Airbnb's long-awaited IPO filing is peppered with evidence that, despite the impact of the pandemic, the company has fared well thanks to a combination of resilience and luck. But as global coronavirus cases surge, the company expects bookings to decline in the fourth quarter and continue to fluctuate.

Airbnb turned a $219 million net profit in the third quarter, collecting $1.34 billion in revenue, according to its filing. Since 2018, the home rental giant has booked a Q3 profit every year, likely owing to tailwinds from the summer travel season. The San Francisco-based company bounced back in Q3 2020 from a dismal Q2, when it tallied a nearly $575.6 million loss.

After the pandemic hammered the company's business, Airbnb's Q2 gross booking value dropped to $3.2 billion, a 67% decrease compared to the same period last year and the lowest quarterly tally since before 2017. But the booking value rebounded to $8 billion in the third quarter, a comparatively modest 17% decline from Q3 2019.

The global travel shock has been offset in part by growth in close-to-home vacations, which benefited the company. In every month since June, domestic bookings within 500 miles of travelers' homes grew on a year-over-year basis.

Airbnb was also helped by an increase in the gross daily rate for accommodations, as travelers opted for more expensive stays.

"Players in short-term rentals kind of got lucky," said Mike Coletta, manager of research and innovation at travel research provider Phocuswright. "Consumers saw short-term rentals as the best option for a getaway."

Competitors including Booking.com and Expedia, which owns short-term rental brand VRBO, also noted the relative strength of vacation rentals during the pandemic in their latest earnings reports. In the first three quarters, Airbnb's 2020 revenue fell 32% YoY to $2.5 billion, whereas both Expedia and Booking.com reported revenue declines of more than 50% during that period.

Despite the bright points, the impact of the virus on Airbnb's business is palpable. The company posted a net loss of $697 million during the nine-month period ended Sept. 30. In March and April, it saw more cancellations and alterations than new reservations.

The IPO is set to be a watershed moment for the company's institutional backers, a group that includes Sequoia, which controls more than 16% of the company, Founders Fund (5.4%) and DST Global (2.3%). Co-founder and CEO Brian Chesky owns 15.3% of shares by voting power. Co-founders Nathan Blecharczyk and Joe Gebbia each own 14.2%.

The number of shares to be sold and the expected price range will be disclosed in a subsequent filing. Airbnb is expected to command a valuation of roughly $30 billion, according to the Wall Street Journal. In April its valuation dropped to $18 billion after being valued at $31 billion in 2017, according to PitchBook data.

Beyond the coronavirus, Airbnb's headwinds include a money-losing business, slowing profit growth and tax headaches.

The company, which has never turned an annual net profit, recorded a $674 million net loss last year. YoY revenue growth also shrank from 42.5% in 2018 to 31.6% in 2019.

Airbnb significantly reduced costs this year, shaving off more than $800 million YoY as of Sept. 30. The company laid off a quarter of its workforce in May. And sales and marketing saw especially steep cuts, with spending falling by more than half.

In its filing, Airbnb disclosed that the IRS recently proposed a tax adjustment dating back to 2013 that could slap the company with a $1.35 billion tax bill related to the transferring of intellectual property to an international subsidiary.

Airbnb had around $2 billion worth of debt as of Sept. 30. The company raised $1 billion in debt and equity from Silver Lake and Sixth Street Partners in April. That same month, it also secured a $1 billion syndicated term loan from investors.

Featured image via ArthurStock/Shutterstock.com

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