Good day, everyone, and welcome to the Expedia Group Q3 2024 Financial Results Teleconference. My name is Alex and I will be the operator for today's call. [Operator Instructions]. For opening remarks, I will turn the call over to SVP, Corporate Development and Strategy and Investor Relations, Harshit Vaish. Please go ahead.

Good afternoon, and welcome to Expedia Group's third quarter 2024 earnings call. I am pleased to be joined on today's call by our CEO, Ariane Gorin; and our CFO, Julie Whalen. As a reminder, our commentary today will include references to certain non-GAAP measures. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in our earnings release. And unless otherwise stated, any reference to expenses exclude stock-based compensation. We will also be making forward-looking statements during the call, which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions, which are subject to risks and uncertainties that are difficult to predict. Actual results could materially differ due to factors discussed during this call and in our most recent Forms 10-K, 10-Q and other filings with the SEC. Except as required by law, we do not undertake any responsibility to update these forward-looking statements. Our earnings release, SEC filings and a replay of today's call can be found on our Investor Relations website at ir.expediagroup.com. And with that, let me turn the call over to Ariane.

Thanks, Harshit, and thank you all for joining us today. Our third quarter results reflect strong execution across our company. We exceeded our expectations on gross bookings and earnings with revenue landing in line despite weather and currency headwinds. We accelerated gross bookings in our consumer business for the second straight quarter, driven by continued strength in Brand Expedia, Vrbo returning to growth, and good results in our international points of sale. Our advertising and B2B businesses continue to outpace the industry, both delivering strong double-digit growth. We remain disciplined on costs with cost of sales and overheads, both declining year-over-year. Overall, we're pleased with the results of our work. We're executing and what's in our control and capitalizing on growth opportunities to rebuild momentum after our tech replatforming. The travel environment in the third quarter was healthy, but mixed with demand softer in July and then improving into August and September. International demand was stronger than the U.S. And compared to last year, booked room nights grew in the low single digits in the U.S., low double digits in Europe and high teens in the rest of the world. Like last quarter, prices held up for both hotel and vacation rentals. For air and car, we saw continued pricing pressure, though air ticket prices grew in September for the first time this year. Turning to our consumer business. We remain focused on the fundamentals, driving more direct traffic, improving product performance, enhancing our supply and expanding internationally. Gross bookings were up 3% year-on-year, which was a 2-point acceleration compared to the second quarter. Global app downloads for our core brands was up nearly 10% year-on-year led by EMEA at 20% growth. And the percent of bookings coming from our apps improved by 3 points. Brand Expedia continued to be…

Thank you, Ariane, and good afternoon, everyone. We are pleased with our third quarter results. Despite some headwinds during the quarter, including unfavorable macro trends, weather events and FX, we were able to deliver year-over-year room night growth of 9%, gross bookings growth of 7%, and acceleration of over 150 basis points versus the second quarter, revenue growth of 3% and EBITDA growth of 3% with only slight margin deleverage of approximately 16 basis points. But before I jump into more of the financial details for the third quarter, I just wanted to say thank you to Ariane, the Board and the Management team here at Expedia. I'm proud to have been associated with Expedia Group as a Board member since 2019 and more recently as CFO. I am committed to supporting the company until and after my successor is in place to ensure a smooth transition. I am confident in this management team and our strategy, and I remain excited about the opportunities ahead for Expedia Group. Now back to the financial details for the third quarter. Total gross bookings of $27.5 billion grew 7% versus last year, driven by lodging gross bookings, which grew 8% and includes our hotel business growing 10%. We were happy to see that we have once again held or grown hotel gross bookings share in virtually all of our key markets. Booking windows for hotels expanded in August and September when compared to last year, which provided a tailwind to our third quarter gross bookings. Outside of our hotel business, we also saw a strong recovery in our air business, driven by growth in multi-item packages and improvement in air prices. And we also saw a continued acceleration at Vrbo, which returned to modest growth on the quarter. Revenue of $4.1 billion grew…

[Operator Instructions] Our first question for today comes from Lee Horowitz of Deutsche Bank.

Julie, pleasure working with you. Maybe on marketing investments at Vrbo -- Vrbo ex common international markets. I guess how should we think about your ability to be able to deliver aggregate marketing leverage on a go forward? I know this year is a big investment year for those brands. But presumably, they're not back to the levels that you'd expect and you'll remain invested. Do you need these bids to get back to market level rates before you can perhaps deliver marketing leverage for the whole business?

Yes. From a marketing leverage perspective, I mean, obviously, as we said, B2B sales and commissions are in that line. So that does put pressure given their level of growth on that line. But if you speak just a B2C business, ex those investments in Vrbo and international markets, we have seen leverage. So essentially, as we get those businesses back to where we need to get them, we expect to see that we'll be able to see some leverage going forward.

Great. Then Ariane, you're seeing really strong growth out of your Media Solutions with an acceleration this quarter against tougher comps. Maybe if you could just unpack what the driver is there? Is it pricing? Is it the expansion of the media network? Any understanding of what's driving that? And then maybe just framing up the opportunity of how large you see that business over time? What's the big opportunity? Where is the clear white space?

So on the growth, we have a sponsored listing business and the display business. On both of them, we've got a lot more partners that are participating, especially in sponsored listings. And as I mentioned in the prepared remarks, we've done quite a bit of work on making the sign-up process, easier doing sort of marketing activities to bring more partners into the auction. At the same time, as I mentioned, we're testing new things like video ads and the like, such that those ads are even more effective, which then translates to pricing. So I think there continues to be a big opportunity on sponsored listing and on display. And if you look at the advertising as a percentage of our overall revenue and compare to some other big retail companies, you can see that we've got quite a bit of white space in order to sort of grow that in the years to come.

Our next question comes from Deepak Mathivanan of Cantor Fitzgerald.

Maybe I'll start with Vrbo. Now that the business has kind of returned to modest growth, what is required to accelerate further and get the growth rates on par with the results that we're seeing from some of the alternative accommodations providers in there? And then second question, maybe for Ariane, I'm not sure if you're ready to comment about 2025. But maybe you can qualitatively discuss how we should think about kind of the cost side that's required to grow the business further and maybe the implications on margins for 2025?

Okay. Well, so on the Vrbo question, -- as we all know, Vrbo went through a migration at the end of last year, and that's why it had such a slow start to this year. And I would say the teams have been doing great work this year in adding the black product features, making the app faster, as I sort of described in my prepared remarks, doing work on supply, I would also call out, we have this great marketing campaign with Nick Saban in the last couple of months. Perhaps people saw it. It was a great performing campaign and drove a lot of conversion. As you think about Vrbo going forward, we need to continue that formula of continuing to improve the product, continuing to expand the supply and having great marketing. And as I mentioned, we've got some new supply that's in more urban destinations. I would say that we're underpenetrated in the markets that we're in internationally. So we have a new general manager who's in, who's running Vrbo, we're looking at what are the longer-term growth plans. So I'm confident that the basic formula we have right now layered on top of it where the market opportunity is, will be what will drive growth. And I'd just add one other thing, which is -- all the work that we're doing to sell vacation rentals well on Vrbo will also help us sell vacation rentals on Expedia. We've had so much going on in the last few years as a company that we haven't made a big concerted effort to sell vacation rentals well on Brand Expedia. And again, all the work on Vrbo on servicing, on communications and the like will then help us as we turn to that for Brand Expedia.

And then as far as 2025, yes, we're not going to be providing any commentary on this call for that. We'll plan to give more updates on that for next call. But I would just say generally that we are very focused on both the top and the bottom line. And as you can see, we've done -- made incredible progress with getting cost out of -- cost of sales and overhead and we're going to continue with that as we move forward into next year. Obviously, top line revenue growth is a play on what will happen on the bottom line. But I think the biggest line, clearly, as everyone knows, is the marketing line. And so as we get these businesses back up to where they need to be, as the product starts to get optimized more and more, we should be able to drive more, repeat and direct behavior and, therefore, drive more marketing efficiencies as we've been seeing in Brand Expedia.

Our next question comes from Trevor Young of Barclays.

First one, just back to Vrbo on the modest growth in the quarter. Can you just speak to the actual cadence throughout the quarter? It wasn't clear last quarter around whether July was still positive relative to the positive June exit rate. And then similarly for October, I think you had called out some of the increment weather issues. Was Vrbo still positive here at the start of 4Q?

Yes, we're not going to give out sort of the monthly comps, if you will. But I think what the great thing is that we're seeing is that business is continuing to accelerate. So I mean as we move to the quarter, we definitely saw that business accelerate. I would say that certainly, when you are impacted by hurricanes and things that create some bumpiness in the results. But out of -- coming out of July, we saw incredible acceleration from that point Trevor.

That's helpful. And Ariane, maybe 1 bigger picture 1 for you. You’re now roughly 6 months into this new role. Can you highlight 2 or 3 things that have been positive surprises to you and maybe a few things that stood out as maybe more challenging than you had anticipated when you first cut into the seat?

Sure. I think -- look, I obviously knew the B2B, the private label business and the advertising business and the supply part of the company quite well because I've been running those for a period of time. The consumer business, while I've been in the management team and I knew it well, that's the part that I've gotten much closer to in the last 6 months. On the positive is just how much passion and I would say, awareness and love there is for our 3 big brands, Expedia, Hotels.com and Vrbo. So that's sort of the positive surprise is just how much sort of love there is there. On the sort of what's been tougher is I think I appreciated all of the technology work that we've done on our platform, and it is really enabling us to innovate faster to have 1 customer identity and the like. But connecting that directly into the brand value propositions, we had done that quite well on Expedia, and I'm now appreciating just the work that we needed to do to get that into Hotels.com and Vrbo. And again, what's been wonderful to see is how quickly the organization and the brands are responding to that. And that's -- when I look at the acceleration we've had in the consumer business from Q1 to Q2 to Q3, it's seen those daily improvements and the way that we're connecting in our brands themselves, what the value proposition is, what the marketing is and what the product and platform can do that gives me real confidence in the future.

Our next question comes from Conor Cunningham of Melius Research.

On the move to add 1 million rooms from Expedia to Vrbo. Just curious on what drove that outcome. And then as you think about additional supply going forward for Vrbo, is the urban market is something that you're focusing on a little bit more than before? And is there any difference in returns from that move?

Thanks for the question. So we took about 1 million units that had been listed on Expedia, and we moved them over to Vrbo. And these are -- this is inventory that's a little bit different from the other inventory that we had on Vrbo. So we've needed to figure out what's the right UX and design, what's the pattern for people shopping and discovering on them. But as I said in the prepared remarks, we've actually seen that, that's allowed us to go after a part of the market that's more urban, that's shorter stay than we've been in before. And -- it's true that historically, Vrbo has been a brand that has tended to be sort of beach and mountain and the like. And we think there's still opportunities for us to grow there, and we'll also be looking at where else can we grow. In terms of -- are there different returns? Again, it's early days for us in exploring that part of the inventory. But ultimately, what we want to do is make sure that people know the Vrbo brand, they understand that when they come to Vrbo, they're going to have whole homes and apartments. They won't have shared spaces, they’ll get to redeem their One Key cash, and they'll have a full supply of whatever it is that they're looking for that we can fulfill for them.

Okay. Helpful. And then you talked about -- or you touched a little bit on just the attach rate of other travel products. Obviously, your competitor talks a lot about that. I was just curious if you could just unpack that strategy a little bit more. And where does that stack up on the priority list? And you obviously have a lot going on, but is it up on the top of where you think?

Thanks for the question. Selling multiple items in a trip is the core DNA of Brand Expedia. Brand Expedia is multi-line of business. So air, car, hotel, activities, cruise, is all of that. And so we have a long history of being able to attach, whether it's attaching when you start with 1 product and add another or doing the actual dynamic packaging at the same time. So I would say that's always been at the core of the strategy for Expedia. I highlighted the growth in our dynamic package travel, but also the multi-item attach is something we continue to work on. It's certainly improved over time, not only in the UX and the design, but also in the recommendations. So being able to personalize what's the next best thing to recommend to a traveler by category and also by item. So I guess I would just conclude by saying it is important to us. It's a core part of Brand Expedia.

Our next question comes from Naved Khan of B. Riley.

So Ariane, you shared a stat with us about 150 basis point improvement in the repeat rates for One Key users. How does that compare versus your own sort of expectations when you sort of launched this program last year? And what are the things that you control to kind of drive further improvement from these levels? So that's one question. The other one I had is on B2B, maybe just -- it's seeing really strong growth. Just give us a sense of what the pipeline here, it looks like that can continue to drive the strong traction?

Yes. So I'd say on One Key, right? It's been -- we launched it in the summer of '23. So we've been pleased with the results so far. I shared some of the stats in my prepared remarks. I'd say we're especially pleased with our tiered member deals, so the silver, gold and platinum members. They're available everywhere, but we're seeing that, that's about 30% of our travelers, but 50% of our room nights. We also, when we launched One key, we're looking for cross-sell across our brands. And as I shared last quarter, 30% of travelers who are redeeming their One Key cash on Vrbo after earning it on the other brands are actually net new to Vrbo. So that's great that we're seeing. And finally, I'd say the One Key technology is giving us capabilities that we didn't have before. So things like gifting One Key cash that has an expiry date, which allows us to be more promotional in order to sort of drive purchases in a short window. At the same time that there's been a lot of positives, we're continuing to work to tune the value proposition by brand and by geography. So for example, I said on Vrbo, we know that 1Q is driving new travelers, but we're still assessing the impact of Vrbo earn on traveler shopping decisions every day. So the One Key program, obviously, as Julie talked through it, it's in our contra revenue. And we are interrogating the spend on loyalty in the same way that we do our marketing spend and the like and making sure that we're able to tune the program. And the good news is the way the technology is built, allows us to configure it. So that's what I would say for One Key. On the question about B2B. As you said, we had another strong quarter at 19% growth, only 1 point down from last quarter. And the B2B business has a massive market, we can work with corporate travel agencies, off-line travel agencies, online travel agencies, financial institutions that have their own loyalty programs. So it's true the last set of quarters, it's grown at a very elevated rate. Some of that was Asia that was really coming back. We believe in this business. We believe it will continue to be healthy double-digit rates, even if perhaps not at the elevated levels that we've seen.

Our next question comes from Mark Mahaney of Evercore ISI.

This is Austin Riddick, actually speaking for Mark Mahaney. Congrats on the quarter. We would just love to hear your thoughts on the U.S. alternative accommodations market, particularly as it relates to the recent regulatory updates coming out of California, Hawaii, et cetera? And do you think if these are basically one-off situations or the sort of a broader trend?

So I would just say all that, but we work with local government to make sure that obviously we're abreast of the regulations. We're taking those into consideration. I think there's always a balance between the contribution to the local economy and following the regulations. But we believe there's a big market out there for alternative accommodations, just like there is for hotels and the like, and that's not impacting our view of our growth potential.

Our next question comes from Jed Kelly of Oppenheimer.

You mentioned integrating Vrbo with Brand Expedia. Can you talk about the opportunity to integrate Vrbo with B2B? And then I didn't hear a mention of Hotels.com. Can you give us an update on how that's performing since you've sort of replatformed the loyalty program outside the U.S. and the U.K.?

Yes, sure. Thanks for the question. On Vacation Rentals, as I said, yes, we are -- we already have some vacation rental inventory on Expedia, and we think there's a bigger opportunity. On B2B, we do have a few partners who are using our vacation rental inventory. As you can imagine, on selling vacation rentals, there is some complexity that is different from hotels. Requirements on communication between the traveler and the owner, for example. And so we're testing it. We want to make sure that we're going to be able to deliver a great traveler experience to our B2B partners’ travelers and to our hosts and owners. So I do see that as an opportunity in the long term. If you ask me on the list of priorities that our B2B business is going after, is this at the top, probably not. But in the long term, this is a real opportunity for us. In terms of Hotels.com, I'd start by reminding us this is a brand that has very strong brand recognition and a large customer base. The performance in Q3 was stable, but it hasn't returned to growth. And this was a brand that was very impacted by our migration, by our change in loyalty program and our international pullback. Now as we are going back into international, Hotels.com is benefiting. And we've got a new general manager in place who's looking at this with a fresh set of eyes, and I'm really excited about what he's going to do with the brand in the quarters to come.

Our next question comes from Kevin Kopelman of TD Securities.

This is [indiscernible] in for Kevin. You mentioned the hurricane impact in October, but can you talk more about quarter-to-date trends and what you're seeing across your consumer brands? And maybe give color on your efforts to regain share in international markets?

Yes. We definitely saw an impact in October from Hurricane Milton. But I would say that it's material, but not anything that we thought it would be originally. So it came in better than our expectations. And the reality is that if you take things out of the picture for things like the hurricane for the election, et cetera, we are actually seeing the underlying health of the business being really strong. So we're excited to see those as we've entered into the fourth quarter.

And then on international, as we said last quarter, we're being surgical. We're looking market-by-market, understanding which of our brands has brand strength there. And then going in with the full funnel market plan -- sorry, a marketing plan in order to start to regain share, but we're being quite surgical about it.

Our next question comes from Anthony Post of Bank of America.

I apologize, it's been asked already. But I wanted to get into selling and marketing. I know B2B is a big contributor there. But when you back that out, -- how do you think about your efficiencies versus competitors? And are there costs that you think you can take out of there over the long term?

Yes. I mean, I would say that, that is an opportunity for us. I think Ariane has said in the past that we want to interrogate every line, and so it is something that we're looking at. And we are delivering efficiencies. I think, obviously, as we've said, we've been investing at the same time back into Vrbo and international markets. And if you exclude that, investment, we are actually seeing efficiencies, particularly in Brand Expedia. And so this is more about us sort of getting the flywheel back on these other businesses getting back to where they need to be, and we think we have an incredible opportunity to be able to deliver more efficiencies when that happens. At the same time, we need to be optimizing the product, the supply and putting all of that together for these businesses to be able to deliver value to the traveler that encourages them to return to our sites as repeat behavior and direct. And so when that starts to happen is when we'll also start to see some of that leverage. But it's certainly something that we are laser focused on going forward.

At this time, we have no further questions. So I'll turn the call over to CEO, Ariane Gorin, for any further remarks.

So thank you all for your questions today. I'm very pleased with our Q3 results. We remain focused on accelerating growth in our consumer business, ensuring our B2B business remains industry-leading and leveraging our unified tech platform to drive more innovation. We have a strong foundation in place to drive sustainable, profitable growth, and I'm confident that we'll continue to create value for our travelers, partners and shareholders. Thank you.

That concludes today's call. Thank you all for joining. You may now disconnect your lines.