tax liabilities, possibly including interest and penalties, which could have a material adverse effect on our results of operations, financial condition and cash flows. For example, Booking.com is the subject of tax proceedings in France and has been assessed approximately 465 million Euros, the majority of which represents penalties and interest. In January 2019, we were required to pay the assessments for the years 2006 through 2012 (356 million Euros) in order to preserve our right to contest the assessments for that period in court, though the payment is not an admission that we owe the taxes. Although we believe that Booking.com has been, and continues to be, in compliance with French tax law, and we are contesting the assessments, during the third quarter of 2020, we contacted the French Tax Authorities regarding the potential to achieve resolution of the matter through a settlement. SeeNote 13 to our Unaudited Consolidated Financial Statements for more information regarding the French tax matter and certain tax contingencies.

In December 2017, the Tax Cuts and Jobs Act (the "Tax Act") was enacted into law in the United States. The Tax Act introduced a tax on 50% of global intangible low-taxed income ("GILTI"), which is income determined to be in excess of a specified routine rate of return on qualifying business assets. The Tax Act further introduced a base erosion and anti-abuse tax ("BEAT") aimed at preventing the erosion of the U.S. tax base and a new tax deduction with respect to certain foreign-derived intangible income. If we are unable to operate our business so that BEAT does not impact us, our effective tax rate, results of operations and cash flows would be adversely affected. The interpretation and implementation of the Tax Act and regulations, rules or guidance that have been or may be adopted under, or result from, the Tax Act have had and could have a negative impact on our results of operations and cash flows. In March 2021, President Biden released his proposed American Jobs Plan, which includes significant corporate income tax changes including raising the U.S. corporate income tax rate to 28% and increasing the percentage of GILTI subject to tax in the United States to 75%. Increases in the U.S. corporate income tax rate, increasing the percentage of GILTI subject to tax in the United States or other changes included in the proposed legislation could have a negative impact on our results of operations and cash flows.

Additionally, there have been significant changes made and proposed to international tax laws that increase the complexity, burden and cost of tax compliance. The Organisation for Economic Co-operation and Development ("OECD") initiated the "base erosion and profit shifting" ("BEPS") project to ensure international tax standards keep pace with changes in global business practices and to address situations where multinational businesses may pay little or no tax in certain jurisdictions by shifting profits away from jurisdictions in which the profit generating activities take place. On July 1, 2021, the OECD issued a Statement announcing that 130 member countries had agreed to an Inclusive Framework on BEPS consisting of a Two-Pillar solution to address the tax challenges arising from a digitalized economy. Pillar One would allow for a portion of the residual profits of in-scope multinational enterprises (“MNEs”) to be allocated to jurisdictions in which such MNEs are conducting at least a minimum amount of business. Initially, in-scope MNEs would be those with global turnover above 20 billion Euros and profit before tax above 10%. The turnover threshold would be reduced to 10 billion Euros beginning 7 years after the agreement comes into force assuming successful implementation of a mandatory binding dispute resolution mechanism for Pillar One. The Statement says that the final package will provide for appropriate coordination between the application of Pillar One and the removal of all digital services taxes and other relevant similar measures on all companies. Pillar Two includes a global minimum tax regime with a rate of at least 15% for MNEs with global annual revenue of at least 750 million Euros. A detailed implementation plan together with remaining issues are expected to be finalized by the October 2021 G20 meeting. The Statement anticipates finalization of the terms of Pillar One and Pillar Two in 2022 and the rules becoming effective in 2023. Based on our pre-COVID-19 revenue levels, it is likely that initially we would not be subject to the profit allocation rules of Pillar One as currently proposed. There still are many details to be finalized with the Inclusive Framework that could impact us including the mechanism and timing of the removal of all digital services taxes, and therefore, it is not certain how the Inclusive Framework will impact us.

Certain countries have taken steps to unilaterally introduce a digital services tax to address the issue of multinational businesses carrying on business in their jurisdiction without a physical presence and therefore generally not subject to income tax in those jurisdictions. These digital services taxes are calculated as a percentage of revenue rather than income or profits. As a result, with the exception of the U.K digital services tax, these taxes apply even in situations where the business may be operating at an overall loss. In most cases, since these digital services taxes are based on revenue and not income, they cannot be credited against taxes paid on income in another jurisdiction for the same revenue. The interpretation and implementation of the various digital services taxes (especially if there is inconsistency in the application of these taxes across tax jurisdictions) could have a materially adverse impact on our results of operations and cash flows. Further, digital services taxes may not apply to our competitors such as hotel chains and smaller OTCs, which harms our business and competitive position. Any changes to international tax laws, including new definitions of permanent establishment, new nexus and profit allocation rules, or changes affecting the benefits of preferential tax regimes such as the Dutch "Innovation Box Tax" (discussed below), could impact the tax treatment of our foreign earnings and adversely impact our effective tax rate. Further, changes to tax laws and additional reporting requirements could increase the complexity, burden and cost of compliance. Due to the large scale of our international business activities, any changes in U.S. or international taxation of our activities or the combined effect of tax laws in multiple jurisdictions may increase our worldwide effective tax rate, increase the complexity and costs associated with tax compliance (especially if changes are implemented or interpreted inconsistently across tax jurisdictions) and adversely affect our cash flows and results of operations.

We are also subject to other non-income-based taxes, such as value-added, payroll, sales, use, excise, net worth, property, hotel occupancy and goods and services taxes. We refer generally to taxes on travel transactions (e.g., value-added taxes, sales taxes, excise taxes, hotel occupancy taxes, etc.) as "travel transaction taxes." From time to time, we are under audit or investigation by tax authorities or involved in legal proceedings related to these non-income-based taxes or we may revise or amend our tax positions, which may result in additional non-income-based tax liabilities.

A number of jurisdictions in the United States have initiated lawsuits or other proceedings against OTCs, including us, related to, among other things, the payment of certain travel transaction taxes (such as hotel occupancy taxes) that could include historical taxes that are claimed to be owed, interest, penalties, punitive damages and/or attorney's fees and costs. Additional jurisdictions may assert that we are subject to travel transaction taxes and could seek to collect such taxes, either retroactively, prospectively or both. For example, in May 2021, Clark County, Nevada filed a suit alleging an underpayment of hotel occupancy taxes. We continue to defend this and other similar lawsuits and, where appropriate, intend to continue to assert that we should not be subject to such taxes. Although we believe we do not owe the taxes claimed in these lawsuits, litigation is uncertain, and if there was an adverse outcome in this litigation, or any similar litigation in other jurisdictions, it could result in liabilities for past and/or future bookings, and it could have an adverse effect on our business, profit margins and results of operations. An unfavorable outcome or settlement of pending litigation could encourage the commencement of additional litigation, audit proceedings or other regulatory inquiries. Jurisdictions could also seek to amend their tax statutes in order to collect travel transaction taxes from us on a prospective basis. Additionally, a number of jurisdictions have adopted or may adopt laws that require us to collect and remit sales tax on behalf of travel service providers, which in some instances may

negatively impact our revenue. Adverse tax decisions or new laws could have a material adverse effect on our business, margins, cash flows and results of operations.

We may not be able to maintain our "Innovation Box Tax" benefit.

The Netherlands corporate income tax law provides that income generated from qualifying innovative activities is taxed at the rate of 9% beginning in January 2021 and 7% prior to 2021 ("Innovation Box Tax") rather than the Dutch statutory rate of 25%. A portion of Booking.com's earnings historically has qualified for Innovation Box Tax treatment.

Our business is subject to various competition/anti-trust, consumer protection and online commerce laws, rules and regulations around the world, and as the size of our business grows, scrutiny of our business by legislators and regulators in these areas may intensify.

We, the travel industry and the technology industry generally are subject to competition/anti-trust and consumer protection laws and regulations around the world. These laws and regulations evolve and change, and their interpretation, application and enforcement can also change, be unpredictable or be affected by changing political or social pressures. As we expand our business into new areas, including our evolution towards the Connected Trip, we may become subject to additional laws and regulations. At times, online travel platforms, including us, have been the subject of investigations or inquiries by various national competition authorities ("NCAs") or other governmental authorities. For example, we have been and continue to be involved in investigations related to whether Booking.com's contractual parity arrangements with accommodation providers, sometimes also referred to as "most favored nation" or "MFN" provisions, are anti-competitive because they require accommodation providers to provide Booking.com with room rates, conditions orand availability that are at least as favorable as those offered to other OTCs or through the accommodation provider's website. To resolve and close certain of the investigations, we have from time to time made commitments to the investigating authorities regarding future business practices or activities. For example, Booking.com has made commitments to several NCAs, including agreeing to narrow the scope of its parity arrangements, in order to resolve parity-related investigations. In August 2020, Booking.com voluntarily extended its parity commitments in the European Union for another three years. Additionally, these types of investigations can result and have resulted in the assessment of fines.

We have also been involved in investigations or inquiries involving consumer protection matters. For example, the United Kingdom's NCA (the Competition and Markets Authority, or CMA) launched a consumer protection law investigation into the clarity, accuracy and presentation of information on hotel booking sites. In connection with this investigation, in 2019, Booking.com, agoda and KAYAK, along with a number of other OTCs, voluntarily agreed to certain commitments with the CMA, ~~in resolution of this~~which resolved the CMA's investigation without a finding by the CMA of an infringement or an admission of wrongdoing by the OTCs involved. Among other things, the commitments provided to the CMA include showing prices inclusive of all mandatory taxes and charges, providing information about the effect of money earned on search result rankings on or before the search results page and making certain adjustments to how discounts and statements concerning popularity or availability are shown to consumers. The CMA has stated that it expects all market participants to adhere to the same standards, regardless of whether they formally signed the commitments. As a result of additional inquiries from other NCAs in the European Union, Booking.com has made similar commitments with the Consumer Protection Cooperation Network that became applicable in the European Union in June 2020. There are consumer protection investigations or inquiries in other countries as well, including in Brazil, and other countries may decide to investigate these or similar issues generally or with respect to specific businesses, including ours, and we are unable to predict the outcome of any such other investigations or inquiries. To the extent that any such other investigations or inquiries result in additional commitments, fines, damages or other remedies, our business, financial condition and results of operations could be harmed.

In light of the COVID-19 pandemic, certain travel service provider partners and consumers have issued complaints with NCAs to dispute our handling of force majeure provisions in our contracts with accommodation partners. As a result, NCAs could decide to investigate our handling of force majeure provisions, and if any NCA concludes the invocation of force majeure was inappropriate, there could be fines or other adverse impacts.

As markets evolve and NCAs or other governmental authorities continue to monitor our industry, new investigations of the industry generally or of us specifically could and have occurred, including revisiting issues that were the subject of prior investigations. For example, a working group of 10 European NCAs (France, Germany, Belgium, Hungary, Ireland, Italy, the Netherlands, Czech Republic, the United Kingdom and Sweden) was established by the European Commission to monitor the effects of the narrow parity clause in ~~Europe. In~~ July 2020, the European Commission announced that it will study the marketing and sale of hotel accommodations in six E.U. countries in ~~2021 by reviewing updated information on distribution arrangements in the sector to assess whether there have been changes relative to the earlier monitoring exercise.~~2021. Also, while we believe that we are complying with our commitments, investigating authorities or third parties may determine that we are not complying with the commitments we have made and decide to pursue legal action to compel compliance or seek other remedies. Further, in September 2017 the Swiss Price Surveillance Office opened an investigation into the level of commissions of Booking.com in Switzerland and the investigation is ongoing. If there is an adverse outcome and Booking.com is unsuccessful in any appeal, Booking.com could be required to reduce its commissions in Switzerland.

We are cooperating with regulators where applicable, but we are unable to predict what, if any, effect any investigations or resolutions thereof, including the effect of any commitments we might make, will have on our business, industry practices or online commerce more generally.

To the extent that regulatory authorities impose fines on us or require changes to our business practices or to those currently common to the industry, our business, competitive position and results of operations could be materially and

adversely affected. Negative publicity regarding competition and/or consumer law investigations could adversely affect our brands and therefore our business, market share and results of operations. Competition and consumer law-related investigations, legislation or issues have and could in the future result in private litigation.

Another area of ~~scrutiny, particularly in Europe,~~regulatory inquiry involves contractual search term bidding restrictions where one contracting party agrees not to bid on certain key search terms related to the other party (e.g., such other party’s name). Although we are generally moving away from these types of agreements, in some of our contracts, we or the other party have agreed to bidding restrictions. If bidding restrictions are held to be illegal or otherwise unenforceable or if we remove them from all of our contracts, ~~our performance marketing costs may increase if bidding on affected key words (especially those related to us) becomes more expensive, which~~it could ~~adversely affect~~negatively impact our performance marketing efficiency, business and results of operations.

There is significant legislative and public focus on the technology industry, especially as technology companies become larger. In some instances, countries have passed legislation that goes further to restrict business activities than actions taken by NCAs or other regulatory authorities. ~~For example,~~ France, Italy, Belgium and Austria have passed legislation prohibiting parity contract clauses in their ~~entirety.~~entirety and a German court recently ruled that our narrow parity clauses are not permitted under German anti-competition law. Additionally, the EU's Platform to Business Regulation regulates the relationship between online platforms such as Booking.com and European business users of online platforms. This new regulation requires online platforms to provide additional disclosure to European business partners, such as terms related to search result ranking and preferential pricing as well as provide for a mediation process to handle any disputes, among other changes. ~~New~~In December 2020, the European Commission proposed the Digital Markets Act and the Digital Services Act, which are expected to give regulators more instruments to investigate digital businesses and impose new rules on certain digital platforms if they are determined to be "gatekeepers." The proposed legislation is not final and it is not known what the laws will look like in their final forms. If the regulators were to determine that we are a gatekeeper under the proposed legislation, we could be subject to additional rules and regulations not applicable to all our competitors and our business could be harmed. For example, the rules applicable to gatekeepers could prohibit single sign-in for different products and create new data sharing requirements and limitations on the use of data from third parties. Additionally, in July 2021 President Biden of the United States signed an executive order aimed at restricting anticompetitive practices within the technology industry. Any rules or regulations that result from this executive order, as well as any other new laws and regulations and changing public perception relating to the technology industry could impact our services, require us to change our business practices or otherwise cause us to incur additional operating costs to comply with or address these developments. Further, as market conditions change as a result of investigations, litigation, legislation or political or social pressure, we may decide to voluntarily modify our business practices beyond what is required, the full effects of which may not be known when making the decision, but which could harm our competitive position and adversely affect our business and results of operations.

With additional attention on the size of travel or technology companies generally, our size and market share may negatively affect our ability to obtain regulatory approval of proposed acquisitions, our ability to expand into complementary businesses or our latitude in dealing with travel service providers (such as by limiting our ability to provide discounts, rebates

or incentives or to exercise contractual rights), any of which could adversely affect our business, results of operations or ability to grow and compete.

Regulatory and legal requirements and uncertainties could subject us to business constraints, increased compliance costs and complexities or otherwise harm our business.

~~The~~

Our ability to provide our services ~~we offer~~ and ~~could offer in the~~any future ~~are subject~~services is and will continue to be affected by legal regulations (including laws, ordinances, rules, licensing requirements and other requirements and regulations) of national and local governments and regulatory authorities around the world, many of which are evolving and subject to the possibility of new or revised interpretations. ~~Our ability to provide our services is and will continue to be affected by such regulations.~~ For example, we currently offer optional rental car-related insurance products to customers protecting them against accidental damage to their rental vehicles and we intend to offer additional trip-related insurance products in the future, which subjects us to certain insurance regulations and related increased compliance costs and complexities, any of which could negatively impact our business and results of operations. Laws in some countries relating to data localization, registration as a travel agent and other local requirements could, if applicable to us, adversely affect our ability to conduct business in those countries. Any increase in the number or complexity of the laws and regulations applicable to us and our businesses could increase our compliance costs and burdens and negatively affect our business and results of operations.

For example, in the European Union, the Package Travel Directive (the "Package Directive") sets out broad requirements such as local registration, certain mandatory financial guarantees, disclosure requirements and other rules regulating the provision of travel packages and linked travel arrangements. The Package Directive also creates additional liability for a provider of travel packages, which could be the OTC, for performance of the travel services within a packaged trip under certain circumstances. ~~Certain~~Some parts of our business are already subject to the broad scope of the Package Directive, and as our offerings continue to diversify and expand, we may become subject to additional requirements of the Package Directive. Compliance with this directive could be costly and complex or, as a result of these requirements, we could choose to limit offerings that would otherwise be beneficial for the business, any of which could adversely affect our business, results of operations or ability to grow and compete.

The implementation of unfavorable regulations or unfavorable interpretations of existing regulations by judicial or regulatory bodies could require us to incur significant compliance costs, cause the development of the affected markets to become impractical and otherwise have a material adverse effect on our business and results of operations. For example, in

connection with a lawsuit begun in 2015 by the Association of Turkish Travel Agencies, a Turkish court ordered in 2019 that Booking.com must meet certain registration requirements in order to offer Turkish hotels and accommodations to Turkish residents. If Booking.com does not successfully appeal this decision or meet the Turkish registration requirements, Booking.com will be unable to resume offering Turkish hotels and accommodations to Turkish residents, which would continue to negatively impact our results of operations. Another example is that the U.S. Government announced in May 2019 that it will no longer suspend the right of private parties to bring litigation under Title III of the Cuban Liberty and Solidarity (Libertad) Act of 1996, popularly known as the Helms-Burton Act, allowing certain individuals whose property was confiscated by the Cuban government beginning in 1959 to sue anyone who "traffics" in the property in question in U.S. courts. We are a defendant in a number of these lawsuits, which seek remedies including the value of the expropriated property (generally, the applicable hotel), plus interest, treble damages, attorneys' fees and costs. We believe that we have meritorious defenses to existing and potential claims and that the results of any related litigation will not be material to our business, financial condition or results of operations. However, litigation is uncertain and there is little judicial history or interpretation of the relevant claims and defenses, in particular as applied to businesses like ours. As a result, there can be no assurance that there will not be an adverse outcome to any such litigation or that such an outcome would not result in an adverse impact on our business, financial condition or results of operations.

Certain jurisdictions, particularly in Europe, are considering regulations intended to address the issue of "overtourism," including restrictions that may adversely affect our ability to offer accommodations, in particular, alternative accommodations, near city centers or popular tourist destinations. To the extent any such regulations require online platforms such as ours to comply with additional restrictions related to offering reservations for accommodations, tours and activities or other travel services in such areas, we could be subject to increased legal and compliance costs, and our business, growth and results of operations could be adversely affected.

Compliance with the laws and regulations of multiple jurisdictions increases our cost of doing business. ~~These~~Examples of these laws and regulations, which vary and sometimes conflict, include the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and local laws which also prohibit corrupt payments to governmental officials or third parties, data privacy requirements, labor relations laws, non-discrimination, human rights or anti-human trafficking laws and regulations, such as the U.K. Modern Slavery Act 2015, tax laws, anti-trust or competition laws, U.S., E.U. or U.N. sanctioned country or sanctioned persons mandates, and consumer protection laws. Violations of these laws and regulations could result in fines, penalties and/

or criminal sanctions against us, our officers or our employees and/or prohibitions on the conduct of our business. Any such violations could result in prohibitions on our ability to offer our services in one or more countries, could delay or prevent potential acquisitions, and could ~~also~~ materially damage our reputation, our brands, our ~~international~~global expansion efforts, our ability to attract and retain employees and business partners, our business and our operating results. Even if we comply with these laws and regulations, doing business in certain jurisdictions or violations of these laws and regulations by the accommodations, restaurants, travel service providers or other parties with whom we conduct business could harm our reputation and brands, which could adversely affect our results of operations or stock price. In addition, these restrictions may provide a competitive advantage to our competitors unless they are also subject to comparable restrictions. Our success depends, in part, on our ability to anticipate these risks and manage these difficulties. Additionally, our employees in certain countries in Europe are represented by works councils and/or trade unions. We are required to consult with works councils on certain matters such as restructurings, acquisitions and divestitures and other matters that could impact our labor force. Consultations may not be completed on terms satisfactory to us and, as a result, could result in increases in our cost of labor, diversion of management's attention away from operating our business, delays in certain initiatives and expose us to claims and litigation. We are also subject to a variety of other regulatory, legal and public policy risks and challenges in managing an organization operating in various countries, including those related to:

•regulatory changes or other government actions;

•additional complexity to comply with regulations in multiple jurisdictions, as well as overlapping or inconsistent legal regimes, in particular with respect to tax, labor, consumer protection, digital content, advertising, promotions, privacy and anti-trust laws;

•difficulties in transferring funds from or converting currencies in certain countries;

•reduced protection for intellectual property rights in some countries; and

•changes in social or political conditions or policies relating to a wide range of sustainability topics.

Prior to the COVID-19 pandemic, our business had grown substantially over the last several years as we expanded into new geographies and added new services. In addition, we have made efforts and expect to make further efforts to integrate access to travel services across our various brands. These changes add complexity to legal and tax compliance and our internal controls, and our size and operating history may increase the likelihood that we will be subject to regulatory scrutiny or audits by tax authorities in various jurisdictions. In addition, by virtue of Booking.com's size and presence in the Netherlands, it ~~was recently~~is required to ~~establish~~have a supervisory board to oversee the strategy and operations of Booking.com. While ~~we do not expect~~ the existence of the supervisory board ~~to have~~has not had a significant impact on our operations, under certain circumstances, this governance structure could require Booking.com to obtain supervisory board approval in order to take certain actions, which could result in delays or other unanticipated strategic or operational challenges.

There are various risks associated with the facilitation of payments from consumers, including risks related to fraud, compliance with evolving rules and regulations and reliance on third parties.

Our results have been and will likely continue to be negatively impacted by consumer purchases made using fraudulent credit cards, claims the consumer did not authorize the purchase or consumers who have closed bank accounts or have insufficient funds in their bank accounts to satisfy payments. We may be held liable for accepting fraudulent credit cards (such as stolen or cloned cards) on our platforms or in connection with other fraudulent transactions on our platforms, as well as other payment disputes with consumers. Accordingly, we calculate and record an allowance for the resulting chargebacks. We must also continually implement and evolve measures to detect and reduce the risk of fraud, in particular as these methods become increasingly sophisticated. If we are unable to successfully combat the use of fraudulent credit cards on our platforms, our business, profit margins, results of operations and financial condition could be materially adversely affected.

We believe that an important component of our future success will be our ability to offer consumers their preferred method of payment in the most efficient manner on all our platforms, and, as a result, we are processing more of our transactions on a merchant basis where we facilitate payments from travelers through the use of credit cards and other payment methods (such as PayPal, Alipay, Paytm and WeChat Pay). While processing transactions on a merchant basis allows us to process transactions for properties that do not otherwise accept credit cards and to increase our ability to offer a variety of payment methods and flexible transaction terms to consumers, we incur additional payment processing costs (which are typically higher for foreign currency transactions) and other costs related to these transactions, such as costs related to fraudulent payments and transactions and fraud detection. As ~~more of~~we expand our ~~transactions are processed on a merchant basis,~~payments services to consumers and business partners, in addition to the revenues from these transactions, we may experience a significant increase in these costs, and our

results of operations and profit margins could be materially adversely affected, in particular if we experience a significant increase in non-variable costs related to fraudulent payments and transactions.

As a greater percentage of our transactions ~~are processed on a merchant basis,~~involve us processing payments, our global systems and processes ~~associated with merchant transactions~~ must be managed on a larger scale, which ~~introduces additional~~adds complexity, ~~and increases~~ administrative burdens and costs and increases the demands on our systems and controls, which could adversely affect our results of operations. ~~Payment~~In addition, as our payment processing ~~may also~~activities continue to develop, we expect to be subject ~~the business~~ to additional regulations, including financial services ~~regulation or other regulatory regimes applicable~~regulations, which we expect to ~~highly regulated businesses, which could~~ result in increased compliance costs and complexities, including those associated with the implementation of new or advanced internal controls. For example, the E.U.'s Payment Services Directive 2, implemented in the UK through the Payment Services Regulations 2017, has further complicated the authentication process for accepting credit cards. As a result of this, ~~directive,~~ payments made on our platforms by consumers in the UK and the European Economic Area are subject to Strong Customer Authentication, which requires the consumer to engage in additional steps to authenticate their transaction. This new ~~process~~requirement could cause consumer transactions to take longer to process or otherwise inconvenience the consumer, which could result in consumers choosing not to utilize our platforms as often or at all. The implementation of this process has resulted and may continue to result in increased compliance costs and administrative burdens for us. AsAdditionally, except where a consumer has acted fraudulently, the consumer will not be liable for any losses incurred in respect of an unauthorized payment transaction where strong customer authentication should have been applied but we did not require it.

Other new or expanded regulations that could apply to us as our ~~business evolves or as we change the way we facilitate~~ payments ~~on our platforms and new money transmission and online payments rules come into effect, we may become subject to new payments and financial services laws and regulations including~~activities evolve include those relating to money transmission licenses, anti-money laundering, card scheme associations, sanctions, banking, privacy and security of our processes, among others. Compliance with this changing regulatory environment ~~could create~~creates significant additional compliance costs and burdens or it could lead us to modify our business plans or operations, any of which could negatively impact our business, results of operations and profit margins.

We are also subject to payment card association rules and obligations under our contracts with the card schemes and our payment card processors, including the Payment Card Industry ~~and~~ Data Security Standard (the "Standard"). Under the Standard and these association rules and obligations, if information is compromised, we could be liable to payment card issuers for associated expenses and penalties, and in some cases, we could be restricted in our ability to accept payment cards. Under certain circumstances in our agreements with the card schemes and in relation to the Standard, we are also subject to periodic audits, self-assessments and other assessments of our compliance with the rules and obligations of the payment card associations and the Standard, which could result in additional expenses and administrative burdens. In addition, if we fail to follow payment card industry security standards, even if no consumer information is compromised, we could incur significant fines or experience a significant increase in payment card transaction costs. Additionally, compliance with the Standard may not prevent all security incidents. If we are fined or required to pay additional processing fees or if our ability to accept payment cards is restricted in any way as a result of our failure to comply with these payment card industry rules, or otherwise, it could adversely impact our business, results of operations and profit margins.

We rely on banks, card schemes and other payment processors to execute certain components of the payments process. We generally pay these third parties interchange fees and other processing and gateway fees to help us facilitate payments from consumers to travel service providers. As a result, if we are unable to maintain our relationships with these third parties on favorable terms or if these fees are increased for any reason, our profit margin, business and results of operations could be harmed. Additionally, if these third parties experience service disruptions or if they cease operations (whether as a result of the COVID-19 pandemic or otherwise), consumers and travel service providers could have difficulty making or receiving payments, which could adversely impact our reputation, business and results of operations.

In addition, in the event that one of our major travel service providers voluntarily or involuntarily declares bankruptcy or otherwise ceases or limits operations, we could experience an increase in chargebacks from customers with travel reservations with such travel service provider and we could experience financial loss from certain prepayments made to such travel service provider if we are not able to recover the prepayment. The COVID-19 pandemic and its resulting impact on travel demand, the travel industry and the economy increases the risk of insolvency or disruption to the ability ~~to provide services for~~of our travel service providers to provide services, and in some cases, ~~has already~~ resulted in the insolvency or closure of travel service providers. As a result, if one of our major travel service providers declares bankruptcy or ceases or limits operations or if many travel service providers declare bankruptcy or cease or limit operations, it could adversely impact our business and results of operations.

~~Our stock price is highly volatile.~~

~~The market price of our common stock is highly volatile and is likely to continue to be subject to wide fluctuations in response to factors such as the following, some of which are beyond our control:~~

•~~financial or operating results that vary from the expectations of securities analysts and investors or our publicly-disclosed estimates;~~

•~~quarterly variations in our financial or operating results;~~

•~~changes in expectations as to our future financial or operating performance, including estimates by securities analysts and investors or our publicly-disclosed estimates of future performance;~~

•~~worldwide economic conditions in general and in Europe in particular;~~

•~~fluctuations in foreign currency exchange rates, particularly between the U.S. Dollar and the Euro;~~

•~~changes in interest rates;~~

•~~occurrence of a significant security breach;~~

•~~announcements of technological innovations or new services by us or our competitors;~~

•~~changes in our capital structure;~~

•~~changes in market valuations of other internet or online service companies;~~

•~~announcements by us or our competitors of price reductions, promotions, significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;~~

•~~loss of a major travel service provider participant, such as a hotel chain, rental car company or airline, from our services;~~

•~~changes in the status of our intellectual property rights;~~

•~~lack of success in the expansion of our business models geographically;~~

•~~business interruptions, such as may result from natural disasters, health concerns such as the COVID-19 pandemic or other events;~~

•~~announcements by third parties of significant claims or initiation of litigation proceedings against us or adverse developments in pending proceedings;~~

•~~additions or departures of key personnel; and~~

•~~trading volume fluctuations.~~

Sales of a substantial number of shares of our common stock, including through the conversion of our convertible notes, could adversely affect the market price of our common stock by introducing a large number of sellers to the market. Given the volatility that exists for our shares, such sales could cause the market price of our common stock to decline significantly. In addition, fluctuations in our stock price and our price-to-earnings multiple may have made our stock attractive to momentum, hedge or day-trading investors who often shift funds into and out of stocks rapidly, exacerbating price fluctuations in either direction, particularly when viewed on a quarterly basis.

The trading prices of internet company stocks in general, including ours, have experienced extreme price and volume fluctuations. To the extent that the public's perception of the prospects of internet or e-commerce or travel companies is negative, our stock price could decline, regardless of our results. Other broad market and industry factors may decrease the market price of our common stock, regardless of our operating performance. Market fluctuations, as well as general political and economic conditions, such as a recession, interest rate or foreign currency exchange rate fluctuations, political instability (e.g., Brexit), changes in trade policy, trade disputes or a natural disaster, health concerns such as the COVID-19 pandemic or a terrorist attack affecting a significant market for our business, such as Europe or the United States, could cause our stock price to decline. Negative market conditions could adversely affect our ability to raise additional capital or the value of our stock for purposes of acquiring other companies or businesses.

We have, in the past, been a defendant in securities class action litigation. Securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. To the extent our stock price declines or is volatile, we may in the future be the target of additional litigation. This additional litigation could result in substantial costs and divert management's attention and resources, either of which could adversely affect our business, financial condition and results of operations.

~~We face increased risks if the level of our debt increases.~~

We have a substantial amount of outstanding indebtedness and we may incur substantial additional indebtedness in the future, including through public or private offerings of debt securities. Our outstanding indebtedness and any additional indebtedness we incur may have significant consequences, which may be amplified as our cash flow and earnings have decreased as a result of the COVID-19 pandemic and which could include:

•requiring the dedication of a portion of our cash flow from operations to service our indebtedness, thereby reducing the amount of cash flow available for other purposes, including capital expenditures, share repurchases and acquisitions;

•~~increased vulnerability to downturns in our business, to competitive pressures and to adverse changes in general economic and industry conditions;~~

•~~decreased or lost ability to obtain additional financing on terms acceptable to us for working capital, capital expenditures, acquisitions, share repurchases or other general corporate purposes; and~~

•~~decreased flexibility when planning for or reacting to changes in our business and industry.~~

Our ability to make payments of principal and interest on our indebtedness depends upon our future performance, which will be subject to the rate of economic and travel industry recovery as a result of the COVID-19 pandemic, general economic conditions, industry cycles and financial, business and other factors affecting our results of operations and financial condition, many of which are beyond our control. Further, we may not have access to equity or debt markets or other sources of financing, or such financing may not be available to us on commercially reasonable terms, to repay or refinance our debt as it comes due or, in the case of our convertible notes, upon conversion.

We face risks related to our intellectual property.

We regard our intellectual property as critical to our success, and we rely on domain name, trademark, copyright and patent law, trade secret protection and confidentiality and/or license agreements with our employees, travel service providers, partners and others to protect our proprietary rights. We have filed various applications for protection of certain aspects of our

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intellectual property in the United States and other jurisdictions, and we currently hold a number of issued patents in several jurisdictions. Further, in the future we may acquire additional patents or patent portfolios, which could require significant cash expenditures. However, we may choose not to patent or otherwise register some of our intellectual property and instead rely on trade secret or other means of protecting our intellectual property. We have licensed in the past, and may license in the future, certain of our proprietary rights, such as trademarks or copyrighted material, to third parties, and these licensees may take actions that diminish the value of our proprietary rights or harm our reputation. We also have procured various intellectual property licenses from third parties. In addition, effective intellectual property protection may not be available in every country in which our services are made available online, particularly in certain jurisdictions in which we operate in which theft of intellectual property may be more prevalent. We may be required to expend significant time and resources to prevent infringement or to enforce our intellectual property rights.

We believe that our intellectual property rights help to protect our business. We endeavor to defend our intellectual property rights diligently, but intellectual property litigation is extremely expensive and time-consuming, and may divert managerial attention and resources from our business objectives. We may not be able to successfully defend our intellectual property rights or they may not be sufficient to effectively protect our business, which could materially adversely affect our business, brands and results of operations.

From time to time, in the ordinary course of our business, we have been subject to, and are currently subject to, legal proceedings and claims relating to the intellectual property rights of others, and we expect that third parties will continue to assert intellectual property claims, in particular patent claims, against us, particularly as we expand the complexity and scope of our business. Successful infringement claims against us could result in a significant monetary liability or prevent us from operating our business, or portions of our business, or require us to change business practices or develop non-infringing intellectual property, which could require significant effort and expense. In addition, resolution of claims may require us to obtain licenses to use intellectual property rights belonging to third parties, which may be expensive to procure, or possibly to cease using those rights altogether. Any of these events could have a material adverse effect on our business, results of operations and financial condition.

~~The value of our investments could decline, which could adversely affect our financial condition and results of operations.~~

We maintain an investment portfolio of various holdings, types and maturities. Our portfolio typically includes marketable debt securities, equity securities of publicly-traded companies, the values of which are subject to market price volatility, and investments in private companies. Investments in government and corporate debt securities and preferred stock classified as debt securities for accounting purposes are generally classified as available-for-sale and, consequently, are recorded in our balance sheets at fair value with unrealized gains or losses, net of tax, reported in "Accumulated other comprehensive loss" in the Consolidated Balance Sheets. Credit losses on such investments are recorded in the Unaudited Consolidated Statement of Operations (see Note 5 to our Unaudited Consolidated Financial Statements). Changes in the fair values of our investments in publicly-traded equity securities are recognized in the Unaudited Consolidated Statement of Operations and these changes have had, and are likely to continue to have, a significant impact on our quarterly net income (or loss). Our investments in equity securities (other than those classified as debt securities for accounting purposes) of private companies are primarily measured at cost, less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer, with changes in value also recognized in the Unaudited Consolidated Statement of Operations (see Note 5 to our Unaudited Consolidated Financial Statements).

We have invested in Trip.com Group convertible notes. We have also invested in other Chinese internet companies (i.e., Meituan Dianping ("Meituan") and Didi Chuxing ("Didi")). See Notes 5 and 6 to our Unaudited Consolidated Financial Statements for more information regarding our investments in Trip.com Group, Meituan and Didi securities. The value of these securities is subject to the risks associated with Trip.com Group's, Meituan's and Didi's respective businesses, as well as any changes by the Chinese government in foreign investment laws or elevated scrutiny or regulation of foreign investments in Chinese companies. For example, Trip.com Group is a Cayman Islands company operating in China through what is commonly referred to as a variable interest entity, or VIE, structure where it conducts part of its business through contractual relationships with affiliated Chinese entities. Although VIE structures are commonly used by Chinese internet and e-commerce companies, there are substantial uncertainties regarding the interpretation and application of People's Republic of China ("PRC") laws and regulations to VIE structures, and it is possible that the PRC government may view the VIE structure as a violation of PRC law. VIE contractual relationships are not as effective in providing control over the affiliated Chinese companies as direct ownership, and Trip.com Group would have to rely on the PRC legal system to enforce those contracts in the event of a breach by one of these entities. Further, conflicts of interest could arise to the extent Trip.com Group's officers or directors are also shareholders, officers or directors of the affiliated Chinese entities. Any of these risks could materially and

adversely affect Trip.com Group's business and therefore the value of our investment in Trip.com Group. Similar VIE-structure considerations and risks apply with respect to our investments in securities of Meituan and Didi, each of which is a Cayman Islands company operating in China through a VIE structure.

Our investments in private companies are inherently risky in that such companies are typically at an early stage of development, may have no or limited revenues, may not be or ever become profitable, may not be able to secure additional funding or their technologies, services or products may not be successfully developed or introduced to the market. Further, our ability to liquidate any such investments is typically dependent on a liquidity event, such as a public offering or acquisition, as no public market exists for such securities. Valuations of privately-held companies are inherently complex and uncertain due to the lack of a liquid market for such securities. If we determine that any of our equity investments in such companies have experienced a decline in value, we are required to recognize the change in net income. For example, in the first quarter of 2020, we recognized an impairment of $100 million related to our investment in Didi that resulted from the negative impact of the COVID-19 pandemic on Didi's business. For investments classified as debt securities, any decline in value attributed to credit losses is also recognized in the Unaudited Consolidated Statements of Operations.

We could lose the full amount of any of our investments, and any impairment of our investments have previously and could in the future have a material adverse effect on our financial condition and results of operations.

~~Investment in new business strategies and acquisitions could disrupt our ongoing business and present risks not originally contemplated.~~

Our mission is to make it easier for everyone to experience the world. As a result, our strategy involves evaluating and potentially entering complementary businesses in furtherance of that mission. We have invested, and in the future may invest, in new business strategies and acquisitions. For example, we acquired FareHarbor in April 2018 to increase our ability to offer local activities and experiences (such as tours and attractions). We also have acquired, and in the future may acquire, businesses similar to those we already operate in an effort to expand our geographic markets, acquire technology or products or to otherwise improve or grow our business. For example, in July 2017 we acquired the Momondo Group and in November 2018 we acquired HotelsCombined, in each case, among other things, to enhance the global reach of our meta-search services. Such endeavors may involve significant risks and uncertainties, including diversion of management's attention from current operations, greater than expected liabilities and expenses, inadequate return on capital, new risks with which we are not familiar, legal compliance obligations that previously did not apply to us, integration risks and difficulties and unidentified issues not discovered in our investigations and evaluations of those strategies and acquisitions. As a result, entering new businesses involves risks and costs that could, if realized, have an adverse effect on our business, reputation, results of operations, profit margins, cash flows or financial condition, as well as on our ability to achieve the expected benefits of any such investments or acquisitions.

We may decide to make minority investments, including through joint ventures, in which we have limited or no management or operational control. The controlling person in such a case may have business interests, strategies or goals that are inconsistent with ours, and decisions of the company or venture in which we invested may result in harm to our reputation or business or adversely affect the value of our investment. A substantial portion of our goodwill and intangible assets were acquired in acquisitions. If we determine that any of our goodwill and intangible assets, or any goodwill or intangible assets acquired in future transactions, experiences a decline in value, we may be required to record, as we did in the first quarter of 2020, an impairment (see Note 8 to our Unaudited Consolidated Financial Statements), which could materially adversely affect our results of operations. Further, we may issue shares of our common stock in these transactions, which could result in dilution to our stockholders.

~~We may not be able to successfully integrate acquired businesses or combine internal businesses.~~

The integration of acquired businesses requires significant time and resources, and we may not manage these processes successfully. Further, as our businesses develop and market conditions change, we have integrated businesses that had been managed independently and integrated certain functions across businesses and we may do so in the future. These integrations may be of varying degree, depending on many factors such as business compatibility, strategic goals or geographic location, among others. Integrations are complex, often involve additional or unexpected costs and create a variety of issues and risks, including:

•~~disruption or harm to the businesses involved;~~

•~~disruption to our other businesses, including as a result of the need for management to spend time and attention on the integration;~~

•~~difficulty combining different company cultures, systems, reporting structures, titles and job descriptions and compensation schemes;~~

•~~problems retaining key personnel, in particular at the acquired or integrated company;~~

•~~loss of travel service providers, restaurants or partners of the acquired business; and~~

•~~difficulty implementing and maintaining effective controls, procedures and policies.~~

Our use of "open source" software could adversely affect our ability to protect our proprietary software and subject us to possible litigation.

We use open source software in connection with our software development. From time to time, companies that use open source software have faced claims challenging the use of open source software and/or compliance with open source license terms. We could be subject to suits by parties claiming ownership of what we believe to be open source software, or claiming non-compliance with open source licensing terms. Some open source licenses require users who distribute software containing open source to make available all or part of such software, which in some circumstances could include valuable proprietary code of the user. While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, in part because open source license terms are often ambiguous. Any requirement to disclose our proprietary source code or pay damages for breach of contract could be harmful to our business, results of operations or financial condition, and could help our competitors develop services that are similar to or better than ours.

~~"Cookie" laws~~

Changes in the use and regulation of Cookies and other tracking technologies could negatively impact the way we do business.

There are several privacy-driven initiatives that are changing the gathering and use of consumer data in the digital marketing ecosystem. These include phasing out the use of third-party cookies (and other tracking technologies) by browsers such as Safari and Google Chrome, restrictions on the use of the identifier for advertisers (such as the Apple “IDFA”) by mobile device manufacturers, the adoption of regulations by many jurisdictions that govern the use of cookies and, most recently, the ability for certain operating systems to hide a user's IP address from websites that user accesses in favor of an IP address associated with the operating system. A ~~"cookie"~~cookie is a text file that is stored on a user's computer or mobile device. An identifier, such as Apple's IDFA, is a unique device identifier assigned by the mobile device manufacturer which allows advertisers to recognize users across multiple mobile apps. An IP address can provide geographic and other information about users to the websites that such user accesses. Cookies, IP addresses and other tracking technologies are common tools used by thousands of websites and mobile apps, including ours, to, among other things, store or gather ~~information~~data (e.g., remember log-on details so a user does not have to re-enter them when revisiting a website or opening an app), market to consumers and enhance the user experience. ~~Cookies are valuable tools for platforms like ours~~

Google Chrome has announced that they will not permit the use of third-party cookies on Chrome beginning in 2023 and other browsers have already stopped their use. Apple has begun to ~~improve~~require advertisers to gain consent to use the ~~customer experience~~IDFA and ~~increase conversion.~~other identifiers with their own consent framework. Apple also recently announced that all paying iCloud customers who update to the upcoming versions of iOS, iPadOS and OS X will have access to the new iCloud+ Private Relay when using the Safari browser to hide such user's IP address from websites. Many jurisdictions, including the European Union and more recently, California, have adopted regulations governing the use of ~~"cookies."~~cookies. While these initiatives will likely impact a small portion of our digital advertising practices, these changes are not unique to the digital advertising at our Company. While we believe that our primary performance marketing spend will not be directly impacted by these changes, we are poised to utilize alternative digital marketing techniques for the portion of our marketing spend that could be impacted. To the extent any ~~such~~of these restrictions and regulations ~~require "opt-in" consent before certain cookies can be placed on a user's computer or mobile device,~~impair our ability to serve certain customers in the most optimal manner or if we ~~currently do might be adversely affected and~~are less effective than our competitors in addressing this change, our ability to continue to improve and optimize performance on our platforms, ~~might be impaired, either of which could negatively affect a consumer's experience using our services and~~ our business, market share and results of ~~operations.~~operations could be adversely affected. Further, any failure to comply with ~~such~~these privacy regulations could result in fines and harm to our reputation.

Financial Risks

Our liquidity, credit ratings and ongoing access to capital could be materially and negatively affected by the impacts of the COVID-19 pandemic.

Our continued access to sources of liquidity depends on multiple factors, including global economic conditions, the condition of global financial markets, the availability of sufficient amounts of financing, our ability to meet debt covenant requirements, our operating performance and our credit ratings. Since the COVID-19 pandemic, there has been increased volatility in the financial and securities markets, which has generally made access to capital less certain and increased the cost of obtaining new capital. Further, if our credit ratings were to be downgraded or if financing sources were to ascribe higher risk to our rating levels, our industry or us, our access to capital and the cost of any financing would be negatively impacted. We currently have $2.0 billion available under our revolving credit facility, which provides an additional potential source of liquidity. The revolving credit facility contains a maximum leverage ratio covenant, compliance with which is a condition to our ability to borrow thereunder. In 2020, we amended the revolving credit facility to (i) suspend the maximum leverage ratio covenant through and including the three months ending March 31, 2022, which was replaced with a $4.5 billion minimum liquidity covenant based on unrestricted cash, cash equivalents, short-term investments and unused capacity under this revolving credit facility and (ii) increase the permitted maximum leverage ratio from and including the three months ending June 30, 2022 through and including the three months ending March 31, 2023. There can be no assurance that we will be able to meet either the minimum liquidity covenant or the maximum leverage ratio covenant, as applicable, at any particular time, and our ability to borrow under the revolving credit facility depends on compliance with the applicable covenant. Further, the lenders have the right to require repayment of any amounts borrowed under the facility if we are not in compliance with the applicable covenant.

There is no guarantee that additional debt financing will be available in the future to fund our obligations, or that it will be available on commercially reasonable terms, in which case we may need to seek other sources of funding. In addition, the terms of future debt agreements could include more restrictive covenants, which could restrict our business operations. SeePart I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources for more information on our liquidity and capital resources.

We are exposed to fluctuations in foreign currency exchange rates.

book lower ADR accommodations, choose to shorten or cancel their international travel plans or choose to travel domestically rather than internationally, any of which could adversely affect our gross bookings, revenues and results of operations, in particular when expressed in U.S. Dollars. Since the beginning of the COVID-19 pandemic, there has been an overall strengthening of the Euro and the British Pound Sterling relative to the U.S. Dollar. However, as a result of the travel restrictions and health concerns arising from the COVID-19 pandemic, we do not believe exchange rates have significantly altered consumer behavior since the pandemic began.

Our stock price is highly volatile.

The market price of our common stock is highly volatile and is likely to continue to be subject to wide fluctuations in response to factors such as the following, some of which are beyond our control:

•financial or operating results that vary from the expectations of securities analysts and investors or any publicly-disclosed estimates;

•quarterly variations in our financial or operating results;

•changes in expectations as to our future financial or operating performance, including estimates by securities analysts and investors or any publicly-disclosed estimates of future performance;

•worldwide economic conditions in general and in Europe in particular;

•fluctuations in foreign currency exchange rates, particularly between the U.S. Dollar and the Euro;

•changes in interest rates;

•occurrence of a significant security breach;

•announcements of technological innovations or new services by us or our competitors;

•changes in our capital structure;

•changes in market valuations of other internet or online service companies;

•announcements by us or our competitors of price reductions, promotions, significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments;

•loss of a major travel service provider participant, such as a hotel chain, rental car company or airline, from our services;

•changes in the status of our intellectual property rights;

•lack of success in the expansion of our business models geographically;

•business interruptions, such as may result from natural disasters, health concerns such as the COVID-19 pandemic or other events;

•announcements by third parties of significant claims or initiation of litigation proceedings against us or adverse developments in pending proceedings;

•additions or departures of key personnel; and

•trading volume fluctuations or other market volatility.

Sales of a substantial number of shares of our common stock, including through the conversion of our convertible notes, could adversely affect the market price of our common stock by introducing a large number of sellers or short sellers to the market. Given the volatility that exists for our shares, such sales could cause the market price of our common stock to decline significantly. In addition, fluctuations in our stock price and our price-to-earnings multiple may have made or may make our stock attractive to momentum, hedge or day-trading investors who often shift funds into and out of stocks rapidly, exacerbating price fluctuations in either direction, particularly when viewed on a quarterly basis.

The trading prices of internet company stocks in general, including ours, have experienced extreme price and volume fluctuations. To the extent that the public's perception of the prospects of internet or e-commerce or travel companies is negative, our stock price could decline, regardless of our results. Other broad market and industry factors may decrease the market price of our common stock, regardless of our operating performance. Market fluctuations, as well as general political and economic conditions, such as a recession, interest rate or foreign currency exchange rate fluctuations, political instability, changes in trade policy, trade disputes or a natural disaster, health concerns such as the COVID-19 pandemic, including any resurgences and the perceived pace or scale of any recovery from the pandemic, or a terrorist attack affecting a significant market for our business, such as Europe or the United States, could cause our stock price to decline. Negative market conditions could adversely affect our ability to raise additional capital or the value of our stock for purposes of acquiring other companies or businesses.

In the past, we have been a defendant in securities class action litigation. Securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. To the extent our stock price declines or is volatile, we may in the future be the target of additional litigation. This additional litigation could result in substantial costs and divert management's attention and resources, either of which could adversely affect our business, financial condition and results of operations.

We face increased risks if the level of our debt increases.

We have a substantial amount of outstanding indebtedness and we may incur substantial additional indebtedness in the future, including through public or private offerings of debt securities. Our outstanding indebtedness and any additional indebtedness we incur may have significant consequences, which may be amplified if our cash flow and earnings decrease, as we experienced as a result of the COVID-19 pandemic and which could include:

•increased vulnerability to downturns in our business, to competitive pressures and to adverse changes in general economic and industry conditions;

•decreased or lost ability to obtain additional financing on terms acceptable to us for working capital, capital expenditures, acquisitions, share repurchases or other general corporate purposes; and

•decreased flexibility when planning for or reacting to changes in our business and industry.

The value of our investments could decline, which could adversely affect our financial condition and results of operations.

Consolidated Statement of Operations (see Note 5 to our Unaudited Consolidated Financial Statements). Changes in the fair values of our investments in publicly-traded equity securities are recognized in the Unaudited Consolidated Statement of Operations. These changes could be volatile and they have had, and are likely to continue to have, a significant impact on our quarterly net income (or loss). Our investments in equity securities (other than those classified as debt securities for accounting purposes) of private companies are primarily measured at cost, less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer, with changes in value also recognized in the Unaudited Consolidated Statement of Operations (see Note 5 to our Unaudited Consolidated Financial Statements).

We have invested in Trip.com Group convertible notes. We have also invested in other Chinese internet companies (i.e., Meituan and DiDi). See Notes 5 and 6 to our Unaudited Consolidated Financial Statements for more information regarding our investments in Trip.com Group, Meituan and DiDi securities. The value of these securities is subject to the risks associated with Trip.com Group's, Meituan's and DiDi's respective businesses, as well as any changes by the Chinese government in foreign investment laws or elevated scrutiny or regulation of foreign investments in Chinese companies. For example, Trip.com Group is a Cayman Islands company operating in China through what is commonly referred to as a variable interest entity, or VIE, structure where it conducts part of its business through contractual relationships with affiliated Chinese entities. Although VIE structures are commonly used by Chinese internet and e-commerce companies, there are substantial uncertainties regarding the interpretation and application of People's Republic of China ("PRC") laws and regulations to VIE structures, and it is possible that the PRC government may view the VIE structure as a violation of PRC law. VIE contractual relationships are not as effective in providing control over the affiliated Chinese companies as direct ownership, and Trip.com Group would have to rely on the PRC legal system to enforce those contracts in the event of a breach by one of these entities. Further, conflicts of interest could arise to the extent Trip.com Group's officers or directors are also shareholders, officers or directors of the affiliated Chinese entities. Any of these risks could materially and adversely affect Trip.com Group's business and therefore the value of our investment in Trip.com Group. Similar VIE-structure considerations and risks apply with respect to our investments in securities of Meituan and DiDi, each of which is a Cayman Islands company operating in China through a VIE structure.

Our investments in private companies are inherently risky in that such companies are typically at an early stage of development, may have no or limited revenues, may not be or ever become profitable, may not be able to secure additional funding or their technologies, services or products may not be successfully developed or introduced to the market. Further, our ability to liquidate any such investments is typically dependent on a liquidity event, such as a public offering or acquisition, as no public market exists for such securities. Valuations of privately-held companies are inherently complex and uncertain due to the lack of a liquid market for such securities. If we determine that any of our equity investments in such companies have experienced a decline in value, we are required to recognize the change in net income. For example, during the three months ended March 31, 2020, we recognized an impairment of $100 million related to our investment in DiDi that resulted from the negative impact of the COVID-19 pandemic on DiDi's business. For investments classified as debt securities, any decline in value attributed to credit losses is also recognized in the Unaudited Consolidated Statements of Operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth information relating to repurchases of our equity securities during the three months ended June 30, ~~2020.~~2021.

ISSUER PURCHASES OF EQUITY SECURITIES

Period Total Number
of Shares (or
Units) Purchased Average
Price Paid per
Share (or Unit) Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs Maximum
Number (or
Approximate Dollar Value)
of Shares (or Units)
that May
Yet Be Purchased
Under the
Plans or Programs
April 1, 2020 – —
⁽¹⁾
N/A — $ 10,420,229,500
⁽¹⁾
April 30, 2020 543
⁽²⁾
1,373.52 N/A N/A
May 1, 2020 – —
⁽¹⁾
N/A — $ 10,420,229,500
⁽¹⁾
May 31, 2020 2,353
⁽²⁾
1,411.41 N/A N/A
June 1, 2020 – —
⁽¹⁾
N/A — $ 10,420,229,500
⁽¹⁾
June 30, 2020 10
⁽²⁾
1,616.58 N/A N/A
Total 2,906 1,405.04 — $ 10,420,229,500


Period	Total Number of Shares (or Units) Purchased		Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
April 1, 2021 –	—	(1)	N/A		—	$	10,420,229,500	(1)
April 30, 2021	34	(2)	$	2,364.11	N/A	N/A

May 1, 2021 –	—	(1)	N/A		—	$	10,420,229,500	(1)
May 31, 2021	2,080	(2)	$	2,255.58	N/A	N/A

June 1, 2021 –	—	(1)	N/A		—	$	10,420,229,500	(1)
June 30, 2021	2,031	(2)	$	2,172.53	N/A	N/A
Total	4,145		$	2,215.77	—	$	10,420,229,500

_____________________________

(1) Pursuant to a stock repurchase program announced on May 9, 2019, whereby we were authorized to repurchase up to $15.0 billion of our common stock.

(2) Pursuant to a general authorization, not publicly announced, whereby we are authorized to repurchase shares of our common stock to satisfy employee withholding tax obligations related to stock-based compensation. The table above does not include adjustments induring the three months ended June 30, ~~2020~~2021 to previously withheld share amounts (reduction of ~~127 shares)~~198 share) that reflect changes to the estimates of employee tax withholding obligations.

Repurchase and Dividend Restrictions

Since October 2020, our revolving credit facility has included a covenant that restricts us from declaring and making any cash distribution and repurchasing any of our shares (with certain exceptions including in connection with tax withholding related to shares issued to employees) unless (i) prior to the delivery of financial statements for the three months ending June 30, 2022, we have at least $6.0 billion of liquidity on a pro forma basis, based on unrestricted cash, cash equivalents, short-term investments and unused capacity under our revolving credit facility and (ii) after the delivery of financial statements for the three months ending June 30, 2022, we are in compliance on a pro forma basis with the maximum leverage ratio covenant then in effect.Such restriction ends upon delivery of financial statements required for the three months ending June 30, 2023, or we have the ability to terminate this restriction earlier if we demonstrate compliance with the original maximum leverage ratio covenant in the revolving credit facility. See Note 9 to our Unaudited Consolidated Financial Statements for more information.

Item 6. Exhibits

The exhibits listed below are filed as part of this Quarterly Report on Form 10-Q.


Exhibit Number			Description

3.1^(a)			Restated Certificate of Incorporation.
3.2^(b)			Certificate of Amendment of the Restated Certificate of Incorporation, dated as of June 4, 2021.
3 .3(b)			Amended and Restated ~~By-Laws.~~
~~4.1~~^(c)			~~Form~~By-Laws of ~~4.100% Senior Note due 2025.~~
~~4.2~~^(c)			~~Form of 4.500% Senior Note due 2027.~~
~~4.3~~^(c)			~~Form of 4.625% Senior Note due 2030.~~
~~4.4~~^(c)			~~Form of 0.750% Convertible Senior Note due 2025.~~
~~4.5~~^(c)			~~Officers' Certificate, dated April 13, 2020, with respect to the 4.100% Senior Notes due 2025 issued pursuant to the Base Indenture.~~
~~4.6~~^(c)			~~Officers' Certificate, dated April 13, 2020, with respect to the 4.500% Senior Notes due 2027 issued pursuant to the Base Indenture.~~
~~4.7~~^(c)			~~Officers' Certificate, dated April 13, 2020, with respect to the 4.625% Senior Notes due 2030 issued pursuant to the Base Indenture.~~
~~4.8~~^(c)			~~Indenture,~~Booking Holdings Inc., dated as of ~~April 14, 2020, between Booking Holdings Inc. and U.S. Bank National Association, as trustee, relating to the 0.75% Convertible Senior Notes due 2025 of Booking Holdings Inc.~~June 4, 2021.
10.1^(d)(b)			~~Amendment, dated~~1999 Omnibus Plan, as ~~of April 7, 2020, to the Credit Agreement, dated as of August 14, 2019, by~~amended and ~~among the Company, the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent.~~restated effective June 3, 2021.
31.1			Certification of Glenn D. Fogel, the Chief Executive Officer and President, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certification of David I. Goulden, the Executive Vice President and Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1			Certification of Glenn D. Fogel, the Chief Executive Officer and President, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2			Certification of David I. Goulden, the Executive Vice President and Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document.
104			Cover Page Interactive Data File - the cover page from this Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2020,~~2021, formatted in Inline XBRL (included in Exhibit 101).

(a) Previously filed as an exhibit to the Current Report on Form 8-K filed on February 21, 2018 and incorporated herein by reference.

(b) Previously filed as an exhibit to the Current Report on Form 8-K filed on ~~October 25, 2019 and incorporated herein by reference.~~

~~(c) Previously filed as an exhibit to the Current Report on Form 8-K filed on April 14, 2020 and incorporated herein by reference.~~

~~(d) Previously filed as an exhibit to the Current Report on Form 8-K filed on April 8, 2020~~June 4, 2021 and incorporated herein by reference.

9095

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			BOOKING HOLDINGS INC.
			(Registrant)


Date:	August ~~6, 2020~~4, 2021	By:	/s/ David I. Goulden
			Name: David I. Goulden Title: Executive Vice President and Chief Financial Officer
			(On behalf of the Registrant and as principal financial officer)

9196


Performance Share Units, by grant year	2019	2018

Shares probable to be issued	44,237	35,721
Shares not subject to the achievement of minimum performance thresholds	44,237	35,721
Shares that could be issued if maximum performance thresholds are met	115,310	62,606