Booking Holdings Inc. (BKNG) Q3 2015 Earnings Report, Transcript and Summary

Welcome to The Priceline Group's Third Quarter 2015 Conference Call. The Priceline Group would like to remind everyone that this call may contain forward-looking statements which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially from those expressed, implied or forecasted in any such forward-looking statements. Expressions of future goals or expectations and similar expressions reflecting something other than historical fact are intended to identify forward-looking statements. For a list of factors that could cause the Group's actual results to differ materially from those described in the forward-looking statements, please refer to the Safe Harbor statement at the end of the Group's earnings press release, as well as The Group's most recent filings with the Securities and Exchange Commission. Unless required by law, The Priceline Group undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. A copy of The Group's earnings press release, together with an accompanying financial and statistical supplement is available in the For Investors section of The Priceline Group's website, www.pricelinegroup.com. And now, I'd like to introduce The Priceline Group speakers for this afternoon, Darren Huston and Daniel Finnegan. Go ahead, gentlemen. Darren Richard Huston - President, Chief Executive Officer & Director: Well, thank you very much, and welcome to The Priceline Group's third quarter conference call. Thank you for joining us before the markets open this morning in New York. I'm here in Norwalk, Connecticut with Priceline's Group CFO, Dan Finnegan. Let me point out that due to technical difficulties at NASDAQ, our press release is only available under the Events & Presentations section of our website, pricelinegroup.com, and should be over the Newswire momentarily. The Group reported consolidated gross bookings for the third quarter of approximately $14.8 billion, up about 22% on a constant currency basis, or about 7% year-over-year in U.S. dollars. Our customers booked accommodation reservations for over 115 million room nights in the quarter, up 22% year-over-year. Gross profit was up 12%, or about 29% on a constant currency basis. EBITDA was also up 12%, to $1.6 billion. Non-GAAP earnings per share was $25.35, surpassing FactSet consensus estimates of $24.21 per share, and our guidance for the quarter. Our U.S. dollar denominated growth rates were again impacted substantially by the strong dollar, and this will continue into Q4 hopefully abating on a year-over-year comparable basis as we head into 2016. Our international business recorded 25% gross bookings growth on a constant-currency basis reflecting strong momentum at Booking.com. Booking.com's performance benefited from further penetration of its existing partner relationships, as well as growth and its accommodation supply. Booking.com's platform now has over 820,000 hotels and other accommodations in 220 countries and territories, up 38% over last year. Today, we are releasing data that shows how these properties represent a combined total of 21 million potentially bookable rooms. Of this number, 14.4 million are within our traditional hotel partners, 1.8 million are vacation rentals, for example, apartments, aparthotels, villas, chalets and other self-catered product, and the remaining 4.8 million are other multi-room unique properties, for instance, B&B's, guest houses, ryokans, riads, et cetera. Hopefully, this gives you a sense of the sheer scale of our accommodation platform, by far the largest directly bookable accommodation selection in the world and provides a better comparison to some of the other players in our space. And all of these different types of rooms are bookable with the least amount of friction on any platform; all without fees to consumers, and all with instant verification. We are also helping guests find and book accommodation on Booking.com at unprecedented levels. Since Booking.com's inception in 1996, we have helped more than 1 billion guests find a place to stay. And in just the last 12 months, 285 million guests stayed with us. Coincidentally, in 2015 OpenTable will also seat its one billionth diner as well. Two industry-leading double-sided marketplace platforms providing scaled experiences for users around the world. Following our successful launch of BookingSuite which continues to gain traction in the B2B arena, we recently introduced another important B2B innovation, Booking.com for Business. This new offering is geared to both the business traveler and the travel organizer. Our tools allow organizers to link travelers to the company account without losing oversight or to book on their behalf. Spending can be managed through budget filters and spending reports. All the company's hotel reservations can be viewed and managed in one place. And best of all, all enrolled Booking.com for business travelers automatically benefit from our rewards program including closed user group discounts and special benefits at over 100,000 select properties worldwide. We were aware that Booking.com had become a popular service for business travelers and we wanted to create an offering that was more tailored to their unique needs. We have high hopes for Booking.com for Business and early results are very encouraging. Booking.com's direct share of business continues to grow reflecting the solid retention of the loyal and satisfied customer base we've accumulated and nurtured over the past decade, as well as the offline advertising we're now conducting in eight major markets around the world. As our direct business grows so too does our investment in online paid channels. We are always looking for new sources of demand and ways to diversify our marketing mix. We invest our money in channels where we believe we can build our brand franchise for the long-term, while also earning an attractive ROI within the transaction. Consistent with these tenets, we agreed to participate in TripAdvisor's Instant Booking platform. Our agreement includes the prominent branding and marketing potential we require to begin participation. As with all of our channels, we'll experiment and optimize with partners at TripAdvisor and expect to achieve healthy ROIs while being given the opportunity bring new customers into our fold for the long-term. We will also work to make adjustments in a similar Instant Booking path we have at KAYAK, and are willing to work with other media owners who adopt similar principles that allow both the media owner and the advertiser an opportunity to promote differentiation in their branded offerings and to grow their businesses. Testing on TripAdvisor is scheduled to go live this week starting with a small sample. Let me also make a comment on China. First, we fully support the recent M&A activities specifically regarding eLong and Qunar buyer investment and commercial partner Ctrip. We hope that these will ultimately lead to a more rational market environment inside China. But outside of our Ctrip relationship, we are not standing still waiting either. For instance, we started 2015 with only 8,000 properties in China on Booking.com, and now it's over 25,000 properties. We expect this to grow rapidly over time in part with Ctrip's assistance. As well, Chinese customer growth has exceeded the overall growth in our business for many quarters now, and the Chinese are now the primary inbound nationality to many important destinations for us. The case of China is a good reminder that travel is inherently a non-local business. It's a global scale combined with win-win partnerships like we have with Ctrip, are critical for our mutual success. Some commentary now on the other brands of The Priceline Group; priceline.com posted modest growth in hotel and rental car reservation and in overall gross profit. With new leadership, we have been busy repositioning and reinvigorating our namesake brand. A critical platform migration of priceline.com is nearing its final phases, and the team is eager to start innovating at a faster pace as the new tech stack rolls out in early 2016. Agoda also had a challenging quarter and was negatively impacted by the August bombing in Bangkok and various currency headwinds. No strangers to challenge, the Agoda team continue to innovate in all aspects of its business and launched in October a substantially revamped mobile app. We are also seeing positive results from recent work to integrate Booking.com agency inventory into Agoda. Similarly, although we continued to see strong diner growth in OpenTable, the pace of innovation needs to be improved, and we've made a number of management changes as a result. In particular, Christa Quarles, OpenTable's Interim CEO, has done an outstanding job leading the team through this transition. We remain excited by the growth potential of OpenTable and are confident that a renewed focus will help us get on the right path to capitalize on its tremendous potential. Moving on to rentalcars.com and KAYAK, both brands delivered strong quarters. rentalcars.com posted solid unit growth despite a tough comp, while KAYAK made some important changes in the way it markets its business internationally, and as a result, accelerated on both the top and bottom lines. The Group performed well in the third quarter, and we believe our brands are taking the right actions to best maximize their share of their attractive and expanding online marketplaces. Booking.com has established clear global leadership in the online accommodations market, and we plan to continue to profitably invest to improve and extend our services and bring more consumers to our sites. Mobile execution remains a bright spot across our Group and we steadfastly adhere to our formula for earning our customers' loyalty through delivering best-in-class consumer experiences end-to-end and across devices. I would like to thank our employees around the world for their hard work and dedication in delivering terrific performance during our peak summer season. I will now turn the call over to Dan for the detailed financial review. Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: Thanks, Darren. I'll discuss some of the highlights in operating results and cash flows for the quarter and then provide guidance for the fourth quarter of 2015. Throughout 2015, we've seen the strong U.S. dollar significantly impact our U.S. dollar reported results because about 90% of our gross bookings and operating income are generated by our international brands. Our two most impactful currencies, the euro and the British pound, were weaker by about 16% and 7% respectively for Q3 as compared to the prior year. Many other important currencies in which we transact were also significantly weaker versus the U.S. dollar this year in Q3 relative to last year. The strong U.S. dollar means our gross bookings, gross profit, operating expenses, adjusted EBITDA and non-GAAP net income mathematically translate into significantly fewer dollars than they would have at last year's exchange rates for Q3 and Q4. Since our expenses are denominated in foreign currencies on a basis similar to our revenues, they will also translate into fewer dollars. Therefore, our operating margins are not significantly impacted by currency fluctuations, and we believe that the impact of currency on our bottom line is generally similar to the top line impact. The Priceline Group performed well for all these key metrics in Q3. Room nights booked grew by 22% in the third quarter, decelerating compared to the 26% growth rate for Q2. Rental car days grew by 13% in Q3 compared to Q2 growth of 20%. Average daily rates for accommodations, or ADRs, for Q3 2015, were up on a constant currency basis by slightly less than 2% for the consolidated Group. ADR trends expressed in U.S. dollars would obviously look significantly worse based upon the currency dynamics I just discussed. While we're in the midst of this period of extreme currency volatility, the fundamental performance of our business is still evident in our unit growth rates and our constant currency growth rates for gross bookings, international gross bookings and gross profit. Specifically, our Q3 gross bookings grew by about 22% on a constant currency basis, but by only about 7% expressed in U.S. dollars compared to prior year due to the stronger dollar. Similarly, international gross bookings grew by about 25% on a constant currency basis and by only about 8% expressed in U.S. dollars. Gross bookings for our U.S. business decreased by about 3%. Similar to recent quarters, the U.S. results are a mix of growth in retail room nights and rental car days, offset by declines in our Name Your Own Price services. In addition, lower airfares significantly impacted gross bookings growth, but have no impact on gross profit growth. Gross profit for the quarter for The Priceline Group was $2.9 billion and grew by about 29% on a constant currency basis, and by 12% in U.S. dollars compared to prior year. Our international operations generated gross profit of $2.6 billion, which grew by about 29% on a constant currency basis, and by 11% in U.S. dollars compared to the prior year. Gross profit for our U.S. operations, including OpenTable's U.S. business, amounted to $335 million, which represented 22% growth versus prior year. OpenTable generated total worldwide revenue in Q3 of about $65 million. Excluding the beneficial $13.7 million impact of a favorable travel transaction tax ruling in Hawaii, U.S. gross profit grew by 17%. Our gross profit take rates were broadly stable, as they have been for quite some time now. We believe that our revenue margins have been sustainable due to our position as a lower cost distribution channel that drives significant demand to our accommodation partners. A highlight for the quarter was operating margins that exceeded our guidance and were slightly better than last year. Non-GAAP operating income amounted to 53.7% of non-GAAP gross profit for Q3. Margins benefited as our marketing teams did a good job driving traffic, with a nice balance between top line and bottom line growth. Margins also reflect the benefit of strong gross profit flow-through. The combination of 29% constant currency gross profit growth with stable operating margins results in strong bottom line profit performance. Adjusted EBITDA for Q3 amounted to $1.6 billion, which exceeded the top end of our guidance range of $1.525 billion and grew by 12% versus prior year despite the significant negative foreign currency translation impact of the stronger U.S. dollar. Non-GAAP net income increased by 10% and non-GAAP EPS grew by 14% including interest expense from our recent bond offerings and the beneficial impact of lower share count from stock repurchases. In terms of cash flow, we generated approximately $1.3 billion of cash from operations during third quarter 2015 which is about 1% above last year, and is also impacted by unfavorable foreign exchange rate translation. We invested $42 million in CapEx and repurchased 985,000 shares of common stock for $1.17 billion in Q3. Thus far in Q4, we have purchased about 400,000 more shares of our common stock for $520 million. Year-to-date through Friday, total cash returned to shareholders is about $2.8 billion. Our cash and investments amounted to $9.4 billion at September 30, 2015, with about $700 million of that balance in the U.S. Now for Q4 guidance. We often get questions from analysts and investors trying to understand the size of the accommodation market and our share of room night reservations. Darren just pointed out that the accommodations on our websites have about 21 million rooms. We internally estimate our market share by multiplying this figure by 365, and then dividing the sum into our annual room nights. This math implies a mid-single digit market share, which I believe highlights the opportunity for us to continue to grow our share with existing partners, while our supply teams also continue to aggressively add new partners. Our quarter is off to a strong start as is evident in our guidance. Our guidance assumes that our growth rates will decelerate as we progress through the quarter mainly due to the size of our business and consistent with long-term trends. We have not yet launched our recently announced advertising placement on TripAdvisor Instant Book. We are confident that this will be another way for us to reach travelers in a branded fashion with reasonable ROIs. Our forecast for the quarter assumes that TripAdvisor Instant Book will not have a significant impact on our top line growth or add efficiency. Our Q4 forecast assumes foreign exchange rates of $1.07 per €1, and $1.51 per £1 for the remainder of the quarter which would result in average exchange rates that would be weaker by about 13% for the euro and about 4% for the British pound as compared to the prior year. I also highlight that the euro and British pound, as well as several other important currencies for our business, including the Brazilian real, the Russian ruble and the Australian dollar have devalued compared to the U.S. dollar since we reported earnings in August, and when most analysts last updated their forecasts. Overall since that point in time, we estimate that foreign exchange rate fluctuations have negatively impacted our Q4 U.S. dollar forecasted results by about 2%. As a result of exchange rate fluctuations, our gross bookings, gross profit, operating expenses, adjusted EBITDA and non-GAAP net income will mathematically translate into significantly fewer dollars than they would have at last year's exchange rates for Q4. Barring further deterioration in exchange rates, we believe that year-over-year currency comps will become less challenging after Q4. For Q4 guidance, we are forecasting total gross bookings to grow by 13% to 20% on a constant-currency basis, and by 1% to 8% in U.S. dollars. With U.S. gross bookings down by 5% to 10% compared with prior year. We expect international gross bookings to grow by 17% to 24% on a constant-currency basis and by 3% to 10% in U.S. dollars. Our Q4 forecast assumes that constant currency ADRs for the consolidated Group will be up by less than 2% compared to the prior period. We expect Q4 revenue to grow year-over-year by approximately 1% to 8%. We expect gross profit to grow by 14% to 21% on a constant-currency basis, and by 3% to 10% in U.S. dollars. We expect that declines in our Name Your Own Price services will negatively impact revenue growth rates in Q4. We expect about 140 bps of deleverage in non-GAAP operating margins compared to prior year, expressed as non-GAAP operating income as a percentage of gross profit. The deleverage is mainly attributable to our assumptions for online ad efficiency and OpEx. Our online advertising efficiency forecast, as usual, assumes deterioration from current levels and provides us with flexibility in a dynamic market to follow our consistent approach of advertising our brands at reasonable ROIs. OpEx leverage has improved compared to earlier in the year as we have left the OpenTable and BookingSuite acquisitions. We are committed to controlling non-advertising OpEx and expect these expenses to generally grow more slowly than our gross profit in the future, although there could be quarterly variations from time-to-time as we invest to be ready for growth. This cost discipline together with industry-leading operating margins allows us to lean-in more aggressively when we see opportunities to advertise our brands to drive growth. Our adjusted EBITDA is expected to range between $710 million and $760 million, which at the midpoint is an increase of 3% versus prior year. We estimate that the currency impact on EBITDA growth is similar to the impact that we are forecasting for gross profit. Our non-GAAP EPS forecast includes an estimated cash income tax rate of approximately 17% comprised of international income taxes, and alternative minimum tax, and state income taxes in the U.S. We are targeting non-GAAP fully diluted EPS of approximately $11.10 to $11.90 per share, which at the midpoint is an increase of 6% versus prior year. Our non-GAAP EPS guidance assumes a fully diluted share count of 50.9 million shares based on yesterday's closing stock price and reflects the beneficial impact of the share repurchases we have made thus far this year. We forecast GAAP EPS between $9.10 and $9.90 per share for Q4. The difference between our GAAP and non-GAAP results is driven by non-GAAP adjustments that are detailed in our earnings release. Consistent with past practice, we have hedge contracts in place to substantially shield our fourth quarter EBITDA and net earnings from any further fluctuation in the euro and British pound versus the dollar between now and the end of the quarter. The hedges do not offset the impact of translation on our gross bookings, revenue, gross profit or operating income. They also do not hedge us against fluctuations and other currencies, and do not hedge our earnings beyond the fourth quarter. Our forecast does not assume any significant change in macroeconomic conditions. One housekeeping item, after reporting Q4, we will no longer report U.S. gross bookings as a separate statistical metric. We believe that the usefulness of this metric has diminished due to the relative size of our U.S. business to our consolidated results, and because two of our three U.S. businesses do not have gross travel bookings. We will continue to report revenue and gross profit for our U.S. business to give insight into its performance. We will now take your questions.

Thank you Our first question is from Tom White with Macquarie. You may begin. Thomas White - Macquarie Capital (USA), Inc.: Great. Thank you for taking my question. Room nights, it looks like there was a bit of a slowdown there, also in international gross bookings growth ex-FX. But the international gross profit growth ex-FX remained strong and steady. I think it was 29% versus last quarter. So can you maybe just talk a little bit about the drivers of the delta there? Was it geographic mix, take rate improvements? Any impact from M&A? And then just on the U.S. business, and I think your largest competitor grew organic room nights something like 25% in the U.S. last quarter, impressive, given that that market is considered more mature. Just maybe an update around your U.S. business. Is it mostly priceline.com? Is it mostly Booking.com and kind of what's stopping you guys from getting your growth rates up to more competitive levels there? Thank you. Darren Richard Huston - President, Chief Executive Officer & Director: Okay. Well, thanks Tom. I'll let Dan take the first question. I'll take the second question. Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: Hey, Tom. So on the first one, first of all, relative to the growth in Q3, we think our marketing teams did a great job of bringing traffic with a good balance between strong top line growth, and really strong bottom line growth, so we were happy with the margin performance and the top line performance in Q3. In terms of the difference between the growth rate and room nights and constant currency gross bookings growth versus our constant currency gross profit growth, there's a few things in there. First of all, there is little bit of an acquisition benefit, so we have about one percentage point of inorganic growth from the OpenTable acquisition, which benefits gross profit and has no impact on gross bookings. I mentioned for our U.S. business, and this partly answers your last question too, we had a significant step-down, 13% reduction in year-over-year airfares, which dramatically impacts gross bookings for the U.S. business, but has no impact on gross profit. And then lastly, and probably most significantly, is just we had two very strong quarters of accelerating growth for room nights and we're seeing the benefit of that now flow-through in Q3 together with just a strong performance relative to our forecast for bookings that came over the trends from after we gave guidance and actually checked out in Q3. Darren Richard Huston - President, Chief Executive Officer & Director: Yeah, and just building on Dan's point, the U.S. growth numbers you see do not include Booking.com, and we feel very good about our Booking.com business in the U.S. There's two things I would comment. One is, our U.S. inbound, which obviously has been weaker because of the strong dollar, and we do particularly well with Europeans and South Americans coming into the U.S., but still, we put some pretty solid numbers on the board. And the other way to look at the business is U.S. as bookers, which grew even faster than U.S. as a destination and we were serving U.S. bookers not just for booking in the United States, but also overseas. So overall we feel great about our U.S. business, but there's a lot more to do. It's one of the big markets where we are definitely under indexed, and we feel like we have a good set of cards to be able to continue to compete in the U.S. and North American markets going forward. Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: And Tom, just a follow-up to my answer. You asked about take rates. As I said in the prepared remarks, our take rates were stable. So that was not a driver of the gross profit growth in excess excessive gross bookings growth. Thomas White - Macquarie Capital (USA), Inc.: Great. Thank you. Darren Richard Huston - President, Chief Executive Officer & Director: You're welcome.

Thank you. Our next question is from Brian Fitzgerald with Jefferies. You may begin.

Thanks, guys. I had a couple questions around Instant Book. Can you talk a little bit more maybe about the decision process to move forward there? You mentioned the requirement for prominent branding. How different are the mechanics there versus what you do with KAYAK? And then, at the end of the day, do you kind of view it as it's just another ad format where you can proactively judge the ROI of the channel and you can adjust exposure to that type of format accordingly? I mean, you still own the hotel and the customer relationship, so a little bit about that please? Darren Richard Huston - President, Chief Executive Officer & Director: Yeah, thanks Brian. So we – if you – KAYAK was actually the original player to create an Instant Book path, and frankly speaking it's not a very well-branded path. And before we bought KAYAK, we had also decided not to participate in that. We participated in it, and then there was a proliferation of these concepts in various meta partners. I'd say TripAdvisor probably the one taking it on most. So we've stayed out of it mostly as we watched the performance of KAYAK, but we wanted to make sure we had an any future Instant Book partnership with first of all great branding, and secondly, the ability to market to the guests that book on our platform. And over the course of over 12 months, we finally came to an agreement where we think we can achieve that. We also believe we're going to get good ROIs off of the TripAssist platform. We think the branding's going to help us, and we also believe that we've protected our content. We don't want our content being used to help other people book. We want our content to be used to help us book, and I think working with TripAdvisor we came to a nice – a good compromise agreement that allows us to achieve that. It also helps TripAdvisor in their strategic move to try to do more on mobile and other kind of small-screen real estate. So overall, we're really positive. As I said, you guys will be able to see it very soon. We're beginning to test on small samples this week with TripAdvisor, and I'm now quite excited that this will be a nice new addition to places that we can get branded bookings from across our various marketing partners.

Great. Thanks, Darren.

Thank you. Our next question is from Eric Sheridan with UBS. You may begin.

So maybe just following up on that, wondering long-term, when you think about these platforms for sort of book on Trip or book on Google, how do you think about the ROI developing long-term on these platforms, and the interplay between auction and commission rates on those platforms? And then maybe just one quick follow-up on health of consumer. Curious if there were any comments you had around the health of the consumer travel trends you saw coming out of the summer season, especially in Europe? Thanks. Darren Richard Huston - President, Chief Executive Officer & Director: Yeah, okay. So let me take both those questions. We are on margin ROI agnostic across various sources of demand. Of course, there are types of demand that work well for us where we will get really healthy customer repeat, that we like the way that the channel's working that we might lean-in a little bit more. And then other channels where we may be getting customers, but we don't like the nature of the customer or they're not repeating in the right fashion, then we'll lean back from that. So we're agnostic in that sense. I think the TripAssist execution is one that we would like to use across other partners. We will make some changes on KAYAK. We have been working very closely with Google, with trivago, other players. And I don't think it's going to enhance our lives. I don't think it will bleed away from our lives, and we're going to have to watch as these things come together and we really get used to the consumer behavior, and whether or not this is a channel we will lean-in to or lean back from. But overall, we always try to earn money on every transaction regardless, and this will be a net positive from a cash flow standpoint for us, although not extremely material given kind of the size and scale of our business today. And then just some comments, geographically, we saw a lot of strength in many areas of the market that we saw earlier in the year. Japanese inbound, China outbound continues to be very strong. UK and U.S. outbound, because both had relatively strong currencies relative to where they were traveling to. Europe, we're seeing some pretty promising trends in Southern Europe; now Greece had a big issue as you know earlier in the summer, but Spain and Italy were both big positives for us in the summer. Maybe there was a bit of travel moving around, but most people in the Eurozone stayed in Europe, and many people came into the Eurozone, so it was a very strong summer in that respect. I'd say, challenges, you have these spot crises going on. We now have this one in Egypt. You saw in Tunisia, the Greek crisis. Russia, generally inbound-outbound is a challenge. There is a lot of travel going on in domestic Russia, but you guys know that whole story. Southeast Asia had the bombing, and then you had MERS in Korea. Those were also negatives in the quarter, but overall, we run a very global and diversified business. So I would say this is certainly our best summer ever if you look at just the volume of business we did, the profitability of the business. And we've now been able to – our business is such we can take advantage of both the positives and clean-up the negative. And going into Q4, we're feeling really good about the overall travel environment. I always remind people that travel is all about headlines. People lose security when they see negative headlines. And when the headlines are generally not negative, they don't even have to be positive, then people will travel. And we continue to see very positive trends going into Q4 as well.

Thanks.

Thank you. Our next question is from Naved Khan with Cantor Fitzgerald. You may begin.

Yeah, thanks. Darren, how do you balance sort of the visibility you have on the TripAdvisor meta auction versus now your participation in Instant Book? How do you sort of decide where do you want to play more? And then in terms of just the cost side of the integration, are there any one-time costs that are baked into your 4Q guidance for the Instant Book? Darren Richard Huston - President, Chief Executive Officer & Director: Okay. Your first question, I didn't - Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: Balance between meta and Instant Book. Darren Richard Huston - President, Chief Executive Officer & Director: Oh, balance between meta and Instant Book. Okay. Well first, I'll take the second question first, there aren't really any costs. There wasn't a lot of dev work that had to happen to make the Instant Book path work. We've been working with TripAdvisor very closely, and already have established fees and things like that. So that was not a big cost on our side. Yeah, certainly, when we look at all of our sources of paid demand, we're always looking for the right balance. We tend to prefer blue links, I call them, versus paths where somebody else tries to build a booking path, probably because we think our booking path is the absolute best in the industry, or an agency model. So we use the credit card as a form of guarantee, not a form of payment. These are all reasons why these Instant Book paths at times have not been as strong of opportunities for us as blue links or meta links. On the other hand, there are some benefits in terms of the branding and the marketing and also the connectedness that we will be showing with TripAdvisor, because when they pick you to do their Instant Book, they're basically saying, hey, here's a great preferred partner to do business with. And that positive shine on us as well as TripAdvisor, I think, is something that we're going to have to see how that works over time. And I'm actually kind of excited to see that, because in a way, we never really – in many of our other channels we don't get that kind of endorsement. But in an Instant Book path, that is one of the positives, given that it's a branded path, that we're looking forward to. And you guys will be able to see again very soon what that looks like, and you'll get a better sense of what I'm referring to.

Okay. Thanks. And then quickly on the – I think you mentioned a new tech stack for priceline.com which you're launching. So can you elaborate a little bit on that and what do you expect to see there? Darren Richard Huston - President, Chief Executive Officer & Director: Yeah, priceline has been an outstanding business for many, many years. But we found that the tech stack wasn't near as flexible and fungible as for instance, the tech stacks we have at Booking.com or even rentalcars.com. So now that we're getting into that, it'll be – we've already had an experimentation framework, but it is just a much more flexible stack to allow for much more rapid philosophy in innovation, and we hope in Q1 that will be fully in place. Paul who's leading that business has decided to put the focus there. Forever, we had sort of two stacks running in parallel and now we'll be able to go onto a single stack that'll also increase innovation speed so people aren't creating code for two different stacks of software. It's not the funnest thing to go through, but we're seeing the light at the end of the tunnel, and we expect hopefully to get some good innovation velocity out of that, and certainly the team at priceline.com is very excited to get through this process.

Thank you. Darren Richard Huston - President, Chief Executive Officer & Director: Thank you.

Thank you. Our next question is from Mark Mahaney with RBC Capital Markets. You may begin.

Two questions please. First has to do with consumer fees. Darren, you mentioned earlier that you're not charging consumer fees, do you? And there's two, you know, Expedia, HomeAway talk about doing that with the HomeAway asset, and obviously Airbnb is doing that. Is it something that your research indicates is important to consumers? And is that why you're sticking with it or do you think that that's something you could toggle on at some point? And then could you also secondly just talk about Facebook as a marketing channel and any new thoughts you've had on that? Thank you. Darren Richard Huston - President, Chief Executive Officer & Director: Okay. Thanks, Mark. Basically, in vacation rentals, we're building a very different product than what Airbnb has, or what HomeAway has. And our whole business is based on no fees for consumer. So it wasn't a strategic move. It's just a reflection of the way that our business works, and we charge our accommodation partners between 12% and 15% commission, so that's where the take rate is. When you're in a classified ad business, it's more difficult to get that kind of take rate from the accommodation partner, so many players will try to also charge a fee or increase fees to consumers. We certainly believe that having a no-fee product drives conversion for us, but we obviously have the benefit of having a digital calendar and an instantly verifiable booking, even the online bookings on HomeAway are on request – or on Airbnb, are on request, so the whole process where the consumers are still deciding, and the properties still deciding whether they want the product that they booked. So no, we feel really good about our positioning. It's more just reflective of the way our entire business works on Booking.com, but if you look at the way their competitive landscape is shaping up, we feel great that our product is both something the consumers love, but is also has the least friction of any of the products in the market. And then your next question on Facebook as a marketing platform, we have been doing more and more business with Facebook. Most of it though is in the category or re-messaging or re-targeting. It's not really in the big sweet spot which is intent-based marketing. That's really what search gives you is intent-based marketing. Somebody types in, I want a hotel in New York, and then you are responding to that request. But the folks at Facebook very much understand this. They're working to try to win that kind of businesses. It's direct response business, it's a big prize for any marketing channel, and we're also trying to work with other large audience versus in Silicon Valley to try to get out that Holy Grail of intent-based marketing. It's really valuable to us as it is to any of them and we're one of the world's best at it. And I feel like it's a little bit strange the advertiser is going and working with the media partner to figure these things out, but there's a lot to be gained by both, and I'll look forward to seeing where it goes. I've been really pleased in particular with Facebook's cooperation is an area and we have engineers working with engineers which is usually a good sign that they're going to figure out something.

Thank you, Darren. Darren Richard Huston - President, Chief Executive Officer & Director: Thanks, Mark.

Thank you. Our next question is from Ken Sena with Evercore ISI. You may begin.

Hi. Thanks. On the U.S. bookings metric, I understand the limitations that you cite, but are there modifications to the metric that you considered before deciding to discontinue it? And maybe, as we look forward, maybe any substitute metrics that we might be able to have to kind of give us a sense of your traction in the U.S. more on the bookings basis? Thanks. Darren Richard Huston - President, Chief Executive Officer & Director: Hey, Ken. We could consider at some point giving some stats on the U.S. in terms of our total hotel business. We haven't until now, but as we've have given milestones like on the size of our European business, or our Latin America business. So I wouldn't preclude the possibility of us doing that at some point. We've opted not to do that as an ongoing metric. We split our business now based upon where the brand is located, and we've stuck with that for a long time, and we'll stick with that for the future. But we will consider that at some point in the future.

Okay. Thank you. Darren Richard Huston - President, Chief Executive Officer & Director: You're welcome.

Thank you. Our next question is from Lloyd Walmsley with Deutsche Bank. You may begin.

Thanks. Going back to just online advertising, it looked like that as a percent of gross profit was only slightly higher than a year ago. How much of that was just more mature like, markets like Europe increasing the mix versus better efficiencies within those geographical regions? Darren Richard Huston - President, Chief Executive Officer & Director: Dan, you want to take that? Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: Yeah, I won't parse our ROIs by region for you, Lloyd, but I'd just say we were very pleased with the performance that the marketing group delivered. We're pleased with top line growth, we're pleased with the improvement in ROIs that we saw in the quarter, and then that metric also benefited by some of that flow-through of bookings that we had made in prior quarters, incurred the advertising then, and recognized the gross profit as our customers traveled in Q3. So it was a good performance. I wouldn't split it by region for you.

Yeah, okay. And then, if I can ask another on BookingSuite, can you just give us any sense for how big that might be right now in terms of the partnerships? And then, how you're kind of going to market with that? Are you leveraging your existing sales force, and kind of what are response rates like from hotels there? Darren Richard Huston - President, Chief Executive Officer & Director: Okay, Lloyd. Yeah, overall our BookingSuite is going very well. For competitive reasons, we don't want to talk about how many contracts or anything, but we have multiples more than when buuteeq was an independent business. The way it's basically working is our account managers will introduce the concept of websites and other technical solutions to partners and then ask them would you like to hear more. And then we have a secondary team that will then speak with the partner about the offerings that we have. We started out with websites. We've now bought a company called PriceMatch out of France, so we're developing business intelligence tools. The ultimate goal of BookingSuite is to have a whole suite of products that meets the needs of accommodation partners in the cloud, and that's what we are building towards. So a lot of innovation happening in the business. I am very happy with where it is. It's not a big contributor to EBITDA or anything at this point, but it's on a good pace, and certainly ahead of where I thought it would have been at this point. It's really strategic for us. It's an area that getting into the software business scenario we can build close relationships with our partners and more to come.

Thanks.

Thank you. Our next question is from Ron Josey with JMP Securities. You may begin.

Great. Thanks for taking the question. I wanted to switch topics and maybe ask about business travel. I think it's now 20% of bookings. Is it something that's ramped relatively recently for you all, and have you placed an emphasis on this before? I'm just wondering, 20% number seems very high. And then also wanted to ask about loyalty rates of these travelers, please, meaning, do you see them coming back in higher amounts for repeat usage? Thanks. Darren Richard Huston - President, Chief Executive Officer & Director: Well, thanks Ron. Yeah, we've – it's funny, before we launched Booking.com for Business, we had never really specifically targeted the business traveler, but we had a pretty good sense that business people were starting to show up to the platform. You see them using their business email address is the one indication we have. So starting about two years ago, we began to say, okay, how do we address the business traveler better? As you'll notice on our website, you don't even have to sign up for the tool, but if you say you're traveling on business, we'll highlight the hotels that are great for business people, we'll show you the review score just from business people, we'll show you amenities that business people care about, things like free Wi-Fi, breakfast, fitness facilities, things like that. That was the beginning of it. And then we started to see that people who marked their booking as business booking was growing faster than even leisure bookers. So then we built a really lightweight tool that helped the systems book on behalf of business bookers, help them track budgets, things like that. And then we saw another pretty good boost to the business. So yeah, it's one out of five today. There's various people who think that it should be, I would say, one out of two sometime in the long-term, because business is basically half of accommodations around the world. There's different reports. It might be 40%, might be 60%, but it's a wide variance. So we're going to continue to build in this space, but we've seen really positive traction. The benefits of business bookings to us are, generally they smooth out seasonality, which is nice; don't cancel as much, generally higher ADR than leisure bookings. So is a lot of positive benefits to business bookers, but I always remind people of is, every business person is a leisure traveler, not every leisure traveler is a business person. But when you do both kinds of travel, and if you're able to do them on one platform, there are a lot of benefits to that, and we of course give the tool for free, we give customer service for free, which is not the case with a lot of the travel management companies who support businesses today. So step-by-step, we're optimizing the product and we're quite optimistic about it for the future.

Great. Thank you.

Thank you. Our next question is from Mike Olson with Piper Jaffray. You may begin. Mike J. Olson - Piper Jaffray & Co (Broker): Hey, good morning. I have two questions. First, is there any detail that you could give us to quantify the impact that the bombing in Thailand had on Agoda during the quarter, and any impact that has on your guidance? And then secondly, when you talked about adding hotels in China, is that in partnership with Ctrip or are you adding that inventory independently from Ctrip? Essentially, what I'm wondering is if you're doing much or anything in China outside of your partnership with Ctrip at this point? Thanks. Darren Richard Huston - President, Chief Executive Officer & Director: Okay, Mike. I'll get Dan to take the first one. Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: Yeah. Darren Richard Huston - President, Chief Executive Officer & Director: I'll take the second. Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: Yeah Mike, I won't quantify for you specifically, but I will say it's a significant impact for Agoda, because it's by far their largest market as a destination. Definitely noticeable principally for our Agoda business. Darren Richard Huston - President, Chief Executive Officer & Director: Yeah, and to the increase of properties in China, it's good you asked, actually the vast majority of them were built by Booking.com. They weren't acquired through the Ctrip partnership. We do have let's call it a small handful of hotels that we have with the Ctrip partnership, we're still optimizing; we had a lot of issues connecting systems, a lot of issues with the high bar that Booking.com has on content, and we want to make sure that the product in China is working absolutely in an outstanding fashion, and the Ctrip team has been responding to that. We haven't given up on it, but the numbers you're seeing have been largely self-built by Booking with a few handfuls. The other side of the commercial partnership with Ctrip is our product on their site, and that's gone very well and continues to grow. So I appreciate you asking, but if we do unlock on Ctrip, it will provide an extra boost to our property count, but right now, this is organic efforts going on at Booking. Mike J. Olson - Piper Jaffray & Co (Broker): Thank you. Darren Richard Huston - President, Chief Executive Officer & Director: Thanks.

Thank you. Our next question is from Justin Post with Bank of America Merrill Lynch. You may begin.

Thank you. I have a couple of questions. It looks like the booking upside you had this quarter versus prior quarters was a little bit less, were there any changes in trends in the quarter that you'd like to call out versus say 2Q? And then the TripAdvisor partnership, after not being partners for a while, is very interesting. Any concerns you might have on kind of helping build a competitive platform over time, and just how are you are thinking about that? Thank you. Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: Hey, Justin. So I'll take the first one. No change, nothing that I'd call out in terms of any kind of change in our approach. I think it was a really spectacular performance in the first couple of quarters for the business to accelerate, and if anything, maybe that's more the outlier than seeing a little bit of deceleration in Q3. If you look at the business over kind of the balance of the three quarters I think it's just very solid growth, and that's pretty much what we've seen over a number of years now is business that's been very resilient, growing at very high rates. Every now and then there will be a step down maybe a little bit bigger than what we're anticipating, and then there's other points there will be a quarter where we accelerate. But overall, we're pleased with the performance year-to-date and in the third quarter specifically. Darren Richard Huston - President, Chief Executive Officer & Director: Yeah, and on the TripAdvisor thing, I think I've largely answered this; obviously, it's a very tricky area and what we would never want to do is be a dumb pipe to somebody else's brand and we would never want to give our content away to somebody to book other people's bookings. And you'll see that we've done neither of those, so I feel great about where we came out at, and time will tell. Of course, every paid marketing partner we have, starting with Google all the way down, there's always that threat and you have to make a really strong balance between the challenge you're participating and how you're participating relative to the ROIs, and I think we do a really good job of that every single day, and I believe time will tell. I also by the way think it's great for TripAdvisor, and that's kind of the nature of partnership is they've got something that they need to achieve, we've got something we need to achieve and there was opportunity to come up with an answer and that's what we did, so let's see. I mean the best thing to do in these situations is find a good way to get in and begin experimenting and optimizing, and ultimately we both win if we can find a way to get a lot more bookings.

Okay. Thanks. Maybe if I could ask a follow-up. If TripAdvisor goes well for you, could it be actually material for your overall bookings at all? Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: We didn't build any assumption in, Justin. I think it's premature to make a call in that fashion. We'll see what the trade-off is between meta and Instant Book, and how much traction it gets, and then we'll report back to you after we have more information. Darren Richard Huston - President, Chief Executive Officer & Director: Yeah, we have a very – I guess it's worth saying, we're a very large business and we have a lot of varied channels and some are coming and going at all times. As Dan said, there's a whole cannibalization impact we don't know. A lot of that's going to be up to TripAdvisor as the media owner, how much do they expose of this product versus the other product, what's the balance that the customer wants to go to, do they want to go down the meta path, do they want to go down the Assist path, lots to learn. TripAdvisor's obviously a big player for us, but they're still overall a small percentage of our overall business. So it would have to be quite a significant incremental uptick to have a material impact on our results.

Great. Thanks. Thank you. I appreciate it.

Thank you. Our next question is from Steven Zhu with Credit Suisse. You may begin. Steven Zhu - Credit Suisse (Hong Kong) Ltd.: Okay. Thanks. So Darren, my understanding is that Agoda is a merchant-based platform, and now it seems like you're integrating Booking.com's agency inventory there. So is agency the direction you want to take with Agoda in the future, or are you leaving the option open to the consumer? Thanks. Darren Richard Huston - President, Chief Executive Officer & Director: Yeah thanks, Steven. I would say more leaving the option. If you look at priceline.com, it's a real mix of merchant and agency and there's ways to merchandise the product. We've always had Booking.com on Agoda, although it was pretty varied, and only recently did we really up Booking.com's presence on Agoda, and now there's a really nice mix. For the customer, often it comes down to, well, do I pay now or do I pay later, how cancellable is the product, things like that, which can be messaged in the path. They don't necessarily see it as an agency versus a merchant product. It's just a different way to experience the accommodation from a payment standpoint. Steven Zhu - Credit Suisse (Hong Kong) Ltd.: Thank you.

Thank you. Our next question is from Heath Terry with Goldman Sachs. Heath Patrick Terry - Goldman Sachs & Co.: Great. Thanks. I wanted to dig a little bit deeper into the math behind the advertising deleverage that you talked to, and just get a bit of an update on the mix there in terms of what you're seeing that's driving that, whether it's deleverage within specific channels, sort of a same-store sales basis, or it's just a mix shift to less efficient channels as you've sort of maxed out the traffic that you can get through more efficient channels like Google? And then Dan, I do want to come back on this U.S. bookings question, and just get a sense, I know you've talked about maybe some incremental disclosures, but as we try and analyze the business going forward, and obviously, the trends in the U.S. or the trends as you guys pointed out in your comments, the trends in individual geographic regions start to matter a lot more. Is there a sense or any sort of guidance you want to give us in terms of the best way to look at that geographic exposure in the business since we're not going to be getting the kind of disclosure that you've given in the past? Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: Sure, Heath. So I'll take both of those. On ad deleverage, what are you talking about specifically? In the guidance, or in the Q3? Heath Patrick Terry - Goldman Sachs & Co.: More in the guidance, but just sort of general trends either way. But the comments that you made earlier in the call during the prepared remarks on the ad deleverage implied for Q4; mainly just looking to get a better sense of whether that's specific channels becoming less efficient over time, or mix shift as you're having to explore other channels that are less efficient because of capacity within your more mature, more efficient channels? Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: Got it. No. So it's no significant assumed change in mix or channels. It's more just looking at what we've delivered thus far to-date in the quarter in terms of ad ROIs, and then building a level of conservatism on top of that for the go-forward, really just to give our marketing team some flexibility that if they do see channels that they think are attractive and they want to lean-in a little bit, or the marketplace becomes more competitive, we've got the ability to hold position and maybe accept somewhat lower ROIs. So it's really just to give us some flexibility to compete in a very dynamic marketplace and look for opportunities to again try and strike a good balance between top line and bottom line growth without feeling that they're handcuffed having to deliver a specific ROI. Darren Richard Huston - President, Chief Executive Officer & Director: The other thing you might just talk about Q4 a little bit and how acceleration in gross bookings can actually cost you in Q4, they have to check out (55:06) in Q1. Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: Yeah, so Q3 we got the benefit of the acceleration that happened in the first couple of quarters and checked out in Q3. A little bit of a deceleration in gross bookings growth is generally helpful to that ad efficiency metric, and that top line forecast that we have for Q4 is relatively stronger, I would say. And so when you don't have that kind of deceleration in top line growth, that puts a little bit more pressure on the ad efficiency metric. Darren Richard Huston - President, Chief Executive Officer & Director: In terms of U.S. gross bookings, I'd say that the best way to look at our U.S. business and understand the trends will be the revenue and gross profit numbers that we'll continue to report. So revenue for OpenTable and KAYAK are reported in advertising and other, and then we'll give you the total U.S. revenue which will kind of give you a proxy on priceline.com so you get a sense for our U.S. travel business. Heath Patrick Terry - Goldman Sachs & Co.: Great. Thank you very much. Darren Richard Huston - President, Chief Executive Officer & Director: You're welcome.

Thank you. Our last question is from Kevin Kopelman with Cowen & Company. You may begin. Kevin Kopelman - Cowen & Co. LLC: Hi. Thanks a lot. I just had a question on your vacation rental business. Can you give us an update there? Are you seeing any increase in competitiveness from Airbnb? And can you talk about your strategy for the U.S. in that business, because it seems like you only have a few listings there today? Thanks. Darren Richard Huston - President, Chief Executive Officer & Director: Yeah, thanks, Kevin. Well, first of all, it's always worth reminding people this is a very large market, so it's a competition you don't necessarily see on a day-to-day basis, and most of this market is booked in quite an inefficient way. But when we look at what we call vacation rentals which is our self-cater product, we have an inventory of 1.8 million bookable rooms. That's in the ballpark of what HomeAway and what Airbnb have. We may be booking different kinds of properties. HomeAway is actually quite focused on vacation homes. We're quite heavy in in-city apartments and things like that. We're also indexed very heavily in Europe. HomeAway indexes and Airbnb quite heavily in the United States. But we feel really good about the scale of our business, its growth. The nature of our booker may be different. There may be somebody who's looking for any form of accommodation versus a vacation home specifically. And this is a really critical market for us in the future. When you think about where we've come from, we came from the hotel space. We've now built a massive amount of inventory and multi-room unique accommodations that one wouldn't technically call a hotel, and now we're adding vacation homes, so that's the way we've approached the market. We feel good about our growth. It's quite fast and comparable, and we're a profitable company which is quite a difference as well. So we continue to build it out. I like the cards that we have, and I'm excited to look forward to where this all ends up. I think in the United States for sure there's more work to be done, and we now – if you look at our total property count, we're right in there with Expedia, if not a little bit more. You can see these on the website and we're going to continue to build out our unique accommodation portfolio in the United States and places that Americans like to go. That's a really high priority for us and a big focus in the coming quarters. Kevin Kopelman - Cowen & Co. LLC: Thanks, Darren. Darren Richard Huston - President, Chief Executive Officer & Director: Yeah, thanks. Darren Richard Huston - President, Chief Executive Officer & Director: Well, I guess that's the last question. Thank you all very much. It's been the biggest quarter in history of The Priceline Group, however, we continue to be very optimistic about the future. And, again, I want to thank all of our employees for a fantastic summer and looking forward to a great 2016.