Good day, and thank you for standing by. Welcome to the Tripadvisor Fourth Quarter 2023 Conference Call. [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, Angela White, VP of IR.

Thank you, Josh. Good morning, everyone, and welcome to Tripadvisor's Fourth Quarter and Full Year 2023 Financial Results Call. Joining me today are Matt Goldberg, President and CEO; and Mike Noonan, CFO. Last night after market close, we filed and made available our earnings release. In that release, you'll find reconciliations of non-GAAP financial measures to the most comparable GAAP measure discussed on this call. Before we begin, I'd like to remind you that this call may contain estimates and other forward-looking statements that represent management's views as of today, February 15, 2024. The 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 these forward-looking statements. With that, I'll turn the call over to Matt.

Thanks, Angela, and good morning, everyone. Before I begin, I'd like to address the press release we filed on Monday. We announced that our Board of Directors has formed a special committee to evaluate any proposals resulting from Liberty Tripadvisor Holdings' stated intention to engage in discussions with respect to a potential transaction. We appreciate your understanding that we won't address any questions on this topic today or provide further updates unless we have something definitive to share. Now I'd like to address our performance. We were pleased to exit the year with results that exceeded our expectations. Q4 revenue was $390 million, reflecting year-over-year growth of 10%. Q4 adjusted EBITDA was $84 million, 22% of revenue, exceeding expectations due to revenue outperformance at brand Tripadvisor and marketing efficiencies at both Brand Tripadvisor and Viator. For the full year, consolidated revenue grew by 20% to an all-time high of $1.8 billion and adjusted EBITDA grew 13% to $334 million. Last year, we made meaningful progress executing against our strategic priorities. We reinforced our market leadership position at Viator while sharpening our focus on smart user acquisition. Viator also finished the year at breakeven profitability, achieving the full year milestone a year earlier than anticipated. At Brand Tripadvisor, we invested in our strategy and delivered promising early proof points while maintaining financial discipline. Finally, at the fork, we delivered revenue gains while significantly improving our profit margin through disciplined cost management and exited the year at breakeven for Q4. Our results also reflect how we're building a stronger, more diversified and defensible position in the large and growing global travel and experiences industry. We have a unique and leading position in the high-growth experiences category, given the breadth of Tripadvisor and the depth of Viator. Within brand Tripadvisor experiences, along with…

Thank you, Matt, and good morning, everyone. I'll start by reviewing our Q4 and full year 2023 performance, and then I'll provide high-level thoughts on 2024. All growth rates for 2023 are relative to the comparable period in 2022, unless otherwise indicated. Q4 consolidated revenue was $390 million, reflecting growth of 10% or 8% on a constant currency basis. Adjusted EBITDA was $84 million or 22% of revenue and 10 percentage points higher than last year. Consolidated performance was higher than our expectations, primarily due to a more favorable traffic mix at brand Tripadvisor and disciplined marketing spend at Viator. Turning to segment performance for the quarter, brand Tripadvisor delivered revenue of $218 million, approximately flat year-over-year. Revenue in branded hotels was $135 million, a decline of 4%, driven by a low single-digit decline in Hotel Meta and flat to slightly down performance in Hotel B2B. Hotel Meta performance was driven by sustained pricing strength in both free and paid channels, which was offset by lower click volumes, primarily in paid channels as we continue to manage these channels for profitability by maintaining consistent ROAS targets. From a revenue perspective, growth in Hotel Meta in the U.S. and Rest of World was flat to slightly up, while EMEA declined in line with prior quarters. Importantly, revenue from free channels remained stable. As a result, Hotel Meta contribution profit margin was slightly higher year-over-year. Media and advertising revenue grew 6% to $35 million. Growth in the quarter was more normalized, but a sequential step-down that we expected, primarily due to the recovery pattern in the broader media and advertising sector. Experiences and Dining revenue grew 12% to $38 million, with experiences revenue growing approximately 20% in the midst of a challenging macro environment. Dining revenue slightly declined as we continued realigning…

[Operator Instructions]. Our first question comes from Ben Miller with Goldman Sachs.

We've talked a lot about the importance of mobile and app base logged in users. Anything you can share just on the top of funnel traffic and engagement you're seeing from that cohort? And anything on conversion of non-app non-logged-in members to members?

So obviously, each of our segments, Ben -- thanks for the question, has a different combination. I mentioned that 75% at TheFork are booking with us on the mobile app. Of course, we put a real focus on the app at Viator and are seeing increasing size of those audiences, and they're engaging further. We're putting this focus on Tripadvisor in a way that we really haven't in a while. I think I mentioned on one of our calls previously that we had refreshed the tech stack. It was modern and ready to go. And really, as we think about shifting to a mobile-first approach, we want that app to be an indispensable experience for travelers. And the way that we're going to do this is we're going to make sure we give good incentives to sign in and log in, which is something that we have already done at scale. We have more than 130 million members and then to convert them to download the app and engage there. And so what will wind up happening is they'll wind up spending time in the app. There will be -- it will feel like a closed experience where you can leverage AI to understand what your opportunities are as you're planning and what's around you when you're in destination. We think that will drive meaningful engagement. And then, of course, we will focus on how that converts through the funnel. Those numbers, I don't think we put mobile app users out publicly in the past, so I don't intend to do that here. But we think that when you look at the overall percentage of our total audience, there is significant headroom to drive people into the app. And then we think that once they're in the app, we know that the value to us is many, many multiples of what they would be in a web-based experience. So I think without disclosing further detail that we haven't done in the past, I think you get a sense that our strategy across the board is to drive direct users into the app, engage them deeply, give them an experience that not only is trusted, high quality. But then when they go and have that experience in the real world, it's only natural to come back to the app and, of course, pay it forward to other travelers by sharing their experience.

Our next question comes from Naved Khan with B. Riley Securities.

Maybe just a high-level question for you, Matt. How does the formation of the special committee by the Board affect timing for a potential spin-off of Viator? And then secondarily, maybe just on Viator margins for 2024. How should we think about the scope for improvement there? Should we look at Q4 as a proxy in terms of the year-on-year gain? And how that might continue into '24? Just give us your high level thoughts there.

Yes, thanks, Naved. Appreciate the question. I'll take the first, and I know Mike will take the second. Since I joined the company, of course, this notion of a spin-off of Viator has just not been something that we've spent a lot of time and energy on given the markets that we've been in. We've been focused on the business. And I think you can see that our focus on the traveler, the experiences they have with us and the way that our product delivers over and over for them again has really shown itself to prove out in the results that we've seen to date. And that remains true. We're totally focused on the business. The announcement this week doesn't change that. I'm focused on moving things forward and focused on our strategies, which I think are clear and really delivering. And I know that our teams are doing the same. Mike?

Naved, on your second question, again, avoiding kind of specific guidance as for my earlier commentary. Listen, I think we -- and this is the statement we've made consistently in the past, we are, I think, on a path to seeing Viator move in direction of its long-term potential margins, right, which we've talked about. I'm not going to peg next year to what we're thinking -- what happened in Q4 other than to say that's the broad trajectory we'd expect the business to pursue. Secondly, I would say, and this will reflect in some of my comments, we're going to be supple as we think about this. We're going to be prudent and disciplined as we think about our marketing investment that means we want to pursue high-quality traffic. That means we're not going to pursue lower quality traffic, right? So really have a disciplined approach and be nimble as we move through the year. So again, I would just say we want this business to be on that trajectory, on that arc for what we believe achieving long-term margin potential over the near term.

Our next question comes from Richard Clarke with Bernstein.

If I can maybe just ask that previous question a slightly different way. If I look at Q4 at Viator, you made a $34 million of additional revenue year-on-year, $18 million of additional EBITDA. So that's like a contribution margin of 53%. I mean is that what's achievable on growth? Or is there anything else that's gone into that big improvement? Is that now the unit economics? And then maybe just secondly, I guess, Expedia last week talking about leaning back in and maybe spending a bit more on marketing. Are you seeing any benefit of that? Is any of that

Great, thanks, Richard. I'll take those. I think I heard the last question is a little light, but we can come back to that in a second. So just on Q4, let's be clear, like we -- Q4 was a tough quarter from a macro perspective. We have a lot of things kind of happening as we said, with the Mideast conflict, certainly brought some headwinds to the market. We also were very much in discipline in terms of thinking about how we want to acquire new users, right? And getting back to the comment I just made, really targeting high-quality traffic and being maybe a bit more discerning. So both those impacts really affected new user growth, right? And so you saw really come through, I think, the power or the model, which is large repeat cohorts, more prominently providing revenue there. So I think Q4 was a bit more of -- and I'll point -- and I'll also point to, Richard, we had revenue of 27% growth, but GBV growth was 20%, right? So there's a difference there and some timing -- rev rec timing differences there that you should just maybe just read through that incremental margin. But it's really more of an impact of we saw the flow-through from lower new user acquisition due to some of the macro and marketing discipline we had in the quarter versus the flow-through of EBITDA from the repeat cohorts. And then the second question...

It was around Expedia, and maybe I'll lead off and -- look, we obviously don't comment on particular participants in the auction. But clearly, the bidding dynamics are healthy. I've said in the past, we take those relationships quite seriously. And so we spend a lot of time working with our partners to make sure that we are optimizing the way that we can deliver for their marketing objectives. And I think as Expedia makes an announcement like that and others respond, I think you can expect that, that's something we will look to take advantage of, but the bidding dynamics are healthy.

Our next question comes from Doug Anmuth with JPMorgan.

This is Dae Lee on for Doug. I had two. First one, I think Mike, you said you're expecting stable revenue dollars at brand Trip. If that's true, could you talk about what's affecting that outlook? And then secondly, you guys saw very strong leverage out of sales and marketing in 4Q. And it sounds like you face greater emphasis on higher value users. [indiscernible] there any else to call out on that marketing efficiency in 4Q? And looking ahead to 2024, should we expect marketing to be a social leverage?

Yes. I mean as you broke up a little bit, let me try to parse through it. I think your first question was around stable revenue at core? Again, I wouldn't show what your specific question was. I would just say that we want to stay away and understand away from specific guidance. And we want to be -- give you some view of the shape of how we're thinking about the year but did want to stay away from any specific guidance due to the recent announcements.

Secondly, the only color I would give on that to you, Doug, is that you can imagine, we've talked from the beginning about a multiyear strategy to transform a business. And when you do that, you're focusing on diversifying your revenues. And I think we are very pleased with how that diversification is going. I tried to reinforce that in my comments upfront. We see replacement dollars from categories that are growing very quickly. And of course, we're all familiar with the secular challenges in some of our revenue streams. So when you balance all that, that sort of comes together in that kind of a shape. It's what we expected, and we feel like we're making really good progress. And the second question was around marketing dollars and whether we'll see...

Can you repeat that?

Yes, why don't you repeat the second question because we are not sure we got that one.

Yes, sorry. Second one was on marketing leverage that you saw in 4Q. It sounds like you guys placed greater emphasis on higher-quality users, but wondering if there's anything else to call out on the efficiency you saw in 4Q and if we should expect marketing to be a source of leverage in 2024?

And again, are you referring to Viator in your comment?

I mean total sales and marketing, you guys saw a very strong leverage. It sounds like you guys saw that across brand Trip and Viator so just across both platforms.

Yes. Yes. So just to unpack on both platforms, I think the leverage is really across brand Tripadvisor and Viator. I already talked about Viator on the last answer. Brand Tripadvisor, we just saw a very healthy free channel mix in the quarter. That very much impacts that leverage result. Just credit to the teams at brand Tripadvisor who really work every day on optimizing all our channels, but particularly on the free channels, whether it's CRM, SEO, or other direct channels. We continue to see good results there. We saw a nice pricing versus our expectations and certainly good pricing on a year-over-year basis. That certainly was the driving factor at brand Tripadvisor. All the teams are focused on how we continue to drive that forward. As you know, when you think about that, that was in both -- just to clarify, that was in both Hotel Meta as well as our experiences business. These are things that the teams will continue to drive into next year, very dynamic markets, both in the free and paid markets, particularly with how we advertise in the paid markets and -- as well as in the free channels, but they will be working hard to continue to advance the ball next year.

And Doug, I just want to say marketing is an area that we put a lot of focus and attention on in 2023. And I think it is becoming an increasing source of strength for us. We are at each business, thinking about how to leverage basically the full funnel of marketing approach. And so at Tripadvisor, we'll be able to adapt that to really back our engagement-led strategy by being more up and down the funnel and being more targeted, leveraging data in our marketing like never before because of our data investments. Obviously, Viator had spent some time in 2022 really getting their cross-channel and fuller funnel approach going, and that is continuing to gain traction and will continue to be optimized. And I think really serve that business as it continues to scale and drive leverage. And then at TheFork, we are very focused on the marketing we want to do across all of our priority markets and thinking about how and when do we focus on new and really leaning into repeat this year and thinking more about -- being prudent about some of the awareness stuff that we used to do in the past everywhere and really focusing on priority markets. So I think what you're seeing is just a much sharper, more strategic, data-driven approach to the full funnel for each segment, and it's going to deliver.

Our next question comes from James Lee with Mizuho.

Two over here. First on media and advertising business and you seem to have a pretty good position given the size of your audience here. Can you talk about the investment you're making in tech stack that will make your product even more engaging? And second, at user experience, I think historically, you guys were looking to reduce the number of steps to get to conversion. And can you talk about the progress on that, please?

Okay. I'll take the first, and then I think Michael will take the second. So the media and advertising part of our business is one that we, obviously, have a fantastic high intent audience and it's highly qualified and it's contextually relevant and it's interested in travel. And that audience is interesting both for endemic and non-endemic advertisers. And I think over the years, it's really been a siloed business. It's existed on its own, and it's been in maybe competition with other areas of the product. Our opportunity, of course, is to integrate that opportunity more holistically into the overall experience and come up with solutions that are not only great for advertisers and partners, but can be part of the traveler experience that's value. Now the media and advertising business had a good year in 2023. I think overall 20 -- 12%, 13% growth, which I think was strong by category standards and even stronger when you consider that much of that growth is coming from formats where we have constraints. It's mostly display. We're not as deep as we can and will be in a few categories like video, mobile and social. But it's also an area that's going to benefit from our engagement-led approach and our investment in data. So overtime, we have not prioritized big, meaningful significant investments in media and advertising in 2023 and that's an area that we are focusing on and we think about what are the formats that we want to deliver for the future? How do we think about the way that we want to serve advertisers in new and unique ways? What's the difference between an enterprise client and a small, medium-size client? And our goal is to get efficiency in our go-to-market productivity in our sales organizations and an integrated offering that I think will drive meaningful bigger, longer deals that are really focused on the value of this audience. And we saw some good traction in '23, and I think we're going to continue to lean into that for '24.

Yes. And then your question on kind of user experience and conversion. It's a broad question, and it cuts across a lot of our brands, primarily at brand Tripadvisor and Viator. Brand Tripadvisor, we're really excited about some of the strategy work we've been working on this year, particularly as it relates to data personalization, I know you've heard us talk about this for some time, but really the ability, I think, to impact both our Hotel Meta and our experiences business at brand Tripadvisor, making sure that we are targeting the right people with the right ad or supply for hotel meta that has very definitive conversion impacts. We're excited about what we've seen there. And we've done so much fun of work on the experiences product at brand Tripadvisor, right? And as you know, we continue to experiment with how do we optimize that user experience in that funnel. And there's a lot of shared learnings between the Viator teams and the brand Tripadvisor teams. And at Viator, funnel optimization is core of what they do. We had very solid conversion gains this year, very proud of the teams and the work they've put in there. That goes to everything from getting the right supply and we do have the largest supply base in Experiences market, using data to get the right supply to offer when the person comes and visits us. So making sure we were presenting the right type of supply or supply diversity at the right price and making it seamless to really to get to book. And that's really what the teams were all about. And we're excited about other things we're working on this year. Matt mentioned loyalty program at Viator. These are all things that we think that are really going to enhance that -- those conversion benefits. So a lot of progress been made across the teams. We think there's more progress to be had and we're excited about it.

Our next question comes from Jed Kelly with Oppenheimer.

Can you just talk about the competition you're seeing in performance marketing channels with some of your competitors, both with Viator and with core Tripadvisor? Seems like some of your competitors recently have indicated they're still going to spend a lot going into '24.

Yes, Jed, so I'd say, as you know, these markets are extremely competitive, different competitors in different areas. Viator -- the Experiences space is a competitive one. You do have a broad competitive dynamics in the paid channels. Obviously, there's a few operators that are larger and more at scale that tend to show up in those paid channels more regularly, but you still have a pretty broad kind of long tail of others that are bidding in that market, fewer so that are in the brand campaigns. Again, there's more of the scaled operators in Experiences that are actually marketing and branding very specific to the Experiences. We'd assume that it would continue and that's where we, again, getting back to being disciplined about our acquisition, make sure we're using our dollars wisely to users that we think will convert, but not just convert, we'll come back. And that's the key, as you know, we've said for some time to how we think about the economic model. At brand Tripadvisor, when you think about primarily Hotel Meta, that is a very competitive marketplace. And you think about where we are competing against in the paid channels are all the players you would imagine in the hotel ecosystem. And that's why, again, we have to be very disciplined in our approach. We have been very disciplined by, as we said many times, maintaining our marketing ROASs. We are excited about the investments that Matt really alluded to in his prepared remarks around thinking about using data and personalization around, again, acquiring the right type of users that we believe can really convert -- not just convert, but actually have a sustainability and LTV to it, right, that we believe can get to the app, we believe can get to some of the goodness that Matt talked about that we see in our app ecosystem and are starting to really think about how we use our data to acquire those right users that have those attributes and promote that behavior. So we're excited about where that can lead us this year. And again, we'll continue to be nimble as we move through the year on both areas.

Our next question comes from Brian Fitzgerald with Wells Fargo.

A quick follow-up on Viator. Nice quarter. [indiscernible] grow to 25%. Can you talk a little bit about -- you talked about the competition and it being a competitive space. Is that sequential decel there? Is it a factor of that consumer demand? Or is it competition you talk to? Or is it really -- it sounded like from the main call, it's just a normalization of pent-up demand in prior periods. So if you can kind of parse out, hey, it's consumer demand macro. Hey it's competition. Hey, it's normalization. Hey, it's 1/3 of each of those. And then experiences in dining revenue on brand Trip was up 12% year-over-year. So we're seeing nice growth there. How much runway is there? And how would you assess your ability to cross-sell inventory across the travel and Dining and Experiences? Is there more runway to drive Experiences and Dining out of brand Trip?

Yes. Great. I'll take the first one and Matt take the second. Yes. So when you think about -- and I think the question is really around Q4 decel. I think it's really two big areas, right? One, it's really, as we said, a slowdown in new bookings. And that was really driven by two things: One, macro. There was a lot of volatility in the quarter and it just -- it was a dampening of demand as we came out of some of that volatility. Two, we are going to be -- and it said, thoughtful -- very thoughtful about acquiring the right type of user, and we're very careful about our marketing spend in the quarter. And then secondly, I would say, we are lapping when you think about the funnel, we're lapping some prices and margin impacts that have helped revenue, right, through the year in 2023. And these are things that, as we look forward, you wouldn't expect would be as big a contributor to revenue. So when you think about that, if we had a kind of a new user demand was a little bit lower because of some of the macro and the things we said, yes, I think that you'd have a knock-on effect as you move into the new year, but we feel pretty good about where we are in our -- in the position that we have, kind of where we're starting the year. But yes, that would be a factual statement. So second question...

I loved the question about the Experiences opportunity. And you talked about Experiences and Dining, really Experiences is proving out what we've talked about as being able to diversify Tripadvisor and take advantage of marketplace economics and really think about how to match supply and demand. And so the $180 million incremental experience shoppers that I mentioned is an example of that, really understanding why our audience comes to our site. And when we have that kind of scale, being thoughtful about how we leverage data, understanding identity and really leading them on the path that they are there to transact on or search for that next opportunity. And so that's going to drive, I think, meaningful upside. Now today, we've proven it out largely through the relationship with Viator, and we're really excited because Tripadvisor offers this really broad guidance platform. And of course, Viator offers this deep well of opportunities, deeper than anywhere else you can find. And being able to bring those two together has driven tremendous growth, and we are finding new and different ways for those to -- businesses to work together to really drive that growth. But at Tripadvisor, there is an opportunity to bring in more inventory to think about matching by geography, by category and maybe even categories that Viator doesn't represent today that we can find elsewhere is something we can do. And that will drive significant upside for a long time to come. I also think you're right. As we think about engaging our highest-value audience as members and increasingly on our mobile app, the cross-sell of wanting to do a full itinerary starting with generative AI and identifying that thing that is most relevant and being able to make it happen right there in the app, gives us tremendous cross-sell opportunities and the opportunity to create tremendous value through that relationship. As I said, I think over the last year, we've articulated this from the start. Quarter-by-quarter, we've said what we've done in product the proof points, the indicators that, that engagement can happen. And I think you are seeing the emerging view of what this strategy can do to drive the diversification of Tripadvisor. So thanks for the question. We're really excited about it.

And if I could, real quickly, as a follow-up because you both mentioned they were -- we're using data and AI to pursue high-quality versus low-quality traffic. And so we're informing ourselves in that regard. And then Matt, you just mentioned, hey, we're using data to better match and to cross-sell. Could you really quickly assess your current strength or how much runway we have in terms of, hey, we're in the early days of taking data and applying it to both optimize our CAC or optimize our matching. Where are we on the spectrum of, hey, we've still got a lot of data that we're not bringing to bear yet?

Yes. I mean it's early days. Remember, when I first arrived, it was when we articulated the vision of -- that we could do more with data. We proceeded to put a unified group data platform in place. We flowed all of our data into that. It now has over 3 billion profiles. And then we created the opportunity and the tools for all of the segments to leverage that data with the appropriate governance and privacy to begin to target. So it's very early innings there. And we are using that same data asset and all -- it's not only identity, it's behavioral data, click stream data, it's the booking data where we have it. We have the ability to bring on second-party data now that we didn't have before. And of course, a third-party data. So we are beginning to get a data stack with the appropriate marketing tech tools to begin to target and to begin to use that in all areas of our product development and really that's what allowed us to move quickly on putting AI at the center of it. And -- because if you have a brand of our size and you have a set of content data and first-party behavioral data with your audience, you can create more relevance, more personalization, but it is early. These are not things that you do immediately overnight. These are things that stack quarter-by-quarter, and we're in that process of stacking. So I think you'll see us continue to progress that over time.

Our next question comes from Trevor Young with Barclays.

Just on Viator, what are the 2 or 3 hurdles that keep new customers from coming back? And what steps are you doing to kind of retain those customers and get them to start behaving more like those repeat customers with more items per trip and higher price per item. Is it those efforts to just try to distill down to those higher-quality customers day 1? Is it going to be the loyalty program? Is it expanding the supply and better surfacing the right supply like you mentioned a couple of minutes ago?

Yes. Look, thanks for the question. I think Viator was on to this very early. The single biggest hurdle is that most of this transacting still happens offline. And so there's an awareness that the category exists. When we talk to travelers, almost all of them would love to book a great relevant experience easily online. And then like 3/4 of those don't even realize that the category exists. So we're excited about the awareness that is rising for the category in general. And I think we're excited that Viator is getting attached to it as we really leaned into that. The second thing is probably just giving them a really easy, smooth experience that works. And the Viator team has been on top of this. They've been focused on scaling their customer base, making the very first end-to-end booking, a trusted, valuable experience with a reason to return, creating the kinds of tools and relevance that make it a habit to come back to Viator. And then, of course, on the other side, making sure that they create real value for operators through strategic programs. And we get excited when our operator counts are the largest in the industry, and we have multiples more product represented on our category. Because if we can figure out the sort and have the right data to match to somebody's interest, that just means we're going to do a better job and ultimately be the default choice not only for our partners, but also for consumers.

Thank you. I would now like to turn the call back over to Matt Goldberg for any closing remarks.

Thank you, and thanks again to everyone for joining us today. We made great progress in 2023. Our talented teams are focused on executing on clear strategies for 2024 and we look forward to the next update. Thank you.

Thank you for your participation. You may now disconnect.