Q3 2019 Earnings Call

So you from those described into forward looking statements. Please refer to the safe Harbor statements at the end of booking Holdings earnings press release as well as booking holdings. Most recent filings with the Securities and Exchange Commission.

Unless required by law booking holdings undertakes no obligation to update publicly and any forward looking statements, whether as a result of new information future events or otherwise.

A copy of booking holdings earnings press release, together with an accompanying financial and statistical supplement is available into for investors section of booking holdings website, Www dot booking holdings that column.

And now I'd like to introduce booking holdings is speakers Fortys afternoon blends logical and David Gold and go ahead gentlemen.

Thank you and welcome to booking holdings third quarter Conference call.

During this afternoon by our CFO David game.

We executed well in our busiest quarter over year as we booked 223 million it almost a quarter of a billion room nights, which is up 11% year over year and exceeded the high end of our guidance right.

We're pleased that room night growth has been reasonably consistent this year, we produced over $5 billion in revenue and approximately $2.5 billion in EBITDA, which are year over year over year increases of approximately 7% and 8% respectively on a constant currency basis.

Well, we believe these financial results show that we have meaningful size and scale. We note that against a very large cable travel market opportunity. We are still a small share the marketplace, which means we have substantial opportunity in front of us.

I am pleased that our performance this quarter delivered better than expected room night growth driven by solid growth in our direct channel, though I note that we continue to witness slower growth in our pay channels and while we look to find ways to drive growth through the pay channels, we remain disciplined and we'll invest only if we like the quality of traffic.

And the associated return on investment.

We remain firmly in execution mode as we work to deliver against our goal of extending our lead in poor accommodations market through key initiatives in customer acquisition merchandising, our payments platform and improving the selection of properties on our web sites.

We expect these initiatives to improve customer conversion and drive incremental growth from our existing demand channels.

We continue to execute execute against our long term strategy of building that connected trip with booking dot com, who recently launching a fleet offering in certain European countries.

The launch is still in its very early days and we will continue to make product enhancements and improve the customer experience to create will we believe will be a better offer overtime.

We remain excited as our long term vision of the connected trip is being translated into new booking dotcom services.

We believe the connected trip has tremendous potential to create a more robust trial ecosystem that will result in greater loyalty and engagement for booking dot coms very large active customer base and it is an opportunity for our large supplier base to merchandise their offerings.

In conjunction with price line Dot Com Agoda has also launched a flight product that is initially focused on select countries in the APAC markets, which we believe will complement its existing accommodations offerings.

Im proud of our Interbrand cooperation development of this product, which demonstrates how we are able to leverage our deep trouble expertise across our company to build new services, we look forward to introducing other areas of collaboration across the brands in the future.

We're also excited to announce our partnership with graph is now showing tangible benefits to our customers one of the goals of the partnership is to give booking dot com app users access to the largest fleet of drivers across eight countries in southeast Asia.

Providing our customers traveling in these countries a frictionless experience removing language and currency barriers right now booking dot com app users can access grab services in Singapore, and we'll be expanding the service to Indonesia, and Thailand by the end of the year end to the remaining markets by early 2020.

Another point to note about the partnership is grab previously introduced a connection to hotel bookings through its own grab app using both agoda and booking dotcom.

In our alternative accommodations business booking dotcom continues to build richer content for both its customers and supply partners booking Dot Com recently announced a series of new tools and product enhancements, specifically designed to help professional short term rental partners more effectively market and simplify the data the man.

As many of their properties on booking Dotcoms platform.

In terms of our Liftings count booking Dotcoms total alternative accommodation listings now stand at over 6.2 million as of September Thirtyth.

A key goal continues to be improving both the quality and variety of our listings in this area.

We are encouraged with the progress in alternative accommodations bills and continue to witness growth outpacing our overall business, while maintaining solid profitability.

In regard to the overall global travel market. We believe this generally healthy but see some mixed results in geographies throughout the world.

Europe remained stable, but is still impacted by somewhat sluggish GDP growth, which is consistent with what we have seen throughout most of the year Southeast Asia continues to grow nicely, however markets like China, and particularly Hong Kong are placing pressure on our overall growth rate due to certain macro events.

International travel to the United States has been negatively impacted by a strong dollar.

Like this year has shown though our global scale has helped us navigate a tricky macro environment and we remain confident that we will continue to do so in the future.

In conclusion, I am very pleased with our performance in the third quarter and we remain confident that the efforts. We are making now will support the long term growth prospects of the company.

Want to thank our over 26000 employees for their hard work and dedication during the busy third quarter, providing unparalleled surface to both our customers and supplier partners around the world.

I will now turn the call over to our CFO , David Gold for the detailed financial review.

Thank you Glenn and good afternoon.

I will review our operating results for the third quarter, and then discuss our guidance for the fourth quarter.

Growth rates are relative to prior year comparable period, unless otherwise indicated.

Information regarding reconciliation to GAAP can be found in our earnings release now for our results for the quarter.

I'll pull through my growth of 11% for the quarter exceeded the high end of our guidance range. Our room night growth in Europe continued to exceed our expectations. This quarter, despite macro environment that remains cautious.

Room night growth rates for the rest of World also exceeded our expectations on grew approximately in line with Europe in Q3.

Average day rates for combinations or Agios, we're down about 3% year over year in Q3 on constant currency basis, which was a larger declines on guidance of down about two and half the sense.

The year on year Aer decline was impacted by decreases in rates when several key markets such as to US Japan, Hong Kong as well as an increase mix to faster growing lower HDR markets.

The increasing pressure on Ngls were seeing a second half a year is influenced by laughing about a 1% growth studios in the second half last year and by a number of macroeconomic driven factors, including less travel in key international card all due to trade and im political issues as well as the strength of the U.S. adult.

Changes in foreign exchange rates reduced Q3 growth rates in us dollars by approximately three percentage points versus last year, we estimate the changes in FX rates impacted gross bookings revenue EBITDA and EPS growth in Q3 by a similar amounts.

Q3, gross bookings grew by 4% expressed in US dollars on grew by about 7% on a constant currency basis coming in above the high end of our guidance range.

Consolidated revenue for the third quarter was $5 billion and grew by 4% in us dollars at about 7% on a constant currency basis.

Advertising and other revenue, which is mainly comprised the Cai can open table grew by 12% in Q3.

Adjusted EBITDA for Q3 was $2.5 billion, which exceeded the high end of our guidance range and was up 5% year over year on reported basis at about 8% on a constant currency basis.

Propose marketing expense declined 2% year over year, which helped drive leverage of our 150 basis points in the quarter. This leverage was driven by increased mixing room nights from a direct channel, which continues to grow faster than our paid channels, while we'll keep working to grow our dark channel over time, we continue to see performs Monte shells.

And efficient way to acquire customers and we'll maintain our approach to spend to rationally in these channels.

We spent $124 million on brand marketing in the quarter, which represented a decline of 22% versus Q3 last year contributing about 80 basis points of leverage as we mentioned on our Q2 earnings call in August we're refining and focusing our brand spend in the second half of this year.

Sales and other expense grew 13% versus Q3 of last year.

Contributed about 50 basis points, a de leverage mainly due primarily due to the growth of our payment platform applicant dotcom sales and although grew slower than motion gross bookings of 36% in the quarter due to low growth in certain payment related expenses.

Personnel expense came in slightly lower than our forecast and contributed a small amount a de leverage in the quarter.

Finally.

GNS expenses increased 41% year over year on a non-GAAP basis note. The non-GAAP Gionee expenses in Q3 last year excluded a 23 million dollar travel transaction tax charge, which negatively impacted GAAP results in the prior year.

non-GAAP Gina expenses contributed about 120 basis points to deleverage in the quarter driven by 29 million dollar year to the impact from the French due to service digital services tax as well as an additional $10 million related to travel transaction taxes from prior periods.

Our non-GAAP EPS was $45.36 up 20% versus the prior year adjusted for currency non-GAAP EPS grew about 24% in the quarter.

non-GAAP net income reflects a non-GAAP tax rate of 18.8% in Q3, which is lower than the prior year George juice, a provision of the tax tax which was classified in Q4 of last year.

Our 10% lower share count in Q3 benefited EPS in the quarter.

On a GAAP basis operating income increased by 5% and GAAP operating margins increased by 70 basis points compared to Q3 last year.

Q3, GAAP net income amounted to $1.95 billion or $45.54 per share of 23% from Q3 2018, our Q3 GAAP net income includes $49 million, our pretax unrealized losses on our equity investments in CMS, one and $72 million.

Of FX remeasurement gains on our euro bonds.