The holders of the outstanding shares of redeemable convertible preferred stock do not have redemption rights; however, as noted above, the Company’s Restated Certificate of Incorporation provides that upon any voluntary or involuntary liquidation, dissolution or winding up of the Company or Deemed Liquidation Event such shares will be entitled to receive the applicable Liquidation Amount.
Common Stock
The Company’s Restated Certificate of Incorporation authorizes the Company to issue 710,000,000 shares of Class A common stock and 710,000,000 shares of Class B common stock. Both classes of common stock have a par value of $0.0001 per share. Class A common stock is entitled to one vote per share and Class B common stock is entitled to 10 votes per share. A share of Class B common stock is convertible into a share of Class A common stock voluntarily at any time by the holder, and automatically upon the earlier of (i) the vote or consent of holders of a majority of the then outstanding shares of Class B common stock voting as a separate class, and (ii) the 20-year anniversary of the consummation of an IPO. In addition, a share of Class B common stock is convertible into a share of Class A common stock automatically upon an assignment, sale or other disposition of such share by the holder. Under the Company’s dual-class common stock structure, outstanding stock options and RSUs issued are exercisable for Class B common stock. All shares of outstanding redeemable convertible preferred stock are initially convertible into Class B common stock.
F-50
Airbnb, Inc.
Notes to Consolidated Financial Statements
As of December 31, 2018 and 2019 and September 30, 2020 (unaudited), the Company had shares of common stock reserved for issuance as follows (in thousands):
| As of December 31, | As of September 30, |
|||||||||||
| 2018 | 2019 | 2020 | ||||||||||
| (unaudited) | ||||||||||||
| Conversion of Series Seed, A, B, B-1, C, D, E, and F redeemable convertible preferred stock |
240,912 | 240,911 | 240,911 | |||||||||
| 2008 Equity Incentive Plan: |
|
|
|
|
|
|
|
|
| |||
| Stock options issued and outstanding |
42,724 | 41,582 | 38,249 | |||||||||
| RSUs issued and outstanding |
39,892 | 38,818 | 38,221 | |||||||||
| 2018 Equity Incentive Plan: |
|
|
|
|
|
|
|
|
| |||
| Stock options issued and outstanding |
3,476 | 4,684 | 6,409 | |||||||||
| RSUs issued and outstanding |
14,786 | 37,262 | 51,916 | |||||||||
| Shares available for future grant |
47,706 | 25,344 | 9,512 | |||||||||
| Assumed Equity Incentive Plan in the acquisition of HotelTonight: |
|
|
|
|
|
|
|
|
| |||
| Stock options issued and outstanding |
— | 246 | 181 | |||||||||
| RSUs issued and outstanding |
— | 56 | 43 | |||||||||
| Warrants exercisable for common stock (1) |
578 | 430 | 7,935 | |||||||||
| Total |
390,074 | 389,333 | 393,377 |
| (1) |
Includes the warrants reclassified to equity as of December 31, 2019 and those issued in connection with the Second Lien Loan as of September 30, 2020 (unaudited). Refer to Class A Common Stock Warrants (Unaudited) and Class B Common Stock Warrants below for further discussion. |
Class A Common Stock Warrants (Unaudited)
As described above in Note 11, Debt, in connection with the Second Lien Loan entered into in April
2020, the Company issued warrants to purchase 7,934,794 shares of Class A common stock with an initial exercise price of $28.355 per share, subject to adjustment upon the occurrence of certain specified events, to the Second Lien Loan lenders.
Class B Common Stock Warrants
In connection with the closing of the Series E redeemable convertible preferred stock financing in 2015, the Company issued warrants exercisable for up to 429,672 shares of Class B common stock. The amount exercisable was based on specific financial milestones achieved during 2018 and 2019. Due to the nature of the terms of the warrants, the warrants qualified as a liability-classified derivative. The warrants were valued as of the issuance date using a Monte Carlo simulation model with varying assumptions including booking projections and probability of achievement. The warrants were marked to market at each reporting period with changes in fair value recorded in sales and marketing expense, given that the warrants are dependent on selling related activities. For the years ended December 31, 2017, 2018 and 2019, the changes in the fair value of the warrant liability were not material. Based on the milestones achieved, as of December 31, 2019, the warrants were exercisable for 237,756 shares of Class B common stock and on December 31, 2019, the fair value of the derivative warrant liability of $14.1 million was reclassified from liability to equity as it met the requirements for permanent equity classification. During the nine months ended September 30, 2020 (unaudited), the warrants were exercised by the respective holders.
F-51
Airbnb, Inc.
Notes to Consolidated Financial Statements
In addition, in connection with the execution of a prior loan agreement, the Company issued a warrant for 150,000 shares of Class B common stock, exercisable any time through June 2019. In June 2019, the warrant was net exercised for a total of 144,986 shares of Class B common stock.
Equity Incentive Plans
2008 Equity Incentive Plan
In 2008, the Company adopted the 2008 Equity Incentive Plan (the “2008 Plan”). The 2008 Plan provided for the issuance of incentive stock options (“ISOs”), nonqualified stock options (“NQSOs”), restricted stock awards and RSUs. ISOs and NQSOs granted under the 2008 Plan are at a price per share not less than the fair value at date of grant.
2018 Equity Incentive Plan
In 2018, the Company adopted the 2018 Equity Incentive Plan (the “2018 Plan”) to replace the 2008 Plan. A total of 50.0 million shares of Class B common stock were reserved for issuance under the 2018 Plan and the 13.2 million shares remaining for issuance under the 2008 Plan were added to the number of shares available under the 2018 Plan. The expiration of the 2008 Plan had no impact on the terms of outstanding awards under that plan. All unvested equity canceled under the 2008 Plan will be added to the 2018 Plan and made available for future issuance.
Assumed Equity Incentive Plan
In connection with the acquisition of HotelTonight, the Company assumed stock options and RSUs under HotelTonight’s equity incentive plan (the “Assumed Equity Incentive Plan,” and together with the 2008 and 2018 Plans, the “Plans”). As of December 31, 2019 and September 30, 2020 (unaudited), a total of 246,998 and 181,782 shares of the Company’s Class A common stock, respectively, were issuable upon exercise of outstanding options under this assumed plan. The weighted-average exercise price of these outstanding stock options was $22.69 per share and $22.65 per share as of December 31, 2019 and September 30, 2020 (unaudited). In addition, as of December 31, 2019 and September 30, 2020 (unaudited), a total of 55,148 and 42,580 RSUs, respectively, were issued and outstanding under this assumed plan. No additional stock options or RSUs may be granted under the Assumed Equity Incentive Plan.
Stock Option and Restricted Stock Unit Activity
The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option-pricing model using the range of assumptions in the following table:
| Year Ended December 31, | Nine Months Ended September 30, |
|||||||||||||||||||
| 2017 | 2018 | 2019 | 2019 | 2020 | ||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Expected dividend yield |
— | — | — | — | — | |||||||||||||||
| Volatility |
47.4% - 49.8 | % | 44.5% - 44.8 | % | 41.8% - 44.3 | % | 41.8% - 44.3% | 39.1% - 44.2% | ||||||||||||
| Expected term (years) |
1.9 - 8.0 | 8.0 - 8.5 | 5.0 - 8.0 | 5.0 - 8.0 | 5.1 - 8.0 | |||||||||||||||
| Risk-free interest rate |
1.2% - 2.1 | % | 2.8% - 3.2 | % | 1.5% - 2.5 | % | 1.5% - 2.5% | 0.4% - 1.5% |
F-52
Airbnb, Inc.
Notes to Consolidated Financial Statements
A summary of option and RSU activity under the Plans was as follows (in thousands, except per share amounts):
|
Outstanding Stock Options |
Outstanding Restricted Stock Units |
|||||||||||||||||||||||||||
| Shares Available for Grant |
Number of Shares |
Weighted- Average Exercise Price |
Number of Shares |
Weighted- Average Grant Date Fair Value |
||||||||||||||||||||||||
| Balances as of December 31, 2018 |
47,706 |
|
|
|
46,200 | $ | 8.73 |
|
|
|
54,678 | $ | 38.94 | |||||||||||||||
| Granted (1) |
(26,502 | ) |
|
|
|
1,944 | 55.79 |
|
|
|
24,906 | 61.80 | ||||||||||||||||
| Exercised/Vested (2) |
— |
|
|
|
(898 | ) | 6.52 |
|
|
|
— | 62.27 | ||||||||||||||||
| Canceled (3) |
4,140 |
|
|
|
(734 | ) | 50.93 |
|
|
|
(3,448 | ) | 54.91 | |||||||||||||||
| Balances as of December 31, 2019 |
25,344 |
|
|
|
46,512 | 10.08 |
|
|
|
76,136 | 45.69 | |||||||||||||||||
| Granted (1) (unaudited) |
(27,593 | ) |
|
|
|
2,489 | 39.64 |
|
|
|
25,104 | 38.93 | ||||||||||||||||
| Shares withheld for taxes (unaudited) |
57 |
|
|
|
— | — |
|
|
|
— | — | |||||||||||||||||
| Exercised/Vested (2) (unaudited) |
— |
|
|
|
(3,266 | ) | 1.66 |
|
|
|
(208 | ) | 30.27 | |||||||||||||||
| Canceled (3) (unaudited) |
11,704 |
|
|
|
(896 | ) | 54.89 |
|
|
|
(10,852 | ) | 52.31 | |||||||||||||||
| Balances as of September 30, 2020 (unaudited) |
9,512 |
|
|
|
44,839 | 11.43 |
|
|
|
90,180 | 43.05 |
| (1) |
The outstanding options and RSUs include 290,236 options and 56,552 RSUs in 2019 that were granted from the Assumed Equity Incentive Plan. There were no options or RSUs that were granted from the Assumed Equity Incentive Plan for the nine months ended September 30, 2020 (unaudited). |
| (2) |
The total RSUs that vested during 2019 were not material. |
| (3) |
The outstanding options and RSUs include cancellations of 36,342 and 45,302 options and 1,404 and no RSUs in 2019 and the nine months ended September 30, 2020 (unaudited), respectively, from the Assumed Equity Incentive Plan that are no longer available for future grants. |
| Number of Shares (in thousands) |
Weighted- Average Exercise Price |
Weighted- Average Remaining Contractual Life (years) |
Aggregate Intrinsic Value |
|||||||||||||
| Options outstanding as of December 31, 2019 |
46,512 | $ | 10.08 | 4.15 | $ | 2,298,685 | ||||||||||
| Options exercisable as of December 31, 2019 |
42,474 | 5.81 | 3.73 | 2,276,062 | ||||||||||||
| Options outstanding as of September 30, 2020 (unaudited) |
44,839 | 11.43 | 3.79 | 1,172,157 | ||||||||||||
| Options exercisable as of September 30, 2020 (unaudited) |
40,430 | 7.50 | 3.25 | 1,168,683 |
During the years ended December 31, 2017, 2018 and 2019 and nine months ended September 30, 2019 and 2020 (unaudited), the weighted-average fair value of stock options granted under the Plans was $24.27, $24.23, $33.46, $33.50, and $15.52 per share, respectively. During the years ended December 31, 2017, 2018 and 2019 and nine months ended September 30, 2019 and 2020 (unaudited), the aggregate intrinsic value of stock options exercised was $25.7 million, $48.8 million, $50.4 million, $45.6 million, and $94.8 million, respectively, and the total grant-date fair value of stock options that vested was $12.7 million, $24.6 million, $44.6 million, $37.6 million, and $32.9 million, respectively.
F-53
Airbnb, Inc.
Notes to Consolidated Financial Statements
As of December 31, 2018 and 2019 and September 30, 2020 (unaudited), there was $109.4 million, $107.1 million, and $88.6 million, respectively, of total unrecognized compensation cost related to stock option awards granted under the Plans. The unrecognized cost as of December 31, 2019 and September 30, 2020 (unaudited) is expected to be recognized over a weighted-average period of 2.8 years and 2.7 years, respectively.
Nonemployee Stock Options
For stock options granted to nonemployees, the Company uses the Black-Scholes option-pricing model to determine the fair value on the date of grant. Total nonemployee stock compensation recognized for the years ended December 31, 2017, 2018 and 2019 and nine months ended September 30, 2019 and 2020 (unaudited) was not material.
Common Shares Issued for Conversion of Convertible Note
In connection with its Luxury Retreats acquisition, the Company entered into an unsecured convertible promissory note with a stockholder of Luxury Retreats. The note converted into 1,236,788 unvested shares of the Company’s Class A common stock on May 15, 2017. The fair value of the shares issued upon conversion of the note was $64.9 million and is recognized as compensation expense within product development expenses over the four-year vesting period. The Company recognized compensation expense, in product development within the consolidated statements of operations, of $10.8 million, $19.6 million, $34.5 million and $34.5 million for the years ended December 31, 2017, 2018 and 2019 and nine months ended September 30, 2019 (unaudited), respectively. The Company fully expensed the shares issued in the third quarter of 2019 as a result of the termination of the stockholder’s employment (unaudited).
Restricted Stock Units
Substantially all of the Company’s RSUs vest upon the satisfaction of both a service-based and a liquidity-event performance-based requirement. The service-based vesting condition for these awards is generally satisfied over four years. The liquidity-based vesting condition is satisfied upon (i) an IPO or (ii) change in control of the Company as defined in the Company’s equity incentive plans. The RSUs vest on the first date upon which both the service-based and liquidity-event performance-based requirements are satisfied. If the RSUs vest, the Company will deliver one share of common stock for each vested RSU on the settlement date.
As of December 31, 2019 and September 30, 2020 (unaudited), the Company had concluded that the liquidity-event performance-based vesting condition had not been met nor was it probable of being satisfied. As a result, the Company has not recorded any stock-based compensation expense to date for any RSUs with a liquidity-event performance-based vesting condition. In the period in which the liquidity-event performance-based condition becomes probable, the Company will record a cumulative catch-up expense for the service period completed to such date and will begin recording stock-based compensation expense using the accelerated attribution method, net of forfeitures, based on the grant-date fair value of the RSUs for awards where the service period is not complete. Had the liquidity-event performance-based vesting condition been probable as of December 31, 2019 and September 30, 2020 (unaudited), the Company would have recognized $2.2 billion and $2.7 billion, respectively, of stock-based
F-54
Airbnb, Inc.
Notes to Consolidated Financial Statements
compensation expense relating to the RSUs then outstanding, for which the service-based vesting condition was satisfied or partially satisfied as of December 31, 2019 and September 30, 2020 (unaudited).
The remaining unrecognized stock-based compensation expense relating to these RSUs was $0.8 billion as of September 30, 2020 (unaudited). This amount represents the remaining expense expected to be recognized had the liquidity-event performance-based and service-based requirements been met on September 30, 2020 (unaudited).
In November 2019, the Company also began granting RSUs with a service-based vesting condition only. Service-based RSUs are measured based on the grant-date fair value. In general, the Company’s RSUs vest over a service period of four years. Stock-based compensation expense is recognized based on the straight-line basis over the requisite service period. During the year ended December 31, 2019 and nine months ended September 30, 2020 (unaudited), the Company recorded stock-based compensation expense totaling $12.0 million and $81.6 million, respectively, related to these RSUs.
As of December 31, 2019 and September 30, 2020 (unaudited), there was $340.0 million and $274.6 million, respectively, of unrecognized compensation expense related to unvested RSUs with only service-based vesting requirements, and these amounts are expected to be recognized over a weighted-average period of 3.8 years and 3.1 years (unaudited), respectively.
Restricted Common Stock
The Company has granted restricted common stock to certain continuing employees, primarily in connection with acquisitions. Vesting of this stock is primarily dependent on a service-based vesting condition that generally becomes satisfied over a period of four years. The Company has the right to repurchase or cancel shares for which the vesting condition is not satisfied.
The following table summarizes the activity related to the Company’s restricted common stock (in thousands, except for per share amounts):
| Number of Shares |
Weighted-Average Grant-Date Fair Value Per Share |
|||||||
| Unvested restricted common stock as of December 31, 2018 |
798 | $ | 53.36 | |||||
| Issued |
924 | 62.48 | ||||||
| Vested |
(726 | ) | 52.74 | |||||
| Unvested restricted common stock as of December 31, 2019 |
996 | 62.26 | ||||||
| Issued (unaudited) |
— | — | ||||||
| Vested (unaudited) |
(114 | ) | 61.73 | |||||
| Unvested restricted common stock as of September 30, 2020 (unaudited) |
882 | 62.30 |
F-55
Airbnb, Inc.
Notes to Consolidated Financial Statements
Stock-Based Compensation
The following table summarizes total stock-based compensation expense (in thousands):
| Year Ended December 31, | Nine Months Ended September 30, |
|||||||||||||||||||
| 2017 | 2018 | 2019 | 2019 | 2020 | ||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Operations and support |
$ | 1,841 | $ | 1,968 | $ | 817 | $ | 283 | $ | 2,869 | ||||||||||
| Product development |
20,309 | 33,895 | 56,632 | 44,991 | 64,088 | |||||||||||||||
| Sales and marketing |
5,997 | 12,465 | 23,919 | 17,074 | 11,979 | |||||||||||||||
| General and administrative |
10,210 | 5,565 | 16,179 | 9,962 | 31,689 | |||||||||||||||
| Restructuring charges |
— | — | — | — | (1,849 | ) | ||||||||||||||
| Total |
$ | 38,357 | $ | 53,893 | $ | 97,547 | $ | 72,310 | $ | 108,776 |
The Company recognized an income tax benefit of $0.9 million, $3.6 million, $9.8 million, and $0.9 million in the consolidated statements of operations for stock-based compensation arrangements in the years ended December 31, 2017, 2018 and 2019 and nine months ended September 30, 2019 (unaudited), respectively. The Company did not recognize any income tax benefit in the consolidated statement of operations for stock-based compensation arrangements in the nine months ended September 30, 2020 (unaudited).
Note 13. Commitments and Contingencies
Commitments
The Company has commitments including purchase obligations for web-hosting services and other commitments for brand marketing. The following table presents these non-cancelable commitments and obligations as of December 31, 2019 (in thousands):
| Total | Less than 1 year |
1 to 3 years | 3 to 5 years | More than 5 years |
||||||||||||||||
| Purchase obligations |
$ | 1,200,000 | $ | 175,000 | $ | 440,000 | $ | 585,000 | $ | — | ||||||||||
| Other commitments |
318,000 | 14,000 | 72,000 | 74,000 | 158,000 | |||||||||||||||
| Total |
$ | 1,518,000 | $ | 189,000 | $ | 512,000 | $ | 659,000 | $ | 158,000 |
The following table presents these non-cancelable commitments and obligations as of September 30, 2020 (unaudited) (in thousands):
| Total | Less than 1 year |
1 to 3 years | 3 to 5 years | More than 5 years |
||||||||||||||||
| Purchase obligations |
$ | 1,186,667 | $ | 80,000 | $ | 240,000 | $ | 396,667 | $ | 470,000 | ||||||||||
| Other commitments |
314,000 | 35,750 | 74,000 | 75,500 | 128,750 | |||||||||||||||
| Total |
$ | 1,500,667 | $ | 115,750 | $ | 314,000 | $ | 472,167 | $ | 598,750 |
F-56
Airbnb, Inc.
Notes to Consolidated Financial Statements
Extenuating Circumstances Policy (Unaudited)
In March 2020, the Company applied its extenuating circumstances policy to cancellations resulting from COVID-19. That policy provides hosts and guests with greater flexibility to cancel reservations that are disrupted by epidemics, natural disasters, and other emergencies. Specifically, accommodation bookings made by guests on or before March 14, 2020, have so far been covered by the policy and may be canceled before check-in. To support hosts impacted by elevated guest cancellations under that policy, the Company committed up to $250 million for hosts. The eligible reservations for this $250 million host program were defined as reservations made on or before March 14, 2020 with a check-in date between March 14, 2020 and May 31, 2020. For these reservations, eligible hosts are entitled to receive 25% of the amount they would have received from guests under the host’s cancellation policies. These payments are accounted for as consideration paid to a customer and as such, are expected to result in a reduction to revenue. Under this policy, the Company recorded $204.4 million of payments, primarily for hosts, in its consolidated statement of operations for the nine months ended September 30, 2020.
Lodging Tax Obligations and Other Non-Income Tax Matters
Some states and localities in the United States and elsewhere in the world impose transient occupancy or lodging accommodations taxes (“Lodging Taxes”) on the use or occupancy of lodging accommodations or other traveler services. The Company collects and remits Lodging Taxes in more than 29,500 jurisdictions on behalf of its hosts. Such Lodging Taxes are generally remitted to tax jurisdictions within a 30 to 90-day period following the end of each month.
As of December 31, 2018 and 2019 and September 30, 2020 (unaudited), the Company had an obligation to remit Lodging Taxes collected from guests who had stayed in these jurisdictions totaling $85.7 million, $103.7 million, and $138.0 million, respectively. These payables were recorded in accrued expenses and other current liabilities on the consolidated balance sheets.
In jurisdictions where the Company does not collect and remit Lodging Taxes, the responsibility for collecting and remitting these taxes primarily rests with hosts. The Company has estimated liabilities in a certain number of jurisdictions with respect to state, city, and local taxes related to lodging where management believes it is probable that the Company can be held jointly liable with hosts for taxes and the related amounts can be reasonably estimated. As of December 31, 2018 and 2019 and September 30, 2020 (unaudited), accrued obligations related to these estimated taxes, including estimated penalties and interest, totaled $95.7 million, $138.4 million, and $51.8 million, respectively. With respect to lodging and related taxes for which a loss is probable or reasonably possible, the Company is unable to determine an estimate of the possible loss or range of loss beyond the amounts already accrued.
The Company’s potential obligations with respect to Lodging Taxes could be affected by various factors, which include, but are not limited to, whether the Company determines, or any tax authority asserts, that the Company has a responsibility to collect lodging and related taxes on either historical or future transactions or by the introduction of new ordinances and taxes which subject the Company’s operations to such taxes. Accordingly, the ultimate resolution of Lodging Taxes may be greater or less than reserve amounts that the Company has recorded.
The Company is currently involved in lawsuits brought by certain states and localities involving the payment of Lodging Taxes. These jurisdictions are asserting that the Company is liable or jointly liable with
F-57
Airbnb, Inc.
Notes to Consolidated Financial Statements
hosts to collect and remit Lodging Taxes. These lawsuits are in various stages and the Company continues to vigorously defend these claims. The Company believes that the statutes at issue impose a Lodging Tax obligation on the person exercising the taxable privilege of providing accommodations, or the Company’s hosts. In March 2020, a fourth District Court of Appeal affirmed that the Company is not a dealer under the Florida and County Tourist Development Tax Law, and therefore not liable for collecting Lodging Taxes (unaudited). Accordingly, the Company concluded in the first quarter of 2020 that the liabilities accrued in all Florida counties were no longer probable and reduced its reserves for Lodging Taxes by $87.0 million, including interest (unaudited). The ultimate resolution of all remaining unresolved lawsuits cannot be determined at this time.
The imposition of such taxes on the Company could increase the cost of a guest booking and potentially cause a reduction in the volume of bookings on the Company’s platform, which would adversely impact the Company’s results of operations. The Company will continue to monitor the application and interpretation of lodging and related taxes and ordinances and will adjust accruals based on any new information or further developments.
The Company is under audit and inquiry by various domestic and foreign tax authorities with regard to non-income tax matters. The subject matter of these contingent liabilities primarily arises from the Company’s transactions with its hosts and guests, as well as the tax treatment of certain employee benefits and related employment taxes. In jurisdictions with disputes connected to transactions with hosts and guests, disputes involve the applicability of transactional taxes (such as sales, value-added, and similar taxes) to services provided, as well as the applicability of withholding tax on payments made to such hosts. Due to the inherent complexity and uncertainty of these matters and judicial processes in certain jurisdictions, the final outcomes may exceed the estimated liabilities recorded. During the years ended December 31, 2017, 2018 and 2019 and nine months ended September 30, 2019 and 2020 (unaudited), the Company recorded $61.0 million of tax expense, $49.6 million of tax expense, $4.0 million of tax benefit, $5.4 million of tax benefit, and $19.0 million of tax expense related to estimated hosts’ withholding tax obligations, respectively. As of December 31, 2018 and 2019 and September 30, 2020 (unaudited), the Company accrued a total of $122.0 million, $118.1 million, and $137.0 million of estimated tax liabilities related to hosts’ withholding tax obligations, respectively. In addition, as of December 31, 2018 and 2019 and September 30, 2020 (unaudited), the Company accrued a total of $35.6 million, $55.4 million, and $58.6 million of estimated tax liabilities related to certain employee benefits and related employment taxes, respectively. Refer to Note 14, Income Taxes, for further discussion on other tax matters.
Legal and Regulatory Matters
The Company has been and is currently a party to various legal and regulatory matters arising in the normal course of business. Such proceedings and claims, even if not meritorious, can require significant financial and operational resources, including the diversion of management’s attention from the Company’s business objectives.
Regulatory Matters
The Company operates in a complex legal and regulatory environment and its operations are subject to various U.S. and foreign laws, rules, and regulations, including those related to: Internet activities; short-term rentals, long-term rentals and home sharing; real estate, property rights, housing and land use; travel
F-58
Airbnb, Inc.
Notes to Consolidated Financial Statements
and hospitality; privacy and data protection; intellectual property; competition; health and safety; protection of minors; consumer protection; employment; payments; taxation; and others. In addition, the nature of the Company’s business exposes it to inquiries and potential claims related to the compliance of the business with applicable law and regulations. In some instances, applicable laws and regulations do not yet exist or are being applied, interpreted or implemented to address aspects of the Company’s business, and such adoption or interpretation could further alter or impact the Company’s business.
In certain instances, the Company has been party to litigation with municipalities relating to or arising out of certain regulations. In addition, the implementation and enforcement of regulation can have an impact on the Company’s business.
New York, New York. In 2010, New York amended its state law to ban the short-term rental of multiple dwelling units in New York City unless a permanent resident is present during the stay. In October 2016, the state amended the law to also ban the advertising of such short-term rentals, and the Company filed a lawsuit against both the state and the city of New York challenging the applicability of the 2016 amendment to the Company. In November and December 2016, the Company settled the lawsuit against the state and the city, respectively, with each agreeing not to enforce the amended law against the Company. Separately, New York City interprets its Administrative Code to bar or regulate short-term rentals in New York City unless specific requirements are met. In July 2018, New York City enacted a new law requiring home sharing platforms to disclose detailed data on hosts and listings to the city on a monthly basis. In August 2018, the Company filed a lawsuit against the city challenging the new data disclosure law on constitutional and statutory grounds. In January 2019, a federal judge entered a preliminary injunction barring the law from going into effect. On February 13, 2020, the parties requested that the Court stay the action so that the parties could explore settlement. Absent settlement, summary judgment proceedings will proceed in 2020. In June 2020, the Company settled its lawsuit with New York City (unaudited). Under the terms of the settlement, the city ordinance was amended to reduce the number of listings subject to data sharing and to provide for the confidentiality of data (unaudited). The revised ordinance will go into effect in January 2021 (unaudited).
Japan. In June 2018, a new national law, the Japanese Private Lodging Act (Act No. 65 of 2017), went into effect to legalize the short-term rental of primary and secondary residences in Japan for up to 180 nights per fiscal year. Under the law, hosts are required to register their rental with the local government. The Company is also required to register as an intermediary (bai-kai) with the Japanese Tourism Agency, and the law prohibits any registered intermediary from intermediating an illegal listing, including unregistered listings. The Company is required to remove listings that do not post a valid registration/license number. At the time of the law’s implementation, the Company took down a significant number of listings and canceled associated reservations. The Company is continuing to take steps to fully comply with the law.
Paris, France. In December 2017, Paris further tightened the rules around short-term rental regulations. Hosts of entire primary and secondary homes offered for short-term rentals are required to obtain and display a registration number from the city in any advertising of the rental in order to demonstrate compliance. In February 2018, the City of Paris initiated legal proceedings against the Company after it claimed to have discovered 67 non-registered listings on the Company’s platform, and sought an injunctive order to compel the Company to enforce compliance of the hosts’ registration obligations for existing and future listings. In March 2019, the court dismissed the case. Separately, in February 2019, the
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Notes to Consolidated Financial Statements
City of Paris launched a second proceeding on similar grounds based on 1,010 illegal listings with a damages demand of 12.6 million Euros. The second case is still pending and a decision is expected in the first quarter of 2021 at the earliest (unaudited). The Company continues to engage with the City of Paris and the national government to find a solution for the regulation of short-term rentals (unaudited).
In addition to the above matters, the Company has been and is currently party or subject to various other government inquiries, investigations and proceedings related to legal and regulatory requirements. For example, the Company is required to comply with governmental economic and trade sanctions laws administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) and other similar international agencies. In many cases, these inquiries, investigations and proceedings can be complex, time consuming, costly to investigate, and can require significant company and management attention. For certain matters, the Company has investigated and is implementing recommended changes to its managerial, operational and compliance practices. The Company is unable to predict the outcomes and implications on the Company’s business, industry practices or online commerce more generally. Furthermore, the outcome of these proceedings could materially adversely affect the Company’s business, results of operations, and financial condition, including possible fines and penalties and requiring changes to operational activities and procedures.
Intellectual Property
The Company has been and is currently subject to claims relating to intellectual property, including alleged patent infringement. Adverse results in such lawsuits may include awards of substantial monetary damages, costly royalty or licensing agreements, or orders preventing the Company from offering certain features, functionalities, products, or services, and may also cause the Company to change its business practices or require development of non-infringing products or technologies, which could result in a loss of revenue or otherwise harm its business. To date, the Company has not incurred any material costs as a result of such cases and has not recorded any material liabilities in its consolidated financial statements related to such matters.
Litigation and Other Legal Proceedings
The Company has been and is currently subject involved in litigation and legal proceedings and subject to legal claims in the ordinary course of business. In addition to the above, these include legal claims asserting, among other things, commercial, competition, tax, employment, pricing, discrimination, consumer, personal injury, and property rights.
Depending on the nature of the claim, the Company may be subject to monetary damage awards, fines, penalties, and/or injunctive orders. Furthermore, the outcome of these matters could materially adversely affect the Company’s business, results of operations, and financial condition. The outcomes of legal proceedings are inherently unpredictable and subject to significant judgment to determine the likelihood and amount of loss related to such matters. While it is not possible to determine the outcomes, the Company believes based on its current knowledge that the resolution of all such pending matters will not, either individually or in the aggregate, have a material adverse effect on the Company’s business, results of operations, financial condition, or cash flows.
The Company establishes an accrued liability for loss contingencies related to legal matters when a loss is both probable and reasonably estimable. These accruals represent management’s best estimate of
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Airbnb, Inc.
Notes to Consolidated Financial Statements
probable losses. Such currently accrued amounts are not material to the Company’s consolidated financial statements. However, management’s views and estimates related to these matters may change in the future, as new events and circumstances arise and the matters continue to develop. Until the final resolution of legal matters, there may be an exposure to losses in excess of the amounts accrued. With respect to outstanding legal matters, based on current knowledge, the amount or range of reasonably possible loss will not, either individually or in the aggregate, have a material adverse effect on the Company’s business, results of operations, financial condition, or cash flows. Legal fees are expensed as incurred.
Host Protections
The Company offers a Host Guarantee Program that provides protection of up to $1.0 million for direct physical loss or damage to a host’s covered property caused by guests during a confirmed booking and when the host and guest are unable to resolve the dispute. The Company retains risk and also maintains insurance from third parties on a per claim basis to protect the Company’s financial exposure under this program. In addition, through third-party insurers and self-insurance mechanisms, including a wholly-owned captive insurance subsidiary created during the year ended December 31, 2019, the Company provides insurance coverage for third-party bodily injury or property damage liability claims that occur during a stay. This host protection insurance offering consists of a commercial general liability policy, with hosts and the Company as named insureds and landlords of hosts as additional insureds. The host protection insurance program provides primary coverage for up to $1.0 million per occurrence, subject to a $1.0 million cap per listing location, and includes various market standard conditions, limitations, and exclusions.
Indemnifications
The Company has entered into indemnification agreements with certain of its officers and directors. The indemnification agreements and the Company’s Amended and Restated Bylaws (the “Bylaws”) require the Company to indemnify these individuals to the fullest extent not prohibited by Delaware law. Subject to certain limitations, the indemnification agreements and Bylaws also require the Company to advance expenses incurred by its directors and officers. No demands have been made upon the Company to provide indemnification under the indemnification agreements or the Bylaws, and thus, there are no claims that the Company is aware of that could have a material adverse effect on the Company’s business, results of operations, financial condition, or cash flows.
In the ordinary course of business, the Company has included limited indemnification provisions under certain agreements with parties with whom the Company has commercial relations of varying scope and terms with respect to certain matters, including losses arising out of its breach of such agreements or out of intellectual property infringement claims made by third parties. It is not possible to determine the maximum potential loss under these indemnification provisions due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. To date, no significant costs have been incurred, either individually or collectively, in connection with the Company’s indemnification provisions.
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Airbnb, Inc.
Notes to Consolidated Financial Statements
Note 14. Income Taxes
The domestic and foreign components of income (loss) before income taxes were as follows (in thousands):
| Year Ended December 31, | ||||||||||||
| 2017 | 2018 | 2019 | ||||||||||
| Domestic |
$ | (12,119 | ) | $ | (73,711 | ) | $ | (153,154 | ) | |||
| Foreign |
(46,980 | ) | 120,744 | (258,549 | ) | |||||||
| Income (loss) before income taxes |
$ | (59,099 | ) | $ | 47,033 | $ | (411,703 | ) |
The components of the provision for income taxes were as follows (in thousands):
| Year Ended December 31, | ||||||||||||
| 2017 | 2018 | 2019 | ||||||||||
| Current |
|
|
|
|
|
|
|
|
| |||
| Federal |
$ | (23 | ) | $ | 7,573 | $ | 223,673 | |||||
| State |
4,153 | 5,236 | 5,930 | |||||||||
| Foreign |
10,997 | 56,101 | 38,660 | |||||||||
| Total current provision for income taxes |
15,127 | 68,910 | 268,263 | |||||||||
| Deferred |
|
|
|
|
|
|
|
|
| |||
| Federal |
(2,876 | ) | (2,136 | ) | (1,563 | ) | ||||||
| State |
5 | 30 | (248 | ) | ||||||||
| Foreign |
(1,309 | ) | (2,911 | ) | (3,816 | ) | ||||||
| Total deferred benefit for income taxes |
(4,180 | ) | (5,017 | ) | (5,627 | ) | ||||||
| Total provision for income taxes |
$ | 10,947 | $ | 63,893 | $ | 262,636 |
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Airbnb, Inc.
Notes to Consolidated Financial Statements
The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate:
| Year Ended December 31, | ||||||||||||
| 2017 | 2018 | 2019 | ||||||||||
| Expected income tax expense at federal statutory rate |
35.0 | % | 21.0 | % | 21.0 | % | ||||||
| State taxes, net of federal benefits |
(5.1 | ) | 8.9 | (0.2 | ) | |||||||
| Foreign tax rate differential |
(42.1 | ) | 0.6 | (19.5 | ) | |||||||
| Stock-based compensation |
(4.2 | ) | (2.2 | ) | (0.9 | ) | ||||||
| Acquisition related expenses |
4.8 | (0.3 | ) | (0.3 | ) | |||||||
| Other statutorily non-deductible expenses |
(10.9 | ) | 14.0 | (2.6 | ) | |||||||
| Research and development credits |
13.9 | (32.5 | ) | (0.9 | ) | |||||||
| Uncertain tax positions—prior year positions |
— | 38.0 | (53.0 | ) | ||||||||
| Uncertain tax positions—current year positions |
(3.5 | ) | 21.3 | (4.2 | ) | |||||||
| Impact of U.S. tax reform |
(87.6 | ) | 6.1 | — | ||||||||
| Other |
0.5 | — | 0.2 | |||||||||
| Change in valuation allowance |
80.7 | 60.9 | (3.4 | ) | ||||||||
| Effective tax rate |
(18.5 | )% | 135.8 | % | (63.8 | )% |
For the year ended December 31, 2017, the difference in the Company’s effective tax rate and the U.S. federal statutory tax rate was primarily due to a revaluation of the Company’s U.S. deferred tax assets from 35% to 21% as a result of U.S. tax reform, the recording of a full valuation allowance on its U.S. deferred tax assets, the realization of losses in zero rated foreign jurisdictions, and an income tax benefit of $2.8 million associated with Alternative Minimum Tax (“AMT”) credit carryovers due to the Tax Cuts and Jobs Act.
For the years ended December 31, 2018 and 2019, the difference in the Company’s effective tax rate and the U.S. federal statutory tax rate was primarily due to a change in the jurisdictional mix of earnings, the Company’s full valuation allowance on its U.S. deferred tax assets, and the Company’s uncertain tax positions.
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Airbnb, Inc.
Notes to Consolidated Financial Statements
The components of deferred tax assets and liabilities consisted of the following (in thousands):
| As of December 31, | ||||||||
| 2018 | 2019 | |||||||
| Deferred tax assets: |
|
|
|
|
|
| ||
| Net operating loss carryforwards |
$ | 15,685 | $ | 41,132 | ||||
| Tax credit carryforwards |
58,128 | 61,141 | ||||||
| Accruals and reserves |
39,255 | 53,690 | ||||||
| Non-income tax accruals |
43,947 | 60,674 | ||||||
| Stock-based compensation |
32,777 | 38,230 | ||||||
| Operating lease liabilities |
— | 77,536 | ||||||
| Intangible assets |
— | 768,521 | ||||||
| Other |
15,296 | 15,671 | ||||||
| Gross deferred tax assets |
205,088 | 1,116,595 | ||||||
| Valuation allowance |
(190,583 | ) | (1,024,005 | ) | ||||
| Total deferred tax assets |
14,505 | 92,590 | ||||||
| Deferred tax liabilities: |
|
|
|
|
|
| ||
| Property and equipment basis differences |
(7,543 | ) | (17,303 | ) | ||||
| Operating lease assets |
— | (70,200 | ) | |||||
| Other |
(1,107 | ) | — | |||||
| Total deferred tax liabilities |
(8,650 | ) | (87,503 | ) | ||||
| Total net deferred tax assets |
$ | 5,855 | $ | 5,087 |
In December 2019, the Company transferred certain intangible assets among its wholly-owned subsidiaries to align its structure to its evolving operations. The transfer resulted in a step-up in the tax basis of intellectual property rights and a correlated increase in foreign deferred tax assets of $789.6 million. Based on available objective evidence, management believes it is not more-likely-than-not that these additional foreign deferred tax assets will be realizable as of December 31, 2019 and, therefore, these deferred tax assets are offset by a full valuation allowance.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Act”). The Act makes broad and complex changes to the U.S. tax code, including, but not limited to: (i) reducing the U.S. federal corporate tax rate from 35% to 21%; (ii) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (iii) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (iv) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; and (v) creating the base erosion anti-abuse tax, a new minimum tax. ASC 740, Income Taxes, (“ASC 740”) requires companies to recognize the effect of the tax law changes in the period of enactment. However, the Securities and Exchange Commission staff issued Staff Accounting Bulletin 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, which allows companies to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. The Company’s accounting for the tax effects of the Act was completed during the year ended December 31, 2018, as described below.
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Airbnb, Inc.
Notes to Consolidated Financial Statements
As of December 31, 2017, the Company had made a reasonable estimate of the effects on its existing deferred tax balances and the one-time transition tax and recorded provisional amounts in the financial statements. The Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The provisional amount recorded related to the remeasurement of the Company’s deferred tax balance was $44.3 million, which was offset by the corresponding movement in valuation allowance. In the fourth quarter of 2018, the Company completed its analysis to determine the effect of the Act and recorded reductions to its prior year unrecognized tax benefits of $10.2 million.
The one-time transition tax is based on the Company’s accumulated foreign subsidiary earnings not previously subject to U.S. income tax. The Company did not record a provisional amount for transition tax because the accumulated foreign subsidiary earnings were in an overall deficit.
Other significant items which were evaluated by the Company include the impact of the Global Intangible Low-Taxed Income (“GILTI”) and Foreign-derived Intangible Income (“FDII”) provisions of the Act. The GILTI provision imposes taxes on foreign earnings in excess of a deemed return on tangible assets. Regarding the new GILTI tax rules, the Company is required to make an accounting policy election to either treat taxes due on future GILTI inclusions in U.S. taxable income as a current period expense when incurred or reflect such portion of the future GILTI inclusions in U.S. taxable income that relate to existing basis differences in the Company’s current measurement of deferred taxes. The Company elected to account for GILTI under the Act as a period cost when the expense is incurred. The FDII imposes taxes on the excess returns earned directly by a U.S. company from foreign sales or services. The accounting for the deduction for FDII is similar to a special deduction and should be accounted for based on the guidance in ASC 740-10-25-37. The tax benefits for special deductions ordinarily are recognized no earlier than the year in which they are deductible on the tax return.
In determining the need for a valuation allowance, the Company weighs both positive and negative evidence in the various jurisdictions in which it operates to determine whether it is more likely than not that its deferred tax assets are recoverable. In assessing the ultimate realizability of its deferred tax assets, the Company considers all available evidence, including cumulative historic and forecasted losses, and as such, does not believe it is more likely than not that its U.S. and Ireland deferred tax assets will be realized. Accordingly, a full valuation allowance has been established in the United States and Ireland, and no deferred tax assets and related tax benefit have been recognized in the accompanying financial statements. There is, however, no valuation allowance in certain foreign jurisdictions that have cumulative income and expected future income.
For the year ended December 31, 2017, the net decrease in the Company’s valuation allowance compared to the prior year was primarily due to a decrease in net operating loss and tax credit carryforwards as a result of current year utilization and the remeasurement of the remaining deferred tax assets and liabilities due to the reduced 21% tax rate under the Act. The decrease was partially offset by an increase in accruals and reserves. For the year ended December 31, 2018, the net increase in the Company’s valuation allowance compared to the prior year was primarily due to an increase in tax credits generated, accruals, reserves, and stock-based compensation. For the year ended December 31, 2019, the net increase in the Company’s valuation allowance compared to the prior year was primarily due to the step-up in tax basis of intellectual
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Airbnb, Inc.
Notes to Consolidated Financial Statements
property rights created upon an intra-entity transfer, and the corresponding recording of valuation allowance, an increase in tax credits generated, accruals, reserves, and stock-based compensation.
As of December 31, 2018 and 2019, the Company had net operating loss carryforwards for federal income tax purposes of $15.9 million and $116.7 million, respectively. The federal net operating loss carryforwards will expire, if not utilized, beginning in 2034. As of December 31, 2018 and 2019, the Company had federal research and development tax credit carryforwards of $51.7 million and $84.1 million, respectively. The research and development tax credits will expire beginning in 2034 if not utilized.
As of December 31, 2018 and 2019, the Company had net operating loss carryforwards for state income tax purposes of $136.3 million and $167.6 million, respectively. The state net operating loss carryforwards will expire, if not utilized, beginning in 2033. As of December 31, 2018 and 2019, the Company had state research and development carryforwards and enterprise zone tax credit carryforwards of $48.0 million and $78.5 million, respectively. The research and development tax credits do not expire, and the enterprise zone tax credits will expire, if not utilized, beginning in 2023.
The Tax Reform Act of 1986 and similar California legislation impose substantial restrictions on the utilization of net operating losses and tax credit carryforwards in the event that there is a change in ownership as provided by Section 382 of the Internal Revenue Code and similar state provisions. Such a limitation could result in the expiration of the net operating loss carryforwards and tax credits before utilization.
A reconciliation of the beginning and ending amount of the Company’s total gross unrecognized tax benefits was as follows (in thousands):
| Year Ended December 31, | ||||||||||||
| 2017 | 2018 | 2019 | ||||||||||
| Balance at beginning of period |
$ | 37,927 | $ | 47,510 | $ | 69,837 | ||||||
| Gross increases related to prior year tax positions |
1,736 | 21,640 | 237,973 | |||||||||
| Gross decreases related to prior year tax positions |
(385 | ) | (11,792 | ) | (5,029 | ) | ||||||
| Gross increases related to current year tax positions |
8,232 | 18,644 | 36,502 | |||||||||
| Reductions due to settlements with taxing authorities |
— | (6,083 | ) | (2,296 | ) | |||||||
| Reduction due to lapse in statute of limitations |
— | (82 | ) | (260 | ) | |||||||
| Balance at end of period |
$ | 47,510 | $ | 69,837 | $ | 336,727 |
The Company corrected the total gross unrecognized tax benefits for the year ended December 31, 2019. The correction resulted in additional gross increases related to prior year and current year tax positions of $64.4 million and $3.2 million, respectively, for the previous netting of certain deferred tax assets.
The Company is in various stages of examination in connection with its ongoing tax audits globally, and it is difficult to determine when these examinations will be settled. The Company believes that an adequate provision has been recorded for any adjustments that may result from tax audits. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company may be required to record an adjustment to the provision for income taxes in the period such resolution occurs. It is
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Airbnb, Inc.
Notes to Consolidated Financial Statements
reasonably possible that over the next 12-month period the Company may experience an increase or decrease in its unrecognized tax benefits as a result of tax examinations or lapses of the statute of limitations. However, an estimate of the range of the reasonably possible change in the next twelve months cannot be made.
As of December 31, 2018 and 2019, $31.2 million and $266.4 million, respectively, of unrecognized tax benefits represents the amount that would, if recognized, impact the Company’s effective income tax rate.
In accordance with the Company’s accounting policy, it recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes. The Company’s accrual for interest and penalties was $5.8 million and $41.4 million as of December 31, 2018 and 2019, respectively.
The Company’s significant tax jurisdictions include the United States, California, and Ireland. The Company is currently under examination for income taxes by the Internal Revenue Service (“IRS”) for the 2013 tax year. The Company is in the process of providing documentation in response to the inquiry. The primary issue under examination is the valuation of the Company’s international intellectual property which was sold to a subsidiary in 2013. In the year ended December 31, 2019, new information became available which required the Company to remeasure its reserve for unrecognized tax benefits. The Company recorded additional tax expense of $196.4 million during the year ended December 31, 2019.
On July 27, 2015, the United States Tax Court (the “Tax Court”) issued an opinion in Altera Corp. v. Commissioner (the “Tax Court Opinion”), which concluded that related parties in a cost sharing arrangement are not required to share expenses related to stock-based compensation. The Tax Court Opinion was appealed by the Commissioner to the Ninth Circuit Court of Appeals (the “Ninth Circuit”). On June 7, 2019, the Ninth Circuit issued an opinion (the “Ninth Circuit Opinion”) that reversed the Tax Court Opinion. On July 22, 2019, Altera Corp. filed a petition for a rehearing before the full Ninth Circuit. On November 12, 2019, the Ninth Circuit denied Altera Corp.’s petition for rehearing its case. The Company accordingly recognized tax expense of $26.6 million related to changes in uncertain tax positions during the year ended December 31, 2019. The Company will continue to monitor future developments in this case to determine if there will be further impacts to its consolidated financial statements.
In addition, in June 2018, the Company reached a preliminary settlement with certain tax authorities with regard to a transfer pricing audit. The Company used the new information obtained in the settlement to remeasure its reserve for unrecognized tax benefits in other jurisdictions relating to similar positions. The net impact to the provision for income taxes in 2018 as a result of the settlement and remeasurement was $34.6 million. There are other ongoing audits in various other jurisdictions that are not material to the Company’s financial statements. The Company’s 2008 to 2018 tax years remain subject to examination in the United States and California due to tax attributes and statutes of limitations, and its 2014 to 2018 tax years remain subject to examination in Ireland. The Company remains subject to possible examination in various other jurisdictions that are not expected to result in material tax adjustments.
The Company’s policy with respect to its undistributed foreign subsidiaries’ earnings is to consider those earnings to be indefinitely reinvested. As discussed above, the Act required a one-time transition tax on previously untaxed accumulated and current earnings and profit. Correspondingly, all undistributed
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Airbnb, Inc.
Notes to Consolidated Financial Statements
earnings were deemed to be taxed in 2017 and distribution of the unremitted earnings will not have any significant U.S. federal and state income tax impact. The Company has not provided for the remaining tax effect, if any, of limited outside basis differences of its foreign subsidiaries. The determination of the future tax consequences of the remittance of these earnings is not practicable.
For the Nine Months Ended September 30, 2020 (Unaudited)
The Company’s tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete items arising in that quarter. In each quarter, the Company updates the estimated annual effective tax rate and makes a year-to-date adjustment to the provision. The estimated annual effective tax rate is subject to significant volatility due to several factors, including accurately predicting the Company’s pre-tax and taxable income and loss and the mix of jurisdictions to which they relate, intercompany transactions, audit-related developments, and changes in statutes, regulations, case law, and administrative actions. Additionally, the Company’s effective tax rate can be more or less volatile based on the amount of pre-tax income or loss.
The Company recorded an income tax provision of $253.2 million and $7.4 million for the nine months ended September 30, 2019 and 2020, respectively. The decrease is primarily due to the remeasurement of unrecognized tax benefits in the second quarter of 2019, associated with the examination of income taxes by the IRS for the 2013 tax year.
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted by the United States on March 27, 2020. Through the nine months ended September 30, 2020, the CARES Act has not had a material impact on the provision for income taxes.
The Company’s gross unrecognized tax benefits were $383.8 million as of September 30, 2020. If the gross unrecognized tax benefits as of September 30, 2020 were realized in a subsequent period, this would result in a tax benefit of $276.7 million within the Company’s provision of income taxes at such time. The amount of interest and penalties accrued was $49.8 million as of September 30, 2020. The Company expects to continue to accrue unrecognized tax benefits for certain recurring tax positions.
Changes in tax laws, regulations, administrative practices, principles, and interpretations may impact the Company’s tax contingencies. The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued. It is reasonably possible that within the next twelve months we will receive additional assessments by various tax authorities or possibly reach resolution of income tax examinations in one or more jurisdictions.
The Company is in the process of providing documentation to the Internal Revenue Service in connection with an examination of the Company’s 2013 income taxes with the primary issue under examination being the valuation of the Company’s international intellectual property which was sold to a subsidiary in 2013. In September 2020, the Company received a Draft Notice of Proposed Adjustment from the IRS which proposes an increase to the Company’s U.S. taxable income that could result in additional income tax expense and cash liability of $1.35 billion, subject to penalties and interest. If the IRS prevails in the assessment of additional tax due based on its position, the assessed tax, interest, and penalties, if any exceeding the Company’s current reserves, could have a material adverse impact on the Company’s financial position, results of operations, and cash flows. Following formal receipt of the Revenue Agent’s
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Airbnb, Inc.
Notes to Consolidated Financial Statements
adjustment, which the Company anticipates late in the fourth quarter of 2020, it intends to vigorously contest the IRS’s proposed adjustment, including through all administrative and, if necessary, judicial remedies which may include: entering into administrative settlement discussions with the IRS Independent Office of Appeals (“IRS Appeals”) in 2021, and if necessary petitioning the U.S. Tax Court (“Tax Court”) for redetermination if an acceptable outcome cannot be reached with IRS Appeals, and finally, and if necessary, appealing the Tax Court’s decision to the appropriate appellate court. The Company believes that adequate amounts have been reserved for any adjustments that may ultimately result from these examinations.
During the third quarter of 2020, the Company approved a restructuring plan to repatriate its intellectual property to the United States to align with its evolving operations in a post-COVID-19 environment. The transaction is expected to be completed in the fourth quarter of 2020. The effects of the transaction are included in the estimated annual effective tax rate. As a result of the approved transaction, the tax benefit of $100.0 million related to the five-year net operating loss carryback provision of the CARES Act accrued in the first two quarters of 2020 was reversed in the third quarter of 2020. In the fourth quarter of 2020, the Company expects to eliminate a $789.6 million foreign deferred tax asset related to the tax basis of intellectual rights that are being repatriated back to the United States. The foreign deferred tax asset was offset by a full valuation allowance. Also, the transaction is intended to create a U.S. deferred tax asset of $98.5 million resulting from a step-up in the tax basis of certain repatriated intellectual property. Based on available objective evidence, management believes it is not more-likely-than-not that these additional U.S. deferred tax assets will be realizable as of September 30, 2020 and, therefore, these deferred tax assets are offset by a full valuation allowance.
Note 15. Net Loss per Share and Unaudited Pro Forma Net Loss per Share
The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders for the periods indicated (in thousands, except per share amounts):
| Year Ended December 31, | Nine Months Ended September 30, |
|||||||||||||||||||
| 2017 | 2018 | 2019 | 2019 | 2020 | ||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Net loss attributable to Class A and Class B common stockholders |
$ | (70,046 | ) | $ | (16,860 | ) | $ | (674,339 | ) | $ | (322,801 | ) | $ | (696,865 | ) | |||||
| Weighted-average shares in computing net loss per share attributable to Class A and Class B common stockholders, basic and diluted |
255,006 | 256,326 | 260,556 | 259,946 | 263,726 | |||||||||||||||
| Net loss per share attributable to Class A and Class B common stockholders, basic and diluted |
$ | (0.27 | ) | $ | (0.07 | ) | $ | (2.59 | ) | $ | (1.24 | ) | $ | (2.64 | ) |
The rights, including the liquidation and dividend rights, of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to 10 votes per share. Each share of Class B common stock is convertible into a share of Class A common stock voluntarily at any
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Airbnb, Inc.
Notes to Consolidated Financial Statements
time by the holder, and automatically upon certain events. The Class A common stock has no conversion rights. As the liquidation and dividend rights are identical for Class A and Class B common stock, the undistributed earnings are allocated on a proportional basis and the resulting net loss per share attributable to common stockholders will, therefore, be the same for both Class A and Class B common stock on an individual or combined basis.
There were no preferred dividends declared or accumulated for the years ended December 31, 2017, 2018, 2019 or nine months ended September 30, 2020 (unaudited). As of December 31, 2017 and 2018, RSUs to be settled in 42,980,770 and 54,677,888 shares of Class B common stock, and warrants to purchase 436,530 and 191,916 shares of Class B common stock, were outstanding, respectively, and were excluded from the table below because they are subject to performance conditions that were not achieved as of this date. As of December 31, 2019, RSUs to be settled in 70,205,104 shares of Class B common stock and 642,166 restricted stock awards were excluded from the table below because they are subject to performance conditions that were not achieved as of such date. As of September 30, 2019 (unaudited), RSUs to be settled in 70,695,446 shares of Class B common stock, 642,166 restricted stock awards, and warrants to purchase 191,916 of Class B common stock were excluded from the table below because they are subject to performance conditions that were not achieved as of such date. As of September 30, 2020 (unaudited), RSUs to be settled in 84,011,392 shares of Class B common stock and 642,166 restricted stock awards were excluded from the table below because they are subject to performance conditions that were not achieved as of such date.
Additionally, the following securities were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive (in thousands):
| As of December 31, | As of September 30, | |||||||||||||||||||
| 2017 | 2018 | 2019 | 2019 | 2020 | ||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Warrants |
202 | 150 | — | — | 7,935 | |||||||||||||||
| Escrow shares |
— | — | 644 | 644 | 644 | |||||||||||||||
| Stock options |
44,494 | 46,200 | 46,512 | 46,613 | 44,839 | |||||||||||||||
| Restricted stock awards |
1,254 | 798 | 354 | 377 | 240 | |||||||||||||||
| Restricted stock units |
— | — | 5,931 | — | 6,169 | |||||||||||||||
| Redeemable convertible preferred stock |
241,190 | 240,912 | 240,911 | 240,912 | 240,911 | |||||||||||||||
| Total |
287,140 | 288,060 | 294,352 | 288,546 | 300,738 |
F-70
Airbnb, Inc.
Notes to Consolidated Financial Statements
Unaudited Pro Forma Net Loss per Share
The following table presents the calculation of pro forma basic and diluted net loss per share attributable to Class A and Class B common stockholders for the period indicated (in thousands, except per share amounts):
| Year Ended December 31, 2019 |
Nine Months Ended September 30, 2020 |
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| Net loss attributable to Class A and Class B common stockholders |
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| Pro forma adjustment to reflect the assumed conversion of the redeemable convertible preferred stock to Class B common stock |
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| Pro forma adjustment to reflect the issuance of Class B common stock upon the assumed vesting of the RSUs with liquidity-event performance-based vesting conditions, net of shares withheld for tax obligations |
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| Pro forma weighted-average shares used in computing pro forma net loss per share attributable to Class A and Class B common stockholders, basic and diluted |
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| Pro forma net loss per share attributable to Class A and Class B common stockholders, basic and diluted |
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Note 16. Employee Benefit Plan
The Company maintains a 401(k) defined contribution benefit plan that covers substantially all of its domestic employees. The plan allows U.S. employees to make voluntary pre-tax contributions in certain investments at the discretion of the employee, up to maximum annual contribution limits established by the U.S. Department of Treasury. The Company matched a portion of employee contributions totaling $4.9 million, $8.3 million, $20.6 million, $13.0 million, and $16.6 million for the years ended December 31, 2017, 2018 and 2019 and nine months ended September 30, 2019 and 2020 (unaudited), respectively. Both employee contributions and the Company’s matching contributions are fully vested upon contribution.
Note 17. Related Party Transactions
An executive officer of the Company served on the board of directors of a payment processing vendor. The Company is party to a merchant agreement with the vendor whereby the Company earns transaction fees and incentives for offering its services to its customers in certain markets and satisfying certain base requirements pursuant to the agreement. The Company applies the transaction fees and incentives received to partially offset the merchant fees charged by the vendor. Net expense with this vendor was $25.8 million, $19.5 million, $130.8 million, $73.7 million, and $156.2 million for the years ended December 31, 2017, 2018 and 2019, nine months ended September 30, 2019 and 2020 (unaudited), respectively, and was included in cost of revenue in the consolidated statements of operations. As of December 31, 2018 and 2019, amounts due to this vendor were not material and $17.9 million, respectively.
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Airbnb, Inc.
Notes to Consolidated Financial Statements
This individual was an executive officer of the Company until March 1, 2020, at which time this individual ceased being an executive officer and was appointed to the Company’s board of directors (unaudited).
Note 18. Geographic Information
The following table sets forth the breakdown of revenue by geography, determined based on the location of the host’s listing (in thousands):
| Year Ended December 31, | Nine Months Ended September 30, |
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| 2017 | 2018 | 2019 | 2019 | 2020 | ||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| United States |
$ | 777,302 | $ | 1,190,719 | $ | 1,770,550 | $ | 1,338,609 | $ | 1,176,522 | ||||||||||
| International (1) |
1,784,419 | 2,461,266 | 3,034,689 | 2,359,834 | 1,342,413 | |||||||||||||||
| Total revenue |
$ | 2,561,721 | $ | 3,651,985 | $ | 4,805,239 | $ | 3,698,443 | $ | 2,518,935 |
| (1) |
No individual international country represented 10% or more of the Company’s total revenue for years ended December 31, 2017, 2018, and 2019 and nine months ended September 30, 2019 and 2020 (unaudited). |
The following table sets forth the breakdown of long-lived assets based on geography (in thousands):
| December 31, | September 30, | |||||||||||
| 2018 | 2019 | 2020 | ||||||||||
| (unaudited) | ||||||||||||
| United States |
$ | 262,506 | $ | 547,288 | $ | 491,137 | ||||||
| Ireland |
26,181 | 86,405 | 75,450 | |||||||||
| Other international |
20,721 | 53,174 | 49,106 | |||||||||
| Total long-lived assets |
$ | 309,408 | $ | 686,867 | $ | 615,693 |
Tangible long-lived assets as of December 31, 2018 and 2019 and September 30, 2020 (unaudited) consisted of property and equipment and operating lease ROU assets. Long-lived assets attributed to the United States, Ireland, and other international geographies are based upon the country in which the asset is located.
Note 19. Restructuring (Unaudited)
During the nine months ended September 30, 2020, the Company experienced significant economic challenges associated with a severe decline in bookings, resulting primarily from COVID-19 and overall global travel restrictions. To address these impacts, in May 2020, the Company’s management approved a restructuring plan to realign the Company’s business and strategic priorities based on the current market and economic conditions as a result of COVID-19. This worldwide restructuring plan included a 25% reduction in the number of full-time employees, or approximately 1,800 employees, as well as a reduction in the contingent workforce and amendments to certain commercial agreements. For the nine months ended September 30, 2020, the Company incurred $137.0 million in restructuring charges, of which $97.9
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Airbnb, Inc.
Notes to Consolidated Financial Statements
million was related to severance and other employee costs, $25.3 million was related to lease impairments, and $13.8 million was primarily related to contract amendments and terminations. These expenses are included in restructuring charges in the Company’s consolidated statements of operations, and unpaid amounts are included in accrued expenses and other current liabilities on its consolidated balance sheets. While some of these activities are ongoing and are expected to be completed during 2021, the majority of these actions were completed by September 30, 2020. As of September 30, 2020, the remaining liability for restructuring-related costs was not material.
Note 20. Subsequent Events
The Company has evaluated subsequent events through March 3, 2020, the date the annual consolidated financial statements were available for issuance, and with respect to the stock split discussed in Note 2, through October 26, 2020.
Note 21. Subsequent Events (Unaudited)
The Company has evaluated subsequent events through November 16, 2020, the date the unaudited interim consolidated financial statements were available for issuance.
On November 4, 2020, in connection with the Company’s IPO, the Company’s board of directors amended all awards outstanding under the Company’s 2008 Plan and 2018 Plan to settle into Class A common stock, rather than into Class B common stock, excluding the stock options held by individuals holding at least 1% of the Company’s outstanding capital stock. Holders of Class A common stock have the right to exchange on one occasion such Class A common stock for Class B common stock until such time the Class A common stock is transferred, unless transferred to a permitted transferee.
On November 10, 2020, the board of directors approved an amendment to the 2018 Plan to provide that awards covering either shares of Class A common stock or Class B common stock may be granted under the 2018 Plan and to increase the number of shares reserved for issuance pursuant to the 2018 Plan.
Equity Incentive Plans
Since October 1, 2020, 2,145,780 stock options and 14,723,720 RSUs have been issued, which are subject to a service-based vesting condition. The RSU awards included a multi-year equity award of 12 million RSUs to the Company’s Chief Executive Officer (“CEO Award”). The CEO Award will only vest if after commencing trading on the Nasdaq Global Select Market, the price of the Company’s Class A common stock reaches certain stock-price hurdles that are significantly in excess of the Company’s current valuation over a ten-year period and is subject to continued service as the Company’s chief executive officer. The CEO Award is divided into ten equal tranches with each tranche becoming eligible to vest on each of the ten anniversaries from the grant date. Shares issuable under the CEO Award will be issued on the second anniversary after they become vested, except for amounts to cover any taxes due in connection with vesting, with shares withheld to cover or offset such taxes.
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Airbnb, Inc.
Schedule II—Valuation and Qualifying Accounts
The tables below detail the activity of the customer receivable reserve, insurance liabilities, and the valuation allowance on deferred tax assets for the years ended December 31, 2017, 2018, and 2019 (in thousands):
| Balance at Beginning of Period |
Charged to Expenses |
Charges Utilized/ Write-Offs |
Balance at End of Period |
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| Customer Receivable Reserve |
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| Year Ended December 31, 2017 |
$ | 21,079 | $ | 30,876 | $ | (25,274 | ) | $ | 26,681 | |||||||
| Year Ended December 31, 2018 |
$ | 26,681 | $ | 49,028 | $ | (49,743 | ) | $ | 25,966 | |||||||
| Year Ended December 31, 2019 |
$ | 25,966 | $ | 77,053 | $ | (51,708 | ) | $ | 51,311 |
| Balance at Beginning of Period |
Additions for Current Period |
Changes in Estimates for Prior Periods |
Net Payments | Balance at End of Period |
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| Insurance Liabilities |
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| Year Ended December 31, 2017 |
$ | 1,246 | $ | 26,743 | $ | 4,414 | $ | (20,818 | ) | $ | 11,585 | |||||||||
| Year Ended December 31, 2018 |
$ | 11,585 | $ | 66,884 | $ | 3,775 | $ | (38,332 | ) | $ | 43,912 | |||||||||
| Year Ended December 31, 2019 |
$ | 43,912 | $ | 130,559 | $ | (7,140 | ) | $ | (94,558 | ) | $ | 72,773 |
| Balance at Beginning of Period |
Charged (Credited) to Expenses |
Charged to Other Accounts |
Balance at End of Period |
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| Valuation Allowance on Deferred Tax Assets |
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| Year Ended December 31, 2017 |
$ | 116,954 | $ | (31,579 | ) | $ | 57,239 | $ | 142,614 | |||||||
| Year Ended December 31, 2018 |
$ | 142,614 | $ | 47,598 | $ | 371 | $ | 190,583 | ||||||||
| Year Ended December 31, 2019 |
$ | 190,583 | $ | 824,628 | $ | 8,794 | $ | 1,024,005 |
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Thank you to the millions of guests who have stayed with us — including Michael, Kat, and Amol, who gave us hope that the idea of strangers staying in each other’s homes wasn’t so crazy after all.
Michael, Kat, and Amol, our first guests
Through and including, (The 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
Part II
Information Not Required in Prospectus
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses, other than the underwriting discounts and commissions, payable by us, in connection with the sale of our Class A common stock being registered. All amounts are estimates except for the Securities and Exchange Commission (“SEC”) registration fee, the Financial Industry Regulatory Authority (“FINRA”) filing fee, and the Nasdaq Global Select Market listing fee.
| SEC registration fee |
$109,100 | |||
| FINRA filing fee |
150,500 | |||
| Nasdaq Global Select Market listing fee |
* | |||
| Printing fees and expenses |
* | |||
| Legal fees and expenses |
* | |||
| Accounting fees and expenses |
* | |||
| Transfer agent and registrar fees and expenses |
* | |||
| Miscellaneous fees and expenses |
* | |||
| Total |
$ * |
| * |
To be provided by amendment. |
Item 14. Indemnification of Directors and Officers.
We expect to adopt a restated certificate of incorporation, which will become effective immediately prior to the completion of this offering and will contain provisions authorized by the General Corporation Law of the State of Delaware (the “Delaware General Corporation Law”) that limit the personal liability of our directors for monetary damages to the fullest extent permitted by Delaware law. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as directors, except liability for the following:
| • |
any breach of the director’s duty of loyalty to our company or our stockholders; |
| • |
any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; |
| • |
unlawful payments of dividends or unlawful stock repurchases or redemptions in violation of Delaware law; or |
| • | any transaction from which the director derived an improper personal benefit. |
Any amendment to, or repeal of, these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission, or claim that occurred or arose prior to that amendment or repeal. If the Delaware General Corporation Law is amended to provide for further limitations on the personal liability of directors of corporations, then the personal liability of our directors will be further limited to the greatest extent permitted by the Delaware General Corporation Law.
Section 145 of the Delaware General Corporation Law, among other things, grants a Delaware corporation the power to, and authorizes a court to award, indemnification and advancement of expenses to officers, directors, and other corporate agents.
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We expect to adopt amended and restated bylaws, which will become effective immediately prior to the completion of this offering and will provide that we will indemnify, to the fullest extent permitted by law, any person who is or was a party or is threatened to be made a party to any action, suit, or proceeding by reason of the fact that he or she is or was one of our directors or officers or is or was serving at our request as a director or officer of another corporation, partnership, joint venture, trust, or other enterprise. Our amended and restated bylaws are expected to provide that we may indemnify to the fullest extent permitted by law any person who is or was a party or is threatened to be made a party to any action, suit, or proceeding by reason of the fact that he or she is or was one of our employees or agents or is or was serving at our request as an employee or agent of another corporation, partnership, joint venture, trust, or other enterprise. Our amended and restated bylaws will also provide that we must advance expenses incurred by or on behalf of a director or officer in advance of the final disposition of any action or proceeding, subject to very limited exceptions.
In addition, the Delaware General Corporation Law provides that to the extent a present or former director or officer of the corporation has been successful on the merits or otherwise in defense of any generally indemnifiable action, suit, or proceeding, that such person will be indemnified by the corporation against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with such action, suit, or proceeding. For any acts or omissions occurring after December 31, 2020, the officers referenced in the immediately preceding sentence could be more limited as a matter of Delaware law.
Further, we have entered into or intend to enter into indemnification agreements with each of our directors, executive officers, and certain other employees. Subject to certain limitations, these indemnification agreements will require us, among other things, to indemnify such directors and executive officers for certain expenses and against certain liabilities including, among other things, attorneys’ fees, judgments, fines, and settlement amounts actually and reasonably paid or incurred by such director or officer in any action, suit, or proceeding arising out of their services as a director or officer or any other company or enterprise to which the person provides services at our request. Subject to certain exceptions, these indemnification agreements will also require us to advance certain expenses (including attorneys’ fees and disbursements) actually and reasonably paid or incurred by these persons in advance of the final disposition of the action, suit, or proceeding. We believe that these indemnification agreements are necessary to attract and retain qualified individuals to serve as directors and executive officers.
The limitation of liability and indemnification provisions that are expected to be included, or are included, in our restated certificate of incorporation, amended and restated bylaws, and in indemnification agreements that we enter into with our directors and executive officers may discourage stockholders from bringing a lawsuit against our directors and executive officers for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against our directors and executive officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be harmed to the extent that we pay the costs of settlement and damage awards against directors and executive officers as required by these indemnification provisions. At present, we are not aware of any pending litigation or proceeding involving any person who is or was one of our directors, officers, employees, or other agents or is or was serving at our request as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, for which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.
We expect to obtain insurance policies under which, subject to the limitations of the policies, coverage is provided to our directors and executive officers against loss arising from claims made by reason of breach
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of fiduciary duty or other wrongful acts as a director or executive officer, including claims relating to public securities matters, and to us with respect to payments that may be made by us to these directors and executive officers pursuant to our indemnification obligations or otherwise as a matter of law.
Certain of our non-employee directors may, through their relationships with their employers, be insured and/or indemnified against certain liabilities incurred in their capacity as members of our board of directors.
The form of underwriting agreement for this initial public offering provides for indemnification by the underwriters of us and our officers and directors who sign this registration statement for specified liabilities, including matters arising under the Securities Act of 1933, as amended (the “Securities Act”).
Item 15. Recent Sales of Unregistered Securities.
Since June 30, 2017, we made sales of the following unregistered securities:
Plan-Related Issuances
Since June 30, 2017, we granted to our employees, consultants, and other service providers options to purchase an aggregate of 442,142 shares of our Class B common stock under our 2008 Equity Incentive Plan (“2008 Plan”), at exercise prices ranging from $45.92 to $49.78 per share.
Since June 30, 2017, we issued and sold to our employees, consultants, and other service providers an aggregate of 5,722,204 shares of our Class B common stock upon the exercise of stock options under our 2008 Plan, at exercise prices ranging from $0.0021 to $29.96 per share, for a weighted-average exercise price of $4.77 and aggregate consideration of approximately $27.3 million.
Since June 30, 2017, we granted to our employees, consultants, and other service providers options to purchase an aggregate of 9,783,676 shares of our Class B common stock under our 2018 Equity Incentive Plan (“2018 Plan”), at exercise prices ranging from $4.82 to $63.30 per share.
Since June 30, 2017, we issued and sold to our employees, consultants, and other service providers an aggregate of 10,938 shares of our Class B common stock upon the exercise of stock options under our 2018 Plan, at exercise prices ranging from $4.82 to $52.70 per share, for a weighted-average exercise price of $19.41 and aggregate consideration of approximately $0.2 million.
Since June 30, 2017, we granted to our employees, consultants, and other service providers options to purchase an aggregate of 290,236 shares of our Class A common stock under our Hotel Tonight, Inc. 2011 Equity Incentive Plan (“2011 Plan”), at exercise prices ranging from $17.51 to $26.19 per share.
Since June 30, 2017, we issued and sold to our employees, consultants, and other service providers an aggregate of 32,204 shares of our Class A common stock upon the exercise of stock options under our 2011 Plan, at exercise prices ranging from $17.51 to $26.19 per share, for a weighted-average exercise price of $22.73 and aggregate consideration of approximately $0.7 million.
Since June 30, 2017, we granted to our employees, consultants, and other service providers restricted stock units, representing an aggregate of 4,706,252 shares of our Class B common stock, under our 2008 Plan.
Since June 30, 2017, we granted to our employees, consultants, and other service providers restricted stock units, covering an aggregate of 80,555,300 shares of our Class B common stock, under our 2018 Plan.
Since June 30, 2017, we granted to our employees, consultants, and other service providers restricted stock units, representing an aggregate of 56,552 shares of our Class A common stock, under our 2011 Plan.
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The offers, sales, and issuances of the securities described above were deemed to be exempt from registration under Rule 701 promulgated under the Securities Act as transactions under compensatory benefit plans and contracts relating to compensation, or under Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering. The recipients of such securities were our directors, employees, or bona fide consultants and received the securities under our equity incentive plans. Appropriate legends were affixed to the securities issued in these transactions.
In connection with this offering, our board of directors amended all awards outstanding under our 2008 Plan and 2018 Plan to settle into Class A common stock, excluding the stock options held by individuals holding at least 1% of our outstanding capital stock which were granted prior to June 30, 2017. The information above does not reflect this amendment to the outstanding equity awards granted under our 2008 Plan and 2018 Plan.
Warrants
Since June 30, 2017, we issued and sold to investors an aggregate of 237,756 shares of our Class B common stock upon the exercise of warrants, for an exercise price of $0.00005 per share. We received aggregate consideration of $12.
On October 31, 2017, we issued to a service provider a warrant to purchase an aggregate of 68,572 shares of our Class A common stock at an exercise price of $0.005. On March 28, 2018, the warrant was exercised to purchase 54,856 shares of our Class A common stock, and on December 12, 2018, the warrant was exercised to purchase 13,716 shares of our Class A common stock. We received aggregate consideration of $343.
On April 17, 2020, we issued to investors warrants to purchase an aggregate of 7,934,794 shares of our Class A common stock at an exercise price of $28.355.
The offers, sales, and issuances of the securities described above were deemed to be exempt from registration under Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D under the Securities Act as a transaction by an issuer not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act.
Acquisitions
On December 10, 2018, we issued 91,896 restricted shares of our Class A common stock to securityholders of Luckey S.A.S. (“Luckey”) in connection with the acquisition of Luckey.
On April 15, 2019, we issued 3,176,852 shares of our Class A common stock and 188,424 restricted shares of our Class A common stock to securityholders of Hotel Tonight, Inc. (“HotelTonight”) in connection with the acquisition of HotelTonight.
On August 5, 2019, we issued 581,740 shares of our Class A common stock and 735,620 restricted shares of our Class A common stock to securityholders of Urbandoor Inc. (“Urbandoor”) in connection with the acquisition of Urbandoor.
The offers, sales, and issuances of the securities described above were deemed to be exempt from registration under Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D under the Securities Act as a transaction by an issuer not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these
II-4
transactions. Each of the recipients of securities in these transactions was an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act.
None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering. All recipients had adequate access, through employment, business, or other relationships, to information about us.
Issuance to Wholly-Owned Host Endowment Fund Subsidiary
On November 10, 2020, we issued 9,200,000 shares of our Class H common stock to our wholly-owned subsidiary, Airbnb Host Endowment LLC (the “Host Endowment Fund”), for consideration consisting of the benefit to the Company related to the purpose of the Host Endowment Fund.
The offer, sale, and issuance of the securities described above were deemed to be exempt from registration under Section 4(a)(2) of the Securities Act under the Securities Act as a transaction by an issuer not involving a public offering.
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Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
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| * |
To be filed by amendment. |
| # |
Indicates management contract or compensatory plan. |
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(b) Financial Statement Schedules.
A financial statement schedule is included in the consolidated financial statements, which form part of this registration statement, and is incorporated herein by reference.
Item 17. Undertakings.
(a) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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Signatures
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Francisco, State of California, on November 16, 2020.
| AIRBNB, INC. | ||
| By: | /s/ Brian Chesky | |
| Brian Chesky Chief Executive Officer |
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Brian Chesky, David E. Stephenson, and Rich Baer, and each of them, as his or her true and lawful attorneys-in-fact and agents, each with the full power of substitution and resubstitution, for him or her and in his or her name, place, or stead, in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments), and to sign any registration statement for the same offering covered by this registration statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933, as amended, and all post-effective amendments thereto, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their, his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Brian Chesky Brian Chesky |
Chief Executive Officer and Director (Principal Executive Officer) |
November 16, 2020 | ||
| /s/ David E. Stephenson David E. Stephenson |
Chief Financial Officer (Principal Financial Officer) |
November 16, 2020 | ||
| /s/ David Bernstein David Bernstein |
Chief Accounting Officer (Principal Accounting Officer) |
November 16, 2020 | ||
| /s/ Joseph Gebbia Joseph Gebbia |
Director |
November 16, 2020 | ||
| /s/ Nathan Blecharczyk Nathan Blecharczyk |
Director |
November 16, 2020 | ||
| /s/ Angela Ahrendts Angela Ahrendts |
Director |
November 16, 2020 | ||
| /s/ Kenneth Chenault Kenneth Chenault |
Director |
November 16, 2020 |
II-9
| Signature | Title | Date | ||
| /s/ Belinda Johnson Belinda Johnson |
Director |
November 16, 2020 | ||
| /s/ Jeffrey Jordan Jeffrey Jordan |
Director |
November 16, 2020 | ||
| /s/ Alfred Lin Alfred Lin |
Director |
November 16, 2020 | ||
| /s/ Ann Mather Ann Mather |
Director |
November 16, 2020 |
II-10


--- layout: post title: The Code Quality Myth date: 2010-11-13 17:20:50.000000000 +02:00 categories: [] tags: [] status: draft type: post published: false post_id: the-code-quality-myth meta: _edit_last: '1' author: login: admin email<EMAIL_ADDRESS>display_name: Radu first_name: '' last_name: '' ---
The Code Quality Myth http://www.artima.com/weblogs/viewpost.jsp?thread=96154