Q1 2022 Expedia Group Inc Earnings Call

In each case, a recovery that seems.

It seems too strong to be held down so the recovery has been strong and nicely. We have seen it beyond just domestic travel which of course had been.

Right spot for a long time during Covid, we're now starting to see a steady business pick up business travel pick up international travel vectors pick up so.

And I would say broadly while some geography lag all geographies are in general growing in returning.

So despite the usual caveats for Covid now have rising inflation to worry about and of course, the geopolitical situation the.

Pent up demand that's out there for travel seems to be outweighing anything the market can throw at it and we continue to be.

We are feeling very good about our summer recovery.

That should be very robust.

And as I've said before we've been spending into that recovery.

Particularly with an eye towards driving long term customer engagement buying the right customers, having the right mix of marketing to attract direct and long term valuable customers. So with an eye towards lifetime value. We are investing into that strong recovery and we will continue to do so.

As an example, our teams have done a great job of driving <unk> and App downloads wearable. According to our third party data from a company called census hours, what the number one downloaded app in North America in the first quarter.

Of the year and Thats, a place where we've had emphasis obviously our emphasis will change through the year and we'll push it to our other brands as well, but app, particularly as a place where we feel like there's a lot of long term customer value, we're improving that product dramatically.

And we think that's a great place to put capital right now.

Importantly, our direct to consumer business only part of the business and we have our big explore event coming up over the next few days in Las Vegas, where I am right now and I'm pleased to say it is packed business seems to be booming at the hotels.

But that event is with our with our business partners all of our supply partners as well as many partners with whom we drive demand and I've talked about this a little bit before but we have a thriving b to b business I haven't spent a lot of time on it but this is the week, where we will now come out and display all of the work we've done to <unk>.

Imagine the future of our business and our place in the travel ecosystem and what we've been doing for the last two years, so we're going to share that with our.

With our partners with a general focus on overall travel experience.

We're rethinking our marketplace and how our platform technology will not only drive our <unk> business, but we will enable our partners to do much more with their own businesses.

And even though I havent spent a ton of time talking about I just want to reframe that our <unk> business is a terrific business was before Covid remains.

<unk> business and we've made a lot of progress during the time of Covid to continue to expand that business, including one example, which is optimize distribution, which I think I've touched on before but this is a product that we started in partnership with Marriott.

Now just had IHG joined this year. So two of the largest global hoteliers in the world as well as many others testing on it and what it does essentially is.

It cleans up the wholesale business for these partners so wholesale rates have been a huge issue.

In the meta universe, they get let out into the world and then find their way back into meta and they ended up hurting hotel companies because there are prices out there that are under the brand dot com prices, we created technology towards this and basically help our partners get the same <unk> business and more.

Wholesale markets, but do it in a way where the prices would be protected and they would have.

And they make sure they werent undercut by their own prices out in the world. So it's going to usually successful programs for Marriott now <unk> again, and we hope many more partners will take advantage of the technology, but that's just one example of the many things we are working on talked about externalizing, our technology before we've had a white label template and a lot of ways.

Where our partners can sell other products we.

We have airlines with whom we power packages and hotel path. We recently added delta to power their car path, we've expanded our offline travel agent business and our share of wallet with our API partners. So it's a great business, we see expansion for it and as we will talk about a lot more of this we could explore.

We have a lot more ways, we think to help our partners and expand the addressable market there.

So as we move into that we will continue to accelerate innovation in our platform and that innovation will drive not only our b to C business, but also our <unk> business and that's why we're so excited about how we're rebuilding our platform.

But all in we expect 'twenty to show continued recovery, we expect a robust summer we expect to continue to drive efficiencies through the business.

And the real work this year is on delivery on delivering on the brand work, we've done which looks great. So far we're rolling out new hotels Dot Com brand work right now and I think the brands teams have done remarkable work, we've got a lot of new product innovation coming this year and we're doing a ton of work on the backend platform. So all of those things will be <unk>.

Pulling out this year and we will have some impact on this year, but really the impact is much longer term and we see great things ahead as those products get delivered so with that I hope all of you can join us at explore its going to be a great event. Our team has worked their butts off too.

To put on an amazing event for close to 3000 partners, who are here and.

If you can't make it right you to watch the streaming and it should be really exciting and it's a chance for us to really display. The work our teams have been working on for the last two years and all of the pain is taking time and effort they've put into changing our direction for the future. So with that I will leave it there.

Alright.

Thanks, everyone for joining the call as well.

While the first quarter did have some volatility travel demand has proven resilient and I remain optimistic around cyber traveling as Peter mentioned as well.

I'd like to start by reminding everyone that the first quarter without any direct contribution from the attempt to your business.

A reminder, we completed the sale of the NCI to Amex GBT on November <unk>.

In our ETF business entered into a 10 year lodging supply agreement with Amex GBT.

I'll provide certain growth rate, excluding MTR, which also exclude any contribution from the amex GBT deal in the first quarter the.

The pro forma numbers are intended and included to get more visibility into the recovery.

And also our financial performance.

Shifting now to button.

Overall for the first quarter total bookings for all products net examples.

Seven 1% versus first quarter of 2019 or down 11% excluding against them yes.

<unk> improvement versus the down 25%, we saw last quarter.

<unk> performed well during the quarter and continued above 2019 level in our hotel business is rebounding, but city in international travel coming back.

While <unk> still lag lodging in the recovery, we saw improvement throughout the first quarter, which held in April .

This quarter, we are going to provide more details into our bucket.

Right.

Our total locking button medicine, which includes hotel <unk> was down 11% in January .

2019 up 8% in February up seven.

7% in March and up approximately 10% in April .

Now onto the P&L.

Total revenue was down approximately 14%.

Versus the first quarter of 2019 are down 10%, excluding <unk>, a slight improvement versus the 17% decline we saw last quarter.

On sales and marketing direct spend in the first quarter with roughly $1 2 billion down 6% versus first quarter 2019 levels compared to the 12% decline last quarter.

As we've mentioned on that Peter mentioned, a few minutes ago, we will continue to spend into the recovery into Q2.

Moving on overhead costs, excluding <unk> were up approximately $13 million versus the fourth quarter of 2021.

Looking ahead, we expect a higher than normal annual compensation increases discussed last quarter, which took effect on April 1st will result in a notable sequential step up in overhead costs in Q2.

In total.

Adjusted EBITDA $173, roughly flat versus 2019 levels, despite revenue still down 14%.

Including the LTM adjusted EBITDA grew by 14%, which suggests we are much more fully recovered and you can see from our reported numbers.

On free cash flow.

Total roughly $2 8 billion.

The first quarter on a reported basis, excluding the change in restricted cash, which is primarily driven by the change in bareboat deferred merchant bookings free cash flow with approximately $1 9 billion.

In terms of the balance sheet, we are committed to our investment grade ratings, reducing leverage and further reducing our cost of capital. We continued to take important steps towards that and as announced last quarter. In March we completed the early redemption of our $650 million eurobond.

Followed the full repayment of our preferred stock last year and in total we have repaid over $1 9 billion in debt since last may.

And if current trends continue we will actively look to further leverage moving forward.

Recently, we also entered into a new $2 5 billion revolving credit facility, which was a real positive outcome for the company.

When compared to the old credit facility and added $500 million and liquidity of the balance sheet and removed many of the restrictions we have been operating under during the pandemic.

Overall, I'm pleased with our financial performance in the first quarter and remain quite optimistic about the recovery heading in to the summer travel.

See them.

And with that we're ready with our for our firm.

Yes.

Okay.

As a reminder, if you'd like to ask a question. Please press star followed by one when your telephone keypad.

Any reason you would like to move that question Press Star two.

Yes.

Our first question comes from Eric Sheridan with Goldman Sachs. Please proceed.

Thanks, So much for taking the question I Hope you both feel better from a bit under the weather maybe.

Maybe two on the marketing side of the equation you know longer term you guys are moving towards trying to rely marketing dollars towards more brand more more direct to consumer can you give us an update on the progression you're making there.

Just the summer travel season in 'twenty, two and how do we align those marketing dollars.

Where you want for the longer term that would be number one and number two when you see things like the mobile app.

Side of the business continued to take off how much increased confidence you have in being able to mine the element of activity. We're seeing ahead of summer 'twenty two.

Joe again create higher ROI.

In 2003 and beyond thanks, so much.

Yes, Thanks, Eric.

I'll take that I think the first one first which is <unk>.

Yes, we are we believe we can drive over time more efficient return on our marketing dollars.

And we do believe that places like brand and App present real opportunities, but the main idea is that we're trying to find and mine. The best means of return of long term return I think.

The industry has been very transactional focus.

And we haven't been great historically had measuring lifetime value and the different value of different customers coming in through different channels. We are getting much better at that in spine or at that and we will look to build that.

The long term high value customer base.

That had to repeat characteristics and high lifetime value.

That we want to drive as opposed to just chasing transactions and hoping the rest takes care of itself. So I think that's really the change. So many of these areas offer opportunity I mean Grand we've always spent a lot on brand, but I would argue not always with the best creative not always with the greatest impact not always with a clear message we're getting much much.

That is.

<unk>.

People, we've added are driving.

Great great product there.

And likewise, we have to improve the product, which goes to your second question, which is the high ROI is really about not only bringing people into the right channels, but it's also having the right engaging products. So all of the work we're putting in to create in our new App, which basically will be largely new over the course of this year.

A number of other things we're doing to engage travelers.

We're announcing a couple of new.

Product features coming out this week at our event.

So we're trying to create much higher engagement, obviously with preferred b through the App, all things being equal and and then we can drive all those other channels will spend the money, where we think we're getting the greatest return and we're driving those people into the right products. So.

It's hard to say.

Where it's going to balance out I would say until we get to more normalized times, it's really hard to get a perfect read as compared to history in terms of percentages spent on X or y or Z, but I would say our mindset is that we're looking for those veins, including App and many other things where we believe we are driving the long term customer the type of customers and acquiring it.

Type of customers that drive long term value into the business.

That's our approach.

Yes, just to add this is Eric.

Peter mentioned the concept of the.

And the improved quality and performance on the brand spend side is also that with a clear value proposition.

Product that delivers against that and then the third prong of what I would add to it as well around our loyalty program. We previously announced that we'll be launching that loyalty program.

Then come together should ultimately we can acquire customers give them a great experience.

Toward them for building a relationship with them.

And then create an ongoing dialogue with them.

And so that obviously some of those components are still in development and relaunch, but that's another component that we move forward that we're excited about.

Great. Thank you.

Thank you.

Thank you for your question.

Our next question is from.

Lloyd Wamsley with UBS. Please proceed.

Thanks, two if I can first just.

Sticking on the marketing team.

The latest update on the effort to consolidate the marketing data and operations are you finished the operational part of that effort and any further clarity around the opportunity to drive better marketing returns at some point I'm just a more coordinated effort across brands and then second one.

<unk> talked about that cost step up in overhead you guys have flagged that last quarter as well, but can you help us understand how to think about that kind of fixed cost inflation rate.

What is that on a kind of an annualized basis and how does it flow into our P&L in two key areas for the rest of the year.

Yeah. Thanks, Thanks, Lloyd I'll take the first one and Eric can take a crack at the second one.

On the consolidation world.

We're a long way along.

Bringing together the data ops out those and everything that goes to drive performance marketing, there's a long tail, obviously, because we're in lots of geos in lots of places that.

Excuse me.

Terribly impactful economically, but overtime, we wanted to get much better and so I would say.

We're a long way through that as I mentioned before getting that operationally right as great. Now we have to test a lot of things to get the benefit youre, referring to which is how do we optimize for multi brand.

Do we optimize and different geos et cetera, but.

The big heavy lift I would say on the 80 20 rule, where probably we've gotten the big stuff.

And now it's really about moving those test through <unk>.

Just mentioned finding with new veins testing all these new veins.

That's the critical work.

And right now.

We're seeing a lot of demand and we want to drive growth not just to like historic levels with better margins, but.

Higher growing levels with better margins due so we want to invest into growth.

And.

And if we see the opportunities with the right returns we will do that so I think.

I think we can drive better returns and better growth and that's the goal.

Again, the shape of the curve may change a little bit as we invest into these high value lifetime value.

Veins of opportunity but.

But we have the operational side I think a long way along it's not perfect yet, but it's a long way there and now it's just about testing everything and getting sharper on the Readouts and of course.

These are not exactly normalized times yet so some of the data is still there are places in the world, where we can't test yet because the recovery is not sufficient and so forth. So it'll take us some time, but I think the big part of it is behind us.

Yes.

Okay.

Alright, Thanks for the question I'll take the second part of it.

No our theater.

I'll take the second part of it I think to answer the question.

Again, we're not going to get into any specifics on apple necessarily flow through but hopefully a couple of.

Couple of framework will help you guys do we in there for the first one is around.

The annual wage increase again, just as a reminder, coming into or went into effect.

On April one.

So that will impact the second quarter, what I would do is I would go back and look at previous increases that you've seen it flow through and similar timelines in the past.

As I mentioned.

There is a step by wage increases.

Relative to prior years, so in effect I would go and look at what that step applied gross it up if you will.

I'll take that.

We are out there.

And then secondly, we've talked about this a bit last quarter as well, which is our hiring in Q4.

Slower than we anticipated and kind of like.

We did see some positive momentum and hiring in the first quarter.

Check that.

In 2022 as well.

So yes.

From an overhead perspective, I suspect that there will be some increases as we go through the year, if we want to invest in our technology platform product in other areas of the business.

As Peter has mentioned.

So the two primary pump components that I would call out and relative timing for wage increase hopefully that's helpful. Good luck.

Okay. Thanks Hope you guys feel better.

Thank you.

Sure.

Thank you for your question.

Our next question is from Kevin Kopelman with Cowen <unk> Company. Please proceed.

Great. Thanks, a lot could you give us some more color on faribault and how it's trending.

As the year goes on and maybe touch on the supply and carve out how.

That's growing detailed supply constraints.

Yes sure.

As Eric mentioned <unk> remains.

Above.

And nicely above 2019 levels.

We are somewhat supply constrained, we will certainly sell out of many of our top locations for this summer we're already seeing that that is where our focus on supply has been to add supply in the markets, where we know we're most constrained and that's been really good in terms of when we add supply we know we can move it in.

And our parts.

Suppliers get great outcomes and everybody wins.

We haven't had as much focus, though we are turning our attention to that now.

The broader overall supply gains and again, we're going to stick to what we do well, which is whole home vacation areas.

Not compete we're not going to pivot and go after cities accepted their vacations that each essentially.

No.

We're sticking to our.

Our main product line here and what we know works and what we know our travelers want but.

I would say the answer is yes, we are a little bit supply constrained, we could certainly move more supply in our most.

High demand markets, but that is where our focus on supply has been and we are kind of gearing up the machine more broadly to go after not just that but more broad supply in places, where we think it will now come back more globally.

Great. Thanks, Peter and a quick follow up if I could.

Looking at the lodging recovery, it's been pretty stable improves a little bit February through to April underneath that.

Are we seeing for part of seasonality play out in that or is it just it's been pretty stable.

Yes, I would say verbal.

<unk> been relatively stable.

Theres been some funkiness over Covid with month to month, where demand has been high in a certain area because of where the waves were and other things, but I would say broadly verbose.

Verbose performance has been strong.

Seeing lots of new customers coming to the product.

I think the first quarter with around 50% of it was new customers. So we're getting a lot of.

A lot of new customers, we're getting a lot of repeat and we're building that base of customers, who have had great experiences with the product. So I think.

We feel like that will continue obviously.

As hotel comes back more strongly.

Another mixed factor that will potentially change where the where the strength is but we think verbal will stay strong just hotel will get better.

Alright, Thanks Peter.

You bet. Thanks.

Thank you for your question.

Yes.

Our next question comes from Deepak, Matt Matthew Zanun with Wolfe. Please proceed.

Great. Thanks for taking the question so first just Pete.

Peter I wanted to ask a little bit more about the last question the cadence off accommodations bookings and it seems like somewhat flattened out between March and April around like high single digit low double digits.

Curious any additional color you can add to that maybe geographically or maybe something specific and then secondly kind of related to that wanted to ask you. How do you think about the travel demand sensitivity too.

Consumer spending levels, and maybe other macro variables, which clearly doesn't seem like it's an issue right now, but how do you think an even planned for second half.

Michael trends start to become more impactful.

Yes, I mean, so far let me take the second one first.

I'd say, so far notwithstanding what we all read about or watching CNBC, so far the macro.

Economic environment has not appeared to have a noticeable impact on the recovery in travel.

I'll make our hypotheses about people having had lots of savings during COVID-19.

<unk> been under spent in leisure and hospitality.

But people are spending into it and our general assumption right now is that.

That will continue in that.

Perhaps as things get as people feel the impact they may.

Downscale, what they are trying to do for holiday or go to a cheaper alternative but not that they won't travel. So we expect that demand to continue.

Obviously impossible to say long term, what happens with inflation and everything else but.

And obviously that could have an impact on ADR, but ADR is particularly in the middle and upper end of the market continued to be really really strong so.

Theres no noticeable I go Thats, something really pivoted in the last few months.

But of course.

Long term, it's hard to say.

As far as bookings flattening out in April .

Again challenging to say with the ups and downs of the various travel in factors and what's going on in the World. We don't think there's anything to be much to be read into that I think we feel good about where April is it continues to show relative momentum.

And we expect that to continue through the summer so.

I wouldn't at least we're not reading much into that right now it's been bumpy all the way along ups.

<unk> Downs.

And I think holidays, and other things start to impact and back to work is starting to impact things. So.

We will see in another quarter, but I don't think thats.

Suggests anything that makes us.

Our eyes effort get concerned.

Got it.

This is Eric.

Yeah, Hey, Deepak.

Use the word planning so let me, let me respond to that but from a planning perspective.

Generally as you think about our marketing spend a large percentage of that of course is on the performance or variable marketing side. We now have instrumentation, which we've talked a lot about that allows us to see on a real time basis, what that demand, but kind of looking like what the CPC as youre looking like where we can allocate capital across the different performance channels different.

Fees et cetera. So ultimately we have the ability to see it in real time, and ultimately make capital allocation decisions based on what we're seeing of course brand spend is a bit more batching.

But at this point, what we're seeing in everything that Peter just walked through we continue to be optimistic about that.

Summer and beyond at this point and if that changes then we'll adjust our how do we think about it.

Yes.

And I guess, maybe it will have prominent we've dealt with a lot of volatility before over the last few years.

A lot of its implementation based on now and that sort of things get more volatile will be in a position to make appropriate decisions in real time.

Yes makes a lot of sense. Thank you so much hope you feel better.

Thanks.

We will see what happens when you start traveling again and shaking People's hands are bound to get a cold.

Yeah.

Thank you for your question.

Our next question is from that Khan with <unk>.

We received.

Yes.

Yes, thanks, Thanks, a lot.

Wanted to dig a little bit into the.

The commentary on the knee users on global I think Peter you mentioned.

At least 50% of the.

On the bookings came from the easing of 50%.

I'm just.

Yeah.

Just trying to figure out how.

How are you planning hiring getting the Hollywood quieting.

Yes.

And word of mouth.

Primarily through performance.

Credit or commentary would be helpful.

The second question I had is just on the and then again.

The improvement in.

And airborne and cross border on.

And business travelers maybe.

In terms of how the bookings and the.

Sub segments that you're comparing versus 2019.

Yes sure.

First on <unk> I would say.

Remember that we that we largely pulled out of performance in North America, and verbal we still use it in some other markets but.

So it's not it's not generally coming through performance marketing it is coming through direct channels.

But as you know we've spent up considerably and brand marketing on <unk>, we were in the pregame show for the Super Bowl, we've been aggressive there.

Been aggressive.

<unk> marketing.

And some other vectors. So I think we've done really nicely there and the team has been very effective in that.

And.

And again I think robo is becoming.

As it has grown and grown through Covid, it's just become more of a known and evolve the brand has landed finally, which.

The initial work on that three years ago was maybe not as good as it could have been but over the course of COVID-19 and with the benefit of.

Better bigger spending.

We've done really well with it so I think we're just riding the momentum of all of that good work.

As far as.

The return of urban and cross border travel I would say, it's all directionally up into the right varying degrees big cities remain still considerably below.

Where they work, but moving in the right direction and we're seeing those recoveries coming back.

We're seeing some of the booking trends for summer in terms of Big International City destinations holiday destinations coming back cross border certainly domestic out of North America.

Alright Cross border out of North America is now recovered above 2019 levels. So again, that's not true for everywhere, it's not true for EMEA.

Not true for some other places, but certainly for APAC.

But all markets are generally up into the right and all products are basically up into the right. So just depends how far behind they started so business big cities still a ways behind but coming back I think international will be the first to break out and come back to historic levels and then we will see the other the other two categories.

Follow up.

Great. Thank you.

Yes and of course international is good for us that's a market both in the U S and in EMEA, where we tend to over index.

Understood.

Thank you for your question.

Our next question comes from Mark Mahaney with Evercore. Please proceed.

Okay. Thanks, two questions. Please first just we Havent mentioned IBSA at this call. So just any quick commentary on whether you.

The efficacy of your App.

Marketing campaigns, and whether you think youre back to parity or it wasn't a major issue for you in the first place and then.

I think Peter you talked a lot in the beginning about the <unk> opportunity if you click down a little bit more than you typically do.

Spent a little bit more time on.

Helping of size that opportunity for for Expedia.

Versus the core market that <unk> been and just talk about the relative attractiveness of that opportunity. Thank you.

Yes.

Easy easy one on the first one it hasn't been a major issue for us.

We werent, probably where you wanted to be in App marketing before now we're in a much better place we've been much more effective and so far <unk> not had a material impact on <unk>.

Where we were historically so.

It hasnt been an issue for us.

On <unk>.

For the question because it's my favorite topic.

I think this is an area of our business that's been underrated by the markets and.

As an opportunity for a significant opportunity for us and.

We've talked about it before but we power many of the biggest financial institutions in the world and their rewards programs, where they have travel with power things like AARP membership travel.

All kinds of things like that we have a huge basis offline travel agents of regional players in regions, where we don't play with our brands we power.

And on and on and on and Theres, a bunch of interesting opportunities in Fintech and other areas that are coming online. So we've had this traditional business, which has been about templates about giving people the access to our supply so they could sell it so imagine an airline sales.

Sales of package with a hotel et cetera, we're driving that hotel in that package very often so there's all kinds of that business. It's been out there, but historically, we've only been able to do it for the largest partners because it took a lot of bespoke work.

To do the.

To get the integration to work.

But what's really exciting what we're all excited about is we're rebuilding the platform now in a way where it will be much more self service.

Much more.

Well to go for the biggest down to the smallest partners, so that anybody who wants to be in the travel business or any of our partners, who want to sell incremental products or use our technology to drive incremental benefit to their business will be able to access it and we think that's really going to dramatically enhance the potential size of the market we have to deliver it.

There's a lot of work still to do but.

Every day as I talked about optimize distribution, we have more and more partners coming on to products like that and and these constitute really significant opportunities for us broadly in 2019, our <unk> business was.

Very sizable.

Taking broke it out but it was significant in that measured in the many many billions of dollars of <unk>.

When we see the opportunity to grow that significantly over time and I would say, we think our <unk> business will accelerate beyond where it was growing historically, but we think the <unk> business will accelerate even faster.

We will outgrow on a percentage basis.

<unk> business for the next several years.

Okay.

Thank you Peter.

Beth.

Thank you for your question.

Our next question comes from Justin Post with Bank of America. Please proceed.

Great. Thank you a couple of questions on your monthly growth rates.

Average the first quarter.

Around plus one or 2% for lodging.

And I think the total is minus <unk> 11, so let's call it GAAP 12 points or so.

I think it has been somewhat consistent for the last few quarters.

Can that gap starts to close as early coverage.

What other drivers are of that gap and then the second question.

Looks like growth is pretty stable on a monthly basis for the last.

Three months, I guess, I would expect a little bit better as international reopens, how did the comps look going forward from here over the summer. Thank you.

Yes, I'll take.

Probably take both of them so on the first one.

Yes, the way to give any other metrics.

Great.

On the CBD line that not all products are recovered at the same at the same rate are dealt within the year.

From a coverage standpoint.

Thanks, Brian .

We have seen an acceleration however, an error.

Peter went through a lot of the different intersections are back.

I would add Eric is while we have seen that.

Well.

It.

It does hit a number of the intersections that are still call it behind where we've been benefiting profit with the last few quarters, which of course are you at.

Darryl.

Et cetera et cetera.

So over the over the course of the year, we would expect.

Sure.

That trial at the Eric come back is there more planes in the air as Theyre more international flights et cetera, but there are some headwinds there.

As we all have heard from airlines around staffing and other.

Yes.

Great.

I would say here is the primary driver as you pointed out.

On the comps for the summer.

I would say that.

Nothing particularly that.

I would call out.

Obviously, there are a few months, there where depending on the year youre comparing against.

Barbell happens, we'll take a really strong months and Ross you go back to that.

2019.

But from a comp perspective.

Great. Thank you.

Okay.

Thank you for your question.

Our next question comes from Tom Champion with Piper. Please proceed.

Hi, good afternoon.

Just curious if you could talk about international travel a little bit more domestic.

And entirely and exceeded.

2019 levels on the revenue side for for domestic travel.

What do you think is kind of an appropriate timeline.

Or pace of recovery to get back to.

To pre pandemic levels on.

On the revenue side and then.

Eric I'm wondering if you could talk a little bit more about.

The balance sheet. It sounds like debt reduction is your focus for now, but just curious if there are any thresholds to keep in mind.

That youre looking to achieve.

You had shift back to buybacks or another.

Use of cash.

Thank you.

Yes.

Yes, Thanks, Tom.

On the international front as I mentioned that we're already seeing for example out of North America.

International levels have recovered across above 2019 levels at least on a dollar volume basis.

So, but again it has driven market by market, so EMEA trails that AP.

Apex far worse than flat Ams in between so.

The trajectory of when it's all back and what does that what does that.

How does that comp over a normalized pre COVID-19 year.

Yes, we're intending to do more with COVID-19 than anything else, but I think.

As we've seen before the bigger travel markets in the west have buoyed.

The category and particularly for us since we are concentrated more in there.

I think we could easily get to.

Pre COVID-19 international levels of volume and dollar volume before the whole world recovers, but it's a little hard to predict because without the whole world recovery other areas have to over index.

Right now we feel good about it I mean, nor Ams are our home market and its great that it is leading the charge.

But obviously too.

Really comp to prior periods in totality, we could use the rest of the world coming back a little more.

But I expect.

Highly possible that by the summer we could be.

We can be at levels.

Mix would be different and some of them would have to do with dollar volumes in <unk>, where we can be at levels above where we were in 2019.

Yes.

The second part of your question. Thanks for the question Tom around the balance sheet.

I think you should assume and also.

That's something that we are having that conversation regularly.

When it comes to our balance sheet, our accounts like that position and ultimately.

Returning cash to shareholders in one form or another.

Mentioned numerous times.

The investment grade rating is important to us we're committed to.

Being investment grade.

It does require us to delever, a little bit to where we are right now and also.

On track from the standpoint of reducing our interest expense.

And as we do that we are then also contemplating and what other capital return would look.

It looked like but don't have anything to announce necessarily today.

The guide you on the.

Mileposts or whatever.

We're currently at four five times trailing EBITDA for mob.

With perspective, it's a bit different on our current leverage ratio for our revolver, but.

So the headline number and if you look at our historical level of leverage that will come down.

Five time, and so I wouldn't necessarily say that $2 five.

Their marker if you will so that is certainly the order of magnitude that we're looking at from that to get our debt down.

That leverage ratio down.

I think that opens up the opportunities for capital returns. Another forum and also remember that there are two primary ways that we can get that ratio down wanted paying down debt, which is something that we are.

Thinking about that.

Rolling into it from an EPS standpoint, we do expect EBITDA.

But as we get into this year as we get more fully recovered and.

And we're certainly going to look at.

Our ratios in this area to open up some more option for them.

Thank you Beth.

Thank you Bill.

Thank you for your question.

Our next question comes from Lee Horowitz with Deutsche Bank. Please proceed.

Great. Thanks for the question two if I could.

Our cow strike U S hotel business has grown increasingly competitive kind of through Covid and in recent months I Wonder if you can comment at all on what you're seeing from competitive standpoint in the U S. Specifically say now versus the pre Covid environment, and then maybe I'd take rates.

With take rate this year being a function above the pace of the overall industry recovery as well as the relative recovery rates of some of the products that we've talked about at this point how do you think about how take rates may evolve in 'twenty to say relative to the.

Levels, we saw in 2019, thanks, so much.

Yes, maybe I could actually when your first question are you asking competitiveness between us and other players or the competitiveness between hotel I'm not sure I understand the question.

No I guess between you and other players within the U S Hotel market.

Yes, I mean look I think as we've talked about before our main competitor has been highly aggressive. This is obviously a market where we are relatively dominant and they want more of the business and we've talked about how COVID-19 and.

Kind of the changes in demand patterns, we are helping them and hurting us in terms of.

Long tail properties in smaller markets as against our relative strength in big cities.

And international travelers et cetera.

So there is certainly focused on it and competitive.

We watch what they do but I think we feel pretty good about our opportunity to continue to grow in the U S and obviously, we expect them to compete hard but.

Got it.

It's our home market and were strong here and we think we have the tools, we need to be competitive and when demand patterns returned to more normal C. I think youll see.

They were pretty much.

Where we were.

We may each make slightly different choices about where we think the long term value isn't customer base, but.

But I don't think Theres any theres.

There is not really something to see there from our perspective right now.

In terms of take rate.

All I can say is that we've renewed a lot of deals throughout COVID-19.

They've been good renewals not not big bites.

And our take rates have been pretty consistent and held so I think there is no.

Sky is falling so we can't pay anybody and equally.

I think it's going the other way but.

We're also building in more opportunities in places like air and things like that where we think there is opportunity to help our partners sell more premium products, so ancillary products with.

With there.

Air tickets, we historically have not really been able to sell things like seat assignments.

Bags and other things and know that increasingly we are direct connecting with airlines. We are now able to sell those things and actually had explore this week. We will have a demo of a new product that we use to help shoppers shop smarter and pick the right product for themselves and it's helping drive.

Premium products and attach rates. So we have a lot of opportunity to do better there.

We got to make it happen, but I think but in terms of the core deals with our partners I think we are in fine shape.

Yes, just with adequate great. Thanks, so much.

The surround.

Yes.

Just a reminder.

Q1 take rate tends.

<unk> tends to be our our seasonal low for the year I think you can see that.

Q1 relative to Q4, and some of our historical numbers and so as you're modeling will ensure that you are taking a look at that the.

Seasonal curve that we experienced in the past and I expect that that curve to be similar this year than it has been.

Thanks, so much.

Yes.

Yeah.

Thank you for your question.

Alright.

Our next question is from Brian Nowak with Morgan Stanley . Please proceed.

Great. Thanks for taking my questions guys I have two.

I appreciate the color about the monthly bookings trends versus versus 2019 I was wondering if there's a lot of investor questions. About this can you just help us understand a little bit, whereas the core hotel business bookings trends are versus 19, even versus those 11 87 numbers. You gave you. So we have a better a rough idea of how that bill.

This is doing through <unk> air and all the other pieces that go on in bookings. That's the first one and then second one sort of a big picture question you have a lot of improvements you've made to the sites and Theres a lot more improvements to come could you just talk to us about progress you've made around traffic conversion and where you still see more low hanging fruit opportunities.

However, you look at it whether it's searches conversions app opens et cetera. What are you seeing on the conversion front and where do you see the biggest opportunity is to kind of further fix that going forward. Thanks.

Okay, maybe I'll take the second one first and then Eric can give a little color on the first.

I would say thanks, Brian .

The low hanging fruit, let me just kind of root everybody and where we've been which is when you re architected in the whole platform and.

Finally, consolidating these different tech stacks and everything else Theres a lot of foundational work that goes into that and as a result, there is way less feature work.

Test and learning going on every moment of every day, because you've got these big heavy lifts to move.

To move on to the same stacks in fact.

This quarter, we have made huge progress moving hotels dot com onto the Expedia stack and we will be consolidating that over the coming months.

And then those things unlock huge opportunities for us from an efficiency standpoint from the opportunity to innovate across a wider breadth of travelers and we'll get more benefits every Java. So we've just started to ramp up.

Ramped back up our sort of historical AB testing into conversion and the exciting part is increasingly we can do that with machine learning and not just with people designing different products. We've had a lot of wind some of the products, we're rolling out and explore we've mentioned the smart shopping idea.

We're getting people to buy more premium products all of those things are helping with conversion and helping with.

If you will dollars per transaction and those kinds of issues.

So we're seeing it in a number of places, but I would say, we're still like just reignite that work because we've been so busy on foundational work. So I think there's probably a lot of low hanging fruit to be had we do have some exciting products rolling out features rolling out this week and we will continue to do that but that's a few things.

Really big day in day out.

AAV testing machine learning driving better conversion, it's really impactful when you get it right and when you're when you're not doing it certainly slows down so.

I think theres, a lot of opportunity, but I cant I could give you a thousand.

It's hard to give you two that are going to be the difference makers. It's a bunch of little things that make a difference and we're in a much better place. If you think about even just the <unk> hotels Dot. Com example, I gave you we would have to test things on our Delta Com test different things on Expedia test other things on <unk>, we will get to a place where.

We will be able to test everything across everything and Thats, just a much more impactful way to make change and drive better traveler outcomes and better conversion. So that's what we're focused on on that front.

Yes, just to add to that and then I'll take the first part of the question just around one of the things that.

We're excited about is that we're starting to see some of the power of our data come through the use of machine learning on the site as well we now have.

<unk> modeled live on the site that is starting to drive more personalized experiences.

For our travel for our travelers our customers.

And what that ultimately means that we can imagine the entire site ultimately as we worked through it will be machine learning and the more that we know about customer more than we know about travelers tomorrow. They sign up for our loyalty program interact with our App interact and book with us that ultimately that werent able to provide more and more personalized service.

What's exciting is that we're in.

Seeing those models live and starting to see some good early returns from that but that would be one component.

That's what Peter mentioned on the core hotel.

Right.

I think I would point.

Two components I think we've talked about them a little bit already won it.

Our strong and our core hotel business.

We're seeing that in the U S and in other more in North America, and other places as well.

And then secondly.

That's around core hotel volume.

We're not going into specifics necessarily between <unk> and hotel on bolt ons.

But we are seeing that vector.

Got it.

Peru across nearly all if not all geographies. So it had improved.

In the U S.

But over the sort of continued to improve over time.

And in other geographies as well.

The hotel business the core hotel business.

Much healthier is it Ben.

<unk>.

And are excited.

And you're operating from.

Okay. Thank you both.

Thank you Phil.

Thank you for your question.

Our next question comes from Jed Kelly with Oppenheimer. Please proceed.

Hey, great. Thanks for taking my question.

Just talking just going back to some of the.

Gains you've made in customer service efficiencies you've talked about on past calls can you give us an update on the progress there in terms of driving more leverage.

As a business and then just this weekend at.

The explore conference.

Any update.

Providing I'm, putting more verbal inventory on brand Expedia or hotels dot com. Thank you.

Yes.

Go ahead go there.

Yes, one on that.

Take the peterbilt.

Feel free to add a little color and then you can take the second one I.

Thank you will note in our results this quarter.

Cost of sales.

Which one.

Down.

Pretty significantly relative to 2019, and that's driven by a number of different opportunities.

Lower head count within that couple of sales across the revenue.

Also.

Yes.

The use of technology has allowed us to read the portfolio to add use case after use kt in regards to using our.

Communications are.

Learning a to that type of opportunity for the customers and that results in a better customer experience, we're getting improved NPS scores, while also driving more efficiency in the business as well so again.

Good results there, we can start to see those coming through the numbers I do want to point out on the cost of sales side. There are a couple of other moving parts and again just for everyone's edification.

The.

Revenue across our sales compared with the merchant fee customer service cloud fulfillment.

Largely volume driven.

In the quarter. This was the first quarter, where we did not have the chance and we did have against there for a month in Q4. So when you are comparing against Q4 remember that.

<unk> came out.

Another thing that we're seeing in the crop on the cost side.

Great improvement as we've talked a lot about.

The number of complex calls, we're getting do you see the COVID-19 disruption that particularly on the air side, which are particularly difficult to manage and we're starting to see that come down.

Throughout the year in the.

The quarter as well, we're getting toward the cleaning them up. So there are fewer of them, we're getting better technology and we have some new technology, that's being released around more automation, where travelers can manage that process.

All good all good progress on the cost of cost.

Cost of sales side and going forward and of course is influenced by seasonality and the call center volume increasing in the summer again.

At this point, we feel pretty good about the progress we're making.

Yeah, and I'll, just just to close on that point before I take the other one.

As things normalize and we get out of these COVID-19 tons of as Eric mentioned, all these old flight cancellations. There is a higher much higher propensity of flight cancellations still than there was pre COVID-19.

And major disruptions like when we get to normalized we should see more benefit even that we've seen so far in our service economics.

So that's more to come but should be good news as far as the verbal on Expedia et cetera.

As I mentioned, we are consolidating the front end platforms right now we've come a long way on hotels Dot Com <unk> is next to go for us and when those things come together onto one front end platform, it's going to be a much much much better experience for our customers coming through whatever channel they come through to get to book Bravo.

Content.

And this is another place where our <unk> business will benefit because we know we have many rewards programs and other places who want our verbal content. So we will have yet again, another way to drive demand through our <unk> partners with products, we haven't always been able to deliver to them because of the complexity. So this is a foundation.

One thing we're doing it's not so much about the tip of the spear I can we put more properties on Expedia, it's really about merging those stacks and getting them. All on one front ends back and when we do that which is coming this year, but still work to be done that will free up a lot of opportunity for us there.

Drive that and innovate around how that experience should work in terms of booking verbose to other brands.

Thank you.

Thank you.

Sure.

Our final question comes from Brian Fitzgerald with Wells Fargo.

Please proceed.

Thanks, guys I wanted to ask your view on some of the shifts.

The regulatory landscape with DMA in the EU and some similar proposals elsewhere. It sounds like these could introduce some friction between Google search and some of their vertical products like hotel I was wondering if you could give us a view on how Google hotels is impact of competition and.

<unk> auctions, and if youre seeing lower volumes going into Google hotels matter, if that could be a tailwind for your customer acquisition costs.

Yes.

Not so much we haven't seen the volumes really decrease.

I think directionally, what he's trying to do.

Makes sense, but it hasnt been very impactful and there is a lot of.

Debate going on with the commissioners about how to wrangle.

Google meta and weather.

The industry has a view on whether it's fair or not but how do you might go about <unk> generally been more aggressive than than the U S.

A reconciliation, but how they might go about trying to.

Do we have Google to deliver a fair fair marketplace, but so far.

We have not seen any real reduction Google matter continues to be extremely strong.

And an important obviously therefore, an important place for all of us to have to deal with so I don't think don't think we're going to see much change there.

Yes, okay.

Thanks Peter.

And with that I think that was our last question.

I just wanted to be clear if I can.

Some of you might be able to make it or might be making into our explore conference that you can't.

Invite you if you can to make time to watch it streamed or <unk>.

We've been a little cagy, because we have a lot of rollouts coming in terms of product delivery and some exciting things that are coming out and I think if you get a chance you'll get a better understanding of what our <unk> ambition is but suffice it to say that we think this is an important time for us to pivot in the industry and really explain to the industry.

How we're going to be a different player in the market and an enabling player in the market and we believe it's going to allow us to expand the marketplace for our partners and ourselves dramatically. So so.

So if you get a chance. Please please tune in and otherwise. Thank you all for your time.

We will talk to you in a quarter take care.

That concludes today's call you may now disconnect your lines have a nice day.

Okay.