Booking Holdings Inc. (BKNG) Q2 2016 Earnings Report, Transcript and Summary

Welcome to The Priceline Group's Second Quarter 2016 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 statements 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's speakers for this afternoon, Jeffery Boyd; and Daniel Finnegan. Go ahead, gentlemen. Jeffery H. Boyd - Chairman, President & Chief Executive Officer: Thank you very much and welcome to The Priceline Group's second quarter conference call. I'm joined this afternoon by our Priceline Group's CFO, Dan Finnegan. I am pleased to report that the Group produced another solid quarter despite an often challenging market backdrop. Execution was consistent across the brands as we achieved several important milestones as a group. The Group reported consolidated gross bookings for the second quarter of approximately $17.9 billion, up about 21% on a constant currency basis, or about 19% year-over-year in U.S. dollars. Gross profit was up 16%, or about 18% on a constant currency basis, and adjusted EBITDA increased 8% to $867 million. Earnings per share were $11.60, up 17% versus the prior year. And finally, non-GAAP earnings per share were $13.93, up 12% versus the prior year, surpassing our guidance for the quarter. Our customers booked accommodation reservations for 141 million room nights in the quarter, up 24% year-over-year. We are pleased with our reservation growth considering the competitive nature of our markets as well as macro volatility in many travel markets experienced throughout the quarter. We believe the consistent growth we are reporting demonstrates the strength of our brands, the value of a diversified global footprint and solid execution by our brand management teams. Booking.com recorded another impressive quarter, and we are excited to announce that we now have over 1 million properties on the Booking.com platform, which represents an increase of 30% over last year. The Booking team has nearly doubled the number of properties on its platform in just two years, a truly remarkable accomplishment that reflects the hard work and dedication that the Booking team employs on behalf of its customers and supply partners. The Booking.com platform includes approximately 493,000 instantly-bookable vacation rental properties, which grew 39% year-over-year. Our properties represent a combined total of approximately 23.7 million potentially bookable rooms. Of this total, 16.3 million are within our traditional hotel partners and 7.3 million are bookable rooms in homes, apartments, villas and other categories of unique places to stay. We believe that Booking.com has one of the largest platforms for vacation rental and alternative accommodation properties and offers the most customer-friendly booking experience in the market. Booking.com also reached another milestone in the quarter as it surpassed over 1 million reservations booked in a single day on its website, an impressive measure that demonstrates the meaningful scale of our business. Agoda produced another solid quarter on both the top and bottom-lines as it continues to grow its global accommodation platform. The Asia-based Agoda team has built a world-class merchant supply platform capable of amassing and serving a wide variety of private discount deals that has proven to be a great asset for the Group. We are especially pleased to see group members leveraging the supply platform and availability for our customers. Consistent with the first quarter, KAYAK exceeded our expectations, posting strong growth in queries, revenue and profit. KAYAK continued its pace of innovation with the launch of several new products and enhancements centered on new verticals, planning and travel tools, and conversational travel services such as KAYAK's Facebook Messenger service, an exciting new way to search and book travel experiences. Rental car days for the Group grew 8% in the quarter, driven primarily by Rentalcars.com. Rentalcars.com delivered a strong quarter and witnessed robust demand for its services across all of its major geographical regions. Rentalcars.com continues to make investments in expanding its global supply base as well as enhancements to its customer service organization. priceline.com made good progress on its efforts to reposition the business, including strengthening the management team, building more sustainable marketing programs and designing improved product offerings and customer service, all in an effort to position the business for a strong start in 2017. OpenTable delivered good bottom-line performance in the quarter driven by a healthy balance of top-line growth and cost efficiencies. OpenTable is working on attractive growth opportunities, increasing the size and scope of its restaurant footprint in North America, using innovation to drive greater diner frequency and pursuing growth in international markets. I am particularly excited about the pace with which our brand teams have built the business on mobile platforms. It is clear that progress in building share in the mobile channel is a critical component of delivering overall growth in the business. Product excellence, distribution and mobile marketing and monetization are all key components. You can see why this remains a top priority for all our brands. In summary, the Group executed another solid quarter. Focus by our brand leadership on controlling spending contributed to better-than-expected margins, underlining that a core strength of our business is control of operating expenses which allows us to deliver attractive returns to our shareholders while investing in future growth. We have now turned our attention to the third quarter and our busy summer travel season. We feel good about our outlook for the third quarter, albeit in a global travel market that is certain to remain volatile due to economic uncertainty and the scourge of terrorism. All of our employees are intently focused on delivering an exceptional customer experience during this busy season. As always, I would like to thank our employees around the world for their hard work and dedication. I will now turn the call over to Dan for the detailed financial review. Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: Thanks, Jeff. I'll discuss operating results and cash flows for the quarter, and then provide guidance for the third quarter of 2016. All growth rates referenced in my comments are compared to the prior year comparable period unless otherwise indicated. Q2 was a solid quarter for The Priceline Group with room night growth of 24% compared to 31% in Q1. Our growth did not decelerate to the extent assumed in our forecast, resulting in room night and gross bookings performance that exceeded the top-end of our guidance range. This momentum has carried over into Q3, as I will discuss in a moment when we get to guidance. We are pleased with the performance broadly across our key geographic regions. While recent terrorist attacks impacted gross bookings and cancellations in the markets affected, they did not have a significant discernible impact on our overall growth. Also, the Brexit vote caused a sizable devaluation in the British pound and creates uncertainty for the U.K.'s economic outlook, but our exposure for the 12 months ended June 30, 2016 to U.K. destination gross profit and U.K. source market gross bookings was 10% or less as a share of our business. Rental car days grew by 8% in Q2 compared to 11% in Q1. Average daily rates for accommodations, or ADRs, were down by less than 1% for Q2 versus prior year on a constant currency basis for the consolidated group which was consistent with our forecast. Foreign exchange rate impacts were slightly unfavorable to our results expressed in U.S. dollars as compared to prior year and our forecast. Our Q2 gross bookings grew by 19% expressed in U.S. dollars and grew by about 21% on a constant currency basis compared to the prior year. The difference between constant currency gross bookings growth and room night growth is due to a decline in airline ticket gross bookings, lower accommodation ADRs and relatively slower growth for rental car gross bookings. Gross profit for the quarter for Priceline Group was $2.4 billion and grew by 16% in U.S. dollars and by about 18% on a constant currency basis compared to the prior year. As I mentioned when we last reported in May, we estimate that earlier Easter timing shifted about $40 million of gross profit and adjusted EBITDA into Q1 that would have been recognized in Q2 if Easter fell in Q2 as it did last year. The timing shift negatively impacts our Q2 gross profit, operating profit, adjusted EBITDA, net income and operating margins compared to the prior year. Gross profit grew at a slower pace than gross bookings in Q2, primarily due to the impact of Easter timing and bookings recorded in Q2 that will benefit gross profit and subsequent quarters when travel occurs rather than due to any significant change in commission rates or gross margin relative to the gross bookings generated through our websites. Our international operations generated a gross profit of $2.1 billion, which grew by 17% in U.S. dollars and by about 19% on a constant currency basis compared to prior year. Gross profit for our U.S. operations amounted to $327 million, which represented 8% growth versus prior year. Advertising and other revenue, which is mainly comprised of non-intercompany revenues for KAYAK and OpenTable, grew by 22% in Q2 compared to the prior year. Operating income grew by 8%. Non-GAAP operating income grew by 6%, and non-GAAP operating margins exceeded our guidance but decreased by 315 bps compared to Q2 last year. Operating margins for Q2 2016 compared to prior year Q2 were pressured by the Easter timing I referred to earlier, performance advertising, and phasing of brand advertising shifting into Q2 from Q1. Performance advertising leverage was impacted by growth in paid marketing channels and growth in gross bookings that will partly benefit gross profit in subsequent quarters when travel takes place. Performance advertising ROIs were stable for the quarter but were under year-over-year pressure towards the end of the quarter and thus far in Q3, as we have lapped the comp last year when ROIs started to improve. Operating margin performance was better than our forecast due to better-than-forecasted ROIs for performance marketing, trimming of brand advertising by our brand teams, and less non-ad OpEx spending than assumed, partly due to phasing shifting to Q3. Adjusted EBITDA for Q2 amounted to $867 million, which exceeded the top end of our guidance range of $795 million and grew by 8% versus prior year. Net income increased by 12%, and fully diluted EPS grew by 17%. Non-GAAP net income increased by 8% and non-GAAP EPS grew by 12%, including increased interest expense from our recent bond offerings and the beneficial impact of lower share count from stock repurchases. Net income also benefited from a lower effective tax rate in Q2 2016 due to the impact on deferred tax balances of a change in state tax law. GAAP net income in Q2 includes a non-cash charge in the amount of $12.9 million related to an other than temporary impairment in the value of cost method investments, mainly related to the write-off of our remaining investment in Hotel Urbano, based on the performance and funding needs of the business, which has been impacted by the deteriorating economic and political situation in Brazil. We excluded the impairment charge from adjusted EBITDA and non-GAAP net income and non-GAAP EPS, because it is not driven by our core operating results and renders comparisons with prior periods less meaningful. In terms of cash flow, we generated $1 billion of cash from operations during second quarter 2016, which is about 38% above last year. We repurchased 236,000 shares of our common stock for $299 million during the quarter, and we have purchased an additional $69 million of our common stock after quarter close in July. CapEx for the quarter amounted to $60 million. Our cash and investments amounted to $12.3 billion at June 30, 2016, with about $1.6 billion of that balance in the U.S. Now for Q3 guidance. Q3 is off to a solid start, with gross bookings continuing to grow nicely across our key geographic regions. 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. Our Q3 forecast is based upon recent foreign exchange rates and assumes that our growth rates in U.S. dollars will be slightly dampened by foreign exchange rate fluctuations. I highlight that the basket of foreign currencies in which we transact weakened on a weighted average basis by about 2% versus the U.S. dollar since we reported our earnings last quarter and most analysts last updated their forecasts. For Q3 guidance, we are forecasting booked room nights to grow by 18% to 23% and total gross bookings to grow by 14% to 19% in U.S. dollars, and by 15% to 20% on a constant currency basis. Our Q3 forecast assumes that constant currency accommodation ADRs for the consolidated Group will be down by less than 1% compared to the prior year period. We expect Q3 revenue to grow year-over-year by approximately 12% to 17%. We expect gross profit to grow by 15% to 20% in U.S. dollars and by 16% to 21% on a constant currency basis. We expect about 260 bps of deleverage in non-GAAP operating margins compared to prior year, expressed as non-GAAP operating income as a percentage of gross profit, principally related to our assumptions for performance advertising. As I mentioned a moment ago, we have seen pressure on ROIs thus far in Q3 as we compare to periods with improved ROI performance last year. Our forecast assumes further ROI deterioration over the balance of the quarter to provide us with flexibility in a dynamic market to follow our consistent approach of generating gross bookings at reasonable ROIs. Our adjusted EBITDA is expected to range between $1.73 billion and $1.83 billion, which at the midpoint is up 11% versus prior year. We forecast GAAP EPS between $26.10 and $27.60 per share for Q3. The difference between our GAAP and non-GAAP results is driven by non-GAAP adjustments that are detailed in our earnings release. Our non-GAAP EPS forecast includes an estimated cash income tax rate of approximately 16%, 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 $28.30 to $29.80 per share, which at the midpoint is up about 15% versus prior year. Our non-GAAP EPS guidance assumes a fully diluted share count of 50.3 million shares based upon yesterday's closing stock price and reflects the beneficial impact of the common stock repurchases we have made to date. Consistent with past practice, we have hedge contracts in place to substantially shield our third quarter EBITDA and net earnings from any further fluctuation in the euro, British pound and various other currencies versus the dollar between now and the end of the quarter. Our forecast does not assume any significant change in macroeconomic conditions in general or in the travel market in particular. I would now like to outline some changes we will make in reporting non-GAAP financial metrics, which will be effective for guidance, and reporting for the fourth quarter and going forward. First, our earnings releases and commentary in our earnings calls with respect to historical results will focus primarily on GAAP results. Second, we will continue to present adjusted EBITDA and non-GAAP net income, but will no longer deduct stock-based compensation, which for us has ranged between 2% and 3% of gross profit for the last few years. We will also discontinue adjusting for the impact of net operating loss carryforwards, as that benefit now represents a smaller contribution to non-GAAP net income and will eventually sunset. We estimate that our non-GAAP tax rate for 2016 after we change to our new approach will be approximately 17%. Apart from the items above, our non-GAAP reporting will be generally consistent with prior practice, and we will provide information to assist investors in comparing our results from the fourth quarter on with prior periods on a consistent basis. We will now take your questions.

Thank you. Our first question comes from the line of Mark Mahaney of RBC Capital Markets. Your line is open.

Thanks. Can I ask you to talk about two growth areas? One, the China outbound market – just an update there and then on the alternative accommodations market, you gave some numbers there for total number of room nights. Could you just talk about traction? And what you're doing in terms of trying to include that in the purchase path? To what extent you're trying to do that and just a general update on end market. Thanks a lot. Jeffery H. Boyd - Chairman, President & Chief Executive Officer: Thank you, Mark. The China outbound market continues to be a market that is large and growing and that we all view has great potential because of the demographic factors that are well known affecting China. We have a number of different ways to participate in it. We participate in it through our partnership with Ctrip where our international hotels are shown to their customers, and Booking.com and Agoda also participate directly in selling outbound to international travelers coming from China. I know there's been a lot written about a slowdown in overall economic growth in China, but we still view it as a very, very attractive market that will have substantial macro tailwinds helping build both the middle class and travel demand, and we want to participate in it. With respect to alternative accommodations, as you can see by the numbers that we disclosed and sort of the ongoing property counts on Booking.com in particular, we have built a very large inventory of dynamically-bookable non-hotel accommodations, and we view it as a growth opportunity for our brands and for Booking.com in particular. And most importantly, our customers have gotten used to having a world-class content and a great experience both in booking and at stay, and that's something that we're determined to deliver. With respect to alternative accommodations, we also have, I think, one of the best distribution networks; in other words, one of the best ways to market those properties of any player in the space and look forward to doing that. In terms of how those are presented on the website, that's something that's determined by technology and the experience we have with users on the website. There's always an opportunity to select those properties for customers who want to use the various filters that are available. So there's a lot of different ways to get to them. But the most fundamental element of it is that we are trying to show the particular customer what they're most likely looking for and that drives the presentation.

Thank you, Jeff.

Our next question comes from the line of Justin Post of Bank of America Merrill Lynch. Your line is open.

Thanks. I would like to focus on the performance advertising. One of your competitors, Expedia, mentioned maybe a competitor benefited from some of their challenges. Has that helped at all in your third quarter outlook? And then on a bigger picture basis, guiding to margin deleverage picking up there, what's causing that and how do you think about margins longer-term for the Group? Thank you. Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: Hey, Justin. So for performance advertising, we specifically called out in Q2 that one of the drivers of the pressure – in fact, the principal driver as it relates to performance advertising – was growth in those channels outpacing growth overall in the business. So we did have some success there. For Q3, that is part of the assumption again, but we are also seeing some pressure on ROI trends relative to prior year. And we think that's principally due to the fact that we're now lapping the period where ROIs started to improve year-over-year a year ago. And – I'm sorry. What was your second question?

Just longer-term, it looks like you are going to have some marketing pressure maybe over the next year. How do think about long-term margins? Can you keep them stable or how are you thinking about that? Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: So similar to what we've said in the past in that regard, we feel if you break it into three pieces, brand advertising, although we've had deleverage pressure from that from time to time, for the long run, we feel that we will be able to deliver operating leverage there. Similar story for non-advertising OpEx where the business has typically grown more quickly than those expenses have, and we feel good about being able to control that for the future. So that leaves the performance advertising, which is by far the biggest expense bucket. We've had several years now of pressure on that metric. Our Q2 results show some pressure and our guidance for Q3 expects there will again be pressure. So beyond that, we don't have a forecast for you. You can make your own prediction as to how that will play out, but that's been the track record to date.

Great, thank you. Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: You're welcome.

And our next question comes from the line of Brian Nowak of Morgan Stanley. Brian Nowak - Morgan Stanley & Co. LLC: Thanks a lot. I have got two. Just to go back to the performance marketing and the incremental pressure you are seeing, can you just help us out a little bit? Are you seeing deteriorating ROIs on a like-for-like basis or is this more geographic mix or channel mix? Just kind of talk a little bit about the drivers of the extra pressure you are seeing? And then secondly, on cancellations, I think last quarter, Dan, you talked about cancellations picking up a bit. I don't think I heard any mention at all this quarter. Just talk about cancellation trends you are seeing. Thanks. Jeffery H. Boyd - Chairman, President & Chief Executive Officer: So, Brian, I'll take the first one and Dan can take the question on cancellations. With respect to getting into more detail on performance marketing, we typically have tried to shy away from that because very often the color that we could give you would essentially be – tip our hand in terms of what we are doing in the market. We're such a large player in the marketplace that a lot of times, the trends are in part driven by what we're doing. So I don't want to get into a lot of detail on that. I think as Dan said, we have seen pressure on that over the last several years, and I think it's fair to say that some of that is competitive pressure with scale players like Expedia being able to be more aggressive in the market as their operational execution has improved. And essentially, our goal is to continue to build market share of the business at reasonable ROIs, and our outlook has not changed on that in any fundamental way over the last several years. Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: And in terms of cancellation trends, Brian, no big change from last quarter. So the longer-term trend has been that our cancellation rates have increased. There was a little bit more volatility in it last quarter, and so we called that out, but the cancellation increases that we've seen are built into our gross bookings and room nights booked, which were all net of cancellations. So we feel like the growth even net of that increase in cancels is pretty solid. Brian Nowak - Morgan Stanley & Co. LLC: Great. Thanks. Jeffery H. Boyd - Chairman, President & Chief Executive Officer: You're welcome.

Thank you. Our next question comes from the line of Douglas Anmuth of JPMorgan. Your line is open.

Hi. This is (27:36) for Doug. Thank you for taking my question. My question is on the brand spend. I think you made a comment about trimming brand spend in 2Q. Is this (27:47) pushed back over a change in strategy? And then for the brand spend going forward, are you guys planning on doing any more brand spending in the U.S.? And as a follow-up, can you talk about the growth in U.S. versus Europe, given the macro and security uncertainty in Europe? Jeffery H. Boyd - Chairman, President & Chief Executive Officer: So I'll answer the first question on brand spend, and Dan can talk about the macro impact on the U.S. versus Europe. We said in the prior – in our prior call that we expected to have a seasonally higher brand spend than we typically would have in the second quarter as spend in Q1 was essentially shifted into Q2. We did experience a higher brand spend than we typically would, but just not to the degree that we forecast. The spending in the United States in general will continue. I think you will continue to see brand advertising by Priceline.com and by Booking.com in particular in the United States. So our outlook on making that investment over the long-term hasn't changed, but the absolute amount of that investment in the second quarter was a little bit less than we had forecast. Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: And in terms of performance by region between the U.S. and Europe, and Europe is our biggest market by far. It's our most mature, so it's growing more slowly than our consolidated growth rate typically. We're pleased with the growth performance for Europe in Q2 and year-to-date. There were impacts in France and Belgium from terrorist attacks, but overall the region is still growing well. U.S. is one of our newer markets, and it's typically growing faster than our consolidated growth rate. And Booking.com in particular continues to build its business in the U.S., and so we're pleased with our overall growth rate in the U.S.

Thank you. Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: You're welcome.

Our next question comes from the line of Lloyd Walmsley of Deutsche Bank. Your line is open.

Thanks. I had a couple questions on the vacation rental, the non-hotel business. The last few years, you have given us a room night number or a booking number in that channel over the last 12 months. Wondering if you can give us an update there. And then, as a follow-up, just curious, as you get more regulatory pressure on that type of inventory, I am curious what your approach is to listing in markets where they have made certain types of it illegal. Are you still taking a really conservative approach? And then, have you seen any – I guess any tick-up in your core hotel business in markets where they have gotten more restrictive on regulation of alternative accommodations? Curious what you are seeing there. Thanks. Jeffery H. Boyd - Chairman, President & Chief Executive Officer: With respect to the first question on quantifying the number of room nights in the non-hotel business, that's not something that we have done in the last couple of quarters, and we're not doing it this quarter. We've given the room counts, but we haven't given that level of detail. With respect to regulatory pressure, the Group is not taking the position that we would operate this business in markets and with properties where it's contrary to the law. We're a law-abiding company and we're not trying to disrupt the legal system. So I guess, if you would characterize that as being a relatively more conservative approach to it, that is our approach. And what was the third question? Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: Pickup in hotels. Jeffery H. Boyd - Chairman, President & Chief Executive Officer: Oh...

In terms of impact to the core hotel. Some markets that have gotten perhaps more restrictive on alternative, are you seeing a benefit in your core hotel business? Jeffery H. Boyd - Chairman, President & Chief Executive Officer: No. I don't think that the size of the non-hotel accommodation business that's being done away from us is big enough where that level of disruption would be visible to us in the positive sense.

Great. Thanks, guys.

Thank you. Our next question comes from the line of Chris Merwin of Barclays. Your line is open.

Hi. Thanks for taking my question. So, I guess last quarter, Expedia talked a bit about spending more dollars on Facebook and I think in your 10-Q, you listed Facebook as a brand advertising partner. So just curious if you have any plans to increase spend in that channel going forward? I know obviously, it is not quite a performance-based channel like Google, but if you can still track ROI in a platform, does that make it easier to scale up spend there? Thanks. Jeffery H. Boyd - Chairman, President & Chief Executive Officer: I think we would like to spend more money on Facebook going forward. We have a good relationship with them, and we've found that a number of things that we've done on Facebook works well, particularly retargeting, which really is more of a performance-based analysis the way we look at it. So, I would look for us to be doing more. As you could see by Facebook's announcement, the scale of their advertising business is growing, and while it traditionally has been more of a brand advertising platform, we like to work closely with Facebook to find ways to make more performance-oriented placements work for us. And that's something that we continue to be interested in doing.

All right. Thank you.

Thank you. Our next question comes from the line of Tom White of Macquarie. Your line is open. Tom White - Macquarie Capital (USA), Inc.: Great. Thanks for taking my question. Just one on the corporate travel opportunity. You guys have been quietly innovating there recently. And I think a few quarters ago, you said one in five bookings was corporate or business travel. How do you guys think maybe that mix looks like in three years to five years? I mean, can you guys kind of ever get to 50-50, you think, with the product offering you have now? And then just a quick follow-up, in terms of the marketing efficiency of some of your newer customer cohorts, specifically for some of your newer geographies, just curious where you think you are or where they are trending relative to your more mature markets in areas like return on investment or repeat purchase behavior, direct traffic, those types of metrics? Thanks. Jeffery H. Boyd - Chairman, President & Chief Executive Officer: Thanks, Tom. On the corporate travel opportunity, we always suspected that we had a substantial number of business users that were using our product, but we didn't until more recently have data on it, which is where that one in five number comes from. And that intuition gave us reason to look at the market more aggressively and try to build some functionality that would be targeted directly at corporate travelers. And so that one in five number represents the self-reported usage of our customers, and what the opportunity is, is to build a business of business travelers using the tools that we provide for them and to try to get that share to go up. I wouldn't hazard a guess as to whether it would ultimately be 50-50. In the United States, the average hotel has 30% business traveler, 30% leisure traveler and 30% large groups for big hotels, so that gives you sort of a breakdown at least in the U.S. market as to what the market kind of looks like. But we think there's a great opportunity to build awareness among business travelers that Booking.com in particular is a great place to go and for business owners to use the tools that we're building which we think will help us build share there. With respect to marketing efficiencies in newer markets, it's traditionally been the pattern that we have been willing to invest in marketing in new markets in order to build share and to build awareness of our brands until we got to a point where we'd achieved enough scale where the more normal ROI patterns would obtain. I don't have anything particular to report to you on that front. There may still be some markets where we're not long-tenured and are doing some investing, and that would be very, very consistent with how we've run the business over the long-term. Tom White - Macquarie Capital (USA), Inc.: Thank you.

Thank you. And our next question comes from the line of Brian Fitzgerald of Jefferies. Your line is open.

Thanks. Jeff, you talked a bit about performance advertising on Facebook and maybe just wondering, are you currently using dynamic product ads for travel there on Facebook and Instagram? Any dynamic to call out with those formats specifically? And then you also mentioned KAYAK's Facebook Messenger service in your prepared remarks. What's been there the traction initially on that product? Thanks. Jeffery H. Boyd - Chairman, President & Chief Executive Officer: So, I'll answer the second one first, which is the KAYAK product on Facebook is fairly new as are most of the technology that's interacting with either with robotic texting or natural language processing with a voice like an Alexa. So that stuff is all in the very early stage and I think it's terrific for our teams to be innovating on those platforms because it puts us in a position to participate and benefit if those platforms ultimately grow to be meaningful sources of demand for e-commerce like ours. With respect to the particular advertising products that are available on Facebook, our teams look at everything. I don't have any particular comment on dynamic product ads or others. Dan, I don't know if you have any comment to make on that. Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: No. No, we're working closely with the Facebook team. Our teams are very innovative and they're looking hard to spend as much in those channels as they can at a reasonable ROI.

Got it. Thanks, guys.

Our next question comes from the line of Ed Sheridan (sic) [Eric Sheridan] (39:37) of UBS. Your line is open.

Thanks for taking the question. Maybe just two. One that we get a lot from investors, Jeff, I'd love to get your take is how the competitive environment might be changing as a result of some of the hotel groups pivoting more towards trying to drive direct booking awareness either through couponing or discounting or loyalty reward programs, how you think that's impacting the competitive environment? And the second one on BookingSuite. Wanted to know if we can get an update there on how the product set continues to evolve, what that might be doing more broadly for the platform, especially with respect to driving loyalty around inventory? Thanks, guys. Jeffery H. Boyd - Chairman, President & Chief Executive Officer: Okay. Thank you, Ed (sic) [Eric] (40:22). So with respect to the competitive environment and the hotel direct book, the hotels have consistently been working hard over the years to maximize the traffic that goes to their own direct websites, and they've done it over the years through driving single image pricing, through a very substantial investment in their own web experience, and we look at the availability of different prices for their members on the website as an evolution of that effort. Our approach is to try to make sure that our customers have the best prices that are published and available, and I think we're doing a pretty good job of accomplishing that. And I think that given the scale of our business, we're in a position where it's a reasonable ask that the largest player in the space be able to show competitive prices to its customers. My belief is that those efforts will continue, and we'll continue to press to make sure that we've got competitive pricing. And I will say that if over the long-term the efforts by the chains or others is essentially starting to drive consumers to expect to book only discounted prices rather than published retail prices that the ultimate impact of that on hotel ADRs is probably not going to be great for the chains. And companies like ours and other large competitors are in the space are very well-positioned to advertise substantial discounts as well. And so my comment there is at some point, it actually might not be a great idea to push the market and push consumers into expecting to book only at discounted prices. On BookingSuite, the product continues to evolve. I think the team is excited about revenue management tools that are now being made available to customers, and I think the customer interest and uptake on that has been good. Ultimately having our engine drive direct bookings for small and medium-sized hotels we still believe is a good thing – a good thing for the hotel because it allows them to participate in a channel that they were not participating in and help build their brand via a direct website that we can build for them and certainly provide the booking engine for. And ultimately, it does help us because it provides us with excellent inventory and builds our relationship with the hotel which is over time very important to us as well.

Thank you. Our next question comes from the line of Perry Gold of MoffettNathanson. Your line is open.

(43:47) question. At what point in the lodging cycle do you believe hotels are generally forced to lean in more aggressively to drive demand through your brands? Is it when RevPAR first goes negative, slightly before or some time afterwards? Thanks so much. Jeffery H. Boyd - Chairman, President & Chief Executive Officer: We actually think it's good for the hotels to lean into our products in any market because ultimately if they use our channel to drive strong demand for their property, it puts them in a position to maintain or increase their ADRs even if the market is relatively strong. So, our look at it would be that hotels should participate aggressively at all times in order to maximize their RevPAR. There's no question that if ADRs start to drop, and in particular occupancy starts to drop, then hotels may have more of an incentive to participate in programs that could enhance the demand that they get from us, but we think it's a good idea regardless of market cycle.

Great. Thanks.

Your next question comes from the line of Kevin Kopelman of Cowen and Company. Your line is open. Kevin Kopelman - Cowen & Co. LLC: Hi. Thanks a lot. So you mentioned hitting about 24 million bookable rooms. Can you give us any color on how you are thinking about runway for properties and rooms and what kind of addressable market you have there? Thanks. Jeffery H. Boyd - Chairman, President & Chief Executive Officer: We still think there is a substantial opportunity to increase the number of properties on our websites, and on the Booking.com platform in particular, and as we mentioned in the prepared remarks, a fairly substantial growth in the size of the platform over the last couple of years, I think, is evidence of that. You can tell from the math, and we've said on prior occasions a number of times that the typical average size of the property that we're bringing on to the platform now is smaller because we're dealing with non-hotel accommodations to a large degree, and those tend to be much smaller than the larger hotels, most of which we've already addressed although there still is opportunity in the hotel space as well. So in some, substantial opportunity to continue to increase the size of the platform, although diminishing return in terms of the number of rooms available per property. Kevin Kopelman - Cowen & Co. LLC: Thanks, Jeff.

Our next question comes from the line of Justin Patterson of Raymond James. Justin T. Patterson - Raymond James & Associates, Inc.: Great. Thank you very much. Going back to vacation rentals, we have seen one of your competitors put up some pretty solid results; you are still having solid results. Can you talk about just the advantage that you have from having the – not charging the consumer a fee here with bookings? How long do you think charging the consumer is actually sustainable in this market? Thanks. Jeffery H. Boyd - Chairman, President & Chief Executive Officer: I think we like our model compared to the other models out there. We have a scale customer base that's used to doing business with us on these terms, and I think we're doing a good job of building the relationships and the business processes and the automation to enable us to deliver the experience to the user when they're booking a non-hotel accommodation or a property that's not being managed by a professional owner. So we like that business model. We like that hand of cards that we've been dealt. I think that HomeAway's customer bases and their owners are chafing a little bit at a substantial increase in fees, and ultimately, in a competitive marketplace for these types of properties, consumers have been shopping around for hotels for 15 years, 17 years now. And it's probably the case that over time, they'll shop around for vacation rentals, and ultimately it'll be about finding the best value. And I'm hopeful that we'll be able to provide the best value. Justin T. Patterson - Raymond James & Associates, Inc.: Thanks.

And our next question comes from the line of Peter Stabler of Wells Fargo. Your line is open.

Thanks. I got a quick follow-up to Eric's question on the hotel and direct initiatives. Is it safe to assume that, to the extent that hotels are offering significantly discounted prices on their direct channels, that they will suffer a negative impact in terms of their ranking position on Booking.com? Thanks very much. Jeffery H. Boyd - Chairman, President & Chief Executive Officer: I'm not going to get into a conversation about, if they do this, will you do that? That's between us and the hotels, and judging by the questions, I just want to underscore that we have great long-term relationships with the hotel chains. We've been in business with them since I started in the business in 2000, and I would expect those relationships to continue to be strong, and we provide a lot of business for the hotel chains, and we provide business in languages and in destinations that it's hard for them to access directly, but we have a unique benefit that we provide, and we absolutely value the inventory that we're getting from our partners here. So I wouldn't express it as if they do this, we'll do that kind of a situation. This is a partnership.

Thanks for the color, Jeff.

Thank you. And our next question comes from Michael Millman of Millman Research. Your line is open.

Thank you. Following up some other questions regarding the effects of the economy and terror, particularly in Europe, would you suggest that you are seeing about the same number of travelers? Are you seeing – and in the U.S. However, particularly in Europe, are you seeing them move more to the south, where there are lower ADRs? And are you seeing an effect from that? And secondly, you talked about the long-term corporate, but is the conditions affecting corporate travelers; in other words, corporations are trying to keep their people – they think keep their people safe? Jeffery H. Boyd - Chairman, President & Chief Executive Officer: On the first question, Michael, we have seen some relative strength in the South Spain and Portugal have been very strong markets. Turkey is not. Turkey has been an impaired market, between terrorist attacks and then the attempted coup. Some of the other markets that have been strong, like Ireland and Germany, so people shying away from some of the markets where terrorist attacks have been taking place in the past, and where maybe they have more of a fear of safety for traveling there at the moment. Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: Yeah. And, Michael, I wouldn't – there's nothing that we can see from our results that indicates a major trend of corporations pulling back travel because of safety concerns. I'm certain there are some business travelers who have canceled trips in the immediate aftermath of some of these events, but broadly speaking, a major pullback is at least not obvious in the numbers we're looking at.

And the Spain and Italy question, is that affecting your ADRs? Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: Well, Spanish ADRs have been very strong. So all of that demand shifting there is actually having a positive impact on the ADRs in those markets. And overall, you can see our ADR trend has been roughly stable, down slightly, less than a percent. So nothing really to call out there.

Great. Thank you. Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: You're welcome.

And our next question comes from the line of Naved Khan of Cantor Fitzgerald. Your line is open.

Hi. Thank you very much. Jeff, I think in your prepared remarks you touched upon KAYAK and its strong performance. Can you give us some more color on what is actually working here and if you've launched in any new markets? And then I have a follow-up. Jeffery H. Boyd - Chairman, President & Chief Executive Officer: So, KAYAK has had a good run of performance here this year. They've done a very nice job of not only building query demand in the United States and elsewhere, but they're doing also a good job of continually innovating with respect to their product and with respect to mobile in particular, which helps with the flow-through of the economics. So they're doing a very nice job and their international expansion continues. I don't have anything to tell you particularly about this market or that market but KAYAK continues to, I would say, in a measured way build its footprint internationally.

Okay, thanks. And then, Dan, can you talk a little bit about, what does your guidance include with respect to any kind of impact on the Olympics positive or negative? Daniel J. Finnegan - Chief Financial Officer & Chief Accounting Officer: We don't see any major impact one way or the other on that, Naved. So we didn't call anything out. We didn't build anything specifically in there.

Okay, thanks. And then one more question, if I may, since nobody asked it. So, any update on the CEO search? Jeffery H. Boyd - Chairman, President & Chief Executive Officer: Naved, the CEO search continues in the normal way with a committee of our board and the recruiting firm and they are right in the middle of it.

Thank you.

We have no further questions in the queue. This does conclude the question-and-answer session. I would now like to turn the call back to The Priceline Group team for closing remarks. Jeffery H. Boyd - Chairman, President & Chief Executive Officer: Thank you all very much for participating in the call.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect.