Good day, and welcome to the Expedia Inc. Q3 2017 Earnings Conference Call. Today's conference is being recorded. At this time I would like to turn the conference over to Kristy Nicholas (0:18), Head of Investor Relations. Please go ahead, ma'am.

Thank you, Cynthia. Good afternoon, and welcome to Expedia Inc.'s financial results conference call for the third quarter ended September 30, 2017. I'm pleased to be joined on the call today by Mark Okerstrom, Expedia's CEO and President, and Alan Pickerill our CFO. The following discussion including responses to your questions reflects management's views as of today, October 26, 2017 only. We do not undertake any obligation to update or revise this information. As always, some of these statements made on today's call are forward-looking. Typically proceeded by words such as we expect, we believe, we anticipate, or similar statements. Please refer to today's earnings release and the company's filings with the SEC for information about factors which could cause our actual results to differ materially from these forward-looking statements. You will find reconciliations of non-GAAP measures to the most comparable GAAP measures discussed today in our earnings release which is posted on the company's investor relations website at ir.expediainc.com and I encourage you to periodically visit our IR website for other important content including today's earnings release. I would like to remind you that beginning in Q1 2017, we include HomeAway on platform gross bookings and property nights in our operation metrics. And such balances have been added to prior year's gross bookings and lodging room nights for clean comparison. Finally, unless otherwise stated, all references to cost of revenues, selling and marketing expense, general and administrative expense, and technology and content expense, exclude stock-based compensation and depreciation expense. And all comparisons on this call will be against our results for the comparable period of 2016. With that, let me turn the call over to Mark.

Thanks, Kristy. Firstly, thanks to everyone for joining our call today. I'm thrilled to be at the helm of Expedia Inc. and I'm incredibly optimistic about the opportunity ahead. Before launching into a more detailed discussion of our Q3 results, I did want to take a few minutes to share some preliminary thoughts about where we are as a company today and how we plan to evolve to better position ourselves to seize the enormous potential ahead of us. As anyone following the industry knows, the size of our opportunity is huge, with the total travel market representing annual spend of around $1.3 trillion globally. We built this company into one of the largest players, yet we only have mid single digit percentage market share, making our potential runway for growth long and wide. Over the last six years we created exceptional returns for our shareholders while at the same time designing, investing in, and building truly global platforms with the potential to deliver growth and shareholder returns for a long time to come. We built, bought, invested in and integrated some of the best travel brands in the world. We modernized our technology stack giving us the capability to learn fast and improve customer and partner experiences across desktop and mobile at scale. While at the same time delivering significant operational efficiency gains in areas like payments and customer operations. We restructured our hotel margins globally and rolled out an agency hotel product to ensure that neither margin nor model were barriers to any lodging partner joining our platform and giving us great inventory. We retooled our hotel acquisition machine and developed solid scaling ability. And though we still have much to do, we dramatically improved our global performance marketing capabilities. It's been an incredible journey, but we believe…

Thanks, Mark. Briefly I'd like to say how honored I am to be in this seat today to have the chance to partner with you, the rest of the leadership team, and Expedia employees globally to continue to build and grow the best and largest travel company in the world. In spite of the headwinds created by the recent natural disasters, lodging revenue including both hotel and total HomeAway revenue increased 15% for the third quarter, driven by stayed room night growth of 16%. In the hotel business, revenue per room night declined 3% while average daily rates grew approximately 2% leading to a gap between these two metrics of approximately 450 basis points. Essentially consistent with last quarter and right in the range of our expectations. HomeAway gross bookings grew 44% while revenue grew 45% to $305 million. Stayed property night growth came in at 36% and would have been higher absent the hurricanes. Third quarter transactional revenue grew by 116% and peaked for the year at $236 million. Subscription revenue declined, decreasing by 37% year-over-year, as HomeAway continued to gain momentum in their eCommerce transition. HomeAway reported the highest quarterly adjusted EBITDA in the company's history of $126 million representing 63% growth year-over-year. Advertising and media revenue of $299 million was up 24% year-over-year due to continued growth at trivago and Media Solutions. Performance for trivago came in substantially below our expectations as compared to the second quarter call with adjusted EBITDA for trivago falling to an $8 million loss on 22% revenue growth. As discussed, on trivago's earnings call yesterday, they continue to see negative trends as advertisers adjust to the new normal and test new bidding strategies. In terms of expenses, cost of revenue grew 8% year-over-year, 4% ex-cloud, leveraging quite nicely. Cloud expense in cost…

. We will take our first question from Lloyd Walmsley with Deutsche Bank. Please go ahead.

Thanks for taking the question. A couple if I can. I guess just first on HomeAway, can you kind of give us a sense for whether the fees that we've been seeing on the customer side of late are going to continue at these elevated levels into 2018, or if these are perhaps just tests? And how should we think about, I guess, the mix of subscription, bookings on subscription listings versus paper booking listings that carry a host fee? Is that something you can give us a little bit of color on in terms of the mix and the trends? And then shifting to the core, can you just talk a little bit more about the investment that you're going to make next year aside from obviously the cloud expense and perhaps a little bit slower growth that's leading to that EBITDA in the towards the low end of that 10 to 20% range?

Sure, Lloyd. Happy to do it. So firstly, on HomeAway, you know, it's hard to say with any precision whether looking forward fees are going to be at the level that they're at right now. The team is really doing a ton of testing. So, you know, you may see something that other consumers don't see. I mean, we will do things where we test things sequentially. So it's hard to get a gauge or give you more guidance than sort of keep your eye on things. In terms of mix between subscription and PPB on the host side of things, you know, I'd say generally the trend has been to shift to more PPB. It's hard to say exactly where it will go. I mean, I think that all of the hosts are trying to figure out what's the optimal break-even point for them. But I think increasingly as HomeAway transitions to, you know, a real marketplace model and starts introducing things like the Accelerator program which like we've got on the hotel side, I think it may be the case that PPB hosts just have a better ability to compete in that marketplace. But time will tell. But the trend is definitely towards more PPB. In terms of the investments in the core besides cloud, you know, really this is all about us be in a position now where we basically stamped out a point of sale presence around the world. Hotels.com I think is now in 75 different countries around the world. You know, brand Expedia has a few to add certainly. But they've got a decent presence. So we sort of planted our flags, if you will, for the most part. And now it's about looking at all of those markets which are large attractive opportunities…

All right. Thanks, guys.

You're welcome. Next question, please.

We will go next to Peter Stabler with Wells Fargo Securities. Please go ahead.

Thanks very much for the question. Mark, could you give us a little bit more color around the decision to lean more aggressively into the marketing for both HomeAway and the core OTA products? Is this reacting to the competitive landscape in the performance marketing channels across different regions, or is this more kind of a philosophical shift now that you're in the seat on seizing this opportunity? Thanks. Any color would be appreciated.

Sure. It's not really or in actuality a result of me changing focus or changing the focus of our various businesses. It's a by-product of a lot of the thinking and execution that the teams have been working on. So for HomeAway, for example, they by the end of this year, we'll be in a position where they have a true technology-driven performance, marketing platform in place. And with the increase in online bookable properties, they've got now up to 1.5 million, with 1/3 of those now being instantly bookable with the platform in place. They're just going to be in a better position to actually execute on performance marketing, make sure they've got coverage and actually track the results than they've ever been, and so that will enable them to step it up. I think as it relates to the core OTA business, again, as we ramp up hotel properties, this creates essentially new opportunities for marketing for us. So we'll see associated marketing spend that go along with our ramp-up in property acquisition. And then, I would just say that the team is just continuing to get better and better and better in terms of just approaching performance marketing, really across all of the capabilities, and that gives us confidence to spend more, and hopefully will allow us to spend more ultimately and deliver better returns over the long-term. So it's really execution. It's not a strategic shift, and I'm not changing the way that we'll be doing things on performance marketing.

Thank you.

You're welcome. Next question.

We will go next too Paul Bieber with Credit Suisse. Please go ahead Paul Bieber - Credit Suisse Securities (USA) LLC: Great. Thank you for taking my questions. I have two of them. What was the bookings impact of the natural disasters? I think I saw an EBITDA impact. I wasn't sure if you had highlighted a bookings impact. And then, also, on the increased cloud spend, what does ramping significantly mean? Can you just provide some context around that?

Yes. Thanks, Paul. This is Alan. Listen, on the bookings side, we didn't quantify it in the prepared remarks. We obviously have looked at it across the entire P&L. I would say the primary factor there on bookings has been a slowdown in domestic room nights booked in the period from about mid-August into a good part of September, and you can see that in our domestic bookings growth in Q3 compared to Q2. So that's the primary impact on gross bookings. On revenue, it's a combination of canceled room nights and then also refunds, where we're refunding more than we normally would in order to accommodate customers, but we haven't quantified the specific amounts. As far as the cloud spend is concerned, I'm not prepared to give you a number today. We are certainly in the process, but I guess what I'd like to do is just kind of be sure that everybody understands how this works. The spend that we're talking about is basically the spend that we pay to a cloud provider for compute power. And so as we move more and more of the products, the technology, the functionality into the cloud computing environment, then the spend ramps up. As we move through 2017, we are putting a fair bit of the compute into the cloud. The biggest component of which happens to be our components of our lodging stack, but by the end of this year, we will still have significant compute to move into the cloud. And so that will happen into 2018, and all of that results in an increase. So we'll have more details on that when we give the guidance, but it is a meaningful increase. I mean, I would say it's – think of it as being more than 50% increase year-over-year.

Yes. And I would just remind you too in addition to moving more compute into the cloud, there is the annualization of the exit rate of compute that's in the cloud as at December. So you're already on a growing base, and then our ambition is to move as much as we can essentially into the cloud. But as a reminder, the real benefit here comes in, yes, there will be some operating savings in terms of decreased power costs that show up in our cost of sale, largely from running our own data centers, but also a significant reduction in CapEx, and you've already seen that. You saw it last quarter. You're seeing it again this quarter. That will be a trend going forward. And, importantly, it's not only just a year-on-year decrease in capital expenditures from what we have had in the past, but remember just given the amount of growth that we've been driving, this is also about, you know, avoiding the future CapEx to just fund that growth that we'd have to spend and then throwing maintenance CapEx on top of that. So we're more convinced than ever that this is an excellent decision from a free cash flow perspective. We're more convinced than ever that this is an excellent decision from a performance standpoint, and we are more convinced than ever that from a velocity of innovation standpoint that this is the right move. Paul Bieber - Credit Suisse Securities (USA) LLC: Okay. Thank you.

You're welcome.

We will take our next question from Deepak Mathivanan with Barclays. Please go ahead.

Thanks, guys. Two questions for me. So first, direct marketing spend de-levered by about 200 basis points, but growth rates also decelerated to 21% this quarter. I know trivago is going through pricing changes, but could you discuss whether you saw changes in efficiencies across any of the marketing channels that might have kind of caused a deceleration in room-nights stayed? And do you think trivago is now at a point where it kind of makes sense from an ROI standpoint to grow spend again? Or do you think there is still adjustments needed? Thanks.

So, yes. So let me start on that, and then Mark can jump in. I think as far as the overall deleverage on selling and marketing, I think more than anything else, the two primary impacts are the impact of the storms. You have a situation where your revenue is hit both, as I said earlier, from cancellations as well as from refunds, but the marketing spend carries on pretty much. So the marketing spend for the stays during the quarter has been spent prior to and into the quarter, and then there's marketing spend that carries on to try to drive gross bookings going forward. So I think that's an element. I think the second element we talked about is just the fact that we're seeing a disproportionate mix of our volume coming from the higher-cost channels. And so just mathematically in a given quarter, that's going to result in lower net efficiencies. And then the trivago component, I think you're right to point out, and I guess the main factor there is that, as trivago saw changes in their marketplace and a slowdown in their revenue growth, they didn't necessarily pull back their marketing immediately. And so they are also going through the process of determining what their appropriate marketing spend ought to be given kind of, you know, what will become a new normal for them on their growth rates. Mark, do you want to add to that one?

Yes. Just a few things on trivago because I know that is a story. So I'll just sort of broaden the conversation a little bit. I think first of all, just from the impact on our results from trivago, in addition to the bottom line result, obviously as that channel has slowed down a little bit, it can have a negative impact on the room-night growth of our business. But elevating back up to trivago just generally, I would just say that we continue to believe that this is just an excellent business. trivago has an incredible consumer following, because it's an incredible consumer product. The management team is excellent. They are terrific operators. They're getting used to being a public company, obviously. But they are just excellent, excellent operators. And the third thing I'd say is that it is a very attractive marketing channel for OTAs and hoteliers, and that has not changed. What has changed is that trivago has made a number of modifications to their marketplace, and including the introduction of the landing-page score and then the normalization of that landing-page score. And advertisers are basically testing into that channel to figure out what the best way to get the best volume at the right efficiencies are from that channel. And I think that's going to take a little bit of time, but as that volatility settles out, and we do believe it's going to settle out, we're not at all questioning whether it's going to be an important channel for our OTA brands. We know it is and will always be, and we're not questioning the importance of trivago in this ecosystem at all.

That's helpful. Mark, just quick follow-up on that. Was there any other channel during the quarter that might have been disproportionately inefficient with respect to marketing efficiencies?

No, nothing I'd call out. Again, the big movers here are, and there's probably three of them. There is trivago itself not being able to pull back fast enough and deleveraging more than they would like; there is essentially the impact of the storms taking revenue away without taking sales and marketing away; and then there is our core OTA business and HomeAway starting to ramp up in performance marketing channels with some associated revenue hitting in the quarter and some coming in future quarters

Great. That's helpful. Thanks, Mark.

You're welcome. Next question.

We will go next to Jed Kelly with Oppenheimer. Please go ahead. Jed Kelly - Oppenheimer & Co., Inc.: Great. Thanks for taking my question. As you talk about more aggressive advertising for HomeAway in 2018, should we expect next year's online bookings to actually accelerate past this year's seasonal trends than we've seen in bookings over the past two years? And then can you speak to some of the qualitative drivers around HomeAway's room nights growth lagging online bookings? I guess some has to do with the hurricane. And should we expect this gap to close or even reverse as you start to drive more shoulder season and overnight travel?

I'll take the first one and then I'll turn it over to Alan for the second one. Listen, I think certainly HomeAway's aspiration would be to accelerate online bookings. But remember that the historic portion of HomeAway's bookings that came from performance marketing channels was pretty darn small and actually a lot of it comes direct. You know, a lot of it comes through other branded sources, you know, SEO is a source, and that's been challenged, you know, across the whole industry. So the question is does the performance marketing, does that become big enough to move the overall number up or not. And we don't really know the answer to that. I mean, what we do believe obviously is that the performance marketing based bookings are going to grow very quickly and will probably accelerate. But whether or not that can move the whole number, it's hard to say at this point.

And, Jed, I would say on your second question, just looking at the room night growth relative to the gross bookings growth, you know, obviously over a period of time, they're going to be the same. And the primary factor in the quarter actually probably has less to do than a significant difference in the rate of room nights booked versus room nights stayed and a bit more to do with their ADRs. Their ADRs are up kind of mid- to high single digits year-over-year as they have been for a while. And that's a combination of mix, it's also impacted by the mix of larger, bigger homes being booked. So I don't think there's a huge story this quarter in terms of their booked volumes versus their stayed volumes.

Next question, please.

We'll go next to Mike Olson with Piper Jaffray. Please go ahead. Mike J. Olson - Piper Jaffray & Co.: Hi. Good afternoon. Couple questions. Other than the hurricanes and the increased investment in various areas that you've outlined, would you say there is any weakness in just fundamentals of the travel environment or any market share issues that you're bumping up against?

Well, I'll take that one. You know, I think that certainly the overall macro climate, it's hard to ignore some of this terrorist activity that we've seen in Barcelona, obviously the horrible events we saw in Las Vegas. I mean, there are things going on that are starting to be sort of the new normal. Aside from that, when we look at the macro environment, it still looks reasonably solid, and a lot of the trends that we have seen for some time now look to be continuing. You know, air ticket pricing is down, which is generally good for us. The lodging industry continues to be relatively strong. Haven't seen a big change there. Car rental companies kind of up and down. But, you know, no significant change their aside from the overall macro shift that seems to be hurting their on-airport locations towards, you know, things like Uber, which is obviously a great company. But, you know, aside from that, no major change. I think in terms of share and us specifically, we don't see a big change in what's happening with our overall our global growth brands. They continue to do very well. The things that end up hitting us from quarter to quarter are some of the smaller brands. I think the regional brands we mentioned got disproportionately hit by the hurricanes and other storms. Hotwire has not yet completely found its new footing, so that can be a drag on results. We still have not completely lapped over the shedding of some of the Orbitz Partner Network business that continues to be a drag on the business. So there's little kind of nicks and cuts that hit our results, but no change for the global growth brands. They are collectively doing well and on solid footing. Mike J. Olson - Piper Jaffray & Co.: All right. And there's lot of interest in the alternative accommodation space from a lot of people. HomeAway appears to be continuing to do pretty well. Do you think that's a function of HomeAway winning the market? Or is it rising-tide-lifts-multiple-ship scenario, or is it some combination of the two?

Well, I think it's a combination of the two. I would disproportionately put attribute winning market to them. If they were sitting still and doing nothing, I could say that they're just getting lifted by the rising tide, but they are just pushing a ton of change. It's remarkable how much change that that team has accomplished in such a short period of time, and they're not even nearly done. So I think that they're winning in the market. Now, whether or not they're winning from a like-for-like competitor, whether they are encouraging more people to travel than would otherwise travel, whether or not they're taking from the traditional lodging market. It's hard to say, but we do believe that they are growing significantly faster than the overall alternative accommodations market. Mike J. Olson - Piper Jaffray & Co.: Thank you.

You're welcome. Next question.

And we will go next to Akshay Bhatia with Bank of America. Please go ahead.

Hi. Thank you. Could you characterize the CapEx savings you expect from cloud migration over time? And can you remind us what sort of the status is of your new headquarters in Seattle and some of the expenses around that?

Yes. So on the CapEx savings, there's a couple ways to think about that. I mean, we're already seeing it. You can kind of see it – you can start to see it in our CapEx numbers. If you take a look at what we've spent so far this year that this year includes our spending on new headquarters. So we are in the data center down already, and the year-over-year comparison isn't even entirely fair to us, because the savings is actually kind of what you would have spent relative to what you are spending. So we are already seeing some benefit there. The real benefit, though, is going to come when we get far enough along in the process that we can actually start to shut down parts of our data centers. We're a little ways away from that. We've not made any final decisions there. We need to learn more in terms of how everything is going and how things are working. But at some point, we will be able to reduce the actual data center size, and that will be more meaningful. It will cut CapEx. And also, by the way, eventually we'll cut some OpEx in cost of sales, too. On the new headquarters, things are progressing just from a timing perspective, the vast majority of the work is going to be done in 2018 and 2019. There has been a fair amount of prep work done so far, but there's a lot of additional fitting out of existing buildings and some new structures going up in the next couple of years. We think the whole project, excluding purchase of the land, will be between (42:02) million. By the end of this year we will probably have spent around, call it, $130 million, $140 million. And so the rest of it will be split, call it, roughly evenly between 2018 and 2019. And we expect to be able to move into the building at the end of 2019.

Great. Thank you.

We'll take our next question from Ron Josey with JMP Securities. Please go ahead.

Great. Thanks for taking the question. I want to ask about hotel acquisitions. I think that's a key strategy for you all. And specifically, Mark, is the team in place and are the processes in place to call it double your hotel count if that's the goal of what the 500,000 as of this quarter? I think earlier you said hotels create more marketing opportunities and therefore growth, and we've talked a lot about the cost side. I want to understand the benefit side and where we are in that process. And then when you think about the step-up in investments going forward between locally relevant, customer care, et cetera, how would you characterize this step-up in investment relative to those in the past? Thank you.

Sure. Well, the team that is required to deliver on the ultimate acceleration in hotel acquisition in 2018 is not yet completely in place. We are in the process of starting to ramp that up. We have not given a number in terms of where we want to get to. I would just say that if you look at our overall property count now at 500,000 available on the OTA side, we've said 95,000 of those are HomeAway. So call it 400,000 less are actually hotel properties and compare that to the overall number of hotel properties that exists in the world. I mean, our ambitions are ultimately to connect everyone in the world to every place in the world and give them the full selection of places to stay. So over the course of the next five years, that's the direction that we're going to go. We do have, obviously, the processes in place now that we can scale things up. If you look at how many properties we added three years ago, it would have been 25,000 to 30,000. This year we'll add 80,000 or so, or a little bit north. So we just about tripled our capacity over the course of the last three years, and we're expecting to do a step change going forward as well. Yes, there's a cost side of this, but we do this to ultimately to generate revenue, and that comes from two sources. One is we have demand on our websites right now looking for properties that we don't currently have signed up. And so signing up those properties allows us to satisfy that demand. But two, if you take the simplest example of trivago that runs hotel-specific meta-search auctions, we are simply not in the auction for any hotel that…

Thank you.

You're welcome. Next question, please?

We'll go next to Mark May with Citi. Please go ahead.

Thanks. I think given that you're deciding to lean in on investing in HomeAway, you've been getting this question a lot, but maybe I'll ask it again. Can you try to give us a sense of what the organic online-plus-offline bookings growth looks like at HomeAway now that you're getting close to over half or the majority of it happening online? I think people are obviously wanting to get a better sense of what the organic bookings growth looks like there. So anything you can add to that would be helpful. Thanks.

Sure. Well, I think, again, we stopped estimating what the total platform bookings were the day that we closed the deal. So we're not – it's very difficult for us to get a sense of the booking volume that's happening offline. What we can tell you is that traffic on the platform is growing, that the total listing count is growing. So we believe that the overall booking volume, including online and offline, is growing as well. At what rate, it's hard for us to tell. But we're very focused on, obviously, the online piece. So I think it's that the total bookings growth rate that we've seen online for HomeAway has been pretty consistently in sort of the 35%, 45% year-on-year range. I suspect obviously that that is penetrating into the larger opportunity and the offline piece is growing slower. But I think the whole 14 billion to 16 billion in total platform bookings, which is the number we gave at the time of the deal, is significantly larger now. Next question, please.

We'll go next to Justin Patterson with Raymond James. Please go ahead. Justin T. Patterson - Raymond James & Associates, Inc.: Great. Thanks. Mark, I want to unpack your first priority around local relevance on a global basis, primarily in the context of Asia and China. You made the investment in Traveloka last quarter. Your competitor just made one (49:06). How should we think about your approach in that region? And then secondly with HomeAway, it looks like you're taking a gradual approach to integrating inventory on Expedia sites. Could you talk about the time line to just integrate all of the inventory and how we should think about factors like non-instant booking inventory listing optimization? Thanks.

Sure. So in Asia Pacific, we've got a multi-pronged strategy there. I think when you think about Expedia, Inc., we are really part portfolio company, part operating company. And the first part of the multi-pronged strategy is about making sure that ultimately if there are attractive assets out there like Traveloka, which has really latched onto something special with what they're building there, that ultimately we can be a part of that. Not only in terms of investing capital, but also partnering with them to provide their non-direct hotel inventory. So that's a piece of it. I think, secondly, is we have a great business with our Expedia affiliate network which is not only powering the likes of Traveloka where we make minority investments but is also out there powering every other online travel agency that exists in China to the extent possible. Corporate travel players, offline travel agencies, all of which are pretty significant in Asia; airlines, for example. So even where we don't have necessarily a consumer-facing presence, making sure that we tap into demand from all of those regions, including China, which you mentioned, and driving that demand into our inventory base both in Asia Pacific but then also outside of Asia Pacific. And then separately, brand Expedia and Hotels.com are building real meaningful presences in Asia. Brand Expedia, for example, very strong in places like Hong Kong, building strong presence in Taiwan, starting to grow significantly in South Korea. Hotels.com very strong in South Korea. Brand Expedia very strong in Japan. So we should have got this combination of investing combined with our affiliate business combined with our global brands, and that's not even to talk about Egencia which is building up a big presence there to serve their corporate clients. So it is really multifaceted.…

You're welcome. Next question.

We'll go next to Perry Gold with MoffettNathanson. Please go ahead.

Hey. Thanks for taking the question. Firstly, Mark and Alan, congratulations on the new roles. Apologies if this question was...

Thank you.

Thank you, Perry.

Yes. Absolutely. Absolutely. Apologies if this question was asked already. Mark, at the Skift Forum in September, you said that HomeAway's next priority will be to push into international markets and major metros. Can you comment on the timing and likely level of investment required to go after these markets? And is there a chance this keeps HomeAway's marketing at elevated levels and possibly restricts margin expansion for several years?

Sure. Well, I think the broader point there is that it is really something that we highlighted at the time of the acquisition, which is Phase 1 of this is just taking the volume of activity that they've got right now and they had at the end of 2015 when we closed the deal that was predominantly U.S. and Western European and predominantly in secondary and tertiary resort and ski destinations and moving that stuff online, and they are still in the process of doing exactly that. Phase 2/2a is then expanding their international presence, and Europe is an area where they are setting themselves up for success. It's part organizational, getting themselves into a real pan-European global organization, part of it is platform consolidation and getting everything on the same global platform, and they're making good progress there. It's hard for me to give you a timing on whether or not that is going to be a meaningful – when that will be a meaningful push for them. I think it'll be a little bit more gradual here through 2018, at least from what we see now. And then, the urban opportunity is something that is – which we called out as kind of the Phase 2, and maybe now I'll call it the Phase 2b. One of the big catalysts there is getting the HomeAway instantly-bookable inventory onto our core OTA sites. Those core OTA sites, brand Expedia, Orbitz, Travelocity, ebookers, Hotels.com, just to name a few, have real meaningful volume into major metropolitan centers, where there is a significant amount of urban inventory. So step one is to get what they've got in the resort and ski destinations, predominantly onto those sites, start actually getting things optimized and working, and then of course once we get those muscles working, moving that more into some urban accommodations. But it's not priority number one right now. It is something that maybe we'll get to towards the end of 2018, but it's not priority number one. Priority number one is get what you got online and monetize it better, and we think they're making great traction on that front.

Okay. Thanks, Mark.

You're welcome.

We'll go next to Kevin Kopelman with Cowen & Company. Kevin Kopelman - Cowen & Co. LLC: Hi. Thanks. So I wanted to ask a follow-up on core OTA marketing. Can you talk about how you're approaching return on ad spend, including what you see as acceptable returns? And also how do you attribute revenue to your ad channels given the complexity of multi-session and multi-device shopping and repeat customer behavior? Thanks.

Sure. So return on ad spend, I'd say no major change to how we've been looking at it. Factor number one is how much money am I going to make on this first transaction from this traffic that I'm buying. And consideration number two is how likely is it that this customer that I am introducing to my product is going to repeat with me. And as a general rule, the traffic that you would get in traditional paid search, think about it as the New York hotels' Blue Link that generally has a higher repeat propensity for our brand than something like a TripAdvisor meta search link, for example. So because of that, the return factor for meta search would be a little bit smaller than it would be for the traditional SEM. So that's essentially how we approach it. Again, I'd say no major change to our overall approach. In terms of how we attribute revenue to the ad channels and how do we attribute to the specific keywords, how do we attribute to all of the keywords they touch, I mean, this is a data science gold mine which we have a ton of people constantly working on answering this exact question. And I'm just not going to get into the details of that right now. It's something that's, I'd say, proprietary, but it is something we spend a lot of time on, and of course the most important thing is trying to get as close as you can to spending as much as you can or allocating as much as you can to the channel and to the keyword or whatever it is that actually drove the booking. And that's the goal of those teams. Kevin Kopelman - Cowen & Co. LLC: Thanks, Mark.

You're welcome. Next question.

We'll go next to Heath Terry with Goldman Sachs. Please go ahead. Heath Terry - Goldman Sachs & Co. LLC: Great. Thanks. Just wanted to get a sense of what you're seeing on the hotel direct side of things. Obviously, Hilton on their earnings call earlier today had very positive things to say about their efforts in these areas. And to the extent that you are seeing a higher cost of customer acquisition or higher marketing costs or, put another way, sort of conversion headwinds on the marketing dollars that are being spent, is there any sense that the success that some of these hotels seem to be having with these direct programs is contributing to that?

Well, I think the short answer is no. We don't think it's impacting our business at all. We have seen no direct impact on our marketing efficiencies from anything they've been doing. We've seen no real impact on our conversion rates, our marketplace from the discounting they've been doing. So we're just not seeing it. I think as it relates to their overall push direct, listen, it makes a ton of sense to me. We do the exact same thing, which is bring customers onto our platforms, try to give them amazing experiences, and try to have them come back to us directly. So we think it makes strategic sense. Now what I would say is that the real way that, at least we think from our humble perspective, that hotels should be thinking about this is that the best way to get customers that are on our channel that are, by the way, brand agnostic. Less than half a percent of Hotels.com shoppers are looking for the largest hotel chain out there. They really are brand agnostic. And in the last 18 months with the all of the discounting activity that's been going on and seeing what that's done to the search results of these hotels, that's only been proven out even more that this is a competitive marketplace amongst hotels on our channel and that ultimately this is the basis of competition. So the question is well, how do they compete in that world. Well, the best way to compete in that world is the way that we compete, again, for our repeat customers is give them an amazing experience. And it's not through a television advertisement. It's not through rewards points. It's not through a discount. It's actually through giving them an amazing experience on property. And if they do that, they're going to build great loyal customers, customers that hopefully will come back to them again and again. But even if they don't come back to them again and again, customers that ultimately choose that hotel the next time they're shopping on Expedia or Hotels.com, and that's where I hope we can shift the dialogue. But I think they're booked direct. Overall, that intent, I think it makes a lot of sense. Heath Terry - Goldman Sachs & Co. LLC: Great. Thank you, Mark.

You're welcome.

We'll go next to Brent Thill with Jefferies. Please go ahead.

Thanks. Just a clarification on the shift to cloud away from your own proprietary infrastructure. What's the duration that you're putting behind this? I know there's associated costs that are ramping, but when you look at the completion, is this two to three years out? How do you think about the end goal of when you'll be pure cloud?

Yes. Well, so it remains to be seen if we'll be pure cloud. I think there's a chance that we may require some of our own data center capacity indefinitely. But in the spirit of your question, at the point at which we think we'll be vast majority cloud, I would say it's a two to three-year effort.

Great. Thanks.

You're welcome. Next question.

We'll go next to Dan Wasiolek with Morningstar. Please go ahead.

Hi, guys. As you look to expand and accelerate your international offering, just wondering if maybe you can give any commentary on how that would potentially impact the international take rate if at all? Just any kind of view on that as we look out into 2018? Thanks.

Sure. I mean, it obviously depends on how you're looking at take rate. We don't anticipate a significant change to our overall hotel margin mix as a result of this. There could be slight as we go into some markets with that lower structural margins, but there's nothing right now that says that's going to be a dramatic impact on our business. I think that if you look at take rate from the purely financial standpoint and look at international gross bookings versus international revenue, I think as we go more international, I think the first step is to actually ramp up our hotel acquisition efforts and get more hotel inventory. And that could drive more mix into hotel, which could be a positive for overall take rate defined by that sense.

Okay. That's helpful. Thank you.

You're welcome. Next question.

We'll go next to Michael Millman with Millman Research Associates. Please go ahead.

Thank you. Could you talk about Egencia? Particularly I'm interested in how much of the growth is market share and how much, if any, of the growth is improved corporate travel and maybe could also break that out geographically, U.S. and international? Thank you.

Glad you asked about Egencia because we're pretty excited about it. I'd say that it is all growth in market share. Egencia has been consistently growing at two to three times faster than the overall market. The overall corporate travel spend environment has been actually pretty consistent over time. You're talking about flat to up slightly, low single digits (01:05:48). Not a significant change in the overall dynamic by region obviously in the emerging markets where overall business activity is growing quicker. You see quicker growth in corporate travel spend. But not a significant driver. So it is really all about growth in market share, and of course Egencia is taking essentially consumer experiences built by the best in class in consumer-facing online travel agencies and putting them in the hands of corporate travelers. And that just resonates with people. So their offering is resonating really well with the corporate travel market, and we are investing aggressively behind that. We mentioned we ramped up their sales force. That continues to go well. They had a record new client signing in Q3, which we're really excited about. And I think that we are I think very early in the stages of what Egencia can become. I think it's going to be a big part of this business, and I think five years from now, that will be all too clear.

So is it picking up share from OTA or creating OTA customers?

Well, I think it's more likely taking it from traditional travel management companies or taking companies that used to work with traditional offline travel agents, some of the smaller ones, and moving them online. I don't think there's a lot of share coming from OTAs at all. In fact, I think there are some OTAs including Hotels.com and some of their other competitors that have a pretty significant part of their business that actually comes from business travelers. They're just not in a managed sense.

Thank you.

You're welcome. Next question.

We'll go next to Naved Khan with SunTrust. Please go ahead.

Yes. Hi. Thank you. I just had a question on the international room night growth, 22% this quarter versus 26% in the prior quarter. Was most of the slowdown because of the change at trivago, or was there anything else driving it?

Yes, I think the majority of it is Easter. I do think there's a possible element that's associated with trivago's changes. But those would be the two primary factors.

Okay. And then just quickly, following up on this trivago change, are you able to redeploy those dollars into the channels or how does it work when you look at the spending?

Well, essentially we're always optimizing our marketing spend within channels and across channels. I'd say that within each channel, we've essentially got efficiency and growth targets, and so whether or not actually a change in trivago results in a change in another channel, I couldn't be too specific with you on that.

Thank you.

You're welcome.

And at this time, there are no further questions. I will turn the conference back over to management for any closing remarks.

Great. Well, I'd just like to reiterate I'm thrilled to be at the helm of this great company. I want to thank all of our amazing Expedians for yet another quarter of great work. And boy, we're really excited about the next chapter and we look forward to delivering it with all of you. Thanks to all of our investors, and we look forward to talking to you at conferences across the quarter and of course on our next Q4 call.

Ladies and gentlemen, this will conclude today's conference call. We thank you for your participation, and you may disconnect at this time.