EXPE - Earnings call transcript Q2 2018

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Unknown Speaker

Expedia Group, Inc. (EXPE) Q2 2018 Earnings Call July 26, 2018

Operator

Good day, and welcome to the Expedia Group Q2 2018 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Michael Senno, Vice President of Investor Relations.

Michael Senno

to quarter financial ended welcome for conference and second the June afternoon Expedia results Group's call Good XX, XXXX. be Group's and to Mark pleased joined call the I'm today Okerstrom, Expedia Pickerill, CEO Alan President; and our CFO. on by your responses of XX, discussion, only. management's July reflects to following views questions, The XXXX including as today, not do to obligation revise or We update any undertake this information.

words similar believe, of statements today's and are factors Please preceded for actual these by differ our call we to made forward-looking. we results information cause expect, or today's As materially from such on the statements. earnings we always, forward-looking the statements. with some refer company's about anticipate, as the to could Typically release which filings SEC

results this stock-based will technology comparisons content all depreciation be of on One businesses. comparable the and presenting expense transactional to and against and you and note, comparable You is references will selling provide to our increased compensation ir.expediagroup.com to period order GAAP results starting today's exclude expense IR release Unless our including on the expense today our and general our release. posted in XXXX. for item otherwise for and cost content important find Relations which both call earnings administrative in performance I quarter, excluding we of reconciliations to discussed trivago website in of financial website other periodically most company's total marketing to transparency last are for expense, measures visit additional Investor and stated, the at Expedia of encourage Group non-GAAP all measures earnings and underlying revenue, on

earnings in measures excluding You'll find reconciliations trivago release. our non-GAAP for

of restructuring corresponding is returns not guidance include, significant acquisition-related to, we or of certain spending but items on to provided Finally, outcome are items expenses. predict to the EBITDA because a the unreasonable without investment, These GAAP ultimate and adjusted efforts. measure closest are unable limited not reconciliation foreign-exchange,

that impact are various And items guidance Mark. call the material uncertain, for such, depend our and me that, the with non-GAAP the the period. on turn are results excluded As a from over to factors GAAP have let on could guidance

Mark D. Okerstrom

Thanks, Michael.

with execution we the far. three late while As more to critical are locally forward relevant the global solid last on on becoming in thus and new And making am outlined up delivered We've continuing we more pleased through halfway initiatives a it's results early our progress aligned although say financial strides becoming and to year, of I that our the I great along pleased customer-centric, strategic sit push am I here basis, speeding days our still year, pace innovation. several transformation, themes with path.

highly we can the optimistic forward, $X.X for in are they dynamic, our this and Looking us though opportunities industry in capabilities about increasingly are market. execution trillion our remains confident unlock

to impact Turning XX% revenue first healthy adjusted XX% of and in smoothing EBITDA to the was and grew the nights year-over-year shift very quarter, gross deliver continued into results, half second of back half nights All the in first have stayed half XX% strong we the HomeAway heading total XXXX. the momentum stayed nights room a Overall grew room bookings XX%. from told, lodging great increasing timing, increased Easter XX%. year. up the grew room XX%, of

growth the while second time the expansion to in direct room the at night spend balance and Our in agenda. marketing marketing profitability quarter. making We to our plan leveraging between our progress healthy and was to better brand aggressively same drive are continue optimization, that optimizing data-driven global teams in keep good approach evident

number acquisition on quarter, new we lodging properties we priority continue in includes our the on in signs and accelerated We're performance. are firmly adding booked growth are we early optimistic and pace relevant are in listings. acceleration in acquisition into build continue to in room a the execution to that markets strive night property domestic property mode, move as the our momentum the a second the seeing further global to portfolio both markets, in we we That where these a encouraging of through XX,XXX and As locally front, basis, momentum we basis, our total XXXX. will markets, Collectively, become in over on more excluding global to build quarter. year these in the seeing HomeAway

our to about the Over the over the to instant further year. year. now on an the an to brands We HomeAway bookability of XX% of as expect over Overall, HomeAway continued XX,XXX HomeAway conversion velocity available from more in are nice properties in the XX,XXX quarter. the into Group million bookable. also than enhancing throughout HomeAway to lodging of them to the we HomeAway to team ended XXXX last track newly-acquired additional total bringing at quarter, shift In to quarter remain XXX,XXX on listings, directly innovation has all the sides of both The XXX,XXX be the integrated do at online addition properties least count Expedia core XXX,XXX platform. new marketplace. been tailwind addition the more time, in property instantly a core platform, listings integrating properties increase the we to end X.X bookable ramping platform up our to add of with

few industry-leading our and Over partners lineup of the productivity out supplier-facing listings. their of impressive it's quarters, past an helping rolled tools the optimize they've

in are bookings stayed be nights Egencia growth another on the well significant to results, years. accelerated new XX% alternative in produce to over continues progress XX%, growth their at in the $XXX and of global quarterly strong opportunity quarter highest signing to room very capitalize and Egencia to The transformation HomeAway at accommodations. Gross grew business so, happy two million sales team nearly with Group continue Expedia very the record. for They're strides in incredible HomeAway. at positioning making and, their We in doing

investments a gain share returns and we've So sales With opportunity nice believe we're seeing corporate long the managed to changes its time comps to the continue the and dynamics for difficult challenges travel come. Egencia trivago team. marketplace. to significant in in navigates momentum it face the a in differentiated in the made as continued in has second to a we quarter offering, to product good from market

past. improve of a the year. between the the progress good we are expects half half highlighted comps, results in EBITDA of approach taking have with work trade-offs the first trivago now of hard made As team yesterday, towards the adjusted than trivago remains, in profitability to with to growth lots Overall, they the profitability more bent a the and easing more-balanced second year. in Combined top-line of

aimed at at Expedia We are well and are much-improved Group initiatives the key to executing a into our Alan. healthy future. with growth over that, traction positioning level With I'll it gaining for turn all

Alan Pickerill

We, with trends second of and quarter the top-line XX% room revenue, up night HomeAway Mark. posted healthy both growth in including Thanks, lodging hotel XX%. again, on stayed

part, marketing year's total night due a first quarter. in more difficult from in expected, quarter, were, headwind and spend comparisons, the room we from decelerated to primarily growth year-over-year in which by As lodging last shift aggressive driven Easter the timing

the to average quarter. the $XX year-over-year narrow Transaction year. second bookings slightly XXX-basis-points continue half the revenue room growth revenue posted gross costs Subscription was quarter, the remained first XX%. doubling revenue HomeAway, million. X%, expect gap the daily roughly line than grew HomeAway of the rate over over to year. approximately and that accounted XX% leverage XX%, quarter robust with smaller and in second XX% increased X%. revenue HomeAway's quarter, nice night to adjusted revenue for last HomeAway time EBITDA the we Excluding That per compared and with in on in very expectations growth strong in both for of at stayed and showed room to for increasing in over XX% our of almost overall declined nights

year's healthy QX. X% against for the growth very we we comp move HomeAway some the out note continue some in appropriately media increases, and a as platform top-line year, we revenue ramp-up expenses nicely our team and at Overall, lapping bottom continued line Total marketing that bookings capabilities marketing I fully-functioning to addition insights. to investments the declines more significant also cost and now advertising decreased quarter and in performance would After at and on function related to to in marketing refine our in HomeAway last gross deceleration over improve profitability, building better to top growth for continue which due gain remains was our we place, the year. did to and do trivago. spend In through leverage and marketing balance track to performance the capabilities primarily With anticipate as and marketing are refine our slower able optimize growth data-driven hiring we recent quarters. last growth XXXX. in last we year, than of

full Solutions took from revenue contra I revenue Media related air in growth of delivered XX% insurance. cost in distribution earlier changes insurance. line the the Our XXX basis ticket. points. change grew reclassification double-digit revenue Other growth to revenue XXXX from Similar margin effect quarter, last profitability. of revenue expense travel across on an reflecting are with to in category first our fees The growth impact overall was increase growth. to sold, added XXX solid Air quarter revenue air our growth the Adjusted fees business expansion in each quarter, growth consolidated of up about tickets expenses in XX% points. for mentioned per to the X% a revenue and basis increased cloud year, X% revenue another benefited the refunds we'll second the than to have neutral they reclassification from These for basis customer the faster decelerated of and points distribution continued expectation around to quarter XX quarter. although certain air revenue EBITDA contributed adjusted rest of drove while cost the and of accounting of In in air largely

stack migrating We continue with to good cost lodging cloud, speed management customer progress prudent the and experience. seamless balancing make to our a

developed through more the to capabilities greater As we've dynamically costs. moved optimize year, we've

efforts, a $XXX below tracking we of million expenses As bit cloud our these previously the XXXX result are a discussed.

of free XXXX, for data to over form be balanced $XXX ahead our spend CapEx. avoided in flow center estimates, total nice in offset call which change, subject million cloud a by Looking the to to early cash are

marketing expect second roughly similar and with cloud we Total the selling to and quarter. addition, several just split and for revenue X% direct expenses past XX/XX quarters. continue X% the to up of to between In cost increased technology expenses expenses content, be

We the last brands several XXXX year. increase in in made easy comparison an have we second decisions the expenses quarter as across investment of aggressive direct to XX% marketing

of that or quarter. growth, the to growth expenses a at slightly for Inorganic basis migration Indirect slower although selling full to as up In do points to count of lap year. quarter. we we and spend sales expect direct to in expenses the and head rest make lapped acquisitions and the expect here third Egencia. incremental total, growth. begin case we we top-line in for that the in In initiative given Technology to does marketing the marketing than XX% and marketing we as over benefits year. optimizing from our adjusted those elevated revenue total selling remain addition, impact the with we second to now Growth continue team initial increased progress were also and grow cloud with in the total remain the line quality content supply our associated of the strive deliver some contributed investments moderated on XXX

in in expect invest slightly we reaccelerate technology content growth second and expense as across continue our the to of product organization. and year innovation to the e-commerce half the platform We

notably general As year's expected, we last last in trivago started as slowed expenses compared increases, and to significantly HomeAway. at and growth quarter lap to administrative staffing

quarter second basis meaningful inorganic over marks last added the The acquisitions, any from points in the of XXX quarter. recent to which impact growth G&A

to general full This further be dynamic now tax roughly the slightly an largely than second growth in year. with of and planned in stems to we anticipate increasingly line that XXXX, environment. expenses growth growth for moderate and though regulatory global growth revenue the higher expect continue G&A from operating half expense We in administrative to in

center quarter in Moving due income in continued to depreciation increasing growth slow, down data part XX% lower from benefit the statement, the CapEx. to related expense

XX% leverage rate saw for lower also our expense quarter we corporate the adjusted benefited and net tax as in on U.S. at We rate. interest from came tax the

All robust of up that share very adjusted XX%. per added growth to earnings of

of rest faster for the We expect than adjusted EPS adjusted to the EBITDA year. grow

total a price million front, an $XXX. the average repurchases of over allocation including year-to-date, share under returned just On shareholders, $XXX capital of over $XXX we've at million to in

XXXX. than Our amount year-to-date any already since full total repurchase year is higher

also for dividend We consecutive year. recently the our raised seventh

to capital intend we the and dividend. deployment, to repurchases capital forward, to M&A Going our balanced through shareholders approach opportunistic maintain same share and returning

to for the Turning our expectations year. financial

consolidated cloud. are pleased XX%. points increasing are now full Note expect the to that We with growth to be That XXX growth point, still adjusted work a more our would ahead of to our we year. this range of have EBITDA higher, half excluding of do our adjusted second and of year basis X% the of lot XXX we while dollar XXX% with in results than us in growth to guidance EBITDA

drive the to near-term, to are sustained continue over first We investing question. have well healthy operator, momentum we're the and key in With profit long-term. top-line growth in and positioned we to initiatives growth that, while our ready take delivering strong operational believe

Operator

we'll America from question Justin Post of Merrill Bank take And our Lynch. from first Certainly.

Justin Post

for Thank two. Great. I taking questions. you have my

about First, bookings right did getting are second, industry it going? you efficient? how the decelerate. is is ROIs And like marketing? feel now? do that And spend, on helping then, overall And on marketing How looks returns more HomeAway, the your that

on called profitability? driving marketing out. are You you. spending versus you Thank How that bookings that try drive between to choosing growth to

Mark D. Okerstrom

Great. Justin. Thanks,

a some just there marketing have we've I would what traffic, from smarter of also the cooling just cloud, the Group Expedia have into that data of efficiency, terms lot is sophistication lot has of and up not in lot the the that we've a way pulling listen, no really been back, leveraging industry, in applying that the some moving the place but ourselves of terms that to allowed that an secret to also understand that by capabilities we're think traffic a be only of the large modern In in I got techniques, for data been infrastructure auction players been science say may of of included, we're heat perspective, our got incremental. now to able the way us that level taking previously. in off bidding that really has

a of things. think combination I it's couple a So of

the as traffic more I to And lead apps experience think also the have where real we're whether result, that and are or a mean whether can result marketing. that something. big channels, I brands, in as think through got to an about care with, industry direct-branded that, a consumers of over brands they're to branded starting shifting

in guidance expect In terms Alan's of slowdown HomeAway, listen, I or wouldn't read bookings in we would some too the that much deceleration. gross

opportunity. a I attention And balanced to we're the would think, I long-term trying largely, put maintain approach. it's your a comps issue to just and

in As from we're phase business a listings business HomeAway the really the transitioning right reminder, about eCommerce now to that one offline an business. an is of

on international have We focused not been expansion.

international new we we We have thousands listings, have It's And the going had phase since of although It's ahead quarter, acquiring And about that. XXX,XXX And into last with two that's that. urban us, about focused acquisition. about after that's expansion. moving not opportunity. new acquired acquisition. sign It's all about property listings the since really of is really been on hundreds up us.

the feel we the really making team of see very comfortable tuning So one. around HomeAway in muscles trajectory with here its phase here trade-offs just is right what and you

Justin Post

Mark. Thanks, Great.

Mark D. Okerstrom

welcome. You're

question, Next please.

Operator

next from from question our UBS. take we'll on, Moving Eric Sheridan

Eric J. Sheridan

the for about calling year. I of migration way much on that? into watching What months? over through out XX conversion, plays versus can. months to for, Maybe give of in move investors sort spending investors us as the efficiency, so next cloud about should next cloud. I you higher think out Thanks, we about a And, on from investments Alan, any want thinking the taking commentary of faster think can Is should should if time room to understand, the there the Thanks cloud pace in year inventory this around nights? in sort there all ask of How framing be investing playing Mark, question. marketing investors how that leading benefits good should terms be you, solid guys. the and for the growth XX to two, how we better out either we for inventory.

Alan Pickerill

say these I thanks. a cloud Sure. the would of we've Yeah. about data points little I side, on talked Eric, some mean, bit already.

and If CapEx you look was our that's decline. at center data XXXX, about to It spend in million it actual $XXX XXXX, million. in down $XX about went the

as had well. to cusp table to decision out centers. building were avoiding to are, the we off all cloud, additional of additional decisions around CapEx data past we taken the is. That's make migrate the before talked you obviously, the as on about that to in fact I've made We and having avoided the the been

into already roll were better the been seeing, on a And CapEx cloud. pretty out Brand Expedia, so, that, of better, where already if algorithms where a much is the algorithms roll On brownout in it. trade-offs think, to much roll to issue ability it had benefits The just what The had latency recovery for ability I deploy the to once we we relative with associated able in resolved. you ton have speed compute quickly, we – much much, reduced, avoided we good and code are there's the to is spending with better cloud, a disaster had cloud. very we're the operational situation a seamlessly it is cloud, test top of out back the in

product perspective, no-brainer. well, ton then, we benefits it total we perspective. over a flow think from as a operational of cash a a like there's it's both So from but And time

Mark D. Okerstrom

two-leg the is you see. after. new and growth Generally, inventory. channels. marketing one going new phase entering take what here benefit room night auctions in Great. see you're Step acceleration I'll properties, as that And markets for There's that the acquire see an on is you're you then, you basically you a the in performance one that

second of see to The density in phase do start properties, you however, you get better rates. it, once higher repeat is

of noticeable And markets that customer a see with loyalty. two see rates in, course, more three phase in and efficiency. see expect year our that, is do higher not that priority You It here to We're this generally, something comes, particularly years on marketing second in expecting in to conversion focused we're better one. year. and would that particularly we manner

Eric J. Sheridan

so much. Thanks

Mark D. Okerstrom

You're welcome.

please. question, Next

Operator

take on, question Nowak Brian Stanley. from our from Morgan next Moving we'll

Brian Nowak

for Thanks Great. have guys. question, two. taking my I

I Just initiative, going about the incremental investment talk from little back supply of to wanted sort to a here. the

the You talked you Can about about little of as the XXXX? you into little sort initiative Mark, go – and and start similar sort of a the of think Away, very good quarter. bit profitability push through target market to we what in just talked around investment question seeing more of decide phase results. investing about HomeAway? strong phase into two. two How timing the you into you you is in kind talk pushing early sort in bit And of Away should about supply and us a your when the then incremental think

Mark D. Okerstrom

Brian. Thanks, Great.

we're is just results supply In normal. really new terms upon the I of far way the that the incremental initiative, say operating investment that so seen we've the in based would

more the thing on umbrella here opposed metered will to but relevant under of is approach, our taking take the supply just more only on supply this a say locally approach global and approach, concentrated a not just basis. more expectation As whole acquisition would in of to I from concept a a is this acquisition distributed to we

it's cases, into supply, push it's but out types, acquiring not we payment as a do be look these not and resources gap in markets, some like to some centric. in on more future resources, competitor So of a because But content, we things versus In wave-one effort to concerted incremental had going next be translation, going our that big the a reasonably waves, is into markets. large supply believe cetera. around the we et cases, concentration a here maybe

year of XXXX, going be into the the we've as so news, to benefit, through The though, that be to where out step-up, step-up, to levers. based areas where point look in it'll going we're is next big with and property our or secondly, we acquisition looking sitting this got terms comps. what responded second are of focus easier are course markets, we be whether this year already focus significant back investment will what of part is that in functional again as again, these a in one-time upon – investment those around in going priority even our of one go, So, of significant we if here is at do the invest, I going areas other will and good investments another pretty terms it's base, against the dictate to year. the Eric, And really big XXXX decisions,

start And flow so that some in big waves. be some in the year see the expectation future this of is of that we'll year, push our start effect, of investments making we'll and will, fund that benefits second the through the to to in

listen, we is and see what nailed done to the In yet, what I move doing as which balance. HomeAway phase here very this and phase we parts they're comes getting focused the the team year, job, really historically, two and we're do through we'll think haven't and here as what and one right do on serious doing things start what think of back is in way, go next about of start a getting I I then by of are XXXX. strike part our great about we've we again in XXXX we'll planning think think HomeAway and XXXX the done to we That's to going through try terms timing,

Brian Nowak

Great. Thanks.

Mark D. Okerstrom

next please. welcome, You're question,

Operator

Markets. question RBC from will Mahaney next Our Mark come Capital from

Mark Mahaney

thanks. Great,

markets markets you why that could accelerate did just room the to us to markets. I what night that of get those tell growth accelerated accelerated markets? night you – non-priority Can from those in that mentioned you is Was get do the growth some And night think, you there, Mark, the room what or growth procurement? room to apply in learnings priority lodging night getting to room growth you're that at as margin you you growth that quarter, that I in do you and could positive, know that you that there, pretty is just then level? like HomeAway want EBITDA profitability lot but reached, sustain there to something talked looked tells feel there bouncing you you've you. a had that level up the of you're Thank work a about from you investment, after new it there?

Mark D. Okerstrom

Great. Thanks, Mark. number over I'll our take turn number one to and CFO. two trustee,

when on supply. room right, is time of In course we to added course, time though, that can it's talk content just acceleration, property of we to and a build pretty into marketed listen, growth side the acquisition markets, of payment whole operational channels. a and really that cetera., lot we're but making just we're in much supply investment, we've search a these But, live these the about also from markets right, gets is trying in package. the actually terms it's metasearch the of night cross-platform types time concentrated so marketing more this, it the got that shrink time engine et site significant that rigor The also in sure the

shape, on great our getting all shape, rigorous much now online course marketing built, in the really say, experience it's just we're hard executing I'd development of into coordinated capabilities. And is of landing basis, developing by basis, operationally multi-currency, board customer terms better This of back a things multi-language, years work much doing. the way. a way, and is more machine really the getting of end-to-end So into doing those of across on an of building whole being we're our supply capabilities, discrete host acquisition page functions and, in that what

Alan Pickerill

ongoing at I it's quarter And look all, business, Mark, just I kind for then, the the I would of EBITDA a of earn in you hyper a chunk The in the Yeah. the margin set first so big be that and vast, ought that remind one exactly margin wouldn't QX, use proxy seasonal margins think, of think they in come in to as on margins. HomeAway, HomeAway. seasonal year. don't what which will adjusted for some will on we're I throughout fluctuations yet fluctuation, results necessarily normalized

line happy in with margin is we're in at the rates. depend the what on they to growth, of going some decisions in we're think can and healthy to we XXXX. grow the that we deliver but of invest move healthy expect that's opportunity to top as the we like We that such forward. delivered that profits Use think business, with that some I we XXXX, happy make profit look that specific

levels As as these Mark of investment the mentioned, initiatives the what some are. look some we'll about we at get right planning, XXXX make through and decisions

deliver EBITDA margins ton be that you we're That's a deliver we out talked look that directional margins something reason we in – how for the have that. a a there pan don't a that how about We EBITDA historically see see we'll over at but honest, healthy pin wouldn't think because will it HomeAway. we we time. of things is tearing But like HomeAway apart couldn't like I to hotel-only confident probably put no that time OTA, a margins aspiration and spend business

Mark D. Okerstrom

be adjusted would Yeah. sustained and to adjusted to a just EBITDA, growth the we're over to best add, EPS rate not And strike I and to that, on long long-term. strongly growth a the too, get flow, cash really for balance looking time of trying again, period free focused We're deliverable really margins. we're particularly drive

Mark Mahaney

Okay. Thanks, Mark. Alan. Thanks,

Mark D. Okerstrom

You're welcome.

please. question, Next

Operator

take from on, question Moving we'll Deepak next our Mathivanan from Barclays.

Deepak Mathivanan

Hey, Two questions. guys. for Thanks questions. the taking

the Alan, Thanks. there dollar second was on whether not the channels U.S. meaningful for better room during impact how couple And significantly performance guidance dollar question, guidance? growth appreciation. changes course. any night optimize contraction? And in that the over several last stayed guys the First, as quarters, you marketing into if the the any expansion you last reversed know would've I of window been the the play it's noticed U.S. the or then the have does booking or were quarters? FX I wondering if

Mark D. Okerstrom

window our and And mix terms associated So, flows, and move Deepak, do of business. performance less so so actually the piece, just the a we it our of around. some ebbs on marketing just in with movements there's see that factors booking mix of more couple

a of have looking when window. I and have bookings at rooms, or rooms think, XX larger They're generally don't one. places homes, generally HomeAway simply taking don't not they're has book homes, XXX that all, even stay they into longer to larger have they're first

sure get want book to So people more that to that that the they stay. they likely place in are further advance that make so they

as flows, room the the mix between of year. the and certain parts see you So lengthening a core the business our at and particularly lodging could ebbs of lodging window, of HomeAway nights

bit second mix. now, And thing opportunity the booking. international or taking driving traditionally in side. short example, weekend mix of that into these overall local basis for is significant domestic trips, more little like to many that It's the the priority business cases, of somewhere of that to more last more has countries for we overall push markets as a we're where to number the you're happen a in travel a skewed markets on it more open as right flight a you're local minute the travel opposed much is in The up does our our

hold. keep seeing things take anything of just over we to imagine do time, to So super can in not Alan, these the one? now, but, we're Again, significant a take FX you right of things want types couple mind.

Alan Pickerill

first out. mean, so year think The more strengthened yeah. fact dollar the here, FX, has a the part to right in it recently. has I you're I helper Deepak, yeah, FX been is that on although Sure, the of point

to here estimate us help year. the and thought. over at has a that when we out of half looks it guided in like a tailwind to you're down XXXX for timeframe, earlier that than slight it crosses rates, the directionally, less of of become kind kind headwind kind becomes as back the current this it It's many year. neutral full of we one point amount And of has considered full we come the it so but relative to year to we And forecast of put right together, factors July-August

Deepak Mathivanan

Thanks much. Great. so

Mark D. Okerstrom

Next please. question,

Operator

& question Moving from on, Kopelman we'll take from Company. Cowen our Kevin next

Kevin Kopelman

Great. lot. Thanks a

the substantial take a Can XXX call driving headwind factors out to So longer-term? the half, like key do you see you from how revenue the it core a bit you it's that looks basis And revenue the but little back lower in going points headwind? hotel pretty Thanks. had to improve over it rates.

Alan Pickerill

Yeah, had I excluding It essentially so last in was got was to little still – the I easier. narrower we've although gap the business the in we prepared gap revenue between are said range. quarter, between the the business HomeAway, as mean, a said itself, I room should XXX hotel my the ADRs than that or comp per we bit there. business a XXX-basis-point gap night the seeing say and – gap remarks,

the at being we can factors look we that reminder, new historically, those a and as have are that markets them contribute taken the we although as in annualizing add new mix As when as have our there at business. the properties changes lower well, margins when we add down changes that revised taken we blend and – to rates, new

but comfortable I purposely rates rates play loyalty as years. will play at like get. value good we'll programs as play we're and other So are well. Expedia-funded our have kind play FX whether the hotel for the accounting Ultimately, ongoing it of marketing We there. and try an as or that. forward and few factors point one The the there. chains XXX of economics in it an A room the as reassess loyalty impact, beyond, then, a cancellations, as programs in contributing we basis are not in. last We of rates still can point weight night. just We XXXX has very it say rules grown. at about that get thing over economics currently to XXX basis course factors revenue and by we into this. get to to the into time lower year, for the gravy. And move we're refunds those been things contra coupons, us that fair discounts to questions all giving looking show push require should range. that from think to this into commission largely is the The of We're time a so all do channel, commission revenue, that it per on number we reset think there

as will don't see that And going so, something that we forward. pressure those rates

Kevin Kopelman

great. so Alan. much, Thanks That's

Mark D. Okerstrom

Next question, please?

Operator

Next, we'll hear from Lloyd Walmsley from Deutsche Bank.

Lloyd Walmsley

Thanks. and It program. differentiated. very really I interesting add-on the have on two looks

probably a just these drag as then, how Are a the economics, uptake participating partners they're the in rates attach sense versus is if And in maybe that percentage wondering one programs, us booking? seeing all So hotel? rate early, on program. or a what people you topic rate And for terms with but have are a on give seeing net of understand guess, just on same how of just we run in what you lift and one, of you I but of be at in sense early unit there? do hotel much are incremental mostly starting Thanks. a it's would you are programs, shift first that's second take that the

Mark D. Okerstrom

Thanks, early seen. and room otherwise Lloyd. would than are rates we customer We're seeing have early, it's attach night but higher higher growth Listen, very indications essentially solid.

change problems. two highly-differentiated things can hard things your you least So all us if does blends it conclusive with of having solve know, what travel, we in is where wonderful but And, deal at one, for move and course, cost secondly, really travel which, called of the think is convenience on it's brand out, plans to that in we to you part which What in overall is get one everything that. all result Expedia, product. It do incremental, of travelers a about it's love. absolutely agent it around, they you've place, lower absolutely, so quote, got which

rates, into of package say just see this economics. a don't very is we've period driver long all as would alteration that and the significant to take of time, of works. of traditional going this deteriorating an I product on a We're of the for package. successful specifics terms how unit get we this not In had a very

things that to ability, to customers gives it target generally is platform target of to out lodging In terms Group deal. going is participation, in a in open partners Expedia a way, incredibly hotels not love hotels, we one about to the that of our but the customers targetable. And are listen, hotel the very this a that know specifically-fenced certain place with the special

are longer program, And flight to it for rates, our is a a else, you booked like lower of they participate, thing generally majority stay, of vast I hotels get and hotel that finding lengths with great have cancelation package be think which just that's traditional when them, the our or Generally, the something so, get get a hotels program. you great partners.

it's of on on again, like delivers to the differentiated value very the platform the side partner it platform early. because it's and So, them. it customer We of of both the side both and great

So we're for can it optimistic do about what us.

Lloyd Walmsley

Thank you.

Mark D. Okerstrom

You're welcome.

please. Next question,

Operator

from take on, Moving Oppenheimer. from we'll our Jed next question Kelly

Jed Kelly

that the profiles? HomeAway is of are taking to mix that is by XX% on the by a new that thanks starting see and, I you was release improve, or there driven HomeAway if over so, transaction The owners then continue to way on paid-per on many being questions. more individual for managers? members guess that driven grew how growth unpack Great, property travelers in my professional comment any with commissions higher year-to-year, that listings to And of

Alan Pickerill

don't for. to looking to we'll try detail Jed, that Yes, get level we're be I of you're think to the going helpful,

I shift the pay-per – terms an been going to on say of it's listings, ongoing are we think, that's that booking for seeing while. in a actual on seeing to listings, subscription fair from we're

have of to it the spite I listings that this products, now think to move a and through I mentioned or transition. we disproportionate of subscription is we that as last SKU be in quarter, expected true that bookings – do remains we as still

so not kind members members the don't I we new And either, I'm would... of on were Mark, sure on have data if profiles. of you that's many ongoing. and I would how the it, – know, don't share with

Mark D. Okerstrom

both up our many transaction platform hosts more we're would obviously growth I platform you just say see that as to our that well. sign of we continue the getting, to think on growth. traveler sides upon can believe the getting significantly stronger we're Well, it, growth based we're We getting and traffic

Jed Kelly

bookings SKU, thousands HomeAway is over on I driven then on or property to – say, the just by comment mean, the much manager being follow-up that I the on how And of of outside property growth HomeAway? guess on of managers, with listings thousands

Mark D. Okerstrom

being essentially shift the we generally that, expect on that to changes constantly think into property say ones we are to a so HomeAway from property their level the in incentives property Yeah, across the large to the managers pretty around the subscription were a to have now individual the shifting, marketplace, can get would and get detail. increasing continued want and longest of all pay-per more are of with continue the dynamic mean, host model. pay-per Yeah, I But the that I owners is performance and categories. commission-based adopters to to the I the managers just bookability time, online for generally, large model that earlier that is don't making environment over performance booking it and time or homes, with really listings some likely generally are are owners, particularly essentially preferring sticking see right and

Jed Kelly

Thank you.

Mark D. Okerstrom

welcome. You're

Next question, please.

Operator

our on, take Moving from we'll question Khan Naved SunTrust. next from

Naved Khan

Yeah, thanks a lot.

couple. a Just

follow-up. GDPR bit as the was impact room the the World So half, And from that there to first noisy? right then or Cup think night And had maybe a the about half we the think any room about back was nights? I way given a what's growth on

Alan Pickerill

business I big travel are patterns. in natural as this the as talked so booking be it population the with Yeah, be could percentage mean, that there the World you sometimes of have and Cup, when a decent events see changes could past. about disasters, see in the it's like it preoccupied do large the think this, an you we've We may have Cup, is so World a where overall a event you when you and do slow it doing bit do situation in demand, Olympics, event you event case, of a country, to we or region have a usually you with pent-up see anything when And the time, do strategically. of back travel longer-term don't anything period should or would we're too, that in come well. certain trajectory pickup of expect say, form location Russia, kind to I ultimately, as has in a in that this into the particular the of during we the but think

of a we're As couple going about I the would to not in room say far to half year, the there get of night are the things growth as into thinking back consider. specifics.

One is of effort that spend. them this with marketing optimize to continue we will

the is we're to Now to definition us. first volume We bit for spend do that spend portion of gotten around would've marketing to trying around test Because still right, is decide the what and effort And for room is little we make want we there, margins. out out can I don't by we edges anyway. incremental. if that decent then a root and not foremost, be that though, lose we're that the take comes a nights probably clear to when spend, do

think growth. that could on impact night we room have So an

move cancellations is growth had of system. night year. I and markets, look of to for was I EBITDA foremost, the we're result there Mark of how night because for some out actually enough lot you growth not the half in more XXXX. total and That but priority a entirely had storms the in than business, the with of happens contribution we're booked in and the for impact a a storms half and end first back you're the our think monitor room travel to big At we're probably those counting what negative nights that's markets. going in priority what domestic impacting customers and And in is whole then those mentioned you not sure, on the on throw it we refunds the big was from room towards impact room just, gets the last needle markets as giving terms In it skewed of reminder, tough just back that would up in you earlier, point factor

the than impact bigger had minor but a back provide in growth, tailwind on profits So it night half of could year. room on the the

Naved Khan

And a quick just helpful. very That's Okay. follow-up. then

traffic some can may the Brand that guess, color So, what App PWA on just the on of previously you side? and the move you Progressive this I Expedia to benefits was give for us much Web are seen? on How the have additional hotel

Mark D. Okerstrom

Sure.

the speed. benefits shopping the we've ramping Web for benefits, And or we terms least So really essentially really the on through just the now it hotel mobile. got the first piece the Progressive quarter. the are at respect Expedia actually Brand hotel whole in we App biggest up really to see of are And – in throughout largely

in particularly, get start to giving latency faster. in And app-like really allows outside significantly So us experiences. coding closer really had which then framework mobile experiences issues, of places where to web U.S. we just, a speed to the is it is it's

benefits to business time us other harder will onto PWA we something of applications functionality measure building for now, and building but the now And of it well. are expect that's long And to lines as more come. over of and more so us give will the app our a be we more is

to for through as benefits year that this give and expect can XXXX. we us we So more move into

Naved Khan

thanks Great, a lot.

Mark D. Okerstrom

You're welcome.

Next question, please.

Operator

securities. Moving next on, from our Wells Stabler take Peter we'll question Fargo from

Peter C. Stabler

the of the on couple about Expedia Thanks A the that you've of to I power directly. talked and come could. for brand, if you question. traffic taking past Mark, the in bookings percent and the brands

a impact versus regional color of if some your close on seeing from the cloud. you're offer and increased and market the you're on just the And a HomeAway then whether the brands brands might follow-up across the brand core the VRBO competitors. little able vary to in that versus on any family quick how marketing efforts wondering Just

in way bps any quantification understand us these terms operational sort XX about whether of any conversion, improvement earlier it's very benefits? you quantification any five there, sort help you bps benefits. on Thank the of spoke that expect of to much. You could there here, Is operational or offer us might

Mark D. Okerstrom

Yeah, you're welcome.

that the many brands. dollars across of long world-leading locally-relevant have you've the have Expedia, great spend, the is of history portion family of power of think, brands you lot generally down comes There the a more to giving billions not, pushing spent our international a them, variation in you up to of really brand we're of got Hotels.com, build as terms such larger we product, the mature business portfolio, those to and in are a brands to customers travel, over markets, really customer really literally directly. in the in if of of expansion, comes the just So aggressively had addition where fully Expedia the significantly because brands, variations amongst, in loyalty experiences again, your how

in come five or come to change. and their game about business Travelocity U.S., type-in these activity, e-mail, particularly the and the I'd markets, think phase build and locally-relevant such have Orbitz over goes to we that major push But markets get U.S., via or competitor down traffic of out of cetera. through branded mean, do U.S., Brand years, course U.S., the the six and is say not the Expedia direct you in as branded last of et you from of percentage getting when really or is markets. sort you each of move I direct as a further away really more more television you advertising. really which that, start for more your And branded or into in mature and Hotels.com lion's direct new to markets, So channels, various players the terms share traffic mobile a products you growth channels of of applications, in are are to of direct. it seen,

U.S., you last the significantly, over you in take come saw five If by the trivago course us. for essentially very backed years example, of the

You pulled Orbitz Travelocity and back. saw

And environment. the – a only are potential it in Booking.com bringing think ourselves. in of differentiate and pulled come these there really think first our it's and going then, other markets, Not globally. capabilities, advertising, lot locally-relevant to formula, we for back, XXXX. dynamic things. You a been TripAdvisor we very part our really in saw to doing come our become we're been just for key have in, it's so also spend, us U.S., has always you our the television but been, But I saw And us, in where think, expertise a brand keep I as increasingly of always

it's drive In this just benefits, to we're will you rates for of up. to the cloud because quantify is you hard terms things the of operational conversion this. What a ton for operational largely us importance of underscore completely though, doing I do, for

base our move cloud potentially code that data over the seamlessly cloud centers rewriting to time. and it from that another We so are environment AWS can between so one our can and environment operate and it cloud in own essentially

in is brightest what engineers, We No have scale. doing one the the doing we're think, we industry. at

capacity, of are optimization think, you the back spool benefits. operational who only sets lightly. essentially and the Alan scientists to is we're the point the And benefits We the reason optimization of we're some we're on-demand are able about, self-learning deliver is working leading cloud but because of, it some algorithms environment, is real-time if of data data to We're these efforts is of the to look you're in this, not that up then that and this we benefits marketing algorithms. bring it helping We've it got now up just and that on right that you I getting re-computation taking processing But of quantification essentially now. financial marketing down, some would our us to actually massive doing want not amount at talking seeing. building doing

it we core do. goes to beyond conversion; goes of it So, just almost right everything the

speed native of Our outside lot which all cloud conversion is a PWA example, for about, benefits that of app. I the that application, particularly this deliver is by enabled of the A outside U.S., the do benefits mean we cloud. talked –

I scratching a thing think we can It's just we're cutting again, really do. We we already what that in do but terms the surface are the doing. the see benefits, edge we're of So, this. at operational big of

Peter C. Stabler

Thanks color, for the Mark.

Mark D. Okerstrom

Yeah.

You're welcome.

please. question, Next

Operator

remind Certainly. everyone And, please to limit you to question. yourself we again, ask to one that

with from on, Anmuth Douglas we'll go JPMorgan. Moving

Douglas T. Anmuth

created market taking has And I Thanks. going for cooled normal, just well? you Thanks you auction landscape focused as performance. question. down know marketing this the you're for on the that is kind the of Do efficiency, this some on forward? the coming opportunities, optimizing think talked recognizing though, Mark, has also you how new

Mark D. Okerstrom

always in Well, to anything the travel new been it's It's dynamic. the hard always It's dynamic. normal. whether say industry is

I of have think of for effectively, in again, the largely measuring driven sets has And by one we're normal. bidding being our opportunities just massive course, we is increased is really that the I us just the and cloud incrementality that precision, something the with more terms created that to more that approach into data-driven environment. new compute thing, and able manipulate up think data that's capabilities

all I this to but it of think is, build to can you've sustain course, the moving. is competitive got you advantage, of question with keep

hold for in and what happens continue So think it's And area. we're overall can to these in tell point. do we at in as the going new But to this assuming auctions, standing again, that, happens really normal. capabilities what still, this we're I to not this hard our competitive we evolve environment the us

Douglas T. Anmuth

Thank you.

Mark D. Okerstrom

welcome. You're

please? Next question,

Operator

we'll take on, Terry next Goldman Sachs. Moving from question from our Heath

Heath Terry

extent negative this were growth them seen marketing still very along significant pulling Doug's their improvement a impact back the bit as This on and same the flat pretty spend, for you sales growth essentially saw been that efficiencies. more to generally here you to in maybe thank quarter, a bookings bookings guys and little question, lines a we've but there's your competitors is marketing Great, much.

of So you're hotels other something you're targets? time? business that system-wide into your using the potentially if that or this pricing making benefiting the potentially you maybe an then terms you're of in on your that's is terms progress something thinking incorporate with or there the their one about having on update as either reset this how that leveraging on could booking some us in or ROI any in different something strategy way about that direct the just sort over from of you you're way models And could of work impact channels guys

Mark D. Okerstrom

doing Thanks, spot. a I and because, Heath. unfortunately, doing we're bit what about compare It's us we're are tell doing. may for us, know be don't we hard what what you they're a what different competitor's for to can to But doing why in little we

generally advertising situations got of auctions where couple who if bid economics. you have start think first against all, it's comparable in each you've destroy a about products, sort auctions, that when of of create industry players can where think, you I will, they other you hot and to and

in of of larger trying locally-relevant We're some But us case. customer auctions think markets I I where to offerings us the where, of where the come we been that hey, activity happening situations markets have in relatively incremental there for and were the to few us where both product built to could that around other have maybe find, to course, competitor that's is yet not and isn't back very and together. us story both the that players, there our that world. markets these bad some we're and mean, type good are news, news many strong.

total you properties hotel of about look and having, If talked alternative quarter, number there's out of us at accommodations the there, We XXX,XXX. millions them. this

time really new availability, healthy more which network get customers more the just growth pull anyways, whole because great that we same a pull got come able be lot are back a as would But more incremental and a more brands our a and way, is platform, impact is back, creates to selection marketing powerful customers, these us we customers which to the at markets to are we're to bookings. simply to adding in already global of, do to just have outside platform that in or significant bunch properties able not of what core got we've because I that going mature effect. and markets just products so spend, the find actually we've and So of such not to call, expansion drive other to

think our specific partners elsewhere. of lot and don't That's our not what customers taken far, it's for a a Listen, really business, why loyalty our haven't look have impact branded for And have any to model opportunity thing forward-thinking business, if you up new that direct thing been used of a industry, they time, But, more cited and and cared, have our they I not not that's come the advantage our long doing. without signed think our a big to to of in that program that message a and value agnostic. us. and terms hotel. hotel sign because partners We impact proposition way a don't exception, the we to have really for our the up that great for We seen new get pricing great we're a great great for we it's think like customers partners to customers, members. saying as of our that's had practice, brand have lower a we've the lot there a again, generally, So our that an this channel there's prices results. out we so

test additional with conversations We partners. stuff. this having always love are to We

all invite works. without the good think a to for and partners, and us. forward part, thing would most our you exception, it's we'll test and Again, do with for I small, I large So come it been see of a if

for we're this us incremental across and the everyone area large hopeful think with as can find and for the collectively I we value again, is drive So, chains platform. win-win an that evolving where can chains we situations small the

Heath Terry

Mark. Thanks, Great.

Mark D. Okerstrom

You're welcome.

Next question, please?

Operator

question we'll And Olson Mike Piper Jaffray. our take final from from

Michael J. Olson

afternoon. Good Hey.

much but guess, take the markets for if more are then, those saw looking could You you could markets I you're adding this inventory. et say fry other new accommodations, that that to to booking what's your too products, with point? bother fish alternative and accommodations at alternative beyond guess, a specifically. acceleration? where talked I What appetite priority for just like about and tourist maybe there's And hotel attractions, cetera, in

Mark D. Okerstrom

you, pretty would Well, happy guess. so event, We'll It's any progress there. future one. you the Mike, wave important tell markets a with markets you've just tell beginning. you I years. bet got you. there. In doing secrets, world we're there the that I are tell the I around I be It's can't won't the good in other my out But

for So going I'm reasons, competitive exactly out are. they what to call not

just across business. all a lines marketplace relevant right the business. a sure cruise products in we going priority year, terms as to the on that, and of that in In appetite travel air, marketplaces early sure building years. accommodations it's the mean, days move and markets and what liquid that and real we're do still hotel $X around been appetite. And multi-product this It's platform, built are we we terms approaching spend locally we I alternative billion those building priority got yet investing that have Yes, This accommodations, making the alternative we listen, world's that and in investing doing making in that we're product have beyond the investments. well to platform and sure in countries, voracious tech of cruise for ones the follow, activities, across platform of for now we're the been P&L we other car, hotel world. our and we'll But we've love do.

we're early, the think I very at early stages. just

gone a investment cycle. multi-year through So we've

it years, piece that the not well. of an also our standalone love love cross-sell advantage. two we for that a something but I incredible the marketplaces look create you to And we're you five already all the our customers these network positioned different effects can and focus as think sophistication add-on product can to to of partners increase It's with across that's going build think It's increased which next also uniquely us. see basis, within in something be only course and categories. over if out I of

Michael J. Olson

Thank you.

Mark D. Okerstrom

welcome. You're

Operator

And like additional Mark remarks. or for to closing over conference Okerstrom to the back turn at I'd time, any this

Mark D. Okerstrom

everyone thank for to I listening today. just in Well, firstly, Thanks. want Great.

Group, thank a With all impressed the that when say Expedia very Group team. Secondly, more I significant In in just and the am to are with enormous very operate we I turn short some way really I'll employees for around have them want I it to time, the changes over Expedia we so of I ever in we front made back at about entire I than our incredible know of excited the opportunities the us. that, speak world. operator. that

Operator

conclude participation, that for thank disconnect. you now at time, do and We you And this today's may conference. will your

Expedia (EXPE) 26 Jul 182018 Q2 Earnings call transcript