Q2 2022 Airbnb Inc Earnings Call
Good afternoon, and thank you for joining Airbnb is earnings conference call for the second quarter of 2022.
I'll now hand, the call over to Ali merits VP of Finance. Please go ahead.
Good afternoon.
And welcome to Airbnb second quarter of 2022 earnings call. Thank you for joining us today.
On the call today, we have Airbnb is co founder and CEO , Brian <unk>, and our Chief Financial Officer, Dave Stevenson.
Earlier today, we issued a shareholder letter with our financial results and commentary for our second quarter of 2022.
These items were posted on the Investor Relations section of Airbnb website.
During the call, we'll make brief opening remarks, and then spend the remainder of time on Q&A.
Before I turn it over to Brian I would like to remind everyone that we will be making forward looking statements on this call that involve a number of risks and uncertainties.
Actual results may differ materially from those expressed or implied in the forward looking statements due to a variety of factors.
These factors are described under forward looking statements in our shareholder letter and in our most recent filings with the Securities and Exchange Commission.
For you to consider these factors and remind you that we undertake no obligation to update the information contained on this call to reflect subsequent events or circumstances, you should be aware that these statements should be considered estimates only and are not a guarantee of future performance.
Also during this call we will discuss some non-GAAP financial measures, we've provided reconciliations to the most directly comparable GAAP financial measures in the shareholder letter posted to our Investor Relations website.
non-GAAP measures are not intended to be substitute for our GAAP results.
And with that I will pass the call to Brian .
Okay.
Alright, Thank you Ali and good afternoon, everyone. Thanks for joining.
Our Q2 results demonstrate that Airbnb has achieved growth and profitability at scale.
From a growth perspective.
<unk> 103 million nights and experiences Buck.
Now this was our largest quarterly number ever revenue was $2 1 billion up 58% from last year or 64% excluding foreign exchange.
Gross booking value was $17 billion.
Up 27% for last year or 34% if you exclude foreign exchange.
Now both revenue and <unk> were 73% higher than Q2, 2019 significantly outperforming the travel industry.
Now from a profitability perspective, we had our most profitable Q2 ever.
Net income of $379 million.
It was a nearly $700 million improvement from Q2 2019 adjusted.
Adjusted EBITDA was $711 million.
This represents a 34% adjusted EBITDA margin.
Which is significantly up from the 16% margin in Q2 2021, a negative 4% in Q2 2019.
Finally, we generated $795 million of free cash flow.
Now this is a $1 $1 billion improvement.
Nearly $300 million of cash burn two years ago at the depth of the pandemic.
Over the last 12 months.
Airbnb generated $3 billion in free cash flow of nearly $3 billion.
And ended the quarter with nearly $10 billion in cash.
So what explains this transformation in our business.
Well first our business model is adaptable we've nearly every type of space at nearly every location. So however, travel changes, we can adapt and regardless of the economic environment, our guests come to Airbnb, because they can find great value in our host can earn extra income.
We have relentlessly innovate it will all still staying focused and disciplined when the pandemic began in 2020, we made some incredibly difficult decisions, we significantly reduced spending making us a leaner and more focused company and we've kept this disciplined EVAR centers, allowing us to keep the hiring and investment plans made at the beginning of year.
Airbnb is well positioned for whatever lies ahead in.
In fact, we're so confident in our long term growth and profitability that today, we're announcing a $2 billion share repurchase program.
And this is coming only a year and a half after our IPO.
Now returning to our Q2 results our strong financial performance is driven by a number of positive business trends.
First guest demand and Airbnb is as high as ever in Q2, we surpassed a 103 million nights and experiences book, marking our highest quarterly number ever now despite broader macroeconomic concerns we still saw a 25% increase in nice and experiences book compared to the quarter of 2021.
Now early in Q2.
<unk> gas demand exceeded our expectations.
This was because gas in Europe , and North America booked earlier than they have historically.
Now given this earlier booking growth rates compared to last year decelerated in May and June .
And since the end of Q2, what we've seen is growth and nice book Reaccelerate from June to July as we enter peak travel season.
Second.
Guests continue to return to cities and cross borders and.
In previous quarters, we've talked about how we saw significant growth driven by surges in domestic travel as well as travel the world destinations.
Now these trends continue but we're also seeing guests returning to cities and crossing borders above pre pandemic levels.
<unk>.
Guests continue to stay longer and Airbnb theyre not just traveling here maybe they are now living on Airbnb. We saw long term stays have 28 days or more remain our fastest growing category by tripling compared to 2019 and long term stays has increased nearly 25% from a year ago and actually long term stays have increased almost 90% since Q2.
<unk> 2019.
Fourth guest demand is driving growth of our host community.
We continue to see the strongest supply increases in areas of greatest demand with non urban active listings up 50% compared to Q2 2019.
But as demand is returning to cities.
We're also seeing an increase in total urban supply.
And we believe the upgrades, we introduced last year, including our new host Onboarding flow and air cover are supporting this growth, but we're not stopping there so youre going to see some exciting new product features to recruit the next generation of host later this year.
Finally, I'd like to share a few highlights from the 2022 summer release.
In May we introduced Airbnb categories.
Since launch listings and Airbnb categories have been viewed more than 180 million times.
Do categories, we are distributing gas discovery across more destinations and dates.
Now we also introduced air cover for gas.
Launch the net promoter score for guests that had an issue with this day has already improved.
And the rail incident instance, where a host cancels.
Recovery led to 10% more re bookings.
So to recap.
We achieved significant milestones this quarter with our results 19 experiences booked were our highest ever revenue and adjusted EBITDA were records for Q2 and free cash flow was $795 million in the last 12 months, we generated nearly $3 billion in free cash flow.
Now before I go to questions I want to talk about an update on my co founder J W.
Last month's Joe announced that he'll be stepping down from his full time operating role.
Joe will continue to serve on the board of directors of both Airbnb and Airbnb Dot Org.
Airbnb is a founder led company. So he is going to continue to take a role at Airbnb and this will be as an advisor to me on future concepts and creative culture.
Since the beginning Joe has always been focused on big ideas to help other.
These are uncompromising true north so it will be fun to be able to spend more time with them on dreaming up new ideas just like the early days.
And as I reflect back on the last 14 years together.
I just can't believe how lucky Joni and I have been.
If anything I'd just gone a few degrees in a different direction I wouldn't be doing this call a few right now that.
How fragile ideas are and it's what gives me gratitude to know germinate.
And what I'm most thankful for is that we're still together still meeting every Sunday 14 years. After we started we built a dream together and now.
After all these years, we still continue to train.
So thank you Joe.
And with that David and I look forward to answer your questions.
If you'd like to ask a question. Please press Star then one on your telephone keypad.
Our first question is from Lloyd Walmsley with UBS. Your line is open.
Thanks, a lot two questions. If I can first just it looks like room nights and experiences book grew a little bit sequentially less in <unk>. This year than it did in 19 and similar to the guidance looks like it's calling for a little bit slower sequential growth just wondering if there's anything you'd call out.
Behind that and then secondly.
Can you give us an update on what youre seeing around just how people are using the platform post some of the new search and discovery innovations. This summer are you seeing demand move into a wider dispersion of areas.
Any changes in conversion rates.
Early learnings from some of those innovations this past summer.
Okay. Thank you very much Dave why don't you take the first question about Q2 Q3 growth I'd like to talk a little bit about how the launch of new categories affected how people use every day.
Yes, I was talking to our Q2 gross nights before the cancellations that you came in actually above our internal expectations. We did see some elevated cancellations in the back of the quarter relative to our forecast we believe that some of the elevated cancellations related to flight cancellations around the world, but it was mostly in North America towards the end of Q2.
<unk>, we're just seeing strong overall nights.
The 25% year over year growth in nitrogen experiences and we feel very.
I'm confident in and the same having the same results for Q3, we also feel quite good about we're just seeing strong demand for guests travel all around the world.
And just to answer the second question.
Just to give a little bit of background for decades travel searches work. The same way there is a box a search box and you are asked to enter our location and the problem with that is that Airbnb is in 100000 locations all over the world and so people cant. Thank the type and 100000 destinations into a search box and so people missed billings.
Airbnb is they would have never known to search for and the reason. This is important as you asked is.
Because we think that categories are the categories can allow us to point demand to where behalf supply because I think it was one of the really big opportunities. So as I said.
Since release listings and everybody categories have been viewed over 180 million times. We've also seen that guests are now showing more flexibility with their data and their destinations than before so for example.
Typical search properties are 30 miles further apart than they would have been before so we are seeing search radiuses increase and additionally, we are seeing more people continue to use the flexible data feature. So we believe our theory is working.
Airbnb categories allows us to highlight what makes us unique that allows us to point commander rehab supply and I also think it also helps us be in this <unk> business, where people start to travel on Airbnb.
Okay. Thank you.
Our next question is from Mario Lu with Barclays. Your line is open.
Yes.
Great. Thanks for taking the questions. So the first one's on new initiatives.
So when you look at the third quarter guidance seems like bookings is expected to contract by more than 10 points and <unk>.
<unk> 2019 versus the second quarter, So does that change the timing our focus on these other new initiatives such as experiences or are more resources now.
Focus back on the core business.
No I mean, we have a very consistent strategy and our strategy is number one we want to unlock the next generation of hubs. We have 4 million hosted on Airbnb and I think that millions more can turn to hosting especially during these economic times. So that I think is really priority number one.
As we add more hosts we continue to grow we want airbnb to be the ultimate hosts to our guests and that's why we offered are copper brake continue to provide better service all over the world, but continue to up level and.
Guests arent just traveling Airbnb are now living in Airbnb, and so we want to continue to offer more opportunities for them to travel and live on Airbnb. So we are still focused on our core business.
Is the priority for US we are also continuing to invest in long term stays and other initiatives and most importantly, providing an incredible service that people love and I would also just say I mean again, we're feeling really really solid good about Q3.
Yes.
So I'm going to ask on Brian's comment, yes, we do really feel good about the stable bookings in Q3 in particular, given we have long lead times that we're seeing we're seeing some pull forward for summer travel here in Q2, and just the broader economic conditions overall.
If you look at our gross booking value growth versus 2019 Q.
Q1 was 73% Q2, 73%, we're just seeing strong gross booking value growth relative to 2019 and to see further kind of quarter over quarter acceleration will just need to see continued to recover recovery in Europe , and APAC, which remains significantly depressed so.
Great and just a follow up speaking of APAC, you guys mentioned that.
Domestic business is shutting down in China.
Which I believe you guys said was around what percent of your business.
Is there any other color you can provide in terms of the P&L impacts from shutting that down.
Any color on how large the outbound bookings for China. Thanks.
Okay.
Yes, I mean, the China business is.
Been a small part of our business overall I mean, it's had less of a 1% impact on our revenue.
One of the things that has been important in us getting out of the domestic business in China is maintaining a focus on what we think is the most valuable and important part of China, which is the outbound business. So really what we've done is we've shifted all of the resources that we're applying in splitting between both domestic and outbound travel we focused all of that on the outbound which we.
Pink is.
Greater prize and the most important part from a long term.
Until China.
There are COVID-19 policy kind of in place and allowing people to kind of travel outbound from China. It will kind of remain to be <unk>.
But.
As that evolves and Chinese travelers' travel again, we think that will be a nice unlock for our Asia Pacific business, it's not going to have a material impact on our on our P&L.
Great. Thanks, Dave.
Sure.
Our next question is from Bernie Mcternan with Needham <unk> Company. Your line is open.
Great. Thanks for taking the questions.
Ours are hanging in there better than feared I believe.
Still expecting them to be up year over year can you just talk through some of the puts and takes.
Demand driven pricing versus versus mix shift.
Hi, David.
Yes, if you kind of rewind to what we've seen with Edr's back at the beginning of the pandemic all of the increase was driven by mix or this initial.
Resurgence of the travel for North America for whom non urban and then over time, we've seen mixed become less and less a part of that.
The increase in the ADR here in both Q1 and Q2, what we've seen is that <unk> are up 40% year over.
Three years back to 2019 and about two thirds of that increase has been price appreciation at about a third due to mix.
And so.
We do anticipate that over time as more people return to travel urban more cross border Avr's may moderate, but yes, what you're seeing there two thirds of that is actually been price appreciation. So it's been stickier then.
Even what we anticipated maybe six months ago.
Got it and then the dip in May and June from the earlier booking Windows and then Reacceleration in July is that Reacceleration for near term bookings in terms of late summer or is that kind of early bookings for the fall and winter period.
Well, it's a bit of both I mean really we have on the books for Q4 of this year, we have more nights on the books in Q4 then.
Relative to the same kind of period a year ago in some very strong we're seeing really strong demand in the back half of the year, we're seeing a bit of both.
Got it thank you.
Yes.
Our next question is from Justin Patterson with Keybanc capital markets. Your line is open.
Great. Thank you two if I can Brian when you look at host's right now and just the friction to Onboarding. What are you looking to really solve with this upcoming release and then secondly, perhaps for both you and Dave you've clearly shown a lot of margin progress free cash flow progress over the next two years.
How should we think about just the puts and takes between our overall growth and showing more margin more free cash flow generation I had thank you.
And just sorry, just to confirm you are talking about with this upcoming release right. This winter, yes, well I mean, it can be a little broader and they're up just where the friction point on onboarding is.
Yes, so thats a great question, let me let me why don't I answer. The first question and then David you can talk about margin improvement and then I can.
Potentially elaborate on that answer as well.
We have actually said, we have 4 million host on Airbnb, but we think there are millions more people that could turn to hosting I mean honestly hosting as one of the easiest ways to be able to make money with an asset that you already have or most people don't even have a startup cost and the majority of people get a booking within the first week.
So there are a number of things that we're going to be doing. This this fall this winter and beyond but one of the most important things we want to do is continue to make it easier to host one of the high things I want to highlight that we launched last year with ask a super hubs ask a super host pairs, our very best Super hosted with respective host. This is really cool because basically what it does.
Is it allows our community to help train new community members new hosts to come on the platform Thats made a big difference and we're going to continue to double down on that product, we're going to but were looking at some other opportunities to continue to reduce friction so youre going to see some really cool products to Britain, just continue to make it even easier to host.
And so that's probably the primary thing that we're going to be focused on.
This fall. We're also looking at some additional protections for host and just ways to really try to get everyday people with their primary homes that want to host occasionally to host on Airbnb you know a lot of people don't realize that the number the top professions for host in the United States. For example, our school teachers and their health care workers their student.
These are the top three kind of professions applications and Airbnb and so what we're really thank the big opportunity is to continue to attract regular people to become host and we think one of the biggest sources of new host our prior guests on Airbnb, 36% of New House last quarter, where prior guests. So this is where we're going to be focused on.
It's a really big opportunity for us and I think again <unk> was founded during a recession 2008 financial crisis people were worried about being to pay their bills pay for their homes and their income and so they turned to hosting and we think a lot of people may turn to hosting once again. So this is a big opportunity for us.
If you want to talk about the margin improvement.
Yeah. Thanks, we're really proud of the progress we've made to reduce our fixed costs and make improvements in our variable costs.
We've really exercise disciplined on our spending here in 2022, and we're going to continue to do so but while we're thrilled with this margin expansion. We're heavily in growth mode. We are not in profit maximization mode.
We want a balanced profitability with growth.
One of things, we're very proud of the Q2 is that we are showing both growth and profitability at scale, but we will continue to invest in growth and we're going to prioritize things will grow the business over the long haul so.
Okay.
Thank you.
Our next question is from Doug Anmuth with Jpmorgan. Your line is open.
Thanks for taking the questions.
Hoping you could talk a little bit about just kind of macro environment, just what youre seeing.
In terms of consumer activity or types of trips being booked and also just to get your view on long term stays you talked about 25% growth year over year.
The trends there going forward. Thanks.
Dave.
Sure well if you start with a macro environment again, we are very pleased with our results. Despite any kind of macroeconomic and we're seeing strong demand here in Q3, and as I said that Q2 nights experiences grew 25% year over year seeing solar growth for Q3, and our demand in Q4 reservations.
Strongest I mentioned earlier.
What we've seen so far is North America, and Europe have been our strengths.
We're seeing but we are seeing an uptick in more cross border and more urban so those are historic strength areas for us and we're starting to see those parts of the businesses come back, but ultimately if you just kind of step back you just see the resilience of our business overall right.
Because we have so much different kinds of supply in so many places around the world. We have any kind of place for anyone that wants to travel and there's just so much pent up demand for travel and just so much demand for travel in general that people would like to spend money on the experience of travel and getting out of their home more than on.
Things that we're just continue to see that great strength in our business and then in terms of long term stay as it continues to be the fastest growing business by tripling. So if you look at nights of 28 days or longer.
Part of the business is growing faster since 2019 and the other segments days.
Actually if you kind of sub segment at nearly.
Nearly 50% of our nights drove seven days or longer and which I think again as you start to stay anyplace seven days or more and Airbnb. This is the best way to kind of experience that stay so long term stay trend continues to be very solid.
Growing faster than any other part of the business.
Great. Thank you.
The next question is from Nick Jones with JMP Securities. Your line is open.
Great. Thanks for taking the questions. Two I guess first can you can you just kind of.
Give us an update on the flexible option.
How that's kind of playing out and what kind of experiences youre able to.
Provide in those markets that maybe are less dense and then a follow up.
Okay.
Yes, yes so.
Nick I am flexible essentially what the product that we launched last year.
It really has two components, there's flexible data to allow people to say I am flex about when to travel and we can say.
Interesting traveling anywhere for a week and a week or a month anytime in the next year and we also.
We also had I am flexible destinations.
We rebuilt I'm flexible destination and the ground up and that became airbnb categories. So that's the product that has been used or people have seen lift.
Listings that have been featured in F&B categories over 180 million times since may 11th business. This has definitely been like a huge boon for us.
And what we're seeing is that people are in fact, discovering homes they would've never otherwise see in her books, we're seeing the search radius widened.
By I think it was 30 miles what I've cited before the other thing. We're seeing is that people are continuing to be more flexible about their data so more and more people are using the iron flexible data feature as well and so we're really excited about this I think this is a really big thing that we're going to be focusing on and we're going to continue to be investing in this product because I think this is a bit of a pair.
But I'm sure for how people will travel not everyone is going to be flexible about how they travel but for anyone thats not traveling for business are not visiting family if youre doing leisure travel almost by definition, you probably have some flexibility and as fewer and fewer people are going to be required to go into office five days a week I think this option is going to be more and more <unk>.
And our business model works uniquely for this because we have a lot of unique inventory. So it is being used quite a lot and hopefully that answers your question.
And then I guess, a follow up is and some of the areas.
That or.
Outside of urban areas less dense less I guess arguably activities how are you.
Thinking about adding more optionality to make these types of experience more engaging for the guests.
I'm sorry can you elaborate.
Outside of urban areas, where it makes sense. So I think if you are in a rural area and theres less activities arguably because theres less population how are you, adding looking to add more experiences for those guests in those regions Oh I see yeah.
Well this is a great question so number one.
Everybody categories and the new products. We're doing are great ways to highlight really interesting home continues you'd never know existed right. We have like these incredible borrowings and foreign stays in capsules in tree houses and many of these are in towns you probably never even heard of most of them, but there is another good question is if you go to Paris the of the actual power, but if you go to a rural area.
In upstate New York or in California, or some other place what do you do when you are there and we do think Airbnb experiences are great obviously for.
Places that are not iconic tourism destination. So that's why we're continuing to invest in that product and people really love Airbnb experiences. They actually have a higher five star rating even at home. So I think this is a great opportunity for a rural destination.
We have a lot of really popular experiences so like if you're going to farm you can do a farm stay and then you can have interesting experiences on that on that farm. So that's just one example, we are really popular.
Experiences for example in Tuscany, you can make pasta with.
Nearly nine year old grandmother, who has been making parts the same way for more than half a century. The leisure experiences you would have never been able to find and we're really excited about them.
Great. Thanks.
Yes.
The next question is from James Lee with Mizuho. Your line is open.
Great. Thanks for taking my question.
And maybe as we look into FY 'twenty three obviously, we have a lot of economic uncertainties here.
If the economy slowed down and consumers start to trade down how do you think the impact of Airbnb.
And also on the other hand, if you look at expenses did demand slowed down is there anything in your cost structure, you could optimize to offset any potential headwinds. Thanks.
Dave do you want <unk>.
Sure I think we've highlighted this a bit on the call.
You don't know what the economy is going to bring but we do know that airbnb is resilient to almost any kind of economic shock as Brian mentioned, there were founded in a recession.
We've obviously thrived in the.
Era of Covid, Despite COVID-19 and we're we're just finding is that people can come to airbnb, because we have any kind of property whether it's.
A small share groom or a private room to luxury stays we have something for anyone depending on their travel needs and we're likely to Sean Covid. If they can't cross border is theyre going to stay domestically and get in the car and they go down the road if domestic air travel gets too expensive.
Again, they can stay domestically and they can basically within their budget find the perfect place for them, because we have such a diversity of tie.
Types of offerings for them. So I think that is one of the things that just gives us this great resilience and then.
In terms of expenses, if the business slows down I mean again, we've already made the hard choices in 2020, we substantially reduced our fixed costs. We eliminated a number of physicians, we moved from being divisional functional. So we are a leaner tighter machine and we will remain that way, we're going to continue to grow with <unk>.
Head count in the.
Your high single digit percentage rates, but that is going to be able to support us for the very long term and we're going to remain very focused and disciplined in our investments. So.
Feel really good about.
The position that we're in with our investment model.
Great. Thanks, so much.
The next question is from Brian Fitzgerald with Wells Fargo. Your line is open.
Thanks, guys. We wanted to ask about the recovery of supply that you're continuously maybe particularly in urban areas are you seeing hosts who had come off the platform now coming back wondering how youre, making these host aware of the increase urban demand.
Helping to re and reactivate them and any color there on that.
Maybe late in supply capacity, because that would be awesome.
David I'll take this.
Yes, a couple of notes on the supply growth. We just continue to see strong supply growth since 2019, our nitrogen experiences booked that grew 24% and our active listings have grown 23% and we have over 6 million active listings now even taking down the domestic listings in China. So.
As you mentioned on the urban side, the active listings well I'll start with the non urban and non urban increased 7% quarter over quarter and 16% from Q2, 'twenty one and then in.
North America increased 23%, but then to your specific question, yes as demand returns to cities, we're seeing a return to growth in the total urban supply is exactly right. The people that have properties. They come back onto Airbnb and are ready to host again, I mean, if you kind of step back and think about it because the vast majority of our.
Hosts are individual house and then therefore, the vast majority of their listings are either their primary home or maybe a secondary home they don't get rid of those.
Recessionary environment.
And it's not.
Like a professional hosts which may be.
Looking at the pure return on investment on a particular property at a particular point in time and so with those individual house when the demand comes back they come back onto Airbnb.
The students are there so it's precisely what we are seeing when the demand comes back the supply is right there ready for them to say.
Awesome. Thanks I appreciate it.
The next question is from Mark Mahaney with Evercore ISI. Your line is open.
Okay, I think I'll ask two.
Questions, just talk about the China outbound market and how.
How you tap into that how material that's been for you to date and then unexperienced is I know that.
That list of long list of things that <unk> been working on in terms of product innovations that it seems like it was less of it's been less of a priority but is there anything that suggests that it's rising a little bit in your list of priorities and that you want to lean into it more aggressively and 23. Thank you.
Yes, David why don't you take China, I can expand on the answer and I'll take experiences.
Yes, I mean, we're very bullish on China over the longer term I mean, it's obviously been significantly impacted due to COVID-19 people are not traveling outbound I mean, that's actually how we started the business is seeing great outbound travel from China, all around the World and then.
And that is still the prize for us to kind of continue to focus on so.
Now APAC is still significantly depressed I mean, if you look at our overall nights growth as we have said, it's 25% from Q2 of 2019, but if you exclude APAC, it's actually up 35%. So you can see what kind of a drag that house and I think the reacceleration and a further acceleration of the business from <unk>.
Today.
We will be benefited by having China outbound comeback and resurrecting our APAC business.
Yes, I would just add.
Add to that.
We have absolutely seen in every other geography in the world that there is pent up demand in North America. There was pent up demand in Europe . There was pent up demand, we expect there'll probably be a lot of pent up demand for travel from China, outbound and more broadly in APAC and so how we've been preparing well number one way to prepare for the China outbound business to make sure we have really great.
Fly in the quarters, where people in China are traveling to this includes like Japan, and Korea Southeast Asia and beyond the next thing is just making sure that once people are ready to travel our product.
Continuing to be updated and we have the marketing campaign ready to go so it's a pretty simple strategy. The great thing is we don't have to make a lot of changes we think our product as it is it's going to be great. Once the China outbound rebounds, and we think it will we expect everything suggest it will just like every other market. So we're pretty excited about that and I think that.
In the coming years, this will actually be a pretty important part of our APAC business now.
Now with regard to experiences yes, Mark let me just give a little bit of context.
2009, 2018, 2019 experiences is going along pretty well and we expect that 2020, what's going to be a breakout year for experiences and I was we were going to focus quite a lot of our energy on it and then of course the opposite happened there was the pandemic we had to pause the business people, we're not comfortable gathering in person, let alone meeting strangers and so during the depths of the parent.
We got focus back on our core business, we got back to basics and I think that explains a lot of the business transformation, we experienced especially now that you've generated nearly 3 billion of free cash flow that being said, we remain incredibly bullish about the long term potential of experiences.
The average five star rating for experiences as I mentioned is higher than the average by Sarbanes even for homes and we just think people need to know more about this product it needs to be by continually integrated into the search flow and you need to continue to market. It. So the answer to your question, yes experiences will become once again, a rising priority.
And we are making quite a few investments in the product to continue to highlight experiences and I think it can be a big part of our story in 2023 and beyond over really the next five years, so I'm really excited about them.
Okay. Thank you, Brian and thank you David.
Our next question is from John <unk> with Jefferies. Your line is open.
Thanks for taking my questions.
Last quarter, you mentioned, an expectation for marketing as a percentage of revenue to remain relatively flat compared to 2021, maybe is it possible for you to update us on whether or not that's still your expectation following marketing in the first half coming in a few hundred basis points below last year.
<unk> and I have a follow up.
Dave Yes short answer is we anticipate marketing as a percentage of revenue in 2020 to be consistent with 2021.
So very modest increase in the back half of the year.
Okay, Great and second question on take rate it looks like.
Outlook for the third quarter implies a take rate that's better than what we were expecting an up a decent chunk versus the same quarter in 2019.
Any chance you can give us some detail about the puts and takes driving that take rate.
Thanks.
The underlying kind of shifted take rate is unchanged.
So any of the variation in take rate is just a timing difference between revenue stays versus timing of bookings.
Okay. Thank you.
Okay.
Our next question is from Stephen Ju with Credit Suisse. Your line is open.
Okay.
Thank you so Brian I think you are.
Yourself signed up to be a digital nomad.
Im joined your employees, who cannot work from anywhere. So is there anything you can share in terms of what youre seeing from the organization overall regarding pickup sort of declines in productivity or your ability to innovate.
Dave at the time of the IPO I think you guys had disclosed that the different cohorts suggests were.
Displaying pretty similar revenue retention as they age.
But as we entered the pandemic you probably had a pretty good influx of new users who signed up to experience.
Airbnb for the first time ever. So is there anything you can share in terms of the behavior of the 2020 into 'twenty one cohorts.
Relative to what you have seen for the folks who are arguably the earlier adopters. Thanks.
Yes, so why don't I take the first question on really remote work so.
In April we announced that Airbnb employees can live and work anywhere.
And.
Why do we do this well there were a couple of reasons number one.
We had the most productive two years in our company history and those two years two years, we rebuilt the company from the ground up.
Fixed cost base accelerated growth and all of this was done on zoom and so it's very clear to me that likes the most productive we've ever been as on zoom and so I thought there was no question that we can maintain that productivity.
Additionally, I think a really good way to predict the future is to look at what young companies do right 20 years ago Young companies had open floor plans and they had a lot of perks on site and that became the dominant way that people work in offices around the world.
Look at a lot of young companies today, they have a lot of flexibility theyre embracing remote work and so I think this is a really good leading indicator of what the office space Office place office environment of the future will look like in the next 10 years.
Now that being said, we do think in person interaction is really important but I don't think that requires you to have to come to an office three days a week. So the guidelines that we've given is we'd like to gather employees at least one week of quarter, so rather than kind of coming in every week, we want more meaningful less frequent interactions and gatherings.
Otherwise, we think zoom is really really efficient or productivity and the other thing I'll. Just say is I know a lot of Ceos are kind of nervous about productivity if their employees aren't in an office, but we have a pretty unique way we run the company. We view. These two releases every year and it's a really great mechanism for accountability. So you can see the productivity.
Everyone in the organization because all of the work is kind of coming together twice a year to date. These really big leaps in the organization. So it's actually.
<unk> kind of easier to track productivity when everything is really online and so that's something that we're really embracing.
Great and then relative to cohorts, what we're starting to see is we.
We believe to start with so we have some of the highest guest retention rates and probably still.
Did that our IPO and we still believe that to be true and our booking frequency remains quite strong.
Getting closer to 2019 levels and as we manage to look at the cohorts really what we're seeing in 2020 and 2021, but the new guest cohorts they've been actually very retentive.
Even maybe more so than kind of historical levels likely due to some self selection new guests who joined in the years of pandemic are willing to kind of travel npower, probably more inclined to kind of travel.
And then others and then in terms of Rebooking rates of past guests, we've seen nice improving rates so those trends.
Here in 2022 above kind of 2021 levels, but maybe still.
A bit below 2019 again, just given the.
The nature of self selection of who's willing to kind of travel at this time.
Okay.
Thank you.
The next question is from Kevin Kopelman with Cowen Your line is open.
Thanks can you give us a sense of what listings growth looks like ex China is shut down.
And then qualitatively.
Can you talk about the key drivers and trends Youre seeing there in listings.
David I'll take that.
Yes.
Terms of the growth.
Stated is that we are.
It's still well above 6 million active listings, even excluding the takedown of the China <unk>.
Domestic so.
As we've kind of mentioned.
Our results were seeing strong listings growth specifically in the areas, where we have the.
The strongest kind of bookings so.
Okay.
Yeah.
Yes.
Did you give the number of finalist.
We have not specifically mentioned.
China listings now.
Okay. Thanks, and then just a quick follow up on.
So on the on the Q2 guide we talked about slowing later in the quarter, but you are still pretty much on your where you had guided for nights is it safe to assume for the third quarter Youre also assuming some.
Slowdown in the remainder of the quarter.
Well if anything we're seeing as the acceleration of the business here in July and actually kind of very stable overall nights book growth for the quarter.
On nights and experiences booked.
Obviously then for.
Our revenue has a.
Modest as a diesel on a year over year basis, but actually it could.
It will be.
From kind of year over three years.
Okay. Thank you.
The next question is from Brian Nowak with Morgan Stanley . Your line is open.
Thanks for taking my questions I have two the first one just any update on the number of flexible queries or sort of how big that's gotten I know, it's a number that you all were disclosing up for a couple of quarters and then secondly, the remains to be an ongoing debate about.
How much of the shift toward Airbnb alternative accommodations was sort of.
Covid and now you're going to have a mean reversion.
Back to your hotels, what what are two or three of the Kpis that you look at that sort of gives you confidence that your addressable market of users of.
The hosts everything is really expand it like what are you seeing on the internal Kpis that you watch now in July and August that gives you confidence there still going to have outsized market share growth and tap into 'twenty three.
Yeah.
David.
Yes.
And we're continuing to see just really strong growth in our new guests, obviously looking at our new guests and new guests retention, which is one of the questions just had which remains quite strong with people coming back on the <unk>.
<unk> to see just overall utilization of Airbnb versus hotels, we didn't ever dip as much as hotels did and reintroduced airbnb to millions of new customers and we should see the new use cases.
A highlight with things like our long term stays.
Use cases, where people aren't going to be at a hotel for more than seven days and so.
Portion of our business nearly 50% better over seven days is really helpful. In that regard and over 28 days is nearly.
A fifth of our business so.
We look at.
Just the destination that people are able to kind of travel so the the robustness of.
Historically have been cross border in urban and now what we've seen this great growth in suburbs and non urban and so the distribution of the nights around the world I think that is also giving us great confidence in the growth of our business overall, because we don't just tap out if we were only say a vacation rental destination type company you can tap.
All in.
Our supply and demand and those kind of areas, but thats really we have such a diversity of supply around the world that we're able to continue to grow quite well so.
Okay.
Yes, maybe I'll, just hey, Brian maybe I'll add a little bit of context, it's good to remember that before the pandemic, our bread and butter was cross border and urban.
Alright that was our bread and butter was cross border travel and urban travel and of course, when the pandemic occurred that got primarily shut off and yet our business recovered because people were using or it can be differently I think the really the key important thing here is that our model is obviously incredibly adaptable. We're in nearly every community in the world. We have nearly every type of space.
Every type of price point, and I think that the reasons that are being people would use airbnb will continue and our people are looking for value. They wanted to they want to feel like analytical local as more and more people have flexibility and trek line in <unk>.
<unk> increased nearly a half of our business is a week or longer it's prohibited probably stay in hotels. So theres a lot of new use cases that we think is here to stay but the thing I'm pretty excited about is that a lot of the older use cases cross border and urban are coming back.
That's helpful. Thank you both.
Thank you.
Thank you. The next question is from <unk> Khan with <unk> Securities. Your line is open.
Thanks.
Im wondering you surprised by the continued strength in North America, and the U S. I think.
You talked about a 37% growth in.
In 19 experiences versus versus EMEA, maybe up to 25%.
Just that EMEA.
Can use to lag or.
From everything that we've been hitting it seems like <unk> got a burst of demand in the second quarter. So just trying to reconcile that.
Okay.
I mean, EMEA is still lagging behind the acceleration that we've seen in North America, we think that that is actually one of the opportunities for <unk>.
Future acceleration of the business I mean, clearly things like the impact of the war on Ukraine, certainly has had an impact.
There's obviously the economic impact of.
Even just foreign exchange rates lower euro.
The British pound relative to the U S. Dollar. So there are some reasons why europes been lagging.
Still a strong business for us is still doing well, but it could even do better.
And then maybe just a follow up so if I have to think about the back half and the.
Advertising channels do you see opportunity too.
Increase the branded Ad spend.
Do you think it pretty much maxed out on my desk.
In the Netherlands.
Okay.
Well again, I think we have a very modest increase in our overall marketing spend in the back half of the year, we're very happy with the approach to our brand spend I mean again, if you step back.
The big strengths of Airbnb is our ability to market to both guests and hosts at the same time.
To be able to bring guests with 90% of our.
Our traffic remaining director unpaid.
And I think this brand strategy frankly is more of a product marketing strategy that we have to market. The features and capabilities that we have an airbnb what makes us different has been a huge strength for us so.
Yes.
We're really happy with that investment we think we're investing fully at the moment. There we will look over time to maybe expand the countries that we're doing more of that investment. So later this year and into early next you could see us expanding into more countries because we're seeing such good success with our investment right now.
Yes.
Thank you.
The next question is from Jed Kelly with Oppenheimer. Your line is open.
Great. Thanks, Thanks for taking my question two if I may just just one on the.
Non urban listings it continues to grow well and youre, adding a lot of supply can you sort of touch on where the share gains are coming from like where those listings are coming from is it coming from people not using their second home is marching going back to more urban destination or are you taking more share with property managers.
You opening up with new destination destinations and then my second question just relates to overall.
Overall seasonality this year it seems like the room nights is falling and consistent.
The seasonal trend as.
2019, so should we expect a similar <unk> seasonality as 2019. Thank you.
Yes, so maybe why don't I can at least answer the first not urban listings at a high level and Dave you can answer maybe more specifically and also talk about seasonality. So.
So hey, Chad at the highest level I would say that one of the things that we've seen is that we have a global network, where the fastest growing markets from a supply basis are typically the fastest growing markets from a demand basis and this is not surprising because the number one source of host a prior guests.
So specifically in non urban listings.
If we don't it's not uniquely different composition, it's not like it's a.
A lot more property managers or anything like that.
Pretty consistent composition from years prior to the vast majority of listings are individuals but there are also property managers that are continuing to come on account on the on the <unk>.
<unk>. We're also seeing people continue to open up more nights under calendar as demand goes up people are often motivated to add where more and more availability on their calendar and also as people get more business. They tend to tell their friends about it and this is one of the great things about having a business where the vast majority of your supply are individuals. So we continue to.
See really strong growth in Nigeria listings by as urban recovers, we are anticipating that we're going to see some solid supply growth in urban areas as well, Dave feel free to elaborate on that and take the second question as well.
No I think you've covered the first really well I mean, I'll just say on the.
Net knights and experiencing booked kind of seasonality now that we kind of enter Q3 and Q4, it's probably just better to look at the year over year growth rates as kind of being more normalized and I think that's the better way to kind of look at the overall seasonal growth.
Thank you.
The next question is from Tom White with D. A Davidson your line is open.
Oh, great. Thanks for taking my question, Brian during the early does it depend on Mike you talked about narrowing your focus on Airbnb. Most perishable opportunities you guys have now achieved profitability at scale. Your cash balance has grown significantly could you update us on maybe your latest thinking about those nonperishable opportunities are any of them, particularly attractive to you or should we.
Maybe infer from the buyback announcement that maybe you're not super close to really exploring those opportunities again.
Hey, Tom Yes, so again during the 2020, a pandemic occurred just to recap we got really focus we got back to basics and over the last two years I think we've really really benefited by perfecting our core product.
That being said we are now looking and we are sticking very expansively. So you should look at our stock buyback as our confidence in our long term growth and profitability. That's all you should be desktop buyback about that being said we are going to continue to be investing aggressively over the coming years. So we are not pulling on the brakes. We are now stepping on the gas.
Remember like the biggest innovations I had arent going BMI 2030.
Right. So we have some pretty big opportunities coming up I am excited about some of things that can be releasing later this year. We have another release coming next spring in time for the summer release in the fall and winter.
And again, we're going to continue to focus on unlocking the next generation of host. So we have some really exciting new products built to attract the next generation of host, especially.
Individuals that want to host occasionally.
We are going to continue to think of radical innovations around.
Airbnb, becoming the ultimate host to our guests and hosts were going to continue to innovate on our search technology and we have a lot of opportunities around helping people travel and live on Airbnb. So there is going to be some pretty exciting opportunities coming forward and I'm pretty bullish about it.
David anything you want to add to that.
Yes, I'll just reemphasize, our priority is investing in growth and.
$10 billion of cash is more than we need 8 billion is more than sufficient to aggressively invest in growth in the business and that is our number one priority.
At the same time, we're able to both.
And best can grow just given the profitability profile of our business overall I am proud that we can do both.
But the.
Priority for us is investing in growth.
Great maybe just one quick follow up on an FX over the years I remember some of the kind of traditional otas talking about.
Maybe it's less about kind of the absolute level of one currency relative to relative to another but.
It is for maybe more like the volatility of foreign exchange rates that dictate customer booking behavior curious, whether you'd say that was a similar dynamic in your business or just generally how the changes in FX rate.
What changes impacts are you seeing kind of in terms of customer behavior.
Well I think the biggest impact do you see with FX is.
As in the cross border travel, obviously right a strengthening dollar gives you the ability for Americans to travel abroad, specifically right now probably Europe , and the U K and a weakening euro and pound makes it more difficult for them to kind of travel back but again, if you look at Airbnb. The fact is that people adjust their travel.
To meet their overall kind of budgets and as we saw on Covid and people are more willing to maybe they stay domestically if they or their budget doesn't allow the cross border travel or maybe they stay domestically if they don't feel like they can afford the cost of airline travel so.
The FX impact from a consumer standpoint.
Usually this cross border impact and then to our overall business. We're just seeing that as we go.
Generate night stayed in euro and pounds and then we bring them back to that.
Yes.
And in the U S. Dollar were just seeing the headwind of foreign exchange, which was which was material in Q1 was 600 basis points of revenue growth driven.
Driven by the FX moves.
I would anticipate Q3, probably would be something less less than that to our overall P&L.
Thank you.
That will conclude our question and answer session for today, So I'll hand, it over to Brian Cheskey for any closing remarks.
Alright, well. Thank you everyone for joining us today. So I just wanted to say I'm incredibly proud of we delivered this quarter record nights and experience is booked we had our most profitable Q2, and we generated $795 million of free cash flow, bringing our total free cash flow over the last 12 months to nearly $3 billion.
This transformation of our business was only possible because of our adaptable model and a relentless innovation and regardless of economic environment. We believe gas will continue to come to airbnb, because they can find great value and hosts can earn extra income.
<unk> is ready for whatever lies ahead and we're so confident in our long term growth and profitability that today, we're announcing a $2 billion share repurchase program.
Thank you all for joining us today and I'll see you next quarter.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Please wait the conference will begin shortly.
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