Good day and thank you for standing by. Welcome to the Tripadvisor Fourth Quarter 2022 Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ms. Angela White, VP of Investor Relations. Ms. White, please go ahead.

Thank you, Chris. And good morning, everyone. Welcome to Tripadvisor's fourth quarter and full year 2022 financial results call. Joining me today are Matt Gvoldberg, President and CEO; and Mike Noonan, CFO. Last night, after market close, we distributed and filed our earnings release and made available our shareholder letter on our Investor Relations website. In the release, you'll find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed on this call. Also on our Investor Relations website, you'll find supplemental financial information, which also includes reconciliations of certain non-GAAP financial measures discussed on this call as well as other metrics. Before we begin, I'd like to remind you that this call may contain estimates and other forward-looking statements that represent management's view as of today, February 15, 2023. Tripadvisor disclaims any obligation to update these statements to reflect future events or circumstances. Please refer to our earnings release as well as our filings with the SEC for information concerning factors that could cause actual results to differ materially from those forward-looking statements. With that, I'll turn the call over to Matt.

Thank you, Angela, and good morning to everyone joining the call. We're pleased with our q4 and full year performance, a combination of the travel industry recovery as a whole, our position in the travel ecosystem, and solid execution by our teams. As we said in the Shareholder Letter we published last night, we saw a strong recovery with 65% consolidated revenue growth relative to 2021, reaching nearly 96% of 2019 revenue for the full year and exiting the year at 106% of 2019 levels in the fourth quarter. We also expanded margins year-over-year in 2022, balancing investment in future profitable growth with prudent cost management across the portfolio. This performance is strong overall relative to our expectations, but we still face mixed recovery and margin pressure in parts of our portfolio. In particular in our Tripadvisor Core segment, which we intend to address head on. I will come back to that shortly. But first let's start with Viator, where the team continued to drive accelerated growth in 2020 to delivering record revenue and scale, with gross bookings value of approximately $2.7 billion, or 186% of 2019 levels. We compete in a large, highly fragmented and under penetrated experiences market, which is estimated to grow to more than $275 billion by 2025. We consider this market highly attractive given that approximately 70% is still offline, but has consistently moved more online each year, with tailwinds from the secular shift in consumer spending preferences away from physical goods in favor of experiences. We're well positioned to take advantage of these secular trends. And our team is doing this through focus, execution and strategic investments which are paying off. We served a record number of both first time and repeat customers in 2022. And we're improving conversion across mobile web and app,…

Thanks, Matt, and good morning, everyone. I will review the results of the fourth quarter, briefly cover our performance for the full year and provide some color on the trends for the first quarter and thoughts on 2023. In summary, we had a strong fourth quarter and full year. We exceeded expectations in Q4 with consolidated revenue of $354 million reflecting year-over-year growth of 47% and reaching 106% of 2019 levels. Recovery rates versus 2019 for reportable segments, Tripadvisor Core, Viator and TheFork were 85%, 208% and 94%, respectively. Let me dive into some top line highlights from Q4 for each of the segments. At Tripadvisor Core, we saw better-than-expected performance in the quarter as revenue reached 85% of 2019 levels, which is a modest step back from third quarter's result of 88%. Our overall branded hotel revenue was 90% of 2019 levels compared to 95% in Q3. Hotel meta revenue recovered to 93% as we saw consistent performance through the quarter. We continue to see varying degrees of recovery by geography with U.S. remaining well over '19 levels, while EMEA and Rest of the World remain below '19 levels. Our hotel B2B revenue line had a solid quarter improving sequentially. Similarly, revenue from our media and platform offering also saw acceleration in the quarter, reaching 85% of 2019 levels, which is acceleration from third quarter's recovery rate of 80%. Tripadvisor's Core's experience and dining revenue saw strong growth in the quarter, reaching 113% recovery versus 2019. This represents a modest step down from Q3's results of 125%. Within this revenue line, the experiences recovery rates continue to accelerate sequentially and was well above the overall experiences and dining recovery rate. As an important reminder, other revenue within Tripadvisor Core includes offerings within the crews, flights, vacation rentals and rental…

Thank you. [Operator Instructions] Our first question will come from Lloyd Walmsley of UBS. Your line is open.

Hi. This is Chris on for Lloyd. Maybe two questions, if we can. Maybe just first on the '23 revenue guidance. You said it would be consistent with broader travel trends. I think focus right is around 18% growth year-over-year for OTA hotel bookings. I guess versus that really kind of the right number we should be benchmarking to? And second, I guess, how should we be thinking about the segment accelerating, decelerating and building to that consolidated consistent with broader travel trends type of growth? I'll pause there and ask the second one as a follow-up.

Yeah. Hey, it's Mike here. Thanks for the question. So when we look across the travel market and we look at not just market surveys, we look at our peer group, we see that kind of market growth rate more mid-teens level and that is a reflection of the diversity of the portfolio of travel segments, but it's really more of the mid-teens level. Your second question was around how do we see kind of growth rates of the segments? So within that, you would expect as we invest in growth in Viator to be a higher growth rate than our consolidated. As we look at that, we are looking the fourth to be a higher growth rate as well. And then on our Tripadvisor Core business, that would be a lower growth rate than kind of our -- than that -- the consolidated growth rate. So that should just give you a shape of kind of we're thinking about the growth as we move for the full year.

Okay. Got it. And maybe just a high level question here. As we think through the new strategy, lot of conversation around Generative AI. Just curious how do you guys think about using Generative AI trained on -- potentially being trained on your reviews to answer questions for travelers to really just help them make decisions without having to come through reviews or really just kind of what are your high-level thoughts at this point more broadly? And how you could use this technology and how it could be impacting travel search and booking experiences.

Thanks, Chris. It's Matt. Appreciate the question. Obviously, just about everyone is talking about Generative AI. I think every kitchen table that I've been at is mentioning it. And it's one of those technologies that we really want to pay attention to. You can imagine that over history, when you look at new technologies, people often get really excited in the short term and maybe overestimate what's going to happen and try to be predictive about that short term, only to underestimate in the long-term. So this is one to watch in the long-term. And we think this is a technology that puts us in a place of advantage. We expect that it will be ubiquitous. The key differentiator is the underlying data and content, if you will, that Generative AI draws from. People in travel want real recommendations based on what other travelers or experts have done and recommend not just generic thought recommendations. And we think that puts us in a really strong position to experiment with the technology, to take advantage of our vast content asset we have, as you know, over 1 billion reviews. And of course, we've got hundreds of millions of members of our audience with unique interest here. So we can create unique tips, guidance and drive a more personalized experience. It will remain to be seen how it impacts search. Obviously, the big search players are experimenting with it, and we know it can't be rushed. We also know that there are some unit economic questions in that space. And we'll leave it for the search organizations to play with that, and we will look to take advantage of it. We think it reinforces the imperative of our strategy to build a persistent and direct relationship with the traveler that experiments with content.

Got it. Thanks for the color. Thank you both.

Thank you. [Operator Instructions] And our next question will come from Stephen Ju of Credit Suisse. Your line is open.

Okay. Thank you so much. So Matt, I don't really want to put words in your mouth, but in terms of your cost plans for Tripadvisor Core. It sounds like you're looking to develop an intermodal search and planning products. I'm just wondering if you can offer us some additional color, more details on what this will look like. And secondarily, you already pulled inventory from your lodging partners and you have some of your own products for things to do at destinations. But do you feel like you have good access to all of the different pieces of the total trip to properly funnel the purchase intent that you already have? Thanks.

Yeah. So we're really excited about the development of our product. We reorganized ourselves to be much more consumer first and product led. And we've got a new Chief Product Officer that has deep experience in that area. And so we have a lot of conviction that we're leaning into an area that's both something that travelers are looking for and something that we're uniquely positioned to deliver. And so the opportunities will really deepen the relationship and focus on making sure that our guidance is well curated, is matched to the individual needs and personalized to users that arrive who we can understand better because of the data asset that we're leveraging. We think that we can start with content to give a really compelling reason to come back to our site and benefit from context and curation. And then it can move into robust planning tools that give users a sense of as they're thinking about where they want to go next, what they want to do that they're able to actually start to think about an itinerary, and we have lots of ideas about how to serve up that from our content and the products that we want to deliver. If we do that, there's going to be a higher level of engagement, and that engagement will, of course, drive monetization. We think that this adds up to a kind of modern media marketplace for travel, and it's not a single product bet. It's really all about the experience that we're delivering. And we already have access to the elements that we need because we're already serving around accommodation, experiences, restaurants and we think we have a lot to build on.

Thank you.

Thank you. [Operator Instructions] Our next question will come from Douglas Anmuth of JPMorgan. Your line is open.

Good morning. This is Dale on for Doug. Thanks for taking the question, about two. First one, you guys talked about macro environment and range is uncertain [ph]. Are you seeing any changes in demand or behaviors of the travelers today? And then secondly, on margins, could you talk about your margin expectations for Viator for in 2023? And then in the fourth, you talked about improving margins in the half of the year. Could you talk about the drivers of that improvement? Thank you.

Thank you for the question, Dale. This is Matt. I'll take the first question, and Mike will take the second. The trends we're seeing from the consumer are strong. There's an ongoing excitement to be able to travel again. And 2023 certainly kicked off with really strong signals of intent and growth from travelers across all regions. And so they're coming back, international is becoming more interesting. We're seeing a level of interest in international being roughly at pre-pandemic levels and travelers are getting more comfortable with advanced planning again. So we're seeing booking windows start to extend. So not only is the traveler returning on our site, it's also translating into both engagement and clear action. The other thing I would say is that as we really try to get a sense of how travelers are thinking about travel in the future, we are seeing a really good signal around 86% of travelers plan to take one to two trips between March and May 2023. Now of course, inflation is still choppy, and there are still signs about thinking about how they want to adjust. And we may see fewer shorter trips likely the weekend get away is going to be really interesting. But ultimately, travelers are protecting the discretionary spend in travel at the expense of other destiny categories. And so we're really pleased with what we're seeing in terms of the robust nature of demand.

Dale, I'll take the second piece on margins. So just to remind you what we just said. So from a consolidated basis, we're going to be consistent flat year-over-year. We said that same thing for Tripadvisor Core. In respect to Viator and TheFork. So Viator, as you've heard us say, we're really excited about this market, right? And we want to continue to invest behind this. That's in things we've talked about already, acquisition, product, channel expansion, et cetera. So we're going to continue to invest there. So we expect those margins to remain fairly consistent year-over-year. On Fork, we've made a lot of investments in our -- as we said in the prepared remarks, around things like systems, things like payments, sales force people to build back supply base. These are assets and investments we're looking to leverage this year. So Fork, we are expecting margins to improve year-over-year. And that would be the basis of that overall consolidated flat year-over-year consolidated guidance.

Okay. Thank you.

Thank you. [Operator Instructions] Our next question will come from Richard Clarke of Berstein. Your line is open.

Hi, good morning. Thanks for taking my questions. Just would like to ask with the new strategy on on Tripadvisor Core, what do you ultimately think that division is capable of? You sort of said you don't expect the revenues to come all the way back to 2019 in the shorter term, but what kind of revenue growth can that business achieve? What kind of margins do you think you can achieve in the Tripadvisor Core business over the midterm? And then maybe any sense of the time scale to get to that performance?

Yeah. Hey, Richard, it's Mike. I'll take a stab and Matt can provide a covenant you want. So as you said, 2023 is an important year for us at Tripadvisor Core. There's a lot of things we're doing foundationally to set us up for which we said sustainable growth and margin expansion in that business. So this year is aligned around how we align ourselves, how we really find a lot and I've already identified operating efficiencies in the business, which we're very excited about. And then it's also making those foundational investments in those -- in the long-term strategy pieces. While those investments won't really show financial return in this year, they very much are expected to continue to prove this out beyond 2023. Those are things we're doing this year like data, as Matt talked about. Things like content, beginnings of experimentation around the tooling and guidance platforms, as we said. So while we're operating and doing these things, we're also making sure we're operating efficiently as possible. Running the business to be efficient on cost, we remove costs where we can, which is largely reflected, Richard, in that margin -- that flat margin guide. Over time, as this business again, moved beyond 2023, which is a very different business than it was in 2019, where, as I mentioned, we had that very large other piece of core revenue as that mix becomes bigger in even TA Core with experiences as we have continued recovery in our media business, which we do think is lagging kind of overall travel -- the travel industry as our B2B business comes back online. All of this is being reinforced and driven by our overall strategy of engagement, which should be really a flywheel impact of all of our businesses. We do expect this then to be able to drive that growth in margin. And again, experiences in TA Core would be a big piece of that as well. But Matt, I don't know if anything --

Yeah, I think that's good color. Richard, I would say we're focused on TA Core as delivering steady growth, sustaining and building off of what we do this year. I think margins, we'd like to see at 2019 levels over the coming midterm, which is over the next three years. This steady growth and the relative shift in our revenue mix towards experiences in media allows us to, I think, over time, expand margin in the medium term to 2019 levels.

So can I ask one quick follow-up? Just your January commentary about stepping back to the mid-70s. That feels a little bit different to some of your peers have talked about a decent acceleration in January compared to Q4. Just anything color you can provide on maybe why your -- you've not seen that acceleration in January that others have?

Yeah. Thanks, Richard. When we talk about recovery, which we hope to get past that -- talk about that in the New Year, it is -- you're anchoring back to a period a long time ago in '19 was a very just unusual year for us. In the first half of very high volume, very high pricing. So when you anchor back to recovery levels, that's why you see that kind of that step down. I would say the growth rates -- when you think about the growth rates, the sequential growth rates, modest step down, but in line. And I think when you really think about the year-over-year change -- the sequential change in revenue, when you go way back pre-pandemic, that Q4 to Q1 -- that Q4 to Q1 movement, we're kind of in line with what we've seen way back when. I know we're throwing a lot of history at folks but these are things we think about when we look at it and say, yes, we see the step back. We understand it's a comp, but we also feel it represents a continuing healthy business. And there's no systematic change in Q1 versus Q4 that is caused enough to have pause for the quarter.

Okay. Fair. Thank you.

Yep.

Thank you. [Operator Instructions] Our next question will come from Ronald Josey of Citi.

Hi. This is Mike on for Ron. Thanks for taking our question. You mentioned that Viator conversion rates improved due to product improvements. Can you talk a little bit more about what changes in the product drove the improvement there? And maybe what product improvement this any are in the pipeline for Viator in 2023? Thank you.

Yeah, I'll take a quick -- give you some thoughts. I know Matt will probably add on to it as well. So -- so we're -- the conversion improvements, we're always experimenting with everything in the funnel, right? And that starts with how we acquire traffic, what we acquire traffic, we're making a lot of investments in diversifying that -- those channels this year as we talked about. We've been launching and lagging our way into some brand spend, which is an example of how we're trying to diversify channel expansion. These are all different ways of improving conversion, finding different pieces of traffic. But then also a lot of the work we're doing in our app, on our mobile product all about how we orient the users who come in with high intent to the surface and get that traffic to convert. So it really starts up and down the funnel. The type of traffic which we acquire and then product improvements to get people to move into the bookable product.

Yeah, I think that's right. And so you see the team focusing deeply on matching the post booking experience, making sure our tech platform is as fast and personalized as it can be that we really are paying attention to repeats, which are improving, and we're seeing cohorts improve. And it's looking at the kinds of things that create loyalty and create the incentive to repeat. We want to make sure we're focused on creating more value for operators and so there's a lot of work going into how we do that through a trusted operator program that really helps them capture opportunities. In the end, it's about being the default choice and that delivers the scale. It creates more reasons for partners to work with us. It creates more reasons for operators to come. And of course, it creates more reason for consumers to come, get a good experience and return to repeat.

That's helpful. Thank you, both.

Thank you [Operator Instructions]. Our next question will come from Mario Lu of Barclays. Your line is open.

Hey, this is Jack on for Mario. Thanks for taking my questions. In the shareholder letter, you mentioned that the U.S. recovery in the hotel space was outpacing Europe and the rest of the world. Maybe if you could just talk to us about what drove that and if there was anything notable outside of macro to call out there? And then similarly, you mentioned within trip branded hotels, European recovery rates slowed from last quarter. I'm just curious as to the main drivers of the slowdown as well? Thank you very much.

Yeah, Jack, it's Mike. I'll take that. So they're really the same drivers because the meta and the branded hotels are part of that same subsegment. So this is a trend that I think we've seen for some time now where U.S. has been recovered in EMEA and rest of the world are just lagging. And I think there's a lot of what's in that is really geographic in nature in terms of different recovery rates by geo. Obviously, the U.S. travel general market has recovered at a faster pace than Europe or the rest of the world. Rest of the world being largely APAC. And obviously, that -- those areas have been slower to open up travelers than other areas. Europe just simply has had maybe more macro headwind, considering the events there, whether it's Ukraine War or other impacts of inflation hitting there. And listen, in the U.S., we're a well known brand here. We have strong auction dynamics within our core meta and continue to drive good performance here. But I think there's nothing really else to call out than those main drivers between the regions.

I will also say, as we think about how we reinforce the relevance and performance of meta as we think about how we're going to leverage data and how we're going to improve the experience, particularly on mobile to attack the monetization opportunity there. We think there's an opportunity in international. We know we haven't served those international audiences in the meta product as well as we may have wanted. And so we think there's room for improvement, and we think monetization will improve and of course, as those markets come back online, particularly in Asia, we see real opportunities. So excited about that for 2023.

Thank you. [Operator Instructions] Our next question will come from Jed Kelly of Oppenheimer. Your line is open.

Hey, great. Thanks for taking my questions. Just a couple on Viator. As you think around the longer-term strategy of Viator, how do you think about potentially serving some of those longer tail providers that might not need to pay like a higher commission rate? And then can you touch on the performance marketing you're investing in Tripadvisor Core to drive experiences? And if you were to potentially do a strategic transaction of Viator, would that impact the margins of Viator just because you're spending some of that performance marketing in Tripadvisor Core experiences? Thank you.

Thanks, Jed. It's Matt. I'll take the first, and then I think Mike will take the second part of that question. Look, Viator for the long term, our goal is to win as the leading global experiences marketplace. And the job there is to create a great experience on the demand side and then to bring the supply side on where we do matching that is easy and delivers a great result where the consumer walks away in wonder. And so the opportunity, as we continue to scale is to help everyone on the operating side that is high quality to they get exposure to that audience. And the team is very focused on working with operators to ensure that anyone who has a high-quality experience that they want to deliver in any location can come on to our platform and meet the appropriate demand. So that concept of leveraging data to do better matching is something that we are very focused on, and that will happen over time. The key is as we continue to scale, we get all kinds of advantages as the leader, and we're very focused on continuing to accelerate and reinforce that position.

Yeah. I'd say on the second question, so experiences on Tripadvisor Core is a great opportunity for us. It's a very different platform, obviously, than Viator, where people are coming to Viator for very specific booking transaction. Tripadvisor Core has a lot of different traffic that comes to us for very, very different reasons. And part of the opportunity for us, I think, as part of our strategy overlay of how to bring those into monetizable channels. So we do spend performance marketing to attract experiences on Tripadvisor core. And again, I think there's a huge opportunity for us to continue to find ways to increase that. And as you know, the Viator is the back end that fills the experience itself. So I think the relationship between the two, it's built on a normal third-party arrangement that -- I think your question was if it were separated, that would seem to be in the same realm of that -- those economics. So I wouldn't think there'd be any really major change because that's the way we've set up the -- the way that the intercompany kind of works today.

Yeah, the segment reporting helps you understand what Viator could look like on a stand-alone basis, the commercial arrangement would continue. We think that the combination of Tripadvisor and Viator together gives us unique positioning to win in this space. And our job is to make sure that we're doing a great job with both. The demand generation platform that Tripadvisor represents and creating the best possible experience when you're thinking about what you want to do next on your travel journey, whether you're planning and thinking about what's that unique experience I want to have and making sure that we have the right supply. Now Viator gives us an advantage immediately to provide that supply, but we know we have upside in providing other supply opportunities. And that's something that we can look at and really match that demand with supply. And in the meantime, Viator can focus on doing the best job of making that conversion and making that a great experience that somebody comes back to want to do again. So the combination of the two and running each of these most effectively is going to put us in a position to win in the category.

Thank you.

Thank you. This will complete the Q&A portion of the call. I would now like to turn the conference back to Matt Goldberg for closing remarks.

With that, I'd like to thank you all for your time today. We're excited about our strategic direction, and we can't be more energized to get out and execute with our teams. We look forward to continuing to share updates with you quarter by quarter. Thanks.

This concludes today's conference call. Thank you all for participating. You may now disconnect. And have a pleasant day.